Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Illinois Tool Works Inc., income tax expense (benefit), continuing operations

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
U.S. federal income taxes	399)	301)	356)	373)	1,117)
Foreign income taxes	302)	276)	302)	358)	296)
State income taxes	79)	48)	77)	66)	106)
Current	780)	625)	735)	797)	1,519)
U.S. federal income taxes	(95)	(54)	(26)	(15)	(10)
Foreign income taxes	(57)	15)	53)	49)	102)
State income taxes	4)	9)	5)	—)	(28)
Deferred	(148)	(30)	32)	34)	64)
Provision for income taxes	632)	595)	767)	831)	1,583)

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).

Download chart

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Illinois Tool Works Inc. current decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Illinois Tool Works Inc. deferred decreased from 2019 to 2020 and from 2020 to 2021.
Provision for income taxes	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Illinois Tool Works Inc. provision for income taxes decreased from 2019 to 2020 but then slightly increased from 2020 to 2021.

Illinois Tool Works Inc., effective income tax rate (EITR) reconciliation

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
U.S. federal statutory tax rate	21.00%	21.00%	21.00%	21.00%	35.00%
U.S. tax effect of foreign earnings	1.20%	1.00%	1.10%	1.50%	0.50%
Changes in tax law	-3.40%	-1.50%	0.00%	0.00%	0.00%
State income taxes, net of U.S. federal tax benefit	2.10%	1.90%	1.70%	1.60%	1.20%
Differences between U.S. federal statutory and foreign tax rates	1.90%	2.00%	2.00%	2.10%	-3.50%
Nontaxable foreign interest income	-1.60%	-2.00%	-1.40%	-1.70%	-1.70%
Tax effect of foreign dividends	0.60%	1.60%	0.20%	1.00%	0.40%
Foreign derived intangible income	-1.30%	-1.30%	-0.10%	-0.70%	0.00%
Tax relief for U.S. manufacturers	0.00%	0.00%	0.00%	0.00%	-1.40%
Excess tax benefits from stock-based compensation	-0.50%	-1.00%	-0.90%	-0.30%	-1.50%
Other, net	-1.00%	0.30%	-0.30%	0.10%	-0.70%
Effective tax rate, before tax effect of U.S. federal tax law change	19.00%	22.00%	23.30%	24.60%	28.30%
Tax effect of U.S. federal tax law change	0.00%	0.00%	0.00%	-0.10%	20.10%
Effective tax rate	19.00%	22.00%	23.30%	24.50%	48.40%

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).

Download chart

Item	Description	The company
Effective tax rate, before tax effect of U.S. federal tax law change	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Illinois Tool Works Inc. effective tax rate, before tax effect of U.S. federal tax law change decreased from 2019 to 2020 and from 2020 to 2021.

Illinois Tool Works Inc., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Goodwill and intangible assets	431)	292)	202)	194)	195)
Inventory reserves, capitalized tax cost and LIFO inventory	39)	31)	29)	30)	31)
Investments	17)	10)	16)	19)	15)
Plant and equipment	17)	16)	17)	17)	18)
Accrued expenses and reserves	39)	37)	42)	36)	45)
Employee benefit accruals	170)	168)	176)	186)	177)
Foreign tax credit carryforwards	11)	12)	7)	8)	13)
Net operating loss carryforwards	456)	418)	419)	451)	507)
Capital loss carryforwards	236)	88)	80)	89)	98)
Allowances for uncollectible accounts	11)	10)	9)	10)	9)
Unrealized (gain) loss on foreign debt instruments	—)	29)	—)	—)	—)
Deferred intercompany deductions	—)	—)	—)	—)	405)
Operating leases	49)	48)	45)	—)	—)
Other	52)	32)	32)	32)	99)
Gross deferred income tax assets	1,528)	1,191)	1,074)	1,072)	1,612)
Valuation allowances	(644)	(427)	(408)	(418)	(459)
Deferred income tax assets	884)	764)	666)	654)	1,153)
Goodwill and intangible assets	(534)	(476)	(453)	(484)	(506)
Inventory reserves, capitalized tax cost and LIFO inventory	(3)	(3)	(3)	(3)	(3)
Investments	(146)	(156)	(158)	(171)	(180)
Plant and equipment	(103)	(91)	(74)	(72)	(64)
Pension liabilities	(65)	(27)	(15)	(19)	(25)
Unrealized (gain) loss on foreign debt instruments	(44)	—)	(57)	(45)	(19)
Operating leases	(49)	(48)	(45)	—)	—)
Other	(42)	(18)	(13)	(13)	(15)
Deferred income tax liabilities	(986)	(819)	(818)	(807)	(812)
Net deferred income tax assets (liabilities)	(102)	(55)	(152)	(153)	341)

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).

Download chart

Item	Description	The company
Gross deferred income tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Illinois Tool Works Inc. gross deferred income tax assets increased from 2019 to 2020 and from 2020 to 2021.
Deferred income tax assets	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Illinois Tool Works Inc. deferred income tax assets increased from 2019 to 2020 and from 2020 to 2021.
Net deferred income tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Illinois Tool Works Inc. net deferred income tax assets (liabilities) increased from 2019 to 2020 but then slightly decreased from 2020 to 2021.

Illinois Tool Works Inc., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
	Deferred income tax assets	552)	533)	516)	554)	505)
	Deferred income tax liabilities	654)	588)	668)	707)	164)

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).

