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What changed in Snap-on's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Snap-on's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+289 added−292 removedSource: 10-K (2023-02-09) vs 10-K (2022-02-11)

Top changes in Snap-on's 2023 10-K

289 paragraphs added · 292 removed · 255 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

39 edited+10 added−6 removed69 unchanged
Biggest changeE-commerce Snap-on offers current and prospective customers online access to research and purchase products through its public website, www.snapon.com . The site features an online catalog of Snap-on hand tools, power tools, tool storage units and diagnostic equipment available to customers in the United States, the United Kingdom, Canada and Australia.
Biggest changeThe site features an online catalog of Snap-on hand tools, power tools, tool storage units and diagnostic equipment available to customers in the United States, the United Kingdom, Canada and Australia. E-commerce and certain other system enhancement initiatives are designed to improve productivity and further leverage the one-on-one relationships and service Snap-on has with its current and prospective customers.
Some of the major trade names and trademarks and the products and services with which they are associated include the following: Names Products and Services Snap-on Hand tools, power tools, tool storage products (including tool control software and hardware), diagnostics, certain equipment and related accessories, mobile tool stores, websites, electronic parts catalogs, warranty analytics solutions, business management systems and services, OEM specialty tools and equipment development and distribution, and OEM facilitation services ATI Aircraft hand tools and machine tools AutoCrib Asset and tool control systems autoVHC Vehicle inspection and training services BAHCO Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage, including tool control systems Blackhawk Collision repair equipment Blue-Point Hand tools, power tools, tool storage, diagnostics, certain equipment and related accessories Cartec Safety testing, brake testers, test lane equipment, dynamometers, suspension testers, emission testers and other equipment Car-O-Liner Collision repair equipment, and information and truck alignment systems CDI Torque tools Challenger Vehicle lifts Cognitran OEM SaaS products Dealer-FX Service operation solutions and OEM SaaS systems Ecotechnics Vehicle air conditioning service equipment Fastorq Hydraulic torque and tensioning products Fish and Hook Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage Hofmann Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment Irimo Saw blades, cutting tools, hand tools, power tools and tool storage John Bean Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment Josam Heavy duty alignment and collision repair solutions Lindström Hand tools Mitchell1 Repair and service information, shop management systems and business services Nexiq Diagnostic tools, information and program distributions for fleet and heavy duty equipment Norbar Torque tools Power Hawk Rescue tools and related equipment for military, government, fire and rescue Pro-Cut Brake service equipment and accessories Sandflex Hacksaw blades, bandsaws, saw blades, hole saws and reciprocating saw blades ShopKey Repair and service information, shop management systems and business services Sioux Power tools Sturtevant Richmont Torque tools Sun Diagnostic tools, wheel balancers, vehicle lifts, tire changers, wheel aligners, air conditioning products and emission testers TreadReader Automotive tire drive-over ramps and handheld devices TruckCam Commercial vehicle OEM factory solutions Williams Hand tools, tool storage, certain equipment and related accessories 2021 ANNUAL REPORT 7 Financial Services Snap-on also generates revenue from various financing programs that include: (i) installment sales and lease contracts arising from franchisees’ customers and Snap-on customers who require financing for the purchase or lease of tools, diagnostics, and equipment products on an extended-term payment plan; and (ii) business and vehicle loans and leases to franchisees.
Some of the major trade names and trademarks and the products and services with which they are associated include the following: Names Products and Services Snap-on Hand tools, power tools, tool storage products (including tool control software and hardware), diagnostics, certain equipment and related accessories, mobile tool stores, websites, electronic parts catalogs, warranty analytics solutions, business management systems and services, OEM specialty tools and equipment development and distribution, and OEM facilitation services ATI Aircraft hand tools and machine tools AutoCrib Asset and tool control systems autoVHC Vehicle inspection and training services BAHCO Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage, including tool control systems Blackhawk Collision repair equipment Blue-Point Hand tools, power tools, tool storage, diagnostics, certain equipment and related accessories Car-O-Liner Collision repair equipment, and information and truck alignment systems Cartec Safety testing, brake testers, test lane equipment, dynamometers, suspension testers, emission testers and other equipment CDI Torque tools Challenger Vehicle lifts Cognitran OEM SaaS products Dealer-FX Service operation solutions and OEM SaaS systems Ecotechnics Vehicle air conditioning service equipment Fastorq Hydraulic torque and tensioning products Fish and Hook Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage Hofmann Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment Irimo Saw blades, cutting tools, hand tools, power tools and tool storage John Bean Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment Josam Heavy duty alignment and collision repair solutions Lindström Hand tools Mitchell1 Repair and service information, shop management systems and business services Nexiq Diagnostic tools, information and program distributions for fleet and heavy duty equipment Norbar Torque tools Power Hawk Rescue tools and related equipment for military, government, fire and rescue Pro-Cut Brake service equipment and accessories Sandflex Hacksaw blades, bandsaws, saw blades, hole saws and reciprocating saw blades ShopKey Repair and service information, shop management systems and business services Sioux Power tools Sturtevant Richmont Torque tools Sun Diagnostic tools, wheel balancers, vehicle lifts, tire changers, wheel aligners, air conditioning products and emission testers TreadReader Automotive tire drive-over ramps and handheld devices TruckCam Commercial vehicle OEM factory solutions Williams Hand tools, tool storage, certain equipment and related accessories 2022 ANNUAL REPORT 7 Financial Services Snap-on also generates revenue from various financing programs that include: (i) installment sales and lease contracts arising from franchisees’ customers and Snap-on customers who require financing for the purchase or lease of tools, diagnostics, and equipment products on an extended-term payment plan; and (ii) business and vehicle loans and leases to franchisees.
Distributors Sales of certain tools and equipment are made through independent distributors who purchase the items from Snap-on and resell them to end users. Hand tools sold under the BAHCO, Irimo, Lindström, CDI, ATI, Fastorq, Norbar, Sioux, Sturtevant Richmont and Williams brands and trade names, for example, are sold through distributors worldwide.
Distributors Sales of certain tools and equipment are made through independent distributors who purchase the items from Snap-on and resell them to end users. Hand tools marketed under the BAHCO, Irimo, Lindström, CDI, ATI, Fastorq, Norbar, Sioux, Sturtevant Richmont and Williams brands and trade names, for example, are sold through distributors worldwide.
The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels.
The 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.
Snap-on will also post any amendments to these documents, or information about any waivers granted to directors or executive officers with respect to the Code of Business Conduct and Ethics, on the company’s website at www.snapon.com . 2021 ANNUAL REPORT 5 Products and Services Tools; Diagnostics, Information and Management Systems; and Equipment Snap-on offers a broad line of products and complementary services that are grouped into three product categories: (i) tools; (ii) diagnostics, information and management systems; and (iii) equipment.
Snap-on will also post any amendments to these documents, or information about any waivers granted to directors or executive officers with respect to the Code of Business Conduct and Ethics, on the company’s website at www.snapon.com . 2022 ANNUAL REPORT 5 Products and Services Tools; Diagnostics, Information and Management Systems; and Equipment Snap-on offers a broad line of products and complementary services that are grouped into three product categories: (i) tools; (ii) diagnostics, information and management systems; and (iii) equipment.
Snap-on also sells these products and services directly to OEMs and their franchised dealers. 2021 ANNUAL REPORT 9 Snap-on brand tools and equipment are marketed to industrial and governmental customers worldwide through both industrial sales associates and independent distributors. Selling activities focus on industrial customers whose main purchase criteria are quality and integrated solutions.
Snap-on also sells these products and services directly to OEMs and their franchised dealers. 2022 ANNUAL REPORT 9 Snap-on brand tools and equipment are marketed to industrial and governmental customers worldwide through both industrial sales associates and independent distributors. Selling activities focus on industrial customers whose main purchase criteria are quality and integrated solutions.
These beliefs go beyond Snap-on and are expected of our suppliers as detailed in the company’s Supplier Code of Conduct.
These beliefs go beyond Snap-on and are expected of suppliers as detailed in the company’s Supplier Code of Conduct.
The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel. The 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 Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s multi-national mobile tool distribution channel. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships, through direct and distributor channels.
Snap-on is committed to conducting business and making decisions honestly, ethically, fairly and within the law, and is guided by the company’s “Who We Are” mission statement, which is translated into multiple languages and prominently displayed in our facilities around the world.
Snap-on is committed to conducting business and making decisions honestly, ethically, fairly and within the law, and is guided by the company’s “Who We Are” mission statement, which is translated into multiple languages and prominently displayed in its facilities around the world.
As of 2021 year end, Snap-on had industrial sales associates and independent distributors primarily in the United States, Canada and in various European, Latin American, Middle Eastern, Asian and African countries, with the United States representing the majority of Snap-on’s total industrial sales.
As of 2022 year end, Snap-on had industrial sales associates and independent distributors primarily in the United States, Canada and in various European, Latin American, Middle Eastern, Asian and African countries, with the United States representing the majority of Snap-on’s total industrial sales.
As of 2021 year end, company-owned routes comprised approximately 4% of the total route population. Snap-on may elect to increase or reduce the number of company-owned routes in the future.
As of 2022 year end, company-owned routes comprised approximately 4% of the total route population. Snap-on may elect to increase or reduce the number of company-owned routes in the future.
Franchise fee revenue, including nominal, non-refundable initial and ongoing monthly fees (primarily for sales and business training, marketing and product promotion programs, and technology support), is recognized as the fees are earned. Franchise fee revenue totaled $17.3 million, $16.2 million and $15.4 million in fiscal 2021, 2020 and 2019, respectively.
Franchise fee revenue, including nominal, non-refundable initial and ongoing monthly fees (primarily for sales and business training, marketing and product promotion programs, and technology support), is recognized as the fees are earned. Franchise fee revenue totaled $18.4 million, $17.3 million and $16.2 million in fiscal 2022, 2021 and 2020, respectively.
In recent years, Snap-on has not experienced any significant work slowdowns, stoppages or other labor disruptions. Snap-on is guided by the beliefs and values in the company’s “Who We Are” mission statement and strives to be the “employer of choice” for its current and future associates.
In recent years, Snap-on has not experienced any significant work slowdowns, stoppages or other labor disruptions. 2022 ANNUAL REPORT 11 Snap-on is guided by the beliefs and values in the company’s “Who We Are” mission statement and strives to be the “employer of choice” for its current and future associates.
Today, Snap-on defines its value proposition more broadly, extending its reach “beyond the garage” to deliver a broad array of unique solutions that make work easier for serious professionals performing critical tasks.
Today, Snap-on defines its value proposition more broadly, extending its reach “beyond the garage” to deliver a broad array of unique solutions that make work easier for serious professionals.
For 2021, Snap-on had an overall safety incident rate of 1.01 (number of injuries and illnesses multiplied by 200,000, divided by hours worked). • Snap-on is committed to its employees and provides developmental opportunities, as well as competitive pay and benefits.
For 2022, Snap-on had an overall safety incident rate of 1.12 (number of injuries and illnesses multiplied by 200,000, divided by hours worked). • Snap-on is committed to its employees and provides developmental opportunities, as well as competitive pay and benefits.
In many of these markets, as in the United States, purchase decisions are generally made or influenced by professional vehicle service technicians as well as repair shop owners and managers. As of 2021 year end, Snap-on’s worldwide route count was approximately 4,775, including approximately 3,425 routes in the United States.
In many of these markets, as in the United States, purchase decisions are generally made or influenced by professional vehicle service technicians as well as repair shop owners and managers. As of 2022 year end, Snap-on’s worldwide route count was approximately 4,725, including approximately 3,400 routes in the United States.
The following table shows the consolidated net sales of these product categories for the last three years: Net Sales (Amounts in millions) 2021 2020 2019 Product Category: Tools $ 2,343.0 $ 1,984.7 $ 2,017.5 Diagnostics, information and management systems 892.5 783.8 827.5 Equipment 1,016.5 824.0 885.0 $ 4,252.0 $ 3,592.5 $ 3,730.0 The tools product category includes hand tools, power tools, tool storage products and other similar products.
The following table shows the consolidated net sales of these product categories for the last three years: Net Sales (Amounts in millions) 2022 2021 2020 Product Category: Tools $ 2,399.4 $ 2,343.0 $ 1,984.7 Diagnostics, information and management systems 942.4 892.5 783.8 Equipment 1,151.0 1,016.5 824.0 $ 4,492.8 $ 4,252.0 $ 3,592.5 The tools product category includes hand tools, power tools, tool storage products and other similar products.
Snap-on has adopted policies that seek to eliminate human trafficking, slavery, forced labor and child labor from its global supply chain. 12 SNAP-ON INCORPORATED Snap-on prioritizes continuous improvement in all facets of its operations, including environmental matters and health and safety.
Snap-on has adopted policies that seek to eliminate human trafficking, slavery, forced labor and child labor from its global supply chain, and has formalized its commitment to protecting human rights in the company’s Human Rights Policy. 12 SNAP-ON INCORPORATED Snap-on prioritizes continuous improvement in all facets of its operations, including environmental matters and health and safety.
To date, nearly 200,000 students have earned Snap-on certifications, preparing them for successful and satisfying careers across various technical disciplines.
To date, over 250,000 students have earned Snap-on certifications, preparing them for successful and satisfying careers across various technical disciplines.
Snap-on’s sustainability framework is focused on key areas impacting our industry, including energy management, employee health and safety, and material management, and is aligned with the standards of the Value Reporting Foundation (formerly known as the Sustainability Accounting Standards Board or “SASB”).
Snap-on’s sustainability framework is focused on key areas impacting our industry, including energy management, employee health and safety, and material management, and is aligned with the standards of the Value Reporting Foundation (formerly known as the Sustainability Accounting Standards Board or “SASB”), which has been consolidated into the International Financial Reporting Standards Foundation.
While such regulations have historically created select opportunities for our business operations, the company continually monitors developments in this area. Human Capital Management As of January 1, 2022, Snap-on employed approximately 12,800 people worldwide, of which approximately 7,000 were employed in the United States and approximately 5,800 were outside the United States.
While such regulations have historically created select opportunities for our business operations, the company continually monitors developments in this area. Human Capital Management As of December 31, 2022, Snap-on employed approximately 12,900 people worldwide, of which approximately 7,200 were employed in the United States and approximately 5,700 were outside the United States.
Expenditures on environmental and governmental matters through EH & SMS have not had a material effect upon Snap-on’s capital expenditures, earnings or competitive position. However, the increasing global focus on climate change may result in new or more stringent environmental or climate-related regulations or standards.
