Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Net earnings attributable to Snap-on of $1,016.9 million, or $19.19 per diluted share, in 2025, included a $16.2 million, or $0.31 per diluted share, after-tax benefit from the 2025 legal settlement and an $18.5 million, or $0.35 per diluted share, after-tax year-over-year increase in non-service net periodic benefit costs. Net earnings attributable to Snap-on of $1,043.9 million, or $19.51 per diluted share, in 2024, included a $17.5 million, or $0.32 per diluted share, after-tax benefit from the 2024 legal payments.
Summary of Segment Performance
The Commercial & Industrial Group consists of business operations serving a broad range of industrial and commercial customers worldwide, including customers in the aerospace, natural resources, government and military, power generation, transportation, and technical education market segments (collectively, “critical industries”), primarily through direct and distributor channels. Segment net sales of $1,457.5 million in 2025 represented a decrease of $19.3 million, or 1.3%, from 2024 levels, reflecting a $30.9 million, or 2.1%, organic sales decline, partially offset by $11.6 million of favorable foreign currency translation. The organic decrease is primarily due to a mid single-digit reduction in the segment’s Asia Pacific operations and a low single-digit decline in the European-based hand tools business, partially offset by a mid single-digit increase in specialty torque. Segment operating earnings of $218.2 million in 2025 compared to $242.1 million in 2024.
The Commercial & Industrial Group intends to focus on the following strategic priorities in 2026:
• Expanding our business with existing customers and reaching new customers in critical industries and other market segments;
• Leveraging our investments in emerging markets to support growth initiatives;
• Broadening our product offering designed particularly for critical industry segments;
• Increasing our customer-connection-driven understanding of work across multiple industries;
• Investing in innovation that, guided by that understanding of work, delivers an ongoing stream of productivity-enhancing custom-engineered solutions; and
• Continuing to reduce structural and operating costs, as well as improve efficiencies, through RCI initiatives.
The Snap-on Tools Group consists of business operations primarily serving vehicle service and repair technicians through the company’s multinational mobile tool distribution channel. Segment net sales of $1,964.9 million in 2025 represented a decrease of $24.3 million, or 1.2%, from 2024 levels. T he decline is due to a low single-digit decrease in the U.S., partially offset by a low single-digit gain in the segment’s international operations. Segment o perating earnings of $426.3 million in 2025 compared to $447.3 million in 2024.
The Snap-on Tools Group intends to focus on the following strategic priorities in 2026:
• Enhancing franchisee sales productivity, profitability, commercial health, and satisfaction;
• Developing new programs and products to match current technician preferences, reaching new customers and increasing penetration with existing customers;
• Expanding investment in new product innovation and development; and
• Improving customer service levels and productivity in back office support functions, manufacturing and the supply chain through RCI initiatives and capacity investment.
The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and original equipment manufacturer (“OEM”) dealership service and repair shops (“OEM dealerships”) through direct and distributor channels. Segment net sales of $1,877.1 million in 2025 represented an increase of $79.2 million, or 4.4%, from 2024 levels, reflecting a $70.6 million, or 3.9%, organic sales gain and $8.6 million of favorable foreign currency translation. The organic improvement reflects a double-digit increase in activity with OEM dealerships and a mid single-digit rise in sales of diagnostic and repair information products to independent repair shop owners and managers, partially offset by a low single-digit decline in sales of undercar equipment. Segment o perating earnings of $500.8 million in 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $455.2 million in 2024.
SNAP-ON INCORPORATED
The Repair Systems & Information Group intends to focus on the following strategic priorities in 2026:
• Extending the product offering with new products and services, thereby providing more to sell to repair shop owners and managers;
• Continuing software and hardware upgrades to further improve functionality, performance and efficiency;
• Further building our proprietary databases to enhance software solutions, including using artificial intelligence (“AI”) to accelerate expansion in that arena;
• Advancing productivity through RCI initiatives and the optimization of resources; and
• Increasing geographic penetration, including in emerging markets.
Financial Services generates revenue from various financing programs and is a strategic partner of the company’s mobile franchise van channel. Financial services revenue of $412.9 million in 2025 compared to $401.0 million in 2024. Originations of $1,120.9 million in 2025 represented a decrease of $62.0 million, or 5.2%, from 2024 levels. Operating earnings from financial services of $281.8 million in 2025 compared to $276.9 million last year.
Financial Services intends to focus on the following strategic priorities in 2026:
• Delivering financial products and services that attract and sustain profitable franchisees and support Snap‑on’s strategies for expanding market coverage and penetration;
• Improving productivity levels and ensuring high quality in all financial products and processes through the use of RCI initiatives; and
• Maintaining healthy portfolio performance levels.
Cash Flows
Net cash provided by operating activities of $1,081.7 million in 2025 compared to $1,217.5 million in 2024. The $135.8 million decrease is primarily due to a $26.6 million decline in net earnings and a $105.6 million change in net operating assets and liabilities.
Net cash used by investing activities of $73.1 million in 2025 included additions to finance receivables of $913.6 million, which were partially offset by collections of $888.9 million. Net cash used by investing activities of $204.1 million in 2024 included additions to finance receivables of $966.0 million, partially offset by collections of $837.8 million. Capital expenditures in 2025 and 2024 totaled $76.0 million and $83.5 million, respectively. Capital expenditures in both years included continued investments related to the company’s execution of its strategic growth initiatives and Value Creation Processes around safety, quality, customer connection, innovation and RCI.
Net cash used by financing activities of $749.9 million in 2025 included $462.2 million for dividend payments to shareholders and $328.6 million for the repurchase of 987,000 shares of Snap-on’s common stock. These amounts were partially offset by $73.9 million of proceeds from stock purchase plans and stock option exercises, and net proceeds from other short-term borrowings of $3.3 million. Net cash used by financing activities of $649.8 million in 2024 included $406.4 million for dividend payments to shareholders, $290.0 million for the repurchase of 952,000 shares of Snap-on’s common stock, and net repayments of other short-term borrowings of $1.3 million. These amounts were partially offset by $92.3 million of proceeds from stock purchase plans and stock option exercises.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Results of Operations
Results of operations for 2025 and 2024 are as follows:
(Amounts in millions)
Change
Net sales
Cost of goods sold
Gross profit
Operating expenses
Operating earnings before financial services
Financial services revenue
Financial services expenses
Operating earnings from financial services
Operating earnings
Interest expense
Other income (expense) – net
Earnings before income taxes
Income tax expense
Net earnings
Net earnings attributable to noncontrolling interests
Net earnings attributable to Snap-on Incorporated
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 $4,743.2 million in 2025 represented an increase of $35.8 million, or 0.8%, from 2024 levels, reflecting a $16.5 million, or 0.3%, organic sales gain and $19.3 million of favorable foreign currency translation.
