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Item 7. Management’s Discussion and Analysis

2024-02-16 compared with 2023-02-09 · 205 added, 224 removed, 513 unchanged (46% of the section changed)

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Management Overview

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

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

We believe our 2023 operating performance demonstrates the continuing momentum of our business, confirms the special resilience of our markets, and reflects the considerable capability of our combined operations and our experienced team to overcome the uncertainties of the current environment.

Throughout the variability, we maintained and further extended our ongoing advantages in our products, in our brands and in our people.

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

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

Our strategic priorities and plans for 2023 involve continuing to build on our Snap-on Value Creation Processes – our suite of strategic principles and processes we employ every day designed to create value, and employed in the areas of safety, quality, customer connection, innovation and rapid continuous improvement (“Rapid Continuous Improvement” or “RCI”).

Our strategic priorities and plans for 2024 involve continuing to build on our Snap-on Value Creation Processes – our suite of strategic principles and processes we employ every day designed to create value, and employed in the areas of safety, quality, customer connection, innovation and Rapid Continuous Improvement (“RCI”).

We expect to continue to deploy these processes in our existing operations as well as into our recently acquired businesses.

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Recent Acquisitions

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

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

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

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

with a fair value of $20.2 million (or $15.7 million, net of cash acquired), and cash of $1.6 million.

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

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

2022 ANNUAL REPORT 27

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

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

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

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

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

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

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

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

On November 20, 2023, Snap-on acquired certain assets of SAVTEQ, Inc.

(“SAVTEQ”), for a cash purchase price of $3.0 million.

SAVTEQ, based in Lexington, Kentucky, provides precise non-contact measuring capabilities that Snap-on intends to leverage in its product offerings.

On November 1, 2023, Snap-on acquired Mountz, Inc.

(“Mountz”) for a cash purchase price of $39.6 million.

Mountz, based in San Jose, California, is a leading developer, manufacturer and marketer of high-precision torque tools, including measurement, calibration and documentation products.

The acquisition of Mountz complements and expands Snap-on’s torque offerings to customers in a variety of critical industries including aerospace, transportation and advanced manufacturing.

For segment reporting purposes, the results o f operations and assets of SAVTEQ have been included in the Repair Systems & Information Group and those of Mountz have been included in the Commercial & Industrial Group since the respective acquisition dates.

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

SNAP-ON INCORPORATED

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

Unless otherwise indicated, references in this document to “fiscal 2023” or “2023” refer to the fiscal year ended December 30, 2023;

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

references to “fiscal 2022” or “2022” refer to the fiscal year ended December 31, 2022;

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

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

References in this document to 2023, 2022 and 2021 year end refer to December 30, 2023, December 31, 2022, and January 1, 2022, respectively.

Snap-on’s 2023, 2022 and 2021 fiscal years each contained 52 weeks of operating results.

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

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

Fiscal 2022 as Compared to Fiscal 2021

A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 can be found under “Part II, Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended January 1, 2022, which was filed with the SEC on February 10, 2022, and is available on the SEC’s website at www.sec.gov as well as in the “Investors” section of our website at www.snapon.com .

SNAP-ON INCORPORATED

Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 9, 2023, and is available on the SEC’s website at www.sec.gov as well as in the “Investors” section of our website at www.snapon.com .

Non-GAAP Measures

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “organic sales” refer to sales from continuing operations calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), adjusted to exclude acquisition-related sales and the impact of foreign currency translation.

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “organic sales” refer to sales from continuing operations calculated in accordance with GAAP, adjusted to exclude acquisition-related sales and the impact of foreign currency translation.

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

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Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in the company’s businesses and facilitates comparisons of its sales performance with prior periods.

Effect of COVID-19

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

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

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

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

See also Part I, Item 1A:

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

Summary of Consolidated Performance

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

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

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

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

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

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

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

Consolidated net sales of $4,730.2 million in 2023 represented an increase of $237.4 million, or 5.3%, from 2022 levels, reflecting a $250.7 million, or 5.6%, organic gain and $5.5 million of acquisition-related sales, partially offset by $18.8 million of unfavorable foreign currency translation.

Operating earnings before financial services of $1,039.9 million in 2023 compared to $941.2 million in 2022, an increase of $98.7 million or 10.5%.

As a percentage of net sales, operating earnings before financial services were 22.0% compared to 20.9% last year.

Operating earnings of $1,310.4 million in 2023 compared to $1,207.2 million in 2022, an increase of $103.2 million or 8.5%.

As a percentage of revenues (net sales plus financial services revenue), operating earnings were 25.7% compared to 24.9% last year.

Net earnings attributable to Snap-on of $1,011.1 million, or $18.76 per diluted share, in 2023 compared to $911.7 million, or $16.82 per diluted share, in 2022, an increase of $99.4 million or $1.94 per diluted share.

