avatar Snap-On Incorporated Manufacturing
  • Location: Wisconsin 
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    ROOTED IN THE DIGNITY OF WORK DRIVEN BY THE NEEDS OF THE SERIOUS GUIDED WITH THE INSIGHT SHAPED BY EXPERIENCE 2017 ANNUAL REPORT


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    Net sales in $ billions NET SALES 2013 $3.06 2014 2015 $3.28 $3.35 ROOTED 2016 $3.43 IN THE DIGNITY OF WORK 2017 $3.69 2013 $5.93 DRIVEN DILUTED SHARE EARNINGS PER 2014 $7.14 2015 $8.10 2016 $9.20 BY THE NEEDS 2017 $9.52 $10.12* OF THE SERIOUS *As adjusted. See “Reconciliation of Non-GAAP Financial Measures” on page 8 for a definition of and further explanation about, earnings per diluted share, as adjusted, to exclude certain legal and tax charges. DIVIDENDS PER SHARE Since 1939, paid without interruption or reduction 2013 2014 $1.58 $1.85 GUIDED 2015 WITH THE INSIGHT $2.20 2016 $2.54 SHAPED BY EXPERIENCE 2017 $2.95 O P E R AT I N G S E G M E N T S 2017 Revenues by Segment 36% Snap-on 6% Tools Group Financial Services 30% 28% Repair Systems & Commercial & Information Group Industrial Group


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    Snap-on makes work easier for serious professionals performing critical tasks of consequence around the world, providing a broad array of unique productivity solutions. Snap-on facts Founded in 1920 Serves Professionals in over 130 Countries 12,600 Associates S&P 500 Company 2017 Net Sales of $3.7 Billion NYSE: SNA


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    TO OUR SNAP-ON SHAREHOLDERS Snap-on is rooted in the dignity of work. From our founding 98 years ago, we have been dedicated to this timeless principle. We celebrate the work and we celebrate our customers, the makers and the fixers, who perform day in and day out to move the world forward. This strong connection is reflected in working men and women Furthermore, through our Snap-on Value Creation proudly displaying the Snap-on logo as a badge of their Processes, we remain committed to improvement in the professionalism, calling our name their own. Snap-on is driven by areas of safety, quality, customer connection, innovation the needs of the serious. Our customers are serious professionals and rapid continuous improvement (RCI). The ongoing and their work entails tasks of consequence, often in harsh and potential of these runways for improvement continued to punishing conditions, where the cost of failure is high. Snap-on manifest itself in a variety of ways in 2017. For example, strives to provide them with the repeatability and reliability they Snap-on again was honored to receive product awards from need to get the job done. Finally, Snap-on is guided with the both MOTOR Magazine and Professional Tool & Equipment News, insight shaped by experience. We call on our customers where reflecting our ability to translate our deep understanding of they perform their work. This presence, coupled with a broad professionals’ work into winning innovations. and rich repository of data and knowledge gained from years of Our RCI framework is a structured set of tools and processes used experience, has enabled us to develop a deep understanding across the corporation to eliminate waste and improve operations. of the challenges raised in the workplaces of today. We use this Since its establishment at Snap-on in 2005, RCI has enabled us understanding to equip our customers with unique productivity to deliver a significant improvement in operating margin before solutions to successfully complete their tasks. financial services. Our work on this front, however, is never done. Since the 1920 invention of the original Snap-on interchangeable For example, while acquisitions made over the last several years socket set, our principle value-creating mechanism has been to have no doubt expanded our capabilities in providing solutions that observe work, translate insights gained and create solutions to address the critical tasks in professional workplaces, they have also make tasks easier. Opportunities to leverage this approach, both served to attenuate operating margins in the near term, including within and beyond vehicle repair, are embodied in our runways for by 50 basis points in 2017. These acquisitions are fertile ground growth: enhance the franchise network, expand with repair shop not only for the cultivation of RCI, but for the whole of our Snap-on owners and managers, extend in critical industries and build in Value Creation Processes. emerging markets. In 2017, we continued to invest and make progress in each of these strategically decisive areas. 2


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    Snap-on associates (from left to right) Nick Drummer (Snap-on Corporate), New complexities, including aluminum and multi‑ Michael Bond (Snap-on Industrial), Brittany Beaumier (Snap-on Tools metal vehicles, along with the advanced electronics Group), Chairman and Chief Executive Officer Nick Pinchuk, and Francesco of lane departure, collision avoidance and other Frezza (Snap-on Equipment) discuss a variety of the unique productivity systems, increase the criticality of collision repair. solutions which enable vehicle repair shops and technicians to effectively Car-O-Liner, a 2016 acquisition, offers complete solutions for collision repair address the challenges that come with increasing and changing vehicle facilities to effectively address trends in the collision repair arena, including technologies and complexity. the need for greater precision in complex systems, requirements in accommodating new materials and higher emphasis on shop efficiency. 3


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    Increasing and changing vehicle technolog y torque wrench on a wider array of vehicles and applications. With more SUVs generates the need for new tools, even w ithin and pick-ups on the road, technicians encounter increased instances of torque categories that have been in existence for requirements above 250 ft. lbs. (4) As some vehicles become smaller and lighter, decades. (1) The extra-long flex head ratchet utilizes length to get access is often sacrificed. Our 3/8" cordless long neck ratchet addresses into compact locations and provides extra leverage for stubborn fasteners. these access challenges, where until now only a hand ratchet could be used. (2) The 3/8" drive 17mm sensor socket is designed to efficiently remove (5) The extended reach needle nose pliers provide much needed access in today’s EPA-required particulate matter sensors, exhaust gas temperature sensors compact engine compartments. and nitrogen oxide sensors on all 2007 and newer vehicles. (3) With an expanded range of 15-300 ft. lbs., technicians can use this ½" drive electronic 2 1 3 4 5 T he John Bean® B600 high performance wheel ba lancing system (1) is designed for high volume shops. Its intuitive user interface and ergonomic touchscreen reduce complexity and offer short cycle times, contributing to better throughput and shop performance. T he Polar tek ® Series air conditioning ser vice eq uipment line (2) recently launched by Ecotechnics, a 2015 acquisition, provides solutions that can service all current vehicle refrigerant requirements. 1 2 4


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    We were encouraged that our results for 2017 reflected our ability relatively newer areas remain compelling. As such, we’re committed to leverage both our runways for growth and improvement, and to strengthening our position in this arena, as evidenced by a once again demonstrated our ability to make work easier for continuing array of new product introductions aimed at solving serious professionals performing critical tasks around the world. the critical tasks faced by professionals in industries like aviation Net sales of $3,686.9 million increased 7.5%, reflecting a $115.0 and aerospace, oil and gas, mining, power generation and million, or 3.4%, organic sales gain (a non-GAAP financial the military. measure that excludes acquisition-related sales and the impact In the fourth quarter, our European-based hand tools business of foreign currency translation) and $141.5 million of acquisition- realized its 17th consecutive quarter of sales growth. One of the related sales. Conditions in our industrial end markets improved many ways this business has been successfully capturing more over 2016 and we saw continued strength in automotive repair, customers is through the Bahco® ERGO™ Tool Management System, as evidenced by strong sales in our businesses that serve repair a suite of customized tool storage solutions which, through shop owners and managers. These strengths were tempered customer connection with end users, are configured from a somewhat by lower sales in our mobile tool distribution business broad line of options and matched to a customer’s particular serving primarily vehicle repair technicians. specifications. We continued to expand our capabilities in our With respect to profitability, our commitment to operating Asia/Pacific operations with the launch of our new RED BOX PLUS improvement through our Snap-on Value Creation processes diagnostics platform. Produced for the Asian market, this latest enabled us to overcome certain legal and tax charges and deliver diagnostic tool includes features that aid repairs on vehicles reported diluted earnings per share of $9.52, up 3.5% year over prominent in China. year. Excluding these charges, diluted earnings per share, as In May 2017, we acquired Norbar Torque Tools (“Norbar”), a leading adjusted, was $10.12, up 10.0%. Operating margin before European manufacturer of a full range of torque products, including financial services of 18.0%, including 130 basis points of negative wrenches, multipliers and calibrators, and which has a strong impact from the legal and tax charges, declined 110 basis points presence in critical industries, including power generation, oil and from 2016. Excluding these charges, operating margin before gas, mining and railroad. The acquisition of Norbar complements financial services, as adjusted, of 19.3% improved 20 basis and expands Snap-on’s existing torque offering to critical industries, points year over year. (See page 8 for a definition of, and further particularly in higher capacity torque products. explanation about, these non-GAAP financial measures that are adjusted to exclude certain legal and tax charges.) In the Snap-on Tools Group, our franchised mobile van network primarily serving vehicle repair technicians, segment net sales In our Commercial & Industrial Group (C&I), we serve a broad of $1,625.1 million decreased 0.5%, reflecting a $6.9 million, or range of industrial and commercial customers, including 0.4%, organic sales decline and $1.9 million of unfavorable foreign professionals in critical industries and emerging markets, currency translation. The organic sales decrease includes lower primarily through direct and distributor channels. Segment net sales in our U.S. franchise operation, partially offset by gains sales of $1,265.0 million increased 10.2%, reflecting a $52.0 in our international franchise operations. Operating margin of million, or 4.5%, organic sales gain and $65.5 million of 16.9% compared to 17.2% in 2016, including 40 basis points acquisition-related sales, partially offset by $0.8 million of of unfavorable foreign currency effects. unfavorable foreign currency translation. The organic sales increase included higher sales to customers in critical industries We do not believe the 2017 results for the Snap-on Tools Group and in our European-based hand tools business, partially offset necessarily indicate a softening marketplace. In fact, based on what by lower sales in the power tools operation. Operating margin of we hear from our franchisees and customers, as well as market data, 14.6% was consistent with the prior year. we believe vehicle repair remains a favorable place to operate and that Snap-on is well-positioned to benefit in the long run from the The operating environment for C&I, which has our greatest market opportunities. Furthermore, our franchisees’ confidence in international presence and includes businesses that serve critical their businesses is evident in our franchisee metrics. These financial industries, meaningfully improved in 2017 when compared to and physical indicators remain favorable and robust with franchisee 2016. High single-digit organic growth in sales to customers in turnover at historically low levels. We believe the 2017 results reflect critical industries was broad-based across our end markets and a number of company-specific headwinds including lower tool we believe the long-term opportunities to further penetrate these 5


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    storage sales. Efforts underway to reinvigorate sales growth products for diagnostics, complex repair, parts catalogs and include enhancing the product line and refreshing our fleet shop management, RS&I is making work easier in repair shops of Rock N’ Roll Cab Express™ vans which serve as sales across the industry. demonstration vehicles for the tool storage product line. Two new diagnostics platforms introduced in 2017 illustrate RS&I’s We continue to introduce initiatives aimed at helping our franchisees advantages in this regard. The new ETHOS® Edge is a full-function be more successful. In 2017, we introduced a 20' model for the scan tool designed to meet the needs of technicians who are standard program van, replacing the 16' model. This new van is performing more routine maintenance tasks and light repairs which configured to increase and optimize the product display area, increasingly require the use of a diagnostic tool for completion. and is designed with enhanced space to allow for dual transaction Providing coverage for 100 vehicle systems such as tire pressure points by two different people, as more of our franchisees have monitoring, hybrid power, and collision avoidance, the ETHOS Edge elected to hire assistants. The new van also has an additional helps technicians get jobs done faster and more accurately. Later passenger seat for the added safety and convenience of franchise in 2017, we also launched the Zeus™ Diagnostic and Information field team staff riding with our franchisees. System as the new flagship platform of our diagnostic line-up. The first platform to feature Snap-on® Intelligent Diagnostics software, In 2017, we again received external recognition that a Snap-on Tools Zeus provides all the functions and repair tips a technician needs to franchise provides significant opportunities for entrepreneurs to diagnose, repair and manage any issue. Unlike any platform before, build a successful and sustainable business. Entrepreneur Magazine it practically anticipates the next move by guiding the technician ranked Snap-on 13th in its “America’s Top Global” listing of 200 through the best path of repair, saving substantial time. franchises with global presence. In addition, Snap-on reached #2 among all franchises evaluated in the same publication’s Financial Services operating earnings of $217.5 million on revenue “Top Franchises for Veterans.” Snap-on was also inducted into the of $313.4 million compared to operating earnings of $198.7 million Franchise Business Review Hall of Fame. The exclusive membership, on revenue of $281.4 million a year ago. Originations of $1,072.0 totaling only 31 franchisors, consists of companies that have million declined slightly, reflecting lower sales growth in the appeared in Franchise Business Review’s annual list of top Snap-on Tools Group. Financial Services expenses were higher in franchises, based on franchisee satisfaction, for at least 10 years. 2017 primarily due to increases in both the provisions for credit losses and in the size of the portfolio. Aimed at supporting essential In the Repair Systems & Information Group (RS&I), which serves big ticket purchases by technicians and shops as well as enabling owners and managers of independent and OEM dealership service our franchisees’ investments in their businesses, our Financial and repair shops, segment net sales of $1,347.2 million increased Services operation, with a strong connection to the Snap-on Tools 14.2%, reflecting an $89.6 million, or 7.6%, organic sales gain, Group, has a decades-long track record of providing financing to $76.0 million of acquisition-related sales and $1.7 million of these particular constituencies in a variety of economic environments. favorable foreign currency translation. The organic increase reflects gains in sales to OEM dealerships and of undercar equipment, In August 2017, our Board of Directors authorized a new share as well as higher sales of diagnostics and repair information repurchase program for up to $500 million of common stock. During products to independent repair shop owners and managers. 2017 we repurchased 1.82 million shares for $287.9 million. Operating margin of 24.8%, including 100 basis points of negative As of 2017 year end, total share repurchase availability under all impact from acquisitions, compared to 25.2% in 2016. authorizations stood at approximately $390.7 million. In November 2017, our Board of Directors raised Snap-on’s quarterly cash Sales growth across RS&I in 2017 demonstrates the Group’s broad dividend 15.5% to $0.82 per share. This is the eighth consecutive and deep capabilities in helping shop owners and managers year with a dividend increase. Snap-on has paid consecutive enhance not only their technical competency in vehicle repair, quarterly cash dividends, without interruption or reduction, since but also their business acumen in operating repair facilities. 1939. These share repurchase and dividend actions reinforce Strength in both areas is increasingly important for our customers, our commitment to create long-term value for our shareholders. in light of rising vehicle complexity and changing technologies At the same time, our priorities for capital allocation remain to coupled with an increasing focus on facility profitability and strategically invest, both organically and through acquisitions, efficiency in the vehicle repair industry. From equipment for wheel, along our defined runways for growth and improvement. brake, air conditioning and collision service to information-based 6


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    Snap-on’s value proposition is to make work easier for serious professionals performing tasks of consequence where the costs of failure are high. We believe vehicle repair, where we began and which still today is our largest end market, exhibits characteristics that are quite conducive to this value proposition. Vehicle repair technicians and repair shop owners and managers are faced with ever-increasing vehicle complexity and changing vehicle technologies. There’s a great deal of speculation today about what 3 the future holds for the structure of the vehicle repair market and where new and emerging vehicle technologies will take it. While it’s impossible to know exactly what will happen in the future, we believe Snap-on, as has been the case over the course of our history, is uniquely positioned to take advantage of the opportunities future change will 1 2 bring. Our strong relationships with OEMs gives us visibility into the trajectory of vehicle technology. At the same time, our strong presence in OEM dealership service centers and aftermarket repair shops allows us to observe our customers’ challenges first-hand. The result is that we take the insights gained from these linkages to provide the unique productivity solutions our customers require to perform their work. While the nature of those tasks can and do change over time, we believe the need for Snap-on as a trusted partner in solving the critical will only expand. In 2018, we expect to make continued progress along our runways for improvement, the Snap-on Value Creation Processes and, at the same time, advance further along each of our runways for growth: enhance the franchise Technicians and repair facilities face network, expand with repair shop owners and managers, ever-increasing vehicle technolog y and extend in critical industries and build in emerging markets. complexit y, including a growing num ber of Rooted in the dignity of work, driven by the needs of the serious, vehicle systems a n d a n i n cr ea si ng n eed for and guided by the insight shaped from experience, Snap-on d i a g n os t i c platforms in completing repairs. remains uniquely positioned in the world of work. I thank Snap-on’s comprehensive line of diagnostic platforms help technicians our franchisees and associates around the world for their and shops navigate this landscape and repair vehicles more quickly and contributions and dedication, our Board of Directors for their accurately. The new ETHOS® Edge (1) is a full-function scan tool designed support and counsel, and our customers and shareholders to meet the needs of technicians performing more routine maintenance for their confidence and commitment. tasks and light repairs. The Zeus™ Diagnostic and Information System (2), the new flagship platform of our diagnostic line-up, is the first unit to feature Snap-on® Intelligent Diagnostics software, providing all the functions and repair tips a technician needs to diagnose, repair and manage any issue; it’s the most sophisticated, most intuitive repair tool Nicholas T. Pinchuk we’ve ever created. Our powerful software (3) is updated regularly to not Chairman and Chief Executive Officer only ensure the availability of the latest information for taking on the toughest jobs, but to provide the most comprehensive diagnostic coverage available, supporting 49 vehicle makes. 7 7


