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Item 2. Management’s Discussion and Analysis

2024-10-17 compared with 2024-07-18 · 141 added, 138 removed, 388 unchanged (42% of the section changed)

43 unchanged sentences

RESULTS OF OPERATIONS

Results of operations for the three months ended June 29, 2024, and July 1, 2023, are as follows:

Results of operations for the three months ended September 28, 2024, and September 30, 2023, are as follows:

Three Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

(Amounts in millions) September 28, 2024 September 30, 2023 Change

Net sales $ 1,147.0 100.0 % $ 1,159.3 100.0 % $ (12.3) (1.1) %

17 unchanged sentences

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 $1,179.4 million in the second quarter of 2024 represented a decrease of $11.9 million, or 1.0%, from 2023 levels, reflecting a $13.5 million, or 1.1%, organic decline and $5.7 million of unfavorable foreign currency translation, partially offset by $7.3 million of acquisition-related sales.

Gross profit of $597.3 million in the second quarter of 2024 compared to $603.7 million last year.

Gross margin (gross profit as a percentage of net sales) in the quarter declined 10 basis points (100 basis points (“bps”) equals 1.0 percent) from the second quarter of 2023 primarily due to lower sales volumes, partially offset by benefits from the company’s “Rapid Continuous Improvement” or “RCI” initiatives.

Net sales of $1,147.0 million in the third quarter of 2024 represented a decrease of $12.3 million, or 1.1%, from 2023 levels, reflecting a $19.2 million, or 1.7%, organic decline and $0.3 million of unfavorable foreign currency translation, partially offset by $7.2 million of acquisition-related sales.

Gross profit of $587.8 million in the third quarter of 2024 compared to $578.2 million last year.

Gross margin (gross profit as a percentage of net sales) in the quarter improved 130 basis points (100 basis points (“bps”) equals 1.0 percent) from the third quarter of 2023 primarily reflecting increased sales in higher-gross-margin businesses, benefits from the company’s “Rapid Continuous Improvement” or “RCI” initiatives, and lower material and other costs.

Snap-on’s RCI initiatives employ a structured set of tools and processes across multiple businesses and geographies intended to eliminate waste and improve operations.

1 unchanged sentence

Unless individually significant, it is not practicable to disclose each RCI activity that generated savings and/or segregate RCI savings embedded in sales volume increases.

Operating expenses of $317.0 million in the second quarter of 2024, including an $11.2 million benefit for the final payments received associated with a legal matter (the “legal payments”), compared to $326.7 million last year.

Operating expenses as a percentage of net sales improved 60 bps from 2023, primarily reflecting the benefit from the legal payments, partially offset by the effects of lower sales volumes.

Operating earnings before financial services of $280.3 million in the second quarter of 2024, including an $11.2 million benefit from the legal payments, compared to $277.0 million in the second quarter of 2023.

Operating expenses of $335.4 million in the third quarter of 2024 compared to $333.0 million last year.

Operating expenses as a percentage of net sales rose 50 bps from 2023 primarily due to the lower sales volumes.

Operating earnings before financial services of $252.4 million in the third quarter of 2024 compared to $245.2 million in the third quarter of 2023.

As a percentage of net sales, operating earnings before financial services were 22.0% compared to 21.2% last year.

Financial services revenue of $100.4 million in the third quarter of 2024 compared to $94.9 million last year.

Financial services operating earnings of $71.7 million compared to $69.4 million in 2023.

SNAP-ON INCORPORATED

1 unchanged sentence

OF OPERATIONS

Financial services revenue of $100.5 million in the second quarter of 2024 compared to $93.4 million last year.

Financial services operating earnings of $70.2 million compared to $66.9 million in 2023.

Operating earnings of $350.5 million in the second quarter of 2024, including an $11.2 million benefit from the legal payments, compared to $343.9 million last year.

Operating earnings of $324.1 million in the third quarter of 2024 compared to $314.6 million last year.

As a percentage of revenues (net sales plus financial services revenue), operating earnings were 26.0% in the quarter compared to 25.1% last year.

Interest expense in the second quarter of 2024 decreased $0.3 million from last year.

Interest expense in the third quarter of 2024 increased $0.1 million from last year.

See Note 8 to the Condensed Consolidated Financial Statements for additional information on debt and credit facilities.

1 unchanged sentence

See Note 16 to the Condensed Consolidated Financial Statements for additional information on Other income (expense) – net.

The effective income tax rate on earnings attributable to Snap-on was 22.6% and 22.9% in the second quarters of 2024 and 2023, respectively.

The effective income tax rate on earnings attributable to Snap-on was 22.9% and 22.6% in the third quarters of 2024 and 2023, respectively.

S ee Note 7 to the Condensed Consolidated Financial Statements for additional information on income taxes.

Net earnings attributable to Snap-on of $271.2 million, or $5.07 per diluted share, in the second quarter of 2024, including an $8.7 million, or $0.16 per diluted share, after-tax benefit from the legal payments, compared to $264.0 million, or $4.89 per diluted share, in the second quarter of 2023.

