avatar Snap-On Incorporated Manufacturing
  • Location: Wisconsin 
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    S N A P - O N I N CO R P O R AT E D 2010 ANNUAL REPORT ENHANCING OUR FRANCHISE NETWORK EXPANDING REACHING IN THE GAR AGE EXTENDING MORE PROFESSIONALS TO CRITICAL INDUSTRIES BUILDING IN EMERGING MARKETS


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    YRKESPERSON Snap-on supports a wide range of professionals in critical A M M AT T I L A I N E N industries, providing a broad array of unique productivity solutions including tools, equipment, diagnostics, repair PROFESJONELL information and systems solutions. Snap-on makes work easier for serious professionals in 130 countries around the world. FAGLIGT UDDA NNE T PROFESSIONAL P ROFE S S IONA L : S E RVI NG TH E S E R IOUS FACHK R A F T PROFESSIONNEL PROFISSIONAL PROFESIONAL With 4,800 mobile stores worldwide, the Snap-on Tools Group supports professional automotive service technicians with a unique combination of PRO F E SS I O N IS TA personal service, innovative premium products and financing solutions. PRO F E S J O N A L IS TA PROFESIONAL PROFESIONÁL The Repair Systems & Information Group provides professional vehicle repair customers, including owners and managers of independent and SZAKEMBER original equipment manufacturer (OEM) dealership service and repair shops, PROFES YONEL with a wide range of diagnostics, undercar equipment and repair information and systems solutions through both direct and distributor channels. YRKESPERSON A M M AT T I L A I N E N The Commercial & Industrial Group serves professionals in critical industries PROFESJONELL and emerging markets with a broad range of productivity solutions delivered through both direct and distributor channels. Industries served include FAGLIGT UDDA NNE T aviation and aerospace, agriculture, construction, military and government, PROFESSIONAL mining, natural resources, and power generation, where mission-critical repairs and activities require repeatability and reliability. FACHK R A F T PROFESSIONNEL


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    In the automotive garage and beyond, the legendary Snap-on® brand conveys a badge of professionalism, delivering confidence to those performing critical tasks where second best is not an option. By enhancing our franchise network, expanding in the garage, extending to critical industries and building in emerging markets, we’re reaching more professionals who value what Snap-on helps them achieve. AROUND THE GLOBE V E H I C L E R E PA I R T E C H N I C I A N S R E PA I R FA C I L I T Y O W N E R S A N D M A N A G E R S CRITICAL INDUSTRIE S PROFE SSIONALS 3


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    During 2010, we made significant progress in the four strategic areas that we’ve identified as decisive to our future: enhancing our franchise TO OUR SNAP-ON network, expanding in the vehicle repair garage, SHAREHOLDERS extending to critical industries and building in emerging markets — all so that we can reach more professionals. We believe continued solid Our performance in 2010 was For the year, net sales of $2.62 billion evidence of solid progress on our were up 10.9% compared to 2009. execution in these four strategic priorities, of continuing Operating income margin of 12.4% benefits from our Snap-on Value improved 200 basis points from strategic areas will place Creation Processes and of 10.4% and diluted earnings per share stabilization in the overall business of $3.19 improved 37.5% from $2.32 Snap-on in a strong position environment. We were encouraged in 2009. These results reflect not by the continuing higher sales and only the positive effects of higher as we move forward, earnings as the year progressed, sales volumes from the improved demonstrating a trend of increasing economic environment and further creating long-term value strategic strength. Our customers penetration in key markets, but began to show restored confidence also the benefits of RCI and other for our shareholders. as their purchases of longer payback initiatives implemented in 2010 items such as diagnostics, undercar and previously. Through ongoing equipment and tool storage recovered advances with RCI and our other from the economic downturn. We were Snap-on Value Creation Processes, also fortified by the ongoing benefits we believe that we have meaningful from our commitment to Snap-on opportunity for further overall Value Creation, driving product improvement and higher efficiency, innovation, customer connection, which will enable us to shift quality assurance, safety and rapid resources to key initiatives and continuous improvement (RCI). investments aimed at future growth. 4


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    Snap-on recently launched the Automated Tool Control (ATC) storage For over 90 years, Snap-on has been system, targeting professionals in aviation and aerospace. This product committed to innovation and making demonstrates Snap-on’s ability, through collaboration, to leverage work easier for serious professionals capabilities in one business and develop them in others. Deploying imaging performing critical tasks. Snap-on technology found in our wheel alignment products, this state-of-the-art storage gains user insight by observing system tracks tools in use. Coupled with a keyless entry system to identify professionals working at Innovation users, the ATC helps mitigate risks of Foreign Object Damage, which can Works, our largest R&D and training cost the aviation and aerospace industries millions of dollars each year. facility. Snap-on Chairman and CEO Nick Pinchuk and an aerospace technician exchange thoughts about a new combination wire stripper, crimper and cutter, a compact tool ideally suited for work in confined areas. Pat McDevitt, Industrial - Aviation, and Anne Witte, Milwaukee Plant - RCI, discuss the benefits of the ATC storage system. 5


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    For our Financial Services segment, In 2010, we celebrated a significant proposition. For example, our global 2010 marked the first full year since milestone — the 90th anniversary of manufacturing footprint provides Snap-on Credit’s 2009 transition Snap-on’s founding. The company proximity to our customers in from a joint venture to a wholly- began with the development of the multiple markets around the world. owned subsidiary, when new original Snap-on interchangeable This is especially important since financing receivables began to be socket set in 1920. Later, Snap-on our development of innovative included on our balance sheet. At pioneered mobile tool distribution, productivity solutions for these the time of the transition, the credit where fully stocked vans sold to professionals requires intimate operation had minimal on-book, professional vehicle repair technicians knowledge of their particular needs. interest-earning assets to offset its at their places of business. For many Our commitment to Snap-on Value operating expenses. By mid-2010, decades, we were viewed, and we Creation enables us to manage Snap-on Credit was generating viewed ourselves, primarily as a tool these multiple local positions to our positive operating earnings and company selling through vans to unique advantage with efficiency we believe the transition has gone vehicle technicians — something we and effectiveness. “THE LEGENDARY SNAP-ON BRAND CONTINUES seamlessly and as planned. For the have always done very well, and The legendary Snap-on® brand full year, the Financial Services continue to do very well today. In continues to be strong, delivering segment generated operating recent years, we’ve defined our value premium quality and performance earnings of $14.4 million on revenues proposition more broadly, reaching to professional users across the of $62.3 million. In the future, we beyond the garage. Snap-on today globe. Both inside and outside the expect the segment can be an even supports serious professionals vehicle repair garage, the brand larger contributor to our earnings. in critical industries — inside and creates confidence with users in At the same time, Financial Services outside vehicle repair — by delivering critical applications where second serves a significant strategic role a broad array of solutions to make best is not an option. Whether in providing financing options work easier. measured by endorsement from for our technician customers, our vehicle technicians, the confidence We have the unique capabilities in franchisees and customers who are of global aerospace companies, place to deliver on this broader value shop owners and managers. or purchases by leading-edge Snap-on continues to expand its capabilities in emerging markets. In 2010, Snap-on’s new plant in Minsk, Belarus, was officially inaugurated. The 115,000 square foot facility manufactures bimetal band saws, hole saws and power hack saws for professionals around the world. Processes in the Minsk facility include the internally developed high speed steel line shown here. 6


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    S NA P- O N R AT E D OV E R A L L B E S T B R A N D companies in end markets like energy We see opportunities to enhance our I N K E Y C AT E G O R I E S and natural resources, the Snap-on franchise network to reach more brand is stronger than ever. vehicle repair technicians. Through RCI, we have an opportunity to The Bahco® brand also continues to In a 2010 study by Frost & Sullivan, increase franchisee productivity so grow in importance, built on strong automotive technicians continue to regard they can engage more customers. foundations in Western Europe. Snap-on as the best brand by an overwhelming We also believe there is potential for It provides a powerful vehicle for margin in primary tool categories. further expansion through a growing expansion throughout the world, offering of innovative products in especially in the emerging markets multiple categories. H A ND TOOLS 70% of Eastern Europe and Asia. With an over 120 year legacy of excellence, We also seek to expand in the garage, Next Leading Brand 8% Bahco products deliver unique further penetrating another distinct ergonomics and other strong user and important customer group within vehicle repair: owners and managers TOOL STORAGE 63% of independent and OEM dealership Next Leading 8% TO BE STRONG.“ service and repair shops. With a broad offering of technology-leading Brand diagnostics, undercar equipment 46 % DIAGNOSTICS benefits across a wide range of and repair information and systems professional applications. solutions, we believe we can achieve Next Leading Brand 9% an increased share with these We believe our clearly defined and important customers similar to what coherent strategy will give us the PNEUM AT IC/ 45 % we currently enjoy with technicians. AIR TOOLS means to capitalize on specific runways for growth — runways that Next Leading Reaching beyond our roots in Brand 20% are clearing as the global economy automotive repair, another significant recovers — including vehicle repair, growth opportunity lies in extending POWER TOOLS 42 % critical industries and emerging to critical industries. Targeting markets. To this end, we are industries such as aviation and Next Leading Brand 8% organized to reach our primary aerospace, agriculture, construction, customer groups and are executing military and government, mining, on our strategic priorities. natural resources, and power Frost & Sullivan – United States (U.S.) Automotive Technicians’ Choice: Evaluation of Automotive Tools Another example of building presence in emerging markets is Snap-on’s Asian resellers conference, held annually with resellers from across the region. The conference, held most recently in Hangzhou, China, recognizes performance, introduces new products and provides training. Snap-on’s Asia-Pacific distribution network now includes 550 resellers from 12 nationalities speaking 10 languages. 7


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    generation, where mission-critical year progressed. Through 2010, increased 8.8% in 2010 and yielded repairs and activities require sales for the Group returned to an improved operating earnings repeatability and reliability, is a pre-recession levels — evidence that margin of 19.4%. We achieved higher natural extension of Snap-on’s our franchisee stimulus programs sales of equipment, diagnostics value proposition, and one where implemented in the face of the and repair information solutions to we continue to make progress. economic downturn were effective. owners and managers of independent In the year, we continued to invest repair shops, and increased activity We are also acting to capitalize on the significantly in training and product with automotive OEM dealerships. building opportunities in emerging support to keep our franchise Sales were driven by innovation, “OVERALL, 2010 WAS AN ENCOURAGING YEAR.“ markets, where there is a developing network robust. In 2010, the annual including the development and demand for our solutions, in what is Snap-on Franchisee Conference launch of new diagnostics and still the early stages of vehicle repair featured more products, more information products, as well as the and other critical industries. training and a business and profit continued expansion of functionality center aimed specifically at helping and content within existing RS&I The Snap-on Tools Group represents franchisees improve their business solutions. For example, in 2010, our worldwide franchised van efficiency. Franchisees attended we launched a new diagnostics business, whose primary customers in significantly higher numbers, unit, the VERDICT™, which raised are vehicle repair technicians. displaying considerable energy and industry handheld standards with In 2010, net sales increased 10.6% enthusiasm regarding prospects for features including Wi-Fi Internet and the operating earnings margin their future. We thank our dedicated capability, integration with Snap-on’s was 11%. Volumes in this segment franchisees and their families for proprietary repair information were among the first to recover as their ongoing commitment and databases and a wireless touch sales of longer payback items such passion for Snap-on. screen display that allows remote as diagnostics and tool storage, use by the technician throughout the which were heavily impacted by Net sales for the Repair Systems garage. Expanding our product range the recession, improved as the & Information Group (RS&I) with new products and services will In 2010, IndustryWeek magazine selected the Snap-on Murphy, North Carolina, power tools manufacturing facility as one of the top 10 plants in North America. The award recognizes facilities that are on the leading edge in competitiveness, in customer satisfaction and in creating stimulating and rewarding work environments. This speaks to the powerful combination of the Snap-on Value Creation Processes and of the dedicated associates who are committed to delivering the most valued productivity solutions in the world . . . every day. 8