Gross profit of $2,385.4 million in 2025 compared to $2,377.9 million last year. Gross margin (gross profit as a percentage of net sales) decreased 20 basis points (100 basis points (“bps”) equals 1.0 percent) from 2024 reflecting 20 bps of unfavorable foreign currency effects. The impact of tariffs in 2025 was largely offset by benefits from the company’s RCI initiatives.
Operating expenses of $1,339.5 million in 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $1,309.1 million last year, which included a $22.5 million benefit from the 2024 legal payments . Operating expenses as a percentage of net sales rose 40 bps from last year primarily due to increased brand-building, personnel and other costs.
The effects of the legal items were included in operating expenses, operating earnings before financial services, and operating earnings in 2025 and 2024, respectively. As a percentage of net sales, the legal items contributed a 50 bps benefit to operating expenses and operating earnings before financial services in their respective periods. As a percentage of revenues, operating earnings also included a 40 bps benefit from the legal items in both 2025 and 2024. Therefore, the legal items had no net effect on these year-over-year comparisons.
Operating earnings before financial services of $1,045.9 million in 2025 compared to $1,068.8 million in 2024. As a percentage of net sales, operating earnings before financial services were 22.1% compared to 22.7% last year.
Financial services revenue of $412.9 million in 2025 compared to $401.0 million last year. Financial services operating earnings of $281.8 million in 2025 compared to $276.9 million in 2024 .
Operating earnings of $1,327.7 million in 2025 compared to $1,345.7 million in 2024. As a percentage of revenues, operating earnings were 25.8% compared to 26.3% last year.
Interest expense in 2025 increased $0.9 million from last year. See Note 9 to the Consolidated Financial Statements for additional information on debt and credit facilities.
SNAP-ON INCORPORATED
Other income (expense) – net primarily includes interest income, non-service components of net periodic benefit costs, and net gains and losses associated with hedging and currency exchange rate transactions. In 2025, other income (expense) - net included $23.9 million of increased year-over-year non-service net periodic benefit costs, primarily reflecting higher amortization of actuarial losses. See Note 17 to the Consolidated Financial Statements for additional information on Other income (expense) – net.
The effective income tax rate on earnings attributable to Snap-on was 22.4% in 2025 and 22.6% in 2024. See Note 8 to the Consolidated Financial Statements for additional information on income taxes.
Net earnings attributable to Snap-on in 2025 of $1,016.9 million, or $19.19 per diluted share, included a $16.2 million, or $0.31 per diluted share, after-tax benefit from the 2025 legal settlement and an $18.5 million, or $0.35 per diluted share, after-tax, year-over-year increase in non-service net periodic benefit costs. Net earnings attributable to Snap-on in 2024 of $1,043.9 million, or $19.51 per diluted share, included a $17.5 million, or $0.32 per diluted share, after-tax benefit from the 2024 legal payments.
Segment Results
Snap-on’s operating segments, which represent Snap-on’s reportable segments, are based on the organizational structure used by the Chief Executive Office, its CODM, to make operating and investment determinations and to assess performance. Snap-on’s reportable operating 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 and military, power generation, transportation and technical education market segments, 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 multinational mobile tool distribution channel. The Repair Systems & Information Group consists of business operations serving other professional vehicle repair customers worldwide, primarily owners and managers of independent repair shops and OEM dealerships, through direct and distributor channels. Financial Services consists of the business operations of Snap-on’s finance subsidiaries.
The CODM evaluates the performance of the Commercial & Industrial Group, the Snap-on Tools Group and the Repair Systems & Information Group operating segments based on segment net sales and segment operating earnings. The segment net sales of the Snap-on Tools Group reflect external net sales, while the segment net sales of the Commercial & Industrial Group and the Repair Systems & Information Group include both external and intersegment net sales. Snap-on accounts for intersegment net sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments. The Financial Services operating segment is evaluated based on financial services revenue and segment operating earnings. Corporate expenses primarily reflect stock-based compensation and other costs not attributable to an operating segment. Intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results.
Commercial & Industrial Group
(Amounts in millions)
Change
External net sales
Intersegment net sales
Segment net sales
Segment cost of goods sold
Segment gross profit
Segment operating expenses
Segment operating earnings
Segment net sales of $1,457.5 million in 2025 represented a decrease of $19.3 million, or 1.3%, from 2024 levels, reflecting a $30.9 million, or 2.1%, organic sales decline, partially offset by $11.6 million of favorable foreign currency translation. The organic decrease is primarily due to a mid single-digit reduction in the segment’s Asia Pacific operations and a low single-digit decline in the European-based hand tools business, partially offset by a mid single-digit increase in specialty torque.
Segment gross margin in 2025 decreased 70 bps from last year primarily reflecting the reduced sales volumes, higher material and other costs, and 30 bps of unfavorable currency effects, partially offset by savings from the segment’s RCI initiatives.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
During the fourth quarter of 2025, Snap-on refined its footprint and aspects of its go-to-market strategy within the Commercial & Industrial Group. These activities included the sale of a building for a net gain of $15.9 million, the retirement of certain trademarks at a cost of $8.9 million, and restructuring charges of $2.5 million (collectively, the “2025 footprint actions”). The 2025 footprint actions resulted in a net benefit to operating expenses of $4.5 million.
Segment operating expenses as a percentage of net sales in 2025 rose 70 bps as compared to 2024 primarily due to the impact of lower sales volumes, and increased personnel and other costs, partially offset by the net benefit from the 2025 footprint actions.
As a result of these factors, segment operating earnings of $218.2 million in 2025 compared to $242.1 million in 2024. Segment operating margin (segment operating earnings as a percentage of segment net sales) for the Commercial & Industrial Group of 15.0% in 2025 compared to 16.4% last year.
Snap-on Tools Group
(Amounts in millions)
Change
Segment net sales
Segment cost of goods sold
Segment gross profit
Segment operating expenses
Segment operating earnings
Segment net sales of $1,964.9 million in 2025 represented a decrease of $24.3 million, or 1.2%, from 2024 levels. The decline is due to a low single-digit decrease in the U.S., partially offset by a low single-digit gain in the segment’s international operations.
Segment gross margin in 2025 decreased 30 bps from last year primarily as a result of the reduced volumes.
Segment operating expenses as a percentage of net sales in 2025 rose 50 bps as compared to 2024 primarily due to the lower sales volumes, as well as increased brand-building and other costs.
As a result of these factors, segment operating earnings of $426.3 million in 2025 compared to $447.3 million in 2024. Operating margin for the Snap‑on Tools Group of 21.7% in 2025 compared to 22.5% last year.