2023 ANNUAL REPORT 29

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

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

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

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

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

Segment net sales of $1,458.3 million in 2023 represented an increase of $59.1 million, or 4.2%, from 2022 levels, reflecting a $69.7 million, or 5.0%, organic gain and $5.5 million of acquisition-related sales, partially offset by $16.1 million of unfavorable currency translation.

The organic increase primarily reflects a double-digit gain in sales to customers in critical industries.

Operating earnings of $226.1 million in 2023, including $9.0 million of unfavorable foreign currency effects, compared to $197.6 million in 2022, an increase of $28.5 million or 14.4%.

The Commercial & Industrial Group intends to focus on the following strategic priorities in 2024:

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

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

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

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

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

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

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

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

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

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

Segment net sales of $2,088.8 million in 2023 represented an increase of $16.8 million, or 0.8%, from 2022 levels, reflecting a $25.0 million, or 1.2%, organic sales gain, partially offset by $8.2 million of unfavorable foreign currency translation.

The organic increase is primarily due to a mid single-digit gain in the segment’s international operations, while activity in the U.S.

operations was essentially flat.

Operating earnings of $493.8 million in 2023, including $12.5 million of unfavorable foreign currency effects, compared to $458.7 million in 2022, an increase of $35.1 million or 7.7%.

The Snap-on Tools Group intends to focus on the following strategic priorities in 2024:

• Enhancing franchisee sales productivity, profitability, commercial health, and satisfaction;

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

• Increasing investment in new product innovation and development;

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

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

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

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

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

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

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

SNAP-ON INCORPORATED

Segment net sales of $1,781.2 million in 2023 represented an increase of $114.3 million, or 6.9%, from 2022 levels, reflecting a $111.7 million, or 6.7%, organic sales increase and $2.6 million of favorable foreign currency translation.

The organic gain primarily reflects double-digit increases in sales of undercar equipment and high single-digit gains in activity with OEM dealerships.

Operating earnings of $433.2 million in 2023, including $1.3 million of favorable foreign currency effects, compared to $393.3 million in 2022, an increase of $39.9 million or 10.1%.

The Repair Systems & Information Group intends to focus on the following strategic priorities in 2024:

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• Continuing productivity advancements through RCI initiatives and leveraging of resources;

• Increasing penetration in geographic markets, including emerging markets.

• Increasing geographic penetration, including in emerging markets.

SNAP-ON INCORPORATED

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

Financial services revenue was $349.7 million in both 2022 and 2021.

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

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

Financial services revenue of $378.1 million in 2023 compared to $349.7 million in 2022.

Originations of $1,235.5 million in 2023 represented an increase of $82.4 million, or 7.1%, from 2022 levels.

Operating earnings from financial services of $270.5 million in 2023 compared to $266.0 million last year.

Financial Services intends to focus on the following strategic priorities in 2024:

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• Maintaining healthy portfolio performance levels.

Net cash provided by operating activities of $675.2 million in 2022 decreased $291.4 million from $966.6 million in 2021.

The $291.4 million decrease is primarily due to a $354.5 million change in net operating assets and liabilities, partially offset by a $92.5 million increase in net earnings.

Net cash provided by operating activities of $1,154.2 million in 2023 compared to $675.2 million in 2022.

The $479.0 million increase is primarily due to a $352.9 million change in net operating assets and liabilities, and a $100.7 million increase in net earnings.

Net cash used by investing activities of $331.8 million in 2023 included additions to finance receivables of $1,029.0 million, which were partially offset by collections of $833.5 million, as well as a use of cash of $42.6 million for the acquisitions of Mountz and SAVTEQ.

Net cash used by investing activities of $206.2 million in 2022 included additions to finance receivables of $955.8 million, partially offset by collections of $826.9 million, as well as $0.5 million of cash provided by acquisitions.

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

Capital expenditures in 2023 and 2022 totaled $95.0 million and $84.2 million, respectively.

Capital expenditures in both years included continued investments related to the company’s execution of its strategic growth initiatives and Value Creation Processes around safety, quality, customer connection, innovation and RCI.

Net cash used by financing activities of $572.9 million in 2023 included $355.6 million for dividend payments to shareholders, $294.7 million for the repurchase of 1,126,000 shares of Snap-on’s common stock, and net repayments of other short-term borrowings of $1.7 million.

These amounts were partially offset by $113.6 million of proceeds from stock purchase plan and stock option exercises.

Net cash used by financing activities of $485.0 million in 2022 included $313.1 million for dividend payments to shareholders and $198.1 million for the repurchase of 899,000 shares of Snap-on’s common stock.