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    WHO WE ARE: OUR MISSION The most BELIEFS VA LU E S VISION valued We deeply believe in: Our behaviors To be acknowledged as the: define our success: productivity Non-negotiable Product Brands of Choice and Workplace Safety We demonstrate Integrity. solutions in Employer of Choice Uncompromising Quality We tell the Truth. the world Franchisor of Choice Passionate Customer Care We respect the Individual. Business Partner of Choice Fearless Innovation We promote Teamwork. Investment of Choice Rapid Continuous Improvement We Listen. S NA P - O N VA LU E C R E AT I O N Principles and Founded on our mission and beliefs, these are strategic processes we use daily to create value processes we across Snap-on, with the strategic partners we embrace and in the acquisitions we make. apply to SAFETY / QUALITY / CUSTOMER CONNECTION / create value I N N O VA T I O N / R A P I D C O N T I N U O U S I M P R O V E M E N T R E C O N C I L I AT I O N O F N O N - G A A P F I NA N C I A L M E A S U R E S (Amounts in millions, except per share data) AS REPORTED 2017 2016 ADJUSTED INFORMATION – NON-GAAP 2017 2016 Charges related to judgments in litigation 1) Operating earnings before financial services matters that are being appealed (“legal charges”) As reported $664.0 $655.5 Pre-tax legal charges $45.9 $ — Legal charges 45.9 — Income tax expense (17.5) — As adjusted to exclude legal charges $709.9 $655.5 Legal charges, net of tax $28.4 $ — Operating earnings before financial services Charge related to implementation of US as a percentage of sales tax legislation (“tax charge”) As reported 18.0% 19.1% Tax charge $7.0 $ — As adjusted to exclude legal charges 19.3% 19.1% Weighted-average shares outstanding – diluted 58.6 59.4 2) Net earnings attributable to Snap-on Incorporated As reported $557.7 $546.4 Diluted EPS – legal charges $0.48 $ — Legal charges, after tax 28.4 — Diluted EPS – tax charge $0.12 $ — Tax charge 7.0 — As adjusted to exclude legal charges and tax charge $593.1 $546.4 3) Diluted EPS For 2017, the company is including operating earnings before financial services, net earnings, and diluted earnings per share, all as adjusted. The adjustments exclude the impact of pre-tax $45.9 million of charges As reported $9.52 $9.20 ($28.4 million after-tax) related to judgments in litigation matters that are being appealed. The company is also including net earnings and diluted earnings per share, all as adjusted to exclude the impact of a Legal charges, after tax 0.48 — $7.0 million charge related to the implementation of tax legislation. Management believes that these are Tax charge 0.12 — unusual events and therefore the non-GAAP financial measures provide more meaningful year-over-year comparisons of the company’s 2017 operating performance. As adjusted to exclude legal charges and tax charge $10.12 $9.20 8


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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 December 30, 2017, or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-7724 (Exact name of registrant as specified in its charter) Delaware 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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in a definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of voting and non-voting common equity held by non-affiliates (excludes 564,907 shares held by directors and executive officers) computed by reference to the price ($158.00) at which common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter (July 1, 2017) was $9.0 billion. The number of shares of Common Stock ($1.00 par value) of the registrant outstanding as of February 9, 2018, was 56,721,048 shares. DOCUMENTS INCORPORATED BY REFERENCE Part III of this Annual Report on Form 10-K incorporates by reference certain information that will be set forth in Snap-on’s Proxy Statement, which is expected to first be mailed to shareholders on or about March 9, 2018, prepared for the Annual Meeting of Shareholders scheduled for April 26, 2018.


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    TABLE OF CONTENTS Page PART I Item 1 Business ................................................................................................................................4 Item 1A Risk Factors ........................................................................................................................12 Item 1B Unresolved Staff Comments ...............................................................................................20 Item 2 Properties ............................................................................................................................20 Item 3 Legal Proceedings...............................................................................................................22 Item 4 Mine Safety Disclosures ......................................................................................................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 ......................................................................................................26 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations .........................................................................................................27 Item 7A Quantitative and Qualitative Disclosures About Market Risk ..............................................57 Item 8 Financial Statements and Supplementary Data..................................................................59 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...........................................................................................................59 Item 9A Controls and Procedures ....................................................................................................59 Item 9B Other Information ................................................................................................................61 PART III Item 10 Directors, Executive Officers and Corporate Governance ..................................................61 Item 11 Executive Compensation ....................................................................................................62 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............................................................................................62 Item 13 Certain Relationships and Related Transactions, and Director Independence ..................63 Item 14 Principal Accounting Fees and Services .............................................................................63 PART IV Item 15 Exhibits, Financial Statement Schedules ............................................................................63 Item 16 Form 10-K Summary ...........................................................................................................66 Signatures ...................................................................................................................................................118 Computation of Ratio of Earnings to Fixed Charges ...................................................................................120 Consent of Independent Registered Public Accounting Firm .....................................................................121 Certifications ................................................................................................................................................122 2 SNAP-ON INCORPORATED


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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 value through its Snap-on Value Creation Processes, including its ability to realize efficiencies and savings from its rapid continuous improvement and other cost reduction initiatives, improve workforce productivity, achieve improvements in the company’s manufacturing footprint and greater efficiencies in its supply chain, and enhance machine maintenance, plant productivity and manufacturing line set- up and change-over practices, any or all of which could result in production inefficiencies, higher costs and/or lost revenues. These risks also include uncertainties related to Snap-on’s capability to implement future strategies with respect to its existing businesses, its ability to refine its brand and franchise strategies, retain and attract franchisees, further enhance service and value to franchisees and thereby help improve their sales and profitability, introduce successful new products, successfully pursue, complete and integrate acquisitions, as well as its ability to withstand disruption arising from natural disasters (such as the recent hurricanes in the southern United States and the Caribbean), planned facility closures or other labor interruptions, the effects of external negative factors, including adverse developments in world financial markets, weakness in certain areas of the global economy (including as a result of the United Kingdom’s pending exit from the European Union), and significant changes in the current competitive environment, inflation, interest rates and other monetary and market fluctuations, changes in tax rates, laws and regulations as well as uncertainty surrounding potential changes, and the impact of energy and raw material supply and pricing, including steel and gasoline, the amount, rate and growth of Snap-on’s general and administrative expenses, including health care and postretirement costs (resulting from, among other matters, U.S. health care legislation and its ongoing implementation or potential reform), continuing and potentially increasing required contributions to pension and postretirement plans, the impacts of non-strategic business and/or product line rationalizations, and the effects on business as a result of new legislation, regulations or government- related developments or issues, risks associated with data security and technological systems and protections, potential reputational damages and costs related to litigation as well as an inability to assure that costs will be reduced or eliminated on appeal, and other world or local events outside Snap-on’s control, including terrorist disruptions. Snap-on disclaims any responsibility to update any forward-looking statement provided in this document, except as required by law. In addition, investors should be aware that generally accepted accounting principles in the United States of America (“GAAP”) prescribe when a company should reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results, therefore, may appear to be volatile in certain accounting periods. Fiscal Year Snap-on’s fiscal year ends on the Saturday that is on or nearest to December 31. Unless otherwise indicated, references in this document to “fiscal 2017” or “2017” refer to the fiscal year ended December 30, 2017; references to “fiscal 2016” or “2016” refer to the fiscal year ended December 31, 2016; and references to “fiscal 2015” or “2015” refer to the fiscal year ended January 2, 2016. Snap-on’s 2017, 2016 and 2015 fiscal years each contained 52 weeks of operating results. References in this document to 2017, 2016 and 2015 year end refer to December 30, 2017, December 31, 2016, and January 2, 2016, respectively. 2017 ANNUAL REPORT 3


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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 for customers in industries, such as aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs designed to facilitate the sales of its products and support its franchise business. Snap-on markets its products and brands worldwide through multiple sales distribution channels in more than 130 countries. Snap-on’s largest geographic markets include the United States, Europe, Canada and Asia/Pacific. Snap-on reaches its customers through the company’s franchisee, company-direct, distributor and internet channels. Snap-on originated the mobile tool distribution channel in the automotive repair market. The company began with the development of the original Snap-on interchangeable socket set in 1920 and subsequently pioneered mobile tool distribution in the automotive repair market, where fully stocked vans sell to professional vehicle technicians at their place of business. Today, Snap-on defines its value proposition more broadly, extending its reach “beyond the garage” to deliver a broad array of unique solutions that make work easier for serious professionals performing critical tasks. The company’s “coherent growth” strategy focuses on developing and expanding its professional customer base in its legacy automotive market, as well as in adjacent markets, additional geographies and other areas, including in critical industries, where the cost and penalties for failure can be high. In addition to its coherent growth strategy, Snap-on is committed to its “Value Creation Processes” – a set of strategic principles and processes designed to create value and employed in the areas of (i) safety; (ii) quality; (iii) customer connection; (iv) innovation; and (v) rapid continuous improvement (“RCI”). Snap-on’s RCI initiatives employ a structured set of tools and processes across multiple businesses and geographies intended to eliminate waste and improve operations. Savings from Snap-on’s RCI initiatives reflect benefits from a wide variety of ongoing efficiency, productivity and process improvements, including savings generated from product design cost reductions, improved manufacturing line set-up and change-over practices, lower-cost sourcing initiatives and facility consolidations. Snap-on’s primary customer segments include: (i) commercial and industrial customers, including professionals in critical industries and emerging markets; (ii) professional vehicle repair technicians who purchase products through the company’s mobile tool distribution network; and (iii) other professional customers related to vehicle repair, including owners and managers of independent and original equipment manufacturer (“OEM”) dealership service and repair shops (“OEM dealerships”). Snap-on’s Financial Services customer segment includes: (i) franchisees’ customers, principally serving vehicle repair technicians, and Snap-on customers who require financing for the purchase or lease of tools and diagnostics and equipment products on an extended-term payment plan; and (ii) franchisees who require financing for vehicle leases and business loans. Snap-on’s business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. Snap-on’s reportable business segments are: (i) the Commercial & Industrial Group; (ii) the Snap-on Tools Group; (iii) the Repair Systems & Information Group; and (iv) Financial Services. The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels. The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships, through direct and distributor channels. Financial Services consists of the business operations of Snap-on Credit LLC (“SOC”), the company’s financial services business in the United States, and Snap-on’s other financial services subsidiaries in those international markets where Snap-on has franchise operations. See Note 18 to the Consolidated Financial Statements for information on business segments and foreign operations. 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 and certain other assets. All significant intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results. Recent Acquisitions On July 28, 2017, Snap-on acquired Torque Control Specialists Pty Ltd (“TCS”) for a cash purchase price of $3.6 million (or $3.5 million, net of cash acquired). TCS, based in Adelaide, Australia, distributes a full range of torque products, including wrenches, multipliers and calibrators, for use in critical industries. The acquisition of TCS enhanced and expanded Snap-on’s capabilities in providing solutions that address torque requirements, which are increasingly essential to critical mechanical performance. For segment reporting purposes, the results of operations and assets of TCS have been included in the Commercial & Industrial Group since the acquisition date. On May 4, 2017, Snap-on acquired Norbar Torque Tools Holdings Limited, along with its U.S. and Chinese joint ventures (“Norbar”), for a cash purchase price of $71.6 million (or $69.9 million, net of cash acquired). Norbar, based in Banbury, U.K., designs and manufactures a full range of torque products, including wrenches, multipliers and calibrators, for use in critical industries. The acquisition of Norbar enhanced and expanded Snap-on’s capabilities in providing solutions that address torque requirements. For segment reporting purposes, the results of operations and assets of Norbar have been included in the Commercial & Industrial Group since the acquisition date. On January 30, 2017, Snap-on acquired BTC Global Limited (“BTC”) for a cash purchase price of $9.2 million. BTC, based in Crewe, U.K., designs and implements automotive vehicle inspection and management software for OEM franchise repair shops. The acquisition of BTC enhanced Snap-on’s capabilities to grow enterprise revenues and add increased productivity for repair workshops. For segment reporting purposes, the results of operations and assets of BTC have been included in the Repair Systems & Information Group since the acquisition date. On November 16, 2016, Snap-on acquired Ryeson Corporation (d/b/a Sturtevant Richmont) for a cash purchase price of $13.0 million (or $12.6 million, net of cash acquired). Sturtevant Richmont, based in Carol Stream, Illinois, designs, manufactures and distributes mechanical and electronic torque wrenches as well as wireless torque error proofing systems for a variety of industrial applications. The acquisition of Sturtevant Richmont enhanced and expanded Snap-on’s capabilities in providing solutions that address torque requirements. For segment reporting purposes, the results of operations and assets of Sturtevant Richmont have been included in the Commercial & Industrial Group since the acquisition date. On October 31, 2016, Snap-on acquired Car-O-Liner Holding AB (“Car-O-Liner”) for a cash purchase price of $152.0 million (or $148.1 million, net of cash acquired). Car-O-Liner, based in Gothenburg, Sweden, designs and manufactures collision repair equipment, and information and truck alignment systems. The acquisition of Car-O-Liner complemented and increased Snap-on’s existing equipment and repair and service information product offerings, broadened its established capabilities in serving vehicle repair facilities and further expanded the company’s presence with repair shop owners and managers. For segment reporting purposes, substantially all of Car-O-Liner’s results of operations and assets have been included in the Repair Systems & Information Group since the acquisition date, with the remaining portions included in the Commercial & Industrial Group. On July 27, 2015, Snap-on acquired the assets of Ecotechnics S.p.A. (“Ecotechnics”) for a cash purchase price of $11.8 million. Ecotechnics, based in Sesto Fiorentino, Italy, designs and manufactures vehicle air conditioning service equipment for OEM dealerships and the automotive aftermarket worldwide. The acquisition of the Ecotechnics product line complemented and increased Snap-on’s existing equipment product offering for OEM dealerships and independent automotive repair shops, broadened its established capabilities in serving vehicle repair facilities, and expanded the company’s presence with repair shop owners and managers. For segment reporting purposes, the results of operations and assets of Ecotechnics have been included in the Repair Systems & Information Group since the acquisition date. Pro forma financial information has not been presented for any of these acquisitions as the net effects, individually and collectively, were neither significant nor material to Snap-on’s results of operations or financial position. 2017 ANNUAL REPORT 5


