What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-09 compared with 2022-02-11 · 264 added, 307 removed, 1917 unchanged (23% of the section changed)

2 unchanged sentences

Snap-on maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that material information relating to the company and its consolidated subsidiaries is timely communicated to the officers who certify Snap-on’s financial reports and to other members of senior management and the Board, as appropriate.

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the company’s management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of January 1, 2022.

Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of January 1, 2022, to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2022, to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control

There has not been any change in the company’s internal control over financial reporting during the quarter ended January 1, 2022, that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)).

There has not been any change in the company’s internal control over financial reporting during the quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)).

Management’s Report on Internal Control over Financial Reporting

1 unchanged sentence

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013) .

The company’s February 26, 2021, acquisition of Dealer-FX Group, Inc.

(which represented 3% of total assets at January 1, 2022, and 0.9% of 2021 net sales) was excluded from the scope of management’s assessment of internal control over financial reporting as of January 1, 2022.

Based on this assessment, the company’s management believes that, as of January 1, 2022, our internal control over financial reporting was effective at a reasonable assurance level.

The company’s internal control over financial reporting as of January 1, 2022, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its attestation report, which is included herein.

Based on this assessment, the company’s management believes that, as of December 31, 2022, our internal control over financial reporting was effective at a reasonable assurance level.

The company’s internal control over financial reporting as of December 31, 2022, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its attestation report, which is included herein.

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting will prevent all errors or fraud.

5 unchanged sentences

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Snap-on Incorporated and subsidiaries (the “Company”) as of January 1, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements as of and for the year ended January 1, 2022, of the Company and our report dated February 10, 2022, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of Accounting Standard Update No.

We have audited the internal control over financial reporting of Snap-on Incorporated and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 9, 2023, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of Accounting Standard Update No.

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

8 unchanged sentences

We believe that our audit provides a reasonable basis for our opinion.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Dealer-FX Group, Inc.

(“Dealer-FX”), which was acquired on February 26, 2021, and whose financial statements represents 3% of total assets and 0.9% of net sales of the consolidated financial statement amounts as of and for the year ended January 1, 2022.

Accordingly, our audit did not include the internal control over financial reporting at Dealer-FX.

Definition and Limitations of Internal Control over Financial Reporting

17 unchanged sentences

Information about our Executive Officers

Information regarding Snap-on’s executive officers, including their ages, business experience (for at least the last five years) and titles as of January 1, 2022, is presented below:

Information regarding Snap-on’s executive officers, including their ages, business experience (for at least the last five years) and titles as of December 31, 2022, is presented below:

Pinchuk (76) – Chairman of the Board of Directors since 2009, President and Chief Executive Officer since December 2007, and President and Chief Operating Officer during 2007.

2 unchanged sentences

Pinchuk held various positions, including President of Global Refrigeration Operations and President of Asia Pacific Operations, at Carrier Corporation, a producer of air conditioning, heating and refrigeration systems, and a subsidiary of United Technologies Corporation.

Pinchuk serves on the board of directors of Columbus McKinnon Corporation.

Pinchuk served as an officer of the U.S.

8 unchanged sentences

Lemerand (60) – Vice President and Chief Information Officer since 2017.

Vice President of Information Technology Services from 2015 to 2017.

Miller (52) – Vice President, General Counsel and Secretary since 2018.

5 unchanged sentences

Army, and two executives who are ethnically diverse.

Additionally, there is no family relationship among the executive officers and there has been no involvement in legal proceedings during the past ten years that would be material to the evaluation of the ability or integrity of any of the executive officers.

Additionally, there is no family relationship among the executive officers and there has been no involvement in legal proceedings during the past 10 years that would be material to the evaluation of the ability or integrity of any of the executive officers.

Executive officers may either be elected by the Board or may be appointed by the Chief Executive Officer at the regular meeting of the Board that follows the Annual Shareholders’ Meeting, which is ordinarily held in April each year, or at such other times as new positions are created or vacancies must be filled.

34 unchanged sentences

Incorporated by reference to the sections entitled “Corporate Governance Practices and Board Information – Board Information” and “Other Information – Transactions with the Company” in Snap-on’s 2023 Proxy Statement.

Principal Accounting Fees and Services

Principal Accountant Fees and Services

Incorporated by reference to the section entitled “Deloitte & Touche LLP Fee Disclosure” in Snap-on’s 2023 Proxy Statement.

SNAP-ON INCORPORATED

Exhibits, Financial Statement Schedules

Exhibit and Financial Statement Schedules

Documents Filed as Part of This Report:

List of Financial Statements

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

Unless otherwise indicated, references 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 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 to 2022, 2021 and 2020 year end refer to December 31, 2022, January 1, 2022, and January 2, 2021, respectively.

The following consolidated financial statements of Snap-on and the Report of Independent Registered Public Accounting Firm thereon, are filed as part of this report:

22 unchanged sentences

2022 ANNUAL REPORT 57

Except for the foregoing, Snap-on and its subsidiaries have no unregistered long-term debt agreement for which the related outstanding debt exceeds 10% of consolidated total assets as of January 1, 2022.

Copies of debt instruments for which the related debt is less than 10% of consolidated total assets will be furnished to the Commission upon request.

20 unchanged sentences

(n) Form of Restricted Stock Unit Award Agreement for Executive Officers and Key Employees under the 2011 Incentive Stock and Awards Plan (incorporated by reference to Exhibit 10(o) to Snap-on's Annual Report on Form 10-K for the fiscal year ended January 2, 2021 Commission File No.

(o) Third Amended and Restated Five Year Credit Agreement, dated as of September 16, 2019, among Snap-on Incorporated and the lenders and agents listed on the signature pages thereof, and JPMorgan Chase Bank, N.A., Citibank N.A.

(o)(1) Third Amended and Restated Five Year Credit Agreement, dated as of September 16, 2019, by and among Snap-on Incorporated and the lenders and agents listed on the signature pages thereof, and JPMorgan Chase Bank, N.A., Citibank N.A.

Bank National Association as joint lead arrangers and joint bookrunners (incorporated by reference to Exhibit 10.1 to Snap-on’s Current Report on Form 8-K dated September 16, 2019 (Commission File No.

(o)(2) Amendment No.

1, dated as of September 15, 2022, by and among Snap-on Incorporated, the lenders party thereto and JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the lenders, to Third Amended and Restated Five Year Credit Agreement, dated as of September 16, 2019, by and among Snap-on Incorporated and the lenders and agents listed on the signature pages thereof, and JPMorgan Chase Bank, N.A., Citibank N.A.

Bank National Association as joint lead arrangers and joint bookrunners (incorporated by reference to Exhibit 10.1 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly period ended October 1, 2022 (Commission File No.

(14) Snap-on Incorporated Section 406 of the Sarbanes-Oxley Act Code of Ethics (incorporated by reference to Exhibit 10(aa) to Snap-on’s Annual Report on Form 10-K for the fiscal year ended January 3, 2004 (Commission File No.

23 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Snap-on Incorporated and subsidiaries (the “Company”) as of January 1, 2022, and January 2, 2021, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the three years in the period ended January 1, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2022, and January 2, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principles

We have audited the accompanying consolidated balance sheets of Snap-on Incorporated and subsidiaries (the “Company”) as of December 31, 2022 and January 1, 2022, the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 4 to the consolidated financial statements, the Company changed its method of accounting for credit losses in the year ended January 2, 2021, due to the adoption of Accounting Standard Update No.

15 unchanged sentences

SNAP-ON INCORPORATED

Finance Receivables - Net - Refer to Notes 1 and 4 to the financial statements

Finance Receivables, Net - Allowance - Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The Company’s 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 average payment terms of approximately four years.

The Company’s 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.

The receivables are generally secured by the underlying tools, diagnostics and/or equipment products financed.

At January 1, 2022, these loans totaled $1,723.6 million with an allowance of $67.3 million recorded against the receivables.

At December 31, 2022, these loans totaled $1,793.9 million with an allowance of $60.9 million recorded against the receivables.

Determining the proper level of allowance requires management to exercise judgment about the timing, frequency and severity of credit losses expected to occur over the life of the contracts.

The Company estimates and records an allowance for credit losses over the expected contractual life of their contracts considering collectability, historical loss experience, current conditions and future market changes.

The Company estimates and records an allowance for credit losses over the remaining contractual life of their contracts considering collectability, historical loss experience, current conditions and future market changes.

Evaluating the judgments related to the finance receivable allowance for credit losses is subjective and requires auditor judgment to effectively evaluate whether management’s judgments were reasonable.

4 unchanged sentences

• We tested the completeness and accuracy and evaluated the relevance of the key data used as inputs in management’s allowance for credit losses calculation, including loan balances, recoveries, charge-offs, portfolio characteristics and other data.

• We tested the mathematical accuracy of the allowance for credit losses calculation and developed an expectation of the allowance for credit losses and compared it to the recorded balance.

• We performed a retrospective review based on net losses as compared to estimates in the Company’s allowance to highlight any inconsistencies.

• We tested the mathematical accuracy of the allowance for credit losses calculation with the assistance of our credit specialists and developed an expectation of the allowance for credit losses and compared it to the recorded balance.