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    continue to be a key driver for success handheld diagnostics unit for the enable us to continue that progress in this arena. Chinese market. These advancements as we move forward. helped drive significant inroads for Our Commercial & Industrial Group In 2010, we welcomed Gregg M. us in this increasingly important region. (C&I) increased sales by 16.8% Sherrill, chairman and chief executive year over year, reflecting higher Since becoming a public company in officer of Tenneco, Inc., to the Board volumes to customers in critical 1939, Snap-on has paid consecutive of Directors. Gregg brings with him a industries and emerging markets. quarterly cash dividends, without wealth of experience and capabilities Higher sales and favorable interruption or reduction — a claim from multiple industries and broad manufacturing utilization contributed few public companies can make. international theatres. This year we to an improved operating earnings In November, the Board of Directors bid farewell to Richard F. Teerlink, who margin, which reached 11.2% for the approved a 6.7% increase in is retiring from the Board after serving year. We continued to apply innovation our dividend, underscoring our since 1997. Over the years, Rich’s through customer connection in commitment to create long-term advice, wisdom and counsel have delivering productivity-enhancing value for our shareholders. In 2010, been invaluable in making Snap-on solutions that address the unique dividends paid per share were $1.22, what it is today. We thank him for his needs of professionals in a variety of representing a return of $71.3 million many years of dedicated service. We critical industries. For example, the to our shareholders. also wish to thank the other members ATC storage system, highlighted earlier, of our Board, our associates and Overall, 2010 was an encouraging was introduced during the past year franchisees for their contributions, year. Considerable progress was to an enthusiastic reception from service and dedication, and our made as we continued investing key professionals in the aviation and customers and shareholders for their in our strategic growth initiatives aerospace industries. ongoing support. aimed at strengthening our business In Asia, where we have been focused capabilities, extending our geographic on building our physical presence over and customer diversification and the past several years, 2010 marked expanding our presence in emerging significant progress in developing markets. We believe that the strength products tailored to the local market, of our brands, the resilience of our including band saws, undercar business models and the power of the Nicholas T. Pinchuk equipment, power tools and our first Snap-on Value Creation Processes will Chairman and Chief Executive Officer WHO WE ARE OUR MISSION The most valued productivity solutions in the world BELIEFS VALUES VISION We deeply believe in: Our behaviors define our success: To be acknowledged as the: Non-negotiable Product We demonstrate Integrity. Brands of Choice and Workplace Safety We tell the Truth. Employer of Choice Uncompromising Quality We respect the Individual. Franchisor of Choice Passionate Customer Care We promote Teamwork. Business Partner of Choice Fearless Innovation Investment of Choice We Listen. Rapid Continuous Improvement 9


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    SNAP-ON VALUE CREATION P r i n c i p l e s a n d P r o c e s s e s We A p p ly t o C r e a t e Va l u e 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. Our commitment to safety is unwavering. Since 2004, we have achieved a 90% reduction SAFETY in our safety incident rate and we will continue our emphasis on safety as we move forward. The serious professionals who use our productivity solutions demand superior quality. QUALITY For 90 years, Snap-on has been delivering just that. Again in 2010, automotive technicians continued to rate Snap-on as the best brand in key tool categories. Through our legions of mobile stores, direct sales people and distributors across the globe, CUSTOMER we make thousands of daily contacts with professionals in their workplace. Each of these CONNECTION contacts represents an opportunity to learn what our customers want and need, which we believe provides Snap-on with an important strategic advantage. We thrive on innovation. Our customer-connection processes help us understand the needs INNOVATION of our customers and our innovation practices and processes translate these insights into productivity solutions that make work easier for professionals. RAPID We apply a structured set of tools and processes to eliminate waste while making improvements CONTINUOUS in quality, delivery and cost. RCI has been critical to our operating income improvements and IMPROVEMENT it will continue to be an important ingredient in our progress going forward. 10


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 1, 2011, 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 39-0622040 (State of incorporation) (I.R.S. Employer Identification No.) 2801 80th Street, Kenosha, Wisconsin 53143 (Address of principal executive offices) (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 Name of each exchange on which registered Common stock, $1.00 par value 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 Web site, 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company 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 228,275 shares held by directors and executive officers) computed by reference to the price ($40.36) at which common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter (July 3, 2010) was $2.3 billion. The number of shares of Common Stock ($1.00 par value) of the registrant outstanding as of February 11, 2011, was 58,284,971 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, 2011, prepared for the Annual Meeting of Shareholders scheduled for April 28, 2011.


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    TABLE OF CONTENTS Page PART I Item 1 Business................................................................................................................................4 Item 1A Risk Factors ........................................................................................................................13 Item 1B Unresolved Staff Comments ...............................................................................................20 Item 2 Properties ............................................................................................................................20 Item 3 Legal Proceedings ..............................................................................................................22 PART II Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities...............................................................................22 Item 6 Selected Financial Data ......................................................................................................25 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.........................................................................................................27 Item 7A Quantitative and Qualitative Disclosures About Market Risk .............................................61 Item 8 Financial Statements and Supplementary Data .................................................................63 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...........................................................................................................63 Item 9A Controls and Procedures ....................................................................................................63 Item 9B Other Information ................................................................................................................65 PART III Item 10 Directors, Executive Officers and Corporate Governance..................................................65 Item 11 Executive Compensation ....................................................................................................66 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............................................................................................66 Item 13 Certain Relationships and Related Transactions, and Director Independence..................66 Item 14 Principal Accounting Fees and Services.............................................................................66 PART IV Item 15 Exhibits, Financial Statement Schedules............................................................................67 Signatures ...................................................................................................................................................116 Exhibit Index................................................................................................................................................118 Computation of Ratio of Earnings to Fixed Charges ..................................................................................122 Consent of Independent Registered Public Accounting Firm .....................................................................123 Certifications................................................................................................................................................124 2 SNAP-ON INCORPORATED


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    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 efficiencies and savings from its Rapid Continuous Improvement and other cost reduction initiatives, including its ability to implement reductions in workforce, 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 enhance their sales and profitability, introduce successful new products, successfully integrate acquisitions, as well as its ability to withstand disruption arising from natural disasters, planned facility closures or other labor interruptions, the potential need to provide further financing for the loans originated by Snap-on Credit LLC, the effects of litigation challenges and proceedings, including the pending dispute with CIT Group Inc., and external negative factors, including continuing uncertainty in world financial markets, weakness in certain areas of the global economy, uncertainty in the U.S. automotive industry and significant changes in the current competitive environment, inflation, interest rates and other monetary and market fluctuations, 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, new U.S. health care legislation and reforms), the impacts of non-strategic business and/or product line rationalizations, and the effects on business as a result of new legislation and regulations 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 (“U.S. 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. Snap-on’s fiscal year ends on the Saturday nearest to December 31. Unless otherwise indicated, references in this document to “fiscal 2010” or “2010” refer to the fiscal year ended January 1, 2011; references to “fiscal 2009” or “2009” refer to the fiscal year ended January 2, 2010; and references to “fiscal 2008” or “2008” refer to the fiscal year ended January 3, 2009. References in this document to 2010, 2009 and 2008 year end refer to January 1, 2011, January 2, 2010, and January 3, 2009, respectively. 2010 ANNUAL REPORT 3


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    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 customers in industry, government, agriculture, aviation and natural resources. Snap-on also derives income from various financing programs to facilitate the sales of its products. Snap-on markets its products and brands through multiple distribution sales channels in approximately 130 countries. Snap-on’s largest geographic markets include the United States, the United Kingdom, Canada, Germany, Australia, France, Japan, Spain, Italy, Sweden, the Netherlands, Argentina, China and Brazil. Snap-on also reaches its customers through the company’s franchisee, company-direct, distributor and internet channels. Snap-on originated the mobile van tool distribution channel in the automotive repair market. In 2010, Snap-on celebrated a significant milestone - the 90th anniversary of its founding. Beginning with the development of the original Snap-on interchangeable socket set in 1920, Snap-on pioneered mobile van tool distribution, where fully stocked vans sell to professional vehicle technicians at their place of business. For many decades, the company was viewed primarily as a tool company selling through vans to vehicle technicians. In recent years, Snap-on has defined its value proposition more broadly, reaching outside the garage. Today, Snap-on delivers a broad array of unique solutions to make work easier for serious professionals performing critical tasks – both within and beyond vehicle repair. As previously disclosed, Snap-on realigned its management organization and, as a result, its reportable business segments in the second quarter of 2010. This organizational change reflects the company’s efforts to better support the product and service needs of the company’s primary customer segments. These customer segments include: (i) commercial and industrial customers, including professionals in critical industries and emerging markets; (ii) professional technicians who purchase products through the company’s worldwide 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. In addition, Snap-on’s Financial Services customer segment offers financing options that include (i) loans to franchisees’ customers and Snap-on’s industrial and other customers for the purchase or lease of tools, equipment and diagnostics products on an extended term payment plan; and (ii) business loans and vehicle leases to franchisees. 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, primarily through direct and distributor channels. The Snap-on Tools Group consists of business operations primarily serving automotive service 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, primarily owners and managers of independent repair shops and OEM dealership service and repair shops, 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 wholly-owned finance subsidiaries in those international markets where Snap-on has franchise operations. See Note 17 to the Consolidated Financial Statements for information on business segments and foreign operations. 4 SNAP-ON INCORPORATED


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    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, pension assets and certain other assets. All significant intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results. Snap-on acquired the remaining 40% interest in Wanda Snap-on (Zhejiang) Co., Ltd. (“Wanda Snap-on”), the company’s tool manufacturing operation in Xiaoshan, China, on April 6, 2010, for a cash purchase price of $7.7 million and $0.1 million of transaction costs. Snap-on acquired the initial 60% interest in Wanda Snap-on for a cash purchase price of $15.4 million (or $14.1 million, net of cash acquired), including $1.2 million of transaction costs, on March 5, 2008. On July 1, 2010, Wanda Snap-on was renamed Snap-on Asia Manufacturing (Zhejiang) Co., Ltd. (“Xiaoshan”). For segment reporting purposes, the results of operations and assets of Xiaoshan, which have been included in Snap-on’s consolidated financial statements since the March 5, 2008 acquisition date, are included in the Commercial & Industrial Group. The Xiaoshan acquisition is part of the company’s ongoing strategic initiatives to further expand its manufacturing presence in emerging growth markets and lower-cost regions. Pro forma financial information is not presented as the net effects of the Xiaoshan acquisition were not material to Snap-on’s results of operations or financial position. Snap-on terminated its financial services operating agreement with CIT Group Inc. (“CIT”) relating to the parties’ SOC financial services joint venture on July 16, 2009, and subsequently purchased, pursuant to the terms of the joint venture agreement, CIT’s 50%-ownership interest in SOC for a cash purchase price of $8.1 million. Since July 16, 2009, Snap-on has been providing financing for the majority of new loans originated by SOC and SOC is recording the interest yield on the new on-book finance portfolio over the life of the contracts as financial services revenue. Following the inception of the financial services operating agreement in 1999, and until July 16, 2009, CIT had been the exclusive purchaser of loans originated by SOC in the United States. Prior to July 16, 2009, SOC sold substantially all new contract originations to CIT and recorded gains on the sale of the contracts as financial services revenue. Since 2004, Snap-on has included the accounts of SOC in its Consolidated Financial Statements, as Snap-on concluded that it was the primary beneficiary of the joint venture arrangement. From 2004 until the July 16, 2009 termination date, CIT’s ownership interest in SOC was reported in the company’s Consolidated Financial Statements as a noncontrolling interest. See Notes 1, 2 and 3 to the Consolidated Financial Statements for further information on SOC. Information Available on the Company’s Web Site Additional information regarding Snap-on and its products is available on the company’s web site at www.snapon.com. Snap-on is not including the information contained on its web site as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. Snap-on’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Definitive Proxy Statements on Schedule 14A, Current Reports on Form 8-K, and 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 Investor Information section of the company’s web site at www.snapon.com. Snap-on makes such material available on its web site 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 web site 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, the company’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 Snap-on’s web site. 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 web site at www.snapon.com. 2010 ANNUAL REPORT 5


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    Products and Services Tools, Diagnostics and Repair Information, and Equipment Snap-on offers a broad line of products and complementary services that are grouped into three product categories: (i) tools; (ii) diagnostics and repair information; 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: Net Sales (Amounts in millions) 2010 2009 2008 Product Category: Tools $ 1,545.1 $ 1,311.3 $ 1,694.9 Diagnostics and repair information 563.3 556.5 589.8 Equipment 510.8 494.7 568.6 $ 2,619.2 $ 2,362.5 $ 2,853.3 The tools product category includes hand tools, power tools and tool storage products. Hand tools include wrenches, screwdrivers, sockets, pliers, ratchets, saws and cutting tools, pruning tools, torque measuring instruments and other similar products. Power tools include pneumatic (air), hydraulic, cordless (battery) and corded (electric) tools such as impact wrenches, ratchets, chisels, drills, sanders, polishers and similar products. Tool storage includes tool chests, roll cabinets, tool control systems and other similar products. The majority of products are manufactured by Snap-on and, in completing the product offering, other items are purchased from external manufacturers. The diagnostics and repair information product category includes handheld and PC-based diagnostics products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems, business services, point-of-sale systems, integrated systems for vehicle service shops, OEM purchasing facilitation services, and warranty management systems and analytics to help OEM dealership service and repair shops manage and track performance. The equipment product category includes solutions for the diagnosis and service of automotive and industrial equipment. Products include wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane systems, collision repair equipment, air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers and hoists. 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. 6 SNAP-ON INCORPORATED