Results of operations for the six months ended June 29, 2024, and July 1, 2023, are as follows:

Six Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

Net earnings attributable to Snap-on of $251.1 million, or $4.70 per diluted share, in the third quarter of 2024 compared to $243.1 million, or $4.51 per diluted share, in the third quarter of 2023.

Results of operations for the nine months ended September 28, 2024, and September 30, 2023, are as follows:

Nine Months Ended

(Amounts in millions) September 28, 2024 September 30, 2023 Change

Net sales $ 3,508.7 100.0 % $ 3,533.6 100.0 % $ (24.9) (0.7) %

17 unchanged sentences

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 $2,361.7 million in the first six months of 2024 represented a decrease of $12.6 million , or 0.5% , from 2023 levels, reflecting a $23.4 million , or 1.0% , organic decline and $3.2 million of unfavorable foreign currency translation, partially offset by $14.0 million of acquisition-related sales.

Net sales of $3,508.7 million in the first nine months of 2024 represented a decrease of $24.9 million , or 0.7% , from 2023 levels, reflecting a $42.6 million , or 1.2% , organic decline and $3.5 million of unfavorable foreign currency translation, partially offset by $21.2 million of acquisition-related sales.

Gross profit of $1,781.8 million in the first nine months of 2024 compared to $1,771.5 million last year.

Gross margin in the first nine months improved 70 bps from 2023 primarily due to benefits from the company’s RCI initiatives and lower material and other costs.

Operating expenses of $978.2 million in the first nine months of 2024, including a $22.5 million benefit for the final payments received associated with a legal matter in the first six months of 2024 (the “legal payments”), compared to $ 989.5 million last year.

Operating expenses as a percentage of net sales improved 10 bps from 2023 primarily reflecting benefits from the legal payments, partially offset by the effects of lower sales volumes.

SNAP-ON INCORPORATED

1 unchanged sentence

OF OPERATIONS

Gross profit of $1,194.0 million in the first six months of 2024 compared to $1,193.3 million last year.

Gross margin in the first six months improved 30 bps from 2023 primarily due to benefits from the company’s RCI initiatives, partially offset by the effects of lower sales volume.

Operating expenses of $642.8 million in the first six months of 2024, including a $22.5 million benefit from the legal payments, compared to $ 656.5 million last year.

Operating expenses as a percentage of net sales improved 40 bps from 2023 primarily reflecting benefits from the legal payments, partially offset by increased personnel and other costs.

Operating earnings before financial services of $551.2 million in the first six months of 2024, including a $22.5 million benefit from the legal payments, compared to $536.8 million in 2023.

Operating earnings before financial services of $803.6 million in the first nine months of 2024, including a $22.5 million benefit from the legal payments, compared to $782.0 million in 2023.

As a percentage of net sales, operating earnings before financial services were 22.9% compared to 22.1% last year.

Financial services revenue of $200.1 million in the first six months of 2024 compared to $186.0 million last year.

Financial services revenue of $300.5 million in the first nine months of 2024 compared to $280.9 million last year.

Financial services operating earnings of $210.2 million compared to $202.6 million in 2023.

Operating earnings of $689.7 million in the first six months of 2024, including a $22.5 million benefit from the legal payments, compared to $670.0 million last year.

Operating earnings of $1,013.8 million in the first nine months of 2024, including a $22.5 million benefit from the legal payments, compared to $984.6 million last year.

As a percentage of revenues, operating earnings were 26.6% in the period compared to 25.8% last year.

Interest expense in the first six months of 2024 decreased $0.2 million from last year.

Interest expense in the first nine months of 2024 decreased $0.1 million from last year.

See Note 8 to the Condensed Consolidated Financial Statements for additional information on debt and credit facilities.

1 unchanged sentence

See Note 16 to the Condensed Consolidated Financial Statements for additional information on Other income (expense) – net.

The effective income tax rate on earnings attributable to Snap-on was 22.4% and 23.0% in the first six months of 2024 and 2023, respectively.

The effective income tax rate on earnings attributable to Snap-on was 22.6% and 22.9% in the first nine months of 2024 and 2023, respectively.

S ee Note 7 to the Condensed Consolidated Financial Statements for additional information on income taxes.

Net earnings attributable to Snap-on of $534.7 million , or $ 9.98 per diluted share, in the first six months of 2024, including a $17.5 million, or $0.32 per diluted share, after-tax benefit from the legal payments, compared to $512.7 million , or $ 9.49 per diluted share, in the first six months of 2023.

Net earnings attributable to Snap-on of $785.8 million , or $ 14.69 per diluted share, in the first nine months of 2024, including a $17.5 million, or $0.32 per diluted share, after-tax benefit from the legal payments, compared to $755.8 million , or $ 14.00 per diluted share, in the first nine months of 2023.

Segment Results

7 unchanged sentences

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.

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.

