-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 Opg2rSnJZHpv+Ldrp+d5bxB0YC/AYycVn2YGOsVGkyz/+kfZkqyydGNHqhBSbxE5
 k1ailYIzx9DOiUP+8J6rZg==

<SEC-DOCUMENT>0000897069-02-000231.txt : 20020415
<SEC-HEADER>0000897069-02-000231.hdr.sgml : 20020415
ACCESSION NUMBER:		0000897069-02-000231
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20011229
FILED AS OF DATE:		20020325

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SNAP ON INC
		CENTRAL INDEX KEY:			0000091440
		STANDARD INDUSTRIAL CLASSIFICATION:	INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825]
		IRS NUMBER:				390622040
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K405
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-07724
		FILM NUMBER:		02584462

	BUSINESS ADDRESS:	
		STREET 1:		10801 CORPORATE DRIVE
		CITY:			KENOSHA
		STATE:			WI
		ZIP:			53141-1430
		BUSINESS PHONE:		4146565200

	MAIL ADDRESS:	
		STREET 1:		10801 CORPORATE DRIVE
		CITY:			KENOSHA
		STATE:			WI
		ZIP:			53141

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SNAP ON TOOLS CORP
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>pdm280a.txt
<DESCRIPTION>FORM 10-K/405
<TEXT>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the fiscal year ended December 29, 2001

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

Commission File Number 1-7724

                              SNAP-ON INCORPORATED
             (Exact name of registrant as specified in its charter)

                 Delaware                                39-0622040
      (State or other jurisdiction of       (I.R.S. Employer Identification No.)
       incorporation or organization)

10801 Corporate Drive, Pleasant Prairie, Wisconsin        53158-1603
(Address of principal executive offices)                  (Zip code)

Registrant's telephone number, including area code: (262) 656-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                     Name of exchange on which registered
- -------------------                     ------------------------------------
Common stock, $1 par value              New York Stock Exchange
Preferred stock purchase rights         New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Aggregate market value of voting stock held by non-affiliates of the registrant
at February 25, 2002:
                                 $1,957,473,238

Number of shares outstanding of each of the registrant's classes of common stock
at February 25, 2002:
                 Common stock, $1 par value, 58,037,218 shares

Documents incorporated by reference
- -----------------------------------
Portions of Snap-on's Annual Report to Shareholders for the fiscal year ended
December 29, 2001, are incorporated by reference into Parts I, II and IV of this
report.

Portions of Snap-on's Proxy Statement, dated March 15, 2002, prepared for the
Annual Meeting of Shareholders scheduled for April 25, 2002, are incorporated by
reference into Part III of this report.
<PAGE>
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I
   Item  1.    Business.......................................................3
   Item  2.    Properties....................................................10
   Item  3.    Legal Proceedings.............................................12
   Item  4.    Submission of Matters to a Vote of Security Holders...........12
   Item  4.1   Executive Officers of the Registrant..........................12

PART II
   Item  5.    Market for Registrant's Common Equity and Related
                Stockholder Matters..........................................13
   Item  6.    Selected Financial Data.......................................13
   Item  7.    Management's Discussion and Analysis of Financial
                Condition and Results of Operations..........................13
   Item  7A.   Qualitative and Quantitative Disclosures About Market Risk....13
   Item  8.    Financial Statements and Supplementary Data...................14
   Item  9.    Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure..........................14

PART III
   Item  10.   Directors and Executive Officers of the Registrant............15
   Item  11.   Executive Compensation........................................15
   Item  12.   Security Ownership of Certain Beneficial Owners
                and Management...............................................15
   Item  13.   Certain Relationships and Related Transactions................15

PART IV
   Item  14.   Exhibits, Financial Statement Schedules and Reports
                 on Form 8-K.................................................16

Signature Pages..............................................................17
Exhibit Index................................................................19


                                       2
<PAGE>
PART I

Item 1: Business

Snap-on Incorporated ("Snap-on") was incorporated under the laws of the state of
Wisconsin in 1920 and reincorporated under the laws of the state of Delaware in
1930. Snap-on is a leading global innovator, manufacturer and marketer of
high-quality tool, diagnostic and equipment solutions for professional tool and
equipment users. Snap-on's mission is to delight its customers - professional
tool and equipment users worldwide - by providing innovative,
productivity-enhancing products, services and solutions. Product lines include
hand and power tools, tool storage, shop equipment, saws and cutting tools,
pruning tools, under-hood diagnostics equipment, under-car equipment,
safety-testing equipment, collision repair equipment, vehicle service
information, business management systems, repair services, and other solutions
for vehicle service, industrial, government and agricultural customers, and
commercial applications, including construction and electrical. Snap-on's
customers include professional automotive technicians, shop owners, franchised
and chain vehicle service centers, vehicle and equipment manufacturers and other
industrial, agricultural, and commercial tool and equipment users worldwide.

Snap-on markets its products and brands through multiple distribution channels
in more than 150 countries. Snap-on's largest geographic markets include the
United States, Australia, Canada, France, Germany, Italy, Japan, the
Netherlands, Spain, Sweden and the United Kingdom. The originator of the dealer
van distribution channel, Snap-on also reaches its customers through company
direct and distributor channels. Snap-on began selling product via the Internet
in 2000 as part of its "Store Without Walls" vision, which offers both current
and prospective customers online, around-the-clock access to purchase Snap-on(R)
products.

Snap-on has two business segments: the Snap-on Dealer Group, which serves the
worldwide dealer van channel, and the Commercial and Industrial Group, which
serves the non-dealer tool and equipment products businesses. Snap-on's segments
are based on the organization structure used by management for making operating
and investment decisions and for assessing performance. These two segments
derive revenues primarily from the sale of tools and equipment. In addition to
its manufacturing, marketing and distribution operations, Snap-on also offers
extended-credit financing for the purchase of its products through it wholly
owned credit subsidiaries and through a 50%-owned financial services joint
venture. For additional information about Snap-on's business segments,
customers, domestic and international operations and products and services, see
Note 17 entitled "Segments" on pages 43 and 44 of Snap-on's 2001 Annual Report,
incorporated herein by reference.

Products and Services

Snap-on derives revenue from the manufacture, marketing and distribution of its
products and related services. Snap-on's two business segments offer a broad
line of products and complementary services that can be divided into two groups:
tools and equipment. The following table shows the consolidated sales of these
product groups in the last three years:

Product Group                                     Net Sales
                                 ---------------------------------------------
(Amounts in millions)               2001            2000             1999
                                 ------------    ------------    -------------

Tools                             $1,291.1        $1,343.5         $1,149.3
Equipment                            804.6           832.2            796.3
                                 ------------    ------------    -------------
                                  $2,095.7        $2,175.7         $1,945.6
                                 ============    ============    =============

The tools product group includes hand tools, power tools and tool storage
products. Hand tools include wrenches, screwdrivers, sockets, pliers, ratchets,
saws and cutting tools, pruning tools and other similar products. Power tools
include pneumatic (air), cordless (battery) and corded (electric) tools such as
impact wrenches, ratchets, chisels, drills, sanders, polishers and similar
products. Tool storage units include tool chests, roll cabinets and other
similar products. The majority of products are manufactured by Snap-on and in
completing the product line, some items are purchased from external
manufacturers.

                                       3
<PAGE>
The equipment product group includes hardware and software solutions for the
diagnosis and service of automotive and industrial equipment. Products include
engine analyzers, air conditioning service equipment, brake service equipment,
wheel balancing and alignment equipment, transmission troubleshooting equipment,
safety-testing equipment, battery chargers, lifts and hoists, diagnostics
equipment service and collision repair equipment. Also included are service and
repair information products, online diagnostics services, management systems,
point-of-sale systems, integrated systems for vehicle repair shops, and
purchasing facilitation services. Snap-on supports the sale of its diagnostics
and shop equipment by offering training programs, primarily focusing on the
technologies and the application of specific products developed and marketed by
Snap-on.

Tools and equipment are marketed under a number of brand names and trademarks,
many of which are well known in the vehicle service and industrial markets
served. Some of the major trade names and trademarks and the products and
services with which they are associated include the following:

     Trademarks                    Products and Services
     ----------                    ----------------------

     Snap-on                       Hand tools, power tools, tool storage units,
                                   diagnostics and certain equipment
     Blue-Point                    Hand tools, power tools, tool storage units
     Acesa                         Hand tools
     BAHCO                         Hand tools
     Fish and Hook (design)        Hand tools
     Irimo                         Hand tools
     Lindstrom                     Hand tools
     Palmera                       Hand tools
     Pradines                      Hand tools
     Williams                      Hand tools
     ATI                           Tools and equipment
     Sioux                         Power tools
     Sun                           Diagnostics and service equipment
     White                         Equipment to recover, recycle and recharge
                                   refrigerant in vehicle air-conditioning
                                   systems and other fluid handling equipment
     John Bean                     Under-car and wheel-service equipment
     Wheeltronic                   Hoists and lifts for vehicle service shops
     Texo                          Hoists and lifts for vehicle service shops
     Hofmann                       Wheel balancers, lifts, tire changers and
                                   aligners
     G.S.                          Wheel-service equipment
     Cartec                        Safety-testing and other equipment
     Blackhawk                     Collision repair equipment
     Brewco                        Collision repair equipment
     Mitchell                      Repair and service information and shop
                                   management systems

                                       4
<PAGE>

     Trademarks                    Products and Services
     ----------                    ---------------------

     ShopKey                       Repair and service information and shop
                                   management systems
     EquiServ                      Equipment maintenance and service
     Equipment Solutions           Vehicle manufacturer facilitation services

Income is also derived from the financing of Snap-on's products through a
50%-owned financial services joint venture and through its wholly owned credit
subsidiaries. Snap-on utilizes various financing programs to facilitate the
sales of its products. To reduce asset intensity from financing activities,
Snap-on established a joint venture in January 1999 with Newcourt Financial USA
Inc. ("Newcourt") now CIT Group, Inc., which was subsequently acquired by Tyco
International Ltd. The joint venture, Snap-on Credit LLC ("the LLC"), is a
50%-owned joint venture that provides financial services to Snap-on's U.S.
dealer and customer network and to Snap-on's industrial and other customers. As
a result of establishing the joint venture, Snap-on effectively outsourced to
the LLC its domestic captive credit function that was previously managed by a
wholly owned Snap-on subsidiary, Snap-on Credit Corporation. Additional
information about the LLC is provided in Note 7 entitled "Snap-on Credit LLC
Joint Venture" on pages 34 and 35 of Snap-on's 2001 Annual Report, incorporated
herein by reference.

The LLC originates loans primarily in three ways. Extended-term contracts are
offered to technicians to enable them to purchase tools and equipment on an
extended-term payment plan, generally with an average term of 32 months. Lease
financing is offered to shop owners, both independents and national chains, who
purchase equipment items. The duration of lease contracts is often two to five
years. Financing options are also made available to dealers to meet a number of
financing needs, including van and truck leases, working capital loans and loans
to enable new dealers to fund the purchase of the franchise. The duration of
these contracts can be up to 10 years. These loans are secured by the underlying
tools or equipment financed and other dealer assets.

Currently, the majority of finance income is derived from the vehicle service
industry in North America. Internationally, Snap-on continues to directly
provide financing to its dealer and customer network through its wholly owned
credit subsidiaries.

Distribution and Sales

Snap-on markets and distributes its products and related services principally to
professional tool and equipment users around the world. The largest two market
sectors are the vehicle service and repair sector, and the industrial sector.

Vehicle Service and Repair Sector

The vehicle service and repair sector has three main customer groups:
professional technicians who purchase tools and equipment for themselves;
service and repair shop owners and managers - including independent shops,
national chains and automotive dealerships - who purchase equipment for use by
multiple technicians within a service or repair facility; and vehicle
manufacturers.

Snap-on provides innovative tool and equipment solutions, as well as technical
sales support and training, to meet technicians' evolving needs. Snap-on's
dealer van distribution system offers technicians the convenience of purchasing
quality tools with minimal disruption of their work routine. Snap-on also serves
owners and managers of shops where technicians work with tools, diagnostics
equipment, repair and service information, and shop management products. Snap-on
provides vehicle manufacturers with products and services including tools,
consulting services and facilitation services. Snap-on's facilitation services
include product procurement, distribution and administrative support to
customers for their dealerships' equipment programs.

Major challenges for Snap-on and the vehicle service and repair industry include
the increasing rate of technological change within motor vehicles and the
resulting impact on the businesses of both suppliers and customers that is
necessitated by such change.

                                       5
<PAGE>
Industrial Sector

Snap-on markets its products to a wide variety of industrial customers including
industrial maintenance and repair facilities; manufacturing and assembly
operations; government facilities; schools; and original equipment manufacturers
that require instrumentation or service tools and equipment for their products.

Major challenges in the industrial sector include a highly competitive,
cost-conscious environment, and a trend toward customers making all of their
tool purchases through one integrated supplier. Snap-on believes it is currently
a meaningful participant in the market sector for industrial tools and
equipment.

Distribution Channels

Snap-on serves customers primarily through three channels of distribution:
dealer and tech representatives ("reps"), company direct sales and distributors.
The following discussion represents Snap-on's general approach in each channel,
and is not intended to be all-inclusive.

Dealer and Tech Rep Organizations

In the United States, the majority of sales to the vehicle repair industry are
conducted through Snap-on's dealer network and its tech rep organization.
Snap-on's mobile dealer van network ("dealers") primarily covers vehicle service
technicians and shop owners, providing weekly contact at the customer's place of
business. Dealers' sales are concentrated in hand and power tools, tool storage
units and small diagnostic and shop equipment, which can easily be transported
in a van and demonstrated during a brief sales call. Dealers purchase Snap-on's
products at a discount from suggested retail prices and resell them at prices of
the dealer's choosing. Although some dealers have sales areas defined by other
methods, most U.S. dealers are provided a list of places of business that serves
as the basis of the dealer's sales route.

Since 1991, all new U.S. dealers, and a majority of the pre-1991 U.S. dealers,
have been enrolled as franchisees of Snap-on. Snap-on also provides franchisees
the opportunity to add a second van to their franchise. Snap-on charges nominal
initial and ongoing monthly license fees. Through the LLC, financial assistance
is provided to franchised dealers, which could include financing for initial
license fees, inventory, the van, revolving accounts receivable, equipment,
fixtures, other expenses and an initial checking account deposit. At year-end
2001, approximately 92% or 3,207 of all U.S. dealers were enrolled as
franchisees, versus approximately 91% or 3,083 dealers in 2000.

Snap-on supports its dealers with an extensive field organization of branch
offices, field managers, and service and distribution centers. Snap-on also
provides sales training, customer and dealer financial assistance, and marketing
and product promotion programs to strengthen dealer sales. In the United States,
a National Dealer Advisory Council, composed of and elected by dealers, assists
Snap-on in identifying and implementing enhancements to the franchise program.

In the United States, dealers are supported by the tech rep employee sales
force. Tech reps are specialists who demonstrate and sell higher-price-point
diagnostics and shop equipment, as well as shop management information systems.
Tech reps work independently and with dealers to identify and generate sales
leads among vehicle service shop owners. Tech reps are compensated primarily on
the basis of commission; dealers receive a brokerage fee from certain sales made
by the tech reps to the dealer's customers. Most products sold through the
dealer and tech rep organization are sold under the Snap-on or Sun brand names.

Snap-on has replicated its U.S. dealer van method of distribution in certain
other countries, including Australia, Canada, Germany, Mexico, Benelux
Countries, South Africa, Japan and the United Kingdom. In many of these markets,
as in the United States, purchase decisions are generally made or influenced by
professional vehicle service technicians and shop owners. Snap-on markets
products in certain other countries through its subsidiary, Snap-on Tools
International, Ltd., which sells to foreign distributors under license or
contract with Snap-on.

                                       6
<PAGE>
Company Direct Sales

In the United States, a growing proportion of shop equipment sales under the
Sun, John Bean, Wheeltronic, White and Hofmann brands are made by a direct sales
force that has responsibility for national accounts. As the automotive service
and repair industry consolidates (with more business conducted by national
chains, automotive dealerships and franchised service centers), these larger
organizations can be serviced most effectively by sales people who can
demonstrate and sell the full line of equipment and diagnostic products and
services. Snap-on also sells these products and services directly to vehicle
manufacturers.

Tools and equipment are marketed to industrial and governmental customers in the
United States through industrial sales representatives, who are employees, and
independent industrial distributors. In most markets outside the United States,
industrial sales are conducted through distributors. The sales representatives
focus on industrial customers whose main purchase criteria are quality and
service. At the end of 2001, Snap-on had industrial sales representatives in the
United States, Australia, Canada, Japan, Mexico, Puerto Rico and some European
countries, with the United States representing the majority of Snap-on's total
industrial sales.

Distributors

Sales of certain tools and equipment are made through vehicle service and
industrial distributors who purchase the items from Snap-on and resell them to
the end users. Products supplied by Bahco, under the Bahco, Fish and Hook
(design), Sandflex, Pradines and Lindstrom brands and trade names, for example,
are sold through distributors in Europe, North and South America, Asia and
certain other parts of the world. Under-car and other vehicle service equipment,
sold through distributors primarily under brands including John Bean and
Hofmann, as well as hand tools under the Irimo, Palmera and Acesa brands, are
differentiated from those products sold through the dealer, tech rep and direct
sales channels. Sun-branded equipment is marketed through distributors in South
America and Asia, and through both a direct sales force and distributors in
Europe.

E-commerce

Snap-on's e-commerce development initiatives are expected to allow Snap-on to
match the capabilities of the Internet with Snap-on's existing brand sales and
distribution strengths and to reach new and under-served customer segments.
Snap-on began selling product via the Internet in 2000 as part of its "Store
Without Walls" vision, which offers both current and prospective customers
online, around-the-clock access to purchase Snap-on(R) products through its
public Web site, snapon.com. The site features an online catalog containing more
than 14,000 products, including Snap-on hand tools, power tools, tool storage
units and diagnostic equipment available to consumers and professionals in the
United States. In 2001, Snap-on extended online sales to select new regions of
the world, and by the end of the year approximately 70,000 customers had
registered on the site, including more than 6,700 industrial accounts. In
addition to its public website, Snap-on will begin to host individual dealer Web
sites in 2002 to help dealers extend their industry-leading service. These
initiatives, and other system enhancements under development, are designed to
further leverage the one-on-one relationships and service Snap-on has with its
current as well as prospective customers. Through the development of its
business-to-business and business-to-consumer capabilities, Snap-on and its
dealers will be enlarging communications with customers on a real-time, 24-hour,
7-days a week basis.

                                       7
<PAGE>
Competition

Snap-on competes on the basis of its product quality, service, brand awareness
and technological innovation. While no one company competes with Snap-on across
all of its product lines and distribution channels, various companies compete in
one or more product categories and/or distribution channels.

Snap-on believes that it is a leading manufacturer and distributor of tools and
equipment, offering the broadest line of these products to the vehicle service
industry. The major competitors selling to professional technicians in the
vehicle service and repair sector through the mobile van channel include MAC
Tools (The Stanley Works) and Matco (Danaher Corporation). Snap-on also competes
with companies that sell through non-mobile van distributors including Facom
(Fimalac), Sears, Roebuck and Co. and The Stanley Works. In the industrial
sector, major competitors include Armstrong (Danaher Corporation), Cooper
Industries, Inc. and Proto (The Stanley Works). The major competitors selling
diagnostics and shop equipment to shop owners in the vehicle service and repair
sector include Corghi S.p.A., Facom (Fimalac), Hennessy (Danaher Corporation),
Hunter Engineering, OTC and Robinair (SPX Corporation), and Rotary and Chief
Automotive (Dover Corporation).

Raw Materials and Purchased Product

Snap-on's supply of raw materials (including various grades and alloys of steel
bars and sheets) and purchased components are readily available from numerous
suppliers.

Approximately 83% of 2001 consolidated net sales consisted of products
manufactured by Snap-on, while the remaining 17% consisted of products purchased
from outside suppliers. No single supplier's products accounted for a material
portion of 2001 consolidated net sales.

Patents, Trademarks and Other Intellectual Property

Snap-on vigorously pursues and relies on patent protection to protect its
inventions and its position in its markets. As of December 29, 2001, Snap-on and
its subsidiaries held 1,343 patents worldwide. No sales relating to any single
patent represented a material portion of Snap-on's revenues in 2001.

Examples of products that have features or designs that benefit from patent
protection include engine analyzers, serrated jaw open-end wrenches, wheel
alignment systems, wheel balancers, sealed ratchets, electronic torque wrenches,
ratcheting screwdrivers, emissions-sensing devices and air conditioning
equipment.

Much of the technology used in the manufacture of vehicle service tools and
equipment is in the public domain. Snap-on relies primarily on trade secret
protection to protect proprietary processes used in manufacturing. Methods and
processes are patented when appropriate. Copyright protection is also utilized
when appropriate.

Trademarks used by Snap-on are of continuing importance to Snap-on in the
marketplace. Trademarks have been registered in the United States and more than
100 other countries, and additional applications for trademark registrations are
pending. Snap-on vigorously polices proper use of its trademarks. Snap-on's
right to manufacture and sell certain products is dependent upon licenses from
others, however, these products do not represent a material portion of Snap-on's
sales.

                                       8
<PAGE>
Working Capital

Because most of Snap-on's business is not seasonal and its inventory needs are
relatively constant, no unusual working capital needs arise during the year.

Snap-on's financial condition and use of working capital is discussed in
"Management's Discussion and Analysis," on pages 23 through 25 of Snap-on's 2001
Annual Report and is incorporated herein by reference.

Snap-on does not depend on any single customer, small group of customers or
government for any material part of its sales, and has no significant backlog of
orders.

Environment

Snap-on complies with applicable environmental control requirements in its
operations. Compliance has not had, and Snap-on does not for the foreseeable
future expect it to have, a material effect upon Snap-on's capital expenditures,
earnings or competitive position.

Employees

At the end of February 2002, Snap-on employed approximately 13,500 people, of
whom approximately 40% are engaged in manufacturing activities.


                                       9
<PAGE>
Item 2: Properties

Snap-on maintains both leased and owned manufacturing, warehouse distribution
and office facilities throughout the world. Snap-on believes that its facilities
are well maintained and have adequate capacity to meet its present and
foreseeable future demand. Snap-on's U.S. facilities occupy approximately 4.4
million square feet, of which 73% is owned, including its corporate and general
offices located in Pleasant Prairie and Kenosha, Wisconsin. Snap-on's facilities
outside the United States contain approximately 4.0 million square feet, of
which 68% is owned. During 2001, through its restructuring efforts, Snap-on
recorded charges for the consolidation or closure of 35 facilities, comprised of
nine manufacturing or distribution facilities and 26 sales or administrative
offices.

The following table provides information about each of Snap-on's principal
manufacturing locations and distribution centers (exceeding 50,000 square feet):

Location                         Type of property               Owned/Leased
- --------                         ----------------               ------------

U.S. Locations:
Conway, Arkansas                 Manufacturing                  Owned
City of Industry, California     Manufacturing                  Leased
Escondido, California            Manufacturing                  Owned

Poway, California                Distribution and manufacturing Leased
San Jose, California             Manufacturing                  Leased
Columbus, Georgia                Distribution                   Owned

Crystal Lake, Illinois           Distribution                   Owned
Mt. Carmel, Illinois             Manufacturing                  Owned
Algona, Iowa                     Manufacturing                  Owned

Sioux City, Iowa                 Manufacturing                  Owned
Olive Branch, Mississippi        Distribution                   Leased and owned
Carson City, Nevada              Distribution                   Leased and owned

Murphy, North Carolina           Manufacturing                  Leased
Robesonia, Pennsylvania          Distribution                   Owned
Elizabethton, Tennessee          Manufacturing                  Owned

Johnson City, Tennessee          Manufacturing                  Owned
Elkhorn, Wisconsin               Manufacturing                  Owned
Kenosha, Wisconsin               Manufacturing                  Owned

Milwaukee, Wisconsin             Manufacturing                  Owned

Non-U.S. Locations:
Santo Tome, Argentina            Manufacturing                  Owned
Santa Barbara D'oeste, Brazil    Manufacturing                  Owned
Mississauga, Canada              Manufacturing                  Leased

Newmarket, Canada                Distribution and manufacturing Owned
Kettering, England               Distribution                   Owned
Rotherham, England               Manufacturing                  Owned

King's Lynn, England             Distribution and manufacturing Owned
Pfungstadt, Germany              Manufacturing                  Leased
Unterneukirchen, Germany         Manufacturing                  Leased

                                 10
<PAGE>
Location                         Type of property               Owned/Leased
- --------                         ----------------               ------------

Wuppertal, Germany               Manufacturing                  Leased
Sopron, Hungary                  Manufacturing                  Owned
Correggio, Italy                 Manufacturing                  Owned

Juarez, Mexico                   Manufacturing                  Leased
Helmond, the Netherlands         Distribution                   Owned
Veenendaal, the Netherlands      Distribution                   Leased

Vila do Conde, Portugal          Manufacturing                  Owned
Irun, Spain                      Manufacturing                  Owned
Urretxu, Spain                   Manufacturing                  Owned

Vitorio, Spain                   Distribution and manufacturing Owned
Bollnas, Sweden                  Manufacturing                  Owned
Edsbyn, Sweden                   Manufacturing                  Owned

Enkoping, Sweden                 Manufacturing                  Owned
Lidkoping, Sweden                Manufacturing                  Owned
Sandviken, Sweden                Distribution                   Leased


                                       11
<PAGE>
Item 3: Legal Proceedings

During 2001, Snap-on entered into a binding arbitration process with SPX
Corporation related to infringement of patents. The arbitrator ruled in favor of
SPX and Snap-on paid damages of $44.0 million in January 2002 to SPX. Further
information is described in Note 15 entitled "Commitments and Contingencies" on
page 42 of Snap-on's 2001 Annual Report, which is incorporated herein by
reference.


Item 4: Submission of Matters to a Vote of Security Holders

There was no matter submitted to a vote of the shareholders during the fourth
quarter of the fiscal year ending December 29, 2001.


Item 4.1: Executive Officers of the Registrant

The executive officers of Snap-on, their ages as of December 29, 2001, their
titles as of that date and positions held during the last five years are listed
below.

Robert A. Cornog (61) - Chairman since July 1991. President and Chief Executive
Officer from July 1991 to April 2001. A Director since 1982.

Dale F. Elliott (47) - President and Chief Executive Officer since April 2001.
President - Diagnostics and Industrial from October 1998 to April 2001.
President - Snap-on Industrial from February 1995 to October 1998. Prior to
joining Snap-on, he was Vice President - Marketing at S-B Power Tool, a joint
venture between the Skil division of Emerson Electric and then Robert Bosch GmbH
from June 1984 to January 1995. A Director since 2001.

Frederick D. Hay (57) - Senior Vice President - Operations since October 1998.
Senior Vice President - Transportation from February 1996 to October 1998. Prior
to joining Snap-on, he was President of the Interior Systems and Components
Division of UT Automotive, a business unit of United Technologies Corporation,
from December 1989 to January 1996.

Donald S. Huml (55) - Senior Vice President - Finance and Chief Financial
Officer since August 1994. Prior to joining Snap-on, he was Vice President and
Chief Financial Officer of Saint-Gobain Corporation from December 1990 to August
1994.

Michael F. Montemurro (53) - Senior Vice President and President - Worldwide
Snap-on Dealer Group since November 2000. Senior Vice President - Transportation
since October 1998. Senior Vice President - Financial Services and
Administration from August 1994 to October 1998. Senior Vice President -
Financial Services, Administration and Chief Financial Officer from April 1994
to August 1994. Senior Vice President - Finance and Chief Financial Officer from
March 1990 to April 1994.

Blaine A. Metzger (45) - Vice President and Controller since May 2001. Prior to
joining Snap-on, he was Chief Financial Officer for Crenlo, Inc. a division of
Dover Corporation from August 2000 to April 2001 and Vice President Financial
Planning, Reporting and Finance Centers for CNH Global N.V. from November 1999
to March 2000. Prior to serving as vice president at CNH Global, he held several
financial management positions at Case Corporation beginning in 1990.

Susan F. Marrinan (53) - Vice President, Secretary and General Counsel since
January 1992.

There is no family relationship among the executive officers and there has been
no involvement in legal proceedings during the past five years that would be
material to the evaluation of the ability or integrity of any of the executive
officers. Executive officers may be elected by the board of directors or
appointed by the Chief Executive Officer at the regular meeting of the board of
directors that follows the Annual Shareholders' Meeting, which is held in April
each year, and at such other times as new positions are created or vacancies
must be filled.

                                       12
<PAGE>
PART II

Item 5: Market for Registrant's Common Equity and Related Stockholder Matters

Snap-on has undertaken stock repurchases from time to time to prevent dilution
created by shares issued for employee and dealer stock purchase plans, stock
options, and other corporate purposes, as well as to repurchase shares when
market conditions are favorable. Snap-on repurchased 400,000 shares in 2001,
following the repurchase of 1,019,500 shares in 2000 and 492,800 shares in 1999.
Since 1997, Snap-on's board of directors has authorized the repurchase of up to
$250 million of Snap-on's common stock. As of the end of 2001, Snap-on has
remaining availability to repurchase up to an additional $133 million in common
stock pursuant to the board's authorizations. The purchase of Snap-on common
stock is at the company's discretion, subject to prevailing financial and market
conditions. Since 1995, Snap-on has repurchased 9,989,583 shares. In 2001,
Snap-on's average common stock repurchase price was $28.14.

At December 29, 2001, Snap-on had 63,923,672 shares of common stock outstanding.
This consists of 57,939,527 shares considered outstanding for purposes of
computing earnings per share and an additional 5,984,145 shares held in a
Grantor Stock Trust, which are considered outstanding for voting purposes but
not for purposes of computing earnings per share.