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    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 Products and Services Snap-on Hand tools, power tools, tool storage products, diagnostics, certain equipment and related accessories, mobile tool stores, web sites, electronic parts catalogs, warranty analytics solutions, business management services, OEM specialty tools and equipment development and distribution, and OEM facilitation services ATI Aircraft hand tools and machine tools BAHCO Saw blades, cutting tools, pruning tools, hand tools, power tools, tool storage and diagnostics Blackhawk Collision repair equipment Blue-Point Hand tools, power tools, tool storage units, diagnostics, certain equipment and related accessories Cartec Safety testing, brake testers, test lane equipment, dynamo-meters, suspension testers, emission testers and other equipment CDI Torque tools Fish and Hook Hand tools and machine tools Hofmann Wheel balancers, lifts, tire changers, wheel aligners, brake testers and test lane equipment Irimo Saw blades, cutting tools, hand tools, power tools and tool storage John Bean Wheel balancers, lifts, tire changers, wheel aligners, brake testers and test lane equipment Lindström Hand tools Mitchell1 Service information, shop management systems and business services Nexiq Diagnostic tools, information and program distributions for fleet and heavy duty equipment Palmera Saw blades, cutting tools, hand tools, power tools and tool storage Sandflex Hacksaw blades, band saws, saw blades, hole saws and reciprocating saw blades ShopKey Repair and service information, shop management systems and business services Sioux Power tools Sun Diagnostic and service equipment Williams Hand tools 2010 ANNUAL REPORT 7


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    Financial Services Snap-on also generates revenue from various financing activities that include (i) loans to franchisees’ customers and the company’s industrial and other customers for the purchase or lease of tools, equipment and diagnostics 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 entity is solely at the customer’s election. When assessing customers for potential financing, Snap-on considers various factors regarding ability to pay including financial condition, collateral, debt-servicing ability, past payment experience and credit bureau information. United States In the United States, Snap-on offers financing through SOC. Since the July 16, 2009 termination of the financial services operating agreement with CIT, Snap-on has been providing financing for the majority of new contracts originated by SOC. The financing revenue from contracts originated after July 16, 2009, which are owned and serviced by SOC, is recognized by SOC over the life of the contracts, with interest computed on the average daily balances of the underlying contracts. From 1999 until July 16, 2009, CIT had been the exclusive purchaser of the financing contracts originated by SOC in the United States. Snap-on recorded gains on the sale of the originated contracts as financial services revenue at the time the contracts were sold to CIT. For contracts sold to CIT prior to July 16, 2009, SOC continues to service the contracts for an estimated servicing fee and such revenue is recognized over the contractual term of the loans. International Snap-on also offers financing to its franchisees and customer networks through its wholly-owned international finance subsidiaries located in Canada, the United Kingdom, Australia and Puerto Rico. Snap-on’s international finance subsidiaries own and service the loans originated through their financing programs. Financing revenue from these contracts is recognized over the contractual term of the loans, with interest computed on the average daily balances of the underlying contracts. Other Franchise fee revenue, including nominal, non-refundable initial and ongoing monthly fees (primarily for sales, business training, marketing and product promotion programs), is recognized as the fees are earned. 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, equipment and diagnostics products for themselves; (ii) other professional customers related to automotive repair, including owners and managers of independent and OEM dealership service and repair shops who purchase tools, equipment and diagnostics 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, to meet technicians’ evolving needs. Snap-on’s franchise van 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 shops, where technicians work, with tools, diagnostics equipment, 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 tools, consulting and facilitation services, which include product procurement, distribution and administrative support to customers for their dealership equipment programs. 8 SNAP-ON INCORPORATED


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    Major challenges for Snap-on and the vehicle service and repair sector include the increasing rate of technological change within motor vehicles, vehicle population growth, vehicle life and the resulting impact on the businesses of both our suppliers and customers that is necessitated by such change. Snap-on believes it is a meaningful participant in the market sector for vehicle service and repair. Snap-on markets its products 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; aerospace and aviation; OEM and service and repair customers; oil and gas developers; mining operations; energy and power generation equipment fabricators and operators; agriculture; infrastructure construction companies; and other customers that require instrumentation, service tools and/or equipment for their products. The industrial sector for Snap-on has achieved growth in recent years by providing value-added products and services to an increasingly expanding global base of customers in critical industries, particularly those in the market segments of natural resources, aerospace, government and education. Through its experienced and dispersed sales organization, industrial “solutioneers” strive to develop unique and highly valued productivity solutions for customers worldwide that leverage Snap-on’s product, service and development capabilities. Major challenges in the industrial sector include a highly competitive, cost-conscious environment, and a trend toward customers making many of their tool and equipment purchases through one integrated supplier. Snap-on believes it is a meaningful participant in the market sector for industrial tools and equipment. 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 are conducted through Snap-on’s mobile franchise van channel. Snap-on’s franchisees primarily serve vehicle service 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, small diagnostic and shop equipment, and diagnostics and repair information products, which can easily be transported in a van 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 places of business that serves as the basis of the franchisee’s sales route. Snap-on also offers an option termed the “Gateway Program” to potential U.S. franchisees that do not meet the franchise qualification requirements. Gateway Program participants have less upfront investment and are provided an initial base level of consigned inventory from Snap-on to assist them in gaining experience and building equity toward the future purchase of a standard franchise. Snap-on also provides certain franchisees the opportunity to add vans to their franchise or to add a limited number of additional franchises. Snap-on charges nominal initial and ongoing monthly franchise fees. Since 1991, written franchise agreements have been entered into with all new U.S. franchisees and most pre-1991 independent franchisees. As of 2010 year end there were 3,159 vans operated by U.S. franchisees (approximately 96%) with written franchise agreements, or individuals employed by such franchisees, as compared with 3,183 vans (approximately 96%) as of 2009 year end. Snap-on has replicated its U.S. franchise van distribution model in certain other countries including Australia, Canada, Germany, Japan, the United Kingdom, the 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 and shop owners and managers. 2010 ANNUAL REPORT 9


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    Through SOC, financing is available to U.S. franchisees, including financing for van and truck leases, working capital loans, and loans to enable new franchisees to fund the purchase of the franchise. Internationally, Snap-on offers financing to its franchisees and customer networks through its wholly-owned international finance subsidiaries. The decision to finance through Snap-on or another financing entity is solely at the customer’s election. Snap-on supports its franchisees with a field organization of regional offices, franchise performance teams, Diagnostic Sales Developers (“DSDs”), 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. In the United States and Canada, the National Franchise Advisory Council and the Snap-on Tools Canadian Franchise Advisory Council, respectively, both of which are composed primarily of franchisees that are elected by franchisees, assist Snap-on in identifying and implementing enhancements to the franchise program. In the United States, franchisees work closely with the DSDs. The DSDs train franchisees on the sale of higher-price- point diagnostics and demonstrate and sell vehicle service shop management and information systems. DSDs work independently and with franchisees to identify and generate sales among vehicle service technicians, shop owners and managers. DSDs are Snap-on employees who are compensated through a combination of base salary and commission; a franchisee receives a brokerage fee from certain sales made by the DSDs to the franchisee’s customers. Most products sold through franchisees and the DSDs are sold under the Snap-on, Blue-Point and Sun brand names. Snap-on also has a company-owned van program in the United States that is designed to (i) provide another pool of potential franchisees and 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 2010 year end, company-owned vans comprised approximately 6% of the total U.S. van population; Snap-on may elect to increase or reduce the number of company-owned vans in the future. Company Direct Sales A significant proportion of shop equipment sales in the United States under the John Bean and Blackhawk 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 equipment and diagnostic products and services. Snap-on also sells these products and services directly to OEMs and their franchised dealers. Snap-on brand tools and equipment are marketed to industrial and governmental customers in the United States through both industrial sales representatives, who are employees, and independent industrial distributors. In most markets outside the United States, industrial sales are conducted through independent distributors. The sales representatives focus on industrial customers whose main purchase criteria are quality and service. As of 2010 year end, Snap-on had industrial sales representatives in the United States (including Puerto Rico), Australia, Canada, Japan, Mexico and some European, Asian, Latin American and Middle Eastern 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, power equipment and sports segments. Products and services are marketed to targeted groups, including OEMs and their dealerships and individual repair shops. To effectively reach OEMs, such as General Motors Company, Daimler AG, Ford Motor Company, Chrysler Group LLC, Toyota Motor Corporation, John Deere (Deere & Company), JC Bamford Excavators Ltd. (JCB), and Yamaha Corporation, 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 under the BAHCO, Fish and Hook, and Lindström brands and trade names, for example, are sold through distributors in Europe, North and South America, Asia and certain other parts of the world. Wheel service and other vehicle service equipment are sold through distributors primarily under brands including Hofmann, John Bean, Cartec and Blackhawk. Diagnostics and equipment 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 BAHCO brands. 10 SNAP-ON INCORPORATED


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    E-commerce Snap-on’s e-commerce development initiatives allow Snap-on to combine the capabilities of the internet with Snap-on’s existing brand sales and distribution strengths to reach new and under-served customer segments. Snap-on offers current and prospective customers online, around-the-clock access to purchase products through its public internet web site at www.snapon.com. The site features an online catalog containing nearly 15,000 products, including Snap-on hand tools, power tools, tool storage units and diagnostic equipment available to consumers and professionals in the United States, the United Kingdom, Canada and Australia. As of 2010 year end, Snap-on had more than 640,000 registered users, including approximately 46,000 industrial accounts. 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. Through business-to-business and business-to-consumer capabilities, Snap-on and its franchisees are enhancing communications with customers on a real-time, 24 hour, 7 day a week basis. Competition Snap-on competes on the basis of its product quality and performance, product line breadth and depth, service, brand awareness and imagery, and technological innovation. While no single company competes with Snap-on across all of its product lines and distribution channels, various companies compete in one or more product categories and/or distribution channels. Snap-on believes it is a leading manufacturer and distributor of professional tools, diagnostics, equipment, repair software and solutions, offering a broad line of these products to the vehicle service industry. Various competitors target and sell to professional technicians in the automotive service and repair sector through the mobile van channel; Snap-on also competes with companies that sell tools and equipment to automotive technicians through retail stores and online, auto parts supply outlets, and tool supply warehouses/distributorships. Within the power tools category and the industrial sectors, Snap-on has various other competitors, including companies with offerings that also overlap with other areas discussed herein. Major competitors selling diagnostics and shop equipment and information to independent repair shop owners and managers as well as automotive dealerships in the vehicle service and repair sector include both companies that specifically offer products serving this sector, as well as the proprietary electronic parts catalog, diagnostic and information systems of OEMs. 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 2011 from steel pricing or availability issues. Patents, Trademarks and Other Intellectual Property Snap-on vigorously pursues and relies on patent protection to protect its intellectual property and its position in its markets. As of 2010 year end, Snap-on and its subsidiaries held over 770 active and pending patents in the United States and over 1,615 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 the last three years. Examples of products that have features or designs that benefit from patent protection include wheel alignment systems, wheel balancers, tire changers, lifts, test lanes, sealed ratchets, electronic torque instruments, ratcheting screwdrivers, 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. 2010 ANNUAL REPORT 11


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    Trademarks used by Snap-on are of continuing importance to Snap-on in the marketplace. Trademarks have been registered in the United States and more than 100 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, work boots, lighting and a variety of other goods, in order to further build equity 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 At the end of January 2011, Snap-on employed approximately 11,300 people as compared to approximately 11,000 people at the end of January 2010. Approximately 2,850 employees, or 25% of Snap-on’s worldwide workforce, are represented by unions and/or covered under collective bargaining agreements. Approximately 1,450 employees are covered under agreements expiring in 2011. In recent years, Snap-on has not experienced any significant work slow-downs, stoppages or other labor disruptions. The number of covered union employees whose contracts expire within the next five years approximates 1,450 employees in 2011; 550 employees in 2012; 400 employees in 2013; and 250 employees in 2014. There are no contracts currently scheduled to expire in 2015. There can be no assurance that future contracts with Snap-on’s unions will be renegotiated upon terms acceptable to Snap-on. Working Capital Most of Snap-on’s businesses are not seasonal and their inventory needs are relatively constant. Since the termination of the financial services operating agreement with CIT on July 16, 2009, Snap-on has been using its working capital to fund, in part, the growth of the on-book receivables originated by SOC. Snap-on did not have a significant backlog of orders at 2010 year end. 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.” 12 SNAP-ON INCORPORATED