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

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

10 unchanged sentences

Three Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

(Amounts in millions) September 28, 2024 September 30, 2023 Change

External net sales $ 288.7 78.9 % $ 280.5 76.6 % $ 8.2 2.9 %

5 unchanged sentences

Segment operating earnings $ 61.0 16.7 % $ 58.1 15.9 % $ 2.9 5.0 %

Segment net sales of $372.0 million in the second quarter of 2024 represented an increase of $7.8 million, or 2.1%, from 2023 levels, reflecting a $4.3 million, or 1.2%, organic sales gain and $7.3 million of acquisition-related sales, partially offset by $3.8 million of unfavorable 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 the segment’s power tools operation and a low single-digit decline in the segment’s European-based hand tools business.

Segment gross margin in the second quarter improved 220 bps from last year, primarily reflecting increased sales volumes in the higher-gross-margin critical industry sector, savings from the segment’s RCI initiatives, and 50 bps of benefits from acquisitions.

Segment operating expenses as a percentage of sales in the second quarter rose 150 bps as compared to 2023 primarily due to increased personnel and other costs, and a 60 bps impact from acquisitions.

As a result of these factors, segment operating earnings of $62.2 million in the second quarter of 2024 compared to $58.1 million in 2023, an increase of $4.1 million or 7.1%.

Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 16.7% in the second quarter of 2024 compared to 16.0% in 2023.

Six Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

Segment net sales of $365.7 million in the third quarter of 2024 represented a decrease of $0.7 million, or 0.2%, from 2023 levels, reflecting a $7.8 million, or 2.1%, organic sales decline and $0.1 million of unfavorable foreign currency translation, partially offset by $7.2 million of acquisition-related sales.

The organic decrease is primarily due to a double-digit reduction in the power tools operation and a mid single-digit decline in the European-based hand tools business, partially offset by a gain in sales to customers in critical industries, including a high single-digit increase in specialty torque.

Segment gross margin in the third quarter improved 220 bps from last year, primarily reflecting increased sales volumes in higher-gross-margin critical industry sectors, lower material and other costs, savings from the segment’s RCI initiatives, and 50 bps of benefits from acquisitions.

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

Segment operating expenses as a percentage of net sales in the third quarter rose 140 bps as compared to 2023 primarily due to increased personnel and other costs, and a 50 bps impact from acquisitions.

As a result of these factors, segment operating earnings of $61.0 million in the third quarter of 2024 compared to $58.1 million in 2023, an increase of $2.9 million or 5.0%.

Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 16.7% in the third quarter of 2024 compared to 15.9% in 2023.

Nine Months Ended

(Amounts in millions) September 28, 2024 September 30, 2023 Change

External net sales $ 884.7 80.6 % $ 848.9 77.6 % $ 35.8 4.2 %

5 unchanged sentences

Segment operating earnings $ 178.6 16.3 % $ 172.0 15.7 % $ 6.6 3.8 %

Segment net sales of $731.9 million in the first six months of 2024 represented an increase of $ 3.9 million , or 0.5% , from 2023 levels, reflecting $14.0 million of acquisition-related sales, partially offset by a $4.9 million , or 0.7% , organic sales decline and $5.2 million of unfavorable foreign currency translation.

The organic decrease is primarily due to a double-digit reduction in the segment’s power tools business and a low single-digit decline in the segment’s Asia-Pacific operations, partially offset by a high single-digit gain in sales to customers in critical industries.

Segment gross margin in the first six months improved 220 bps from last year, primarily reflecting increased sales volumes in the higher-gross-margin critical industry sector, savings from the segment’s RCI initiatives, and 50 bps of benefits from acquisitions.

Segment operating expenses as a percentage of sales in the first six months rose 170 bps as compared to 2023 primarily due to increased personnel and other costs, and a 60 bps impact from acquisitions.

Segment net sales of $1,097.6 million in the first nine months of 2024 represented an increase of $ 3.2 million , or 0.3% , from 2023 levels, reflecting $21.2 million of acquisition-related sales, partially offset by a $12.7 million , or 1.2% , organic sales decline and $5.3 million of unfavorable foreign currency translation.

The organic decrease is primarily due to a double-digit reduction in the power tools operation and a mid single-digit decline in the European-based hand tools business, partially offset by a mid single-digit gain in sales to customers in critical industries.

Segment gross margin in the first nine months improved 220 bps from last year, primarily reflecting increased sales volumes in higher-gross-margin critical industry sectors, savings from the segment’s RCI initiatives, lower material and other costs, and 50 bps of benefits from acquisitions.

Segment operating expenses as a percentage of net sales in the first nine months rose 160 bps as compared to 2023 primarily due to increased personnel and other costs, and a 60 bps impact from acquisitions.

SNAP-ON INCORPORATED

1 unchanged sentence

OF OPERATIONS

As a result of these factors, segment operating earnings of $117.6 million in the first six months of 2024 compared to $113.9 million in 2023, an increase of $3.7 million or 3.2% .

Operating margin for the Commercial & Industrial Group of 16.1% in the first six months of 2024 compared to 15.6% in 2023.

As a result of these factors, segment operating earnings of $178.6 million in the first nine months of 2024 compared to $172.0 million in 2023, an increase of $6.6 million or 3.8% .