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    Information Available on the Company’s Website Additional information regarding Snap-on and its products is available on the company’s website at www.snapon.com. Snap-on is not including the information contained on its website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. Snap-on’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statements on Schedule 14A and Current Reports on Form 8-K, as well as any amendments to those reports, are made available to the public at no charge, other than an investor’s own internet access charges, through the Investors section of the company’s website at www.snapon.com. Snap-on makes such material available on its website as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the Securities and Exchange Commission (“SEC”). Copies of any materials the company files with the SEC can also be obtained free of charge through the SEC’s website at www.sec.gov. The SEC’s Public Reference Room can be contacted at 100 F Street, N.E., Washington, D.C. 20549, or by calling 1-800-732-0330. In addition, Snap-on’s (i) charters for the Audit, Corporate Governance and Nominating, and Organization and Executive Compensation Committees of the company’s Board of Directors; (ii) Corporate Governance Guidelines; and (iii) Code of Business Conduct and Ethics are available on the company’s website. Snap-on will also post any amendments to these documents, or information about any waivers granted to directors or executive officers with respect to the Code of Business Conduct and Ethics, on the company’s website at www.snapon.com. Products and Services Tools; Diagnostics, Information and Management Systems; and Equipment Snap-on offers a broad line of products and complementary services that are grouped into three product categories: (i) tools; (ii) diagnostics, information and management systems; and (iii) equipment. Further product line information is not presented as it is not practicable to do so. The following table shows the consolidated net sales of these product categories for the last three years: Net Sales (Amounts in millions) 2017 2016 2015 Product Category: Tools $ 1,946.7 $ 1,899.2 $ 1,910.1 Diagnostics, information and management systems 800.4 748.2 689.6 Equipment 939.8 783.0 753.1 $ 3,686.9 $ 3,430.4 $ 3,352.8 The tools product category includes hand tools, power tools, tool storage products and other similar products. Hand tools include wrenches, sockets, ratchet wrenches, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning tools, torque measuring instruments and other similar products. Power tools include cordless (battery), pneumatic (air), hydraulic and corded (electric) tools, such as impact wrenches, ratchets, screwdrivers, drills, sanders, grinders and similar products. Tool storage includes tool chests, roll cabinets and other similar products. For many industrial customers, Snap-on creates specific, engineered solutions, including facility-level tool control and asset management hardware and software, custom kits in a wide range of configurations, and custom-built tools designed to meet customer requirements. The majority of products are manufactured by Snap-on and, in completing the product offering, other items are purchased from external manufacturers. The diagnostics, information and management systems product category includes handheld and PC-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, OEM purchasing facilitation services, and warranty management systems and analytics to help OEM dealerships manage and track performance. The equipment product category includes solutions for the service of vehicles and industrial equipment. Products include wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane systems, collision repair equipment, vehicle air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers and hoists. 6 SNAP-ON INCORPORATED


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    Snap-on supports the sale of its diagnostics and vehicle service shop equipment by offering training programs as well as after-sales support for its customers, primarily focusing on the technologies and the application of specific products developed and marketed by Snap-on. Products are marketed under a number of brand names and trademarks, many of which are well known in the vehicle service and industrial markets served. Some of the major trade names and trademarks and the products and services with which they are associated include the following: Names Products and Services Snap-on Hand tools, power tools, tool storage products (including tool control software and hardware), diagnostics, certain equipment and related accessories, mobile tool stores, websites, electronic parts catalogs, warranty analytics solutions, business management systems and services, OEM specialty tools and equipment development and distribution, and OEM facilitation services ATI Aircraft hand tools and machine tools autoVHC Vehicle inspection and training services BAHCO Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage Blackhawk Collision repair equipment Blue-Point Hand tools, power tools, tool storage, diagnostics, certain equipment and related accessories Cartec Safety testing, brake testers, test lane equipment, dynamometers, suspension testers, emission testers and other equipment Car-O-Liner Collision repair equipment, and information and truck alignment systems CDI Torque tools Challenger Vehicle lifts Ecotechnics Vehicle air conditioning service equipment Fish and Hook Saw blades, cutting tools, pruning tools, hand tools, power tools and tool storage Hofmann Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment Irimo Saw blades, cutting tools, hand tools, power tools and tool storage John Bean Wheel balancers, vehicle lifts, tire changers, wheel aligners, brake testers and test lane equipment Josam Heavy duty alignment and collision repair solutions Lindström Hand tools Mitchell1 Repair and service information, shop management systems and business services Nexiq Diagnostic tools, information and program distributions for fleet and heavy duty equipment Norbar Torque tools Pro-Cut On-car brake lathes, related equipment and accessories Sandflex Hacksaw blades, bandsaws, saw blades, hole saws and reciprocating saw blades ShopKey Repair and service information, shop management systems and business services Sioux Power tools Sturtevant Richmont Torque tools Sun Diagnostic tools, wheel balancers, vehicle lifts, tire changers, wheel aligners, air conditioning products and emission testers TruckCam Commercial OEM factory solutions Williams Hand tools, tool storage, certain equipment and related accessories 2017 ANNUAL REPORT 7


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    Financial Services Snap-on also generates revenue from various financing programs that include: (i) installment sales and lease contracts arising from franchisees’ customers and Snap-on customers who require financing for the purchase or lease of tools and diagnostic and equipment products on an extended-term payment plan; and (ii) business loans and vehicle leases to franchisees. The decision to finance through Snap-on or another financing source is solely election of the customer. When assessing customers for potential financing, Snap-on considers various factors regarding ability to pay, including the customers’ financial condition, debt-servicing ability, past payment experience, and credit bureau and proprietary Snap-on credit model information, as well as the value of the underlying collateral. Snap-on offers financing through SOC and the company’s international finance subsidiaries in those markets where Snap-on has franchise operations. Financing revenue from contract originations is recognized over the life of the underlying contracts, with interest computed primarily on the average daily balances of the underlying contracts. Sales and Distribution Snap-on markets and distributes its products and related services principally to professional tool and equipment users around the world. The two largest market sectors are the vehicle service and repair sector and the industrial sector. Vehicle Service and Repair Sector The vehicle service and repair sector has three main customer groups: (i) professional technicians who purchase tools and diagnostic and equipment products for use in their work; (ii) other professional customers related to vehicle repair, including owners and managers of independent repair shops and OEM dealerships who purchase tools and diagnostic and equipment products for use by multiple technicians within a service or repair facility; and (iii) OEMs. Snap-on provides innovative tool, equipment and business solutions, as well as technical sales support and training, designed to meet technicians’ evolving needs. Snap-on’s mobile tool distribution system offers technicians the convenience of purchasing quality tools at their place of business with minimal disruption of their work routine. Snap-on also provides owners and managers of repair shops, where technicians work, with tools, diagnostic equipment, and repair and service information, including electronic parts catalogs and shop management products. Snap-on’s OEM facilitation business provides OEMs with products and services including special and essential tools as well as consulting and facilitation services, which include product procurement, distribution and administrative support to customers for their dealership equipment programs. The vehicle service and repair sector is characterized by an increasing rate of technological change within motor vehicles, vehicle population growth and increasing vehicle life, and the resulting effects of these changes on the businesses of both our suppliers and customers. Snap-on believes it is a meaningful participant in the vehicle service and repair market sector. Industrial Sector Snap-on markets its products and services globally to a broad cross-section of commercial and industrial customers, including maintenance and repair operations; manufacturing and assembly facilities; various government agencies, facilities and operations, including military operations; vocational and technical schools; aviation and aerospace operations; oil and gas developers; mining operations; energy and power generation; equipment fabricators and operators; railroad manufacturing and maintenance; customers in agriculture; infrastructure construction companies; and other customers that require instrumentation, service tools and/or equipment for their product and business needs. The industrial sector for Snap-on focuses on providing value-added products and services to an increasingly expanding global base of customers in critical industries. Through its experienced and dispersed sales organization, industrial “solutioneers” develop unique and highly valued productivity solutions for customers worldwide that leverage Snap-on’s product, service and development capabilities. The industrial sector is characterized by a highly competitive environment with multiple suppliers offering a full line or industry specific portfolios for tools and equipment. Industrial customers increasingly require specialized solutions that provide repeatability and reliability in performing tasks of consequence that are specific to the particular end market in which they operate. Snap-on believes it is a meaningful participant in the industrial tools and equipment market sector. 8 SNAP-ON INCORPORATED


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    Distribution Channels Snap-on serves customers primarily through the following channels of distribution: (i) the mobile van channel; (ii) company direct sales; (iii) distributors; and (iv) e-commerce. The following discussion summarizes Snap-on’s general approach for each channel and is not intended to be all-inclusive. Mobile Van Channel In the United States, a significant portion of sales to the vehicle service and repair sector is conducted through Snap-on’s mobile franchise van channel. Snap-on’s franchisees primarily serve vehicle repair technicians and vehicle service shop owners, generally providing weekly contact at the customer’s place of business. Franchisees’ sales are concentrated in hand and power tools, tool storage products, shop equipment, and diagnostic and repair information products, which can easily be transported in a van or trailer and demonstrated during a brief sales call. Franchisees purchase Snap-on’s products at a discount from suggested list prices and resell them at prices established by the franchisee. U.S. franchisees are provided a list of calls that serves as the basis of the franchisee’s sales route. Snap-on’s franchisees also have the opportunity to add a limited number of additional franchises. Snap-on charges nominal initial and ongoing monthly franchise fees. Franchise fee revenue, including nominal, non- refundable initial and ongoing monthly fees (primarily for sales and business training, and marketing and product promotion programs), is recognized as the fees are earned. Franchise fee revenue totaled $15.2 million, $13.9 million and $12.7 million in fiscal 2017, 2016 and 2015, respectively. Snap-on also has a company-owned route program that is designed to: (i) provide another pool of potential field organization personnel; (ii) service customers in select new and/or open routes not currently serviced by franchisees; and (iii) allow Snap-on to pilot new sales and promotional ideas prior to introducing them to franchisees. As of 2017 year end, company- owned routes comprised less than 3% of the total route population; Snap-on may elect to increase or reduce the number of company-owned routes in the future. In addition to its mobile van channel in the United States, Snap-on has replicated its U.S. franchise distribution model in certain other countries including the United Kingdom, Canada, Japan, Australia, Germany, Netherlands, South Africa, New Zealand, Belgium and Ireland. In many of these markets, as in the United States, purchase decisions are generally made or influenced by professional vehicle service technicians as well as repair shop owners and managers. As of 2017 year end, Snap-on’s worldwide route count was approximately 4,900, including approximately 3,500 routes in the United States. Through SOC, financing is available to U.S. franchisees, including financing for van leases, working capital loans and loans to help enable new franchisees to fund the purchase of the franchise. In many international markets, Snap-on offers a variety of financing options to its franchisees and/or customer networks through its international finance subsidiaries. The decision to finance through Snap-on or another financing source is solely at the customer’s election. Snap-on supports its franchisees with a field organization of regional offices, franchise performance teams, customer care centers and distribution centers. Snap-on also provides sales and business training, and marketing and product promotion programs, as well as customer and franchisee financing programs through SOC and the company’s international finance subsidiaries, all of which are designed to strengthen franchisee sales. National Franchise Advisory Councils in the United States, the United Kingdom, Canada and Australia, composed primarily of franchisees that are elected by franchisees, assist Snap-on in identifying and implementing enhancements to the franchise program. Company Direct Sales A significant proportion of shop equipment sales in North America under the John Bean, Hofmann, Blackhawk, Car-O-Liner, Challenger and Pro-Cut brands, diagnostic products under the Snap-on brand and information products under the Mitchell1 brand are made by direct and independent sales forces that have responsibility for national and other accounts. As the vehicle service and repair sector consolidates (with more business conducted by national chains and franchised service centers), Snap-on believes these larger organizations can be serviced most effectively by sales people who can demonstrate and sell the full line of diagnostic and equipment products and services. Snap-on also sells these products and services directly to OEMs and their franchised dealers. 2017 ANNUAL REPORT 9


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    Snap-on brand tools and equipment are marketed to industrial and governmental customers worldwide through both industrial sales associates and independent distributors. Selling activities focus on industrial customers whose main purchase criteria are quality and integrated solutions. As of 2017 year end, Snap-on had industrial sales associates and independent distributors primarily in the United States and in various European, Latin American, Middle Eastern, Asian and African countries, with the United States representing the majority of Snap-on’s total industrial sales. Snap-on also sells software, services and solutions to the automotive, commercial, heavy duty, agriculture, power equipment and power sports segments. Products and services are marketed to targeted groups, including OEMs and their dealerships, fleets and individual repair shops. To effectively reach OEMs, which frequently have a multi-national presence, Snap-on has deployed focused business teams globally. Distributors Sales of certain tools and equipment are made through independent distributors who purchase the items from Snap-on and resell them to end users. Hand tools sold under the BAHCO, Fish and Hook, Irimo, Lindström, CDI, ATI, Norbar, Sioux, Sturtevant Richmont and Williams brands and trade names, for example, are sold through distributors worldwide. Wheel service and other vehicle service equipment are sold through distributors primarily under brands including Hofmann, John Bean, Car-O-Liner, Challenger, Pro-Cut, Cartec, Blackhawk and Ecotechnics. Diagnostic and equipment products are marketed through distributors in South America and Asia, and through both a direct sales force and distributors in Europe under the Snap-on, Sun and Blue-Point brands. E-commerce Snap-on offers current and prospective customers online access to research and purchase products through its public website at www.snapon.com. The site features an online catalog of Snap-on hand tools, power tools, tool storage units and diagnostic equipment available to customers in the United States, the United Kingdom, Canada and Australia. E-commerce and certain other system enhancement initiatives are designed to improve productivity and further leverage the one-on-one relationships and service Snap-on has with its current and prospective customers. Sales through the company’s e-commerce distribution channel were not significant in any of the last three years. Competition Snap-on competes on the basis of its product quality and performance, product line breadth and depth, service, brand awareness and imagery, technological innovation and availability of financing (through SOC or its international finance subsidiaries). While Snap-on does not believe that any single company competes with it across all of its product lines and distribution channels, various companies compete in one or more product categories and/or distribution channels. Snap-on believes it is a leading manufacturer and distributor of professional tools, tool storage, diagnostic and equipment products, and repair software and solutions, offering a broad line of these products to both vehicle service and industrial marketplaces. Various competitors target and sell to professional technicians in the vehicle service and repair sector through the mobile tool distribution channel. Snap-on also competes with companies that sell tools and equipment to vehicle service and repair technicians online and through retail stores, vehicle parts supply outlets and tool supply warehouses/distributorships. Within the power tools category and the industrial sector, Snap-on has various other competitors, including companies with offerings that overlap with other areas discussed herein. Major competitors selling diagnostics, shop equipment and information to vehicle dealerships and independent repair shops include OEMs and their proprietary electronic parts catalogs and diagnostics and information systems, and other companies that offer products serving this sector. Raw Materials and Purchased Product Snap-on’s supply of raw materials and purchased components are generally and readily available from numerous suppliers. Snap-on believes it has secured an ample supply of both bar and coil steel for the near future to ensure stable supply to meet material demands. The company does not currently anticipate experiencing any significant impact in 2018 from steel pricing or availability issues. 10 SNAP-ON INCORPORATED


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    Patents, Trademarks and Other Intellectual Property Snap-on vigorously pursues and relies on patent protection to protect its intellectual property and position in its markets. As of 2017 year end, Snap-on and its subsidiaries held approximately 700 active and pending patents in the United States and approximately 1,600 active and pending patents outside of the United States. Sales relating to any single patent did not represent a material portion of Snap-on’s revenues in any of the last three years. Examples of products that have features or designs that benefit from patent protection include hand tools (including sealed ratchets and ratcheting screwdrivers), power tools, wheel alignment systems, wheel balancers, tire changers, vehicle lifts, tool storage, tool control, collision measurement, test lanes, brake lathes, electronic torque instruments, emissions-sensing devices and diagnostic equipment. Much of the technology used in the manufacture of vehicle service tools and equipment is in the public domain. Snap-on relies primarily on trade secret protection to protect proprietary processes used in manufacturing. Methods and processes are patented when appropriate. Copyright protection is also utilized when appropriate. Trademarks used by Snap-on are of continuing importance to Snap-on in the marketplace. Trademarks have been registered in the United States and many other countries, and additional applications for trademark registrations are pending. Snap-on vigorously polices proper use of its trademarks. Snap-on’s right to manufacture and sell certain products is dependent upon licenses from others; however, these products under license do not represent a material portion of Snap-on’s net sales. Domain names have become a valuable corporate asset for companies around the world, including Snap-on. Domain names often contain a trademark or service mark or even a corporate name and are often considered intellectual property. The recognition and value of the Snap-on name, trademark and domain name are core strengths of the company. Snap-on strategically licenses the Snap-on brand to carefully selected manufacturing and distribution companies for items such as apparel and a variety of other goods, in order to further build brand awareness and market presence for the company’s strongest brand. Environmental Snap-on is subject to various environmental laws, ordinances, regulations, and other requirements of government authorities in the United States and other nations. At Snap-on, these environmental liabilities are managed through the Snap-on Environmental, Health and Safety Management System (“EH & SMS”), which is applied worldwide. The system is based upon continual improvement and is certified to ISO 14001:2004 and OHSAS 18001:2007, verified through Det Norske Veritas (DNV) Certification, Inc. Snap-on believes that it complies with applicable environmental control requirements in its operations. Expenditures on environmental matters through EH & SMS have not had, and Snap-on does not for the foreseeable future expect them to have, a material effect upon Snap-on’s capital expenditures, earnings or competitive position. Employees Snap-on employed approximately 12,600 people at the end of January 2018; Snap-on employed approximately 12,100 people at the end of January 2017. The year-over-year increase in employees primarily reflects acquisitions during 2017. Approximately 2,700 employees, or 21% of Snap-on’s worldwide workforce, are represented by unions and/or covered under collective bargaining agreements. The number of covered union employees whose contracts expire over the next five years approximates 1,450 employees in 2018, 225 employees in 2019, 825 employees in 2020, 125 employees in 2021, and 25 employees in 2022. In recent years, Snap-on has not experienced any significant work slowdowns, stoppages or other labor disruptions. There can be no assurance that these and other future contracts with Snap-on’s unions will be renegotiated upon terms acceptable to Snap-on. 2017 ANNUAL REPORT 11