• We evaluated management’s ability to accurately forecast credit losses by performing a retrospective review, which involved comparing actual credit losses to historical estimates.

/s/ DELOITTE & TOUCHE LLP

45 unchanged sentences

( 92.8 ) 85.1 3.8

Income tax (expense) benefit ( 18.6 ) ( 0.3 ) 0.2

Income tax benefit (expense) 23.8 ( 18.6 ) ( 0.3 )

Net of tax ( 69.0 ) 66.5 3.5

26 unchanged sentences

Other intangibles – net 275.6 301.7

Pension assets 70.6 160.7

Other assets 13.7 15.6

2 unchanged sentences

Current liabilities:

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

36 unchanged sentences

Comprehensive

Income (Loss) Treasury

Loss Treasury

Stock Noncontrolling

1 unchanged sentence

Balance at December 28, 2019 $ 67.4 $ 379.1 $ 4,779.7 $ ( 507.9 ) $ ( 1,309.2 ) $ 21.7 $ 3,430.8

Impact of the Tax Act on Accumulated Other Comprehensive Income (ASU No.

Impact of the Credit Loss Standard (ASU No.

2016-13) — — ( 6.1 ) — — — ( 6.1 )

9 unchanged sentences

Other — — ( 0.4 ) — — ( 19.4 ) ( 19.8 )

Balance at December 28, 2019 67.4 379.1 4,779.7 ( 507.9 ) ( 1,309.2 ) 21.7 3,430.8

Impact of the Credit Loss Standard (ASU No.

2016-13) — — ( 6.1 ) — — — ( 6.1 )

Balance at December 29, 2019 67.4 379.1 4,773.6 ( 507.9 ) ( 1,309.2 ) 21.7 3,424.7

Balance at January 2, 2021 67.4 391.7 5,156.9 ( 365.8 ) ( 1,425.3 ) 21.7 3,846.6

Net earnings for 2021

10 unchanged sentences

— — 911.7 — — 22.2 933.9

Other comprehensive income — — — 21.9 — — 21.9

Other comprehensive loss — — — ( 184.4 ) — — ( 184.4 )

Cash dividends – $ 5.88 per share

4 unchanged sentences

Other — — ( 2.3 ) — — ( 21.9 ) ( 24.2 )

Balance at January 1, 2022 $ 67.4 $ 472.7 $ 5,699.9 $ ( 343.9 ) $ ( 1,714.2 ) $ 21.9 $ 4,203.8

Balance at December 31, 2022 $ 67.4 $ 499.9 $ 6,296.2 $ ( 528.3 ) $ ( 1,853.9 ) $ 22.2 $ 4,503.5

See Notes to Consolidated Financial Statements.

12 unchanged sentences

Deferred income tax provision (benefit) ( 10.3 ) 8.4 ( 8.2 )

Loss on sales of assets 1.7 1.4 0.9

(Gain) loss on sales of assets ( 3.1 ) 1.7 1.4

Settlement of treasury lock — — 1.4

3 unchanged sentences

Inventories ( 272.1 ) ( 75.4 ) 34.2

Prepaid and other assets ( 10.7 ) 8.5 ( 22.2 )

Prepaid expenses and other assets ( 6.3 ) ( 10.7 ) 8.5

Accounts payable 17.7 56.8 17.8

34 unchanged sentences

Intercompany accounts and transactions have been eliminated.

Snap-on accounts for investments in unconsolidated affiliates where the company has a non-significant ownership interest under the equity method of accounting.

An investment in an unconsolidated affiliate of $ 21.8 million as of July 1, 2021, was exchanged for 100 % ownership of a wholly owned subsidiary of the unconsolidated affiliate.

Investments in unconsolidated affiliates of $ 21.0 million as of January 2, 2021, are included in “Other assets” on the accompanying Consolidated Balance Sheets;

no equity investment dividends were received in any period presented.

See Note 3 for further information on acquisitions.

In the normal course of business, the company may purchase products or services from, or sell products or services to, unconsolidated affiliates.

Purchases from unconsolidated affiliates were $ 7.7 million, $ 9.3 million and $ 10.4 million in 2021, 2020 and 2019, respectively, and sales to unconsolidated affiliates were $ 0.6 million in 2021, $ 0.5 million in 2020 and $ 0.6 million in 2019.

Fiscal year accounting period:

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

The 2022 fiscal year ended on December 31, 2022 (“2022”) and contained 52 weeks of operating results.

The 2021 fiscal year ended on January 1, 2022 (“2021”) and contained 52 weeks of operating results.

1 unchanged sentence

the impact of the additional week of operations was not material to Snap-on’s 2020 total revenues or net earnings.

The 2019 fiscal year ended on December 28, 2019 (“2019”) and contained 52 weeks of operating results.

Use of estimates:

6 unchanged sentences

Revenue recognition:

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

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

See Note 2 for information on revenue recognition.

10 unchanged sentences

Snap-on conducts monthly reviews of credit and collection performance for both the finance and contract receivable portfolios, focusing on data such as delinquency trends, nonaccrual receivables, and write-off and recovery activity.

2021 ANNUAL REPORT 67

Notes to Consolidated Financial Statements (continued)

Financial services lease arrangements:

9 unchanged sentences

Research and engineering costs are included in “Operating expenses” on the accompanying Consolidated Statements of Earnings.

2022 ANNUAL REPORT 67

Notes to Consolidated Financial Statements (continued)

Internally developed software:

33 unchanged sentences

Accrued interest and penalties are included within the related tax asset or liability on the accompanying Consolidated Balance Sheets.

SNAP-ON INCORPORATED

Deferred income taxes are provided for temporary differences arising from differences in bases of assets and liabilities for tax and financial reporting purposes.

3 unchanged sentences

See Note 9 for further information on income taxes.

SNAP-ON INCORPORATED

Per share data:

1 unchanged sentence

The dilutive effect of the potential exercise of outstanding options and stock-settled stock appreciation rights (“SARs”) to purchase common shares is calculated using the treasury stock method.

As of January 1, 2022, there were no awards outstanding that were anti-dilutive;

As of both December 31, 2022, and January 1, 2022, there were no awards outstanding that were anti-dilutive;

as of January 2, 2021, there were 2,207,411 awards outstanding that were anti-dilutive.

and as of December 28, 2019 there were 1,215,695 awards outstanding that were anti-dilutive.

Performance-based equity awards are included in the diluted earnings per share calculation based on the attainment of the applicable performance metrics to date.

10 unchanged sentences

See Note 14 for further information on stock-based compensation.

Snap-on utilizes derivative financial instruments, including foreign currency forward contracts, interest rate swap agreements, treasury lock agreements and prepaid equity forward agreements to manage its exposures to foreign currency exchange rate risks, interest rate risks, and market risk associated with the stock-based portion of its deferred compensation plans.

Snap-on may utilize derivative financial instruments, including foreign currency forward contracts, interest rate swap agreements, treasury lock agreements and prepaid equity forward agreements to manage its exposures to foreign currency exchange rate risks, interest rate risks, and market risk associated with the stock-based portion of its deferred compensation plans.

Snap-on accounts for its derivative instruments at fair value.

3 unchanged sentences

Snap-on considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Cash and cash equivalents consisted of investments in money market funds and bank deposits at January 1, 2022 and January 2, 2021.

Cash and cash equivalents consisted of investments in money market funds and bank deposits at December 31, 2022 and January 1, 2022.

Receivables and allowances for credit losses:

1 unchanged sentence

The amortized costs for finance and contract receivables is the amount originated adjusted for applicable accrued interest and net of deferred fees or costs, net of collections and write-offs.

Snap-on maintains allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and supportable forecasts when appropriate.

Snap-on maintains allowances for credit losses, which represent an estimate of expected credit losses over the remaining contractual life of its receivables considering current conditions and supportable forecasts when appropriate.

The estimate is a result of the company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in each of its receivable portfolios (trade, finance and contract receivables).

For trade receivables, Snap-on uses historical loss experience rates by portfolio and applies them to a related aging analysis while also considering customer and/or economic risk where appropriate.

For finance receivables, Snap-on uses a vintage loss experience analysis.

For contract receivables, a weighted-average remaining maturity method is primarily used.

Snap-on uses a vintage loss experience methodology for finance receivables.

For contract receivables, Snap-on primarily uses a Weighted-Average Remaining Maturity (“WARM”) methodology.

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

The allowances take into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, supportable forecasts, when appropriate, and credit risk characteristics.

2021 ANNUAL REPORT 69

Notes to Consolidated Financial Statements (continued)

The allowances take into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current conditions, supportable forecasts, when appropriate, and credit risk characteristics.

Snap-on evaluates the credit risk of the customer when extending credit based on a combination of various financial and qualitative factors that may affect its customers’ ability to pay.

These factors may include the customer’s financial condition, past payment experience, and credit bureau and proprietary Snap-on credit model information, as well as the value of the underlying collateral.

2022 ANNUAL REPORT 69

Notes to Consolidated Financial Statements (continued)

Management performs detailed reviews of its receivables on a monthly and/or quarterly basis to assess the adequacy of the allowances and to determine if any impairment has occurred.

2 unchanged sentences

A receivable generally has credit losses when it is expected that all amounts related to the receivable will not be collected according to the contractual terms of the agreement.