Operating margin for the Commercial & Industrial Group of 16.3% in the first nine months of 2024 compared to 15.7% in 2023.

Snap-on Tools Group

Three Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

(Amounts in millions) September 28, 2024 September 30, 2023 Change

Segment net sales $ 500.5 100.0 % $ 515.4 100.0 % $ (14.9) (2.9) %

3 unchanged sentences

Segment operating earnings $ 108.3 21.6 % $ 113.4 22.0 % $ (5.1) (4.5) %

Segment net sales of $482.0 million in the second quarter of 2024 represented a decrease of $41.1 million, or 7.9%, from 2023 levels, reflecting a $40.3 million, or 7.7%, organic sales decline and $0.8 million of unfavorable foreign currency translation.

The organic decrease is due to a high single-digit decline in the U.S., partially offset by a low single-digit gain in the segment’s international operations.

Segment gross margin in the second quarter declined 20 bps from last year primarily due to the lower sales volume.

Segment operating expenses as a percentage of net sales in the second quarter rose 230 bps as compared to 2023 primarily due to the effects of lower sales volumes.

As a result of these factors, segment operating earnings of $114.8 million in the second quarter of 2024 compared to $137.7 million in 2023, a decrease of $22.9 million or 16.6%.

Operating margin for the Snap-on Tools Group of 23.8% in the second quarter of 2024 compared to 26.3% last year.

Six Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

Segment net sales of $500.5 million in the third quarter of 2024 represented a decrease of $14.9 million, or 2.9%, from 2023 levels, reflecting a $15.8 million, or 3.1%, organic sales decline, partially offset by $0.9 million of favorable foreign currency translation.

The organic decrease is due to a mid single-digit decline in the U.S., partially offset by a low single-digit gain in the segment’s international operations.

Segment gross margin in the third quarter improved 100 bps from last year primarily due to lower material and other costs, and benefits from RCI initiatives.

Segment operating expenses as a percentage of net sales in the third quarter rose 140 bps as compared to 2023 primarily reflecting the lower sales volumes.

As a result of these factors, segment operating earnings of $108.3 million in the third quarter of 2024 compared to $113.4 million in 2023, a decrease of $5.1 million or 4.5%.

Operating margin for the Snap-on Tools Group of 21.6% in the third quarter of 2024 compared to 22.0% last year.

Nine Months Ended

(Amounts in millions) September 28, 2024 September 30, 2023 Change

Segment net sales $ 1,482.6 100.0 % $ 1,575.5 100.0 % $ (92.9) (5.9) %

3 unchanged sentences

Segment operating earnings $ 340.4 23.0 % $ 382.8 24.3 % $ (42.4) (11.1) %

Segment net sales of $982.1 million in the first six months of 2024 represented a decrease of $78.0 million , or 7.4% , from 2023 levels, reflecting a $77.8 million , or 7.3% , organic sales decline and $0.2 million of unfavorable foreign currency translation.

The organic decrease is due to a high single-digit decline in the U.S., partially offset by a mid single-digit gain in the segment’s international operations.

Segment gross margin in the first six months improved 40 bps from last year, primarily reflecting decreased sales of lower-gross-margin products.

Segment operating expenses as a percentage of net sales in the first six months rose 220 bps as compared to 2023 primarily due to the lower sales volumes.

As a result of these factors, segment operating earnings of $232.1 million in the first six months of 2024 compared to $269.4 million in 2023, a decrease of $37.3 million or 13.8% .

Operating margin for the Snap-on Tools Group of 23.6% in the first six months of 2024 compared to 25.4% last year.

Segment net sales of $1,482.6 million in the first nine months of 2024 represented a decrease of $92.9 million , or 5.9% , from 2023 levels, reflecting a $93.6 million , or 5.9% , organic sales decline, partially offset by $0.7 million of favorable foreign currency translation.

The organic decrease is due to a high single-digit decline in the U.S., partially offset by a low single-digit gain in the segment’s international operations.

Segment gross margin in the first nine months improved 60 bps from last year primarily reflecting decreased sales of lower-gross-margin products.

Segment operating expenses as a percentage of net sales in the first nine months rose 190 bps as compared to 2023 primarily due to the lower sales volumes.

As a result of these factors, segment operating earnings of $340.4 million in the first nine months of 2024 compared to $382.8 million in 2023, a decrease of $42.4 million or 11.1% .

Operating margin for the Snap-on Tools Group of 23.0% in the first nine months of 2024 compared to 24.3% last year.

SNAP-ON INCORPORATED

3 unchanged sentences

Three Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

(Amounts in millions) September 28, 2024 September 30, 2023 Change

External net sales $ 357.8 84.6 % $ 363.4 84.2 % $ (5.6) (1.5) %

5 unchanged sentences

Segment operating earnings $ 107.3 25.4 % $ 104.9 24.3 % $ 2.4 2.3 %

Segment net sales of $454.8 million in the second quarter of 2024 represented an increase of $2.8 million, or 0.6%, from 2023 levels, reflecting a $4.3 million, or 1.0%, organic sales gain, partially offset by $1.5 million of unfavorable foreign currency translation.

