Derivatives: All derivative instruments are reported in the Consolidated Financial Statements at fair value. Changes in the fair value of derivatives are recorded each period in earnings or on the accompanying Consolidated Balance Sheets, depending on whether the derivative is designated and effective as part of a hedged transaction. Gains or losses on derivative instruments recorded in earnings are presented in the same Consolidated Statement of Earnings line that is used to present the earnings effect of the hedged item. Gains or losses on derivative instruments in accumulated other comprehensive income (loss) (“Accumulated OCI”) are reclassified to earnings in the period in which earnings are affected by the underlying hedged item.

The criteria used to determine if hedge accounting treatment is appropriate are: (i) the designation of the hedge to an underlying exposure; (ii) whether or not overall risk is being reduced; and (iii) if there is a correlation between the value of the derivative instrument and the underlying hedged item. Once a derivative contract is entered into, Snap-on designates the derivative as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a natural hedging instrument whose change in fair value is recognized as an economic hedge against changes in the value of the hedged item. Snap-on does not use derivative instruments for speculative or trading purposes.

The company is exposed to global market risks, including the effects of changes in foreign currency exchange rates, interest rates, and the company’s stock price, and therefore uses derivatives to manage financial exposures that occur in the normal course of business. The primary risks managed by using derivative instruments are foreign currency risk, interest rate risk and stock-based deferred compensation risk.

Foreign currency risk management: Snap-on has significant international operations and is subject to certain risks inherent with foreign operations that include currency fluctuations. Foreign currency exchange risk exists to the extent that Snap-on has payment obligations or receipts denominated in currencies other than the functional currency, including intercompany loans denominated in foreign currencies. To manage these exposures, Snap-on identifies naturally offsetting positions and then purchases hedging instruments to protect the residual net exposures. Snap-on manages most of these exposures on a consolidated basis, which allows for netting of certain exposures to take advantage of natural offsets. Foreign currency forward contracts (“foreign currency forwards”) are used to hedge the net exposures. Gains or losses on net foreign currency hedges are intended to offset losses or gains on the underlying net exposures in an effort to reduce the earnings volatility resulting from fluctuating foreign currency exchange rates. Snap-on’s foreign currency forwards are typically not designated as hedges. The fair value changes of these contracts are reported in earnings as foreign exchange gain or loss, which is included in “Other income (expense) - net” on the accompanying Consolidated Statements of Earnings. See Note 18 for additional information on Other income (expense) - net.

As of 2021 year end, Snap-on had $81.3 million of net foreign currency forward sell contracts outstanding comprised of sell contracts including $290.0 million in Canadian dollars, $10.3 million in euros, $8.1 million in Indian rupees, $6.3 million in Hungarian forints, and $4.5 million in other currencies, and buy contracts comprised of $79.6 million in British pounds, $48.4 million in Swedish kronor, $31.0 million in Chinese renminbi, $30.0 million in Hong Kong dollars, $14.3 million in Australian dollars, $14.2 million in Singapore dollars, $7.2 million in Norwegian kroner, $4.9 million in Danish kroner, and $8.3 million in other currencies. As of 2020 year end, Snap-on had $46.7 million of net foreign currency forward buy contracts outstanding comprised of buy contracts including $58.9 million in Swedish kronor, $43.5 million in British pounds, $26.1 million in Chinese renminbi, $22.5 million in Hong Kong dollars, $14.6 million in Singapore dollars, $6.2 million in Australian dollars, $5.8 million in Norwegian kroner, $5.1 million in Danish kroner, and $3.7 million in other currencies, and sell contracts comprised of $120.4 million in Canadian dollars, $7.9 million in Indian rupees, $3.5 million in Hungarian forints, and $7.9 million in other currencies.

Interest rate risk management: Snap-on aims to control funding costs by managing the exposure created by the differing maturities and interest rate structures of Snap-on’s borrowings through the use of interest rate swap agreements (“interest rate swaps”) and treasury lock agreements (“treasury locks”).