Snap-on's stock is listed on the New York Stock Exchange under the ticker symbol
SNA. As of December 29, 2001, there were 10,819 registered holders of Snap-on
common stock.

Snap-on's common stock high and low prices for the last two years by quarter
were as follows:

Common Stock High/Low Prices - Unaudited
(Amounts in dollars)

Quarter                        2001                          2000
- -------------         -----------------------        ----------------------
                        High          Low             High          Low
                      ----------    ---------        --------     ---------
First                  $30.75        $27.38          $27.69        $20.88
Second                 $30.93        $24.16          $30.31        $24.38
Third                  $27.31        $21.65          $32.44        $21.81
Fourth                 $34.21        $21.68          $28.50        $21.00

Additional information required by Item 5 is contained in the section entitled
"Quarterly Financial Information" on page 45 of Snap-on's 2001 Annual Report and
is incorporated herein by reference.

Item 6: Selected Financial Data

The information required by Item 6 is contained in the section entitled
"Six-year Data" on page 46 of Snap-on's 2001 Annual Report and is incorporated
herein by reference.

Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations

The information required by Item 7 is contained in the section entitled
"Management's Discussion and Analysis" on pages 17 through 27 of Snap-on's 2001
Annual Report and is incorporated herein by reference.

Item 7A: Qualitative and Quantitative Disclosures About Market Risk

The information required by Item 7A is contained in the section entitled
"Market, Credit and Economic Risks" on pages 25 and 26 and in Note 10 entitled
"Financial Instruments" on pages 37 and 38 of Snap-on's 2001 Annual Report and
is incorporated herein by reference.

                                       13
<PAGE>
Item 8: Financial Statements and Supplementary Data

Financial statements and supplementary data required by Item 8 is contained in
Snap-on's 2001 Annual Report appearing in the sections entitled "Consolidated
Statements of Earnings" on page 28, "Consolidated Balance Sheets" on page 29,
"Consolidated Statements of Shareholders' Equity and Comprehensive Income" on
page 30, "Consolidated Statements of Cash Flows" on page 31, "Notes to
Consolidated Financial Statements" on pages 32 through 44, "Quarterly Financial
Information" appearing on page 45, and "Report of Independent Public
Accountants" on page 47, and is incorporated herein by reference.

Snap-on's 2001 earnings before cumulative effect of a change in accounting
principle and related earnings per share by quarter were as follows:

Earnings - Unaudited
(Amounts in millions except per share data)

            Earnings (loss)
                 before              Earnings (loss)         Earnings (loss)
Quarter    Cumulative Effect        per Share - Basic      per Share - Diluted
- --------  --------------------     -------------------    ---------------------
First            $  29.4                $  .51                  $  .51
Second           $   8.9                $  .15                  $  .15
Third            $    .6                $  .01                  $  .01
Fourth           $ (17.4)               $ (.30)                 $ (.30)

Additionally, Snap-on's gross profit for the last two years by quarter was as
follows:

Gross Profit* - Unaudited
(Amounts in millions)

Quarter                     2001            2000
- -------------           ------------    ------------
First                      $243.7          $248.9
Second                     $239.3          $264.8
Third                      $222.4          $233.0
Fourth                     $243.6          $250.1

*Gross Profit equals net sales less cost of goods sold and cost of goods sold -
non-recurring charges.

Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

                                       14
<PAGE>
PART III

Item 10: Directors and Executive Officers of the Registrant

The identification of Snap-on's directors as required by Item 10 is contained in
Snap-on's Proxy Statement, dated March 15, 2002, in the section entitled
"Proposal to be Voted on: Election of Directors" on page 4 and in the section
entitled "Board of Directors-Directors Not Standing for Election" on page 5, and
is incorporated herein by reference.

With respect to information about Snap-on's executive officers, see Item 4.1,
"Executive Officers of the Registrant," at the end of Part I of this report.

The disclosure concerning Section 16(a) filing compliance pursuant to Item 405
of Regulation S-K is contained in Snap-on's Proxy Statement, dated March 15,
2002, in the section entitled "Other Information" on page 24, and is
incorporated herein by reference.

Item 11: Executive Compensation

The information required by Item 11 is contained in Snap-on's Proxy Statement,
dated March 15, 2002, in the section entitled "Executive Compensation" on pages
15 through 20 and in the section entitled "Other Information" on pages 21
through 24, and is incorporated herein by reference.

Item 12: Security Ownership of Certain Beneficial Owners and Management

The information required by Item 12 is contained in Snap-on's Proxy Statement,
dated March 15, 2002, in the section entitled "Security Ownership of Management
and Certain Beneficial Owners" contained on pages 8 and 9, and is incorporated
herein by reference.

Item 13: Certain Relationships and Related Transactions

None.

                                       15
<PAGE>
PART IV

Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K

Item 14(a):  Documents filed as part of this report:

1.  List of Financial Statements

The following consolidated financial statements of Snap-on and the Report of
Independent Public Accountants thereon, contained on pages 28 through 44 and on
page 47 of Snap-on's 2001 Annual Report to its shareholders for the year ended
December 29, 2001, are incorporated by reference in Item 8 of this report:

Consolidated Statements of Earnings for the years ended December 29, 2001,
December 30, 2000, and January 1, 2000.

Consolidated Balance Sheets as of December 29, 2001, and December 30, 2000.

Consolidated Statements of Shareholders' Equity and Comprehensive Income for the
years ended December 29, 2001, December 30, 2000, and January 1, 2000.

Consolidated Statements of Cash Flows for the years ended December 29, 2001,
December 30, 2000, and January 1, 2000.

Notes to Consolidated Financial Statements.

Report of Independent Public Accountants.

2.  Financial Statement Schedules

The following consolidated financial statement schedules of Snap-on are included
in Item 14(d) as a separate section of this report:

Schedule II Valuation and Qualifying Accounts and Reserves - page 22 herein.

Report of Independent Public Accountants on Financial Statement Schedule - page
23 herein.

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are inapplicable and,
therefore, have been omitted, or are included in Snap-on's 2001 Annual Report in
the Notes to Consolidated Financial Statements for the years ended December 29,
2001, December 30, 2000, and January 1, 2000, which are incorporated by
reference in Item 8 of this report.

3.  List of Exhibits

The exhibits filed with or incorporated by reference in this report are as
specified in the exhibit index under Item 14(c) - pages 19 through 21 herein.

Item 14(b):  Reports on Form 8-K

During the fourth quarter of 2001, there were no matters reported on Form 8-K.

Subsequent to year-end, Snap-on reported on Form 8-K the following:

Date Filed        Date of Report      Item
- ----------        --------------      ----
January 4, 2002   December 28, 2001   Item 5. Snap-on filed a press release
                                      announcing the conclusion of the
                                      arbitration with SPX.

                                       16
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, Snap-on has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


SNAP-ON INCORPORATED


By: /s/ Dale F. Elliott                                     Date: March 22, 2002
    ------------------------------------------------------        --------------
    Dale F. Elliott, President and Chief Executive Officer
    and Director


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of Snap-on and in the
capacities as indicated.


    /s/ Dale F. Elliott                                     Date: March 22, 2002
    ------------------------------------------------------        --------------
    Dale F. Elliott, President and Chief Executive Officer
    and Director


    /s/ Donald S. Huml                                      Date: March 22, 2002
    ------------------------------------------------------        --------------
    Donald S. Huml, Principal Financial Officer,
    and Senior Vice President - Finance


    /s/ Blaine A. Metzger                                   Date: March 22, 2002
    ------------------------------------------------------        --------------
    Blaine A. Metzger, Principal Accounting Officer,
    Vice President and Controller


                                       17
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of Snap-on and in the
capacities as indicated.


By: /s/ Bruce S. Chelberg                                   Date: March 22, 2002
    ------------------------------------------------------        --------------
    Bruce S. Chelberg, Director


By: /s/ Robert A. Cornog                                    Date: March 22, 2002
    ------------------------------------------------------        --------------
    Robert A. Cornog, Chairman of the Board of Directors


By: /s/ Roxanne J. Decyk                                    Date: March 22, 2002
    ------------------------------------------------------        --------------
    Roxanne J. Decyk, Director


By:  /s/ Leonard A. Hadley                                  Date: March 22, 2002
    ------------------------------------------------------        --------------
    Leonard A. Hadley, Director


By: /s/ Arthur L. Kelly                                     Date: March 22, 2002
    ------------------------------------------------------        --------------
    Arthur L. Kelly, Director


By: /s/ George W. Mead                                      Date: March 22, 2002
    ------------------------------------------------------        --------------
    George W. Mead, Director


By: /s/ Jack D. Michaels                                    Date: March 22, 2002
    ------------------------------------------------------        --------------
    Jack D. Michaels, Director


By: /s/ Frank S. Ptak                                       Date: March 22, 2002
    ------------------------------------------------------        --------------
    Frank S. Ptak, Director


By: /s/ Edward H. Rensi                                     Date: March 22, 2002
    ------------------------------------------------------        --------------
    Edward H. Rensi, Director


By: /s/ Richard F. Teerlink                                 Date: March 22, 2002
    ------------------------------------------------------        --------------
    Richard F. Teerlink, Director




By:                                                         Date:
    ------------------------------------------------------       ---------------
    Lars Nyberg, Director*

*Lars Nyberg was not a director during 2001.  He first became a director in
February 2002, and is listed here because he was a director at the time of
filing.  Under the circumstances, as a majority of the directors had signed, he
was not required to sign and the Company did not request him to sign this
document.
                                       18
<PAGE>
                                  EXHIBIT INDEX
Item 14(c):  Exhibits

(3)  (a)  Restated Certificate of Incorporation of the Corporation as amended
          through April 25, 1997 (incorporated by reference to Exhibit 3(a) to
          Snap-on's Annual Report on Form 10-K for the fiscal year ended January
          2, 1998 (Commission File No. 1-7724))

     (b)  Bylaws of the Corporation, effective as of January 26, 1996
          (incorporated by reference to Exhibit 3(b) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended December 30, 1996 (Commission
          File No. 1-7724))

(4)  (a)  Rights Agreement between the Corporation and First Chicago Trust
          Company of New York, effective as of August 22, 1997 (incorporated by
          reference to Snap-on's Form 8-A12B dated October 17, 1997 (Commission
          File No. 1-7724))

     (b)  Amendment No. 1 to the Rights Agreement dated as of September 24, 2001
          between the Corporation and EquiServe Trust Company, N.A. (successor
          to First Chicago Trust Company of New York) (incorporated by reference
          to Snap-on's Form 8-A/A dated September 26, 2001 (Commission File No.
          1-7724))

     Snap-on and its subsidiaries have no long-term debt agreement for which the
     related outstanding debt exceeds 10% of consolidated total assets as of
     December 29, 2001. Copies of debt instruments for which the related debt is
     less than 10% of consolidated total assets will be furnished to the
     Commission upon request.

(10) Material Contracts

     (a)  Amended and Restated Snap-on Incorporated 1986 Incentive Stock Program
          (incorporated by reference to Exhibit 10(a) of Snap-on's Annual Report
          on Form 10-K for the fiscal year ended January 1, 2000 (Commission
          File No. 1-7724))*

     (b)  Snap-on Incorporated 2001 Incentive Stock and Awards Plan
          (incorporated by reference to Appendix B to Snap-on's Proxy Statement
          on Schedule 14A filed on March 16, 2001 (Commission File No. 1-7724))*

     (c)  Form of Restated Senior Officer Agreement between the Corporation and
          each of Dale F. Elliott, Frederick D. Hay, Donald S. Huml and Michael
          F. Montemurro (incorporated by reference to Exhibit 10(b) to Snap-on's
          Annual Report on Form 10-K for the fiscal year ended December 30, 1995
          (Commission File No. 1-7724))*

     (d)  Form of Restated Executive Agreement between the Corporation and each
          of Alan T. Biland, Sharon M. Brady, Richard V. Caskey, Jeffrey N.
          Eggert, Gary S. Henning, Nicholas L. Loffredo, Denis J. Loverine,
          Susan F. Marrinan and Blaine A. Metzger (incorporated by reference to
          Exhibit 10(b) to Snap-on's Annual Report on Form 10-K for the fiscal
          year ended December 30, 1995 (Commission File No. 1-7724))*

     (e)  Deferred Compensation Waiver and Insurance Benefit Agreement between
          the Corporation and Robert A. Cornog dated January 30, 1998
          (incorporated by reference to Exhibit 10(d) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended January 2, 1999 (Commission
          File No. 1-7724))*

     (f)  Deferred Compensation Waiver and Insurance Benefit Agreement between
          the Corporation and Branko M. Beronja dated December 21, 1998
          (incorporated by reference to Exhibit 10(e) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended January 2, 1999 (Commission
          File No. 1-7724))*

     (g)  Deferred Compensation Waiver and Insurance Benefit Agreement between
          the Corporation and Frederick D. Hay dated September 27, 1999
          (incorporated by reference to Exhibit 10(f) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended January 1, 2000 (Commission
          File No. 1-7724))*

                                       19
<PAGE>
     (h)  Form of Indemnification Agreement between the Corporation and each of
          the Directors, Frederick D. Hay, Donald S. Huml, Susan F. Marrinan and
          Michael F. Montemurro effective October 24, 1997 (incorporated by
          reference to Exhibit 3(a) to Snap-on's Annual Report on Form 10-K for
          the fiscal year ended January 2, 1998 (Commission File No. 1-7724))*

     (i)  Amended and Restated Snap-on Incorporated Directors' 1993 Fee Plan
          (incorporated by reference to Exhibit 10(h) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended January 1, 2000 (Commission
          File No. 1-7724))*

     (j)  Snap-on Incorporated Deferred Compensation Plan (as amended through
          March 13, 2002)*#

     (k)  Snap-on Incorporated Supplemental Retirement Plan for Officers
          (incorporated by reference to Exhibit 10(j) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended January 1, 2000 (Commission
          File No. 1-7724))*

     (l)  Amended and Restated Benefit Trust Agreement between the Corporation
          and The Northern Trust Company, dated as of July 2, 1998 and amended
          and restated as of March 17, 2000 (incorporated by reference to
          Snap-on's Form 8-K dated March 17, 2000 (Commission File No. 1-7724))

     (m)  Form of Deferred Award Agreement between the Corporation and each of
          Robert A. Cornog, Alan T. Biland, Dale F. Elliott, Gary S. Henning,
          Frederick D. Hay, Donald S. Huml, Michael F. Montemurro and Susan F.
          Marrinan, dated March 1, 1999 and Form of Restricted Stock Agreement
          between the Corporation and David E. Cox, dated March 1, 1999
          (incorporated by reference to Exhibit 10(l) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended January 1, 2000 (Commission
          File No. 1-7724))*

     (n)  Five-year Credit Agreement between the Corporation and Salomon Smith
          Barney Inc., Banc One Capital Markets Inc. and the First National Bank
          of Chicago (incorporated by reference to Exhibit 10(a) to Snap-on's
          report on Form 10-Q for the quarterly period ended October 2, 1999
          (Commission File No. 1-7724))

     (o)  364-Day Credit Agreement between the Corporation and Salomon Smith
          Barney Inc., Banc One Capital Markets Inc. and the First National Bank
          of Chicago (incorporated by reference to Exhibit 10(a) to Snap-on's
          report on Form 10-Q for the quarterly period ended October 2, 1999
          (Commission File No. 1-7724))

     (p)  Amended and Restated 364-Day Credit Agreement between the Corporation
          and Salomon Smith Barney Inc., Banc One Capital Markets, Inc.,
          Citibank, N.A. and Bank One, N.A. (incorporated by reference to
          Exhibit 10.1 to Snap-on's report on Form 10-Q for the quarter ended
          September 29, 2001 (Commission File No. 1-7724))

     (q)  Amended and Restated Five Year Credit Agreement between the
          Corporation and Salomon Smith Barney Inc., Banc One Capital Markets
          Inc., Citibank, N.A. and Bank One, N.A. (incorporated by reference to
          Exhibit 10(o) to Snap-on's Annual Report on Form 10-K for the fiscal
          year ended December 30, 2000 (Commission File No. 1-7724))

     (r)  Agreement between Branko M. Beronja and the Corporation regarding
          various subsidiary director assignments and special project fees for
          2000 and 2001 (incorporated by reference to Exhibit 10(q) to Snap-on's
          Annual Report on Form 10-K for the fiscal year ended December 30, 2000
          (Commission File No. 1-7724))*

     (s)  Retention and Recognition Agreement between Robert A. Cornog and the
          Corporation (incorporated by reference to Exhibit 10(r) to Snap-on's
          Annual Report on Form 10-K for the fiscal year ended December 30, 2000
          (Commission File No. 1-7724))*

                                       20
<PAGE>
     (t)  Form of Severance Agreement between Donald S. Huml and the Corporation
          (incorporated by reference to Exhibit 10(s) to Snap-on's Annual Report
          on Form 10-K for the fiscal year ended December 30, 2000 (Commission
          File No. 1-7724))*

     (u)  Form of Severance Agreements between the Corporation and each of Alan
          T. Biland, Sharon M. Brady, Dale F. Elliott, Frederick D. Hay,
          Nicholas L. Loffredo, Susan F. Marrinan and Michael F. Montemurro
          dated October 27, 2000 (incorporated by reference to Exhibit 10(t) to
          Snap-on's Annual Report on Form 10-K for the fiscal year ended
          December 30, 2000 (Commission File No. 1-7724))*

     (v)  Form of Amendment to Deferred Compensation Waiver and Insurance
          Benefit Agreement between the Corporation and each of Robert A.
          Cornog, Branko M. Beronja and Fredrick D. Hay (incorporated by
          reference to Exhibit 10(u) to Snap-on's Annual Report on Form 10-K for
          the fiscal year ended December 30, 2000 (Commission File No. 1-7724))*

     (w)  Form of Split-Dollar Insurance Plan Agreement between the Corporation
          and each of Robert A. Cornog, Branko M. Beronja, Dale F. Elliot,
          Fredrick D. Hay, Donald S. Huml, Susan F. Marrinan and Michael F.
          Montemurro (incorporated by reference to Exhibit 10(v) to Snap-on's
          Annual Report on Form 10-K for the fiscal year ended December 30, 2000
          (Commission File No. 1-7724))*

     (x)  Form of Amendment to Split-Dollar Insurance Plan Agreement between the
          Corporation and each of Robert A. Cornog, Branko M. Beronja, Dale F.
          Elliot, Fredrick D. Hay, Donald S. Huml, Susan F. Marrinan and Michael
          F. Montemurro (incorporated by reference to Exhibit 10(w) to Snap-on's
          Annual Report on Form 10-K for the fiscal year ended December 30, 2000
          (Commission File No. 1-7724))*

     (y)  Employment Agreement between the Corporation and Dale F. Elliott,
          effective as of April 27, 2001 (incorporated by reference to Exhibit
          10.2 to Snap-on's report on Form 10-Q for the quarterly period ended
          June 30, 2001 (Commission File No. 1-7724))*

     (z)  Executive Employment Agreement between Frederick D. Hay and the
          Corporation (incorporated by reference to Exhibit 10.2 to Snap-on's
          report on Form 10-Q for the quarterly period ended September 29, 2001
          (Commission File No. 1-7724))*

(12) Computation of Ratio of Earnings to Fixed Charges#

(13) The following portions of Snap-on's Annual Report to Shareholders, which
     are incorporated by reference in this Form 10-K, are filed as Exhibit 13:
     Management's Discussion and Analysis, Consolidated Statements of Earnings,
     Consolidated Balance Sheets, Consolidated Statements of Shareholders'
     Equity and Comprehensive Income, Consolidated Statements of Cash Flows,
     Notes to Consolidated Financial Statements, Quarterly Financial
     Information, Six-year Data, Management's Responsibility for Financial
     Reporting and Report of Independent Public Accountants.#

(21) Subsidiaries of the Corporation#

(23) Consent of Independent Public Accountants#

# Filed herewith.
* Denotes management contract or compensatory plan or arrangement.

                                       21
<PAGE>
Item 14(d): Schedules


          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                              (Amounts in millions)


                     Balance at                                       Balance at
                     Beginning                                         End of
Description           of Year    Expenses  Deductions(1) Other - Net    Year
- -------------------  ----------  --------  ------------- -----------  ----------
Allowance for
doubtful accounts:

Year ended
December 29, 2001       $40.9      $31.4       $(32.7)*     $  -         $39.6

Year ended
December 30, 2000       $27.8      $27.9       $(14.8)      $  -         $40.9

Year ended
January 1, 2000         $29.2      $21.1       $(15.0)      $(7.5)**     $27.8


(1) This amount represents write-offs of bad debts.

* The increase in bad debt write-offs in 2001 was primarily due to write-offs
resulting from the exiting of a segment of the emissions-testing business and
the termination of a European supplier relationship.

** Includes a $9.5 million reduction due to the sale of receivables to
The CIT Group, Inc.


                                       22
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE


We have audited in accordance with auditing standards generally accepted in the
United States, the financial statements included in Snap-on Incorporated's
("Snap-on") Annual Report to Shareholders, incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 29, 2002. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed on page 22 is the responsibility of Snap-on's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.


                                           /s/ Arthur Andersen LLP

                                           ARTHUR ANDERSEN LLP

Chicago, Illinois
January 29, 2002


                                       23

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(J)
<SEQUENCE>3
<FILENAME>pdm280c.txt
<DESCRIPTION>DEFERRED COMPENSATION PLAN
<TEXT>
                                 Exhibit (10)(j)

                              SNAP-ON INCORPORATED
                           DEFERRED COMPENSATION PLAN
                       (as amended through March 12, 2002)

                     Section 1. Establishment and Purposes

1.1  Establishment. Snap-on Incorporated established effective as of April 1,
     1986, a deferred compensation plan for executives as described herein,
     known as the "SNAP-ON INCORPORATED DEFERRED COMPENSATION PLAN" (hereinafter
     called the "Plan"). Snap-on Incorporated hereby amends the Plan effective
     March 12, 2002.

1.2  Purposes. The purposes of this Plan are to (i) enable the Corporation to
     attract and retain persons of outstanding competence, (ii) provide a means
     whereby certain amounts payable by the Corporation to selected executives
     may be deferred to some future period and to provide such executives with a
     means to have deferred amounts treated as if invested in the Corporation's
     stock, thereby aligning their interests more closely with the interests of
     shareholders and (iii) effective July 1, 2001, provide a matching credit by
     the Corporation to certain elected officers of the Corporation and to
     provide such elected officers with alternatives as to the manner in which
     annual adjustments are made to their credited matching accounts. The Plan
     is intended to constitute an unfunded plan primarily for the purpose of
     providing deferred compensation for a select group of management or highly
     compensated employees.

                             Section 2. Definitions

2.1  Definitions. Whenever used herein, the following terms shall have the
     meanings set forth below:

     (a)  "Board" means the Board of Directors of the Corporation.

     (b) "Cause" means that prior to a Participant's termination of employment,
he shall have (i) engaged in any act of fraud, embezzlement or theft in
connection with his duties as an executive or in the course of employment with
the Corporation or its subsidiaries; (ii) wrongfully disclosed any secret
process or confidential information of the Corporation or its subsidiaries; or
(iii) engaged in any Competitive Activity; and in any such case the act shall
have been determined to have been materially harmful to the Corporation. A
Participant's employment may not be terminated for Cause prior to the receipt by
the Participant of a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for the purpose of considering such
termination (after reasonable notice to the Participant and an opportunity for
the Participant, together with the Participant's counsel, to be heard before the
Board) finding that the Participant was guilty of conduct set forth in the
definition of Cause, and specifying the particulars

<PAGE>

thereof in detail. In the event of a dispute regarding whether the Participant's
employment has been terminated for Cause, no claim by the Corporation that Cause
exists shall be given effect unless the Corporation establishes by clear and
convincing evidence that Cause exists.

     (c) "Committee" means the Organization and Executive Compensation Committee
of the Board or, as to compensation matters in respect of which it has
authority, any other committee of the Board or director or officer of the
Corporation that has authority of the Organization and Executive Compensation
Committee of the Board relating to compensation matters.

     (d) "Common Stock" means the common stock, par value $1.00 per share, of
the Corporation.

     (e) "Compensation" means the gross Salary and Incentive Compensation
payable to a Participant during a Year and Other Compensation payable to a
Participant.

          (i) Salary. "Salary" means all regular, basic compensation, before
     reduction for amounts deferred pursuant to this Plan or any other plan of
     the Corporation, payable in cash to a Participant for services during the
     Year, exclusive of any bonuses or incentive compensation, special fees or
     awards, allowances, or amounts designated by the Corporation as payments
     toward or reimbursement of expenses.

          (ii) Incentive Compensation. "Incentive Compensation" means the annual
     Incentive Compensation Plan payable in cash by the Corporation to a
     Participant in a Year.

          (iii) Other Compensation. "Other Compensation" means other
     compensation payable in cash and/or Common Stock or other property by the
     Corporation to a Participant in a Year, including without limitation
     compensation payable under the Amended and Restated Snap-on Incorporated
     1986 Incentive Stock Program, as amended (the "Stock Program"), if the
     award of such compensation provides that the Participant may defer the
     compensation.

     (f) "Competitive Activity" shall mean the Participant's participation
without the written consent of the Board in the management of any business
enterprise which manufactures or sells any product or service competitive with
any product or service of the Corporation or its subsidiaries. Competitive
Activity shall not include the ownership of less than five (5) percent of the
securities in any enterprise and exercise of any ownership rights related
thereto.

     (g) "Corporation" means Snap-on Incorporated, a Delaware corporation.

     (h) "Fair Market Value" means the closing price of the Common Stock on the
New York Stock Exchange on any particular date; provided, however, that for
purposes of Section 17, Fair Market Value shall mean the closing price of the
Common Stock on


                                       2
<PAGE>

the New York Stock Exchange on the date of the Change of Control (as defined
therein) or, if higher, the highest price per share of Common Stock paid in the
transaction giving rise to the Change of Control.

     (i) "Growth Increment" means the amount of interest earned on a
Participant's deferred amounts.

     (j) "Participant" means an individual selected by the Committee for
participation in the Plan.

     (k) "Snap-on 401(k) Plan" means the Snap-on Incorporated 401(k) Personal
Savings Plan, as amended from time to time.

     (l) "Year" means a calendar year.

2.2  Gender and Number. Except when otherwise indicated by the context, any
     masculine terminology used herein also shall include the feminine gender,
     and the definition of any term herein in the singular also shall include
     the plural.

                    Section 3. Eligibility and Participation

3.1  Eligibility. The following persons shall be eligible to participate in the
     Plan:
     (a)  the elected officers and appointed officers of the Corporation;
     (b)  the elected officers and appointed officers of Snap-on Tools Company
          LLC;
     (c)  the elected officers and appointed officers of any other direct or
          indirect subsidiary of the Corporation designated by the Committee
          from time to time; and
     (d)  any other employee of the Corporation or any direct or indirect
          subsidiary of the Corporation designated by the Committee from time to
          time.

3.2  Ceasing Eligibility. In the event a Participant no longer meets the
     requirements for participation in this Plan, he shall become an inactive
     Participant. An inactive Participant shall retain all rights described
     under this Plan, except the right to make any further deferrals and the
     right to receive any further matching credits, until the time that he again
     meets the eligibility requirements of Section 3.1 (and, if applicable,
     Section 5.1).

                          Section 4. Election to Defer

4.1  Deferral Election. (a) Subject to the following provisions, prior to the
     beginning of the Year, a Participant irrevocably may elect, by written
     notice to the Corporation, to defer all or a percentage of annual Salary,
     Incentive Compensation, or both Salary and Incentive Compensation. The
     amount to be deferred each Year must equal or exceed Five Thousand and
     No/100 Dollars ($5,000.00).


                                       3
<PAGE>

          (i) With respect to Salary deferrals, the deferral percentage elected
     shall be applied to the Participant's Salary for each pay period of the
     Year to which the deferral election applies and must be made before
     November 30 of the year immediately preceding the Year for which such
     deferral election applies.

          (ii) With respect to Incentive Compensation deferrals, the deferral
     percentage elected shall apply only to the Participant's Incentive
     Compensation payable with respect to service to be performed in the Year
     and must be made before December 31 of such Year.

     (b) An individual who becomes a Participant at or after the beginning of
the Year may irrevocably elect, by written notice to the Corporation, to defer
all or a percentage of (i) the annual Salary earned by such Participant for such
Year after such election, if such election is made within thirty (30) days after
becoming a Participant, and (ii) the pro rata share of the Participant's
Incentive Compensation, if any, payable with respect to service performed during
such Year, if such election is made before December 31 of such Year.

     (c) If so provided in an award of Other Compensation, and subject to such
restrictions and conditions as may be set forth in the award or imposed by the
Corporation, a Participant irrevocably may elect, by written notice to the
Corporation, to defer all or a percentage of such Other Compensation.

4.2  Deferral Period. (a) The Participant irrevocably shall select the deferral
     period for each separate deferral. The deferral period shall be for a
     specified number of Years or until a specified date. The deferral period
     shall not be less than five (5) Years.

     (b) However, notwithstanding the deferral period specified, payments of
deferred amounts shall begin following the earliest to occur of:

          (i) Death,

          (ii) Total and permanent disability,

          (iii) Subject to subsection (c), retirement, or

          (iv) Subject to subsection (d), termination of employment.

     (c) A Participant may elect to have the deferral period for some or all
amounts deferred continue beyond termination of employment due to retirement by
so indicating when the Participant selects, or modifies pursuant to Section 4.4,
the Participant's deferral period for a deferral. At such time the Participant
may elect one or more successive post retirement deferral periods of up to five
(5) Years each.

