Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Statements:

Statements in this document that are not historical facts, including statements that (i) are in the future tense; (ii) include the words "expects," "plans," "targets," "estimates," "believes," "anticipates," or similar words that reference Snap-on Incorporated ("Snap-on" or "the company") or its management;
(iii) are specifically identified as forward-looking; or (iv) describe Snap-on's or management's future outlook, plans, estimates, objectives or goals, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader that any forward-looking statements included in this document that are based upon assumptions and estimates were developed by management in good faith and 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. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results or regarded as a representation by the company or its management that the projected results will be achieved. For those forward-looking statements, Snap-on cautions the reader that numerous important factors, such as those listed below, as well as those factors discussed in its Annual Report on Form 10-K for the fiscal year ended January 3, 2009, which are incorporated herein by reference, could affect the company's actual results and could cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, Snap-on.

These risks and uncertainties include, without limitation, uncertainties related to estimates, statements, assumptions and projections generally, and the timing and progress with which Snap-on can attain efficiencies and savings from its Rapid Continuous Improvement and other cost reduction initiatives, including its ability to implement reductions in workforce, achieve improvements in the company's manufacturing footprint and greater efficiencies in its supply chain, and enhance machine maintenance, plant productivity and manufacturing line set-up and change-over practices, any or all of which could result in production inefficiencies, higher costs and lost revenues. These risks also include uncertainties related to Snap-on's capability to implement future strategies with respect to its existing businesses, its ability to refine its brand and franchise strategies, retain and attract franchisees, further enhance service and value to franchisees and thereby enhance their sales and profitability, introduce successful new products, successfully integrate acquisitions, as well as its ability to withstand disruption arising from natural disasters, planned facility closures or other labor interruptions, the need to provide financing for the contracts and loans originated by Snap-on Credit LLC due to the termination of Snap-on's joint venture with The CIT Group, Inc., litigation challenges and external negative factors including the current instability in world credit and financial markets, weakness in the global economy, the substantial weakness and uncertainty in the U.S. automotive industry, and significant changes in the current competitive environment, inflation, interest rates and other monetary and market fluctuations, and the impact of legal proceedings, energy and raw material supply and pricing, including steel and gasoline, the amount, rate and growth of Snap-on's general and administrative expenses, including health care and postretirement costs, the impacts of non-strategic business and/or product line rationalizations, and terrorist disruptions on business. Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year. Snap-on disclaims any responsibility to update any forward-looking statement provided in this document, except as required by law.

In addition, investors should be aware that generally accepted accounting principles in the United States of America ("U.S. GAAP") prescribe when a company should reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results, therefore, may appear to be volatile in certain accounting periods.

Subsequent Events:

On July 16, 2009, Snap-on terminated its joint venture agreement with The CIT Group, Inc. ("CIT") relating to the parties' Snap-on Credit LLC ("SOC") financial services joint venture. Snap-on purchased CIT's ownership interest in SOC for approximately $8.2 million pursuant to Snap-on's rights under the joint venture agreement. SOC will continue to service the portfolio of contracts, estimated at approximately $830 million as of the termination date, that were previously sold to and remain owned by CIT; Snap-on has no obligation to purchase the existing portfolio of contracts owned by CIT.

The operations of SOC are expected to be uninterrupted by this event and all activities surrounding the financing of extended credit contracts to customers, leases of shop equipment and loans to franchisees will continue without change. Snap-on will provide financing for new contract originations to franchisees and their customers on a prospective basis. Snap-on estimates that the incremental financing needs of this business will approximate $450 million over the next 12 months. New contracts originated by SOC will be reflected as finance receivables on the company's balance sheet, and the company will record the interest yield on these receivables over the life of the contract as financial services revenue. Snap-on will also record additional interest cost on debt incurred to fund new contract originations. Previously, the company recorded gains on contracts sold to CIT as financial services revenue.

Snap-on believes that it has sufficient available cash, cash flow from operating activities, and available credit facilities, including access to public debt markets, to fund the financing needs of SOC.