Repair Systems & Information Group
(Amounts in millions)
Change
External net sales
Intersegment net sales
Segment net sales
Segment cost of goods sold
Segment gross profit
Segment operating expenses
Segment operating earnings
Segment net sales of $1,877.1 million in 2025 represented an increase of $79.2 million, or 4.4%, from 2024 levels, reflecting a $70.6 million, or 3.9%, organic sales gain and $8.6 million of favorable foreign currency translation. The organic improvement reflects a double-digit increase in activity with OEM dealerships and a mid single-digit rise in sales of diagnostic and repair information products to independent repair shop owners and managers, partially offset by a low single-digit decline in sales of undercar equipment.
Segment gross margin in 2025 improved 40 bps from last year primarily due to the increased sales and benefits from the segment’s RCI initiatives, partially offset by higher material and other costs.
Segment operating expenses in 2025 included a $22.0 million benefit from the 2025 legal settlement. Segment operating expenses as a percentage of net sales in 2025 improved 100 bps from 2024 primarily reflecting a 120 bps benefit from the 2025 legal settlement.
SNAP-ON INCORPORATED
As a result of these factors, segment operating earnings of $500.8 million in 2025, including a $22.0 million benefit from the 2025 legal settlement, compared to $455.2 million in 2024. Operating margin for the Repair Systems & Information Group of 26.7% in 2025 compared to 25.3% last year.
Financial Services
(Amounts in millions)
Change
Financial services revenue
Financial services expenses
Segment operating earnings
Financial services revenue is generally dependent on the size of the average financial services portfolio during the period, as well as on the average yield on receivables. Financial services revenue of $412.9 million in 2025 represented an increase of $11.9 million, or 3.0%, from 2024, and included $7.4 million of revenue resulting from a full additional week of interest income from the 53-week 2025 fiscal year. In 2025 and 2024, the respective average yields on finance receivables were 17.6% and 17.7%. In 2025 and 2024 , the average yields on contract receivables were 9.1% and 9.0% , respectively. Originations of $1,120.9 million in 2025 represented a decrease of $62.0 million, or 5.2%, from 2024 levels.
Financial services expenses primarily include personnel-related and other general and administrative costs, as well as provisions for credit losses. These expenses are generally more dependent on changes in the size of the financial services portfolio than they are on the revenue of the segment. Financial services expenses in 2025 increased $7.0 million primarily due to $2.4 million of higher provisions for credit losses, as well as increased personnel and other costs. As a percentage of the average financial services portfolio, financial services expenses were 5.2% in 2025 and 5.0% in 2024.
As a result of these factors, segment operating earnings of $281.8 million in 2025 compared to $276.9 million last year .
See Note 1 and Note 4 to the Consolidated Financial Statements for additional information on financial services.
Corporate
S nap-on’s general corporate expenses in 2025 of $99.4 million compared to $75.8 million recorded in 2024 . The year-over-year increase primarily reflects the benefits from the legal payments received in 2024.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Quarterly Data
(Amounts in millions, except per share data)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Net sales
Gross profit
Financial services revenue
Financial services expenses
Net earnings
Net earnings attributable to Snap-on Incorporated
Earnings per share – basic*
Earnings per share – diluted*
Cash dividends paid per share
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Net sales
Gross profit
Financial services revenue
Financial services expenses
Net earnings
Net earnings attributable to Snap-on Incorporated
Earnings per share – basic*
Earnings per share – diluted*
Cash dividends paid per share
Amounts may not total to annual earnings per share because each quarter and year are calculated separately based on basic and diluted weighted-average common shares outstanding during each respective period.
SNAP-ON INCORPORATED
Fourth Quarter
Results of operations for the fourth quarters of 2025 and 2024 are as follows:
Fourth Quarter
(Amounts in millions)
Change
Net sales
Cost of goods sold
Gross profit
Operating expenses
Operating earnings before financial services
Financial services revenue
Financial services expenses
Operating earnings from financial services
Operating earnings
Interest expense
Other income (expense) – net
Earnings before income taxes
Income tax expense
Net earnings
Net earnings attributable to noncontrolling interests
Net earnings attributable to Snap-on Incorporated
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 $1,231.9 million in the fourth quarter of 2025 represented an increase of $33.2 million, or 2.8%, from 2024 levels, reflecting a $17.6 million, or 1.4%, organic gain and $15.6 million of favorable foreign currency translation.
Gross profit of $605.5 million in the fourth quarter of 2025 compared to $596.1 million last year. Gross margin in the quarter decreased 50 bps from the fourth quarter of 2024 primarily due to higher material and other costs, partially offset by benefits from the company’s RCI initiatives.
Operating expenses of $340.3 million in the fourth quarter of 2025 compared to $330.9 million in 2024. Operating expenses as a percentage of net sales rose 10 bps from last year.
Operating earnings before financial services of $265.2 million in the fourth quarter of 2025 was unchanged from 2024. As a percentage of net sales, operating earnings before financial services were 21.5% compared to 22.1% last year.
Financial services revenue of $108.0 million in the fourth quarter of 2025 compared to $100.5 million last year. Financial services operating earnings of $74.4 million in the period compared to $66.7 million in 2024 .
Operating earnings of $339.6 million in the fourth quarter of 2025 compared to $331.9 million in 2024. As a percentage of revenues, operating earnings were 25.3% in the quarter compared to 25.5% last year.
Interest expense in the fourth quarter of 2025 increased $1.1 million from last year . See Note 9 to the Consolidated Financial Statements for additional information on debt and credit facilities.
Other income (expense) – net primarily includes interest income , non-service components of net periodic benefit costs, and net gains and losses associated with hedging and currency exchange rate transactions. In the fourth quarter of 2025, other income (expense) - net included $6.0 million of increased year-over-year non-service net periodic benefit costs, primarily reflecting higher amortization of actuarial losses. See Note 17 to the Consolidated Financial Statements for additional information on Other income (expense) – net.
The effective income tax rate on earnings attributable to Snap-on in the fourth quarter was 22.3% in 2025 and 22.5% in 2024. See Note 8 to the Consolidated Financial Statements for additional information on income taxes.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Net earnings attributable to Snap-on of $260.7 million, or $4.94 per diluted share, in the fourth quarter of 2025 compared to $258.1 million, or $4.82 per diluted share, in the fourth quarter of 2024.