     (d) Effective January 1, 2001, a Participant may elect to have the deferral
period for some or all amounts deferred continue beyond termination of
employment with the


                                       4
<PAGE>

Corporation, but only if such employment was terminated at the initiative of the
Corporation for reasons other than for Cause. A Participant may exercise this
one-time election by so indicating when the Participant selects, or modifies
pursuant to Section 4.4, the Participant's deferral period for a deferral. At
such time, the Participant may elect one or more post-termination deferral
periods of up to five (5) Years each.

4.3  Manner of Payment Election. At the same time as an election is made
     pursuant to Section 4.1, or is modified pursuant to Section 4.4, the
     Participant also may elect to have a deferred amount paid either in a lump
     sum or in up to twenty (20) substantially equal annual installments;
     provided, however, at such time a Participant that elects to receive
     payments in substantially equal annual installments may also specify a date
     within the installment period to receive all then remaining deferred
     amounts in a lump sum.

4.4  Modification. A Participant may change the manner in which a deferred
     amount will be paid and/or the date such payments are to commence by
     written election made prior to the Year in which such payments are to
     commence.

                          Section 5. Matching Credits

5.1  Effective Date and Eligibility. Effective July 1, 2001, the Corporation
     shall credit matching credits under this Plan only to Participants
     described in this Section at such time and in such amounts as provided in
     Section 5.2. Notwithstanding anything to the contrary in the Plan, only
     elected officers of the Corporation who are also actively participating
     under the cash balance formula in the Snap-on Incorporated Supplemental
     Retirement Plan for Officers, as amended from time to time, and are making
     deferrals for the Year shall be eligible for a matching credit by the
     Corporation for a Year for their benefit under this Plan.

5.2  Time and Amount of Matching Contributions. The Corporation shall credit
     matching credits under this Plan during each calendar quarter for the
     benefit of each eligible Participant. The amount of the matching credit for
     each calendar quarter for the benefit of an eligible Participant will be an
     amount equal to the excess of:

     (a) the lesser of (i) the product of the Participant's total deferrals to
this Plan, excluding deferrals of Other Compensation under the Amended and
Restated Snap-on Incorporated 1986 Incentive Stock Program or the Snap-on
Incorporated 2001 Incentive Stock and Awards Plan, for the calendar quarter
multiplied by fifty percent (50%), or (ii) three percent (3%) of the
Participant's Compensation (other than Other Compensation under the Amended and
Restated Snap-on Incorporated 1986 Incentive Stock Program or the Snap-on
Incorporated 2001 Incentive Stock and Awards Plan) for such calendar quarter,
over

     (b) the actual matching contribution made by the Corporation for the
benefit of such Participant for such calendar quarter under the Snap-on 401(k)
Plan.

                                       5
<PAGE>
5.3  Deferral Period.

     (a) The deferral period selected for a Year's deferrals by a Participant
under Section 4.2 shall also apply to the matching credits credited under
Section 5 with respect to those deferrals.

     (b) However, notwithstanding the deferral period specified, payments of
matching credits shall begin following the earliest to occur of:

          (i) Death,

          (ii) Total and permanent disability,

          (iii) Subject to Section 4.2(c), retirement, or

          (iv) Subject to section 4.2(d), termination of employment.

5.4  Manner of Payment Election. A Participant's elected manner of payment for
     deferred payments under Section 4.3 shall also apply to the matching
     credits credited under Section 5 with respect to those deferrals.

5.5  Modification. A Participant's change in the manner in which the deferred
     amounts will be paid and/or the date such payments are to commence under
     Section 4.4 will apply to the associated matching credits.

         Section 6. Deferred Compensation and Matching Credits Accounts

6.1  Participant Accounts.

     (a) Deferred Compensation Accounts. The Corporation shall establish and
maintain individual bookkeeping accounts in respect of deferrals made by a
Participant consisting of a "Cash Account" and a "Share Account." A Participant
shall have separate Cash Accounts and Share Accounts for deferred amounts with
different deferral periods under Section 4.2 and/or manners of payment under
Section 4.3. A Participant's Cash Account shall be credited with the dollar
amount of any amount deferred as of the date the amount deferred otherwise would
have become due and payable unless prior to such date the Participant notifies
the Corporation in writing that all or any portion of the dollar amount deferred
shall be converted into deferred shares of Common Stock to be credited to the
Participant's Share Account. In such event (i) there shall be credited to the
Participant's Share Account as of such date a number of units ("Share Units")
equal to the dollar amount of any amount deferred or if less the dollar amount
specified in such notice divided by the Fair Market Value on the last trading
business day immediately preceding the date the amount deferred otherwise would
have become due and payable and (ii) the Participant's Cash Account shall be
credited as of such date with the balance of the dollar amount deferred, if any.


                                       6
<PAGE>

     (b) Matching Credits Accounts. The Corporation shall establish and maintain
an individual bookkeeping account in respect of matching credits by the
Corporation for the benefit of an eligible Participant to be known as a
"Matching Account". A Participant's Matching Account shall be credited with a
number of units ("Share Units") equal to the dollar amount of matching credits
under Section 5 for the Participant's benefit divided by the Fair Market Value
on the last trading business day immediately preceding the date the Corporation
credits the matching credits.

6.2  Growth Increments on Cash Accounts. The Corporation will provide the
     opportunity for Growth Increments to be earned on the balance of a
     Participant's Cash Accounts. The Committee will have the authority to
     select, from time to time, the appropriate interest rate to apply to such
     amounts. Each Cash Account shall be credited on the first day of each month
     with a Growth Increment computed on the daily balance in the Cash Account
     during the immediately preceding month. The Growth Increment shall be the
     sum of the daily interest earned, compounded monthly by the interest rate
     selected by the Committee.

6.3  Share Accounts.

     (a) Subject to applicable corporate policies, from time to time a
Participant may convert all or a portion of any Cash Account balance of the
Participant into deferred shares of Common Stock credited to the Participant's
corresponding Share Account by written notice to the Corporation. In such event,
and effective as of the date the Corporation receives such a notice, (i) there
shall be credited to the Participant's Share Account a number of Share Units
equal to the number of Share Units specified in the notice or, if such notice
specifies a dollar amount, a number of Share Units equal to such dollar amount
divided by the Fair Market Value on the last trading business day immediately
preceding the date the Corporation receives such notice and (ii) the
Participant's Cash Account shall be debited in an amount equal to the number of
Share Units credited to the Share Account multiplied by the Fair Market Value on
the same trading business day.

     (b) Subject to the authority of the Committee, the Corporation's Chief
Executive Officer may approve the terms of any agreements between the
Corporation and any Participant relating to the deferral of Other Compensation
where, but for the Participant's deferral, the Participant would have received
shares of Common Stock if such officer determines that such terms are
appropriate to carry out the purposes of this Plan and the award of Other
Compensation. Without limitation, the Corporation may enter into an agreement
with a Participant relating to such a deferral under which (i)(A) there shall be
credited to the Participant's Share Account a number of Share Units equal to the
number of shares of Common Stock the receipt of which the Participant has
deferred which credit shall be made as of the date the Other Compensation
deferred otherwise would have become due and payable or (B) Share Units shall be
credited to the Participant's Share Account only at a future date, such as the
date that one or more conditions to vesting have been satisfied; (ii) a credit
of Share Units may be made subject to such restrictions as are imposed under the
terms of the award of Other Compensation (or restrictions substantially
equivalent to those to which shares of Common Stock would have been


                                       7
<PAGE>

subject but for the deferral), including without limitation forfeiture under
certain circumstances and restrictions on the Participant's rights to convert
such Share Units pursuant to this Section 6.5; and (iii) if the terms of the
award of Other Compensation require a Participant to deliver cash and/or shares
of Common Stock to the Corporation to exercise or otherwise receive the benefit
of such Other Compensation, then in lieu of delivering such cash and/or Common
Stock, there may be a debit to the Participant's Cash Account in an amount equal
to the amount of cash that the Participant otherwise would have delivered and/or
a debit to the Participant's Share Account in an amount equal to the number of
shares of Common Stock that the Participant otherwise would have delivered, in
each case to the extent of any credit balance in such account.

6.4  Cash Dividends. Whenever cash dividends are paid by the Corporation on
     outstanding Common Stock, as of the payment date for the dividend, at the
     election of a Participant (i) there shall be credited to a Participant's
     Cash Account, as appropriate, an amount equal to the amount per share of
     the cash dividend on the Common Stock multiplied by the number of Share
     Units credited to the Participant's Share Account, if any, as of the close
     of business on the record date for the dividend or (ii) there shall be
     credited between a Participant's Share Account and Matching Account (if
     any, and then only to the extent then maintained in Share Units), as
     appropriate, additional Share Units equal to the cash amount described in
     clause (i) divided by the Fair Market Value of the Common Stock on the last
     trading business day immediately preceding the date of payment of the
     dividend. Absent an express election by a Participant, clause (i) shall
     apply. A Participant shall be entitled to elect treatment under clause (i)
     as to some Share Units reflected in the Participant's Share Account and
     treatment under clause (ii) as to other Share Units reflected in the
     Participant's Share Account. Clause (ii) shall apply to Share Units
     reflected in the Participant's Matching Account.

6.5  Conversion of Share Account. Subject to applicable corporate policies, from
     time to time a Participant with a credit balance in a Share Account may
     convert all or a portion of such balance into an amount to be credited to
     the Participant's corresponding Cash Account by giving written notice to
     the Corporation. In such event, and effective as of the date the
     Corporation receives such a notice, (i) there shall be credited to the
     Participant's Cash Account an amount equal to the number of Share Units
     specified in the notice multiplied by the Fair Market Value on the last
     trading business day immediately preceding the date the Corporation
     receives such notice and (ii) the Participant's Share Account shall be
     debited by the number of Share Units specified in the notice.

6.6  Earnings Adjustments to Matching Accounts.

     (a) Except as provided in Section 6.6(b), a Participant's Matching Account
will be adjusted (in the manner provided in Section 6.6(c)) at the end of each
Year in an amount which is equal to the net increase (or net decrease as
appropriate) in Fair Market Value for the same Year.


                                       8
<PAGE>

     (b) Diversification Election. Notwithstanding anything in Section 6.6(a) to
the contrary, a Participant may elect, subject to the limits in this Section
6.6(b), that annual earnings adjustments to his Matching Account be determined
with reference to a measure other than Fair Market Value. For purposes of this
Section 6.6(b), a change to the measure used to determine adjustments to a
Matching Account of a Participant shall be made at the election of the
Participant, but only at the same times, under the same conditions and subject
to the same limitations as are allowed or imposed under the Snap-on 401(k) Plan
for diversifying the Corporation's matching contribution under such plan out of
shares of Common Stock to other permissible investments available under the
Snap-on 401(k) Plan. The election provided in this Section 6.6(b) shall be made
in writing as directed by the Committee. Earnings adjustments to Matching
Accounts after the effective date of an election under this Section 6.6(b) shall
be calculated for the Participant's Matching Account with reference to the
Participant's duly elected alternative earnings measure. Once an election is
made under this Section 6.6(b), the Participant's Matching Account balance shall
be converted out of Share Units (using Fair Market Value on the last trading
business day immediately preceding the date the election is effective) and shall
not be maintained in Share Units again.

     (c) An eligible Participant's Matching Account shall be credited, or
debited, as appropriate, at the end of each Year with (i) a number of Share
Units equal to the dollar amount of adjustments determined under Section 6.6(a)
divided by the Fair Market Value on the last trading business day immediately
preceding the date the Corporation credits such adjustments to the Participant's
Matching Account, or (ii) an earnings adjustment calculated as provided in
Section 6.6(b) if a qualified election has been made under Section 6.6(b).

6.7  Charges Against Accounts. There shall be charged against a Participant's
     Cash Account any cash payments (excluding payments for fractional shares)
     made to the Participant or to his beneficiary in accordance with Section 7.
     There shall be charged against a Participant's Share Account any
     distributions made to the Participant or to his beneficiary in respect of
     the Participant's Share Account in accordance with Section 7. There shall
     be charged against a Participant's Matching Account any distributions made
     to the Participant or to his beneficiary in respect of the Participant's
     Matching Account in accordance with Section 7.

              Section 7. Payment of Deferred and Matching Amounts

7.1  Payment of Deferred and Matching Amounts.

     (a) Payment of a Participant's Cash Account balance, including accumulated
Growth Increments attributable thereto and dividend credits under Section 6.4,
shall be paid in cash commencing within thirty (30) calendar days after the
commencement date referred to in Section 4.2. The payments shall be made in the
manner selected by the Participant under Section 4.3 or, in the absence thereof,
in a lump sum. The amount of each payment shall be equal to a Participant's then
distributable Cash Account balance multiplied by a fraction, the numerator of
which is one and the denominator of which is the number of installment payments
remaining.


                                       9
<PAGE>

     (b) Payment of a Participant's Share Account balance shall be paid
commencing within thirty (30) calendar days after the commencement date referred
to in Section 4.2. Payments in respect of a Share Account balance shall be made
by converting Share Units into Common Stock on a one-for-one basis, with payment
of fractional shares to be made in cash based upon the Fair Market Value on the
last trading business day immediately preceding the date of payment; provided,
however, that at the election of a Participant, made by written notice to the
Corporation delivered not less than five business days before a payment due
date, payments in respect of a Share Account may be made solely in cash in an
amount equal to the number of Share Units then payable multiplied by the Fair
Market Value on the last trading business day immediately preceding the date of
payment. The payments shall be made in the manner selected by the Participant
under Section 4.3 or, in the absence thereof, in a lump sum. The number of Share
Units payable at the time of a payment shall be equal to a Participant's then
distributable Share Account balance multiplied by a fraction, the numerator of
which is one and the denominator of which is the number of installment payments
remaining.

     (c) Payment of a Participant's Matching Account balance shall be paid
commencing within thirty (30) calendar days after the commencement date referred
to in Section 5.3. Payments in respect of a Matching Account balance maintained
in Share Units at the time shall be made by converting Share Units into Common
Stock on a one-for-one basis, with payment of fractional shares to be made in
cash based upon the Fair Market Value on the last trading business day
immediately preceding the date of payment; provided, however, that at the
election of a Participant, made by written notice to the Corporation delivered
not less than five (5) business days before a payment due date, payments in
respect of a Matching Account maintained in Share Units at the time may be made
solely in cash in an amount equal to the number of Share Units then payable
multiplied by the Fair Market Value on the last trading business day immediately
preceding the date of payment. Payments of a Participant's Matching Account
balance that is no longer maintained in Share Units shall be in cash in an
amount equal to the Matching Account balance plus accumulated adjustments under
Sections 6.6(b) and 6.6(c) and dividend credits under Section 6.4. The payments
shall be made in the manner selected by the Participant under Section 5.4 or, in
the absence thereof, in a lump sum. The number of Share Units payable at the
time of a payment shall be equal to a Participant's then distributable Matching
Account balance maintained in Share Units multiplied by a fraction, the
numerator of which is one and the denominator of which is the number of
installment payments remaining.

7.2  Acceleration of Payments. If a Participant dies prior to the payment of all
     or a portion of his Cash Account, Share Account and/or Matching Account
     balances, the balance of any amounts payable shall be paid in a lump sum to
     the beneficiaries designated under Section 8. If a Participant's Cash
     Account balance is less than Five Thousand and No/100 Dollars ($5,000.00)
     at the time for the payment specified, such amount shall be paid to the
     Participant in a lump sum. If either a Participant's Share Account or
     Matching Account balance is less than three hundred (300) Share Units at
     the time for the payment specified, such amount shall be paid to the
     Participant in a lump sum.


                                       10
<PAGE>

7.3  Financial Emergency. The Committee, in its sole discretion, may alter the
     timing or manner of payment of deferred amounts and/or matching amounts in
     the event that the Participant establishes, to the satisfaction of the
     Committee, severe financial hardship. In such event, the Committee may:

     (a) provide that all, or a portion of, the amount previously deferred by
the Participant immediately shall be paid in a lump sum payment,

     (b) provide that all, or a portion of, the installments payable over a
period of time immediately shall be paid in a lump sum, or

     (c) provide for such other installment payment schedules as it deems
appropriate under the circumstances, as long as the amount distributed shall not
be in excess of that amount which is necessary for the Participant to meet the
financial hardship.

Severe financial hardship will be deemed to have occurred in the event of the
Participant's impending bankruptcy, a dependent's long and serious illness, or
other events of similar magnitude. The Committee's decision in passing on the
severe financial hardship of the Participant and the manner in which, if at all,
the payment of deferred amounts or matching credits shall be altered or modified
shall be final, conclusive, and not subject to appeal.

                       Section 8. Beneficiary Designation

8.1  Designation of Beneficiary. A Participant shall designate a beneficiary or
     beneficiaries who, upon the Participant's death, are to receive the amounts
     that otherwise would have been paid to the Participant. All designations
     shall be in writing to the Corporation in such form as it requires or
     accepts and signed by the Participant. The designation shall be effective
     only if and when delivered to the Corporation during the lifetime of the
     Participant. The Participant also may change his beneficiary or
     beneficiaries by a signed, written instrument delivered to the Corporation.
     However, if a married Participant maintains his primary residence in a
     state that has community property laws, the Participant's spouse shall join
     in any designation of a beneficiary or beneficiaries other than the spouse.
     The payment of amounts shall be in accordance with the last unrevoked
     written designation of beneficiary that has been signed and delivered to
     the Corporation.

8.2  Death of Beneficiary. In the event that all of the beneficiaries named in
     Section 8.1 predecease the Participant, the amounts that otherwise would
     have been paid to the Participant shall be paid to the Participant's
     estate, and in such event, the term "beneficiary" shall include his estate.

8.3  Ineffective Designation. In the event the Participant does not designate a
     beneficiary, or if for any reason such designation is ineffective, in whole
     or in part, the amounts that otherwise would have been paid to the
     Participant shall be paid to the Participant's estate, and in such event,
     the term "beneficiary" shall include his estate.


                                       11
<PAGE>

                       Section 9. Rights of Participants

9.1  Contractual Obligation. It is intended that the Corporation is under a
     contractual obligation to make payments from a Participant's account when
     due. Payment of account balances payable in cash shall be made out of the
     general funds of the Corporation as determined by the Board.

9.2  Unsecured Interest. No Participant or beneficiary shall have any interest
     whatsoever in any specific asset of the Corporation. To the extent that any
     person acquires a right to receive payments under this Plan, such receipt
     shall be no greater than the right of any unsecured general creditor of the
     Corporation.

9.3  Employment. Nothing in the Plan shall interfere with or limit in any way
     the rights of the Corporation to terminate any Participant's employment at
     any time, nor confer upon any Participant any right to continue in the
     employ of the Corporation.

9.4  Participation. No employee shall have a right to be selected as a
     Participant or, having been so selected, to be selected again as a
     Participant.

                         Section 10. Nontransferability

10.1 Nontransferability. In no event shall the Corporation make any payment
     under this Plan to any assignee or creditor of a Participant or a
     beneficiary. Prior to the time of a payment hereunder, a Participant or a
     beneficiary shall have no rights by way of anticipation or otherwise to
     assign or otherwise dispose of any interest under this Plan nor shall such
     rights be assigned or transferred by operation of law.

                           Section 11. Administration

11.1 Administration. This Plan shall be administered by the Committee. The
     Committee may from time to time establish rules for the administration of
     this Plan that are not inconsistent with the provisions of this Plan.

11.2 Finality of Determination. The Committee has sole discretion in
     interpreting the provisions of the Plan. The determination of the Committee
     as to any disputed questions arising under this Plan, including questions
     of construction and interpretation, shall be final, binding, and conclusive
     upon all persons.

11.3 Expenses. The cost of payments from this Plan and the expenses of
     administering the Plan shall be borne by the Corporation.

11.4 Action by the Corporation. Any action required or permitted to be taken
     under this Plan by the Corporation shall be by resolution of the Board, by
     the duly


                                       12
<PAGE>

authorized Committee of the Board, or by a person or persons authorized by
resolution of the Board or the Committee.

                     Section 12. Amendment and Termination

12.1 Amendment and Termination. The Corporation expects the Plan to be permanent
     but, since future conditions affecting the Corporation cannot be
     anticipated or foreseen, the Corporation necessarily must and does hereby
     reserve the right to amend, modify, or terminate the Plan at any time by
     action of the Board. Notwithstanding the foregoing, upon the occurrence of
     a Potential Change of Control (as hereinafter defined) and for a period of
     six (6) months thereafter, the Plan may not be terminated or amended in a
     manner adverse to Participants. For purposes of this Section, a "Potential
     Change of Control" shall be deemed to have occurred if an event set forth
     in any one of the following shall have occurred:

          (i) The Corporation enters into an agreement, the consummation of
     which would result in the occurrence of a Change of Control;

          (ii) The Corporation or any other Person publicly announces an
     intention to take or consider taking actions that, if consummated, would
     constitute a Change of Control;

          (iii) Any Person becomes the Beneficial Owner, directly or indirectly,
     of securities of the Corporation representing fifteen percent (15%) or more
     of either the then outstanding shares of Common Stock or the combined
     voting power of the Corporation's then outstanding voting securities; or

          (iv) The Board adopts a resolution to the effect that, for purposes of
     this Plan, a Potential Change of Control has occurred.

Each of "Change of Control," "Person" and "Beneficial Owner" shall have the
meaning set forth in Section 17.1.

                           Section 13. Applicable Law

13.1 Applicable Law. This Plan shall be governed and construed in accordance
     with the laws of the State of Wisconsin.

                        Section 14. Withholding of Taxes

14.1 Tax Withholding. The Corporation shall have the right to deduct from all
     contributions made to, or payments made from, the Plan any federal, state,
     or local taxes required by law to be withheld with respect to such
     contributions or payments. The Corporation may defer making payments in the
     form of Common Stock under the Plan until satisfactory arrangements have
     been made for the payment of any federal, state or local taxes required to
     be withheld with respect to such payment or delivery. Each Participant
     shall be entitled to irrevocably elect, prior to the date shares of Common
     Stock would otherwise be delivered


                                       13
<PAGE>

     hereunder, to have the Corporation withhold shares of Common Stock having
     an aggregate value equal to the amount required to be withheld. The value
     of fractional shares remaining after payment of the withholding taxes shall
     be paid to the Participant in cash. Shares so withheld shall be valued at
     Fair Market Value on the last trading business day immediately preceding
     the date such shares would have otherwise been transferred hereunder.

                               Section 15. Notice

15.1 Notice. Any notice required or permitted to be given under the Plan shall
     be sufficient if in writing and hand-delivered, or sent by a registered or
     certified mail, and if given to the Corporation, delivered to the principal
     office of the Corporation. Such notice shall be deemed given as of the date
     of delivery or, if delivery is made by mail, as of the date shown on the
     postmark or the receipt for registration or certification.

                        Section 16. Common Stock Matters

16.1 Stock Reserved for the Plan. The Corporation shall make available as and
     when required a sufficient number of shares of Common Stock to meet the
     needs of the Plan. Shares of Common Stock issued hereunder shall be
     previously issued shares reacquired and held by the Corporation.

16.2 General Restrictions.

     (a) Investment Representations. The Corporation may require any
Participant, as a condition of receiving Common Stock under this Plan, to give
written assurances in substance and form satisfactory to the Corporation and its
counsel to the effect that such person is acquiring the Common Stock for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Corporation
deems necessary or appropriate in order to comply with federal and applicable
state securities laws.

     (b) Compliance with Securities Laws. Delivery of Common Stock under the
Plan shall be subject to the requirement that, if at any time counsel to the
Corporation shall determine that the listing, registration or qualification of
the shares of Common Stock upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
is necessary as a condition of, or in connection with, the issuance of shares
thereunder, such shares may not be delivered in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained on conditions acceptable to the Committee. Nothing herein
shall be deemed to require the Corporation to apply for or to obtain such
listing, registration or qualification.

16.3 Effect of Certain Changes in Capitalization. In the event of any Change in
     Capitalization, a proportionate substitution or adjustment may be made in
     (a) the aggregate number and/or kind of shares or other property reserved
     for issuance under the Plan, (b) the number and kind of shares or other
     property to be delivered


                                       14
<PAGE>

     under the Plan and (c) the number and kind of shares or other property held
     in each Participant's Share Account and Matching Account (if any), in each
     case as may be determined by the Committee in its sole discretion. Such
     other proportionate substitutions or adjustments may be made as shall be
     determined by the Committee in its sole discretion. "Change in
     Capitalization" means any increase, reduction, change or exchange of shares
     of Common Stock for a different number or kind of shares or other
     securities or property by reason of a reclassification, recapitalization,
     merger, consolidation, reorganization, issuance of warrants or rights,
     stock dividend, stock split or reverse stock split, combination or exchange
     of shares, repurchase of shares, change in corporate structure or
     otherwise; or any other corporate action, such as declaration of a special
     dividend, that affects the capitalization of the Corporation.

                         Section 17. Change of Control

17.1 Change of Control. For purposes of this Plan, a "Change of Control" shall
     be deemed to have occurred on the first to occur of any one of the events
     set forth in the following paragraphs:

     (a) any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Corporation (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Corporation or
its Affiliates) representing 25% or more of either the then outstanding shares
of Common Stock or the combined voting power of the Corporation's then
outstanding voting securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (i) of
paragraph (c) below; or

     (b) the following individuals cease for any reason to constitute a majority
of the number of directors then serving: individuals who, on January 25, 2002,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Corporation as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act) whose appointment or election by the
Board or nomination for election by the Corporation's stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on January 25, 2002 or whose
appointment, election or nomination for election was previously so approved or
recommended; or

     (c) there is consummated a merger or consolidation of the Corporation or
any direct or indirect subsidiary of the Corporation with any other corporation,
other than (i) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof) at least 60% of the combined voting power of the voting securities of
the Corporation or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar


                                       15
<PAGE>

transaction) in which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the
Corporation or its Affiliates) representing 25% or more of either the then
outstanding shares of Common Stock or the combined voting power of the
Corporation's then outstanding voting securities; or

     (d) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is consummated an
agreement for the sale or disposition by the Corporation of all or substantially
all of the Corporation's assets (in one transaction or a series of related
transactions within any period of 24 consecutive months), other than a sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets to an entity, at least 75% of the combined voting power of the voting
securities of which are owned by stockholders of the Corporation in
substantially the same proportions as their ownership of the Corporation
immediately prior to such sale.

Notwithstanding the foregoing, no "Change of Control" shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the Common Stock
immediately prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Corporation immediately following such
transaction or series of transactions.

For purposes of the definitions of Change of Control and Potential Change of
Control, "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act; "Beneficial Owner" shall have the meaning
set forth in Rule 13d-3 under the Exchange Act; "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended; and "Person" shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i) the
Corporation or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its Affiliates, (iii) an underwriter temporarily holding securities pursuant to
an offering of such securities, (iv) a corporation owned, directly or
indirectly, by the shareholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation or (v) any
individual, entity or group which is permitted to, and actually does, report its
Beneficial Ownership on Schedule 13G (or any successor schedule); provided that
if any such individual, entity or group subsequently becomes required to or does
report its Beneficial Ownership on Schedule 13D (or any successor schedule),
such individual, entity or group shall be deemed to be a Person for purposes
hereof on the first date on which such individual, entity or group becomes
required to or does so report Beneficial Ownership of all of the voting
securities of the Corporation Beneficially Owned by it on such date.

17.2 Payments. Upon the occurrence of a Change of Control, and notwithstanding
     Section 7,


                                       16
<PAGE>

     (a) payment of a Participant's Cash Account balance and Matching Account
balance (if any, and then only to the extent not then maintained in Share Units)
shall be made immediately in cash in a lump sum;

     (b) all Share Units credited to a Participant's Share Account and Matching
Account (if any) shall be converted into an amount equal to the number of Share
Units multiplied by the Fair Market Value, which amount shall be (i) paid as
soon as possible to such Participant and (ii) denominated in (A) such form of
consideration as the Participant would have received had the Participant been
the owner of record of such shares of Common Stock at the time of such Change of
Control, in the case of a "Change of Control With Consideration" or (B) cash, in
the case of a "Change of Control Without Consideration". For purposes of this
Section 17.2(b), (I) "Change of Control With Consideration" shall mean a Change
of Control in which shares of Common Stock are exchanged or surrendered for
shares, cash or other property and (II) "Change of Control Without
Consideration" shall mean a Change of Control pursuant to which shares of Common
Stock are not exchanged or surrendered for shares, cash or other property.

                            Section 18. Rating Event

18.1 Rating Event. The term "Rating Event" means the date on which the
     Corporation's debt rating drops below an Investment Grade Rating.
     "Investment Grade Rating" means a rating at or above Baa3 by Moody's
     Investors Services, Inc. (or its successors) or a rating at or above BBB by
     Standard & Poor's Corporation (or its successors). Only one such rating at
     the required level is necessary for the Corporation to have an Investment
     Grade Rating for purposes of this Section. If either or both of these
     ratings cease to be available then an equivalent rating from a nationally
     prominent rating agency shall be substituted by the Corporation.