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    Working Capital Most of Snap-on’s businesses are not seasonal and their inventory needs are relatively constant. Snap-on did not have a significant backlog of orders at 2017 year end. In recent years, Snap-on has been using its working capital to fund, in part, the continued growth of the company’s financial services portfolio and the acquisitions discussed above. Snap-on’s liquidity and capital resources and use of working capital are discussed herein in “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of 2017 year end, neither Snap-on nor any of its segments depend on any single customer, small group of customers or government for any material part of its revenues. Item 1A: Risk Factors In evaluating the company, careful consideration should be given to the following risk factors, in addition to the other information included in this Annual Report on Form 10-K, including the Consolidated Financial Statements and the related notes. Each of these risk factors could adversely affect the company’s business, operating results, cash flows and/or financial condition, as well as adversely affect the value of an investment in the company’s common stock. Economic conditions and world events could affect our operating results. We, our franchisees and our customers, may be adversely affected by changing economic conditions, including conditions that may particularly impact specific regions. These conditions may result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending. We, our franchisees and our customers, and the economy as a whole, also may be affected by future world or local events outside our control, such as acts of terrorism, developments in the war on terrorism, conflicts in international situations, weather events and natural disasters, as well as government-related developments or issues. These factors may affect our results of operations by reducing our sales, margins and/or net earnings as a result of a slowdown in customer orders or order cancellations, impact the availability of raw materials and/or the supply chain, and could potentially lead to future impairment of our intangible assets. In addition, political and social turmoil related to international conflicts and terrorist acts may put pressure on economic conditions abroad. Unstable political, social and economic conditions may make it difficult for our franchisees, customers, suppliers and us to accurately forecast and plan future business activities. If such conditions persist, our business, financial condition, results of operations and cash flows could be negatively affected. In June 2016, the United Kingdom voted in a referendum to exit the European Union (“Brexit”), which resulted in significant currency exchange rate fluctuations and volatility. Negotiations are underway to determine the terms of Brexit. Given the lack of comparable precedent and the status of the negotiations, the implications of Brexit, or how such implications might affect Snap-on, continue to remain unclear at this time. Brexit could, among other impacts, disrupt trade and the movement of goods, services and people between the United Kingdom and the European Union or other countries as well as create legal and global economic uncertainty. These and other potential implications could adversely affect our business and results of operations. In 2017, Canada, Mexico and the United States commenced negotiations to potentially modify the terms of the North American Free Trade Agreement (“NAFTA”). It is difficult to predict what, if any, changes will be made to NAFTA as a result of these negotiations. If the U.S. were to withdraw from NAFTA or if significant changes are made that, among other impacts, disrupt trade and the movement of goods and services between these countries, it could have a material adverse impact on our business. These and other matters significantly impacting the regulation of trade could adversely affect our business and results of operations. 12 SNAP-ON INCORPORATED


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    Raw material and energy price fluctuations and shortages (including steel and various fuel sources) could adversely affect the ability to obtain needed manufacturing materials and could adversely affect our results of operations. The principal raw material used in the manufacture of our products is steel, which we purchase in competitive, price- sensitive markets. To meet Snap-on’s high quality standards, our steel needs range from specialized alloys, which are available only from a limited group of approved suppliers, to commodity types of alloys. These raw materials have historically exhibited price and demand cyclicality. Some of these materials have been, and in the future may be, in short supply, particularly in the event of mill shutdowns or production cut backs. As some steel alloys require specialized manufacturing procedures, we could experience inventory shortages if we were required to use an alternative manufacturer on short notice. Additionally, unexpected price increases for raw materials could result in higher prices to our customers or an erosion of the margins on our products. We believe our ability to sell our products is also dependent on the number of vehicles on the road, the number of miles driven and the general aging of vehicles. These factors affect the frequency, type and amount of service and repair performed on vehicles by technicians, and therefore affect the demand for the number of technicians, the prosperity of technicians and, consequently, the demand technicians have for our tools, other products and services, and the value technicians place on those products and services. The use of other methods of transportation, including more frequent use of public transportation, could result in a decrease in the use of privately operated vehicles. A decrease in the use of privately operated vehicles may lead to fewer repairs and less demand for our products. We use various energy sources to transport, produce and distribute products, and some of our products have components that are petroleum based. Petroleum and energy prices have periodically increased significantly over short periods of time; future volatility and changes may be caused by market fluctuations, supply and demand, currency fluctuations, production and transportation disruptions, world events and changes in governmental programs. Energy price increases raise both our operating costs and the costs of our materials, and we may not be able to increase our prices enough to offset these costs. Higher prices also may reduce the level of future customer orders and our profitability. The performance of Snap-on’s mobile tool distribution business depends on the success of its franchisees. Approximately 41% of our consolidated net revenues in 2017 were generated by the Snap-on Tools Group, which consists of Snap-on’s business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel. Snap-on’s success is dependent on its relationships with franchisees, individually and collectively, as they are the primary sales and service link between the company and vehicle service and repair technicians, who are an important class of end users for Snap-on’s products and services. If our franchisees are not successful, or if we do not maintain an effective relationship with our franchisees, the delivery of products, the collection of receivables and/or our relationship with end users could be adversely affected and thereby negatively impact our business, financial condition, results of operations and cash flows. In addition, if we are unable to maintain effective relationships with franchisees, Snap-on or the franchisees may choose to terminate the relationship, which may result in (i) open routes, in which end-user customers are not provided reliable service; (ii) litigation resulting from termination; (iii) reduced collections or increased write-offs of franchisee receivables owed to Snap-on; and/or (iv) reduced collections or increased write-offs of finance and contract receivables. Exposure to credit risks of customers and resellers may make it difficult to collect receivables and could adversely affect operating results and financial condition. The size of our financial services portfolio has increased significantly in recent years. A decline in industry and/or economic conditions could have the potential to weaken the financial position of some of our customers. If circumstances surrounding our customers’ ability to repay their credit obligations were to deteriorate and result in the write-down or write-off of such receivables, it would negatively affect our operating results for the period in which they occur and, if large, could have a material adverse effect on our business, financial condition, results of operations and cash flows. 2017 ANNUAL REPORT 13


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    Our inability to provide acceptable financing alternatives to end-user customers and franchisees could adversely impact our operating results. An integral component of our business and profitability is our ability to offer competitive financing alternatives to end-user customers and franchisees. The lack of our ability to offer such alternatives or obtain capital resources or other financing to support our receivables on terms that we believe are attractive, whether resulting from the state of the financial markets, our own operating performance, or other factors, would negatively affect our operating results and financial condition. Adverse fluctuations in interest rates and/or our ability to provide competitive financing programs could also have an adverse impact on our revenue and profitability. Changes to legislation and regulations may affect our business, reputation, results of operations and financial condition. Significant changes to legislative and regulatory activity and compliance burdens, including those associated with sales to our government, military and defense contractor customers, as well as the manner in which they are applied, could significantly impact our business and the economy as a whole. Financial services businesses of all kinds are subject to significant and complex regulations and enforcement. In addition to potentially increasing the costs of doing business due to compliance obligations, new laws and regulations, or changes to existing laws and regulations, as well as the enforcement thereof, may affect the relationships between creditors and debtors, inhibit the rights of creditors to collect amounts owed to them, expand liability for certain actions or inactions, or limit the types of financial products or services offered, any or all of which could have a material adverse effect on our financial condition, results of operations and cash flows. Failure to comply with any of these laws or regulations could also result in civil, criminal, monetary and/or non-monetary penalties, damage to our reputation, and/or the incurrence of remediation costs. Snap-on’s results of operations could also be affected by changes in the company’s effective tax rate as a result of changes in statutory tax rates, laws and regulations, as well as related guidance. The company is currently analyzing the impact of the December 2017 passage of “H.R.1”, formerly known as the Tax Cuts and Jobs Act in the United States (the “Tax Act”), which made significant changes to the U.S. Tax Code and affects, among other items, the company’s tax rate, previously unremitted foreign earnings and valuations of deferred tax assets and liabilities. If new guidance is issued on the recently enacted tax revisions, depending on the circumstances, this (and other) tax legislation could adversely affect our results of operations. These developments, and other potential future legislation and regulations, as well as the factors in the strict regulatory environment, including the growing international regulation of privacy rights, may also adversely affect the customers to which, and the markets into which, we sell our products, and increase our costs and otherwise negatively affect our business, reputation, results of operations and financial condition, including in ways that cannot yet be foreseen. Failure to achieve expected investment returns on pension plan assets, as well as changes in interest rates or plan demographics, could adversely impact our results of operations, financial condition and cash flows. Snap-on sponsors various defined benefit pension plans (the “pension plans”). The assets of the pension plans are diversified in an attempt to mitigate the risk of a large loss. Required funding for the company’s domestic defined benefit pension plans is determined in accordance with guidelines set forth in the federal Employee Retirement Income Security Act (“ERISA”); foreign defined benefit pension plans are funded in accordance with local statutes or practice. Additional contributions to enhance the funded status of the pension plans can be made at the company’s discretion. However, there can be no assurance that the value of the pension plan assets, or the investment returns on those plan assets, will be sufficient to meet the future benefit obligations of such plans. In addition, during periods of adverse investment market conditions and declining interest rates, the company may be required to make additional cash contributions to the pension plans that could reduce our financial flexibility. Changes in plan demographics, including an increase in the number of retirements or changes in life expectancy assumptions, may also increase the costs and funding requirements of the obligations related to the company’s pension plans. 14 SNAP-ON INCORPORATED


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    Our pension plan obligations are affected by changes in market interest rates. Significant fluctuations in market interest rates have added, and may further add, volatility to our pension plan obligations. In periods of declining market interest rates, our pension plan obligations generally increase; in periods of increasing market interest rates, our pension plan obligations generally decrease. While our plan assets are broadly diversified, there are inherent market risks associated with investments; if adverse market conditions occur, our plan assets could incur significant or material losses. Since we may need to make additional contributions to address changes in obligations and/or a loss in plan assets, the combination of declining market interest rates, past or future plan asset investment losses, and/or changes in plan demographics could adversely impact our results of operations, financial condition and cash flows. The company’s pension plan expense is comprised of the following factors: (i) service cost; (ii) interest on projected benefit obligations; (iii) expected return on plan assets; (iv) the amortization of prior service costs and credits; (v) effects of actuarial gains and losses; and (vi) settlement/curtailment costs, when applicable. The accounting for pensions involves the estimation of a number of factors that are highly uncertain. Certain factors, such as the interest on projected benefit obligations and the expected return on plan assets, are impacted by changes in market interest rates and the value of plan assets. A significant decrease in market interest rates and a decrease in the fair value of plan assets would increase net pension expense and may adversely affect the company’s future results of operations. See Note 11 to the Consolidated Financial Statements for further information on the company’s pension plans. Adverse developments in the credit and financial markets could negatively impact the availability of credit that we and our customers need to operate our businesses. We depend upon the availability of credit to operate our business, including the financing of receivables from end-user customers that are originated by our financial services businesses. Our end-user customers, franchisees and suppliers also require access to credit for their businesses. At times, world financial markets have been unstable and subject to uncertainty. Adverse developments in the credit and financial markets, or unfavorable changes in Snap-on’s credit rating, could negatively impact the availability of future financing and the terms on which it might be available to Snap-on, its end-user customers, franchisees and suppliers. Inability to access credit or capital markets, or a deterioration in the terms on which financing might be available, could have an adverse impact on our business, financial condition, results of operations and cash flows. Increasing our financial leverage could affect our operations and profitability. The maximum available credit under our multi-currency revolving credit facility is $700 million. The company’s leverage ratio may affect both our availability of additional capital resources as well as our operations in several ways, including: 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 or access to the commercial paper market; x The potential for higher levels of interest expense to service or maintain our 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. While we believe we will have the ability to service our debt and obtain additional resources in the future if and when needed, that will depend upon our results of operations and financial position at the time, the then-current state of the credit and financial markets, and other factors that may be beyond our control. Therefore, we cannot give assurances that credit will be available on terms that we consider attractive, or at all, if and when necessary or beneficial to us. 2017 ANNUAL REPORT 15


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    Data security and information technology infrastructure and security are critical to supporting business objectives; failure of our systems to operate effectively could adversely affect our business and reputation. We depend heavily on information technology infrastructure to achieve our business objectives and to protect sensitive information, and continually invest in improving such systems. Problems that impair or compromise this infrastructure, including natural disasters, power outages, major network failures, security breaches or malicious attacks, or during system upgrades and/or new system implementations, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the company, our customers, our suppliers and business partners, or otherwise carry on business in the normal course. Any such events, if significant, could cause us to lose customers and/or revenue and could require us to incur significant expense to remediate, including as a result of legal or regulatory claims or proceedings, and could also damage our reputation. While we have taken steps to maintain adequate data security and address these risks and uncertainties by implementing security technologies, internal controls, network and data center resiliency, and redundancy and recovery processes, as well as by securing insurance, these measures may be inadequate. In association with initiatives to better integrate business units, rationalize operating footprint and improve responsiveness to franchisees and customers, Snap-on is continually replacing and enhancing its global Enterprise Resource Planning (ERP) management information systems. As we integrate, implement and deploy new information technology processes and enhance our common information infrastructure across our global operations, we could experience disruptions in our business that could have an adverse effect on our business, financial condition, results of operations and cash flows. Failure to maintain effective distribution of products and services could adversely impact revenue, gross margin and profitability. We use a variety of distribution methods to sell our products and services. Successfully managing the interaction of our distribution efforts to reach various potential customer segments for our products and services is a complex process. Moreover, since each distribution method has distinct risks, costs and gross margins, our failure to implement the most advantageous balance in the delivery model for our products and services could adversely affect our revenue and gross margins and therefore our profitability. Risks associated with the disruption of manufacturing operations could adversely affect profitability or competitive position. We manufacture a significant portion of the products we sell. Any prolonged disruption in the operations of our existing manufacturing facilities, whether due to technical or labor difficulties, facility consolidation or closure actions, lack of raw material or component availability, destruction of or damage to any facility (as a result of natural disasters, weather events, use and storage of hazardous materials, acts of war, sabotage or terrorism, or other events), or other reasons, could have a material adverse effect on our business, financial condition, results of operations and cash flows. The inability to continue to introduce new products that respond to customer needs and achieve market acceptance could result in lower revenues and reduced profitability. Sales from new products represent a significant portion of our net sales and are expected to continue to represent a significant component of our future net sales. We may not be able to compete effectively unless we continue to enhance existing products or introduce new products to the marketplace in a timely manner. Product improvements and new product introductions require significant financial and other resources, including significant planning, design, development, and testing at the technological, product and manufacturing process levels. Our competitors’ new products may beat our products to market, be more effective with more features, be less expensive than our products, and/or render our products obsolete. Any new products that we develop may not receive market acceptance or otherwise generate any meaningful net sales or profits for us relative to our expectations based on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs and research and development. 16 SNAP-ON INCORPORATED