Snap-on believes that it complies with applicable environmental and government requirements in its operations. Expenditures on environmental and governmental matters through EH & SMS have not had a material effect upon Snap-on’s capital expenditures, earnings or competitive position. However, the increasing global focus on climate change may result in new or more stringent environmental or climate-related regulations or standards.
Much of the technology used in the manufacture of vehicle service tools and equipment is in the public domain. Snap-on relies primarily on trade secret protection for proprietary processes used in manufacturing. Methods and processes are patented when appropriate. Copyright protection is also utilized when appropriate. Trademarks used by Snap-on are of continuing importance in the marketplace.
Much of the technology used in the manufacture of vehicle service tools and equipment is in the public domain. Snap-on relies primarily on trade secret protection for proprietary processes used in manufacturing. Methods and processes are patented when appropriate.
Snap-on reaches its customers through the company’s franchised, company-direct, distributor and internet channels. The company began with the development of the original Snap-on interchangeable socket set in 1920 and subsequently pioneered mobile tool distribution in the automotive repair market, where well-stocked vans sell to professional vehicle technicians at their place of business.
The company began with the development of the original Snap-on interchangeable socket set and subsequently pioneered mobile tool distribution in the automotive repair market, where well-stocked vans sell to professional vehicle technicians at their place of business.
At Snap-on, environmental liabilities are managed through the Snap-on Environmental, Health and Safety Management System (“EH & SMS”), which is applied worldwide. The system is based upon continual improvement and is certified to ISO 14001:2015 and ISO 45001:2018, verified through Det Norske Veritas (DNV) Certification, Inc. Snap-on believes that it complies with applicable environmental and government requirements in its operations.
At Snap-on, environmental liabilities are managed through the Snap-on Environmental, Health and Safety Management System (“EH & SMS”), which is applied worldwide. The system is based upon continual improvement and is certified to ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018, verified through Det Norske Veritas (DNV) Certification, Inc.
Snap-on also derives income from various financing programs designed to facilitate the sales of its products and support its franchise business. Snap-on markets its products and brands worldwide through multiple sales distribution channels in more than 130 countries. Snap-on’s largest geographic markets include the United States, Europe, Canada and Asia Pacific.
The company also provides financing programs to facilitate the sales of its products and to support its franchise business. Snap-on markets its products and brands worldwide in more than 130 countries. Snap-on’s largest geographic markets include the United States, Europe, Canada and Asia Pacific.
Snap-on’s SASB Index, along with additional information regarding the company’s sustainability commitment, is available in the “Investors” section on the company’s website at www.snapon.com . Customers and Seasonality Snap-on does not have any single customer or government on which its business was substantially dependent in any of the indicated periods.
Additional information regarding the company’s sustainability commitment is available in the “Investors” section of the company’s website at www.snapon.com . Customers and Seasonality Snap-on does not have any single customer or government on which its business was substantially dependent in any of the indicated periods. Most of Snap-on’s businesses are not seasonal and their inventory needs are relatively constant.
As a permanent priority agenda item at all operational meetings, safety comes first. Snap-on strives to maintain a safe workplace and expects its employees to broadly embrace the company’s safety programs. Snap-on invests in its strong safety culture and in elevating the importance of worker safety throughout all levels of the organization.
Snap-on strives to maintain a safe workplace and expects its employees to broadly embrace the company’s safety programs. Snap-on invests in its strong safety culture and in elevating the importance of worker safety throughout all levels of the organization.
While the company does experience raw material and component cost fluctuations from time to time and from operation to operation, including during the ongoing COVID-19 pandemic, it endeavors to employ its RCI processes to improve efficiencies and reduce waste to minimize the impact of any cost increases.
While the company does experience raw material and component cost fluctuations, as well as availability variations from time to time and from operation to operation, including due to the ongoing COVID-19 pandemic and its impact on the global supply chain, Snap-on endeavors to employ its RCI processes to improve efficiencies and reduce waste to minimize the impact of any cost increases.
Item 1: Business Snap-on is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks.
Item 1: Business Snap-on is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks including those working in vehicle repair, aerospace, the military, natural resources, and manufacturing.
Competition Snap-on competes on the basis of its product quality and performance, product line breadth and depth, service, brand awareness and imagery, technological innovation and availability of financing (through SOC or its international finance subsidiaries).
Sales through the company’s e-commerce distribution channel were not significant in any of the last three years. Competition Snap-on competes on the basis of its product quality and performance, product line breadth and depth, service, brand awareness and imagery, technological innovation and availability of financing (through SOC or its international finance subsidiaries).
As reported to the CDP in 2021, the company’s total GHG emissions of 102,137 metric tons of carbon dioxide equivalent (“CO2e”) reflected an intensity of 28.4 (metric tons of CO2e, divided by net sales in millions), which is 30% lower than when initially reported in 2008.
In 2022, the company’s total GHG emissions of 101,805 metric tons of carbon dioxide equivalent (“CO2e”) reflected an intensity of 22.7 (metric tons of CO2e, divided by net sales in millions), which is over 40% lower than when initially reported in 2008.
Furthermore, through our Snap-on Value Creation Processes, a suite of principles we use every day, the company remains committed to the areas of safety, quality, customer connection, innovation and RCI, which are closely linked to and contribute to improving employee engagement, productivity, and efficiency. 2021 ANNUAL REPORT 11 Successful execution of our way forward is dependent on attracting, developing and retaining key employees and members of our management team, which we achieve through the following: • Snap-on believes strongly in workplace safety.
Furthermore, through our Snap-on Value Creation Processes, a suite of principles we use every day, the company remains committed to the areas of safety, quality, customer connection, innovation and RCI, which are closely linked to and contribute to improving employee engagement, productivity, and efficiency.
For information regarding recent acquisitions, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the Consolidated Financial Statements. Information Available on the Company’s Website Additional information about Snap-on, including its products and its sustainability commitment, is available on the company’s website at www.snapon.com .
For information regarding recent acquisitions, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the Consolidated Financial Statements.
As of 2021 year end, Snap-on and its subsidiaries held approximately 850 active and pending patents in the United States and approximately 2,550 active and pending patents outside of the United States. Sales relating to any single patent did not represent a material portion of Snap-on’s revenues in any of the last three years.
Sales relating to any single patent did not represent a material portion of Snap-on’s revenues in any of the last three years.
Wheel service and other vehicle service equipment are sold through distributors primarily under brands including Hofmann, John Bean, Car-O-Liner, Challenger, Pro-Cut, Cartec, Blackhawk and Ecotechnics. Diagnostics and equipment products are marketed through distributors in South America and Asia, and through both a direct sales force and distributors in Europe under the Snap-on, Sun and Blue-Point brands.
Asset and tool control solutions are sold under the AutoCrib brand primarily through distributors worldwide. Wheel service and other vehicle service equipment are sold through distributors primarily under brands including Hofmann, John Bean, Car-O-Liner, Challenger, Pro-Cut, Cartec, Blackhawk and Ecotechnics.
Annual employee training is used to reinforce ethics, environmental matters, health and safety, information security and regulatory compliance, which includes anti-corruption training for all relevant employees. Throughout the COVID-19 pandemic, Snap-on has generally maintained its headcount and has accommodated its operations to the virus environment.
Annual employee training is used to reinforce ethics, environmental matters, health and safety, human rights, information security and regulatory compliance, which includes anti-corruption training for all relevant employees. Social Responsibility and Sustainability Commitment Snap-on is deeply dedicated to honoring and celebrating the dignity of work.
The company does not currently anticipate experiencing any significant impact in 2022 from raw material and purchased component cost or availability issues.
The company does not currently anticipate experiencing any significant impact in 2023 from raw material and purchased component cost or availability issues. 10 SNAP-ON INCORPORATED To date, the company has not observed any meaningful supply shortages or cost increases directly or indirectly resulting from climate change factors.
Based on the most recently filed EEO-1 data, which is available in the “Investors” section on the company’s website at www.snapon.com , females constitute 25.8% and minorities constitute 22.4% of the workforce in the United States. Additionally, on a global basis, approximately 2,700 employees are represented by unions and/or covered under collective bargaining agreements with varying expiration dates through 2023.
Based on Snap-on’s most recently filed EEO-1 data, which is available under “ESG Reporting” in the “Investors” section of the company’s website at www.snapon.com , females constitute 26.0% and minorities constitute 23.5% of the company’s workforce in the United States.
Removed
Products and services include hand and power tools, tool storage, diagnostic software, handheld and computer-based diagnostic products, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, such as aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education.
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From its founding in 1920, Snap-on has been recognized as the mark of the serious and the outward sign of the pride and dignity working men and women take in their professions. Products and services are sold through the company’s network of widely recognized franchisee vans as well as through direct and distributor channels, under a variety of notable brands.
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E-commerce and certain other system enhancement initiatives are designed to improve productivity and further leverage the one-on-one relationships and service Snap-on has with its current and prospective customers. Sales through the company’s e-commerce distribution channel were not significant in any of the last three years.
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Information Available on the Company’s Website Additional information about Snap-on, including its products and its environmental, health and safety, social responsibility, governance and sustainability (collectively, “ESG”) commitment, is available on the company’s website at www.snapon.com .
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In addition, to date, the company has not observed any meaningful supply shortages or cost increases directly or indirectly resulting from climate change factors. 10 SNAP-ON INCORPORATED Patents, Trademarks and Other Intellectual Property Snap-on vigorously pursues and relies on patent protection to protect its intellectual property and position in its markets.
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Diagnostics and equipment products are marketed through distributors in South America and Asia, and through both a direct sales force and distributors in Europe under the Snap-on, Sun and Blue-Point brands. E-commerce Snap-on offers current and prospective customers online access to research and purchase products through its public website, www.snapon.com .
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Snap-on has taken what it believes to be appropriate measures to ensure the health and safety of its personnel, including enhancing cleaning protocols, providing protective equipment and providing wages for quarantined associates.
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Patents, Trademarks and Other Intellectual Property Snap-on vigorously pursues and relies on patent protection to safeguard its intellectual property and position in its markets. As of 2022 year end, Snap-on and its subsidiaries held approximately 870 active and pending patents in the United States and approximately 2,780 active and pending patents outside of the United States.
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Refer to the “Impact of the COVID-19” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on actions taken by the company in response to the COVID-19 pandemic. Social Responsibility and Sustainability Commitment Snap-on is deeply dedicated to honoring and celebrating the dignity of work.
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Snap-on leverages trade secret and other protections, as well as contractual arrangements and confidentiality procedures, for its proprietary software and other innovative solutions. Copyright protection is also utilized when appropriate. Trademarks used by Snap-on are of continuing importance in the marketplace.
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Most of Snap-on’s businesses are not seasonal and their inventory needs are relatively constant.
Added
Additionally, on a global basis, approximately 2,600 employees are represented by unions and/or covered under collective bargaining agreements with varying expiration dates through 2025.
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Successful execution of our way forward is dependent on attracting, developing and retaining key employees and members of our management team, which we achieve through the following: • Snap-on believes strongly in workplace safety. As a permanent priority agenda item at all operational meetings, safety comes first.
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Snap-on’s SASB Index is available under “ESG Reporting” in the “Investors” section on the company’s website at www.snapon.com .
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Feedback on the evaluation of risks and/or opportunities related to ESG matters identified by the company’s internal Environmental, Social and Governance Committee (the “ESGC”) and by the company’s operating units is included and discussed as part of the company’s quarterly operations reviews with senior management.
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The ESGC reports to the company’s Chief Executive Officer and updates the Corporate Governance and Nominating Committee about its plans and actions at least two times per year. The full Board has ultimate oversight of the company’s strategy related to ESG matters and receives regular reports on the subject from the Corporate Governance and Nominating Committee.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

45 edited+14 added−5 removed74 unchanged
Biggest changeSignificant and unanticipated changes in circumstances, such as significant and long-term adverse changes in business climate, adverse actions by regulators, unanticipated competition, the loss of key customers, and/or changes in technology or markets, could require a provision for impairment in a future period that could substantially impact our reported earnings and reduce our consolidated net worth and shareholders’ equity.
Biggest changeOur determination of whether impairment has occurred is based on a comparison of each of our reporting units’ fair market value with its carrying value. 2022 ANNUAL REPORT 19 Significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, changes in key personnel or litigation, a sustained decrease in share price and/or other events, could require a provision for impairment in a future period that could substantially impact our reported earnings and reduce our consolidated net worth and shareholders’ equity.
We may not be able to compete effectively unless we continue to enhance existing products or introduce new products to the marketplace in a timely manner. Product improvements and new product introductions require significant financial and other resources, including significant planning, design, development, sourcing and testing at the technological, product and manufacturing process levels.
We may not be able to compete effectively unless we continue to enhance existing products or introduce new products to the marketplace in a timely manner. Product improvements and new product introductions require significant financial and other resources, including planning, design, development, sourcing and testing at the technological, product and manufacturing process levels.
Price competition in our various industries is intense and pricing pressures from competitors and customers continue to increase. In general, as a manufacturer and marketer of premium products and services, the expectations of Snap-on’s customers and its franchisees are high and continue to increase.
Price competition in our various industries is intense and pricing pressures from competitors and customers continue to increase. In general, as a manufacturer and marketer of premium products and services, the expectations of Snap-on’s customers and its franchisees are high.
Data security and information technology infrastructure and security are critical to supporting business objectives; failure of our systems to operate effectively could adversely affect our business and reputation. We depend heavily on information technology infrastructure to achieve our business objectives and to protect sensitive information, and continually invest in improving such systems.
Data security and information technology infrastructure and security are critical to supporting business objectives; failure of our systems to operate effectively could adversely affect our business and reputation. We depend heavily on information technology infrastructure to achieve our business objectives and to protect sensitive data, and we continually invest in improving such systems.
The company’s allowances may not be adequate to cover actual losses, and future allowances for credit losses could materially and adversely affect our financial condition, results of operations and cash flows. Foreign operations are subject to currency exchange, inflation, interest and other risks that could adversely affect our business, financial condition, results of operations and cash flows.
The company’s allowances may not be adequate to cover actual losses, and future provisions for credit losses could materially and adversely affect our financial condition, results of operations and cash flows. Foreign operations are subject to currency exchange, inflation, interest and other risks that could adversely affect our business, financial condition, results of operations and cash flows.
Any new products that we develop may not receive market acceptance or otherwise generate any meaningful net sales or profits for us relative to our expectations based on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs and research and development.
Any new products that we develop may not receive market acceptance or otherwise generate any meaningful net sales or profits for us relative to our expectations based on, among other factors, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs and research and development.
The inability to successfully defend claims from taxing authorities could adversely affect our financial condition, results of operations and cash flows. We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions.