18.2 Payment. Upon the occurrence of a Rating Event, and notwithstanding Section
     7:

     (a) a Participant's Cash Account balance and Matching Account balance (if
any, and then only to the extent not then maintained in Share Units) shall be
paid immediately in cash in a lump sum; and

     (b) payments in respect of a Share Account balance shall be made
immediately by converting Share Units into Common Stock on a one-for-one basis,
with payment of fractional shares to be made in cash based upon the Fair Market
Value on the last trading business day immediately preceding the date of
payment; provided, however, that at the election of a Participant, made by
written notice to the Corporation prior to delivery of such Common Stock,
payments in respect of a Share Account may be made solely in cash in an amount
equal to the number of Share Units then payable multiplied by the Fair Market
Value on the last trading business day immediately preceding the date of
payment; and

     (c) payments in respect of a Matching Account balance (if any, and then
only to the extent then maintained in Share Units) shall be made immediately by
converting


                                       17
<PAGE>

Share Units into Common Stock on a one-for-one basis, with payment of fractional
shares to be made in cash based upon the Fair Market Value on the last trading
business day immediately preceding the date of payment; provided, however, that
at the election of the Participant, made by written notice to the Corporation
prior to delivery of such Common Stock, payments in respect of a Matching
Account may be made solely in cash in an amount equal to the number of Share
Units then payable multiplied by the Fair Market Value on the last trading
business day immediately preceding the date of payment.

     (d) In addition to payment of the Participant's Cash Account balance as
described above, the Corporation shall pay the Participant an amount equal to
the interest that would have been earned on the Accelerated Tax Amount from the
date of the Rating Event to the date payment of the deferred amounts was then
scheduled to commence, calculated at the interest rate determined under Section
6.2, compounded monthly, which interest amount shall then be discounted to the
date of payment at a discount rate equal to the rate determined under Section
6.2. The "Accelerated Tax Amount" means the Participant's Cash Account balance
multiplied by the Assumed Tax Rate. The "Assumed Tax Rate" means a percentage
which reflects the highest stated federal and state income tax rates imposed on
residents of Wisconsin after giving effect to the deductibility of state income
taxes.

18.3 Revocation of Election. Upon the occurrence of a Rating Event all deferral
     elections made prior thereto are revoked.



                                       18

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>4
<FILENAME>pdm280d.txt
<DESCRIPTION>COMPUTATION
<TEXT>

                                  Exhibit (12)

                COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                              (Amounts in millions)


                                            2001        2000        1999
                                         ---------   ---------   ---------
Net Earnings                                $19.0      $148.5      $127.2

Add (Deduct):
   Income taxes                              26.1        69.5        70.7
   Minority interest in earnings
     of consolidated subsidiaries             2.7         3.0          .2
   Cumulative effect                          2.5       (25.4)          -
                                         ---------   ---------   ---------

Net Earnings as Defined                      50.3       195.6       198.1

Fixed Charges:
   Interest on debt                          35.5        40.7        27.4
   Interest element of rentals                5.4         5.3         5.0
                                         ---------   ---------   ---------

Total Fixed Charges                          40.9        46.0        32.4
                                         ---------   ---------   ---------
Total Adjusted Earnings Available
  for Payment of Fixed Charges              $91.2      $241.6      $230.5
                                         =========   =========   ==========

Ratio of Earnings to Fixed Charges            2.2         5.3         7.1
                                         =========   =========   =========


For purpose of computing this ratio, "Net Earnings" consist of (a) income from
continuing operations before income taxes and adjusted for minority interest,
and (b) "Fixed Charges," consists of interest on debt and the estimated interest
portion of rents.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>pdm280b.txt
<DESCRIPTION>PORTION OF ANNUAL REPORT
<TEXT>
Management's Discussion and Analysis

Snap-on Incorporated ("Snap-on") is a leading global innovator, manufacturer and
marketer of high-quality tool, diagnostic and equipment solutions for
professional tool and equipment users. Snap-on's mission is to delight its
customers - professional tool and equipment users worldwide - by providing
innovative, productivity-enhancing products, services and solutions. Product
lines include hand and power tools, tool storage, shop equipment, saws and
cutting tools, pruning tools, under-hood diagnostics equipment, under-car
equipment, safety-testing equipment, collision repair equipment, vehicle service
information, business management systems, repair services, and other solutions
for vehicle service, industrial, government and agricultural customers, and
commercial applications, including construction and electrical. Snap-on's
customers include professional automotive technicians, shop owners, franchised
and chain vehicle service centers, vehicle and equipment manufacturers and other
industrial, agricultural, and commercial tool and equipment users worldwide.

Snap-on has two business segments: the Snap-on Dealer Group, which serves the
worldwide dealer van channel, and the Commercial and Industrial Group, which
serves the non-dealer tool and equipment products businesses. In addition to its
manufacturing, marketing and distribution operations, Snap-on also offers
extended-credit financing for the purchase of its products through its wholly
owned credit facilities and through a 50%-owned financial services joint
venture.

Snap-on markets its products through multiple distribution channels and under
various brands worldwide. Products are primarily sold through Snap-on's dealer
van, company-direct and distributor sales channels and the Internet. Snap-on
began selling product via the Internet in 2000 as part of its "Store Without
Walls" vision, which offers both current and prospective customers online,
around-the-clock access to purchase Snap-on(R) products.

Snap-on: Driven to Deliver(TM)
In 2001, Dale F. Elliott succeeded Robert A. Cornog as president and chief
executive officer of Snap-on and introduced a new message of Driven to
Deliver(TM) as a catalyst to respond to marketplace changes - including economic
factors, market consolidation, the impact of technology and changing customer
expectations. The Driven to Deliver(TM) process, which builds on the strong
foundation already created through the partnering efforts of Snap-on employees
and dealers worldwide, provides a business management framework for all
employees to take action, produce improvements and contribute to building a
stronger Snap-on. Through the balance of three strategic principles - Quality
People, Operational Fitness and Profitable Growth - Snap-on has set a course of
action that it believes will better position the company by further
strengthening the foundation for value and by setting the stage for continued
expansion and growth.
<PAGE>

The Driven to Deliver(TM) principle of "Quality People" means employees
throughout the company are encouraged to anticipate and take appropriate action
to achieve Snap-on's goals. The "Operational Fitness" principle means that the
businesses and functions of Snap-on are striving toward a high level of
operating effectiveness and that a planning and process-driven approach is used.
Operational Fitness is not a short-term objective - it does not translate into
simply cutting costs - it means building continuous improvement as a mindset
among all employees and applying it to every aspect of the business. The
"Profitable Growth" principle means growing the company while delivering a
measurable increase in financial performance. At Snap-on, this will be
accomplished through the rationalization of businesses not earning acceptable
financial returns and through a continuous stream of innovative,
productivity-enhancing new products.

The Driven to Deliver(TM) business process prompted Snap-on to take significant
action during 2001 to reduce costs companywide in response to the slower sales
environment and improve operating performance in businesses not earning
acceptable financial returns. These initiatives, including the consolidation or
closure of 35 facilities, coupled with a planned reduction in worldwide
headcount of 796, or 6%, are expected to enhance financial returns and support
investment initiatives that will deliver future profitable growth. Snap-on
expects to achieve $40 million in pretax savings in 2002 from its restructuring
and cost control activities, with approximately one-half of the savings targeted
to support growth initiatives.

Consolidated Results of Operations
Snap-on's Global Presence: In recent years, Snap-on had product sales in the
following geographic regions:

- -------------------------------------------------------------------------------
(Amounts in millions)              2001            2000            1999
- -------------------------------------------------------------------------------
United States                  $1,360.0        $1,367.1        $1,306.7
Europe                            537.5           587.5           434.3
All other                         198.2           221.1           204.6
- -------------------------------------------------------------------------------
Total net sales                $2,095.7        $2,175.7        $1,945.6
- -------------------------------------------------------------------------------

NET SALES: Net sales in 2001 were $2.096 billion, down 3.7% from the $2.176
billion posted in 2000. In the Snap-on Dealer Group, worldwide net sales
declined 1.9% from 2000 levels as a decrease in sales of big-ticket equipment
and diagnostics products was partially offset by the success of new product
introductions and continued demand for tools and tool storage. In the Commercial
and Industrial Group, worldwide net sales declined 5.4% for the year. The
slowing economy in 2001 depressed demand for big-ticket capital goods equipment
throughout the year, while the demand for professional tools in the
manufacturing and industrial marketplace weakened in the second half. Despite
adverse economic conditions in 2001, Snap-on strengthened its business through
successful new product introductions and further investment in the expansion of
the U.S. dealer base under its "More Feet on the Street" initiative.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  17
<PAGE>
Management's Discussion and Analysis (continued)

Overall, the year-over-year decline in net sales of 3.7% reflects a 2%
deterioration from unfavorable currency translation and a 1.7% decline in
organic sales. Organic sales exclude the impact of acquisitions, divestitures
and currency translation. The combined net impact on 2001 sales from
acquisitions and divestitures, including the impact of Snap-on's decision in
December 2000 to exit an unprofitable segment of the emissions-testing business,
was minimal.

Net sales in 2000 were a record $2.176 billion, up 12% over the $1.946 billion
posted in 1999 and the ninth consecutive year of higher sales for Snap-on.
Acquisition sales growth contributed 11%, primarily attributable to the
full-year contribution of Bahco Group AB ("Bahco"). Acquired by Snap-on on
September 30, 1999, Bahco is a leading manufacturer and supplier of professional
hand tools, including saws and other cutting implements, files, wrenches,
pliers, screwdrivers and pruning tools. Sales of BAHCO(R) products in 2000
totaled $283 million, as compared to $75 million for the three-month period in
1999. Organic sales growth contributed 5% over 1999 levels led by solid dealer
sales growth in North America and Europe and incremental sales of equipment to
new-car dealerships under facilitation contracts, in which Snap-on provides
product procurement, distribution and administrative support to customers for
their dealerships' equipment programs ("the facilitation business"). These
increases in net sales were partially offset by a 3% deterioration from
unfavorable currency translation and a 1% decline from discontinued activities.

Net sales in 1999 increased 10% to $1.946 billion over the $1.773 billion posted
in 1998. Organic sales grew 5%, driven primarily by increased unit volumes in
the Snap-on Dealer Group and in the North American region of the Commercial and
Industrial Group. Acquisitions contributed an additional 7%, partially offset by
a 1% decline from lower sales of emissions-testing equipment and a 1% decline
from unfavorable currency translation.

- -------------------------------------------------------------------------------
(Amounts in millions
except per share data)             2001            2000            1999
- -------------------------------------------------------------------------------
Net sales                      $2,095.7        $2,175.7        $1,945.6
Net earnings                       19.0           148.5           127.2
Net earnings per share:
   Basic                            .33            2.54            2.18
   Diluted                          .33            2.53            2.16
- -------------------------------------------------------------------------------

Snap-on recognizes revenues at the time that products are shipped or services
are performed, and accrues for estimated future returns in the period in which
the sale is recorded. Franchise fee revenue is recognized as the fees are earned
and was not material in any year. Subscription revenue is deferred and
recognized over the life of the subscription.
<PAGE>
EARNINGS: Snap-on reported net earnings of $19.0 million in 2001, as compared to
net earnings of $148.5 million in 2000. Diluted earnings per share were $.33 in
2001, as compared to $2.53 in 2000. In the second quarter of 2001, Snap-on
announced that it was taking significant action to (i) reduce costs companywide
to adjust to the slower sales environment and (ii) improve operational
performance in businesses not earning acceptable financial returns. Snap-on
incurred pretax charges of $120.4 million ($85.2 million after tax or $1.47 per
diluted share) in implementing these and other actions in 2001, including $62.0
million for restructuring and non-recurring charges and $58.4 million for other
non-comparable items, including $47.0 million for the resolution of an
arbitration matter and related legal costs. In addition to these charges, the
decline in 2001 net earnings also reflects the impact of lower sales of
higher-margin products, increased operating expenses for new product development
and higher training and recruiting costs associated with the More Feet on the
Street initiative.

Net earnings in 2001 included a one-time net charge of $2.5 million, or $.04 per
diluted share, for the cumulative effect of adopting Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities."

Snap-on's net earnings were $148.5 million in 2000, as compared to net earnings
of $127.2 million in 1999. Diluted earnings per share were $2.53 in 2000, as
compared to $2.16 in 1999. The year-over-year increase in earnings was primarily
driven by organic sales growth, the full-year impact of Bahco and benefits from
ongoing streamlining initiatives, partially offset by lower finance income,
reduced gross profit margins, higher interest expense and adverse currency
impacts. In 2000, net earnings included pretax charges totaling $21.8 million
($14.2 million after tax or $.24 per diluted share) for restructuring and other
non-recurring items, and pretax charges of $16.8 million ($10.5 million after
tax or $.18 per diluted share) for certain legal and other costs.

Net earnings in 2000 also included a one-time gain of $41.3 million ($25.4
million after tax or $.43 per diluted share) resulting from the cumulative
effect of a change in accounting for pensions. This change, recommended by
Snap-on's outside actuarial firm, did not result in any

MARGIN ANALYSIS
1997 - $1,672 Net Sales in millions
     - 50.5% Gross Profit Margin
     - 11.6% Segment Operating Margin
1998 - $1,773 Net Sales in millions
     - 43.1% Gross Profit Margin
     - 6.7% Segment Operating Margin
1999 - $1,946 Net Sales in millions
     - 46.1% Gross Profit Margin
     - 9.7% Segment Operating Margin
2000 - $2,176 Net Sales in millions
     - 45.8% Gross Profit Margin
     - 9.8% Segment Operating Margin
2001 - $2,096 Net Sales in millions
     - 45.3% Gross Profit Margin
     - 7.5% Segment Operating Margin

18 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
cash flow into or out of the plan, and better reflects the market-related value
of benefit plan assets for financial reporting purposes. The impact of this
change on 2000 operating results was to reduce pension expense by $9.7 million.

In 1999, Snap-on reported net earnings of $127.2 million, or $2.16 per diluted
share, including non-recurring charges totaling $37.2 million ($23.3 million
after tax or $.40 per diluted share) for restructuring and other non-recurring
items associated with Snap-on's Project Simplify restructuring initiative.
Project Simplify, a broad program of internal rationalizations, consolidations
and reorganizations intended to make the Snap-on business operations simpler and
more effective, began in the third quarter of 1998 and was essentially completed
at the end of 1999.

COSTS AND PROFIT MARGINS: Gross profit margin was $949.0 million in 2001, down
4.8% from $996.8 million in 2000. As a percent of net sales, gross profit margin
was 45.3% in 2001 versus 45.8% in 2000. Effective price discipline, improved
productivity and the success of new product introductions in 2001 partially
offset the underabsorption of manufacturing costs from the lower-than-planned
sales. In addition, Snap-on recorded charges of $12.6 million and $9.5 million
in 2001 and 2000 for non-recurring inventory write-downs and warranty costs
associated with its restructuring activities. These charges are included in
"Cost of goods sold - non-recurring charges" on the accompanying Consolidated
Statements of Earnings.

Gross profit margin increased to $996.8 million in 2000, up 11.2% from $896.2
million in 1999, largely driven by increased sales volumes, including the
full-year impact of Bahco. As a percent of net sales, gross profit margin was
45.8% in 2000, down from 46.1% in 1999, reflecting the impact of a planned shift
in product mix to include higher volumes of lower margin sales associated with
the facilitation and Bahco businesses. Bahco primarily sells its products
through distributors, resulting in lower gross margins when compared to
Snap-on's historical business mix. Unfavorable currency translation also
adversely affected gross profit margin. The decline in gross profit margin was
somewhat offset by operating improvements and streamlining benefits.

Operating expenses were $848.7 million, or 40.5% of net sales, in 2001, as
compared to $792.6 million, or 36.4%, in 2000. The year-over-year increase
primarily reflects the impact of incremental costs incurred in 2001 for certain
non-comparable legal and other costs, increased costs for new product
development and higher spending for dealer expansion, training and recruitment
under the More Feet on the Street initiative, and increased bad debt provisions.
In 2001, Snap-on incurred charges totaling $56.9 million for certain legal and
other costs, including $44.0 million for the resolution of a long-standing
arbitration matter with SPX Corporation ("SPX") that includes patents and $3.0
million for related legal costs; $5.9 million for costs related to the
termination of a European supplier relationship; and $4.0 million for
emissions-related bad debts. These cost increases were partially offset by
savings generated from the company's focus on Operational Fitness, including
benefits realized from its cost-reduction and restructuring initiatives.
<PAGE>
OPERATING EXPENSES AS A PERCENT OF NET SALES
- --------------------------------------------
1997  -  38.9
1998  -  39.8
1999  -  37.2
2000  -  36.4
2001  -  40.5

RESEARCH & ENGINEERING (in $ millions)
- ----------------------
1997  -  47
1998  -  49
1999  -  50
2000  -  51
2001  -  55

Operating expenses were $792.6 million in 2000, compared to $723.7 million in
1999. The increase in year-over-year operating expenses primarily reflects the
impact of higher sales volumes and the full-year addition of Bahco, as well as
the inclusion of $16.8 million for certain non-comparable legal and other costs.
Operating expenses improved from 37.2% of net sales in 1999 to 36.4% in 2000,
primarily due to the planned shift in business mix associated with Bahco and
higher sales in the facilitation business, as well as lower pension expense and
benefits from Project Simplify activities. These improvements were partially
offset by higher costs for recruiting and training for the dealer expansion
initiative and by increased bad debt provisions and higher energy-driven freight
costs.

Research and engineering costs for the development of new and improved products
and process improvements are included in operating expenses. In 2001, Snap-on
filed 132 new patent applications in conjunction with its development
activities, resulting in a total of 1,343 active or pending patents at year end.
Research and engineering expenses totaled $54.6 million, $50.6 million and $50.2
million in 2001, 2000 and 1999. In 2001, Snap-on introduced such new and
improved products as the handheld, Color Graphing Scanner,(TM) the air-powered
Crud Thug(TM) material-removing tool, productivity-enhancing wheel balancers and
aligners, and new BAHCO(R) hand tools. These new product introductions
contributed incremental sales in 2001 and enhanced Snap-on's leadership position
in the marketplace.

SEGMENT RESULTS: Snap-on's business segments include the Snap-on Dealer Group
and the Commercial and Industrial Group. Snap-on defines operating earnings for
segment reporting purposes as net sales, less cost of goods sold and operating
expenses, excluding restructuring and non-recurring charges. Had it been
Snap-on's policy to allocate restructuring and other non-recurring charges to
its reportable segments, such charges of $62.0 million, $21.8 million and $37.2
million for 2001, 2000 and 1999 would have been allocated to the segments as
follows: Snap-on Dealer Group - $14.3 million, $11.5 million and $8.9 million
for 2001, 2000 and 1999; Commercial and Industrial Group - $47.7 million, $10.3
million and $28.3 million for 2001, 2000 and 1999. In 2001, the $44.0 million
cost for the resolution of patent arbitration was not allocated to the
reportable segments.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  19
<PAGE>
Management's Discussion and Analysis (continued)

Snap-on reported segment net sales and operating earnings of $2.096 billion and
$156.9 million in 2001, as compared to net sales and operating earnings of
$2.176 billion and $213.7 million in 2000. The following discussion focuses on
Snap-on's reported net sales and operating earnings by segment. For supplemental
segment information, refer to Note 17.

(Amounts in millions)              2001            2000            1999
- -------------------------------------------------------------------------------
Net sales
Snap-on Dealer Group           $1,048.8        $1,068.7        $1,050.9
Commercial and
 Industrial Group               1,046.9         1,107.0           894.7
- -------------------------------------------------------------------------------
Total net sales                $2,095.7        $2,175.7        $1,945.6
- -------------------------------------------------------------------------------

Operating earnings
Snap-on Dealer Group           $  116.8        $  127.3        $  120.0
Commercial and
 Industrial Group                  40.1            86.4            69.1
- -------------------------------------------------------------------------------
Total operating earnings       $  156.9        $  213.7        $  189.1
- -------------------------------------------------------------------------------

Snap-on Dealer Group
Worldwide net sales in the Snap-on Dealer Group were $1.049 billion in 2001,
down 1.9% from $1.069 billion in 2000, reflecting lower sales of big-ticket
equipment and diagnostic products and adverse currency impacts, partially offset
by the success of new products and the continued demand for tools and tool
storage. During 2001, Snap-on continued to focus resources on expanding its U.S.
dealer network through its More Feet on the Street program of second vans and
second franchises. This initiative, introduced in 2000, provides new expansion
opportunities for successful existing franchised Snap-on dealers. The addition
of second vans and second franchises under this program also facilitates better
market penetration and service to Snap-on customers. In 2001, a net addition of
203 dealers in the United States was achieved, and in 2000, Snap-on added 137
net new dealers as part of this expansion initiative. Based on the success of
its dealer expansion efforts to date, Snap-on will continue to invest in adding
more second vans and new franchise dealers in 2002 under this program.

Organic sales in the Snap-on Dealer Group were flat year over year. Sales to
U.S. dealers, which account for approximately 78% of Snap-on Dealer Group sales,
were flat with 2000 levels. Despite the difficult economies, however, 2001 sales
in the U.S. dealer business, excluding sales of big-ticket equipment and
diagnostics products sold through the company's tech rep organization, were up
3% over the prior year and international dealer sales were up 4% in local
currencies.

Organic sales in the Snap-on Dealer Group grew 4% in 2000 from 1999 levels.
Sales to U.S. dealers grew 4% and, in local currencies, international dealer
sales were up 2% over the prior year.

<PAGE>

Operating earnings decreased 8.2% to $116.8 million in 2001, as compared to
$127.3 million in 2000. The decrease reflects the negative operating leverage
experienced during the first half of the year on the lower-than-planned sales,
higher training and recruiting costs related to expanding the dealer base and
increased bad debt provisions.

Operating earnings increased 6.1% to $127.3 million in 2000, as compared to
$120.0 million in 1999. This increase primarily resulted from enhanced dealer
sales, improved customer service and market penetration as a result of the net
increase in dealers. The year-over-year growth in organic sales and continued
cost savings from ongoing streamlining initiatives, as well as the elimination
of discontinued business activities, all had a positive impact on segment
operating earnings. Higher costs for recruiting and training as part of the More
Feet on the Street initiative, as well as increased bad debt provisions and
higher energy-driven freight costs, partially offset the year-over-year
improvement in operating earnings.

Commercial and Industrial Group
Worldwide net sales in the Commercial and Industrial Group decreased 5.4% to
$1.047 billion in 2001 from $1.107 billion in 2000, largely due to a decline in
industrial tool sales, continued softness in the diagnostics and equipment
markets and unfavorable currency translation. Organic sales decreased 3%,
reflecting a decline in industrial sales, as well as declines in equipment and
diagnostic sales in both North America and Europe. An erosion in consumer
confidence and weaker economic conditions affected many industrial sectors, such
as automotive, electronics and aerospace. The slowing economy also depressed
demand for diagnostics and equipment throughout the year, while the demand for
tools in many industrial sectors, such as manufacturing, weakened in the second
half. Sales in Europe declined 9%, with approximately one-half due to
unfavorable currency translation. In conjunction with the Driven to Deliver(TM)
business process, equipment operations are being consolidated in North America
with a clear focus toward achieving an improved operating profit. And in Europe,
the diagnostics business is progressing toward a pan-European "build-to-order"
supply process. New product introductions - such as productivity-enhancing wheel
balancers and aligners, and ergonomic BAHCO(R) hand tools - improved Snap-on's
marketplace position.

Net sales in the Commercial and Industrial Group were $1.107 billion in 2000, up
23.7% as compared to 1999 sales of $894.7 million. The year-over-year increase
in net sales was primarily due to the full-year contribution of Bahco,
incremental growth in the facilitation business, increased commercial tool sales
in Europe and higher sales to industrial customers worldwide. These increases
were partially offset by soft market conditions for equipment and diagnostics
and by negative currency impacts.

20 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>

Operating earnings were $40.1 million in 2001 compared with $86.4 million in
2000. The decline in operating earnings reflects the lower sales in 2001, as
well as the impact of non-comparable charges incurred during the year. These
charges include additional asset write-downs related to the December 2000
announced exiting of an unprofitable segment of the emissions-testing business
and charges related to the second-quarter 2001 termination of a European
supplier agreement.

Operating earnings increased 25.0% to $86.4 million in 2000, as compared to
$69.1 million in 1999. The increase primarily resulted from the full-year
contribution of Bahco and incremental growth in the facilitation business,
partially offset by the decline in equipment sales. Margin enhancements and
improved profitability in Europe, along with savings generated from actions
taken under Project Simplify, also added to the year-over-year improvement in
operating earnings.

Snap-on's Commercial and Industrial Group includes a Bahco hand-tool
manufacturing facility in Argentina with net assets of approximately $11.7
million as of December 29, 2001, including reserves for restructuring charges
incurred in 2001. Due to the economic instability in Argentina, Snap-on resized
its operations there, shifting a portion of its manufacturing to other existing
Snap-on facilities. The Bahco Argentina facility will continue to operate with
about one-half of its previous workforce, manufacturing product at a level to
support its local market. Snap-on will continue to assess Argentina's economic
situation to determine if any future actions or impairment write-downs are
warranted.

NET FINANCE INCOME: Net finance income was $35.7 million in 2001, down from
$38.1 million in 2000. The year-over-year decline in net finance income is a
result of a 1% decline in loan originations related to the soft demand for
capital-type equipment and diagnostics products, partially offset by the effects
of a more favorable interest-rate environment. The decrease also reflects the
impact of gains realized in 2000 on the sale of installment receivables
associated with the formation of the financial services joint venture in 1999.

Snap-on utilizes various financing programs to facilitate the sales of its
products. To reduce asset intensity from financing activities, Snap-on
established a joint venture in January 1999 with Newcourt Financial USA Inc.
("Newcourt"), now CIT Group, Inc., which was subsequently acquired by Tyco
International Ltd. The joint venture, Snap-on Credit LLC ("the LLC"), is a
50%-owned joint venture that provides financial services to Snap-on's U.S.
dealer and customer network and to its industrial and other customers. As a
result of establishing the joint venture, Snap-on effectively outsourced to the
LLC its domestic captive credit function that was previously managed by a wholly
owned subsidiary.

In conjunction with the establishment of the LLC, Snap-on repurchased $337.0
million of its previously securitized installment receivables and $68.3 million
of its previously securitized dealer finance loan receivables. Upon repurchase,
these receivables were sold to Newcourt. In a separate transaction, Snap-on also
sold to Newcourt its remaining on-balance-sheet portfolio of U.S. installment
receivables, including existing extended credit, equipment lease and dealer loan
receivables, for an aggregate

<PAGE>

sale price of $141.1 million, resulting in a pretax gain of approximately $40
million. Since Newcourt had the right to put back to Snap-on the unpaid portion
of the extended credit installment receivable portfolio based on the same
pricing formula, this gain was recognized over a two-year period. For additional
information on the LLC, refer to Note 7.

Net finance income was $38.1 million in 2000, as compared to $60.5 million in
1999. The year-over-year decline was largely due to reduced gains on the sale of
installment receivables and the adverse effect of higher interest rates in 2000,
partially offset by an increase in loan originations. In 2000, originations grew
15% over prior-year levels, influenced by growth in extended credit, dealer
finance and van leasing programs.

RESTRUCTURING AND NON-RECURRING CHARGES: As a result of its Driven to
Deliver(TM) business process, Snap-on announced in the second quarter of 2001
that it was taking significant action to (i) reduce costs companywide to adjust
to the slower sales environment and (ii) improve operational performance in
businesses not earning acceptable financial returns. As a result of selective
rationalization and consolidation actions, Snap-on recorded $62.0 million in
pretax restructuring and other non-recurring charges in 2001 for actions that
include the consolidation or closure of 35 facilities, asset write-downs and
severance costs to effect a 6% reduction in workforce. The $62.0 million charge
includes restructuring charges of $40.3 million and non-recurring charges of
$21.7 million. On the accompanying Consolidated Statements of Earnings,
"Restructuring and other non-recurring charges" of $49.4 million includes
restructuring charges of $40.3 million and other non-recurring charges of $9.1
million, and "Cost of goods sold - non-recurring charges" includes $12.6 million
for certain inventory write-downs and warranty costs. Approximately 45% of the
charges recorded in 2001 were non-cash, with the remaining costs requiring cash
outflows from operations and borrowings under Snap-on's existing credit
facilities.

The 2001 restructuring charges are for the consolidation or closure of 35
facilities, comprised of nine manufacturing or distribution facilities and 26
sales or administrative offices. The $40.3 million charge includes $27.1 million
for severance costs associated with the planned elimination of 796 salaried and
hourly positions, $6.0 million for non-cancelable lease agreements, $5.9 million
for facility asset write-downs, and $1.3 million for exit-related legal and
professional services. Non-recurring charges of $9.1 million include $8.4
million for management transition costs associated with the April 2001
retirement of Snap-on's president and chief executive officer and the
appointment of Dale F. Elliott as successor to this position and $.7 million for
non-recurring transition costs related to equipment and employee relocation
associated with the facility consolidations. The non-recurring charges of $12.6
million in "Cost of goods sold - non-recurring charges" are comprised of $2.3
million for restructuring-related inventory write-downs and $10.3 million for
additional inventory write-downs and warranty costs associated with Snap-on's
exiting of an unprofitable segment of the emissions-testing business.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  21
<PAGE>
Management's Discussion and Analysis (continued)

Snap-on recorded charges for expected losses on the disposition of discontinued
inventory, extended warranty costs and other asset impairments related to this
exit plan in December 2000. During 2001, Snap-on experienced higher than
expected emissions-related warranty costs and, as a result, Snap-on revised its
cost estimate relative to the emissions exit plan and recorded $10.3 million of
additional non-recurring charges in 2001.

The composition of Snap-on's restructuring reserve activity for the year ended
December 29, 2001, was as follows:
                                                              Restructuring
                                                              Reserve as of
(Amounts in millions)        Provisions           Usage       Dec. 29, 2001
- -------------------------------------------------------------------------------
Severance costs                   $27.1          $ (6.0)              $21.1
Facility consolidation
 or closure costs                   7.3            (5.3)                2.0
Loss on asset write-downs           5.9            (5.9)                  -
- -------------------------------------------------------------------------------
Total restructuring reserves      $40.3          $(17.2)              $23.1
- -------------------------------------------------------------------------------

As of December 29, 2001, restructuring reserve usage of $17.2 million represents
$6.0 million for severance payments related to the separation of 272 of the 796
identified employees, $5.3 million for facility consolidation or closure costs
and $5.9 million for the write-down of assets. Snap-on believes that the
restructuring reserve balance of $23.1 million as of December 29, 2001, is
adequate to complete all announced activities and anticipates that all actions
will be completed by the end of 2002.