Amounts determined to be uncollectable are charged directly against the allowance, while amounts recovered on previously written-off accounts increase the allowance.

For both finance and contract receivables, net write-offs include the principal amount of losses written off as well as written-off accrued interest and fees, and recourse from franchisees on finance receivables.

Recovered interest and fees previously written off are recorded through the allowance for credit losses and increase the allowance.

Finance receivables are assessed for write-off when an account becomes 120 days past due and are written off typically within 60 days of asset repossession.

Contract receivables related to equipment leases are generally written off when an account becomes 150 days past due, while contract receivables related to franchise finance and van leases are generally written off up to 180 days past the asset return date.

For finance and contract receivables, customer bankruptcies are generally written off upon notification that the associated debt is not being reaffirmed or, in any event, no later than 180 days past due.

Changes to the allowances for credit losses are maintained through adjustments to the provision for credit losses, which are charged to current period earnings.

Amounts determined to be uncollectable are charged directly against the allowances, while amounts recovered on previously written off accounts increase the allowances.

For both finance and contract receivables, write-offs include the uncollectable principal amount of the receivable as well as the uncollectable accrued interest and fees, net of repossessions.

For finance receivables only, write-offs are partially offset by recourse from franchisees.

Recovered interest and fees previously written off are recorded through the allowances for credit losses and increase the allowances.

Absent a repossession, finance receivables are generally written off when an account becomes 120 days past due.

Repossessed accounts are typically written off within 60 days of asset repossession.

Changes to the allowances for credit losses are maintained through adjustments to the provisions for credit losses.

Actual amounts as of the balance sheet dates may be materially different than the amounts reported in future periods due to the uncertainty in the estimation process.

7 unchanged sentences

Accrued warranty 14.3 17.3

Operating lease liability 19.6 19.3

Operating lease liabilities 19.4 19.6

Deferred subscription revenue 57.1 56.4

34 unchanged sentences

New accounting standards:

On January 3, 2021, the beginning of Snap-on’s 2021 fiscal year, the company adopted ASU No.

2019-12, Simplifying the Accounting for Income Taxes , which is designed to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The adoption of this ASU did not have a significant impact on the company’s Consolidated Financial Statements.

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures , which requires enhanced disclosure of certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and eliminates certain current recognition and measurement accounting guidance.

This ASU also requires the disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases.

2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The adoption of this ASU is not expected to have a material impact on Snap-on’s Consolidated Financial Statements.

Revenue Recognition

71 unchanged sentences

Approximately 90 % of Snap-on’s net sales are products sold at a point in time through ship-and-bill performance obligations that also include repair services.

The remaining sales revenue is earned over time primarily on a subscription basis including software, extended warranty and other subscription service agreements.

The remaining sales revenue is earned over time primarily for software subscriptions, other subscription service agreements and extended warranty programs.

Snap-on enters into contracts related to the selling of tools, diagnostics, repair information, equipment and related services.

7 unchanged sentences

The remaining duration of these unsatisfied performance obligations range from one month up to 60 months.

Snap-on had approximately $ 190.0 million of long-term contracts that have fixed consideration that extends beyond one year as of January 1, 2022.

Snap-on had approximately $ 179.0 million of long-term contracts that have fixed consideration that extends beyond one year as of December 31, 2022.

Snap-on expects to recognize approximately 75 % of these contracts as revenue by the end of fiscal 2024, an additional 20 % by the end of fiscal 2026 and the balance thereafter.

35 unchanged sentences

The timing of payment is typically on a monthly, quarterly or annual basis.

The balance of total contract liabilities was $ 63.8 million and $ 61.0 million at January 1, 2022, and January 2, 2021, respectively.

The balance of total contract liabilities was $ 63.3 million and $ 63.8 million at December 31, 2022, and January 1, 2022, respectively.

The current portion of contract liabilities is included in “Other accrued liabilities” and the non-current portion of such liabilities is included in “Other long-term liabilities” on the accompanying Consolidated Balance Sheets.

In 2022, Snap-on recognized revenue of $ 55.0 million that was included in the contract liability balance at January 1, 2022, which was primarily from the amortization of software subscriptions, extended warranties and other subscription agreements.

The increase in the total contract liabilities balance is primarily driven by the timing of cash payments received or due in advance of satisfying Snap-on’s performance obligations and growth in certain software subscriptions, partially offset by revenues recognized that were included in the contract liability balance at the beginning of the year.

The decrease in the total contract liabilities balance was primarily driven by the timing of cash payments received or due in advance of satisfying Snap-on’s performance obligations.

Franchise fee revenue, including nominal, non-refundable initial fees, is recognized upon the granting of a franchise, which is when the company has performed substantially all initial services required by the franchise agreement.

3 unchanged sentences

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

In fiscal 2021, the company recorded, on a preliminary basis, the $ 3.3 million excess of the purchase price over the fair value of the net assets acquired in “Goodwill” on the accompanying Consolidated Balance Sheets.

The company anticipates completing the purchase accounting for the acquired net assets of AutoCrib Germany in first half of 2022.

In fiscal 2022, the company completed the purchase accounting valuations for the acquired net assets of AutoCrib Germany.

The $ 3.3 million excess of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets.

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

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

with a fair value of $ 20.2 million (or $ 15.7 million, net of cash acquired), which reflects a $ 0.5 million purchase accounting adjustment finalized in fiscal 2022, and cash of $ 1.6 million.

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

In fiscal 2021, the company recorded, on a preliminary basis, the $ 10.7 million excess of the purchase price over the fair value of net assets acquired in “Goodwill” in the accompanying Consolidated Balance Sheets.

The company anticipates completing the purchase accounting for the acquired net assets of Pradines in the first half of 2022.

In fiscal 2022, the company completed the purchase accounting valuations for the acquired net assets of Pradines.

The $ 10.2 million excess of the purchase price over the fair value of net assets acquired was recorded in “Goodwill” in the accompanying Consolidated Balance Sheets.

Snap-on previously accounted for Deville S.A.

as an equity method investment.

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

2 unchanged sentences

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

In fiscal 2021, the company substantially completed the purchase accounting valuations for the acquired net assets of Dealer-FX, including identifiable intangible assets.

Final purchase accounting valuations are expected to be completed in the first quarter of 2022, including the evaluation of tax benefits associated with net operating loss carryforwards.

The preliminary $ 150.8 million excess of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets.

In fiscal 2022, the company completed the purchase accounting valuations for the acquired net assets of Dealer-FX, and recorded $ 32.6 million of net deferred tax changes.

The $ 118.2 million excess of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets.

2022 ANNUAL REPORT 75

Notes to Consolidated Financial Statements (continued)

The following is a summary of the values of the assets acquired and liabilities assumed of Dealer-FX, including adjustments recorded as of December 31, 2022, as a result of new information obtained about facts and circumstances that existed as of the February 26, 2021 acquisition date:

Amounts as of

(Amounts in millions) February 26, 2021

Assets acquired:

Trade and other accounts receivable 8.0

Property and equipment 0.7

Deferred income tax assets 16.5

Goodwill 118.2

Other intangibles:

Customer relationships 28.4

Developed technology 14.8

Non-amortized trademarks 17.7

Other assets 0.8

Total assets acquired 205.2

Liabilities assumed:

Accounts payable 2.6

Accrued expenses 2.5

Total liabilities acquired 5.1

Net assets acquired $ 200.1

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

1 unchanged sentence

AutoCrib, based in Tustin, California, designs, manufactures and markets asset and tool control solutions for a variety of aerospace, automotive, military, natural resources and general industry operations.

In fiscal 2021, the company completed the purchase accounting valuations for the acquired net assets of AutoCrib, including intangible assets.

In fiscal 2021, the company completed the purchase accounting valuations for the acquired net assets of AutoCrib.

The $ 18.3 million excess of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets.

1 unchanged sentence

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

In fiscal 2020, the company completed the purchase accounting valuations for the acquired net assets of Sigmavision, including intangible assets.

The $ 5.6 million excess of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets.

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

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

In fiscal 2020, the company completed the purchase accounting valuations for the acquired net assets of Cognitran, including intangible assets.

The $ 14.5 million excess of the purchase price over the fair value of the net assets acquired in “Goodwill” on the accompanying Consolidated Balance Sheets.

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

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

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

In fiscal 2019, the company completed the purchase accounting valuations for the acquired net assets of Power Hawk, including intangible assets.

In fiscal 2020, the company completed the purchase accounting valuations for the acquired net assets of Sigmavision.

The $ 5.6 million excess of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets.

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

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

In fiscal 2019, the company completed the purchase accounting valuations for the acquired net assets of TMB.

Substantially all of the purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets.

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

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

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

1 unchanged sentence

SNAP-ON INCORPORATED

At the beginning of fiscal 2020, Snap-on adopted ASU No.

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

The adoption did not have a significant impact on the company’s consolidated financial statements.

Under ASU No.

2016-13, Snap-on is required to determine expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts.