The inability to successfully defend claims from taxing authorities and changes in tax laws and rules could adversely affect our financial condition, results of operations and cash flows. We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions.
We, our franchisees and our customers, and the economy as a whole, also may be affected by future world or local events outside our control, such as tariffs and other trade protection measures put in place by the United States or other countries, acts of terrorism, developments in the war on terrorism, armed conflicts, civil unrest, conflicts in international situations, weather events and natural disasters, outbreaks of infectious diseases such as the ongoing COVID-19 pandemic, as well as government-related developments or issues, including changes in tax laws and regulations, including regulations related to climate change and other sustainability matters, and changes in financial accounting standards.
We, our franchisees and our customers, and the economy as a whole, also may be affected by future world or local events outside our control, such as tariffs and other trade protection measures put in place by the United States or other countries, acts of terrorism, developments in the war on terrorism, armed conflicts (including the current war in Ukraine), civil unrest, conflicts in international situations, weather events and natural disasters, outbreaks of infectious diseases such as the ongoing COVID-19 pandemic, as well as government-related developments or issues, including changes in tax laws and regulations, new or enhanced regulations related to climate change and other sustainability matters, and changes in financial accounting standards.
In addition, outbreaks of infectious diseases, weather events or other circumstances beyond our control could also impact the availability of raw materials and components. Physical risks of climate change may also impact the availability and cost of materials, sources and supply of energy and could also increase operating costs.
In addition, outbreaks of infectious diseases, weather events, armed conflicts or other circumstances beyond our control could also impact the availability of raw materials and components. Physical risks of climate change may also impact the availability and cost of materials, sources and supply of energy and could also increase operating costs.
Therefore, we cannot give assurances that credit will be available on terms that we consider attractive, or at all, if and when necessary or beneficial to us. 18 SNAP-ON INCORPORATED Failure to achieve expected investment returns on pension plan assets, as well as changes in interest rates or plan demographics, could adversely impact our results of operations, financial condition and cash flows.
Therefore, we cannot give assurances that credit will be available on terms that we consider attractive, or at all, if and when necessary or beneficial to us. Failure to achieve expected investment returns on pension plan assets, as well as changes in interest rates or plan demographics, could adversely impact our results of operations, financial condition and cash flows.
Failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business. 14 SNAP-ON INCORPORATED The global tool, equipment, diagnostics, and repair information industries are competitive. We face strong competition in all of our market segments.
Failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business. The global tool, equipment, diagnostics, and repair information industries are competitive. We face strong competition in all of our market segments.
From time to time we are subject to legal disputes that are being litigated and/or settled in the ordinary course of business. Disputes or future lawsuits could result in the diversion of management’s time and attention away from business operations.
In the ordinary course of our business, we are subject to legal disputes that are litigated and/or settled. Disputes or future lawsuits could result in the diversion of management’s time and attention away from business operations.
Petroleum and energy prices have periodically increased significantly over short periods of time; future volatility and changes may be caused by market fluctuations, supply and demand, currency fluctuations, production and transportation disruptions, climate change regulations, world events and changes in governmental programs.
Petroleum and energy prices have periodically increased significantly over short periods of time; future volatility and changes may be caused by market fluctuations, supply and demand, currency fluctuations, production and transportation disruptions, climate change regulations, world events, including armed conflicts, and changes in governmental programs.
If we were to incur a substantial charge or are unable to effectively manage our cost reduction and restructuring efforts, our business, financial condition, results of operations and cash flows could be adversely affected in certain periods. Financial Risks Our inability to provide acceptable financing alternatives to franchisees and other end-user customers could adversely impact our operating results.
If we were to incur a substantial charge or are unable to effectively manage our cost reduction and restructuring efforts, our business, financial condition, results of operations and cash flows could be adversely affected in certain periods. 2022 ANNUAL REPORT 17 Financial Risks Our inability to provide acceptable financing alternatives to franchisees and other end-user customers could adversely impact our operating results.
Adverse fluctuations in interest rates and/or our ability to provide competitive financing programs could also have an adverse impact on our revenue and profitability. 2021 ANNUAL REPORT 17 Exposure to credit risks of customers and resellers may make it difficult to collect receivables, and our allowances for credit losses for receivables may prove inadequate, which could adversely affect operating results and financial condition.
Adverse fluctuations in interest rates and/or our ability to provide competitive financing programs could also have an adverse impact on our revenue and profitability. Exposure to credit risks of customers and resellers may make it difficult to collect receivables, and our allowances for credit losses for receivables may prove inadequate, which could adversely affect operating results and financial condition.
Raw materials, components and certain purchased finished goods can exhibit price and demand cyclicality, including as a result of tariffs, other trade protection measures, inflationary factors, and supply chain inefficiencies. Associated unexpected variability could result in an increase in product costs and require Snap-on to increase prices to maintain margins.
Raw materials, components and certain purchased finished goods can exhibit price and demand cyclicality, including as a result of tariffs, other trade protection measures, inflationary factors, and supply chain inefficiencies. Associated unexpected variability has resulted, and in the future could result, in an increase in product costs and require Snap-on to increase prices to maintain margins.
Risk related to COVID-19 and Other Infectious Diseases The ongoing COVID-19 pandemic is expected to continue to pose risks to our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact. We face risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic.
Risk related to COVID-19 and Other Infectious Diseases The ongoing COVID-19 pandemic continues to pose risks to our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact. We face risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic.
Among the effects of COVID-19, and potential effects of other similar outbreaks, on the company could include, but are not limited to, reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, supply chain inefficiencies, and reduced business and consumer spending, which could adversely affect our results of operations by reducing our sales, margins and/or net income as a result of rising costs, a slowdown in customer orders or order cancellations.
The effects of COVID-19 or other similar outbreaks on the company could include reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, supply chain inefficiencies, and reduced business and consumer spending, which could adversely affect our results of operations by reducing our sales, margins and/or net income as a result of rising costs, a slowdown in customer orders or order cancellations.
While we believe that advances in vehicle technologies provide us with opportunities to provide innovative products and solutions to the vehicle repair market, if we are not able to execute on those possibilities, our business and results of operations could suffer. The performance of Snap-on’s mobile tool distribution business depends on the success of its franchisees.
While we believe that advances in vehicle technologies provide us with opportunities to develop innovative products and solutions for the vehicle repair market, if we are not able to execute on those possibilities, our business and results of operations could suffer. 2022 ANNUAL REPORT 13 The performance of Snap-on’s mobile tool distribution business depends on the success of its franchisees.
Any prolonged disruption in the operations of our existing manufacturing facilities, whether due to technical or labor difficulties, facility consolidation or closure actions, lack of raw material or component availability, destruction of or damage to any facility (as a result of natural disasters, climate or weather events, use and storage of hazardous materials, acts of war, sabotage, terrorism, civil unrest or other events), or other reasons, including outbreaks of infectious diseases, such as the ongoing COVID-19 pandemic, could have a material adverse effect on our business, financial condition, results of operations and cash flows. 2021 ANNUAL REPORT 15 Price fluctuations and shortages of raw materials, components, certain purchased finished goods and energy sources could adversely affect the ability to obtain needed materials or products and could adversely affect our results of operations.
Any prolonged disruption in the operations of our existing manufacturing facilities, whether due to technical or labor difficulties, facility consolidation or closure actions, lack of raw material or component availability, destruction of or damage to any facility (as a result of natural disasters, climate or weather events, use and storage of hazardous materials, armed conflicts, sabotage, terrorism, civil unrest or other events), or other reasons, including outbreaks of infectious diseases, such as the ongoing COVID-19 pandemic, could have a material adverse effect on our business, financial condition, results of operations and cash flows. 2022 ANNUAL REPORT 15 Price inflation and shortages of raw materials, components, certain purchased finished goods and energy sources have impacted, and in the future could adversely affect, the ability to obtain, as well as the cost of, needed materials or products and, in turn, our results of operations.
Approximately 42% of our consolidated net revenues in 2021 were generated by the Snap-on Tools Group, which consists of Snap-on’s business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel.
Approximately 43% of our consolidated net revenues in 2022 were generated by the Snap-on Tools Group, which consists of Snap-on’s business operations primarily serving vehicle service and repair technicians through the company’s multi-national mobile tool distribution channel.
These developments, and other potential future legislation and regulations, including the increasing global regulation of privacy rights, may also adversely affect the customers to which, and the markets into which, we sell our products, and increase our costs and otherwise negatively affect our business, reputation, results of operations and financial condition, including in ways that cannot yet be foreseen.
These developments, and other potential future legislation and regulations, including the increasing global regulation of privacy rights, may also adversely affect the customers to which, and the markets into which, we sell our products, and increase our costs and otherwise negatively affect our business, reputation, results of operations and financial condition, including in ways that cannot yet be foreseen. 20 SNAP-ON INCORPORATED Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and cash flows.
Significant changes to legislative and regulatory activity, and compliance burdens, including those associated with: (i) sales to our government, military and defense contractor customers; and (ii) classification of third parties, including our franchisees, as independent from the company, as well as the manner in which they are applied, could significantly impact our business and the economy as a whole. 2021 ANNUAL REPORT 19 Financial services businesses of all kinds are subject to significant and complex regulations and enforcement.
Significant changes to legislative and regulatory activity, and compliance burdens, including those associated with: (i) sales to our government, military and defense contractor customers; and (ii) classification of third parties, including our franchisees, as independent from the company, as well as the manner in which they are applied, could significantly impact our business and the economy as a whole.
Inability to access credit or capital markets, or a deterioration in the terms on which financing might be available, could have an adverse impact on our business, financial condition, results of operations and cash flows. Increasing our financial leverage could affect our operations and profitability. The maximum available credit under our multi-currency revolving credit facility is $800 million.
Inability to access credit or capital markets, or a deterioration in the terms on which financing might be available, could have an adverse impact on our business, financial condition, results of operations and cash flows. 18 SNAP-ON INCORPORATED Increasing our financial leverage could affect our operations and profitability.
Adverse outcomes or settlements could also require us to pay damages, potentially in excess of amounts reserved, or incur liability for other remedies that could have a material adverse effect on our business, reputation, financial condition, results of operations and cash flows. 20 SNAP-ON INCORPORATED Our operations expose us to the risk of environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations and reputation.
Adverse outcomes or settlements could also require us to pay damages, potentially in excess of amounts reserved, or incur liability for other remedies that could have a material adverse effect on our business, reputation, financial condition, results of operations and cash flows.
Our foreign operations are also subject to other risks and challenges, such as the need to staff and manage diverse workforces, respond to the needs of multiple national and international marketplaces, and differing business climates and cultures in various countries.
Our foreign operations are also subject to other risks and challenges, such as the need to staff and manage diverse workforces, respond to the needs of multiple national and international marketplaces, and differing business climates and cultures in various countries. Operational Risks Risks associated with the disruption of manufacturing operations could adversely affect our profitability or competitive position.
Future growth rates and success of our business depends in large part on continued growth in our non-U.S. operations, including growth in emerging markets and critical industries. Numerous risks and uncertainties affect our non-U.S. operations.
Approximately 28% of our revenues in 2022 were generated outside of the United States. Future growth rates and success of our business depends in large part on continued growth in our non-U.S. operations, including growth in emerging markets and critical industries. Numerous risks and uncertainties affect our non-U.S. operations.
As we integrate, implement and deploy new information technology processes and enhance our information infrastructure across our global operations, we could experience disruptions in our business that could have an adverse effect on our business, financial condition, results of operations and cash flows. 16 SNAP-ON INCORPORATED Failure to attract, retain and effectively manage qualified personnel could lead to a loss of revenue and/or profitability.
As we integrate, implement and deploy new information technology processes and enhance our information infrastructure across our global operations, we could experience disruptions in our business that could have an adverse effect on our business, financial condition, results of operations and cash flows.
Increases or decreases in exchange rates between the U.S. dollar and other currencies affect the U.S. dollar value of those items, as reflected in the Consolidated Financial Statements. Substantial fluctuations in the value of the U.S. dollar or other transactional currencies could have a significant impact on the company’s financial condition and results of operations.
Increases or decreases in exchange rates between the U.S. dollar and other currencies affect the U.S. dollar value of those items, as reflected in the Consolidated Financial Statements.
To the extent the COVID-19 pandemic, or a future outbreak, adversely affects our business, financial condition, results of operations and cash flows, it may also heighten many of the other risks described in this section.
To the extent the ongoing COVID-19 pandemic, or a future outbreak of an infectious disease, adversely affects our business, financial condition, results of operations and cash flows, it may also heighten many of the other risks described in this section. 2022 ANNUAL REPORT 21 General Risk Factor Economic conditions and world events could affect our operating results.
We are required to perform impairment tests on our goodwill and other intangibles annually or at any time when events occur that could impact the value of our business segments. Our determination of whether impairment has occurred is based on a comparison of each of our reporting units’ fair market value with its carrying value.
We are required to perform impairment tests on our goodwill and other intangibles annually or at any time when events occur that could impact the value of our business segments.
Any such events, if significant, could cause us to lose customers and/or revenue and could require us to incur significant expense to remediate, including as a result of legal or regulatory claims, proceedings, fines or penalties, and could also damage our reputation.
The March 2022 incident did not have a significant impact on the results of our operations; however, future cyber events could cause us to lose customers and/or revenue and could require us to incur significant expense to remediate, including as a result of legal or regulatory claims, proceedings, fines or penalties, and could also damage our reputation.
The use of other methods of transportation, including more frequent use of public transportation in the future, could result in a decrease in the use of privately-operated vehicles.
The use of other methods of transportation, including more frequent use of public transportation in the future, could result in a decrease in the use of privately-operated vehicles. A decrease in the use of privately-operated vehicles may lead to fewer repairs and less demand for our products.
Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and cash flows. The products that we design and/or manufacture, and/or the services we provide, can lead to product liability claims or other legal claims being filed against us.
The products that we design and/or manufacture, and/or the services we provide, can lead to product liability claims or other legal claims being filed against us.
Snap-on’s success depends, in part, on the efforts and abilities of its senior management team and other key employees. Their skills, experience and industry contacts significantly benefit our operations and administration.
Failure to attract, retain and effectively manage qualified personnel could lead to a loss of revenue and/or profitability. Snap-on’s success depends, in part, on the efforts and abilities of its senior management team and other key employees whose skills, experience and industry contacts significantly benefit our operations and administration.
Problems that impair or compromise this infrastructure, including natural disasters, power outages, major network failures, security breaches or malicious attacks, or during system upgrades and/or new system implementations, could impede our ability to record or process orders, manufacture and ship in a timely manner, manage our financial services operations including originating, processing, accounting for and collecting receivables, protect sensitive data of the company, our customers, our suppliers and business partners, or otherwise carry on business in the normal course.