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    The global tool, equipment, and diagnostics and repair information industries are competitive. We face strong competition in all of our market segments. Price competition in our various industries is intense and pricing pressures from competitors and customers are increasing. In general, as a manufacturer and marketer of premium products and services, the expectations of Snap-on’s customers and its franchisees are high and continue to increase. Any inability to maintain customer satisfaction could diminish Snap-on’s premium image and reputation and could result in a lessening of our ability to command premium pricing. We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase market share or profitability. Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and cash flows. The products that we design and/or manufacture, and/or the services we provide, can lead to product liability claims or other legal claims being filed against us. To the extent that plaintiffs are successful in showing that a defect in a product’s design, manufacture or warnings led to personal injury or property damage, or that our provision of services resulted in similar injury or damage, we may be subject to claims for damages. Although we are insured for damages above a certain amount, we bear the costs and expenses associated with defending claims, including frivolous lawsuits, and are responsible for damages up to the insurance retention amount. In addition to claims concerning individual products, as a manufacturer, we can be subject to costs, potential negative publicity and lawsuits related to product recalls, which could adversely impact our results of operations and damage our reputation. Legal disputes could adversely affect our business, reputation, financial condition, results of operations and cash flows. From time to time we are subject to legal disputes that are being litigated and/or settled in the ordinary course of business. Disputes or future lawsuits could result in the diversion of management’s time and attention away from business operations. Additionally, negative developments with respect to legal disputes and the costs incurred in defending ourselves, even if successful, could have an adverse impact on the company and its reputation. Successful outcomes, at trial or on appeal, can never be assured. Adverse outcomes or settlements could also require us to pay damages, potentially in excess of amounts reserved, or incur liability for other remedies that could have a material adverse effect on our business, reputation, financial condition, results of operations and cash flows. Failure to adequately protect intellectual property, or claims of infringement, could adversely affect our business, reputation, financial condition, results of operations and cash flows. Intellectual property rights are an important and integral component of our business and failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business. We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. In addition, we have been and in the future may be subject to claims of intellectual property infringement against us by third parties; whether or not these claims have merit, we could be required to expend significant resources in defense of those claims. Adverse determinations in a judicial or administrative proceeding could prevent us from manufacturing and selling our products, prevent us from stopping others from manufacturing and selling competing products, and/or result in payments for damages. In the event of an infringement claim, we may also be required to spend significant resources to develop alternatives or obtain licenses which may not be available on reasonable terms or at all, and may reduce our sales and disrupt our production. Failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business. 2017 ANNUAL REPORT 17


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    Foreign operations are subject to political, economic, currency exchange and other risks that could adversely affect our business, financial condition, results of operations and cash flows. Approximately 32% of our revenues in 2017 were generated outside of the United States. Future growth rates and success of our business depends in large part on continued growth in our non-U.S. operations, including growth in emerging markets and critical industries. Numerous risks and uncertainties affect our non-U.S. operations. These risks and uncertainties include political, economic and social instability, such as acts of war, civil disturbance or acts of terrorism, local labor conditions, changes in government policies and regulations, including imposition or increases in withholding and other taxes on remittances and other payments by international subsidiaries, as well as the exposure to liabilities under anti-corruption laws in various countries, such as the U.S. Foreign Corrupt Practices Act, currency volatility, transportation delays or interruptions, sovereign debt uncertainties and difficulties in enforcement of contract and intellectual property rights, as well as natural disasters. Should the economic environment in our non-U.S. markets deteriorate from current levels, our results of operations and financial position could be materially impacted, including as a result of the effects of potential impairment write-downs of goodwill and/or other intangible assets related to these businesses. The reporting currency for Snap-on’s consolidated financial statements is the U.S. dollar. Certain of the company’s assets, liabilities, expenses and revenues are denominated in currencies other than the U.S. dollar. In preparing Snap-on’s Consolidated Financial Statements, those assets, liabilities, expenses and revenues are translated into U.S. dollars at applicable exchange rates. Increases or decreases in exchange rates between the U.S. dollar and other currencies affect the U.S. dollar value of those items, as reflected in the Consolidated Financial Statements. Substantial fluctuations in the value of the U.S. dollar could have a significant impact on the company’s financial condition and results of operations. We are also affected by changes in inflation rates and interest rates. Additionally, cash generated in non-U.S. jurisdictions may be difficult to repatriate to the United States in a tax-efficient manner. Our foreign operations are also subject to other risks and challenges, such as the need to staff and manage diverse workforces, respond to the needs of multiple national and international marketplaces, and differing business climates and cultures in various countries. We may not successfully integrate businesses we acquire, which could have an adverse impact on our business, financial condition, results of operations and cash flows. The pursuit of growth through acquisitions, including participation in joint ventures, involves significant risks that could have a material adverse effect on our business, financial condition, results of operations and cash flows. These risks include: x Loss of the acquired businesses’ customers; x Inability to integrate successfully the acquired businesses’ operations; x Inability to coordinate management and integrate and retain employees of the acquired businesses; x Unforeseen or contingent liabilities of the acquired businesses; x Large write-offs or write-downs, or the impairment of goodwill or other intangible assets; 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; and x The dilutive effect in the event of the issuance of additional equity securities. 18 SNAP-ON INCORPORATED


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    The recognition of impairment charges on goodwill or other intangible assets would adversely impact our future financial condition and results of operations. We have a substantial amount of goodwill and purchased intangible assets, almost all of which are booked in the Commercial & Industrial Group and in the Repair Systems & Information Group. We are required to perform impairment tests on our goodwill and other intangibles annually or at any time when events occur that could impact the value of our business segments. Our determination of whether impairment has occurred is based on a comparison of each of our reporting units’ fair market value with its carrying value. Significant and unanticipated changes in circumstances, such as significant and long-term adverse changes in business climate, adverse actions by regulators, unanticipated competition, the loss of key customers, and/or changes in technology or markets, could require a provision for impairment in a future period that could substantially impact our reported earnings and reduce our consolidated net worth and shareholders’ equity. Should the economic environment in these markets deteriorate, our results of operations and financial position could be materially impacted, including as a result of the effects of potential impairment write-downs of goodwill and/or other intangible assets related to these businesses. Our operations expose us to the risk of environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations and reputation. Certain of our operations are subject to environmental laws and regulations in the jurisdictions in which they operate, which impose limitations on the discharge of pollutants into the ground, air and water and establish standards for the generation, treatment, use, storage and disposal of hazardous wastes. We must also comply with various health and safety regulations in the United States and abroad in connection with our operations. Failure to comply with any of these laws could result in civil and criminal, monetary and non-monetary penalties and damage to our reputation. In addition, we may incur costs related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices. We cannot provide assurance that our costs of complying with current or future environmental protection and health and safety laws will not exceed our estimates. The inability to successfully defend claims from taxing authorities could adversely affect our financial condition, results of operations and cash flows. We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions. Due to the subjectivity of tax laws between those jurisdictions, as well as the subjectivity of factual interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims from taxing authorities related to these differences could have an adverse impact on our financial condition, results of operations and cash flows. Failure to attract and retain qualified personnel could lead to a loss of revenue and/or profitability. Snap-on’s success depends, in part, on the efforts and abilities of its senior management team and other key employees. Their skills, experience and industry contacts significantly benefit our operations and administration. The failure to attract and retain members of our senior management team and other key employees could have a negative effect on our operating results. In addition, transitions of important responsibilities to new individuals inherently include the possibility of disruptions to our business and operations, which could negatively affect our business, financial condition, results of operations and cash flows. 2017 ANNUAL REPORT 19


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    The steps taken to restructure operations, rationalize operating footprint, lower operating expenses and achieve greater efficiencies in the supply chain could disrupt business. We have taken steps in the past, and expect to take additional steps in the future, intended to improve customer service and drive further efficiencies and reduce costs, some of which could be disruptive to our business. These actions, collectively across our operating groups, are focused on the following: 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 initiatives throughout the company 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, receivables within our financial services businesses. A failure to succeed in the implementation of any or all of these actions could result in an inability to achieve our financial goals and could be disruptive to the business. In addition, any future reductions to headcount and other cost reduction measures may result in the loss of technical expertise and could adversely affect our research and development efforts as well as our ability to meet product development schedules. Efforts to reduce components of expense could result in the recording of charges for inventory and technology-related write-offs, workforce reduction costs or other charges relating to the consolidation or closure of facilities. If we were to incur a substantial charge to further these efforts, our earnings per share would be adversely affected in such period. If we are unable to effectively manage our cost reduction and restructuring efforts, our business, financial condition, results of operations and cash flows could be negatively affected. Item 1B: Unresolved Staff Comments None. Item 2: Properties Snap-on maintains leased and owned manufacturing, software development, warehouse, distribution, research and development and office facilities throughout the world. Snap-on believes that its facilities currently in use are suitable and have adequate capacity to meet its present and foreseeable future demand. Snap-on’s facilities in the United States occupy approximately 3.4 million square feet, of which 73% is owned, including its corporate and general office facility located in Kenosha, Wisconsin. Snap-on’s facilities outside the United States occupy approximately 4.5 million square feet, of which approximately 73% is owned. Certain Snap-on facilities are leased through operating and capital lease agreements. See Note 15 to the Consolidated Financial Statements for information on the company’s operating and capital leases. Snap-on management continually monitors the company’s capacity needs and makes adjustments as dictated by market and other conditions. 20 SNAP-ON INCORPORATED


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    The following table provides information about our corporate headquarters and financial services operations, and each of Snap-on’s principal active manufacturing locations, distribution centers and software development locations (exceeding 50,000 square feet) as of 2017 year end: Location Principal Property Use Owned/Leased Segment* U.S. Locations: Elkmont, Alabama Manufacturing Owned SOT Conway, Arkansas Manufacturing and distribution Owned RS&I City of Industry, California Manufacturing Leased C&I Poway, California Software development Leased RS&I San Jose, California Software development Leased RS&I Columbus, Georgia Distribution Owned C&I Crystal Lake, Illinois Distribution Owned and leased SOT Libertyville, Illinois Financial services Leased FS Algona, Iowa Manufacturing and distribution Owned SOT Louisville, Kentucky Manufacturing and distribution Leased RS&I Olive Branch, Mississippi Distribution Owned SOT Carson City, Nevada Distribution Owned and leased SOT Murphy, North Carolina Manufacturing and distribution Owned C&I Richfield, Ohio Software development Owned RS&I Robesonia, Pennsylvania Distribution Owned SOT Elizabethton, Tennessee Manufacturing Owned SOT Kenosha, Wisconsin Distribution and corporate Owned SOT, C&I, RS&I Milwaukee, Wisconsin Manufacturing Owned SOT Non-U.S. Locations: Santo Tome, Argentina Manufacturing Owned C&I New South Wales, Australia Distribution and financial services Leased SOT, FS Minsk, Belarus Manufacturing Owned C&I Santa Bárbara d'Oeste, Brazil Manufacturing and distribution Owned RS&I Calgary, Canada Distribution Leased SOT Mississauga, Canada Distribution Leased SOT, RS&I Beijing, China Manufacturing and distribution Leased C&I Kunshan, China Manufacturing Owned C&I Xiaoshan, China Manufacturing Owned C&I Banbury, England Manufacturing and distribution Owned C&I Bramley, England Manufacturing Owned C&I Kettering, England Distribution and financial services Owned and leased SOT, C&I, FS Sopron, Hungary Manufacturing Owned RS&I Correggio, Italy Manufacturing Owned RS&I Tokyo, Japan Distribution Leased C&I Helmond, Netherlands Distribution Owned C&I Vila do Conde, Portugal Manufacturing Owned C&I Irun, Spain Manufacturing Owned C&I Placencia, Spain Manufacturing Owned C&I Vitoria, Spain Manufacturing and distribution Owned C&I Bollnäs, Sweden Manufacturing Owned C&I Edsbyn, Sweden Manufacturing Owned C&I Kungsör, Sweden Manufacturing and distribution Owned RS&I Lidköping, Sweden Manufacturing Owned C&I * Segment abbreviations: C&I – Commercial & Industrial Group SOT – Snap-on Tools Group RS&I – Repair Systems & Information Group FS – Financial Services 2017 ANNUAL REPORT 21


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    Item 3: Legal Proceedings Snap-on is involved in various legal matters that are being litigated and/or settled in the ordinary course of business. Although it is not possible to predict the outcome of these legal matters, management believes that the results of these legal matters will not have a material impact on Snap-on’s consolidated financial position, results of operations or cash flows. Item 4: Mine Safety Disclosures Not applicable. PART II Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Snap-on had 56,690,249 shares of common stock outstanding as of 2017 year end. Snap-on’s stock is listed on the New York Stock Exchange under the ticker symbol “SNA.” At February 9, 2018, there were 4,884 registered holders of Snap-on common stock. The high and low closing prices of Snap-on’s common stock during each fiscal quarter for the last two years were as follows: Common Stock High/Low Prices 2017 2016 Quarter High Low High Low First $ 181.53 $ 164.91 $ 168.53 $ 135.41 Second 175.26 153.24 164.39 148.03 Third 159.02 141.51 162.70 146.76 Fourth 175.88 147.90 176.20 145.97 Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Quarterly dividends in 2017 were $0.82 per share in the fourth quarter and $0.71 per share in each of the first three quarters ($2.95 per share for the year). Quarterly dividends in 2016 were $0.71 per share in the fourth quarter and $0.61 per share in each of the first three quarters ($2.54 per share for the year). Cash dividends paid in 2017 and 2016 totaled $169.4 million and $147.5 million, respectively. Snap-on’s Board of Directors (the “Board”) monitors and evaluates the company’s dividend practice quarterly and the Board may elect to increase, decrease or not pay a dividend on Snap-on common stock based upon the company’s financial condition, results of operations, cash requirements and future prospects of Snap-on and other factors deemed relevant by the Board. See Note 13 to the Consolidated Financial Statements for information on securities authorized for issuance under equity compensation plans. 22 SNAP-ON INCORPORATED


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    Issuer Purchases of Equity Securities The following chart discloses information regarding the shares of Snap-on’s common stock repurchased by the company during the fourth quarter of fiscal 2017, all of which were purchased pursuant to the Board’s authorizations that the company has publicly announced. Snap-on has undertaken stock repurchases from time to time to offset dilution created by shares issued for employee and franchisee stock purchase plans, and equity plans, and for other corporate purposes, as well as when the company believes market conditions are favorable. The repurchase of Snap-on common stock is at the company’s discretion, subject to prevailing financial and market conditions. Approximate value of shares that may yet be Shares purchased as purchased under Average part of publicly publicly Shares price announced plans or announced plans Period purchased per share programs or programs* 10/01/17 to 10/28/17 80,000 $160.86 80,000 $427.2 million 10/29/17 to 11/25/17 330,000 $157.89 330,000 $375.9 million 11/26/17 to 12/30/17 62,000 $166.34 62,000 $390.7 million Total/Average 472,000 $159.50 472,000 N/A N/A: Not applicable * Subject to further adjustment pursuant to the 1996 Authorization described below, as of December 30, 2017, the approximate value of shares that may yet be purchased pursuant to the two outstanding Board authorizations discussed below is $390.7 million. 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 $158.45, $159.70 and $174.30 per share of common stock as of the end of the fiscal 2017 months ended October 28, 2017, November 25, 2017, and December 30, 2017, respectively. x In 2017, the Board authorized the repurchase of an aggregate of up to $500 million of the company’s common stock (“the 2017 Authorization”). The 2017 Authorization will expire when the aggregate repurchase price limit is met, unless terminated earlier by the Board. 2017 ANNUAL REPORT 23


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    Other Purchases or Sales of Equity Securities The following chart discloses information regarding transactions in shares of Snap-on’s common stock by Citibank, N.A. (“Citibank”) during the fourth quarter of 2017 pursuant to a prepaid equity forward agreement (the “Agreement”) with Citibank that is intended to reduce the impact of market risk associated with the stock-based portion of the company’s deferred compensation plans. The company’s stock-based deferred compensation liabilities, which are impacted by changes in the company’s stock price, increase as the company’s stock price rises and decrease as the company’s stock price declines. Pursuant to the Agreement, Citibank may purchase or sell shares of the company’s common stock (for Citibank’s account) in the market or in privately negotiated transactions. The Agreement has no stated expiration date and does not provide for Snap-on to purchase or repurchase its shares. Citibank Sales of Snap-on Stock Average price Period Shares sold per share 10/01/17 to 10/28/17 – – 10/29/17 to 11/25/17 – – 11/26/17 to 12/30/17 18,600 $ 167.53 Total/Average 18,600 $ 167.53 24 SNAP-ON INCORPORATED


