R O O T E D I N
T H E D I G N I T Y
O F W O R K
D R I V E N B Y T H E N E E D S O F
T H E S E R I O U S
G U I D E D W I T H
T H E I N S I G H T
S H A P E D B Y E X P E R I E N C E
2 0 1 7
A N N U A L R E P O R T
R O O T E D
I N T H E D I G N I T Y O F W O R K
D R I V E N
B Y T H E N E E D S
O F T H E S E R I O U S
G U I D E D
W I T H T H E I N S I G H T
S H A P E D B Y E X P E R I E N C E
Net sales in $ billions
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
S
E
L
A
S
T
E
N
R
E
P
S
G
N
I
N
R
A
E
E
R
A
H
S
D
E
T
U
L
I
D
$3.06
$3.28
$3.35
$3.43
$3.69
$5.93
$7.14
$8.10
$9.20
$9.52
$10.12*
*As adjusted. See “Reconciliation of Non-GAAP Financial
Measures” on page 8 for a definition of and further
explanation about, earnings per diluted share, as
adjusted, to exclude certain legal and tax charges.
Since 1939, paid without interruption or reduction
2013
2014
2015
2016
2017
$1.58
$1.85
$2.20
$2.54
$2.95
36%
Snap-on
Tools Group
6%
Financial
Services
30%
Repair Systems &
Information Group
28%
Commercial &
Industrial Group
E
R
A
H
S
R
E
P
S
D
N
E
D
I
V
I
D
S
T
N
E
M
G
E
S
G
N
I
T
A
R
E
P
O
2017 Revenues by Segment
Snap-on makes work
easier for serious
professionals
performing
critical tasks of
consequence around
the world, providing
a broad array of
unique productivity
solutions.
Snap-on facts
Founded in 1920
Serves Professionals
in over 130 Countries
12,600 Associates
S&P 500 Company
2017 Net Sales of $3.7 Billion
NYSE: SNA
T O O U R
S N A P ‑ O N
S H A R E H O L D E R S
Snap-on is rooted in the dignity of work. From our founding 98 years ago,
we have been dedicated to this timeless principle. We celebrate the work
and we celebrate our customers, the makers and the fixers, who perform
day in and day out to move the world forward.
This strong connection is reflected in working men and women
Furthermore, through our Snap-on Value Creation
proudly displaying the Snap-on logo as a badge of their
Processes, we remain committed to improvement in the
professionalism, calling our name their own. Snap-on is driven by
the needs of the serious. Our customers are serious professionals
and their work entails tasks of consequence, often in harsh and
areas of safety, quality, customer connection, innovation
and rapid continuous improvement (RCI). The ongoing
potential of these runways for improvement continued to
punishing conditions, where the cost of failure is high. Snap-on
manifest itself in a variety of ways in 2017. For example,
strives to provide them with the repeatability and reliability they
Snap-on again was honored to receive product awards from
need to get the job done. Finally, Snap-on is guided with the
insight shaped by experience. We call on our customers where
they perform their work. This presence, coupled with a broad
and rich repository of data and knowledge gained from years of
experience, has enabled us to develop a deep understanding
of the challenges raised in the workplaces of today. We use this
understanding to equip our customers with unique productivity
solutions to successfully complete their tasks.
both MOTOR Magazine and Professional Tool & Equipment News,
reflecting our ability to translate our deep understanding of
professionals’ work into winning innovations.
Our RCI framework is a structured set of tools and processes used
across the corporation to eliminate waste and improve operations.
Since its establishment at Snap-on in 2005, RCI has enabled us
to deliver a significant improvement in operating margin before
financial services. Our work on this front, however, is never done.
Since the 1920 invention of the original Snap-on interchangeable
For example, while acquisitions made over the last several years
socket set, our principle value-creating mechanism has been to
have no doubt expanded our capabilities in providing solutions that
observe work, translate insights gained and create solutions to
address the critical tasks in professional workplaces, they have also
make tasks easier. Opportunities to leverage this approach, both
served to attenuate operating margins in the near term, including
within and beyond vehicle repair, are embodied in our runways for
by 50 basis points in 2017. These acquisitions are fertile ground
growth: enhance the franchise network, expand with repair shop
not only for the cultivation of RCI, but for the whole of our Snap-on
owners and managers, extend in critical industries and build in
Value Creation Processes.
emerging markets. In 2017, we continued to invest and make
progress in each of these strategically decisive areas.
2
T O O U R
S N A P ‑ O N
S H A R E H O L D E R S
Snap-on associates (from left to right) Nick Drummer (Snap-on Corporate),
New complexities, including aluminum and multi‑
Michael Bond (Snap-on Industrial), Brittany Beaumier (Snap-on Tools
metal vehicles, along with the advanced electronics
Group), Chairman and Chief Executive Officer Nick Pinchuk, and Francesco
of lane departure, collision avoidance and other
Frezza (Snap-on Equipment) discuss a variety of the unique productivity
systems, increase the criticality of collision repair.
solutions which enable vehicle repair shops and technicians to effectively
Car-O-Liner, a 2016 acquisition, offers complete solutions for collision repair
address the challenges that come with increasing and changing vehicle
facilities to effectively address trends in the collision repair arena, including
technologies and complexity.
the need for greater precision in complex systems, requirements in
accommodating new materials and higher emphasis on shop efficiency.
3
Increasing and changing vehicle technolog y
torque wrench on a wider array of vehicles and applications. With more SUVs
generates the need for new tools, even w ithin
and pick-ups on the road, technicians encounter increased instances of torque
categories that have been in existence for
requirements above 250 ft. lbs. (4) As some vehicles become smaller and lighter,
decades. (1) The extra-long flex head ratchet utilizes length to get
access is often sacrificed. Our 3/8" cordless long neck ratchet addresses
into compact locations and provides extra leverage for stubborn fasteners.
these access challenges, where until now only a hand ratchet could be used.
(2) The 3/8" drive 17mm sensor socket is designed to efficiently remove
(5) The extended reach needle nose pliers provide much needed access in today’s
EPA-required particulate matter sensors, exhaust gas temperature sensors
compact engine compartments.
and nitrogen oxide sensors on all 2007 and newer vehicles. (3) With an
expanded range of 15-300 ft. lbs., technicians can use this ½" drive electronic
2
3
1
4
5
T he John Bean® B600 high
performance wheel ba lancing
system (1) is designed for high volume shops.
Its intuitive user interface and ergonomic
touchscreen reduce complexity and offer
short cycle times, contributing to better
throughput and shop performance.
T he Polar tek ® Series
air conditioning ser vice
eq uipment line (2) recently launched
by Ecotechnics, a 2015 acquisition, provides
solutions that can service all current vehicle
refrigerant requirements.
4
1
2
We were encouraged that our results for 2017 reflected our ability
relatively newer areas remain compelling. As such, we’re committed
to leverage both our runways for growth and improvement, and
to strengthening our position in this arena, as evidenced by a
once again demonstrated our ability to make work easier for
continuing array of new product introductions aimed at solving
serious professionals performing critical tasks around the world.
the critical tasks faced by professionals in industries like aviation
Net sales of $3,686.9 million increased 7.5%, reflecting a $115.0
and aerospace, oil and gas, mining, power generation and
million, or 3.4%, organic sales gain (a non-GAAP financial
the military.
measure that excludes acquisition-related sales and the impact
of foreign currency translation) and $141.5 million of acquisition-
related sales. Conditions in our industrial end markets improved
over 2016 and we saw continued strength in automotive repair,
as evidenced by strong sales in our businesses that serve repair
shop owners and managers. These strengths were tempered
somewhat by lower sales in our mobile tool distribution business
serving primarily vehicle repair technicians.
In the fourth quarter, our European-based hand tools business
realized its 17th consecutive quarter of sales growth. One of the
many ways this business has been successfully capturing more
customers is through the Bahco® ERGO™ Tool Management System,
a suite of customized tool storage solutions which, through
customer connection with end users, are configured from a
broad line of options and matched to a customer’s particular
specifications. We continued to expand our capabilities in our
With respect to profitability, our commitment to operating
Asia/Pacific operations with the launch of our new RED BOX PLUS
improvement through our Snap-on Value Creation processes
diagnostics platform. Produced for the Asian market, this latest
enabled us to overcome certain legal and tax charges and deliver
diagnostic tool includes features that aid repairs on vehicles
reported diluted earnings per share of $9.52, up 3.5% year over
prominent in China.
year. Excluding these charges, diluted earnings per share, as
adjusted, was $10.12, up 10.0%. Operating margin before
financial services of 18.0%, including 130 basis points of negative
impact from the legal and tax charges, declined 110 basis points
from 2016. Excluding these charges, operating margin before
financial services, as adjusted, of 19.3% improved 20 basis
points year over year. (See page 8 for a definition of, and further
explanation about, these non-GAAP financial measures that are
adjusted to exclude certain legal and tax charges.)
In our Commercial & Industrial Group (C&I), we serve a broad
range of industrial and commercial customers, including
professionals in critical industries and emerging markets,
primarily through direct and distributor channels. Segment net
sales of $1,265.0 million increased 10.2%, reflecting a $52.0
million, or 4.5%, organic sales gain and $65.5 million of
acquisition-related sales, partially offset by $0.8 million of
unfavorable foreign currency translation. The organic sales
increase included higher sales to customers in critical industries
and in our European-based hand tools business, partially offset
by lower sales in the power tools operation. Operating margin of
14.6% was consistent with the prior year.
The operating environment for C&I, which has our greatest
international presence and includes businesses that serve critical
industries, meaningfully improved in 2017 when compared to
2016. High single-digit organic growth in sales to customers in
critical industries was broad-based across our end markets and
we believe the long-term opportunities to further penetrate these
In May 2017, we acquired Norbar Torque Tools (“Norbar”), a leading
European manufacturer of a full range of torque products, including
wrenches, multipliers and calibrators, and which has a strong
presence in critical industries, including power generation, oil and
gas, mining and railroad. The acquisition of Norbar complements
and expands Snap-on’s existing torque offering to critical industries,
particularly in higher capacity torque products.
In the Snap‑on Tools Group, our franchised mobile van network
primarily serving vehicle repair technicians, segment net sales
of $1,625.1 million decreased 0.5%, reflecting a $6.9 million, or
0.4%, organic sales decline and $1.9 million of unfavorable foreign
currency translation. The organic sales decrease includes lower
sales in our U.S. franchise operation, partially offset by gains
in our international franchise operations. Operating margin of
16.9% compared to 17.2% in 2016, including 40 basis points
of unfavorable foreign currency effects.
We do not believe the 2017 results for the Snap-on Tools Group
necessarily indicate a softening marketplace. In fact, based on what
we hear from our franchisees and customers, as well as market data,
we believe vehicle repair remains a favorable place to operate and
that Snap-on is well-positioned to benefit in the long run from the
market opportunities. Furthermore, our franchisees’ confidence in
their businesses is evident in our franchisee metrics. These financial
and physical indicators remain favorable and robust with franchisee
turnover at historically low levels. We believe the 2017 results reflect
a number of company-specific headwinds including lower tool
5
storage sales. Efforts underway to reinvigorate sales growth
products for diagnostics, complex repair, parts catalogs and
include enhancing the product line and refreshing our fleet
shop management, RS&I is making work easier in repair shops
of Rock N’ Roll Cab Express™ vans which serve as sales
across the industry.
demonstration vehicles for the tool storage product line.
Two new diagnostics platforms introduced in 2017 illustrate RS&I’s
We continue to introduce initiatives aimed at helping our franchisees
advantages in this regard. The new ETHOS® Edge is a full-function
be more successful. In 2017, we introduced a 20' model for the
scan tool designed to meet the needs of technicians who are
standard program van, replacing the 16' model. This new van is
performing more routine maintenance tasks and light repairs which
configured to increase and optimize the product display area,
increasingly require the use of a diagnostic tool for completion.
and is designed with enhanced space to allow for dual transaction
Providing coverage for 100 vehicle systems such as tire pressure
points by two different people, as more of our franchisees have
elected to hire assistants. The new van also has an additional
monitoring, hybrid power, and collision avoidance, the ETHOS Edge
helps technicians get jobs done faster and more accurately. Later
passenger seat for the added safety and convenience of franchise
in 2017, we also launched the Zeus™ Diagnostic and Information
field team staff riding with our franchisees.
System as the new flagship platform of our diagnostic line-up. The
In 2017, we again received external recognition that a Snap-on Tools
franchise provides significant opportunities for entrepreneurs to
build a successful and sustainable business. Entrepreneur Magazine
ranked Snap-on 13th in its “America’s Top Global” listing of 200
franchises with global presence. In addition, Snap-on reached
#2 among all franchises evaluated in the same publication’s
“Top Franchises for Veterans.” Snap-on was also inducted into the
Franchise Business Review Hall of Fame. The exclusive membership,
totaling only 31 franchisors, consists of companies that have
first platform to feature Snap-on® Intelligent Diagnostics software,
Zeus provides all the functions and repair tips a technician needs to
diagnose, repair and manage any issue. Unlike any platform before,
it practically anticipates the next move by guiding the technician
through the best path of repair, saving substantial time.
Financial Services operating earnings of $217.5 million on revenue
of $313.4 million compared to operating earnings of $198.7 million
on revenue of $281.4 million a year ago. Originations of $1,072.0
million declined slightly, reflecting lower sales growth in the
appeared in Franchise Business Review’s annual list of top
franchises, based on franchisee satisfaction, for at least 10 years.
Snap-on Tools Group. Financial Services expenses were higher in
2017 primarily due to increases in both the provisions for credit
In the Repair Systems & Information Group (RS&I), which serves
owners and managers of independent and OEM dealership service
and repair shops, segment net sales of $1,347.2 million increased
14.2%, reflecting an $89.6 million, or 7.6%, organic sales gain,
$76.0 million of acquisition-related sales and $1.7 million of
favorable foreign currency translation. The organic increase reflects
losses and in the size of the portfolio. Aimed at supporting essential
big ticket purchases by technicians and shops as well as enabling
our franchisees’ investments in their businesses, our Financial
Services operation, with a strong connection to the Snap-on Tools
Group, has a decades-long track record of providing financing to
these particular constituencies in a variety of economic environments.
gains in sales to OEM dealerships and of undercar equipment,
In August 2017, our Board of Directors authorized a new share
as well as higher sales of diagnostics and repair information
repurchase program for up to $500 million of common stock. During
products to independent repair shop owners and managers.
2017 we repurchased 1.82 million shares for $287.9 million.
Operating margin of 24.8%, including 100 basis points of negative
As of 2017 year end, total share repurchase availability under all
impact from acquisitions, compared to 25.2% in 2016.
authorizations stood at approximately $390.7 million. In November
Sales growth across RS&I in 2017 demonstrates the Group’s broad
and deep capabilities in helping shop owners and managers
enhance not only their technical competency in vehicle repair,
but also their business acumen in operating repair facilities.
Strength in both areas is increasingly important for our customers,
in light of rising vehicle complexity and changing technologies
coupled with an increasing focus on facility profitability and
efficiency in the vehicle repair industry. From equipment for wheel,
brake, air conditioning and collision service to information-based
2017, our Board of Directors raised Snap-on’s quarterly cash
dividend 15.5% to $0.82 per share. This is the eighth consecutive
year with a dividend increase. Snap-on has paid consecutive
quarterly cash dividends, without interruption or reduction, since
1939. These share repurchase and dividend actions reinforce
our commitment to create long-term value for our shareholders.
At the same time, our priorities for capital allocation remain to
strategically invest, both organically and through acquisitions,
along our defined runways for growth and improvement.
6
Snap‑on’s value proposition is to make work easier for
serious professionals performing tasks of consequence
where the costs of failure are high. We believe vehicle repair,
where we began and which still today is our largest end market,
exhibits characteristics that are quite conducive to this value
proposition. Vehicle repair technicians and repair shop
owners and managers are faced with ever-increasing
vehicle complexity and changing vehicle technologies.
There’s a great deal of speculation today about what
the future holds for the structure of the vehicle repair
market and where new and emerging vehicle
technologies will take it. While it’s impossible to
know exactly what will happen in the future, we
believe Snap-on, as has been the case over the
course of our history, is uniquely positioned to take
advantage of the opportunities future change will
bring. Our strong relationships with OEMs gives us
visibility into the trajectory of vehicle technology. At
the same time, our strong presence in OEM dealership
service centers and aftermarket repair shops allows us to
observe our customers’ challenges first-hand. The result
is that we take the insights gained from these linkages to
provide the unique productivity solutions our customers require
to perform their work. While the nature of those tasks can and
do change over time, we believe the need for Snap-on as a
trusted partner in solving the critical will only expand.
In 2018, we expect to make continued progress along our
runways for improvement, the Snap‑on Value Creation
Processes and, at the same time, advance further along
each of our runways for growth: enhance the franchise
network, expand with repair shop owners and managers,
extend in critical industries and build in emerging markets.
Rooted in the dignity of work, driven by the needs of the serious,
and guided by the insight shaped from experience, Snap-on
remains uniquely positioned in the world of work. I thank
our franchisees and associates around the world for their
contributions and dedication, our Board of Directors for their
support and counsel, and our customers and shareholders
for their confidence and commitment.
Nicholas T. Pinchuk
Chairman and Chief Executive Officer
3
1
2
Technicians and repair facilities face
ever‑increasing vehicle technolog y and
complexit y, including a growing num ber of
vehicle systems a n d a n i n cr ea si ng n eed for
d i a g n os t i c platforms in completing repairs.
Snap-on’s comprehensive line of diagnostic platforms help technicians
and shops navigate this landscape and repair vehicles more quickly and
accurately. The new ETHOS® Edge (1) is a full-function scan tool designed
to meet the needs of technicians performing more routine maintenance
tasks and light repairs. The Zeus™ Diagnostic and Information System (2),
the new flagship platform of our diagnostic line-up, is the first unit to
feature Snap-on® Intelligent Diagnostics software, providing all the
functions and repair tips a technician needs to diagnose, repair and
manage any issue; it’s the most sophisticated, most intuitive repair tool
we’ve ever created. Our powerful software (3) is updated regularly to not
only ensure the availability of the latest information for taking on the
toughest jobs, but to provide the most comprehensive diagnostic coverage
available, supporting 49 vehicle makes.
7
7
W H O W E A R E : O U R M I S S I O N
The most
valued
productivity
solutions in
the world
B E L I E F S
We deeply believe in:
Non-negotiable Product
and Workplace Safety
Uncompromising Quality
Passionate Customer Care
Fearless Innovation
V A L U E S
Our behaviors
define our success:
We demonstrate Integrity.
We tell the Truth.
We respect the Individual.
We promote Teamwork.
V I S I O N
To be acknowledged as the:
Brands of Choice
Employer of Choice
Franchisor of Choice
Business Partner of Choice
Investment of Choice
Rapid Continuous Improvement
We Listen.
S NA P ‑ O N VA LU E C R E AT I O N
Principles and
processes we
apply to
create value
Founded on our mission and beliefs, these are strategic processes we use daily to create value
across Snap‑on, with the strategic partners we embrace and in the acquisitions we make.
S A F E T Y / Q U A L I T Y / C U S T O M E R C O N N E C T I O N /
I N N O VA T I O N / R A P I D C O N T I N U O U S I M P R O V E M E N T
R E C O N C I L I AT I O N O F N O N ‑ G A A P F I NA N C I A L M E A S U R E S
(Amounts in millions, except per share data)
A S R E P O R T E D
2 0 1 7
2 0 1 6
ADJUSTED INFORMATION – NON‑GAAP
2 0 1 7
2 0 1 6
Charges related to judgments in litigation
matters that are being appealed (“legal charges”)
Pre-tax legal charges
Income tax expense
Legal charges, net of tax
$45.9
(17.5)
$28.4
$ —
—
$ —
Charge related to implementation of US
tax legislation (“tax charge”)
Tax charge
$7.0
$ —
1 ) Operating earnings before financial services
As reported
Legal charges
As adjusted to exclude legal charges
Operating earnings before financial services
as a percentage of sales
As reported
As adjusted to exclude legal charges
Weighted-average shares outstanding – diluted
58.6
59.4
2 ) Net earnings attributable to Snap-on Incorporated
Diluted EPS – legal charges
$0.48
$ —
As reported
Legal charges, after tax
Diluted EPS – tax charge
$0.12
$ —
Tax charge
$664.0
$655.5
45.9
—
$709.9
$655.5
18.0%
19.3%
19.1%
19.1%
$557.7
$546.4
28.4
7.0
—
—
As adjusted to exclude legal charges and tax charge
$593.1
$546.4
For 2017, the company is including operating earnings before financial services, net earnings, and diluted
earnings per share, all as adjusted. The adjustments exclude the impact of pre-tax $45.9 million of charges
($28.4 million after-tax) related to judgments in litigation matters that are being appealed. The company
is also including net earnings and diluted earnings per share, all as adjusted to exclude the impact of a
$7.0 million charge related to the implementation of tax legislation. Management believes that these are
unusual events and therefore the non-GAAP financial measures provide more meaningful year-over-year
comparisons of the company’s 2017 operating performance.
3 ) Diluted EPS
As reported
Legal charges, after tax
Tax charge
$9.52
$9.20
0.48
0.12
—
—
As adjusted to exclude legal charges and tax charge
$10.12
$9.20
8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For the fiscal year ended December 30, 2017, or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7724
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
39-0622040
(I.R.S. Employer Identification No.)
2801 80th Street, Kenosha, Wisconsin
(Address of principal executive offices)
53143
(Zip code)
(262) 656-5200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, $1.00 par value
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in a definitive proxy or information statement incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Smaller reporting company
Emerging growth company
Non-accelerated filer
Accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of voting and non-voting common equity held by non-affiliates (excludes 564,907 shares held by directors and executive
officers) computed by reference to the price ($158.00) at which common equity was last sold as of the last business day of the registrant’s most recently
completed second fiscal quarter (July 1, 2017) was $9.0 billion.
The number of shares of Common Stock ($1.00 par value) of the registrant outstanding as of February 9, 2018, was 56,721,048 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference certain information that will be set forth in Snap-on’s Proxy Statement, which is
expected to first be mailed to shareholders on or about March 9, 2018, prepared for the Annual Meeting of Shareholders scheduled for April 26, 2018.
TABLE OF CONTENTS
Page
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Item 16
Business ................................................................................................................................ 4
Risk Factors ........................................................................................................................ 12
Unresolved Staff Comments ............................................................................................... 20
Properties ............................................................................................................................ 20
Legal Proceedings............................................................................................................... 22
Mine Safety Disclosures ...................................................................................................... 22
Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities ............................................................................... 22
Selected Financial Data ...................................................................................................... 26
Management’s Discussion and Analysis of Financial Condition and
Results of Operations ......................................................................................................... 27
Quantitative and Qualitative Disclosures About Market Risk .............................................. 57
Financial Statements and Supplementary Data .................................................................. 59
Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure ........................................................................................................... 59
Controls and Procedures .................................................................................................... 59
Other Information ................................................................................................................ 61
Directors, Executive Officers and Corporate Governance .................................................. 61
Executive Compensation .................................................................................................... 62
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters ............................................................................................. 62
Certain Relationships and Related Transactions, and Director Independence .................. 63
Principal Accounting Fees and Services ............................................................................. 63
Exhibits, Financial Statement Schedules ............................................................................ 63
Form 10-K Summary ........................................................................................................... 66
Signatures ................................................................................................................................................... 118
Computation of Ratio of Earnings to Fixed Charges ................................................................................... 120
Consent of Independent Registered Public Accounting Firm ..................................................................... 121
Certifications ................................................................................................................................................ 122
2
SNAP-ON INCORPORATED
PART I
Safe Harbor
Statements in this document that are not historical facts, including statements that (i) are in the future tense; (ii) include the
words “expects,” “plans,” “targets,” “estimates,” “believes,” “anticipates,” or similar words that reference Snap-on
Incorporated (“Snap-on” or “the company”) or its management; (iii) are specifically identified as forward-looking; or (iv)
describe Snap-on’s or management’s future outlook, plans, estimates, objectives or goals, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader that any forward-
looking statements included in this document that are based upon assumptions and estimates were developed by
management in good faith and are subject to risks, uncertainties or other factors that could cause (and in some cases have
caused) actual results to differ materially from those described in any such statement. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual results or regarded as a representation by the company or
its management that the projected results will be achieved. For those forward-looking statements, Snap-on cautions the
reader that numerous important factors, such as those listed below, as well as those factors discussed in this Annual Report
on Form 10-K, particularly those in “Item 1A: Risk Factors,” could affect the company’s actual results and could cause its
actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf
of, Snap-on.
These risks and uncertainties include, without limitation, uncertainties related to estimates, statements, assumptions and
projections generally, and the timing and progress with which Snap-on can attain value through its Snap-on Value Creation
Processes, including its ability to realize efficiencies and savings from its rapid continuous improvement and other cost
reduction initiatives, improve workforce productivity, achieve improvements in the company’s manufacturing footprint and
greater efficiencies in its supply chain, and enhance machine maintenance, plant productivity and manufacturing line set-
up and change-over practices, any or all of which could result in production inefficiencies, higher costs and/or lost revenues.
These risks also include uncertainties related to Snap-on’s capability to implement future strategies with respect to its
existing businesses, its ability to refine its brand and franchise strategies, retain and attract franchisees, further enhance
service and value to franchisees and thereby help improve their sales and profitability, introduce successful new products,
successfully pursue, complete and integrate acquisitions, as well as its ability to withstand disruption arising from natural
disasters (such as the recent hurricanes in the southern United States and the Caribbean), planned facility closures or other
labor interruptions, the effects of external negative factors, including adverse developments in world financial markets,
weakness in certain areas of the global economy (including as a result of the United Kingdom’s pending exit from the
European Union), and significant changes in the current competitive environment, inflation, interest rates and other
monetary and market fluctuations, changes in tax rates, laws and regulations as well as uncertainty surrounding potential
changes, and the impact of energy and raw material supply and pricing, including steel and gasoline, the amount, rate and
growth of Snap-on’s general and administrative expenses, including health care and postretirement costs (resulting from,
among other matters, U.S. health care legislation and its ongoing implementation or potential reform), continuing and
potentially increasing required contributions to pension and postretirement plans, the impacts of non-strategic business
and/or product line rationalizations, and the effects on business as a result of new legislation, regulations or government-
related developments or issues, risks associated with data security and technological systems and protections, potential
reputational damages and costs related to litigation as well as an inability to assure that costs will be reduced or eliminated
on appeal, and other world or local events outside Snap-on’s control, including terrorist disruptions. Snap-on disclaims any
responsibility to update any forward-looking statement provided in this document, except as required by law.
In addition, investors should be aware that generally accepted accounting principles in the United States of America
(“GAAP”) prescribe when a company should reserve for particular risks, including litigation exposures. Accordingly, results
for a given reporting period could be significantly affected if and when a reserve is established for a major contingency.
Reported results, therefore, may appear to be volatile in certain accounting periods.
Fiscal Year
Snap-on’s fiscal year ends on the Saturday that is on or nearest to December 31. Unless otherwise indicated, references
in this document to “fiscal 2017” or “2017” refer to the fiscal year ended December 30, 2017; references to “fiscal 2016” or
“2016” refer to the fiscal year ended December 31, 2016; and references to “fiscal 2015” or “2015” refer to the fiscal year
ended January 2, 2016. Snap-on’s 2017, 2016 and 2015 fiscal years each contained 52 weeks of operating results.
References in this document to 2017, 2016 and 2015 year end refer to December 30, 2017, December 31, 2016, and
January 2, 2016, respectively.
2017 ANNUAL REPORT
3
Item 1: Business
Snap-on was incorporated under the laws of the state of Wisconsin in 1920 and reincorporated under the laws of the state
of Delaware in 1930. 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. Products and services include
hand and power tools, tool storage, diagnostics software, 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.
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. Snap-on reaches its
customers through the company’s franchisee, company-direct, distributor and internet channels. Snap-on originated the
mobile tool distribution channel in the automotive repair market.
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 fully stocked vans sell to professional vehicle
technicians at their place of business. 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. The company’s “coherent growth” strategy focuses on developing and expanding its professional customer
base in its legacy automotive market, as well as in adjacent markets, additional geographies and other areas, including in
critical industries, where the cost and penalties for failure can be high. In addition to its coherent growth strategy, Snap-on
is committed to its “Value Creation Processes” – a set of strategic principles and processes designed to create value and
employed in the areas of (i) safety; (ii) quality; (iii) customer connection; (iv) innovation; and (v) rapid continuous
improvement (“RCI”). Snap-on’s RCI initiatives employ a structured set of tools and processes across multiple businesses
and geographies intended to eliminate waste and improve operations. Savings from Snap-on’s RCI initiatives reflect
benefits from a wide variety of ongoing efficiency, productivity and process improvements, including savings generated from
product design cost reductions, improved manufacturing line set-up and change-over practices, lower-cost sourcing
initiatives and facility consolidations.
Snap-on’s primary customer segments include: (i) commercial and industrial customers, including professionals in critical
industries and emerging markets; (ii) professional vehicle repair technicians who purchase products through the company’s
mobile tool distribution network; and (iii) other professional customers related to vehicle repair, including owners and
managers of independent and original equipment manufacturer (“OEM”) dealership service and repair shops (“OEM
dealerships”). Snap-on’s Financial Services customer segment includes: (i) franchisees’ customers, principally serving
vehicle repair technicians, and Snap-on customers who require financing for the purchase or lease of tools and diagnostics
and equipment products on an extended-term payment plan; and (ii) franchisees who require financing for vehicle leases
and business loans.
Snap-on’s business segments are based on the organization structure used by management for making operating and
investment decisions and for assessing performance. Snap-on’s reportable business segments are: (i) the Commercial &
Industrial Group; (ii) the Snap-on Tools Group; (iii) the Repair Systems & Information Group; and (iv) Financial Services.
The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial
customers worldwide, including customers in the aerospace, natural resources, government, power generation,
transportation and technical education market segments (collectively, “critical industries”), primarily through direct and
distributor channels. The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair
technicians through the company’s worldwide mobile tool distribution channel. The 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. Financial Services
consists of the business operations of Snap-on Credit LLC (“SOC”), the company’s financial services business in the United
States, and Snap-on’s other financial services subsidiaries in those international markets where Snap-on has franchise
operations. See Note 18 to the Consolidated Financial Statements for information on business segments and foreign
operations.
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SNAP-ON INCORPORATED
Snap-on evaluates the performance of its operating segments based on segment revenues, including both external and
intersegment net sales, and segment operating earnings. Snap-on accounts for intersegment sales and transfers based
primarily on standard costs with reasonable mark-ups established between the segments. 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.
Recent Acquisitions
On July 28, 2017, Snap-on acquired Torque Control Specialists Pty Ltd (“TCS”) for a cash purchase price of $3.6 million
(or $3.5 million, net of cash acquired). TCS, based in Adelaide, Australia, distributes a full range of torque products,
including wrenches, multipliers and calibrators, for use in critical industries. The acquisition of TCS enhanced and expanded
Snap-on’s capabilities in providing solutions that address torque requirements, which are increasingly essential to critical
mechanical performance. For segment reporting purposes, the results of operations and assets of TCS have been included
in the Commercial & Industrial Group since the acquisition date.
On May 4, 2017, Snap-on acquired Norbar Torque Tools Holdings Limited, along with its U.S. and Chinese joint ventures
(“Norbar”), for a cash purchase price of $71.6 million (or $69.9 million, net of cash acquired). Norbar, based in Banbury,
U.K., designs and manufactures a full range of torque products, including wrenches, multipliers and calibrators, for use in
critical industries. The acquisition of Norbar enhanced and expanded Snap-on’s capabilities in providing solutions that
address torque requirements. For segment reporting purposes, the results of operations and assets of Norbar have been
included in the Commercial & Industrial Group since the acquisition date.
On January 30, 2017, Snap-on acquired BTC Global Limited (“BTC”) for a cash purchase price of $9.2 million. BTC, based
in Crewe, U.K., designs and implements automotive vehicle inspection and management software for OEM franchise repair
shops. The acquisition of BTC enhanced Snap-on’s capabilities to grow enterprise revenues and add increased productivity
for repair workshops. For segment reporting purposes, the results of operations and assets of BTC have been included in
the Repair Systems & Information Group since the acquisition date.
On November 16, 2016, Snap-on acquired Ryeson Corporation (d/b/a Sturtevant Richmont) for a cash purchase price of
$13.0 million (or $12.6 million, net of cash acquired). Sturtevant Richmont, based in Carol Stream, Illinois, designs,
manufactures and distributes mechanical and electronic torque wrenches as well as wireless torque error proofing systems
for a variety of industrial applications. The acquisition of Sturtevant Richmont enhanced and expanded Snap-on’s
capabilities in providing solutions that address torque requirements. For segment reporting purposes, the results of
operations and assets of Sturtevant Richmont have been included in the Commercial & Industrial Group since the
acquisition date.
On October 31, 2016, Snap-on acquired Car-O-Liner Holding AB (“Car-O-Liner”) for a cash purchase price of $152.0 million
(or $148.1 million, net of cash acquired). Car-O-Liner, based in Gothenburg, Sweden, designs and manufactures collision
repair equipment, and information and truck alignment systems. The acquisition of Car-O-Liner complemented and
increased Snap-on’s existing equipment and repair and service information product offerings, broadened its established
capabilities in serving vehicle repair facilities and further expanded the company’s presence with repair shop owners and
managers. For segment reporting purposes, substantially all of Car-O-Liner’s results of operations and assets have been
included in the Repair Systems & Information Group since the acquisition date, with the remaining portions included in the
Commercial & Industrial Group.
On July 27, 2015, Snap-on acquired the assets of Ecotechnics S.p.A. (“Ecotechnics”) for a cash purchase price of $11.8
million. Ecotechnics, based in Sesto Fiorentino, Italy, designs and manufactures vehicle air conditioning service equipment
for OEM dealerships and the automotive aftermarket worldwide. The acquisition of the Ecotechnics product line
complemented and increased Snap-on’s existing equipment product offering for OEM dealerships and independent
automotive repair shops, broadened its established capabilities in serving vehicle repair facilities, and expanded the
company’s presence with repair shop owners and managers. For segment reporting purposes, the results of operations
and assets of Ecotechnics have been included in the Repair Systems & Information Group since the acquisition date.
Pro forma financial information has not been presented for any of these acquisitions as the net effects, individually and
collectively, were neither significant nor material to Snap-on’s results of operations or financial position.
2017 ANNUAL REPORT
5
Information Available on the Company’s Website
Additional information regarding Snap-on and its products is available on the company’s website at www.snapon.com.
Snap-on is not including the information contained on its website as a part of, or incorporating it by reference into, this
Annual Report on Form 10-K. Snap-on’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statements
on Schedule 14A and Current Reports on Form 8-K, as well as any amendments to those reports, are made available to
the public at no charge, other than an investor’s own internet access charges, through the Investors section of the
company’s website at www.snapon.com. Snap-on makes such material available on its website as soon as reasonably
practicable after it electronically files such material with, or furnishes it to, the Securities and Exchange Commission (“SEC”).
Copies of any materials the company files with the SEC can also be obtained free of charge through the SEC’s website at
www.sec.gov. The SEC’s Public Reference Room can be contacted at 100 F Street, N.E., Washington, D.C. 20549, or by
calling 1-800-732-0330. In addition, Snap-on’s (i) charters for the Audit, Corporate Governance and Nominating, and
Organization and Executive Compensation Committees of the company’s Board of Directors; (ii) Corporate Governance
Guidelines; and (iii) Code of Business Conduct and Ethics are available on the company’s website. 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.
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. Further product line information is not
presented as it is not practicable to do so. The following table shows the consolidated net sales of these product categories
for the last three years:
(Amounts in millions)
Product Category:
Tools
Diagnostics, information and
management systems
Equipment
2017
Net Sales
2016
2015
$ 1,946.7
$ 1,899.2
$ 1,910.1
800.4
939.8
$ 3,686.9
748.2
783.0
$ 3,430.4
689.6
753.1
$ 3,352.8
The tools product category includes hand tools, power tools, tool storage products and other similar products. Hand tools
include wrenches, sockets, ratchet wrenches, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning
tools, torque measuring instruments and other similar products. Power tools include cordless (battery), pneumatic (air),
hydraulic and corded (electric) tools, such as impact wrenches, ratchets, screwdrivers, drills, sanders, grinders and similar
products. Tool storage includes tool chests, roll cabinets and other similar products. For many industrial customers,
Snap-on creates specific, engineered solutions, including facility-level tool control and asset management hardware and
software, custom kits in a wide range of configurations, and custom-built tools designed to meet customer requirements.
The majority of products are manufactured by Snap-on and, in completing the product offering, other items are purchased
from external manufacturers.
The diagnostics, information and management systems product category includes handheld and PC-based diagnostic
products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business
management systems and services, point-of-sale systems, integrated systems for vehicle service shops, OEM purchasing
facilitation services, and warranty management systems and analytics to help OEM dealerships manage and track
performance.
The equipment product category includes solutions for the service of vehicles and industrial equipment. Products include
wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane systems, collision repair equipment,
vehicle air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission
troubleshooting equipment, safety testing equipment, battery chargers and hoists.
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SNAP-ON INCORPORATED
Snap-on supports the sale of its diagnostics and vehicle service shop equipment by offering training programs as well as
after-sales support for its customers, primarily focusing on the technologies and the application of specific products
developed and marketed by Snap-on.
Products are marketed under a number of brand names and trademarks, many of which are well known in the vehicle
service and industrial markets served. Some of the major trade names and trademarks and the products and services with
which they are associated include the following:
Names
Snap-on
ATI
autoVHC
BAHCO
Blackhawk
Blue-Point
Cartec
Products and Services
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
Aircraft hand tools and machine tools
Vehicle inspection and training services
Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage
Collision repair equipment
Hand tools, power tools, tool storage, diagnostics, certain equipment and related accessories
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
Ecotechnics Vehicle air conditioning service equipment
Fish and Hook
Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage
Hofmann
Irimo
John Bean
Josam
Lindström
Mitchell1
Nexiq
Norbar
Pro-Cut
Sandflex
ShopKey
Sioux
Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment
Saw blades, cutting tools, hand tools, power tools and tool storage
Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment
Heavy duty alignment and collision repair solutions
Hand tools
Repair and service information, shop management systems and business services
Diagnostic tools, information and program distributions for fleet and heavy duty equipment
Torque tools
On-car brake lathes, related equipment and accessories
Hacksaw blades, bandsaws, saw blades, hole saws and reciprocating saw blades
Repair and service information, shop management systems and business services
Power tools
Sturtevant Richmont
Torque tools
Sun
TruckCam
Williams
Diagnostic tools, wheel balancers, vehicle lifts, tire changers, wheel aligners, air conditioning
products and emission testers
Commercial OEM factory solutions
Hand tools, tool storage, certain equipment and related accessories
2017 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 and
diagnostic and equipment products on an extended-term payment plan; and (ii) business loans and vehicle leases to
franchisees. The decision to finance through Snap-on or another financing source is solely election of the customer. When
assessing customers for potential financing, Snap-on considers various factors regarding ability to pay, including the
customers’ financial condition, debt-servicing ability, past payment experience, and credit bureau and proprietary Snap-on
credit model information, as well as the value of the underlying collateral.
Snap-on offers financing through SOC and the company’s international finance subsidiaries in those markets where
Snap-on has franchise operations. Financing revenue from contract originations is recognized over the life of the underlying
contracts, with interest computed primarily on the average daily balances of the underlying contracts.
Sales and Distribution
Snap-on markets and distributes its products and related services principally to professional tool and equipment users
around the world. The two largest market sectors are the vehicle service and repair sector and the industrial sector.
Vehicle Service and Repair Sector
The vehicle service and repair sector has three main customer groups: (i) professional technicians who purchase tools and
diagnostic and equipment products for use in their work; (ii) other professional customers related to vehicle repair, including
owners and managers of independent repair shops and OEM dealerships who purchase tools and diagnostic and equipment
products for use by multiple technicians within a service or repair facility; and (iii) OEMs.
Snap-on provides innovative tool, equipment and business solutions, as well as technical sales support and training,
designed to meet technicians’ evolving needs. Snap-on’s mobile tool distribution system offers technicians the convenience
of purchasing quality tools at their place of business with minimal disruption of their work routine. Snap-on also provides
owners and managers of repair shops, where technicians work, with tools, diagnostic equipment, and repair and service
information, including electronic parts catalogs and shop management products. Snap-on’s OEM facilitation business
provides OEMs with products and services including special and essential tools as well as consulting and facilitation
services, which include product procurement, distribution and administrative support to customers for their dealership
equipment programs.
The vehicle service and repair sector is characterized by an increasing rate of technological change within motor vehicles,
vehicle population growth and increasing vehicle life, and the resulting effects of these changes on the businesses of both
our suppliers and customers. Snap-on believes it is a meaningful participant in the vehicle service and repair market sector.
Industrial Sector
Snap-on markets its products and services globally to a broad cross-section of commercial and industrial customers,
including maintenance and repair operations; manufacturing and assembly facilities; various government agencies, facilities
and operations, including military operations; vocational and technical schools; aviation and aerospace operations; oil and
gas developers; mining operations; energy and power generation; equipment fabricators and operators; railroad
manufacturing and maintenance; customers in agriculture; infrastructure construction companies; and other customers that
require instrumentation, service tools and/or equipment for their product and business needs.
The industrial sector for Snap-on focuses on providing value-added products and services to an increasingly expanding
global base of customers in critical industries. Through its experienced and dispersed sales organization, industrial
“solutioneers” develop unique and highly valued productivity solutions for customers worldwide that leverage Snap-on’s
product, service and development capabilities.
The industrial sector is characterized by a highly competitive environment with multiple suppliers offering a full line or
industry specific portfolios for tools and equipment. Industrial customers increasingly require specialized solutions that
provide repeatability and reliability in performing tasks of consequence that are specific to the particular end market in which
they operate. Snap-on believes it is a meaningful participant in the industrial tools and equipment market sector.
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SNAP-ON INCORPORATED
Distribution Channels
Snap-on serves customers primarily through the following channels of distribution: (i) the mobile van channel; (ii) company
direct sales; (iii) distributors; and (iv) e-commerce. The following discussion summarizes Snap-on’s general approach for
each channel and is not intended to be all-inclusive.
Mobile Van Channel
In the United States, a significant portion of sales to the vehicle service and repair sector is conducted through Snap-on’s
mobile franchise van channel. Snap-on’s franchisees primarily serve vehicle repair technicians and vehicle service shop
owners, generally providing weekly contact at the customer’s place of business. Franchisees’ sales are concentrated in
hand and power tools, tool storage products, shop equipment, and diagnostic and repair information products, which can
easily be transported in a van or trailer and demonstrated during a brief sales call. Franchisees purchase Snap-on’s products
at a discount from suggested list prices and resell them at prices established by the franchisee. U.S. franchisees are
provided a list of calls that serves as the basis of the franchisee’s sales route. Snap-on’s franchisees also have the
opportunity to add a limited number of additional franchises.
Snap-on charges nominal initial and ongoing monthly franchise fees. Franchise fee revenue, including nominal, non-
refundable initial and ongoing monthly fees (primarily for sales and business training, and marketing and product promotion
programs), is recognized as the fees are earned. Franchise fee revenue totaled $15.2 million, $13.9 million and $12.7
million in fiscal 2017, 2016 and 2015, respectively.