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

Segment gross margin in the second quarter improved 50 bps from last year primarily due to savings from RCI initiatives.

Segment operating expenses as a percentage of net sales in the second quarter improved 10 bps from 2023.

As a result of these factors, segment operating earnings of $113.6 million in the second quarter of 2024 compared to $110.4 million in 2023, an increase of $3.2 million or 2.9%.

Operating margin for the Repair Systems & Information Group of 25.0% in the second quarter of 2024 compared to 24.4% last year.

Six Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

Segment net sales of $422.7 million in the third quarter of 2024 represented a decrease of $9.1 million, or 2.1%, from 2023 levels, reflecting an $8.2 million, or 1.9%, organic sales decline and $0.9 million of unfavorable foreign currency translation.

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

Segment gross margin in the third quarter improved 190 bps from last year primarily reflecting increased sales of higher-gross-margin products.

Segment operating expenses as a percentage of net sales in the third quarter rose 80 bps from 2023 primarily due to the lower sales volumes and increased personnel and other costs.

As a result of these factors, segment operating earnings of $107.3 million in the third quarter of 2024 compared to $104.9 million in 2023, an increase of $2.4 million or 2.3%.

Operating margin for the Repair Systems & Information Group of 25.4% in the third quarter of 2024 compared to 24.3% last year.

Nine Months Ended

(Amounts in millions) September 28, 2024 September 30, 2023 Change

External net sales $ 1,141.4 85.1 % $ 1,109.2 83.4 % $ 32.2 2.9 %

5 unchanged sentences

Segment operating earnings $ 333.8 24.9 % $ 319.9 24.0 % $ 13.9 4.3 %

Segment net sales of $918.6 million in the first six months of 2024 represented an increase of $20.0 million , or 2.2% , from 2023 levels, reflecting a $19.0 million , or 2.1% , organic sales gain and $1.0 million of favorable foreign currency translation.

The organic improvement primarily reflects a high single-digit increase in activity with OEM dealerships, partially offset by a low single-digit decline in sales of diagnostic and repair information products to independent repair shop owners and managers.

Segment gross margin in the first six months improved 100 bps from last year primarily due to savings from RCI initiatives, and lower material and other costs.

Segment operating expenses as a percentage of net sales in the first six months rose 20 bps from 2023, primarily reflecting increased personnel and other costs.

As a result of these factors, segment operating earnings of $226.5 million in the first six months of 2024 compared to $215.0 million in 2023, an increase of $11.5 million or 5.3% .

Operating margin for the Repair Systems & Information Group of 24.7% in the first six months of 2024 compared to 23.9% last year.

Segment net sales of $1,341.3 million in the first nine months of 2024 represented an increase of $10.9 million , or 0.8% , from 2023 levels, reflecting a $10.8 million , or 0.8% , organic sales gain and $0.1 million of favorable foreign currency translation.

The organic improvement reflects a mid single-digit increase in activity with OEM dealerships, partially offset by low single-digit declines in both sales of undercar equipment and of diagnostic and information products to independent repair shop owners and managers.

Segment gross margin in the first nine months improved 120 bps from last year primarily due to savings from RCI initiatives, and lower material and other costs.

Segment operating expenses as a percentage of net sales in the first nine months rose 30 bps from 2023 primarily reflecting increased personnel and other costs.

As a result of these factors, segment operating earnings of $333.8 million in the first nine months of 2024 compared to $319.9 million in 2023, an increase of $13.9 million or 4.3% .

Operating margin for the Repair Systems & Information Group of 24.9% in the first nine months of 2024 compared to 24.0% last year.

SNAP-ON INCORPORATED

3 unchanged sentences

Three Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

(Amounts in millions) September 28, 2024 September 30, 2023 Change

Financial services revenue $ 100.4 100.0 % $ 94.9 100.0 % $ 5.5 5.8 %

2 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 $100.5 million in the second quarter of 2024 increased $7.1 million, or 7.6%, from last year.

In the second quarters of 2024 and 2023, the respective average yields on finance receivables were 17.7% and 17.6% .

In the second quarters of 2024 and 2023, the average yields on contract receivables were 8.9% and 8.6%, respectively.

Originations of $308.1 million in the second quarter of 2024 represented a decrease of $18.2 million, or 5.6%, from 2023 levels.

Financial services revenue of $100.4 million in the third quarter of 2024 increased $5.5 million, or 5.8%, from last year.

In the third quarters of both 2024 and 2023, the average yield on finance receivables was 17.7%.

In the third quarters of 2024 and 2023, the average yields on contract receivables were 9.1% and 8.8%, respectively.

Originations of $288.0 million in the third quarter of 2024 represented a decrease of $17.2 million, or 5.6%, from 2023 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 the second quarter of 2024 increased primarily due to higher provisions for credit losses as compared to those recorded in the second quarter of 2023.

As a percentage of the average financial services portfolio, expenses were 1.2% and 1.1% in the respective second quarters of 2024 and 2023.

Segment operating earnings in the second quarter of 2024 increased $3.3 million, or 4.9%, from 2023 levels.