Snap-on expects to fund the cash requirements of its 2001 restructuring
activities with cash flows from operations and borrowings under the company's
existing credit facilities. The specific restructuring measures and estimated
costs were based on management's best business judgment under prevailing
circumstances. Snap-on also expects to incur an estimated $7 million to $8
million in restructuring-related transition costs in the first half of 2002.
Transition costs do not qualify for restructuring accrual treatment and are
therefore expensed when incurred.

In 2000, Snap-on recorded restructuring and non-recurring charges totaling $21.8
million pretax, primarily for various exit-related costs and impairment
write-downs. These costs were comprised of a $4.2 million restructuring charge
and $17.2 million in non-recurring charges. The restructuring charge relates to
the closure of a small, underperforming vehicle-service business in the
Asia/Pacific region and includes costs related to severance, lease terminations
and write-offs of intangible assets. The non-recurring charges primarily relate
to Snap-on's decision, prompted by continued changes in technology and emissions
regulations at both the state and federal levels, to exit an unprofitable
segment of the emissions-testing business. The non-recurring charges consist of
$5.6 million for expected losses on the disposition of discontinued inventory,
$3.9 million for extended warranty costs and $7.7 million

<PAGE>
for other asset impairments. Additionally, Snap-on incurred $.4 million in
non-recurring charges for relocation, severance and facilities consolidation
costs.

On the accompanying Consolidated Statements of Earnings, the $9.5 million of
non-recurring charges for emissions-related inventory write-downs and warranty
costs in 2000 have been reported as "Cost of goods sold - non-recurring
charges." The $12.3 million in "Restructuring and other non-recurring charges"
includes non-recurring charges of $7.7 million for emissions-related asset
impairments and $.4 million for other relocation, severance and facilities
consolidation costs. Also included in "Restructuring and other non-recurring
charges" was $4.2 million in restructuring costs for severance and exit costs
related to the closure of a vehicle-service business. The restructuring actions
initiated in 2000 were completed during the first half of 2001.

In 1999, Snap-on recorded $37.2 million in restructuring and non-recurring
charges related to its Project Simplify initiative. Project Simplify, a broad
program of internal rationalizations, consolidations and reorganizations to make
Snap-on's business operations simpler and more effective, was implemented in the
third quarter of 1998. The 18-month program included the cost of closing
facilities, employee severance associated with a reduction in staffing, impaired
asset write-downs, costs to revalue discontinued stock keeping units ("SKUs"),
legal matters and other non-recurring costs. Of the $37.2 million in charges
recorded, $16.6 million was reflected in the Consolidated Statements of Earnings
as "Cost of goods sold - non-recurring charges," and $20.6 million was included
in "Restructuring and other non-recurring charges." The $16.6 million in
non-recurring charges reflects the discontinuance of an emissions-testing
equipment line as part of Snap-on's refocus on high-volume products. The $20.6
million of non-recurring charges represents employee incentives of $1.5 million,
relocation costs of $10.9 million, professional services of $9.1 million and
$4.8 million for the discontinuance of SKUs. These costs were partially offset
by the reversal of $5.1 million of excess warranty reserves and the reversal of
$.6 million of excess severance costs.

Snap-on achieved its Project Simplify objectives of consolidating certain
business units, closing 60 facilities, eliminating approximately 1,100 positions
and discontinuing more than 12,000 SKUs. Total charges incurred for Project
Simplify were $187.5 million, and were comprised of $67.1 million of
restructuring charges and $120.4 million of other non-recurring charges. Project
Simplify was essentially completed as of year-end 1999.

INTEREST EXPENSE: Interest expense for 2001 was $35.5 million, compared with
$40.7 million in 2000 and $27.4 million in 1999. The $5.2 million decrease in
year-over-year interest expense reflects the impact of lower debt levels and
lower average interest rates in 2001. In 2000, the $13.3 million increase in
year-over-year interest expense was primarily due to higher average debt levels
from the financing of the Bahco acquisition and higher interest rates.

22  SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
OTHER INCOME (EXPENSE): "Other income (expense) - net" includes the impact of
all non-operating items such as interest income, license fees, minority
interests, disposals of fixed assets, hedging and exchange rate transaction
gains and losses, and other miscellaneous items. In 2001, other expense was $3.5
million, as compared to income of $3.3 million in 2000, largely due to exchange
losses and lower interest income in 2001. In 1999, other income totaled $12.9
million and primarily included a gain on the sale of an interest in a Snap-on
subsidiary and a net gain on a currency hedge for the purchase of Bahco.

INCOME TAXES: Snap-on's effective income tax rate, before cumulative effect,
restructuring, non-recurring and other non-comparable items, was 36.5% in 2001.
The effective tax rate on 2001 restructuring, non-recurring and other
non-comparable items was 29.3%. Snap-on's reported effective income tax rate was
56.3% in 2001, 36.5% in 2000 and 35.7% in 1999. The 2001 tax rate was adversely
impacted by the 2001 restructuring, non-recurring and other non-comparable items
where certain expenses in various foreign jurisdictions were not tax benefited.
For additional income tax information, refer to Note 9.

FOURTH QUARTER: Net sales in the fourth quarter of 2001 were $534.6 million, a
3.9% decline from $556.3 million in the comparable prior-year period. Sales in
the fourth quarter of 2001 were adversely impacted by continued difficult
economic conditions. Sales declines in the worldwide industrial sector and in
equipment for the vehicle repair market in North America and Europe offset
increased U.S. dealer sales of tools and tool storage.

The fourth quarter 2001 net loss was $17.4 million, compared with net earnings
of $13.7 million in 2000. Loss per diluted share was $.30, compared with
earnings of $.24 per share in the prior year. The decline in 2001 earnings is
largely due to the recording of $48.3 million of charges ($31.2 million after
tax or $.54 per diluted share), including $44.0 million for the resolution of an
arbitration matter and $3.0 million in related legal costs, as well as $1.3
million for a revised estimate of costs related to the termination of a European
supplier relationship. These charges have been reported in "Operating expenses"
on the accompanying Consolidated Statements of Earnings.

In the fourth quarter of 2001, Snap-on also incurred pretax restructuring and
non-recurring charges totaling $17.2 million ($16.3 million after tax or $.28
per diluted share) for the consolidation or closure of nine facilities,
including related severance costs and asset write-downs. Restructuring charges
of $16.6 million include $13.6 million for severance costs associated with the
elimination of 340 identified positions,

<PAGE>
$2.4 million for non-cancelable lease agreements and related facility asset
write-downs, and $.6 million for exit-related legal and professional services.
Non-recurring charges of $.6 million include $.2 million in "Cost of goods sold
- - non-recurring charges" for inventory write-downs and $.4 million of other
equipment and employee relocation costs related to the facility consolidations.
The $16.6 million in restructuring costs, as well as the $.4 million in other
non-recurring charges, have been reported in "Restructuring and other
non-recurring charges" on the accompanying Consolidated Statements of Earnings.

The year-over-year decline in fourth-quarter 2001 net earnings also reflects the
impact of lower sales volumes, lower absorption of manufacturing costs as a
result of inventory reduction efforts, increased spending for new product
introductions and dealer expansion initiatives, and exchange losses from the
decline of the euro and Swedish krona against the U.S. dollar. These declines
were partially offset by the initial benefits of tighter cost controls under
Operational Fitness, reduced interest expense and increased finance income.
Fourth quarter net finance income was $8.0 million in 2001, up from $7.5 million
in 2000, as the effects of a more favorable interest-rate environment offset
lower loan originations caused by the soft demand for big-ticket equipment and
diagnostics in 2001.

In the fourth quarter of 2000, net earnings of $13.7 million included pretax
charges of $21.4 million ($14.0 million after tax or $.24 per diluted share) for
restructuring and non-recurring charges, including $9.5 million for inventory
write-downs and warranty costs and $7.7 million for asset impairment write-downs
related to the exit of a segment of the emissions-testing business, and $4.2
million in severance and exit costs for a vehicle-service business in the
Asia/Pacific region. In 2000, Snap-on also reserved $16.8 million ($10.5 million
after tax or $.18 per diluted share) for certain legal and other costs,
including $13.6 million primarily for the aggressive defense and assertion of
Snap-on's intellectual property rights and $3.2 million for emissions-related
asset write-downs.

Financial Condition
Snap-on's financial condition continues to be strong, and Snap-on believes it
has the resources necessary to meet future anticipated funding needs. Growth has
historically been supported by a combination of cash provided by operating
activities and debt financing.

(Amounts in millions)              2001            2000            1999
- -------------------------------------------------------------------------------
Net cash provided by
 operating activities            $163.7          $190.2          $235.6
Net increase (decrease) in debt   (68.7)          (86.5)          290.1
- -------------------------------------------------------------------------------

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  23
<PAGE>
Management's Discussion and Analysis (continued)

NET CASH PROVIDED BY OPERATING ACTIVITIES (in $ millions)
- ---------------------------------------------------------
1997  -  195
1998  -  75
1999  -  236
2000  -  190
2001  -  164

AVERAGE WORKING CAPITAL AS A PERCENT OF NET SALES (in percent)
- --------------------------------------------------------------
1997  -  40.2
1998  -  36.4
1999  -  35.3
2000  -  32.2
2001  -  29.5

Net cash provided by operating activities was $163.7 million in 2001, $190.2
million in 2000 and $235.6 million in 1999. In 2001, the year-over-year decline
in net cash provided by operating activities is primarily due to lower earnings,
partially offset by working capital reductions. In 2001, Snap-on used its cash
flow principally to fund cash requirements of its restructuring activities,
internal growth opportunities, stock repurchases, dividend payments and debt
repayments. Net debt levels decreased by $68.7 million to $474.6 million in
2001, as compared to $543.3 million in 2000, as a result of Snap-on's strong
cash flow and reduced working capital. At year-end 2001, the ratio of total debt
to total capital was 38.0%, as compared to 39.2% at the end of 2000.

In 2000, Snap-on reduced its year-over-year net debt levels by $86.5 million. At
year-end 2000, the ratio of total debt to total capital had improved to 39.2%
from 43.3% at the prior year end. In 1999, net debt levels increased largely due
to the financing of the Bahco acquisition in September 1999.

LIQUIDITY: Snap-on's working capital at the end of 2001 was $590.0 million, down
$58.4 million from $648.4 million in 2000. Snap-on's focus on improving working
capital turns, particularly for inventory and receivables, contributed to the
working capital reduction. In 2000, working capital was $648.4 million, down
$105.2 million from year-end 1999 levels due to higher inventory turns and an
increase in current liabilities.

The ratio of current assets to current liabilities at year-end 2001 was 2.1 to
1, compared with 2.2 to 1 at year-end 2000 and 2.7 to 1 at year-end 1999. Cash
and cash equivalents were $6.7 million at December 29, 2001, compared to $6.1
million and $17.6 million at year-end 2000 and 1999.

(Amounts in millions)              2001            2000            1999
- -------------------------------------------------------------------------------
Current assets                 $1,139.4        $1,186.4        $1,206.3
Current liabilities               549.4           538.0           452.7
- -------------------------------------------------------------------------------
Working capital                $  590.0        $  648.4        $  753.6
- -------------------------------------------------------------------------------
<PAGE>
Accounts receivable at the end of 2001 were $615.2 million, down $29.3 million
compared with year-end 2000, primarily due to lower sales volumes. In 2000,
accounts receivable were up $26.8 million to $644.5 million, as compared with
year-end 1999, largely due to higher sales and an increase in dealer financing
receivables. In 1999, accounts receivable increased principally as a result of
acquiring Bahco. Bad debt write-offs in 2001 represented 4.9% of average
accounts receivable, compared with 2.2% in 2000 and 1.9% in 1999. The increase
in bad debt write-offs in 2001 was primarily due to write-offs resulting from
the exiting of a segment of the emissions-testing business and the termination
of a European supplier relationship.

Inventories at year-end 2001 were $375.2 million, down $43.7 million from
year-end 2000. The decrease in year-over-year inventory levels reflects improved
inventory turns, despite the slower sales environment, from the company's focus
on working capital and the effect of currency translation. In 2000, inventories
of $418.9 million were down $35.9 million from year-end 1999, reflecting
increased inventory turns and currency translation impacts. In 1999, inventories
increased by $79.4 million, primarily due to the Bahco acquisition.

Notes payable and current maturities of long-term debt totaled $29.1 million at
the end of 2001 compared with $70.3 million at year-end 2000. Current maturities
of long-term debt were $2.6 million and $4.9 million at year-end 2001 and 2000.
At the end of 2001 and 2000, Snap-on had $142.2 million and $365.5 million in
outstanding short-term commercial notes that were classified as long term, as it
is Snap-on's intent, and it has the ability (supported by its long-term
revolving credit facilities), to refinance this debt on a long-term basis.

At December 29, 2001, Snap-on had $458 million of multi-currency revolving
credit facilities to support its commercial paper programs. Snap-on has a $208
million revolving credit facility that is effective for a five-year term and
terminates on August 20, 2005, and a $250 million credit facility that is a
364-day facility with a one-year term-out option that terminates on August 19,
2002. The term-out option allows Snap-on to elect to borrow under the credit
facility for an additional year after the termination date. At the end of 2001
and 2000, Snap-on was in compliance with all covenants of the revolving credit
facilities and there were no borrowings under either revolving credit
commitment. The most restrictive covenant requires Snap-on to maintain a total
debt to total capital percentage of 60% or better.

Average commercial paper and bank notes outstanding were $389.2 million in 2001
and $529.1 million in 2000. The weighted-average interest rate on these
instruments was 4.3% in 2001 and 5.9% in 2000. As of December 29, 2001, and
December 30, 2000, commercial paper and bank notes outstanding had a
weighted-average interest rate of 2.1% and 6.1%.

In August 2001, Snap-on issued $200 million of unsecured notes pursuant to a
$300 million shelf registration statement filed with the Securities and Exchange
Commission in 1994. In October 1995, Snap-on issued $100 million of unsecured
notes to the public under this shelf registration. The August 2001 notes require
semiannual interest payments at a rate of 6.25% and mature in their entirety on
August 15, 2011. The October 1995 notes require semiannual interest payments at
a rate

24 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
TOTAL DEBT AS A PERCENT OF TOTAL CAPITAL (in percent)
- -----------------------------------------------------
1997  -  16.4
1998  -  30.8
1999  -  43.3
2000  -  39.2
2001  -  38.0

TOTAL CAPITAL* (in $ millions)
- -----------------------------
1997  -  1,067
1998  -  1,102
1999  -  1,455
2000  -  1,387
2001  -  1,250

* Total debt plus shareholders' equity

of 6.625% and mature in their entirety on October 1, 2005. The proceeds from
these issuances were used to repay a portion of Snap-on's outstanding commercial
paper and for working capital and general corporate purposes.

Snap-on believes that its sources of borrowings, coupled with cash from
operations, are sufficient to support its working capital requirements, finance
capital expenditures and restructuring activities, make acquisitions, repurchase
common stock and pay dividends. Due to Snap-on's credit rating over the years,
external funds have been available at a reasonable cost. At the end of 2001,
Snap-on's long-term debt and commercial paper was rated A1 and P-1 by Moody's
Investors Service and A+ and A-1 by Standard & Poor's. Snap-on believes that the
strength of its balance sheet affords the company the financial flexibility to
respond to both internal growth opportunities and those available through
acquisition.

CAPITAL EXPENDITURES: Capital expenditures in 2001 were $53.6 million, as
compared to $57.6 million in 2000 and $35.4 million in 1999. The year-over-year
decrease in 2001 reflects greater spending discipline in light of the weaker
economy. Investments for the year primarily included ongoing replacements and
upgrades of manufacturing and distribution facilities and equipment, and
restructuring-related capital investments. The impact of full-year capital
expenditures at Bahco drove the year-over-year increase in 2000 capital spending
over 1999 levels. Snap-on anticipates that 2002 capital expenditures will
approximate $50 million to $55 million.

CAPITAL EXPENDITURES (in $ millions)
- ------------------------------------
1997  -  55
1998  -  47
1999  -  35
2000  -  58
2001  -  54

DEPRECIATION AND AMORTIZATION (in $ millions)
- ---------------------------------------------
1997  -  38
1998  -  45
1999  -  55
2000  -  66
2001  -  68
<PAGE>
DEPRECIATION AND AMORTIZATION: Depreciation in 2001 was $50.4 million, compared
with $48.4 million in 2000 and $41.3 million in 1999. Amortization expense for
goodwill and intangibles was $17.6 million in 2001, $17.8 million in 2000 and
$14.1 million in 1999. Acquisitions and the amortization of resulting goodwill
and intangibles accounted for the higher expense in 2000 over 1999.

Snap-on will adopt SFAS No. 142, "Goodwill and Other Intangible Assets," at the
beginning of its 2002 fiscal year. Snap-on currently estimates that the
annualized pretax impact of discontinuing goodwill amortization, as required
under SFAS No. 142, will approximate $13.9 million ($11.9 million after tax or
$.20 per diluted share). For additional information on Snap-on's adoption of
SFAS No. 142, refer to the section entitled "Accounting Pronouncements."

DIVIDENDS: During 2001, Snap-on paid dividends of $.96 per share. Snap-on has
paid consecutive quarterly cash dividends since 1939.

(Amounts in millions
except per share data)             2001            2000            1999
- -------------------------------------------------------------------------------
Cash dividends paid               $55.6           $55.0           $52.6
Cash dividends paid per
  common share                      .96             .94             .90
Cash dividends paid as
  a percent of prior-year
  retained earnings                 5.3%            5.7%            6.0%
- -------------------------------------------------------------------------------

STOCK REPURCHASE PROGRAM: Snap-on has undertaken stock repurchases from time to
time to prevent dilution created by shares issued for employee and dealer stock
purchase plans, stock options, and other corporate purposes, as well as to
repurchase shares when market conditions are favorable. Snap-on repurchased
400,000 shares in 2001, following the repurchase of 1,019,500 shares in 2000 and
492,800 shares in 1999. Since 1997, Snap-on's board of directors has authorized
the repurchase of up to $250 million of Snap-on's common stock. As of the end of
2001, Snap-on has remaining availability to repurchase up to an additional $133
million in common stock pursuant to the board's authorizations. The purchase of
Snap-on common stock is at the company's discretion, subject to prevailing
financial and market conditions. Since 1995, Snap-on has repurchased 9,989,583
shares.

Market, Credit and Economic Risks
Market risk is the potential economic loss that may result from adverse changes
in the fair value of financial instruments. Snap-on is exposed to market risk
from changes in both foreign currency exchange rates and interest rates. Snap-on
monitors its exposure to these risks and manages the underlying economic
exposures through the use of financial instruments such as forward exchange
contracts and interest rate swap agreements. Snap-on does not use derivative
instruments for speculative or trading purposes. Snap-on's broad-based business
activities help to reduce the impact that volatility in any particular area or
related areas may have on its operating earnings as a whole. Snap-on's
management takes an active role in the risk management process and has developed
policies and procedures that require specific administrative and business
functions to assist in the identification, assessment and control of various
risks.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  25
<PAGE>
Management's Discussion and Analysis (continued)

FOREIGN CURRENCY RISK MANAGEMENT: Snap-on has significant international
operations. Foreign exchange risk exists to the extent that Snap-on has payment
obligations or receipts denominated in currencies other than the functional
currency. To manage these exposures, Snap-on identifies naturally offsetting
positions and then purchases hedging instruments to protect the residual net
anticipated exposures. For additional information, refer to Note 10.

INTEREST RATE RISK MANAGEMENT: Snap-on's interest rate risk management policies
are designed to reduce the potential volatility of earnings that could arise
from changes in interest rates. Through the use of interest rate swaps, Snap-on
aims to stabilize funding costs by managing the exposure created by the
differing maturities and interest rate structures of Snap-on's assets and
liabilities. For additional information, refer to Note 10.

Snap-on utilizes a Value-at-Risk ("VAR") model to determine the potential
one-day loss in the fair value of its interest rate and foreign
exchange-sensitive financial instruments from adverse changes in market factors.
The VAR model estimates were made assuming normal market conditions and a 95%
confidence level. Snap-on's computations are based on the inter-relationships
among movements in various currencies and interest rates (variance/co-variance
technique). These inter-relationships were determined by observing interest rate
and foreign currency market changes over the preceding quarter.

The estimated maximum potential one-day loss in fair value, calculated using the
VAR model, at December 29, 2001, was $1.9 million on interest rate-sensitive
financial instruments and $2.4 million on foreign currency-sensitive financial
instruments. The VAR model is a risk management tool and does not purport to
represent actual losses in fair value that will be incurred by Snap-on, nor does
it consider the potential effect of favorable changes in market factors.

CREDIT RISK: Credit risk is the possibility of loss from a customer's failure to
make payments according to contract terms. Prior to granting a loan, each
customer is evaluated, taking into consideration the borrower's financial
condition, collateral, debt-servicing capacity, past payment experience, credit
bureau information and numerous other financial and qualitative factors that may
affect the borrower's ability to repay. Specific credit reviews and standard
industry credit scoring models are used in performing this evaluation. Loans
that have been granted are typically monitored through an asset-quality-review
process that closely monitors past due accounts and initiates collection actions
when appropriate. In addition to credit risk exposure from its on-balance-sheet
receivables, Snap-on also has credit risk exposure for certain loan originations
with recourse provisions from the LLC. At December 29, 2001, $46.3 million of
loans originated by the LLC have a recourse provision to Snap-on if the
receivables become more than 90 days past due. In addition, there were $27.1
million of dealers' customer-originated loans that have a primary recourse
provision directly to the dealer, with secondary recourse to Snap-on in the
event of dealer default. For additional information, refer to Note 7.
<PAGE>
ECONOMIC RISK: Economic risk is the possibility of loss resulting from economic
instability in certain areas of the world. Economic instability from time to
time may cause Snap-on to react to such market conditions. The economic
uncertainty in Argentina prompted Snap-on to resize its operations there in
2001, shifting a portion of its manufacturing to other existing Snap-on
facilities. The Bahco Argentina facility will continue to operate with about
one-half of its previous workforce, manufacturing product at a level to support
its local market. Snap-on will continue to assess Argentina's economic situation
to determine if any future actions or impairment write-downs are warranted.

Other Matters
ACQUISITIONS: During 2001, Snap-on incurred acquisition costs of $.9 million
related to the finalization of its fiscal 2000 acquisitions. During 2000,
Snap-on acquired full ownership of two business operations. The aggregate cash
purchase price plus costs related to the finalization of 1999 acquisitions was
$11.9 million. Each of the acquisitions provided Snap-on with a complementary
product line, new customer relationships, access to additional distribution
and/or an extended geographic reach.

On September 30, 1999, Snap-on acquired Bahco Group AB for $391 million in a
cash purchase transaction. Also during 1999, Snap-on acquired the remaining 40%
of Mitchell Repair Information Company, LLC ("MRIC") and full ownership of three
businesses for an aggregate cash purchase price of $73.9 million.

DIVESTITURES: During 2000, Snap-on divested Windsor Forestry Tools Inc.
("Windsor"), which was acquired as part of the Bahco acquisition. As Windsor was
accounted for as "held for sale" in accordance with Accounting Principles Board
Opinion No. 16, it had no impact on Snap-on's Consolidated Statements of
Earnings. The sale of Windsor resulted in cash proceeds of $15.5 million and an
adjustment to goodwill.

During the fourth quarter of 1999, Snap-on sold a 15% interest in MRIC to
Genuine Parts Company ("GPC") in support of an alliance to enhance and expand
the e-business efforts of both companies. The combined effort unites the
replacement-parts catalog and online order interface and procurement
capabilities of GPC's Automotive Parts Group with the online repair information,
"voice and view" diagnostics help, labor rates and shop management capabilities
of MRIC.

ACCOUNTING PRONOUNCEMENTS: In 2001, Snap-on adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138.
The adoption of this standard resulted in the recording of a cumulative effect
transition adjustment to decrease reported net income in the first quarter of
2001 by $2.5 million after tax related to a hedge strategy that did not qualify
for hedge accounting under SFAS No. 133. Snap-on also recorded in the first
quarter of 2001 a transition adjustment of $1.2 million after tax to recognize
previously deferred net gains on derivatives designated as cash flow hedges that
qualify for hedge accounting under SFAS No. 133. The $1.2 million transition
adjustment was recorded in "Accumulated other comprehensive income (loss)" on
the accompanying Consolidated Balance Sheets.

26 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires all business combinations initiated after June
30, 2001, to be accounted for under the purchase method, prohibiting the use of
the pooling-of-interests approach, and includes criteria for the recognition of
intangible assets separately from goodwill. SFAS No. 142 requires the periodic
testing of goodwill and indefinite-lived intangible assets for impairment, as
compared to the current method of amortizing such assets to expense over their
estimated useful lives. Snap-on will adopt SFAS No. 142 at the beginning of its
2002 fiscal year and estimates that, on an annualized basis, the pretax impact
of discontinuing goodwill amortization will approximate $13.9 million ($11.9
million after tax or $.20 per diluted share). Goodwill, net of accumulated
amortization, was $331.2 million and $360.0 million at the end of 2001 and 2000.

The FASB also issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," in June 2001. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets. The statement requires that the fair value of a liability for an asset's
retirement obligation be recognized in the period in which it is incurred and
capitalized as part of the carrying amount of the long-lived asset. The
statement will be effective for fiscal years beginning after June 15, 2002.
Snap-on is currently evaluating the impact these new accounting standards may
have on Snap-on's financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The statement provides a single accounting model for long-lived assets to
be disposed of. Snap-on will adopt SFAS No. 144 at the beginning of its 2002
fiscal year. The effect of this change in accounting is not material to
Snap-on's financial position or results of operations.

OUTLOOK: Snap-on believes that the long-term underlying fundamental trends that
influence its business remain sound. In 2002, Snap-on will continue its efforts
to incorporate the Driven to Deliver(TM) business process into its
organizational culture. The strengths and potential of Snap-on's businesses will
continue to be examined, and appropriate actions to drive improvement in
operational metrics will be a focus. As these changes are implemented, Snap-on
will ensure that its near-term efforts on enhancing profitability are balanced
with a disciplined review of longer-term profitable growth investments. Snap-on
also expects further progress on working capital to lead to improvements in cash
flow.

Snap-on expects that the current weak economic conditions will continue to
challenge sales growth and profitability, particularly in the first half of
2002. With $40 million in pretax savings targeted in 2002 from its restructuring
and cost-control activities. Snap-on plans to invest approximately one-half of
those savings to support the further devel-
<PAGE>
opment of innovative products and other profitable growth initiatives, such as
the continued expansion of the Snap-on dealer network. Continued emphasis on
inventory reduction, coupled with the weak economic conditions, will limit
Snap-on's ability to benefit from restructuring savings in the first quarter of
2002; however, beginning in the second quarter, Snap-on expects that improved
seasonal volumes and benefits from Operational Fitness will lead to earnings per
share growth over 2001 levels.

The Snap-on(R) brand is the leading brand preferred by professional technicians.
High quality, product performance, exacting standards, customer service, strong
relationships and innovation remain the guiding principles throughout Snap-on.
In 2002, emphasis will remain on supporting Snap-on's traditional growth
drivers: developing new, innovative products and services, enhancing the
delivery of value to its customers, and reinforcing its strong brands worldwide.