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

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

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

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

2023 ANNUAL REPORT 31

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Interest expense (49.9) (1.0) % (47.1) (1.0) % (2.8) (5.9) %

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

Other income (expense) – net 67.5 1.3 % 42.5 0.9 % 25.0 58.8 %

Earnings before income taxes and equity earnings

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Income tax expense (293.4) (5.7) % (268.7) (5.5) % (24.7) (9.2) %

Earnings before equity earnings 933.9 19.3 % 839.9 18.3 % 94.0 11.2 %

Equity earnings, net of tax — — 1.5 — (1.5) NM

Net earnings 1,034.6 20.3 % 933.9 19.3 % 100.7 10.8 %

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$ 1,011.1 19.8 % $ 911.7 18.8 % $ 99.4 10.9 %

Not meaningful

Percentage Disclosure:

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

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

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

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

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

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

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

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

Net sales of $4,730.2 million in 2023 represented an increase of $237.4 million, or 5.3%, from 2022 levels, reflecting a $250.7 million, or 5.6%, organic gain and $5.5 million of acquisition-related sales, partially offset by $18.8 million of unfavorable foreign currency translation.

Gross profit of $2,349.1 million in 2023 compared to $2,181.1 million last year, an increase of $168.0 million or 7.7%.

Gross margin (gross profit as a percentage of net sales) improved 120 basis points (100 basis points (“bps”) equals 1.0 percent) from 2022 primarily due to increased sales volumes and pricing actions, lower material and other costs, and benefits from the company’s RCI initiatives.

These improvements were partially offset by 30 bps of unfavorable foreign currency effects.

Operating expenses of $1,309.2 million in 2023 compared to $1,239.9 million last year .

Operating expenses as a percentage of net sales rose 10 bps from last year, primarily reflecting increased personnel and other costs, partially offset by benefits from higher sales volumes.

Operating earnings before financial services of $1,039.9 million in 2023 compared to $941.2 million in 2022, an increase of $98.7 million or 10.5%.

As a percentage of net sales, operating earnings before financial services were 22.0% compared to 20.9% last year.

Financial services revenue of $378.1 million in 2023 compared to $349.7 million last year.

Financial services operating earnings of $270.5 million in 2023 compared to $266.0 million in 2022.

Operating earnings of $1,310.4 million in 2023 compared to $1,207.2 million in 2022 , an increase of $103.2 million or 8.5%.

As a percentage of revenues, operating earnings were 25.7% compared to 24.9% last year.

Interest expense in 2023 increased $2.8 million compared to last year.

See Note 9 to the Consolidated Financial Statements for additional information on debt and credit facilities.

SNAP-ON INCORPORATED

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

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

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

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

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

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

Other income (expense) – net includes net gains and losses associated with hedging and currency exchange rate transactions, non-service components of net periodic benefit costs, and interest income.

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

Other income (expense) – net primarily includes net gains and losses associated with hedging and currency exchange rate transactions, non-service components of net periodic benefit costs, and interest income.

See Note 17 to the Consolidated Financial Statements for additional information on Other income (expense) – net.

The effective income tax rate on earnings attributable to Snap-on was 22.5% in 2023 and 22.8% in 2022.

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

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

See Note 8 to the Consolidated Financial Statements for additional information on income taxes.

Segment Results

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

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

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

Financial Services consists of the business operations of Snap-on’s finance subsidiaries.

Snap-on evaluates the performance of its operating segments based on segment revenues, including both external and intersegment net sales, and segment operating earnings.

Snap-on accounts for intersegment sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments.

Snap-on evaluates the performance of its operating segments based on segment revenues and segment operating earnings.

The Snap-on Tools Group segment revenues include external net sales, while the Commercial & Industrial Group and the Repair Systems & Information Group segment revenues include both external and intersegment net sales.

Snap-on accounts for intersegment net sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments.

Identifiable assets by segment are those assets used in the respective reportable segment’s operations.

Corporate assets consist of cash and cash equivalents (excluding cash held at Financial Services), deferred income taxes and certain other assets.

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

Intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results.

Commercial & Industrial Group

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Segment operating earnings $ 226.1 15.5 % $ 197.6 14.1 % $ 28.5 14.4 %

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

The organic increase primarily reflects a double-digit gain in sales to customers in critical industries.

Segment gross margin in 2023 improved 200 bps from last year, primarily due to increased sales volumes in the higher-gross-margin critical industry sector, pricing actions, and benefits from the segment’s RCI initiatives.

These improvements were partially offset by 40 bps of unfavorable foreign currency effects.

Segment operating expenses as a percentage of net sales in 2023 rose 60 bps as compared to 2022 primarily reflecting increased sales in higher-expense businesses, as well as increased personnel and other costs.

As a result of these factors, segment operating earnings of $226.1 million in 2023, including $9.0 million of unfavorable foreign currency effects, compared to $197.6 million in 2022, an increase of $28.5 million or 14.4%.

Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 15.5% in 2023 compared to 14.1% last year.

2023 ANNUAL REPORT 33

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

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

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

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

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

Snap-on Tools Group

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Segment operating earnings $ 493.8 23.6 % $ 458.7 22.1 % $ 35.1 7.7 %

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

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

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

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

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

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

The organic increase is primarily due to a mid single-digit gain in the segment’s international operations, while activity in the U.S.

operations was essentially flat.