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    As of 2010 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; prior to July 16, 2009, Snap-on’s Financial Services segment depended on CIT for more than 10% 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 continue to be adversely affected by challenging economic conditions. These conditions may result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business as well as 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 and natural disasters. These factors may affect our results of operations by reducing our sales, margins and/or net income as a result of a slowdown in customer orders or order cancellations. 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 flow could be negatively affected. The performance of Snap-on’s mobile van tool distribution business depends on the success of its franchisees. Approximately 39% of our 2010 revenues were generated by the Snap-on Tools Group, which consists of Snap-on’s business operations serving the worldwide van channel. Except in limited circumstances, each of our mobile tool vans is operated by a franchisee pursuant to a franchise agreement. 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 flow. 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 extended credit contracts and, to a lesser extent, lease contracts that are collected by franchisees on behalf of SOC. As Snap-on has approximately 4,800 franchisees worldwide and most of these franchise relationships are governed by contract, litigation can result from the termination of these relationships. 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 fluctuations of a cyclical nature. Some of these materials have been, and in the future may be, in short supply, particularly in the event of a general economic recovery. 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 other raw materials could result in higher prices to our customers or an erosion of the margins on our products. 2010 ANNUAL REPORT 13


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    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 the technicians and, subsequently, the demand technicians have for our tools, other products and services, and the value technicians place on those products and services. To the extent that the prices of gasoline and other petroleum-based fuels increase, consumers may turn to other methods of transportation, including more frequent use of public transportation. 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; further volatility and changes may be caused by market fluctuations, supply and demand, currency fluctuation, production and transportation disruption, 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. Exposure to credit risks of customers and resellers may make it difficult to collect receivables and could adversely affect operating results and financial condition. Industry and economic conditions have the potential to weaken the financial position of some of our customers. If circumstances surrounding our customers’ financial capabilities were to deteriorate, such receivables write-downs or write-offs 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 flow. Regulatory changes related to financial services operations could adversely affect operating results and financial condition. Financial services operations of all kinds are subject to increasing regulation. In addition to potentially increasing the costs of doing business, new laws and regulations, or changes to existing laws and regulations, may affect the relationships between creditors and debtors or inhibit the rights of creditors to collect amounts owed to them. For example, if such changes impede our ability to collect amounts that are due to us or limit the rates we can charge, our profitability would suffer. Instability and uncertainty in the credit and financial markets could adversely 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 SOC. Our end-user customers, franchisees and suppliers also require access to credit for their businesses. Instability and uncertainty in the credit and financial markets could adversely 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 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 flow. We have increased our financial leverage, which could affect our operations and profitability. Over the past several years, we have increased our use of borrowed funds, primarily to fund the receivables of SOC and to finance acquisitions. The company’s increased leverage may affect both our availability of additional capital resources in the future, as well as our operations in several ways, including: x 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; x The possible lack of availability of additional credit; x Higher levels of interest expense to service outstanding debt; x The possibility of additional borrowings in the future to repay our indebtedness when it comes due; and x The possible diversion of capital resources from other uses. 14 SNAP-ON INCORPORATED


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    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. Failure to achieve expected investment returns on pension plan assets, as well as changes in interest rates, could adversely impact our results of operations, financial position and cash flow. Snap-on sponsors various defined benefit pension plans (“pension plans”). The assets of the pension plans are broadly diversified in an attempt to mitigate the risk of a large loss. The assets are invested in equity securities, fixed income securities, real estate and other real assets, other alternative investments and cash. Required funding for the company’s defined benefit pension plans is determined in accordance with guidelines set forth in the federal Employee Retirement Income Security Act (ERISA). 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 plans that could reduce our financial flexibility. 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. Declining market interest rates will increase our pension plan obligations. While our plan assets are broadly diversified, there are inherent market risks associated with investments. Our pension plan assets, in the aggregate, incurred a substantial loss in 2008 as a result of market conditions; if adverse market conditions occur, our plan assets could incur additional losses. Since we may need to make additional contributions to address an increase in obligations and/or a loss in plan assets, the combination of declining market interest rates and/or past or future plan asset investment losses could adversely impact our financial position, results of operations 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) the expected return on plan assets; (iv) the amortization of prior service costs; and (v) the effects of actuarial gains and losses. The accounting for pensions involves the estimation of a number of factors that are highly uncertain. Certain factors, such as the interest cost 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. 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 financing alternatives to end-user customers and franchisees. Since the July 16, 2009 termination of our financial services operating agreement with CIT, Snap-on is providing the resources for the majority of this financing at SOC. As a result, we are more dependent upon our ability to obtain capital resources or other financing on terms that we believe are attractive to support SOC’s on-book receivables. The lack of our ability to obtain capital resources or financing, 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 for other reasons could also have an adverse impact on our revenue and profitability. 2010 ANNUAL REPORT 15


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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 2011, intended to improve customer service and to 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: x Continuing to invest in initiatives focused on building a strong sales and operating presence in emerging growth markets; x Continuing to enhance service and value to our franchisees and customers; x Continuing to implement efficiency and productivity (collectively “Rapid Continuous Improvement” or “RCI”) initiatives throughout the organization to drive further efficiencies and reduce costs; x 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; x Continuing to invest in developing and marketing new, innovative, higher-value-added products and advanced technologies; x Extending our products and services into additional and/or adjacent markets or to new customers; and x Continuing to provide financing for, and grow our portfolio of, on-book receivables at SOC. We believe that by executing on these focus areas, along with a continued commitment to new innovative products and RCI initiatives to drive higher levels of productivity and lower costs, the company and its franchisees may realize stronger growth and profitability. However, 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, reductions to headcount and other cost reduction measures may result in the loss of technical expertise that could adversely affect our research and development efforts and 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 flow could be negatively affected. 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, use and storage of hazardous materials or other events), or other reasons, could have a material adverse effect on our business, financial condition, results of operations and cash flow. 16 SNAP-ON INCORPORATED


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    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. The effects of brand rationalization, dealership closures and/or other difficulties in the automotive industry could impact our business and operating results. Some of our business units have substantial interrelationships with the automotive industry. Weakness in the automotive industry has, in recent years, resulted in the bankruptcy of certain automobile manufacturers, as well as suppliers and dealers who are dependent upon them, discontinuance of auto brands and other significant changes in the industry. The ongoing effects of these changes cannot yet be fully determined; however, they have resulted in a reduction in the number of automobile dealerships. Additionally, weakness of companies in the automotive industry could affect their levels of purchases from us and the collectability of amounts owed to us. Even though we believe that our products and services enhance productivity, a reduction in the number of automotive manufacturers and/or dealers, or their capital expenditures, could substantially affect our sales. Any of those factors could negatively affect our business, financial condition, results of operations and cash flow. 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 increasing. Any inability to maintain customer satisfaction could diminish Snap-on’s premium image and reputation and could result in a lessening of its 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, financial condition, results of operations and cash flow. The products that we design and/or manufacture can lead to product liability claims being filed against us. To the extent that plaintiffs are successful in showing that defects in the design or manufacture of our products led to personal injury or property 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 below the insurance retention amount. As a manufacturer, we can be subject to the costs and potential negative publicity of product recalls, which could impact our results. New legislation and regulations may affect our business and results of operations. There has recently been an increase in legislative and regulatory activity, particularly in the United States, that could significantly impact our business and the economy as a whole. For example, the Affordable Care Act (“Act”), which was enacted in March 2010 and will be phased in over the next several years, significantly affects the provision of both health care services and benefits in the United States; this Act may impact our cost of providing our employees and retirees with health insurance and/or benefits and may also impact various other aspects of our business. Also, the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may affect, among other matters, our financial services businesses by requiring changes in the way in which we provide credit or by otherwise increasing the expenses of that operation, as well as the costs related to corporate governance, disclosures and general securities law compliance. 2010 ANNUAL REPORT 17


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    These developments, and other potential future legislation and regulations, 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, financial condition or results of operations, including in ways that cannot yet be foreseen. Legal disputes could adversely affect our business, financial condition, results of operations and cash flow. From time to time we are subject to legal disputes that are being litigated and/or settled in the ordinary course of business. As described more fully below in “Part I, Item 3: Legal Proceedings,” Snap-on has a dispute pending in arbitration with CIT in which both parties make claims relating to matters that occurred during the course of their financial services joint venture. That dispute, and any other dispute or future lawsuit, 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 could have an adverse impact on us. 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, financial condition, results of operations and cash flows. Information technology infrastructure is critical to supporting business objectives; failure of our information technology infrastructure to operate effectively could adversely affect our business. We depend heavily on information technology infrastructure to achieve our business objectives. If a problem occurs that impairs this infrastructure, the resulting disruption could impede our ability to record or process orders, manufacture and ship in a timely manner, or otherwise carry on business in the normal course. Any such events could cause us to lose customers or revenue and could require us to incur significant expense to remediate. 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 existing global Enterprise Resource Planning (ERP) management information systems. As we integrate, implement and deploy new information technology processes and a 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 flow. The recognition of impairment charges on goodwill or other intangible assets would adversely impact future financial position and results of operations. 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 adverse changes in business climate, adverse actions by regulators, unanticipated competition, loss of key customers, including large customers associated with the automotive industry, 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. Failure to adequately protect intellectual property could adversely affect our business. Intellectual property rights are an important and integral component of 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. Adverse determinations in a judicial or administrative proceeding could prevent us from manufacturing and selling our products or prevent us from stopping others from manufacturing and selling competing products. Failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business. 18 SNAP-ON INCORPORATED


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    Foreign operations are subject to currency exchange, political, economic and other risks that could adversely affect our business, financial condition, results of operations and cash flow. 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 those other currencies affect the U.S. dollar value of those items as reflected in Snap-on’s 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. Approximately 41% of our revenues in 2010 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. 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, transportation delays or interruptions and difficulties in enforcement of contract and intellectual property rights. Should the economic environment in our non-U.S. markets deteriorate from current levels, including as a result of the effects of potential impairment write-downs of goodwill and/or other intangible assets related to these businesses, our results of operations and financial position could be materially impacted. 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. 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. Legislation has been proposed, and governmental regulatory action has been both proposed and taken, that may significantly impact environmental compliance in the United States; these actions could increase our costs of production by raising the cost of energy as well as by further restricting emissions or other processes that we currently use in our operations. 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 flow. 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 flow. 2010 ANNUAL REPORT 19


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    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 flow. We may not successfully integrate businesses we acquire, which could have an adverse impact on our business, financial condition, results of operations and cash flow. The pursuit of future 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 flow. These risks include: x Loss of the acquired businesses’ customers; x An inability to integrate successfully the acquired businesses’ operations; x Inability to coordinate management and integrate and retain employees of the acquired businesses; x Difficulties in implementing and maintaining consistent standards, controls, procedures, policies and information systems; x Failure to realize anticipated synergies, economies of scale or other anticipated benefits, or to maintain operating margins; x Strain on our personnel, systems and resources, and diversion of attention from other priorities; x Incurrence of additional debt and related interest expense; x The dilutive effect of the issuance of additional equity securities; x Unforeseen or contingent liabilities of the acquired businesses; and x Large write-offs or write-downs, or the impairment of goodwill or other intangible assets. Item 1B: Unresolved Staff Comments None. Item 2: Properties Snap-on maintains leased and owned manufacturing, 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 3.5 million square feet, of which 77% is owned, including its corporate and general office facility located in Kenosha, Wisconsin. Snap-on’s facilities outside the United States occupy approximately 3.9 million square feet, of which approximately 72% 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