Trade and other accounts receivable:

8 unchanged sentences

Allowances for credit losses:

Beginning of period $ 26.3 $ 20.9

Beginning of year $ 27.3 $ 26.3

Provision for credit losses

2 unchanged sentences

( 0.7 ) ( 0.9 )

End of period $ 27.3 $ 26.3

End of year $ 31.1 $ 27.3

Finance and contract receivables:

3 unchanged sentences

Interest income on finance and contract receivables is included in “Financial services revenue” on the accompanying Consolidated Statements of Earnings.

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

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

Contract receivables, with payment terms of up to 10 years, are comprised of extended-term payment contracts to a broad base of customers worldwide, including shop owners, both independents and national chains, for their purchase of tools, diagnostics, and equipment products, as well as extended-term contracts to franchisees to meet a number of financing needs, including working capital loans, loans to enable new franchisees to fund the purchase of the franchise and van leases, or the expansion of an existing franchise.

18 unchanged sentences

Total contract allowance for credit losses ( 1.7 ) ( 2.1 )

Total allowance for credit losses ( 23.9 ) ( 26.2 )

Total allowances for credit losses ( 21.3 ) ( 23.9 )

Total current finance and contract receivables – net $ 672.1 $ 652.7

19 unchanged sentences

Total contract allowance for credit losses ( 4.9 ) ( 6.3 )

Total allowance for credit losses ( 51.8 ) ( 59.1 )

Total allowances for credit losses ( 46.2 ) ( 51.8 )

Total long-term finance and contract receivables – net $ 1,554.6 $ 1,492.2

17 unchanged sentences

Credit quality:

The company’s receivable portfolio is comprised of two portfolio segments, finance and contract receivables, which are the same segments used to estimate expected credit losses reported in the allowance for credit losses.

The amortized cost basis for finance and contract receivables is the amount originated adjusted for applicable accrued interest and net of deferred fees or costs, collection of cash, and write-offs.

20 unchanged sentences

Total Contract receivables $ 178.1 $ 119.4 $ 85.1 $ 57.5 $ 33.1 $ 27.1 $ 500.3

Allowance for credit losses:

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

SNAP-ON INCORPORATED

The allowance for credit losses is maintained at a level that is considered adequate to cover credit-related losses on the receivables.

Management performs detailed reviews of its receivables on a monthly and/or quarterly basis to assess the adequacy of the allowance and determine if any impairment has occurred.

A receivable may have credit losses when it is expected that all amounts related to the receivable will not be collected according to the contractual terms of the agreement.

Amounts determined to be uncollectable are charged directly against the allowance, while amounts recovered on previously written-off accounts increase the allowance.

Recovered interest and fees previously written off are recorded through the allowance for credit losses and increase the allowance.

Finance receivables are assessed for write-off when an account becomes 120 days past due and are written off typically within 60 days of asset repossession.

Changes to the allowances for credit losses are maintained through adjustments to the provision for credit losses.

Allowances for credit losses:

The allowances for credit losses are maintained at levels that are considered adequate to cover 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.

Management performs detailed reviews of its receivables on a monthly and/or quarterly basis to assess the adequacy of the allowances and to determine if any impairment has occurred.

A receivable generally has credit losses when it is expected that all amounts related to the receivable will not be collected according to the contractual terms of the agreement.

Amounts determined to be uncollectable are charged directly against the allowances, while amounts recovered on previously written off accounts increase the allowances.

For both finance and contract receivables, write-offs include the uncollectable principal amount of the receivable as well as the uncollectable accrued interest and fees, net of repossessions.

For finance receivables only, write-offs are partially offset by recourse from franchisees.

Recovered interest and fees previously written off are recorded through the allowances for credit losses and increase the allowances.

Absent a repossession, finance receivables are typically written off when an account reaches 120 days past due.

Repossessed accounts are typically written off within 60 days of asset repossession.

Changes to the allowances for credit losses are maintained through adjustments to the provisions for credit losses.

For finance receivables, the company uses a vintage loss rate methodology to determine expected losses.

1 unchanged sentence

The finance receivable portfolio contains a substantial amount of homogeneous contracts which fits well with the vintage analysis.

For contract receivables the company primarily uses a Weighted-Average Remaining Maturity methodology (“WARM”).

For contract receivables the company primarily uses a WARM methodology.

The WARM methodology calculates the average annual write-off rate and applies it to the remaining term of the receivables.

The WARM method is used since the contract receivables have limited loss experience over generally longer terms and, therefore, the predictive loss patterns are more difficult to estimate.

The WARM methodology is used since the contract receivables have limited loss experience over generally longer terms and, therefore, the predictive loss patterns are more difficult to estimate.

The company performed a correlation analysis to compare historical losses to many economic factors.

3 unchanged sentences

Similar qualitative factors are considered for both finance and contract receivables.

The qualitative factors used in determining the estimate of expected credit losses are influenced by the changes in the composition of the portfolio, underwriting practices, and other relevant conditions that were different from the historical periods, which included considering the impact of the coronavirus (“COVID-19”) pandemic.

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

The allowances for credit losses are adjusted each period for changes in the credit risk and expected lifetime credit losses.

The following is a rollforward of the allowances for credit losses for finance and contract receivables for 2022 and 2021:

5 unchanged sentences

Beginning of year $ 67.3 $ 8.4 $ 76.3 $ 9.0

Impact of adopting ASU No.

2016-13 — — 5.2 2.9

Provision for credit losses 37.7 0.5 32.1 0.8

79 unchanged sentences

Currency translation ( 19.4 ) — ( 11.3 ) ( 30.7 )

Acquisitions 18.3 — 8.7 27.0

Acquisition adjustments 14.0 — 150.8 164.8

Balance as of 2021 year end $ 325.8 $ 12.4 $ 778.3 $ 1,116.5

Currency translation ( 22.4 ) — ( 15.7 ) ( 38.1 )

Acquisitions 14.0 — 150.8 164.8

Acquisition adjustments ( 0.5 ) — ( 32.6 ) ( 33.1 )

Balance as of 2022 year end $ 302.9 $ 12.4 $ 730.0 $ 1,045.3

Goodwill of $ 1,116.5 million as of 2021 year end included $ 150.8 million, on a preliminary basis, from the acquisition of Dealer-FX, $ 10.7 million, on a preliminary basis, from the acquisition of Pradines and $ 3.3 million, on a preliminary basis, from the acquisition of AutoCrib Germany.

Goodwill of $ 1,045.3 million as of 2022 year end included $ 118.2 million from the acquisition of Dealer-FX, $ 10.2 million from the acquisition of Pradines and $ 3.3 million from the acquisition of AutoCrib Germany.

The goodwill from Dealer-FX is included in the Repair Systems & Information Group and the goodwill from AutoCrib Germany and Pradines is included in the Commercial & Industrial Group.

Goodwill of $ 982.4 million as of 2020 year end includes:

(i) $ 5.6 million from the acquisition of certain assets of Sigmavision, (ii) $ 14.5 million from the acquisition of Cognitran;

and (iii) $ 18.3 million, from the acquisition of AutoCrib.

During 2020, the purchase accounting valuations for the acquired net assets, including intangible assets, of Sigmavision and Cognitran were completed, resulting in an increase in goodwill of $ 3.1 million for Cognitran.

The remaining purchase accounting valuations for the acquired net assets, including intangible assets, of AutoCrib were completed in the first quarter of 2021.

The goodwill from the Sigmavision and Cognitran acquisitions is included in the Repair Systems & Information Group.

The goodwill from the AutoCrib acquisition is included in the Commercial & Industrial Group.

The purchase accounting valuations for the acquired net assets of AutoCrib Germany, Dealer-FX and Pradines were completed in 2022.

The purchase accounting valuations for the acquired net assets of Dealer-FX resulted in a reduction of goodwill of $ 32.6 million from 2021 year end.

The purchase accounting valuations for the acquired net assets of Pradines resulted in a reduction of goodwill of $ 0.5 million from 2021 year end.

See Note 3 for additional information on acquisitions.

2 unchanged sentences

Additional disclosures related to other intangible assets as of 2022 and 2021 year end are as follows:

(Amounts in millions) Gross

Carrying Value Accumulated

Amortization Gross

(Amounts in millions) Gross Carrying Value Accumulated

Amortization Net Carrying Value Gross

Carrying Value Accumulated

Amortization Net Carrying Value

Amortized other intangible assets:

8 unchanged sentences

Total other intangible assets $ 621.6 $ ( 346.0 ) $ 275.6 $ 637.6 $ ( 335.9 ) $ 301.7

As of year-end 2021, the gross carrying value of intangible assets includes $ 28.4 million of customer relationships, $ 14.8 million of developed technology and a $ 17.7 million non-amortized trademark related to the Dealer-FX acquisition.

As of year-end 2020, the gross carrying value of intangible assets includes $ 4.6 million of customer relationship s, $ 1.7 million of developed technology and a $ 7.4 million non-amortized trademark from the AutoCrib acquisition, as well as $ 0.3 million of patents related to the Sigmavision acquisition.

Provision for impairment of goodwill and/or other intangible assets could arise in a future period due to significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to significant and long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, significant changes in key personnel or litigation, a significant and sustained decrease in share price and/or other events, including effects from the sale or disposal of a reporting unit.

Provision for impairment of goodwill and/or other intangible assets could arise in a future period due to significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to 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.