Segment gross margin in 2023 improved 210 bps from last year, primarily reflecting increased sales of higher-gross-margin products, benefits from sales volumes and pricing actions, and lower material and other costs.

These improvements were partially offset by 50 bps of unfavorable foreign currency effects.

Segment operating expenses as a percentage of net sales in 2023 rose 60 bps from last year primarily due to increased personnel and other costs.

As a result of these factors, segment operating earnings of $493.8 million in 2023, including $12.5 million of unfavorable foreign currency effects, compared to $458.7 million in 2022, an increase of $35.1 million or 7.7%.

Operating margin for the Snap‑on Tools Group of 23.6% in 2023 compared to 22.1% last year.

8 unchanged sentences

Segment operating earnings $ 433.2 24.3 % $ 393.3 23.6 % $ 39.9 10.1 %

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

SNAP-ON INCORPORATED

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

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

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

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

The organic gain primarily reflects double-digit increases in sales of undercar equipment and high single-digit gains in activity with OEM dealerships.

Segment gross margin in 2023 improved 90 bps from last year primarily due to lower material and other costs, increased sales volumes and pricing actions, and savings from RCI initiatives.

Segment operating expenses as a percentage of net sales in 2023 rose 20 bps from 2022 , primarily reflecting increased personnel and other costs, partially offset by benefits from sales volume leverage.

As a result of these factors, segment operating earnings of $433.2 million in 2023, including $1.3 million of favorable foreign currency effects, compared to $393.3 million in 2022, an increase of $39.9 million or 10.1%.

Operating margin for the Repair Systems & Information Group of 24.3% in 2023 compared to 23.6% last year.

SNAP-ON INCORPORATED

Financial Services

4 unchanged sentences

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

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

Financial services revenue of $378.1 million in 2023 increased $28.4 million, or 8.1%, from 2022 .

In 2023 and 2022, the respective average yields on finance receivables were 17.7% and 17.6%.

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

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

Financial services expenses primarily include personnel-related and other general and administrative costs, as well as expenses for credit losses.

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

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

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

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

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

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

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

In 2023 and 2022 , the average yields on contract receivables were 8.8% and 8.5%, respectively.

Originations of $1,235.5 million in 2023 represented an increase of $82.4 million, or 7.1%, from 2022 levels.

Financial services expenses primarily include personnel-related and other general and administrative costs, as well as provisions for credit losses.

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

Financial services expenses in 2023 increased primarily due to higher provisions for credit losses as compared to those recorded in 2022.

The increase in provisions reflects both the growth of the portfolio, as well as a return to more typical pre-pandemic rates of provision.

As a percentage of the average financial services portfolio, financial services expenses were 4.5% in 2023 and 3.7% in 2022.

As a result of these factors, segment operating earnings in 2023, including $0.6 million of unfavorable foreign currency effects, increased $4.5 million, or 1.7%, from 2022 levels.

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

S nap-on’s general corporate expenses in 2023 of $113.2 million compared to $108.4 million recorded in 2022 .

The year-over-year increase primarily reflects higher stock-based and performance-based compensation expense.

2023 ANNUAL REPORT 35

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Interest expense (12.5) (1.0) % (12.0) (1.0) % (0.5) (4.2) %

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

Other income (expense) – net 17.5 1.4 % 11.8 1.0 % 5.7 48.3 %

Earnings before income taxes

6 unchanged sentences

$ 255.3 19.7 % $ 238.9 19.2 % $ 16.4 6.9 %

Not meaningful

Percentage Disclosure:

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

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

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

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

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

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

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

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

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

Net sales of $1,196.6 million in the fourth quarter of 2023 represented an increase of $40.7 million, or 3.5%, from 2022 levels, reflecting a $26.1 million, or 2.2%, organic gain, $5.5 million of acquisition-related sales, and $9.1 million of favorable foreign currency translation.

Gross profit of $577.6 million in the fourth quarter of 2023 compared to $560.7 million last year, an increase of $16.9 million or 3.0%.

Gross margin in the quarter declined 20 bps from the fourth quarter of 2022 primarily due to 20 bps of unfavorable foreign currency effects.

Benefits from lower material and other costs, and savings from the company’s RCI initiatives, were offset by increased sales in lower-gross-margin businesses.

Operating expenses of $319.7 million in the fourth quarter of 2023 compared to $312.7 million in 2022.

Operating expenses as a percentage of net sales improved 30 bps from last year, primarily reflecting lower corporate expenses and benefits from higher sales volumes, partially offset by increased personnel and other costs.

Operating earnings before financial services of $257.9 million in the fourth quarter of 2023 compared to $248.0 million in 2022, an increase of $9.9 million or 4.0%.

As a percentage of net sales, operating earnings before financial services were 21.6% compared to 21.5% last year.

Financial services revenue of $97.2 million in the fourth quarter of 2023 compared to $88.3 million last year.