The termination of the joint venture agreement with CIT on July 16, 2009, occurred subsequent to Snap-on's second-quarter end. As a result, the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations, as of and for the three and six month periods ended July 4, 2009, and June 28, 2008, and as of January 3, 2009, includes the results of operations, financial position and cash flows for the company's joint venture with CIT. Unless otherwise indicated, and as included in the accompanying Liquidity and Capital Resources and Outlook discussions, the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations does not address any prospective changes as a result of the joint venture termination.

RESULTS OF OPERATIONS



Results of operations for the three month periods ended July 4, 2009, and
June 28, 2008, are as follows:



                                                     Three Months Ended
(Amounts in millions)            July 4, 2009          June 28, 2008              Change
Net sales                    $ 590.0     100.0 %    $ 766.1     100.0 %    $ (176.1 )   -23.0 %
Cost of goods sold            (336.0 )   -56.9 %     (419.6 )   -54.8 %        83.6      19.9 %
Gross profit                   254.0      43.1 %      346.5      45.2 %       (92.5 )   -26.7 %

Financial services revenue      25.6     100.0 %       18.3     100.0 %         7.3      39.9 %
Financial services
expenses                        (9.0 )   -35.2 %       (7.5 )   -41.0 %        (1.5 )   -20.0 %
Operating income from
financial services              16.6      64.8 %       10.8      59.0 %         5.8      53.7 %

Operating expenses            (200.3 )   -33.9 %     (245.6 )   -32.1 %        45.3      18.4 %
Operating earnings              70.3      11.4 %      111.7      14.2 %       (41.4 )   -37.1 %

Interest expense               (11.6 )    -1.9 %       (8.8 )    -1.1 %        (2.8 )   -31.8 %
Other income (expense) -
net                              1.1       0.2 %        1.3       0.2 %        (0.2 )   -15.4 %
Earnings before income
taxes and
equity earnings (loss)          59.8       9.7 %      104.2      13.3 %       (44.4 )   -42.6 %
Income tax expense             (17.6 )    -2.9 %      (34.5 )    -4.4 %        16.9      49.0 %
Earnings before equity
earnings (loss)                 42.2       6.8 %       69.7       8.9 %       (27.5 )   -39.5 %
Equity earnings (loss),
net of tax                      (0.2 )      -           0.7       0.1 %        (0.9 )      NM
Net earnings                    42.0       6.8 %       70.4       9.0 %       (28.4 )   -40.3 %
Net earnings attributable
to noncontrolling
interests                       (4.6 )    -0.7 %       (3.5 )    -0.5 %        (1.1 )   -31.4 %
Net earnings attributable
to Snap-on Incorporated      $  37.4       6.1 %    $  66.9       8.5 %    $  (29.5 )   -44.1 %

Percentage Disclosure: Cost of goods sold, Gross profit and Operating expenses percentages are calculated as a percentage of Net sales. Financial services expenses and Operating income from financial services percentages are calculated as a percentage of Financial services revenue. All other income statement line item percentages are calculated as a percentage of the sum of Net sales and Financial services revenue.

Net sales in the second quarter of 2009 of $590.0 million were down $176.1 million, or 23.0%, from 2008 levels. The year-over-year sales decline reflects the impact of the ongoing global recession that continued in the second quarter of 2009. The year-over-year sales decline also included $50.2 million of unfavorable currency translation largely due to the strengthening of the dollar. Snap-on has significant international operations and is subject to certain risks inherent with foreign operations, including currency translation fluctuations. Excluding the $50.2 million of unfavorable currency translation, organic (excluding foreign currency translation effects) sales in the second quarter of 2009 declined 16.4% from 2008 levels.

Sales in the Commercial & Industrial Group of $256.4 million were down $131.3 million, or 33.9%, year over year. Excluding $33.2 million of unfavorable currency translation, organic sales in the Commercial & Industrial Group declined 25.3% year over year primarily due to the continued economic downturn. Sales in the Snap-on Tools Group of $258.3 million declined $34.5 million, or 11.8%, year over year. Excluding $12.4 million of unfavorable currency translation, organic sales in the Snap-on Tools Group declined 7.5% year over year. In the Diagnostics & Information

Group, sales of $137.0 million were down $27.8 million, or 16.9%, from 2008 levels primarily due to lower essential tool and facilitation program sales to Original Equipment Manufacturer ("OEM") dealerships. Excluding $7.2 million of unfavorable currency translation, organic sales in the Diagnostics & Information Group declined 12.5%.