Download chart

Item	Description	The company
Deferred income tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Illinois Tool Works Inc. deferred income tax assets increased from 2019 to 2020 and from 2020 to 2021.
Deferred income tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Illinois Tool Works Inc. deferred income tax liabilities decreased from 2019 to 2020 but then increased from 2020 to 2021 not reaching 2019 level.

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: Noncurrent deferred tax assets, net	552)	533)	516)	554)	505)
Total assets (adjusted)	15,525)	15,079)	14,552)	14,316)	16,275)
Adjustment to Total Liabilities
Total liabilities (as reported)	12,451)	12,430)	12,038)	11,612)	12,191)
Less: Noncurrent deferred tax liabilities, net	654)	588)	668)	707)	164)
Total liabilities (adjusted)	11,797)	11,842)	11,370)	10,905)	12,027)
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: Net deferred tax assets (liabilities)	(102)	(55)	(152)	(153)	341)
Stockholders’ equity attributable to ITW (adjusted)	3,727)	3,236)	3,178)	3,407)	4,244)
Adjustment to Net Income
Net income (as reported)	2,694)	2,109)	2,521)	2,563)	1,687)
Add: Deferred income tax expense (benefit)	(148)	(30)	32)	34)	64)
Net income (adjusted)	2,546)	2,079)	2,553)	2,597)	1,751)

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

Download chart

Illinois Tool Works Inc., adjusted financial ratios

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net Profit Margin
Reported net profit margin	18.64%	16.77%	17.87%	17.36%	11.79%
Adjusted net profit margin	17.61%	16.53%	18.09%	17.59%	12.23%
Total Asset Turnover
Reported total asset turnover	0.90	0.81	0.94	0.99	0.85
Adjusted total asset turnover	0.93	0.83	0.97	1.03	0.88
Financial Leverage
Reported financial leverage	4.44	4.91	4.98	4.57	3.66
Adjusted financial leverage	4.17	4.66	4.58	4.20	3.83
Return on Equity (ROE)
Reported ROE	74.32%	66.30%	83.31%	78.76%	36.79%
Adjusted ROE	68.31%	64.25%	80.33%	76.23%	41.26%
Return on Assets (ROA)
Reported ROA	16.76%	13.51%	16.73%	17.24%	10.05%
Adjusted ROA	16.40%	13.79%	17.54%	18.14%	10.76%

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 net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Illinois Tool Works Inc. adjusted net profit margin ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 not reaching 2019 level.
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 financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Illinois Tool Works Inc. adjusted financial leverage ratio increased from 2019 to 2020 but then decreased significantly from 2020 to 2021.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Illinois Tool Works Inc. adjusted ROE deteriorated from 2019 to 2020 but then slightly improved from 2020 to 2021.
Adjusted ROA	A profitability ratio calculated as adjusted 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 not reaching 2019 level.

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

Download chart

	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)
Operating revenue	14,455)	12,574)	14,109)	14,768)	14,314)
Profitability Ratio
Net profit margin¹	18.64%	16.77%	17.87%	17.36%	11.79%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income	2,546)	2,079)	2,553)	2,597)	1,751)
Operating revenue	14,455)	12,574)	14,109)	14,768)	14,314)
Profitability Ratio
Adjusted net profit margin²	17.61%	16.53%	18.09%	17.59%	12.23%

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 Net profit margin = 100 × Net income ÷ Operating revenue
= 100 × 2,694 ÷ 14,455 = 18.64%

² Adjusted net profit margin = 100 × Adjusted net income ÷ Operating revenue
= 100 × 2,546 ÷ 14,455 = 17.61%

Download chart

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Illinois Tool Works Inc. adjusted net profit margin 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)
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 Deferred Taxes
Selected Financial Data (US$ in millions)
Operating revenue	14,455)	12,574)	14,109)	14,768)	14,314)
Adjusted total assets	15,525)	15,079)	14,552)	14,316)	16,275)
Activity Ratio
Adjusted total asset turnover²	0.93	0.83	0.97	1.03	0.88

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 ÷ 15,525 = 0.93

Download chart

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 Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	15,525)	15,079)	14,552)	14,316)	16,275)
Adjusted stockholders’ equity attributable to ITW	3,727)	3,236)	3,178)	3,407)	4,244)
Solvency Ratio
Adjusted financial leverage²	4.17	4.66	4.58	4.20	3.83

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
= 15,525 ÷ 3,727 = 4.17

Download chart

Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Illinois Tool Works Inc. adjusted financial leverage ratio increased from 2019 to 2020 but then decreased significantly from 2020 to 2021.

	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 Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income	2,546)	2,079)	2,553)	2,597)	1,751)
Adjusted stockholders’ equity attributable to ITW	3,727)	3,236)	3,178)	3,407)	4,244)
Profitability Ratio
Adjusted ROE²	68.31%	64.25%	80.33%	76.23%	41.26%

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 × Adjusted net income ÷ Adjusted stockholders’ equity attributable to ITW
= 100 × 2,546 ÷ 3,727 = 68.31%

Download chart

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Illinois Tool Works Inc. adjusted ROE deteriorated from 2019 to 2020 but then slightly improved from 2020 to 2021.

	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 Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income	2,546)	2,079)	2,553)	2,597)	1,751)
Adjusted total assets	15,525)	15,079)	14,552)	14,316)	16,275)
Profitability Ratio
Adjusted ROA²	16.40%	13.79%	17.54%	18.14%	10.76%

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 × Adjusted net income ÷ Adjusted total assets
= 100 × 2,546 ÷ 15,525 = 16.40%

Download chart

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted 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 not reaching 2019 level.

Illinois Tool Works Inc. (NYSE:ITW)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

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

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

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

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)