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 2025, 2024 and 2023 is as follows:
| | | | | | | | | | | | | | | | | | | | |
| (Amounts in millions) | | 2025 | | 2024 | | 2023 |
| Warranty accrual: | | | | | | |
| Beginning of year | | $ | 15.2 | | | $ | 14.7 | | | $ | 14.3 | |
| Additions | | 13.8 | | | 15.0 | | | 14.7 | |
| Usage | | (14.5) | | | (14.5) | | | (14.3) | |
| End of year | | $ | 14.5 | | | $ | 15.2 | | | $ | 14.7 | |
Approximately 2,300 employees, or 18% of Snap-on’s worldwide workforce, are represented by unions and/or covered under collective bargaining agreements. The number of covered union employees whose contracts expire over the next five years approximates 600 employees in 2026, 800 employees in 2027, 150 employees in 2028, and 50 employees in 2029; there are no contracts currently scheduled to expire in 2030. In recent years, Snap-on has not experienced any significant work slowdowns, stoppages or other labor disruptions.
In the ordinary course of business, Snap-on is subject to legal disputes that are being litigated and/or settled. The accompanying Consolidated Statements of Earnings for the year ended January 3, 2026, include a benefit in “Operating expenses” of $22.0 million for the settlement of a legal matter (the “2025 legal settlement”). In addition, the accompanying Consolidated Statement of Earnings for the year ended December 28, 2024, include a benefit in “Operating expenses” of $22.5 million, for the final payments received associated with a separate legal matter (the “2024 legal payments”). Although it is not possible to predict the outcome of legal matters, management believes that the results of all legal matters will not have a material impact on Snap-on’s consolidated financial position, results of operations or cash flows.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.