Gross profit in the second quarter of 2009 was $254.0 million as compared to $346.5 million in 2008. The $92.5 million decline in year-over-year gross profit is primarily due to the lower sales volumes, costs to carry excess manufacturing capacity as a result of lower production and inventory reduction efforts, $23.2 million of unfavorable currency impacts, and $5.7 million of higher restructuring costs. These year-over-year declines in gross profit were partially offset by $12.8 million of savings from ongoing efficiency and productivity (collectively "Rapid Continuous Improvement" or "RCI") initiatives and other cost reduction activities, including benefits from restructuring and material cost reduction. As a percentage of sales, gross profit margin was 43.1% in the second quarter of 2009, as compared to 45.2% in 2008.

Operating expenses in the second quarter of 2009 were $200.3 million, as compared to $245.6 million in 2008. In addition to lower volume-related expenses, the $45.3 million reduction in year-over-year operating expenses primarily resulted from $17.2 million of benefits from ongoing RCI and other cost reduction initiatives, $13.5 million of currency translation, and lower performance-based compensation and other expenses. These year-over-year declines in operating expenses were partially offset by $3.0 million of higher pension expense as a result of declines in pension asset values and $1.0 million of higher restructuring costs. As a percentage of net sales, operating expenses were 33.9% in the second quarter of 2009, as compared to 32.1% in 2008.

Operating income from Financial Services was $16.6 million on revenue of $25.6 million in the second quarter of 2009, as compared with $10.8 million of operating income on revenue of $18.3 million in 2008. The year-over-year increase in revenue and operating income primarily reflects the impact of lower market discount rates and higher levels of originations.

Consolidated operating earnings in the second quarter of 2009 of $70.3 million declined $41.4 million, or 37.1%, from the $111.7 million achieved in the second quarter of 2008. Unfavorable currency effects contributed $10.3 million of the $41.4 million decrease in year-over-year operating earnings.

Interest expense of $11.6 million in the second quarter of 2009 was up $2.8 million from prior year primarily due to the company's issuance of $300 million of fixed rate, long-term notes on February 24, 2009, partially offset by the impact of declining interest rates on the company's floating rate debt. See Note 8 to the Condensed Consolidated Financial Statements for information on the company's debt and credit facilities.

Other income (expense) - net was income of $1.1 million in the second quarter of 2009 as compared to income of $1.3 million in 2008. Other income (expense) - net primarily included interest income and hedging and currency exchange rate transaction gains and losses. See Note 16 to the Condensed Consolidated Financial Statements for further information.

Snap-on's effective income tax rate on earnings attributable to Snap-on was 31.9% in the second quarter of 2009 and 34.3% in the second quarter of 2008. The lower second quarter 2009 effective income tax rate is primarily due to realization of a tax benefit in a foreign jurisdiction partially offset by a higher mix of U.S. earnings. See Note 7 to the Condensed Consolidated Financial Statements for information on income taxes.

On March 5, 2008, Snap-on acquired a 60% interest in Zhejiang Wanda Tools Co., Ltd. ("Wanda Snap-on"), a tool manufacturer in China, for a total purchase price of $15.4 million (or $14.1 million, net of cash acquired), including $1.2 million of transaction costs. The acquisition of Wanda Snap-on is part of the company's ongoing strategic initiatives to

further expand its manufacturing presence in emerging growth markets and lower-cost regions. For segment reporting purposes, the results of Wanda Snap-on, which have been included in Snap-on's consolidated financial statements since the date of acquisition, are included in the Commercial & Industrial Group. The net sales and operating earnings impact of the acquisition were not material to Snap-on's 2008 or 2009 results of operations or financial position.