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    The following table provides information about each of Snap-on’s principal manufacturing locations and distribution centers (exceeding 50,000 square feet) as of 2010 year end: Location Type of Property Owned/Leased Segment* U.S. Locations: Elkmont, Alabama Manufacturing Owned SOT Conway, Arkansas Manufacturing Owned RS&I City of Industry, California Manufacturing Leased C&I Poway, California Manufacturing and distribution Leased RS&I San Jose, California Manufacturing Leased RS&I Columbus, Georgia Distribution Owned C&I Crystal Lake, Illinois Distribution Owned and Leased SOT Algona, Iowa Manufacturing and distribution Owned SOT Olive Branch, Mississippi Distribution Owned SOT Carson City, Nevada Distribution Owned and Leased SOT Murphy, North Carolina Manufacturing and distribution Owned C&I Richfield, Ohio Manufacturing and distribution Owned RS&I Robesonia, Pennsylvania Distribution Owned SOT Elizabethton, Tennessee Manufacturing Owned SOT Kenosha, Wisconsin Distribution and corporate Owned SOT, C&I, RS&I Milwaukee, Wisconsin Manufacturing Owned SOT Non-U.S. Locations: Santo Tome, Argentina Manufacturing Owned C&I Minsk, Belarus Manufacturing Owned C&I Santa Barbara D'oeste, Brazil Manufacturing and distribution Owned RS&I Mississauga, Canada Manufacturing Leased RS&I Newmarket, Canada Manufacturing Owned SOT Kunshan, China Manufacturing Owned C&I Xiaoshan, China Manufacturing Owned C&I Bramley, England Manufacturing Leased C&I Kettering, England Distribution Owned SOT, C&I Sopron, Hungary Manufacturing Owned RS&I Correggio, Italy Manufacturing Owned RS&I Tokyo, Japan Distribution Leased C&I Helmond, the Netherlands Distribution Owned C&I Vila do Conde, Portugal Manufacturing Owned C&I Irun, Spain Manufacturing Owned C&I Placencia, Spain Manufacturing Owned C&I Vitoria, Spain Manufacturing and distribution Owned C&I Bollnäs, Sweden Manufacturing Owned C&I Edsbyn, Sweden Manufacturing Owned C&I Lidköping, Sweden Manufacturing Owned C&I Sandviken, Sweden Distribution Leased C&I * Segment abbreviations: C&I – Commercial & Industrial Group SOT – Snap-on Tools Group RS&I – Repair Systems & Information Group On January 24, 2011, Snap-on announced the expected mid-2011 closure of its Newmarket, Canada, tool storage manufacturing facility; Snap-on is consolidating its North American tool storage manufacturing and distribution operations into its existing tool storage facility in Algona, Iowa. Snap-on expects the Newmarket facility will be available for sale following its closure in 2011. 2010 ANNUAL REPORT 21


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    Item 3: Legal Proceedings See Note 15 to the Consolidated Financial Statements for information on legal proceedings. Snap-on filed a notice of arbitration with the American Arbitration Association on January 8, 2010, concerning a dispute with CIT relating to various underpayments made during the course of their financial services joint venture, in which Snap-on has alleged damages of approximately $115 million. As a result of the dispute, Snap-on has withheld certain amounts (totaling $107.8 million as of 2010 year end) from payments made to CIT relating to SOC’s ongoing business activities. CIT filed its response denying Snap-on's claim and asserting certain claims against Snap-on for other matters relating to the joint venture on January 29, 2010. CIT's claims allege damages in excess of $110 million, the majority of which relates to returning the $107.8 million withheld by Snap-on. The $107.8 million retained by Snap-on is included in other accrued liabilities on Snap-on’s January 1, 2011 consolidated balance sheet. Discovery in the CIT matter is ongoing, with arbitration scheduled for the second quarter of 2011. At this time, no determination can be made as to the likely outcome of this dispute. Snap-on is involved in various other 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 other legal matters, management believes that the results of these other legal matters will not have a material impact on Snap-on’s consolidated financial position, results of operations or cash flows. PART II Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Snap-on had 58,181,545 shares of common stock outstanding as of 2010 year end. Snap-on’s stock is listed on the New York Stock Exchange under the ticker symbol “SNA.” At February 11, 2011, there were 6,417 registered holders of Snap-on common stock. Snap-on’s common stock high and low prices, as of the close of trading, for the last two years by quarter were as follows: Common Stock High/Low Prices 2010 2009 Quarter High Low High Low First $ 44.90 $ 40.12 $ 41.07 $ 20.66 Second 49.54 40.36 34.70 26.79 Third 46.92 39.88 38.63 26.50 Fourth 57.39 46.30 43.57 34.05 Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. On November 4, 2010, the company announced that its Board of Directors (“Board”) increased the quarterly cash dividend from $0.30 per share to $0.32 per share. Quarterly dividends declared in 2010 were $0.32 per share in the fourth quarter and $0.30 per share in the first three quarters ($1.22 per share for the year). Quarterly dividends in 2009 and 2008 were $0.30 per share ($1.20 per share for each year). Cash dividends paid in 2010, 2009 and 2008 totaled $71.3 million, $69.0 million and $69.7 million, respectively. Snap-on’s 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


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    The following chart discloses information regarding the shares of Snap-on’s common stock repurchased by the company during the fourth quarter of fiscal 2010, all of which were purchased pursuant to the Board’s authorizations that the company has publicly announced. There were no other stock repurchases by the company in fiscal 2010. Snap-on has undertaken stock repurchases from time to time to offset dilution created by shares issued for employee and dealer stock purchase plans, stock options and other corporate purposes, as well as to repurchase shares 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. Issuer Purchases of Equity Securities Approximate Value of Shares Average Number of Shares that May Yet be Number of Price Purchased as Part of Purchased Shares Paid per Publicly Announced Under the Plans * Period Purchased Share Plans or Programs or Programs 10/03/10 to 10/30/10 – N/A – $155.2 million 10/31/10 to 11/27/10 – N/A – $158.7 million 11/28/10 to 01/01/11 152,000 $56.99 152,000 $159.4 million Total/Average 152,000 $56.99 152,000 N/A *Subject to further adjustment pursuant to the 1996 Authorization described below, as of January 1, 2011, the approximate value of shares that may yet be purchased pursuant to the three outstanding Board authorizations discussed below is $159.4 million. x 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 $51.00, $52.86 and $56.58 per share of common stock as of the end of the fiscal 2010 months ended October 30, 2010, November 27, 2010, and January 1, 2011, respectively. x In 1998, the Board authorized the repurchase of an aggregate of $100 million of the company’s common stock (“the 1998 Authorization”). The 1998 Authorization will expire when the aggregate repurchase price limit is met, unless terminated earlier by the Board. x In 1999, the Board authorized the repurchase of an aggregate of $50 million of the company’s common stock (“the 1999 Authorization”). The 1999 Authorization will expire when the aggregate repurchase price limit is met, unless terminated earlier by the Board. 2010 ANNUAL REPORT 23


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    Five-year Stock Performance Graph The graph below illustrates the cumulative total shareholder return on Snap-on Common Stock since December 31, 2005, assuming that dividends were reinvested. The graph compares Snap-on’s performance to that of the Standard & Poor’s 500 Stock Index (“S&P 500”) and a Peer Group. Snap-on Incorporated Total Shareholder Return (1) SNAP-ON INCORPORATED PEER GROUP S&P 500 200 175 150 DOLLARS 125 100 75 50 2005 2006 2007 2008 2009 2010 Snap-on Fiscal Year Ended (2) Incorporated Peer Group (3) S&P 500 December 31, 2005 $ 100.00 $ 100.00 $ 100.00 December 31, 2006 130.15 118.80 115.80 December 31, 2007 134.76 139.56 122.16 December 31, 2008 112.19 90.45 76.96 December 31, 2009 124.98 115.00 97.33 December 31, 2010 171.92 154.37 111.99 (1) Assumes $100 was invested on December 31, 2005, and that dividends were reinvested quarterly. (2) The company's fiscal year ends on the Saturday closest to December 31 of each year; the fiscal year end is assumed to be December 31 for ease of calculation. (3) The Peer Group consists of: Stanley Black & Decker, Inc., Cooper Industries plc., Danaher Corporation, Emerson Electric Co., Fortune Brands, Inc., Genuine Parts Company, Newell Rubbermaid Inc., Pentair, Inc., SPX Corporation, and W.W. Grainger, Inc. The Peer Group has been adjusted to reflect the 2010 merger of The Black & Decker Corporation and The Stanley Works. 24 SNAP-ON INCORPORATED


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    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) 2010 2009 2008 2007 2006 Results of Operations Net sales $ 2,619.2 $ 2,362.5 $ 2,853.3 $ 2,841.2 $ 2,455.1 Gross profit 1,211.1 1,057.6 1,284.6 1,266.6 1,079.8 Operating expenses 894.1 824.4 933.1 964.2 930.0 Operating earnings before financial services 317.0 233.2 351.5 302.4 149.8 Financial services revenue 62.3 58.3 81.4 63.0 49.0 Financial services expenses 47.9 40.8 44.1 40.6 36.0 Operating earnings 331.4 250.7 388.8 324.8 162.8 Interest expense 54.8 47.7 33.8 46.1 20.6 Earnings before income taxes and equity earnings 277.4 205.3 357.8 284.2 147.5 Income tax expense 87.6 62.7 117.8 92.5 45.9 Earnings before equity earnings 189.8 142.6 240.0 191.7 101.6 Equity earnings, net of tax 3.2 1.1 3.6 2.4 – Net earnings from continuing operations 193.0 143.7 243.6 194.1 101.6 Income (loss) from discontinued operations, net of tax – – – (8.0) 2.2 Net earnings 193.0 143.7 243.6 186.1 103.8 Net earnings attributable to noncontrolling interests (6.5) (9.5) (6.9) (4.9) (3.7) Net earnings attributable to Snap-on Inc. 186.5 134.2 236.7 181.2 100.1 Financial Position Cash and cash equivalents $ 572.2 $ 699.4 $ 115.8 $ 93.0 $ 63.4 Trade and other accounts receivable – net 443.3 414.4 462.2 512.6 494.1 Finance receivables – net 215.3 122.3 37.1 42.5 45.1 Contract receivables – net 45.6 32.9 22.8 31.8 20.0 Inventories – net 329.4 274.7 359.2 322.4 323.0 Current assets 1,765.5 1,676.1 1,140.7 1,187.4 1,113.2 Property and equipment – net 344.0 347.8 327.8 304.8 297.1 Total assets 3,729.4 3,447.4 2,710.3 2,765.1 2,654.5 Notes payable and current maturities of long-term debt 216.0 164.7 12.0 15.9 43.6 Accounts payable 146.1 119.8 126.0 171.6 178.8 Current liabilities 881.1 739.9 547.5 639.2 682.0 Long-term debt 954.8 902.1 503.4 502.0 505.6 Total debt 1,170.8 1,066.8 515.4 517.9 549.2 Total shareholders' equity attributable to Snap-on Inc. 1,388.5 1,290.0 1,186.5 1,280.1 1,076.3 Working capital 884.4 936.2 593.2 548.2 431.2 Common Share Summary Average shares outstanding – diluted 58.4 57.9 58.1 58.6 59.2 Earnings per share (“EPS”), continuing operations: Basic $ 3.22 $ 2.33 $ 4.12 $ 3.27 $ 1.68 Diluted 3.19 2.32 4.07 3.23 1.65 Net EPS attributable to Snap-on Incorporated: Basic 3.22 2.33 4.12 3.13 1.72 Diluted 3.19 2.32 4.07 3.09 1.69 Cash dividends paid per share 1.22 1.20 1.20 1.11 1.08 Shareholders' equity per basic share 23.94 22.36 20.63 22.11 18.46 Fiscal year-end per share price 56.58 42.26 41.10 48.13 47.64 x Snap-on terminated its financial services joint venture operating agreement with CIT on July 16, 2009, and subsequently purchased CIT’s 50%-ownership interest in SOC for $8.1 million. Since July 16, 2009, Snap-on has been providing financing for the majority of new contracts originated by SOC. New contracts originated by SOC are reflected as finance and contract receivables on the company’s balance sheet and the company is recording the interest yield on these receivables over the life of the contracts as financial services revenue. Previously, the company recorded gains on contracts sold to CIT as financial services revenue. 2010 ANNUAL REPORT 25


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    x Results of operations for all years presented prior to 2008 have been restated to reflect the 2007 sale of the Sun Electric Systems business based in the Netherlands as discontinued operations. Snap-on recorded an $8.0 million net loss from the sale of the Sun Electric Systems business in 2007. x Operating expenses and operating earnings in 2006 included a $38.0 million pretax charge ($23.4 million after tax, or $0.40 per diluted share) to settle certain legal matters related to certain then current and former franchisees. Results in 2006 also included the impact of the company’s acquisition of Snap-on Business Solutions for the approximate five-week period from the November 28, 2006 acquisition date to year end. 26 SNAP-ON INCORPORATED


