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.

Revenue Disaggregation

The following table shows the consolidated revenues by revenue source:



	Three Months Ended		Three Months Ended
(Amounts in millions)	March 30, 2019		March 31, 2018

Revenue from contracts with customers	$	916.4	$	930.4
Other revenues	5.3		5.1
Total net sales	921.7		935.5
Financial services revenue	85.6		83.0
Total revenues	$	1,007.3	$	1,018.5

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. All significant 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 March 30, 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*	$	108.9	$	351.6	$	185.1	$	—	$	—		$	645.6
Europe	77.4		36.9		59.5		—		—			173.8
All other	63.2		21.7		17.4		—		—			102.3
External net sales	249.5		410.2		262.0		—		—			921.7
Intersegment net sales	73.0		—		65.9		—		(138.9		)	—
Total net sales	322.5		410.2		327.9		—		(138.9		)	921.7
Financial services revenue	—		—		—		85.6		—			85.6
Total revenue	$	322.5	$	410.2	$	327.9	$	85.6	$	(138.9	)	$	1,007.3



	For the Three Months Ended March 31, 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*	$	107.5	$	338.9	$	185.3	$	—	$	—		$	631.7
Europe	82.9		41.5		67.0		—		—			191.4
All other	68.4		24.3		19.7		—		—			112.4
External net sales	258.8		404.7		272.0		—		—			935.5
Intersegment net sales	72.8		—		65.0		—		(137.8		)	—
Total net sales	331.6		404.7		337.0		—		(137.8		)	935.5
Financial services revenue	—		—		—		83.0		—			83.0
Total revenue	$	331.6	$	404.7	$	337.0	$	83.0	$	(137.8	)	$	1,018.5

The following table represents external net sales disaggregated by customer type:



	For the Three Months Ended March 30, 2019
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial					Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations			Incorporated
Net sales:
Vehicle service professionals	$	20.0	$	410.2	$	262.0	$	—	$	—		$	692.2
All other professionals	229.5		—		—		—		—			229.5
External net sales	249.5		410.2		262.0		—		—			921.7
Intersegment net sales	73.0		—		65.9		—		(138.9		)	—
Total net sales	322.5		410.2		327.9		—		(138.9		)	921.7
Financial services revenue	—		—		—		85.6		—			85.6
Total revenue	$	322.5	$	410.2	$	327.9	$	85.6	$	(138.9	)	$	1,007.3



	For the Three Months Ended March 31, 2018
	Commercial		Snap-on		Repair Systems
	& Industrial		Tools		& Information		Financial					Snap-on
(Amounts in millions)	Group		Group		Group		Services		Eliminations			Incorporated
Net sales:
Vehicle service professionals	$	22.5	$	404.7	$	272.0	$	—	$	—		$	699.2
All other professionals	236.3		—		—		—		—			236.3
External net sales	258.8		404.7		272.0		—		—			935.5
Intersegment net sales	72.8		—		65.0		—		(137.8		)	—
Total net sales	331.6		404.7		337.0		—		(137.8		)	935.5
Financial services revenue	—		—		—		83.0		—			83.0
Total revenue	$	331.6	$	404.7	$	337.0	$	83.0	$	(137.8	)	$	1,018.5

Nature of Goods and Services

Snap-on derives net sales from a broad line of products and complementary services that are grouped into three categories (i) tools; (ii) diagnostics, information and management systems; and (iii) equipment. The tools product category includes Snap-on’s hand tools, power tools, tool storage products and other similar products. The diagnostics, information and management systems product category includes handheld and PC-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, original equipment manufacturer (“OEM”) purchasing facilitation services, and warranty management systems and analytics to help OEM dealerships manage and track performance. The equipment product category includes solutions for the service of vehicles and industrial equipment. Snap-on supports the sale of its diagnostics and vehicle service shop equipment by offering training programs as well as after-sales support to its customers. Through its financial services businesses, Snap-on also derives revenue from various financing programs designed to facilitate the sales of its products and support its franchise business.

Approximately 90% of Snap-on’s net sales are products sold at a point in time through ship-and-bill performance obligations that also includes service repair services. The remaining sales revenue is earned over time primarily on a subscription basis including software, extended warranty and other subscription service agreements.

Snap-on enters into contracts related to the selling of tools, diagnostic and repair information and equipment products and related services. At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, Snap-on considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Contracts with customers are comprised of customer purchase orders, invoices and written contracts.

For certain performance obligations related to software subscriptions, extended warranty and other subscription agreements that are settled over time, Snap-on has elected not to disclose the value of unsatisfied performance obligations for: (i) contracts that have an original expected length of one year or less; (ii) contracts where revenue is recognized as invoiced; and (iii) contracts with variable consideration related to unsatisfied performance obligations. The remaining duration of these unsatisfied performance obligations range from one month up to 60 months. Snap-on had approximately $238.0 million of long-term contracts that have fixed consideration that extends beyond one year as of March 30, 2019. Snap-on expects to recognize approximately 65% of these contracts as revenue by the end of fiscal 2020, an additional 25% by the end of fiscal 2022 and the balance thereafter.

Contract Liabilities (Deferred Revenues)

Contract liabilities are recorded when cash payments are received in advance of Snap-on’s performance. The timing of payment is typically on a monthly, quarterly or annual basis. The balance of total contract liabilities at March 30, 2019 was $70.4 million and $63.8 million at December 29, 2018. The current portion of contract liabilities and the non-current portion are included in “Other accrued liabilities” and “Other long-term liabilities”, respectively, on the accompanying Condensed Consolidated Balance Sheets. During the three months ended March 30, 2019, Snap-on recognized revenue of $27.0 million that was included in the contract liability balance at the beginning of the period, which was primarily from the amortization of software subscriptions, extended warranties and other subscription agreements.

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