Such impacts could interfere with our ability to record or process orders, manufacture and ship in a timely manner, manage our financial services operations including originating, processing, accounting for and collecting receivables, protect sensitive data of the company, our customers, our suppliers and business partners, or otherwise carry on business in the normal course.
The company maintains allowances for credit losses for receivables to provide for defaults and nonperformance. These allowances represent an estimate of losses over the remaining contractual lives of our receivables which include current market conditions and estimates for reasonable and supportable forecasts, when appropriate.
The company maintains allowances for credit losses for receivables to provide for defaults and nonperformance. These allowances represent an estimate of expected credit losses over the remaining contractual life of the receivables, using historical loss experience, asset specific risk characteristics, current conditions, reasonable and supportable forecasts, and an appropriate reversion period, when applicable.
Our end-user customers, franchisees and suppliers also require access to credit for their businesses. At times, world financial markets have been unstable and subject to uncertainty.
We depend upon the availability of credit to operate our business, including the financing of receivables from end-user customers that are originated by our financial services businesses. Our end-user customers, franchisees and suppliers also require access to credit for their businesses. At times, world financial markets have been unstable and subject to uncertainty.
Any inability to maintain customer satisfaction could diminish Snap-on’s premium image and reputation and could result in a lessening of our ability to command premium pricing. We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase market share or profitability.
Any inability to maintain customer satisfaction could diminish Snap-on’s premium image and reputation and could result in a lessening of our ability to command premium pricing.
A decrease in the use of privately-operated vehicles may lead to fewer repairs and less demand for our products. 2021 ANNUAL REPORT 13 In addition, the number of electric and hybrid vehicles developed and sold has risen in recent years, and is expected to continue to increase in the future.
In addition, the number of electric and hybrid vehicles developed and sold has risen in recent years, and is expected to continue to increase in the future.
General Risk Factor Economic conditions and world events could affect our operating results. In addition to the specific risks above, we, our franchisees and our customers, may be adversely affected by changing economic conditions, including conditions that may particularly impact specific regions.
In addition to the specific risks above, we, our franchisees and our customers, may be adversely affected by changing economic conditions, including conditions that may particularly impact specific regions. These conditions may result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending.
Existing measures may be extended in certain regions and additional measures may be imposed to combat the COVID-19 pandemic or future outbreaks of infectious diseases.
In response to COVID-19 and its variants, national and local governments around the world have instituted certain protective measures at various times. While such restrictions have generally eased in many countries where we have operations, existing measures may be extended in certain regions and additional measures may be imposed to combat the COVID-19 pandemic or future outbreaks of infectious diseases.
We are also affected by changes in inflation rates and interest rates. Additionally, cash generated in certain non-U.S. jurisdictions may be difficult to repatriate to the United States in a tax-efficient manner.
Cash generated in certain non-U.S. jurisdictions may be difficult to repatriate to the United States in a tax-efficient manner. Adverse developments in the credit and financial markets could negatively impact the availability of credit that we and our customers need to operate our businesses.
Foreign operations are subject to political, economic and other risks that could adversely affect our business, financial condition, results of operations and cash flows. Approximately 31% of our revenues in 2021 were generated outside of the United States.
We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase market share or profitability. 14 SNAP-ON INCORPORATED Foreign operations are subject to political, economic, trade and other risks that could adversely affect our business, financial condition, results of operations and cash flows.
While we have taken steps to maintain adequate data security and address these risks and uncertainties by implementing security technologies, internal controls, network and data center resiliency, and redundancy and recovery processes, as well as by securing insurance, these measures may be inadequate. These risks may be heightened when associates work remotely.
The information technology incident did not significantly affect the company’s financial results. 16 SNAP-ON INCORPORATED In response to the evolving cyber threat environment, we continue to invest in data security and address these risks and uncertainties by implementing security technologies, internal controls, network and data center resiliency, and redundancy and recovery processes, as well as by securing insurance.
Removed
In response to COVID-19, national and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.
Added
These and other potential implications could adversely affect our business and results of operations. The February 2022 Russian invasion of Ukraine and the ongoing conflict in the region has led to sanctions and actions taken against Russia and Belarus by the United States, the U.K., the European Union and others.
Removed
The ultimate impact of COVID-19, as well as future outbreaks of infectious diseases, is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.
Added
The war in Ukraine has not had a material impact on our business and operations; however, expansion of the conflict beyond its current geographic, political and economic scope could adversely impact our business, results of operations and financial condition.
Removed
These and other potential implications could adversely affect our business and results of operations. Operational Risks Risks associated with the disruption of manufacturing operations could adversely affect our profitability or competitive position. We manufacture a significant portion of the products we sell.
Added
Risks related to this situation include supply chain inefficiencies, price increases and shortages of raw materials and components, exchange rate volatility, energy shortages in Europe, an increase in cybersecurity incidents, and potential impairment of certain assets.
Removed
Adverse developments in the credit and financial markets could negatively impact the availability of credit that we and our customers need to operate our businesses. We depend upon the availability of credit to operate our business, including the financing of receivables from end-user customers that are originated by our financial services businesses.
Added
We manufacture a significant portion of the products we sell.
Removed
These conditions may result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending.
Added
In the ordinary course of business, we collect and store sensitive data and information, including personally identifiable information about our employees and the company’s proprietary and regulated business information, as well as that of our customers, suppliers and business partners.
Added
Our information systems, like those of other companies, are susceptible to malicious damage, intrusions and outages due to, among other events, viruses, cyber attacks, industrial espionage, phishing attempts, hacking, break-ins and similar events, as well as other breaches of security, natural disasters, power loss or telecommunications failures.
Added
Techniques used to breach information technology systems are growing in sophistication and increasingly come from threat actors of all types, including individuals, criminal organizations and state-sponsored operatives.
Added
In early March 2022, as previously disclosed, Snap-on detected unusual activity in some areas of its information technology environment, quickly took down its network connections as part of the company’s defense protocols, launched a comprehensive analysis assisted by a leading external forensics firm, and notified law enforcement.
Added
The company continued to pursue its commercial activities and restored connections as system interfaces were cleared.
Added
Future problems that impair or compromise the company’s information technology infrastructure, including those due to natural disasters, power outages, major network failures, security breaches or malicious attacks, or those occurring during system upgrades and/or new system implementations could impede our operations.
Added
Substantial fluctuations in the value of the U.S. dollar or other transactional currencies have had and, in the future, could have a significant impact on the company’s financial condition and results of operations. We are also affected by changes in inflation and interest rates in non-U.S. jurisdictions.
Added
The maximum available credit under our multi-currency revolving credit facility is $800 million.
Added
Financial services businesses of all kinds are subject to significant and complex regulations and enforcement.
Added
Our operations expose us to the risk of environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations and reputation.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed2 unchanged
Biggest changeLocations: Santo Tome, Argentina Manufacturing Owned C&I New South Wales, Australia Distribution and financial services Leased SOT, FS Minsk, Belarus Manufacturing Owned C&I Santa Bárbara d’Oeste, Brazil Manufacturing and distribution Owned RS&I Calgary, Canada Distribution Leased SOT Mississauga, Canada Distribution Leased SOT, RS&I Beijing, China Manufacturing and distribution Leased C&I Kunshan, China Manufacturing Owned C&I Xiaoshan, China Manufacturing Owned C&I Banbury, England Manufacturing and distribution Owned C&I Bramley, England Manufacturing Owned C&I Kettering, England Distribution and financial services Owned and leased SOT, C&I, FS Bauge-en-Anjou, France Manufacturing Owned C&I Sopron, Hungary Manufacturing Owned RS&I Correggio, Italy Manufacturing Owned RS&I Tokyo, Japan Distribution Leased C&I Helmond, Netherlands Distribution Owned C&I Vila do Conde, Portugal Manufacturing Owned C&I Irun, Spain Manufacturing Owned C&I Placencia, Spain Manufacturing Owned C&I Vitoria, Spain Manufacturing and distribution Owned C&I Bollnäs, Sweden Manufacturing Owned C&I Edsbyn, Sweden Manufacturing Owned C&I Kungsör, Sweden Manufacturing and distribution Owned RS&I Lidköping, Sweden Manufacturing Owned C&I * Segment abbreviations: C&I – Commercial & Industrial Group SOT – Snap-on Tools Group RS&I – Repair Systems & Information Group FS – Financial Services 22 SNAP-ON INCORPORATED
Biggest changeLocations: Santo Tome, Argentina Manufacturing Owned C&I New South Wales, Australia Distribution and financial services Leased SOT, FS Minsk, Belarus Manufacturing Owned C&I Santa Bárbara d’Oeste, Brazil Manufacturing and distribution Owned RS&I Calgary, Canada Distribution Leased SOT Mississauga, Canada Distribution Leased SOT, RS&I Beijing, China Manufacturing and distribution Leased C&I Kunshan, China Manufacturing Owned C&I Xiaoshan, China Manufacturing Owned C&I Banbury, England Manufacturing and distribution Owned C&I Bramley, England Manufacturing Owned C&I Kettering, England Distribution and financial services Owned and leased SOT, C&I, FS Bauge-en-Anjou, France Manufacturing Owned C&I Sopron, Hungary Manufacturing Owned RS&I Correggio, Italy Manufacturing Owned RS&I Tokyo, Japan Distribution Leased C&I Helmond, Netherlands Distribution Owned C&I Vila do Conde, Portugal Manufacturing Owned C&I Irun, Spain Manufacturing Owned C&I Placencia, Spain Manufacturing Owned C&I Vitoria, Spain Manufacturing and distribution Owned C&I Edsbyn, Sweden Manufacturing Owned C&I Kungsör, Sweden Manufacturing and distribution Owned RS&I Lidköping, Sweden Manufacturing Owned C&I * Segment abbreviations: C&I – Commercial & Industrial Group SOT – Snap-on Tools Group RS&I – Repair Systems & Information Group FS – Financial Services 2022 ANNUAL REPORT 23
Locations: Elkmont, Alabama Manufacturing Owned SOT Conway, Arkansas Manufacturing and distribution Owned RS&I City of Industry, California Manufacturing Leased C&I San Diego, California Software development Owned RS&I San Jose, California Software development Leased RS&I Tustin, California Manufacturing and distribution Leased C&I Columbus, Georgia Distribution Owned C&I Crystal Lake, Illinois Distribution Owned and leased SOT Libertyville, Illinois Financial services Leased FS Algona, Iowa Manufacturing and distribution Owned SOT Louisville, Kentucky Manufacturing and distribution Leased RS&I Olive Branch, Mississippi Distribution Owned SOT Carson City, Nevada Distribution Owned and leased SOT Murphy, North Carolina Manufacturing and distribution Owned and leased C&I Richfield, Ohio Software development Owned RS&I Robesonia, Pennsylvania Distribution Owned SOT Elizabethton, Tennessee Manufacturing Owned SOT Kenosha, Wisconsin Distribution and corporate Owned SOT, C&I, RS&I Milwaukee, Wisconsin Manufacturing Owned SOT Pleasant Prairie, Wisconsin Distribution Owned SOT, C&I, RS&I Non-U.S.
Locations: Elkmont, Alabama Manufacturing Owned SOT Conway, Arkansas Manufacturing and distribution Owned and leased RS&I City of Industry, California Manufacturing Leased C&I San Diego, California Software development Owned RS&I San Jose, California Software development Leased RS&I Tustin, California Manufacturing and distribution Leased C&I Columbus, Georgia Distribution Owned C&I Crystal Lake, Illinois Distribution Owned and leased SOT Libertyville, Illinois Financial services Leased FS Algona, Iowa Manufacturing and distribution Owned SOT Louisville, Kentucky Manufacturing and distribution Leased RS&I Olive Branch, Mississippi Distribution Owned SOT Carson City, Nevada Distribution Owned and leased SOT Murphy, North Carolina Manufacturing and distribution Owned and leased C&I Richfield, Ohio Software development Owned RS&I Robesonia, Pennsylvania Distribution Owned SOT Elizabethton, Tennessee Manufacturing Owned SOT Kenosha, Wisconsin Distribution and corporate Owned SOT, C&I, RS&I Milwaukee, Wisconsin Manufacturing Owned SOT Pleasant Prairie, Wisconsin Distribution Owned SOT, C&I, RS&I Non-U.S.
Snap-on management continually monitors the company’s capacity needs and makes adjustments as dictated by market and other conditions. 2021 ANNUAL REPORT 21 The following table provides information about our corporate headquarters and financial services operations, and each of Snap-on’s principal active manufacturing locations, distribution centers and software development locations (exceeding 50,000 square feet) as of 2021 year end: Location Principal Property Use Owned/Leased Segment* U.S.
Snap-on management continually monitors the company’s capacity needs and makes adjustments as dictated by market and other conditions. 22 SNAP-ON INCORPORATED The following table provides information about our corporate headquarters and financial services operations, and each of Snap-on’s principal active manufacturing locations, distribution centers and software development locations (exceeding 50,000 square feet) as of 2022 year end: Location Principal Property Use Owned/Leased Segment* U.S.
Snap-on’s facilities in the United States occupy approximately 3.9 million square feet, of which 74% is owned, including its corporate and general office facility located in Kenosha, Wisconsin. Snap-on’s facilities outside the United States occupy approximately 4.6 million square feet, of which approximately 74% is owned. Certain Snap-on facilities are leased through operating and finance lease agreements.
Snap-on’s facilities in the United States occupy approximately 4.1 million square feet, of which 73% is owned, including its corporate and general office facility located in Kenosha, Wisconsin. Snap-on’s facilities outside the United States occupy approximately 4.4 million square feet, of which approximately 73% is owned. Certain Snap-on facilities are leased through operating and finance lease agreements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSnap-on has undertaken stock repurchases from time to time to offset dilution created by shares issued for employee and franchisee stock purchase plans, and equity plans, and for other corporate purposes, as well as when the company believes market conditions are favorable. The repurchase of Snap-on common stock is at the company’s discretion, subject to prevailing financial and market conditions.
Biggest changeSnap-on has undertaken stock repurchases from time to time to offset dilution related to equity plan issuances and for other corporate purposes, as well as when the company believes market conditions are favorable.
Because the number of shares that are purchased pursuant to the 1996 Authorization will change from time to time as (i) the company issues shares under its various plans; and (ii) shares are repurchased pursuant to this authorization, the number of shares authorized to be repurchased will vary from time to time.
Because the number of shares that are purchased pursuant to the 1996 Authorization will change as (i) the company issues shares under its various plans; and (ii) shares are repurchased pursuant to this authorization, the number of shares authorized to be repurchased will vary from time to time.