Financial services operating earnings of $67.9 million in the period compared to $63.9 million in 2022 .

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

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

Operating earnings of $325.8 million in the fourth quarter of 2023 compared to $311.9 million in 2022, an increase of $13.9 million or 4.5%.

As a percentage of revenues, operating earnings were 25.2% in the quarter compared to 25.1% last year.

Interest expense in the fourth quarter of 2023 increased $0.5 million compared to last year .

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

Other income (expense) – net includes net gains and losses associate d with hedging and currency exchange rate transactions, non-service components of net periodic benefit costs, and interest income.

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

See Note 9 to the Consolidated Financial Statements for additional information on debt and credit facilities.

Other income (expense) – net primarily includes net gains and losses associate d with hedging and currency exchange rate transactions, non-service components of net periodic benefit costs, and interest income.

See Note 17 to the Consolidated Financial Statements for additional information on Other income (expense) – net.

2023 ANNUAL REPORT 37

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

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

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

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

The effective income tax rate on earnings attributable to Snap-on in the fourth quarter was 21.4% in 2023 and 22.0% in 2022.

See Note 8 to the Consolidated Financial Statements for additional information on income taxes.

Net earnings attributable to Snap-on of $255.3 million, or $4.75 per diluted share, in the fourth quarter of 2023 compared to $238.9 million, or $4.42 per diluted share, in 2022, an increase of $16.4 million or $0.33 per diluted share.

Segment Results

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Segment operating earnings $ 54.1 14.9 % $ 47.9 14.0 % $ 6.2 12.9 %

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

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

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

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

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

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

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

Segment net sales of $363.9 million in the fourth quarter of 2023 represented an increase of $20.7 million, or 6.0%, fro m 2022 levels, reflecting an $11.6 million, or 3.3%, organic gain, $5.5 million of acquisition-related sales, and $3.6 million of favorable foreign currency translation.

The organic increase is primarily due to a double-digit gain in sales to customers in critical industries, partially offset by a double-digit decline in sales of power tools.

Segment gross margin in the fourth quarter improved 150 bps from last year, primarily reflecting increased sales volumes in the higher-gross-margin critical industry sector, pricing actions, savings from the segment’s RCI initiatives, and 30 bps of benefits from acquisitions.

These improvements were partially offset by 60 bps of unfavorable foreign currency effects.

Segment operating expenses as a percentage of net sales in the fourth quarter rose 60 bps as compared to 2022 primarily due to a 30 bps impact from acquisitions and increased personnel and other costs.

As a result of these factors, segment operating earnings of $54.1 million in the fourth quarter of 2023, including $1.4 million of unfavorable foreign currency effects, compared to $47.9 million in 2022 , an increase of $6.2 million or 12.9%.

Operating margin for the Commercial & Industrial Group of 14.9% in the quarter compared to 14.0% last year.

Snap-on Tools Group

6 unchanged sentences

Segment operating earnings $ 111.0 21.6 % $ 116.1 21.4 % $ (5.1) (4.4) %

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

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

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

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

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

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

Segment net sales of $513.3 million in the fourth quarter of 2023 represented a decrease of $29.4 million, or 5.4%, from 2022 levels, reflecting a $31.0 million, or 5.7%, organic sales decline, partially offset by $1.6 million of favorable foreign currency translation.

The organic decrease is due to a high single-digit decline in the U.S.

operations, partially offset by a mid single-digit gain in the segment’s international operations.

Segment gross margin in the fourth quarter improved 200 bps from last year, primarily reflecting decreased sales of lower-gross-margin products.

Segment operating expenses as a percentage of net sales in the fourth quarter rose 180 bps as compared to 2022 primarily due to the lower sales volumes.

SNAP-ON INCORPORATED

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

As a result of these factors, segment operating earnings of $111.0 million in the fourth quarter of 2023, including $0.1 million of unfavorable foreign currency effects, compared to $116.1 million in 2022 , a decrease of $5.1 million, or 4.4%.

Operating margin for the Snap‑on Tools Group of 21.6% in the quarter compared to 21.4% last year.

9 unchanged sentences

Segment operating earnings $ 113.3 25.1 % $ 110.6 25.3 % $ 2.7 2.4 %

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

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

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

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

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

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

Segment net sales of $450.8 million in the fourth quarter of 2023 represented an increase of $12.9 million, or 2.9%, from 2022 levels, reflecting an $8.8 million, or 2.0%, organic sales increase and $4.1 million of favorable foreign currency translation.

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

Segment gross margin in the fourth quarter was unchanged from last year with benefits from lower material and other costs and savings from RCI initiatives, offset by increased sales in lower-gross-margin businesses.

Segment operating expenses as a percentage of net sales in the fourth quarter rose 20 bps from 2022, primarily reflecting increased personnel and other costs.

