Income Taxes (Tables)

12 Months Ended

Jan. 02, 2021

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)	2020		2019		2018
United States	$	715.9	$	765.3	$	735.4
Foreign	119.3		156.8		174.5
Total	$	835.2	$	922.1	$	909.9

Components of Income Tax

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

(Amounts in millions)	2020		2019		2018
Current:
Federal	$	136.8	$	110.0	$	117.9
Foreign	29.9		38.1		52.4
State	30.6		29.5		30.4
Total current	197.3		177.6		200.7
Deferred:
Federal	(10.0)		26.6		18.7
Foreign	3.0		1.5		(8.4)
State	(1.2)		6.1		3.4
Total deferred	(8.2)		34.2		13.7
Total income tax provision	$	189.1	$	211.8	$	214.4

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: 

	2020	2019	2018
Statutory federal income tax rate	21.0%	21.0%	21.0%
Increase (decrease) in tax rate resulting from:
State income taxes, net of federal benefit	2.9	2.9	2.9
Noncontrolling interests	(0.5)	(0.4)	(0.4)
Repatriation of foreign earnings	(0.7)	(0.1)	(0.1)
Change in valuation allowance for deferred tax assets	0.5	0.4	0.3
Adjustments to tax accruals and reserves	(0.5)	(0.4)	(0.2)
Foreign rate differences	0.5	0.4	0.4
Excess tax benefits related to equity compensation	(0.5)	(0.5)	(0.8)
U.S. tax reform, net impact	—	—	0.4
Other	(0.1)	(0.3)	0.1
Effective tax rate	22.6%	23.0%	23.6%

Schedule of Deferred Tax Assets and Liabilities

Temporary differences that give rise to the net deferred income tax asset (liability) as of 2020, 2019 and 2018 year end are as follows:

(Amounts in millions)	2020		2019		2018
Deferred income tax assets (liabilities):
Inventories	$	41.4	$	34.7	$	33.6
Accruals not currently deductible	75.1		62.4		72.9
Tax credit carryforward	2.4		2.0		1.8
Employee benefits	32.4		41.3		56.5
Net operating losses	37.1		40.4		40.9
Depreciation and amortization	(192.0)		(178.9)		(167.5)
Valuation allowance	(26.7)		(27.8)		(25.1)
Equity-based compensation	14.3		16.2		16.6
Undistributed non-U.S. earnings	(5.4)		(6.6)		(6.0)
Other	1.3		(0.7)		(0.4)
Net deferred income tax asset (liability)	$	(20.1)	$	(17.0)	$	23.3

Operating Loss Carry Forwards

As of 2020 year end, Snap-on had tax net operating loss carryforwards totaling $184.1 million as follows:

(Amounts in millions)	State		Federal		Foreign		Total
Year of expiration:
2021-2025	$	0.3	$	—	$	58.5	$	58.8
2026-2030	—		—		10.4		10.4
2031-2035	56.7		—		—		56.7
2036-2040	—		—		—		—
2041-2045	—		—		31.9		31.9
Indefinite	—		—		26.3		26.3
Total net operating loss carryforwards	$	57.0	$	—	$	127.1	$	184.1

Reconciliation of Unrecognized Tax Benefits

The following is a reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2020, 2019 and 2018:

(Amounts in millions)	2020		2019		2018
Unrecognized tax benefits at beginning of year	$	10.3	$	11.1	$	7.7
Gross increases – tax positions in prior periods	0.4		—		1.3
Gross decreases – tax positions in prior periods	—		(0.6)		(0.1)
Gross increases – tax positions in the current period	0.4		0.5		2.8
Settlements with taxing authorities	(1.4)		—		—
Lapsing of statutes of limitations	(0.6)		(0.7)		(0.6)
Unrecognized tax benefits at end of year	$	9.1	$	10.3	$	11.1