The 1996 Authorization allows the repurchase of up to the number of shares issued or delivered from treasury from time to time under the various plans the company has in place that call for the issuance of the company’s common stock.
The 1996 Authorization allows the repurchase of up to the number of shares issued or delivered from treasury under the various plans the company has in place that call for the issuance of the company’s common stock.
Issuer Purchases of Equity Securities The following chart discloses information regarding the shares of Snap-on’s common stock repurchased by the company during the fourth quarter of fiscal 2021, all of which were purchased pursuant to the Board’s authorizations that the company has publicly announced.
Issuer Purchases of Equity Securities The following chart discloses information regarding the shares of Snap-on’s common stock repurchased by the company during the fourth quarter of fiscal 2022, all of which were purchased pursuant to the Board’s authorizations that the company has publicly announced.
(“Citibank”) during the fourth quarter of 2021 pursuant to a prepaid equity forward agreement (the “Agreement”) with Citibank that is intended to reduce the impact of market risk associated with the stock-based portion of the company’s deferred compensation plans.
(“Citibank”) during the fourth quarter of 2022 pursuant to a prepaid equity forward agreement (the “Agreement”) with Citibank that is intended to reduce the impact of market risk associated with the stock-based portion of the company’s deferred compensation plans.
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Snap-on had 53,429,650 shares of common stock outstanding as of 2021 year end. Snap-on’s stock is listed on the New York Stock Exchange under the ticker symbol “SNA.” At February 4, 2022, there were 4,226 registered holders of Snap-on common stock.
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Snap-on had 53,002,580 shares of common stock outstanding as of 2022 year end. Snap-on’s stock is listed on the New York Stock Exchange under the ticker symbol “SNA.” At February 3, 2023, there were 4,113 registered holders of Snap-on common stock.
On November 4, 2021, the Board authorized the repurchase of up to $500 million of the company’s common stock (the “2021 Authorization”).
The 1996 Authorization will expire when terminated by the Board. • On November 4, 2021, the Board authorized the repurchase of up to $500 million of the company’s common stock (the “2021 Authorization”).
The 2021 Authorization replaced the 2019 Authorization (under which approximately $179 million remained available at the time of replacement) and, will expire when the aggregate repurchase price limit is met, unless terminated earlier by the Board. 2021 ANNUAL REPORT 23 Other Purchases or Sales of Equity Securities The following chart discloses information regarding transactions in shares of Snap-on’s common stock by Citibank, N.A.
The 2021 Authorization will expire when the aggregate repurchase price limit is met, unless terminated earlier by the Board. 24 SNAP-ON INCORPORATED Other Purchases or Sales of Equity Securities The following chart discloses information regarding transactions in shares of Snap-on’s common stock by Citibank, N.A.
Period Shares purchased Average price per share Shares purchased as part of publicly announced plans or programs Approximate value of shares that may yet be purchased under publicly announced plans or programs* 10/03/21 to 10/30/21 40,000 $206.07 40,000 $188.8 million 10/31/21 to 11/27/21 155,000 $215.30 155,000 $476.9 million 11/28/21 to 01/01/22 160,000 $212.06 160,000 $454.9 million Total/Average 355,000 $212.80 355,000 N/A ______________________ N/A: Not applicable * Subject to further adjustment pursuant to the 1996 Authorization described below, as of January 1, 2022, the approximate value of shares that may yet be purchased pursuant to the outstanding Board authorizations discussed below is $454.9 million. • In 1996, the Board authorized the company to repurchase shares of the company’s common stock from time to time in the open market or in privately negotiated transactions (“the 1996 Authorization”).
Period Shares purchased Average price per share Shares purchased as part of publicly announced plans or programs Approximate value of shares that may yet be purchased under publicly announced plans or programs* 10/02/22 to 10/29/22 50,000 $216.45 50,000 $385.6 million 10/30/22 to 11/26/22 87,000 $231.48 87,000 $387.6 million 11/27/22 to 12/31/22 147,000 $233.07 147,000 $362.4 million Total/Average 284,000 $229.66 284,000 N/A ______________________ N/A: Not applicable * Subject to further adjustment pursuant to the 1996 Authorization described below, as of December 31, 2022, the approximate value of shares that may yet be purchased pursuant to the outstanding Board authorizations discussed below is $362.4 million. • In 1996, the Board authorized the company to repurchase shares of the company’s common stock periodically in the open market or in privately negotiated transactions (“the 1996 Authorization”).
Citibank Sales of Snap-on Stock Period Shares Sold Average Price per Share 10/03/21 to 10/30/21 — — 10/31/21 to 11/27/21 5,000 $203.00 11/28/21 to 01/01/22 3,900 $209.99 Total/Average 8,900 $206.06 24 SNAP-ON INCORPORATED Five-year Stock Performance Graph The graph below illustrates the cumulative total shareholder return on Snap-on common stock since December 31, 2016, of a $100 investment, assuming that dividends were reinvested quarterly.
Citibank Purchases (Sales) of Snap-on Stock Period Shares Purchased (Sold) Average Price per Share 10/02/22 to 10/29/22 — — 10/30/22 to 11/26/22 (6,400) $228.61 11/27/22 to 12/31/22 500 $235.45 Total/Average (5,900) $229.11 2022 ANNUAL REPORT 25 Five-year Stock Performance Graph The graph below illustrates the cumulative total shareholder return on Snap-on common stock since December 31, 2017, of a $100 investment, assuming that dividends were reinvested quarterly.
Fiscal Year Ended (1) Snap-on Incorporated S&P 500 Industrials S&P 500 December 31, 2016 $100.00 $100.00 $100.00 December 31, 2017 $103.65 $121.03 $121.83 December 31, 2018 $88.26 $104.95 $116.49 December 31, 2019 $105.50 $135.77 $153.17 December 31, 2020 $109.73 $150.79 $181.35 December 31, 2021 $141.38 $182.63 $233.41 _______________________________ (1) The company’s fiscal year ends on the Saturday that is on or nearest to December 31 of each year; for ease of calculation, the fiscal year end is assumed to be December 31.
Fiscal Year Ended (1) Snap-on Incorporated S&P 500 Industrials S&P 500 December 31, 2017 $100.00 $100.00 $100.00 December 31, 2018 $85.15 $86.71 $95.62 December 31, 2019 $101.79 $112.17 $125.72 December 31, 2020 $105.86 $124.59 $148.85 December 31, 2021 $136.40 $150.89 $191.58 December 31, 2022 $148.55 $142.63 $156.89 _______________________________ (1) The company’s fiscal year ends on the Saturday that is on or nearest to December 31 of each year; for ease of calculation, the fiscal year end is assumed to be December 31.
Removed
The 1996 Authorization will expire when terminated by the Board.
Added
The repurchase of Snap-on common stock is at the company’s discretion, subject to prevailing financial and market conditions, and pursuant to the Board’s authorizations that the company has publicly announced.
Removed
When calculating the approximate value of shares that the company may yet purchase under the 1996 Authorization, the company assumed a price of $203.23, $211.30 and $215.38 per share of common stock as of the end of the fiscal 2021 months ended October 30, 2021, November 27, 2021, and January 1, 2022, respectively. • On February 14, 2019, the Board authorized the repurchase of an aggregate of up to $500 million of the company’s common stock (the “2019 Authorization”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeQuarterly Data (Amounts in millions, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter Total 2021 Net sales $ 1,024.6 $ 1,081.4 $ 1,037.7 $ 1,108.3 $ 4,252.0 Gross profit 513.6 543.1 520.7 533.4 2,110.8 Financial services revenue 88.6 86.9 87.3 86.9 349.7 Financial services expenses (23.3) (18.0) (16.7) (19.7) (77.7) Net earnings 197.6 213.2 201.5 229.1 841.4 Net earnings attributable to Snap-on Incorporated 192.6 208.0 196.2 223.7 820.5 Earnings per share – basic* 3.55 3.85 3.65 4.18 15.22 Earnings per share – diluted* 3.50 3.76 3.57 4.10 14.92 Cash dividends paid per share 1.23 1.23 1.23 1.42 5.11 First Quarter Second Quarter Third Quarter Fourth Quarter Total 2020 Net sales $ 852.2 $ 724.3 $ 941.6 $ 1,074.4 $ 3,592.5 Gross profit 421.6 341.2 469.5 516.2 1,748.5 Financial services revenue 85.9 84.6 85.8 93.4 349.7 Financial services expenses (29.0) (27.0) (20.2) (24.9) (101.1) Net earnings 142.0 105.9 184.7 213.8 646.4 Net earnings attributable to Snap-on Incorporated 137.2 101.2 179.7 208.9 627.0 Earnings per share – basic* 2.52 1.86 3.31 3.85 11.55 Earnings per share – diluted* 2.49 1.85 3.28 3.82 11.44 Cash dividends paid per share 1.08 1.08 1.08 1.23 4.47 * Amounts may not total to annual earnings per share because each quarter and year are calculated separately based on basic and diluted weighted-average common shares outstanding during each respective period. 2021 ANNUAL REPORT 35 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Fourth Quarter Results of operations for the fourth quarters of 2021 and 2020 are as follows: Fourth Quarter (Amounts in millions) 2021 2020 Change Net sales $ 1,108.3 100.0 % $ 1,074.4 100.0 % $ 33.9 3.2 % Cost of goods sold (574.9) (51.9) % (558.2) (52.0) % (16.7) (3.0) % Gross profit 533.4 48.1 % 516.2 48.0 % 17.2 3.3 % Operating expenses (301.2) (27.1) % (300.0) (27.9) % (1.2) (0.4) % Operating earnings before financial services 232.2 21.0 % 216.2 20.1 % 16.0 7.4 % Financial services revenue 86.9 100.0 % 93.4 100.0 % (6.5) (7.0) % Financial services expenses (19.7) (22.7) % (24.9) (26.7) % 5.2 20.9 % Operating earnings from financial services 67.2 77.3 % 68.5 73.3 % (1.3) (1.9) % Operating earnings 299.4 25.1 % 284.7 24.4 % 14.7 5.2 % Interest expense (11.3) (0.9) % (15.4) (1.3) % 4.1 26.6 % Other income (expense) – net 5.1 0.3 % 2.4 0.2 % 2.7 NM Earnings before income taxes and equity earnings 293.2 24.5 % 271.7 23.3 % 21.5 7.9 % Income tax expense (64.1) (5.3) % (58.2) (5.0) % (5.9) (10.1) % Earnings before equity earnings 229.1 19.2 % 213.5 18.3 % 15.6 7.3 % Equity earnings, net of tax — — 0.3 — (0.3) NM Net earnings 229.1 19.2 % 213.8 18.3 % 15.3 7.2 % Net earnings attributable to noncontrolling interests (5.4) (0.5) % (4.9) (0.4) % (0.5) (10.2) % Net earnings attributable to Snap-on Inc. $ 223.7 18.7 % $ 208.9 17.9 % $ 14.8 7.1 % NM: 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.
Biggest changeThe year-over-year decrease primarily reflects lower costs associated with the company’s employee stock purchase plan. 2022 ANNUAL REPORT 35 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Quarterly Data (Amounts in millions, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter Total 2022 Net sales $ 1,097.8 $ 1,136.6 $ 1,102.5 $ 1,155.9 $ 4,492.8 Gross profit 534.3 553.5 532.6 560.7 2,181.1 Financial services revenue 87.7 86.4 87.3 88.3 349.7 Financial services expenses (17.3) (21.1) (20.9) (24.4) (83.7) Net earnings 222.7 237.2 229.5 244.5 933.9 Net earnings attributable to Snap-on Incorporated 217.4 231.5 223.9 238.9 911.7 Earnings per share – basic* 4.07 4.34 4.21 4.50 17.14 Earnings per share – diluted* 4.00 4.27 4.14 4.42 16.82 Cash dividends paid per share 1.42 1.42 1.42 1.62 5.88 First Quarter Second Quarter Third Quarter Fourth Quarter Total 2021 Net sales $ 1,024.6 $ 1,081.4 $ 1,037.7 $ 1,108.3 $ 4,252.0 Gross profit 513.6 543.1 520.7 533.4 2,110.8 Financial services revenue 88.6 86.9 87.3 86.9 349.7 Financial services expenses (23.3) (18.0) (16.7) (19.7) (77.7) Net earnings 197.6 213.2 201.5 229.1 841.4 Net earnings attributable to Snap-on Incorporated 192.6 208.0 196.2 223.7 820.5 Earnings per share – basic* 3.55 3.85 3.65 4.18 15.22 Earnings per share – diluted* 3.50 3.76 3.57 4.10 14.92 Cash dividends paid per share 1.23 1.23 1.23 1.42 5.11 * Amounts may not total to annual earnings per share because each quarter and year are calculated separately based on basic and diluted weighted-average common shares outstanding during each respective period. 36 SNAP-ON INCORPORATED Fourth Quarter Results of operations for the fourth quarters of 2022 and 2021 are as follows: Fourth Quarter (Amounts in millions) 2022 2021 Change Net sales $ 1,155.9 100.0 % $ 1,108.3 100.0 % $ 47.6 4.3 % Cost of goods sold (595.2) (51.5) % (574.9) (51.9) % (20.3) (3.5) % Gross profit 560.7 48.5 % 533.4 48.1 % 27.3 5.1 % Operating expenses (312.7) (27.0) % (301.2) (27.1) % (11.5) (3.8) % Operating earnings before financial services 248.0 21.5 % 232.2 21.0 % 15.8 6.8 % Financial services revenue 88.3 100.0 % 86.9 100.0 % 1.4 1.6 % Financial services expenses (24.4) (27.6) % (19.7) (22.7) % (4.7) (23.9) % Operating earnings from financial services 63.9 72.4 % 67.2 77.3 % (3.3) (4.9) % Operating earnings 311.9 25.1 % 299.4 25.1 % 12.5 4.2 % Interest expense (12.0) (1.0) % (11.3) (0.9) % (0.7) (6.2) % Other income (expense) – net 11.8 1.0 % 5.1 0.3 % 6.7 NM Earnings before income taxes 311.7 25.1 % 293.2 24.5 % 18.5 6.3 % Income tax expense (67.2) (5.4) % (64.1) (5.3) % (3.1) (4.8) % Net earnings 244.5 19.7 % 229.1 19.2 % 15.4 6.7 % Net earnings attributable to noncontrolling interests (5.6) (0.5) % (5.4) (0.5) % (0.2) (3.7) % Net earnings attributable to Snap-on Inc. $ 238.9 19.2 % $ 223.7 18.7 % $ 15.2 6.8 % NM: 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.