Interest rate swaps: Snap-on enters into interest rate swaps to manage risks associated with changing interest rates related to the company’s fixed rate borrowings. Interest rate swaps are accounted for as fair value hedges. The differentials paid or received on interest rate swaps are recognized as adjustments to “Interest expense” on the accompanying Consolidated Statements of Earnings. The change in the fair value of the derivative is recorded in “Notes payable and current maturities of long-term debt” in 2020 on the accompanying Consolidated Balance Sheets. As of 2020 year end, the notional amount of interest rate swaps outstanding and designated as fair value hedges was $100 million. The interest rate swaps matured in fiscal 2021 and there were no outstanding swaps as of 2021 year end.


Consolidated Balance Sheets Line Item Where Hedge Item is Recorded	Carrying Amount of the Hedged Assets/(Liabilities)				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
	(in millions)				(in millions)
	2021		2020		2021		2020
Notes payable and current maturities of long-term debt	$	—	$	(255.1)	$	—	$	(5.1)

Treasury locks: Snap-on uses treasury locks to manage the potential change in interest rates in anticipation of the issuance of fixed rate debt. Treasury locks are accounted for as cash flow hedges. The differentials to be paid or received on treasury locks related to the anticipated issuance of fixed rate debt are initially recorded in Accumulated OCI for derivative instruments that are designated and qualify as cash flow hedges. Upon the issuance of debt, the related amount in Accumulated OCI is released over the term of the debt and recognized as an adjustment to interest expense on the Consolidated Statements of Earnings.

In the second quarter of 2020, Snap-on entered into a $300.0 million treasury lock to manage changes in interest rates in anticipation of the issuance of fixed rate debt. Snap-on settled the $300.0 million treasury lock in conjunction with the April 2020 issuance of the 2050 Notes. The $1.4 million gain on the settlement of the treasury lock was recorded in Accumulated OCI and is being amortized over the initial 10-year term of the 2050 Notes and recognized as an adjustment to interest expense on the Consolidated Statements of Earnings.

Stock-based deferred compensation risk management: Snap-on aims to manage market risk associated with the stock-based portion of its deferred compensation plans through the use of prepaid equity forward agreements (“equity forwards”). Equity forwards are used to aid in offsetting the potential mark-to-market effect on stock-based deferred compensation from changes in Snap-on’s stock price. Since stock-based deferred compensation liabilities increase as the company’s stock price rises and decrease as the company’s stock price declines, the equity forwards are intended to mitigate the potential impact on deferred compensation expense that may result from such mark-to-market changes. As of 2021 and 2020 year end, Snap-on had equity forwards in place intended to manage market risk with respect to 72,100 shares and 78,800 shares, respectively, of Snap‑on common stock associated with its deferred compensation plans.

Counterparty risk: Snap-on is exposed to credit losses in the event of non-performance by the counterparties to its various financial agreements, including its foreign currency forward contracts, interest rate swap agreements, treasury lock agreements and prepaid equity forward agreements. Snap-on does not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of the counterparties and generally enters into agreements with financial institution counterparties with a credit rating of A- or better. Snap-on does not anticipate non-performance by its counterparties, but cannot provide assurances.

Fair value measurements: The fair value measurement hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority (“Level 1”) to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority (“Level 3”) to unobservable inputs. Fair value measurements primarily based on observable market information are given a “Level 2” priority.