SAFE HARBOR: Statements in this document that are not historical facts,
including statements (i) that include the words "expects," "targets,"
"believes," "anticipates," "estimates," or similar words that reference Snap-on
or its management; (ii) specifically identified as forward-looking; or (iii)
describing Snap-on's or management's future outlook, plans, objectives or goals,
are forward-looking statements. Snap-on or its representatives may also make
similar forward-looking statements from time to time orally or in writing.
Snap-on cautions the reader that these statements are subject to risks,
uncertainties or other factors that could cause (and in some cases have caused)
actual results to differ materially from those described in any such statement.
Some of these factors are discussed below, as a well as elsewhere in this
document, and in Snap-on's Securities and Exchange Commission filings. These
important factors include the validity of assumptions set forth above and the
timing and progress with which Snap-on can continue to achieve further cost
reductions and savings from its restructuring initiatives; Snap-on's ability to
retain and attract dealers and to withstand external negative factors, including
terrorist disruptions on business, changes in trade, monetary and fiscal
policies, laws and regulations, or other activities of governments or their
agencies; the timing, speed or ability with which Snap-on can realize the
benefits of the Driven to Deliver(TM) initiatives; and the absence of
significant changes in the current competitive environment, inflation, energy
supply or pricing, legal proceedings, supplier disruptions, currency
fluctuations, or the material worsening of economic and political situations
around the world. These factors may not constitute all factors that could cause
actual results to differ materially from those discussed in any forward-looking
statement. Snap-on operates in a continually changing business environment and
new factors emerge from time to time. Snap-on cannot predict such factors, nor
can it assess the impact, if any, of such factors on Snap-on's financial
position or its results of operations. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results. Snap-on disclaims
any responsibility to update any forward-looking statement provided in this
document.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  27
<PAGE>
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
(Amounts in millions except per share data)                                    2001          2000           1999
- -------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>            <C>            <C>
Net sales                                                                $  2,095.7     $ 2,175.7      $ 1,945.6
Cost of goods sold                                                         (1,134.1)     (1,169.4)      (1,032.8)
Cost of goods sold - non-recurring charges                                    (12.6)         (9.5)         (16.6)
Operating expenses                                                           (848.7)       (792.6)        (723.7)
Net finance income                                                             35.7          38.1           60.5
Restructuring and other non-recurring charges                                 (49.4)        (12.3)         (20.6)
Interest expense                                                              (35.5)        (40.7)         (27.4)
Other income (expense) - net                                                   (3.5)          3.3           12.9
- -------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes                        47.6         192.6          197.9
- -------------------------------------------------------------------------------------------------------------------
Income taxes on earnings from continuing operations                            26.1          69.5           70.7
- -------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of a change in accounting principle          21.5         123.1          127.2
Cumulative effect of a change in accounting principle
 for derivatives in 2001 (net of tax benefit of $1.6 million)
 and for pensions in 2000 (net of tax of $15.9 million)                        (2.5)         25.4              -
- -------------------------------------------------------------------------------------------------------------------
Net earnings                                                             $     19.0     $   148.5      $   127.2
- -------------------------------------------------------------------------------------------------------------------
Net earnings per share - basic:
 Earnings before cumulative effect of a change in
  accounting principle                                                   $      .37     $    2.11      $    2.18
 Cumulative effect of a change in accounting
  principle, net of tax                                                        (.04)          .43              -
- -------------------------------------------------------------------------------------------------------------------
Net earnings per share - basic                                           $      .33     $    2.54      $    2.18
- -------------------------------------------------------------------------------------------------------------------
Net earnings per share - diluted:
 Earnings before cumulative effect of a change in
   accounting principle                                                  $      .37     $    2.10      $    2.16
 Cumulative effect of a change in accounting
   principle, net of tax                                                       (.04)          .43              -
- -------------------------------------------------------------------------------------------------------------------
Net earnings per share - diluted                                         $      .33     $    2.53      $    2.16
- -------------------------------------------------------------------------------------------------------------------
Weighted-average shares outstanding:
  Basic                                                                        57.9          58.4           58.5
  Effect of dilutive options                                                     .2            .2             .4
- -------------------------------------------------------------------------------------------------------------------
  Diluted                                                                      58.1          58.6           58.9
- -------------------------------------------------------------------------------------------------------------------
Pro forma amounts of a change in accounting for pensions:
  Net earnings                                                           $     19.0     $   123.1      $   133.3
  Net earnings per share - basic                                                .33          2.11           2.28
  Net earnings per share - diluted                                              .33          2.10           2.26
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.

28 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Amounts in millions except share data)                                         December 29, 2001      December 30, 2000
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
<S>                                                                                     <C>                    <C>
Cash and cash equivalents                                                               $     6.7              $     6.1
Accounts receivable - net of allowances                                                     615.2                  644.5
Inventories                                                                                 375.2                  418.9
Prepaid expenses and other assets                                                           142.3                  116.9
- --------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                      1,139.4                1,186.4

Property and equipment - net                                                                327.7                  345.1
Deferred income tax benefits                                                                 27.7                   33.0
Intangibles - net                                                                            60.7                   64.6
Goodwill - net                                                                              331.2                  360.0
Other assets                                                                                 87.6                   80.0
- --------------------------------------------------------------------------------------------------------------------------
Total assets                                                                            $ 1,974.3               $2,069.1
- --------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable                                                                        $   141.2               $  161.0
Notes payable and current maturities of long-term debt                                       29.1                   70.3
Accrued compensation                                                                         58.7                   56.3
Dealer deposits                                                                              42.0                   39.8
Deferred subscription revenue                                                                45.0                   44.9
Accrued restructuring reserves                                                               23.1                      -
Other accrued liabilities                                                                   210.3                  165.7
- --------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                                                   549.4                  538.0

Long-term debt                                                                              445.5                  473.0
Deferred income taxes                                                                        24.7                   24.7
Retiree health care benefits                                                                 92.7                   92.2
Pension liability                                                                            54.5                   60.1
Other long-term liabilities                                                                  31.7                   37.1
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                         1,198.5                1,225.1
- --------------------------------------------------------------------------------------------------------------------------

Shareholders' equity
Preferred stock - authorized 15,000,000 shares of $1 par value; none outstanding                -                      -
Common stock - authorized 250,000,000 shares of $1 par value;
 issued 66,847,107 and 66,789,090 shares                                                     66.8                   66.8
Additional paid-in capital                                                                  108.0                   71.6
Retained earnings                                                                         1,014.7                1,051.3
Accumulated other comprehensive income (loss)                                              (120.6)                 (87.2)
Grantor stock trust at fair market value - 5,984,145 and 6,443,033 shares                  (203.0)                (179.6)
Treasury stock at cost - 2,923,435 and 2,523,435 shares                                     (90.1)                 (78.9)
- --------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                                  775.8                  844.0
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                              $ 1,974.3               $2,069.1
- --------------------------------------------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

                                                                               SNAP-ON INCORPORATED 2001 ANNUAL REPORT  29
</TABLE>
<PAGE>
Consolidated Statements of Shareholders' Equity and Comprehensive Income
<TABLE>
<CAPTION>
                                                                                   Accumulated
                                                       Additional                        Other   Grantor                     Total
                                              Common      Paid-in    Retained    Comprehensive     Stock   Treasury  Shareholders'
(Amounts in millions except share data)        Stock      Capital    Earnings    Income (Loss)     Trust      Stock         Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>       <C>              <C>        <C>         <C>            <C>
Balance at January 2, 1999                     $66.7       $117.4    $  883.2         $  (30.2)  $(241.0)    $(33.7)        $762.4
Comprehensive income:
  Net earnings for 1999                                                 127.2
  Foreign currency translation                                                            (5.4)
  Minimum pension liability                                                                (.2)
Total comprehensive income                                                                                                   121.6
Cash dividends - $.90 per share                                         (52.6)                                               (52.6)
Dividend reinvestment plan - 38,809 shares                    1.2                                                              1.2
Stock plans - 5,479 shares                                     .4                                                               .4
Grantor stock trust - 246,569 shares                                                                 6.9                       6.9
Share repurchase, net of
  reissuance - 489,115 shares                                                                                 (14.6)         (14.6)
Adjustment of grantor stock trust
  to fair market value                                      (56.7)                                  56.7                         -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2000                      66.7         62.3       957.8            (35.8)   (177.4)     (48.3)         825.3

Comprehensive income:
  Net earnings for 2000                                                 148.5
  Foreign currency translation                                                           (52.0)
  Minimum pension liability                                                                 .6
Total comprehensive income                                                                                                    97.1
Cash dividends - $.94 per share                                         (55.0)                                               (55.0)
Dividend reinvestment plan - 50,725 shares        .1          1.3                                                              1.4
Stock plans - 8,908 shares                                     .3                                                               .3
Grantor stock trust - 234,417 shares                                                                 5.5                       5.5
Share repurchase, net of
 reissuance - 1,018,096 shares                                                                                (30.6)         (30.6)
Adjustment of grantor stock trust
 to fair market value                                         7.7                                   (7.7)                        -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 30, 2000                    66.8         71.6     1,051.3            (87.2)   (179.6)     (78.9)         844.0

Comprehensive income:
  Net earnings for 2001                                                  19.0
  Foreign currency translation                                                           (29.9)
  Mark to market for cash flow hedges,
    net of tax of $.7 million                                                             (2.0)
  Minimum pension liability                                                               (1.5)
Total comprehensive income                                                                                                   (14.4)
Cash dividends - $.96 per share                                         (55.6)                                               (55.6)
Dividend reinvestment plan - 47,650 shares                    1.3                                                              1.3
Stock plans - 10,367 shares                                    .3                                                               .3
Grantor stock trust - 458,888 shares                                                                10.4                      10.4
Share repurchase - 400,000 shares                                                                             (11.2)         (11.2)
Tax benefit from certain stock options                        1.0                                                              1.0
Adjustment of grantor stock trust
  to fair market value                                       33.8                                  (33.8)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 29, 2001                   $66.8       $108.0    $1,014.7          $(120.6)  $(203.0)    $(90.1)        $775.8
- -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>

30  SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Amounts in millions)                                                            2001          2000           1999
- --------------------------------------------------------------------------------------------------------------------
Operating activities
<S>                                                                           <C>          <C>             <C>
Net earnings                                                                  $  19.0      $  148.5        $ 127.2
Adjustments to reconcile net earnings to net cash
  provided (used) by operating activities:
    Cumulative effect of a change in accounting principle, net of tax             2.5        (25.4)              -
    Depreciation                                                                 50.4         48.4            41.3
    Amortization of intangibles                                                   3.7          3.3             2.6
    Amortization of goodwill                                                     13.9         14.5            11.5
    Deferred income tax provision                                                 5.4          9.7            16.3
    Gain on sale of assets                                                        (.1)        (1.5)           (1.3)
    Gain on dispositions of businesses                                              -            -            (4.4)
    Gain on mark to market for cash flow hedges                                  (2.0)           -               -
    Restructuring and other non-recurring charges, net of tax                    46.1          14.2           23.3
Changes in operating assets and liabilities,
  net of effects of acquisitions:
    (Increase) decrease in receivables                                           18.2         (50.2)          21.6
    (Increase) decrease in inventories                                           18.9           9.0           (5.7)
    (Increase) decrease in prepaid and other assets                             (19.8)        (12.9)          42.0
    Increase (decrease) in accounts payable                                     (13.2)         17.9            7.4
    Increase (decrease) in accruals and other liabilities                        20.7          14.7          (46.2)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                       163.7         190.2          235.6

Investing activities
Capital expenditures                                                            (53.6)        (57.6)         (35.4)
Acquisitions of businesses - net of cash acquired                                 (.9)        (11.9)        (440.7)
Dispositions of businesses                                                          -          15.5           21.3
Disposals of property and equipment                                               6.9          11.7            6.5
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                           (47.6)        (42.3)        (448.3)

Financing activities
Payment of long-term debt                                                        (6.4)         (8.0)         (48.7)
Increase in long-term debt                                                      200.4           6.3            6.8
Increase (decrease) in short-term borrowings - net                             (255.1)        (77.9)         316.2
Purchase of treasury stock                                                      (11.2)        (30.6)         (14.6)
Proceeds from stock  purchase and option plans                                   13.0           7.1            8.5
Cash dividends paid                                                             (55.6)        (55.0)         (52.6)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                            (114.9)       (158.1)         215.6

Effect of exchange rate changes on cash                                           (.6)         (1.3)           (.3)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                                   .6         (11.5)           2.6
Cash and cash equivalents at beginning of year                                    6.1          17.6           15.0
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                     $    6.7      $    6.1       $   17.6
- --------------------------------------------------------------------------------------------------------------------

Supplemental cash flow disclosures:
  Cash paid for interest                                                     $   32.3      $   40.8       $   27.4
  Cash paid for income taxes                                                     27.4          54.0           26.4
- --------------------------------------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.

                                                                         SNAP-ON INCORPORATED 2001 ANNUAL REPORT  31
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements

>  NOTE 1 Nature of Operations

Snap-on Incorporated ("Snap-on"), a Delaware corporation, is a leading global
innovator, manufacturer and marketer of tool, diagnostic and equipment solutions
for professional tool and equipment users. Product lines include hand and power
tools, diagnostics and shop equipment, tool storage, diagnostics software and
other solutions for vehicle-service, industrial, government and agricultural
customers, and commercial applications, including construction and electrical.
Products are sold through its dealer van, company-direct and distributor sales
channels and the Internet.

>  NOTE 2 Summary of Accounting Policies
PRINCIPLES OF CONSOLIDATION AND PRESENTATION: The consolidated financial
statements include the accounts of Snap-on and its majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
Snap-on Credit LLC ("the LLC"), a 50%-owned joint venture with Tyco
International Ltd., is recorded using the equity method. Certain prior-year
amounts have been reclassified to conform with the current-year presentation.

USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FISCAL YEAR ACCOUNTING PERIOD: Snap-on's fiscal year ends on the Saturday
nearest December 31. The 2001, 2000 and 1999 fiscal years each contained 52
weeks and ended on December 29, 2001, December 30, 2000, and January 1, 2000.

REVENUE RECOGNITION: Snap-on recognizes revenues at the time that products are
shipped or services are performed, and accrues for estimated future returns in
the period in which the sale is recorded. Franchise fee revenue is recognized as
the fees are earned and was not material in any year. Subscription revenue is
deferred and recognized over the life of the subscription.

CASH EQUIVALENTS: Snap-on considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are stated at cost, which approximates market value.

INVENTORIES: Inventories consist of manufactured products and merchandise for
resale and are stated at the lower of cost or market. Manufactured products
include the costs of materials, labor and manufacturing overhead. Inventories
accounted for using the first-in, first-out ("FIFO") method approximated 65% and
63% of total inventories as of year-end 2001 and 2000. All other inventories are
accounted for using the last-in, first-out ("LIFO") cost method. For additional
inventory information, refer to Note 4.
<PAGE>
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
provided on a straight-line basis over estimated useful lives. Accelerated
depreciation methods are used for income tax purposes. Major repairs that extend
the useful life of an asset are capitalized, while routine maintenance and
repairs are expensed as incurred. Capitalized software included in property and
equipment reflects costs related to internally developed or purchased software
for internal use that are capitalized and amortized on a straight-line basis
over their estimated useful lives. Development costs for computer software to be
sold, leased or otherwise marketed externally are capitalized once technological
feasibility has been achieved and are amortized on a straight-line basis over
their estimated useful lives. Capitalized software is subject to an ongoing
assessment of recoverability based upon anticipated future revenues and
identified changes in hardware and software technologies. For additional
property and equipment information, refer to Note 5.

GOODWILL AND INTANGIBLES: Goodwill and other intangibles are being amortized
over 13 to 40 years on a straight-line basis. Goodwill, net of accumulated
amortization, was $331.2 million and $360.0 million at the end of 2001 and 2000.
Pretax goodwill amortization was $13.9 million, $14.5 million and $11.5 million
for 2001, 2000 and 1999. Accumulated amortization of goodwill was $55.6 million
and $41.7 million at the end of 2001 and 2000. Snap-on continually evaluates the
existence of goodwill impairment on the basis of whether the goodwill is fully
recoverable from projected, undiscounted net cash flows of the related business
unit. Patents and trademarks totaling $60.7 million and $64.6 million at
year-end 2001 and 2000 are being amortized over their estimated useful lives.
Accumulated amortization of patents and trademarks was $12.2 million and $9.6
million at the end of 2001 and 2000. At the beginning of its 2002 fiscal year,
Snap-on will adopt Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 requires the periodic
testing of goodwill and indefinite-lived intangible assets for impairment, as
compared to the current method of amortizing such assets to expense over their
estimated useful lives.

SHIPPING AND HANDLING: Snap-on adopted Emerging Issues Task Force Issue 00-10,
"Accounting for Shipping and Handling Fees and Costs," which requires that
amounts billed to customers for shipping and handling be included as a component
of sales. The impact of implementing this statement was not significant to any
periods presented. Shipping and handling costs are included as a component of
both "Cost of goods sold" and "Operating expenses" on the accompanying
Consolidated Statements of Earnings. In 2001, 2000 and 1999, costs of $11.2
million, $11.1 million and $12.6 million were recorded in "Cost of goods sold,"
while costs of $41.9 million, $41.9 million and $35.5 million were recorded in
"Operating expenses."

RESEARCH AND ENGINEERING: Research and engineering costs are charged to expense
in the year incurred except for certain software development costs that qualify
for capitalization. For 2001, 2000 and 1999, these costs were $54.6 million,
$50.6 million and $50.2 million.

32  SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
INCOME TAXES: Deferred income taxes are provided for temporary differences
arising from differences in bases of assets and liabilities for tax and
financial reporting purposes. Deferred income taxes are recorded on temporary
differences at the tax rate expected to be in effect when the temporary
differences reverse. For detailed tax information, refer to Note 9.

FOREIGN CURRENCY TRANSLATION: The financial statements of Snap-on's foreign
subsidiaries are translated into U.S. dollars in accordance with SFAS No. 52,
"Foreign Currency Translation." Assets and liabilities of foreign subsidiaries
are translated at current rates of exchange, and income and expense items are
translated at the average exchange rate for the year. The resulting translation
adjustments are recorded directly into "Accumulated other comprehensive income
(loss)" in the accompanying Consolidated Balance Sheets. Foreign exchange
transactions resulted in pretax losses of $6.5 million in 2001, gains of $4.1
million in 2000 and gains of $2.5 million in 1999, and are reported in "Other
income (expense) - net" on the accompanying Consolidated Statements of Earnings.

NET FINANCE INCOME: Net finance income consists of royalty and management fees
paid by the LLC based on the volume of receivables originated by the LLC and 50%
of any residual profit or loss of the LLC after operating expenses, including
royalty and management fees, interest costs and credit loss provisions. Net
finance income also consists of installment contract income and dealer start-up
loan receivable income, net of administrative expenses, derived from Snap-on's
wholly owned international credit operations. Net finance income includes gains
on the sale of receivables when applicable.

ADVERTISING AND PROMOTION: Production costs of future media advertising are
deferred until the advertising occurs. All other advertising and promotion costs
are generally expensed when incurred. For 2001, 2000 and 1999, advertising and
promotion expense totaled $47.6 million, $47.3 million and $36.2 million.

WARRANTIES: Snap-on provides product warranties for specific product lines and
accrues for estimated future warranty costs in the period in which the sale is
recorded.

DERIVATIVES: Snap-on utilizes derivative financial instruments, including
interest rate swaps and foreign exchange contracts, to manage its exposure to
interest rate and foreign currency exchange rate risks. Snap-on accounts for its
derivatives in accordance with SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138. The adoption of
this standard in 2001 resulted in a cumulative effect transition adjustment that
decreased reported net income in 2001 by $2.5 million after tax related to a
hedge strategy that did not qualify for hedge accounting under SFAS No. 133.
Snap-on also recorded in 2001 a transition adjustment of $1.2 million after tax
in "Accumulated other comprehensive income (loss)" to recognize previously
deferred net gains on derivatives designated as cash flow hedges that qualify
for hedge accounting under SFAS No. 133. Snap-on does not hold or issue
financial instruments for speculative or trading purposes. For detailed
financial instrument information, refer to Note 10.
<PAGE>
ACCOUNTING PRONOUNCEMENTS: In June 2001, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141 requires all business
combinations initiated after June 30, 2001, to be accounted for under the
purchase method, prohibiting the use of the pooling-of-interests approach, and
includes criteria for the recognition of intangible assets separately from
goodwill. SFAS No. 142 requires the periodic testing of goodwill and
indefinite-lived intangible assets for impairment, as compared to the current
method of amortizing such assets to expense over their estimated useful lives.
Snap-on will adopt SFAS No. 142 at the beginning of its 2002 fiscal year, and
estimates that the pretax impact of discontinuing goodwill amortization will
approximate $13.9 million ($11.9 million after tax) on an annualized basis.
Snap-on is currently evaluating what additional impact the adoption of SFAS No.
142 may have on Snap-on's financial position or results of operations.

In June 2001, the FASB also issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets. The statement requires that the fair value of a liability for an asset's
retirement obligation be recognized in the period in which it is incurred and
capitalized as part of the carrying amount of the long-lived asset. The
statement will be effective for fiscal years beginning after June 15, 2002.
Snap-on is currently evaluating the impact this new accounting standard may have
on Snap-on's financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The statement provides a single accounting model for long-lived assets to
be disposed of. Snap-on will adopt SFAS No. 144 at the beginning of its 2002
fiscal year. The effect of this change in accounting is not material to
Snap-on's financial position or results of operations.

PER SHARE DATA: Basic earnings per share calculations were computed by dividing
net earnings by the corresponding weighted-average number of common shares
outstanding for the period. The dilutive effect of the potential exercise of
outstanding options to purchase common shares is calculated using the treasury
stock method. Snap-on had dilutive shares as of year-end 2001, 2000 and 1999 of
241,557 shares, 175,155 shares and 383,200 shares.

> NOTE 3 Acquisitions and Divestitures
During 2001, Snap-on incurred acquisition costs of $.9 million related to the
finalization of its fiscal 2000 acquisitions. During 2000, Snap-on acquired full
ownership of two business operations. The aggregate cash purchase price plus
costs related to the finalization of 1999 acquisitions was $11.9 million. Pro
forma financial information has not been presented, as the effects of these
businesses, individually and in the aggregate, were not material.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  33
<PAGE>
Notes to Consolidated Financial Statements (continued)

On September 30, 1999, Snap-on acquired Bahco Group AB ("Bahco") for $391
million in a cash purchase transaction. Also during 1999, Snap-on acquired the
remaining 40% of Mitchell Repair Information Company, LLC ("MRIC") and full
ownership of three businesses for an aggregate cash purchase price of $73.9
million. During the fourth quarter of 1999, Snap-on sold a 15% interest in MRIC
to Genuine Parts Company.

During 2000, Snap-on divested Windsor Forestry Tools Inc. ("Windsor"), which was
acquired as part of the Bahco acquisition. As Windsor was accounted for as "held
for sale" in accordance with Accounting Principles Board ("APB") Opinion No. 16,
it had no impact on Snap-on's Consolidated Statements of Earnings. The sale of
Windsor resulted in cash proceeds of $15.5 million and an adjustment to
goodwill.

> NOTE 4 Inventories
The components of Snap-on's inventories were as follows:

(Amounts in millions)                         2001           2000
- -------------------------------------------------------------------
Finished goods                              $351.4         $386.0
Work in process                               41.5           45.1
Raw materials                                 77.2           79.7
Excess of current cost over LIFO cost        (94.9)         (91.9)
- -------------------------------------------------------------------
Total inventories                           $375.2         $418.9
- -------------------------------------------------------------------

> NOTE 5 Property and Equipment
Snap-on's property and equipment values, which are carried at cost, were as
follows:

(Amounts in millions)                         2001           2000
- -------------------------------------------------------------------
Land                                      $   23.4       $   24.3
Buildings and improvements                   195.5          204.8
Machinery and equipment                      501.3          477.2
- -------------------------------------------------------------------
                                             720.2          706.3
Less: accumulated depreciation              (392.5)        (361.2)
- -------------------------------------------------------------------
Property and equipment - net              $  327.7       $  345.1
- -------------------------------------------------------------------

The estimated service lives of property and equipment are principally as
follows:

- -------------------------------------------------------------------
Buildings and improvements                          3 to 50 years
Machinery and equipment                             2 to 15 years
Computer software                                    2 to 7 years
Vehicles                                             2 to 6 years
- -------------------------------------------------------------------
<PAGE>
> NOTE 6 Accounts Receivable
Accounts receivable include trade and installment receivables. At the end of
2001 and 2000, the allowance for doubtful accounts was $39.6 million and $40.9
million. Trade accounts receivable of $26.0 million with extended credit terms
are due beyond one year from the end of 2001. There were no trade accounts
receivable due beyond one year as of year-end 2000.

Gross installment receivables amounted to $85.0 million and $89.7 million at the
end of 2001 and 2000, and include $13.4 million and $15.0 million of unearned
finance charges at the end of 2001 and 2000. Gross installment receivables of
$42.4 million and $41.3 million are due beyond one year from the end of 2001 and
2000.

> NOTE 7 Snap-on Credit LLC Joint Venture
Snap-on Credit LLC ("the LLC") was established on January 3, 1999, as a 50/50
joint venture between Snap-on and Newcourt Financial USA Inc. ("Newcourt"). The
LLC provides a broad range of financial services to Snap-on's U.S. dealer and
customer network and to Snap-on's industrial and other customers. As a result of
establishing the LLC, Snap-on effectively outsourced to the LLC its domestic
captive credit function, which was previously managed by Snap-on's wholly owned
subsidiary, Snap-on Credit Corporation. On November 15, 1999, Newcourt was
acquired by The CIT Group, Inc. ("CIT") and was subsequently acquired by Tyco
International Ltd. on June 1, 2001. Snap-on also provides extended-term
financing internationally through its wholly owned credit subsidiaries.

Snap-on receives royalty and management fee income from the LLC based on the
volume of receivables originated by the LLC and also shares with CIT ratably in
any residual net profit or loss of the joint venture after operating expenses,
including royalty and management fees, interest costs and credit loss
provisions. These amounts are included in net finance income. At December 29,
2001, Snap-on's equity investment in the LLC was $.3 million.

The LLC originates extended-term receivables on sales of Snap-on product sold
through the U.S. dealer and customer network and to Snap-on's industrial and
other customers. The LLC then sells substantially all of these receivables
(through asset-securitization transactions) to CIT and pays
securitization-related fees to CIT in conjunction with its purchase of the
receivables.

The LLC originates loans primarily in three ways. Extended-term contracts are
offered to technicians to enable them to purchase tools and equipment on an
extended-term payment plan, generally with an average term of 32 months. Lease
financing is offered to shop owners, both independents and national chains, who
purchase equipment items. The duration of lease contracts is often two to five
years. Financing options are also made available to dealers to meet a number of
financing needs, including van and truck leases, working capital loans, and
loans to enable new dealers to fund the purchase of the franchise. The duration
of these contracts can be up to 10 years. The above receivables are secured by
the underlying tools or equipment financed and other dealer assets.

34 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
Financial information regarding LLC loan originations and reserves was as
follows:
                                                   2001       2000        1999
- -------------------------------------------------------------------------------
Originations (Amounts in millions)
Extended-credit receivables                    $  343.6   $  328.9    $  301.7
Equipment leases                                   47.7       81.0        65.9
Dealer financing                                   73.4       61.4        44.1
- -------------------------------------------------------------------------------
Total originations                             $  464.7   $  471.3    $  411.7
- -------------------------------------------------------------------------------

Number of accounts outstanding
Extended-credit receivables                     177,484    178,461     176,056
Equipment leases                                 16,765     19,051      18,377
Dealer financing                                  2,781      2,430       1,917
- -------------------------------------------------------------------------------
Total                                           197,030    199,942     196,350
- -------------------------------------------------------------------------------

Average account balance (Amounts in dollars)
Extended-credit receivables                    $  1,936   $  1,843    $  1,714
Equipment leases                                  2,845      4,252       3,586
Dealer financing                                 26,393     25,267      23,005
- -------------------------------------------------------------------------------

Reserves
Net reserves (Amounts in millions)             $    8.1   $    8.6    $   12.1
Net reserves as % of originations                   1.7%       1.8%        2.9%
- -------------------------------------------------------------------------------

The LLC establishes a credit reserve for all receivables sold to CIT, and the
LLC's credit losses on the sold receivables are limited to the extent of the
reserve. In addition, certain loans originated by the LLC have a recourse
provision to Snap-on. At December 29, 2001, $46.3 million of loans originated by
the LLC have a recourse provision to Snap-on if the receivables become more than
90 days past due. In 2001, $6.2 million of such receivables were purchased by
Snap-on under the recourse provision. In addition, at December 29, 2001, there
were $27.1 million of dealers' customer-originated loans that have a primary
recourse provision directly to the dealer, with secondary recourse to Snap-on in
the event of dealer default. In 2001, the amount of such receivables purchased
by Snap-on under the recourse provision was not material. The LLC also
establishes a prepayment reserve to cover amounts due to CIT as a result of
early prepayment by customers on loans sold.

The LLC maintains a $25 million bank line of credit for working capital
purposes, of which Snap-on is a 60% guarantor and CIT is a 40% guarantor.
Borrowings under this facility totaled $22.0 million at both December 29, 2001,
and December 30, 2000. The average amount outstanding under this facility was
$11.9 million in 2001 and $14.3 million in 2000. The weighted-average interest
rate for 2001 and 2000 was 4.2% and 6.9%. As of December 29, 2001, and December
30, 2000, the weighted-average interest rate was 2.5% and 7.8%.

In conjunction with the establishment of the LLC, Snap-on repurchased $337.0
million of its previously securitized installment receivables and $68.3 million
of its previously securitized dealer-finance loan receivables. Upon repurchase,
these receivables were sold to Newcourt. In a separate transaction, Snap-on
Credit Corporation also sold to Newcourt its remaining on-balance-sheet
portfolio of U.S. installment receivables, including existing extended term,
equipment lease and dealer loan

<PAGE>
receivables, for an aggregate sale price of $141.1 million, resulting in a
pretax gain of approximately $40 million. Since Newcourt had the right to put
back to Snap-on the unpaid portion of the extended-term installment receivable
portfolio based on the same pricing formula, this gain was recognized by Snap-on
over a two-year period. These transactions were recorded as sales of accounts
receivable with the gains on these sales included in "Net finance income" on the
accompanying Consolidated Statements of Earnings.

> NOTE 8 Short-term and Long-term Debt
Notes payable to banks under bank lines of credit totaled $26.5 million and
$65.4 million at the end of 2001 and 2000.

Commercial paper totaled $142.2 million at the end of 2001 and $365.5 million at
the end of 2000. At the end of 2001, Snap-on had commercial paper outstanding in
U.S. dollars of $135.0 million and Japanese yen of $7.2 million. At the end of
2000, Snap-on had commercial paper outstanding in U.S. dollars of $316.6
million, Swedish kronor of $28.8 million, euros of $14.0 million and Japanese
yen of $6.1 million. These amounts have been classified as long term, as it is
Snap-on's intent, and it has the ability (supported by its long-term revolving
credit facilities), to refinance this debt on a long-term basis.

At December 29, 2001, Snap-on had $458 million of multi-currency revolving
credit facilities to support its commercial paper programs. Snap-on has a $208
million revolving credit facility that is effective for a five-year term and
terminates on August 20, 2005, and a $250 million credit facility that is a
364-day facility with a one-year term-out option that terminates on August 19,
2002. The term-out option allows Snap-on to elect to borrow under the credit
facility for an additional year after the termination date. At the end of 2001
and 2000, Snap-on was in compliance with all covenants of the revolving credit
facilities and there were no borrowings under either revolving credit
commitment. The most restrictive covenant requires Snap-on to maintain a total
debt to total capital percentage of 60% or better.