Snap-on also has a company-owned route program that is designed to: (i) provide another pool of potential field organization
personnel; (ii) service customers in select new and/or open routes not currently serviced by franchisees; and (iii) allow
Snap-on to pilot new sales and promotional ideas prior to introducing them to franchisees. As of 2017 year end, company-
owned routes comprised less than 3% of the total route population; Snap-on may elect to increase or reduce the number of
company-owned routes in the future.
In addition to its mobile van channel in the United States, Snap-on has replicated its U.S. franchise distribution model in
certain other countries including the United Kingdom, Canada, Japan, Australia, Germany, Netherlands, South Africa, New
Zealand, Belgium and Ireland. 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 2017 year
end, Snap-on’s worldwide route count was approximately 4,900, including approximately 3,500 routes in the United States.
Through SOC, financing is available to U.S. franchisees, including financing for van leases, working capital loans and loans
to help enable new franchisees to fund the purchase of the franchise. In many international markets, Snap-on offers a
variety of financing options to its franchisees and/or customer networks through its international finance subsidiaries. The
decision to finance through Snap-on or another financing source is solely at the customer’s election.
Snap-on supports its franchisees with a field organization of regional offices, franchise performance teams, customer care
centers and distribution centers. Snap-on also provides sales and business training, and marketing and product promotion
programs, as well as customer and franchisee financing programs through SOC and the company’s international finance
subsidiaries, all of which are designed to strengthen franchisee sales. National Franchise Advisory Councils in the United
States, the United Kingdom, Canada and Australia, composed primarily of franchisees that are elected by franchisees,
assist Snap-on in identifying and implementing enhancements to the franchise program.
Company Direct Sales
A significant proportion of shop equipment sales in North America under the John Bean, Hofmann, Blackhawk, Car-O-Liner,
Challenger and Pro-Cut brands, diagnostic products under the Snap-on brand and information products under the Mitchell1
brand are made by direct and independent sales forces that have responsibility for national and other accounts. As the
vehicle service and repair sector consolidates (with more business conducted by national chains and franchised service
centers), Snap-on believes these larger organizations can be serviced most effectively by sales people who can
demonstrate and sell the full line of diagnostic and equipment products and services. Snap-on also sells these products
and services directly to OEMs and their franchised dealers.
2017 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. As of 2017 year end, Snap-on had industrial sales associates and
independent distributors primarily in the United States 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.
Snap-on also sells software, services and solutions to the automotive, commercial, heavy duty, agriculture, power
equipment and power sports segments. Products and services are marketed to targeted groups, including OEMs and their
dealerships, fleets and individual repair shops. To effectively reach OEMs, which frequently have a multi-national presence,
Snap-on has deployed focused business teams globally.
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, Fish and Hook, Irimo, Lindström, CDI, ATI, Norbar, Sioux,
Sturtevant Richmont and Williams brands and trade names, for example, are sold 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. Diagnostic 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 at 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.
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.
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). While Snap-on does not believe that any single company competes with it across all of its product lines and
distribution channels, various companies compete in one or more product categories and/or distribution channels.
repair
Snap-on believes it is a leading manufacturer and distributor of professional tools, tool storage, diagnostic and equipment
products, and repair software and solutions, offering a broad line of these products to both vehicle service and industrial
marketplaces. Various competitors target and sell to professional technicians in the vehicle service and repair sector through
the mobile tool distribution channel. Snap-on also competes with companies that sell tools and equipment to vehicle service
and
tool supply
warehouses/distributorships. Within the power tools category and the industrial sector, Snap-on has various other
competitors, including companies with offerings that overlap with other areas discussed herein. Major competitors selling
diagnostics, shop equipment and information to vehicle dealerships and independent repair shops include OEMs and their
proprietary electronic parts catalogs and diagnostics and information systems, and other companies that offer products
serving this sector.
retail stores, vehicle parts supply outlets and
technicians online and
through
Raw Materials and Purchased Product
Snap-on’s supply of raw materials and purchased components are generally and readily available from numerous suppliers.
Snap-on believes it has secured an ample supply of both bar and coil steel for the near future to ensure stable supply to
meet material demands. The company does not currently anticipate experiencing any significant impact in 2018 from steel
pricing or availability issues.
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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. As
of 2017 year end, Snap-on and its subsidiaries held approximately 700 active and pending patents in the United States and
approximately 1,600 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.
Examples of products that have features or designs that benefit from patent protection include hand tools (including sealed
ratchets and ratcheting screwdrivers), power tools, wheel alignment systems, wheel balancers, tire changers, vehicle lifts,
tool storage, tool control, collision measurement, test lanes, brake lathes, electronic torque instruments, emissions-sensing
devices and diagnostic equipment.
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 to protect 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 to Snap-on in the marketplace. Trademarks have been
registered in the United States and many other countries, and additional applications for trademark registrations are
pending. Snap-on vigorously polices proper use of its trademarks. Snap-on’s right to manufacture and sell certain products
is dependent upon licenses from others; however, these products under license do not represent a material portion of
Snap-on’s net sales.
Domain names have become a valuable corporate asset for companies around the world, including Snap-on. Domain
names often contain a trademark or service mark or even a corporate name and are often considered intellectual property.
The recognition and value of the Snap-on name, trademark and domain name are core strengths of the company.
Snap-on strategically licenses the Snap-on brand to carefully selected manufacturing and distribution companies for items
such as apparel and a variety of other goods, in order to further build brand awareness and market presence for the
company’s strongest brand.
Environmental
Snap-on is subject to various environmental laws, ordinances, regulations, and other requirements of government
authorities in the United States and other nations. At Snap-on, these 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 14001:2004 and OHSAS 18001:2007, verified through Det
Norske Veritas (DNV) Certification, Inc.
Snap-on believes that it complies with applicable environmental control requirements in its operations. Expenditures on
environmental matters through EH & SMS have not had, and Snap-on does not for the foreseeable future expect them to
have, a material effect upon Snap-on’s capital expenditures, earnings or competitive position.
Employees
Snap-on employed approximately 12,600 people at the end of January 2018; Snap-on employed approximately 12,100
people at the end of January 2017. The year-over-year increase in employees primarily reflects acquisitions during 2017.
Approximately 2,700 employees, or 21% of Snap-on’s worldwide workforce, are represented by unions and/or covered
under collective bargaining agreements. The number of covered union employees whose contracts expire over the next
five years approximates 1,450 employees in 2018, 225 employees in 2019, 825 employees in 2020, 125 employees in
2021, and 25 employees in 2022. In recent years, Snap-on has not experienced any significant work slowdowns, stoppages
or other labor disruptions.
There can be no assurance that these and other future contracts with Snap-on’s unions will be renegotiated upon terms
acceptable to Snap-on.
2017 ANNUAL REPORT
11
Working Capital
Most of Snap-on’s businesses are not seasonal and their inventory needs are relatively constant. Snap-on did not have a
significant backlog of orders at 2017 year end. In recent years, Snap-on has been using its working capital to fund, in part,
the continued growth of the company’s financial services portfolio and the acquisitions discussed above.
Snap-on’s liquidity and capital resources and use of working capital are discussed herein in “Part II, Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
As of 2017 year end, neither Snap-on nor any of its segments depend on any single customer, small group of customers or
government for any material part of its revenues.
Item 1A: Risk Factors
In evaluating the company, careful consideration should be given to the following risk factors, in addition to the other
information included in this Annual Report on Form 10-K, including the Consolidated Financial Statements and the related
notes. Each of these risk factors could adversely affect the company’s business, operating results, cash flows and/or
financial condition, as well as adversely affect the value of an investment in the company’s common stock.
Economic conditions and world events could affect our operating results.
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. 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 acts of terrorism, developments in the war on terrorism, conflicts in international situations,
weather events and natural disasters, as well as government-related developments or issues. These factors may affect our
results of operations by reducing our sales, margins and/or net earnings as a result of a slowdown in customer orders or
order cancellations, impact the availability of raw materials and/or the supply chain, and could potentially lead to future
impairment of our intangible assets. In addition, political and social turmoil related to international conflicts and terrorist acts
may put pressure on economic conditions abroad. Unstable political, social and economic conditions may make it difficult
for our franchisees, customers, suppliers and us to accurately forecast and plan future business activities. If such conditions
persist, our business, financial condition, results of operations and cash flows could be negatively affected.
In June 2016, the United Kingdom voted in a referendum to exit the European Union (“Brexit”), which resulted in significant
currency exchange rate fluctuations and volatility. Negotiations are underway to determine the terms of Brexit. Given the
lack of comparable precedent and the status of the negotiations, the implications of Brexit, or how such implications might
affect Snap-on, continue to remain unclear at this time. Brexit could, among other impacts, disrupt trade and the movement
of goods, services and people between the United Kingdom and the European Union or other countries as well as create
legal and global economic uncertainty. These and other potential implications could adversely affect our business and
results of operations.
In 2017, Canada, Mexico and the United States commenced negotiations to potentially modify the terms of the North
American Free Trade Agreement (“NAFTA”). It is difficult to predict what, if any, changes will be made to NAFTA as a result
of these negotiations. If the U.S. were to withdraw from NAFTA or if significant changes are made that, among other
impacts, disrupt trade and the movement of goods and services between these countries, it could have a material adverse
impact on our business.
These and other matters significantly impacting the regulation of trade could adversely affect our business and results of
operations.
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SNAP-ON INCORPORATED
Raw material and energy price fluctuations and shortages (including steel and various fuel sources) could adversely affect
the ability to obtain needed manufacturing materials and could adversely affect our results of operations.
The principal raw material used in the manufacture of our products is steel, which we purchase in competitive, price-
sensitive markets. To meet Snap-on’s high quality standards, our steel needs range from specialized alloys, which are
available only from a limited group of approved suppliers, to commodity types of alloys. These raw materials have historically
exhibited price and demand cyclicality. Some of these materials have been, and in the future may be, in short supply,
particularly in the event of mill shutdowns or production cut backs. As some steel alloys require specialized manufacturing
procedures, we could experience inventory shortages if we were required to use an alternative manufacturer on short notice.
Additionally, unexpected price increases for raw materials could result in higher prices to our customers or an erosion of
the margins on our products.
We believe our ability to sell our products is also dependent on the number of vehicles on the road, the number of miles
driven and the general aging of vehicles. These factors affect the frequency, type and amount of service and repair
performed on vehicles by technicians, and therefore affect the demand for the number of technicians, the prosperity of
technicians and, consequently, the demand technicians have for our tools, other products and services, and the value
technicians place on those products and services. The use of other methods of transportation, including more frequent use
of public transportation, 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.
We use various energy sources to transport, produce and distribute products, and some of our products have components
that are petroleum based. 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, world events and changes in governmental programs. Energy price increases raise both our
operating costs and the costs of our materials, and we may not be able to increase our prices enough to offset these costs.
Higher prices also may reduce the level of future customer orders and our profitability.
The performance of Snap-on’s mobile tool distribution business depends on the success of its franchisees.
Approximately 41% of our consolidated net revenues in 2017 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. Snap-on’s success is dependent on its relationships with franchisees, individually and
collectively, as they are the primary sales and service link between the company and vehicle service and repair technicians,
who are an important class of end users for Snap-on’s products and services. If our franchisees are not successful, or if we
do not maintain an effective relationship with our franchisees, the delivery of products, the collection of receivables and/or
our relationship with end users could be adversely affected and thereby negatively impact our business, financial condition,
results of operations and cash flows.
In addition, if we are unable to maintain effective relationships with franchisees, Snap-on or the franchisees may choose to
terminate the relationship, which may result in (i) open routes, in which end-user customers are not provided reliable service;
(ii) litigation resulting from termination; (iii) reduced collections or increased write-offs of franchisee receivables owed to
Snap-on; and/or (iv) reduced collections or increased write-offs of finance and contract receivables.
Exposure to credit risks of customers and resellers may make it difficult to collect receivables and could adversely affect
operating results and financial condition.
The size of our financial services portfolio has increased significantly in recent years. A decline in industry and/or economic
conditions could have the potential to weaken the financial position of some of our customers. If circumstances surrounding
our customers’ ability to repay their credit obligations were to deteriorate and result in the write-down or write-off of such
receivables, it would negatively affect our operating results for the period in which they occur and, if large, could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
2017 ANNUAL REPORT
13
Our inability to provide acceptable financing alternatives to end-user customers and franchisees could adversely impact our
operating results.
An integral component of our business and profitability is our ability to offer competitive financing alternatives to end-user
customers and franchisees. The lack of our ability to offer such alternatives or obtain capital resources or other financing to
support our receivables on terms that we believe are attractive, whether resulting from the state of the financial markets,
our own operating performance, or other factors, would negatively affect our 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.
Changes to legislation and regulations may affect our business, reputation, results of operations and financial condition.
Significant changes to legislative and regulatory activity and compliance burdens, including those associated with sales to
our government, military and defense contractor customers, as well as the manner in which they are applied, could
significantly impact our business and the economy as a whole.
Financial services businesses of all kinds are subject to significant and complex regulations and enforcement. In addition
to potentially increasing the costs of doing business due to compliance obligations, new laws and regulations, or changes
to existing laws and regulations, as well as the enforcement thereof, may affect the relationships between creditors and
debtors, inhibit the rights of creditors to collect amounts owed to them, expand liability for certain actions or inactions, or
limit the types of financial products or services offered, any or all of which could have a material adverse effect on our
financial condition, results of operations and cash flows. Failure to comply with any of these laws or regulations could also
result in civil, criminal, monetary and/or non-monetary penalties, damage to our reputation, and/or the incurrence of
remediation costs.
Snap-on’s results of operations could also be affected by changes in the company’s effective tax rate as a result of changes
in statutory tax rates, laws and regulations, as well as related guidance. The company is currently analyzing the impact of
the December 2017 passage of “H.R.1”, formerly known as the Tax Cuts and Jobs Act in the United States (the “Tax Act”),
which made significant changes to the U.S. Tax Code and affects, among other items, the company’s tax rate, previously
unremitted foreign earnings and valuations of deferred tax assets and liabilities. If new guidance is issued on the recently
enacted tax revisions, depending on the circumstances, this (and other) tax legislation could adversely affect our results of
operations.
These developments, and other potential future legislation and regulations, as well as the factors in the strict regulatory
environment, including the growing international 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.
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.
Snap-on sponsors various defined benefit pension plans (the “pension plans”). The assets of the pension plans are
diversified in an attempt to mitigate the risk of a large loss. Required funding for the company’s domestic defined benefit
pension plans is determined in accordance with guidelines set forth in the federal Employee Retirement Income Security
Act (“ERISA”); foreign defined benefit pension plans are funded in accordance with local statutes or practice. Additional
contributions to enhance the funded status of the pension plans can be made at the company’s discretion. However, there
can be no assurance that the value of the pension plan assets, or the investment returns on those plan assets, will be
sufficient to meet the future benefit obligations of such plans. In addition, during periods of adverse investment market
conditions and declining interest rates, the company may be required to make additional cash contributions to the pension
plans that could reduce our financial flexibility. Changes in plan demographics, including an increase in the number of
retirements or changes in life expectancy assumptions, may also increase the costs and funding requirements of the
obligations related to the company’s pension plans.
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SNAP-ON INCORPORATED
Our pension plan obligations are affected by changes in market interest rates. Significant fluctuations in market interest
rates have added, and may further add, volatility to our pension plan obligations. In periods of declining market interest
rates, our pension plan obligations generally increase; in periods of increasing market interest rates, our pension plan
obligations generally decrease. While our plan assets are broadly diversified, there are inherent market risks associated
with investments; if adverse market conditions occur, our plan assets could incur significant or material losses. Since we
may need to make additional contributions to address changes in obligations and/or a loss in plan assets, the combination
of declining market interest rates, past or future plan asset investment losses, and/or changes in plan demographics could
adversely impact our results of operations, financial condition and cash flows.
The company’s pension plan expense is comprised of the following factors: (i) service cost; (ii) interest on projected benefit
obligations; (iii) expected return on plan assets; (iv) the amortization of prior service costs and credits; (v) effects of actuarial
gains and losses; and (vi) settlement/curtailment costs, when applicable. The accounting for pensions involves the
estimation of a number of factors that are highly uncertain. Certain factors, such as the interest on projected benefit
obligations and the expected return on plan assets, are impacted by changes in market interest rates and the value of plan
assets. A significant decrease in market interest rates and a decrease in the fair value of plan assets would increase net
pension expense and may adversely affect the company’s future results of operations. See Note 11 to the Consolidated
Financial Statements for further information on the company’s pension plans.
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. 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.
Adverse developments in the credit and financial markets, or unfavorable changes in Snap-on’s credit rating, could
negatively impact the availability of future financing and the terms on which it might be available to Snap-on, its end-user
customers, franchisees and suppliers. 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 $700 million. The company’s leverage
ratio may affect both our availability of additional capital resources as well as our operations in several ways, including:
(cid:120) The terms on which credit may be available to us could be less attractive, both in the economic terms of the credit
and the covenants stipulated by the credit terms;
(cid:120) The possible lack of availability of additional credit or access to the commercial paper market;
(cid:120) The potential for higher levels of interest expense to service or maintain our outstanding debt;
(cid:120) The possibility of additional borrowings in the future to repay our indebtedness when it comes due; and
(cid:120) The possible diversion of capital resources from other uses.
While we believe we will have the ability to service our debt and obtain additional resources in the future if and when needed,
that will depend upon our results of operations and financial position at the time, the then-current state of the credit and
financial markets, and other factors that may be beyond our control. 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.
2017 ANNUAL REPORT
15
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. 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, account for and collect receivables, protect sensitive data of the company, our customers, our suppliers
and business partners, or otherwise carry on business in the normal course. 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 or proceedings, and could also damage our reputation. 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.
In association with initiatives to better integrate business units, rationalize operating footprint and improve responsiveness
to franchisees and customers, Snap-on is continually replacing and enhancing its global Enterprise Resource Planning
(ERP) management information systems. As we integrate, implement and deploy new information technology processes
and enhance our common 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.
Failure to maintain effective distribution of products and services could adversely impact revenue, gross margin and
profitability.
We use a variety of distribution methods to sell our products and services. Successfully managing the interaction of our
distribution efforts to reach various potential customer segments for our products and services is a complex process.
Moreover, since each distribution method has distinct risks, costs and gross margins, our failure to implement the most
advantageous balance in the delivery model for our products and services could adversely affect our revenue and gross
margins and therefore our profitability.
Risks associated with the disruption of manufacturing operations could adversely affect profitability or competitive position.
We manufacture a significant portion of the products we sell. 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, weather events,
use and storage of hazardous materials, acts of war, sabotage or terrorism, or other events), or other reasons, could have
a material adverse effect on our business, financial condition, results of operations and cash flows.
The inability to continue to introduce new products that respond to customer needs and achieve market acceptance could
result in lower revenues and reduced profitability.
Sales from new products represent a significant portion of our net sales and are expected to continue to represent a
significant component of our future net sales. 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, and
testing at the technological, product and manufacturing process levels. Our competitors’ new products may beat our
products to market, be more effective with more features, be less expensive than our products, and/or render our products
obsolete. 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.
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SNAP-ON INCORPORATED
The global tool, equipment, and diagnostics and repair information industries are competitive.
We face strong competition in all of our market segments. Price competition in our various industries is intense and pricing
pressures from competitors and customers are increasing. 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. 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.
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. To the extent that plaintiffs are successful in showing that a defect in a product’s design,
manufacture or warnings led to personal injury or property damage, or that our provision of services resulted in similar injury
or damage, we may be subject to claims for damages. Although we are insured for damages above a certain amount, we
bear the costs and expenses associated with defending claims, including frivolous lawsuits, and are responsible for
damages up to the insurance retention amount. In addition to claims concerning individual products, as a manufacturer,
we can be subject to costs, potential negative publicity and lawsuits related to product recalls, which could adversely impact
our results of operations and damage our reputation.
Legal disputes could adversely affect our business, reputation, financial condition, results of operations and cash flows.
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.
Additionally, negative developments with respect to legal disputes and the costs incurred in defending ourselves, even if
successful, could have an adverse impact on the company and its reputation. Successful outcomes, at trial or on appeal,
can never be assured. 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.
Failure to adequately protect intellectual property, or claims of infringement, could adversely affect our business, reputation,
financial condition, results of operations and cash flows.
Intellectual property rights are an important and integral component of our business and failure to obtain or maintain
adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business.
We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret
laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. In addition, we have been
and in the future may be subject to claims of intellectual property infringement against us by third parties; whether or not
these claims have merit, we could be required to expend significant resources in defense of those claims. Adverse
determinations in a judicial or administrative proceeding could prevent us from manufacturing and selling our products,
prevent us from stopping others from manufacturing and selling competing products, and/or result in payments for damages.
In the event of an infringement claim, we may also be required to spend significant resources to develop alternatives or
obtain licenses which may not be available on reasonable terms or at all, and may reduce our sales and disrupt our
production. Failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a
material adverse effect on our business.
2017 ANNUAL REPORT
17
Foreign operations are subject to political, economic, currency exchange and other risks that could adversely affect our
business, financial condition, results of operations and cash flows.
Approximately 32% of our revenues in 2017 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. These risks and uncertainties
include political, economic and social instability, such as acts of war, civil disturbance or acts of terrorism, local labor
conditions, changes in government policies and regulations, including imposition or increases in withholding and other taxes
on remittances and other payments by international subsidiaries, as well as the exposure to liabilities under anti-corruption
laws in various countries, such as the U.S. Foreign Corrupt Practices Act, currency volatility, transportation delays or
interruptions, sovereign debt uncertainties and difficulties in enforcement of contract and intellectual property rights, as well
as natural disasters. Should the economic environment in our non-U.S. markets deteriorate from current levels, our results
of operations and financial position could be materially impacted, including as a result of the effects of potential impairment
write-downs of goodwill and/or other intangible assets related to these businesses.
The reporting currency for Snap-on’s consolidated financial statements is the U.S. dollar. Certain of the company’s assets,
liabilities, expenses and revenues are denominated in currencies other than the U.S. dollar. In preparing Snap-on’s
Consolidated Financial Statements, those assets, liabilities, expenses and revenues are translated into U.S. dollars at
applicable exchange rates. 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 could have a significant impact on the company’s financial condition and results of operations.
We are also affected by changes in inflation rates and interest rates. Additionally, cash generated in non-U.S. jurisdictions
may be difficult to repatriate to the United States in a tax-efficient manner. 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.
We may not successfully integrate businesses we acquire, which could have an adverse impact on our business, financial
condition, results of operations and cash flows.
The pursuit of growth through acquisitions, including participation in joint ventures, involves significant risks that could have
a material adverse effect on our business, financial condition, results of operations and cash flows. These risks include:
Inability to integrate successfully the acquired businesses’ operations;
Inability to coordinate management and integrate and retain employees of the acquired businesses;
(cid:120) Loss of the acquired businesses’ customers;
(cid:120)
(cid:120)
(cid:120) Unforeseen or contingent liabilities of the acquired businesses;
(cid:120) Large write-offs or write-downs, or the impairment of goodwill or other intangible assets;
(cid:120) Difficulties in implementing and maintaining consistent standards, controls, procedures, policies and information
systems;
(cid:120) Failure to realize anticipated synergies, economies of scale or other anticipated benefits, or to maintain operating
margins;
(cid:120) Strain on our personnel, systems and resources, and diversion of attention from other priorities;
(cid:120)
(cid:120) The dilutive effect in the event of the issuance of additional equity securities.
Incurrence of additional debt and related interest expense; and
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SNAP-ON INCORPORATED
The recognition of impairment charges on goodwill or other intangible assets would adversely impact our future financial
condition and results of operations.
We have a substantial amount of goodwill and purchased intangible assets, almost all of which are booked in the
Commercial & Industrial Group and in the Repair Systems & Information Group. 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. Significant 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.
Should the economic environment in these markets deteriorate, our results of operations and financial position could be
materially impacted, including as a result of the effects of potential impairment write-downs of goodwill and/or other
intangible assets related to these businesses.
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.
Certain of our operations are subject to environmental laws and regulations in the jurisdictions in which they operate, which
impose limitations on the discharge of pollutants into the ground, air and water and establish standards for the generation,
treatment, use, storage and disposal of hazardous wastes. We must also comply with various health and safety regulations
in the United States and abroad in connection with our operations. Failure to comply with any of these laws could result in
civil and criminal, monetary and non-monetary penalties and damage to our reputation. In addition, we may incur costs
related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices. We
cannot provide assurance that our costs of complying with current or future environmental protection and health and safety
laws will not exceed our estimates.
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. Due to the subjectivity of tax laws between those jurisdictions, as well as the subjectivity of factual
interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims from taxing
authorities related to these differences could have an adverse impact on our financial condition, results of operations and
cash flows.
Failure to attract and retain 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.
Their skills, experience and industry contacts significantly benefit our operations and administration. The failure to attract
and retain members of our senior management team and other key employees could have a negative effect on our operating
results. In addition, transitions of important responsibilities to new individuals inherently include the possibility of disruptions
to our business and operations, which could negatively affect our business, financial condition, results of operations and
cash flows.
2017 ANNUAL REPORT
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The steps taken to restructure operations, rationalize operating footprint, lower operating expenses and achieve greater
efficiencies in the supply chain could disrupt business.
We have taken steps in the past, and expect to take additional steps in the future, intended to improve customer service
and drive further efficiencies and reduce costs, some of which could be disruptive to our business. These actions,
collectively across our operating groups, are focused on the following:
(cid:120) Continuing to invest in initiatives focused on building a strong sales and operating presence in emerging growth
markets;
(cid:120) Continuing to enhance service and value to our franchisees and customers;
(cid:120) Continuing to implement efficiency and productivity initiatives throughout the company to drive further efficiencies
and reduce costs;
(cid:120) Continuing on the company’s existing path to improve and transform global manufacturing and the supply chain
into a market-demand-based replenishment system with lower costs;
(cid:120) Continuing to invest in developing and marketing new, innovative, higher-value-added products and advanced
technologies;
(cid:120) Extending our products and services into additional and/or adjacent markets or to new customers; and
(cid:120) Continuing to provide financing for, and grow our portfolio of, receivables within our financial services businesses.
A failure to succeed in the implementation of any or all of these actions could result in an inability to achieve our financial
goals and could be disruptive to the business.
In addition, any future reductions to headcount and other cost reduction measures may result in the loss of technical
expertise and could adversely affect our research and development efforts as well as our ability to meet product
development schedules. Efforts to reduce components of expense could result in the recording of charges for inventory and
technology-related write-offs, workforce reduction costs or other charges relating to the consolidation or closure of facilities.
If we were to incur a substantial charge to further these efforts, our earnings per share would be adversely affected in such
period. If we are unable to effectively manage our cost reduction and restructuring efforts, our business, financial condition,
results of operations and cash flows could be negatively affected.
Item 1B: Unresolved Staff Comments
None.
Item 2: Properties
Snap-on maintains leased and owned manufacturing, software development, warehouse, distribution, research and
development and office facilities throughout the world. Snap-on believes that its facilities currently in use are suitable and
have adequate capacity to meet its present and foreseeable future demand. Snap-on’s facilities in the United States occupy
approximately 3.4 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 4.5 million square feet, of which
approximately 73% is owned. Certain Snap-on facilities are leased through operating and capital lease agreements. See
Note 15 to the Consolidated Financial Statements for information on the company’s operating and capital leases. Snap-on
management continually monitors the company’s capacity needs and makes adjustments as dictated by market and other
conditions.
20
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 2017 year end:
Location
Principal Property Use
Owned/Leased
Segment*
U.S. Locations:
Elkmont, Alabama
Conway, Arkansas
City of Industry, California
Poway, California
San Jose, California
Columbus, Georgia
Crystal Lake, Illinois
Libertyville, Illinois
Algona, Iowa
Louisville, Kentucky
Olive Branch, Mississippi
Carson City, Nevada
Murphy, North Carolina
Richfield, Ohio
Robesonia, Pennsylvania
Elizabethton, Tennessee
Kenosha, Wisconsin
Milwaukee, Wisconsin
Non-U.S. Locations:
Santo Tome, Argentina
New South Wales, Australia
Minsk, Belarus
Santa Bárbara d'Oeste, Brazil
Calgary, Canada
Mississauga, Canada
Beijing, China
Kunshan, China
Xiaoshan, China
Banbury, England
Bramley, England
Kettering, England
Sopron, Hungary
Correggio, Italy
Tokyo, Japan
Helmond, Netherlands
Vila do Conde, Portugal
Irun, Spain
Placencia, Spain
Vitoria, Spain
Bollnäs, Sweden
Edsbyn, Sweden
Kungsör, Sweden
Lidköping, Sweden
Manufacturing
Manufacturing and distribution
Manufacturing
Software development
Software development
Distribution
Distribution
Financial services
Manufacturing and distribution
Manufacturing and distribution
Distribution
Distribution
Manufacturing and distribution
Software development
Distribution
Manufacturing
Distribution and corporate
Manufacturing
Manufacturing
Distribution and financial services
Manufacturing
Manufacturing and distribution
Distribution
Distribution
Manufacturing and distribution
Manufacturing
Manufacturing
Manufacturing and distribution
Manufacturing
Distribution and financial services
Manufacturing
Manufacturing
Distribution
Distribution
Manufacturing
Manufacturing
Manufacturing
Manufacturing and distribution
Manufacturing
Manufacturing
Manufacturing and distribution
Manufacturing
Owned
Owned
Leased
Leased
Leased
Owned
Owned and leased
Leased
Owned
Leased
Owned
Owned and leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Leased
Leased
Leased
Owned
Owned
Owned
Owned
Owned and leased
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
SOT
RS&I
C&I
RS&I
RS&I
C&I
SOT
FS
SOT
RS&I
SOT
SOT
C&I
RS&I
SOT
SOT
SOT, C&I, RS&I
SOT
C&I
SOT, FS
C&I
RS&I
SOT
SOT, RS&I
C&I
C&I
C&I
C&I
C&I
SOT, C&I, FS
RS&I
RS&I
C&I
C&I
C&I
C&I
C&I
C&I
C&I
C&I
RS&I
C&I
* Segment abbreviations:
C&I – Commercial & Industrial Group
SOT – Snap-on Tools Group
RS&I – Repair Systems & Information Group
FS – Financial Services
2017 ANNUAL REPORT
21
Item 3: Legal Proceedings
Snap-on is involved in various legal matters that are being litigated and/or settled in the ordinary course of business. Although
it is not possible to predict the outcome of these legal matters, management believes that the results of these legal matters will
not have a material impact on Snap-on’s consolidated financial position, results of operations or cash flows.
Item 4: Mine Safety Disclosures
Not applicable.
PART II
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Snap-on had 56,690,249 shares of common stock outstanding as of 2017 year end. Snap-on’s stock is listed on the New
York Stock Exchange under the ticker symbol “SNA.” At February 9, 2018, there were 4,884 registered holders of Snap-on
common stock.
The high and low closing prices of Snap-on’s common stock during each fiscal quarter for the last two years were as follows:
Common Stock High/Low Prices
2017
2016
Quarter
First
Second
Third
Fourth
High
$ 181.53
175.26
159.02
175.88
Low
$ 164.91
153.24
141.51
147.90
High
$ 168.53
164.39
162.70
176.20
Low
$ 135.41
148.03
146.76
145.97
Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Quarterly dividends
in 2017 were $0.82 per share in the fourth quarter and $0.71 per share in each of the first three quarters ($2.95 per share
for the year). Quarterly dividends in 2016 were $0.71 per share in the fourth quarter and $0.61 per share in each of the first
three quarters ($2.54 per share for the year). Cash dividends paid in 2017 and 2016 totaled $169.4 million and $147.5
million, respectively. Snap-on’s Board of Directors (the “Board”) monitors and evaluates the company’s dividend practice
quarterly and the Board may elect to increase, decrease or not pay a dividend on Snap-on common stock based upon the
company’s financial condition, results of operations, cash requirements and future prospects of Snap-on and other factors
deemed relevant by the Board.
See Note 13 to the Consolidated Financial Statements for information on securities authorized for issuance under equity
compensation plans.
22
SNAP-ON INCORPORATED
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 2017, all of which were purchased pursuant to the Board’s authorizations that the company
has publicly announced. Snap-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.
Period
10/01/17 to 10/28/17
10/29/17 to 11/25/17
11/26/17 to 12/30/17
Shares
purchased
80,000
330,000
62,000
Average
price
per share
$160.86
$157.89
$166.34
Shares purchased as
part of publicly
announced plans or
programs
80,000
330,000
62,000
Approximate
value of shares
that may yet be
purchased under
publicly
announced plans
or programs*
$427.2 million
$375.9 million
$390.7 million
Total/Average
472,000
$159.50
472,000
N/A
N/A: Not applicable
* Subject to further adjustment pursuant to the 1996 Authorization described below, as of December 30, 2017, the approximate value of shares that may yet
be purchased pursuant to the two outstanding Board authorizations discussed below is $390.7 million.
(cid:120)
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”). 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. 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. The 1996 Authorization will expire when terminated by the Board. When calculating the approximate value of shares that the company
may yet purchase under the 1996 Authorization, the company assumed a price of $158.45, $159.70 and $174.30 per share of common stock as of
the end of the fiscal 2017 months ended October 28, 2017, November 25, 2017, and December 30, 2017, respectively.
(cid:120)
In 2017, the Board authorized the repurchase of an aggregate of up to $500 million of the company’s common stock (“the 2017 Authorization”).
The 2017 Authorization will expire when the aggregate repurchase price limit is met, unless terminated earlier by the Board.
2017 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.
(“Citibank”) during the fourth quarter of 2017 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. The company’s stock-based deferred compensation liabilities, which are impacted by changes in the
company’s stock price, increase as the company’s stock price rises and decrease as the company’s stock price declines.
Pursuant to the Agreement, Citibank may purchase or sell shares of the company’s common stock (for Citibank’s account)
in the market or in privately negotiated transactions. The Agreement has no stated expiration date and does not provide for
Snap-on to purchase or repurchase its shares.
Citibank Sales of Snap-on Stock
Period
Shares sold
10/01/17 to 10/28/17
10/29/17 to 11/25/17
11/26/17 to 12/30/17
Total/Average
–
–
18,600
18,600
Average
price
per share
–
–
$ 167.53
$ 167.53
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, 2012,
assuming that dividends were reinvested. The graph compares Snap-on’s performance to that of the Standard & Poor’s 500
Industrials Index (“S&P 500 Industrials”) and Standard & Poor’s 500 Stock Index (“S&P 500”).
Snap-on Incorporated Total Shareholder Return (1)
SNAP-ON INCORPORATED
S&P 500 Industrials
S&P 500
250
200
150
100
S
R
A
L
L
O
D
50
2012
2013
2014
2015
2016
2017
Fiscal Year Ended (2)
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
$
Snap-on
Incorporated
100.00
141.06
178.82
227.32
230.82
239.25
$
S&P 500
Industrials
100.00
140.68
154.50
150.59
178.99
216.64
$
S&P 500
100.00
132.39
150.51
152.59
170.84
208.14
(1) Assumes $100 was invested on December 31, 2012, and that dividends were reinvested quarterly.
(2) 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.
2017 ANNUAL REPORT
25
Item 6: Selected Financial Data
The selected financial data presented below has been derived from, and should be read in conjunction with, the respective
historical consolidated financial statements of the company, including the notes thereto, and “Part II, Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Five-year Data
(Amounts in millions, except per share data)
Results of Operations
Net sales
Gross profit
Operating expenses
Operating earnings before financial services
Financial services revenue
Financial services expenses
Operating earnings from financial services
Operating earnings
Interest expense
Earnings before income taxes and equity earnings
Income tax expense
Earnings before equity earnings
Equity earnings, net of tax
Net earnings
Net earnings attributable to noncontrolling interests
Net earnings attributable to Snap-on
Financial Position
Cash and cash equivalents
Trade and other accounts receivable – net
Finance receivables – net (current)
Contract receivables – net (current)
Inventories – net
Property and equipment – net
Long-term finance receivables – net
Long-term contract receivables – net
Total assets
Notes payable and current maturities of
long-term debt
Accounts payable
Long-term debt
Total debt
Total shareholders’ equity attributable to Snap-on
Common Share Summary
Weighted-average shares outstanding – diluted
Net earnings per share attributable to Snap-on:
Basic
Diluted
Cash dividends paid per share
Shareholders’ equity per basic share
2017
2016
2015
2014
2013
$ 3,686.9
1,824.9
1,160.9
664.0
313.4
95.9
217.5
881.5
52.4
821.9
250.9
571.0
1.2
572.2
(14.5)
557.7
$
$
92.0
675.6
505.4
96.8
638.8
484.4
1,039.2
322.6
5,249.1
433.2
178.2
753.6
1,186.8
2,953.9
58.6
9.72
9.52
2.95
51.46
$ 3,430.4
1,709.6
1,054.1
655.5
281.4
82.7
198.7
854.2
52.2
801.4
244.3
557.1
2.5
559.6
(13.2)
546.4
$
$
77.6
598.8
472.5
88.1
530.5
425.2
934.5
286.7
4,723.2
301.4
170.9
708.8
1,010.2
2,617.2
59.4
9.40
9.20
2.54
45.05
$ 3,352.8
1,648.3
1,053.7
594.6
240.3
70.1
170.2
764.8
51.9
710.5
221.2
489.3
1.3
490.6
(11.9)
478.7
$
$
92.8
562.5
447.3
82.1
497.8
413.5
772.7
266.6
4,331.1
18.4
148.3
861.7
880.1
2,412.7
59.1
8.24
8.10
2.20
41.53
$ 3,277.7
1,584.3
1,048.7
535.6
214.9
65.8
149.1
684.7
52.9
630.9
199.5
431.4
0.7
432.1
(10.2)
421.9
$
$
132.9
550.8
402.4
74.5
475.5
404.5
650.5
242.0
4,162.0
56.6
145.0
862.7
919.3
2,207.8
59.1
7.26
7.14
1.85
38.00
$ 3,056.5
1,472.9
1,012.4
460.5
181.0
55.3
125.7
586.2
56.1
526.2
166.7
359.5
0.2
359.7
(9.4)
350.3
$
$
217.6
531.6
374.6
68.4
434.4
392.5
560.6
217.1
3,994.5
113.1
155.6
858.9
972.0
2,113.2
59.1
6.02
5.93
1.58
36.31
26
SNAP-ON INCORPORATED
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management Overview
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”), excluding acquisition-related sales and the impact of foreign currency translation.
Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth
from the company’s existing businesses as a result of increased output, customer base and geographic expansion, new
product development and/or pricing, and excludes sales contributions from acquired operations the company did not own
as of the comparable prior-year reporting period. The company’s organic sales disclosures also exclude the effects of
foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business
trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it
provides them with useful information to aid in identifying underlying growth trends in our businesses and facilitating
comparisons of our sales performance with prior periods.
We believe our operating results in 2017 demonstrate Snap-on’s continued progress in providing repeatability and reliability
to a wide range of professional customers performing critical tasks in workplaces of consequence. Leveraging capabilities
already demonstrated in the automotive repair arena, our “coherent growth” strategy focuses on developing and expanding
our professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other
areas, including in critical industries, where the cost and penalties for failure can be high.
We also believe our 2017 operating results provide continued evidence that Snap-on’s value proposition of making work
easier for serious professionals in workplaces of consequence is an ongoing strength as we move forward along our
runways for coherent growth:
(cid:120) Enhancing the franchise network, where we continued to focus on helping our franchisees extend their reach
through innovative selling processes and productivity initiatives that break the traditional time and space barriers
inherent in a mobile van;
(cid:120) Expanding in the vehicle repair garage, where we continued to make progress in connecting with customers and
translating the resulting insights into innovation that solves specific challenges in the repair facility;
(cid:120) Further extending in critical industries, where we continued to grow our lines of products customized for specific
industries, including through acquisitions (as discussed below); and
(cid:120) Building in emerging markets, where we continued to build manufacturing capacity, focused product lines and
distribution capability.
Our strategic priorities and plans for 2018 will continue 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”).
We expect to continue to deploy these processes in our existing operations as well as into our newly acquired businesses.
Snap-on’s RCI initiatives employ a structured set of tools and processes across multiple businesses and geographies
intended to eliminate waste and improve operations. Savings from Snap-on’s RCI initiatives reflect benefits from a wide
variety of ongoing efficiency, productivity and process improvements, including savings generated from product design cost
reductions, improved manufacturing line set-up and change-over practices, lower-cost sourcing initiatives and facility
consolidations. Unless individually significant, it is not practicable to disclose each RCI activity that generated savings
and/or segregate RCI savings embedded in sales volume increases.
Our global financial services operations continue to serve a significant strategic role in offering financing options to our
franchisees, to their customers, and to customers in other parts of our business. We expect that our global financial services
business, which includes both Snap-on Credit LLC (“SOC”) in the United States and our other international finance
subsidiaries, will continue to be a meaningful contributor to our operating earnings going forward.
Snap-on has significant international operations and is subject to risks inherent with foreign operations, including foreign
currency translation fluctuations.
2017 ANNUAL REPORT
27
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Recent Acquisitions
On July 28, 2017, Snap-on acquired Torque Control Specialists Pty Ltd (“TCS”) for a cash purchase price of $3.6 million
(or $3.5 million, net of cash acquired). TCS, based in Adelaide, Australia, distributes a full range of torque products,
including wrenches, multipliers and calibrators, for use in critical industries. The acquisition of TCS enhanced and expanded
Snap-on’s capabilities in providing solutions that address torque requirements, which are increasingly essential to critical
mechanical performance. For segment reporting purposes, the results of operations and assets of TCS have been included
in the Commercial & Industrial Group since the acquisition date.
On May 4, 2017, Snap-on acquired Norbar Torque Tools Holdings Limited, along with its U.S. and Chinese joint ventures
(“Norbar”), for a cash purchase price of $71.6 million (or $69.9 million, net of cash acquired). Norbar, based in Banbury,
U.K., designs and manufactures a full range of torque products, including wrenches, multipliers and calibrators, for use in
critical industries. The acquisition of Norbar enhanced and expanded Snap-on’s capabilities in providing solutions that
address torque requirements. For segment reporting purposes, the results of operations and assets of Norbar have been
included in the Commercial & Industrial Group since the acquisition date.
On January 30, 2017, Snap-on acquired BTC Global Limited (“BTC”) for a cash purchase price of $9.2 million. BTC, based
in Crewe, U.K., designs and implements automotive vehicle inspection and management software for original equipment
manufacturer (“OEM”) franchise repair shops. The acquisition of BTC enhanced Snap-on’s capabilities to grow enterprise
revenues and add increased productivity for repair workshops. For segment reporting purposes, the results of operations
and assets of BTC have been included in the Repair Systems & Information Group since the acquisition date.
On November 16, 2016, Snap-on acquired Ryeson Corporation (d/b/a Sturtevant Richmont) for a cash purchase price of
$13.0 million (or $12.6 million, net of cash acquired). Sturtevant Richmont, based in Carol Stream, Illinois, designs,
manufactures and distributes mechanical and electronic torque wrenches as well as wireless torque error proofing systems
for a variety of industrial applications. The acquisition of Sturtevant Richmont enhanced and expanded Snap-on’s
capabilities in providing solutions that address torque requirements. For segment reporting purposes, the results of
operations and assets of Sturtevant Richmont have been included in the Commercial & Industrial Group since the
acquisition date.