Six Months Ended

(Amounts in millions) June 29, 2024 July 1, 2023 Change

Financial services expenses in the third quarter of 2024 increased primarily due to higher provisions for credit losses as compared to those recorded in the third quarter of 2023.

As a percentage of the average financial services portfolio, expenses were 1.1% in the third quarters of both 2024 and 2023.

As a result of these factors, segment operating earnings of $71.7 million in the third quarter of 2024 compared to $69.4 million in 2023 , an increase of $2.3 million, or 3.3%.

Nine Months Ended

(Amounts in millions) September 28, 2024 September 30, 2023 Change

Financial services revenue $ 300.5 100.0 % $ 280.9 100.0 % $ 19.6 7.0 %

1 unchanged sentence

Segment operating earnings $ 210.2 70.0 % $ 202.6 72.1 % $ 7.6 3.8 %

Financial services revenue of $200.1 million in the first six months of 2024 increased $14.1 million , or 7.6% , from last year.

In the first six months of 2024 and 2023, the respective average yields on finance receivables were 17.7% and 17.6% .

In the first six months of 2024 and 2023, the average yields on contract receivables were 9.0% and 8.7% , respectively.

Originations of $ 609.8 million in the first six months of 2024 represented a decrease of $ 17.4 million , or 2.8% , from 2023 levels.

Financial services expenses in the first six months of 2024 increased primarily due to higher provisions for credit losses as compared to those recorded last year.

As a percentage of the average financial services portfolio, expenses were 2.5% and 2.3% in the respective first six months of 2024 and 2023.

Segment operating earnings in the first six months of 2024 increased $5.3 million , or 4.0% , from 2023 levels.

Snap-on’s second quarter 2024 general corporate expenses of $10.3 million compared to $29.2 million last year.

For the first six months of 2024, expenses of $25.0 million compared to $61.5 million recorded in 2023.

The year-over-year decreases in corporate expenses in 2024 for both periods primarily reflect benefits from the legal payments and lower performance-based compensation and other costs.

Financial services revenue of $300.5 million in the first nine months of 2024 increased $19.6 million , or 7.0% , from last year.

In the first nine months of both 2024 and 2023, the average yield on finance receivables was 17.7% .

In the first nine months of 2024 and 2023, the average yields on contract receivables were 9.0% and 8.7% , respectively.

Originations of $ 897.8 million in the first nine months of 2024 represented a decrease of $ 34.6 million , or 3.7% , from 2023 levels.

Financial services expenses in the first nine months of 2024 increased primarily due to higher provisions for credit losses as compared to those recorded last year.

As a percentage of the average financial services portfolio, expenses were 3.6% and 3.3% in the respective first nine months of 2024 and 2023.

As a result of these factors, segment operating earnings of $210.2 million in the first nine months of 2024 compared to $202.6 million in 2023 , an increase of $7.6 million , or 3.8%.

Snap-on’s third quarter 2024 general corporate expenses of $24.2 million compared to $31.2 million last year.

The year-over-year decrease primarily reflects lower performance-based compensation and other costs.

For the first nine months of 2024, general corporate expenses of $49.2 million compared to $92.7 million recorded in 2023.

The year-over-year decrease primarily reflects benefits from the legal payments received in the first six months of 2024 and lower performance-based compensation and other costs.

SNAP-ON INCORPORATED

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

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the three months ended June 29, 2024, and July 1, 2023, is as follows:

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the three months ended September 28, 2024, and September 30, 2023, is as follows:

Operations* Financial Services

(Amounts in millions) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

(Amounts in millions) September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023

Net sales $ 1,147.0 $ 1,159.3 $ — $ —

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OF OPERATIONS

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the six months ended June 29, 2024, and July 1, 2023, is as follows:

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Statements of Earnings information for the nine month periods ended September 28, 2024, and September 30, 2023, is as follows:

Operations* Financial Services

(Amounts in millions) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

(Amounts in millions) September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023

Net sales $ 3,508.7 $ 3,533.6 $ — $ —

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OF OPERATIONS

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Balance Sheet information as of June 29, 2024, and December 30, 2023, is as follows:

Non-GAAP Supplemental Consolidating Data – Supplemental Condensed Balance Sheets information as of September 28, 2024, and December 30, 2023, is as follows:

Operations* Financial Services

(Amounts in millions) June 29,

2024 December 30, 2023 June 29,

(Amounts in millions) September 28,

2024 December 30, 2023 September 28,

2024 December 30, 2023

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Operations* Financial Services

(Amounts in millions) June 29,

2024 December 30, 2023 June 29,

(Amounts in millions) September 28,

2024 December 30, 2023 September 28,

2024 December 30, 2023

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Snap-on’s growth has historically been funded by a combination of cash provided by operating activities and debt financing.

Snap-on believes that its cash from operations and collections of finance receivables, coupled with its sources of borrowings and available cash on hand, are sufficient to fund its currently anticipated requirements for scheduled debt repayments, payments of interest and dividends, new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and acquisitions, if and as they arise.