Average commercial paper and bank notes outstanding were $389.2 million in 2001
and $529.1 million in 2000. The weighted-average interest rate on these
instruments was 4.3% in 2001 and 5.9% in 2000. As of December 29, 2001, and
December 30, 2000, commercial paper and bank notes outstanding had a
weighted-average interest rate of 2.1% and 6.1%.

In August 2001, Snap-on issued $200 million of unsecured notes pursuant to a
$300 million shelf registration statement filed with the Securities and Exchange
Commission in 1994. In October 1995, Snap-on issued $100 million of unsecured
notes to the public under this shelf registration. The August 2001 notes require
semiannual interest payments at a rate of 6.25% and mature in their entirety on
August 15, 2011. The October 1995 notes require semiannual interest payments at
a rate of 6.625% and mature in their entirety on October 1, 2005. The proceeds
from these issuances were used to repay a portion of Snap-on's outstanding
commercial paper and for working capital and general corporate purposes.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  35
<PAGE>
Notes to Consolidated Financial Statements (continued)

Snap-on's long-term debt consisted of the following:

(Amounts in millions)                                         2001        2000
- -------------------------------------------------------------------------------
Senior unsecured indebtedness                               $300.0      $100.0
Borrowings under commercial paper programs                   142.2       365.5
Other long-term debt                                           5.9        12.4
- -------------------------------------------------------------------------------
                                                             448.1       477.9
Less: current maturities                                      (2.6)       (4.9)
- -------------------------------------------------------------------------------
Total long-term debt                                        $445.5      $473.0
- -------------------------------------------------------------------------------

The annual maturities of Snap-on's long-term debt due in the next five years are
$2.6 million in 2002, $2.7 million in 2003, $.2 million in 2004 and $242.5
million in 2005, with no maturities of long-term debt in 2006.

> NOTE 9 Income Taxes
Earnings before income taxes consisted of the following:

(Amounts in millions)                              2001       2000        1999
- -------------------------------------------------------------------------------
United States                                     $20.7     $175.2      $171.5
Foreign                                            22.8       58.7        26.4
- -------------------------------------------------------------------------------
Total earnings before income taxes                $43.5     $233.9      $197.9
- -------------------------------------------------------------------------------

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

(Amounts in millions)                              2001       2000        1999
- -------------------------------------------------------------------------------
Current:
  Federal                                       $  21.8      $42.9       $38.2
  Foreign                                          13.3       19.7        13.9
  State                                             3.7        4.6         5.4
- -------------------------------------------------------------------------------
Total current                                      38.8       67.2        57.5
- -------------------------------------------------------------------------------
Deferred:
  Federal                                          (8.1)      11.8         9.8
  Foreign                                          (1.3)       4.0         1.4
  State                                            (4.9)       2.4         2.0
- -------------------------------------------------------------------------------
Total deferred                                    (14.3)      18.2        13.2
- -------------------------------------------------------------------------------
Total income tax provision                      $  24.5      $85.4       $70.7
- -------------------------------------------------------------------------------

A reconciliation of Snap-on's effective income tax rate to the statutory federal
tax rate follows:

                                                   2001       2000        1999
- -------------------------------------------------------------------------------
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                           3.2        2.0         2.4
  Foreign sales corporation
   tax benefit                                     (1.6)      (1.4)       (1.2)
  Restructuring and other
   non-recurring charges                           19.8          -         (.3)
  Change in valuation allowance                     (.1)       1.0          .2
  Non-deductible goodwill
   amortization                                     1.8        1.4          .1
  Foreign rate difference                           (.8)      (1.0)        (.5)
  Other                                            (1.0)       (.5)          -
- -------------------------------------------------------------------------------
Effective tax rate                                 56.3%      36.5%       35.7%
- -------------------------------------------------------------------------------
<PAGE>
Snap-on's reported effective income tax rate was 56.3% for 2001, 36.5% for 2000
and 35.7% for 1999. The 2001 tax rate was adversely impacted by the 2001
restructuring, non-recurring and other non-comparable charges where certain
expenses in various foreign jurisdictions were not tax benefited.

Temporary differences that give rise to the net deferred tax benefit were as
follows:

(Amounts in millions)                              2001       2000        1999
- -------------------------------------------------------------------------------
Current deferred income tax benefits:
 Inventories                                    $  26.4    $  20.6     $  18.4
 Accruals and reserves not
   currently deductible                            19.0       17.2        32.8
 Restructuring and other
   non-recurring accruals                          31.5       19.3         3.4
 Other                                              3.3        3.5         5.0
- -------------------------------------------------------------------------------
Total current (included in
  prepaid expenses)                                80.2       60.6        59.6
- -------------------------------------------------------------------------------
Long-term deferred income
 tax benefits (liabilities):
  Employee benefits                                46.8       45.1        66.7
  Net operating losses                             26.3       27.9        27.6
  Depreciation                                    (37.5)     (39.0)      (41.6)
  Restructuring and other
   non-recurring accruals                             -          -        (3.0)
  Snap-on Credit LLC
   securitizations                                (10.2)      (1.8)          -
  Other                                             3.9        3.3         2.2
  Valuation allowance                             (26.3)     (27.2)      (24.2)
- -------------------------------------------------------------------------------
Total long-term                                     3.0        8.3        27.7
- -------------------------------------------------------------------------------
Net deferred income tax benefit                 $  83.2    $  68.9     $  87.3
- -------------------------------------------------------------------------------

At December 29, 2001, Snap-on had tax net operating loss carryforwards totaling
$87.6 million as follows:

(Amounts in millions)                     United States    Foreign       Total
- -------------------------------------------------------------------------------
Year of expiration:
  2002 - 2004                                     $   -      $ 8.0       $ 8.0
  2005 - 2008                                      10.5       12.2        22.7
  2009 - 2013                                         -        1.6         1.6
  Indefinite                                          -       55.3        55.3
- -------------------------------------------------------------------------------
                                                  $10.5      $77.1       $87.6
- -------------------------------------------------------------------------------

A valuation allowance totaling $26.3 million, $27.2 million and $24.2 million in
2001, 2000 and 1999 has been established for deferred income tax benefits
related to certain subsidiary loss carryforwards that may not be realized.
Included in this valuation allowance is $2.4 million that relates to the
deferred tax assets recorded from acquisitions. Any tax benefits subsequently
recognized for these deferred tax assets will be allocated to goodwill.

Realization of the net deferred tax assets is dependent on generating sufficient
taxable income prior to their expiration. Although realization is not assured,
management believes it is more likely than not that the net deferred tax assets
will be realized. The amount of the net deferred tax assets considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward periods are reduced.

36 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
The undistributed earnings of all subsidiaries totaled $159.1 million, $146.7
million and $112.8 million at the end of 2001, 2000 and 1999. Snap-on does not
expect that additional income taxes will be incurred on future distributions of
such earnings, and no deferred income taxes have been provided for the
distribution of these earnings to the parent company.

> NOTE 10 Financial Instruments
Snap-on accounts for its hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 138.
These standards require that all derivative instruments be reported in the
consolidated financial statements at fair value. Changes in the fair value of
derivatives are to be recorded each period in earnings or "Accumulated other
comprehensive income (loss)," depending on the type of hedged transaction and
whether the derivative is designated and effective as part of a hedged
transaction. Gains or losses on derivative instruments reported in "Accumulated
other comprehensive income (loss)" must be reclassified as earnings in the
period in which earnings are affected by the underlying hedged item, and the
ineffective portion of all hedges must be recognized in earnings in the current
period.

In accordance with the provisions of SFAS No. 133, Snap-on recorded a transition
adjustment on December 31, 2000, the beginning of Snap-on's 2001 fiscal year, to
recognize its derivative instruments at fair value and to recognize the
difference between the carrying values and fair values of related hedged assets
and liabilities upon adoption of these standards. The cumulative effect of this
transition adjustment was to decrease reported net income in the first quarter
of 2001 by $2.5 million after tax related to a hedge strategy that did not
qualify for hedge accounting under SFAS No. 133. Snap-on also recorded in the
first quarter of 2001 a transition adjustment of $1.2 million after tax in
"Accumulated other comprehensive income (loss)" on the accompanying Consolidated
Balance Sheets to recognize previously deferred net gains on derivatives
designated as cash flow hedges that qualify for hedge accounting under SFAS No.
133.

Snap-on uses derivative instruments to manage well-defined interest rate and
foreign currency exposures. Snap-on does not use derivative instruments for
speculative or trading purposes. The criteria used to determine if hedge
accounting treatment is appropriate are (i) the designation of the hedge to an
underlying exposure, (ii) whether or not overall risk is being reduced, and
(iii) if there is a correlation between the value of the derivative instrument
and the underlying obligation. Upon adoption of the new derivative accounting
requirements, on the date a derivative contract is entered into, Snap-on
designates the derivative as either a fair value hedge, a cash flow hedge, a
hedge of a net investment in a foreign operation or a natural hedging instrument
whose change in fair value is recognized as an economic hedge against changes in
the values of the hedged item.

FOREIGN CURRENCY DERIVATIVE INSTRUMENTS: Snap-on has operations in a number of
countries that have transactions outside their functional currencies and, as a
result, is exposed to changes in foreign currency exchange rates. In addition,
Snap-on hedges the anticipated repayment of intercompany loans to foreign
subsidiaries denominated in foreign currencies. Snap-on manages most of these
exposures on a consolidated
<PAGE>
basis, which allows for netting of certain exposures to take advantage of
natural offsets. To the extent the net exposures are hedged, forward exchange
contracts are used. Gains and/or losses on these foreign currency hedges are
intended to offset losses and/or gains on the hedged transaction in an effort to
reduce the earnings volatility resulting from fluctuating foreign currency
exchange rates.

At December 29, 2001, Snap-on had net outstanding foreign exchange forward
contracts totaling $191.3 million comprised of buy contracts of $55.1 million in
Swedish kronor and sell contracts of $113.6 million in euros, $73.8 million in
British pounds, $31.2 million in Canadian dollars, $8.8 million in Singapore
dollars, $4.9 million in Danish kronor, $4.4 million in Australian dollars and
$9.7 million in other currencies. At December 30, 2000, Snap-on had outstanding
foreign exchange forward contracts totaling $168.9 million comprised of
contracts to sell $65.4 million in euros, $61.1 million in British pounds, $26.4
million in Canadian dollars, $12.6 million in Swedish kronor and $3.4 million in
other currencies.

Snap-on's foreign exchange forward contracts generally do not qualify for hedge
accounting treatment under SFAS No. 133 and are excluded from the assessment of
effectiveness. The fair value changes of these contracts are reported in
earnings as foreign exchange gain or loss, which is included in "Other income
(expense) - net" on the accompanying Consolidated Statements of Earnings. Those
forward exchange contracts that qualify for hedge accounting treatment are
accounted for as cash flow hedges where the effective portion of the changes in
fair value of the derivative is recorded in "Accumulated other comprehensive
income (loss)." When the hedged item is realized in income, the gain or loss
included in "Accumulated other comprehensive income (loss)" is reclassified to
income in the same financial statement caption as the hedged item. The
ineffective portion of changes in fair value of the cash flow hedges are
reported in earnings as foreign exchange gain or loss, which is included in
"Other income (expense) - net" and which were not material. Forward points on
forward exchange contracts are recognized as interest expense.

NON-DERIVATIVE INSTRUMENTS USED IN HEDGING RELATIONSHIPS: Snap-on uses non-U.S.
dollar financing transactions as net investment hedges of long-term investments
in the corresponding foreign currency. Hedges that meet the effectiveness
requirements are accounted for under net investment hedging rules. The effective
portion of the net investment hedge of a foreign operation is recorded in
"Accumulated other comprehensive income (loss)" as a cumulative translation
adjustment. When applicable, the ineffective portion of the net investment hedge
is recorded in earnings as foreign exchange gain or loss, which is included in
"Other income (expense) - net" and which were not material. At December 29,
2001, net gains of $11.4 million arising from effective hedges of net
investments have been reflected in the cumulative translation adjustment account
as a component of "Accumulated other comprehensive income (loss)."

INTEREST RATE SWAP AGREEMENTS: Snap-on enters into interest rate swap agreements
to manage interest costs and risks associated with changing interest rates,
specifically the future issuance of commercial paper. Snap-on has interest rate
swap agreements that effectively exchange floating rate payments for fixed rate
payments. Interest rate swap agreements are accounted for as cash flow hedges.
The differentials paid or received

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  37
<PAGE>
Notes to Consolidated Financial Statements (continued)

on interest rate swap agreements are accrued and recognized as adjustments to
interest expense. The effective portion of the change in fair value of the
derivative is recorded in "Accumulated other comprehensive income (loss)," while
any ineffective portion is recorded as an adjustment to interest expense. At
December 29, 2001, and December 30, 2000, the notional principal amounts
outstanding of these agreements were $25 million and $100 million, respectively.

For all derivatives qualifying for hedge accounting under SFAS No. 133, the net
accumulated derivative loss at December 29, 2001, was $2.0 million after tax and
is reflected in "Accumulated other comprehensive income (loss)." At December 29,
2001, the maximum maturity date of any cash flow hedge was approximately 39
months. During the next 12 months, Snap-on expects to reclassify into earnings
net losses from "Accumulated other comprehensive income (loss)" of approximately
$1.1 million after tax at the time the underlying hedged transactions are
realized.

During 2001, cash flow hedge ineffectiveness was not material. However, there
were pretax derivative losses totaling $.8 million in 2001 that were excluded
from the assessment of effectiveness and, as a result, were recorded in
"Interest expense" and "Other income (expense) - net."

CREDIT CONCENTRATIONS: Snap-on is exposed to credit losses in the event of
non-performance by the counterparties to its interest rate swap and foreign
exchange contracts. Snap-on does not obtain collateral or other security to
support financial instruments subject to credit risk, but monitors the credit
standing of the counterparties and enters into agreements only with financial
institution counterparties with a credit rating of A- or better. Snap-on does
not anticipate non-performance by its counterparties.

Snap-on's accounts receivable do not represent significant concentrations of
credit risk because of the diversified portfolio of individual customers and
geographic areas.

FAIR VALUE OF FINANCIAL INSTRUMENTS: SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments," requires Snap-on to disclose the fair value of
financial instruments for both on- and off-balance-sheet assets and liabilities
for which it is practicable to estimate that value. The following methods and
assumptions were used in estimating the fair value of financial instruments:

Installment contracts: A discounted cash flow analysis was performed over the
average life of a contract using a discount rate currently available to Snap-on
adjusted for credit quality, cost and profit factors. As of December 29, 2001,
and December 30, 2000, the fair value was approximately $82 million and $85
million versus a book value of $71.6 million and $74.7 million.

Long-term debt: The fair value of long-term debt including current maturities
was estimated using a discounted cash flow analysis based on quoted market rates
for similar instruments. As of December 29, 2001, and December 30, 2000, the
fair value was approximately $452 million and $479 million versus a book value
of $448.1 million and $477.9 million.
<PAGE>
Other financial instruments: The carrying amounts of all other financial
instruments approximate fair value based on quoted market prices or discounted
cash flow analysis for cash equivalents, interest rate swaps, forward exchange
contracts and other financial instruments.

> NOTE 11 Pension Plans
Snap-on has several non-contributory pension plans covering most U.S. employees
and certain employees in foreign countries. Snap-on also has foreign
contributory plans covering certain foreign employees. Retirement benefits are
generally provided based on employees' years of service and average earnings or
stated amounts for years of service. Normal retirement age is 65, with
provisions for earlier retirement. Snap-on recognizes retirement plan expenses
in accordance with SFAS No. 87, "Employers' Accounting for Pensions," and
contributes to the plans based on actuarial computations. In certain defined
retirement benefit plans, these computations include the amortization of past
service cost over a maximum of 30 years. Plan assets primarily consist of
corporate equities and various debt securities.

In 2001, Snap-on amended certain of its U.S. pension plans and began offering a
non-contributory account-based pension plan with a 401(k) match to certain U.S.
salaried employees ("the 401(k) Plan"). Eligible participants were allowed to
elect the 401(k) Plan, while new hires as of January 1, 2001, are automatically
enrolled under this plan. Under the 401(k) Plan, Snap-on matches 50% of the
first 6% of the employee's annual pretax contributions in Snap-on common stock,
which is funded through the Grantor Stock Trust. Employees have the opportunity
to diversify this match as they approach retirement. For 2001, Snap-on
contributed $.4 million of Snap-on common stock to the 401(k) Plan.

Snap-on utilizes the market-related approach to value its plan assets. During
the fourth quarter of 2000, Snap-on changed its method of valuing its plan
assets from a five-year averaging method to a three-year averaging method. The
impact of this change is reported as a change in accounting principle for
pensions, with a cumulative, pretax effect of $41.3 million recorded as of
January 2, 2000. The impact on 2000 operating results was to reduce pension
expense by $9.7 million.

Snap-on's net pension expense (income) included the following components:

(Amounts in millions)                              2001       2000        1999
- -------------------------------------------------------------------------------
Service cost - benefits earned
  during the year                               $  15.8    $  15.8     $  18.7
Interest cost on projected benefits                38.9       35.6        34.0
Less: actual loss (return) on
  plan assets                                       1.6      (33.1)      (37.2)
Curtailment gain                                      -        (.6)       (3.3)
Net amortization and deferral:
  Actual return on plan assets in
    excess of projected return                    (57.2)     (20.2)        (.6)
  Amortization of net
    assets at transition                           (1.3)      (1.3)       (1.2)
  Other                                            (4.1)      (3.7)        1.3
- -------------------------------------------------------------------------------
Net pension expense (income)                     $ (6.3)    $ (7.5)    $  11.7
- -------------------------------------------------------------------------------

38 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
The status of Snap-on's pension plans was as follows:

(Amounts in millions)                                         2001        2000
- -------------------------------------------------------------------------------
Change in projected benefit obligation
Benefit obligation at beginning of year                     $490.6     $ 491.4
Service cost                                                  15.8        15.8
Interest cost                                                 38.9        35.6
Plan participants' contributions                                .8          .6
Benefits paid                                                (26.4)      (24.1)
Curtailment gain                                                 -         (.6)
Plan amendments                                                6.9          .7
Actuarial loss (gain)                                         31.2       (31.2)
Foreign currency impact                                       (2.8)       (3.9)
Effect of business acquisitions                                7.0         7.9
Effect of settlements                                            -        (1.6)
- -------------------------------------------------------------------------------
Benefit obligation at end of year                           $562.0     $ 490.6
- -------------------------------------------------------------------------------

Change in plan assets
Fair value of plan assets at beginning of year              $545.8     $ 526.7
Actual return (loss) on plan assets                           (1.6)       33.1
Plan participants' contributions                                .8          .6
Employer contributions                                         5.4         5.2
Benefits paid                                                (26.4)      (24.1)
Foreign currency impact                                       (1.8)       (1.8)
Effect of business acquisitions                                7.5         8.0
Effect of settlements                                            -        (1.9)
- -------------------------------------------------------------------------------
Fair value of plan assets at end of year                    $529.7      $545.8
- -------------------------------------------------------------------------------

Funded status                                              $ (32.3)    $  55.4
Unrecognized net assets at year-end                           (2.9)       (4.0)
Change in unrecognized net gain from
 revaluation of market-related value of assets                   -        41.3
Unrecognized net loss (gain) from
 experience different than assumed                              .1      (136.4)
Unrecognized prior service cost                               14.8        10.5
- -------------------------------------------------------------------------------
Net amount recognized                                      $ (20.3)    $ (33.2)
- -------------------------------------------------------------------------------

Amounts recognized in the consolidated
 balance sheets consist of:
  Prepaid benefit cost                                      $ 31.6     $  27.5
  Accrued benefit liability                                  (56.2)      (63.1)
  Other assets                                                  .7          .3
  Accumulated other comprehensive income (loss)                3.6         2.1
- -------------------------------------------------------------------------------
Net amount recognized                                       $(20.3)    $ (33.2)
- -------------------------------------------------------------------------------

The prepaid benefit cost is included in "Other assets" with the current portion
in "Prepaid expenses and other assets" on the accompanying Consolidated Balance
Sheets, while the accrued benefit liability is included in "Pension liability,"
with the current portion in "Other accrued liabilities."
<PAGE>
The weighted-average rate assumptions used in determining pension costs and the
projected benefit obligation were as follows:
                                                              2001        2000
- -------------------------------------------------------------------------------
Discount rate used to determine
 present value of projected benefit
 obligation at end of year                                     7.4%        7.9%
Expected long-term rate of return
 on plan assets for the year                                   9.6%        9.7%
Expected rate of increase in future
 compensation levels                                           4.6%        4.9%
- -------------------------------------------------------------------------------

Snap-on has pension plans in which the accumulated benefit obligation exceeds
the fair value of plan assets. At the end of 2001 and 2000, Snap-on had three
such plans, including certain non-U.S. plans, with an aggregate accumulated
benefit obligation of $30.0 million and $25.3 million with no plan assets.

> NOTE 12 Retiree Health Care
Snap-on provides certain health care benefits for most retired U.S. employees.
The majority of Snap-on's U.S. employees become eligible for those benefits if
they reach early retirement age while working for Snap-on; however, the age and
service requirements for eligibility under the plans have been increased for
certain employees hired on and after specified dates since 1992. Generally, most
plans pay stated percentages of covered expenses after a deductible is met.
There are several plan designs, with more recent retirees being covered under a
comprehensive major medical plan. In determining benefits, the plans take into
consideration payments by Medicare and other coverages.

For employees retiring under the comprehensive major medical plans,
contributions are required, and these plans contain provisions allowing for
benefit and coverage changes. The plans require retirees to contribute either
the full cost of the coverage or amounts estimated to exceed a capped
per-retiree annual cost commitment by Snap-on. Most employees hired since 1994
are required to pay the full cost. Snap-on does not fund the retiree health care
plans.

Snap-on recognizes postretirement health care expense in accordance with SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions."

Snap-on's net postretirement health care benefits expense included the following
components:

(Amounts in millions)                              2001       2000        1999
- -------------------------------------------------------------------------------
Service cost - benefits attributed
 to service during the year                      $  1.1       $1.3        $2.0
Interest cost on accumulated
 postretirement benefit obligation                  5.5        5.6         5.9
Curtailment gain                                      -          -         (.2)
Amortization of unrecognized
 net gain                                          (1.4)       (.9)        (.1)
- -------------------------------------------------------------------------------
Net postretirement health
 care benefit expense                            $  5.2       $6.0        $7.6
- -------------------------------------------------------------------------------

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  39
<PAGE>
Notes to Consolidated Financial Statements (continued)

The status of Snap-on's U.S. postretirement plans was as follows:

(Amounts in millions)                                         2001        2000
- -------------------------------------------------------------------------------
Change in projected benefit obligation
Benefit obligation at beginning of year                     $ 75.0      $ 83.2
Service cost                                                   1.1         1.3
Interest cost                                                  5.5         5.6
Plan participants' contributions                               2.2         1.6
Benefits paid                                                 (6.8)       (6.8)
Actuarial gain                                                (1.7)       (9.9)
- -------------------------------------------------------------------------------
Benefit obligation at end of year                           $ 75.3      $ 75.0
- -------------------------------------------------------------------------------

Change in plan assets
Fair value of plan assets at beginning of year              $    -      $    -
Plan participants' contributions                               2.2         1.6
Employer contributions                                         4.6         5.2
Benefits paid                                                 (6.8)       (6.8)
- -------------------------------------------------------------------------------
Fair value of plan assets at end of year                    $    -      $    -
- -------------------------------------------------------------------------------

Unfunded status                                             $(75.3)     $(75.0)
Unrecognized actuarial gain                                  (22.2)      (22.2)
- -------------------------------------------------------------------------------
Postretirement liability                                    $(97.5)     $(97.2)
- -------------------------------------------------------------------------------

The accumulated postretirement benefit obligation at the end of 2001 consists of
a current liability of $4.8 million and a long-term liability of $92.7 million.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at the end of 2001 and 8.0% at the
end of 2000. The actuarial calculation assumes a health care trend rate of 6.2%
in 2002, decreasing gradually to 4.5% in 2006 and thereafter.

As of December 29, 2001, a one-percentage-point increase in the health care cost
trend rate for future years would increase the accumulated postretirement
benefit obligation by $1.0 million and the service cost and interest cost
components by $.1 million. Conversely, a one-percentage-point decrease in the
health care cost trend rate for future years would decrease the accumulated
postretirement benefit obligation by $.9 million and the service cost and
interest cost components by $.1 million.

> NOTE 13 Stock Option and Purchase Plans
Snap-on has stock option plans for directors, officers and key employees, with
expiration dates on the options ranging from 2002 to 2011 and vesting periods
ranging from immediate to three years. The plans provide that options be granted
at exercise prices equal to market value on the date the option is granted. On
April 27, 2001, Snap-on's shareholders approved the 2001 Incentive Stock and
Awards Plan. The 2001 Plan reserves five million shares of common stock for
issuance.

Non-employee directors receive a mandatory minimum of 50% and an elective
maximum of up to 100% of their fees and retainer in shares of Snap-on stock.
Directors may elect to defer receipt of all or part of these shares. For 2001,
2000 and 1999, issuances under the Directors' Fee Plan totaled 10,367 shares,
8,908 shares and 5,479 shares. Additionally,
<PAGE>
receipt of 15,043 shares, 11,670 shares and 6,886 shares was deferred in 2001,
2000 and 1999. At December 29, 2001, shares reserved for issuance to directors
under this plan totaled 200,328 shares.

Employees of Snap-on are eligible to participate in an employee stock purchase
plan. The employee purchase price of the common stock is the lesser of the mean
of the high and low price of the stock on the beginning date (May 15) or ending
date (May 14) of each plan year. For 2001, 2000 and 1999, issuances under the
employee stock purchase plan totaled 57,231 shares, 55,322 shares and 53,082
shares. At December 29, 2001, shares reserved for issuance to employees under
this plan totaled 543,856, and Snap-on held employee contributions of
approximately $1.2 million for the purchase of common stock.

Franchised dealers are eligible to participate in a dealer stock purchase plan.
The dealer purchase price of the common stock is the lesser of the mean of the
high and low price of the stock on the beginning date (May 15) or ending date
(May 14) of each plan year. For 2001, 2000 and 1999, issuances under the dealer
stock purchase plan totaled 78,440 shares, 78,165 shares and 65,630 shares. At
December 29, 2001, shares reserved for issuance to franchised dealers under this
plan totaled 290,924, and Snap-on held dealer contributions of approximately
$1.3 million for the purchase of common stock.

Under the dividend reinvestment and stock purchase plan, participating
shareholders may invest the cash dividends from all or a portion of their common
stock to buy additional shares. The program also permits new investors and
current shareholders to make additional cash contributions. For 2001, 2000 and
1999, issuances under the dividend reinvestment and stock purchase plan totaled
47,650 shares, 50,725 shares and 38,809 shares. At December 29, 2001, shares
available for purchase under this plan totaled 1,808,286 shares.

Snap-on accounts for its stock-based compensation plans in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and, as a result, no
compensation expense for stock options was recognized. For disclosure purposes
only under SFAS No. 123, "Accounting for Stock-Based Compensation," the fair
value of each option grant was estimated as of the date of grant using the
Black-Scholes option pricing model.

Pro forma net income and earnings per share, and the assumptions used therein,
assuming the fair value of accounting for stock-based compensation as prescribed
under SFAS No. 123, were as follows:

(Amounts in millions except per share data)        2001       2000        1999
- -------------------------------------------------------------------------------
Net earnings:
  As reported                                     $19.0     $148.5      $127.2
  Pro forma                                        13.0      141.3       122.8
Net earnings per share - diluted:
  As reported                                       .33       2.53        2.16
  Pro forma                                         .22       2.41        2.09
Weighted-average assumptions
  under Black-Scholes:
   Risk-free interest rate                          4.9%       6.7%        4.7%
   Dividend yield                                   2.8%       2.5%        2.5%
   Expected stock price volatility                 38.7%      28.2%       32.1%
   Expected option life (in years)                  5.6        5.6         5.6
- -------------------------------------------------------------------------------

40 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
Stock option activity was as follows:
<TABLE>
<CAPTION>
                                                         2001                          2000                           1999
- -------------------------------------------------------------------------------------------------------------------------------
                                       Options   Exercise Price*    Options    Exercise Price*    Options     Exercise Price*
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>           <C>             <C>           <C>              <C>
Outstanding at beginning of year      4,526,481      $29.44        2,977,467       $30.83        2,398,136        $29.21
Granted                               1,227,707       28.95        1,735,600        26.37          785,800         34.41
Exercised                              (375,756)      21.83         (118,681)       20.42         (132,254)        22.27
Canceled                               (189,286)      30.14          (67,905)       28.16          (74,215)        31.86
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year            5,189,146      $29.83        4,526,481       $29.44        2,977,467        $30.83
- -------------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year            3,447,146      $30.65        2,887,281       $30.21        1,982,416        $28.31
Available for grant at end of year    4,349,388                      387,809                     2,056,504
- -------------------------------------------------------------------------------------------------------------------------------
*Weighted-average
</TABLE>
As calculated using the Black-Scholes option pricing model, the weighted-average
fair value of options granted during the years ended 2001, 2000 and 1999 were
$9.37, $7.55 and $9.64. The following table summarizes information about stock
options outstanding as of December 29, 2001:
<TABLE>
<CAPTION>
                                                  2001 Options Outstanding              2001 Options Exercisable
                                  ---------------------------------------------------------------------------------------------
                                                    Remaining
                                                  Contractual
Range of Exercise Prices             Options      Life (Years)*   Exercise Price*     Options       Exercise Price*
- -------------------------------------------------------------------------------------------------------------------------------
<C>                                <C>                <C>             <C>          <C>                 <C>
$19 to $25                            610,823           2.2            $21.39         610,823            $21.39
$25 to $31                          2,889,377           8.6             27.60       1,147,377             26.68
$31 to $38                          1,166,239           6.4             35.30       1,166,239             35.30
$38 to $46                            522,707           6.1             39.96         522,707             39.96
- -----------------------------------------------------------------------------------------------------------------
Totals                              5,189,146           7.1            $29.83       3,447,146            $30.65
- -----------------------------------------------------------------------------------------------------------------
*Weighted-average
</TABLE>

As of December 29, 2001, Snap-on had 460,850 performance units granted to
certain officers and key employees with an average grant price of $29.60 per
unit.

