Goodwill and Intangible Asset Disclosure
Adjustments to Financial Statements: Removal of Goodwill
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Illinois Tool Works Inc., balance sheet: goodwill and intangible assets

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Goodwill	4,965)	4,690)	4,492)	4,633)	4,752)
Customer lists and relationships	1,849)	1,692)	1,530)	1,747)	1,753)
Trademarks and brands	732)	742)	694)	759)	761)
Patents and proprietary technology	640)	606)	581)	621)	623)
Other	533)	487)	449)	478)	474)
Amortizable intangible assets, cost	3,754)	3,527)	3,254)	3,605)	3,611)
Accumulated amortization	(3,035)	(2,906)	(2,563)	(2,681)	(2,499)
Amortizable intangible assets, net	719)	621)	691)	924)	1,112)
Trademarks and brands	253)	160)	160)	160)	160)
Indefinite-lived intangible assets	253)	160)	160)	160)	160)
Intangible assets	972)	781)	851)	1,084)	1,272)
Goodwill and intangible assets	5,937)	5,471)	5,343)	5,717)	6,024)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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Item	Description	The company
Goodwill	Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.	Illinois Tool Works Inc. goodwill increased from 2019 to 2020 and from 2020 to 2021.
Intangible assets	Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Illinois Tool Works Inc. intangible assets decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.
Goodwill and intangible assets	Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Illinois Tool Works Inc. goodwill and intangible assets increased from 2019 to 2020 and from 2020 to 2021.

Illinois Tool Works Inc., adjustments to financial statements

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Adjustment to Total Assets
Total assets (as reported)	16,077)	15,612)	15,068)	14,870)	16,780)
Less: Goodwill	4,965)	4,690)	4,492)	4,633)	4,752)
Total assets (adjusted)	11,112)	10,922)	10,576)	10,237)	12,028)
Adjustment to Stockholders’ Equity Attributable To ITW
Stockholders’ equity attributable to ITW (as reported)	3,625)	3,181)	3,026)	3,254)	4,585)
Less: Goodwill	4,965)	4,690)	4,492)	4,633)	4,752)
Stockholders’ equity attributable to ITW (adjusted)	(1,340)	(1,509)	(1,466)	(1,379)	(167)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

Illinois Tool Works Inc., Financial Data: Reported vs. Adjusted

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Illinois Tool Works Inc., adjusted financial ratios

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Total Asset Turnover
Reported total asset turnover	0.90	0.81	0.94	0.99	0.85
Adjusted total asset turnover	1.30	1.15	1.33	1.44	1.19
Financial Leverage
Reported financial leverage	4.44	4.91	4.98	4.57	3.66
Adjusted financial leverage	—	—	—	—	—
Return on Equity (ROE)
Reported ROE	74.32%	66.30%	83.31%	78.76%	36.79%
Adjusted ROE	—	—	—	—	—
Return on Assets (ROA)
Reported ROA	16.76%	13.51%	16.73%	17.24%	10.05%
Adjusted ROA	24.24%	19.31%	23.84%	25.04%	14.03%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

Financial ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Illinois Tool Works Inc. adjusted total asset turnover ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 not reaching 2019 level.
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Illinois Tool Works Inc. adjusted ROA deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

Illinois Tool Works Inc., Financial Ratios: Reported vs. Adjusted

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Operating revenue	14,455)	12,574)	14,109)	14,768)	14,314)
Total assets	16,077)	15,612)	15,068)	14,870)	16,780)
Activity Ratio
Total asset turnover¹	0.90	0.81	0.94	0.99	0.85
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Operating revenue	14,455)	12,574)	14,109)	14,768)	14,314)
Adjusted total assets	11,112)	10,922)	10,576)	10,237)	12,028)
Activity Ratio
Adjusted total asset turnover²	1.30	1.15	1.33	1.44	1.19

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Total asset turnover = Operating revenue ÷ Total assets
= 14,455 ÷ 16,077 = 0.90

² Adjusted total asset turnover = Operating revenue ÷ Adjusted total assets
= 14,455 ÷ 11,112 = 1.30

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Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Illinois Tool Works Inc. adjusted total asset turnover ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 not reaching 2019 level.

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Total assets	16,077)	15,612)	15,068)	14,870)	16,780)
Stockholders’ equity attributable to ITW	3,625)	3,181)	3,026)	3,254)	4,585)
Solvency Ratio
Financial leverage¹	4.44	4.91	4.98	4.57	3.66
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets	11,112)	10,922)	10,576)	10,237)	12,028)
Adjusted stockholders’ equity attributable to ITW	(1,340)	(1,509)	(1,466)	(1,379)	(167)
Solvency Ratio
Adjusted financial leverage²	—	—	—	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity attributable to ITW
= 16,077 ÷ 3,625 = 4.44

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity attributable to ITW
= 11,112 ÷ -1,340 = —

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income	2,694)	2,109)	2,521)	2,563)	1,687)
Stockholders’ equity attributable to ITW	3,625)	3,181)	3,026)	3,254)	4,585)
Profitability Ratio
ROE¹	74.32%	66.30%	83.31%	78.76%	36.79%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income	2,694)	2,109)	2,521)	2,563)	1,687)
Adjusted stockholders’ equity attributable to ITW	(1,340)	(1,509)	(1,466)	(1,379)	(167)
Profitability Ratio
Adjusted ROE²	—	—	—	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity attributable to ITW
= 100 × 2,694 ÷ 3,625 = 74.32%

² Adjusted ROE = 100 × Net income ÷ Adjusted stockholders’ equity attributable to ITW
= 100 × 2,694 ÷ -1,340 = —

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income	2,694)	2,109)	2,521)	2,563)	1,687)
Total assets	16,077)	15,612)	15,068)	14,870)	16,780)
Profitability Ratio
ROA¹	16.76%	13.51%	16.73%	17.24%	10.05%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income	2,694)	2,109)	2,521)	2,563)	1,687)
Adjusted total assets	11,112)	10,922)	10,576)	10,237)	12,028)
Profitability Ratio
Adjusted ROA²	24.24%	19.31%	23.84%	25.04%	14.03%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × 2,694 ÷ 16,077 = 16.76%

² Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 2,694 ÷ 11,112 = 24.24%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Illinois Tool Works Inc. adjusted ROA deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

Illinois Tool Works Inc. (NYSE:ITW)

Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Asset Disclosure

Adjustments to Financial Statements: Removal of Goodwill

Illinois Tool Works Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Illinois Tool Works Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)