Segment Results
Commercial & Industrial Group
Fourth Quarter
(Amounts in millions)
Change
External net sales
Intersegment net sales
Segment net sales
Segment cost of goods sold
Segment gross profit
Segment operating expenses
Segment operating earnings
Segment net sales of $398.1 million in the fourth quarter of 2025 represented an increase of $18.9 million, or 5.0%, fro m 2024 levels, reflecting an $11.0 million, or 2.8%, organic gain and $7.9 million of favorable foreign currency translation. The organic increase is primarily due to a mid single-digit rise in activity with customers in critical industries, a double-digit gain in the power tools operation, and a mid single-digit increase in specialty torque, partially offset by lower sales to U.S. markets by the Asia Pacific business.
Segment gross margin in the fourth quarter decreased 240 bps from last year primarily reflecting higher material and other costs, increased sales volumes in lower-gross-margin businesses, and 30 bps of unfavorable foreign currency effects, partially offset by savings from the segment’s RCI initiatives.
Segment operating expenses as a percentage of net sales in the fourth quarter of 2025 improved 90 bps from 2024 primarily due to the net benefit from the 2025 footprint actions.
As a result of these factors, segment operating earnings of $60.6 million in the fourth quarter of 2025 compared to $63.5 million in 2024. Operating margin for the Commercial & Industrial Group of 15.2% in the quarter compared to 16.7% last year.
Snap-on Tools Group
Fourth Quarter
(Amounts in millions)
Change
Segment net sales
Segment cost of goods sold
Segment gross profit
Segment operating expenses
Segment operating earnings
Segment net sales of $505.0 million in the fourth quarter of 2025 represented a decrease of $1.6 million, or 0.3%, from 2024 levels, reflecting a $3.4 million, or 0.7%, organic sales decline, partially offset by $1.8 million of favorable foreign currency translation. The organic decrease is due to a low single-digit decline in the U.S., partially offset by a high single-digit gain in the segment’s international operations.
Segment gross margin in the fourth quarter improved 150 bps from last year primarily due to a year-over-year shift in product mix and savings from the segment’s RCI initiatives.
Segment operating expenses as a percentage of net sales in the fourth quarter rose 140 bps from 2024 primarily reflecting increased brand-building and other costs.
As a result of these factors, segment operating earnings of $107.3 million in the fourth quarter of 2025 compared to $106.9 million in 2024. Operating margin for the Snap‑on Tools Group of 21.2% in the quarter compared to 21.1% last year.
SNAP-ON INCORPORATED
Repair Systems & Information Group
Fourth Quarter
(Amounts in millions)
Change
External net sales
Intersegment net sales
Segment net sales
Segment cost of goods sold
Segment gross profit
Segment operating expenses
Segment operating earnings
Segment net sales of $467.8 million in the fourth quarter of 2025 represented an increase of $11.2 million, or 2.5%, from 2024 levels, reflecting a $4.8 million, or 1.0%, organic sales gain and $6.4 million of favorable foreign currency translation. The organic improvement includes low single-digit gains in activity with OEM dealerships and in sales of diagnostic and repair information products to independent repair shop owners and managers, while sales of undercar equipment were essentially flat.
Segment gross margin in the fourth quarter decreased 10 bps from last year. The impact of tariffs in 2025 was largely offset by benefits from the segment’s RCI initiatives.
Segment operating expenses as a percentage of net sales in the fourth quarter rose 130 bps from 2024 primarily due to increased activity in higher-expense businesses and a rise in other costs.
As a result of these factors, segment operating earnings of $117.7 million in the fourth quarter of 2025 compared to $121.4 million in 2024. Operating margin for the Repair Systems & Information Group of 25.2% in the quarter compared to 26.6% last year.
Financial Services
Fourth Quarter
(Amounts in millions)
Change
Financial services revenue
Financial services expenses
Segment operating earnings
Financial services revenue of $108.0 million in the fourth quarter of 2025 represented an increase of $7.5 million, or 7.5%, from 2024, primarily reflecting $7.4 million of higher revenue as a result of a full additional week of interest income from the 53-week 2025 fiscal year. In the fourth quarters of 2025 and 2024, the respective average yields on finance receivables were 17.6% and 17.7% . In the fourth quarters of 2025 and 2024 , the average yield on contract receivables was 9.1% in both periods. Originations of $285.1 million in the quarter were unchanged from last year.
Financial services expenses in the fourth quarter of 2025 of $33.6 million compared to $33.8 million last year. As a percentage of the average financial services portfolio, financial services expenses were 1.3% in the fourth quarters of both 2025 and 2024.
As a result of these factors, segment operating earnings of $74.4 million in the fourth quarter of 2025 compared to $66.7 million in 2024.
See Note 1 and Note 4 to the Consolidated Financial Statements for additional information on financial services.
Corporate
Snap-on’s fourth quarter 2025 general corporate expenses of $20.4 million compared to $26.6 million last year. The year-over-year decrease primarily reflects lower performance-based compensation and other costs.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Non-GAAP Supplemental Data
The following non-GAAP supplemental data is presented for informational purposes to provide readers with insight into the information used by management for assessing the operating performance of Snap-on’s non-financial services (“Operations”) and Financial Services businesses.
The supplemental Operations data reflects the results of operations and financial position of Snap-on’s tools, diagnostics, equipment products, software, and other non-financial services operations with Financial Services presented on the equity method. The supplemental Financial Services data reflects the results of operations and financial position of Snap-on’s U.S. and international financial services operations. The financing needs of Financial Services are met through intersegment borrowings and cash generated from Operations; Financial Services is charged interest expense on intersegment borrowings at market rates. Income taxes are charged to Financial Services on the basis of the specific tax attributes generated by the U.S. and international financial services businesses. Transactions between the Operations and Financial Services businesses are eliminated to arrive at the Consolidated Financial Statements.
Non-GAAP Supplemental Consolidating Data – Supplemental Statements of Earnings information for 2025 and 2024 is as follows:
Operations*
Financial Services
(Amounts in millions)
Net sales
Cost of goods sold
Gross profit
Operating expenses
Operating earnings before financial services
Financial services revenue
Financial services expenses
Operating earnings from financial services
Operating earnings
Interest expense
Intersegment interest income (expense) – net
Other income (expense) – net
Earnings before income taxes and equity earnings
Income tax expense
Earnings before equity earnings
Financial services – net earnings attributable to Snap-on Incorporated
Net earnings
Net earnings attributable to noncontrolling interests
Net earnings attributable to Snap-on Incorporated
* Snap-on with Financial Services presented on the equity method.