> NOTE 14 Capital Stock
Snap-on has undertaken stock repurchases from time to time to prevent dilution
created by shares issued for employee and dealer stock purchase plans, stock
options, and other corporate purposes, as well as to repurchase shares when
market conditions are favorable. Snap-on repurchased 400,000 shares in 2001,
following the repurchase of 1,019,500 shares in 2000 and 492,800 shares in 1999.
Since 1997, Snap-on's board of directors has authorized the repurchase of up to
$250 million of Snap-on's common stock. As of the end of 2001, Snap-on has
remaining availability to repurchase up to an additional $133 million in common
stock pursuant to the board's authorizations. The purchase of Snap-on common
stock is at the company's discretion, subject to prevailing financial and market
conditions. Since 1995, Snap-on has repurchased 9,989,583 shares.

The board of directors declared on August 22, 1997, a dividend distribution of
one preferred stock purchase right for each share of Snap-on's outstanding
common stock. The rights are exercisable only if a person or group acquires 15%
or more of Snap-on's common stock ("Acquiring Person") or publicly announces a
tender offer to become an Acquiring Person. Each right may then be exercised to
purchase one one-hundred-and-fiftieth of a share of Series A Junior Preferred
Stock for $190, but if a person or group becomes an Acquiring Person, then each
right entitles the holder (other than an Acquiring Person) to acquire common
stock of Snap-on having a market value equivalent to two times the current
purchase price. If Snap-on is acquired in a merger or other business combination
not approved by the board of directors, then each holder of a right will be
entitled to purchase common stock of the surviving company having a market value
equivalent to two times the current purchase price. The effect of the rights is
to cause ownership dilution to a person or group attempting to acquire Snap-on
without approval of Snap-on's board of directors. The rights expire on November
3, 2007, and may be redeemed by Snap-on at a price of $.01 per right under
certain circumstances.

Snap-on created a Grantor Stock Trust ("GST") in 1998 that was subsequently
amended. In conjunction with the formation of the GST, Snap-on sold 7.1 million
shares of treasury stock to the GST. The sale of these shares had no net impact
on shareholders' equity or on Snap-on's Consolidated Statements of Earnings. The
GST is a funding mechanism for certain benefit programs and compensation
arrangements, including the incentive stock program and employee and dealer
stock purchase plans. The Northern Trust Company, as trustee of the GST, votes
the common stock held by the GST based on the terms set forth in the GST
Agreement as amended. The GST is recorded as "Grantor stock trust at fair market
value" on the accompanying Consolidated Balance Sheets. Shares owned by the GST
are accounted for as a reduction to shareholders' equity until used in
connection with employee benefits. Each period, the shares owned by the GST are
valued at the closing market price, with corresponding changes in the GST
balance reflected in additional paid-in capital. At December 29, 2001, the GST
held 5,984,145 shares of common stock.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  41
<PAGE>
Notes to Consolidated Financial Statements (continued)

> NOTE 15 Commitments and Contingencies
Snap-on leases facilities and office equipment under non-cancelable operating
leases that extend for varying amounts of time.

Snap-on's future minimum lease commitments under these leases, net of
sub-leases, were as follows:

Year Ending                                     (Amounts in millions)
- --------------------------------------------------------------------
2002                                                           $27.4
2003                                                            19.9
2004                                                            13.4
2005                                                            10.3
2006                                                             8.4
2007 and thereafter                                             22.5
- --------------------------------------------------------------------

Rent expense, net of sub-lease rental income, for worldwide facilities and
office equipment was $32.1 million, $35.3 million and $26.7 million in 2001,
2000 and 1999.

In 1996, Snap-on filed a complaint against SPX Corporation ("SPX") alleging
infringement of Snap-on's patents and asserting claims relating to SPX's hiring
of the former president of Sun Electric, a subsidiary of Snap-on acquired in
1992. SPX filed a counterclaim alleging infringement of certain SPX patents.
These patents, which related to engine analyzer products first introduced in the
1980s, have expired. In 2001, both companies agreed to a binding arbitration
process. The arbitrator ruled in favor of SPX, and Snap-on will pay $44.0
million in damages to SPX. This obligation, which will be paid in January 2002,
has been recorded in "Other accrued liabilities" on the accompanying
Consolidated Balance Sheets and in "Operating expenses" on the accompanying
Consolidated Statements of Earnings.

Snap-on is involved in various other legal matters that are being defended and
handled in the ordinary course of business, and Snap-on maintains accruals for
such costs that are expected to be incurred. Although it is not possible to
predict the outcome of these matters, management believes that the results will
not have a material impact on Snap-on's financial statements.

> NOTE 16 Restructuring and Non-recurring Charges
Snap-on announced in the second quarter of 2001 that it was taking significant
action to (i) reduce costs companywide to adjust to the slower sales environment
and (ii) improve operational performance in businesses not earning acceptable
financial returns. As a result of selective rationalization and consolidation
actions, Snap-on recorded $62.0 million in pretax restructuring and other
non-recurring charges in 2001 for actions that include the consolidation or
closure of 35
<PAGE>
facilities, asset write-downs and severance costs to effect a 6% reduction in
workforce. The $62.0 million charge includes restructuring charges of $40.3
million and non-recurring charges of $21.7 million. On the accompanying
Consolidated Statements of Earnings, "Restructuring and other non-recurring
charges" of $49.4 million includes restructuring charges of $40.3 million and
other non-recurring charges of $9.1 million, and "Cost of goods sold -
non-recurring charges" includes $12.6 million for certain inventory write-downs
and warranty costs. Approximately 45% of the charges recorded in 2001 were
non-cash, with the remaining costs requiring cash outflows from operations and
borrowings under Snap-on's existing credit facilities.

The 2001 restructuring charges are for the consolidation or closure of 35
facilities, comprised of nine manufacturing or distribution facilities and 26
sales or administrative offices. The $40.3 million charge includes $27.1 million
for severance costs associated with the planned elimination of 796 salaried and
hourly positions, $6.0 million for non-cancelable lease agreements, $5.9 million
for facility asset write-downs, and $1.3 million for exit-related legal and
professional services. Non-recurring charges of $9.1 million include $8.4
million for management transition costs associated with the April 2001
retirement of Snap-on's president and chief executive officer and the
appointment of Dale F. Elliott as successor to this position and $.7 million for
non-recurring transition costs related to equipment and employee relocation
associated with the facility consolidations. The non-recurring charges of $12.6
million in "Cost of goods sold - non-recurring charges" are comprised of $2.3
million for restructuring-related inventory write-downs and $10.3 million for
additional inventory write-downs and warranty costs associated with Snap-on's
exiting of an unprofitable segment of the emissions-testing business. Snap-on
recorded charges for expected losses on the disposition of discontinued
inventory, extended warranty costs and other asset impairments related to this
exit plan in December 2000. During 2001, Snap-on experienced higher than
expected emissions-related warranty costs and, as a result, Snap-on revised its
cost estimate relative to the emissions exit plan and recorded $10.3 million of
additional non-recurring charges in 2001.

The composition of Snap-on's restructuring reserve activity for the year ended
December 29, 2001, was as follows:
                                                              Restructuring
                                                              Reserve as of
(Amounts in millions)       Provisions      Usage             Dec. 29, 2001
- ------------------------------------------------------------------------------
Severance costs               $27.1        $ (6.0)                  $21.1
Facility consolidation
  or closure costs              7.3          (5.3)                    2.0
Loss on asset write-downs       5.9          (5.9)                      -
- ------------------------------------------------------------------------------
Total restructuring reserves  $40.3        $(17.2)                  $23.1
- ------------------------------------------------------------------------------

42 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>

As of December 29, 2001, restructuring reserve usage of $17.2 million represents
$6.0 million for severance payments related to the separation of 272 of the 796
identified employees, $5.3 million for facility consolidation or closure costs
and $5.9 million for the write-down of assets. Snap-on believes that the
restructuring reserve balance of $23.1 million as of December 29, 2001, is
adequate to complete all announced activities and anticipates that all actions
will be completed by the end of 2002.

Snap-on expects to fund the cash requirements of its 2001 restructuring
activities with cash flows from operations and borrowings under the company's
existing credit facilities. The specific restructuring measures and estimated
costs were based on management's best business judgment under prevailing
circumstances. Snap-on also expects to incur an estimated $7 million to $8
million in restructuring-related transition costs in the first half of 2002.
Transition costs do not qualify for restructuring accrual treatment and are
therefore expensed when incurred.

In 2000, Snap-on recorded restructuring and non-recurring charges totaling $21.8
million pretax, primarily for various exit-related costs and impairment
write-downs. These costs were comprised of a $4.2 million restructuring charge
and $17.2 million in non-recurring charges. The restructuring charge relates to
the closure of a small, underperforming vehicle-service business in the
Asia/Pacific region and includes costs related to severance, lease terminations
and write-offs of intangible assets. The non-recurring charges primarily relate
to Snap-on's decision, prompted by continued changes in technology and emissions
regulations at both the state and federal levels, to exit an unprofitable
segment of the emissions-testing business. The non-recurring charges consist of
$5.6 million for expected losses on the disposition of discontinued inventory,
$3.9 million for extended warranty costs and $7.7 million for other asset
impairments. Additionally, Snap-on incurred $.4 million in non-recurring charges
for relocation, severance and facilities consolidation costs.

On the accompanying Consolidated Statements of Earnings, the $9.5 million of
non-recurring charges for emissions-related inventory write-downs and warranty
costs in 2000 have been reported as "Cost of goods sold - non-recurring
charges." The $12.3 million in "Restructuring and other non-recurring charges"
includes non-recurring charges of $7.7 million for emissions-related asset
impairments and $.4 million for other relocation, severance and facilities
consolidation costs. Also included in "Restructuring and other non-recurring
charges" was $4.2 million in restructuring costs for severance and exit costs
related to the closure of a vehicle-service business. The restructuring actions
initiated in 2000 were completed during the first half of 2001.

In 1999, Snap-on recorded $37.2 million in restructuring and non-recurring
charges related to its Project Simplify initiative. Project Simplify, a broad
program of internal rationalizations, consolidations and reorganizations to make
Snap-on's business operations simpler and more effective, was implemented in the
third quarter of 1998. The 18-month program included the cost of closing
facilities, employee severance associated with a reduction in staffing, impaired
asset write-downs, costs to revalue discontinued stock keeping units ("SKUs"),
legal matters and other non-
<PAGE>
recurring costs. Of the $37.2 million in charges recorded, $16.6 million was
reflected in the Consolidated Statements of Earnings as "Cost of goods sold -
non-recurring charges," and $20.6 million was included in "Restructuring and
other non-recurring charges." The $16.6 million in non-recurring charges
reflects the discontinuance of an emissions-testing equipment line as part of
Snap-on's refocus on high-volume products. The $20.6 million of non-recurring
charges represents employee incentives of $1.5 million, relocation costs of
$10.9 million, professional services of $9.1 million and $4.8 million for the
discontinuance of SKUs. These costs were partially offset by the reversal of
$5.1 million of excess warranty reserves and the reversal of $.6 million of
excess severance costs.

Snap-on achieved its Project Simplify objectives of consolidating certain
business units, closing 60 facilities, eliminating approximately 1,100 positions
and discontinuing more than 12,000 SKUs. Total charges incurred for Project
Simplify were $187.5 million, and were comprised of $67.1 million of
restructuring charges and $120.4 million of other non-recurring charges. Project
Simplify was essentially completed as of year-end 1999.

> NOTE 17 Segments
Snap-on has two reportable segments: the Snap-on Dealer Group and the Commercial
and Industrial Group. These segments are based on the organization structure
used by management for making operating and investment decisions and for
assessing performance. The Snap-on Dealer Group consists of Snap-on's business
operations serving the worldwide dealer van channel. The Commercial and
Industrial Group consists of the business operations serving the worldwide
non-dealer tool and equipment products businesses. These two segments derive
revenues primarily from the sale of tools and equipment.

The accounting policies described in Note 2 are applicable to the reportable
segments. Snap-on evaluates the performance of its operating segments based on
segment net sales and operating earnings. Snap-on accounts for intersegment
sales and transfers based primarily on standard costs established between the
segments. Snap-on allocates shared services expenses to those segments that
utilize the services based on their percentage of revenues from external
sources. Restructuring and other non-recurring charges are not allocated to the
reportable segments. Had it been Snap-on's policy to allocate restructuring and
other non-recurring charges to its reportable segments, such charges of $62.0
million, $21.8 million and $37.2 million for 2001, 2000 and 1999 would have been
allocated to the segments as follows: Snap-on Dealer Group - $14.3 million,
$11.5 million and $8.9 million for 2001, 2000 and 1999; Commercial and
Industrial Group - $47.7 million, $10.3 million and $28.3 million for 2001, 2000
and 1999. In 2001, the $44.0 million cost for the resolution of patent
arbitration as described in Note 15 was not allocated to the reportable
segments.

Neither Snap-on nor any of its segments depends on any single customer, small
group of customers or government for more than 10% of its sales.

                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  43
<PAGE>
Notes to Consolidated Financial Statements (continued)

Financial data by segment was as follows:

(Amounts in millions)                              2001       2000        1999
- -------------------------------------------------------------------------------
Net sales from external customers
Snap-on Dealer Group                           $1,048.8   $1,068.7    $1,050.9
Commercial and Industrial Group                 1,046.9    1,107.0       894.7
- -------------------------------------------------------------------------------
Total net sales                                $2,095.7   $2,175.7    $1,945.6
- -------------------------------------------------------------------------------

Intersegment sales
Snap-on Dealer Group                           $     .1   $     .1    $      -
Commercial and Industrial Group                   381.4      361.5       414.8
- -------------------------------------------------------------------------------
Total intersegment sales                          381.5      361.6       414.8
Elimination of intersegment sales                (381.5)    (361.6)     (414.8)
- -------------------------------------------------------------------------------
Total consolidated
  intersegment sales                           $      -   $      -    $      -
- -------------------------------------------------------------------------------

Earnings
Snap-on Dealer Group                           $  116.8   $  127.3    $  120.0
Commercial and Industrial Group                    40.1       86.4        69.1
- -------------------------------------------------------------------------------
Segment operating earnings                        156.9      213.7       189.1
Net finance income                                 35.7       38.1        60.5
Restructuring and other
  non-recurring charges                           (62.0)     (21.8)      (37.2)
Arbitration resolution                            (44.0)         -           -
Interest expense                                  (35.5)     (40.7)      (27.4)
Other income (expense) - net                       (3.5)       3.3        12.9
- -------------------------------------------------------------------------------
Earnings from continuing
  operations before income taxes               $   47.6   $  192.6    $  197.9
- -------------------------------------------------------------------------------

Assets
Snap-on Dealer Group                           $  823.3   $  805.3    $  772.3
Commercial and Industrial Group                 1,120.6    1,220.2     1,321.2
- -------------------------------------------------------------------------------
Total from reportable segments                  1,943.9    2,025.5     2,093.5
Financial Services                                 82.0       96.2        97.2
Elimination of intersegment
  receivables                                     (51.6)     (52.6)      (29.8)
- -------------------------------------------------------------------------------
Total assets                                   $1,974.3   $2,069.1    $2,160.9
- -------------------------------------------------------------------------------
<PAGE>
(Amounts in millions)                              2001       2000        1999
- -------------------------------------------------------------------------------
Capital expenditures
Snap-on Dealer Group                           $   14.7   $   13.0    $   16.2
Commercial and Industrial Group                    38.9       44.6        19.2
- -------------------------------------------------------------------------------
Total from reportable segments                     53.6       57.6        35.4
Financial Services                                    -          -           -
- -------------------------------------------------------------------------------
Total capital expenditures                     $   53.6   $   57.6    $   35.4
- -------------------------------------------------------------------------------

Depreciation and amortization
Snap-on Dealer Group                           $   21.4   $   20.3    $   20.5
Commercial and Industrial Group                    46.6       45.9        34.9
- -------------------------------------------------------------------------------
Total from reportable segments                     68.0       66.2        55.4
Financial Services                                    -          -           -
- -------------------------------------------------------------------------------
Total depreciation and amortization            $   68.0   $   66.2    $   55.4
- -------------------------------------------------------------------------------

Geographic data was as follows:

(Amounts in millions)                              2001       2000        1999
- ------------------------------------------------------------------------------
Net sales*
United States                                  $1,360.0   $1,367.1    $1,306.7
Europe                                            537.5      587.5       434.3
All other                                         198.2      221.1       204.6
- ------------------------------------------------------------------------------
Total net sales                                $2,095.7   $2,175.7    $1,945.6
- ------------------------------------------------------------------------------

Long-lived assets
United States                                  $  189.1   $  199.0    $  218.8
Europe                                            114.0      121.7       117.8
All other                                          24.6       24.4        26.0
- ------------------------------------------------------------------------------
Total long-lived assets                        $  327.7   $  345.1    $  362.6
- ------------------------------------------------------------------------------

* Net sales are attributed to countries based on the origin of the sale.

PRODUCTS AND SERVICES: Snap-on derives revenue from a broad line of products and
complementary services that can be divided into two groups: tools and equipment.
The following table shows the consolidated sales of these product groups in the
last three years:

(Amounts in millions)                              2001       2000        1999
- ------------------------------------------------------------------------------
Tools                                          $1,291.1   $1,343.5    $1,149.3
Equipment                                         804.6      832.2       796.3
- ------------------------------------------------------------------------------
Total                                          $2,095.7   $2,175.7    $1,945.6
- ------------------------------------------------------------------------------

44 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>
Quarterly Financial Information (Unaudited)

(Amounts in millions except per share data)        2001       2000        1999
- -------------------------------------------------------------------------------
Net sales
First quarter                                  $  527.4   $  544.3    $  452.6
Second quarter                                    525.6      563.2       473.1
Third quarter                                     508.1      511.9       453.2
Fourth quarter                                    534.6      556.3       566.7
- -------------------------------------------------------------------------------
                                               $2,095.7   $2,175.7    $1,945.6
- -------------------------------------------------------------------------------
Net earnings (loss)
First quarter*                                 $   26.9   $   60.7    $   32.2
Second quarter                                      8.9       45.7        25.0
Third quarter                                        .6       28.4        42.6
Fourth quarter                                    (17.4)      13.7        27.4
- -------------------------------------------------------------------------------
                                               $   19.0   $  148.5    $  127.2
- -------------------------------------------------------------------------------
Earnings (loss) per share - basic
First quarter*                                 $    .47   $   1.03    $    .55
Second quarter                                      .15        .78         .43
Third quarter                                       .01        .48         .73
Fourth quarter                                     (.30)       .25         .47
- -------------------------------------------------------------------------------
                                               $    .33   $   2.54    $   2.18
- -------------------------------------------------------------------------------
Earnings (loss) per share - diluted
First quarter*                                 $    .47   $   1.03    $    .55
Second quarter                                      .15        .78         .42
Third quarter                                       .01        .48         .72
Fourth quarter                                     (.30)       .24         .47
- -------------------------------------------------------------------------------
                                               $    .33   $   2.53    $   2.16
- -------------------------------------------------------------------------------
Cash dividends paid per share
First quarter                                  $    .24   $    .23    $    .22
Second quarter                                      .24        .23         .22
Third quarter                                       .24        .24         .23
Fourth quarter                                      .24        .24         .23
- -------------------------------------------------------------------------------
                                               $    .96   $    .94    $    .90
- -------------------------------------------------------------------------------

* The first quarter of 2001 includes a pretax loss of $4.1 million ($2.5 million
after tax or $.04 per basic and diluted share) for the cumulative effect of a
change in accounting principle for derivatives. The first quarter of 2000
includes a pretax gain of $41.3 million ($25.4 million after tax or $.43 per
basic and diluted share) for the cumulative effect of a change in accounting
principle for pensions.
<PAGE>

NET SALES (in $ millions)
- -------------------------
1997  -  1,672
1998  -  1,773
1999  -  1,946
2000  -  2,176
2001  -  2,096

NET EARNINGS (LOSS) (in $ millions)
- -----------------------------------
1997  -  150
1998  -  (5)
1999  -  127
2000  -  149
2001  -  19

SHAREHOLDERS' EQUITY PER SHARE (in dollars)
- -------------------------------------------
1997  -  14.74
1998  -  12.98
1999  -  14.10
2000  -  14.60
2001  -  13.40

CASH DIVIDENDS PAID PER SHARE (in dollars)
- ------------------------------------------
1997  -  .82
1998  -  .86
1999  -  .90
2000  -  .94
2001  -  .96


                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  45
<PAGE>
Six-year Data
<TABLE>
<CAPTION>
(Amounts in millions except per share data)         2001           2000          1999          1998           1997          1996
- ----------------------------------------------------------------------------------------------------------------------------------
Summary of operations
<S>                                             <C>            <C>           <C>           <C>            <C>           <C>
Net sales                                       $2,095.7       $2,175.7      $1,945.6      $1,772.6       $1,672.2      $1,485.3
Gross profit                                       949.0          996.8         896.2         763.2          843.8         750.8
Operating expenses                                 848.7          792.6         723.7         705.8          650.2         594.5
Net finance income                                  35.7           38.1          60.5          65.9           71.9          64.3
Interest expense                                    35.5           40.7          27.4          21.2           17.6          12.7
Earnings from continuing operations                 47.6          192.6         197.9          10.8          238.7         208.7
Income taxes                                        26.1           69.5          70.7          15.6           88.3          77.2
Cumulative effect, net of taxes                     (2.5)          25.4             -             -              -             -
Net earnings (loss)                                 19.0          148.5         127.2          (4.8)         150.4         131.5
- ----------------------------------------------------------------------------------------------------------------------------------

Financial position
Accounts receivable - net                       $  615.2       $  644.5      $  617.7      $  554.7       $  539.6      $  651.7
Inventories                                        375.2          418.9         454.8         375.4          373.2         269.8
Current assets                                   1,139.4        1,186.4       1,206.3       1,079.8        1,021.7       1,017.3
Accounts payable                                   141.2          161.0         146.4          89.4           91.6          89.3
Current liabilities                                549.4          538.0         452.7         458.0          352.5         341.4
Working capital                                    590.0          648.4         753.6         621.8          669.2         675.9
Working investment                                 849.2          902.4         926.1         840.7          821.2         832.2
Total capital                                    1,250.4        1,387.3       1,455.1       1,102.0        1,067.2       1,001.2
Property and equipment - net                       327.7          345.1         362.6         272.0          265.8         245.3
Total assets                                     1,974.3        2,069.1       2,160.9       1,674.9        1,641.4       1,520.8
Long-term debt                                     445.5          473.0         607.5         246.6          151.0         149.8
Total debt                                         474.6          543.3         629.8         339.7          175.1         173.0
Total shareholders' equity                         775.8          844.0         825.3         762.4          892.1         828.2
- ----------------------------------------------------------------------------------------------------------------------------------

Common share summary
Net earnings (loss) per share - diluted         $    .33       $   2.53      $   2.16      $   (.08)      $   2.44      $   2.13
Cash dividends paid per share                        .96            .94           .90           .86            .82           .76
Shareholders' equity per share                     13.40          14.60         14.10         12.98          14.74         13.62
Common stock price range                     34.21-21.65    32.44-20.88   37.81-26.44   46.44-25.50    46.31-34.25   38.25-27.33
Year-end share price                               33.93          27.88         26.56         34.81          42.38         36.38
Average shares outstanding - diluted                58.1           58.6          58.9          59.2           61.7          61.6
- ----------------------------------------------------------------------------------------------------------------------------------

Other financial statistics
Cash dividends paid                             $   55.6       $   55.0      $   52.6      $   51.0       $   49.9      $   46.3
Net cash provided by operating activities          163.7          190.2         235.6          75.0          194.9         136.4
Capital expenditures                                53.6           57.6          35.4          46.8           55.4          52.3
Depreciation and amortization                       68.0           66.2          55.4          45.0           38.4          31.9
Percent of total debt to total capital              38.0%          39.2%         43.3%         30.8%          16.4%         17.3%
Return on average shareholders' equity               2.3%          17.8%         16.0%         (.6)%          17.5%         16.7%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

2001 results include $62.0 million of pretax restructuring and other
non-recurring charges ($46.1 million after tax or $.80 per diluted share) and a
$4.1 million pretax loss ($2.5 million after tax or $.04 per diluted share) for
the cumulative effect of a change in accounting principle for derivatives.

2000 results include $21.8 million of pretax restructuring and other
non-recurring charges ($14.2 million after tax or $.24 per diluted share) and a
$41.3 million pretax gain ($25.4 million after tax or $.43 per diluted share)
for the cumulative effect of a change in accounting principle for pensions.

1999 results include $37.2 million of pretax restructuring and other
non-recurring charges ($23.3 million after tax or $.40 per diluted share).

1998 results include $149.9 million of pretax restructuring and other
non-recurring charges ($107.6 million after tax or $1.82 per diluted share).

For financial definitions see Glossary of Financial Terms on inside back cover.

46 SNAP-ON INCORPORATED 2001 ANNUAL REPORT
<PAGE>

Management's Responsibility
for Financial Reporting

The management of Snap-on Incorporated is responsible for the preparation and
integrity of all financial statements and other information contained in this
Annual Report. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include amounts
based on judgments and estimates by management. Snap-on maintains internal
control systems designed to provide reasonable assurance that Snap-on's
financial records reflect the transactions of Snap-on and that its assets are
protected from loss or unauthorized use. A staff of internal auditors conducts
operational and financial audits to evaluate the adequacy of internal controls
and accounting practices.

Snap-on's consolidated financial statements have been audited by Arthur Andersen
LLP, independent public accountants. As part of their audit of Snap-on's
consolidated financial statements, Arthur Andersen LLP considered Snap-on's
system of internal control to the extent they deemed necessary to determine the
nature, timing and extent of their audit tests. Management has made available to
Arthur Andersen LLP Snap-on's financial records and related data.

The audit committee of the board of directors is responsible for
reviewing and evaluating the overall performance of Snap-on's financial
reporting and accounting practices. The committee meets periodically and
independently with management, internal auditors and the independent public
accountants to discuss Snap-on's internal accounting controls, auditing and
financial reporting matters. The internal auditors and independent public
accountants have unrestricted access to the audit committee.



/s/ Dale F. Elliott
Dale F. Elliott
President and Chief Executive Officer



/s/ Donald S. Huml
Donald S. Huml
Senior Vice President - Finance and Chief Financial Officer
<PAGE>
Report of Independent
Public Accountants

To the Board of Directors and
Shareholders of Snap-on Incorporated:

We have audited the accompanying consolidated balance sheets of Snap-on
Incorporated (a Delaware Corporation) and subsidiaries as of December 29, 2001,
and December 30, 2000, and the related consolidated statements of earnings,
shareholders' equity and comprehensive income, and cash flows for each of the
three years in the period ended December 29, 2001. These consolidated financial
statements are the responsibility of Snap-on's management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Snap-on Incorporated and subsidiaries as of December 29, 2001, and
December 30, 2000, and the consolidated results of its operations and cash flows
for each of the three years in the period ended December 29, 2001, in conformity
with accounting principles generally accepted in the United States.

As explained in Note 10 to the financial statements, effective
December 31, 2000, Snap-on Incorporated changed its method of accounting for
derivatives.

As explained in Note 11 to the financial statements, effective
January 2, 2000, Snap-on Incorporated changed its method of accounting for
pensions.


/s/ Arthur Andersen LLP
Arthur Andersen LLP

Chicago, Illinois
January 29, 2002


                                     SNAP-ON INCORPORATED 2001 ANNUAL REPORT  47

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>pdm280e.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>

                                  Exhibit (21)

                         SUBSIDIARIES OF THE CORPORATION
                             As of December 29, 2001


Name                                 State or other jurisdiction of organization
- ------------------------------       -------------------------------------------
IDSC Holdings, Inc.                  Wisconsin
SB Tools S.a.r.l.                    Luxembourg
Snap-on Global Holdings, Inc.        Delaware
Snap-on Holdings AB                  Sweden
Snap-on Logistics Company            Wisconsin
Snap-on Technologies, Inc.           Illinois
Snap-on Tools Company LLC            Wisconsin
Snap-on Tools International, Ltd.    Delaware

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>pdm280f.txt
<DESCRIPTION>CONSENT
<TEXT>


                                  Exhibit (23)


                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation of our
reports dated January 29, 2002 incorporated by reference and included in this
Form 10-K, into Snap-on Incorporated's previously filed Registration Statement
File Nos. 2-53663, 2-53578, 33-7471, 33-22417, 33-37924, 33-39660, 33-57898,
33-55607, 33-58939, 33-58943, 333-14769, 333-21277, 333-21285, 333-41359 and
333-62098. It should be noted that we have not audited any financial statements
of Snap-on Incorporated subsequent to December 29, 2001 or performed any audit
procedures subsequent to the date of our report.


                                        /s/ Arthur Andersen LLP

                                        ARTHUR ANDERSEN LLP

Chicago, Illinois
March 22, 2002

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