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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, 2012, assuming that dividends were reinvested. The graph compares Snap-on’s performance to that of the Standard & Poor’s 500 Industrials Index (“S&P 500 Industrials”) and Standard & Poor’s 500 Stock Index (“S&P 500”). Snap-on Incorporated Total Shareholder Return (1) SNAP-ON INCORPORATED S&P 500 Industrials S&P 500 250 200 DOLLARS 150 100 50 2012 2013 2014 2015 2016 2017 Snap-on S&P 500 Fiscal Year Ended (2) Incorporated Industrials S&P 500 December 31, 2012 $ 100.00 $ 100.00 $ 100.00 December 31, 2013 141.06 140.68 132.39 December 31, 2014 178.82 154.50 150.51 December 31, 2015 227.32 150.59 152.59 December 31, 2016 230.82 178.99 170.84 December 31, 2017 239.25 216.64 208.14 (1) Assumes $100 was invested on December 31, 2012, and that dividends were reinvested quarterly. (2) The company's fiscal year ends on the Saturday that is on or nearest to December 31 of each year; for ease of calculation, the fiscal year end is assumed to be December 31. 2017 ANNUAL REPORT 25


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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) 2017 2016 2015 2014 2013 Results of Operations Net sales $ 3,686.9 $ 3,430.4 $ 3,352.8 $ 3,277.7 $ 3,056.5 Gross profit 1,824.9 1,709.6 1,648.3 1,584.3 1,472.9 Operating expenses 1,160.9 1,054.1 1,053.7 1,048.7 1,012.4 Operating earnings before financial services 664.0 655.5 594.6 535.6 460.5 Financial services revenue 313.4 281.4 240.3 214.9 181.0 Financial services expenses 95.9 82.7 70.1 65.8 55.3 Operating earnings from financial services 217.5 198.7 170.2 149.1 125.7 Operating earnings 881.5 854.2 764.8 684.7 586.2 Interest expense 52.4 52.2 51.9 52.9 56.1 Earnings before income taxes and equity earnings 821.9 801.4 710.5 630.9 526.2 Income tax expense 250.9 244.3 221.2 199.5 166.7 Earnings before equity earnings 571.0 557.1 489.3 431.4 359.5 Equity earnings, net of tax 1.2 2.5 1.3 0.7 0.2 Net earnings 572.2 559.6 490.6 432.1 359.7 Net earnings attributable to noncontrolling interests (14.5) (13.2) (11.9) (10.2) (9.4) Net earnings attributable to Snap-on 557.7 546.4 478.7 421.9 350.3 Financial Position Cash and cash equivalents $ 92.0 $ 77.6 $ 92.8 $ 132.9 $ 217.6 Trade and other accounts receivable – net 675.6 598.8 562.5 550.8 531.6 Finance receivables – net (current) 505.4 472.5 447.3 402.4 374.6 Contract receivables – net (current) 96.8 88.1 82.1 74.5 68.4 Inventories – net 638.8 530.5 497.8 475.5 434.4 Property and equipment – net 484.4 425.2 413.5 404.5 392.5 Long-term finance receivables – net 1,039.2 934.5 772.7 650.5 560.6 Long-term contract receivables – net 322.6 286.7 266.6 242.0 217.1 Total assets 5,249.1 4,723.2 4,331.1 4,162.0 3,994.5 Notes payable and current maturities of long-term debt 433.2 301.4 18.4 56.6 113.1 Accounts payable 178.2 170.9 148.3 145.0 155.6 Long-term debt 753.6 708.8 861.7 862.7 858.9 Total debt 1,186.8 1,010.2 880.1 919.3 972.0 Total shareholders’ equity attributable to Snap-on 2,953.9 2,617.2 2,412.7 2,207.8 2,113.2 Common Share Summary Weighted-average shares outstanding – diluted 58.6 59.4 59.1 59.1 59.1 Net earnings per share attributable to Snap-on: Basic $ 9.72 $ 9.40 $ 8.24 $ 7.26 $ 6.02 Diluted 9.52 9.20 8.10 7.14 5.93 Cash dividends paid per share 2.95 2.54 2.20 1.85 1.58 Shareholders’ equity per basic share 51.46 45.05 41.53 38.00 36.31 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 References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “organic sales” refer to sales from continuing operations calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), excluding acquisition-related sales and the impact of foreign currency translation. Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, customer base and geographic expansion, new product development and/or pricing, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. The company’s organic sales disclosures also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in our businesses and facilitating comparisons of our sales performance with prior periods. We believe our operating results in 2017 demonstrate Snap-on’s continued progress in providing repeatability and reliability to a wide range of professional customers performing critical tasks in workplaces of consequence. Leveraging capabilities already demonstrated in the automotive repair arena, our “coherent growth” strategy focuses on developing and expanding our professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including in critical industries, where the cost and penalties for failure can be high. We also believe our 2017 operating results provide continued evidence that Snap-on’s value proposition of making work easier for serious professionals in workplaces of consequence is an ongoing strength as we move forward along our runways for coherent growth: x Enhancing the franchise network, where we continued to focus on helping our franchisees extend their reach through innovative selling processes and productivity initiatives that break the traditional time and space barriers inherent in a mobile van; x Expanding in the vehicle repair garage, where we continued to make progress in connecting with customers and translating the resulting insights into innovation that solves specific challenges in the repair facility; x Further extending in critical industries, where we continued to grow our lines of products customized for specific industries, including through acquisitions (as discussed below); and x Building in emerging markets, where we continued to build manufacturing capacity, focused product lines and distribution capability. Our strategic priorities and plans for 2018 will continue to build on our Snap-on Value Creation Processes – our suite of strategic principles and processes we employ every day designed to create value, and employed in the areas of safety, quality, customer connection, innovation and rapid continuous improvement (“Rapid Continuous Improvement” or “RCI”). We expect to continue to deploy these processes in our existing operations as well as into our newly acquired businesses. Snap-on’s RCI initiatives employ a structured set of tools and processes across multiple businesses and geographies intended to eliminate waste and improve operations. Savings from Snap-on’s RCI initiatives reflect benefits from a wide variety of ongoing efficiency, productivity and process improvements, including savings generated from product design cost reductions, improved manufacturing line set-up and change-over practices, lower-cost sourcing initiatives and facility consolidations. Unless individually significant, it is not practicable to disclose each RCI activity that generated savings and/or segregate RCI savings embedded in sales volume increases. Our global financial services operations continue to serve a significant strategic role in offering financing options to our franchisees, to their customers, and to customers in other parts of our business. We expect that our global financial services business, which includes both Snap-on Credit LLC (“SOC”) in the United States and our other international finance subsidiaries, will continue to be a meaningful contributor to our operating earnings going forward. Snap-on has significant international operations and is subject to risks inherent with foreign operations, including foreign currency translation fluctuations. 2017 ANNUAL REPORT 27


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Recent Acquisitions On July 28, 2017, Snap-on acquired Torque Control Specialists Pty Ltd (“TCS”) for a cash purchase price of $3.6 million (or $3.5 million, net of cash acquired). TCS, based in Adelaide, Australia, distributes a full range of torque products, including wrenches, multipliers and calibrators, for use in critical industries. The acquisition of TCS enhanced and expanded Snap-on’s capabilities in providing solutions that address torque requirements, which are increasingly essential to critical mechanical performance. For segment reporting purposes, the results of operations and assets of TCS have been included in the Commercial & Industrial Group since the acquisition date. On May 4, 2017, Snap-on acquired Norbar Torque Tools Holdings Limited, along with its U.S. and Chinese joint ventures (“Norbar”), for a cash purchase price of $71.6 million (or $69.9 million, net of cash acquired). Norbar, based in Banbury, U.K., designs and manufactures a full range of torque products, including wrenches, multipliers and calibrators, for use in critical industries. The acquisition of Norbar enhanced and expanded Snap-on’s capabilities in providing solutions that address torque requirements. For segment reporting purposes, the results of operations and assets of Norbar have been included in the Commercial & Industrial Group since the acquisition date. On January 30, 2017, Snap-on acquired BTC Global Limited (“BTC”) for a cash purchase price of $9.2 million. BTC, based in Crewe, U.K., designs and implements automotive vehicle inspection and management software for original equipment manufacturer (“OEM”) franchise repair shops. The acquisition of BTC enhanced Snap-on’s capabilities to grow enterprise revenues and add increased productivity for repair workshops. For segment reporting purposes, the results of operations and assets of BTC have been included in the Repair Systems & Information Group since the acquisition date. On November 16, 2016, Snap-on acquired Ryeson Corporation (d/b/a Sturtevant Richmont) for a cash purchase price of $13.0 million (or $12.6 million, net of cash acquired). Sturtevant Richmont, based in Carol Stream, Illinois, designs, manufactures and distributes mechanical and electronic torque wrenches as well as wireless torque error proofing systems for a variety of industrial applications. The acquisition of Sturtevant Richmont enhanced and expanded Snap-on’s capabilities in providing solutions that address torque requirements. For segment reporting purposes, the results of operations and assets of Sturtevant Richmont have been included in the Commercial & Industrial Group since the acquisition date. On October 31, 2016, Snap-on acquired Car-O-Liner Holding AB (“Car-O-Liner”) for a cash purchase price of $152.0 million (or $148.1 million, net of cash acquired). Car-O-Liner, based in Gothenburg, Sweden, designs and manufactures collision repair equipment, and information and truck alignment systems. The acquisition of Car-O-Liner complemented and increased Snap-on’s existing equipment and repair and service information product offerings, broadened its established capabilities in serving vehicle repair facilities and further expanded the company’s presence with repair shop owners and managers. For segment reporting purposes, substantially all of Car-O-Liner’s results of operations and assets have been included in the Repair Systems & Information Group since the acquisition date, with the remaining portions included in the Commercial & Industrial Group. On July 27, 2015, Snap-on acquired the assets of Ecotechnics S.p.A. (“Ecotechnics”) for a cash purchase price of $11.8 million. Ecotechnics, based in Sesto Fiorentino, Italy, designs and manufactures vehicle air conditioning service equipment for OEM dealerships and the automotive aftermarket worldwide. The acquisition of the Ecotechnics product line complemented and increased Snap-on’s existing equipment product offering for OEM dealerships and independent automotive repair shops, broadened its established capabilities in serving vehicle repair facilities, and expanded the company’s presence with repair shop owners and managers. For segment reporting purposes, the results of operations and assets of Ecotechnics have been included in the Repair Systems & Information Group since the acquisition date. Pro forma financial information has not been presented for any of these acquisitions as the net effects, individually and collectively, were neither significant nor material to Snap-on’s results of operations or financial position. 28 SNAP-ON INCORPORATED


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    Consolidated net sales of $3,686.9 million in 2017 increased $256.5 million, or 7.5%, from 2016 levels, reflecting a $115.0 million, or 3.4%, increase in organic sales (a non-GAAP financial measure that excludes acquisition-related sales and the impact of foreign currency translation) and $141.5 million of acquisition-related sales. Foreign currency translation had no effect on net sales in 2017. Operating earnings before financial services of $664.0 million in 2017, including $8.6 million of unfavorable foreign currency effects, increased $8.5 million, or 1.3%, as compared to $655.5 million last year. Fiscal 2017 results included a $30.9 million charge related to a judgment in a patent-related litigation matter and a $15.0 million charge related to a judgment in an employment-related litigation matter brought by an individual (collectively, the “legal matters”); both judgments are being appealed. The company can provide no assurance as to the results of these appeals. As a percentage of net sales, operating earnings before financial services of 18.0% in 2017 compared to 19.1% last year. Operating earnings of $881.5 million in 2017, including $45.9 million of expense related to the legal matters and $9.0 million of unfavorable foreign currency effects, increased $27.3 million, or 3.2%, from $854.2 million last year. As a percentage of revenues (net sales plus financial services revenue), operating earnings of 22.0% in 2017 compared to 23.0% last year. In 2017, net earnings attributable to Snap-on were $557.7 million, or $9.52 per diluted share, including $28.4 million, or $0.48 per diluted share, for the after-tax expense related to the legal matters, and $7.0 million, or $0.12 per diluted share, of tax expense as a result of the implementation of “H.R.1”, formerly known as the U.S. Tax Cuts and Jobs Act (the “Tax Act”). Net earnings attributable to Snap-on Incorporated in 2016 were $546.4 million or $9.20 per diluted share. Impact of the Tax Act On December 22, 2017, the U.S. government passed the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to: (i) reducing the future U.S. federal corporate tax rate from 35 percent to 21 percent; (ii) requiring companies to pay a one-time transition tax on certain unremitted earnings of foreign subsidiaries; and (iii) bonus depreciation that will allow for full expensing of qualified property. The Tax Act also established new tax laws that will affect 2018, including, but not limited to: (i) the reduction of the U.S. federal corporate tax rate discussed above; (ii) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (iii) a new provision designed to tax global intangible low-taxed income (“GILTI”); (iv) the repeal of the domestic production activity deductions; (v) limitations on the deductibility of certain executive compensation; (vi) limitations on the use of foreign tax credits to reduce the U.S. income tax liability; and (vii) a new provision that allows a domestic corporation an immediate deduction for a portion of its foreign derived intangible income (“FDII”). The Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the related accounting under ASC 740, Accounting for Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for a certain income tax effect of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. 2017 ANNUAL REPORT 29


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) The company’s accounting for certain elements of the Tax Act is incomplete. However, the company was able to make reasonable estimates of the effects and, therefore, recorded provisional estimates for these items. In connection with its initial analysis of the impact of the Tax Act, the company has recorded a provisional discrete net tax expense of $7.0 million in the period ended December 30, 2017. This provisional estimate consists of a net expense of $13.7 million for the one- time transition tax and a net benefit of $6.7 million related to revaluation of deferred tax assets and liabilities, caused by the new lower corporate tax rate. To determine the transition tax, the company must determine the amount of post-1986 accumulated earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. While the company was able to make a reasonable estimate of the transition tax, it is continuing to gather additional information to more precisely compute the final amount. Likewise, while the company was able to make a reasonable estimate of the impact of the reduction to the corporate tax rate, it may be affected by other analyses related to the Tax Act, including, but not limited to, the state tax effect of adjustments made to federal temporary differences. Due to the complexity of the new GILTI tax rules, the company is continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under GAAP, the company is allowed to make an accounting policy choice to either: (1) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”); or (2) factor in such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The company’s selection of an accounting policy with respect to the new GILTI tax rules is dependent on additional analysis and potential future modifications to existing structure, which are not currently known. Accordingly, the company has not made any adjustments related to potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI. The company will continue to analyze the full effects of the Tax Act on its financial statements. The impact of the Tax Act may differ from the current estimate, possibly materially, due to changes in interpretations and assumptions the company has made, future guidance that may be issued and actions the company may take as a result of the law. The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels. Segment net sales of $1,265.0 million in 2017 increased $116.7 million, or 10.2%, from 2016 levels, reflecting a $52.0 million, or 4.5%, organic sales gain and $65.5 million of acquisition-related sales, partially offset by $0.8 million of unfavorable foreign currency translation. The organic sales increase includes higher sales to customers in critical industries and in the segment’s European-based hand tools business, partially offset by lower sales in the segment’s power tools operation. Operating earnings of $185.3 million in 2017 increased $17.3 million, or 10.3%, from 2016 levels, primarily due to increased organic sales volume, acquisitions, and $0.4 million of favorable foreign currency effects. The Commercial & Industrial Group intends to continue building on the following strategic priorities in 2018: x Continuing to invest in emerging market growth initiatives; x Expanding our business with existing customers and reaching new customers in critical industries and other market segments; x Broadening our product offering and engineered solutions designed particularly for critical industry segments; x Increasing our customer-connection-driven understanding of work across multiple industries; x Investing in innovation that, guided by that understanding of work, delivers an ongoing stream of productivity- enhancing solutions; and x Continuing to reduce structural and operating costs through RCI initiatives. The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel. Segment net sales of $1,625.1 million in 2017 decreased $8.8 million, or 0.5%, from 2016 levels, reflecting a $6.9 million, or 0.4%, organic sales decline and $1.9 million of unfavorable foreign currency translation. The organic sales decrease includes a decline in the company’s U.S. franchise operations that was partially offset by higher sales in the international franchise operations. Operating earnings of $274.5 million in 2017 decreased $6.6 million, or 2.3%, from 2016 levels primarily due to $7.9 million of unfavorable foreign currency effects, partially offset by lower operating expenses. 30 SNAP-ON INCORPORATED