SNAP-ON INCORPORATED
Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheets Information as of 2025 and 2024 year end is as follows:
Operations*
Financial Services
(Amounts in millions)
ASSETS
Current assets:
Cash and cash equivalents
Intersegment receivables
Trade and other accounts receivable – net
Finance receivables – net
Contract receivables – net
Inventories – net
Prepaid expenses and other current assets
Total current assets
Property and equipment – net
Operating lease right-of-use assets
Investment in Financial Services
Deferred income tax assets
Intersegment long-term notes receivable
Long-term finance receivables – net
Long-term contract receivables – net
Goodwill
Other intangible assets – net
Pension assets
Other long-term assets
Total assets
* Snap-on with Financial Services presented on the equity method.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Non-GAAP Supplemental Consolidating Data – Supplemental Balance Sheets Information (continued):
Operations*
Financial Services
(Amounts in millions)
LIABILITIES AND EQUITY
Current liabilities:
Notes payable
Accounts payable
Intersegment payables
Accrued benefits
Accrued compensation
Franchisee deposits
Other accrued liabilities
Total current liabilities
Long-term debt and intersegment long-term debt
Deferred income tax liabilities
Retiree health care benefits
Pension liabilities
Operating lease liabilities
Other long-term liabilities
Total liabilities
Total shareholders’ equity attributable to Snap-on Incorporated
Noncontrolling interests
Total equity
Total liabilities and equity
* Snap-on with Financial Services presented on the equity method.
SNAP-ON INCORPORATED
Liquidity and Capital Resources
Snap-on’s growth has historically been funded by a combination of cash provided by operating activities and debt financing. Snap-on believes that its cash from operations and collections of finance receivables, coupled with its sources of borrowings and available cash on hand, are sufficient to fund its currently anticipated requirements for scheduled debt repayments, payments of interest and dividends, new receivables originated by our financial services businesses, capital expenditures, working capital, funding of pension plans, and share repurchases and acquisitions, if and as they arise.
Due to Snap-on’s credit rating over the years, external funds have been available at an acceptable cost. As of February 6, 2026, Snap-on’s long-term debt and commercial paper were rated, respectively: A2 and P-1 by Moody’s Investors Service; A- and A-2 by Standard & Poor’s; and A and F1 by Fitch Ratings. Snap-on believes that its current credit arrangements are sound and that the strength of its balance sheet affords the company the financial flexibility, including through access to financial markets for potential new financing, to respond to both internal growth opportunities and those available through acquisitions. However, Snap-on cannot provide any assurance that financing will be available in the future on acceptable terms, or that its debt ratings will not decrease.
The following discussion focuses on information included in the accompanying Consolidated Balance Sheets.
As of 2025 year end, working capital (current assets less current liabilities) of $3,484.3 million represented an increase of $456.4 million from $3,027.9 million as of 2024 year end primarily as a result of the net changes in working capital discussed below.
The following represents the company’s working capital position as of 2025 and 2024 year end:
(Amounts in millions)
Cash and cash equivalents
Trade and other accounts receivable – net
Finance receivables – net
Contract receivables – net
Inventories – net
Prepaid expenses and other current assets
Total current assets
Notes payable
Accounts payable
Other current liabilities
Total current liabilities
Working capital
Cash and cash equivalents of $1,624.5 million as of 2025 year end represented an increase of $264.0 million from 2024 year-end levels primarily due to: (i) $1,081.7 million of cash generated from operations; (ii) $888.9 million of cash from collections of finance receivables; and (iii) $73.9 million of cash proceeds from stock purchase plans and stock option exercises. These increases in cash and cash equivalents were partially offset by: (i) the funding of $913.6 million of new finance receivables; (ii) dividend payments to shareholders of $462.2 million; (iii) the repurchase of 987,000 shares of the company’s common stock for $328.6 million; and (iv) the funding of $76.0 million for capital expenditures.
Of the $1,624.5 million of cash and cash equivalents as of 2025 year end, $548.5 million was held outside of the United States. Snap-on maintains non-U.S. funds in its foreign operations to: (i) provide adequate working capital; (ii) satisfy various regulatory requirements; and/or (iii) take advantage of business expansion opportunities as they arise. Although the Tax Cuts and Jobs Act (“Tax Act”) generally eliminated U.S. federal taxation of dividends from foreign subsidiaries, such dividends may still be subject to state income taxation and foreign withholding taxes. Snap-on periodically evaluates its cash held outside the United States and may pursue opportunities to repatriate certain foreign cash amounts to the extent that it can be accomplished in a tax efficient manner.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Trade and other accounts receivable – net of $881.4 million as of 2025 year end represented an increase of $65.8 million from 2024 year-end levels primarily due to a higher mix of sales with longer payment terms, $25.3 million of foreign currency translation and $19.8 million related to the sale of a building. Days sales outstanding (trade and other accounts receivable – net as of the respective period end, divided by the respective trailing 12 months of sales, times 360 days) was 67 days and 62 days at the respective 2025 and 2024 year ends.
The current portions of net finance and contract receivables of $720.2 million as of 2025 year end compared to $730.3 million at 2024 year end. The long-term portions of net finance and contract receivables of $1,721.9 million as of 2025 year end compared to $1,730.3 million at 2024 year end.
Inventories – net of $1,025.2 million as of 2025 year end increased $81.8 million from 2024 year-end levels primaril y due to uncertainty in the current trade environment and $41.4 million of foreign currency translation. Inventory turns (trailing 12 months of cost of goods sold, divided by the average of the beginning and ending inventory balances for the trailing 12 months) were 2.4 a s of both 2025 and 2024 year end. Inventories accounted for using the first-in, first-out (“FIFO”) method as of 2025 and 2024 year end approximated 62% and 57% of total inventories, respectively. All other inventories are accounted for using the last-in, first-out (“LIFO”) method. The company’s LIFO reserve was $126.7 million and $122.4 million at 2025 and 2024 year end, respectively.
Notes payable of $16.2 million as of 2025 year end compared to $13.7 million as of 2024 year end. Average notes payable outstanding were $18.0 million and $14.9 million in 2025 and 2024, respectively. The 2025 weighted-average interest rate on such borrowings of 13.4% compared with 10.4% in 2024. At 2025 year end, the weighted-average rate on outstanding notes payable of 15.6% compared with 9.5% in 2024.
Accounts payable of $229.1 million as of 2025 year end represented a decrease of $36.8 million from 2024 year-end levels, primarily due to the timing of payments, partially offset by $5.5 million of foreign currency translation.
Other accrued liabilities of $465.1 million as of 2025 year end represented an increase of $7.4 million from 2024 year-end levels.
Long-term debt of $1,186.4 million as of 2025 year end consisted of: (i) $300.0 million of unsecured 3.25% notes that mature on March 1, 2027 (the “2027 Notes”); (ii) $400.0 million of unsecured 4.10% notes that mature on March 1, 2048 (“the 2048 Notes”); and (iii) $500.0 million of 3.10% notes that mature on May 1, 2050 (the “2050 Notes”), partially offset by $13.6 million of unamortized debt issuance costs and issuance discounts.