On October 31, 2016, Snap-on acquired Car-O-Liner Holding AB (“Car-O-Liner”) for a cash purchase price of $152.0 million
(or $148.1 million, net of cash acquired). Car-O-Liner, based in Gothenburg, Sweden, designs and manufactures collision
repair equipment, and information and truck alignment systems. The acquisition of Car-O-Liner complemented and
increased Snap-on’s existing equipment and repair and service information product offerings, broadened its established
capabilities in serving vehicle repair facilities and further expanded the company’s presence with repair shop owners and
managers. For segment reporting purposes, substantially all of Car-O-Liner’s results of operations and assets have been
included in the Repair Systems & Information Group since the acquisition date, with the remaining portions included in the
Commercial & Industrial Group.
On July 27, 2015, Snap-on acquired the assets of Ecotechnics S.p.A. (“Ecotechnics”) for a cash purchase price of $11.8
million. Ecotechnics, based in Sesto Fiorentino, Italy, designs and manufactures vehicle air conditioning service equipment
for OEM dealerships and the automotive aftermarket worldwide. The acquisition of the Ecotechnics product line
complemented and increased Snap-on’s existing equipment product offering for OEM dealerships and independent
automotive repair shops, broadened its established capabilities in serving vehicle repair facilities, and expanded the
company’s presence with repair shop owners and managers. For segment reporting purposes, the results of operations
and assets of Ecotechnics have been included in the Repair Systems & Information Group since the acquisition date.
Pro forma financial information has not been presented for any of these acquisitions as the net effects, individually and
collectively, were neither significant nor material to Snap-on’s results of operations or financial position.
28
SNAP-ON INCORPORATED
Consolidated net sales of $3,686.9 million in 2017 increased $256.5 million, or 7.5%, from 2016 levels, reflecting a $115.0
million, or 3.4%, increase in organic sales (a non-GAAP financial measure that excludes acquisition-related sales and the
impact of foreign currency translation) and $141.5 million of acquisition-related sales. Foreign currency translation had no
effect on net sales in 2017.
Operating earnings before financial services of $664.0 million in 2017, including $8.6 million of unfavorable foreign currency
effects, increased $8.5 million, or 1.3%, as compared to $655.5 million last year. Fiscal 2017 results included a $30.9
million charge related to a judgment in a patent-related litigation matter and a $15.0 million charge related to a judgment in
an employment-related litigation matter brought by an individual (collectively, the “legal matters”); both judgments are being
appealed. The company can provide no assurance as to the results of these appeals. As a percentage of net sales,
operating earnings before financial services of 18.0% in 2017 compared to 19.1% last year.
Operating earnings of $881.5 million in 2017, including $45.9 million of expense related to the legal matters and $9.0 million
of unfavorable foreign currency effects, increased $27.3 million, or 3.2%, from $854.2 million last year. As a percentage of
revenues (net sales plus financial services revenue), operating earnings of 22.0% in 2017 compared to 23.0% last year.
In 2017, net earnings attributable to Snap-on were $557.7 million, or $9.52 per diluted share, including $28.4 million, or
$0.48 per diluted share, for the after-tax expense related to the legal matters, and $7.0 million, or $0.12 per diluted share,
of tax expense as a result of the implementation of “H.R.1”, formerly known as the U.S. Tax Cuts and Jobs Act (the “Tax
Act”). Net earnings attributable to Snap-on Incorporated in 2016 were $546.4 million or $9.20 per diluted share.
Impact of the Tax Act
On December 22, 2017, the U.S. government passed the Tax Act. The Tax Act makes broad and complex changes to the
U.S. tax code, including, but not limited to: (i) reducing the future U.S. federal corporate tax rate from 35 percent to 21
percent; (ii) requiring companies to pay a one-time transition tax on certain unremitted earnings of foreign subsidiaries; and
(iii) bonus depreciation that will allow for full expensing of qualified property.
The Tax Act also established new tax laws that will affect 2018, including, but not limited to: (i) the reduction of the U.S.
federal corporate tax rate discussed above; (ii) a general elimination of U.S. federal income taxes on dividends from foreign
subsidiaries; (iii) a new provision designed to tax global intangible low-taxed income (“GILTI”); (iv) the repeal of the domestic
production activity deductions; (v) limitations on the deductibility of certain executive compensation; (vi) limitations on the
use of foreign tax credits to reduce the U.S. income tax liability; and (vii) a new provision that allows a domestic corporation
an immediate deduction for a portion of its foreign derived intangible income (“FDII”).
The Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on
accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one
year from the Tax Act enactment date for companies to complete the related accounting under ASC 740, Accounting for
Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax
Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for a certain income
tax effect of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate
in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements,
it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the
enactment of the Tax Act.
2017 ANNUAL REPORT
29
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
The company’s accounting for certain elements of the Tax Act is incomplete. However, the company was able to make
reasonable estimates of the effects and, therefore, recorded provisional estimates for these items. In connection with its
initial analysis of the impact of the Tax Act, the company has recorded a provisional discrete net tax expense of $7.0 million
in the period ended December 30, 2017. This provisional estimate consists of a net expense of $13.7 million for the one-
time transition tax and a net benefit of $6.7 million related to revaluation of deferred tax assets and liabilities, caused by the
new lower corporate tax rate. To determine the transition tax, the company must determine the amount of post-1986
accumulated earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such
earnings. While the company was able to make a reasonable estimate of the transition tax, it is continuing to gather
additional information to more precisely compute the final amount. Likewise, while the company was able to make a
reasonable estimate of the impact of the reduction to the corporate tax rate, it may be affected by other analyses related to
the Tax Act, including, but not limited to, the state tax effect of adjustments made to federal temporary differences. Due to
the complexity of the new GILTI tax rules, the company is continuing to evaluate this provision of the Tax Act and the
application of ASC 740. Under GAAP, the company is allowed to make an accounting policy choice to either: (1) treat taxes
due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period
cost method”); or (2) factor in such amounts into a company’s measurement of its deferred taxes (the “deferred method”).
The company’s selection of an accounting policy with respect to the new GILTI tax rules is dependent on additional analysis
and potential future modifications to existing structure, which are not currently known. Accordingly, the company has not
made any adjustments related to potential GILTI tax in our financial statements and have not made a policy decision
regarding whether to record deferred taxes on GILTI. The company will continue to analyze the full effects of the Tax Act
on its financial statements. The impact of the Tax Act may differ from the current estimate, possibly materially, due to
changes in interpretations and assumptions the company has made, future guidance that may be issued and actions the
company may take as a result of the law.
The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial
customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation
and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels.
Segment net sales of $1,265.0 million in 2017 increased $116.7 million, or 10.2%, from 2016 levels, reflecting a $52.0 million,
or 4.5%, organic sales gain and $65.5 million of acquisition-related sales, partially offset by $0.8 million of unfavorable foreign
currency translation. The organic sales increase includes higher sales to customers in critical industries and in the segment’s
European-based hand tools business, partially offset by lower sales in the segment’s power tools operation. Operating
earnings of $185.3 million in 2017 increased $17.3 million, or 10.3%, from 2016 levels, primarily due to increased organic sales
volume, acquisitions, and $0.4 million of favorable foreign currency effects.
The Commercial & Industrial Group intends to continue building on the following strategic priorities in 2018:
(cid:120) Continuing to invest in emerging market growth initiatives;
(cid:120) Expanding our business with existing customers and reaching new customers in critical industries and other market
segments;
(cid:120) Broadening our product offering and engineered solutions designed particularly for critical industry segments;
(cid:120)
(cid:120)
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 solutions; and
(cid:120) Continuing to reduce structural and operating costs through RCI initiatives.
The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through
the company’s worldwide mobile tool distribution channel. Segment net sales of $1,625.1 million in 2017 decreased $8.8
million, or 0.5%, from 2016 levels, reflecting a $6.9 million, or 0.4%, organic sales decline and $1.9 million of unfavorable
foreign currency translation. The organic sales decrease includes a decline in the company’s U.S. franchise operations
that was partially offset by higher sales in the international franchise operations. Operating earnings of $274.5 million in
2017 decreased $6.6 million, or 2.3%, from 2016 levels primarily due to $7.9 million of unfavorable foreign currency effects,
partially offset by lower operating expenses.
30
SNAP-ON INCORPORATED
Despite the net sales challenges in 2017, the Snap-on Tools Group remained focused on its fundamental, strategic
initiatives to strengthen the franchise network and enhance franchisee profitability. In 2018, the Snap-on Tools Group
intends to continue these initiatives, with specific focus on the following:
(cid:120) Continuing to improve franchisee satisfaction, productivity, profitability and commercial health;
(cid:120) Developing new programs and products to expand market coverage, reaching new technicians and increasing
(cid:120)
(cid:120)
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.
By focusing on these areas, we believe that Snap-on, as well as its franchisees, will have the opportunity to continue to
serve customers more effectively, more profitably and with improved satisfaction.
The Repair Systems & Information Group consists of business operations serving other professional vehicle repair
customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships through direct and
distributor channels. Segment net sales of $1,347.2 million in 2017 increased $167.3 million, or 14.2%, from 2016 levels,
reflecting an $89.6 million, or 7.6%, organic sales gain, $76.0 million of acquisition-related sales and $1.7 million of favorable
foreign currency translation. The organic sales increase primarily reflects higher sales to OEM dealerships, as well as
increased sales to independent repair shop owners and managers, including higher sales of diagnostic and repair information
products, and increased sales of undercar equipment. Operating earnings of $333.8 million in 2017 increased $36.0 million,
or 12.1%, from 2016 levels, primarily due to higher sales, including acquisition-related sales, and savings from RCI initiatives,
partially offset by $1.1 million of unfavorable foreign currency effects.
The Repair Systems & Information Group intends to focus on the following strategic priorities in 2018:
(cid:120) Expanding the product offering with new products and services, thereby providing more to sell to repair shop owners
and managers;
(cid:120) Continuing software and hardware upgrades to further improve functionality, performance and efficiency;
(cid:120) Leveraging integration of software solutions;
(cid:120) Continuing productivity advancements through RCI initiatives and leveraging of resources; and
(cid:120)
Increasing penetration in geographic markets, including emerging markets.
Financial Services revenue was $313.4 million in 2017 and $281.4 million in 2016; originations of $1,072.0 million in 2017
decreased $3.7 million, or 0.3%, from 2016 levels. In 2017, operating earnings from financial services of $217.5 million,
including $0.4 million of unfavorable foreign currency effects, increased $18.8 million, or 9.5%, from $198.7 million last year.
In recent years, Snap-on has steadily grown its financial services portfolio by providing financing for new finance and
contract receivables originated by our global financial services operations.
Financial Services intends to focus on the following strategic priorities in 2018:
(cid:120) Delivering financial products and services that attract and sustain profitable franchisees and support Snap-on’s
(cid:120)
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
(cid:120) Maintaining healthy portfolio performance levels.
Cash Flows
Net cash provided by operating activities of $608.5 million in 2017 increased $32.4 million from $576.1 million in 2016. The
$32.4 million increase is primarily due to $12.6 million of higher net earnings and $14.9 million of cash proceeds from the
settlement of a treasury lock. Net cash provided by operating activities was $507.2 million in 2015.
2017 ANNUAL REPORT
31
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Net cash used by investing activities of $341.4 million in 2017 included additions to finance receivables of $892.0 million,
partially offset by collections of $712.7 million, as well as $82.9 million (net of $1.8 million of cash acquired) for the
acquisitions of BTC, Norbar, and TCS, and working capital adjustments for the Car-O-Liner and Sturtevant Richmont
acquisitions. Net cash used by investing activities of $473.4 million in 2016 included additions to finance receivables of
$915.0 million, partially offset by collections of $671.7 million, as well as, on a preliminary basis, a total of $160.4 million
(net of $4.3 million of cash acquired) for the acquisitions of Car-O-Liner and Sturtevant Richmont. Net cash used by
investing activities of $306.4 million in 2015 included additions to finance receivables of $844.2 million, partially offset by
collections of $624.8 million, as well as $11.8 million for the acquisition of Ecotechnics. Capital expenditures in 2017, 2016
and 2015 totaled $82.0 million, $74.3 million and $80.4 million, respectively. Capital expenditures in all three years included
investments to support the company’s execution of its strategic growth initiatives and Value Creation Processes around
safety, quality, customer connection, innovation and savings from the company’s RCI initiatives.
Net cash used by financing activities of $256.1 million in 2017 included the January 2017 repayment of $150 million of 5.5%
unsecured notes upon maturity (the “2017 Notes”). These amounts were partially offset by Snap-on’s sale, on February
15, 2017, of $300 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”) at a discount, from
which Snap-on received $297.8 million of net proceeds, reflecting $1.9 million of transaction costs. Net cash used by
financing activities in 2017 also included $287.9 million for the repurchase of 1,820,000 shares of Snap-on’s common stock
and $169.4 million for dividend payments to shareholders, partially offset by $46.2 million of proceeds from stock purchase
and option plan exercises and $30.6 million of proceeds from a net increase in notes payable and other short-term
borrowings. Net cash used by financing activities of $116.0 million in 2016 included $147.5 million for dividend payments
to shareholders and $120.4 million for the repurchase of 758,000 shares of Snap-on’s common stock, partially offset by
$134.2 million of proceeds from a net increase in notes payable and other short-term borrowings and $41.8 million of
proceeds from stock purchase and option plan exercises. Net cash used by financing activities of $236.7 million in 2015
included $127.9 million for dividend payments to shareholders, $110.4 million for the repurchase of 723,000 shares of
Snap-on’s common stock and $34.0 million from a net decrease in notes payable and other short-term borrowings, partially
offset by $41.6 million of proceeds from stock purchase and option plan exercises.
Fiscal Year
Snap-on’s fiscal year ends on the Saturday that is on or nearest to December 31. Unless otherwise indicated, references
in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “fiscal 2017” or “2017”
refer to the fiscal year ended December 30, 2017; references to “fiscal 2016” or “2016” refer to the fiscal year ended
December 31, 2016; and references to “fiscal 2015” or “2015” refer to the fiscal year ended January 2, 2016. References
in this document to 2017, 2016 and 2015 year end refer to December 30, 2017, December 31, 2016, and January 2, 2016,
respectively.
Snap-on’s 2017, 2016 and 2015 fiscal years each contained 52 weeks of operating results.
32
SNAP-ON INCORPORATED
Results of Operations
2017 vs. 2016
Results of operations for 2017 and 2016 are as follows:
(Amounts in millions)
Net sales
Cost of goods sold
Gross profit
Operating expenses
2017
2016
Change
$ 3,686.9
100.0%
$ 3,430.4
100.0%
$ 256.5
7.5%
(1,862.0)
-50.5%
(1,720.8)
-50.2%
(141.2)
-8.2%
1,824.9
49.5%
1,709.6
49.8%
115.3
6.7%
(1,160.9)
-31.5%
(1,054.1)
-30.7%
(106.8)
-10.1%
Operating earnings before financial services
664.0
18.0%
655.5
19.1%
8.5
1.3%
Financial services revenue
Financial services expenses
313.4
100.0%
281.4
100.0%
32.0
11.4%
(95.9)
-30.6%
(82.7)
-29.4%
(13.2)
-16.0%
Operating earnings from financial services
217.5
69.4%
198.7
70.6%
18.8
9.5%
Operating earnings
Interest expense
Other income (expense) – net
881.5
22.0%
854.2 23.0%
27.3
3.2%
(52.4)
-1.3%
(52.2)
-1.4%
(7.2)
-0.2%
(0.6)
–
(0.2)
(6.6)
-0.4%
NM
Earnings before income taxes and equity earnings
821.9
20.5%
801.4
21.6%
20.5
2.6%
Income tax expense
(250.9)
-6.2%
(244.3)
-6.6%
(6.6)
-2.7%
Earnings before equity earnings
571.0
14.3%
557.1
15.0%
13.9
2.5%
Equity earnings, net of tax
1.2
–
2.5
0.1%
(1.3)
NM
Net earnings
572.2
14.3%
559.6
15.1%
12.6
2.3%
Net earnings attributable to noncontrolling interests
(14.5)
-0.4%
(13.2)
-0.4%
(1.3)
-9.8%
Net earnings attributable to Snap-on Inc.
$
557.7
13.9%
$
546.4
14.7%
$ 11.3
2.1%
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.
Net sales of $3,686.9 million in 2017 increased $256.5 million, or 7.5%, from 2016 levels, reflecting a $115.0 million, or
3.4%, organic sales gain and $141.5 million of acquisition-related sales. Foreign currency translation had no effect on net
sales in 2017.
Gross profit of $1,824.9 million in 2017 compared to $1,709.6 million last year. Gross margin (gross profit as a percentage
of net sales) of 49.5% in 2017 decreased 30 basis points (100 basis points (“bps”) equals 1.0 percent) from 49.8% last year
primarily due to 20 bps of unfavorable foreign currency effects and a 20 bps impact from acquisitions, partially offset by RCI
savings. Restructuring costs included in gross profit were $0.8 million in 2016.
2017 ANNUAL REPORT
33
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Operating expenses of $1,160.9 million in 2017 compared to $1,054.1 million last year, as 2017 included $45.9 million of
charges related to the legal matters. The operating expense margin (operating expenses as a percentage of net sales) of
31.5% in 2017 increased 80 bps from 30.7% last year as 130 bps for the legal matters and 30 bps of operating expenses
from acquisitions were partially offset by benefits from sales volume leverage. Restructuring costs included in operating
expenses were $0.1 million in 2016.
Operating earnings before financial services of $664.0 million in 2017, including $45.9 million of expense related to the legal
matters and $8.6 million of unfavorable foreign currency effects, increased $8.5 million, or 1.3%, as compared to $655.5
million last year. As a percentage of net sales, operating earnings before financial services of 18.0%, including 130 bps
impact from the legal matters, compared to 19.1% last year.
Financial services revenue of $313.4 million in 2017 compared to revenue of $281.4 million last year. Financial services
operating earnings of $217.5 million in 2017 increased $18.8 million, or 9.5%, as compared to $198.7 million last year,
including $0.4 million of unfavorable foreign currency effects. The year-over-year increases in both revenue and operating
earnings primarily reflect continued growth of the company’s financial services portfolio.
Operating earnings of $881.5 million in 2017, including $45.9 million of expense related to the legal matters and $9.0 million
of unfavorable foreign currency effects, increased $27.3 million, or 3.2%, from $854.2 million last year. As a percentage of
revenues, operating earnings of 22.0% compared to 23.0% last year.
Interest expense of $52.4 million in 2017 increased $0.2 million from $52.2 million last year. See Note 9 to the Consolidated
Financial Statements for information on Snap-on’s debt and credit facilities.
Other income (expense) – net was expense of $7.2 million and $0.6 million in 2017 and 2016, respectively. Other income
(expense) – net reflects net losses and gains associated with hedging and currency exchange rate transactions, and interest
income. See Note 16 to the Consolidated Financial Statements for information on other income (expense) – net.
Snap-on’s effective income tax rate on earnings attributable to Snap-on was 31.1% in 2017, including a 0.4% benefit from
the legal matters, compared to 31.0% in 2016. The 2017 tax rate includes a $7.0 million, or 90 bps, impact from the
implementation of the Tax Act, including the estimated transition tax of $13.7 million on previously unremitted foreign
earnings, partially offset by a $6.7 million estimated tax benefit related to revaluation of deferred tax assets and liabilities.
See Note 8 to the Consolidated Financial Statements for information on income taxes.
Net earnings attributable to Snap-on of $557.7 million, or $9.52 per diluted share, in 2017, including $28.4 million, or $0.48
per diluted share, for the after-tax expense related to the legal matters, and $7.0 million, or $0.12 per diluted share related
to the Tax Act, increased $11.3 million, or $0.32 per diluted share, from 2016 levels. Net earnings attributable to Snap-on
in 2016 were $546.4 million or $9.20 per diluted share.
Segment Results
Snap-on’s business segments are based on the organization structure used by management for making operating and
investment decisions and for assessing performance. Snap-on’s reportable business segments are: (i) the Commercial &
Industrial Group; (ii) the Snap-on Tools Group; (iii) the Repair Systems & Information Group; and (iv) Financial Services.
The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial
customers worldwide, including customers in the aerospace, natural resources, government, power generation,
transportation and technical education market segments (collectively, “critical industries”), primarily through direct and
distributor channels. The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair
technicians through the company’s worldwide mobile tool distribution channel. The 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. Financial Services
consists of the business operations of Snap-on’s finance subsidiaries.
Snap-on evaluates the performance of its operating segments based on segment revenues, including both external and
intersegment net sales, and segment operating earnings. Snap-on accounts for intersegment sales and transfers based
primarily on standard costs with reasonable mark-ups established between the segments. 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.
34
SNAP-ON INCORPORATED
Commercial & Industrial Group
(Amounts in millions)
External net sales
Intersegment net sales
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
2017
2016
Change
$
986.1
278.9
78.0%
22.0%
$
863.0
285.3
75.2%
24.8%
1,265.0
100.0%
1,148.3
100.0%
(766.9)
-60.6%
(698.3)
-60.8%
498.1
39.4%
450.0
39.2%
$ 123.1
(6.4)
116.7
(68.6)
48.1
14.3%
-2.2%
10.2%
-9.8%
10.7%
(312.8)
-24.8%
(282.0)
-24.6%
(30.8)
-10.9%
Segment operating earnings
$
185.3
14.6%
$
168.0
14.6%
$
17.3
10.3%
Segment net sales of $1,265.0 million in 2017 increased $116.7 million, or 10.2%, from 2016 levels, reflecting a $52.0
million or 4.5%, organic sales gain and $65.5 million of acquisition-related sales, partially offset by $0.8 million of unfavorable
foreign currency translation. The organic sales increase primarily includes a high single-digit gain in sales to customers in
critical industries, and a mid single-digit gain in the segment’s European-based hand tools business. These organic sales
gains were partially offset by a low single-digit decline in sales in the segment’s power tools operations.
Segment gross profit of $498.1 million in 2017 compared to $450.0 million last year. Gross margin of 39.4% in 2017
improved 20 bps from 39.2% last year primarily due to savings from RCI and other cost reduction initiatives.
Segment operating expenses of $312.8 million in 2017 compared to $282.0 million last year. The operating expense margin
of 24.8% in 2017 increased 20 bps from 24.6% last year as 40 bps of operating expenses from acquisitions and increased
costs for research and engineering activities were partially offset by benefits from sales volume leverage.
As a result of these factors, segment operating earnings of $185.3 million in 2017, including $0.4 million of favorable foreign
currency effects, increased $17.3 million from 2016 levels. Operating margin (segment operating earnings as a percentage
of segment net sales) for the Commercial & Industrial Group was 14.6% in both years.
Snap-on Tools Group
(Amounts in millions)
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
2017
2016
Change
$ 1,625.1
100.0%
$ 1,633.9
100.0%
$
(8.8)
(930.9)
-57.3%
(929.8)
-56.9%
694.2
42.7%
704.1
43.1%
(419.7)
-25.8%
(423.0)
-25.9%
(1.1)
(9.9)
3.3
Segment operating earnings
$
274.5
16.9%
$
281.1
17.2%
$
(6.6)
-0.5%
-0.1%
-1.4%
0.8%
-2.3%
Segment net sales of $1,625.1 million in 2017 decreased $8.8 million, or 0.5%, from 2016 levels, reflecting a $6.9 million,
or 0.4%, organic sales decrease and $1.9 million of unfavorable foreign currency translation. The organic sales decrease
reflects a low single-digit decline in the company’s U.S. franchise operations partially offset by a high single-digit gain in the
international franchise operations.
Segment gross profit of $694.2 million in 2017 compared to $704.1 million last year. Gross margin of 42.7% in 2017
decreased from 43.1% last year due to 40 bps of unfavorable foreign currency effects.
Segment operating expenses of $419.7 million in 2017 compared to $423.0 million last year. The operating expense margin
of 25.8% in 2017 improved 10 bps from 25.9% last year.
As a result of these factors, segment operating earnings of $274.5 million in 2017, including $7.9 million of unfavorable
foreign currency effects, decreased $6.6 million from 2016 levels. Operating margin for the Snap-on Tools Group of 16.9%
in 2017 compared to 17.2% last year.
2017 ANNUAL REPORT
35
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Repair Systems & Information Group
(Amounts in millions)
External net sales
Intersegment net sales
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
2017
2016
Change
$ 1,075.7
271.5
79.8%
20.2%
$
933.5
246.4
79.1%
20.9%
1,347.2
100.0%
1,179.9
100.0%
$ 142.2
25.1
167.3
15.2%
10.2%
14.2%
(714.6)
-53.0%
(624.4)
-52.9%
(90.2)
-14.4%
632.6
47.0%
555.5
47.1%
77.1
13.9%
(298.8)
-22.2%
(257.7)
-21.9%
(41.1)
-15.9%
Segment operating earnings
$
333.8
24.8%
$
297.8
25.2%
$
36.0
12.1%
Segment net sales of $1,347.2 million in 2017 increased $167.3 million, or 14.2%, from 2016 levels, reflecting an $89.6 million,
or 7.6%, organic sales gain, $76.0 million of acquisition-related sales and $1.7 million of favorable foreign currency translation.
The organic sales increase includes a double-digit gain in sales to OEM dealerships, a high single-digit gain in sales of
diagnostic and repair information products to independent repair shop owners and managers, and mid single-digit increases
in sales of undercar equipment.
Segment gross profit of $632.6 million in 2017 compared to $555.5 million last year. Gross margin of 47.0% in 2017 decreased
10 bps from 47.1% last year, as the impact from higher sales of lower gross margin products were partially offset by savings
from RCI initiatives and 20 bps of benefits from acquisitions. Restructuring costs included in gross profit were $0.8 million in
2016.
Segment operating expenses of $298.8 million in 2017 compared to $257.7 million last year. The operating expense margin
of 22.2% in 2017 increased 30 bps from 21.9% last year primarily due to a 120 bps impact from acquisitions, partially offset
by benefits from sales volume leverage. Restructuring costs included in operating expenses were $0.1 million in 2016.
As a result of these factors, segment operating earnings of $333.8 million in 2017, including $1.1 million of unfavorable foreign
currency effects, increased $36.0 million from 2016 levels. Operating margin for the Repair Systems & Information Group of
24.8% in 2017 compared to 25.2% last year.
Financial Services
(Amounts in millions)
2017
2016
Change
Financial services revenue
$
313.4
100.0%
$
281.4
100.0%
$ 32.0
Financial services expenses
(95.9)
-30.6%
(82.7)
-29.4%
(13.2)
Segment operating earnings
$
217.5
69.4%
$
198.7
70.6%
$ 18.8
11.4%
-16.0%
9.5%
Financial services revenue of $313.4 million in 2017 increased $32.0 million, or 11.4%, from $281.4 million last year primarily
reflecting $34.9 million of higher revenue as a result of continued growth of the company’s financial services portfolio,
partially offset by $2.9 million of decreased revenue from lower average yields on finance and contract receivables. In 2017
and 2016, the respective average yields on finance receivables were 17.9% and 18.0%, and the respective average yield
on contract receivables were 9.2% and 9.4%. Originations of $1,072.0 million in 2017 decreased $3.7 million, or 0.3%,
from 2016 levels.
Financial services expenses primarily include personnel-related and other general and administrative costs, as well as
provisions for credit losses. These expenses are generally more dependent on changes in the financial services portfolio
than they are on the revenue of the segment. Financial services expenses of $95.9 million in 2017 increased from $82.7
million last year primarily due to changes in both the provisions for credit losses and in the size of the portfolio. As a
percentage of the average financial services portfolio, financial services expenses were 5.0% and 4.9% in 2017 and 2016,
respectively.
Financial services operating earnings of $217.5 million in 2017, including $0.4 million of unfavorable foreign currency effects,
increased $18.8 million, or 9.5%, from 2016 levels.
See Note 1 and Note 3 to the Consolidated Financial Statements for further information on financial services.
36
SNAP-ON INCORPORATED
Corporate
Snap-on’s general corporate expenses in 2017 of $129.6 million increased $38.2 million from $91.4 million last year. The
year-over-year increase in general corporate expenses primarily reflects $45.9 million of expense related to the legal
matters, partially offset by lower performance-based compensation costs and lower pension expenses.
Fourth Quarter
Results of operations for the fourth quarters of 2017 and 2016 are as follows:
(Amounts in millions)
Net sales
Cost of goods sold
Gross profit
Operating expenses
Fourth Quarter
2017
2016
Change
$ 974.6
100.0%
$ 889.8
100.0%
$ 84.8
9.5%
(509.3)
-52.3%
(445.9)
-50.1%
(63.4)
-14.2%
465.3
47.7%
443.9
49.9%
21.4
4.8%
(307.6)
-31.5%
(267.8)
-30.1%
(39.8)
-14.9%
Operating earnings before financial services
157.7
16.2%
176.1
19.8%
(18.4)
-10.4%
Financial services revenue
Financial services expenses
79.9
100.0%
74.2
100.0%
5.7
7.7%
(25.5)
-31.9%
(22.6)
-30.5%
(2.9)
-12.8%
Operating earnings from financial services
54.4
68.1%
51.6
69.5%
2.8
5.4%
Operating earnings
Interest expense
212.1
20.1%
227.7
23.6%
(13.6)
-1.3%
(13.1)
-1.4%
Other income (expense) – net
(1.5)
-0.1%
(0.3)
–
Earnings before income taxes and equity earnings
197.0
18.7%
214.3
22.2%
Income tax expense
(63.8)
-6.1%
(64.9)
-6.7%
(15.6)
(0.5)
(1.2)
(17.3)
1.1
-6.9%
-3.8%
NM
-8.1%
1.7%
Earnings before equity earnings
133.2
12.6%
149.4
15.5%
(16.2)
-10.8%
Equity earnings, net of tax
–
–
0.3
–
(0.3)
NM
Net earnings
133.2
12.6%
149.7
15.5%
(16.5)
-11.0%
Net earnings attributable to noncontrolling interests
(3.7)
-0.3%
(3.4)
-0.3%
(0.3)
-8.8%
Net earnings attributable to Snap-on Inc.
$
129.5
12.3%
$ 146.3
15.2%
$
(16.8)
-11.5%
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.
Net sales of $974.6 million in the fourth quarter of 2017 increased $84.8 million, or 9.5%, from 2016 levels, reflecting a
$38.9 million, or 4.3%, organic sales gain, $29.7 million of acquisition-related sales, and $16.2 million of favorable foreign
currency translation.
Gross profit of $465.3 million in the fourth quarter of 2017 compared to $443.9 million last year. Gross margin of 47.7% in
the quarter declined 220 bps from 49.9% last year primarily due to higher sales of lower gross margin products, 60 bps of
lower gross margins on acquisition-related sales, and 20 bps of unfavorable foreign currency effects.
Operating expenses of $307.6 million in the fourth quarter of 2017 compared to $267.8 million last year, as 2017 included
a $30.9 million legal charge discussed above. The operating expense margin of 31.5% in the quarter increased 140 bps
from 30.1% last year as 320 bps related to the legal charge were partially offset by benefits from sales volume leverage
and a 40 bps benefit from operating expenses for acquisitions.
2017 ANNUAL REPORT
37
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Operating earnings before financial services of $157.7 million in the fourth quarter of 2017, including $30.9 million of
expense related to the legal charge, decreased $18.4 million, or 10.4%, as compared to $176.1 million last year. As a
percentage of net sales, operating earnings before financial services of 16.2% in the quarter, including the legal charge,
compared to 19.8% last year.
Financial services revenue of $79.9 million in the fourth quarter of 2017 compared to revenue of $74.2 million last year.
Financial services operating earnings of $54.4 million in the fourth quarter of 2017, including $0.3 million of favorable foreign
currency effects, increased $2.8 million, or 5.4%, as compared to $51.6 million last year. The year-over-year increases in
both revenue and operating earnings primarily reflect continued growth of the company’s financial services portfolio.
Operating earnings of $212.1 million in the fourth quarter of 2017, including $1.8 million of favorable foreign currency effects
and $30.9 million of expense for the legal charge, decreased $15.6 million, or 6.9%, from $227.7 million last year. As a
percentage of revenues, operating earnings of 20.1% in the quarter compared to 23.6% last year.
Interest expense of $13.6 million in the fourth quarter of 2017 increased $0.5 million from $13.1 million last year. See Note
9 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities.
Other income (expense) – net was expense of $1.5 million and $0.3 million in the respective fourth quarters of 2017 and
2016. See Note 16 to the Consolidated Financial Statements for information on other income (expense) – net.
Snap-on’s fourth quarter effective income tax rate on earnings attributable to Snap-on was 33.0%, including a 1.2% benefit
from the legal charge, in 2017 compared to 30.8% in 2016. The 2017 rate includes a $7.0 million, or 360 bps, impact related
to the implementation of the Tax Act, including the estimated transition tax of $13.7 million on previously unremitted foreign
earnings, partially offset by a $6.7 million estimated tax benefit related to revaluation of deferred tax assets and liabilities.
See Note 8 to the Consolidated Financial Statements for information on income taxes.
Net earnings attributable to Snap-on of $129.5 million, or $2.24 per diluted share, in the fourth quarter of 2017, including
$19.1 million, or $0.33 per diluted share, for the after-tax expense related to the legal charge, and $7.0 million, or $0.12 per
diluted share related to the Tax Act, decreased $16.8 million, or $0.23 per diluted share, from 2016 levels. Net earnings
attributable to Snap-on in the fourth quarter of 2016 were $146.3 million or $2.47 per diluted share.
Segment Results
Commercial & Industrial Group
(Amounts in millions)
External net sales
Intersegment net sales
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
Fourth Quarter
2017
2016
Change
$
273.2
68.5
80.0%
20.0%
$
218.5
67.8
76.3%
23.7%
341.7
100.0%
286.3
100.0%
$
54.7
0.7
55.4
25.0%
1.0%
19.4%
(207.7)
-60.8%
(170.9)
-59.7%
(36.8)
-21.5%
134.0
39.2%
115.4
40.3%
18.6
16.1%
(83.1)
-24.3%
(71.5)
-25.0%
(11.6)
-16.2%
Segment operating earnings
$
50.9
14.9%
$
43.9
15.3%
$
7.0
15.9%
Segment net sales of $341.7 million in the fourth quarter of 2017 increased $55.4 million, or 19.4%, from 2016 levels, reflecting
a $29.5 million, or 10.1%, organic sales gain, $19.1 million of acquisition-related sales and $6.8 million of favorable foreign
currency translation. The organic sales increase primarily includes double-digit gains in both sales to customers in critical
industries and the segment’s European-based hand tools business, as well as low single-digit gains in both the segment’s
power tools and Asia/Pacific operations.
38
SNAP-ON INCORPORATED
Segment gross profit of $134.0 million in the fourth quarter of 2017 compared to $115.4 million last year. Gross margin of
39.2% in the quarter declined 110 bps from 40.3% last year due to higher sales of lower gross margin products and 50 bps of
unfavorable foreign currency effects.
Segment operating expenses of $83.1 million in the fourth quarter of 2017 compared to $71.5 million last year. The
operating expense margin of 24.3% in the quarter improved 70 bps from 25.0% last year primarily due to the benefits of
sales volume leverage, partially offset by 50 bps of operating expenses from acquisitions.
As a result of these factors, segment operating earnings of $50.9 million in the fourth quarter of 2017, including $0.6 million
of unfavorable foreign currency effects, increased $7.0 million from 2016 levels. Operating margin for the Commercial &
Industrial Group of 14.9% in the fourth quarter of 2017 compared to 15.3% last year.
Snap-on Tools Group
(Amounts in millions)
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
Fourth Quarter
2017
2016
Change
$
409.2
100.0%
$
417.5
100.0%
$
(8.3)
(239.9)
-58.6%
(242.0)
-58.0%
169.3
41.4%
175.5
42.0%
2.1
(6.2)
-2.0%
0.9%
-3.5%
(102.0)
-25.0%
(102.0)
-24.4%
–
–
Segment operating earnings
$
67.3
16.4%
$
73.5
17.6%
$
(6.2)
-8.4%
Segment net sales of $409.2 million in the fourth quarter of 2017 decreased $8.3 million, or 2.0%, from 2016 levels, reflecting
a $12.6 million, or 3.0%, organic sales decline, partially offset by $4.3 million of favorable foreign currency translation. The
organic sales decrease reflects a mid single-digit decline in the company’s U.S. franchise operations, partially offset by a
mid single-digit gain in the international franchise operations.
Segment gross profit of $169.3 million in the fourth quarter of 2017 compared to $175.5 million last year. Gross margin of
41.4% in the quarter declined 60 bps from 42.0% due to the lower volume and related costs.
Segment operating expenses of $102.0 million in the fourth quarter of 2017 was unchanged from last year. The operating
expense margin of 25.0 % in the quarter increased 60 bps from 24.4% last year primarily due to the effect of lower sales.
As a result of these factors, segment operating earnings of $67.3 million in the fourth quarter of 2017, including $1.3 million of
favorable foreign currency effects, decreased $6.2 million from 2016 levels. Operating margin for the Snap-on Tools Group
of 16.4% in the fourth quarter of 2017 compared to 17.6% last year.
Repair Systems & Information Group
(Amounts in millions)
External net sales
Intersegment net sales
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
Fourth Quarter
2017
2016
Change
$
292.2
64.6
81.9%
18.1%
$
253.8
66.0
79.4%
20.6%
356.8
100.0%
319.8
100.0%
$
38.4
(1.4)
37.0
15.1%
-2.1%
11.6%
(194.8)
-54.6%
(166.8)
-52.2%
(28.0)
-16.8%
162.0
45.4%
153.0
47.8%
(72.2)
-20.2%
(70.5)
-22.0%
9.0
(1.7)
5.9%
-2.4%
8.8%
Segment operating earnings
$
89.8
25.2%
$
82.5
25.8%
$
7.3
2017 ANNUAL REPORT
39
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Segment net sales of $356.8 million in the fourth quarter of 2017 increased $37.0 million, or 11.6%, from 2016 levels,
reflecting a $20.2 million, or 6.2%, organic sales gain, $10.6 million of acquisition-related sales and $6.2 million of favorable
foreign currency translation. The organic sales increase includes a double-digit gain in sales to OEM dealerships, and a
low single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers.
Segment gross profit of $162.0 million in the fourth quarter of 2017 compared to $153.0 million last year. Gross margin of
45.4% in the quarter decreased 240 bps from 47.8% last year as a 110 bps impact from acquisitions, higher sales of lower
gross margin products, and 10 bps of unfavorable foreign currency impacts were partially offset by savings from RCI
initiatives.
Segment operating expenses of $72.2 million in the fourth quarter of 2017 compared to $70.5 million last year. The operating
expense margin of 20.2% improved 180 bps from 22.0% last year due to the higher sales volume and 80 bps of benefits
from acquisitions, partially offset by 10 bps of unfavorable foreign currency effects.
As a result of these factors, segment operating earnings of $89.8 million in the fourth quarter of 2017, including $0.8 million
of favorable foreign currency effects, increased $7.3 million from 2016 levels. Operating margin for the Repair Systems &
Information Group of 25.2% in the fourth quarter of 2017 compared to 25.8% last year.
Financial Services
Fourth Quarter
(Amounts in millions)
2017
2016
Change
Financial services revenue
$
79.9
100.0%
$
74.2
100.0%
$
5.7
7.7%
Financial services expenses
(25.5)
-31.9%
(22.6)
-30.5%
(2.9)
-12.8%
Segment operating earnings
$
54.4
68.1%
$
51.6
69.5%
$
2.8
5.4%
Financial services revenue of $79.9 million in the fourth quarter of 2017 increased $5.7 million, or 7.7%, from $74.2 million
last year primarily reflecting $7.7 million of higher revenue as a result of continued growth of the company’s financial services
portfolio, partially offset by $2.0 million of decreased revenue from lower average yields on finance and contract receivables.
In the fourth quarters of 2017 and 2016, the respective average yields on finance receivables were 17.8% and 18.2%, and
the respective average yields on contract receivables were 9.2% and 9.3%. Originations of $265.0 million in the fourth
quarter of 2017 increased $4.7 million, or 1.8%, from 2016 levels.
Financial services expenses primarily include personnel-related and other general and administrative costs, as well as
provisions for credit losses. These expenses are generally more dependent on changes in the financial services portfolio
than they are on the revenue of the segment. Financial services expenses of $25.5 million in the fourth quarter of 2017
increased from $22.6 million last year primarily due to changes in both the provisions for credit losses and in the size of the
portfolio. As a percentage of the average financial services portfolio, financial services expenses were 1.3% for both the
fourth quarters of 2017 and 2016.
Financial services operating earnings of $54.4 million in the fourth quarter of 2017, including $0.3 million of favorable foreign
currency effects, increased $2.8 million, or 5.4%, from 2016 levels.
See Note 1 and Note 3 to the Consolidated Financial Statements for further information on financial services.
Corporate
Snap-on’s fourth quarter 2017 general corporate expenses of $50.3 million increased $26.5 million from $23.8 million last
year primarily due to the $30.9 million legal charge, partially offset by lower performance-based compensation costs.
40
SNAP-ON INCORPORATED
2016 vs. 2015
Results of operations for 2016 and 2015 are as follows:
(Amounts in millions)
Net sales
Cost of goods sold
Gross profit
Operating expenses
2016
2015
Change
$ 3,430.4
100.0%
$ 3,352.8
100.0%
$ 77.6
2.3%
(1,720.8)
-50.2%
(1,704.5)
-50.8%
(16.3)
-1.0%
1,709.6
49.8%
1,648.3
49.2%
61.3
3.7%
(1,054.1)
-30.7%
(1,053.7)
-31.5%
(0.4)
–
Operating earnings before financial services
655.5
19.1%
594.6
17.7%
60.9
10.2%
Financial services revenue
Financial services expenses
281.4
100.0%
240.3
100.0%
41.1
17.1%
(82.7)
-29.4%
(70.1)
-29.2%
(12.6)
-18.0%
Operating earnings from financial services
198.7
70.6%
170.2
70.8%
28.5
16.7%
Operating earnings
Interest expense
Other income (expense) – net
854.2
23.0%
764.8 21.3%
89.4
11.7%
(52.2)
-1.4%
(51.9)
-1.4%
(0.3)
-0.6%
(0.6)
–
(2.4)
-0.1%
1.8
NM
Earnings before income taxes and equity earnings
801.4
21.6%
710.5
19.8%
90.9
12.8%
Income tax expense
(244.3)
-6.6%
(221.2)
-6.2%
(23.1)
-10.4%
Earnings before equity earnings
557.1
15.0%
489.3
13.6%
67.8
13.9%
Equity earnings, net of tax
2.5
0.1%
1.3
–
1.2
NM
Net earnings
559.6
15.1%
490.6
13.6%
69.0
14.1%
Net earnings attributable to noncontrolling interests
(13.2)
-0.4%
(11.9)
-0.3%
(1.3)
-10.9%
Net earnings attributable to Snap-on Inc.
$
546.4
14.7%
$
478.7
13.3%
$ 67.7
14.1%
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.
Net sales of $3,430.4 million in 2016 increased $77.6 million, or 2.3%, from 2015 levels, reflecting a $96.2 million, or 2.9%,
organic sales gain and $32.9 million of acquisition-related sales, partially offset by $51.5 million of unfavorable foreign
currency translation.