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    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 Unless otherwise indicated, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “fiscal 2010” or “2010” refer to the fiscal year ended January 1, 2011; references to “fiscal 2009” or “2009” refer to the fiscal year ended January 2, 2010; and references to “fiscal 2008” or “2008” refer to the fiscal year ended January 3, 2009. References to 2010, 2009 and 2008 year end refer to January 1, 2011, January 2, 2010, and January 3, 2009, respectively. We believe our 2010 operating performance evidences stabilization in the overall business environment, significant progress on our strategic priorities and continued benefits from our Snap-on Value Creation Processes. Considerable progress was made as we continued investing in our strategic growth initiatives aimed at strengthening our business models, pursuing geographic and customer diversification and expanding our presence in emerging markets. In 2010, we maintained a balance between a disciplined operational approach and continued focus on our most important strategic growth initiatives aimed at enhancing the franchisee network, expanding in the vehicle repair garage, extending in critical industries and building in emerging markets. Our global financial services operations serve a significant strategic role in providing financing options for our franchisees’ customers, our franchisees and customers in other parts of our business. Fiscal 2010 marked the first full year since our U.S. financial services operation, Snap-on Credit LLC (“SOC”), transitioned from a financial services joint venture with CIT Group Inc. (“CIT”) to a wholly-owned subsidiary. Following the July 16, 2009 termination of the financial services operating agreement with CIT, we have been steadily growing our on-book finance portfolio and providing financing for the majority of new loans originated by SOC. Going forward, we expect that our financial services businesses, including both SOC and our wholly-owned international finance subsidiaries, will be meaningful contributors to our operating earnings. We expect that operating earnings from financial services, which is before interest expense, will continue to improve as the on-book finance portfolio grows. We believe that continued advancement of our strategic initiatives will enable us to capitalize on our defined runways for growth and be decisive in creating long-term value for our shareholders. Specific opportunities for growth in 2011 include the areas of vehicle repair, critical industries and emerging markets. In vehicle repair, we intend to enhance our mobile tool distribution network by reaching out to more vehicle repair technicians. Similarly, we seek to further penetrate another key customer group within vehicle repair – shop owners and managers – through direct and distributor channels within our Repair Systems & Information Group. We also expect to continue rolling the Snap-on brand “out of the garage,” providing professional technicians in critical industries, including power generation, oil and gas, aerospace, military, mining, natural resources, alternative energy and education, with a broad range of productivity solutions suited to their unique needs. We also intend to continue investing in emerging markets, including the further expansion of our manufacturing capacity and product offerings in China, India and Eastern Europe. Global market conditions in 2011, including the depth and breadth of the economic recovery, may impact the level and timing of resources deployed in pursuit of these initiatives. Net sales in 2010 of $2,619.2 million increased $256.7 million, or 10.9%, from 2009 levels, with favorable foreign currency translation contributing $14.9 million of the increase. Operating earnings of $331.4 million in 2010 increased $80.7 million from 2009 levels primarily due to higher sales, contributions from ongoing efficiency and productivity (collectively “Rapid Continuous Improvement” or “RCI”) initiatives and benefits from restructuring actions. Net earnings in 2010 of $186.5 million, or $3.19 per diluted share, increased 39.0% from the $134.2 million, or $2.32 per diluted share, earned in 2009. In the second quarter of 2010, as previously disclosed, we realigned our management organization and, as a result, our reportable business segments. This organizational change reflects our efforts to better support the product and service needs of our primary customer segments, which include: (i) commercial and industrial customers, including professionals in critical industries and emerging markets; (ii) professional technicians who purchase products through our worldwide 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. In addition, our Financial Services customer segment offers financing options that include (i) loans to franchisees’ customers and our industrial and other customers for the purchase or lease of tools, equipment and diagnostics products on an extended term payment plan; and (ii) business loans and vehicle leases to franchisees. 2010 ANNUAL REPORT 27


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) The primary organizational changes in 2010 included the realignment of our equipment products and equipment repair services operations from the Commercial & Industrial Group to the newly created Repair Systems & Information Group in order to better serve customers in the worldwide vehicle service and repair marketplace, including owners and managers of independent and OEM dealership service and repair shops. In addition to equipment products and equipment repair services, the Repair Systems & Information Group includes the business operations of our former Diagnostics & Information Group, consisting of those operations providing diagnostics, vehicle service information, business management systems, electronic parts catalogs and other solutions for vehicle service to customers in the worldwide vehicle and repair marketplace. The organizational changes also included the realignment of our sales operations in Japan from the Snap-on Tools Group to the Commercial & Industrial Group to assist in further penetrating the customer base, particularly industrial buyers, in that region. We also reallocated certain costs between the operating units as a result of these organizational changes, reflecting value-added activities and contributions related to the particular customer base being served. Prior year segment financial data was restated to reflect these reportable business segment realignments. As a result of the organizational changes in 2010, our 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, primarily through direct and distributor channels. The Snap-on Tools Group consists of business operations primarily serving automotive service technicians through our worldwide mobile tool distribution channel. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers, primarily owners and managers of independent repair shops and OEM dealership service and repair shops, through direct and distributor channels. Financial Services consists of the business operations of our wholly-owned finance subsidiaries. In the Commercial & Industrial Group, segment net sales of $1,048.2 million in 2010 increased $150.6 million, or 16.8%, from 2009 levels. Excluding $3.0 million of favorable foreign currency translation, organic (excluding foreign currency translation effects) sales in 2010 increased $147.6 million, or 16.4%, year over year, primarily reflecting higher sales to customers in critical industries and emerging markets. Sales in our European-based hand tools business also improved in 2010 from depressed 2009 levels. Operating earnings of $116.9 million in 2010 increased $68.7 million from 2009 levels primarily due to higher sales and favorable manufacturing utilization, lower restructuring costs and $19.7 million of savings from ongoing RCI and restructuring initiatives. The Commercial & Industrial Group incurred $5.2 million of restructuring costs in 2010 primarily to improve the segment’s cost structure in Europe. The Commercial & Industrial Group intends to build on the following strategic priorities in 2011: x Continuing to invest in emerging market growth initiatives, including China, India and Eastern Europe; x Increasing market share in key industrial market segments by reaching new customers, expanding our business with existing customers, and continually expanding value-added product content; x Continuing to invest in innovation that delivers productivity-enhancing solutions that utilize the latest technology; and x Continuing to rationalize the operating footprint and reduce structural costs. In the Snap-on Tools Group, segment net sales of $1,039.9 million in 2010 increased $99.8 million, or 10.6%, from 2009 levels; excluding $14.0 million of favorable foreign currency translation, organic sales in 2010 increased $85.8 million, or 9.0%, year over year primarily due to higher sales in the company’s U.S. franchise operations. Operating earnings in 2010 of $114.0 million increased $5.8 million from 2009 levels as earnings contributions from higher sales, favorable foreign currency effects and savings from ongoing RCI and restructuring initiatives were partially offset by higher year- over-year “last in, first out” (“LIFO”) related inventory valuation expense and higher restructuring costs. The Snap-on Tools Group incurred $5.3 million of restructuring costs in 2010 primarily for the mid-2011 consolidation of its North American tool storage manufacturing and distribution operations into its existing tool storage facility in Algona, Iowa. 28 SNAP-ON INCORPORATED


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    | In 2010, the Snap-on Tools Group continued to make progress on its fundamental, strategic initiatives to strengthen the group and enhance franchisee profitability and satisfaction. In 2011, the Snap-on Tools Group intends to continue building on the progress made in 2010, with specific initiatives focused on the following: x Continuing to improve franchisee profitability and satisfaction; x Developing new programs to expand market coverage; x Continuing to invest in new product innovation and development; and x Increasing operational flexibility in back office support functions, manufacturing and the supply chain through RCI initiatives and investment. By executing in these areas, we believe that we, as well as our franchisees, will continue to serve more customers better and more profitably. In the Repair Systems & Information Group, segment net sales of $847.2 million in 2010 increased $68.4 million, or 8.8%, from 2009 levels; excluding $2.5 million of unfavorable foreign currency translation, organic sales in 2010 increased $70.9 million, or 9.1%. The year-over-year sales increase primarily reflects higher equipment and diagnostics sales to owners and managers of independent repair shops and increased activity with automotive OEM dealerships. Sales in 2010 benefited from the further development and launch of new diagnostics and information products, and the continued expansion of product functionality, content and product integration. These sales increases were partially offset by anticipated lower year- over-year sales of electronic parts catalogs to OEMs and their franchised dealer networks primarily due to the consolidation of North American automotive dealerships in 2009 and 2010. Operating earnings in 2010 of $164.4 million increased $42.3 million, or 34.6%, from 2009 levels, primarily due to higher sales, $11.4 million of savings from ongoing RCI and other cost reduction initiatives, including savings from cost containment actions, and $4.4 million of lower restructuring costs. The Repair Systems & Information Group intends to focus on the following strategic priorities in 2011: x Continuing software and hardware upgrades; x Expanding product range with new products and services; x Increasing penetration in geographic markets; x Leveraging integration of software solutions; x Continuing productivity advancements through RCI initiatives and leveraging of resources; and x Continuing investment in emerging markets. Financial Services revenue was $62.3 million in 2010 and $58.3 million in 2009; in 2010, originations of $538.2 million increased $40.1 million, or 8.1%, from 2009 levels. Following the July 16, 2009 termination of the financial services operating agreement with CIT, we have been steadily growing our on-book finance portfolio and providing financing for the majority of new loans originated by SOC. SOC records the interest yield on the new on-book finance portfolio over the life of the contracts as financial services revenue; prior to July 16, 2009, SOC sold substantially all new contract originations to CIT and recorded gains on the sale of the contracts as financial services revenue. At the time of the July 16, 2009 transition, SOC had minimal on-book, interest-earning assets to offset its infrastructure operating costs. By mid- 2010, SOC’s on-book finance portfolio was generating positive operating earnings. For full year 2010, operating earnings from financial services were $14.4 million, as compared to $17.5 million last year. We expect that operating earnings from financial services, which is before interest expense, will continue to improve as our on-book finance portfolio grows. Financial Services intends to focus on the following strategic priorities in 2011: x Delivering financial products and services that attract and sustain profitable franchisees; x Delivering financial products and services that foster lifetime customer loyalty; x Delivering high quality in all of our financial products and processes through the use of RCI initiatives; x Delivering additional financial products and services in the United Kingdom and Australia; and x Improving overall portfolio performance. 2010 ANNUAL REPORT 29


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Cash Flows Net cash provided by operating activities was $140.4 million in 2010 as compared to $347.1 million in 2009. The lower net cash provided by operating activities in 2010 was primarily due to net changes in operating assets and liabilities as a result of higher sales and increased customer demand, including $116.6 million of higher trade, contract and other receivables and $55.2 million of increased inventories. The decrease in net cash provided by operating activities in 2010 also included a fourth quarter 2010 discretionary cash contribution of $48.0 million to the company’s domestic pension plans. Net cash used by investing activities of $303.0 million in 2010 included additions to, and collections of, finance receivables of $497.6 million and $245.2 million, respectively. Capital expenditures in 2010 of $51.1 million included continued spending to support the company’s strategic growth initiatives, including the expansion of manufacturing capabilities in lower-cost regions and emerging growth markets. Capital expenditures in 2010 also included higher levels of efficiency and cost-reduction capital investments, including the installation of new production and machine tooling to enhance manufacturing and distribution operations, and increased spending to enhance the company’s corporate headquarters and research and development facilities in Kenosha, Wisconsin. Net cash provided by financing activities totaled $34.8 million in 2010. In December 2010, Snap-on issued $250 million of 4.25% unsecured long-term notes at a discount; Snap-on is using the $247.7 million of proceeds from the sale of these notes, net of $1.6 million of transaction costs, for general corporate purposes, which may include working capital, capital expenditures, repayment of all or a portion of the company’s $200 million 6.25% unsecured notes maturing on August 15, 2011, the financing of finance and contract receivables related to SOC, and possible acquisitions. In January 2010, Snap-on repaid $150 million of floating rate debt upon its maturity with available cash. Cash proceeds received from stock purchase and option plans totaled $23.7 million in 2010; dividends paid to shareholders totaled $71.3 million in 2010. 30 SNAP-ON INCORPORATED


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    | Results of Operations In the second quarter of 2010, as previously disclosed, Snap-on realigned its management organization and, as a result, its reportable business segments. This organizational change reflects the company’s efforts to better support the product and service needs of the company’s primary customer segments. As a result of this realignment, 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. Prior year segment financial data was restated to reflect these reportable business segment realignments. See Note 17 to the Consolidated Financial Statements and “Segment Results” in this Management’s Discussion and Analysis for further information on the company’s reportable business segments. 2010 vs. 2009 Results of operations for 2010 and 2009 are as follows: (Amounts in millions) 2010 2009 Change Net sales $ 2,619.2 100.0% $ 2,362.5 100.0% $ 256.7 10.9% Cost of goods sold (1,408.1) -53.8% (1,304.9) -55.2% (103.2) -7.9% Gross profit 1,211.1 46.2% 1,057.6 44.8% 153.5 14.5% Operating expenses (894.1) -34.1% (824.4) -34.9% (69.7) -8.5% Operating earnings before financial services 317.0 12.1% 233.2 9.9% 83.8 35.9% Financial services revenue 62.3 100.0% 58.3 100.0% 4.0 6.9% Financial services expenses (47.9) -76.9% (40.8) -70.0% (7.1) -17.4% Operating earnings from financial services 14.4 23.1% 17.5 30.0% (3.1) -17.7% Operating earnings 331.4 12.4% 250.7 10.4% 80.7 32.2% Interest expense (54.8) -2.0% (47.7) -2.0% (7.1) -14.9% Other income (expense) – net 0.8 – 2.3 0.1% (1.5) -65.2% Earnings before income taxes and equity earnings 277.4 10.4% 205.3 8.5% 72.1 35.1% Income tax expense (87.6) -3.3% (62.7) -2.6% (24.9) -39.7% Earnings before equity earnings 189.8 7.1% 142.6 5.9% 47.2 33.1% Equity earnings, net of tax 3.2 0.1% 1.1 – 2.1 NM Net earnings 193.0 7.2% 143.7 5.9% 49.3 34.3% Net earnings attributable to noncontrolling interests (6.5) -0.2% (9.5) -0.4% 3.0 31.6% Net earnings attributable to Snap-on Inc. $ 186.5 7.0% $ 134.2 5.5% $ 52.3 39.0% 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 in 2010 of $2,619.2 million were up $256.7 million, or 10.9%, from 2009 levels; excluding $14.9 million of favorable foreign currency translation, organic sales increased $241.8 million, or 10.2%, from 2009 levels. Snap-on has significant international operations and is subject to certain risks inherent with foreign operations, including foreign currency translation fluctuations. 2010 ANNUAL REPORT 31