As of 2022 year end, the company had no accumulated impairment losses.

3 unchanged sentences

Internally developed software 6

Snap-on is amortizing its customer relationships on both an accelerated and straight-line basis over a 14 year weighted-average life;

the remaining intangibles are amortized on a straight-line basis.

The weighted-average amortization period for all amortizable intangibles on a combined basis is 12 years.

The company’s customer relationships generally have contractual terms of three to five years and are typically renewed without significant cost to the company.

The weighted-average 14 year life for customer relationships is based on the company’s historical renewal experience.

Intangible asset renewal costs are expensed as incurred.

3 unchanged sentences

Exit and Disposal Activities

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

Snap-on recorded $ 12.5 million of costs associated with exit and disposal activities during fiscal 2020.

The costs associated with disposal activities by operating segment are as follows:

(Amounts in millions) 2021 2020

Exit and disposal costs

Cost of goods sold:

Commercial & Industrial Group

Repair System & Information Group

Total cost of goods sold $ — $ 7.1

Operating Expenses:

Snap-on Tools Group

Repair System & Information Group

Total operating expenses $ — $ 5.4

Total exit and disposal costs:

Commercial & Industrial Group

Snap-on Tools Group

Repair System & Information Group

Total exit and disposal costs $ — $ 12.5

Of the $ 12.5 million of costs incurred in 2020, $ 12.2 million qualified for accrual treatment.

Costs associated with exit and disposal activities in 2020 primarily related to headcount reductions from the ongoing optimization of the company’s cost structure in Europe and various other management and realignment actions.

Snap-on did not record any costs for exit and disposal activities during fiscal 2022 or fiscal 2021.

Snap-on’s exit and disposal accrual activity for 2022 and 2021 are as follows:

10 unchanged sentences

Total $ 10.0 $ — $ ( 3.0 ) $ 7.0 $ — $ ( 4.2 ) $ 2.8

As of January 1, 2022, the company expects that approximately $ 5.2 million of the $ 7.0 million exit and disposal accrual will be utilized in 2022, and the remainder thereafter, primarily for longer-term severance payments.

As of December 31, 2022, the company expects that approximately $ 1.9 million of the $ 2.8 million exit and disposal accrual will be utilized in 2023, and the remainder thereafter, primarily for longer-term severance payments.

Snap-on expects to fund the remaining cash requirements of its exit and disposal activities with available cash on hand, cash flows from operating activities and borrowings under the company’s existing credit facilities.

The estimated costs for the exit and disposal activities were based on management’s best business judgement under prevailing circumstances.

2021 ANNUAL REPORT 85

Notes to Consolidated Financial Statements (continued)

The source of earnings before income taxes and equity earnings consisted of the following:

14 unchanged sentences

Total income tax provision $ 268.7 $ 247.0 $ 189.1

2022 ANNUAL REPORT 85

Notes to Consolidated Financial Statements (continued)

The following is a reconciliation of the statutory federal income tax rate to Snap-on’s effective tax rate:

12 unchanged sentences

Snap-on’s effective income tax rate on earnings attributable to Snap-on Incorporated was 22.8 % in 2022, 23.2 % in 2021, and 23.2 % in 2020.

SNAP-ON INCORPORATED

Temporary differences that give rise to the net deferred income tax liability as of 2022, 2021 and 2020 year end are as follows:

23 unchanged sentences

Total net operating loss carryforwards $ 12.1 $ — $ 178.0 $ 190.1

SNAP-ON INCORPORATED

A valuation allowance totaling $ 23.5 million, $ 24.5 million and $ 26.7 million as of 2022, 2021 and 2020 year end, respectively, has been established for deferred income tax assets primarily related to certain subsidiary loss carryforwards that may not be realized.

2 unchanged sentences

The amount of the net deferred income tax assets considered realizable, however, could change in the near term if estimates of future taxable income during the carryforward period fluctuate.

The expected realization of tax benefits associated with the February 26, 2021 acquired loss carryforwards will be recorded in the first quarter of 2022, with the final purchase accounting valuation for Dealer-FX.

See Note 3 for more information on acquisitions.

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2022, 2021 and 2020:

7 unchanged sentences

Unrecognized tax benefits at end of year $ 5.6 $ 8.9 $ 9.1

2021 ANNUAL REPORT 87

Notes to Consolidated Financial Statements (continued)

The unrecognized tax benefits of $ 5.6 million, $ 8.9 million and $ 9.1 million as of 2022, 2021 and 2020 year end, respectively, would impact the effective income tax rate if recognized.

As of January 1, 2022, unrecognized tax benefits of $ 1.3 million and $ 7.6 million were included in “Deferred income tax assets” and “Other long-term liabilities,” respectively, on the accompanying Consolidated Balance Sheets.

As of December 31, 2022, unrecognized tax benefits of $ 1.2 million and $ 4.4 million were included in “Deferred income tax assets” and “Other long-term liabilities,” respectively, on the accompanying Consolidated Balance Sheets.

Interest and penalties related to unrecognized tax benefits are recorded in income tax expense.

As of 2022, 2021 and 2020 year end, the company had provided for $ 0.9 million, $ 1.4 million and $ 1.1 million, respectively, of accrued interest and penalties related to unrecognized tax benefits.

As of January 1, 2022, $ 1.4 million of accrued interest and penalties were included in “Other long-term liabilities” on the accompanying Consolidated Balance Sheets.

As of December 31, 2022, $ 0.9 million of accrued interest and penalties were included in “Other long-term liabilities” on the accompanying Consolidated Balance Sheets.

Snap-on and its subsidiaries file income tax returns in the United States and in various state, local and foreign jurisdictions.

12 unchanged sentences

cash in a tax efficient manner.

Accordingly, the company has reversed its prior assertion concerning the indefinite reinvestment of the majority of its undistributed foreign earnings and has recorded a deferred tax liability of $ 4.4 million for the incremental tax costs associated with the future potential repatriation of such earnings.

Accordingly, the company does not have an indefinitely reinvested assertion on the majority of undistributed earnings for its non-U.S.

subsidiaries and has recorded a deferred tax liability of $ 4.2 million for the incremental tax costs associated with the future potential repatriation of such earnings.

2022 ANNUAL REPORT 87

Notes to Consolidated Financial Statements (continued)

Short-term and Long-term Debt

4 unchanged sentences

3.10 % unsecured notes due 2050

Other debt* 1.0 0.3

1,201.0 1,200.3

notes payable and current maturities of long-term debt:

Current maturities of long-term debt

$ — $ ( 250.0 )

( 17.4 ) ( 18.5 )

( 17.4 ) ( 268.5 )

notes payable ( 17.2 ) ( 17.4 )

Total long-term debt $ 1,183.8 $ 1,182.9

* Includes the net effects of debt amortization costs and fair value adjustments related to interest rate swaps.

SNAP-ON INCORPORATED

There are no annual maturities of Snap-on’s long-term debt and notes payable over the next five years.

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.

* Includes unamortized debt issuance costs.

Snap-on’s long-term debt and notes payable have no annual maturities in the next four years and $ 300.0 million matures in 2027.

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.

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.

On April 27, 2020, Snap-on sold, at a discount, $ 500 million of unsecured 3.10 % notes that mature on May 1, 2050 (the “2050 Notes”).

2 unchanged sentences

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:

4 unchanged sentences

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.

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

Financial Instruments

3 unchanged sentences

Gains or losses on derivative instruments in accumulated other comprehensive income (loss) (“Accumulated OCI”) are reclassified to earnings in the period in which earnings are affected by the underlying hedged item.

SNAP-ON INCORPORATED

The criteria used to determine if hedge accounting treatment is appropriate are:

4 unchanged sentences

Snap-on does not use derivative instruments for speculative or trading purposes.

The company is exposed to global market risks, including the effects of changes in foreign currency exchange rates, interest rates, and the company’s stock price, and therefore uses derivatives to manage financial exposures that occur in the normal course of business.

Snap-on is exposed to global market risks, including the effects of changes in foreign currency exchange rates, interest rates, and the company’s stock price.

The company uses derivatives to manage financial exposures that occur in the normal course of business.

The primary risks managed by using derivative instruments are foreign currency risk, interest rate risk and stock-based deferred compensation risk.

2021 ANNUAL REPORT 89

Notes to Consolidated Financial Statements (continued)

Foreign currency risk management:

8 unchanged sentences

See Note 18 for additional information on Other income (expense) - net.

As of 2022 year end, Snap-on had $ 92.7 million of net foreign currency forward sell contracts outstanding comprised of sell contracts including $ 250.0 million in Canadian dollars, $ 39.2 million in euros, $ 8.5 million in Hungarian forints, $ 5.4 million in Indian rupees, and $ 3.9 million in other currencies, and buy contracts comprised of $ 72.0 million in British pounds, $ 41.3 million in Swedish kronor, $ 36.5 million in Hong Kong dollars, $ 26.8 million in Chinese renminbi, $ 16.0 million in Singapore dollars, $ 6.7 million in Australian dollars, $ 5.9 million in Norwegian kroner, $ 4.7 million in Danish kroner, and $ 4.4 million in other currencies.