Net earnings attributable to Snap-on in the second quarter of 2009 were $37.4 million, or $0.65 per diluted share. Net earnings attributable to Snap-on in the second quarter of 2008 were $66.9 million, or $1.15 per diluted share.

Results of operations for the six month periods ended July 4, 2009, and June 28, 2008, are as follows:

                                                        Six Months Ended
(Amounts in millions)             July 4, 2009            June 28, 2008               Change
Net sales                    $ 1,162.6     100.0 %    $ 1,487.7     100.0 %    $ (325.1 )   -21.9 %
Cost of goods sold              (649.9 )   -55.9 %       (815.3 )   -54.8 %       165.4      20.3 %
Gross profit                     512.7      44.1 %        672.4      45.2 %      (159.7 )   -23.8 %

Financial services revenue        45.6     100.0 %         43.7     100.0 %         1.9       4.3 %
Financial services
expenses                         (19.0 )   -41.7 %        (20.1 )   -46.0 %         1.1       5.5 %
Operating income from
financial services                26.6      58.3 %         23.6      54.0 %         3.0      12.7 %

Operating expenses              (404.7 )   -34.8 %       (491.1 )   -33.0 %        86.4      17.6 %
Operating earnings               134.6      11.1 %        204.9      13.4 %       (70.3 )   -34.3 %

Interest expense                 (20.2 )    -1.7 %        (18.3 )    -1.2 %        (1.9 )   -10.4 %
Other income (expense) -
net                                0.8       0.1 %          2.3       0.1 %        (1.5 )   -65.2 %
Earnings before income
taxes and
equity earnings (loss)           115.2       9.5 %        188.9      12.3 %       (73.7 )   -39.0 %
Income tax expense               (35.9 )    -2.9 %        (62.8 )    -4.1 %        26.9      42.8 %
Earnings before equity
earnings (loss)                   79.3       6.6 %        126.1       8.2 %       (46.8 )   -37.1 %
Equity earnings (loss),
net of tax                        (0.1 )      -             2.0       0.2 %        (2.1 )      NM
Net earnings                      79.2       6.6 %        128.1       8.4 %       (48.9 )   -38.2 %
Net earnings attributable
to noncontrolling
interests                         (7.0 )    -0.6 %         (4.6 )    -0.3 %        (2.4 )   -52.2 %
Net earnings attributable
to Snap-on Incorporated      $    72.2       6.0 %    $   123.5       8.1 %    $  (51.3 )   -41.5 %

Percentage Disclosure: Cost of goods sold, Gross profit and Operating expenses percentages are calculated as a percentage of Net sales. Financial services expenses and Operating income from financial services percentages are calculated as a percentage of Financial services revenue. All other income statement line item percentages are calculated as a percentage of the sum of Net sales and Financial services revenue.

Net sales in the first six months of 2009 of $1,162.6 million were down $325.1 million, or 21.9%, from 2008 levels reflecting the ongoing global recession. The year-over-year sales decline also included $104.7 million of unfavorable currency translation largely due to the strengthening of the dollar. Snap-on has significant international operations and is subject to certain risks inherent with foreign operations, including currency translation fluctuations. Excluding the $104.7 million of unfavorable currency translation, organic sales in the first six months of 2009 declined 14.8% from 2008 levels.

Sales in the Commercial & Industrial Group of $516.2 million declined $228.2 million, or 30.7%, year over year. Excluding $66.8 million of unfavorable currency translation, organic sales in the Commercial & Industrial Group declined 21.7% year over year. Sales in the Snap-on Tools Group of $500.7 million were down $81.4 million, or 14.0%, year over year. Excluding $28.3 million of unfavorable currency translation, organic sales in the Snap-on Tools Group declined 9.1% year over year. In the Diagnostics & Information Group, sales of $269.5 million were down $50.3 million, or 15.7%, from 2008 levels as higher sales of diagnostics products in Europe were more than offset by lower essential

tool and facilitation program sales to OEM dealerships and $13.9 million of unfavorable currency translation. Excluding the unfavorable currency translation, organic sales in the Diagnostics & Information Group declined 11.4%.

Gross profit in the first six months of 2009 was $512.7 million as compared to $672.4 million in 2008. The $159.7 million decline in year-over-year gross profit is primarily due to the lower sales volumes, costs to carry excess manufacturing capacity as a result of lower production and inventory reduction efforts, and $49.4 million of unfavorable currency effects. These year-over-year declines in gross profit were partially offset by $20.1 million of savings from ongoing RCI and other cost reduction initiatives. As a result of these factors, gross profit margin of 44.1% in 2009 declined 110 basis points (100 basis points equals 1.0 percent) from 45.2% in 2008.

Operating expenses in the first six months of 2009 were $404.7 million, as compared to $491.1 million in 2008. In addition to lower volume-related and other expenses, the $86.4 million reduction in year-over-year operating expenses primarily resulted from $29.5 million of currency translation, $28.1 million of benefits from ongoing RCI and other cost reduction initiatives, and lower performance-based and stock-based compensation expense. These declines in year-over-year operating expenses were partially offset by $6.0 million of higher pension expense as a result of declines in pension asset values. As a percentage of net sales, operating expenses were 34.8% in the first six months of 2009, as compared to 33.0% in 2008.

Operating income from Financial Services was $26.6 million on revenue of $45.6 million in the first six months of 2009, as compared with $23.6 million of operating income on revenue of $43.7 million in 2008. The year-over-year increase in revenue and operating income primarily reflects the impact of higher customer yields as a result of lower market discount rates partially offset by lower levels of originations.

Consolidated operating earnings in the first six months of 2009 of $134.6 million were down $70.3 million, or 34.3%, from the $204.9 million achieved in the first six months of 2008. Unfavorable currency effects contributed $21.3 million of the $70.3 million decrease in year-over-year operating earnings.

Interest expense of $20.2 million in the first six months of 2009 was up $1.9 million from prior-year levels primarily due to the company's issuance of $300 million of fixed-rate, long-term notes on February, 24, 2009, partially offset by declining interest rates on the company's floating rate debt. See Note 8 to the Condensed Consolidated Financial Statements for information on the company's debt and credit facilities.

Other income (expense) - net was income of $0.8 million in the first six months of 2009, as compared to income of $2.3 million in 2008. Other income (expense)
- net primarily included interest income and hedging and currency exchange rate transaction gains and losses. See Note 16 to the Condensed Consolidated Financial Statements for further information.

Snap-on's effective income tax rate on earnings attributable to Snap-on was 33.2% in the first six months of 2009 and 34.1% in the first six months of 2008. See Note 7 to the Condensed Consolidated Financial Statements for information on income taxes.

Net earnings attributable to Snap-on in the first six months of 2009 were $72.2 million, or $1.25 per diluted share, as compared with $123.5 million, or $2.12 per diluted share, in 2008.

Exit and Disposal Activities

Snap-on recorded costs of $8.6 million and $10.6 million for exit and disposal activities in the three and six month periods of 2009, respectively, as compared to $2.0 million and $6.6 million of such costs in the three and six month periods of 2008, respectively. Snap-on currently anticipates that full-year 2009 exit and disposal costs will be in a range of $20 million to $24 million, as compared to the $14.7 million incurred in full-year 2008. See Note 6 to the Condensed Consolidated Financial Statements for information on Snap-on's exit and disposal activities.

Segment Results

Snap-on's business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. Snap-on's reportable business segments include: (i) the Commercial & Industrial Group; (ii) the Snap-on Tools Group; (iii) the Diagnostics & Information Group; and (iv) Financial Services. The Commercial & Industrial Group consists of the business operations providing tools and equipment products and equipment repair services to a broad range of industrial and commercial customers worldwide through direct, distributor and other non-franchise distribution channels. The Snap-on Tools Group consists of the business operations serving the worldwide franchise van channel. The Diagnostics & Information Group consists of the business operations providing diagnostics equipment, vehicle service information, business management systems, electronic parts catalogs, and other solutions for vehicle service to customers in the worldwide vehicle service and repair marketplace. Financial Services consists . . .