Gross profit of $1,709.6 million in 2016 compared to $1,648.3 million in 2015. Gross margin of 49.8% in 2016 improved 60
basis points from 49.2% in 2015 as benefits from higher sales and savings from RCI initiatives were partially offset by 20
bps of unfavorable foreign currency effects. Restructuring costs included in gross profit were $0.8 million and zero in 2016
and 2015, respectively.
Operating expenses of $1,054.1 million in 2016 compared to $1,053.7 million in 2015. The operating expense margin of
30.7% in 2016 improved 80 bps from 31.5% in 2015 primarily due to sales volume leverage and savings from RCI initiatives,
30 bps of lower stock-based (mark-to-market) compensation and other expenses, including lower costs associated with the
company’s employee and franchisee stock purchase plans, and 20 bps of lower pension expense. Restructuring costs
included in operating expenses were $0.1 million and zero in 2016 and 2015, respectively.
Operating earnings before financial services of $655.5 million in 2016, including $21.5 million of unfavorable foreign
currency effects, increased $60.9 million, or 10.2%, as compared to $594.6 million in 2015. As a percentage of net sales,
operating earnings before financial services of 19.1% in 2016 improved 140 bps from 17.7% in 2015.
2017 ANNUAL REPORT
41
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Financial services revenue of $281.4 million in 2016 compared to revenue of $240.3 million in 2015. Financial services
operating earnings of $198.7 million in 2016, including $1.8 million of unfavorable foreign currency effects, increased $28.5
million, or 16.7%, as compared to $170.2 million in 2015. The year-over-year increases in both revenue and operating
earnings primarily reflect continued growth of the company’s financial services portfolio.
Operating earnings of $854.2 million in 2016, including $23.3 million of unfavorable foreign currency effects, increased
$89.4 million, or 11.7%, from $764.8 million in 2015. As a percentage of revenues, operating earnings of 23.0% in 2016
improved 170 bps from 21.3% in 2015.
Interest expense of $52.2 million in 2016 increased $0.3 million from $51.9 million in 2015. See Note 9 to the Consolidated
Financial Statements for information on Snap-on’s debt and credit facilities.
Other income (expense) – net was expense of $0.6 million and $2.4 million in 2016 and 2015, respectively. See Note 16
to the Consolidated Financial Statements for information on other income (expense) – net.
Snap-on’s effective income tax rate on earnings attributable to Snap-on was 31.0% in 2016 and 31.7% in 2015. See Note
8 to the Consolidated Financial Statements for information on income taxes.
Net earnings attributable to Snap-on of $546.4 million, or $9.20 per diluted share, in 2016 increased $67.7 million, or $1.10
per diluted share, from 2015 levels. Net earnings attributable to Snap-on in 2015 were $478.7 million or $8.10 per diluted
share.
Segment Results
Commercial & Industrial Group
(Amounts in millions)
External net sales
Intersegment net sales
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
2016
2015
Change
$
863.0
285.3
75.2%
24.8%
$
895.5
268.1
77.0%
23.0%
1,148.3
100.0%
1,163.6
100.0%
(698.3)
-60.8%
(717.1)
-61.6%
450.0
39.2%
446.5
38.4%
(282.0)
-24.6%
(277.1)
-23.8%
$
(32.5)
17.2
(15.3)
18.8
3.5
(4.9)
Segment operating earnings
$
168.0
14.6%
$
169.4
14.6%
$
(1.4)
-3.6%
6.4%
-1.3%
2.6%
0.8%
-1.8%
-0.8%
Segment net sales of $1,148.3 million in 2016 decreased $15.3 million, or 1.3%, from 2015 levels, reflecting $20.6 million
of unfavorable foreign currency translation partially offset by $4.2 million of acquisition-related sales and a $1.1 million, or
0.1%, organic sales gain. The organic sales increase primarily includes a mid single-digit gain in the segment’s European-
based hand tools business and low single-digit increases in both the segment’s Asia/Pacific and power tools operations.
These organic sales gains were largely offset by a mid single-digit decline in sales to customers in critical industries,
primarily in the international aerospace and natural resources market segments.
Segment gross profit of $450.0 million in 2016 compared to $446.5 million in 2015. Gross margin of 39.2% in 2016 improved
80 bps from 38.4% in 2015 primarily due to savings from RCI and other cost reduction initiatives, and 20 bps of favorable
foreign currency effects.
Segment operating expenses of $282.0 million in 2016 compared to $277.1 million in 2015. The operating expense margin
of 24.6% in 2016 increased 80 bps from 23.8% in 2015 primarily due to higher costs, including costs associated with
continued expansion initiatives in Asia, a 20 bps benefit realized in 2015 from a gain on the sale of a former manufacturing
facility, and 10 bps of unfavorable foreign currency effects.
As a result of these factors, segment operating earnings of $168.0 million in 2016, including $1.1 million of unfavorable
foreign currency effects, decreased $1.4 million from 2015 levels. Operating margin for the Commercial & Industrial Group
was 14.6% in both years.
42
SNAP-ON INCORPORATED
Snap-on Tools Group
(Amounts in millions)
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
2016
2015
Change
$ 1,633.9
100.0%
$ 1,568.7
100.0%
$
65.2
(929.8)
-56.9%
(885.7)
-56.5%
704.1
43.1%
683.0
43.5%
(423.0)
-25.9%
(427.0)
-27.2%
(44.1)
21.1
4.0
Segment operating earnings
$
281.1
17.2%
$
256.0
16.3%
$
25.1
4.2%
-5.0%
3.1%
0.9%
9.8%
Segment net sales of $1,633.9 million in 2016 increased $65.2 million, or 4.2%, from 2015 levels, reflecting an $86.4 million,
or 5.6%, organic sales gain partially offset by $21.2 million of unfavorable foreign currency translation. The organic sales
increase includes mid single-digit gains in both the company’s U.S. and international franchise operations.
Segment gross profit of $704.1 million in 2016 compared to $683.0 million in 2015. Gross margin of 43.1% in 2016 declined
40 bps from 43.5% in 2015 as 70 bps of unfavorable foreign currency effects were partially offset by benefits from higher
sales.
Segment operating expenses of $423.0 million in 2016 compared to $427.0 million in 2015. The operating expense margin
of 25.9% in 2016 improved 130 bps from 27.2% in 2015 primarily due to sales volume leverage and savings from RCI and
other cost reduction initiatives, as well as 20 bps of lower stock-based costs associated with the company’s franchisee stock
purchase plan.
As a result of these factors, segment operating earnings of $281.1 million in 2016, including $15.3 million of unfavorable
foreign currency effects, increased $25.1 million from 2015 levels. Operating margin for the Snap-on Tools Group of 17.2%
in 2016 improved 90 bps from 16.3% in 2015.
Repair Systems & Information Group
(Amounts in millions)
External net sales
Intersegment net sales
Segment net sales
Cost of goods sold
Gross profit
Operating expenses
2016
2015
Change
$
933.5
246.4
79.1%
20.9%
$
888.6
224.6
79.8%
20.2%
1,179.9
100.0%
1,113.2
100.0%
(624.4)
-52.9%
(594.4)
-53.4%
555.5
47.1%
518.8
46.6%
(257.7)
-21.9%
(245.4)
-22.0%
$
44.9
21.8
66.7
(30.0)
36.7
(12.3)
Segment operating earnings
$
297.8
25.2%
$
273.4
24.6%
$
24.4
5.1%
9.7%
6.0%
-5.0%
7.1%
-5.0%
8.9%
Segment net sales of $1,179.9 million in 2016 increased $66.7 million, or 6.0%, from 2015 levels, reflecting a $52.1 million, or
4.7%, organic sales gain and $28.7 million of acquisition-related sales, partially offset by $14.1 million of unfavorable foreign
currency translation. The organic sales increase includes a high single-digit gain in sales of diagnostic and repair information
products to independent repair shop owners and managers, and low single-digit increases in both sales of undercar equipment
and sales to OEM dealerships.
Segment gross profit of $555.5 million in 2016 compared to $518.8 million in 2015. Gross margin of 47.1% in 2016 improved
50 bps from 46.6% in 2015, as benefits from higher sales and savings from RCI initiatives were partially offset by 10 bps of
unfavorable currency effects. Restructuring costs included in gross profit were $0.8 million and zero in 2016 and 2015,
respectively.
Segment operating expenses of $257.7 million in 2016 compared to $245.4 million in 2015. The operating expense margin of
21.9% in 2016 improved 10 bps from 22.0% in 2015 primarily due to sales volume leverage and savings from RCI initiatives,
partially offset by 20 bps of impact from the Car-O-Liner acquisition. Restructuring costs included in operating expenses were
$0.1 million and zero in 2016 and 2015, respectively.
2017 ANNUAL REPORT
43
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
As a result of these factors, segment operating earnings of $297.8 million in 2016, including $5.1 million of unfavorable foreign
currency effects, increased $24.4 million from 2015 levels. Operating margin for the Repair Systems & Information Group of
25.2% in 2016 improved 60 bps from 24.6% in 2015.
Financial Services
(Amounts in millions)
2016
2015
Change
Financial services revenue
$
281.4
100.0%
$
240.3
100.0%
$ 41.1
Financial services expenses
(82.7)
-29.4%
(70.1)
-29.2%
(12.6)
Segment operating earnings
$
198.7
70.6%
$
170.2
70.8%
$ 28.5
17.1%
-18.0%
16.7%
Financial services revenue of $281.4 million in 2016 increased $41.1 million, or 17.1%, from $240.3 million in 2015 primarily
reflecting $38.1 million of higher revenue as a result of continued growth of the company’s financial services portfolio and
$2.7 million of increased revenue from higher average yields on finance receivables. In 2016 and 2015, the respective
average yield on finance receivables was 18.0% and 17.8%, and the respective average yield on contract receivables was
9.4% and 9.5%. Originations of $1,075.7 million in 2016 increased $82.0 million, or 8.3%, from 2015 levels.
Financial services expenses primarily include personnel-related and other general and administrative costs, as well as
provisions for credit losses. These expenses are generally more dependent on changes in the financial services portfolio
than they are on the revenue of the segment. Financial services expenses of $82.7 million in 2016 increased from $70.1
million in 2015 primarily due to changes in both the size of the portfolio and in the provisions for credit losses. As a
percentage of the average financial services portfolio, financial services expenses were 4.9% and 4.8% in 2016 and 2015,
respectively.
Financial services operating earnings of $198.7 million in 2016, including $1.8 million of unfavorable foreign currency effects,
increased $28.5 million, or 16.7%, from 2015 levels.
See Note 1 and Note 3 to the Consolidated Financial Statements for further information on financial services.
Corporate
Snap-on’s general corporate expenses in 2016 of $91.4 million decreased $12.8 million from $104.2 million in 2015. The
year-over-year decrease in general corporate expenses primarily reflects $6.9 million of lower pension expense, $6.4 million
of lower stock-based (mark-to-market) compensation expense and $2.3 million of lower stock-based costs associated with
the company’s employee stock purchase plan, partially offset by $2.8 million of higher acquisition-related and other costs.
Non-GAAP Supplemental Data
The following non-GAAP supplemental data is presented for informational purposes to provide readers with insight into the
information used by management for assessing the operating performance of Snap-on Incorporated’s (“Snap-on”) non-
financial services (“Operations”) and “Financial Services” businesses.
The supplemental Operations data reflects the results of operations and financial position of Snap-on’s tools, diagnostic
and equipment products, software and other non-financial services operations with Financial Services on the equity method.
The supplemental Financial Services data reflects the results of operations and financial position of Snap-on’s U.S. and
international financial services operations. The financing needs of Financial Services are met through intersegment
borrowings and cash generated from Operations; Financial Services is charged interest expense on intersegment
borrowings at market rates. Income taxes are charged to Financial Services on the basis of the specific tax attributes
generated by the U.S. and international financial services businesses. Transactions between the Operations and Financial
Services businesses were eliminated to arrive at the Consolidated Financial Statements.
44
SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data – Supplemental Statements of Earnings information for 2017, 2016 and 2015
is as follows:
(Amounts in millions)
Net sales
Cost of goods sold
Gross profit
Operating expenses
Operations*
Financial Services
2017
2016
2015
2017
2016
2015
$ 3,686.9
$ 3,430.4
$ 3,352.8
$
(1,862.0)
(1,720.8)
(1,704.5)
1,824.9
1,709.6
1,648.3
(1,160.9)
(1,054.1)
(1,053.7)
–
–
–
–
–
$
–
–
–
–
–
$
–
–
–
–
–
Operating earnings before financial services
664.0
655.5
594.6
Financial services revenue
Financial services expenses
Operating earnings from financial services
Operating earnings
Interest expense
Intersegment interest income (expense) – net
Other income (expense) – net
Earnings before income taxes
and equity earnings
Income tax expense
Earnings before equity earnings
Financial services – net earnings
attributable to Snap-on
Equity earnings, net of tax
Net earnings
Net earnings attributable to noncontrolling
–
–
–
664.0
(52.1)
70.8
(7.2)
675.5
(196.8)
478.7
92.3
1.2
572.2
–
–
–
655.5
(51.9)
72.2
(0.7)
675.1
(197.7)
477.4
79.7
2.5
559.6
–
–
–
313.4
281.4
240.3
(95.9)
(82.7)
(70.1)
217.5
198.7
170.2
594.6
217.5
198.7
170.2
(51.4)
62.7
(2.4)
(0.3)
(70.8)
–
(0.3)
(72.2)
0.1
(0.5)
(62.7)
–
603.5
146.4
126.3
107.0
(181.9)
421.6
67.7
1.3
490.6
(54.1)
92.3
(46.6)
79.7
(39.3)
67.7
–
–
–
–
–
–
92.3
79.7
67.7
interests
(14.5)
(13.2)
(11.9)
–
–
–
Net earnings attributable to Snap-on $ 557.7
$ 546.4
$ 478.7
$ 92.3
$ 79.7
$ 67.7
* Snap-on with Financial Services on the equity method.
2017 ANNUAL REPORT
45
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheet Information as of 2017 and 2016 year end is
as follows:
Operations*
Financial Services
2017
2016
2017
2016
(Amounts in millions)
ASSETS
Current assets:
Cash and cash equivalents
Intersegment receivables
Trade and other accounts receivable – net
Finance receivables – net
Contract receivables – net
Inventories – net
Prepaid expenses and other assets
$
91.8
17.1
674.9
–
9.4
638.8
117.6
$
77.5
15.0
598.2
–
7.9
530.5
122.4
Total current assets
1,549.6
1,351.5
Property and equipment – net
Investment in Financial Services
Deferred income tax assets
Intersegment long-term notes receivable
Long-term finance receivables – net
Long-term contract receivables – net
Goodwill
Other intangibles – net
Other assets
Total assets
* Snap-on with Financial Services on the equity method.
482.4
317.4
25.2
583.7
–
13.2
924.1
253.7
$
0.2
$
–
0.7
505.4
87.4
–
0.7
594.4
2.0
–
26.8
–
423.8
288.7
49.1
584.7
11.2
895.5
184.6
–
1,039.2
309.4
–
–
–
0.1
–
0.6
472.5
80.2
–
1.1
554.5
1.4
–
23.7
–
934.5
275.5
–
–
0.1
63.1
$ 4,212.4
47.9
$ 3,837.0
$ 1,971.8
$ 1,789.7
46
SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheet Information (continued):
(Amounts in millions)
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt
Accounts payable
Intersegment payables
Accrued benefits
Accrued compensation
Franchisee deposits
Other accrued liabilities
Total current liabilities
Long-term debt and intersegment long-term debt
Deferred income tax liabilities
Retiree health care benefits
Pension liabilities
Other long-term liabilities
Total liabilities
Operations*
Financial Services
2017
2016
2017
2016
$
183.2
$
151.4
$
250.0
$
150.0
177.1
170.3
–
55.8
67.8
66.5
366.0
916.4
–
28.4
36.0
158.9
100.4
–
52.8
85.7
66.7
292.1
819.0
–
13.1
36.7
246.5
86.5
1.1
17.1
–
3.7
–
29.7
301.6
0.6
15.0
–
4.1
–
22.8
192.5
1,337.3
1,293.5
–
–
–
–
–
–
15.5
15.0
1,240.1
1,201.8
1,654.4
1,501.0
Total shareholders’ equity attributable to Snap-on
2,953.9
2,617.2
18.4
18.0
2,972.3
2,635.2
$ 4,212.4 $ 3,837.0
317.4
$ 1,971.8
317.4
–
288.7
–
288.7
$ 1,789.7
Noncontrolling interests
Total equity
Total liabilities and equity
* Snap-on with Financial Services on the equity method.
2017 ANNUAL REPORT
47
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Liquidity and Capital Resources
Snap-on’s growth has historically been funded by a combination of cash provided by operating activities and debt financing. On
January 16, 2018, Snap-on repaid $250 million of unsecured 4.25% notes (the “2018 Notes”), upon maturity with available cash
and cash generated from issuances of commercial paper. Snap-on believes that its cash from operations and collections of
finance receivables, coupled with its sources of borrowings and available cash on hand, are sufficient to fund its currently
anticipated requirements for scheduled debt repayments (including the repayment of $200 million of unsecured 6.70% notes,
due March 1, 2019 (the “2019 Notes”)), payments of interest and dividends, new receivables originated by our financial services
businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and
acquisitions, if and as they arise.
Due to Snap-on’s credit rating over the years, external funds have been available at an acceptable cost. As of the close of
business on February 9, 2018, 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. Snap-on believes that its current credit
arrangements are sound and that the strength of its balance sheet affords the company the financial flexibility, including through
access to financial markets for potential new financing, to respond to both internal growth opportunities and those available
through acquisitions. However, Snap-on cannot provide any assurances of the availability of future financing or the terms on
which it might be available, or that its debt ratings may not decrease.
The following discussion focuses on information included in the accompanying Consolidated Balance Sheets.
As of 2017 year end, working capital (current assets less current liabilities) of $926.0 million increased $31.5 million from $894.5
million as of 2016 year end primarily as a result of other net changes in working capital discussed below. As of 2016 year end,
the 2018 Notes were included in “Long-term debt” on the accompanying Consolidated Balance Sheet as their scheduled
maturity was in excess of one year of the 2016 year-end balance sheet date.
The following represents the company’s working capital position as of 2017 and 2016 year end:
(Amounts in millions)
Cash and cash equivalents
Trade and other accounts receivable – net
Finance receivables – net
Contract receivables – net
Inventories – net
Prepaid expenses and other assets
Total current assets
Notes payable and current maturities of long-term debt
Accounts payable
Other current liabilities
Total current liabilities
Working capital
2017
2016
$
92.0
675.6
505.4
96.8
638.8
110.7
2,119.3
$
77.6
598.8
472.5
88.1
530.5
116.5
1,884.0
(433.2)
(178.2)
(581.9)
(1,193.3)
926.0
$
$
(301.4)
(170.9)
(517.2)
(989.5)
894.5
Cash and cash equivalents of $92.0 million as of 2017 year end increased $14.4 million from 2016 year-end levels primarily
due to (i) $712.7 million of cash from collections of finance receivables; (ii) $608.5 million of cash generated from operations,
net of $60.0 million of discretionary cash contributions to the company’s domestic pension plans; (iii) $297.8 million of net
proceeds from the 2027 Notes; (iv) $46.2 million of cash proceeds from stock purchase and option plan exercises; and (v) $30.6
million of net proceeds from notes payable and other short-term borrowings. These increases in cash and cash equivalents
were partially offset by (i) the funding of $892.0 million of new finance receivables; (ii) the repurchase of 1,820,000 shares of the
company’s common stock for $287.9 million; (iii) dividend payments to shareholders of $169.4 million; (iv) the January 2017
repayment of $150 million of the 2017 Notes; (v) the funding of $82.9 million for acquisitions; and (vi) the funding of $82.0 million
of capital expenditures.
48
SNAP-ON INCORPORATED
Of the $92.0 million of cash and cash equivalents as of 2017 year end, $72.1 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. The repatriation of cash from certain
foreign subsidiaries could have adverse net tax consequences on the company should Snap-on be required to pay and record
U.S. income taxes and foreign withholding taxes on such funds. Alternatively, the repatriation of cash from certain other foreign
subsidiaries could result in favorable net tax consequences for the company. 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 does not
incur unfavorable net tax consequences.
Trade and other accounts receivable – net of $675.6 million as of 2017 year end increased $76.8 million from 2016 year-
end levels primarily due to higher sales, $21.7 million of foreign currency translation and $9.5 million of receivables related
to the Norbar, BTC and TCS acquisitions. Days sales outstanding (trade and other accounts receivable – net as of the
respective period end, divided by the respective trailing 12 months sales, times 360 days) was 66 days at 2017 year end
and 63 days at 2016 year end.
The current portions of net finance and contract receivables of $602.2 million as of 2017 year end compared to $560.6
million at 2016 year end. The long-term portions of net finance and contract receivables of $1,361.8 million as of 2017 year
end compared to $1,221.2 million at 2016 year end. The combined $182.2 million increase in net current and long-term
finance and contract receivables over 2016 year-end levels is primarily due to continued growth of the company’s financial
services portfolio and $17.5 million of foreign currency translation.
Inventories – net of $638.8 million as of 2017 year end increased $108.3 million from 2016 year-end levels primarily to
support continued higher customer demand in certain segments and new product introductions, as well as from $23.9 million
of foreign currency translation and $5.7 million of inventories related to the Norbar and TCS acquisitions. As of 2017 and
2016 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 3.2 turns and 3.3 turns, respectively. Inventories accounted for using the
first-in, first-out (“FIFO”) method as of 2017 and 2016 year end approximated 61% and 59%, respectively, of total
inventories. All other inventories are accounted for using the last-in, first-out (“LIFO”) method. The company’s LIFO reserve
was $75.1 million and $73.2 million as 2017 and 2016 year end, respectively.
Notes payable and current maturities of long-term debt of $433.2 million as of 2017 year end consisted of $250 million of
the 2018 Notes (which were subsequently repaid), $151 million of commercial paper borrowings and $32.2 million of other
notes. Notes payable and current maturities of long-term debt of $301.4 million as of 2016 year end consisted of $150
million of the 2017 Notes, $130 million of commercial paper borrowings and $21.4 million of other notes. As of 2016 year
end, the 2018 Notes were included in “Long-term debt” on the accompanying Consolidated Balance Sheet as their
scheduled maturity was in excess of one year of the 2016 year-end balance sheet date.
Average notes payable outstanding, including commercial paper borrowings, were $126.8 million and $49.3 million in 2017
and 2016, respectively. The weighted-average interest rate of 2.45% in 2017 decreased from 7.09% last year. This reflects
the impact of the higher commercial paper borrowings which generally have lower interest rates than other notes payable
outstanding. Average commercial paper borrowings were $103.3 million and $26.6 million in 2017 and 2016, respectively,
and the weighted-average interest rate of 1.14% in 2017 increased from 0.73% last year. At 2017 year end, the weighted-
average interest rate on outstanding notes payable of 2.34% compared with 2.85% at 2016 year end. The 2017 year-end
rate benefited from lower interest rates on international borrowings. The 2016 year-end rate benefited from lower interest
rates on commercial paper borrowings.
Accounts payable of $178.2 million as of 2017 year end increased $7.3 million from 2016 year-end levels primarily due to
the timing of payments, partially offset by $6.8 million of foreign currency translation.
Other accrued liabilities of $388.1 million as of 2017 year end increased $80.2 million from 2016 year-end levels primarily
due to higher income tax accruals, $45.9 million in legal matters and $10.1 million of foreign currency translation.
2017 ANNUAL REPORT
49
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Long-term debt of $753.6 million as of 2017 year end consisted of: (i) $200 million of the 2019 Notes; (ii) $250 million of
unsecured 6.125% notes that mature in 2021; (iii) $300 million the 2027 Notes; and (iv) $3.6 million of other long-term debt,
including fair value adjustments related to interest rate swaps.
Snap-on has a five-year, $700 million multi-currency revolving credit facility that terminates on December 15, 2020 (the
“Credit Facility”); no amounts were outstanding under the Credit Facility as of December 30, 2017. Borrowings under the
Credit Facility bear interest at varying rates based on Snap-on’s then-current, long-term debt ratings. The Credit Facility’s
financial covenant requires that Snap-on maintain, as of each fiscal quarter end, either (i) a ratio not greater than 0.60 to
1.00 of consolidated net debt (consolidated debt net of certain cash adjustments) to the sum of such consolidated net debt
plus total equity and less accumulated other comprehensive income or loss (the “Debt Ratio”); or (ii) a ratio not greater than
3.50 to 1.00 of such consolidated net debt to earnings before interest, taxes, depreciation, amortization and certain other
adjustments for the preceding four fiscal quarters then ended (the “Debt to EBITDA Ratio”). Snap-on may, up to two times
during any five-year period during the term of the Credit Facility (including any extensions thereof), increase the maximum
Debt Ratio to 0.65 to 1.00 and/or increase the maximum Debt to EBITDA Ratio to 3.75 to 1.00 for four consecutive fiscal
quarters in connection with certain material acquisitions (as defined in the related credit agreement). As of 2017 year end,
the company’s actual ratios of 0.26 and 1.16, respectively, were both within the permitted ranges set forth in this financial
covenant. Snap-on generally issues commercial paper to fund its financing needs on a short-term basis and uses the Credit
Facility as back-up liquidity to support such commercial paper issuances.
Snap-on’s Credit Facility and other debt agreements also contain certain usual and customary borrowing, affirmative,
negative and maintenance covenants. As of 2017 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. Snap-on manages its aggregate short-term borrowings
so as not to exceed its availability under the revolving Credit Facility. Snap-on believes that it can access short-term debt
markets, predominantly through commercial paper issuances and existing lines of credit, to fund its short-term requirements
and to ensure near-term liquidity. Snap-on regularly monitors the credit and financial markets and may take advantage of
what it believes are favorable market conditions to issue long-term debt to further improve its liquidity and capital resources.
Near-term liquidity requirements for Snap-on include scheduled debt payments (including the repayment of the 2019 Notes;
as noted above, the 2018 Notes were repaid on January 16, 2018), payments of interest and dividends, funding to support
new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of
pension plans, and funding for share repurchases and acquisitions, if and as they arise. Snap-on intends to make
contributions of $9.7 million to its foreign pension plans and $2.4 million to its domestic pension plans in 2018, as required
by law. Depending on market and other conditions, Snap-on may make additional discretionary cash contributions to its
pension plans in 2018.
Snap-on’s long-term financing strategy is to maintain continuous access to the debt markets to accommodate its liquidity
needs, including the use of commercial paper, additional fixed-term debt and/or securitizations.
The following discussion focuses on information included in the accompanying Consolidated Statements of Cash Flows.
Operating Activities
Net cash provided by operating activities of $608.5 million in 2017 increased $32.4 million from $576.1 million in 2016. The
$32.4 million increase is primarily due to $12.6 million of higher net earnings and $14.9 million of cash proceeds from the
settlement of a treasury lock. Net cash provided by operating activities was $507.2 million in 2015.
Depreciation expense was $65.6 million in 2017, $61.4 million in 2016 and $57.8 million in 2015. Amortization expense
was $27.6 million in 2017, $24.2 million in 2016 and $24.7 million in 2015. See Note 6 to the Consolidated Financial
Statements for information on goodwill and other intangible assets.
50
SNAP-ON INCORPORATED
Investing Activities
Net cash used by investing activities of $341.4 million in 2017 included additions to finance receivables of $892.0 million,
partially offset by collections of $712.7 million. Net cash used by investing activities of $473.4 million in 2016 included
additions to finance receivables of $915.0 million, partially offset by collections of $671.7 million. Net cash used by investing
activities of $306.4 million in 2015 included additions to finance receivables of $844.2 million, partially offset by collections
of $624.8 million. Finance receivables are comprised of extended-term installment payment contracts to both technicians
and independent shop owners (i.e., franchisees’ customers) to enable them to purchase tools and diagnostic and equipment
products on an extended-term payment plan, generally with average payment terms approaching four years.
Net cash used by investing activities in 2017 also included a total of $82.9 million (net of $1.8 million of cash acquired) for
the acquisitions of BTC, Norbar and TCS, as well as working capital adjustments for the Car-O-Liner and Sturtevant
Richmont acquisitions. Net cash used by investing activities in 2016 included, on a preliminary basis, a total of $160.4
million (net of $4.3 million of cash acquired) for the acquisitions of Car-O-Liner and Sturtevant Richmont. Net cash used by
investing activities in 2015 included $11.8 million for the acquisition of Ecotechnics. See Note 2 to the Consolidated
Financial Statements for information on acquisitions.
Capital expenditures in 2017, 2016 and 2015 totaled $82.0 million, $74.3 million and $80.4 million, respectively. Capital
expenditures in all three years included continued investments related to the company’s execution of its strategic Value
Creation Processes and strategic growth initiatives. The company also invested in: (i) new product, efficiency, safety and
cost reduction initiatives that are intended to expand and improve its manufacturing capabilities worldwide; (ii) new
production and machine tooling to enhance manufacturing operations, as well as ongoing replacements of manufacturing
and distribution equipment, particularly in the United States; (iii) the ongoing replacement and enhancement of the
company’s global enterprise resource planning (ERP) management information systems; and (iv) improvements to the
company’s research and development facilities and corporate headquarters in Kenosha, Wisconsin. Capital expenditures
in 2015 also included the purchase of a previously leased manufacturing facility in the United Kingdom. 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 2018.
Financing Activities
Net cash used by financing activities of $256.1 million in 2017 included the January 2017 repayment of $150 million of the
2017 Notes, and the other items discussed below. These amounts were partially offset by Snap-on’s sale, on February 15,
2017, of $300 million of the 2027 Notes at a discount, from which Snap-on received $297.8 million of net proceeds, reflecting
$1.9 million of transaction costs, and $30.6 million of net proceeds from notes payable and other short-term borrowings.
Net cash used by financing activities of $116.0 million in 2016 included $134.2 million of proceeds from a net increase in
notes payable and other short-term borrowings. Net cash used by financing activities of $236.7 million in 2015 included the
net repayment of $34.0 million of notes payable and other short-term borrowings.
Proceeds from stock purchase and option plan exercises totaled $46.2 million in 2017, $41.8 million in 2016 and $41.6
million in 2015. Snap-on has undertaken stock repurchases from time to time to offset dilution created by shares issued for
employee and franchisee stock purchase plans, stock options and other corporate purposes. In 2017, Snap-on repurchased
1,820,000 shares of its common stock for $287.9 million under its previously announced share repurchase programs. As
of 2017 year end, Snap-on had remaining availability to repurchase up to an additional $390.7 million in common stock
pursuant to its Board of Directors’ (the “Board”) authorizations. The purchase of Snap-on common stock is at the company’s
discretion, subject to prevailing financial and market conditions. Snap-on repurchased 758,000 shares of its common stock
for $120.4 million in 2016 and Snap-on repurchased 723,000 shares of its common stock for $110.4 million in 2015.
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 share repurchases, if any, in 2018.
2017 ANNUAL REPORT
51
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Cash dividends paid
in 2017, 2016 and 2015 totaled $169.4 million, $147.5 million and $127.9 million, respectively. On November 6, 2017, the
company announced that its Board increased the quarterly cash dividend by 15.5% to $0.82 per share ($3.28 per share
annualized). Quarterly dividends in 2017 were $0.82 per share in the fourth quarter and $0.71 per share in the first three
quarters ($2.95 per share for the year). Quarterly dividends in 2016 were $0.71 per share in the fourth quarter and $0.61
per share in the first three quarters ($2.54 per share for the year). Quarterly dividends in 2015 were $0.61 per share in the
fourth quarter and $0.53 per share in the first three quarters ($2.20 per share for the year).
Cash dividends paid per common share
Cash dividends paid as a percent of prior-year
retained earnings
2017
$ 2.95
2016
$ 2.54
2015
$ 2.20
5.0%
4.9%
4.8%
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 2018.
Off-Balance-Sheet Arrangements
Except as included below in the section labeled “Contractual Obligations and Commitments” and Note 15 to the
Consolidated Financial Statements, the company had no off-balance-sheet arrangements as of 2017 year end.
Contractual Obligations and Commitments
A summary of Snap-on’s future contractual obligations and commitments as of 2017 year end are as follows:
Total
(Amounts in millions)
Contractual obligations:
Notes payable and current
maturities of long-term debt $ 433.2
753.6
Long-term debt
161.5
Interest on fixed rate debt
84.8
Operating leases
18.1
Capital leases
Purchase obligations
60.4
$ 1,511.6
Total
2018
2019 – 2020
2021 – 2022
2023 and
thereafter
$ 433.2
–
38.9
25.5
3.6
55.0
$ 556.2
$
–
200.0
52.3
33.7
6.2
5.3
$ 297.5
$
–
250.0
29.7
17.7
4.8
0.1
$ 302.3
$
–
303.6
40.6
7.9
3.5
–
$ 355.6
On January 16, 2018, Snap-on repaid the 2018 Notes (included in “Notes payable and current maturities of long-term debt” in
the table above) upon maturity with available cash and cash generated from issuances of commercial paper.
Snap-on intends to make contributions of $9.7 million to its foreign pension plans and $2.4 million to its domestic pension
plans in 2018, as required by law. Depending on market and other conditions, Snap-on may make additional discretionary
cash contributions to its pension plans in 2018. Snap-on has not presented estimated pension and postretirement funding
contributions in the table above as the funding can vary from year to year based on changes in the fair value of the plan
assets and actuarial assumptions; see Note 11 and Note 12 to the Consolidated Financial Statements for information on the
company's benefit plans and payments.
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 for its remaining uncertain tax liabilities. As a result,
$7.7 million of unrecognized tax benefits have been excluded from the table above; see Note 8 to the Consolidated Financial
Statements for information on income taxes.
52
SNAP-ON INCORPORATED
Environmental Matters
Snap-on is subject to various federal, state and local government requirements regulating the discharge of materials into
the environment or otherwise relating to the protection of the environment. Snap-on’s policy is to comply with these
requirements and the company believes that, as a general matter, its policies, practices and procedures are properly
designed to prevent unreasonable risk of environmental damage, and of resulting financial liability, in connection with its
business. Some risk of environmental damage is, however, inherent in some of Snap-on’s operations and products, as it is
with other companies engaged in similar businesses.
Snap-on is and has been engaged in the handling, manufacture, use and disposal of many substances classified as
hazardous or toxic by one or more regulatory agencies. Snap-on believes that, as a general matter, its handling,
manufacture, use and disposal of these substances are in accordance with environmental laws and regulations. It is
possible, however, that future knowledge or other developments, such as improved capability to detect substances in the
environment or increasingly strict environmental laws and standards and enforcement policies, could bring into question
the company’s handling, manufacture, use or disposal of these substances.
New Accounting Standards
See Note 1 to the Consolidated Financial Statements for information on new accounting standards.
Critical Accounting Policies and Estimates
The Consolidated Financial Statements and related notes contain information that is pertinent to management’s discussion
and analysis. The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. These estimates are generally based on historical experience,
current conditions and on various other assumptions that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available
from other sources, as well as identifying and assessing our accounting treatment with respect to commitments and
contingencies. Actual results could differ from those estimates.
In addition to the company’s significant accounting policies described in Note 1 to the Consolidated Financial Statements,
Snap-on considers the following policies and estimates to be the most critical in understanding the judgments that are involved
in the preparation of the company’s consolidated financial statements and the uncertainties that could impact the company’s
financial position, results of operations and cash flows.
Impairment of Goodwill and Other Indefinite-lived Intangible Assets: Goodwill and other indefinite-lived intangible assets
are tested for impairment annually or more frequently if events or changes in circumstances indicate that the assets might
be impaired. Annual impairment tests are performed by the company in the second quarter of each year using information
available as of fiscal April month end.
Snap-on evaluates the recoverability of goodwill by estimating the future discounted cash flows of the businesses to which
the goodwill relates. Estimated cash flows and related goodwill are grouped at the reporting unit level. The company has
determined that its reporting units for testing goodwill impairment are its operating segments or components of an operating
segment that constitute a business for which discrete financial information is available and for which segment management
regularly reviews the operating results. Within its four reportable operating segments, the company has identified 11
reporting units.
2017 ANNUAL REPORT
53
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Snap-on evaluates the recoverability of goodwill by utilizing an income approach that estimates the fair value of the future
discounted cash flows of the reporting units to which the goodwill relates. The future projections, which are based on both
past performance and the projections and assumptions used in the company’s operating plans, are subject to change as a
result of changing economic and competitive conditions. This approach reflects management’s internal outlook at the
reporting units, which management believes provides the best determination of value due to management’s insight and
experience with the reporting units. Significant estimates used by management in the discounted cash flows methodology
include estimates of future cash flows based on expected growth rates, price increases, working capital levels, expected
benefits from RCI initiatives, and a weighted-average cost of capital that reflects the specific risk profile of the reporting unit
being tested. The company’s methodologies for valuing goodwill are applied consistently on a year-over-year basis; the
assumptions used in performing the second quarter 2017 impairment calculations were evaluated in light of then-current
market and business conditions. Snap-on continues to believe that the future discounted cash flow valuation model provides
the most reasonable and meaningful fair value estimate based upon the reporting units’ projections of future operating
results and cash flows and replicates how market participants would value the company’s reporting units in an orderly
transaction.
In the event the fair value of a reporting unit is less than the carrying value, including goodwill, the company would then
record an impairment charge based on the excess of a reporting units carrying amount over its fair value.
Snap-on also evaluates the recoverability of its indefinite-lived trademarks by utilizing an income approach that estimates
the fair value of the future discounted cash flows of each of its trademarks. The future projections, which are based on both
past performance and the projections and assumptions used in the company’s operating plans, are subject to change as a
result of changing economic and competitive conditions. Significant estimates used by management in the discounted cash
flows methodology include estimates of future cash flows based on expected growth and royalty rates, expected synergies,
and a weighted-average cost of capital that reflects the specific risk profile of the trademark being tested. The company’s
methodologies for valuing trademarks are applied consistently on a year-over-year basis; the assumptions used in
performing the second quarter 2017 impairment calculations were evaluated in light of then-current market and business
conditions. Snap-on continues to believe that the future discounted cash flow valuation model provides the most reasonable
and meaningful fair value estimate based upon the trademarks’ projected future cash flows and replicates how market
participants would value the company’s trademarks in an orderly transaction.
Inherent in fair value determinations are significant judgments and estimates, including material assumptions about future
revenue, profitability and cash flows, the company’s operational plans and its interpretation of current economic indicators.
Should the operations of the businesses with which goodwill or other indefinite-lived intangible assets are 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 or other indefinite-lived intangible assets could be subject
to impairment and could result in a material adverse effect on Snap-on’s financial position or results of operations.
Snap-on completed its annual impairment testing of goodwill and other indefinite-lived intangible assets in the second
quarter of 2017, the results of which did not result in any impairment. As of 2017 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
performing its annual impairment testing the company performed a sensitivity analysis on the material assumptions used in
the discounted cash flow valuation models for each of its 11 reporting units. Based on the company’s second quarter 2017
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 6 to the Consolidated Financial Statements for further information about goodwill and other intangible assets.
Pension Benefits: The pension benefit obligation and related pension expense are calculated in accordance with GAAP and
are impacted by certain actuarial assumptions. Changes in these assumptions are primarily influenced by factors outside
of Snap-on’s control, such as changes in economic conditions, and can have a significant effect on the amounts reported
in the financial statements. Snap-on believes that the two most critical assumptions are (i) the expected return on plan
assets; and (ii) the assumed discount rate.
54
SNAP-ON INCORPORATED
Snap-on’s domestic pension plans have a long-term investment horizon and a total return strategy that emphasizes a capital
growth objective. In 2017, 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 7.5% 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. As of 2017 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 7.45%, a decrease of 5 bps from 2017, to be used in determining pension expense for 2018. In
estimating the domestic expected return on plan assets, Snap-on utilizes a nominal returns forecasting method. For each
asset class, future returns are estimated by identifying the premium of riskier asset classes over lower risk alternatives. The
methodology constructs expected returns using a “building block” approach to the individual components of total return.
These forecasts are stated in both nominal and real (after inflation) terms. This process first considers the long-term
historical return premium based on the longest set of data available for each asset class. These premiums, calculated
using the geometric mean, are then adjusted based on current relative valuation levels, macro-economic conditions, and
the expected alpha related to active investment management. The asset return assumption is also adjusted by an implicit
expense load for estimated administrative and investment-related expenses. Since asset allocation is a key determinant of
expected investment returns, the current and expected mix of plan assets are also considered when setting the assumption.
Pension expense increases as the expected rate of return on plan assets decreases. Lowering the expected rate of return
assumption for Snap-on’s domestic pension plans’ assets by 50 bps would have increased Snap-on’s 2017 domestic
pension expense by approximately $5.0 million.
The objective of Snap-on’s discount rate assumption is to reflect the rate at which the pension benefits could be effectively
settled. In making this determination, the company takes into account the timing and amount of benefits that would be
available under the plans. The domestic discount rate as of 2017 and 2016 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. This methodology matches the plans’ yearly projected cash flows for benefits and service costs to those of
hypothetical bond portfolios using high-quality, AA rated or better, corporate bonds from either Moody’s Investors Service
or Standard & Poor’s credit rating agencies available at the measurement date. 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.
The selection of the 3.9% weighted-average discount rate for Snap-on’s domestic pension plans as of 2017 year end
(compared to 4.5% as of 2016 year end) represents the single rate that produces the same present value of cash flows as
the estimated benefit plan payments. Lowering Snap-on’s domestic discount rate assumption by 50 bps would have
increased Snap-on’s 2017 domestic pension expense and projected benefit obligation by approximately $4.3 million and
$71.3 million, respectively. As of 2017 year end, Snap-on’s domestic projected benefit obligation comprised approximately
83% of Snap-on’s worldwide projected benefit obligation. The weighted-average discount rate for Snap-on’s foreign pension
plans of 2.7% (compared to 2.9% as of 2016 year end) represents the single rate that produces the same present value of
cash flows as the estimated benefit plan payments. Lowering Snap-on’s foreign discount rate assumption by 50 bps would
have increased Snap-on’s 2017 foreign pension expense and projected benefit obligation by approximately $1.8 million and
$24.4 million, respectively.
Actuarial gains and losses in excess of 10 percent of the greater of the projected benefit obligation or market-related value
of assets are amortized on a straight-line basis over the average remaining service period of active participants or over the
average remaining life expectancy for plans with primarily inactive participants. Prior service costs and credits resulting from
plan amendments are amortized in equal annual amounts over the average remaining service period of active participants
or over the average remaining life expectancy for plans with primarily inactive participants.
To determine the 2018 net periodic benefit cost, Snap-on is using weighted-average discount rates for its domestic and
foreign pension plans of 3.9% and 2.7%, respectively, and an expected return on plan assets for its domestic pension plans
of 7.45%. The expected returns on plan assets for foreign pension plans ranged from 1.9% and 6.1% as of 2017 year end.
The net change in these two key assumptions from those used in 2017 is expected to increase pension expense in 2018.
Other factors, such as changes in plan demographics and discretionary contributions, may further increase or decrease
pension expense in 2018. See Note 11 to the Consolidated Financial Statements for further information on pension plans.