Snap-on has a $900 million multicurrency revolving credit facility that terminates on September 12, 2028 (the “Credit Facility”). The Credit Facility contains an accordion feature that, subject to certain customary conditions, may allow the maximum commitment to be increased by up to $450 million with the approval of the lenders providing additional commitments. No amounts were borrowed or outstanding under the Credit Facility during the years ended and as of January 3, 2026, or December 28, 2024.
Borrowings under the Credit Facility bear interest at varying rates based on either: (i) Snap-on’s then-current, long-term debt ratings; or (ii) Snap-on’s then-current ratio of consolidated debt net of certain cash adjustments (“Consolidated Net Debt”) to earnings before interest, taxes, depreciation, amortization and certain other adjustments for the preceding four fiscal quarters then ended (the “Consolidated Net Debt to EBITDA Ratio”). The Credit Facility’s financial covenant requires that Snap-on maintain, as of each fiscal quarter end, either (i) a ratio not greater than 0.60 to 1.00 of Consolidated Net Debt to the sum of Consolidated Net Debt plus total equity and less accumulated other comprehensive income or loss (the “Leverage Ratio”); or (ii) a Consolidated Net Debt to EBITDA Ratio not greater than 3.50 to 1.00. Snap-on may, up to two times during any five-year period during the term of the Credit Facility (including any extensions thereof), elect to increase the maximum Leverage Ratio to 0.65 to 1.00 and/or increase the maximum Consolidated Net Debt to EBITDA Ratio to 4.00 to 1.00 for four consecutive fiscal quarters in connection with certain material acquisitions (as defined in the related credit agreement). As of January 3, 2026, the company’s consolidated cash balance, net of certain adjustments, exceeded consolidated debt resulting in actual ratios of (0.05) and (0.21), respectively. Both ratios are within the permitted ranges set forth in this financial covenant.
Snap-on generally issues commercial paper to fund its financing needs on a short-term basis and uses the Credit Facility as back-up liquidity to support such commercial paper issuances. There was no commercial paper issued or outstanding during the years ended and as of January 3, 2026, or December 28, 2024.
Snap-on’s Credit Facility and other debt agreements also contain certain usual and customary borrowing, affirmative, negative and maintenance covenants. As of 2025 year end, Snap-on was in compliance with all covenants of its Credit Facility and other debt agreements.
SNAP-ON INCORPORATED
Snap-on believes it has sufficient available cash and access to both committed and uncommitted credit facilities to cover its expected funding needs on both a short-term and long-term basis. Snap-on manages its aggregate short-term borrowings so as not to exceed its availability under the Credit Facility. Snap-on believes that it can access short-term debt markets, predominantly through commercial paper issuances and existing lines of credit, to fund its short-term requirements and to ensure near-term liquidity. Snap-on regularly monitors the credit and financial markets and, if it believes conditions are favorable, it may take advantage of such conditions to issue long-term debt to further improve its liquidity and capital resources. Near-term liquidity requirements for Snap-on include payments of interest and dividends, funding to support new receivables originated by our financial services businesses, capital expenditures, working capital, the funding of pension plans, and funding for share repurchases and acquisitions, if and as they arise. Snap-on intends to make contributions of $4.5 million to its foreign pension plans and $3.7 million to its domestic pension plans in 2026, as required by law. Depending on market and other conditions, Snap-on may make additional discretionary cash contributions to its pension plans in 2026.
Snap-on’s long-term financing strategy is to maintain continuous access to the debt markets to accommodate its liquidity needs, including the potential use of commercial paper, additional fixed-term debt and/or securitizations.
The following discussion focuses on information included in the accompanying Consolidated Statements of Cash Flows.
Operating Activities
Net cash provided by operating activities of $1,081.7 million in 2025 decreased $135.8 million from $1,217.5 million in 2024. The decrease is primarily due to a $105.6 million change in net operating assets and liabilities and a $26.6 million decrease in net earnings.
Depreciation expense was $75.8 million in 2025 and $72.7 million in 2024. Amortization expense was $22.7 million in 2025 and $25.3 million in 2024. See Note 6 and Note 7 to the Consolidated Financial Statements for information on property and equipment and goodwill and other intangible assets.
Investing Activities
Net cash used by investing activities of $73.1 million in 2025 included additions to finance receivables of $913.6 million, partially offset by collections of $888.9 million and $20.4 million received for the sale of a building and other assets. Net cash used by investing activities of $204.1 million in 2024 included additions to finance receivables of $966.0 million, partially offset by collections of $837.8 million. Finance receivables are comprised of extended-term installment payment contracts to both technicians and independent shop owners (i.e., franchisees’ customers) to enable them to purchase tools, diagnostics, and equipment products on an extended-term payment plan, with average payment terms of approximately four years.
Capital expenditures in 2025 and 2024 totaled $76.0 million and $83.5 million, respectively. Capital expenditures in both years included continued investments related to the company’s execution of its strategic Value Creation Processes. The company also invested in: (i) new product, efficiency, safety and cost reduction initiatives that are intended to expand and improve its manufacturing and distribution capabilities worldwide; (ii) new production and machine tooling to enhance manufacturing operations, as well as ongoing replacements of manufacturing and distribution equipment, particularly in the United States; and (iii) the ongoing enhancement of the company’s global enterprise resource planning (ERP) management information systems. Snap-on believes that its cash generated from operations, as well as its available cash on hand and funds available from its credit facilities will be sufficient to fund the company’s capital expenditure requirements in 2026.
Financing Activities
Net cash used by financing activities was $749.9 million in 2025 and $649.8 million in 2024. Proceeds from stock purchase plans and stock option exercises totaled $73.9 million in 2025 and $92.3 million in 2024. In 2025, Snap-on repurchased 987,000 shares of its common stock for $328.6 million under its previously announced share repurchase programs. Snap-on repurchased 952,000 shares of its common stock for $290.0 million in 2024. As of 2025 year end, Snap-on had remaining availability to repurchase up to an additional $260.0 million in common stock pursuant to its Board’s authorizations. The repurchase of Snap-on common stock to offset dilution related to equity plan issuances or for other corporate purposes is at the company’s discretion, subject to prevailing financial and market conditions. Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to fund the company’s additional share repurchases, if any.
Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939. Cash dividends paid in 2025 and 2024 totaled $462.2 million and $406.4 million, respectively. On November 6, 2025, the company announced that its Board increased the quarterly cash dividend by 14.0% to $2.44 per share ($9.76 per share annualized). Quarterly dividends in 2025 were $2.44 per share in the fourth quarter and $2.14 per share in the first three quarters ($8.86 per share for the year).
