Commitments and Contingencies

9 Months Ended

Sep. 29, 2012

Commitments and Contingencies

Note 13: Commitments and Contingencies

Snap-on provides product warranties for specific product lines and accrues for estimated future warranty cost in the period in which the sale is recorded. Snap-on calculates its accrual requirements based on historic warranty loss experience that is periodically adjusted for recent actual experience, including the timing of claims during the warranty period and actual costs incurred. Snap-on’s product warranty accrual activity for the three and nine month periods ended September 29, 2012, and October 1, 2011, is as follows:

	Three Months Ended						Nine Months Ended
(Amounts in millions)	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011
Warranty reserve:
Beginning of period	$	18.4		$	18.0		$	18.6		$	16.9
Additions		2.6			3.8			7.7			11.4
Usage		(2.1	)		(3.7	)		(7.4	)		(10.2	)
End of period	$	18.9		$	18.1		$	18.9		$	18.1

On May 5, 2011, Snap-on and CIT reached an amicable settlement of their respective claims (described in Note 1) and, in the second quarter of 2011, Snap-on recorded an $18.0 million pretax arbitration settlement gain and paid $89.8 million of cash to CIT, representing $107.8 million of cash previously withheld net of the $18.0 million settlement. The $18.0 million arbitration settlement gain is included in “Operating earnings from financial services” on the accompanying Condensed Consolidated Statements of Earnings.

Snap-on has credit risk exposure for certain SOC-originated contracts with recourse provisions related to franchisee van loans sold by SOC; as of September 29, 2012, and December 31, 2011, $13.4 million and $13.9 million, respectively, of franchisee loans contain a recourse provision to Snap-on if the loans become more than 90 days past due. The asset value of the collateral underlying these recourse loans would serve to mitigate Snap-on’s loss in the event of default. The estimated fair value of the guarantees for all loan originations with recourse as of September 29, 2012, was not material.

Snap-on is involved in various legal matters that are being litigated and/or settled in the ordinary course of business. Although it is not possible to predict the outcome of these legal matters, management believes that the results of these legal matters will not have a material impact on Snap-on’s consolidated financial position, results of operations or cash flows.