2017 ANNUAL REPORT
55
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Allowances for Doubtful Accounts on Finance and Contract Receivables: The allowances for doubtful accounts on finance
and contract receivables are maintained at levels management believes are adequate to cover probable losses inherent in
Snap-on’s finance and contract receivables portfolios as of the measurement date. The allowances represent
management’s estimate of the losses inherent in the company’s receivables portfolios based on ongoing assessments and
evaluations of collectability and historical loss experience. Determination of the proper level of allowances by portfolio
requires management to exercise significant judgment about the timing, frequency and severity of credit losses that could
materially affect the provision for credit losses and, as a result, net earnings. The allowances take into consideration
numerous quantitative and qualitative factors that include receivable type, historical loss experience, loss migration,
delinquency trends, collection experience, current economic conditions and credit risk characteristics. Some of these factors
are influenced by items such as the customers’ financial condition, debt-servicing ability, past payment experience, and
credit bureau and proprietary Snap-on credit model information, as well as the value of the underlying collateral. Changes
in economic conditions and assumptions, including the resulting credit quality metrics relative to the performance of the
finance and contract receivables portfolios, create uncertainty and could result in changes to both the allowances and
provision for credit losses.
Management utilizes established policies and procedures in an effort to ensure the estimates and assumptions are well
controlled, reviewed and consistently applied. As of December 30, 2017, the ratios of the allowances for doubtful accounts
to finance and contract receivables (the “allowance ratios”) were 3.53% and 1.08%, respectively. As of December 31, 2016,
the respective allowance ratios were 3.34% and 1.03%. While management believes it exercises prudent judgment and
applies reasonable assumptions in establishing its estimates for allowances for finance and contract receivables, there can
be no assurance that changes in economic conditions or other factors would not adversely impact the financial health of
our customers and result in changes to the estimates used in the allowance calculations. For reference, a 100 bps increase
in the allowance ratios for both finance and contract receivables as of December 30, 2017, would have increased Snap-on’s
2017 provision expense and related allowances for doubtful accounts by approximately $16.0 million and $4.2 million,
respectively.
For additional information on Snap-on’s allowances for doubtful accounts, see Note 1 and Note 3 to the Consolidated
Financial Statements.
Outlook
Snap-on expects to make continued progress in 2018 along its defined runways for coherent growth, leveraging capabilities
already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not
only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical
industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital
expenditures in 2018 will be in a range of $90 million to $100 million.
As a result of the recently enacted Tax Act, Snap-on currently anticipates that its full year 2018 effective income tax rate
will be in the range of 24% to 25%. This compares to a full year 2017 effective tax rate of 31.1%.
56
SNAP-ON INCORPORATED
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Market, Credit and Economic Risks
Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments. Snap-on
is exposed to market risk from changes in interest rates and foreign currency exchange rates. Snap-on is also exposed to
market risk associated with the stock-based portion of its deferred compensation plans. Snap-on monitors its exposure to these
risks and attempts to manage the underlying economic exposures through the use of financial instruments such as foreign
currency forward contracts, interest rate swap agreements, treasury lock agreements and prepaid equity forward agreements
(“equity forwards”). Snap-on does not use derivative instruments for speculative or trading purposes. Snap-on’s broad-based
business activities help to reduce the impact that volatility in any particular area or related areas may have on its operating
earnings as a whole. Snap-on’s management takes an active role in the risk management process and has developed policies
and procedures that require specific administrative and business functions to assist in the identification, assessment and control
of various risks.
Foreign Currency Risk Management
Snap-on has significant international operations and is subject to certain risks inherent with foreign operations that include
currency fluctuations. Foreign currency exchange risk exists to the extent that Snap-on has payment obligations or receipts
denominated in currencies other than the functional currency, including intercompany loans denominated in foreign currencies.
To manage these exposures, Snap-on identifies naturally offsetting positions and then purchases hedging instruments to protect
the residual net exposures. See Note 10 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. Treasury lock agreements are used from time to
time to manage the potential change in interest rates in anticipation of the possible issuance of fixed rate debt. See Note 10 to
the Consolidated Financial Statements for information on interest rate risk management.
Snap-on utilizes a Value-at-Risk (“VAR”) model to determine the potential one-day loss in the fair value of its interest rate
and foreign exchange-sensitive financial instruments from adverse changes in market factors. The VAR model estimates
were made assuming normal market conditions and a 95% confidence level. Snap-on’s computations are based on the
inter-relationships among movements in various currencies and interest rates (variance/co-variance technique). These
inter-relationships were determined by observing interest rate and foreign currency market changes over the preceding
quarter.
The estimated maximum potential one-day loss in fair value, calculated using the VAR model, as of 2017 and 2016 year end
was $1.5 million and $0.4 million, respectively, on interest rate-sensitive financial instruments, and $0.1 million and $0.8 million,
respectively, on foreign currency-sensitive financial instruments. The VAR model is a risk management tool and does not purport
to represent actual losses in fair value that will be incurred by Snap-on, nor does it consider the potential effect of favorable
changes in market factors.
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. Since stock-based deferred compensation liabilities
increase as the company’s stock price rises and decrease as the company’s stock price declines, the equity forwards are
intended to mitigate the potential impact on compensation expense that may result from such mark-to-market changes.
See Note 10 to the Consolidated Financial Statements for additional information on stock-based deferred compensation
risk management.
2017 ANNUAL REPORT
57
Credit Risk
Credit risk is the possibility of loss from a customer’s failure to make payments according to contract terms. Prior to extending
credit, each customer is evaluated, taking into consideration various factors, including the customer’s financial condition, debt-
servicing ability, past payment experience, credit bureau information, and other financial and qualitative factors that may affect
the customer’s ability to repay, as well as the value of the underlying collateral. Credit risk is also monitored regularly through
the use of internal proprietary custom scoring models to evaluate each transaction at the time of the application for credit and
by periodically updating those credit scores for ongoing monitoring purposes. Snap-on evaluates credit quality through the use
of an internal proprietary measuring system that provides a framework to analyze finance and contract receivables on the basis
of risk factors of the individual obligor as well as transaction specific risk. The finance and contract receivables are typically
monitored through an asset quality review process that closely monitors past due accounts and initiates a progressive collection
action process when appropriate.
Counterparty Risk
Snap-on is exposed to credit losses in the event of non-performance by the counterparties to its various financial
agreements, including its foreign currency forward contracts, interest rate swap agreements, treasury lock agreements and
prepaid equity forward agreements. Snap-on does not obtain collateral or other security to support financial instruments
subject to credit risk, but monitors the credit standing of the counterparties and generally enters into agreements with
financial institution counterparties with a credit rating of A- or better. Snap-on does not anticipate non-performance by its
counterparties, but cannot provide assurances.
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 potential effects of the United Kingdom’s
pending exit from the European Union, although it is too soon to know what effects this might have on the world economy
or the company. Inflation has not had a significant impact on the company.
As a result of the above market, credit and economic risks, net earnings and revenues in any particular period may not be
representative of full-year results and may vary significantly from year to year.
Commodity Risk
Snap-on is a purchaser of certain commodities such as steel, natural gas and electricity. The company is also a purchaser
of components and parts that are integrated into the company’s end products, as well as the purchaser of certain finished goods,
all of which may contain various commodities including steel, aluminum, nickel, copper and others. Snap-on’s supply of raw
materials and purchased components are generally and readily available from numerous suppliers.
The principal raw material used in the manufacture of the company’s products is steel, which the company purchases in
competitive, price-sensitive markets. To meet Snap-on’s high quality standards, the company’s steel needs range from
specialized alloys, which are available only from a limited group of approved suppliers, to commodity types of alloys. These
raw materials have historically exhibited price and demand cyclicality. Some of these materials have been, and in the future
may be, in short supply, particularly in the event of mill shutdowns or production cut backs. As some steel alloys require
specialized manufacturing procedures, Snap-on could experience inventory shortages if it were required to use an
alternative manufacturer on short notice. Additionally, unexpected price increases for raw materials could result in higher
prices to Snap-on’s customers or an erosion of the margins on its products.
Snap-on believes its ability to sell product is also dependent on the number of vehicles on the road, the number of miles
driven and the general aging of vehicles. These factors affect the frequency, type and amount of service and repair
performed on vehicles by technicians, and therefore affect the demand for the number of technicians, the prosperity of the
technicians and, consequently, the demand technicians have for the company’s tools, other products and services, and the
value technicians place on those products and services. The use of other methods of transportation, including more frequent
use of public transportation, 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 the company’s products.
To the extent that commodity prices increase and the company does not have firm pricing agreements with its suppliers, the
company may experience margin declines to the extent that it is not able to increase the selling prices of its products.
58
SNAP-ON INCORPORATED
Item 8: Financial Statements and Supplementary Data
The financial statements and schedules are listed in Item 15(a) and are incorporated by reference into this Item 8.
Item 9: Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Snap-on maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that
material information relating to the company and its consolidated subsidiaries is timely communicated to the officers who certify
Snap-on’s financial reports and to other members of senior management and the Board, as appropriate.
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the company’s management
evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and
operation of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of December 30, 2017. Based upon their evaluation of these disclosure controls and procedures, the Chief
Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of
December 30, 2017, to ensure that information required to be disclosed by the company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and
Exchange Commission rules and forms, and to ensure that information required to be disclosed by the company in the reports
it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its
principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure.
Changes in Internal Control
During the quarter ended December 30, 2017, the company implemented a plan that calls for modifications and additions
to internal control over financial reporting related to the accounting for revenues as a result of the new revenue recognition
standard, ASC 606. The modified and new controls have been designed to address risks associated with recognizing
revenue under the new standard. The company has added additional controls over financial reporting by enhancing the
contract review process to include the attributes related to revenue recognition as well as to provide for the gathering of the
disclosure information needed under the new requirements. There were no other changes in internal controls during the
quarter ended December 30, 2017, that have materially affected, or are reasonably likely to materially affect, the company’s
internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)).
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, we evaluated the effectiveness of our internal control over financial reporting based on the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013).
Based on this assessment, the company’s management believes that, as of December 30, 2017, our internal control over
financial reporting was effective at a reasonable assurance level. The company’s internal control over financial reporting as
of December 30, 2017, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in its attestation report, which is included herein.
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our internal control
over financial reporting will prevent all error or fraud. Because of inherent limitations, a system of internal control over
financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because
of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
2017 ANNUAL REPORT
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Snap-on Incorporated:
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Snap-on Incorporated and subsidiaries (the “Company”) as
of December 30, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 30, 2017, based on criteria
established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements as of and for the year ended December 30, 2017, of the Company and
our report dated February 15, 2018, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 15, 2018
60
SNAP-ON INCORPORATED
Item 9B: Other Information
None.
PART III
Item 10: Directors, Executive Officers and Corporate Governance
Incorporated by reference to sections entitled “Item 1: Election of Directors,” “Corporate Governance Practices and Board
Information” and “Other Information” in Snap-on’s 2017 Annual Meeting Proxy Statement, which is expected to be mailed to
shareholders on or about March 9, 2018 (the “2018 Proxy Statement”).
The Section 16(a) filing compliance disclosure pursuant to Item 405 of Regulation S-K is contained in Snap-on’s 2018 Proxy
Statement in the section entitled “Other Information – Section 16(a) Beneficial Ownership Reporting Compliance,” and is
incorporated herein by reference.
Information regarding Snap-on’s executive officers, including their ages, business experience (for at least the last five years)
and titles as of December 30, 2017, is presented below:
Nicholas T. Pinchuk (71) – Chairman of the Board of Directors since 2009, President and Chief Executive Officer since
December 2007 and President and Chief Operating Officer from April to December 2007. Senior Vice President and President
– Worldwide Commercial & Industrial Group from 2002 to 2007. Prior to joining Snap-on, Mr. Pinchuk held various positions,
including President of Global Refrigeration Operations and President of Asia Pacific Operations, at Carrier Corporation, a
producer of air conditioning, heating and refrigeration systems, and a subsidiary of United Technologies Corporation. Mr.
Pinchuk serves on the board of directors of Columbus McKinnon Corporation.
Aldo J. Pagliari (63) – Senior Vice President – Finance and Chief Financial Officer since 2010.
Anup R. Banerjee (67) – Senior Vice President, Human Resources and Chief Development Officer since 2015, and President,
Commercial Group from 2011 to 2015.
Iain Boyd (55) – Vice President, Operations Development since 2015. Vice President – Human Resources from 2007 to 2015.
Thomas L. Kassouf (65) – Senior Vice President and President – Snap-on Tools Group since 2010.
June C. Lemerand (55) – Vice President and Chief Information Officer since 2017. Vice President of Information Technology
Services from 2015 to 2017, and Senior Director, Information Technology Sales and Marketing Applications from 2005 to
2015.
Irwin M. Shur (59) – Vice President, General Counsel and Secretary since 2008.
Richard K. Strege (60) – Vice President and Controller since 2017. Vice President, Internal Audit, Controls and Compliance
from 2007 to 2017.
Thomas J. Ward (65) – Senior Vice President and President – Repair Systems & Information Group since 2010.
There is no family relationship among the executive officers and there has been no involvement in legal proceedings during
the past ten years that would be material to the evaluation of the ability or integrity of any of the executive officers. Executive
officers may either be elected by the Board or may be appointed by the Chief Executive Officer at the regular meeting of the
Board that follows the Annual Shareholders’ Meeting, which is ordinarily held in April each year, or at such other times as new
positions are created or vacancies must be filled.
2017 ANNUAL REPORT
61
Code of Ethics and Website Disclosure
Snap-on has adopted a written code of ethics that applies to its Chief Executive Officer, Chief Financial Officer, Vice President
and Controller, and all other financial officers and executives performing similar functions. Snap-on has posted a copy of the
code of ethics in the Investors/Corporate Governance section on the company’s website at www.snapon.com. 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.
Snap-on intends to satisfy the disclosure requirements under Item 10 of Form 8-K regarding amendments to, or waivers from,
the code of ethics by posting such information in the “Investors” section of its corporate website at www.snapon.com.
Item 11: Executive Compensation
The information required by Item 11 is contained in Snap-on’s 2018 Proxy Statement in the sections entitled “Executive
Compensation,” “Board Compensation,” “Compensation Committee Report,” and “Other Information” and is incorporated
herein by reference.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information about Snap-on’s equity compensation plans at 2017 year end:
Number of securities to
be issued upon
exercise of outstanding
options, warrants and
rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)
3,606,096 (1)
$117.66 (2)
4,219,539 (3)
62,807 (4)
3,668,903
Not Applicable
$117.66 (2)
–
(5)
4,219,539 (5)
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
(1) Includes (i) options to acquire 476,028 shares granted under the 2001 Incentive Stock and Awards Plan (the “2001 Plan”); (ii) options and stock
appreciation rights to acquire 3,081,885 shares granted under the 2011 Incentive Stock and Awards Plan (the “2011 Plan,” and collectively with the
2001 Plan, the “Incentive Plans”); and (iii) 48,183 shares represented by deferred share units under the Directors’ Fee Plan. Excludes 50,528 shares
issuable in connection with the vesting of restricted stock units and restricted stock under the 2001 Plan, and 207,335 shares issuable in connection
with the vesting of performance share awards, restricted stock units and restricted stock under the 2011 Plan. Also excludes shares of common stock
that may be issuable under the employee and franchisee stock purchase plans.
(2) Reflects only the weighted-average exercise price of outstanding stock options and stock appreciation rights granted under the Incentive Plans and
does not include shares represented by deferred share units under the Directors’ Fee Plan and shares issuable in connection with the vesting of
restricted stock units or performance units under the Incentive Plans for which there are no exercise prices. Also excludes shares of common stock
that may be issuable under the employee and franchisee stock purchase plans.
(3) Includes (i) 3,296,859 shares reserved for issuance under the 2011 Plan; (ii) 169,080 shares reserved for issuance under the Directors’ Fee Plan; and
(iii) 753,600 shares reserved for issuance under the employee stock purchase plan.
(4) Consists of deferred share units under Snap-on’s Deferred Compensation Plan, which allows elected and appointed officers of Snap-on to defer all or
a percentage of their respective annual salary and/or incentive compensation. The deferred share units are payable in shares of Snap-on common
stock on a one-for-one basis and are calculated at fair market value. Shares of common stock delivered under the Deferred Compensation Plan are
previously issued shares reacquired and held by Snap-on.
(5) The Deferred Compensation Plan provides that Snap-on will make available, as and when required, a sufficient number of shares of common stock to
meet the needs of the plan. It further provides that such shares shall be previously issued shares reacquired and held by Snap-on.
62
SNAP-ON INCORPORATED
The additional information required by Item 12 is contained in Snap-on’s 2018 Proxy Statement in the sections entitled
“Executive Compensation,” “Security Ownership of Certain Beneficial Owners and Management,” and “Other Information,”
and is incorporated herein by reference.
Item 13: Certain Relationships and Related Transactions, and Director Independence
Incorporated by reference to the sections entitled “Corporate Governance Practices and Board Information – Board
Information” and “Other Information – Transactions with the Company” in Snap-on’s 2018 Proxy Statement.
Item 14: Principal Accounting Fees and Services
Incorporated by reference to the section entitled “Deloitte & Touche LLP Fee Disclosure” in Snap-on’s 2018 Proxy Statement.
PART IV
Item 15: Exhibits, Financial Statement Schedules
Item 15(a): Documents Filed as Part of This Report:
1. List of Financial Statements
Unless otherwise indicated, references to “fiscal 2017” or “2017” refer to the fiscal year ended December 30, 2017;
references to “fiscal 2016” or “2016” refer to the fiscal year ended December 31, 2016; and references to “fiscal 2015” or
“2015” refer to the fiscal year ended January 2, 2016. References to 2017, 2016 and 2015 year end refer to December 30,
2017, December 31, 2016, and January 2, 2016, respectively.
The following consolidated financial statements of Snap-on and the Report of Independent Registered Public Accounting Firm
thereon, are filed as part of this report:
(cid:120) Report of Independent Registered Public Accounting Firm.
(cid:120) Consolidated Statements of Earnings for the 2017, 2016 and 2015 fiscal years.
(cid:120) Consolidated Statements of Comprehensive Income for the 2017, 2016 and 2015 fiscal years.
(cid:120) Consolidated Balance Sheets as of 2017 and 2016 year end.
(cid:120) Consolidated Statements of Equity for the 2017, 2016 and 2015 fiscal years.
(cid:120) Consolidated Statements of Cash Flows for the 2017, 2016 and 2015 fiscal years.
(cid:120) Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
All schedules are omitted because they are not applicable, or the required information is included in the consolidated financial
statements or notes thereto.
2017 ANNUAL REPORT
63
3. List of Exhibits (*)
(3)
(a) Restated Certificate of Incorporation of Snap-on Incorporated, as amended through April 25, 2013 (incorporated
by reference to Exhibit 3.1 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly period ended
September 28, 2013 (Commission File No. 1-7724))
(b) Bylaws of Snap-on Incorporated, as amended and restated as of April 25, 2013 (incorporated by reference to
Exhibit 3.2 to Snap-on’s Current Report on Form 8-K dated April 25, 2013 (Commission File No. 1-7724))
(4)
(a)
Indenture, dated as of January 8, 2007, between Snap-on Incorporated and U.S. Bank National Association as
trustee (incorporated by reference to Exhibit (4)(b) to Form S-3 Registration Statement (Registration No.
333-139863))
(b) Officer's Certificate, dated as of February 24, 2009, providing for the $200,000,000 6.70% Notes due 2019
(incorporated by reference to Exhibit 4.2 to Snap-on's Current Report on Form 8-K dated February 19, 2009
(Commission File No. 1-7724))
(c) Officer's Certificate, dated as of August 14, 2009, providing for the $250,000,000 6.125% Notes due 2021
(incorporated by reference to Exhibit 4.1 to Snap-on's Current Report on Form 8-K dated August 11, 2009
(Commission File No. 1-7724))
(d) Officer's Certificate, dated as of February 21, 2017, providing for the $300,000,000 3.25% Notes due 2027
(incorporated by reference to Exhibit 4.2 to Snap-on's Current Report on Form 8-K dated February 15, 2017
(Commission File No. 1-7724))
Except for the foregoing, Snap-on and its subsidiaries have no unregistered long-term debt agreement for which the related
outstanding debt exceeds 10% of consolidated total assets as of December 30, 2017. Copies of debt instruments for which
the related debt is less than 10% of consolidated total assets will be furnished to the Commission upon request.
(10) Material Contracts
(a) Amended and Restated Snap-on Incorporated 2001 Incentive Stock and Awards Plan (Amended and Restated
as of April 27, 2006, as further amended on August 6, 2009) (incorporated by reference to Exhibit 10.1 to
Snap-on’s Quarterly Report on Form 10-Q for the quarterly period ended October 3, 2009 (Commission File
No. 1-7724))** (superseded except as to outstanding awards)
(b) Snap-on Incorporated 2011 Incentive Stock and Awards Plan (As Amended and Restated)** (Reflects non-
material changes finalized in November 2017.)
(c) Form of Restated Executive Agreement between Snap-on Incorporated and each of its executive officers**
(Reflects non-material changes finalized in November 2017.)
(d)(1) Form of Indemnification Agreement between Snap-on Incorporated and certain executive officers (incorporated
by reference to Exhibit 10.1 to Snap-on's Annual Report on Form 10-K for the fiscal year ended January 1,
2011 (Commission File No. 1-7724))**
(d)(2) Form of Indemnification Agreement between Snap-on Incorporated and directors (incorporated by reference to
Exhibit 10.1 to Snap-on's Annual Report on Form 10-K for the fiscal year ended January 1, 2011 (Commission
File No. 1-7724))**
(e)(1) Amended and Restated Snap-on Incorporated Directors’ 1993 Fee Plan (as amended through August 5, 2010)
(incorporated by reference to Exhibit 10.1 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly period
ended October 2, 2010 (Commission File No. 1-7724))**
(e)(2) Amendment to Amended and Restated Snap-on Incorporated Directors' 1993 Fee Plan (incorporated by
reference to Exhibit 10(e)(2) to Snap-on’s Annual Report on Form 10-K for the fiscal year ended December 28,
2013 (Commission File No. 1-7724))**
64
SNAP-ON INCORPORATED
(f)(1) Snap-on Incorporated Deferred Compensation Plan (as amended and restated as of September 1, 2011)
(incorporated by reference to Exhibit 10(g) to Snap-on’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2011 (Commission File No. 1-7724))**
(f)(2) Amendment to Snap-on Incorporated Deferred Compensation Plan (incorporated by reference to Exhibit
10(f)(2) to Snap-on’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013 (Commission
File No. 1-7724))**
(g) Snap-on Incorporated Supplemental Retirement Plan for Officers (as amended through June 11, 2010)
(incorporated by reference to Exhibit 10.2 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly period
ended July 3, 2010 (Commission File No. 1-7724))**
(h) Form of Non-Qualified Stock Option Agreement under the 2001 Incentive Stock and Awards Plan (and
accompanying Non-Qualified Stock Option Grant Offer Letter) (incorporated by reference to Exhibit 10.1 to
Snap-on’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007 (Commission File No.
1-7724))** (superseded except as to outstanding awards)
(i)
Form of Restricted Stock Unit Agreement for Directors under the 2001 Incentive Stock and Awards Plan (and
accompanying Restricted Stock Unit Offer Letter) (incorporated by reference to Exhibit 10.2 to Snap-on’s
Quarterly Report on Form 10-Q for the quarterly period ended October 3, 2009 (Commission File No. 1-7724))**
(superseded except as to outstanding awards)
(j) Form of Non-Qualified Stock Option Agreement under the 2011 Incentive Stock and Awards Plan (and
accompanying Non-Qualified Stock Option Grant Offer Letter) (incorporated by reference to Exhibit 10.1 to
Snap-on’s Quarterly Report on Form 10-Q for the quarterly period ended October 1, 2011 (Commission File
No. 1-7724))**
(k) Form of Performance Share Unit Award Agreement under the 2011 Incentive Stock and Awards Plan
(incorporated by reference to Exhibit 10.1 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2012 (Commission File No. 1-7724))**
(l)
Form of Restricted Unit Award Agreement for Executive Officers under the 2011 Incentive Stock and Awards
Plan (incorporated by reference to Exhibit 10.1 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2012 (Commission File No. 1-7724))**
(m) Form of Restricted Unit Award Agreement for Directors under the 2011 Incentive Stock and Awards Plan
(incorporated by reference to Exhibit 10.1 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2012 (Commission File No. 1-7724))**
(n) Form of Restricted Stock Award Agreement for Directors under the 2011 Incentive Stock and Awards Plan
(incorporated by reference to Exhibit 10.1 to Snap-on’s Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 2013 (Commission File No. 1-7724))**
(o) Second Amended and Restated Five Year Credit Agreement, dated as of December 15, 2015, among Snap-on
Incorporated and the lenders and agents listed on the signature pages thereof, and J.P. Morgan Securities
LLC, Citigroup Global Markets Inc. and U.S. Bank National Association as joint lead arrangers and joint
bookrunners (incorporated by reference to Exhibit 10.1 to Snap-on’s Current Report on Form 8-K dated
December 15, 2015 (Commission File No. 1-7724))
(p) Underwriting Agreement, dated as of February 15, 2017, among Snap-on Incorporated, Citigroup Global
Markets Inc. and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein.
(incorporated by reference to Exhibit 1.1 to Snap-on’s Current Report on Form 8-K dated February 15, 2017
(Commission File No. 1-7724))
(12) Computation of Ratio of Earnings to Fixed Charges
2017 ANNUAL REPORT
65
(14)
Snap-on Incorporated Section 406 of the Sarbanes-Oxley Act Code of Ethics (incorporated by reference to Exhibit
10(aa) to Snap-on’s Annual Report on Form 10-K for the fiscal year ended January 3, 2004 (Commission File No.
1-7724))
(21) Subsidiaries of the Corporation
(23) Consent of Independent Registered Public Accounting Firm
(31.1) Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(31.2) Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32.1) Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(32.2) Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
(101.INS) XBRL Instance Document***
(101.SCH) XBRL Taxonomy Extension Schema Document***
(101.CAL) XBRL Taxonomy Extension Calculation Linkbase Document***
(101.DEF) XBRL Taxonomy Extension Definition Linkbase Document***
(101.LAB) XBRL Taxonomy Extension Label Linkbase Document***
(101.PRE) XBRL Taxonomy Extension Presentation Linkbase Document***
*
Filed electronically or incorporated by reference as an exhibit to this Annual Report on Form 10-K. Copies of any materials the company files with
the SEC can also be obtained free of charge through the SEC’s website at www.sec.gov. The SEC’s Public Reference Room can be contacted at
100 F Street, N.E., Washington, D.C. 20549, or by calling the SEC’s Public Reference Room at 1-800-732-0330.
** Represents a management compensatory plan or agreement.
*** Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated
Statements of Earnings for the twelve months ended December 30, 2017, December 31, 2016, and January 2, 2016; (ii) Consolidated Statements of
Comprehensive Income for the twelve months ended December 30, 2017, December 31, 2016, and January 2, 2016; (iii) Consolidated Balance
Sheets as of December 30, 2017, and December 31, 2016; (iv) Consolidated Statements of Equity for the twelve months ended December 30, 2017,
December 31, 2016, and January 2, 2016; (v) Consolidated Statements of Cash Flows for the twelve months ended December 30, 2017, December
31, 2016, and January 2, 2016; and (vi) Notes to Consolidated Financial Statements.
Item 16: Form 10-K Summary
None.
66
SNAP-ON INCORPORATED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Snap-on Incorporated:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Snap-on Incorporated and subsidiaries (the
"Company") as of December 30, 2017, and December 31, 2016, and the related consolidated statements of earnings,
comprehensive income, equity, and cash flows for each of the three years in the period ended December 30, 2017, and the
related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 30, 2017, and December 31, 2016, and the
results of its operations and its cash flows for each of the three years in the period ended December 30, 2017, in conformity
with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company's internal control over financial reporting as of December 30, 2017, based on criteria established
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 15, 2018, expressed an unqualified opinion on the Company's internal control
over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/ DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 15, 2018
We have served as the Company's auditor since 2002.
2017 ANNUAL REPORT
67
Snap-on Incorporated - Consolidated Statements of Earnings
(Amounts in millions, except per share data)
Net sales
Cost of goods sold
Gross profit
Operating expenses
2017
2016
2015
$ 3,686.9
$ 3,430.4
$ 3,352.8
(1,862.0)
(1,720.8)
(1,704.5)
1,824.9
1,709.6
1,648.3
(1,160.9)
(1,054.1)
(1,053.7)
Operating earnings before financial services
664.0
655.5
594.6
Financial services revenue
Financial services expenses
Operating earnings from financial services
Operating earnings
Interest expense
Other income (expense) – net
Earnings before income taxes and equity earnings
Income tax expense
Earnings before equity earnings
Equity earnings, net of tax
Net earnings
Net earnings attributable to noncontrolling interests
313.4
(95.9)
217.5
881.5
(52.4)
(7.2)
821.9
(250.9)
571.0
1.2
572.2
(14.5)
281.4
(82.7)
198.7
854.2
(52.2)
(0.6)
801.4
(244.3)
557.1
2.5
559.6
(13.2)
240.3
(70.1)
170.2
764.8
(51.9)
(2.4)
710.5
(221.2)
489.3
1.3
490.6
(11.9)
Net earnings attributable to Snap-on Incorporated
$ 557.7
$ 546.4
$ 478.7
Net earnings per share attributable to
Snap-on Incorporated:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Effect of dilutive securities
Diluted
$
9.72
$
9.40
$
9.52
9.20
57.4
1.2
58.6
58.1
1.3
59.4
8.24
8.10
58.1
1.0
59.1
See Notes to Consolidated Financial Statements.
68
SNAP-ON INCORPORATED
Snap-on Incorporated - Consolidated Statements of Comprehensive Income
(Amounts in millions)
Comprehensive income (loss):
Net earnings
Other comprehensive income (loss):
Foreign currency translation*
Unrealized cash flow hedges, net of tax:
Other comprehensive income before reclassifications
Reclassification of cash flow hedges to net earnings
Defined benefit pension and postretirement plans:
Net prior service costs and credits and unrecognized gain (loss)
Income tax benefit (expense)
Net of tax
Amortization of net prior service costs and credits and
unrecognized loss included in net periodic benefit cost
Income tax benefit
Net of tax
Total comprehensive income
2017
2016
2015
$
572.2
$
559.6
$
490.6
135.2
(99.2)
(110.8)
6.9
(1.6)
15.9
(4.1)
11.8
26.6
(9.4)
17.2
741.7
8.8
(0.3)
(93.3)
30.7
(62.6)
30.1
(11.1)
19.0
425.3
–
(0.3)
(48.3)
19.4
(28.9)
38.0
(14.0)
24.0
374.6
Comprehensive income attributable to noncontrolling interests
(14.5)
(13.2)
(11.9)
Comprehensive income attributable to Snap-on Incorporated
$
727.2
$
412.1
$
362.7
* There is no reclassification adjustment as there was no sale or liquidation of any foreign entity during any period presented.
See Notes to Consolidated Financial Statements.
2017 ANNUAL REPORT
69
Snap-on Incorporated - Consolidated Balance Sheets
(Amounts in millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents
Trade and other accounts receivable – net
Finance receivables – net
Contract receivables – net
Inventories – net
Prepaid expenses and other assets
Total current assets
Property and equipment – net
Deferred income tax assets
Long-term finance receivables – net
Long-term contract receivables – net
Goodwill
Other intangibles – net
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt
Accounts payable
Accrued benefits
Accrued compensation
Franchisee deposits
Other accrued liabilities
Total current liabilities
Long-term debt
Deferred income tax liabilities
Retiree health care benefits
Pension liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 15)
Equity
Shareholders’ equity attributable to Snap-on Incorporated:
Preferred stock (authorized 15,000,000 shares of $1 par value; none
outstanding)
Common stock (authorized 250,000,000 shares of $1 par value; issued
67,407,704 and 67,400,250 shares, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock at cost (10,717,455 and 9,450,393 shares, respectively)
Total shareholders’ equity attributable to Snap-on Incorporated
Noncontrolling interests
Total equity
Total liabilities and equity
Fiscal Year End
2017
2016
92.0
675.6
505.4
96.8
638.8
110.7
2,119.3
484.4
52.0
1,039.2
322.6
924.1
253.7
53.8
5,249.1
433.2
178.2
55.8
71.5
66.5
388.1
1,193.3
753.6
28.4
36.0
158.9
106.6
2,276.8
–
67.4
343.2
3,772.3
(329.0)
(900.0)
2,953.9
18.4
2,972.3
5,249.1
$
$
$
$
77.6
598.8
472.5
88.1
530.5
116.5
1,884.0
425.2
72.8
934.5
286.7
895.5
184.6
39.9
4,723.2
301.4
170.9
52.8
89.8
66.7
307.9
989.5
708.8
13.1
36.7
246.5
93.4
2,088.0
–
67.4
317.3
3,384.9
(498.5)
(653.9)
2,617.2
18.0
2,635.2
4,723.2
$
$
$
$
See Notes to Consolidated Financial Statements.
70
SNAP-ON INCORPORATED
Snap-on Incorporated - Consolidated Statements of Equity
(Amounts in millions, except share data)
Balance at January 3, 2015
Net earnings for 2015
Other comprehensive loss
Cash dividends – $2.20 per share
Stock compensation plans
Share repurchases – 723,000 shares
Tax benefit from certain stock options
Dividend reinvestment plan and other
Balance at January 2, 2016
Net earnings for 2016
Other comprehensive loss
Cash dividends – $2.54 per share
Stock compensation plans
Share repurchases – 758,000 shares
Other
Balance at December 31, 2016
Net earnings for 2017
Other comprehensive income
Cash dividends – $2.95 per share
Stock compensation plans
Share repurchases – 1,820,000 shares
Other
Balance at December 30, 2017
Shareholders’ Equity Attributable to Snap-on Incorporated
Common
Stock
67.4
–
–
–
–
–
–
–
67.4
–
–
–
–
–
–
67.4
–
–
–
–
–
–
67.4
$
$
Additional
Paid-in
Capital
$ 254.7
–
–
–
23.3
–
18.3
–
296.3
–
–
–
21.0
–
–
317.3
–
–
–
25.9
–
–
$ 343.2
Retained
Earnings
$ 2,637.2
478.7
–
(127.9)
–
–
–
(1.1)
2,986.9
546.4
–
(147.5)
–
–
(0.9)
3,384.9
557.7
–
(169.4)
–
–
(0.9)
$ 3,772.3
Accumulated
Other
Comprehensive
Income (Loss)
(248.2)
$
–
(116.0)
–
–
–
–
–
(364.2)
–
(134.3)
–
–
–
–
(498.5)
–
169.5
–
–
–
–
(329.0)
$
Treasury
Stock
$ (503.3)
–
–
–
40.0
(110.4)
–
–
(573.7)
–
–
–
40.2
(120.4)
–
(653.9)
–
–
–
41.8
(287.9)
–
(900.0)
$
See Notes to Consolidated Financial Statements.
$
Noncontrolling
Interests
17.5
11.9
–
–
–
–
–
(11.4)
18.0
13.2
–
–
–
–
(13.2)
18.0
14.5
–
–
–
–
(14.1)
18.4
$
Total Equity
$ 2,225.3
490.6
(116.0)
(127.9)
63.3
(110.4)
18.3
(12.5)
2,430.7
559.6
(134.3)
(147.5)
61.2
(120.4)
(14.1)
2,635.2
572.2
169.5
(169.4)
67.7
(287.9)
(15.0)
$ 2,972.3
2017 ANNUAL REPORT
71
Snap-on Incorporated - Consolidated Statements of Cash Flows
(Amounts in millions)
Operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation
Amortization of other intangibles
Provision for losses on finance receivables
Provision for losses on non-finance receivables
Stock-based compensation expense
Excess tax benefits from stock-based compensation
Deferred income tax provision (benefit)
Loss (gain) on sales of assets
Settlement of treasury lock
Changes in operating assets and liabilities, net of effects of acquisitions:
Increase in trade and other accounts receivable
Increase in contract receivables
Increase in inventories
Increase in prepaid and other assets
Increase (decrease) in accounts payable
Increase (decrease) in accruals and other liabilities
Net cash provided by operating activities
Investing activities:
Additions to finance receivables
Collections of finance receivables
Capital expenditures
Acquisitions of businesses, net of cash acquired
Disposals of property and equipment
Other
Net cash used by investing activities
Financing activities:
Proceeds from issuance of long-term debt
Repayment of long-term debt
Proceeds from notes payable
Repayments of notes payable
Net increase (decrease) in other short-term borrowings
Cash dividends paid
Purchases of treasury stock
Proceeds from stock purchase and option plans
Excess tax benefits from stock-based compensation
Other
Net cash used by financing activities
2017
2016
2015
$ 572.2
$ 559.6
$ 490.6
65.6
27.6
54.6
10.5
30.3
–
12.3
(0.2)
14.9
(55.5)
(41.8)
(76.0)
(10.0)
(2.2)
6.2
608.5
(892.0)
712.7
(82.0)
(82.9)
1.5
1.3
(341.4)
297.8
(150.0)
16.8
(4.5)
18.3
(169.4)
(287.9)
46.2
–
(23.4)
(256.1)
61.4
24.2
44.0
7.5
31.0
–
1.3
0.2
–
(41.0)
(31.9)
(32.7)
(11.9)
16.3
(51.9)
576.1
(915.0)
671.7
(74.3)
(160.4)
2.2
2.4
(473.4)
–
–
4.5
(5.3)
135.0
(147.5)
(120.4)
41.8
–
(24.1)
(116.0)
57.8
24.7
31.6
13.6
39.8
(18.3)
(5.1)
(2.1)
–
(44.7)
(34.6)
(43.3)
(28.2)
4.7
20.7
507.2
(844.2)
624.8
(80.4)
(11.8)
3.5
1.7
(306.4)
–
–
7.1
(6.3)
(34.8)
(127.9)
(110.4)
41.6
18.3
(24.3)
(236.7)
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
3.4
14.4
77.6
$ 92.0
(1.9)
(15.2)
92.8
$ 77.6
(4.2)
(40.1)
132.9
$ 92.8
Supplemental cash flow disclosures:
Cash paid for interest
Net cash paid for income taxes
See Notes to Consolidated Financial Statements.
$
(51.2)
(228.1)
$ (51.0)
(247.3)
$ (50.8)
(191.9)
72
SNAP-ON INCORPORATED
Notes to Consolidated Financial Statements
Note 1: Summary of Accounting Policies
Principles of consolidation and presentation: The Consolidated Financial Statements include the accounts of Snap-on
Incorporated and its wholly-owned and majority-owned subsidiaries (collectively, “Snap-on” or “the company”).
Snap-on accounts for investments in unconsolidated affiliates where Snap-on has a greater than 20% but less than 50%
ownership interest under the equity method of accounting. Investments in unconsolidated affiliates of $18.6 million as of
December 30, 2017, and $15.2 million as of December 31, 2016, are included in “Other assets” on the accompanying
Consolidated Balance Sheets; no equity investment dividends were received in any period presented. In the normal course
of business, the company may purchase products or services from, or sell products or services to, unconsolidated affiliates.
Purchases from unconsolidated affiliates were $11.6 million, $12.9 million and $13.4 million in 2017, 2016 and 2015,
respectively, and sales to unconsolidated affiliates were $0.5 million in 2017, $0.2 million in 2016 and zero in 2015. The
Consolidated Financial Statements do not include the accounts of the company’s independent franchisees. Snap-on’s
Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United
States of America (“GAAP”). All intercompany accounts and transactions have been eliminated.
Fiscal year accounting period: Snap-on’s fiscal year ends on the Saturday that is on or nearest to December 31. The
2017 fiscal year ended on December 30, 2017 (“2017”). The 2016 fiscal year ended on December 31, 2016 (“2016”). The
2015 fiscal year ended on January 2, 2016 (“2015”). The 2017, 2016, and 2015 fiscal years each contained 52 weeks of
operating results.
Use of estimates: The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Financial instruments: The fair value of the company’s derivative financial instruments is generally determined using
quoted prices in active markets for similar assets and liabilities. The carrying value of the company’s non-derivative financial
instruments either approximates fair value, due to their short-term nature, or the amount disclosed for fair value is based
upon a discounted cash flow analysis or quoted market values. See Note 10 for further information on financial instruments.
Revenue recognition: Snap-on recognizes revenue from the sale of tools and diagnostic and equipment products when
contract terms are met, the price is fixed or determinable, collectability is reasonably assured and a product is shipped or
risk of ownership has been transferred to and accepted by the customer. For sales contingent upon customer acceptance,
revenue recognition is deferred until such obligations are fulfilled. Estimated product returns are recorded as a reduction
in reported revenues at the time of sale based upon historical product return experience and gross profit margin adjusted
for known trends. Provisions for customer volume rebates, discounts and allowances are also recorded as a reduction of
reported revenues at the time of sale based on historical experience and known trends. Revenue related to extended
warranty and subscription agreements is recognized over the terms of the respective agreements.
Snap-on also recognizes revenue related to multiple element arrangements, including sales of hardware, software and
software-related services. When a sales arrangement contains multiple elements, such as hardware and software products
and/or services, Snap-on uses the relative selling price method to allocate revenues between hardware and software
elements. For software elements that are not essential to the hardware’s functionality and related software post-contract
customer support, vendor specific objective evidence (“VSOE”) of fair value is used to further allocate revenue to each
element based on its relative fair value and, when necessary, the residual method is used to assign value to the delivered
elements when VSOE only exists for the undelivered elements. The amount assigned to the products or services is
recognized when the product is delivered and/or when the services are performed. In instances where the product and/or
services are performed over an extended period, as is the case with subscription agreements or the providing of ongoing
support, revenue is generally recognized on a straight-line basis over the term of the agreement, which generally ranges
from 12 to 60 months.
Franchise fee revenue, including nominal, non-refundable initial fees, is recognized upon the granting of a franchise, which
is when the company has performed substantially all initial services required by the franchise agreement. Franchise fee
revenue also includes ongoing monthly fees (primarily for sales and business training as well as marketing and product
promotion programs) that are recognized as the fees are earned. Franchise fee revenue totaled $15.2 million, $13.9 million
and $12.7 million in 2017, 2016 and 2015, respectively.
2017 ANNUAL REPORT
73
Notes to Consolidated Financial Statements (continued)
Financial services revenue: 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 and diagnostic and equipment products on an extended-term payment plan; and (ii) business
loans and vehicle leases to franchisees. These financing programs are offered through Snap-on’s wholly owned finance
subsidiaries. Financial services revenue consists primarily of interest income on finance and contract receivables and is
recognized over the life of the underlying contracts, with interest computed primarily on the average daily balances of the
underlying contracts.
The decision to finance through Snap-on or another financing source is solely at the election of the customer. When
assessing customers for potential financing, Snap-on considers various factors regarding ability to pay, including the
customers’ financial condition, debt-servicing ability, past payment experience, and credit bureau and proprietary Snap-on
credit model information, as well as the value of the underlying collateral. For finance and contract receivables, Snap-on
assesses these factors through the use of credit quality indicators consisting primarily of customer credit risk scores
combined with internal credit risk grades, collection experience and other internal metrics.
Financial services lease arrangements: Snap-on accounts for its financial services leases as direct financing or sales-
type leases. The company determines the gross investment in the lease as the present value of the minimum lease
payments using the interest rate implicit in the lease, net of amounts, if any, included therein for executor costs to be paid
by Snap-on, together with any profit thereon. The difference between the gross investment in the lease and the related
undiscounted minimum lease payments for the leased property is reported as unearned finance charges. Unearned finance
charges are amortized to income over the life of the contract. The default covenants included in the lease arrangements
are usual and customary, consistent with industry practice, and do not impact the lease classification. Except in
circumstances where the company has concluded that a lessee’s financial condition has deteriorated, the other default
covenants under Snap-on’s lease arrangements are objectively determinable.