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Quarterly dividends in 2024 were $2.14 per share in the fourth quarter and $1.86 per share in the first three quarters ($7.72 per share for the year).
Cash dividends paid per common share
Cash dividends paid as a percentage of prior-year retained earnings
Snap-on believes that its cash generated from operations, available cash on hand, and funds available from its credit facilities, will be sufficient to pay dividends in 2026.
Contractual Obligations and Commitments
Snap-on’s contractual obligations for long-term debt and operating and finance leases are reflected in the Consolidated Balance Sheets; see Note 9 and Note 16 to the Consolidated Financial Statements for information on the company’s long-term debt and leases. Snap-on also enters into contracts for future purchases in the normal course of business. As of year-end 2025, the company had $180.3 million in purchase commitments to be paid in 2026 and $6.5 million to be paid thereafter.
Snap-on intends to make contributions of $4.5 million to its foreign pension plans and $3.7 million to its domestic pension plans in 2026, as required by law. Depending on market and other conditions, Snap-on may make additional discretionary cash contributions to its pension plans in 2026; see Note 11 and Note 12 to the Consolidated Financial Statements for information on the company’s benefit plans and payments.
Due to the uncertainty of the timing of settlements with taxing authorities, Snap-on is unable to make reasonably reliable estimates of the period of cash settlement of unrecognized tax benefits totaling $7.4 million for its remaining uncertain tax liabilities. See Note 8 to the Consolidated Financial Statements for information on income taxes.
Environmental Matters
Snap-on is subject to various federal, state and local government requirements regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. Snap-on’s policy is to comply with these requirements and the company believes that, as a general matter, its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage, and of resulting financial liability, in connection with its business. Some risk of environmental damage is, however, inherent in some of Snap-on’s operations and products, as it is with other companies engaged in similar businesses.
Snap-on is and has been engaged in the handling, manufacture, use and disposal of many substances classified as hazardous or toxic by one or more regulatory agencies. Snap-on believes that, as a general matter, its handling, manufacture, use and disposal of these substances are in accordance with environmental laws and regulations. It is possible, however, that future knowledge or other developments, such as improved capability to detect substances in the environment or increasingly strict environmental laws and standards and enforcement policies, could affect the company’s handling, manufacture, use or disposal of these substances.
In recent years there has been increased public awareness on environmental and sustainability issues, which has resulted in additional and/or more restrictive regulations, disclosure requirements and industry or third-party requirements and standards globally to reduce or mitigate climate change as well as other environmental or sustainability risks. Snap-on is monitoring developments in this area.
New Accounting Standards
See Note 1 to the Consolidated Financial Statements for information on new accounting standards.
SNAP-ON INCORPORATED
Critical Accounting Policies and Estimates
The Consolidated Financial Statements and related notes contain information that is pertinent to management’s discussion and analysis. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are generally based on historical experience, current conditions and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources, as well as identifying and assessing our accounting treatment with respect to commitments and contingencies. Actual results could differ from those estimates.
In addition to the company’s significant accounting policies described in Note 1 to the Consolidated Financial Statements, Snap-on considers the following policies and estimates to be the most critical in understanding the judgments that are involved in the preparation of the company’s consolidated financial statements and the uncertainties that could impact the company’s financial position, results of operations and cash flows.
Allowance for Credit Losses on Finance Receivables: The allowance for credit losses on finance receivables is maintained at a level management believes is adequate to cover expected losses in Snap-on’s finance receivables portfolio as of the reporting date. The allowance represents management’s estimate of the expected losses in the company’s finance receivables portfolio based on ongoing assessments and evaluations of credit losses over the remaining contractual life of the receivables portfolio considering collectability, historical loss experience, current conditions and future market expectations. Determination of the proper level of allowance requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provisions for credit losses and, as a result, net earnings. The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current and future economic conditions and credit risk characteristics. Some of these factors are influenced by items such as the customers’ financial condition, past payment experience, credit bureau and proprietary Snap-on credit model information, as well as the value of the underlying collateral. Changes in economic conditions and assumptions, including the resulting credit quality metrics relative to the performance of the finance receivables portfolio, create uncertainty and could result in changes to both the allowances for credit and provisions for credit .
Management utilizes established policies and procedures in an effort to ensure the estimates and assumptions are well controlled, reviewed and consistently applied. As of January 3, 2026, the ratio of the allowance for credit losses to finance receivables was 3.75%. As of December 28, 2024, the allowance ratio was 3.63%. While management believes it exercises prudent judgment and applies reasonable assumptions in establishing its estimates for allowances for finance receivables, there can be no assurance that changes in economic conditions or other factors would not adversely impact the financial health of our customers and result in changes to the estimates used in the allowance calculation. For reference, a 100 bps increase in the allowance ratios for finance receivables as of January 3, 2026, would have increased Snap-on’s 2025 provisions for credit losses and related allowance for credit losses by approximately $19.6 million.
For additional information on Snap-on’s allowances for credit losses, see Note 1 and Note 4 to the Consolidated Financial Statements.
Impairment of Goodwill: Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. Annual impairment tests are performed by the company in the second quarter of each year using information available as of April month end.
Snap-on evaluates the recoverability of goodwill by estimating the future discounted cash flows of the businesses to which the goodwill relates. Estimated cash flows and related goodwill are grouped at the reporting unit level. The company has determined that its reporting units for testing goodwill impairment are its operating segments or components of an operating segment that constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. Within its four reportable operating segments, the company has identified 11 reporting units.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Snap-on evaluates the recoverability of goodwill by utilizing an income approach that estimates the fair value of the future discounted cash flows of the reporting units to which the goodwill relates. The future projections, which are based on both past performance and the projections and assumptions used in the company’s operating plans, are subject to change as a result of changing economic and competitive conditions. This approach reflects management’s internal outlook at the reporting units, which management believes provides the best determination of value due to management’s insight and experience with the reporting units. Significant estimates used by management in the discounted cash flows methodology include estimates of future cash flows based on expected growth rates, price increases, working capital levels, expected benefits from RCI initiatives, and a weighted-average cost of capital that reflects the risk profile of the reporting unit being tested. The company’s methodologies for valuing goodwill are applied consistently on a year-over-year basis; the assumptions used in performing the second quarter 2025 impairment calculations were evaluated in light of then-current market and business conditions. Snap-on continues to believe that the future discounted cash flow valuation model provides the most reasonable and meaningful fair value estimate based upon the reporting units’ projections of future operating results and cash flows and replicates how market participants would value the company’s reporting units in an orderly transaction.
In the event the fair value of a reporting unit is less than the carrying value, including goodwill, the company would then record an impairment charge based on the excess of a reporting units carrying amount over its fair value.