As a result of these factors, segment operating earnings of $113.3 million in the fourth quarter of 2023, including $0.4 million of favorable foreign currency effects, compared to $110.6 million in 2022, an increase of $2.7 million or 2.4%.

Operating margin for the Repair Systems & Information Group of 25.1% in the quarter compared to 25.3% last year.

5 unchanged sentences

Segment operating earnings $ 67.9 69.9 % $ 63.9 72.4 % $ 4.0 6.3 %

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

Financial services revenue of $97.2 million in the fourth quarter of 2023 increased $8.9 million, or 10.1%, from last year.

In the fourth quarters of 2023 and 2022, the respective average yields on finance receivables were 17.8% and 17.6%.

In the fourth quarters of 2023 and 2022 , the average yields on contract receivables were 8.9% and 8.6%, respectively.

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

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

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

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

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

Originations of $303.1 million in the fourth quarter of 2023 represented an increase of $3.4 million, or 1.1%, from 2022 levels.

Financial services expenses in the fourth quarter of 2023 increased primarily due to higher provisions for credit losses as compared to those recorded in the fourth quarter of 2022.

The increase in provisions reflects both the growth of the portfolio, as well as a return to more typical pre-pandemic rates of provision.

As a percentage of the average financial services portfolio, financial services expenses were 1.2% in the fourth quarter of 2023 and 1.1% in 2022.

As a result of these factors, segment operating earnings in the fourth quarter of 2023 increased $4.0 million, or 6.3%, from 2022 levels.

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

2023 ANNUAL REPORT 39

1 unchanged sentence

Snap-on’s fourth quarter 2023 general corporate expenses of $20.5 million compared to $26.6 million last year.

The year-over-year decrease in corporate expenses primarily reflects the recovery of costs associated with a legal matter.

Non-GAAP Supplemental Data

7 unchanged sentences

and international financial services businesses.

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

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

Non-GAAP Supplemental Consolidating Data – Supplemental Statements of Earnings information for 2023 and 2022 is as follows:

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155.0 153.8 — —

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

Net earnings 1,034.6 933.9 155.0 153.8

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Inventories – net 1,005.9 1,033.1 — —

Prepaid expenses and other assets 149.2 136.8 5.8 7.4

Prepaid expenses and other current assets 143.2 149.2 7.4 5.8

Total current assets 2,962.2 2,719.8 717.7 672.7

7 unchanged sentences

Goodwill 1,097.4 1,045.3 — —

Other intangibles – net 275.6 301.7 — —

Other intangible assets – net 268.9 275.6 — —

Pension assets 130.5 70.6 — —

Other assets 27.1 27.9 0.1 0.1

Other long-term assets 30.2 27.1 0.1 0.1

Total assets $ 6,338.6 $ 5,767.0 $ 2,430.0 $ 2,242.7

35 unchanged sentences

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

As of February 3, 2023, Snap-on’s long-term debt and commercial paper were rated, respectively, A2 and P-1 by Moody’s Investors Service;

As of February 9, 2024, Snap-on’s long-term debt and commercial paper were rated, respectively:

A2 and P-1 by Moody’s Investors Service;

A- and A-2 by Standard & Poor’s;

3 unchanged sentences

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

As of 2022 year end, working capital (current assets less current liabilities) of $2,397.3 million increased $326.1 million from $2,071.2 million as of 2021 year end primarily as a result of other net changes in working capital discussed below.

As of 2023 year end, working capital (current assets less current liabilities) of $2,710.4 million represented an increase of $313.1 million from $2,397.3 million as of 2022 year end primarily as a result of other net changes in working capital discussed below.

The following represents the company’s working capital position as of 2023 and 2022 year end:

5 unchanged sentences

Inventories – net 1,005.9 1,033.1

Prepaid expenses and other assets 144.8 134.6

Prepaid expenses and other current assets 138.4 144.8

Total current assets 3,652.0 3,368.9

4 unchanged sentences

Working capital $ 2,710.4 $ 2,397.3

Cash and cash equivalents of $757.2 million as of 2022 year end decreased $22.8 million from 2021 year-end levels primarily due to:

Cash and cash equivalents of $1,001.5 million as of 2023 year end represented an increase of $244.3 million from 2022 year-end levels primarily due to:

(i) $1,154.2 million of cash generated from operations;

(ii) $833.5 million of cash from collections of finance receivables;

and (iii) $113.6 million of cash proceeds from stock purchase plan and stock option exercises.

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

(i) the funding of $1,029.0 million of new finance receivables;

1 unchanged sentence

(iii) the repurchase of 1,126,000 shares of the company’s common stock for $294.7 million;

and (iv) the funding of $84.2 million for capital expenditures.

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

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

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

(iii) $55.0 million of cash proceeds from stock purchase and option plan exercises;

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

(iv) the funding of $95.0 million for capital expenditures;

(v) the funding of $42.6 million for acquisitions;

and (vi) net repayments of other short-term borrowings of $1.7 million.