Research and engineering: Snap-on incurred research and engineering costs of $60.9 million, $53.4 million and $49.3
million in 2017, 2016 and 2015, respectively. Research and engineering costs are included in “Operating expenses” on the
accompanying Consolidated Statements of Earnings.
Internally developed software: Costs incurred in the development of software that will ultimately be sold are capitalized
from the time technological feasibility has been attained and capitalization ceases when the related product is ready for
general release. During 2017, 2016 and 2015, Snap-on capitalized $11.3 million, $10.8 million and $14.9 million,
respectively, of such costs. Amortization of capitalized software development costs, which is included in “Cost of goods
sold” on the accompanying Consolidated Statements of Earnings, was $14.7 million in 2017, $13.8 million in 2016 and
$14.0 million in 2015. Unamortized capitalized software development costs of $43.6 million as of 2017 year end and $47.4
million as of 2016 year end are included in “Other intangibles – net” on the accompanying Consolidated Balance Sheets.
Internal-use software: Costs that are incurred in creating software solutions and enhancements to those solutions are
capitalized only for the application development stage of the project.
Shipping and handling: Amounts billed to customers for shipping and handling are included as a component of sales.
Costs incurred by Snap-on for shipping and handling are included as a component of cost of goods sold when the costs
relate to manufacturing activities. In 2017, 2016 and 2015, Snap-on incurred shipping and handling charges of $49.7 million,
$43.1 million and $39.0 million, respectively, that were recorded in “Cost of goods sold” on the accompanying Consolidated
Statements of Earnings. Shipping and handling costs incurred in conjunction with selling or distribution activities are included
as a component of operating expenses. Shipping and handling charges were $82.3 million in 2017, $81.2 million in 2016
and $78.5 million in 2015; these charges were recorded in “Operating expenses” on the accompanying Consolidated
Statements of Earnings.
Advertising and promotion: Production costs of future media advertising are deferred until the advertising occurs. All
other advertising and promotion costs are expensed when incurred. For 2017, 2016 and 2015, advertising and promotion
expenses totaled $55.7 million, $52.6 million and $54.9 million, respectively. Advertising and promotion costs are included
in “Operating expenses” on the accompanying Consolidated Statements of Earnings.
Warranties: Snap-on provides product warranties for specific product lines and accrues for estimated future warranty costs
in the period in which the sale is recorded. See Note 15 for information on warranties.
74
SNAP-ON INCORPORATED
Foreign currency: The financial statements of Snap-on’s foreign subsidiaries are translated into U.S. dollars. Assets and
liabilities of foreign subsidiaries are translated at current rates of exchange, and income and expense items are translated
at the average exchange rates for the period. The resulting translation adjustments are recorded directly into “Accumulated
other comprehensive loss” on the accompanying Consolidated Balance Sheets. Foreign exchange transactions, net of
foreign currency hedges, resulted in pretax losses of $7.0 million, $1.3 million and $2.7 million in 2017, 2016 and 2015,
respectively. Foreign exchange transaction gains and losses are reported in “Other income (expense) – net” on the
accompanying Consolidated Statements of Earnings.
Income taxes: Current tax assets and liabilities are based upon an estimate of taxes refundable or payable for each of the
jurisdictions in which the company is subject to tax. In the ordinary course of business, there is inherent uncertainty in
quantifying income tax positions. Snap-on assesses income tax positions and records tax benefits for all years subject to
examination based upon management’s evaluation of the facts, circumstances and information available at the reporting
dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, Snap-on records the
largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing
authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-
not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. When applicable, associated
interest and penalties are recognized as a component of income tax expense. Accrued interest and penalties are included
within the related tax asset or liability on the accompanying Consolidated Balance Sheets.
Deferred income taxes are provided for temporary differences arising from differences in bases of assets and liabilities for
tax and financial reporting purposes. Deferred income taxes are recorded on temporary differences using enacted tax rates
in effect for the year in which the temporary differences are expected to reverse. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or
all of the deferred tax assets will not be realized. See Note 8 for further information on income taxes.
Per share data: Basic earnings per share calculations were computed by dividing net earnings attributable to Snap-on
Incorporated by the corresponding weighted-average number of common shares outstanding for the period. The dilutive
effect of the potential exercise of outstanding options and stock-settled stock appreciation rights (“SARs”) to purchase
common shares is calculated using the treasury stock method. As of December 30, 2017, there were 722,715 awards
outstanding that were anti-dilutive; as of both December 31, 2016, and January 2, 2016, there were 1,600 awards
outstanding that were anti-dilutive. Performance-based equity awards are included in the diluted earnings per share
calculation based on the attainment of the applicable performance metrics to date. Snap-on had dilutive securities totaling
1,207,285 shares, 1,307,914 shares and 1,016,969 shares, as of the end of 2017, 2016 and 2015, respectively. See Note
13 for further information on equity awards.
Stock-based compensation: Snap-on recognizes the cost of employee services in exchange for awards of equity
instruments based on the grant date fair value of those awards. That cost, based on the estimated number of awards that
are expected to vest, is recognized on a straight-line basis over the period during which the employee is required to provide
the service in exchange for the award. No compensation cost is recognized for awards for which employees do not render
the requisite service. The grant date fair value of employee stock options and similar instruments is estimated using the
Black-Scholes valuation model.
The Black-Scholes valuation model requires the input of subjective assumptions, including the expected life of the stock-based
award and stock price volatility. The assumptions used are management’s best estimates, but the estimates involve inherent
uncertainties and the application of management judgment. As a result, if other assumptions had been used, the recorded
stock-based compensation expense could have been materially different from that depicted in the financial statements. See
Note 13 for further information on stock-based compensation.
Derivatives: Snap-on utilizes derivative financial instruments, including foreign currency forward contracts, interest rate
swap agreements, treasury lock agreements and prepaid equity forward agreements to manage its exposures to foreign
currency exchange rate risks, interest rate risks, and market risk associated with the stock-based portion of its deferred
compensation plans. Snap-on accounts for its derivative instruments at fair value. Snap-on does not hold or issue financial
instruments for speculative or trading purposes. See Note 10 for further information on derivatives.
Cash equivalents: Snap-on considers all highly liquid investments with an original maturity of three months or less to be
cash equivalents. There were no cash equivalents as of 2017 and 2016 year ends.
2017 ANNUAL REPORT
75
Notes to Consolidated Financial Statements (continued)
Receivables and allowances for doubtful accounts: All trade, finance and contract receivables are reported on the
Consolidated Balance Sheets at their outstanding principal balance adjusted for any charge-offs and net of allowances for
doubtful accounts. Finance and contract receivables also include accrued interest and contract acquisition costs, net of
contract acquisition fees.
Snap-on maintains allowances for doubtful accounts to absorb probable losses inherent in its portfolio of receivables. The
allowances for doubtful accounts represent management’s estimate of the losses inherent in the company’s receivables
portfolio based on ongoing assessments and evaluations of collectability and historical loss experience. In estimating losses
inherent in each of its receivable portfolios (trade, finance and contract receivables), Snap-on uses historical loss experience
rates by portfolio and applies them to a related aging analysis. Determination of the proper level of allowances by portfolio
requires management to exercise significant judgment about the timing, frequency and severity of credit losses that could
materially affect the provision for credit losses and, as a result, net earnings. The allowances take into consideration
numerous quantitative and qualitative factors that include receivable type, historical loss experience, loss migration,
delinquency trends, collection experience, current economic conditions and credit risk characteristics as follows:
(cid:120) Snap-on evaluates the collectability of receivables based on a combination of various financial and qualitative
factors that may affect its customers’ ability to pay. These factors may include customers’ financial condition, debt-
servicing ability, past payment experience, and credit bureau and proprietary Snap-on credit model information, as
well as the value of the underlying collateral.
(cid:120) For finance and contract receivables, Snap-on assesses quantitative and qualitative factors through the use of
credit quality indicators consisting primarily of collection experience and other internal metrics as follows:
o Collection experience – Snap-on conducts monthly reviews of credit and collection performance for each of its
finance and contract receivable portfolios focusing on data such as delinquency trends, non-performing assets,
and charge-off and recovery activity. These reviews allow for the formulation of collection strategies and potential
collection policy modifications in response to changing risk profiles in the finance and contract receivable portfolios.
o Other internal metrics – Snap-on maintains a system that aggregates credit exposure by customer, risk
classification and geographical area, among other factors, to further monitor changing risk profiles.
Management performs detailed reviews of its receivables on a monthly and/or quarterly basis to assess the adequacy of
the allowances based on historical and current trends and other factors affecting credit losses and to determine if any
impairment has occurred. A receivable is impaired when it is probable that all amounts related to the receivable will not be
collected according to the contractual terms of the agreement. Additions to the allowances for doubtful accounts are
maintained through adjustments to the provision for credit losses, which are charged to current period earnings; amounts
determined to be uncollectable are charged directly against the allowances, while amounts recovered on previously
charged-off accounts increase the allowances. Net charge-offs include the principal amount of losses charged-off as well
as charged-off interest and fees. Recovered interest and fees previously charged-off are recorded through the allowances
for doubtful accounts and increase the allowances. Finance receivables are assessed for charge-off when an account
becomes 120 days past due and are charged-off typically within 60 days of asset repossession. Contract receivables related
to equipment leases are generally charged-off when an account becomes 150 days past due, while contract receivables
related to franchise finance and van leases are generally charged-off up to 180 days past the asset return date. For finance
and contract receivables, customer bankruptcies are generally charged-off upon notification that the associated debt is not
being reaffirmed or, in any event, no later than 180 days past due.
Snap-on does not believe that its trade accounts, finance or contract receivables represent significant concentrations of
credit risk because of the diversified portfolio of individual customers and geographical areas. See Note 3 for further
information on receivables and allowances for doubtful accounts.
76
SNAP-ON INCORPORATED
Other accrued liabilities: Supplemental balance sheet information for “Other accrued liabilities” as of 2017 and 2016 year
end is as follows:
(Amounts in millions)
Income taxes
Accrued restructuring
Accrued warranty
Deferred subscription revenue
Accrued property, payroll and other taxes
Accrued selling and promotion expense
Accrued legal matters
Other
Total other accrued liabilities
2017
41.6
0.6
17.2
38.9
45.4
28.6
45.9
169.9
388.1
$
$
2016
21.4
2.8
16.0
43.0
36.1
24.7
–
163.9
307.9
$
$
Inventories: Snap-on values its inventory at the lower of cost or market and adjusts for the value of inventory that is
estimated to be excess, obsolete or otherwise unmarketable. Snap-on records allowances for excess and obsolete
inventory based on historical and estimated future demand and market conditions. Allowances for raw materials are largely
based on an analysis of raw material age and actual physical inspection of raw material for fitness for use. As part of
evaluating the adequacy of allowances for work-in-progress and finished goods, management reviews individual product
stock-keeping units (SKUs) by product category and product life cycle. Cost adjustments for each product category/product
life-cycle state are generally established and maintained based on a combination of historical experience, forecasted sales
and promotions, technological obsolescence, inventory age and other actual known conditions and circumstances. Should
actual product marketability and raw material fitness for use be affected by conditions that are different from management
estimates, further adjustments to inventory allowances may be required.
Snap-on adopted the “last-in, first-out” (“LIFO”) inventory valuation method in 1973 for its U.S. locations. Snap-on’s U.S.
inventories accounted for on a LIFO basis consist of purchased product and inventory manufactured at the company’s
heritage U.S. manufacturing facilities (primarily hand tools and tool storage). Since Snap-on began acquiring businesses in
the 1990’s, the company has used the “first-in, first-out” (“FIFO”) inventory valuation methodology for acquisitions; the
company does not adopt the LIFO inventory valuation methodology for new acquisitions. See Note 4 for further information
on inventories.
Property and equipment: Property and equipment is stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are provided on a straight-line basis over estimated useful lives. Major repairs that extend
the useful life of an asset are capitalized, while routine maintenance and repairs are expensed as incurred. Capitalized
software included in property and equipment reflects costs related to internally developed or purchased software for internal
use and is amortized on a straight-line basis over their estimated useful lives. Long-lived assets are evaluated for impairment
when events or circumstances indicate that the carrying amount of the long-lived asset may not be recoverable. See Note
5 for further information on property and equipment.
Goodwill and other intangible assets: Goodwill and other indefinite-lived assets are tested for impairment annually or
more frequently if events or changes in circumstances indicate that the assets might be impaired. Annual impairment tests
are performed by the company in the second quarter of each year using information available as of fiscal April month end.
Snap-on evaluates the existence of goodwill and indefinite-lived intangible asset impairment on the basis of whether the
assets are fully recoverable from projected, discounted cash flows of the related reportable unit or asset. Intangible assets
with finite lives are amortized over their estimated useful lives using straight-line and accelerated methods depending on
the nature of the particular asset. See Note 6 for further information on goodwill and other intangible assets.
2017 ANNUAL REPORT
77
Notes to Consolidated Financial Statements (continued)
New accounting standards
The following new accounting pronouncement was adopted in fiscal year 2017:
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment, which eliminates the
requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will
record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. Snap-on early
adopted this ASU in the second quarter of 2017 in conjunction with its annual impairment test. The amendments in this
ASU are being applied on a prospective basis and the adoption did not have a significant impact on the company’s
consolidated financial statements.
The following new accounting pronouncements, and related impacts on adoption, are being evaluated by the company:
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) – Targeted Improvements to
Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the
economic results of an entity’s risk management activities in its financial statements. The amendments in this update also
make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. ASU
No. 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years; the ASU allows for early adoption in any interim period after issuance of the update. The company is currently
assessing the impact this ASU will have on its consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715) – Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which provides additional guidance
on the presentation of net periodic pension and postretirement benefit costs in the income statement and on the components
eligible for capitalization. The amendments in this ASU require that an employer report the service cost component of the
net periodic benefit costs in the same income statement line item as other compensation costs arising from services
rendered by employees during the period. The non-service-cost components of net periodic benefit costs are to be
presented in the income statement separately from the service cost components and outside a subtotal of income from
operations. The ASU also allows for the capitalization of the service cost components, when applicable (i.e., as a cost of
internally manufactured inventory or a self-constructed asset).
The ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those annual
periods. The company will adopt this ASU at the beginning of its 2018 fiscal year, with the changes applied retrospectively.
The adoption of this ASU is not expected to have a significant impact on the company’s consolidated income statement.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740) – Intra-Entity Transfers of Assets Other
Than Inventory. The ASU eliminates the requirement to defer the recognition of current and deferred income taxes for an
intra-entity asset transfer until the asset has been sold to an outside party. Under the new guidance, an entity should
recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.
The company will adopt this ASU at the beginning of its 2018 fiscal year. The adoption of this ASU will not have a significant
impact on the company’s consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), which adds and/or clarifies
guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is
intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The
company will adopt this ASU at the beginning of its 2018 fiscal year. The adoption of the ASU is not expected to have a
significant impact to the designations of operating, investing and financing activities on the company’s consolidated
statement of cash flows.
78
SNAP-ON INCORPORATED
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), to require the
measurement of expected credit losses for financial instruments held at the reporting date based on historical experience,
current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with
more decision-useful information about the expected credit losses on financial instruments and other commitments to
extend credit held by a reporting entity at each reporting date. ASU No. 2016-13 is effective for fiscal years beginning after
December 15, 2019, including interim periods within those fiscal years; the ASU allows for early adoption as of the beginning
of an interim or annual reporting period beginning after December 15, 2018. The company is currently assessing the impact
this ASU will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information
about leasing arrangements. The ASU is intended to represent an improvement over previous GAAP, which did not require
lease assets and lease liabilities to be recognized for most leases. This ASU, which supersedes most current lease
guidance, affects any entity that enters into a lease (as that term is defined in the ASU), with some specified scope
exemptions. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years; the ASU allows for early adoption as of the beginning of an interim or annual reporting period. The
company is currently assessing the impact this ASU will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), that, together with
several subsequent updates, outlines a single comprehensive model for entities to use in accounting for revenue arising
from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. Topic 606 is based on the principle that an entity should recognize revenue to depict the transfer of goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. Topic 606 also requires additional disclosure about the nature, amount, timing and uncertainty of
revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments.
Entities have the option of adopting this standard using either a full retrospective approach or a modified retrospective
approach (i.e., through a cumulative-effect adjustment directly to retained earnings at the time of adoption).
Snap-on commenced its assessment of Topic 606 during the second half of 2014 and developed a comprehensive project
plan that included representatives from across the company’s business segments. The project plan included analyzing the
standard’s impact on the company’s various revenue streams, comparing its historical accounting policies and practices to
the requirements of the new standard, identifying potential differences from applying the requirements of the new standard
to its contracts, and providing updates on implementation progress. The company is in the process of implementing
appropriate changes to its business processes, systems and controls to support revenue recognition and disclosures under
Topic 606.
As of December 30, 2017, and subject to the company’s ongoing evaluation of new transactions and contracts, the company
has substantially completed its evaluation of the expected impact of adopting Topic 606 and anticipates that the adoption
of this standard will not have a significant impact on the company’s consolidated financial statements. The company believes
that the adoption will result in the recognition of an inventory asset related to certain product returns by increasing the
returns liability and inventory for the anticipated value of the returns; the corresponding increase in the inventory asset and
returns liability is expected to be approximately $24 million at the date of adoption. The adoption is also expected to result
in the recognition of an increase in the inventory obsolescence reserve related to the anticipated value on returns of
approximately $3 million and a $1 million increase in deferred income tax assets, with a corresponding adjustment to fiscal
2018 beginning retained earnings.
The company will adopt Topic 606 at the beginning of its 2018 fiscal year using the modified retrospective approach.
2017 ANNUAL REPORT
79
Notes to Consolidated Financial Statements (continued)
Note 2: Acquisitions
On July 28, 2017, Snap-on acquired Torque Control Specialists Pty Ltd (“TCS”) for a cash purchase price of $3.6 million
(or $3.5 million, net of cash acquired). TCS, based in Adelaide, Australia, distributes a full range of torque products,
including wrenches, multipliers and calibrators, for use in critical industries.
In fiscal 2017, the company substantially completed the purchase accounting valuations for the acquired net assets of TCS.
The $1.9 million excess of purchase price over the fair value of the net assets acquired was recorded in “Goodwill” on the
accompanying Consolidated Balance Sheets. For segment reporting purposes, the results of operations and assets of TCS
have been included in the Commercial & Industrial Group since the acquisition date.
On May 4, 2017, Snap-on acquired Norbar Torque Tools Holdings Limited, along with its U.S. and Chinese joint ventures
(“Norbar”), for a cash purchase price of $71.6 million (or $69.9 million, net of cash acquired). Norbar, based in Banbury,
U.K., designs and manufactures a full range of torque products, including wrenches, multipliers and calibrators for use in
critical industries.
In fiscal 2017, the company substantially completed the purchase accounting valuations for the acquired net assets of
Norbar, including intangible assets. The $23.7 million excess of purchase price over the fair value of the net assets acquired
was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets. For segment reporting purposes, the
results of operations and assets of Norbar have been included in the Commercial & Industrial Group since the acquisition
date.
On January 30, 2017, Snap-on acquired BTC Global Limited (“BTC”) for a cash purchase price of $9.2 million. BTC, based
in Crewe, U.K., designs and implements automotive vehicle inspection and management software for original equipment
manufacturer (“OEM”) franchise repair shops.
In fiscal 2017, the company completed the purchase accounting valuations for the acquired net assets of BTC, including
intangible assets. The $5.9 million excess of purchase price over the fair value of the net assets acquired was recorded in
“Goodwill” on the accompanying Consolidated Balance Sheets. For segment reporting purposes, the results of operations
and assets of BTC have been included in the Repair Systems and Information Group since the acquisition date.
On November 16, 2016, Snap-on acquired Ryeson Corporation (d/b/a Sturtevant Richmont) for a cash purchase price of
$13.0 million (or $12.6 million, net of cash acquired). Sturtevant Richmont, based in Carol Stream, Illinois, designs,
manufactures and distributes mechanical and electronic torque wrenches as well as wireless torque error proofing systems
for a variety of industrial applications.
In fiscal 2017, the company completed the purchase accounting valuations for the acquired net assets of Sturtevant
Richmont, including intangible assets. The $5.0 million excess of purchase price over the fair value of the net assets
acquired was recorded in “Goodwill” on the accompanying Consolidated Balance Sheets. For segment reporting purposes,
the results of operations and assets of Sturtevant Richmont have been included in the Commercial & Industrial Group since
the acquisition date.
On October 31, 2016, Snap-on acquired Car-O-Liner Holding AB (“Car-O-Liner”) for a cash purchase price of $152.0 million
(or $148.1 million, net of cash acquired). Car-O-Liner, based in Gothenburg, Sweden, designs and manufactures collision
repair equipment, and information and truck alignment systems.
In fiscal 2017, the company completed the purchase accounting valuations for the acquired net assets of Car-O-Liner,
including intangible assets. The $77.3 million excess of purchase price over the fair value of the net assets acquired was
recorded in “Goodwill” on the accompanying Consolidated Balance Sheets. For segment reporting purposes, substantially
all of Car-O-Liner’s results of operations and assets have been included in the Repair Systems & Information Group since
the acquisition date, with the remaining portions included in the Commercial & Industrial Group.
80
SNAP-ON INCORPORATED
The following is a summary of the values of the assets acquired and liabilities assumed of Car-O-Liner, including
adjustments recorded as of December 30, 2017, as a result of new information obtained about facts and circumstances that
existed as of the October 31, 2016 acquisition date:
(Amounts in millions)
Assets acquired:
Cash
Trade and other accounts receivable
Inventories
Property and equipment
Goodwill
Other intangibles:
Customer relationships
Non-amortized trademarks
Other assets
Total assets acquired
Liabilities assumed:
Accounts payable
Deferred income tax liabilities
Accrued expenses
Pension liabilities
Total liabilities assumed
Net assets acquired
Amounts as of
October 31, 2016
(As Adjusted)
$ 3.9
17.0
18.3
17.5
77.3
27.2
27.7
5.8
194.7
9.8
14.8
13.8
4.3
42.7
152.0
$
In fiscal 2017, Snap-on recognized expense of $0.5 million (of which $0.2 million was in “Cost of goods sold” and $0.3
million was in “Operating expenses”) in the accompanying Consolidated Statements of Earnings related to Car-O-Liner that
would have been recognized in 2016 if the provisional adjustments identified in the current reporting period had been
recognized as of the October 31, 2016 acquisition date.
On July 27, 2015, Snap-on acquired the assets of Ecotechnics S.p.A. (“Ecotechnics”) for a cash purchase price of $11.8
million. Ecotechnics designs and manufactures vehicle air conditioning service equipment for original equipment
manufacturer (“OEM”) dealerships and the automotive aftermarket worldwide. For segment reporting purposes, the results
of operations and assets of Ecotechnics have been included in the Repair Systems & Information Group since the
acquisition date.
Pro forma financial information has not been presented for any of these acquisitions as the net effects, individually and
collectively, were neither significant nor material to Snap-on’s results of operations or financial position. See Note 6 for
further information on goodwill and other intangible assets.
Note 3: Receivables
Trade and Other Accounts Receivable
Snap-on’s trade and other accounts receivable primarily arise from the sale of tools and diagnostic and equipment products
to a broad range of industrial and commercial customers and to Snap-on’s independent franchise van channel on a non-
extended-term basis with payment terms generally ranging from 30 to 120 days.
2017 ANNUAL REPORT
81
Notes to Consolidated Financial Statements (continued)
The components of Snap-on’s trade and other accounts receivable as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Trade and other accounts receivable
Allowances for doubtful accounts
Total trade and other accounts receivable – net
Finance and Contract Receivables
2017
690.2
(14.6)
675.6
2016
612.8
(14.0)
598.8
$
$
$
$
Snap-on Credit LLC (“SOC”), the company’s financial services operation in the United States, originates extended-term
finance and contract receivables on sales of Snap-on’s products sold through the U.S. franchisee and customer network
and to certain other customers of Snap-on; Snap-on’s foreign finance subsidiaries provide similar financing internationally.
Interest income on finance and contract receivables is included in “Financial services revenue” on the accompanying
Consolidated Statements of Earnings.
Snap-on’s finance receivables are comprised of extended-term installment payment contracts to both technicians and
independent shop owners (i.e., franchisees’ customers) to enable them to purchase tools and diagnostic and equipment
products on an extended-term payment plan, generally with average payment terms approaching four years. Contract
receivables, with payment terms of up to 10 years, are comprised of extended-term installment payment contracts to a
broad base of customers worldwide, including shop owners, both independents and national chains, for their purchase of
tools and diagnostic and equipment products. Contract receivables also include extended-term installment loans to
franchisees to meet a number of financing needs, including working capital loans, loans to enable new franchisees to fund
the purchase of the franchise and van leases. Finance and contract receivables are generally secured by the underlying
tools and/or diagnostic or equipment products financed and, for installment loans to franchisees, other franchisee assets.
The components of Snap-on’s current finance and contract receivables as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Finance receivables, net of unearned finance charges
of $21.0 million and $17.0 million, respectively
Contract receivables, net of unearned finance charges
of $17.6 million and $15.6 million, respectively
Total
Allowances for doubtful accounts:
Finance receivables
Contract receivables
Total
Total current finance and contract receivables – net
Finance receivables – net
Contract receivables – net
Total current finance and contract receivables – net
2017
2016
$
523.1
$
488.1
98.1
621.2
(17.7)
(1.3)
(19.0)
602.2
505.4
96.8
602.2
89.3
577.4
(15.6)
(1.2)
(16.8)
560.6
472.5
88.1
560.6
$
$
$
$
$
$
82
SNAP-ON INCORPORATED
The components of Snap-on’s finance and contract receivables with payment terms beyond one year as of 2017 and 2016
year end are as follows:
(Amounts in millions)
Finance receivables, net of unearned finance charges
of $16.7 million and $13.0 million, respectively
Contract receivables, net of unearned finance charges
of $25.5 million and $21.5 million, respectively
Total
Allowances for doubtful accounts:
Finance receivables
Contract receivables
Total
Total long-term finance and contract receivables – net
Finance receivables – net
Contract receivables – net
Total long-term finance and contract receivables – net
2017
2016
$ 1,078.0
$
967.5
325.9
1,403.9
289.4
1,256.9
(38.8)
(3.3)
(42.1)
$ 1,361.8
(33.0)
(2.7)
(35.7)
$ 1,221.2
$ 1,039.2
322.6
$ 1,361.8
$
934.5
286.7
$ 1,221.2
Long-term finance and contract receivables installments, net of unearned finance charges, as of 2017 and 2016 year end
are scheduled as follows:
(Amounts in millions)
Due in Months:
13 – 24
25 – 36
37 – 48
49 – 60
Thereafter
Total
Finance
Receivables
415.1
$
333.3
225.5
104.1
–
2017
Contract
Receivables
$
$
Finance
Receivables
380.9
296.9
196.8
92.9
–
967.5
2016
Contract
Receivables
$
$
69.5
60.2
49.7
37.7
72.3
289.4
77.6
67.6
56.5
42.8
81.4
325.9
$ 1,078.0
$
$
Delinquency is the primary indicator of credit quality for finance and contract receivables. The entire receivable balance of
a contract is considered delinquent when contractual payments become 30 days past due. Depending on the contract,
payments for finance and contract receivables are due on a monthly or weekly basis. Weekly payments are converted into
a monthly equivalent for purposes of calculating delinquency. Delinquencies are assessed at the end of each month
following the monthly equivalent due date. Removal from delinquent status occurs when the cumulative number of monthly
payments due has been received by the company.
Finance receivables are generally placed on nonaccrual status (nonaccrual of interest and other fees) (i) when a customer
is placed on repossession status; (ii) upon receipt of notification of bankruptcy; (iii) upon notification of the death of a
customer; or (iv) in other instances in which management concludes collectability is not reasonably assured. Finance
receivables that are considered nonperforming include receivables that are on nonaccrual status and receivables that are
generally more than 90 days past due.
Contract receivables are generally placed on nonaccrual status (i) when a receivable is more than 90 days past due or at
the point a customer’s account is placed on terminated status regardless of its delinquency status; (ii) upon notification of
the death of a customer; or (iii) in other instances in which management concludes collectability is not reasonably assured.
Contract receivables that are considered nonperforming include receivables that are on nonaccrual status and receivables
that are generally more than 90 days past due.
2017 ANNUAL REPORT
83
Notes to Consolidated Financial Statements (continued)
The accrual of interest and other fees is resumed when the finance or contract receivable becomes contractually current
and collection of all remaining contractual amounts due is reasonably assured. Finance and contract receivables are
evaluated for impairment on a collective basis. A receivable is impaired when it is probable that all amounts related to the
receivable will not be collected according to the contractual terms of the applicable agreement. Impaired finance and
contract receivables are covered by the company’s respective allowances for doubtful accounts and are charged-off against
the allowances when appropriate. As of 2017 and 2016 year end, there were $28.0 million and $24.9 million, respectively,
of impaired finance receivables, and there were $2.3 million and $2.0 million, respectively, of impaired contract receivables.
It is the general practice of Snap-on’s financial services business to not engage in contract or loan modifications. In limited
instances, Snap-on’s financial services business may modify certain impaired receivables in troubled debt restructurings.
The amount and number of restructured finance and contract receivables as of 2017 and 2016 year end were immaterial to
both the financial services portfolio and the company’s results of operations and financial position.
The aging of finance and contract receivables as of 2017 and 2016 year end is as follows:
30-59
Days Past
Due
60-90
Days Past
Due
Greater
Than 90
Days Past
Due
Total Past
Due
Total Not
Past Due
Total
Greater
Than 90
Days Past
Due and
Accruing
$ 19.3
1.2
$ 13.9
0.6
$ 20.1
1.9
$ 53.3
3.7
$ 15.1
1.4
$
9.8
0.9
$ 17.0
1.4
$ 41.9
3.7
$ 1,547.8 $ 1,601.1 $ 15.4
0.6
424.0
420.3
$ 1,413.7 $ 1,455.6 $ 13.2
0.5
378.7
375.0
(Amounts in millions)
2017 year end:
Finance receivables
Contract receivables
2016 year end:
Finance receivables
Contract receivables
The amount of performing and nonperforming finance and contract receivables based on payment activity as of 2017 and
2016 year end is as follows:
(Amounts in millions)
Performing
Nonperforming
Total
2017
2016
Finance
Receivables
Contract
Receivables
Finance
Receivables
Contract
Receivables
$ 1,573.1
$
421.7
$ 1,430.7
$
376.7
28.0
2.3
24.9
2.0
$ 1,601.1
$
424.0
$ 1,455.6
$
378.7
The amount of finance and contract receivables on nonaccrual status as of 2017 and 2016 year end is as follows:
(Amounts in millions)
Finance receivables
Contract receivables
$
2017
12.6
1.7
$
2016
11.7
1.5
84
SNAP-ON INCORPORATED
The following is a rollforward of the allowances for doubtful accounts for finance and contract receivables for 2017 and
2016:
(Amounts in millions)
2017
2016
Finance
Receivables
Contract
Receivables
Finance
Receivables
Contract
Receivables
Allowances for doubtful accounts:
Beginning of year
$
Provision
Charge-offs
Recoveries
Currency translation
End of year
$
48.6
54.6
(53.3)
6.6
–
$
56.5
$
3.9
2.7
(2.5)
0.4
0.1
4.6
$
$
38.2
44.0
(39.8)
6.2
–
48.6
$
$
4.4
1.0
(1.8)
0.4
(0.1)
3.9
The following is a rollforward of the combined allowances for doubtful accounts related to trade and other accounts
receivable, as well as finance and contract receivables, for 2017, 2016 and 2015:
(Amounts in millions)
Allowances for doubtful accounts:
2017
2016
2015
Balance at
Beginning
of Year
Expenses
Deductions (1)
Balance at
End of
Year
$
66.5
59.3
52.4
$
65.1
51.5
45.1
$
(55.9)
$
(44.3)
(38.2)
75.7
66.5
59.3
(1) Represents write-offs of bad debts, net of recoveries, and the net impact of currency translation.
Note 4: Inventories
Inventories by major classification as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Finished goods
Work in progress
Raw materials
Total FIFO value
Excess of current cost over LIFO cost
2017
2016
$
541.9
$
467.4
49.3
122.7
713.9
(75.1)
42.7
93.6
603.7
(73.2)
Total inventories – net
$
638.8
$
530.5
Inventories accounted for using the FIFO method approximated 61% and 59% of total inventories as of 2017 and 2016 year
end, respectively. The company accounts for its non-U.S. inventory on the FIFO method. As of 2017 year end,
approximately 33% of the company’s U.S. inventory was accounted for using the FIFO method and 67% was accounted for
using the LIFO method. There were no LIFO inventory liquidations in 2017, 2016 or 2015.
2017 ANNUAL REPORT
85
Notes to Consolidated Financial Statements (continued)
Note 5: Property and Equipment
Property and equipment (which are carried at cost) as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Land
2017
2016
$
24.5
$
19.1
Buildings and improvements
Machinery, equipment and computer software
Property and equipment – gross
Accumulated depreciation and amortization
357.4
889.2
1,271.1
(786.7)
309.4
809.6
1,138.1
(712.9)
Property and equipment – net
$
484.4
$
425.2
The estimated service lives of property and equipment are principally as follows:
Buildings and improvements
3 to 50 years
Machinery, equipment and computer software
2 to 15 years
The cost and accumulated depreciation of property and equipment under capital leases as of 2017 and 2016 year end are
as follows:
(Amounts in millions)
Buildings and improvements
Accumulated depreciation
Net book value
2017
21.4
(14.0)
2016
$
20.5
(12.3)
7.4
$
8.2
$
$
Depreciation expense was $65.6 million, $61.4 million and $57.8 million in 2017, 2016 and 2015, respectively.
Note 6: Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by segment for 2017 and 2016 are as follows:
(Amounts in millions)
Balance as of 2015 year end
Currency translation
Acquisitions
Balance as of 2016 year end
Currency translation
Acquisitions
Balance as of 2017 year end
$
Commercial &
Industrial Group
253.1
(16.4)
5.7
242.4
30.3
25.7
298.4
$
$
Snap-on
Tools Group
12.5
–
–
12.5
–
–
12.5
$
$
$
$
Repair Systems &
Information Group
524.5
(9.5)
125.6
640.6
15.8
(43.2)
613.2
$
$
$
$
$
Total
790.1
(25.9)
131.3
895.5
46.1
(17.5)
924.1
Goodwill of $924.1 million as of 2017 year end includes the following from 2017 acquisitions: (i) $23.7 million, on a
preliminary basis, from the acquisition of Norbar, (ii) $5.9 million from the acquisition of BTC, and (iii) $1.9 million, on a
preliminary basis, from the acquisition of TCS. As of 2017 year end goodwill also includes, from 2016 acquisitions: (i) $77.3
million from the acquisition of Car-O-Liner, and (ii) $5.0 million from the acquisition of Sturtevant Richmont.
During 2017, the purchase accounting valuations for the acquired net assets, including intangible assets, of Car-O-Liner
were completed, resulting in a reduction of goodwill of $50.8 million from 2016 year end, with a $49.1 million reduction in
the Repair Systems & Information Group and $1.7 million in the Commercial & Industrial Group. Additionally, purchase
accounting for Sturtevant Richmont was also completed in 2017, resulting in a $1.8 million increase in goodwill from 2016
year end.
86
SNAP-ON INCORPORATED
The goodwill from the Car-O-Liner acquisition is distributed as follows: $76.5 million in the Repair Systems & Information
Group and $0.8 million in the Commercial & Industrial Group. The goodwill from Norbar, TCS and Sturtevant Richmont is
included in the Commercial & Industrial Group and the goodwill from the BTC acquisition is included in the Repair Systems
& Information Group. See Note 2 for additional information on acquisitions.
As the purchase accounting for deferred taxes for the acquired net assets of Norbar and TCS were not complete as of 2017
year end, the allocation of the respective purchase prices and resulting goodwill has been prepared on a preliminary basis and
changes to the allocations will occur as the deferred taxes are determined. The company is expected to complete the purchase
accounting within one year of their respective acquisition dates.
Additional disclosures related to other intangible assets as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Amortized other intangible assets:
Customer relationships
Developed technology
Internally developed software
Patents
Trademarks
Other
Total
Non-amortized trademarks
Total other intangible assets
2017
2016
Gross Carrying
Value
Accumulated
Amortization
Gross Carrying
Value
Accumulated
Amortization
$
$
175.2
18.9
177.0
34.1
3.0
7.7
415.9
115.2
531.1
$
$
(98.2)
(18.4)
(133.4)
(22.7)
(2.0)
(2.7)
(277.4)
–
(277.4)
$
$
142.6
17.7
165.7
31.9
2.8
7.2
367.9
64.2
432.1
$
$
(86.0)
(17.7)
(118.3)
(21.5)
(1.8)
(2.2)
(247.5)
–
(247.5)
The gross carrying value of customer relationships as of 2017 year end includes $28.8 million related to the Car-O-Liner
acquisition, $1.2 million related to the BTC acquisition and $1.1 million related to the Norbar acquisition. The gross carrying
value of non-amortized trademarks as of 2017 year end includes $29.8 million related to the Car-O-Liner acquisition, $2.1
million related to the BTC acquisition and $16.9 million related to the Norbar acquisition.
Significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to significant
and long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in
technology or markets, significant changes in key personnel or litigation, a significant and sustained decrease in share price
and/or other events, including effects from the sale or disposal of a reporting unit, could require a provision for impairment
of goodwill and/or other intangible assets in a future period. As of 2017 year end, the company had no accumulated
impairment losses.
The weighted-average amortization periods related to other intangible assets are as follows:
Customer relationships
Developed technology
Internally developed software
Patents
Trademarks
Other
In Years
15
3
4
8
6
39
Snap-on is amortizing its customer relationships on both an accelerated and straight-line basis over a 15 year weighted-
average life; the remaining intangibles are amortized on a straight-line basis. The weighted-average amortization period for all
amortizable intangibles on a combined basis is 11 years.
2017 ANNUAL REPORT
87
Notes to Consolidated Financial Statements (continued)
The company’s customer relationships generally have contractual terms of three to five years and are typically renewed without
significant cost to the company. The weighted-average 15 year life for customer relationships is based on the company’s
historical renewal experience. Intangible asset renewal costs are expensed as incurred.
The aggregate amortization expense was $27.6 million in 2017, $24.2 million in 2016 and $24.7 million in 2015. Based on
current levels of amortizable intangible assets and estimated weighted-average useful lives, estimated annual amortization
expense is expected to be $25.4 million in 2018, $21.8 million in 2019, $16.8 million in 2020, $14.4 million in 2021, and $13.4
million in 2022.
Note 7: Exit and Disposal Activities
In 2017, Snap-on did not record any costs for exit and disposal activities. In 2016, the company’s Repair Systems &
Information Group recorded $0.9 million of severance costs for exit and disposal activities, all of which qualified for accrual
treatment; no costs for exit and disposal activities were recorded in 2015. The exit and disposal accrual of $0.6 million as
of 2017 year end is expected to be fully utilized in 2018. Snap-on anticipates funding the remaining cash requirements of
its exit and disposal activities with available cash on hand, cash flows from operations and borrowings under the company’s
existing credit facilities. The estimated costs for the exit and disposal activities were based on management’s best business
judgment under prevailing circumstances.
Note 8: Income Taxes
The source of earnings before income taxes and equity earnings consisted of the following:
(Amounts in millions)
United States
Foreign
Total
2017
$ 645.5
176.4
$ 821.9
2016
$ 644.0
157.4
$ 801.4
2015
$ 578.4
132.1
$ 710.5
The provision (benefit) for income taxes consisted of the following:
(Amounts in millions)
Current:
Federal
Foreign
State
Total current
Deferred:
Federal
Foreign
State
Total deferred
Total income tax provision
2017
2016
2015
$ 166.9
41.1
30.6
238.6
$ 175.9
39.9
27.2
243.0
$ 165.8
40.8
19.7
226.3
8.7
2.9
0.7
12.3
$ 250.9
6.3
(6.7)
1.7
1.3
$ 244.3
(8.7)
3.9
(0.3)
(5.1)
$ 221.2
88
SNAP-ON INCORPORATED
The following is a reconciliation of the statutory federal income tax rate to Snap-on’s effective tax rate:
Statutory federal income tax rate
Increase (decrease) in tax rate resulting from:
State income taxes, net of federal benefit
Noncontrolling interests
Repatriation of foreign earnings
Change in valuation allowance for deferred tax assets
Adjustments to tax accruals and reserves
Foreign rate differences
Domestic production activities deduction
Excess tax benefits related to equity compensation
U.S. tax reform, net impact
Other
Effective tax rate
2017
35.0%
2016
35.0%
2015
35.0%
2.4
(0.6)
(1.2)
0.1
(0.3)
(2.4)
(2.1)
(1.4)
0.9
0.1
30.5%
2.4
(0.6)
(0.1)
(1.0)
0.3
(2.1)
(1.9)
(1.8)
–
0.3
30.5%
2.3
(0.6)
(3.0)
0.1
0.8
(1.9)
(1.9)
–
–
0.3
31.1%
Snap-on’s effective income tax rate on earnings attributable to Snap-on Incorporated was 31.1% in 2017, 31.0% in 2016,
and 31.7% in 2015. The effective tax rate for 2017 included the one-time net tax costs associated with the newly enacted
“H.R.1”, formerly known as the Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law in the fourth quarter of
2017, as well as tax benefits associated with certain legal matters. The effective tax rate for 2016 included tax benefits from
the reversal of deferred tax asset valuation allowances that are now expected to be realized in future years, as well as tax
benefits associated with the January 3, 2016 adoption of ASU No. 2016-09, Compensation – Stock Compensation (Topic
718) – Improvements to Employee Share-Based Payment Accounting; these tax benefits were partially offset by tax
contingency reserves established for certain non-U.S. tax audits.
On December 22, 2017, the U.S. government passed the Tax Act. The Tax Act makes broad and complex changes to the
U.S. tax code, including, but not limited to: (i) reducing the future U.S. federal corporate tax rate from 35 percent to 21
percent; (ii) requiring companies to pay a one-time transition tax on certain unremitted earnings of foreign subsidiaries; and
(iii) bonus depreciation that will allow for full expensing of qualified property.
The Tax Act also established new tax laws that will affect 2018, including, but not limited to: (i) the reduction of the U.S.
federal corporate tax rate discussed above; (ii) a general elimination of U.S. federal income taxes on dividends from foreign
subsidiaries; (iii) a new provision designed to tax global intangible low-taxed income (“GILTI”); (iv) the repeal of the domestic
production activity deductions; (v) limitations on the deductibility of certain executive compensation; (vi) limitations on the
use of foreign tax credits to reduce the U.S. income tax liability; and (vii) a new provision that allows a domestic corporation
an immediate deduction for a portion of its foreign derived intangible income (“FDII”).
The Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on
accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one
year from the Tax Act enactment date for companies to complete the related accounting under ASC 740, Accounting for
Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax
Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for a certain income
tax effect of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate
in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements,
it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the
enactment of the Tax Act.