Snap-on believes that its cash from operations and collections of finance receivables, coupled with its sources of borrowings and available cash on hand, are sufficient to fund its currently anticipated requirements for scheduled debt repayments, payments of interest and dividends, new receivables originated by our financial services businesses, capital expenditures, working capital, funding of pension plans, and share repurchases and acquisitions, if and as they arise.

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

As of July 12, 2024, Snap-on’s long-term debt and commercial paper were rated, respectively, A2 and P-1 by Moody’s Investors Service;

As of October 11, 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;

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

Working capital (current assets less current liabilities) of $2,908.0 million as of June 29, 2024, represented an increase of $197.6 million from $2,710.4 million as of December 30, 2023 (fiscal 2023 year end), primarily as a result of the net changes discussed below.

The following represents the company’s working capital position as of June 29, 2024, and December 30, 2023:

(Amounts in millions) June 29,

Working capital (current assets less current liabilities) of $3,044.3 million as of September 28, 2024, represented an increase of $333.9 million from $2,710.4 million as of December 30, 2023 (fiscal 2023 year end), primarily as a result of the net changes discussed below.

The following represents the company’s working capital position as of September 28, 2024, and December 30, 2023:

(Amounts in millions) September 28,

2024 December 30, 2023

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Working capital $ 3,044.3 $ 2,710.4

Cash and cash equivalents of $1,232.7 million as of June 29, 2024, represented an increase of $231.2 million from 2023 year-end levels primarily due to:

Cash and cash equivalents of $1,313.3 million as of September 28, 2024, represented an increase of $311.8 million from 2023 year-end levels primarily due to:

(i) $924.0 million of cash generated from operations;

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and (iv) the funding of $65.4 million of capital expenditures.

Of the $1,232.7 million of cash and cash equivalents as of June 29, 2024, $452.7 million was held outside of the United States.

Of the $1,313.3 million of cash and cash equivalents as of September 28, 2024, $507.7 million was held outside of the United States.

Snap-on maintains non-U.S.

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OF OPERATIONS

Trade and other accounts receivable – net of $783.5 million as of June 29, 2024, compared to $791.3 million as of December 30, 2023, a decrease of $7.8 million primarily due to $12.6 million of foreign currency translation.

Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months sales, times 360 days) was 60 days for both June 29, 2024, and December 30, 2023.

The current portions of net finance and contract receivables of $729.9 million as of June 29, 2024, compared to $714.9 million at 2023 year end.

The long-term portions of net finance and contract receivables of $1,718.8 million as of June 29, 2024, compared to $1,692.1 million at 2023 year end.

The combined $41.7 million increase in net current and long-term finance and contract receivables over 2023 year-end levels is primarily due to net receivable originations, partially offset by $6.9 million of foreign currency translation.

Inventories – net of $965.0 million as of June 29, 2024, decreased $40.9 million compared to $1,005.9 million as of December 30, 2023, primaril y due to easing supply chain disruptions and $17.5 million of foreign currency translation.

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 2.4 turns and 2.3 turns as of June 29, 2024, and December 30, 2023, respectively.

Inventories accounted for using the first-in, first-out (“FIFO”) method approximated 59% of total inventories as of both June 29, 2024, and December 30, 2023.

Trade and other accounts receivable – net of $796.4 million as of September 28, 2024, compared to $791.3 million as of December 30, 2023, an increase of $5.1 million primarily due to an increase in days sales outstanding, partially offset by $1.6 million of foreign currency translation.

Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months of sales, times 360 days) was 61 days for September 28, 2024, and 60 days for December 30, 2023.

The current portions of net finance and contract receivables of $746.8 million as of September 28, 2024, compared to $714.9 million at 2023 year end.

The long-term portions of net finance and contract receivables of $1,731.1 million as of September 28, 2024, compared to $1,692.1 million at 2023 year end.

The combined $70.9 million increase in net current and long-term finance and contract receivables over 2023 year-end levels is primarily due to net receivable originations and $4.9 million of foreign currency translation.

Inventories – net of $995.8 million as of September 28, 2024, decreased $10.1 million compared to $1,005.9 million as of December 30, 2023, primaril y due to easing supply chain disruptions, partially offset by $0.8 million of foreign currency translation.

Inventory turns (trailing 12 months of cost of goods sold, divided by the average of the beginning and ending inventory balances for the trailing 12 months) were 2.3 turns as of both September 28, 2024, and December 30, 2023.

Inventories accounted for using the first-in, first-out (“FIFO”) method approximated 58% of total inventories as of September 28, 2024, and 59% of total inventories as of December 30, 2023.

All other inventories are accounted for using the last-in, first-out (“LIFO”) method.

The company’s LIFO reserve was $122.2 million and $115.9 million as of June 29, 2024, and December 30, 2023, respectively.

Notes payable of $15.7 million as of June 29, 2024, compared to $15.6 million as of 2023 year end.

Accounts payable of $271.1 million as of June 29, 2024, compared to $238.0 million as of December 30, 2023, an increase of $33.1 million primarily due to the timing of payments, partially offset by $2.6 million of foreign currency translation.