Inherent in fair value determinations are significant judgments and estimates, including material assumptions about future revenue, profitability and cash flows, the company’s operational plans and its interpretation of current economic indicators. Should the operations of the businesses with which goodwill is associated incur significant and unanticipated changes in circumstances, such as declines in profitability and cash flow due to long-term deterioration in macroeconomic, industry and market conditions, the loss of key customers, changes in technology or markets, changes in key personnel or litigation, a sustained decrease in share price and/or other events, some or all of the recorded goodwill could be subject to impairment and could result in a material adverse effect on Snap-on’s financial position or results of operations.
Snap-on completed its annual impairment testing of goodwill in the second quarter of 2025, the results of which did not result in any impairment. As of 2025 year end, the company has no accumulated impairment losses. Although the company consistently uses the same methods in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain by nature and can vary from actual results. In performing its annual impairment testing the company performed a sensitivity analysis on the material assumptions used in the discounted cash flow valuation models for each of its 11 reporting units. Based on the company’s second quarter 2025 impairment testing, and assuming a hypothetical 10% decrease in the estimated fair values of each of its 11 reporting units, the hypothetical fair value of each of the company’s 11 reporting units would have been greater than its carrying value. See Note 7 to the Consolidated Financial Statements for additional information about goodwill.
Pension Benefits: The pension benefit obligation and related pension expense are calculated in accordance with GAAP and are impacted by certain actuarial assumptions. Changes in these assumptions are primarily influenced by factors outside of Snap-on’s control, such as changes in economic conditions, and can have a significant effect on the amounts reported in the financial statements. Snap-on believes that the two most critical assumptions are (i) the expected return on plan assets; and (ii) the assumed discount rate.
Snap-on’s domestic pension plans have a long-term investment horizon and a total return strategy that emphasizes a capital growth objective. In 2025, the long-term investment performance objective for Snap-on’s domestic plans’ assets was to achieve net of expense returns that met or exceeded the 7.5% domestic expected return on plan assets assumption. Snap-on uses a three-year, market-related value asset method of amortizing the difference between actual and expected returns on its domestic plans’ assets. As of 2025 year end, Snap-on’s domestic pension plans’ assets comprised approximately 86% of the company’s worldwide pension plan assets.
SNAP-ON INCORPORATED
Based on forward-looking capital market expectations, Snap-on selected an expected return on plan assets assumption for its U.S. pension plans of 7.5%, the same rate used in 2025, to be used in determining pension expense for 2026. The process for determining the overall expected long-term return on plan assets begins by establishing long-term assumptions for core economic variables such as U.S. Gross Domestic Product (GDP) growth and inflation, and long-term assumptions for market variables such as interest rates, credit spreads, earnings growth, and equity valuations. When developing these variables, economic relationships and market histories are applied to a forecast of future conditions. In addition to this valuation component, the total return calculation also factors in fundamentals such as coupons, dividend yields and earnings growth, among others by each respective asset class. The asset return assumption is also adjusted by any expected outperformance related to active investment management and an implicit expense load for estimated administrative and investment related expenses. Risk and correlation assumptions are developed based on historical analysis as well as an assessment of future conditions. Since asset allocation is a key determinant of expected investment returns, the current and expected mix of plan assets are also considered when setting the assumption.
Pension expense increases as the expected rate of return on plan assets decreases. Lowering the expected rate of return assumption for Snap-on’s domestic pension plans’ assets by 50 bps would have increased Snap-on’s 2025 domestic pension expense by approximatel y $5.4 million.
The objective of Snap-on’s discount rate assumption is to reflect the rate at which the pension benefits could be effectively settled. The domestic discount rate as of 2025 and 2024 year end was selected based on a cash flow matching methodology developed by the company’s outside actuaries that incorporates a review of current economic conditions. This methodology matches the plans’ yearly projected cash flows for benefits and service costs to those of hypothetical bond portfolios using high-quality, AA rated or better, corporate bonds from either Moody’s Investors Service or Standard & Poor’s credit rating agencies available at the measurement date. This technique calculates bond portfolios that produce adequate cash flows to pay the plans’ projected yearly benefits and then selects the portfolio with the highest yield and uses that yield as the recommended discount rate.
The selection of the 5.5% weighted-average discount rate for Snap-on’s domestic pension plans as of 2025 year end (compared to 5.6% as of 2024 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments. Lowering Snap-on’s domestic discount rate assumption by 50 bps would have increased Snap-on’s 2025 domestic pension expense and projected benefit obligation by approximately $2.8 million and $46.2 million, respectively. As of 2025 year end, Snap-on’s domestic projected benefit obligation comprised approximately 85% of Snap-on’s worldwide projected benefit obligation. The weighted-average discount rate for Snap-on’s foreign pension plans of 4.9% (compared to 4.6% as of 2024 year end) represents the single rate that produces the same present value of cash flows as the estimated benefit plan payments. Lowering Snap-on’s foreign discount rate assumption by 50 bps would have increased Snap-on’s 2025 foreign pension expense and projected benefit obligation by approximately $0.7 million and $12.2 million, respectively.
Actuarial gains and losses in excess of 10 percent of the greater of the projected benefit obligation or market-related value of assets are amortized on a straight-line basis over the average remaining service period of active participants or over the average remaining life expectancy for plans with primarily inactive participants. Prior service costs and credits resulting from plan amendments are amortized in equal annual amounts over the average remaining service period of active participants or over the average remaining life expectancy for plans with primarily inactive participants.
Pension expense was $16.9 million in 2025 and Snap-on expects pension expense of approximately $10.3 million in 2026, primarily reflecting lower amortization of pension actuarial losses. The projected 2026 pension expense is based on benefit plan status, weighted average discount rates, expected returns on plan assets, and other factors. To determine the 2026 net periodic benefit cost, Snap-on is using weighted-average discount rates for its domestic and foreign pension plans of 5.5% and 4.9%, respectively, and an expected return on plan assets for its domestic pension plans of 7.5%. The expected returns on plan assets for foreign pension plans ranged from 2.2% to 6.7% as of 2025 year end. See Note 11 to the Consolidated Financial Statements for additional information on pension plans.
2025 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Outlook
We believe that our markets and our operations possess and have demonstrated continuing and considerable resilience against the uncertainties of the current environment. Snap-on expects to make ongoing progress along its decisive runways for coherent growth, leveraging capabilities already proven in the automotive repair arena, developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure are high. In pursuit of these initiatives, we project that capital expenditures in 2026 will approximate $100 million.
Snap-on currently anticipates that its full-year 2026 effective income tax rate will be in the range of 22% to 23%.
SNAP-ON INCORPORATED