2017 ANNUAL REPORT
89
Notes to Consolidated Financial Statements (continued)
The company’s accounting for certain elements of the Tax Act is incomplete. However, the company was able to make
reasonable estimates of the effects and, therefore, recorded provisional estimates for these items. In connection with its
initial analysis of the impact of the Tax Act, the company has recorded a provisional discrete net tax expense of $7.0 million
in the period ended December 30, 2017. This provisional estimate consists of a net expense of $13.7 million for the one-
time transition tax and a net benefit of $6.7 million related to revaluation of deferred tax assets and liabilities, caused by the
new lower corporate tax rate. To determine the transition tax, the company must determine the amount of post-1986
accumulated earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such
earnings. While the company was able to make a reasonable estimate of the transition tax, it is continuing to gather
additional information to more precisely compute the final amount. Likewise, while the company was able to make a
reasonable estimate of the impact of the reduction to the corporate tax rate, it may be affected by other analyses related to
the Tax Act, including, but not limited to, the state tax effect of adjustments made to federal temporary differences. Due to
the complexity of the new GILTI tax rules, the company is continuing to evaluate this provision of the Tax Act and the
application of ASC 740. Under GAAP, the company is allowed to make an accounting policy choice to either: (1) treat taxes
due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period
cost method”); or (2) factor in such amounts into a company’s measurement of its deferred taxes (the “deferred method”).
The company’s selection of an accounting policy with respect to the new GILTI tax rules is dependent on additional analysis
and potential future modifications to existing structure, which are not currently known. Accordingly, the company has not
made any adjustments related to potential GILTI tax in our financial statements and have not made a policy decision
regarding whether to record deferred taxes on GILTI. The company will continue to analyze the full effects of the Tax Act
on its financial statements. The impact of the Tax Act may differ from the current estimate, possibly materially, due to
changes in interpretations and assumptions the company has made, future guidance that may be issued and actions the
company may take as a result of the law.
Temporary differences that give rise to the net deferred income tax asset (liability) as of 2017, 2016 and 2015 year end are
as follows:
(Amounts in millions)
Long-term deferred income tax assets (liabilities):
Inventories
Accruals not currently deductible
Tax credit carryforward
Employee benefits
Net operating losses
Depreciation and amortization
Valuation allowance
Equity-based compensation
Cash flow hedge
Other
Net deferred income tax asset
2017
2016
2015
$ 28.8
61.7
2.1
56.8
44.0
(161.3)
(25.2)
17.1
(0.3)
(0.1)
$ 23.6
$
$
33.3
77.7
15.1
108.1
42.8
(209.8)
(21.7)
24.3
(5.5)
(4.6)
59.7
$
$
29.4
71.1
10.2
101.2
44.4
(199.3)
(32.0)
22.7
–
(1.6)
46.1
As of 2017 year end, Snap-on had tax net operating loss carryforwards totaling $240.3 million as follows:
(Amounts in millions)
Year of expiration:
2018 – 2022
2023 – 2027
2028 – 2032
2033 – 2037
Indefinite
Total net operating loss carryforwards
State
Federal
Foreign
Total
$
$
0.1
0.2
107.1
–
–
$ 107.4
$
–
–
–
–
–
–
$
45.8
8.0
38.1
–
41.0
$ 132.9
$
45.9
8.2
145.2
–
41.0
$ 240.3
90
SNAP-ON INCORPORATED
A valuation allowance totaling $25.2 million, $21.7 million and $32.0 million as of 2017, 2016 and 2015 year end,
respectively, has been established for deferred income tax assets primarily related to certain subsidiary loss carryforwards
that may not be realized. For the year ended December 31, 2016, the net valuation allowance decreased by $10.3 million
primarily due to a non-U.S. subsidiary having, in part, attained three years of cumulative pretax income and, as a result,
management concluded there is sufficient positive evidence that it is more-likely-than-not that additional deferred taxes are
realizable. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to
their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred
income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could
change in the near term if estimates of future taxable income during the carryforward period fluctuate.
The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2017, 2016 and 2015:
(Amounts in millions)
Unrecognized tax benefits at beginning of year
Gross increases – tax positions in prior periods
Gross decreases – tax positions in prior periods
Gross increases – tax positions in the current period
Settlements with taxing authorities
Lapsing of statutes of limitations
Unrecognized tax benefits at end of year
2017
9.4
1.4
–
1.0
(3.6)
(0.5)
7.7
$
$
2016
7.2
2.5
(0.3)
0.5
–
(0.5)
9.4
$
$
2015
6.4
1.7
(0.5)
0.5
–
(0.9)
7.2
$
$
The unrecognized tax benefits of $7.7 million, $9.4 million and $7.2 million as of 2017, 2016 and 2015 year end, respectively,
would impact the effective income tax rate if recognized. As of December 30, 2017, unrecognized tax benefits of $1.8
million, $2.4 million and $3.5 million were included in “Deferred income tax assets,” “Other accrued liabilities” and “Other
long-term liabilities,” respectively, on the accompanying Consolidated Balance Sheet. Interest and penalties related to
unrecognized tax benefits are recorded in income tax expense. As of 2017, 2016 and 2015 year end, the company had
provided for $0.6 million, $0.9 million and $0.5 million, respectively, of accrued interest and penalties related to unrecognized
tax benefits. During 2017, the company decreased the reserve attributable to interest and penalties associated with
unrecognized tax benefits by a net $0.3 million. As of December 30, 2017, $0.1 million and $0.5 million of accrued interest
and penalties were included in “Other accrued liabilities” and “Other long-term liabilities,” respectively, on the accompanying
Consolidated Balance Sheet.
Snap-on and its subsidiaries file income tax returns in the United States and in various state, local and foreign jurisdictions.
It is reasonably possible that certain unrecognized tax benefits may either be settled with taxing authorities or the statutes
of limitations for such items may lapse within the next 12 months, causing Snap-on’s gross unrecognized tax benefits to
decrease by a range of zero to $3.2 million. Over the next 12 months, Snap-on anticipates taking certain tax positions on
various tax returns for which the related tax benefit does not meet the recognition threshold. Accordingly, Snap-on’s gross
unrecognized tax benefits may increase by a range of zero to $1.3 million over the next 12 months for uncertain tax positions
expected to be taken in future tax filings.
With few exceptions, Snap-on is no longer subject to U.S. federal and state/local income tax examinations by tax authorities
for years prior to 2012, and Snap-on is no longer subject to non-U.S. income tax examinations by tax authorities for years
prior to 2012.
The undistributed earnings of all non-U.S. subsidiaries totaled $876.7 million, $800.6 million and $624.1 million as of 2017,
2016 and 2015 year end, respectively. As a result of the Tax Act, the company is currently analyzing its global working
capital and cash requirements and the potential tax liabilities attributable to any future repatriation, but the company has yet
to determine whether it plans to change its prior assertion and repatriate earnings. Accordingly, the company has not
recorded any deferred taxes attributable to its investments in foreign subsidiaries. The company will record the tax effects
of any change in its prior assertion in the period that it has completed the analysis and is able to make a reasonable
estimate, and disclose any unrecognized deferred tax liability for temporary differences related to its foreign investments, if
practicable.
2017 ANNUAL REPORT
91
Notes to Consolidated Financial Statements (continued)
Note 9: Short-term and Long-term Debt
Short-term and long-term debt as of 2017 and 2016 year end consisted of the following:
(Amounts in millions)
2017
2016
5.50% unsecured notes due 2017
$
–
$
150.0
4.25% unsecured notes due 2018
6.70% unsecured notes due 2019
6.125% unsecured notes due 2021
3.25% unsecured notes due 2027
Other debt*
250.0
200.0
250.0
300.0
186.8
250.0
200.0
250.0
–
160.2
1,186.8
1,010.2
Less: notes payable and current maturities of
long-term debt:
Current maturities of long-term debt
$
(250.0)
$
(150.0)
Commercial paper borrowings
Other notes
(151.0)
(32.2)
(433.2)
(130.0)
(21.4)
(301.4)
Total long-term debt
$
753.6
$
708.8
* Includes fair value adjustments related to interest rate swaps.
The annual maturities of Snap-on’s long-term debt and notes payable over the next five years are $433.2 million in 2018,
(including $250 million of unsecured 4.25% notes due January 16, 2018 (the “2018 Notes”), that were repaid upon maturity),
$200 million in 2019, no maturities in 2020, $250 million in 2021, and no maturities in 2022. See Note 20 regarding the
January 2018 repayment of the 2018 Notes.
Average notes payable outstanding, including commercial paper borrowings, were $126.8 million and $49.3 million in 2017
and 2016, respectively. The weighted-average interest rate of 2.45% in 2017 decreased from 7.09% last year. This reflects
the impact of the higher commercial paper borrowings which generally have lower interest rates than other notes payable
outstanding. Average commercial paper borrowings were $103.3 million and $26.6 million in 2017 and 2016, respectively,
and the weighted-average interest rate of 1.14% in 2017 increased from 0.73% last year. At 2017 year end, the weighted-
average interest rate on outstanding notes payable of 2.34% compared with 2.85% at 2016 year end. The 2017 year-end
rate benefited from lower interest rates on international borrowings. The 2016 year-end rate benefited from lower interest
rates on commercial paper borrowings.
On February 15, 2017, Snap-on sold, at a discount, $300 million of unsecured 3.25% long-term notes that mature on March
1, 2027 (the “2027 Notes”). Interest on the 2027 Notes accrues at a rate of 3.25% per year and is payable semi-annually
beginning September 1, 2017. Snap-on used the $297.8 million of net proceeds from the sale of the 2027 Notes, reflecting
$1.9 million of transaction costs, to repay a portion of its then-outstanding commercial paper borrowings and the remainder
is being used for general corporate purposes, which may include working capital, capital expenditures and possible
acquisitions.
92
SNAP-ON INCORPORATED
Snap-on has a five-year, $700 million multi-currency revolving credit facility that terminates on December 15, 2020 (the
“Credit Facility”); no amounts were outstanding under the Credit Facility as of December 30, 2017. Borrowings under the
Credit Facility bear interest at varying rates based on Snap-on’s then-current, long-term debt ratings. The Credit Facility’s
financial covenant requires that Snap-on maintain, as of each fiscal quarter end, either (i) a ratio not greater than 0.60 to
1.00 of consolidated net debt (consolidated debt net of certain cash adjustments) to the sum of such consolidated net debt
plus total equity and less accumulated other comprehensive income or loss (the “Debt Ratio”); or (ii) a ratio not greater than
3.50 to 1.00 of such consolidated net debt to earnings before interest, taxes, depreciation, amortization and certain other
adjustments for the preceding four fiscal quarters then ended (the “Debt to EBITDA Ratio”). Snap-on may, up to two times
during any five-year period during the term of the Credit Facility (including any extensions thereof), increase the maximum
Debt Ratio to 0.65 to 1.00 and/or increase the maximum Debt to EBITDA Ratio to 3.75 to 1.00 for four consecutive fiscal
quarters in connection with certain material acquisitions (as defined in the related credit agreement). As of 2017 year end,
the company’s actual ratios of 0.26 and 1.16, respectively, were both within the permitted ranges set forth in this financial
covenant. Snap-on generally issues commercial paper to fund its financing needs on a short-term basis and uses the Credit
Facility as back-up liquidity to support such commercial paper issuances.
Note 10: Financial Instruments
Derivatives: All derivative instruments are reported in the Consolidated Financial Statements at fair value. Changes in the
fair value of derivatives are recorded each period in earnings or on the accompanying Consolidated Balance Sheets,
depending on whether the derivative is designated and effective as part of a hedged transaction. Gains or losses on
derivative instruments recorded in Accumulated other comprehensive income (loss) (“Accumulated OCI”) must be
reclassified to earnings in the period in which earnings are affected by the underlying hedged item and the ineffective portion
of all hedges must be recognized in earnings in the period that such portion is determined to be ineffective.
The criteria used to determine if hedge accounting treatment is appropriate are: (i) the designation of the hedge to an
underlying exposure; (ii) whether or not overall risk is being reduced; and (iii) if there is a correlation between the value of
the derivative instrument and the underlying hedged item. On the date a derivative contract is entered into, Snap-on
designates the derivative as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a
natural hedging instrument whose change in fair value is recognized as an economic hedge against changes in the value
of the hedged item. Snap-on does not use derivative instruments for speculative or trading purposes.
The company is exposed to global market risks, including the effects of changes in foreign currency exchange rates, interest
rates, and the company’s stock price, and therefore uses derivatives to manage financial exposures that occur in the normal
course of business. The primary risks managed by using derivative instruments are foreign currency risk, interest rate risk
and stock-based deferred compensation risk.
Foreign currency risk management: Snap-on has significant international operations and is subject to certain risks
inherent with foreign operations that include currency fluctuations. Foreign currency exchange risk exists to the extent that
Snap-on has payment obligations or receipts denominated in currencies other than the functional currency, including
intercompany loans denominated in foreign currencies. To manage these exposures, Snap-on identifies naturally offsetting
positions and then purchases hedging instruments to protect the residual net exposures. Snap-on manages most of these
exposures on a consolidated basis, which allows for netting of certain exposures to take advantage of natural offsets.
Foreign currency forward contracts (“foreign currency forwards”) are used to hedge the net exposures. Gains or losses on
net foreign currency hedges are intended to offset losses or gains on the underlying net exposures in an effort to reduce
the earnings volatility resulting from fluctuating foreign currency exchange rates. Snap-on’s foreign currency forwards are
typically not designated as hedges. The fair value changes of these contracts are reported in earnings as foreign exchange
gain or loss, which is included in “Other income (expense) – net” on the accompanying Consolidated Statements of
Earnings.
2017 ANNUAL REPORT
93
Notes to Consolidated Financial Statements (continued)
As of 2017 year end, Snap-on had $53.8 million of net foreign currency forward buy contracts outstanding comprised of buy
contracts including $64.9 million in euros, $15.4 million in Swedish kronor, $13.1 million in Hong Kong dollars, $11.3 million
in Singapore dollars, $6.8 million in South Korean won, $5.7 million in Norwegian kroner, and $8.0 million in other currencies,
and sell contracts comprised of $29.7 million in British pounds, $13.8 million in Canadian dollars, $11.8 million in Australian
dollars, $6.0 million in Indian rupees, $3.4 million in Thai baht, and $6.7 million in other currencies. As of 2016 year end,
Snap-on had $144.4 million of net foreign currency forward buy contracts outstanding comprised of buy contracts including
$55.0 million in euros, $53.6 million in British pounds, $47.0 million in Swedish kronor, $9.0 million in Hong Kong dollars,
$7.0 million in South Korean won, $5.5 million in Singapore dollars, $4.9 million in Mexican pesos, $4.6 million in Norwegian
kroner, and $6.4 million in other currencies, and sell contracts comprised of $16.6 million in Japanese yen, $11.8 million in
Canadian dollars, $4.4 million in Australian dollars, $4.0 million in Brazilian real, and $11.8 million in other currencies.
Interest rate risk management: Snap-on aims to control funding costs by managing the exposure created by the differing
maturities and interest rate structures of Snap-on’s borrowings through the use of interest rate swap agreements (“interest
rate swaps”) and treasury lock agreements (“treasury locks”).
Interest rate swaps: Snap-on enters into interest rate swaps to manage risks associated with changing interest rates related
to the company’s fixed rate borrowings. Interest rate swaps are accounted for as fair value hedges. The differentials paid
or received on interest rate swaps are recognized as adjustments to “Interest expense” on the accompanying Consolidated
Statements of Earnings. The effective portion of the change in fair value of the derivative is recorded in “Long-term debt”
on the accompanying Consolidated Balance Sheets, while any ineffective portion is recorded as an adjustment to “Interest
expense” on the accompanying Consolidated Statements of Earnings. The notional amount of interest rate swaps
outstanding and designated as fair value hedges was $100 million as of both 2017 and 2016 year end.
Treasury locks: Snap-on entered into a $300 million treasury lock in November 2017 to manage the potential change in
interest rates in anticipation of the possible issuance of fixed rate debt; the treasury lock expires on February 28, 2018.
Treasury locks are accounted for as cash flow hedges. The effective differentials to be paid or received on treasury locks
related to the anticipated issuance of fixed rate debt are initially recorded in Accumulated OCI. As of 2017 year end, an
unrecognized gain of $0.8 million has been recorded in Accumulated OCI on the accompanying Consolidated Balance
Sheet. Upon the issuance of debt, the related amount in Accumulated OCI will be released over the term of the debt and
recognized as an adjustment to interest expense on the consolidated statements of earnings.
The notional amount of treasury locks outstanding and designated as cash flow hedges was $300 million as of December
30, 2017, and $250 million as of December 31, 2016. In fiscal 2017, Snap-on settled the $250 million treasury lock in
conjunction with the February 2017 issuance of the 2027 Notes. The $14.9 million gain on the settlement of the treasury
lock was recorded in Accumulated OCI and is being amortized over the term of the 2027 Notes and recognized as an
adjustment to interest expense on the consolidated statement of earnings. There were no treasury locks settled in 2016 or
2015.
Stock-based deferred compensation risk management: Snap-on aims to manage market risk associated with the stock-
based portion of its deferred compensation plans through the use of prepaid equity forward agreements (“equity forwards”).
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. Since stock-based deferred compensation liabilities increase as the company’s stock
price rises and decrease as the company’s stock price declines, the equity forwards are intended to mitigate the potential
impact on deferred compensation expense that may result from such mark-to-market changes. As of 2017 and 2016 year
end, Snap-on had equity forwards in place intended to manage market risk with respect to 102,300 shares and 104,400
shares, respectively, of Snap-on common stock associated with its deferred compensation plans.
94
SNAP-ON INCORPORATED
Fair value measurements: Snap-on has derivative assets and liabilities related to interest rate swaps, treasury locks,
foreign currency forwards and equity forwards that are measured at Level 2 fair value on a recurring basis. The fair values
of derivative instruments included within the accompanying Consolidated Balance Sheets as of 2017 and 2016 year end
are as follows:
(Amounts in millions)
Derivatives designated as
hedging instruments:
Balance Sheet Presentation
Interest rate swaps
Treasury locks
Other assets
Other assets
Derivatives not designated
as hedging instruments:
Foreign currency forwards Prepaid expenses and other assets
Foreign currency forwards Other accrued liabilities
Equity forwards
Prepaid expenses and other assets
2017
2016
Asset
Derivatives
Fair Value
Liability
Derivatives
Fair Value
Asset
Derivatives
Fair Value
Liability
Derivatives
Fair Value
$
7.3
1.4
8.7
$
–
–
–
$
9.8
$
14.3
24.1
–
–
–
$
4.1
$
–
$
4.4
$
–
–
17.8
21.9
6.5
–
6.5
6.5
–
17.9
22.3
13.5
–
13.5
$ 46.4
$ 13.5
Total derivative instruments
$ 30.6
$
As of 2017 and 2016 year end, the fair value adjustment to long-term debt related to the interest rate swaps was $7.3 million
and $9.8 million, respectively.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between participants at the measurement date. Level 2 fair value measurements for derivative assets and liabilities are
measured using quoted prices in active markets for similar assets and liabilities. Interest rate swaps are valued based on
the six-month LIBOR swap rate for similar instruments. Treasury locks are valued based on the 10-year U.S. treasury
interest rate. Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for
similar instruments. Equity forwards are valued using a market approach based primarily on the company’s stock price at
the reporting date. The company did not have any derivative assets or liabilities measured at Level 1 or Level 3, nor did it
implement any changes in its valuation techniques as of and for its 2017 and 2016 years ended.
The effect of derivative instruments designated as fair value hedges as included in the Consolidated Statements of Earnings
is as follows:
(Amounts in millions)
Derivatives designated as fair
value hedges:
Statement of
Earnings
Presentation
Effective Portion of Gain Recognized in Income
2017
2016
2015
Interest rate swaps
Interest expense
$
2.8
$
2.9
$
3.7
2017 ANNUAL REPORT
95
Notes to Consolidated Financial Statements (continued)
The effect of derivative instruments designated as cash flow hedges as included in Accumulated OCI on the Consolidated
Balance Sheets and the Consolidated Statements of Earnings is as follows:
Effective Portion of Gain Recognized
in Accumulated OCI
2017
2016
2015
Statement of
Earnings
Presentation
Effective Portion of Gain Reclassified
from Accumulated OCI into Income
2017
2016
2015
(Amounts in millions)
Derivatives designated
as cash flow hedges:
Treasury locks
$ 6.9
$ 8.8
$ –
Interest expense
$ 1.6
$ 0.3
$ 0.3
The effects of derivative instruments not designated as hedging instruments as included in the Consolidated Statements of
Earnings are as follows:
(Amounts in millions)
Derivatives not designated as
hedging instruments:
Foreign currency forwards
Statement of
Earnings
Presentation
Other income
(expense) – net
Gain (Loss) Recognized in Income
2017
2016
2015
$
(25.8)
$
(7.4)
$
(15.5)
Equity forwards
Operating expenses
0.9
0.8
4.7
Snap-on’s foreign currency forwards are typically not designated as hedges for financial reporting purposes. The fair value
changes of foreign currency forwards not designated as hedging instruments are reported in earnings as foreign exchange
gain or loss in “Other income (expense) – net” on the accompanying Consolidated Statements of Earnings. In 2017, the
$25.8 million derivative loss was partially offset by transaction gains on net exposures of $18.8 million, resulting in a net
foreign exchange loss of $7.0 million. In 2016, the $7.4 million derivative loss was partially offset by transaction gains on
net exposures of $6.1 million, resulting in a net foreign exchange loss of $1.3 million. In 2015, the $15.5 million derivative
loss was partially offset by transaction gains on net exposures of $12.8 million, resulting in a net foreign exchange loss of
$2.7 million. The resulting net foreign exchange losses are included in “Other income (expense) – net” on the accompanying
Consolidated Statements of Earnings. See Note 16 for additional information on “Other income (expense) – net.”
Snap-on’s equity forwards are not designated as hedges for financial reporting purposes. Fair value changes of both the
equity forwards and related stock-based (mark-to-market) deferred compensation liabilities are reported in “Operating
expenses” on the accompanying Consolidated Statements of Earnings. The $0.9 million derivative gain recognized in 2017
was primarily offset by $0.8 million of mark-to-market deferred compensation expense. The $0.8 million derivative gain
recognized in 2016 was partially offset by $0.3 million of mark-to-market deferred compensation expense. The $4.7 million
derivative gain recognized in 2015 was largely offset by $4.6 million of mark-to-market deferred compensation expense.
As of 2017 year end, the maximum maturity date of any fair value hedge was four years. During the next 12 months,
Snap-on expects to reclassify into earnings net gains from Accumulated OCI of approximately $1.0 million after tax at the
time the underlying hedge transactions are realized.
Counterparty risk: Snap-on is exposed to credit losses in the event of non-performance by the counterparties to its various
financial agreements, including its foreign currency forward contracts, interest rate swap agreements, treasury lock
agreements and prepaid equity forward agreements. Snap-on does not obtain collateral or other security to support financial
instruments subject to credit risk, but monitors the credit standing of the counterparties and generally enters into agreements
with financial institution counterparties with a credit rating of A- or better. Snap-on does not anticipate non-performance by
its counterparties, but cannot provide assurances.
96
SNAP-ON INCORPORATED
Fair value of financial instruments: The fair values of financial instruments that do not approximate the carrying values
in the financial statements as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Finance receivables – net
Contract receivables – net
Long-term debt, notes payable and
current maturities of long-term debt
2017
2016
Carrying
Value
$ 1,544.6
419.4
Fair
Value
$ 1,791.5
459.1
Carrying
Value
$ 1,407.0
374.8
Fair
Value
$ 1,631.2
409.7
1,186.8
1,235.6
1,010.2
1,076.7
The following methods and assumptions were used in estimating the fair value of financial instruments:
(cid:120) Finance and contract receivables include both short-term and long-term receivables. The fair value estimates of
finance and contract receivables are derived utilizing discounted cash flow analyses performed on groupings of
receivables that are similar in terms of loan type and characteristics. The cash flow analyses consider recent
prepayment trends where applicable. The cash flows are discounted over the average life of the receivables using
a current market discount rate of a similar term adjusted for credit quality. Significant inputs to the fair value
measurements of the receivables are unobservable and, as such, are classified as Level 3.
(cid:120) Fair value of long-term debt and current maturities of long-term debt were estimated, using Level 2 fair value
measurements, based on quoted market values of Snap-on’s publicly traded senior debt. The carrying value of
long-term debt includes adjustments related to fair value hedges. The fair value of notes payable approximates
such instruments’ carrying value due to their short-term nature.
(cid:120) The fair value of all other financial instruments, including trade and other accounts receivable, accounts payable
and other financial instruments, approximates such instruments’ carrying value due to their short-term nature.
Note 11: Pension Plans
Snap-on has several non-contributory defined benefit pension plans covering most U.S. employees and certain employees
in foreign countries. Snap-on also has foreign contributory defined benefit pension plans covering certain foreign
employees. Retirement benefits are generally provided based on employees’ years of service and average earnings or
stated amounts for years of service. Normal retirement age is 65, with provisions for earlier retirement.
The status of Snap-on’s pension plans as of 2017 and 2016 year end is as follows:
(Amounts in millions)
Change in projected benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participant contributions
Plan settlements
Benefits paid
Actuarial loss
Foreign currency impact
Benefit obligation at end of year
2017
2016
$ 1,361.4
22.7
56.1
0.6
(0.3)
(66.6)
69.5
24.2
$ 1,467.6
$ 1,279.4
19.3
56.5
1.0
–
(63.2)
94.7
(26.3)
$ 1,361.4
2017 ANNUAL REPORT
97
Notes to Consolidated Financial Statements (continued)
(Amounts in millions)
Change in plan assets:
2017
2016
Fair value of plan assets at beginning of year
$ 1,110.8
$ 1,049.2
Actual return on plan assets
Employer contributions
Plan participant contributions
Plan settlements
Benefits paid
Foreign currency impact
Fair value of plan assets at end of year
Unfunded status at end of year
175.7
69.6
0.6
(0.3)
(66.6)
15.2
73.5
68.7
1.0
–
(63.2)
(18.4)
$ 1,305.0
$ 1,110.8
$
(162.6)
$
(250.6)
Amounts recognized in the Consolidated Balance Sheets as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Other assets
Accrued benefits
Pension liabilities
Net liability
2017
2016
$
1.5
$
(5.2)
(158.9)
0.6
(4.7)
(246.5)
$
(162.6)
$
(250.6)
Amounts included in Accumulated OCI on the accompanying Consolidated Balance Sheets as of 2017 and 2016 year end
are as follows:
(Amounts in millions)
Net loss, net of tax of $146.4 million and $160.6 million, respectively
Prior service credit, net of tax of $0.9 million and $1.3 million, respectively
2017
(266.7)
1.5
(265.2)
$
$
2016
$
(297.0)
2.2
(294.8)
$
The accumulated benefit obligation for Snap-on’s pension plans as of 2017 and 2016 year end was $1,385.0 million and
$1,283.1 million, respectively.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for Snap-on’s pension plans
in which the accumulated benefit obligation exceeds the fair value of plan assets as of 2017 and 2016 year end are as
follows:
(Amounts in millions)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2017
2016
$ 398.7
378.1
275.6
$ 1,312.1
1,238.7
1,061.0
98
SNAP-ON INCORPORATED
The components of net periodic benefit cost and changes recognized in “Other comprehensive income (loss)” (“OCI”) are
as follows:
(Amounts in millions)
Net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized loss
Amortization of prior service credit
Settlement loss
Net periodic benefit cost
2017
2016
2015
$ 22.7
56.1
(83.4)
27.9
(1.1)
0.1
$ 22.3
$ 19.3
56.5
(81.0)
31.3
(1.1)
–
$ 20.0
53.2
(79.0)
38.6
(0.9)
–
$ 25.0
$ 31.9
Changes in benefit obligations recognized in OCI, net of tax:
Net (gain) loss
Prior service cost
Total recognized in OCI
$
$
(30.3)
0.7
(29.6)
$ 43.3
0.6
$ 43.9
$
$
6.3
0.7
7.0
Amounts in Accumulated OCI that are expected to be amortized as net expense into net periodic benefit cost during 2018
are as follows:
(Amounts in millions)
Amortization of unrecognized loss
Amortization of prior service credit
Total to be recognized in net periodic benefit cost
Amount
32.0
(1.2)
30.8
$
$
The worldwide weighted-average assumptions used to determine Snap-on’s full-year pension costs are as follows:
Discount rate
Expected return on plan assets
Rate of compensation increase
2017
4.2%
7.2%
3.4%
2016
4.5%
7.4%
3.6%
2015
4.1%
7.4%
3.6%
The worldwide weighted-average assumptions used to determine Snap-on’s projected benefit obligation as of 2017 and
2016 year end are as follows:
Discount rate
Rate of compensation increase
2017
3.7%
3.4%
2016
4.2%
3.4%
The objective of Snap-on’s discount rate assumption is to reflect the rate at which the pension benefits could be effectively
settled. In making this determination, the company takes into account the timing and amount of benefits that would be
available under the plans. The domestic discount rate as of 2017 and 2016 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. This methodology matches the plans’ yearly projected cash flows for benefits and service costs to those of
hypothetical bond portfolios using high-quality, AA rated or better, corporate bonds from either Moody’s Investors Service
or Standard & Poor’s credit rating agencies available at the measurement date. 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.
2017 ANNUAL REPORT
99
Notes to Consolidated Financial Statements (continued)
The weighted-average discount rate for Snap-on’s domestic pension plans of 3.9% represents the single rate that produces
the same present value of cash flows as the estimated benefit plan payments. Lowering Snap-on’s domestic discount rate
assumption by 50 basis points (100 basis points (“bps”) equals 1.0 percent) would have increased Snap-on’s 2017 domestic
pension expense and projected benefit obligation by approximately $4.3 million and $71.3 million, respectively. As of 2017
year end, Snap-on’s domestic projected benefit obligation comprised approximately 83% of Snap-on’s worldwide projected
benefit obligation. The weighted-average discount rate for Snap-on’s foreign pension plans of 2.7% represents the single
rate that produces the same present value of cash flows as the estimated benefit plan payments. Lowering Snap-on’s
foreign discount rate assumption by 50 bps would have increased Snap-on’s 2017 foreign pension expense and projected
benefit obligation by approximately $1.8 million and $24.4 million, respectively.
Actuarial gains and losses in excess of 10 percent of the greater of the projected benefit obligation or market-related value
of assets are amortized on a straight-line basis over the average remaining service period of active participants or over the
average remaining life expectancy for plans with primarily inactive participants. Prior service costs and credits resulting from
plan amendments are amortized in equal annual amounts over the average remaining service period of active participants
or over the average remaining life expectancy for plans with primarily inactive participants.
As a practical expedient, Snap-on uses the calendar year end as the measurement date for its plans. Snap-on funds its
pension plans as required by governmental regulation and may consider discretionary contributions as conditions warrant.
Snap-on intends to make contributions of $9.7 million to its foreign pension plans and $2.4 million to its domestic pension
plans in 2018, as required by law. Depending on market and other conditions, Snap-on may make discretionary cash
contributions to its pension plans in 2018.
The following benefit payments, which reflect expected future service, are expected to be paid as follows:
(Amounts in millions)
Amount
Year:
2018
2019
2020
2021
2022
2023 – 2027
$
73.6
75.2
78.9
81.5
91.4
462.3
Snap-on’s domestic pension plans have a long-term investment horizon and a total return strategy that emphasizes a capital
growth objective. The long-term investment performance objective for Snap-on’s domestic plans’ assets is to achieve net
of expense returns that meet or exceed the 7.45% domestic long-term return on plan assets assumption used for reporting
purposes. 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. As of 2017 year end, Snap-on’s domestic pension plans’ assets comprised
approximately 86% of the company’s worldwide pension plan assets.
The basis for determining the overall expected long-term return on plan assets assumption is a nominal returns forecasting
method. For each asset class, future returns are estimated by identifying the premium of riskier asset classes over lower
risk alternatives. The methodology constructs expected returns using a “building block” approach to the individual
components of total return. These forecasts are stated in both nominal and real (after inflation) terms. This process first
considers the long-term historical return premium based on the longest set of data available for each asset class. These
premiums, which are calculated using the geometric mean, are then adjusted based on current relative valuation levels,
macro-economic conditions, and the expected alpha related to active investment management. The asset return
assumption is also adjusted by an implicit expense load for estimated administrative and investment-related expenses.
For risk and correlation assumptions, the actual experience for each asset class is reviewed for the longest time period
available. Expected relationships for a 10 to 20 year time horizon are determined based upon historical results, with
adjustments made for material changes.
100
SNAP-ON INCORPORATED
Investments are diversified to attempt to minimize the risk of large losses. Since asset allocation is a key determinant of
expected investment returns, assets are periodically rebalanced to the targeted allocation to correct significant deviations
from the asset allocation policy that are caused by market fluctuations and cash flow. Asset/liability studies are conducted
periodically to determine if any revisions to the strategic asset allocation policy are necessary.
Snap-on’s domestic pension plans’ target allocation and actual weighted-average asset allocation by asset category and
fair value of plan assets as of 2017 and 2016 year end are as follows:
Asset category:
Equity securities
Debt securities and cash and cash equivalents
Real estate and other real assets
Hedge funds
Total
Target
51%
37%
2%
10%
100%
2017
51%
38%
1%
10%
100%
2016
51%
39%
1%
9%
100%
Fair value of plan assets (Amounts in millions)
$ 1,122.7
$ 957.1
The fair value measurement hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest
priority (“Level 1”) to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority
(“Level 3”) to unobservable inputs. Fair value measurements primarily based on observable market information are given a
“Level 2” priority.
Certain equity and debt securities are valued at quoted per share or unit market prices for which an official close or last
trade pricing on an active exchange is available and are categorized as Level 1 in the fair value hierarchy. If quoted market
prices are not readily available for specific securities, values are estimated using quoted prices of securities with similar
characteristics and are categorized as Level 2 in the fair value hierarchy. Insurance contracts are valued at the present
value of the estimated future cash flows promised under the terms of the insurance contracts and are categorized as Level
2 in the fair value hierarchy.
Commingled equity securities and commingled multi-strategy funds are valued at the NAV per share or unit multiplied by
the number of shares or units held as of the measurement date, as reported by the fund managers. The share or unit price
is quoted on a private market and is based on the value of the underlying investments, which are primarily based on
observable inputs; such investments that are measured at fair value using the NAV per share (or its equivalent) practical
expedient have not been classified in the fair value hierarchy.
Private equity partnership funds, hedge funds, and real estate and other real assets are valued at the NAV as reported by
the fund managers. Private equity partnership funds, certain hedge funds, and certain real estate and other real assets are
valued based on the proportionate interest or share of net assets held by the pension plan, which is based on the estimated
fair market value of the underlying investments. Certain other hedge funds and real estate and other real assets are valued
at the NAV per share or unit multiplied by the number of shares or units held as of the measurement date, based on the
estimated value of the underlying investments as reported by the fund managers. These investments are measured at fair
value using the NAV per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy.
The company regularly reviews fund performance directly with its investment advisor and the fund managers, and performs
qualitative analysis to corroborate the reasonableness of the reported NAVs. For funds for which the company did not
receive a year-end NAV, the company recorded an estimate of the change in fair value for the latest period based on return
estimates and other fund activity obtained from the fund managers.
The columns labeled “Investments Measured at NAV” in the following tables reflect certain investments that are measured
at fair value using the NAV per share (or its equivalent) practical expedient and have not been categorized in the fair value
hierarchy. The fair value amounts presented in these tables are intended to permit a reconciliation of the fair value hierarchy
to the pension plan assets.
2017 ANNUAL REPORT
101
Notes to Consolidated Financial Statements (continued)
The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of Snap-on’s
domestic pension plans’ assets as of 2017 year end:
(Amounts in millions)
Asset category:
Cash and cash equivalents
Equity securities:
Domestic
Foreign
Commingled funds – domestic
Commingled funds – foreign
Private equity partnerships
Debt securities:
Government
Corporate bonds
Real estate and other real assets
Hedge funds
Total
Quoted
Prices for
Identical
Assets
(Level 1)
20.6
Significant
Other
Observable
Inputs
(Level 2)
–
$
$
Investments
Measured at
NAV
–
$
Total
20.6
$
73.4
100.1
–
–
–
152.8
–
–
–
–
–
–
–
–
2.2
253.0
–
–
$ 346.9
$ 255.2
–
–
225.0
148.8
27.5
73.4
100.1
225.0
148.8
27.5
–
–
13.2
106.1
$ 520.6
155.0
253.0
13.2
106.1
$ 1,122.7
The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of Snap-on’s
domestic pension plans’ assets as of 2016 year end:
(Amounts in millions)
Asset category:
Cash and cash equivalents
Equity securities:
Domestic
Foreign
Commingled funds – domestic
Commingled funds – foreign
Private equity partnerships
Debt securities:
Government
Corporate bonds
Real estate and other real assets
Hedge funds
Total
Quoted
Prices for
Identical
Assets
(Level 1)
20.4
Significant
Other
Observable
Inputs
(Level 2)
–
$
$
Investments
Measured at
NAV
–
$
Total
20.4
$
66.0
74.7
–
–
–
–
–
–
–
–
–
–
191.3
117.7
34.2
66.0
74.7
191.3
117.7
34.2
139.2
–
–
–
0.9
214.6
–
–
$ 300.3
$ 215.5
–
–
10.4
87.7
$ 441.3
140.1
214.6
10.4
87.7
$ 957.1
Snap-on’s primary investment objective for its foreign pension plans’ assets is to meet the projected obligations to the
beneficiaries over a long period of time, and to do so in a manner that is consistent with the company’s risk tolerance. The
foreign asset allocation policies consider the company’s financial strength and long-term asset class risk/return
expectations, since the obligations are long term in nature. The company believes the foreign pension plans’ assets, which
are managed locally by professional investment firms, are well diversified.
102
SNAP-ON INCORPORATED
The expected long-term rates of return on foreign plans’ assets, which ranged from 1.9% to 6.1% as of 2017 year end,
reflect management’s expectations of long-term average rates of return on funds invested to provide benefits included in
the plans’ projected benefit obligation. The expected returns are based on outlooks for inflation, fixed income returns and
equity returns, asset allocations and investment strategies. Differences between actual and expected returns on foreign
pension plans’ assets are recorded as an actuarial gain or loss and amortized accordingly.
Snap-on’s foreign pension plans’ target allocation and actual weighted-average asset allocation by asset category and fair
value of plan assets as of 2017 and 2016 year end are as follows:
Asset category:
Equity securities*
Debt securities* and cash and cash equivalents
Insurance contracts and hedge funds
Total
Target
35%
40%
25%
100%
2017
36%
42%
22%
100%
2016
41%
36%
23%
100%
Fair value of plan assets (Amounts in millions)
$ 182.3
$ 153.7
* Includes commingled funds – multi-strategy
The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of Snap-on’s
foreign pension plans’ assets as of 2017 year end:
(Amounts in millions)
Asset category:
Cash and cash equivalents
Commingled funds – multi-strategy
Debt securities:
Government
Corporate bonds
Insurance contracts
Hedge fund
Total
Quoted
Prices for
Identical
Assets
(Level 1)
0.7
$
–
8.8
–
–
–
9.5
$
Significant
Other
Observable
Inputs
(Level 2)
–
–
$
Investments
Measured at
NAV
–
114.2
$
–
18.3
24.2
–
42.5
$
–
–
–
16.1
$ 130.3
$
Total
0.7
114.2
8.8
18.3
24.2
16.1
$ 182.3
The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of Snap-on’s
foreign pension plans’ assets as of 2016 year end:
(Amounts in millions)
Asset category:
Cash and cash equivalents
Commingled funds – multi-strategy
Insurance contracts
Hedge fund
Total
$
$
Quoted
Prices for
Identical
Assets
(Level 1)
0.7
–
–
–
0.7
Significant
Other
Observable
Inputs
(Level 2)
–
–
21.3
–
21.3
$
$
$
Investments
Measured at
NAV
–
117.4
–
14.3
$ 131.7
$
Total
0.7
117.4
21.3
14.3
$ 153.7
2017 ANNUAL REPORT
103
Notes to Consolidated Financial Statements (continued)
Snap-on has several 401(k) plans covering certain U.S. employees. Snap-on’s employer match to the 401(k) plans is made
with cash contributions. For 2017, 2016 and 2015, Snap-on recognized $8.9 million, $8.2 million and $7.0 million,
respectively, of expense related to its 401(k) plans.
Note 12: Postretirement Plans
Snap-on provides health care benefits for certain retired U.S. employees. Employees retiring prior to 1989 were eligible for
retiree medical coverage upon reaching early retirement age, with no retiree contributions required. Benefits are paid based
on deductibles and percentages of covered expenses and take into consideration payments made by Medicare and other
insurance coverage.
Since 1989, U.S. retirees have been eligible for comprehensive major medical plans. Benefits are paid based on deductibles
and percentages of covered expenses, and plan provisions allow for benefit and coverage changes. Most retirees are
required to pay the entire cost of the coverage, but Snap-on may elect to subsidize the cost of coverage under certain
circumstances.
Snap-on has a Voluntary Employees Beneficiary Association (“VEBA”) trust for the funding of existing postretirement health
care benefits for certain non-salaried retirees in the United States; all other retiree health care plans are unfunded.
The status of Snap-on’s U.S. postretirement health care plans as of 2017 and 2016 year end is as follows:
(Amounts in millions)
Change in accumulated postretirement benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participant contributions
Benefits paid
Actuarial loss (gain)
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Plan participant contributions
Benefits paid
Fair value of plan assets at end of year
Unfunded status at end of year
2017
2016
$ 53.2
–
2.1
0.4
(4.3)
1.1
$ 52.5
$ 13.2
1.3
2.8
0.4
(4.3)
$ 13.4
$ (39.1)
$ 55.6
0.1
2.2
0.5
(4.4)
(0.8)
$ 53.2
$ 13.7
0.5
2.9
0.5
(4.4)
$ 13.2
$ (40.0)
Amounts recognized in the Consolidated Balance Sheets as of 2017 and 2016 year end are as follows:
(Amounts in millions)
Accrued benefits
Retiree health care benefits
Net liability
2017
$
(3.1)
(36.0)
$ (39.1)
$
2016
(3.3)
(36.7)
$ (40.0)
104
SNAP-ON INCORPORATED
Amounts included in Accumulated OCI on the accompanying Consolidated Balance Sheets as of 2017 and 2016 year end
are as follows:
(Amounts in millions)
Net gain, net of tax of $2.6 million and $2.9 million, respectively
2017
4.2
$
2016
$ 4.8
The components of net periodic benefit cost and changes recognized in OCI are as follows:
(Amounts in millions)
Net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized (gain) loss
Net periodic benefit cost
2017
2016
2015
$ –
2.1
(0.8)
(0.3)
$ 1.0
$ 0.1
2.2
(0.9)
(0.1)
$ 1.3
$ 0.1
2.2
(1.0)
0.3
$ 1.6
Changes in benefit obligations recognized in OCI, net of tax:
Net (gain) loss
$ 0.6
$ (0.3)
$ (2.1)
Snap-on expects to recognize $0.3 million of prior unrecognized gains, included in Accumulated OCI on the accompanying
2017 Consolidated Balance Sheet, in net periodic benefit cost during 2018.
The weighted-average discount rate used to determine Snap-on’s postretirement health care expense is as follows:
Discount rate
2017
4.1%
2016
4.1%
2015
3.6%
The weighted-average discount rate used to determine Snap-on’s accumulated benefit obligation is as follows:
Discount rate
2017
3.6%
2016
4.1%
The methodology for selecting the year-end 2017 and 2016 weighted-average discount rate for the company’s domestic
postretirement plans was to match the plans’ yearly projected cash flows for benefits and service costs to those of
hypothetical bond portfolios using high-quality, AA rated or better, corporate bonds from either Moody’s Investors Service
or Standard & Poor’s credit rating agencies available at the measurement date. As a practical expedient, Snap-on uses
the calendar year end as the measurement date for its plans.