Other accrued liabilities of $457.9 million as of June 29, 2024, compared to $447.4 million as of 2023 year end, an increase of $10.5 million primarily d ue to higher tax accruals, partially offset by $5.7 million of foreign currency translation.

Long-term debt of $1,185.1 million as of June 29, 2024, consisted of:

The company’s LIFO reserve was $125.7 million and $115.9 million as of September 28, 2024, and December 30, 2023, respectively.

Notes payable of $14.3 million as of September 28, 2024, compared to $15.6 million as of 2023 year end.

Accounts payable of $270.0 million as of September 28, 2024, compared to $238.0 million as of December 30, 2023, an increase of $32.0 million primarily due to the timing of payments, partially offset by $1.2 million of foreign currency translation.

Other accrued liabilities of $450.0 million as of September 28, 2024, compared to $447.4 million as of 2023 year end, an increase of $2.6 million, including $0.3 million of foreign currency translation.

Long-term debt of $1,185.3 million as of September 28, 2024, consisted of:

(i) $300 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”);

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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 the Credit Facility during the six months ended and as of June 29, 2024.

No amounts were borrowed or outstanding under the Credit Facility during the nine months ended and as of September 28, 2024.

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

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

As of June 29, 2024, the company’s actual ratios of 0.01 and 0.03, respectively, were both within the permitted ranges set forth in this financial covenant.

As of September 28, 2024, the company’s consolidated cash balance, net of certain adjustments, exceeded consolidated debt resulting in actual ratios of (0.01) and (0.03), respectively.

Both ratios are 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.

As of June 29, 2024, there were no commercial paper issuances outstanding.

As of September 28, 2024, there were no commercial paper issuances outstanding.

SNAP-ON INCORPORATED

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Operating Activities

Net cash provided by operating activities was $649.8 million and $571.9 million in the first six months of 2024 and 2023, respectively.

Net cash provided by operating activities was $924.0 million and $857.3 million in the first nine months of 2024 and 2023, respectively.

The $66.7 million year-over-year increase in net cash provided by operating activities primarily reflects a $23.7 million change in net operating assets and liabilities and a $31.4 million increase in net earnings.

Investing Activities

Net cash used by investing activities of $123.4 million in the first six months of 2024 included additions to finance receivables of $504.2 million, partially offset by collections of $422.8 million.

Net cash used by investing activities of $167.5 million in the first six months of 2023 included additions to finance receivables of $536.3 million, partially offset by collections of $418.1 million.

Net cash used by investing activities of $163.9 million in the first nine months of 2024 included additions to finance receivables of $731.3 million, partially offset by collections of $629.3 million.

Net cash used by investing activities of $227.2 million in the first nine months of 2023 included additions to finance receivables of $779.8 million, partially offset by collections of $626.5 million.

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

Capital expenditures were $45.0 million and $48.8 million in the first six months of 2024 and 2023, respectively.

Capital expenditures were $65.4 million and $73.9 million in the first nine months of 2024 and 2023, respectively.

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

Financing Activities

Net cash used by financing activities was $292.1 million in the first six months of 2024 and $288.6 million in the first six months of 2023.

Proceeds from stock purchase plans and stock option exercises totaled $51.7 million and $84.6 million in the first six months of 2024 and 2023, respectively.

In the first six months of 2024, Snap-on repurchased 422,000 shares of its common stock for $117.6 million under its previously announced share repurchase programs.

In the first six months of 2023, Snap-on repurchased 715,000 shares of its common stock for $182.0 million under its previously announced share repurchase programs.

As of June 29, 2024, Snap-on had remaining availability to repurchase up to an additional $271.1 million in common stock pursuant to its Board’s authorizations.

Net cash used by financing activities was $448.3 million in the first nine months of 2024 and $423.9 million in the first nine months of 2023.

Proceeds from stock purchase plans and stock option exercises totaled $61.6 million and $94.5 million in the first nine months of 2024 and 2023, respectively.

In the first nine months of 2024, Snap-on repurchased 637,000 shares of its common stock for $177.5 million under its previously announced share repurchase programs.

In the first nine months of 2023, Snap-on repurchased 909,000 shares of its common stock for $233.8 million under its previously announced share repurchase programs.

As of September 28, 2024, Snap-on had remaining availability to repurchase up to an additional $471.5 million in common stock pursuant to its Board’s authorizations.

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

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Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939.

Cash dividends totaled $196.2 million and $172.0 million in the first six months of 2024 and 2023, respectively.

Cash dividends totaled $294.1 million and $257.6 million in the first nine months of 2024 and 2023, respectively.

On November 2, 2023, the Board increased the quarterly cash dividend by 14.8% to $1.86 per share ($7.44 per share annualized).

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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, we project that capital expenditures in 2024 will be in the range of $100 million to $110 million, of which $45.0 million was incurred in the first six months of the year.

For the remainder of 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, we project that capital expenditures in 2024 will approximate $100 million, of which $65.4 million was incurred in the first nine months of the year.

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

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-Q

Item 2. Management’s Discussion and Analysis