The Commercial & Industrial Group intends to continue building on the following strategic priorities in 2022: • Continuing to invest in emerging market growth initiatives; • Expanding our business with existing customers and reaching new customers in critical industries and other market segments; • Broadening our product offering designed particularly for critical industry segments; • Increasing our customer-connection-driven understanding of work across multiple industries; • Investing in innovation that, guided by that understanding of work, delivers an ongoing stream of productivity-enhancing custom engineered solutions; and • Continuing to reduce structural and operating costs, as well as improve efficiencies, through RCI initiatives.
The Commercial & Industrial Group intends to continue building on the following strategic priorities in 2023: • Expanding our business with existing customers and reaching new customers in critical industries and other market segments; • Continuing to invest in emerging market growth initiatives; • Broadening our product offering designed particularly for critical industry segments; • Increasing our customer-connection-driven understanding of work across multiple industries; • Investing in innovation that, guided by that understanding of work, delivers an ongoing stream of productivity-enhancing custom engineered solutions; and • Continuing to reduce structural and operating costs, as well as improve efficiencies, through RCI initiatives.
The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation and technical education market segments, primarily through direct and distributor channels.
The 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 allowance represents management’s estimate of the expected losses in the company’s finance receivables portfolio based on ongoing assessments and evaluations of credit losses over the expected contractual life of the receivables portfolio considering collectability, historical loss experience, current conditions and future market changes.
The allowance represents management’s estimate of the expected losses in the company’s finance receivables portfolio based on ongoing assessments and evaluations of credit losses over the remaining contractual life of the receivables portfolio considering collectability, historical loss experience, current conditions and future market changes.
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. 2021 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.
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.
Throughout the turbulence, we maintained and further developed our ongoing advantages in our products, brands and people. At the same time, we leveraged existing proficiencies to focus on expanding our professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including critical industries, where the cost and penalties for failure can be high.
Throughout the turbulence, we maintained and further extended our ongoing advantages in our products, brands and people. At the same time, we leveraged existing proficiencies to focus on expanding our professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including critical industries, where the cost and penalties for failure can be high.
Financial Services intends to focus on the following strategic priorities in 2022: • Delivering financial products and services that attract and sustain profitable franchisees and support Snap‑on’s strategies for expanding market coverage and penetration; • Improving productivity levels and ensuring high quality in all financial products and processes through the use of RCI initiatives; and • Maintaining healthy portfolio performance levels.
Financial Services intends to focus on the following strategic priorities in 2023: • Delivering financial products and services that attract and sustain profitable franchisees and support Snap‑on’s strategies for expanding market coverage and penetration; • Improving productivity levels and ensuring high quality in all financial products and processes through the use of RCI initiatives; and • Maintaining healthy portfolio performance levels.
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 2022. Other factors, such as changes in plan demographics and discretionary contributions, may further increase or decrease pension income in 2022. See Note 12 to the Consolidated Financial Statements for further information on pension plans.
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.
Based on the company’s second quarter 2021 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.
Based on the company’s second quarter 2022 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.
Our strategic priorities and plans for 2022 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 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”).
The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel. The 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 Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s multi-national mobile tool distribution channel. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships, through direct and distributor channels.
As of 2021 year end, the company has no accumulated impairment losses. Although the company consistently uses the same methods in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain by nature and can vary from actual results.
As of 2022 year end, the company has no accumulated impairment losses. Although the company consistently uses the same methods in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain by nature and can vary from actual results.
In pursuit of these initiatives, it is projected that capital expenditures in 2022 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.
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.
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. 2021 ANNUAL REPORT 49 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) The selection of the 2.9% weighted-average discount rate for Snap-on’s domestic pension plans as of 2021 year end (compared to 2.7% as of 2020 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments.
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 2022 year end (compared to 2.9% as of 2021 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments.
The company’s methodologies for valuing goodwill are applied consistently on a year-over-year basis; the assumptions used in performing the second quarter 2021 impairment calculations were evaluated in light of then-current market and business conditions.
The company’s methodologies for valuing goodwill are applied consistently on a year-over-year basis; the assumptions used in performing the second quarter 2022 impairment calculations were evaluated in light of then-current market and business conditions.
Depending on market and other conditions, Snap-on may make additional discretionary cash contributions to its pension plans in 2022; see Note 12 and Note 13 to the Consolidated Financial Statements for information on the company’s benefit plans and payments.
Depending on market and other conditions, Snap-on may make additional discretionary cash contributions to its pension plans in 2023; see Note 12 and Note 13 to the Consolidated Financial Statements for information on the company’s benefit plans and payments.
In making this determination, the company takes into account the timing and amount of benefits that would be available under the plans. The domestic discount rate as of 2021 and 2020 year end was selected based on a cash flow matching methodology developed by the company’s outside actuaries and which incorporates a review of current economic conditions.
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 2022 and 2021 year end was selected based on a cash flow matching methodology developed by the company’s outside actuaries that incorporates a review of current economic conditions.
For segment reporting purposes, the results of operations and assets of Dealer-FX and Sigmavision have been included in the Repair Systems & Information Group since the respective acquisition dates, and the results of operations and assets of AutoCrib Germany, Pradines, and AutoCrib have been included in the Commercial & Industrial Group since the respective acquisition dates.
For segment reporting purposes, the results of operations and assets of Dealer-FX have been included in the Repair Systems & Information Group since the acquisition date, and the results of operations and assets of AutoCrib Germany and Pradines have been included in the Commercial & Industrial Group since the respective acquisition dates.
On July 1, 2021, Snap-on exchanged its 35% equity interest in Deville S.A., valued at $21.8 million, for 100% ownership of Secateurs Pradines (“Pradines”), a wholly owned subsidiary of Deville S.A. with a fair value of $20.7 million (or $16.2 million, net of cash acquired), and cash of $1.1 million.
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.
The current focus on these matters is expected to result in additional and/or more restrictive regulations, requirements and/or industry or third-party standards to reduce or mitigate global warming and other environmental or sustainability risks, though the timing is uncertain. Snap-on is monitoring developments in this area.
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 expects to make continued progress in 2022 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high.
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.
References in this document to 2021, 2020 and 2019 year end refer to January 1, 2022, January 2, 2021, and December 28, 2019, respectively. Snap-on’s 2021 and 2019 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.
References in this document to 2022, 2021 and 2020 year end refer to December 31, 2022, January 1, 2022, and January 2, 2021, respectively. Snap-on’s 2022 and 2021 fiscal years each contained 52 weeks of operating results. Snap-on’s 2020 fiscal year contained 53 weeks of operating results with the extra week occurring in the fourth quarter.
Snap-on currently anticipates that its full year 2022 effective income tax rate will be in the range of 23% to 24%. 50 SNAP-ON INCORPORATED
Snap-on currently anticipates that its full year 2023 effective income tax rate will be in the range of 23% to 24%. 50 SNAP-ON INCORPORATED
In 2021, the long-term investment performance objective for Snap-on’s domestic plans’ assets was to achieve net of expense returns that met or exceeded the 6.75% domestic expected return on plan assets assumption. Snap-on uses a three-year, market-related value asset method of amortizing the difference between actual and expected returns on its domestic plans’ assets.
In 2022, the long-term investment performance objective for Snap-on’s domestic plans’ assets was to achieve net of expense returns that met or exceeded the 6.5% domestic expected return on plan assets assumption. Snap-on uses a three-year, market-related value asset method of amortizing the difference between actual and expected returns on its domestic plans’ assets.
Due to Snap-on’s credit rating over the years, external funds have been available at an acceptable cost. As of February 4, 2022, 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; and A and F1 by Fitch Ratings.
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; A- and A-2 by Standard & Poor’s; and A and F1 by Fitch Ratings.
As of 2021 year end, Snap-on was in compliance with all covenants of its Credit Facility and other debt agreements. 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.
As of 2022 year end, Snap-on was in compliance with all covenants of its Credit Facility and other debt agreements. 44 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.
Lowering the expected rate of return assumption for Snap-on’s domestic pension plans’ assets by 50 bps would have increased Snap-on’s 2021 domestic pension expense by approximately $6.2 million. The objective of Snap-on’s discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled.
Lowering the expected rate of return assumption for Snap-on’s domestic pension plans’ assets by 50 bps would have increased Snap-on’s 2022 domestic pension expense by approximately $6.8 million. The objective of Snap-on’s discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled.
Fiscal 2020 as Compared to Fiscal 2019 A discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 can be found under “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended January 2, 2021, which was filed with the SEC on February 11, 2021, and is available on the SEC’s website at www.sec.gov as well as in the “Investors” section of our corporate website at www.snapon.com . 2021 ANNUAL REPORT 27 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) 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.
Fiscal 2021 as Compared to Fiscal 2020 A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 can be found under “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended January 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 . 28 SNAP-ON INCORPORATED 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.
Due to the uncertainty of the timing of settlements with taxing authorities, Snap-on is unable to make reasonably reliable estimates of the period of cash settlement of unrecognized tax benefits totaling $8.9 million for its remaining uncertain tax liabilities.
Due to the uncertainty of the timing of settlements with taxing authorities, Snap-on is unable to make reasonably reliable estimates of the period of cash settlement of unrecognized tax benefits totaling $5.6 million for its remaining uncertain tax liabilities.
Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to fund the company’s additional share repurchases, if any. Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Cash dividends paid in 2021 and 2020 totaled $275.8 million and $243.3 million, respectively.
Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to fund the company’s additional share repurchases, if any. Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Cash dividends paid in 2022 and 2021 totaled $313.1 million and $275.8 million, respectively.
In 2022, the Snap-on Tools Group intends to continue these initiatives, with specific focus on the following: • Continuing to improve franchisee satisfaction, productivity, profitability and commercial health; • 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; and • Increasing customer service levels and productivity in back office support functions, manufacturing and the supply chain through RCI initiatives and investment.
In 2023, the Snap-on Tools Group intends to continue its expansion with specific focus on the following initiatives: • Continuing to improve franchisee sales productivity, profitability, commercial health, and satisfaction; • Developing new programs and products to expand market coverage, reaching new technician customers and increasing penetration with existing customers; • Increasing investment in new product innovation and development; and • Improving customer service levels and productivity in back office support functions, manufacturing and the supply chain through RCI initiatives and investment.
Quarterly dividends in 2020 were $1.23 per share in the fourth quarter and $1.08 per share in the first three quarters ($4.47 per share for the year). 2021 2020 Cash dividends paid per common share $ 5.11 $ 4.47 Cash dividends paid as a percentage of prior-year retained earnings 5.3 % 5.1 % Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to pay dividends in 2022.
Quarterly dividends in 2021 were $1.42 per share in the fourth quarter and $1.23 per share in the first three quarters ($5.11 per share for the year). 2022 2021 Cash dividends paid per common share $ 5.88 $ 5.11 Cash dividends paid as a percentage of prior-year retained earnings 5.5 % 5.3 % Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to pay dividends in 2023.
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 58 days and 64 days at the respective 2021 and 2020 year ends.
Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months sales, times 360 days) was 61 days and 58 days at the respective 2022 and 2021 year ends.
For reference, a 100 bps increase in the allowance ratios for finance receivables as of January 1, 2022, would have increased Snap-on’s 2021 provision for credit losses and related allowance for credit losses by approximately $17.2 million. For additional information on Snap-on’s allowances for credit losses, see Note 1 and Note 4 to the Consolidated Financial Statements.
For reference, a 100 bps increase in the allowance ratios for finance receivables as of December 31, 2022, would have increased Snap-on’s 2022 provision for credit losses and related allowance for credit losses by approximately $17.9 million. For additional information on Snap-on’s allowances for credit losses, see Note 1 and Note 4 to the Consolidated Financial Statements.
As of 2021 and 2020 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 2.8 turns and 2.4 turns, respectively.
As of 2022 and 2021 year end, inventory turns (trailing 12 months of cost of goods sold, divided by the average of the beginning and ending inventory balance for the trailing 12 months) were 2.5 turns and 2.8 turns, respectively.
Of the $780.0 million of cash and cash equivalents as of 2021 year end, $293.1 million was held outside of the United States. Snap-on maintains non-U.S. funds in its foreign operations to: (i) provide adequate working capital; (ii) satisfy various regulatory requirements; and/or (iii) take advantage of business expansion opportunities as they arise.
Of the $757.2 million of cash and cash equivalents as of 2022 year end, $244.1 million was held outside of the United States. Snap-on maintains non-U.S. funds in its foreign operations to: (i) provide adequate working capital; (ii) satisfy various regulatory requirements; and/or (iii) take advantage of business expansion opportunities as they arise.
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.
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.
Snap-on intends to make contributions of $9.4 million to its foreign pension plans and $9.5 million to its domestic pension plans in 2022, as required by law. Depending on market and other conditions, Snap-on may make discretionary cash contributions to its pension plans in 2022.
Snap-on intends to make contributions of $6.9 million to its foreign pension plans and $2.4 million to its domestic pension plans in 2023, as required by law. Depending on market and other conditions, Snap-on may make discretionary cash contributions to its pension plans in 2023.
Should the operations of the businesses with which goodwill is associated incur significant declines in profitability and cash flow due to significant and long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, significant changes in key personnel or litigation, a significant and sustained decrease in share price and/or other events, including effects from the sale or disposal of a reporting unit, some or all of the recorded goodwill could be subject to impairment and could result in a material adverse effect on Snap-on’s financial position or results of operations. 48 SNAP-ON INCORPORATED Snap-on completed its annual impairment testing of goodwill in the second quarter of 2021, which did not result in any impairment.
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. 48 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.
The weighted-average discount rate for Snap-on’s foreign pension plans of 2.0% (compared to 1.7% as of 2020 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments.
The weighted-average discount rate for Snap-on’s foreign pension plans of 4.8% (compared to 2.0% as of 2021 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments.
In 2021, Snap-on repurchased 1,943,900 shares of its common stock for $431.3 million under its previously announced share repurchase programs. As of 2021 year end, Snap-on had remaining availability to repurchase up to an additional $454.9 million in common stock pursuant to its Board’s authorizations.
In 2022, Snap-on repurchased 899,000 shares of its common stock for $198.1 million under its previously announced share repurchase programs. As of 2022 year end, Snap-on had remaining availability to repurchase up to an additional $362.4 million in common stock pursuant to its Board’s authorizations. Snap-on repurchased 1,943,900 shares of its common stock for $431.3 million in 2021.
To determine the 2022 net periodic benefit cost, Snap-on is using weighted-average discount rates for its domestic and foreign pension plans of 2.9% and 2.0%, respectively, and an expected return on plan assets for its domestic pension plans of 6.50%. The expected returns on plan assets for foreign pension plans ranged from 1.3% to 5.6% as of 2021 year end.