For 2018, the actuarial calculations assume a pre-65 health care cost trend rate of 5.8% and a post-65 health care cost
trend rate of 6.5%, both decreasing gradually to 4.5% in 2038 and thereafter. As of 2017 year end, a one-percentage-point
increase in the health care cost trend rate for future years would increase the accumulated postretirement benefit obligation
by approximately $0.6 million and the aggregate of the service cost and interest cost components by less than $0.1 million.
Conversely, a one-percentage-point decrease in the health care cost trend rate for future years would decrease the
accumulated postretirement benefit obligation by $0.6 million and the aggregate of the service cost and interest rate
components by less than $0.1 million.
2017 ANNUAL REPORT
105
Notes to Consolidated Financial Statements (continued)
The following benefit payments, which reflect expected future service, are expected to be paid as follows:
(Amounts in millions)
Year:
2018
2019
2020
2021
2022
2023 – 2027
Amount
$
4.1
4.2
4.3
4.4
4.5
23.0
The objective of the VEBA trust is to achieve net of expense returns that meet or exceed the 6.3% long-term return on plan
assets assumption used for reporting purposes. Investments are diversified to attempt to minimize the risk of large losses.
Since asset allocation is a key determinant of expected investment returns, assets are periodically rebalanced to the
targeted allocation to correct significant deviations from the asset allocation policy that are caused by market fluctuations
and cash flow.
The basis for determining the overall expected long-term return on plan assets assumption is a nominal returns forecasting
method. For each asset class, future returns are estimated by identifying the premium of riskier asset classes over lower
risk alternatives. The methodology constructs expected returns using a “building block” approach to the individual
components of total return. These forecasts are stated in both nominal and real (after inflation) terms. This process first
considers the long-term historical return premium based on the longest set of data available for each asset class. These
premiums, which are calculated using the geometric mean, are then adjusted based on current relative valuation levels and
macro-economic conditions. The asset return assumption is also adjusted by an implicit expense load for estimated
administrative and investment-related expenses.
Snap-on’s VEBA plan target allocation and actual weighted-average asset allocation by asset category and fair value of
plan assets as of 2017 and 2016 year end are as follows:
Asset category:
Debt securities and cash and cash equivalents
Equity securities
Hedge funds
Total
Target
46%
29%
25%
100%
2017
42%
29%
29%
100%
2016
45%
28%
27%
100%
Fair value of plan assets (Amounts in millions)
$
13.4
$
13.2
The fair value measurement hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest
priority (Level 1) to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority
(Level 3) to unobservable inputs. Fair value measurements primarily based on observable market information are given a
Level 2 priority.
Debt securities are valued at quoted per share or unit market prices for which an official close or last trade pricing on an
active exchange is available and are categorized as Level 1 in the fair value hierarchy.
Equity securities are valued at the NAV per share or unit multiplied by the number of shares or units held as of the
measurement date, as reported by the fund managers. The share or unit price is quoted on a private market and is based
on the value of the underlying investments, which are primarily based on observable inputs; such investments that are
measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair
value hierarchy.
106
SNAP-ON INCORPORATED
Hedge funds are stated at the NAV per share or unit (based on the estimated fair market value of the underlying investments)
multiplied by the number of shares or units held as of the measurement date, as reported by the fund managers. These
investments are measured at fair value using the NAV per share (or its equivalent) practical expedient and have not been
classified in the fair value hierarchy.
The company regularly reviews fund performance directly with its investment advisor and the fund managers, and performs
qualitative analysis to corroborate the reasonableness of the reported NAVs. For funds for which the company did not
receive a year-end NAV, the company recorded an estimate of the change in fair value for the latest period based on return
estimates and other fund activity obtained from the fund managers.
The columns labeled “Investments Measured at NAV” in the following tables are measured at fair value using the NAV per
share (or its equivalent) practical expedient and have not been categorized in the fair value hierarchy. The fair value
amounts presented in these tables are intended to permit a reconciliation of the fair value hierarchy to the VEBA plan assets.
The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of the VEBA
plan assets as of 2017 year end:
The following is a summary, by asset category, of the fair value and the level within the fair value hierarchy of the VEBA
plan assets as of 2016 year end:
(Amounts in millions)
Asset category:
Quoted
Prices for
Identical
Assets
(Level 1)
Investments
Measured at
NAV
Cash and cash equivalents
$
Debt securities
Equity securities
Hedge fund
Total
$
0.2
5.5
–
–
$
5.7
$
(Amounts in millions)
Asset category:
Quoted
Prices for
Identical
Assets
(Level 1)
Investments
Measured at
NAV
Cash and cash equivalents
$
Debt securities
Equity securities
Hedge fund
Total
$
0.7
5.3
–
–
$
6.0
$
$
Total
0.2
5.5
3.8
3.9
$ 13.4
$
Total
0.7
5.3
3.6
3.6
$ 13.2
–
–
3.8
3.9
7.7
–
–
3.6
3.6
7.2
Note 13: Stock-based Compensation and Other Stock Plans
The 2011 Incentive Stock and Awards Plan (the “2011 Plan”) provides for the grant of stock options, performance awards,
stock appreciation rights (“SARs”) and restricted stock awards (which may be designated as “restricted stock units” or
“RSUs”). No further grants are being made under its predecessor, the 2001 Incentive Stock and Awards Plan (the “2001
Plan”), although outstanding awards under the 2001 Plan will continue in accordance with their terms. As of 2017 year end,
the 2011 Plan had 3,296,859 shares available for future grants. The company uses treasury stock to deliver shares under
both the 2001 and 2011 Plans.
2017 ANNUAL REPORT
107
Notes to Consolidated Financial Statements (continued)
Net stock-based compensation expense was $30.3 million in 2017, $31.0 million in 2016 and $39.8 million in 2015. Cash
received from stock purchase and option plan exercises was $46.2 million in 2017, $41.8 million in 2016 and $41.6 million
in 2015. The tax benefit realized from both the exercise and vesting of share-based payment arrangements was $20.9
million in 2017, $24.8 million in 2016 and $26.4 million in 2015.
Stock Options
Stock options are granted with an exercise price equal to the market value of a share of Snap-on’s common stock on the
date of grant and have a contractual term of ten years. Stock option grants vest ratably on the first, second and third
anniversaries of the date of grant.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model. The
company uses historical data regarding stock option exercise and forfeiture behaviors for different participating groups to
estimate the period of time that options granted are expected to be outstanding. Expected volatility is based on the historical
volatility of the company’s stock for the length of time corresponding to the expected term of the option. The expected
dividend yield is based on the company’s historical dividend payments. The risk-free interest rate is based on the U.S.
treasury yield curve on the grant date for the expected term of the option.
The following weighted-average assumptions were used in calculating the fair value of stock options granted during 2017,
2016 and 2015, using the Black-Scholes valuation model:
Expected term of option (in years)
Expected volatility factor
Expected dividend yield
Risk-free interest rate
2017
5.15
22.01%
1.63%
1.78%
2016
5.05
22.17%
1.77%
1.04%
2015
4.76
24.13%
2.04%
1.38%
A summary of stock option activity during 2017 is presented below:
Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Exercisable at end of year
* Weighted-average
Shares
(in thousands)
3,011
655
(396)
(72)
3,198
1,990
Exercise
Price per
Share*
$ 100.78
168.71
86.29
153.53
115.30
91.27
Remaining
Contractual
Term*
(in years)
Aggregate
Intrinsic
Value
(in millions)
6.4
5.1
$ 188.7
165.2
The weighted-average grant date fair value of options granted was $31.13 in 2017, $22.99 in 2016 and $25.64 in 2015.
The intrinsic value of options exercised was $33.3 million in 2017, $35.2 million in 2016 and $37.6 million in 2015. The fair
value of stock options vested was $14.0 million in 2017, $12.7 million in 2016 and $9.9 million in 2015.
As of 2017 year end, there was $19.3 million of unrecognized compensation cost related to non-vested stock options that
is expected to be recognized as a charge to earnings over a weighted-average period of 1.5 years.
108
SNAP-ON INCORPORATED
Performance Awards
Performance awards, which are granted as performance share units (“PSUs”) and performance-based RSUs, are earned
and expensed using the fair value of the award over a contractual term of three years based on the company’s performance.
Vesting of the performance awards is dependent upon performance relative to pre-defined goals for revenue growth and
return on net assets for the applicable performance period. For performance achieved above specified levels, the recipient
may earn additional shares of stock, not to exceed 100% of the number of performance awards initially granted.
The PSUs have a three-year performance period based on the results of the consolidated financial metrics of the company.
The performance-based RSUs have a one-year performance period based on the results of the consolidated financial
metrics of the company followed by a two-year cliff vesting schedule, assuming continued employment.
The fair value of performance awards is calculated using the market value of a share of Snap-on’s common stock on the
date of grant and assumed forfeitures based on recent historical experience; in recent years, forfeitures have not been
significant. The weighted-average grant date fair value of performance awards granted during 2017, 2016 and 2015 was
$168.70, $138.83 and $139.30, respectively. Vested PSUs totaled 50,316 shares as of 2017 year end, 61,149 shares as
of 2016 year end and 94,186 shares as of 2015 year end. PSUs related to 60,980 shares, 94,186 shares and 130,764
shares were paid out in 2017, 2016 and 2015, respectively. Earned PSUs are generally paid out following the conclusion
of the applicable performance period upon approval by the Organization and Executive Compensation Committee of the
company’s Board of Directors (the “Board”).
Based on the company’s 2017 performance, 13,648 RSUs granted in 2017 were earned; assuming continued employment,
these RSUs will vest at the end of fiscal 2019. Based on the company’s 2016 performance, 45,502 RSUs granted in 2016
were earned; assuming continued employment, these RSUs will vest at the end of fiscal 2018. Based on the company’s
2015 performance, 64,327 RSUs granted in 2015 were earned; these RSUs vested as of fiscal 2017 year end and were
paid out shortly thereafter.
Changes to the company’s non-vested performance awards in 2017 are as follows:
Non-vested performance awards at beginning of year
Granted
Vested
Cancellations and other
Non-vested performance awards at end of year
* Weighted-average
Shares
(in thousands)
207
77
(114)
(38)
132
Fair Value
Price per
Share*
$ 141.94
168.70
144.61
159.80
149.93
As of 2017 year end, there was $9.5 million of unrecognized compensation cost related to non-vested performance awards
that is expected to be recognized as a charge to earnings over a weighted-average period of 1.6 years.
Stock Appreciation Rights (“SARs”)
The company also issues stock-settled and cash-settled SARs to certain key non-U.S. employees. SARs have a contractual
term of ten years and vest ratably on the first, second and third anniversaries of the date of grant. SARs are granted with
an exercise price equal to the market value of a share of Snap-on’s common stock on the date of grant.
2017 ANNUAL REPORT
109
Notes to Consolidated Financial Statements (continued)
Stock-settled SARs are accounted for as equity instruments and provide for the issuance of Snap-on common stock equal
to the amount by which the company’s stock has appreciated over the exercise price. Stock-settled SARs have an effect
on dilutive shares and shares outstanding as any appreciation of Snap-on’s common stock value over the exercise price
will be settled in shares of common stock. Cash-settled SARs provide for the cash payment of the excess of the fair market
value of Snap-on’s common stock price on the date of exercise over the grant price. Cash-settled SARs have no effect on
dilutive shares or shares outstanding as any appreciation of Snap-on’s common stock over the grant price is paid in cash
and not in common stock.
The fair value of stock-settled SARs is estimated on the date of grant using the Black-Scholes valuation model. The fair
value of cash-settled SARs is revalued (mark-to-market) each reporting period using the Black-Scholes valuation model
based on Snap-on’s period-end stock price. The company uses historical data regarding SARs exercise and forfeiture
behaviors for different participating groups to estimate the expected term of the SARs granted based on the period of time
that similar instruments granted are expected to be outstanding. Expected volatility is based on the historical volatility of the
company’s stock for the length of time corresponding to the expected term of the SARs. The expected dividend yield is
based on the company’s historical dividend payments. The risk-free interest rate is based on the U.S. treasury yield curve
in effect as of the grant date (for stock-settled SARs) or reporting date (for cash-settled SARs) for the length of time
corresponding to the expected term of the SARs.
The following weighted-average assumptions were used in calculating the fair value of stock-settled SARs granted during
2017, 2016 and 2015, using the Black-Scholes valuation model:
Expected term of stock-settled SARs (in years)
Expected volatility factor
Expected dividend yield
Risk-free interest rate
2017
3.99
19.39%
1.46%
1.55%
2016
4.03
20.09%
1.66%
1.11%
2015
4.72
23.66%
2.04%
1.50%
Changes to the company’s stock-settled SARs in 2017 are as follows:
Stock-settled
SARs
(in thousands)
303
100
(13)
(30)
360
165
Exercise
Price per
Share*
$ 125.38
168.73
103.16
121.53
138.63
119.46
Remaining
Contractual
Term*
(in years)
Aggregate
Intrinsic
Value
(in millions)
7.6
6.6
$
12.8
9.1
Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Exercisable at end of year
* Weighted-average
The weighted-average grant date fair value of stock-settled SARs granted was $24.13 in 2017, $19.47 in 2016 and $25.37
in 2015. The intrinsic value of stock-settled SARs exercised was $0.9 million in 2017, $1.9 million in 2016 and $1.0 million
in 2015. The fair value of stock-settled SARs vested was $2.1 million in both 2017 and 2016 and $1.4 million in 2015.
As of 2017 year end there was $2.5 million of unrecognized compensation cost related to non-vested stock-settled SARs
that is expected to be recognized as a charge to earnings over a weighted-average period of 1.5 years.
110
SNAP-ON INCORPORATED
The following weighted-average assumptions were used in calculating the fair value of cash-settled SARs granted during
2017, 2016 and 2015, using the Black-Scholes valuation model:
Expected term of cash-settled SARs (in years)
Expected volatility factor
Expected dividend yield
Risk-free interest rate
2017
3.09
19.93%
1.59%
1.98%
2016
3.11
19.53%
1.56%
1.47%
2015
3.10
18.14%
1.69%
1.31%
The intrinsic value of cash-settled SARs exercised was $1.6 million in 2017, $3.3 million in 2016 and $11.0 million in 2015.
The fair value of cash-settled SARs vested during both 2017 and 2016 was $0.2 million and was $4.6 million in 2015.
Changes to the company’s non-vested cash-settled SARs in 2017 are as follows:
Non-vested cash-settled SARs at beginning of year
Granted
Vested
Non-vested cash-settled SARs at end of year
* Weighted-average
Cash-settled
SARs
(in thousands)
7
1
(3)
5
$
Fair Value
Price per
Share*
40.83
26.36
46.16
35.41
As of 2017 year end there was $0.2 million of unrecognized compensation cost related to non-vested cash-settled SARs
that is expected to be recognized as a charge to earnings over a weighted-average period of 1.1 years.
Restricted Stock Awards – Non-employee Directors
The company awarded 6,966 shares, 7,145 shares and 8,640 shares of restricted stock to non-employee directors in 2017,
2016 and 2015, respectively. The fair value of the restricted stock awards is expensed over a one-year vesting period based
on the fair value on the date of grant. All restrictions for the restricted stock generally lapse upon the earlier of the first
anniversary of the grant date, the recipient’s death or disability or in the event of a change in control, as defined in the 2011
Plan. If termination of the recipient’s service occurs prior to the first anniversary of the grant date for any reason other than
death or disability, the shares of restricted stock would be forfeited, unless otherwise determined by the Board.
Directors’ Fee Plan
Under the Directors’ 1993 Fee Plan, as amended, non-employee directors may elect to receive up to 100% of their fees
and retainer in shares of Snap-on’s common stock. Directors may elect to defer receipt of all or part of these shares. For
2017, 2016 and 2015, issuances under the Directors’ Fee Plan totaled 1,800 shares, 2,579 shares and 2,747 shares,
respectively, of which 1,312 shares, 2,019 shares and 1,969 shares, respectively, were deferred. As of 2017 year end,
shares reserved for issuance to directors under this plan totaled 169,080 shares.
Employee Stock Purchase Plan
Substantially all Snap-on employees in the United States and Canada are eligible to participate in an employee stock
purchase plan. The purchase price of the company’s common stock to participants is the lesser of the mean of the high and
low price of the stock on the beginning date (May 15) or ending date (the following May 14) of each plan year. For 2017,
2016 and 2015, issuances under this plan totaled 26,963 shares, 27,156 shares and 57,324 shares, respectively. As of
2017 year end, shares reserved for issuance under this plan totaled 753,600 shares and Snap-on held participant
contributions of approximately $2.5 million. Participants are able to withdraw from the plan at any time prior to the ending
date and receive back all contributions made during the plan year. Compensation expense for plan participants was $0.1
million in 2017, zero in 2016 and $2.3 million in 2015.
2017 ANNUAL REPORT
111
Notes to Consolidated Financial Statements (continued)
Franchisee Stock Purchase Plan
All franchisees in the United States and Canada are eligible to participate in a franchisee stock purchase plan. The
purchase price of the company’s common stock to participants is the lesser of the mean of the high and low price of the
stock on the beginning date (May 15) or ending date (the following May 14) of each plan year. For 2017, 2016 and 2015,
issuances under this plan totaled 47,314 shares, 42,867 shares and 74,001 shares, respectively. As of 2017 year end,
shares reserved for issuance under this plan totaled 566,155 shares and Snap-on held participant contributions of
approximately $4.8 million. Participants are able to withdraw from the plan at any time prior to the ending date and receive
back all contributions made during the plan year. The company recognized mark-to-market expense of $0.2 million in 2017,
a mark-to-market benefit of $0.2 million in 2016, and mark-to-market expense of $2.9 million in 2015.
Note 14: Capital Stock
Snap-on has undertaken repurchases of Snap-on common stock from time to time to offset dilution created by shares
issued for employee and franchisee stock purchase plans, stock awards and other corporate purposes. Snap-on
repurchased 1,820,000 shares, 758,000 shares and 723,000 shares in 2017, 2016 and 2015, respectively. As of 2017 year
end, Snap-on has remaining availability to repurchase up to an additional $390.7 million in common stock pursuant to Board
authorizations. The purchase of Snap-on common stock is at the company’s discretion, subject to prevailing financial and
market conditions.
Cash dividends paid in 2017, 2016 and 2015 totaled $169.4 million, $147.5 million and $127.9 million, respectively. Cash
dividends per share in 2017, 2016 and 2015 were $2.95, $2.54 and $2.20, respectively. On February 15, 2018, the
company’s Board declared a quarterly dividend of $0.82 per share, payable on March 10, 2018, to shareholders of record
on February 24, 2018.
Note 15: Commitments and Contingencies
Snap-on leases facilities, office equipment and vehicles under non-cancelable operating and capital leases that extend for
varying amounts of time. Snap-on’s future minimum lease commitments under these leases, net of sub-lease rental income,
are as follows:
(Amounts in millions)
Year:
2018
2019
2020
2021
2022
2023 and thereafter
Total minimum lease payments
Less: amount representing interest
Total present value of minimum capital lease payments
Operating
Leases
Capital
Leases
$
$
25.5
19.6
14.1
10.5
7.2
7.9
84.8
$
$
$
3.6
3.2
3.0
2.6
2.2
3.5
18.1
(1.2)
16.9
112
SNAP-ON INCORPORATED
Amounts included in the accompanying Consolidated Balance Sheets for the present value of minimum capital lease
payments as of 2017 year end are as follows:
(Amounts in millions)
Other accrued liabilities
Other long-term liabilities
Total present value of minimum capital lease payments
2017
3.2
13.7
16.9
$
$
Rent expense for worldwide facilities, office equipment and vehicles, net of sub-lease rental income, was $35.2 million,
$31.2 million and $29.4 million in 2017, 2016 and 2015, respectively.
Snap-on provides product warranties for specific product lines and accrues for estimated future warranty cost in the period
in which the sale is recorded. Snap-on calculates its accrual requirements based on historic warranty loss experience that
is periodically adjusted for recent actual experience, including the timing of claims during the warranty period and actual
costs incurred. Snap-on’s product warranty accrual activity for 2017, 2016 and 2015 is as follows:
(Amounts in millions)
Warranty accrual:
Beginning of year
Additions
Usage
End of year
2017
2016
2015
$
$
16.0
15.2
(14.0)
17.2
$
$
16.4
12.8
(13.2)
16.0
$
$
17.3
13.3
(14.2)
16.4
Approximately 2,700 employees, or 21% of Snap-on’s worldwide workforce, are represented by unions and/or covered
under collective bargaining agreements. The number of covered union employees whose contracts expire over the next
five years approximates 1,450 employees in 2018, 225 employees in 2019, 825 employees in 2020, 125 employees in
2021, and 25 employees in 2022. In recent years, Snap-on has not experienced any significant work slowdowns, stoppages
or other labor disruptions.
Snap-on is involved in various legal matters that are being litigated and/or settled in the ordinary course of business. The
year ended December 30, 2017, included accruals for $30.9 million related to a judgment in a patent-related litigation matter,
as well as $15.0 million related to a judgment in an employment-related litigation matter brought by an individual; both
judgments are being appealed.
Although it is not possible to predict the outcome of these and other legal matters, management believes that the results of
all legal matters will not have a material impact on Snap-on’s consolidated financial position, results of operations or cash
flows.
Note 16: Other Income (Expense) – Net
“Other income (expense) – net” on the accompanying Consolidated Statements of Earnings consists of the following:
(Amounts in millions)
Interest income
Net foreign exchange loss
Other
Total other income (expense) – net
2017
0.3
(7.0)
(0.5)
(7.2)
$
$
2016
0.6
(1.3)
0.1
(0.6)
$
$
2015
0.5
(2.7)
(0.2)
(2.4)
$
$
2017 ANNUAL REPORT
113
Notes to Consolidated Financial Statements (continued)
Note 17: Accumulated Other Comprehensive Income (Loss)
The following is a summary of net changes in Accumulated OCI by component and net of tax for 2017 and 2016:
(Amounts in millions)
Balance as of 2015 year end
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from Accumulated OCI
Net other comprehensive income (loss)
Balance as of 2016 year end
Other comprehensive income before
reclassifications
Amounts reclassified from Accumulated OCI
Net other comprehensive income
Balance as of 2017 year end
Foreign
Currency
Translation
(118.5)
$
Cash Flow
Hedges
0.7
$
Defined
Benefit
Pension and
Postretirement
Plans
(246.4)
$
(99.2)
–
(99.2)
(217.7)
135.2
–
135.2
(82.5)
$
$
8.8
(0.3)
8.5
9.2
6.9
(1.6)
5.3
14.5
(62.6)
19.0
(43.6)
(290.0)
11.8
17.2
29.0
(261.0)
$
$
$
$
Total
$ (364.2)
(153.0)
18.7
(134.3)
$ (498.5)
153.9
15.6
169.5
$ (329.0)
The reclassifications out of Accumulated OCI in 2017 and 2016 are as follows:
(Amounts in millions)
Gains on cash flow hedges:
Treasury locks
Income tax expense
Net of tax
$
Amortization of net unrecognized losses and
prior service credits
Income tax benefit
Net of tax
Total reclassifications for the period, net of tax
$
Amounts Reclassified from
Accumulated OCI
2017
2016
Statement of Earnings
Presentation
1.6
–
1.6
(26.6)
9.4
(17.2)
(15.6)
$
$
0.3
–
0.3
(30.1)
11.1
(19.0)
(18.7)
Interest expense
Income tax expense
See footnote below*
Income tax expense
* These Accumulated OCI components are included in the computation of net periodic pension and postretirement health care costs; see Note 11 and
Note 12 for further information.
Note 18: Segments
Snap-on’s business segments are based on the organization structure used by management for making operating and
investment decisions and for assessing performance. Snap-on’s reportable business segments are: (i) the Commercial &
Industrial Group; (ii) the Snap-on Tools Group; (iii) the Repair Systems & Information Group; and (iv) Financial Services.
The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial
customers worldwide, including customers in the aerospace, natural resources, government, power generation,
transportation and technical education market segments (collectively, “critical industries”), primarily through direct and
distributor channels. The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair
technicians through the company’s worldwide mobile tool distribution channel. The Repair Systems & Information Group
consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and
managers of independent repair shops and OEM dealership service and repair shops (“OEM dealerships”), through direct
and distributor channels. Financial Services consists of the business operations of Snap-on’s finance subsidiaries.
114
SNAP-ON INCORPORATED
Snap-on evaluates the performance of its operating segments based on segment revenues, including both external and
intersegment net sales, and segment operating earnings. Snap-on accounts for intersegment sales and transfers based
primarily on standard costs with reasonable mark-ups established between the segments. 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.
Neither Snap-on nor any of its segments depend on any single customer, small group of customers or government for more
than 10% of its revenues.
Financial Data by Segment:
(Amounts in millions)
Net sales:
Commercial & Industrial Group
Snap-on Tools Group
Repair Systems & Information Group
Segment net sales
Intersegment eliminations
Total net sales
Financial Services revenue
Total revenues
2017
2016
2015
$ 1,265.0
1,625.1
1,347.2
4,237.3
(550.4)
$ 3,686.9
313.4
$ 4,000.3
$ 1,148.3
1,633.9
1,179.9
3,962.1
(531.7)
$ 3,430.4
281.4
$ 3,711.8
$ 1,163.6
1,568.7
1,113.2
3,845.5
(492.7)
$ 3,352.8
240.3
$ 3,593.1
Operating earnings:
Commercial & Industrial Group
Snap-on Tools Group
Repair Systems & Information Group
Financial Services
Segment operating earnings
Corporate
Operating earnings
Interest expense
Other income (expense) – net
Earnings before income taxes and equity earnings
$ 185.3
274.5
333.8
217.5
1,011.1
(129.6)
881.5
(52.4)
(7.2)
$ 821.9
$ 168.0
281.1
297.8
198.7
945.6
(91.4)
854.2
(52.2)
(0.6)
801.4
$
$ 169.4
256.0
273.4
170.2
869.0
(104.2)
764.8
(51.9)
(2.4)
$ 710.5
(Amounts in millions)
Assets:
Commercial & Industrial Group
Snap-on Tools Group
Repair Systems & Information Group
Financial Services
Total assets from reportable segments
Corporate
Elimination of intersegment receivables
Total assets
2017
2016
$ 1,113.9
714.3
1,314.3
1,971.8
5,114.3
200.6
(65.8)
$ 5,249.1
$ 907.1
668.1
1,211.0
1,789.7
4,575.9
212.3
(65.0)
$ 4,723.2
2017 ANNUAL REPORT
115
Notes to Consolidated Financial Statements (continued)
Financial Data by Segment (continued):
(Amounts in millions)
Capital expenditures:
Commercial & Industrial Group
Snap-on Tools Group
Repair Systems & Information Group
Financial Services
Total from reportable segments
Corporate
Total capital expenditures
Depreciation and amortization:
Commercial & Industrial Group
Snap-on Tools Group
Repair Systems & Information Group
Financial Services
Total from reportable segments
Corporate
Total depreciation and amortization
Revenues by geographic region:*
United States
Europe
All other
Total revenues
(Amounts in millions)
Long-lived assets:**
United States
Sweden
All other
Total long-lived assets
2017
2016
2015
$
$
$
$
22.6
40.1
13.4
1.2
77.3
4.7
82.0
22.8
29.1
37.8
0.6
90.3
2.9
93.2
$
$
$
$
19.3
38.3
13.1
0.6
71.3
3.0
74.3
20.7
27.6
33.9
0.6
82.8
2.8
85.6
$
$
$
$
31.0
38.1
9.0
1.0
79.1
1.3
80.4
20.1
24.9
34.0
0.7
79.7
2.8
82.5
$ 2,703.3
748.8
548.2
$ 4,000.3
$ 2,588.8
654.4
468.6
$ 3,711.8
$ 2,483.9
635.0
474.2
$ 3,593.1
2017
2016
$ 1,081.2
252.6
328.4
$ 1,662.2
$ 1,048.6
218.8
237.9
$ 1,505.3
* Revenues are attributed to countries based on the origin of the sale.
** Long-lived assets consist of Property and equipment – net, Goodwill, and Other intangibles – net.
Products and Services: Snap-on derives net sales from a broad line of products and complementary services that are
grouped into three categories: (i) tools; (ii) diagnostics, information and management systems; and (iii) equipment. The tools
product category includes hand tools, power tools, tool storage products and other similar products. The diagnostics,
information and management systems product category includes handheld and PC-based diagnostic products, service and
repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and
services, point-of-sale systems, integrated systems for vehicle service shops, OEM purchasing facilitation services, and
warranty management systems and analytics to help OEM dealerships manage and track performance. The equipment
product category includes solutions for the service of vehicles and industrial equipment. Snap-on supports the sale of its
diagnostics and vehicle service shop equipment by offering training programs as well as after-sales service support to its
customers. Through its financial services businesses, Snap-on also derives revenue from various financing programs
designed to facilitate the sales of its products and support its franchise business. Further product line information is not
presented as it is not practicable to do so.
116
SNAP-ON INCORPORATED
The following table shows the consolidated net sales and revenues of these product groups in the last three years:
(Amounts in millions)
Net sales:
Tools
Diagnostics, information and
management systems
Equipment
Total net sales
2017
2016
2015
$ 1,946.7
$ 1,899.2
$ 1,910.1
800.4
939.8
748.2
783.0
689.6
753.1
$ 3,686.9
$ 3,430.4
$ 3,352.8
Financial services revenue
313.4
281.4
240.3
Total revenues
$ 4,000.3
$ 3,711.8
$ 3,593.1
Note 19: Quarterly Data (unaudited)
(Amounts in millions, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2017
Net sales
Gross profit
Financial services revenue
Financial services expenses
Net earnings
Net earnings attributable to Snap-on
Incorporated
Earnings per share – basic
Earnings per share – diluted
Cash dividends paid per share
2016
Net sales
Gross profit
Financial services revenue
Financial services expenses
Net earnings
Net earnings attributable to Snap-on
Incorporated
Earnings per share – basic
Earnings per share – diluted
Cash dividends paid per share
Note 20: Subsequent Event
$ 887.1
$ 921.4
$ 903.8
$ 974.6
$ 3,686.9
448.0
76.8
(24.3)
145.1
463.0
77.7
(23.1)
156.8
448.6
79.0
(23.0)
137.1
465.3
79.9
(25.5)
133.2
1,824.9
313.4
(95.9)
572.2
141.6
153.2
133.4
129.5
557.7
2.45
2.39
0.71
2.65
2.60
0.71
2.33
2.29
0.71
2.28
2.24
0.82
9.72
9.52
2.95
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ 834.2
$ 872.3
$ 834.1
$ 889.8
$ 3,430.4
415.3
66.3
(19.3)
131.3
431.3
69.3
(19.8)
143.4
419.1
71.6
(21.0)
135.2
443.9
74.2
(22.6)
149.7
1,709.6
281.4
(82.7)
559.6
128.3
140.1
131.7
146.3
546.4
2.21
2.16
0.61
2.41
2.36
0.61
2.27
2.22
0.61
2.52
2.47
0.71
9.40
9.20
2.54
On January 16, 2018, Snap-on repaid the 2018 Notes upon maturity with an aggregate of $250 million of available cash
and cash generated from issuances of commercial paper.
2017 ANNUAL REPORT
117
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Snap-on has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SNAP-ON INCORPORATED
By:
/s/ Nicholas T. Pinchuk
Nicholas T. Pinchuk, Chairman, President
and Chief Executive Officer
Date: February 15, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of Snap-on and in the capacities and on the date indicated.
/s/ Nicholas T. Pinchuk
Nicholas T. Pinchuk, Chairman, President
and Chief Executive Officer
/s/ Aldo J. Pagliari
Aldo J. Pagliari, Principal Financial Officer, Senior
Vice President – Finance and Chief Financial Officer
/s/ Richard K. Strege
Richard K. Strege, Principal Accounting Officer,
Vice President and Controller
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
118
SNAP-ON INCORPORATED
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of Snap-on and in the capacities and on the date indicated.
SIGNATURES
By:
/s/ David C. Adams
David C. Adams, Director
By:
/s/ Karen L. Daniel
Karen L. Daniel, Director
By:
/s/ Ruth Ann M. Gillis
Ruth Ann M. Gillis, Director
By:
/s/ James P. Holden
James P. Holden, Director
By:
/s/ Nathan J. Jones
Nathan J. Jones, Director
By:
/s/ Henry W. Knueppel
Henry W. Knueppel, Director
By:
/s/ W. Dudley Lehman
W. Dudley Lehman, Director
By:
/s/ Nicholas T. Pinchuk
Nicholas T. Pinchuk, Director
By:
/s/ Gregg M. Sherrill
Gregg M. Sherrill, Director
By:
/s/ Donald J. Stebbins
Donald J. Stebbins, Director
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
Date: February 15, 2018
2017 ANNUAL REPORT
119
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
EXHIBIT 12
Earnings before income taxes
and equity earnings
Fixed charges:
Interest on debt
Interest element of rentals
Total fixed charges
Total adjusted earnings available for
payment of fixed charges
2017
2016
2015
2014
2013
$ 821.9
$ 801.4
$ 710.5
$ 630.9
$ 526.2
$ 51.8
2.7
$ 54.5
$ 51.5
2.6
$ 54.1
$ 51.0
2.7
$ 53.7
$ 51.8
2.9
$ 54.7
$ 55.3
2.7
$ 58.0
$ 876.4
$ 855.5
$ 764.2
$ 685.6
$ 584.2
Ratio of earnings to fixed charges
16.1
15.8
14.2
12.5
10.1
120
SNAP-ON INCORPORATED
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23
We consent to the incorporation by reference in Registration Statement Nos. 33-37924, 333-21285, and 333-208480 on Form
S-3 and Registration Statement Nos. 33-57898, 33-58939, 333-21277, 333-62098, 333-142412, 333-91712, 333-177794,
333-177795 and 333-208479 on Form S-8 of our reports dated February 15, 2018, relating to the consolidated financial
statements of Snap-on Incorporated and the effectiveness of Snap-on Incorporated’s internal control over financial reporting,
appearing in this Annual Report on Form 10-K of Snap-on Incorporated for the year ended December 30, 2017.
/s/ DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 15, 2018
2017 ANNUAL REPORT
121
Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.1
I, Nicholas T. Pinchuk, certify that:
1. I have reviewed this annual report on Form 10-K of Snap-on Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 15, 2018
/s/ Nicholas T. Pinchuk
Nicholas T. Pinchuk
Chief Executive Officer
122
SNAP-ON INCORPORATED
Certification of the Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.2
I, Aldo J. Pagliari, certify that:
1. I have reviewed this annual report on Form 10-K of Snap-on Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 15, 2018
/s/ Aldo J. Pagliari
Aldo J. Pagliari
Principal Financial Officer
2017 ANNUAL REPORT
123
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.1
In connection with the Annual Report of Snap-on Incorporated (the "Company") on Form 10-K for the period ended December
30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Nicholas T. Pinchuk as
Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Nicholas T. Pinchuk
Nicholas T. Pinchuk
Chief Executive Officer
February 15, 2018
124
SNAP-ON INCORPORATED
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 32.2
In connection with the Annual Report of Snap-on Incorporated (the "Company") on Form 10-K for the period ended December
30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Aldo J. Pagliari as Principal
Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Aldo J. Pagliari
Aldo J. Pagliari
Principal Financial Officer
February 15, 2018
2017 ANNUAL REPORT
125
INVESTOR INFORMATION
EXCHANGE LISTING
Snap-on Incorporated’s common stock is listed on the New
York Stock Exchange under the ticker symbol SNA.
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
462 South 4th Street
Suite 1600
Louisville, KY 40202, U.S.A.
Shareholders with questions may call our transfer agent,
Computershare Trust Company, N.A., toll-free at 800-446-
2617 (in the United States) or 781-575-2723 (outside the
United States). The deaf and hearing impaired may call
800-952-9245. An
is
available 24 hours a day, every day. Operators are
available Monday through Friday, 9 a.m. to 5 p.m. U.S.
Eastern Time. More
is available at
www.computershare.com.
interactive automated system
information
CERTIFICATE TRANSFERS
By mail:
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000, U.S.A.
By overnight mail or private courier:
Computershare Investor Services
462 South 4th Street
Suite 1600
Louisville, KY 40202, U.S.A.
a
through
no-commission
COMPUTERSHARE INVESTMENT PLAN
Investors may purchase Snap-on stock and increase their
investment
dividend
reinvestment and direct stock purchase plan sponsored by
Computershare Trust Company, N.A. All
fees and
brokerage commissions in connection with the purchase of
stock, as well as most administrative costs, are paid by
Snap-on. For information visit www.computershare.com or
write to:
Computershare Investor Services
462 South 4th Street
Suite 1600
Louisville, KY 40202, U.S.A.
ANTICIPATED DIVIDEND RECORD AND PAYMENT
DATES FOR 2018
Quarter
First
Second
Third
Fourth
Record Date
Payment Date
March 2
May 21
August 17
November 20
March 16
June 8
September 10
December 10
FINANCIAL PUBLICATIONS
Publications are available without charge. Contact the
Snap-on investor relations department at 2801 80th Street,
Kenosha, WI 53143, visit our website, or send an e-mail to
InvestorRelations@snapon.com.
WEBSITE
Snap-on’s website contains Form 10-Qs, Form 10-Ks,
news releases, annual reports, proxy statements and other
information about Snap-on. Our website address is
www.snapon.com.
INDEPENDENT AUDITORS
Deloitte & Touche LLP
555 East Wells Street, Suite 1400
Milwaukee, WI 53202-3824, U.S.A.
INVESTOR RELATIONS
Investors and other interested parties should direct
inquiries to:
Leslie H. Kratcoski
Vice President, Investor Relations
262-656-6121 or leslie.h.kratcoski@snapon.com
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at the
IdeaForge located within the Snap-on Innovation Works at
the Company’s headquarters, 2801 80th Street, Kenosha,
WI 53143, at 10:00 a.m. U.S. Central Time on Thursday,
April 26, 2018.
CORPORATE OFFICES
2801 80th Street
Kenosha, WI 53143, U.S.A.
262-656-5200
CAUTIONARY STATEMENT REGARDING FORWARD-
LOOKING INFORMATION:
Statements in this Report that are not historical facts are
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such
statements include those that are in the future tense;
include the words “expect,” “plan,” “target,” “estimate,”
“believe,” “anticipate,” or similar words; are specifically
identified as forward-looking; or describe Snap-on’s or
management’s outlook, plans, estimates, objectives or
goals. These forward-looking statements are subject to
uncertainties, risks and other factors that could cause
actual results to differ materially from those described.
Numerous important factors, such as those in the Annual
Report on Form 10-K (forming part of this Report) in Part I
under "Safe Harbor" or Item 1A: "Risk Factors," could
affect Snap-on's actual results and could cause its actual
results to differ materially from those expressed in any
forward-looking statement.
SNAP-ON INCORPORATED
B O A R D O F D I R E C T O R S
Nicholas T. Pinchuk
Chairman of the Board
and Chief Executive Officer
Snap-on Incorporated
Director since 2007
David C. Adams (c)
Chairman of the Board
and Chief Executive Officer
Curtiss-Wright Corporation
Director since 2016
Karen L. Daniel (a)
Division President
and Chief Financial Officer
Black & Veatch Corporation
Director since 2005
Ruth Ann M. Gillis (a)
Retired Executive Vice President
and Chief Administrative Officer
Exelon Corporation
Director since 2014
Henry W. Knueppel (c)*
Retired Chairman of the Board
and Chief Executive Officer
Regal Beloit Corporation
Director since 2011
James P. Holden (b)
Lead Director
Retired President
and Chief Executive Officer
DaimlerChrysler Corporation
Director since 2007
Nathan J. Jones (a)*
Retired President, Worldwide
Commercial & Consumer
Equipment Division
Deere & Company
Director since 2008
W. Dudley Lehman (c)
Retired Group President
Kimberly-Clark Corporation
Director since 2003
Gregg M. Sherrill (b)*
Executive Chairman of the Board
Tenneco Inc.
Director since 2010
Donald J. Stebbins (b)
President and
Chief Executive Officer
Superior Industries
International, Inc.
Director since 2015
B O A R D C O M M I T T E E S :
(a) Audit Committee
(b) Organization and Executive
Compensation Committee
(c) Corporate Governance and
Nominating Committee
* Denotes Chair
M A N A G E M E N T T E A M
M A N A G E M E N T T E A M
Eugenio Amador
President –
Car-O-Liner
Bennett L. Brenton
Vice President –
Innovation
Govind K. Arora
Vice President –
Worldwide Strategic
Sourcing
Jesus Arregui
President –
SNA Europe
Anup R. Banerjee
Senior Vice President –
Human Resources
and Chief
Development Officer
Steven K. Bartels
Vice President –
Corporate Tax
Samuel E. Bottum
Vice President and
Chief Marketing Officer
Iain Boyd
Vice President –
Operations
Development
Joseph J. Burger
President –
Snap-on Credit
Timothy L. Chambers
President –
Commercial Group
David Ellingen
President –
Diagnostics and
Mitchell 1
Michael G. Gentile
Vice President –
Operations
Snap-on Tools Group
Robert J. Hamilton
Vice President – Finance
Snap-on Tools Group
Gary S. Henning
Vice President –
Manufacturing Development
David T. Hietpas
Vice President and
General Manager –
Specialty Tools
Jeffrey W. Howe
Vice President –
North American Sales
Snap-on Tools Group
Thomas L. Kassouf
Senior Vice President
and President –
Snap-on Tools Group
Richard G. Kobor
President –
Equipment
Jeffrey F. Kostrzewa
Vice President
and Treasurer
Leslie H. Kratcoski
Vice President –
Investor Relations
June Lemerand
Vice President and
Chief Information Officer
© 2018 Snap-on Incorporated; All rights reser ved
Snap-on as well as other marks are trademarks, registered
in the United States and other countries, of Snap-on Incorporated.
All other marks are marks of their respective holders.
Manuel Macedo
Vice President –
Operations
SNA Europe
James Ng
President –
Snap-on Asia/Pacific
Benny Oh
Chairman –
Snap-on Asia/Pacific
Aldo J. Pagliari
Senior Vice President –
Finance and Chief
Financial Officer
Nicholas T. Pinchuk
Chairman and
Chief Executive Officer
Christopher H. Potter
President –
Power Tools
Irwin M. Shur
Vice President,
General Counsel
and Secretary
Richard K. Strege
Vice President
and Controller
Irene S. Sudac
Vice President –
Financial Services
Kevin L. Thatcher
Vice President –
Business Development
David L. Thompson
Vice President – Finance
Repair Systems &
Information Group
Thomas J. Ward
Senior Vice President
and President –
Repair Systems &
Information Group
John A. Wolf
President –
OEM Solutions
Barrie Young
President –
Sales and Franchising
Snap-on Tools Group
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