Income Taxes (Tables)

12 Months Ended

Jan. 02, 2016

Income Tax Disclosure [Abstract]

Earnings Before Income Taxes and Equity Earnings

The source of earnings before income taxes and equity earnings consisted of the following:

(Amounts in millions)	2015		2014		2013
United States	$	578.4	$	481.1	$	406.7
Foreign		132.1		149.8		119.5
Total	$	710.5	$	630.9	$	526.2

Components of Income Tax

The provision (benefit) for income taxes consisted of the following:

(Amounts in millions)	2015		2014		2013
Current:
Federal	$	165.8	$	137.6	$	115.5
Foreign		40.8		41.2		27.6
State		19.7		17.5		14.1
Total current		226.3		196.3		157.2
Deferred:
Federal		(8.7)		10.0		6.9
Foreign		3.9		(8.2)		2.0
State		(0.3)		1.4		0.6
Total deferred		(5.1)		3.2		9.5
Total income tax provision	$	221.2	$	199.5	$	166.7

Reconciliation of Statutory Federal Income Tax Rate

The following is a reconciliation of the statutory federal income tax rate to Snap-on’s effective tax rate:

	2015		2014		2013
Statutory federal income tax rate		35.0%		35.0%		35.0%
Increase (decrease) in tax rate resulting from:
State income taxes, net of federal benefit		2.3		2.2		2.1
Noncontrolling interests		(0.6)		(0.5)		(0.6)
Repatriation of foreign earnings		(3.0)		(0.4)		–
Change in valuation allowance for deferred tax assets		0.1		(0.9)		0.7
Adjustments to tax accruals and reserves		0.8		0.5		(1.3)
Foreign rate differences		(1.9)		(2.2)		(1.7)
Domestic production activities deduction		(1.9)		(2.0)		(2.7)
Other		0.3		(0.1)		0.2
Effective tax rate		31.1%		31.6%		31.7%

Schedule of Deferred Tax Assets and Liabilities

Temporary differences that give rise to the net deferred income tax asset (liability) as of 2015, 2014 and 2013 year end are as follows:

(Amounts in millions)	2015		2014		2013
Current deferred income tax assets (liabilities):
Inventories	$	29.4	$	29.2	$	24.4
Accruals not currently deductible		71.1		72.7		63.2
Tax credit carryforward		10.2		–		–
Valuation allowance		(1.1)		(1.1)		(2.4)
Total current (included in deferred income tax assets and other accrued liabilities)		109.6		100.8		85.2
Long-term deferred income tax assets (liabilities):
Employee benefits		101.2		91.5		62.5
Net operating losses		44.4		53.5		59.9
Depreciation and amortization		(199.3)		(191.2)		(180.8)
Valuation allowance		(30.9)		(33.7)		(43.0)
Equity-based compensation		22.7		19.6		17.6
Other		(1.6)		(5.7)		(2.9)
Total long term		(63.5)		(66.0)		(86.7)
Net deferred income tax asset (liability)	$	46.1	$	34.8	$	(1.5)

Operating Loss Carry Forwards

As of 2015 year end, Snap-on had tax net operating loss carryforwards totaling $266.4 million as follows:

(Amounts in millions)	State		United States		Foreign		Total
Year of expiration:
2016 – 2020	$	–	$	–	$	32.9	$	32.9
2021 – 2025		0.3		–		20.5		20.8
2026 – 2030		–		–		20.3		20.3
2031 – 2035		136.5		–		10.2		146.7
Indefinite		–		–		45.7		45.7
Total net operating loss carryforwards	$	136.8	$	–	$	129.6	$	266.4

Reconciliation of Unrecognized Tax Benefits

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2015, 2014 and 2013:

(Amounts in millions)	2015		2014		2013
Unrecognized tax benefits at beginning of year	$	6.4	$	4.6	$	6.8
Gross increases – tax positions in prior periods		1.7		2.1		1.5
Gross decreases – tax positions in prior periods		(0.5)		–		(1.6)
Gross increases – tax positions in the current period		0.5		1.8		0.5
Settlements with taxing authorities		–		(1.6)		(2.1)
Lapsing of statutes of limitations		(0.9)		(0.5)		(0.5)
Unrecognized tax benefits at end of year	$	7.2	$	6.4	$	4.6