To determine the 2023 net periodic benefit cost, Snap-on is using weighted-average discount rates for its domestic and foreign pension plans of 5.5% and 4.8%, 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 6.9% as of 2022 year end.
Snap-on periodically evaluates its cash held outside the United States and may pursue opportunities to repatriate certain foreign cash amounts to the extent that it can be accomplished in a tax efficient manner. 2021 ANNUAL REPORT 43 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Trade and other accounts receivable – net of $682.3 million as of 2021 year end increased $41.6 million from 2020 year-end levels primarily due to higher sales and $9.7 million from acquisitions, partially offset by $12.5 million of foreign currency translation.
Snap-on periodically evaluates its cash held outside the United States and may pursue opportunities to repatriate certain foreign cash amounts to the extent that it can be accomplished in a tax efficient manner. 2022 ANNUAL REPORT 43 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.
Inventories accounted for using the first-in, first-out (“FIFO”) method as of 2021 and 2020 year end approximated 60% and 57% of total inventories, respectively. All other inventories are accounted for using the last-in, first-out (“LIFO”) method. The company’s LIFO reserve was $87.2 million and $84.0 million at 2021 and 2020 year end, respectively.
Inventories accounted for using the first-in, first-out (“FIFO”) method as of 2022 and 2021 year end approximated 61% and 60% of total inventories, respectively. All other inventories are accounted for using the last-in, first-out (“LIFO”) method. The company’s LIFO reserve was $108.6 million and $87.2 million at 2022 and 2021 year end, respectively.
Net cash used by investing activities of $290.4 million in 2021 included additions to finance receivables of $878.1 million, partially offset by collections of $854.2 million, as well as a total of $199.7 million for the acquisitions of Dealer-FX, AutoCrib Germany and Pradines.
Net cash used by investing activities of $290.4 million in 2021 included additions to finance receivables of $878.1 million, partially offset by collections of $854.2 million, as well as $199.7 million for the acquisitions of Dealer-FX, AutoCrib Germany and Pradines. Capital expenditures in 2022 and 2021 totaled $84.2 million and $70.1 million, respectively.
Financial Services (Amounts in millions) 2021 2020 Change Financial services revenue $ 349.7 100.0 % $ 349.7 100.0 % $ — — Financial services expenses (77.7) (22.2) % (101.1) (28.9) % 23.4 23.1 % Segment operating earnings $ 272.0 77.8 % $ 248.6 71.1 % $ 23.4 9.4 % Financial services revenue is generally dependent on the size of the average financial services portfolio during the period, as well as on the average yield on receivables in the period.
Financial Services (Amounts in millions) 2022 2021 Change Financial services revenue $ 349.7 100.0 % $ 349.7 100.0 % $ — — Financial services expenses (83.7) (23.9) % (77.7) (22.2) % (6.0) (7.7) % Segment operating earnings $ 266.0 76.1 % $ 272.0 77.8 % $ (6.0) (2.2) % Financial services revenue is generally dependent on the size of the average financial services portfolio during the period, as well as on the average yield on receivables.
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 2022. 2021 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 $818.8 million in 2021 included the $250.0 million repayment of the 2021 Notes at maturity and net proceeds from notes payable and other short-term borrowings of $3.3 million.
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 2023. 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 $485.0 million in 2022 included net proceeds from other short-term borrowings of $1.6 million.
Unless otherwise indicated, references in this document to “fiscal 2021” or “2021” refer to the fiscal year ended January 1, 2022; references to “fiscal 2020” or “2020” refer to the fiscal year ended January 2, 2021; and references to “fiscal 2019” or “2019” refer to the fiscal year ended December 28, 2019.
Unless otherwise indicated, references in this document to “fiscal 2022” or “2022” refer to the fiscal year ended December 31, 2022; references to “fiscal 2021” or “2021” refer to the fiscal year ended January 1, 2022; and references to “fiscal 2020” or “2020” refer to the fiscal year ended January 2, 2021.
As of 2021 year end, working capital (current assets less current liabilities) of $2,071.2 million increased $153.1 million from $1,918.1 million as of 2020 year end primarily as a result of other net changes in working capital discussed below.
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.
Snap-on has an $800 million multi-currency revolving credit facility that terminates on September 16, 2024 (the “Credit Facility”); no amounts were outstanding under the Credit Facility as of January 1, 2022.
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.
Financial services expenses in the fourth quarter of 2021 decreased $5.2 million from last year primarily due to lower provisions for credit losses as compared to those recorded in the fourth quarter of 2020. As a percentage of the average financial services portfolio, financial services expenses were 0.9% and 1.1% for the fourth quarters of 2021 and 2020, respectively.
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 of 2021 year end, Snap-on’s domestic pension plans’ assets comprised approximately 86% of the company’s worldwide pension plan assets. Based on forward-looking capital market expectations, Snap-on selected an expected return on plan assets assumption for its U.S. pension plans of 6.50%, a decrease of 25 bps from 2021, to be used in determining pension expense for 2022.
As of 2022 year end, Snap-on’s domestic pension plans’ assets comprised approximately 87% of the company’s worldwide pension plan assets. 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.
Capital expenditures in 2021 and 2020 totaled $70.1 million and $65.6 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.
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.
Lowering Snap-on’s domestic discount rate assumption by 50 bps would have increased Snap-on’s 2021 domestic pension expense and projected benefit obligation by approximately $4.0 million and $77.0 million, respectively. As of 2021 year end, Snap-on’s domestic projected benefit obligation comprised approximately 82% of Snap-on’s worldwide projected benefit obligation.
Lowering Snap-on’s domestic discount rate assumption by 50 bps would have increased Snap-on’s 2022 domestic pension expense and projected benefit obligation by approximately $4.5 million and $48.6 million, respectively. As of 2022 year end, Snap-on’s domestic projected benefit obligation comprised approximately 85% of Snap-on’s worldwide projected benefit obligation.
As of year-end 2021, the company had $147.5 million in purchase commitments to be paid in 2022 and $17.3 million to be paid thereafter. Snap-on intends to make contributions of $9.4 million to its foreign pension plans and $9.5 million to its domestic pension plans in 2022, as required by law.
As of year-end 2022, the company had $165.2 million in purchase commitments to be paid in 2023 and $10.9 million to be paid thereafter. Snap-on intends to make contributions of $6.9 million to its foreign pension plans and $2.4 million to its domestic pension plans in 2023, as required by law.
The organic increase is due to a low single-digit gain in the U.S. franchise business, partially offset by a low single-digit decline in the segment’s international operations.
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.
The current portions of net finance and contract receivables of $652.7 million as of 2021 year end compared to $642.7 million at 2020 year end. The long-term portions of net finance and contract receivables of $1,492.2 million as of 2021 year end compared to $1,511.0 million at 2020 year end.
The current portions of net finance and contract receivables of $672.1 million as of 2022 year end compared to $652.7 million at 2021 year end. The long-term portions of net finance and contract receivables of $1,554.6 million as of 2022 year end compared to $1,492.2 million at 2021 year end.
On November 4, 2021, the company announced that its Board increased the quarterly cash dividend by 15.4% to $1.42 per share ($5.68 per share annualized). Quarterly dividends in 2021 were $1.42 per share in the fourth quarter and $1.23 per share in the first three quarters ($5.11 per share for the year).
On November 4, 2022, the company announced that its Board increased the quarterly cash dividend by 14.1% to $1.62 per share ($6.48 per share annualized). Quarterly dividends in 2022 were $1.62 per share in the fourth quarter and $1.42 per share in the first three quarters ($5.88 per share for the year).
Lowering Snap-on’s foreign discount rate assumption by 50 bps would have increased Snap-on’s 2021 foreign pension expense and projected benefit obligation by approximately $2.4 million and $27.8 million, respectively.
Lowering Snap-on’s foreign discount rate assumption by 50 bps would have increased Snap-on’s 2022 foreign pension expense and projected benefit obligation by approximately $1.4 million and $12.3 million, respectively.
As a percentage of the average financial services portfolio, financial services expenses were 3.5% and 4.6% in 2021 and 2020, respectively. As a result of these factors, segment operating earnings of $272.0 million in 2021, including $2.3 million of favorable foreign currency effects, increased $23.4 million, or 9.4%, from 2020 levels.
As a 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.
Long-term debt of $1,182.9 million as of 2021 year end consisted of: (i) $300.0 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”); (ii) $400.0 million of unsecured 4.10% notes that mature on March 1, 2048 (“the 2048 Notes”); and (iii) $500.0 million of 3.10% notes that mature on May 1, 2050 (the “2050 Notes”), partially offset by $17.1 million from the net effects of debt amortization costs.
Long-term debt of $1,183.8 million as of 2022 year end consisted of: (i) $300.0 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”); (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.
These decreases in cash and cash equivalents were partially offset by: (i) $966.6 million of cash generated from operations; (ii) $854.2 million of cash from collections of finance receivables; (iii) $162.4 million of cash proceeds from stock purchase and option plan exercises; and (iv) $3.3 million of net proceeds from notes payable and other short-term borrowings.
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.
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 2021 and 2020. Originations of $1,073.2 million in 2021 increased $36.6 million, or 3.5%, from 2020 levels.
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.
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.
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.
Depreciation expense was $75.6 million in 2021 and $73.3 million in 2020. Amortization expense was $29.2 million in 2021 and $23.4 million in 2020. See Note 7 to the Consolidated Financial Statements for information on goodwill and other intangible assets.
Depreciation expense was $71.5 million in 2022 and $75.6 million in 2021. Amortization expense was $28.7 million in 2022 and $29.2 million in 2021. See Note 6 and Note 7 to the Consolidated Financial Statements for information on property and equipment, goodwill and other intangible assets.
As of January 1, 2022, the ratio of the allowance for credit losses to finance receivables was 3.90%. As of January 2, 2021, the allowance ratio was 4.38%.
As of December 31, 2022, the ratio of the allowance for credit losses to finance receivables was 3.39%. As of January 1, 2022, the allowance ratio was 3.90%.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations Management Overview We believe our 2021 operating results demonstrate the continued momentum of our operations and confirms the resilience of our markets and our considerable capabilities to overcome the challenges of the COVID environment.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations 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.
Gross margin of 48.1% in the quarter improved 10 bps from the fourth quarter of 2020 primarily due to higher sales volumes, pricing actions, 30 bps of favorable foreign currency effects, and benefits from the company’s RCI initiatives, which offset higher material and other costs.
Gross margin of 48.5% in the quarter improved 40 bps from the fourth quarter of 2021 primarily due to increased sales volumes and pricing actions, 40 bps of favorable foreign currency effects, and benefits from the company’s RCI initiatives. These improvements were partially offset by higher material and other costs.
Accounts payable of $277.6 million as of 2021 year end increased $54.7 million from 2020 year-end levels, primarily due to the timing of payments and $3.4 million from acquisitions, partially offset by $3.4 million of foreign currency translation.
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.
Investing Activities 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. Net cash used by investing activities of $187.8 million in 2020 included additions to finance receivables of $835.0 million, partially offset by collections of $750.3 million.
Investing Activities 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. 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 a percentage of revenues, operating earnings of 25.1% in the quarter compared to 24.4% last year. Interest expense in the fourth quarter of 2021 decreased $4.1 million from last year primarily as a result of lower year-over-year outstanding debt levels. See Note 10 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities.
As a percentage of revenues, operating earnings of 25.1% in the quarter was unchanged from last year. Interest expense in the fourth quarter of 2022 increased $0.7 million compared to last year . See Note 10 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities.
Repair Systems & Information Group Fourth Quarter (Amounts in millions) 2021 2020 Change External net sales $ 325.4 82.9 % $ 295.3 81.8 % $ 30.1 10.2 % Intersegment net sales 67.1 17.1 % 65.8 18.2 % 1.3 2.0 % Segment net sales 392.5 100.0 % 361.1 100.0 % 31.4 8.7 % Cost of goods sold (211.5) (53.9) % (194.8) (53.9) % (16.7) (8.6) % Gross profit 181.0 46.1 % 166.3 46.1 % 14.7 8.8 % Operating expenses (83.8) (21.3) % (76.3) (21.2) % (7.5) (9.8) % Segment operating earnings $ 97.2 24.8 % $ 90.0 24.9 % $ 7.2 8.0 % Segment net sales of $392.5 million in the fourth quarter of 2021 increased $31.4 million, or 8.7%, from 2020 levels, reflecting a $19.7 million, or 5.5%, organic sales increase and $12.2 million of acquisition-related sales, partially offset by $0.5 million of unfavorable foreign currency translation.
Repair Systems & Information Group Fourth Quarter (Amounts in millions) 2022 2021 Change External net sales $ 355.0 81.1 % $ 325.4 82.9 % $ 29.6 9.1 % Intersegment net sales 82.9 18.9 % 67.1 17.1 % 15.8 23.5 % Segment net sales 437.9 100.0 % 392.5 100.0 % 45.4 11.6 % Cost of goods sold (241.0) (55.0) % (211.5) (53.9) % (29.5) (13.9) % Gross profit 196.9 45.0 % 181.0 46.1 % 15.9 8.8 % Operating expenses (86.3) (19.7) % (83.8) (21.3) % (2.5) (3.0) % Segment operating earnings $ 110.6 25.3 % $ 97.2 24.8 % $ 13.4 13.8 % 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.
Finance receivables are comprised of extended-term installment payment contracts to both technicians and independent shop owners (i.e., franchisees’ customers) to enable them to purchase tools, diagnostics, and equipment products on an extended-term payment plan, generally with payment terms of approximately four years.
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.