As of 2021 year end, Snap-on had $ 81.3 million of net foreign currency forward sell contracts outstanding comprised of sell contracts including $ 290.0 million in Canadian dollars, $ 10.3 million in euros, $ 8.1 million in Indian rupees, $ 6.3 million in Hungarian forints, and $ 4.5 million in other currencies, and buy contracts comprised of $ 79.6 million in British pounds, $ 48.4 million in Swedish kronor, $ 31.0 million in Chinese renminbi, $ 30.0 million in Hong Kong dollars, $ 14.3 million in Australian dollars, $ 14.2 million in Singapore dollars, $ 7.2 million in Norwegian kroner, $ 4.9 million in Danish kroner, and $ 8.3 million in other currencies.

As of 2020 year end, Snap-on had $ 46.7 million of net foreign currency forward buy contracts outstanding comprised of buy contracts including $ 58.9 million in Swedish kronor, $ 43.5 million in British pounds, $ 26.1 million in Chinese renminbi, $ 22.5 million in Hong Kong dollars, $ 14.6 million in Singapore dollars, $ 6.2 million in Australian dollars, $ 5.8 million in Norwegian kroner, $ 5.1 million in Danish kroner, and $ 3.7 million in other currencies, and sell contracts comprised of $ 120.4 million in Canadian dollars, $ 7.9 million in Indian rupees, $ 3.5 million in Hungarian forints, and $ 7.9 million in other currencies.

Interest rate risk management:

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

Snap-on may manage the exposure created by the differing maturities and interest rate structures of Snap-on’s borrowings through the use of interest rate swap agreements (“interest rate swaps”) and treasury lock agreements (“treasury locks”).

Interest rate swaps:

Snap-on enters into interest rate swaps to manage risks associated with changing interest rates related to the company’s fixed rate borrowings.

Snap-on may enter into interest rate swaps to manage risks associated with changing interest rates related to the company’s fixed rate borrowings.

Interest rate swaps are accounted for as fair value hedges.

The differentials paid or received on interest rate swaps are recognized as adjustments to “Interest expense” on the accompanying Consolidated Statements of Earnings.

The change in the fair value of the derivative is recorded in “Notes payable and current maturities of long-term debt” in 2020 on the accompanying Consolidated Balance Sheets.

As of 2020 year end, the notional amount of interest rate swaps outstanding and designated as fair value hedges was $ 100 million.

The interest rate swaps matured in fiscal 2021 and there were no outstanding swaps as of 2021 year end.

Consolidated Balance Sheets Line Item Where Hedge Item is Recorded Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)

(in millions) (in millions)

2021 2020 2021 2020

Notes payable and current maturities of long-term debt $ — $ ( 255.1 ) $ — $ ( 5.1 )

The change in the fair value of the derivative is recorded in “Long-term debt” on the accompanying Consolidated Balance Sheets.

There were no outstanding interest rate swaps as of both 2022 and 2021 year end.

Treasury locks:

Snap-on uses treasury locks to manage the potential change in interest rates in anticipation of the issuance of fixed rate debt.

Snap-on may use treasury locks to manage the potential change in interest rates in anticipation of the issuance of fixed rate debt.

Treasury locks are accounted for as cash flow hedges.

1 unchanged sentence

Upon the issuance of debt, the related amount in Accumulated OCI is released over the term of the debt and recognized as an adjustment to interest expense on the Consolidated Statements of Earnings.

SNAP-ON INCORPORATED

In the second quarter of 2020, Snap-on entered into a $ 300.0 million treasury lock to manage changes in interest rates in anticipation of the issuance of fixed rate debt.

Snap-on settled the $ 300.0 million treasury lock in conjunction with the April 2020 issuance of the 2050 Notes.

The $ 1.4 million gain on the settlement of the treasury lock was recorded in Accumulated OCI and is being amortized over the initial 10 -year term of the 2050 Notes and recognized as an adjustment to interest expense on the Consolidated Statements of Earnings.

There were no treasury locks outstanding as of both January 1, 2022, and January 2, 2021.

There were no treasury locks outstanding as of both 2022 and 2021 year end.

See Note 18 for additional information on Other income (expense) - net.

2022 ANNUAL REPORT 89

Notes to Consolidated Financial Statements (continued)

Stock-based deferred compensation risk management:

Snap-on aims to manage market risk associated with the stock-based portion of its deferred compensation plans through the use of prepaid equity forward agreements (“equity forwards”).

Snap-on manages market risk associated with the stock-based portion of its deferred compensation plans through the use of prepaid equity forward agreements (“equity forwards”).

Equity forwards are used to aid in offsetting the potential mark-to-market effect on stock-based deferred compensation from changes in Snap‑on’s stock price.

9 unchanged sentences

Fair value measurements primarily based on observable market information are given a “Level 2” priority.

Snap-on has derivative assets and liabilities related to interest rate swaps, treasury locks, foreign currency forwards and equity forwards that are measured at Level 2 fair value on a recurring basis.

Snap-on has derivative assets and liabilities related to treasury locks, foreign currency forwards and equity forwards that are measured at Level 2 fair value on a recurring basis.

The fair values of derivative instruments included within the accompanying Consolidated Balance Sheets as of 2022 and 2021 year end are as follows:

4 unchanged sentences

Fair Value Derivative

Derivatives designated as

hedging instruments:

Interest rate swaps Other assets $ — $ — $ 5.1 $ —

Derivatives not designated as hedging instruments:

2 unchanged sentences

Equity forwards Prepaid expenses and other assets 14.8 — 15.5 —

25.7 5.3 25.7 7.0

Total derivative instruments $ 33.3 $ 16.9 $ 25.7 $ 5.3

2021 ANNUAL REPORT 91

Notes to Consolidated Financial Statements (continued)

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date.

5 unchanged sentences

The effect of derivative instruments designated as cash flow hedges as included in the Accumulated OCI on the Consolidated Balance Sheets is as follows:

Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative

Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative Instruments

(Amounts in millions) 2022 2021 2020

1 unchanged sentence

Treasury locks $ — $ — $ 1.4

SNAP-ON INCORPORATED

The effect of derivative instruments designated as fair value and cash flow hedges as included in the Consolidated Statements of Earnings is as follows:

15 unchanged sentences

During the next 12 months, Snap-on expects to reclassify into earnings net gains from Accumulated OCI of approximately $ 1.2 million after tax at the time the underlying hedge transactions are realized.

SNAP-ON INCORPORATED

The effects of derivative instruments not designated as hedging instruments as included in the Consolidated Statements of Earnings are as follows:

11 unchanged sentences

Operating expenses ( 1.4 ) ( 4.3 ) ( 1.2 )

2022 ANNUAL REPORT 91

Notes to Consolidated Financial Statements (continued)

Snap-on’s foreign currency forwards are typically not designated as hedges for financial reporting purposes.

9 unchanged sentences

Contract receivables – net 493.7 520.4 488.6 542.5

Long-term debt, notes payable and current maturities of long-term debt

Long-term debt and notes payable

1,201.0 982.1 1,200.3 1,339.7

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

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

• Finance and contract receivables include both short-term and long-term receivables.

3 unchanged sentences

Significant inputs to the fair value measurements of the receivables are unobservable and, as such, are classified as Level 3.

• Fair value of long-term debt and current maturities of long-term debt were estimated, using Level 2 fair value measurements, based on quoted market values of Snap-on’s publicly traded senior debt.

The carrying value of long-term debt and the current maturities of long-term debt includes adjustments related to fair value hedges.

• Fair value of long-term debt is estimated, using Level 2 fair value measurements, based on quoted market values of Snap-on’s publicly traded senior debt.

The carrying value of long-term debt includes unamortized debt issuance costs.

The fair value of notes payable approximates such instruments’ carrying value due to their short-term nature.

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

2021 ANNUAL REPORT 93

Notes to Consolidated Financial Statements (continued)

SNAP-ON INCORPORATED

Pension Plans

11 unchanged sentences

Plan participant contributions 0.4 0.5

Plan amendments — 0.1

Benefits paid ( 77.7 ) ( 75.6 )

Actuarial (gain) loss ( 30.2 ) 122.8

Actuarial gain ( 382.4 ) ( 30.2 )

Foreign currency impact ( 23.7 ) ( 8.7 )

2 unchanged sentences

Fair value of plan assets at beginning of year $ 1,710.9 $ 1,632.4

Actual gain on plan assets 146.3 227.9

Actual gain (loss) on plan assets ( 384.1 ) 146.3

Employer contributions 10.8 10.7

7 unchanged sentences

(Amounts in millions) 2022 2021

Other assets $ 160.7 $ 54.2

Pension assets $ 70.6 $ 160.7

Accrued benefits ( 4.9 ) ( 12.0 )

8 unchanged sentences

Total amount included in Accumulated OCI $ ( 269.5 ) $ ( 210.0 )

2022 ANNUAL REPORT 93

Notes to Consolidated Financial Statements (continued)

The accumulated benefit obligation for Snap-on’s pension plans as of 2022 and 2021 year end was $ 1,201.8 million and $ 1,580.4 million, respectively.