Of the $1,001.5 million of cash and cash equivalents as of 2023 year end, $394.9 million was held outside of the United States.

9 unchanged sentences

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

Trade and other accounts receivable – net of $761.7 million as of 2022 year end increased $79.4 million from 2021 year-end levels primarily due to higher sales, partially offset by $18.2 million of foreign currency translation.

Trade and other accounts receivable – net of $791.3 million as of 2023 year end represented an increase of $29.6 million from 2022 year-end levels primarily due to higher sales, $9.3 million of foreign currency translation and $4.1 million from acquisitions.

Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months sales, times 360 days) was 60 days and 61 days at the respective 2023 and 2022 year ends.

1 unchanged sentence

The long-term portions of net finance and contract receivables of $1,692.1 million as of 2023 year end compared to $1,554.6 million at 2022 year end.

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

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

The combined $180.3 million increase in net current and long-term finance and contract receivables compared to 2022 year-end levels is primarily due to an increase in net receivable originations and $9.1 million of foreign currency translation.

Inventories – net of $1,005.9 million as of 2023 year end decreased $27.2 million from 2022 year-end levels primarily due to $47.8 million of inventory reductions as a result of easing supply chain disruptions, partially offset by $16.6 million of foreign currency translation and $4.0 million related to acquisitions.

As of 2023 and 2022 year end, inventory turns (trailing 12 months of cost of goods sold, divided by the average of the beginning and ending inventory balance for the trailing 12 months) were 2.3 turns and 2.5 turns, respectively.

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At 2023 year end, the weighted-average rate on outstanding notes payable of 11.1% compared with 10.9% in 2022.

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

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

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

Accounts payable of $238.0 million as of 2023 year end represented a decrease of $49.0 million from 2022 year-end levels, primarily due to the timing of payments, partially offset by $3.0 million of foreign currency translation and $1.6 million related to acquisitions.

Other accrued liabilities of $447.4 million as of 2023 year end represented an increase of $11.0 million from 2022 year-end levels, primarily due to higher income tax and other tax accruals, $3.7 million of foreign currency translation and $0.8 million related to acquisitions.

Long-term debt of $1,184.6 million as of 2023 year end consisted of:

1 unchanged sentence

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

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

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

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

and (iii) $500.0 million of 3.10% notes that mature on May 1, 2050 (the “2050 Notes”), partially offset by $15.4 million of unamortized debt issuance costs and issuance discounts.

On September 12, 2023, Snap-on entered into a $900 million multicurrency revolving credit facility that terminates on September 12, 2028 (the “Credit Facility”), which amended and restated in its entirety Snap-on’s previous $800 million multicurrency revolving credit facility that was set to terminate on September 16, 2024.

The Credit Facility contains an accordion feature that, subject to certain customary conditions, may allow the maximum commitment to be increased by up to $450 million with the approval of the lenders providing additional commitments.

No amounts were borrowed or outstanding under either Credit Facility during the years ended and as of December 30, 2023 or December 31, 2022.

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

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

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

There was no commercial paper issued or outstanding during the years ended and as of December 30, 2023 or December 31, 2022.

SNAP-ON INCORPORATED

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

As of 2023 year end, Snap-on was in compliance with all covenants of its Credit Facility and other debt agreements.

SNAP-ON INCORPORATED

Snap-on believes it has sufficient available cash and access to both committed and uncommitted credit facilities to cover its expected funding needs on both a short-term and long-term basis.

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Operating Activities

Net cash provided by operating activities of $675.2 million in 2022 decreased $291.4 million from $966.6 million in 2021.

The $291.4 million decrease is primarily due to a $354.5 million change in net operating assets and liabilities, partially offset by a $92.5 million increase in net earnings.

Net cash provided by operating activities of $1,154.2 million in 2023 increased $479.0 million from $675.2 million in 2022.

The $479.0 million increase is primarily due to a $352.9 million change in net operating assets and liabilities, and a $100.7 million increase in net earnings.

Depreciation expense was $72.2 million in 2023 and $71.5 million in 2022.

Amortization expense was $27.1 million in 2023 and $28.7 million in 2022.

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

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

Investing Activities

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

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

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

Net cash used by investing activities in 2023 also included $42.6 million for the acquisitions of Mountz and SAVTEQ.

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

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

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Snap-on believes that its cash generated from operations, as well as its available cash on hand and funds available from its credit facilities will be sufficient to fund the company’s capital expenditure requirements in 2024.

2022 ANNUAL REPORT 45

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

Financing Activities

Net cash used by financing activities of $572.9 million in 2023 included net repayments of other short-term borrowings of $1.7 million.

Net cash used by financing activities of $485.0 million in 2022 included net proceeds from other short-term borrowings of $1.6 million.

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

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

2023 ANNUAL REPORT 45

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

Proceeds from stock purchase plan and stock option exercises totaled $113.6 million in 2023 and $55.0 million in 2022.