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Gross profit in 2010 was $1,211.1 million as compared to $1,057.6 million in 2009. The $153.5 million, or 14.5%, gross profit increase is primarily due to higher sales, $21.6 million of savings from ongoing RCI initiatives, including benefits from restructuring and cost containment actions, $17.5 million of favorable foreign currency effects and $4.7 million of lower restructuring costs. The year-over-year gross profit comparison also benefited from favorable manufacturing utilization as a result of increased production levels; in 2009, the company incurred costs to carry excess manufacturing capacity, primarily in Europe, as a result of lower demand and inventory reduction efforts. These gross profit increases were partially offset by $10.9 million of lower year-over-year LIFO-related inventory valuation benefits ($1.0 million of LIFO-related expense in 2010 and $9.9 million of LIFO-related benefits in 2009). The LIFO-related inventory benefits in 2009 resulted from inventory reductions, including as a result of increased liquidations and disposals of slow-moving and excess inventories, as the company adjusted its production and inventory levels in response to weakened consumer and business demand during the continued global economic downturn. As a result of these factors, gross margin of 46.2% in 2010 increased 140 basis points (100 basis points equals 1.0 percent) from 44.8% in 2009. Operating expenses in 2010 were $894.1 million as compared to $824.4 million in 2009. In addition to higher volume- related and other expenses, the $69.7 million increase in year-over-year operating expenses includes $19.3 million of higher performance-based incentive compensation expense, $16.3 million of increased pension expense, largely due to the amortization of investment losses incurred in 2008 related to the company’s domestic pension plan assets, $7.5 million of higher stock-based, including mark-to-market, expense and $3.9 million of unfavorable foreign currency effects. These increases were partially offset by $12.6 million of benefits from ongoing RCI and other cost reduction activities, including benefits from restructuring and cost containment actions, $7.5 million of lower bad debt expense and $2.9 million of lower restructuring costs. As a percentage of sales, operating expenses in 2010 of 34.1% compared to 34.9% in 2009. Operating earnings from Financial Services was $14.4 million on revenue of $62.3 million in 2010, as compared with $17.5 million of operating earnings on revenue of $58.3 million in 2009; the $3.1 million decrease in year-over-year operating earnings from Financial Services included $0.7 million of favorable foreign currency translation effects. Prior to the July 16, 2009 termination of the financial services operating agreement with CIT, SOC sold substantially all new contract originations to CIT and recorded gains on the sale of the contracts as financial services revenue. Since July 16, 2009, Snap-on has been providing financing for the majority of new loans originated by SOC and SOC is recording the interest yield on the new on-book finance portfolio over the life of the contracts as financial services revenue. See Notes 1, 2 and 3 to the Consolidated Financial Statements for further information on SOC. Consolidated operating earnings in 2010 of $331.4 million increased $80.7 million, or 32.2%, from $250.7 million in 2009, including $14.3 million of favorable foreign currency effects. As a percentage of revenues (net sales plus financial services revenue), operating earnings in 2010 improved 200 basis points to 12.4% as compared to 10.4% in 2009. Interest expense of $54.8 million in 2010 increased $7.1 million from 2009 levels primarily due to higher average debt levels and interest rates. See Note 9 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities. Other income (expense) – net was income of $0.8 million in 2010 as compared to income of $2.3 million in 2009. Other income (expense) – net primarily includes interest income as well as hedging and currency exchange rate transaction gains and losses. 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 32.3% in 2010 and 32.0% in 2009. The 2010 effective income tax rate reflects the favorable settlement of certain tax audits. The effective income tax rate in 2009 reflects the favorable resolution of certain tax matters and the impact of increased earnings attributable to noncontrolling interests that are not taxable to Snap-on. See Note 8 to the Consolidated Financial Statements for further information on income taxes. Snap-on acquired the remaining 40% interest in Wanda Snap-on (Zhejiang) Co., Ltd. (“Wanda Snap-on”), the company’s tool manufacturing operation in Xiaoshan, China, on April 6, 2010. Snap-on acquired the initial 60% interest in Wanda Snap-on on March 5, 2008. On July 1, 2010, Wanda Snap-on was renamed Snap-on Asia Manufacturing (Zhejiang) Co., Ltd. (“Xiaoshan”). For segment reporting purposes, the results of operations and assets of Xiaoshan, which have been included in Snap-on’s consolidated financial statements since the March 5, 2008 acquisition date, are included in the Commercial & Industrial Group. The Xiaoshan acquisition is part of the company’s ongoing strategic initiatives to further expand its manufacturing presence in emerging growth markets and lower-cost regions. Pro forma financial information is not presented as the net effects of the Xiaoshan acquisition were not material to Snap-on’s results of operations or financial position. 32 SNAP-ON INCORPORATED


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    | Net earnings attributable to Snap-on were $186.5 million, or $3.19 per diluted share, in 2010 as compared with $134.2 million, or $2.32 per diluted share, in 2009. Exit and Disposal Activities Snap-on recorded costs of $14.2 million for exit and disposal activities in 2010 as compared to $22.0 million of such costs in 2009. See Note 7 to the Consolidated Financial Statements for information on Snap-on’s exit and disposal activities. 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. In the second quarter of 2010, Snap-on realigned its management organization and, as a result, its reportable business segments. As a result of the organizational changes discussed in Note 17 to the accompanying Consolidated Financial Statements, 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, primarily through direct and distributor channels. The Snap-on Tools Group consists of business operations primarily serving automotive service 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, primarily owners and managers of independent repair shops and OEM dealership service and repair shops, through direct and distributor channels. Financial Services consists of the business operations of Snap-on’s wholly-owned 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, pension assets and certain other assets. All significant intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results. Commercial & Industrial Group (Amounts in millions) 2010 2009 Change External net sales $ 891.3 85.0% $ 789.9 88.0% $ 101.4 12.8% Intersegment net sales 156.9 15.0% 107.7 12.0% 49.2 45.7% Segment net sales 1,048.2 100.0% 897.6 100.0% 150.6 16.8% Cost of goods sold (662.7) -63.2% (592.9) -66.1% (69.8) -11.8% Gross profit 385.5 36.8% 304.7 33.9% 80.8 26.5% Operating expenses (268.6) -25.6% (256.5) -28.5% (12.1) -4.7% Segment operating earnings $ 116.9 11.2% $ 48.2 5.4% $ 68.7 142.5% Segment net sales of $1,048.2 million in 2010 increased $150.6 million, or 16.8%, from 2009 levels. Excluding $3.0 million of favorable foreign currency translation, organic sales increased $147.6 million, or 16.4%, reflecting higher sales to customers in critical industries (including natural resources, power generation, oil and gas, aerospace and military) and emerging growth markets, increased sales in the segment’s European-based hand tools business, and higher sales of power and specialty tools. Segment gross profit of $385.5 million in 2010 was up $80.8 million, or 26.5%, from 2009 levels. The $80.8 million gross profit increase is primarily due to higher sales and favorable manufacturing utilization as a result of increased production levels; in 2009, the segment incurred costs to carry excess manufacturing capacity, primarily in Europe, as a result of lower production and inventory reduction efforts. The year-over-year gross profit comparison also benefited from $15.3 million of savings from ongoing RCI and other cost reduction activities, including benefits from restructuring and cost containment actions, $6.3 million of lower restructuring costs and $2.8 million of favorable foreign currency effects. As a result of these factors, gross margin of 36.8% in 2010 improved 290 basis points from 33.9% last year. 2010 ANNUAL REPORT 33


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Operating expenses of $268.6 million in 2010 increased $12.1 million from 2009 levels primarily due to higher volume- related and other expenses and $1.5 million of unfavorable foreign currency effects. These operating expense increases were partially offset by $4.4 million of savings from ongoing restructuring and other cost reduction and cost containment initiatives, and $1.0 million of lower restructuring costs. As a percentage of sales, operating expenses in 2010 improved 290 basis points to 25.6% from 28.5% last year. As a result of these factors, segment operating earnings of $116.9 million in 2010 increased $68.7 million from 2009 levels, including $1.3 million from favorable foreign currency effects. As a percentage of segment net sales, operating earnings for the Commercial & Industrial Group increased 580 basis points from 5.4% in 2009 to 11.2% in 2010. Snap-on Tools Group (Amounts in millions) 2010 2009 Change Segment net sales $ 1,039.9 100.0% $ 940.1 100.0% $ 99.8 10.6% Cost of goods sold (604.3) -58.1% (532.7) -56.7% (71.6) -13.4% Gross profit 435.6 41.9% 407.4 43.3% 28.2 6.9% Operating expenses (321.6) -30.9% (299.2) -31.8% (22.4) -7.5% Segment operating earnings $ 114.0 11.0% $ 108.2 11.5% $ 5.8 5.4% Segment net sales of $1,039.9 million in 2010 increased $99.8 million, or 10.6%, from 2009 levels. Excluding $14.0 million of favorable foreign currency translation, organic sales increased $85.8 million, or 9.0%, year over year, including a 10.4% sales increase in the United States and a 5.3% increase in the company’s international franchise operations. Segment gross profit of $435.6 million in 2010 increased $28.2 million, or 6.9%, from 2009 levels. The $28.2 million gross profit increase is primarily due to higher sales and favorable manufacturing utilization as a result of increased production levels, $15.0 million of favorable foreign currency effects and $1.7 million of savings from ongoing restructuring initiatives. These increases were partially offset by $10.9 million of lower year-over-year LIFO-related inventory valuation benefits ($1.0 million of LIFO-related expense in 2010 and $9.9 million of LIFO-related benefits in 2009) and $4.7 million of higher restructuring costs. The LIFO-related inventory benefits in 2009 resulted from inventory reductions, including as a result of increased liquidations and disposals of slow-moving and excess inventories, as the segment adjusted its production and inventory levels in response to weakened consumer and business demand during the continued global economic downturn. The $4.7 million of higher restructuring costs primarily reflects initial costs for the expected mid-2011 closure of Snap-on’s Newmarket, Canada, tool storage manufacturing facility. Snap-on expects to phase out production at the Newmarket facility and consolidate its North American tool storage manufacturing and distribution operations into its existing tool storage facility in Algona, Iowa. The year-over-year gross profit comparison was also impacted by $2.4 million of lower warranty expense in 2009 due to favorable historic warranty trend rates. As a percentage of sales, gross margin was 41.9% in 2010 as compared to 43.3% last year. Operating expenses of $321.6 million in 2010 increased $22.4 million from 2009 levels primarily due to higher volume- related and other expenses, including higher costs as a result of increased participation at the annual Snap-on Franchisee Conference and higher costs associated with the development of a new and expanded product catalog that was deferred from 2009 into 2010. The year-over-year operating expense increase also includes $3.3 million of unfavorable foreign currency effects and $1.3 million of higher stock-based expense related to the franchisee stock purchase plan. These operating expense increases were partially offset by $1.4 million of savings from ongoing cost reduction and cost containment initiatives, $1.4 million of lower bad debt expense and $0.6 million of lower restructuring costs. As a percentage of sales, operating expenses in 2010 improved 90 basis points to 30.9% from 31.8% last year. As a result of these factors, operating earnings for the Snap-on Tools Group of $114.0 million in 2010 increased $5.8 million from 2009 levels, including $11.7 million from favorable foreign currency effects. As a percentage of segment net sales, operating earnings for the Snap-on Tools Group of 11.0% in 2010 declined 50 basis points from 11.5% in 2009. 34 SNAP-ON INCORPORATED