Transactions between the Operations and Financial Services businesses were eliminated to arrive at the Consolidated Financial Statements. 2021 ANNUAL REPORT 39 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-GAAP Supplemental Consolidating Data – Supplemental Statements of Earnings information for 2021, 2020 and 2019 is as follows: Operations* Financial Services (Amounts in millions) 2021 2020 2019 2021 2020 2019 Net sales $ 4,252.0 $ 3,592.5 $ 3,730.0 $ — $ — $ — Cost of goods sold (2,141.2) (1,844.0) (1,886.0) — — — Gross profit 2,110.8 1,748.5 1,844.0 — — — Operating expenses (1,259.3) (1,116.6) (1,127.6) — — — Operating earnings before financial services 851.5 631.9 716.4 — — — Financial services revenue — — — 349.7 349.7 337.7 Financial services expenses — — — (77.7) (101.1) (91.8) Operating earnings from financial services — — — 272.0 248.6 245.9 Operating earnings 851.5 631.9 716.4 272.0 248.6 245.9 Interest expense (53.0) (53.8) (48.8) (0.1) (0.2) (0.2) Intersegment interest income (expense) – net 57.1 68.5 70.5 (57.1) (68.5) (70.5) Other income (expense) – net 16.4 8.5 8.9 0.1 0.2 (0.1) Earnings before income taxes and equity earnings 872.0 655.1 747.0 214.9 180.1 175.1 Income tax expense (193.3) (142.7) (166.6) (53.7) (46.4) (45.2) Earnings before equity earnings 678.7 512.4 580.4 161.2 133.7 129.9 Financial services – net earnings attributable to Snap-on 161.2 133.7 129.9 — — — Equity earnings, net of tax 1.5 0.3 0.9 — — — Net earnings 841.4 646.4 711.2 161.2 133.7 129.9 Net earnings attributable to noncontrolling interests (20.9) (19.4) (17.7) — — — Net earnings attributable to Snap-on $ 820.5 $ 627.0 $ 693.5 $ 161.2 $ 133.7 $ 129.9 * Snap-on with Financial Services presented on the equity method. 40 SNAP-ON INCORPORATED Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheet Information as of 2021 and 2020 year end is as follows: Operations* Financial Services (Amounts in millions) 2021 2020 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 779.9 $ 923.2 $ 0.1 $ 0.2 Intersegment receivables 12.5 14.6 — 0.2 Trade and other accounts receivable – net 681.7 639.7 0.6 1.0 Finance receivables – net — — 542.3 530.2 Contract receivables – net 6.4 7.0 104.0 105.5 Inventories – net 803.8 746.5 — — Prepaid expenses and other assets 136.8 131.1 7.4 7.8 Total current assets 2,421.1 2,462.1 654.4 644.9 Property and equipment – net 516.5 524.4 1.7 1.8 Operating lease right-of-use assets 50.0 49.7 1.9 2.2 Investment in Financial Services 350.6 349.8 — — Deferred income tax assets 26.5 27.6 23.0 22.7 Intersegment long-term notes receivable 570.1 316.9 — — Long-term finance receivables – net — — 1,114.0 1,136.3 Long-term contract receivables – net 9.7 12.4 368.5 362.3 Goodwill 1,116.5 982.4 — — Other intangibles – net 301.7 260.8 — — Other assets 188.6 103.9 0.1 0.1 Total assets $ 5,551.3 $ 5,090.0 $ 2,163.6 $ 2,170.3 * Snap-on with Financial Services presented on the equity method. 2021 ANNUAL REPORT 41 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheet Information (continued): Operations* Financial Services (Amounts in millions) 2021 2020 2021 2020 LIABILITIES AND EQUITY Current liabilities: Notes payable and current maturities of long-term debt $ 17.4 $ 18.5 $ — $ 250.0 Accounts payable 276.6 222.3 1.0 0.6 Intersegment payables — — 12.5 14.8 Accrued benefits 67.4 59.7 — — Accrued compensation 110.9 87.2 3.9 2.7 Franchisee deposits 80.7 78.4 — — Other accrued liabilities 407.1 418.8 26.8 35.9 Total current liabilities 960.1 884.9 44.2 304.0 Long-term debt and intersegment long-term debt — — 1,753.0 1,499.0 Deferred income tax liabilities 122.7 70.4 — — Retiree health care benefits 31.1 34.5 — — Pension liabilities 104.9 127.1 — — Operating lease liabilities 32.5 31.6 1.7 2.4 Other long-term liabilities 96.2 94.9 14.1 15.1 Total liabilities 1,347.5 1,243.4 1,813.0 1,820.5 Total shareholders’ equity attributable to Snap-on 4,181.9 3,824.9 350.6 349.8 Noncontrolling interests 21.9 21.7 — — Total equity 4,203.8 3,846.6 350.6 349.8 Total liabilities and equity $ 5,551.3 $ 5,090.0 $ 2,163.6 $ 2,170.3 * Snap-on with Financial Services presented on the equity method. 42 SNAP-ON INCORPORATED Liquidity and Capital Resources Snap-on’s growth has historically been funded by a combination of cash provided by operating activities and debt financing.
Non-GAAP Supplemental Consolidating Data – Supplemental Statements of Earnings information for 2022, 2021 and 2020 is as follows: Operations* Financial Services (Amounts in millions) 2022 2021 2020 2022 2021 2020 Net sales $ 4,492.8 $ 4,252.0 $ 3,592.5 $ — $ — $ — Cost of goods sold (2,311.7) (2,141.2) (1,844.0) — — — Gross profit 2,181.1 2,110.8 1,748.5 — — — Operating expenses (1,239.9) (1,259.3) (1,116.6) — — — Operating earnings before financial services 941.2 851.5 631.9 — — — Financial services revenue — — — 349.7 349.7 349.7 Financial services expenses — — — (83.7) (77.7) (101.1) Operating earnings from financial services — — — 266.0 272.0 248.6 Operating earnings 941.2 851.5 631.9 266.0 272.0 248.6 Interest expense (47.1) (53.0) (53.8) — (0.1) (0.2) Intersegment interest income (expense) – net 59.3 57.1 68.5 (59.3) (57.1) (68.5) Other income (expense) – net 42.3 16.4 8.5 0.2 0.1 0.2 Earnings before income taxes and equity earnings 995.7 872.0 655.1 206.9 214.9 180.1 Income tax expense (215.6) (193.3) (142.7) (53.1) (53.7) (46.4) Earnings before equity earnings 780.1 678.7 512.4 153.8 161.2 133.7 Financial services – net earnings attributable to Snap-on 153.8 161.2 133.7 — — — Equity earnings, net of tax — 1.5 0.3 — — — Net earnings 933.9 841.4 646.4 153.8 161.2 133.7 Net earnings attributable to noncontrolling interests (22.2) (20.9) (19.4) — — — Net earnings attributable to Snap-on $ 911.7 $ 820.5 $ 627.0 $ 153.8 $ 161.2 $ 133.7 * Snap-on with Financial Services presented on the equity method. 40 SNAP-ON INCORPORATED Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheet Information as of 2022 and 2021 year end is as follows: Operations* Financial Services (Amounts in millions) 2022 2021 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 757.1 $ 779.9 $ 0.1 $ 0.1 Intersegment receivables 13.4 12.5 — — Trade and other accounts receivable – net 761.1 681.7 0.6 0.6 Finance receivables – net — — 562.2 542.3 Contract receivables – net 5.9 6.4 104.0 104.0 Inventories – net 1,033.1 803.8 — — Prepaid expenses and other assets 149.2 136.8 5.8 7.4 Total current assets 2,719.8 2,421.1 672.7 654.4 Property and equipment – net 510.7 516.5 1.9 1.7 Operating lease right-of-use assets 60.1 50.0 1.4 1.9 Investment in Financial Services 363.9 350.6 — — Deferred income tax assets 48.4 26.5 21.6 23.0 Intersegment long-term notes receivable 635.9 570.1 — — Long-term finance receivables – net — — 1,170.8 1,114.0 Long-term contract receivables – net 9.6 9.7 374.2 368.5 Goodwill 1,045.3 1,116.5 — — Other intangibles – net 275.6 301.7 — — Pension assets 70.6 160.7 — — Other assets 27.1 27.9 0.1 0.1 Total assets $ 5,767.0 $ 5,551.3 $ 2,242.7 $ 2,163.6 * Snap-on with Financial Services presented on the equity method. 2022 ANNUAL REPORT 41 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheet Information (continued): Operations* Financial Services (Amounts in millions) 2022 2021 2022 2021 LIABILITIES AND EQUITY Current liabilities: Notes payable $ 17.2 $ 17.4 $ — $ — Accounts payable 285.8 276.6 1.2 1.0 Intersegment payables — — 13.4 12.5 Accrued benefits 58.6 67.4 — — Accrued compensation 95.6 110.9 3.0 3.9 Franchisee deposits 73.8 80.7 — — Other accrued liabilities 420.8 407.1 25.8 26.8 Total current liabilities 951.8 960.1 43.4 44.2 Long-term debt and intersegment long-term debt — — 1,819.7 1,753.0 Deferred income tax liabilities 82.1 122.7 — — Retiree health care benefits 23.4 31.1 — — Pension liabilities 78.6 104.9 — — Operating lease liabilities 43.6 32.5 1.1 1.7 Other long-term liabilities 84.0 96.2 14.6 14.1 Total liabilities 1,263.5 1,347.5 1,878.8 1,813.0 Total shareholders’ equity attributable to Snap-on 4,481.3 4,181.9 363.9 350.6 Noncontrolling interests 22.2 21.9 — — Total equity 4,503.5 4,203.8 363.9 350.6 Total liabilities and equity $ 5,767.0 $ 5,551.3 $ 2,242.7 $ 2,163.6 * Snap-on with Financial Services presented on the equity method. 42 SNAP-ON INCORPORATED Liquidity and Capital Resources Snap-on’s growth has historically been funded by a combination of cash provided by operating activities and debt financing.
Cash Flows Net cash provided by operating activities of $966.6 million in 2021 decreased $42.0 million from $1,008.6 million in 2020. The $42.0 million decrease is primarily due to a $253.6 million change in net operating assets and liabilities, partially offset by a $195.0 million increase in net earnings.
Cash Flows 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.
Operating Activities Net cash provided by operating activities of $966.6 million in 2021 decreased $42.0 million from $1,008.6 million in 2020. The $42.0 million decrease is primarily due to a $253.6 million change in net operating assets and liabilities, partially offset by a $195.0 million increase in net earnings.
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.
The effective income tax rate on earnings attributable to Snap-on in both 2021 and 2020 was 23.2%. The 2020 effective tax rate included a 10 bps increase related to restructuring actions. See Note 9 to the Consolidated Financial Statements for information on income taxes.
The effective income tax rate on earnings attributable to Snap-on was 22.8% in 2022 and 23.2% in 2021. See Note 9 to the Consolidated Financial Statements for information on income taxes.
Segment operating expenses as a percentage of net sales in 2021 of 23.3% improved 100 bps as compared to 2020 primarily reflecting the higher sales.
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.
Operating earnings of $348.6 million in 2021, including $1.6 million of unfavorable foreign currency effects, increased $50.6 million, or 17.0%, from $298.0 million in 2020, which included $5.5 million of restructuring charges. 2021 ANNUAL REPORT 29 Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) The Repair Systems & Information Group intends to focus on the following strategic priorities in 2022: • Expanding the product offering with new products and services, thereby providing more to sell to repair shop owners and managers; • Continuing software and hardware upgrades to further improve functionality, performance and efficiency; • Leveraging integration of software solutions; • Continuing productivity advancements through RCI initiatives and leveraging of resources; and • Increasing penetration in geographic markets, including emerging markets.
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. 30 SNAP-ON INCORPORATED The Repair Systems & Information Group intends to focus on the following strategic priorities in 2023: • Expanding the product offering with new products and services, thereby providing more to sell to repair shop owners and managers; • Continuing software and hardware upgrades to further improve functionality, performance and efficiency; • Leveraging integration of software solutions; • Continuing productivity advancements through RCI initiatives and leveraging of resources; and • Increasing penetration in geographic markets, including emerging markets.
Segment gross margin in the fourth quarter of 43.9% improved 100 bps from last year primarily due to higher sales volumes, pricing actions, and 60 bps of favorable foreign currency effects, which offset higher material and other costs.
Segment 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed24 unchanged
Biggest changeSee Note 11 to the Consolidated Financial Statements for information on foreign currency risk management. Interest Rate Risk Management Snap-on aims to control funding costs by managing the exposure created by the differing maturities and interest rate structures of Snap-on’s borrowings through the use of interest rate swap agreements.
Biggest changeSee Note 11 to the Consolidated Financial Statements for information on foreign currency risk management. Interest Rate Risk Management Snap-on may manage the exposure created by the differing maturities and interest rate structures of Snap-on’s borrowings through the use of interest rate swap agreements.
See Note 11 to the Consolidated Financial Statements for additional information on stock-based deferred compensation risk management. 2021 ANNUAL REPORT 51 Credit Risk Credit risk is the possibility of loss from a customer’s failure to make payments according to contract terms.
See Note 11 to the Consolidated Financial Statements for additional information on stock-based deferred compensation risk management. 2022 ANNUAL REPORT 51 Credit Risk Credit risk is the possibility of loss from a customer’s failure to make payments according to contract terms.
Stock-based Deferred Compensation Risk Management Snap-on aims to manage market risk associated with the stock-based portion of its deferred compensation plans through the use of equity forwards. Equity forwards are used to aid in offsetting the potential mark-to-market effect on stock-based deferred compensation from changes in Snap-on’s stock price.
Stock-based Deferred Compensation Risk Management Snap-on manages market risk associated with the stock-based portion of its deferred compensation plans through the use of equity forwards. Equity forwards are used to aid in offsetting the potential mark-to-market effect on stock-based deferred compensation from changes in Snap-on’s stock price.
In addition, the company continues to monitor developments related to the United Kingdom’s exit from the European Union, and the effects this may have on the world economy and the company.
In addition, the company continues to monitor developments resulting from the United Kingdom’s exit from the European Union, and the effects this may have on the world economy and the company.
Economic Risk Economic risk is the possibility of loss resulting from economic instability in certain areas of the world. Snap-on continually monitors its exposure in these markets. For example, the company is monitoring the impact of and developments related to the ongoing COVID-19 pandemic, which continues to have an impact on the global economy.
Economic Risk Economic risk is the possibility of loss resulting from economic instability in certain areas of the world. Snap-on continually monitors its exposure in these markets. For example, the company is monitoring the impact of and developments related to Russia’s invasion of Ukraine and the ongoing COVID-19 pandemic, which continue to have an impact on the global economy.
Treasury lock agreements are used from time to time to manage the potential change in interest rates in anticipation of the issuance of fixed rate debt. See Note 11 to the Consolidated Financial Statements for information on interest rate risk management.
Treasury lock agreements may be used to manage the potential change in interest rates in anticipation of the issuance of fixed rate debt. See Note 11 to the Consolidated Financial Statements for information on interest rate risk management.
The estimated maximum potential net one-day loss in fair value, calculated using the VAR model, as of 2021 and 2020 year end was $20.6 million and $13.9 million, respectively, on interest rate-sensitive financial instruments, and $0.3 million and $0.1 million, respectively, on foreign currency-sensitive financial instruments.
The estimated maximum potential net one-day loss in fair value, calculated using the VAR model, as of 2022 and 2021 year end was $18.0 million and $20.6 million, respectively, on interest rate-sensitive financial instruments, and $0.2 million and $0.3 million, respectively, on foreign currency-sensitive financial instruments.

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