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    Despite the net sales challenges in 2017, the Snap-on Tools Group remained focused on its fundamental, strategic initiatives to strengthen the franchise network and enhance franchisee profitability. In 2018, the Snap-on Tools Group intends to continue these initiatives, with specific focus on the following: x Continuing to improve franchisee satisfaction, productivity, profitability and commercial health; x Developing new programs and products to expand market coverage, reaching new technicians and increasing penetration with existing customers; x Increasing investment in new product innovation and development; and x Increasing customer service levels and productivity in back office support functions, manufacturing and the supply chain through RCI initiatives and investment. By focusing on these areas, we believe that Snap-on, as well as its franchisees, will have the opportunity to continue to serve customers more effectively, more profitably and with improved satisfaction. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships through direct and distributor channels. Segment net sales of $1,347.2 million in 2017 increased $167.3 million, or 14.2%, from 2016 levels, reflecting an $89.6 million, or 7.6%, organic sales gain, $76.0 million of acquisition-related sales and $1.7 million of favorable foreign currency translation. The organic sales increase primarily reflects higher sales to OEM dealerships, as well as increased sales to independent repair shop owners and managers, including higher sales of diagnostic and repair information products, and increased sales of undercar equipment. Operating earnings of $333.8 million in 2017 increased $36.0 million, or 12.1%, from 2016 levels, primarily due to higher sales, including acquisition-related sales, and savings from RCI initiatives, partially offset by $1.1 million of unfavorable foreign currency effects. The Repair Systems & Information Group intends to focus on the following strategic priorities in 2018: x Expanding the product offering with new products and services, thereby providing more to sell to repair shop owners and managers; x Continuing software and hardware upgrades to further improve functionality, performance and efficiency; x Leveraging integration of software solutions; x Continuing productivity advancements through RCI initiatives and leveraging of resources; and x Increasing penetration in geographic markets, including emerging markets. Financial Services revenue was $313.4 million in 2017 and $281.4 million in 2016; originations of $1,072.0 million in 2017 decreased $3.7 million, or 0.3%, from 2016 levels. In 2017, operating earnings from financial services of $217.5 million, including $0.4 million of unfavorable foreign currency effects, increased $18.8 million, or 9.5%, from $198.7 million last year. In recent years, Snap-on has steadily grown its financial services portfolio by providing financing for new finance and contract receivables originated by our global financial services operations. Financial Services intends to focus on the following strategic priorities in 2018: x Delivering financial products and services that attract and sustain profitable franchisees and support Snap-on’s strategies for expanding market coverage and penetration; x Improving productivity levels and ensuring high quality in all financial products and processes through the use of RCI initiatives; and x Maintaining healthy portfolio performance levels. Cash Flows Net cash provided by operating activities of $608.5 million in 2017 increased $32.4 million from $576.1 million in 2016. The $32.4 million increase is primarily due to $12.6 million of higher net earnings and $14.9 million of cash proceeds from the settlement of a treasury lock. Net cash provided by operating activities was $507.2 million in 2015. 2017 ANNUAL REPORT 31


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Net cash used by investing activities of $341.4 million in 2017 included additions to finance receivables of $892.0 million, partially offset by collections of $712.7 million, as well as $82.9 million (net of $1.8 million of cash acquired) for the acquisitions of BTC, Norbar, and TCS, and working capital adjustments for the Car-O-Liner and Sturtevant Richmont acquisitions. Net cash used by investing activities of $473.4 million in 2016 included additions to finance receivables of $915.0 million, partially offset by collections of $671.7 million, as well as, on a preliminary basis, a total of $160.4 million (net of $4.3 million of cash acquired) for the acquisitions of Car-O-Liner and Sturtevant Richmont. Net cash used by investing activities of $306.4 million in 2015 included additions to finance receivables of $844.2 million, partially offset by collections of $624.8 million, as well as $11.8 million for the acquisition of Ecotechnics. Capital expenditures in 2017, 2016 and 2015 totaled $82.0 million, $74.3 million and $80.4 million, respectively. Capital expenditures in all three years included investments to support the company’s execution of its strategic growth initiatives and Value Creation Processes around safety, quality, customer connection, innovation and savings from the company’s RCI initiatives. Net cash used by financing activities of $256.1 million in 2017 included the January 2017 repayment of $150 million of 5.5% unsecured notes upon maturity (the “2017 Notes”). These amounts were partially offset by Snap-on’s sale, on February 15, 2017, of $300 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”) at a discount, from which Snap-on received $297.8 million of net proceeds, reflecting $1.9 million of transaction costs. Net cash used by financing activities in 2017 also included $287.9 million for the repurchase of 1,820,000 shares of Snap-on’s common stock and $169.4 million for dividend payments to shareholders, partially offset by $46.2 million of proceeds from stock purchase and option plan exercises and $30.6 million of proceeds from a net increase in notes payable and other short-term borrowings. Net cash used by financing activities of $116.0 million in 2016 included $147.5 million for dividend payments to shareholders and $120.4 million for the repurchase of 758,000 shares of Snap-on’s common stock, partially offset by $134.2 million of proceeds from a net increase in notes payable and other short-term borrowings and $41.8 million of proceeds from stock purchase and option plan exercises. Net cash used by financing activities of $236.7 million in 2015 included $127.9 million for dividend payments to shareholders, $110.4 million for the repurchase of 723,000 shares of Snap-on’s common stock and $34.0 million from a net decrease in notes payable and other short-term borrowings, partially offset by $41.6 million of proceeds from stock purchase and option plan exercises. Fiscal Year Snap-on’s fiscal year ends on the Saturday that is on or nearest to December 31. Unless otherwise indicated, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “fiscal 2017” or “2017” refer to the fiscal year ended December 30, 2017; references to “fiscal 2016” or “2016” refer to the fiscal year ended December 31, 2016; and references to “fiscal 2015” or “2015” refer to the fiscal year ended January 2, 2016. References in this document to 2017, 2016 and 2015 year end refer to December 30, 2017, December 31, 2016, and January 2, 2016, respectively. Snap-on’s 2017, 2016 and 2015 fiscal years each contained 52 weeks of operating results. 32 SNAP-ON INCORPORATED


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    Results of Operations 2017 vs. 2016 Results of operations for 2017 and 2016 are as follows: (Amounts in millions) 2017 2016 Change Net sales $ 3,686.9 100.0% $ 3,430.4 100.0% $ 256.5 7.5% Cost of goods sold (1,862.0) -50.5% (1,720.8) -50.2% (141.2) -8.2% Gross profit 1,824.9 49.5% 1,709.6 49.8% 115.3 6.7% Operating expenses (1,160.9) -31.5% (1,054.1) -30.7% (106.8) -10.1% Operating earnings before financial services 664.0 18.0% 655.5 19.1% 8.5 1.3% Financial services revenue 313.4 100.0% 281.4 100.0% 32.0 11.4% Financial services expenses (95.9) -30.6% (82.7) -29.4% (13.2) -16.0% Operating earnings from financial services 217.5 69.4% 198.7 70.6% 18.8 9.5% Operating earnings 881.5 22.0% 854.2 23.0% 27.3 3.2% Interest expense (52.4) -1.3% (52.2) -1.4% (0.2) -0.4% Other income (expense) – net (7.2) -0.2% (0.6) – (6.6) NM Earnings before income taxes and equity earnings 821.9 20.5% 801.4 21.6% 20.5 2.6% Income tax expense (250.9) -6.2% (244.3) -6.6% (6.6) -2.7% Earnings before equity earnings 571.0 14.3% 557.1 15.0% 13.9 2.5% Equity earnings, net of tax 1.2 – 2.5 0.1% (1.3) NM Net earnings 572.2 14.3% 559.6 15.1% 12.6 2.3% Net earnings attributable to noncontrolling interests (14.5) -0.4% (13.2) -0.4% (1.3) -9.8% Net earnings attributable to Snap-on Inc. $ 557.7 13.9% $ 546.4 14.7% $ 11.3 2.1% NM: Not meaningful Percentage Disclosure: All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue. Net sales of $3,686.9 million in 2017 increased $256.5 million, or 7.5%, from 2016 levels, reflecting a $115.0 million, or 3.4%, organic sales gain and $141.5 million of acquisition-related sales. Foreign currency translation had no effect on net sales in 2017. Gross profit of $1,824.9 million in 2017 compared to $1,709.6 million last year. Gross margin (gross profit as a percentage of net sales) of 49.5% in 2017 decreased 30 basis points (100 basis points (“bps”) equals 1.0 percent) from 49.8% last year primarily due to 20 bps of unfavorable foreign currency effects and a 20 bps impact from acquisitions, partially offset by RCI savings. Restructuring costs included in gross profit were $0.8 million in 2016. 2017 ANNUAL REPORT 33


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Operating expenses of $1,160.9 million in 2017 compared to $1,054.1 million last year, as 2017 included $45.9 million of charges related to the legal matters. The operating expense margin (operating expenses as a percentage of net sales) of 31.5% in 2017 increased 80 bps from 30.7% last year as 130 bps for the legal matters and 30 bps of operating expenses from acquisitions were partially offset by benefits from sales volume leverage. Restructuring costs included in operating expenses were $0.1 million in 2016. Operating earnings before financial services of $664.0 million in 2017, including $45.9 million of expense related to the legal matters and $8.6 million of unfavorable foreign currency effects, increased $8.5 million, or 1.3%, as compared to $655.5 million last year. As a percentage of net sales, operating earnings before financial services of 18.0%, including 130 bps impact from the legal matters, compared to 19.1% last year. Financial services revenue of $313.4 million in 2017 compared to revenue of $281.4 million last year. Financial services operating earnings of $217.5 million in 2017 increased $18.8 million, or 9.5%, as compared to $198.7 million last year, including $0.4 million of unfavorable foreign currency effects. The year-over-year increases in both revenue and operating earnings primarily reflect continued growth of the company’s financial services portfolio. Operating earnings of $881.5 million in 2017, including $45.9 million of expense related to the legal matters and $9.0 million of unfavorable foreign currency effects, increased $27.3 million, or 3.2%, from $854.2 million last year. As a percentage of revenues, operating earnings of 22.0% compared to 23.0% last year. Interest expense of $52.4 million in 2017 increased $0.2 million from $52.2 million last year. See Note 9 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities. Other income (expense) – net was expense of $7.2 million and $0.6 million in 2017 and 2016, respectively. Other income (expense) – net reflects net losses and gains associated with hedging and currency exchange rate transactions, and interest income. See Note 16 to the Consolidated Financial Statements for information on other income (expense) – net. Snap-on’s effective income tax rate on earnings attributable to Snap-on was 31.1% in 2017, including a 0.4% benefit from the legal matters, compared to 31.0% in 2016. The 2017 tax rate includes a $7.0 million, or 90 bps, impact from the implementation of the Tax Act, including the estimated transition tax of $13.7 million on previously unremitted foreign earnings, partially offset by a $6.7 million estimated tax benefit related to revaluation of deferred tax assets and liabilities. See Note 8 to the Consolidated Financial Statements for information on income taxes. Net earnings attributable to Snap-on of $557.7 million, or $9.52 per diluted share, in 2017, including $28.4 million, or $0.48 per diluted share, for the after-tax expense related to the legal matters, and $7.0 million, or $0.12 per diluted share related to the Tax Act, increased $11.3 million, or $0.32 per diluted share, from 2016 levels. Net earnings attributable to Snap-on in 2016 were $546.4 million or $9.20 per diluted share. Segment Results Snap-on’s business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. Snap-on’s reportable business segments are: (i) the Commercial & Industrial Group; (ii) the Snap-on Tools Group; (iii) the Repair Systems & Information Group; and (iv) Financial Services. The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government, power generation, transportation and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels. The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s worldwide mobile tool distribution channel. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships through direct and distributor channels. Financial Services consists of the business operations of Snap-on’s finance subsidiaries. Snap-on evaluates the performance of its operating segments based on segment revenues, including both external and intersegment net sales, and segment operating earnings. Snap-on accounts for intersegment sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments. Identifiable assets by segment are those assets used in the respective reportable segment’s operations. Corporate assets consist of cash and cash equivalents (excluding cash held at Financial Services), deferred income taxes and certain other assets. All significant intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results. 34 SNAP-ON INCORPORATED


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    Commercial & Industrial Group (Amounts in millions) 2017 2016 Change External net sales $ 986.1 78.0% $ 863.0 75.2% $ 123.1 14.3% Intersegment net sales 278.9 22.0% 285.3 24.8% (6.4) -2.2% Segment net sales 1,265.0 100.0% 1,148.3 100.0% 116.7 10.2% Cost of goods sold (766.9) -60.6% (698.3) -60.8% (68.6) -9.8% Gross profit 498.1 39.4% 450.0 39.2% 48.1 10.7% Operating expenses (312.8) -24.8% (282.0) -24.6% (30.8) -10.9% Segment operating earnings $ 185.3 14.6% $ 168.0 14.6% $ 17.3 10.3% Segment net sales of $1,265.0 million in 2017 increased $116.7 million, or 10.2%, from 2016 levels, reflecting a $52.0 million or 4.5%, organic sales gain and $65.5 million of acquisition-related sales, partially offset by $0.8 million of unfavorable foreign currency translation. The organic sales increase primarily includes a high single-digit gain in sales to customers in critical industries, and a mid single-digit gain in the segment’s European-based hand tools business. These organic sales gains were partially offset by a low single-digit decline in sales in the segment’s power tools operations. Segment gross profit of $498.1 million in 2017 compared to $450.0 million last year. Gross margin of 39.4% in 2017 improved 20 bps from 39.2% last year primarily due to savings from RCI and other cost reduction initiatives. Segment operating expenses of $312.8 million in 2017 compared to $282.0 million last year. The operating expense margin of 24.8% in 2017 increased 20 bps from 24.6% last year as 40 bps of operating expenses from acquisitions and increased costs for research and engineering activities were partially offset by benefits from sales volume leverage. As a result of these factors, segment operating earnings of $185.3 million in 2017, including $0.4 million of favorable foreign currency effects, increased $17.3 million from 2016 levels. Operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group was 14.6% in both years. Snap-on Tools Group (Amounts in millions) 2017 2016 Change Segment net sales $ 1,625.1 100.0% $ 1,633.9 100.0% $ (8.8) -0.5% Cost of goods sold (930.9) -57.3% (929.8) -56.9% (1.1) -0.1% Gross profit 694.2 42.7% 704.1 43.1% (9.9) -1.4% Operating expenses (419.7) -25.8% (423.0) -25.9% 3.3 0.8% Segment operating earnings $ 274.5 16.9% $ 281.1 17.2% $ (6.6) -2.3% Segment net sales of $1,625.1 million in 2017 decreased $8.8 million, or 0.5%, from 2016 levels, reflecting a $6.9 million, or 0.4%, organic sales decrease and $1.9 million of unfavorable foreign currency translation. The organic sales decrease reflects a low single-digit decline in the company’s U.S. franchise operations partially offset by a high single-digit gain in the international franchise operations. Segment gross profit of $694.2 million in 2017 compared to $704.1 million last year. Gross margin of 42.7% in 2017 decreased from 43.1% last year due to 40 bps of unfavorable foreign currency effects. Segment operating expenses of $419.7 million in 2017 compared to $423.0 million last year. The operating expense margin of 25.8% in 2017 improved 10 bps from 25.9% last year. As a result of these factors, segment operating earnings of $274.5 million in 2017, including $7.9 million of unfavorable foreign currency effects, decreased $6.6 million from 2016 levels. Operating margin for the Snap-on Tools Group of 16.9% in 2017 compared to 17.2% last year. 2017 ANNUAL REPORT 35