SNAP-ON INCORPORATED

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for Snap-on’s pension plans as of 2022 and 2021 year end are as follows:

13 unchanged sentences

Amortization of unrecognized loss 18.0 36.3 34.5

Amortization of prior service cost (credit) 0.1 — ( 0.9 )

Net periodic benefit cost $ 13.1 $ 15.5 $ 12.7

Amortization of prior service cost 0.1 0.1 —

Net periodic benefit cost (credit) $ ( 10.2 ) $ 13.1 $ 15.5

Changes in benefit obligations recognized in OCI, net of tax:

16 unchanged sentences

cash balance plan 3.8 % 3.8 %

2021 ANNUAL REPORT 95

Notes to Consolidated Financial Statements (continued)

SNAP-ON INCORPORATED

The objective of Snap-on’s discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled.

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.

25 unchanged sentences

The asset return assumption is also adjusted by an implicit expense load for estimated administrative and investment-related expenses.

SNAP-ON INCORPORATED

2022 ANNUAL REPORT 95

Notes to Consolidated Financial Statements (continued)

For risk and correlation assumptions, the actual experience for each asset class is reviewed for the longest time period available.

29 unchanged sentences

The fair value amounts presented in these tables are intended to permit a reconciliation of the fair value hierarchy to the pension plan assets.

2021 ANNUAL REPORT 97

Notes to Consolidated Financial Statements (continued)

SNAP-ON INCORPORATED

The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of Snap-on’s domestic pension plans’ assets as of 2022 year end:

45 unchanged sentences

The company believes the foreign pension plans’ assets, which are managed locally by professional investment firms, are well diversified.

SNAP-ON INCORPORATED

The expected long-term rates of return on foreign plans’ assets, which range from 1.3 % to 5.6 % as of 2021 year end, reflect management’s expectations of long-term average rates of return on funds invested to provide benefits included in the plans’ projected benefit obligation.

2022 ANNUAL REPORT 97

Notes to Consolidated Financial Statements (continued)

The expected long-term rates of return on foreign plans’ assets, which range fro m 2.2 % to 6.9 % as of 2022 year end, reflect management’s expectations of long-term average rates of return on funds invested to provide benefits included in the plans’ projected benefit obligation.

The expected returns are based on outlooks for inflation, fixed income returns and equity returns, asset allocations and investment strategies.

36 unchanged sentences

Total $ 15.7 $ 58.0 $ 172.5 $ 246.2

2021 ANNUAL REPORT 99

Notes to Consolidated Financial Statements (continued)

SNAP-ON INCORPORATED

Snap-on has several 401(k) plans covering certain U.S.

20 unchanged sentences

Benefits paid ( 3.8 ) ( 3.6 )

Actuarial (gain) loss ( 0.8 ) 3.3

Actuarial gain ( 7.8 ) ( 0.8 )

Benefit obligation at end of year $ 37.3 $ 47.5

1 unchanged sentence

Fair value of plan assets at beginning of year $ 13.7 $ 13.3

Actual return on plan assets 1.1 1.4

Actual gain (loss) on plan assets ( 1.7 ) 1.1

Employer contributions 2.8 2.7

11 unchanged sentences

Net gain, net of tax of $ 2.2 million and $ 0.8 million, respectively

SNAP-ON INCORPORATED

2022 ANNUAL REPORT 99

Notes to Consolidated Financial Statements (continued)

The components of net periodic benefit cost and changes recognized in OCI are as follows:

3 unchanged sentences

Expected return on plan assets ( 0.6 ) ( 0.6 ) ( 0.6 )

Amortization of unrecognized gain — — ( 0.8 )

Net periodic benefit cost $ 0.6 $ 0.5 $ 0.9

17 unchanged sentences

Since asset allocation is a key determinant of expected investment returns, assets are periodically rebalanced to the targeted allocation to correct significant deviations from the asset allocation policy that are caused by market fluctuations and cash flow.

2021 ANNUAL REPORT 101

Notes to Consolidated Financial Statements (continued)

SNAP-ON INCORPORATED

The basis for determining the overall expected long-term return on plan assets assumption is a nominal returns forecasting method.

27 unchanged sentences

The fair value amounts presented in these tables are intended to permit a reconciliation of the fair value hierarchy to the VEBA plan assets.

SNAP-ON INCORPORATED

2022 ANNUAL REPORT 101

Notes to Consolidated Financial Statements (continued)

The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of the VEBA plan assets as of 2022 year end:

17 unchanged sentences

Stock-based Compensation and Other Stock Plans

The 2011 Incentive Stock and Awards Plan (the “2011 Plan”) provides for the grant of stock options, performance awards, SARs and restricted stock awards (which may be designated as “restricted stock units” or “RSUs”).

The 2011 Incentive Stock and Awards Plan (the “2011 Plan”) provides for the grant of stock options, performance share units (“PSUs”), stock appreciation rights (“SARs”) and restricted stock awards (which may be designated as “restricted stock units” or “RSUs”).

As of 2022 year end, the 2011 Plan had 3,122,593 shares available for future grants.

4 unchanged sentences

Stock options:

Stock options are granted with an exercise price equal to the market value of a share of Snap-on’s common stock on the date of grant and have a contractual term of ten years .

Stock options are granted with an exercise price equal to the market value of a share of Snap-on’s common stock on the date of grant and have a contractual term of 10 years.

Stock option grants vest ratably on the first, second and third anniversaries of the date of grant.

5 unchanged sentences

treasury yield curve on the grant date for the expected term of the option.

2021 ANNUAL REPORT 103

Notes to Consolidated Financial Statements (continued)

SNAP-ON INCORPORATED

The following weighted-average assumptions were used in calculating the fair value of stock options granted during 2022, 2021 and 2020, using the Black-Scholes valuation model:

20 unchanged sentences

As of 2022 year end, there was $ 10.2 million of unrecognized compensation cost related to non-vested stock options that is expected to be recognized as a charge to earnings over a weighted-average period of 1.3 years.

Performance share unit and restricted stock unit awards:

Performance share units (“PSUs”) are earned and expensed using the fair value of the award over a contractual term of three years based on the company’s performance.

Performance share units:

PSUs are earned and expensed using the fair value of the award over a contractual term of three years based on the company’s performance.

Vesting of the PSUs is dependent upon performance relative to pre-defined goals for revenue growth and return on net assets for the applicable performance period.

1 unchanged sentence

The PSUs have a three-year performance period based on the results of the consolidated financial metrics of the company.

The fair value of PSUs is calculated using the market value of a share of Snap-on’s common stock on the date of grant and assumed forfeitures based on recent historical experience;

in recent years, forfeitures have not been significant.

The weighted-average grant date fair value of PSUs granted during 2022, 2021 and 2020, was $ 211.67 , $ 183.13 and $ 155.34 , respectively.

Earned PSUs totaled 61,839 shares as of the 2022 year end and 46,343 as of the 2021 year end.

There were no earned PSUs as of the 2020 year end.

Earned PSUs vest and are generally paid out following the conclusion of the applicable performance period upon approval by the Organization and Executive Compensation Committee of the company’s Board of Directors (the “Board”).

PSUs related to 46,217 shares and 21,183 shares were paid out in 2022 and 2020, respectively.

There were no PSUs paid out in 2021.

2022 ANNUAL REPORT 103

Notes to Consolidated Financial Statements (continued)

Changes to the company’s non-vested PSUs in 2022 are as follows:

(in thousands)

Non-vested PSUs at beginning of year 183 $ 178.60

Granted 62 211.67

Performance assumption change ** 21 185.41

Vested ( 62 ) 155.34

Cancellations and other ( 5 ) 190.55

Non-vested PSUs at end of year 199 196.51

* Weighted-average

** Reflects the number of PSUs above target levels based on performance metrics.

As of 2022 year end, there was $ 17.3 million of unrecognized compensation cost related to non-vested PSUs that is expected to be recognized as a charge to earnings over a weighted-average period of 1.3 years.

Restricted stock units:

Time-based RSUs are earned and expensed using the fair value of the award over the contractual term of three years .

1 unchanged sentence

Prior to 2021, the company granted performance-based RSUs with a one-year performance period followed by a two-year cliff vesting schedule.

The fair value of PSUs and RSUs is calculated using the market value of a share of Snap-on’s common stock on the date of grant and assumed forfeitures based on recent historical experience;

The fair value of RSUs is calculated using the market value of a share of Snap-on’s common stock on the date of grant and assumed forfeitures based on recent historical experience;

in recent years, forfeitures have not been significant.

The weighted-average grant date fair value of awards granted during 2021, 2020 and 2019, was $ 184.32 , $ 155.34 and $ 155.92 , respectively.

Earned PSUs totaled 46,343 shares as of the 2021 year end.

There were no earned PSUs as of the 2020 year end and as of 2019 year end earned PSUs totaled 21,183 shares.

There were no PSUs paid out in 2021.

PSUs related to 21,183 shares and 32,114 shares were paid out in 2020 and 2019, respectively.

The weighted-average grant date fair value of RSUs granted during 2022, 2021 and 2020, was $ 211.67 , $ 189.89 and $ 155.34 , respectively.

In fiscal 2022, 28,050 time-based RSUs were granted;

assuming continued employment, these RSUs will vest at the end of the 3-year cliff vesting period.