In 2023, Snap-on repurchased 1,126,000 shares of its common stock for $294.7 million under its previously announced share repurchase programs.

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See Note 8 to the Consolidated Financial Statements for information on income taxes.

SNAP-ON INCORPORATED

Environmental Matters

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

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

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

Snap-on continues to monitor developments in this area.

SNAP-ON INCORPORATED

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

The current focus on these matters is expected to result in additional and/or more restrictive regulations, and industry or third-party requirements and standards to reduce or mitigate climate change as well as other environmental or sustainability risks.

The timing of certain of these regulations and requirements has yet to be determined.

Snap-on is monitoring developments in this area.

New Accounting Standards

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

2022 ANNUAL REPORT 47

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

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

As of December 30, 2023, the ratio of the allowance for credit losses to finance receivables was 3.48%.

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

As of December 31, 2022, the allowance ratio was 3.39%.

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

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Annual impairment tests are performed by the company in the second quarter of each year using information available as of April month end.

2023 ANNUAL REPORT 47

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

Snap-on evaluates the recoverability of goodwill by estimating the future discounted cash flows of the businesses to which the goodwill relates.

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This approach reflects management’s internal outlook at the reporting units, which management believes provides the best determination of value due to management’s insight and experience with the reporting units.

Significant estimates used by management in the discounted cash flows methodology include estimates of future cash flows based on expected growth rates, price increases, working capital levels, expected benefits from RCI initiatives, and a weighted-average cost of capital that reflects the specific risk profile of the reporting unit being tested.

The company’s methodologies for valuing goodwill are applied consistently on a year-over-year basis;

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Should the operations of the businesses with which goodwill is associated incur significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, changes in key personnel or litigation, a sustained decrease in share price and/or other events, some or all of the recorded goodwill could be subject to impairment and could result in a material adverse effect on Snap-on’s financial position or results of operations.

SNAP-ON INCORPORATED

Snap-on completed its annual impairment testing of goodwill in the second quarter of 2022, which did not result in any impairment.

Snap-on completed its annual impairment testing of goodwill in the second quarter of 2023, the results of which did not result in any impairment.

As of 2023 year end, the company has no accumulated impairment losses.

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Based on the company’s second quarter 2023 impairment testing, and assuming a hypothetical 10% decrease in the estimated fair values of each of its 11 reporting units, the hypothetical fair value of each of the company’s 11 reporting units would have been greater than its carrying value.

See Note 7 to the Consolidated Financial Statements for further information about goodwill.

See Note 7 to the Consolidated Financial Statements for additional information about goodwill.

Pension Benefits:

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As of 2023 year end, Snap-on’s domestic pension plans’ assets comprised approximately 86% of the company’s worldwide pension plan assets.

SNAP-ON INCORPORATED

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

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

pension plans of 7.5%, the same rate used in 2023, to be used in determining pension expense for 2024.

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

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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 2023 and 2022 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.

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

2022 ANNUAL REPORT 49

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

The selection of the 5.5% weighted-average discount rate for Snap-on’s domestic pension plans as of 2023 year end (compared to 5.5% as of 2022 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments.

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Prior service costs and credits resulting from plan amendments are amortized in equal annual amounts over the average remaining service period of active participants or over the average remaining life expectancy for plans with primarily inactive participants.

Pension income in 2023 was $19.0 million and Snap-on expects to have pension income of approximately $8.0 million in 2024, primarily reflecting higher amortization of pension actuarial losses.

The projected 2024 pension income is based on benefit plan status, weighted average discount rates, expected returns on plan assets, and other factors.

To determine the 2024 net periodic benefit cost, Snap-on is using weighted-average discount rates for its domestic and foreign pension plans of 5.5% and 4.3%, respectively, and an expected return on plan assets for its domestic pension plans of 7.5%.

The expected returns on plan assets for foreign pension plans ranged from 2.2% to 6.7% as of 2023 year end.

Due to the net change in these two key assumptions, in addition to the overall benefit plan status, Snap-on expects to have pension income in 2023.

Other factors, such as changes in plan demographics and discretionary contributions, may further increase or decrease pension income in 2023.

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

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

In 2023, despite the uncertainties, Snap-on expects to make continued progress along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high.

In pursuit of these initiatives, it is projected that capital expenditures in 2023 will be in a range of $90 million to $100 million.

Snap-on continues to respond to global macroeconomic challenges through its RCI process and other cost reduction initiatives.

See Note 11 to the Consolidated Financial Statements for additional information on pension plans.

2023 ANNUAL REPORT 49

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

We believe that our markets and our operations possess and have demonstrated continuing and considerable resilience against the uncertainties of the current environment.

In 2024, Snap-on expects to make ongoing progress along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high.

In pursuit of these initiatives, it is projected that capital expenditures in 2024 will be in a range of $100 million to $110 m illion.

Snap-on currently anticipates that its full-year 2024 effective income tax rate will be in the range of 22% to 23%.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis