Document
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                                   to                                                          
Commission File Number 1-7724
Snap-on Incorporated

(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
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $1.00 par value
SNA
New York Stock Exchange
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 every Interactive Data File required to be submitted 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 such files). Yes    No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
Class
 
Outstanding at July 12, 2019
Common Stock, $1.00 par value
 
55,210,205 shares


Table of Contents

TABLE OF CONTENTS 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

SNAP-ON INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in millions, except per share data)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Net sales
$
951.3

 
$
954.6

 
$
1,873.0

 
$
1,890.1

Cost of goods sold
(477.5
)
 
(467.5
)
 
(927.6
)
 
(931.4
)
Gross profit
473.8

 
487.1

 
945.4

 
958.7

Operating expenses
(283.9
)
 
(294.0
)
 
(568.1
)
 
(587.9
)
Operating earnings before financial services
189.9

 
193.1

 
377.3

 
370.8

 
 
 
 
 
 
 
 
Financial services revenue
84.1

 
82.0

 
169.7

 
165.0

Financial services expenses
(23.5
)
 
(24.2
)
 
(47.0
)
 
(50.3
)
Operating earnings from financial services
60.6

 
57.8

 
122.7

 
114.7

 
 
 
 
 
 
 
 
Operating earnings
250.5

 
250.9

 
500.0

 
485.5

Interest expense
(12.4
)
 
(12.0
)
 
(24.9
)
 
(25.6
)
Other income (expense) – net
2.1

 
(0.6
)
 
3.6

 
2.2

Earnings before income taxes and equity earnings
240.2

 
238.3

 
478.7

 
462.1

Income tax expense
(55.6
)
 
(55.8
)
 
(112.5
)
 
(113.4
)
Earnings before equity earnings
184.6

 
182.5

 
366.2

 
348.7

Equity earnings, net of tax
0.3

 
0.2

 
0.8

 
0.8

Net earnings
184.9

 
182.7

 
367.0

 
349.5

Net earnings attributable to noncontrolling interests
(4.5
)
 
(4.0
)
 
(8.7
)
 
(7.8
)
Net earnings attributable to Snap-on Incorporated
$
180.4

 
$
178.7

 
$
358.3

 
$
341.7

 
 
 
 
 
 
 
 
Net earnings per share attributable to Snap-on Incorporated:
 
 
 
 
 
 
 
Basic
$
3.27

 
$
3.17

 
$
6.47

 
$
6.04

Diluted
3.22

 
3.12

 
6.38

 
5.93

 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
Basic
55.2

 
56.4

 
55.4

 
56.6

Effect of dilutive securities
0.8

 
0.9

 
0.8

 
1.0

Diluted
56.0

 
57.3

 
56.2

 
57.6

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.95

 
$
0.82

 
$
1.90

 
$
1.64


See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

SNAP-ON INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Comprehensive income:
 
 
 
 
 
 
 
Net earnings
$
184.9

 
$
182.7

 
$
367.0

 
$
349.5

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation*
(8.4
)
 
(97.6
)
 
(0.8
)
 
(58.5
)
Unrealized cash flow hedges, net of tax:
 
 
 
 
 
 
 
Other comprehensive loss before reclassifications

 

 

 
(0.8
)
Reclassification of cash flow hedges to net earnings
(0.3
)
 
(0.3
)
 
(0.7
)
 
(0.8
)
Defined benefit pension and postretirement plans:
 
 
 
 
 
 
 
Amortization of net unrecognized losses and prior service credits included in net periodic benefit cost
5.9

 
8.0

 
11.7

 
15.6

Income tax benefit
(1.5
)
 
(2.0
)
 
(2.8
)
 
(3.8
)
Net of tax
4.4

 
6.0

 
8.9

 
11.8

Total comprehensive income
$
180.6

 
$
90.8

 
$
374.4

 
$
301.2

 
 
 
 
 
 
 
 
Comprehensive income attributable to noncontrolling interests
(4.5
)
 
(4.0
)
 
(8.7
)
 
(7.8
)
Comprehensive income attributable to Snap-on Incorporated
$
176.1

 
$
86.8

 
$
365.7

 
$
293.4


* There is no reclassification adjustment as there was no sale or liquidation of any foreign entity during any period presented.


See Notes to Condensed Consolidated Financial Statements.

4

Table of Contents

SNAP-ON INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share data)
(Unaudited)

 
June 29,
2019
 
December 29,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
164.0

 
$
140.9

Trade and other accounts receivable – net
684.1

 
692.6

Finance receivables – net
529.0

 
518.5

Contract receivables – net
91.5

 
98.3

Inventories – net
725.8

 
673.8

Prepaid expenses and other assets
112.2

 
92.8

Total current assets
2,306.6

 
2,216.9

 
 
 
 
Property and equipment:
 
 
 
Land
31.6

 
31.7

Buildings and improvements
392.5

 
368.6

Machinery, equipment and computer software
965.6

 
944.4

 
1,389.7

 
1,344.7

Accumulated depreciation and amortization
(883.3
)
 
(849.6
)
Property and equipment – net
506.4

 
495.1

 
 
 
 
Operating lease right-of-use assets
55.4

 

Deferred income tax assets
53.9

 
64.7

Long-term finance receivables – net
1,089.0

 
1,074.4

Long-term contract receivables – net
347.5

 
344.9

Goodwill
907.0

 
902.2

Other intangibles – net
227.9

 
232.9

Other assets
51.7

 
42.0

Total assets
$
5,545.4

 
$
5,373.1


See Notes to Condensed Consolidated Financial Statements.

5

Table of Contents

SNAP-ON INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share data)
(Unaudited)

 
June 29,
2019
 
December 29,
2018
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Notes payable
$
168.2

 
$
186.3

Accounts payable
215.3

 
201.1

Accrued benefits
42.4

 
52.0

Accrued compensation
62.2

 
71.5

Franchisee deposits
69.5

 
67.5

Other accrued liabilities
373.2

 
373.6

Total current liabilities
930.8

 
952.0

 
 
 
 
Long-term debt
947.9

 
946.0

Deferred income tax liabilities
45.4

 
41.4

Retiree health care benefits
30.5

 
31.8

Pension liabilities
136.6

 
171.3

Operating lease liabilities
35.7

 

Other long-term liabilities
109.8

 
112.0

Total liabilities
2,236.7

 
2,254.5

 
 
 
 
Commitments and contingencies (Note 14)

 

 
 
 
 
Equity
 
 
 
Shareholders’ equity attributable to Snap-on Incorporated:
 
 
 
Preferred stock (authorized 15,000,000 shares of $1 par value; none outstanding)

 

Common stock (authorized 250,000,000 shares of $1 par value; issued 67,422,949 and 67,415,091 shares, respectively)
67.4

 
67.4

Additional paid-in capital
371.7

 
359.4

Retained earnings
4,556.1

 
4,257.6

Accumulated other comprehensive loss
(500.7
)
 
(462.2
)
Treasury stock at cost (12,213,408 and 11,804,310 shares, respectively)
(1,206.4
)
 
(1,123.4
)
Total shareholders’ equity attributable to Snap-on Incorporated
3,288.1

 
3,098.8

Noncontrolling interests
20.6

 
19.8

Total equity
3,308.7

 
3,118.6

Total liabilities and equity
$
5,545.4

 
$
5,373.1


See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents

SNAP-ON INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Amounts in millions, except share data)
(Unaudited)
The following summarizes the changes in total equity for the three month period ended June 29, 2019:
 
 
Shareholders’ Equity Attributable to Snap-on Incorporated
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
Noncontrolling
Interests
 
Total
Equity
Balance at March 30, 2019
 
$
67.4

 
$
361.3

 
$
4,428.4

 
$
(496.4
)
 
$
(1,163.1
)
 
$
20.2

 
$
3,217.8

Net Earnings for the three months ended June 29, 2019
 

 

 
180.4

 

 

 
4.5

 
184.9

Other comprehensive loss
 

 

 

 
(4.3
)
 

 

 
(4.3
)
Cash dividends – $0.95 per share
 

 

 
(52.5
)
 

 

 

 
(52.5
)
Stock compensation plans
 

 
10.4

 

 

 
16.8

 

 
27.2

Share repurchases – 365,000 shares
 

 

 

 

 
(60.1
)
 

 
(60.1
)
Other
 

 

 
(0.2
)
 

 

 
(4.1
)
 
(4.3
)
Balance at June 29, 2019
 
$
67.4

 
$
371.7

 
$
4,556.1

 
$
(500.7
)
 
$
(1,206.4
)
 
$
20.6

 
$
3,308.7

The following summarizes the changes in total equity for the six month period ended June 29, 2019:
 
 
Shareholders’ Equity Attributable to Snap-on Incorporated
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 29, 2018
 
$
67.4

 
$
359.4

 
$
4,257.6

 
$
(462.2
)
 
$
(1,123.4
)
 
$
19.8

 
$
3,118.6

Impact of the Tax Act on Accumulated Other Comprehensive Income (ASU No. 2018-02)
 

 

 
45.9

 
(45.9
)
 

 

 

Balance at December 30, 2018
 
$
67.4

 
$
359.4

 
$
4,303.5

 
$
(508.1
)
 
$
(1,123.4
)
 
$
19.8

 
$
3,118.6

Net Earnings for the six months ended June 29, 2019
 

 

 
358.3

 

 

 
8.7

 
367.0

Other comprehensive income
 

 

 

 
7.4

 

 

 
7.4

Cash dividends – $1.90 per share
 

 

 
(105.3
)
 

 

 

 
(105.3
)
Stock compensation plans
 

 
12.3

 

 

 
24.5

 

 
36.8

Share repurchases – 660,000 shares
 

 

 

 

 
(107.5
)
 

 
(107.5
)
Other
 

 

 
(0.4
)
 

 

 
(7.9
)
 
(8.3
)
Balance at June 29, 2019
 
$
67.4

 
$
371.7

 
$
4,556.1

 
$
(500.7
)
 
$
(1,206.4
)
 
$
20.6

 
$
3,308.7



See Notes to Condensed Consolidated Financial Statements.

7

Table of Contents

SNAP-ON INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Amounts in millions, except share data)
(Unaudited)

The following summarizes the changes in total equity for the three month period ended June 30, 2018:
 
 
Shareholders’ Equity Attributable to Snap-on Incorporated
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
Noncontrolling
Interests
 
Total
Equity
Balance at March 31, 2018
 
$
67.4

 
$
343.9

 
$
3,886.7

 
$
(285.4
)
 
$
(928.7
)
 
$
18.4

 
$
3,102.3

Net Earnings for the three months ended June 30, 2018
 

 

 
178.7

 

 

 
4.0

 
182.7

Other comprehensive loss
 

 

 

 
(91.9
)
 

 

 
(91.9
)
Cash dividends – $0.82 per share
 

 

 
(46.3
)
 

 

 

 
(46.3
)
Stock compensation plans
 

 
8.7

 

 

 
15.5

 

 
24.2

Share repurchases – 371,000 shares
 

 

 

 

 
(55.2
)
 

 
(55.2
)
Other
 

 

 
(0.2
)
 

 

 
(4.0
)
 
(4.2
)
Balance at June 30, 2018
 
$
67.4

 
$
352.6

 
$
4,018.9

 
$
(377.3
)
 
$
(968.4
)
 
$
18.4

 
$
3,111.6


The following summarizes the changes in total equity for the six month period ended June 30, 2018:
 
 
Shareholders’ Equity Attributable to Snap-on Incorporated
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated Other Comprehensive Loss
 
Treasury
Stock
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 30, 2017
 
$
67.4

 
$
343.2

 
$
3,772.3

 
$
(329.0
)
 
$
(900.0
)
 
$
18.4

 
$
2,972.3

Net Earnings for the six months ended June 30, 2018
 

 

 
341.7

 

 

 
7.8

 
349.5

Other comprehensive loss
 

 

 

 
(48.3
)
 

 

 
(48.3
)
Cash dividends – $1.64 per share
 

 

 
(92.8
)
 

 

 

 
(92.8
)
Stock compensation plans
 

 
9.4

 

 

 
30.3

 

 
39.7

Share repurchases – 646,000 shares
 

 

 

 

 
(98.7
)
 

 
(98.7
)
Other
 

 

 
(2.3
)
 

 

 
(7.8
)
 
(10.1
)
Balance at June 30, 2018
 
$
67.4

 
$
352.6

 
$
4,018.9

 
$
(377.3
)
 
$
(968.4
)
 
$
18.4

 
$
3,111.6


See Notes to Condensed Consolidated Financial Statements.

8

Table of Contents

SNAP-ON INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
 
Six Months Ended
 
June 29,
2019
 
June 30,
2018
Operating activities:
 
 
 
Net earnings
$
367.0

 
$
349.5

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
 
 
 
Depreciation
34.8

 
35.0

Amortization of other intangibles
10.8

 
13.0

Provision for losses on finance receivables
24.4

 
29.4

Provision for losses on non-finance receivables
8.7

 
5.5

Stock-based compensation expense
14.1

 
14.6

Deferred income tax provision (benefit)
12.4

 
(4.1
)
Loss on sales of assets
0.6

 
0.1

Loss on early extinguishment of debt

 
7.8

Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
(Increase) decrease in trade and other accounts receivable
3.9

 
(9.1
)
(Increase) decrease in contract receivables
3.0

 
(4.5
)
Increase in inventories
(52.8
)
 
(24.5
)
(Increase) decrease in prepaid and other assets
(27.0
)
 
6.4

Increase in accounts payable
16.6

 
25.4

Decrease in accruals and other liabilities
(69.7
)
 
(25.7
)
Net cash provided by operating activities
346.8

 
418.8

Investing activities:
 
 
 
Additions to finance receivables
(431.1
)
 
(436.7
)
Collections of finance receivables
383.5

 
379.9

Capital expenditures
(48.2
)
 
(38.6
)
Acquisitions of businesses, net of cash acquired
(9.3
)
 
(3.0
)
Disposals of property and equipment
0.4

 
0.5

Other
0.8

 
(2.9
)
Net cash used by investing activities
(103.9
)
 
(100.8
)
Financing activities:
 
 
 
Proceeds from issuance of long-term debt

 
395.4

Repayments of long-term debt

 
(457.8
)
Repayment of notes payable

 
(16.8
)
Net decrease in other short-term borrowings
(18.2
)
 
(37.2
)
Cash dividends paid
(105.3
)
 
(92.8
)
Purchases of treasury stock
(107.5
)
 
(98.7
)
Proceeds from stock purchase and option plans
24.6

 
28.3

Other
(14.3
)
 
(16.2
)
Net cash used by financing activities
(220.7
)
 
(295.8
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
0.9

 
(1.9
)
Increase in cash and cash equivalents
23.1

 
20.3

Cash and cash equivalents at beginning of year
140.9

 
92.0

Cash and cash equivalents at end of period
$
164.0

 
$
112.3

Supplemental cash flow disclosures:
 
 
 
Cash paid for interest
$
(23.4
)
 
$
(27.8
)
Net cash paid for income taxes
(92.2
)
 
(97.4
)

See Notes to Condensed Consolidated Financial Statements.

9

Table of Contents
SNAP-ON INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



Note 1: Summary of Accounting Policies
Principles of consolidation and presentation
The Condensed Consolidated Financial Statements include the accounts of Snap-on Incorporated and its wholly-owned and majority-owned subsidiaries (collectively, “Snap-on” or the “company”). These financial statements should be read in conjunction with, and have been prepared in conformity with, the accounting principles reflected in the consolidated financial statements and related notes included in Snap-on’s 2018 Annual Report on Form 10-K for the fiscal year ended December 29, 2018 (“2018 year end”). The company’s 2019 fiscal second quarter ended on June 29, 2019; the 2018 fiscal second quarter ended on June 30, 2018. Each of the company’s 2019 and 2018 fiscal first and second quarters contained 13 weeks of operating results. Snap-on’s Condensed Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”).
In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the Condensed Consolidated Financial Statements for the three and six month periods ended June 29, 2019, and June 30, 2018, have been made. Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Financial Instruments
The fair value of the company’s derivative financial instruments is generally determined using quoted prices in active markets for similar assets and liabilities. The carrying value of the company’s non-derivative financial instruments either approximates fair value, due to their short-term nature, or the amount disclosed for fair value is based upon a discounted cash flow analysis or quoted market values. See Note 9 for further information on financial instruments.
New Accounting Standards
The following new accounting pronouncements were adopted in fiscal year 2019:
On December 30, 2018, the beginning of Snap-on’s 2019 fiscal year, Snap-on adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815) – Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments in this update also make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The adoption of this ASU did not have a significant impact on the company’s Condensed Consolidated Financial Statements.
On December 30, 2018, the beginning of Snap-on’s 2019 fiscal year, Snap-on adopted ASU No. 2018-02, Income Statement - Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (the “Tax Act”). The adoption of this ASU resulted in an increase of $45.9 million to Retained Earnings on the company’s Condensed Consolidated Statements of Equity with an offsetting decrease in Accumulated Other Comprehensive Income (Loss).

10

Table of Contents
SNAP-ON INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


On December 30, 2018, the beginning of Snap-on’s 2019 fiscal year, Snap-on adopted ASU No. 2016-02, Leases (Topic 842), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 is intended to represent an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. Topic 842, which supersedes most current lease guidance, affects any entity that enters into a lease with some specified scope exemptions. Snap-on adopted Topic 842 using the modified retrospective approach, using a date of initial application of December 30, 2018. Snap-on elected the package of practical expedients permitted under the standard, which also allowed the company to carry forward historical lease classifications. The company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the Right-of-Use (“ROU”) assets and lease liabilities. The adoption of this ASU did not have a significant impact on the company’s Condensed Consolidated Financial Statements. See note 15 for further information on leases.
The following new accounting pronouncements, and related impacts on adoption, are being evaluated by the company:

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. ASU No. 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years; the ASU allows for early adoption of certain disclosures in any interim period after issuance of the update. The adoption of this ASU is not expected to have a significant impact on the company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General Subtopic 715-20 - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which is designed to improve the effectiveness of disclosures by removing and adding disclosures related to defined benefit plans. ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020; the ASU allows for early adoption in any year end after issuance of the update. The adoption of this ASU is not expected to have a significant impact on the company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU, along with subsequent ASU’s issued to clarify certain provisions of ASU 2016-13, is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Snap-on commenced its assessment of Topic 326 during the second half of 2018 and developed a comprehensive project plan that included representatives from the company’s business segments. The project plan includes analyzing the standard’s potential change on the company’s allowance for doubtful accounts reserves, identifying reporting requirements of the new standard, and identifying changes to the company’s business processes, systems and controls to support the accounting and disclosures under Topic 326. The company is currently assessing the impact this ASU will have on its consolidated financial statements.

Note 2: Revenue Recognition

Snap-on recognizes revenue from the sale of tools, diagnostic and equipment products and related services based on when control of the product passes to the customer or the service is provided and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.










11

Table of Contents
SNAP-ON INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


Revenue Disaggregation

The following table shows the consolidated revenues by revenue source:
 
 
Three Months Ended
 
Six Months Ended
(Amounts in millions)
 
June 29,
2019
 
June 30,
2018
 
June 29,
2019
 
June 30,
2018
 
 
 
 
 
 
 
 
 
Revenue from contracts with customers
 
$
945.8

 
$
949.2

 
$
1,862.2

 
$
1,879.6

Other revenues
 
5.5

 
5.4

 
10.8

 
10.5

Total net sales
 
951.3

 
954.6

 
1,873.0

 
1,890.1

Financial services revenue
 
84.1

 
82.0

 
169.7

 
165.0

Total revenues
 
$
1,035.4

 
$
1,036.6

 
$
2,042.7

 
$
2,055.1

 
 
 
 
 
 
 
 
 


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 both intersegment sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments. Intersegment amounts are eliminated to arrive at Snap-on’s consolidated financial results.

The following table represents external net sales disaggregated by geography, based on the customers’ billing addresses:
 
 
For the Three Months Ended June 29, 2019
 
 
Commercial
 
Snap-on
 
Repair Systems
 
 
 
 
 
 
 
 
& Industrial
 
Tools
 
& Information
 
Financial
 
 
 
Snap-on
(Amounts in millions)
 
Group
 
Group
 
Group
 
Services
 
Eliminations
 
Incorporated
Net sales by geographic region:
 
 
 
 
 
 
 
 
 
 
 
 
North America*
 
$
121.6

 
$
350.1

 
$
202.3

 
$

 
$

 
$
674.0

Europe
 
72.3

 
36.5

 
62.3

 

 

 
171.1

All other
 
69.1

 
19.2

 
17.9

 

 

 
106.2

External net sales
 
263.0

 
405.8

 
282.5

 

 

 
951.3

Intersegment net sales
 
72.0

 

 
66.4

 

 
(138.4
)
 

Total net sales
 
335.0

 
405.8

 
348.9

 

 
(138.4
)
 
951.3

Financial services revenue
 

 

 

 
84.1

 

 
84.1

Total revenue
 
$
335.0

 
$
405.8

 
$
348.9

 
$
84.1

 
$
(138.4
)
 
$
1,035.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 29, 2019
 
 
Commercial
 
Snap-on
 
Repair Systems
 
 
 
 
 
 
 
 
& Industrial
 
Tools
 
& Information
 
Financial
 
 
 
Snap-on
(Amounts in millions)
 
Group
 
Group
 
Group
 
Services
 
Eliminations
 
Incorporated
Net sales by geographic region:
 
 
 
 
 
 
 
 
 
 
 
 
North America*
 
$
230.5

 
$
701.7

 
$
387.4

 
$

 
$

 
$
1,319.6

Europe
 
149.7

 
73.4

 
121.8

 

 

 
344.9

All other
 
132.3

 
40.9

 
35.3

 

 

 
208.5

External net sales
 
512.5

 
816.0

 
544.5

 

 

 
1,873.0

Intersegment net sales
 
145.0

 

 
132.3

 

 
(277.3
)
 

Total net sales
 
657.5

 
816.0

 
676.8

 

 
(277.3
)
 
1,873.0

Financial services revenue
 

 

 

 
169.7

 

 
169.7

Total revenue
 
$
657.5

 
$
816.0

 
$
676.8

 
$
169.7

 
$
(277.3
)
 
$
2,042.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* North America is comprised of the United States, Canada and Mexico.

12

Table of Contents
SNAP-ON INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)



 
 
For the Three Months Ended June 30, 2018
 
 
Commercial
 
Snap-on
 
Repair Systems
 
 
 
 
 
 
 
 
& Industrial
 
Tools
 
& Information
 
Financial
 
 
 
Snap-on
(Amounts in millions)
 
Group
 
Group
 
Group
 
Services
 
Eliminations
 
Incorporated
Net sales by geographic region:
 
 
 
 
 
 
 
 
 
 
 
 
North America*
 
$
118.3

 
$
346.2

 
$
189.4

 
$

 
$

 
$
653.9

Europe
 
76.6

 
43.7

 
68.2

 

 

 
188.5

All other
 
72.2

 
22.0

 
18.0

 

 

 
112.2

External net sales
 
267.1

 
411.9

 
275.6

 

 

 
954.6

Intersegment net sales
 
70.7

 

 
67.5

 

 
(138.2
)
 

Total net sales
 
337.8

 
411.9

 
343.1

 

 
(138.2
)
 
954.6

Financial services revenue
 

 

 

 
82.0

 

 
82.0

Total revenue
 
$
337.8

 
$
411.9

 
$
343.1

 
$
82.0

 
$
(138.2
)
 
$
1,036.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30, 2018
 
 
Commercial
 
Snap-on
 
Repair Systems
 
 
 
 
 
 
 
 
& Industrial
 
Tools
 
& Information
 
Financial
 
 
 
Snap-on
(Amounts in millions)
 
Group
 
Group
 
Group
 
Services
 
Eliminations
 
Incorporated
Net sales by geographic region:
 
 
 
 
 
 
 
 
 
 
 
 
North America*
 
$
225.8

 
$
685.1

 
$
374.7

 
$

 
$

 
$
1,285.6

Europe
 
159.5

 
85.2

 
135.2

 

 

 
379.9

All other
 
140.6

 
46.3

 
37.7

 

 

 
224.6

External net sales
 
525.9

 
816.6

 
547.6

 

 

 
1,890.1

Intersegment net sales
 
143.5

 

 
132.5

 

 
(276.0
)
 

Total net sales
 
669.4

 
816.6

 
680.1

 

 
(276.0
)
 
1,890.1

Financial services revenue
 

 

 

 
165.0

 

 
165.0

Total revenue
 
$
669.4

 
$
816.6

 
$
680.1

 
$
165.0

 
$
(276.0
)
 
$
2,055.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* North America is comprised of the United States, Canada and Mexico.


13

Table of Contents
SNAP-ON INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


The following table represents external net sales disaggregated by customer type:
<
 
 
For the Three Months Ended June 29, 2019
 
 
Commercial
 
Snap-on
 
Repair Systems
 
 
 
 
 
 
 
 
& Industrial
 
Tools
 
& Information
 
Financial
 
 
 
Snap-on
(Amounts in millions)
 
Group
 
Group
 
Group
 
Services
 
Eliminations