Based on the company’s 2020 and 2019 performance, none of the performance-based RSUs granted in either 2020 or 2019 were earned.

SNAP-ON INCORPORATED

Changes to the company’s non-vested PSUs and RSUs in 2021 are as follows:

In fiscal 2021, 32,265 time-based RSUs were granted;

assuming continued employment, these RSUs will vest at the end of the 3-year cliff vesting period.

In fiscal 2020, performance-based RSUs were granted, but based on the company’s 2020 performance, none of the RSUs granted were earned.

Changes to the company’s non-vested RSUs in 2022 are as follows:

(in thousands)

Non-vested PSUs and RSUs at beginning of year 76 $ 155.61

Non-vested RSUs at beginning of year 32 $ 189.89

Granted 28 211.67

1 unchanged sentence

Cancellations and other ( 1 ) 198.29

Non-vested PSUs and RSUs at end of year 215 180.29

Non-vested RSUs at end of year 58 200.16

* Weighted-average

As of 2021 year end, there was $ 22.9 million of unrecognized compensation cost related to non-vested PSUs and RSUs that is expected to be recognized as a charge to earnings over a weighted-average period of 1.4 years.

As of 2022 year end, there was $ 6.2 million of unrecognized compensation cost related to non-vested RSUs that is expected to be recognized as a charge to earnings over a weighted-average period of 1.5 years.

Stock appreciation rights:

The company also issues stock-settled and cash-settled SARs to certain key non-U.S.

SARs have a contractual term of ten years and vest ratably on the first, second and third anniversaries of the date of grant.

SARs have a contractual term of 10 years and vest ratably on the first, second and third anniversaries of the date of grant.

SARs are granted with an exercise price equal to the market value of a share of Snap-on’s common stock on the date of grant.

3 unchanged sentences

Cash-settled SARs have no effect on dilutive shares or shares outstanding as any appreciation of Snap-on’s common stock over the grant price is paid in cash and not in common stock.

SNAP-ON INCORPORATED

The fair value of stock-settled SARs is estimated on the date of grant using the Black-Scholes valuation model.

12 unchanged sentences

Risk-free interest rate 1.96 % 0.19 % 1.42 %

2021 ANNUAL REPORT 105

Notes to Consolidated Financial Statements (continued)

Changes to the company’s stock-settled SARs in 2022 are as follows:

22 unchanged sentences

The intrinsic value of cash-settled SARs exercised was $ 0.6 million in 2022, $ 0.6 million in 2021 and $ 1.0 million in 2020.

The fair value of cash-settled SARs vested during 2021, 2020 and 2019 was $ 0.1 million, zero and $ 0.1 million, respectively.

The fair value of cash-settled SARs vested during 2022, 2021 and 2020 was $ 0.1 million, $ 0.1 million and zero , respectively.

2022 ANNUAL REPORT 105

Notes to Consolidated Financial Statements (continued)

Changes to the company’s non-vested cash-settled SARs in 2022 are as follows:

11 unchanged sentences

If termination of the recipient’s service occurs prior to the first anniversary of the grant date for any reason other than death or disability, the shares of restricted stock would be forfeited, unless otherwise determined by the Board.

SNAP-ON INCORPORATED

Directors’ fee plan:

6 unchanged sentences

The purchase price of the company’s common stock to participants is the lesser of the mean of the high and low price of the stock on the beginning date (May 15) or ending date (the following May 14) of each plan year.

The company records compensation expense when Snap-on’s period-end stock price is greater than the plan purchase price.

For 2022, 2021 and 2020, issuances under this plan totaled 18,452 shares, 82,286 shares and 25,425 shares, respectively.

5 unchanged sentences

The company records mark-to-market expense when Snap-on’s period-end stock price is greater than the plan purchase price.

For 2022, 2021 and 2020, issuances under this plan totaled 44,937 shares, 143,388 shares and 55,980 shares, respectively.

As of 2022 year end, shares reserved for issuance under this plan totaled 225,225 shares and Snap-on held participant contributions of approximately $ 6.3 million.

Participants are able to withdraw from the plan at any time prior to the ending date and receive back all contributions made during the plan year.

Participants are able to withdraw from the plan at any time prior to the ending date and generally receive back all contributions made during the plan year.

The company recognized mark-to-market expense of $ 0.4 million in 2022, $ 16.7 million in 2021, and $ 1.9 million in 2020.

Capital Stock

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

Snap-on repurchased 899,000 shares, 1,943,900 shares and 1,109,000 shares in 2022, 2021 and 2020, respectively.

1 unchanged sentence

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

SNAP-ON INCORPORATED

Cash dividends paid in 2022, 2021 and 2020 totaled $ 313.1 million, $ 275.8 million and $ 243.3 million, respectively.

12 unchanged sentences

Approximately 2,600 employees, or 20 % of Snap-on’s worldwide workforce, are represented by unions and/or covered under collective bargaining agreements.

The number of covered union employees whose contracts expire over the next five years approximates 1,300 employees in 2022, 875 employees in 2023, 400 employees in 2024, and 125 employees in 2025;

there are no contracts currently scheduled to expire in 2026.

The number of covered union employees whose contracts expire over the next five years approximates 1,600 employees in 2023, 825 employees in 2024, and 175 employees in 2025;

there are no contracts currently scheduled to expire in 2026 or 2027.

In recent years, Snap-on has not experienced any significant work slowdowns, stoppages or other labor disruptions.

2021 ANNUAL REPORT 107

Notes to Consolidated Financial Statements (continued)

Snap-on is involved in various legal matters that are being litigated and/or settled in the ordinary course of business.

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

Although it is not possible to predict the outcome of legal matters, management believes that the results of all legal matters will not have a material impact on Snap-on’s consolidated financial position, results of operations or cash flows.

16 unchanged sentences

For all equipment leases, including vehicles, Snap-on accounts for the lease and non-lease components as a single lease component.

2022 ANNUAL REPORT 107

Notes to Consolidated Financial Statements (continued)

Total lease costs for 2022, 2021 and 2020 consist of the following:

15 unchanged sentences

Operating lease liabilities 33.5 23.4 15.2

SNAP-ON INCORPORATED

Supplemental balance sheet information related to leases in 2022 and 2021 is as follows:

12 unchanged sentences

Total operating lease liabilities $ 64.1 $ 53.8

SNAP-ON INCORPORATED

Weighted-average lease terms and discount rates in 2022 and 2021 are as follows:

6 unchanged sentences

Operating leases 2.9 % 1.9 % 2.6 %

Maturities of lease liabilities as of January 1, 2022 are as follows:

Maturities of lease liabilities as of December 31, 2022, are as follows:

(Amounts in millions) Operating Leases Finance Leases

22 unchanged sentences

In 2022 and 2021, contract receivables have future minimum lease payments, including unguaranteed residual value, of $ 296.7 million and $ 293.7 million, respectively, and unearned finance charges of $ 49.8 million and $ 49.0 million, respectively.

Future minimum lease payments as of January 1, 2022 are as follows:

Future minimum lease payments as of December 31, 2022 are as follows:

(Amounts in millions) Lease Receivables

21 unchanged sentences

Balance at beginning of 2021 $ ( 74.7 ) $ 10.5 $ ( 301.6 ) $ ( 365.8 )

Other comprehensive income before reclassifications 112.7 1.4 3.5 117.6

Other comprehensive income (loss) before reclassifications ( 69.4 ) — 66.5 ( 2.9 )

Amounts reclassified from Accumulated OCI ( 1.0 ) ( 1.6 ) 27.4 24.8

1 unchanged sentence

Balance as of 2021 year end $ ( 145.1 ) $ 8.9 $ ( 207.7 ) $ ( 343.9 )

Other comprehensive income (loss) before reclassifications ( 69.4 ) — 66.5 ( 2.9 )

Other comprehensive loss before reclassifications ( 127.4 ) — ( 69.0 ) ( 196.4 )

Amounts reclassified from Accumulated OCI — ( 1.6 ) 13.6 12.0

Net other comprehensive income (loss) ( 70.4 ) ( 1.6 ) 93.9 21.9

Net other comprehensive loss ( 127.4 ) ( 1.6 ) ( 55.4 ) ( 184.4 )

Balance as of 2022 year end $ ( 272.5 ) $ 7.3 $ ( 263.1 ) $ ( 528.3 )

24 unchanged sentences

and (iv) Financial Services.

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

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

The 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.

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.

The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships, through direct and distributor channels.

70 unchanged sentences

** Long-lived assets consist of Property and equipment - net and Operating lease right-of-use assets.

Prior year has been recast to conform with the current year presentation which includes Operating lease right-of-use assets and excludes Goodwill and Other intangibles - net.

2022 ANNUAL REPORT 113

7 unchanged sentences

The equipment product category includes solutions for the service of vehicles and industrial equipment.

Snap-on supports the sale of its diagnostics and vehicle service shop equipment by offering training programs as well as after-sales service support for its customers.

Snap-on supports the sale of its diagnostics and vehicle service shop equipment by offering training programs as well as after-sales support for its customers.

Through its financial services businesses, Snap-on also derives revenue from various financing programs designed to facilitate the sales of its products and support its franchise business.

63 unchanged sentences

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 9A. Controls and Procedures