Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Illinois Tool Works Inc. (NYSE:ITW)

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Analysis of Income Taxes

Advanced level


Income Tax Expense (Benefit)

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

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
U.S. federal income taxes
Foreign income taxes
State income taxes
Current
U.S. federal income taxes
Foreign income taxes
State income taxes
Deferred
Foreign income taxes
Benefit of net operating loss carryforwards
Provision for income taxes

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Illinois Tool Works Inc.’s current decreased from 2017 to 2018 and from 2018 to 2019.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Illinois Tool Works Inc.’s deferred decreased from 2017 to 2018 and from 2018 to 2019.
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.’s provision for income taxes decreased from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

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

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
U.S. federal statutory tax rate
U.S. tax effect of foreign earnings
State income taxes, net of U.S. federal tax benefit
Differences between U.S. federal statutory and foreign tax rates
Nontaxable foreign interest income
Tax effect of foreign dividends
Tax relief for U.S. manufacturers
Excess tax benefits from stock-based compensation
Other, net
Effective tax rate, before tax effect of U.S. federal tax law change
Tax effect of U.S. federal tax law change
Effective tax rate

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

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.’s effective tax rate, before tax effect of U.S. federal tax law change decreased from 2017 to 2018 and from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Goodwill and intangible assets
Inventory reserves, capitalized tax cost and LIFO inventory
Investments
Plant and equipment
Accrued expenses and reserves
Employee benefit accruals
Foreign tax credit carryforwards
Net operating loss carryforwards
Capital loss carryforwards
Allowances for uncollectible accounts
Pension liabilities
Deferred intercompany deductions
Operating leases
Other
Gross deferred income tax assets
Valuation allowances
Deferred income tax assets
Goodwill and intangible assets
Inventory reserves, capitalized tax cost and LIFO inventory
Investments
Plant and equipment
Pension liabilities
Unrealized (gain) loss on foreign debt instruments
Operating leases
Other
Deferred income tax liabilities
Net deferred income tax assets (liabilities)

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

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.’s gross deferred income tax assets decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
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.’s deferred income tax assets decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
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.’s net deferred income tax assets (liabilities) decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Deferred income tax assets
Deferred income tax liabilities

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

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.’s deferred income tax assets increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.
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.’s deferred income tax liabilities increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

Illinois Tool Works Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Assets
Total assets (as reported)
Less: Noncurrent deferred tax assets, net
Total assets (adjusted)
Adjustment to Total Liabilities
Total liabilities (as reported)
Less: Noncurrent deferred tax liabilities, net
Total liabilities (adjusted)
Adjustment to Stockholders’ Equity Attributable To ITW
Stockholders’ equity attributable to ITW (as reported)
Less: Net deferred tax assets (liabilities)
Stockholders’ equity attributable to ITW (adjusted)
Adjustment to Net Income
Net income (as reported)
Add: Deferred income tax expense (benefit)
Net income (adjusted)

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).


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


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Illinois Tool Works Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

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.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Illinois Tool Works Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
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.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Illinois Tool Works Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Illinois Tool Works Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

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


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income
Operating revenue
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Operating revenue
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

1 Net profit margin = 100 × Net income ÷ Operating revenue
= 100 × ÷ =

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Operating revenue
= 100 × ÷ =

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.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Operating revenue
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Operating revenue
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

1 Total asset turnover = Operating revenue ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Operating revenue ÷ Adjusted total assets
= ÷ =

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.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets
Stockholders’ equity attributable to ITW
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted stockholders’ equity attributable to ITW
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity attributable to ITW
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity attributable to ITW
= ÷ =

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.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income
Stockholders’ equity attributable to ITW
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted stockholders’ equity attributable to ITW
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity attributable to ITW
= 100 × ÷ =

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity attributable to ITW
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Illinois Tool Works Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

2019 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Illinois Tool Works Inc.’s adjusted ROA improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.