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Repair Systems & Information Group (Amounts in millions) 2017 2016 Change External net sales $ 1,075.7 79.8% $ 933.5 79.1% $ 142.2 15.2% Intersegment net sales 271.5 20.2% 246.4 20.9% 25.1 10.2% Segment net sales 1,347.2 100.0% 1,179.9 100.0% 167.3 14.2% Cost of goods sold (714.6) -53.0% (624.4) -52.9% (90.2) -14.4% Gross profit 632.6 47.0% 555.5 47.1% 77.1 13.9% Operating expenses (298.8) -22.2% (257.7) -21.9% (41.1) -15.9% Segment operating earnings $ 333.8 24.8% $ 297.8 25.2% $ 36.0 12.1% Segment net sales of $1,347.2 million in 2017 increased $167.3 million, or 14.2%, from 2016 levels, reflecting an $89.6 million, or 7.6%, organic sales gain, $76.0 million of acquisition-related sales and $1.7 million of favorable foreign currency translation. The organic sales increase includes a double-digit gain in sales to OEM dealerships, a high single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers, and mid single-digit increases in sales of undercar equipment. Segment gross profit of $632.6 million in 2017 compared to $555.5 million last year. Gross margin of 47.0% in 2017 decreased 10 bps from 47.1% last year, as the impact from higher sales of lower gross margin products were partially offset by savings from RCI initiatives and 20 bps of benefits from acquisitions. Restructuring costs included in gross profit were $0.8 million in 2016. Segment operating expenses of $298.8 million in 2017 compared to $257.7 million last year. The operating expense margin of 22.2% in 2017 increased 30 bps from 21.9% last year primarily due to a 120 bps impact from acquisitions, partially offset by benefits from sales volume leverage. Restructuring costs included in operating expenses were $0.1 million in 2016. As a result of these factors, segment operating earnings of $333.8 million in 2017, including $1.1 million of unfavorable foreign currency effects, increased $36.0 million from 2016 levels. Operating margin for the Repair Systems & Information Group of 24.8% in 2017 compared to 25.2% last year. Financial Services (Amounts in millions) 2017 2016 Change Financial services revenue $ 313.4 100.0% $ 281.4 100.0% $ 32.0 11.4% Financial services expenses (95.9) -30.6% (82.7) -29.4% (13.2) -16.0% Segment operating earnings $ 217.5 69.4% $ 198.7 70.6% $ 18.8 9.5% Financial services revenue of $313.4 million in 2017 increased $32.0 million, or 11.4%, from $281.4 million last year primarily reflecting $34.9 million of higher revenue as a result of continued growth of the company’s financial services portfolio, partially offset by $2.9 million of decreased revenue from lower average yields on finance and contract receivables. In 2017 and 2016, the respective average yields on finance receivables were 17.9% and 18.0%, and the respective average yield on contract receivables were 9.2% and 9.4%. Originations of $1,072.0 million in 2017 decreased $3.7 million, or 0.3%, from 2016 levels. Financial services expenses primarily include personnel-related and other general and administrative costs, as well as provisions for credit losses. These expenses are generally more dependent on changes in the financial services portfolio than they are on the revenue of the segment. Financial services expenses of $95.9 million in 2017 increased from $82.7 million last year primarily due to changes in both the provisions for credit losses and in the size of the portfolio. As a percentage of the average financial services portfolio, financial services expenses were 5.0% and 4.9% in 2017 and 2016, respectively. Financial services operating earnings of $217.5 million in 2017, including $0.4 million of unfavorable foreign currency effects, increased $18.8 million, or 9.5%, from 2016 levels. See Note 1 and Note 3 to the Consolidated Financial Statements for further information on financial services. 36 SNAP-ON INCORPORATED


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    Corporate Snap-on’s general corporate expenses in 2017 of $129.6 million increased $38.2 million from $91.4 million last year. The year-over-year increase in general corporate expenses primarily reflects $45.9 million of expense related to the legal matters, partially offset by lower performance-based compensation costs and lower pension expenses. Fourth Quarter Results of operations for the fourth quarters of 2017 and 2016 are as follows: Fourth Quarter (Amounts in millions) 2017 2016 Change Net sales $ 974.6 100.0% $ 889.8 100.0% $ 84.8 9.5% Cost of goods sold (509.3) -52.3% (445.9) -50.1% (63.4) -14.2% Gross profit 465.3 47.7% 443.9 49.9% 21.4 4.8% Operating expenses (307.6) -31.5% (267.8) -30.1% (39.8) -14.9% Operating earnings before financial services 157.7 16.2% 176.1 19.8% (18.4) -10.4% Financial services revenue 79.9 100.0% 74.2 100.0% 5.7 7.7% Financial services expenses (25.5) -31.9% (22.6) -30.5% (2.9) -12.8% Operating earnings from financial services 54.4 68.1% 51.6 69.5% 2.8 5.4% Operating earnings 212.1 20.1% 227.7 23.6% (15.6) -6.9% Interest expense (13.6) -1.3% (13.1) -1.4% (0.5) -3.8% Other income (expense) – net (1.5) -0.1% (0.3) – (1.2) NM Earnings before income taxes and equity earnings 197.0 18.7% 214.3 22.2% (17.3) -8.1% Income tax expense (63.8) -6.1% (64.9) -6.7% 1.1 1.7% Earnings before equity earnings 133.2 12.6% 149.4 15.5% (16.2) -10.8% Equity earnings, net of tax – – 0.3 – (0.3) NM Net earnings 133.2 12.6% 149.7 15.5% (16.5) -11.0% Net earnings attributable to noncontrolling interests (3.7) -0.3% (3.4) -0.3% (0.3) -8.8% Net earnings attributable to Snap-on Inc. $ 129.5 12.3% $ 146.3 15.2% $ (16.8) -11.5% NM: Not meaningful Percentage Disclosure: All income statement line item percentages below “Operating earnings from financial services” are calculated as a percentage of the sum of Net sales and Financial services revenue. Net sales of $974.6 million in the fourth quarter of 2017 increased $84.8 million, or 9.5%, from 2016 levels, reflecting a $38.9 million, or 4.3%, organic sales gain, $29.7 million of acquisition-related sales, and $16.2 million of favorable foreign currency translation. Gross profit of $465.3 million in the fourth quarter of 2017 compared to $443.9 million last year. Gross margin of 47.7% in the quarter declined 220 bps from 49.9% last year primarily due to higher sales of lower gross margin products, 60 bps of lower gross margins on acquisition-related sales, and 20 bps of unfavorable foreign currency effects. Operating expenses of $307.6 million in the fourth quarter of 2017 compared to $267.8 million last year, as 2017 included a $30.9 million legal charge discussed above. The operating expense margin of 31.5% in the quarter increased 140 bps from 30.1% last year as 320 bps related to the legal charge were partially offset by benefits from sales volume leverage and a 40 bps benefit from operating expenses for acquisitions. 2017 ANNUAL REPORT 37


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Operating earnings before financial services of $157.7 million in the fourth quarter of 2017, including $30.9 million of expense related to the legal charge, decreased $18.4 million, or 10.4%, as compared to $176.1 million last year. As a percentage of net sales, operating earnings before financial services of 16.2% in the quarter, including the legal charge, compared to 19.8% last year. Financial services revenue of $79.9 million in the fourth quarter of 2017 compared to revenue of $74.2 million last year. Financial services operating earnings of $54.4 million in the fourth quarter of 2017, including $0.3 million of favorable foreign currency effects, increased $2.8 million, or 5.4%, as compared to $51.6 million last year. The year-over-year increases in both revenue and operating earnings primarily reflect continued growth of the company’s financial services portfolio. Operating earnings of $212.1 million in the fourth quarter of 2017, including $1.8 million of favorable foreign currency effects and $30.9 million of expense for the legal charge, decreased $15.6 million, or 6.9%, from $227.7 million last year. As a percentage of revenues, operating earnings of 20.1% in the quarter compared to 23.6% last year. Interest expense of $13.6 million in the fourth quarter of 2017 increased $0.5 million from $13.1 million last year. See Note 9 to the Consolidated Financial Statements for information on Snap-on’s debt and credit facilities. Other income (expense) – net was expense of $1.5 million and $0.3 million in the respective fourth quarters of 2017 and 2016. See Note 16 to the Consolidated Financial Statements for information on other income (expense) – net. Snap-on’s fourth quarter effective income tax rate on earnings attributable to Snap-on was 33.0%, including a 1.2% benefit from the legal charge, in 2017 compared to 30.8% in 2016. The 2017 rate includes a $7.0 million, or 360 bps, impact related to the implementation of the Tax Act, including the estimated transition tax of $13.7 million on previously unremitted foreign earnings, partially offset by a $6.7 million estimated tax benefit related to revaluation of deferred tax assets and liabilities. See Note 8 to the Consolidated Financial Statements for information on income taxes. Net earnings attributable to Snap-on of $129.5 million, or $2.24 per diluted share, in the fourth quarter of 2017, including $19.1 million, or $0.33 per diluted share, for the after-tax expense related to the legal charge, and $7.0 million, or $0.12 per diluted share related to the Tax Act, decreased $16.8 million, or $0.23 per diluted share, from 2016 levels. Net earnings attributable to Snap-on in the fourth quarter of 2016 were $146.3 million or $2.47 per diluted share. Segment Results Commercial & Industrial Group Fourth Quarter (Amounts in millions) 2017 2016 Change External net sales $ 273.2 80.0% $ 218.5 76.3% $ 54.7 25.0% Intersegment net sales 68.5 20.0% 67.8 23.7% 0.7 1.0% Segment net sales 341.7 100.0% 286.3 100.0% 55.4 19.4% Cost of goods sold (207.7) -60.8% (170.9) -59.7% (36.8) -21.5% Gross profit 134.0 39.2% 115.4 40.3% 18.6 16.1% Operating expenses (83.1) -24.3% (71.5) -25.0% (11.6) -16.2% Segment operating earnings $ 50.9 14.9% $ 43.9 15.3% $ 7.0 15.9% Segment net sales of $341.7 million in the fourth quarter of 2017 increased $55.4 million, or 19.4%, from 2016 levels, reflecting a $29.5 million, or 10.1%, organic sales gain, $19.1 million of acquisition-related sales and $6.8 million of favorable foreign currency translation. The organic sales increase primarily includes double-digit gains in both sales to customers in critical industries and the segment’s European-based hand tools business, as well as low single-digit gains in both the segment’s power tools and Asia/Pacific operations. 38 SNAP-ON INCORPORATED


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    Segment gross profit of $134.0 million in the fourth quarter of 2017 compared to $115.4 million last year. Gross margin of 39.2% in the quarter declined 110 bps from 40.3% last year due to higher sales of lower gross margin products and 50 bps of unfavorable foreign currency effects. Segment operating expenses of $83.1 million in the fourth quarter of 2017 compared to $71.5 million last year. The operating expense margin of 24.3% in the quarter improved 70 bps from 25.0% last year primarily due to the benefits of sales volume leverage, partially offset by 50 bps of operating expenses from acquisitions. As a result of these factors, segment operating earnings of $50.9 million in the fourth quarter of 2017, including $0.6 million of unfavorable foreign currency effects, increased $7.0 million from 2016 levels. Operating margin for the Commercial & Industrial Group of 14.9% in the fourth quarter of 2017 compared to 15.3% last year. Snap-on Tools Group Fourth Quarter (Amounts in millions) 2017 2016 Change Segment net sales $ 409.2 100.0% $ 417.5 100.0% $ (8.3) -2.0% Cost of goods sold (239.9) -58.6% (242.0) -58.0% 2.1 0.9% Gross profit 169.3 41.4% 175.5 42.0% (6.2) -3.5% Operating expenses (102.0) -25.0% (102.0) -24.4% – – Segment operating earnings $ 67.3 16.4% $ 73.5 17.6% $ (6.2) -8.4% Segment net sales of $409.2 million in the fourth quarter of 2017 decreased $8.3 million, or 2.0%, from 2016 levels, reflecting a $12.6 million, or 3.0%, organic sales decline, partially offset by $4.3 million of favorable foreign currency translation. The organic sales decrease reflects a mid single-digit decline in the company’s U.S. franchise operations, partially offset by a mid single-digit gain in the international franchise operations. Segment gross profit of $169.3 million in the fourth quarter of 2017 compared to $175.5 million last year. Gross margin of 41.4% in the quarter declined 60 bps from 42.0% due to the lower volume and related costs. Segment operating expenses of $102.0 million in the fourth quarter of 2017 was unchanged from last year. The operating expense margin of 25.0 % in the quarter increased 60 bps from 24.4% last year primarily due to the effect of lower sales. As a result of these factors, segment operating earnings of $67.3 million in the fourth quarter of 2017, including $1.3 million of favorable foreign currency effects, decreased $6.2 million from 2016 levels. Operating margin for the Snap-on Tools Group of 16.4% in the fourth quarter of 2017 compared to 17.6% last year. Repair Systems & Information Group Fourth Quarter (Amounts in millions) 2017 2016 Change External net sales $ 292.2 81.9% $ 253.8 79.4% $ 38.4 15.1% Intersegment net sales 64.6 18.1% 66.0 20.6% (1.4) -2.1% Segment net sales 356.8 100.0% 319.8 100.0% 37.0 11.6% Cost of goods sold (194.8) -54.6% (166.8) -52.2% (28.0) -16.8% Gross profit 162.0 45.4% 153.0 47.8% 9.0 5.9% Operating expenses (72.2) -20.2% (70.5) -22.0% (1.7) -2.4% Segment operating earnings $ 89.8 25.2% $ 82.5 25.8% $ 7.3 8.8% 2017 ANNUAL REPORT 39


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    Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) Segment net sales of $356.8 million in the fourth quarter of 2017 increased $37.0 million, or 11.6%, from 2016 levels, reflecting a $20.2 million, or 6.2%, organic sales gain, $10.6 million of acquisition-related sales and $6.2 million of favorable foreign currency translation. The organic sales increase includes a double-digit gain in sales to OEM dealerships, and a low single-digit gain in sales of diagnostic and repair information products to independent repair shop owners and managers. Segment gross profit of $162.0 million in the fourth quarter of 2017 compared to $153.0 million last year. Gross margin of 45.4% in the quarter decreased 240 bps from 47.8% last year as a 110 bps impact from acquisitions, higher sales of lower gross margin products, and 10 bps of unfavorable foreign currency impacts were partially offset by savings from RCI initiatives. Segment operating expenses of $72.2 million in the fourth quarter of 2017 compared to $70.5 million last year. The operating expense margin of 20.2% improved 180 bps from 22.0% last year due to the higher sales volume and 80 bps of benefits from acquisitions, partially offset by 10 bps of unfavorable foreign currency effects. As a result of these factors, segment operating earnings of $89.8 million in the fourth quarter of 2017, including $0.8 million of favorable foreign currency effects, increased $7.3 million from 2016 levels. Operating margin for the Repair Systems & Information Group of 25.2% in the fourth quarter of 2017 compared to 25.8% last year. Financial Services Fourth Quarter (Amounts in millions) 2017 2016 Change Financial services revenue $ 79.9 100.0% $ 74.2 100.0% $ 5.7 7.7% Financial services expenses (25.5) -31.9% (22.6) -30.5% (2.9) -12.8% Segment operating earnings $ 54.4 68.1% $ 51.6 69.5% $ 2.8 5.4% Financial services revenue of $79.9 million in the fourth quarter of 2017 increased $5.7 million, or 7.7%, from $74.2 million last year primarily reflecting $7.7 million of higher revenue as a result of continued growth of the company’s financial services portfolio, partially offset by $2.0 million of decreased revenue from lower average yields on finance and contract receivables. In the fourth quarters of 2017 and 2016, the respective average yields on finance receivables were 17.8% and 18.2%, and the respective average yields on contract receivables were 9.2% and 9.3%. Originations of $265.0 million in the fourth quarter of 2017 increased $4.7 million, or 1.8%, from 2016 levels. Financial services expenses primarily include personnel-related and other general and administrative costs, as well as provisions for credit losses. These expenses are generally more dependent on changes in the financial services portfolio than they are on the revenue of the segment. Financial services expenses of $25.5 million in the fourth quarter of 2017 increased from $22.6 million last year primarily due to changes in both the provisions for credit losses and in the size of the portfolio. As a percentage of the average financial services portfolio, financial services expenses were 1.3% for both the fourth quarters of 2017 and 2016. Financial services operating earnings of $54.4 million in the fourth quarter of 2017, including $0.3 million of favorable foreign currency effects, increased $2.8 million, or 5.4%, from 2016 levels. See Note 1 and Note 3 to the Consolidated Financial Statements for further information on financial services. Corporate Snap-on’s fourth quarter 2017 general corporate expenses of $50.3 million increased $26.5 million from $23.8 million last year primarily due to the $30.9 million legal charge, partially offset by lower performance-based compensation costs. 40 SNAP-ON INCORPORATED

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