  • Page 45

    | Repair Systems & Information Group (Amounts in millions) 2010 2009 Change External net sales $ 688.0 81.2% $ 632.5 81.2% $ 55.5 8.8% Intersegment net sales 159.2 18.8% 146.3 18.8% 12.9 8.8% Segment net sales 847.2 100.0% 778.8 100.0% 68.4 8.8% Cost of goods sold (457.2) -54.0% (433.3) -55.6% (23.9) -5.5% Gross profit 390.0 46.0% 345.5 44.4% 44.5 12.9% Operating expenses (225.6) -26.6% (223.4) -28.7% (2.2) -1.0% Segment operating earnings $ 164.4 19.4% $ 122.1 15.7% $ 42.3 34.6% Segment net sales of $847.2 million in 2010 increased $68.4 million, or 8.8%, from 2009 levels. Excluding $2.5 million of unfavorable foreign currency translation, organic sales increased $70.9 million, or 9.1%, year over year primarily due to higher worldwide sales of equipment, increased essential tool and facilitation program activity with automotive OEM dealerships, and higher sales of diagnostics and Mitchell1 information products. These sales increases were partially offset by anticipated lower year-over-year sales of electronic parts catalogs to OEMs and their franchised dealer networks primarily due to the consolidation of North American automotive dealerships in 2009 and 2010. Segment gross profit of $390.0 million in 2010 increased $44.5 million, or 12.9%, from 2009 levels. As a percentage of sales, gross margin improved 160 basis points from 44.4% in 2009 to 46.0% in 2010. The $44.5 million gross profit increase primarily reflects higher sales, $4.6 million of benefits from ongoing RCI, restructuring and other cost reduction and cost containment initiatives, $3.6 million of savings from material cost reductions and $3.1 million of lower restructuring costs. The gross profit comparison also benefited from favorable year-over-year manufacturing utilization as a result of increased production levels. Operating expenses of $225.6 million in 2010 increased $2.2 million from 2009 levels as higher volume-related, product development and other expenses were partially offset by $6.8 million of savings from ongoing RCI, restructuring and other cost reduction and cost containment initiatives, $1.3 million of lower restructuring costs and $0.9 million of favorable foreign currency effects. The operating expense comparison also benefited from $5.4 million of lower year-over-year bad debt expense; in 2009, the segment incurred higher bad debt expense primarily related to increased credit exposure at North American automotive dealerships. As a percentage of sales, operating expenses in 2010 improved 210 basis points to 26.6% from 28.7% last year. As a result of these factors, segment operating earnings of $164.4 million in 2010 increased $42.3 million, or 34.6%, from 2009 levels, including $0.6 million from favorable foreign currency effects. As a percentage of segment net sales, operating earnings for the Repair Systems & Information Group increased 370 basis points from 15.7% in 2009 to 19.4% in 2010. Financial Services (Amounts in millions) 2010 2009 Change Financial services revenue $ 62.3 100.0% $ 58.3 100.0% $ 4.0 6.9% Financial services expenses (47.9) -76.9% (40.8) -70.0% (7.1) -17.4% Segment operating earnings $ 14.4 23.1% $ 17.5 30.0% $ (3.1) -17.7% Segment operating earnings were $14.4 million on $62.3 million of revenue in 2010, as compared with $17.5 million of operating earnings on $58.3 million of revenue in 2009. Originations of $538.2 million in 2010 increased $40.1 million, or 8.1%, from 2009 levels. Since the July 16, 2009 termination of the financial services operating agreement with CIT, Snap-on has been providing financing for the majority of new loans originated by SOC and SOC is recording the interest yield on the new on-book receivables over the life of the contracts as financial services revenue. Prior to July 16, 2009, SOC sold substantially all new contract originations to CIT and recorded gains on the sale of the contracts as financial services revenue. The $3.1 million decrease in year-over-year operating earnings from Financial Services included $0.7 million of favorable foreign currency effects. See Notes 1, 2 and 3 to the Consolidated Financial Statements for further information on SOC. 2010 ANNUAL REPORT 35


  • Page 46

    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Corporate Snap-on’s general corporate expenses of $78.3 million in 2010 increased $33.0 million from $45.3 million in 2009 primarily due to $17.3 million of increased performance-based incentive compensation expense, $16.3 million of higher pension expense, largely due to the amortization of investment losses incurred in 2008 related to the company’s domestic pension plan assets, and $6.2 million of higher stock-based, including mark-to-market, expense. These year-over-year expense increases were partially offset by $8.0 million of savings primarily from ongoing cost containment and other actions. Non-GAAP Supplemental Data The 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’s 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, diagnostics, equipment, 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 from Snap-on Incorporated and cash generated from operations; Financial Services is charged interest expense on intersegment borrowings at market rates. Long-term debt for Operations includes the company’s third party external borrowings, net of intersegment borrowings to Financial Services. Income taxes are charged (credited) 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. 36 SNAP-ON INCORPORATED


  • Page 47

    | Supplemental Consolidating Data – Supplemental Statements of Earnings information for 2010 and 2009 is as follows: Operations* Financial Services (Amounts in millions) 2010 2009 2010 2009 Net sales $ 2,619.2 $ 2,362.5 $ – $ – Cost of goods sold (1,408.1) (1,304.9) – – Gross profit 1,211.1 1,057.6 – – Operating expenses (894.1) (824.4) – – Operating earnings before financial services 317.0 233.2 – – Financial services revenue – – 62.3 58.3 Financial services expenses – – (47.9) (40.8) Operating earnings from financial services – – 14.4 17.5 Operating earnings 317.0 233.2 14.4 17.5 Interest expense (54.4) (47.7) (0.4) – Intersegment interest income (expense) – net 23.9 3.0 (23.9) (3.0) Other income (expense) – net 0.9 3.0 (0.1) (0.7) Earnings (loss) before income taxes and equity earnings 287.4 191.5 (10.0) 13.8 Income tax (expense) benefit (92.2) (60.1) 4.6 (2.6) Earnings (loss) before equity earnings 195.2 131.4 (5.4) 11.2 Financial services – net earnings (loss) attributable to Snap-on Incorporated (5.4) 6.9 – – Equity earnings, net of tax 3.2 1.1 – – Net earnings (loss) 193.0 139.4 (5.4) 11.2 Net earnings attributable to noncontrolling interests (6.5) (5.2) – (4.3) Net earnings (loss) attributable to Snap-on Incorporated $ 186.5 $ 134.2 $ (5.4) $ 6.9 * Snap-on Incorporated with Financial Services on the equity method. 2010 ANNUAL REPORT 37


  • Page 48

    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Supplemental Consolidating Data – Supplemental Balance Sheet information as of 2010 and 2009 year end is as follows: Operations* Financial Services (Amounts in millions) 2010 2009 2010 2009 ASSETS Current assets Cash and cash equivalents $ 462.6 $ 577.1 $ 109.6 $ 122.3 Intersegment receivables 6.7 4.8 – 0.1 Trade and other accounts receivable – net 434.5 411.5 8.8 2.9 Finance receivables – net – – 215.3 122.3 Contract receivables – net 7.9 7.4 37.7 25.5 Inventories – net 329.4 274.7 – – Deferred income tax assets 82.4 69.3 4.6 0.2 Prepaid expenses and other assets 74.1 60.1 0.7 2.8 Total current assets 1,397.6 1,404.9 376.7 276.1 Property and equipment – net 343.0 346.4 1.0 1.4 Investment in Financial Services 134.4 205.6 – – Deferred income tax assets 75.7 73.6 15.8 14.6 Long-term finance receivables – net – – 345.7 177.9 Long-term contract receivables – net 8.4 10.9 110.9 59.8 Goodwill 798.4 814.3 – – Other intangibles – net 192.8 206.2 – – Other assets 72.8 65.2 0.5 1.0 Total assets $ 3,023.1 $ 3,127.1 $ 850.6 $ 530.8 * Snap-on Incorporated with Financial Services on the equity method. 38 SNAP-ON INCORPORATED


  • Page 49

    | Supplemental Consolidating Data – Balance Sheet Information (continued): Operations* Financial Services (Amounts in millions) 2010 2009 2010 2009 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Notes payable and current maturities of long-term debt $ 216.0 $ 164.7 $ – $ – Accounts payable 129.6 119.3 16.5 0.5 Intersegment payables – 4.2 6.7 0.7 Accrued benefits 45.0 48.4 – 0.3 Accrued compensation 83.4 61.6 3.3 3.2 Franchisee deposits 40.4 40.5 – – Other accrued liabilities 218.1 215.7 132.0 85.7 Total current liabilities 732.5 654.4 158.5 90.4 Long-term debt and intersegment long-term debt 418.8 674.8 536.0 227.3 Deferred income tax liabilities 94.3 97.8 0.1 – Retiree health care benefits 59.6 60.7 – – Pension liabilities 246.1 255.9 – – Other long-term liabilities 67.4 77.9 21.6 7.5 Total liabilities 1,618.7 1,821.5 716.2 325.2 Total shareholders’ equity attributable to Snap-on Inc. 1,388.5 1,290.0 134.4 205.6 Noncontrolling interests 15.9 15.6 – – Total shareholders’ equity 1,404.4 1,305.6 134.4 205.6 Total liabilities and shareholders’ equity $ 3,023.1 $ 3,127.1 $ 850.6 $ 530.8 * Snap-on Incorporated with Financial Services on the equity method. 2010 ANNUAL REPORT 39


  • Page 50

    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Fourth Quarter Results of operations for the fourth quarters of 2010 and 2009 are as follows: Fourth Quarter (Amounts in millions) 2010 2009 Change Net sales $ 696.9 100.0% $ 618.1 100.0% $ 78.8 12.7% Cost of goods sold (378.4) -54.3% (333.7) -54.0% (44.7) -13.4% Gross profit 318.5 45.7% 284.4 46.0% 34.1 12.0% Operating expenses (231.0) -33.1% (213.2) -34.5% (17.8) -8.3% Operating earnings before financial services 87.5 12.6% 71.2 11.5% 16.3 22.9% Financial services revenue 21.5 100.0% 6.7 100.0% 14.8 NM Financial services expenses (12.1) -56.3% (10.5) -156.7% (1.6) -15.2% Operating earnings (loss) from financial services 9.4 43.7% (3.8) -56.7% 13.2 NM Operating earnings 96.9 13.5% 67.4 10.8% 29.5 43.8% Interest expense (14.1) -2.0% (14.7) -2.4% 0.6 4.1% Other income (expense) – net 0.6 0.1% 1.3 0.2% (0.7) -53.8% Earnings before income taxes and equity earnings 83.4 11.6% 54.0 8.6% 29.4 54.4% Income tax expense (24.5) -3.4% (16.5) -2.6% (8.0) -48.5% Earnings before equity earnings 58.9 8.2% 37.5 6.0% 21.4 57.1% Equity earnings, net of tax 0.9 0.1% 0.6 0.1% 0.3 50.0% Net earnings 59.8 8.3% 38.1 6.1% 21.7 57.0% Net earnings attributable to noncontrolling interests (1.9) -0.2% (1.5) -0.2% (0.4) -26.7% Net earnings attributable to Snap-on Inc. $ 57.9 8.1% $ 36.6 5.9% $ 21.3 58.2% 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 in the fourth quarter of 2010 of $696.9 million were up $78.8 million, or 12.7%, from 2009 levels; excluding $4.5 million of unfavorable foreign currency translation, organic sales in the quarter increased $83.3 million, or 13.6%, from 2009 levels. Snap-on has significant international operations and is subject to certain risks inherent with foreign operations, including foreign currency translation fluctuations. Gross profit in the fourth quarter of 2010 was $318.5 million as compared to $284.4 million in 2009. The $34.1 million gross profit increase is primarily due to higher sales, favorable manufacturing utilization as a result of increased production levels and $3.6 million of savings from ongoing RCI and other cost reduction activities, including benefits from restructuring actions. These gross profit increases were partially offset by $6.5 million of lower year-over-year LIFO- related inventory valuation benefits ($0.2 million of LIFO-related benefits in 2010 and $6.7 million of LIFO-related benefits in 2009) and $1.4 million of unfavorable foreign currency effects. The higher LIFO-related inventory benefits in 2009 resulted from inventory reductions, including as a result of increased liquidations and disposals of slow-moving and excess inventories, as the company adjusted its production and inventory levels in response to weakened consumer and business demand during the continued global economic downturn. In the fourth quarter of 2010, restructuring costs included in gross profit totaled $4.4 million as compared to $5.2 million last year. As a percentage of sales, gross margin of 45.7% in the fourth quarter of 2010 compared to 46.0% in 2009. 40 SNAP-ON INCORPORATED

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