Snap-on has derivative assets and liabilities related to interest rate swaps, treasury locks, foreign currency forwards and equity forwards that are measured at Level 2 fair value on a recurring basis. The fair values of derivative instruments included within the accompanying Consolidated Balance Sheets as of 2021 and 2020 year end are as follows:


		2021				2020
(Amounts in millions)	Balance Sheet Presentation	Derivative Assets Fair Value		Derivative Liability Fair Value		Derivative Assets Fair Value		Derivative Liability Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other assets	$	—	$	—	$	5.1	$	—
Derivatives not designated as hedging instruments:
Foreign currency forwards	Prepaid expenses and other assets	$	10.2	$	—	$	12.2	$	—
Foreign currency forwards	Other accrued liabilities	—		5.3		—		7.0
Equity forwards	Prepaid expenses and other assets	15.5		—		13.5		—
		25.7		5.3		25.7		7.0
Total derivative instruments		$	25.7	$	5.3	$	30.8	$	7.0

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. Level 2 fair value measurements for derivative assets and liabilities are measured using quoted prices in active markets for similar assets and liabilities. Interest rate swaps are valued based on the six-month LIBOR swap rate for similar instruments. Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. Equity forwards are valued using a market approach based primarily on the company’s stock price at the reporting date. The company did not have any derivative assets or liabilities measured at Level 1 or Level 3, nor did it implement any changes in its valuation techniques in 2021 and 2020, respectively.


	Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
	2021				2020				2019
(Amounts in millions)	Interest expense		Other income (expense) - net		Interest expense		Other income (expense) - net		Interest expense		Other income (expense) - net

Total amounts of income and expense presented in the Consolidated Statements of Earnings:	$	(53.1)	$	16.5	$	(54.0)	$	8.7	$	(49.0)	$	8.8

Gain (loss) on fair value hedging relationships:
Interest rate swaps
Long-term debt	$	(10.2)	$	—	$	(15.7)	$	—	$	(15.4)	$	—
Derivatives designated as hedging instruments	2.7		—		3.9		—		2.0		—

Gain on cash flow hedging relationships:
Treasury locks
Gain reclassified from accumulated OCI into income	$	1.6	$	—	$	1.6	$	—	$	1.5	$	—


	Statement of Earnings Presentation	Gain (Loss) Recognized in Income on Derivatives

(Amounts in millions)		2021		2020		2019
Gain (loss) on derivative relationships:
Foreign currency forwards	Other income (expense) – net	$	(10.8)	$	(6.6)	$	(20.0)
Net exposures	Other income (expense) – net	9.6		2.7		16.4

Equity forwards	Operating expenses	$	4.1	$	1.0	$	3.0
Stock-based deferred compensation liabilities	Operating expenses	(4.3)		(1.2)		(3.0)

Snap-on’s foreign currency forwards are typically not designated as hedges for financial reporting purposes. The fair value changes of foreign currency forwards not designated as hedging instruments are reported in earnings as foreign exchange gain or loss in “Other income (expense) – net” on the accompanying Consolidated Statements of Earnings. See Note 18 for additional information on “Other income (expense) – net.”

Snap-on’s equity forwards are not designated as hedges for financial reporting purposes. Fair value changes of both the equity forwards and related stock-based (mark-to-market) deferred compensation liabilities are reported in “Operating expenses” on the accompanying Consolidated Statements of Earnings.


	2021				2020
(Amounts in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Finance receivables – net	$	1,656.3	$	1,988.6	$	1,666.5	$	2,024.4
Contract receivables – net	488.6		542.5		487.2		545.4
Long-term debt, notes payable and current maturities of long-term debt	1,200.3		1,339.7		1,450.6		1,678.2

•Finance and contract receivables include both short-term and long-term receivables. The fair value estimates of finance and contract receivables are derived utilizing discounted cash flow analyses performed on groupings of receivables that are similar in terms of loan type and characteristics. The cash flow analyses consider recent prepayment trends where applicable. The cash flows are discounted over the average life of the receivables using a current market discount rate of a similar term adjusted for credit quality. Significant inputs to the fair value measurements of the receivables are unobservable and, as such, are classified as Level 3.

•Fair value of long-term debt and current maturities of long-term debt were estimated, using Level 2 fair value measurements, based on quoted market values of Snap-on’s publicly traded senior debt. The carrying value of long-term debt and the current maturities of long-term debt includes adjustments related to fair value hedges. The fair value of notes payable approximates such instruments’ carrying value due to their short-term nature.