Illinois Tool Works Inc. (NYSE:ITW)

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Illinois Tool Works Inc., adjusted total assets

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Total assets	16,077)	15,612)	15,068)	14,870)	16,780)
Adjustments
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)¹	—)	—)	—)	203)	284)
Add: Allowance for doubtful accounts	28)	29)	20)	21)	43)
Add: LIFO reserve²	118)	82)	89)	97)	89)
Less: Deferred income tax assets³	552)	533)	516)	554)	505)
After Adjustment
Adjusted total assets	15,671)	15,190)	14,661)	14,637)	16,691)

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).

¹ Operating lease right-of-use asset (before adoption of FASB Topic 842). See details »

² LIFO reserve. See details »

³ Deferred income tax assets. See details »

The financial trajectory of total assets and adjusted total assets exhibits a consistent pattern of contraction followed by a period of steady growth between 2017 and 2021. A significant reduction in the asset base occurred between December 31, 2017, and December 31, 2018, after which both metrics entered a recovery phase that lasted through the end of 2021.

Asset Valuation Trends: Total assets decreased from 16,780 million US$ in 2017 to 14,870 million US$ in 2018, marking a notable contraction. Following this decline, a consistent upward trend was observed, with total assets increasing to 15,068 million US$ in 2019, 15,612 million US$ in 2020, and reaching 16,077 million US$ by 2021.
Analysis of Asset Adjustments: Adjusted total assets mirrored the movements of total assets, decreasing from 16,691 million US$ in 2017 to 14,637 million US$ in 2018 before climbing steadily to 15,671 million US$ by 2021. The variance between total assets and adjusted total assets expanded over the period; the difference was 89 million US$ in 2017 and widened to 406 million US$ by 2021.
Comparative Growth and Recovery: From the 2018 trough, total assets grew by approximately 8.1% by the end of 2021. The adjusted total assets showed a slightly stronger recovery from the same period, increasing by approximately 7.1% from 2018 to 2021. The stability in the gap between the two figures from 2019 to 2021 suggests a consistent application of adjustment criteria during the recovery phase.

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Illinois Tool Works Inc., adjusted current liabilities

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Current liabilities	3,470)	2,589)	2,154)	3,542)	3,053)
Adjustments
Less: Current deferred revenue and customer deposits	394)	222)	188)	215)	205)
Less: Current accrued product warranties	46)	45)	45)	45)	45)
After Adjustment
Adjusted current liabilities	3,030)	2,322)	1,921)	3,282)	2,803)

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).

An examination of the liability structure reveals a fluctuating trend in both reported and adjusted current liabilities over the five-year period ending December 31, 2021. A notable peak occurred in 2018, followed by a significant contraction in 2019, before entering a phase of steady increase through 2021.

Liability Volatility and Recovery: Current liabilities increased from 3,053 million USD in 2017 to a peak of 3,542 million USD in 2018. A sharp decline followed in 2019, where liabilities dropped to 2,154 million USD. This was followed by a two-year recovery trend, with figures rising to 2,589 million USD in 2020 and reaching 3,470 million USD by the end of 2021.
Relationship Between Reported and Adjusted Liabilities: Adjusted current liabilities consistently trended in parallel with reported current liabilities, maintaining a lower valuation across all observed years. The adjustment mirrored the 2019 trough and the subsequent growth phase, suggesting that the factors driving the adjustments are correlated with the overall scale of current obligations.
Analysis of Adjustment Variance: Between 2017 and 2020, the absolute difference between reported and adjusted current liabilities remained relatively stable, ranging from 233 million USD to 267 million USD. However, a significant expansion in this gap occurred in 2021, where the adjustment increased to 440 million USD. This represents a notable increase in the magnitude of adjustments relative to the total current liability balance compared to the preceding four years.

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Illinois Tool Works Inc., adjusted total liabilities

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Total liabilities	12,451)	12,430)	12,038)	11,612)	12,191)
Adjustments
Add: Operating lease liability (before adoption of FASB Topic 842)¹	—)	—)	—)	203)	284)
Less: Deferred income tax liabilities²	654)	588)	668)	707)	164)
Less: Deferred revenue and customer deposits	394)	222)	188)	215)	205)
Less: Accrued product warranties	46)	45)	45)	45)	45)
After Adjustment
Adjusted total liabilities	11,357)	11,575)	11,137)	10,848)	12,061)

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).

¹ Operating lease liability (before adoption of FASB Topic 842). See details »

² Deferred income tax liabilities. See details »

An analysis of the liability structure from 2017 to 2021 reveals a divergence between reported total liabilities and adjusted total liabilities. While nominal total liabilities experienced a general upward trajectory after 2018, the adjusted figures demonstrate greater volatility and a distinct decline in the final period of the analysis.

Total Liabilities Trend: Reported total liabilities fluctuated between 11.6 billion and 12.5 billion USD. Following a decrease in 2018 to 11,612 million USD, a consistent year-over-year increase was observed through 2021, with the balance peaking at 12,451 million USD.
Adjusted Total Liabilities Trend: Adjusted total liabilities exhibited a more pronounced decrease in 2018, falling to 10,848 million USD. Although a recovery trend persisted through 2020, a subsequent decline occurred in 2021, bringing the balance to 11,357 million USD. This movement is notable as it occurs in opposition to the increase observed in the nominal total liabilities for the same period.
Analysis of Liability Adjustments: The variance between reported and adjusted total liabilities expanded significantly over the five-year horizon. The adjustment gap grew from 130 million USD in 2017 to 1,094 million USD in 2021. This widening trend indicates that the specific financial adjustments applied to the total liabilities have exerted a progressively larger influence on the adjusted financial position.

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Illinois Tool Works Inc., adjusted stockholders’ equity attributable to ITW

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Stockholders’ equity attributable to ITW	3,625)	3,181)	3,026)	3,254)	4,585)
Adjustments
Less: Net deferred income tax assets (liabilities)¹	(102)	(55)	(152)	(153)	341)
Add: Allowance for doubtful accounts	28)	29)	20)	21)	43)
Add: LIFO reserve²	118)	82)	89)	97)	89)
Add: Deferred revenue and customer deposits	394)	222)	188)	215)	205)
Add: Accrued product warranties	46)	45)	45)	45)	45)
Add: Noncontrolling interest	1)	1)	4)	4)	4)
After Adjustment
Adjusted total stockholders’ equity	4,314)	3,615)	3,524)	3,789)	4,630)

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).

¹ Net deferred income tax assets (liabilities). See details »

² LIFO reserve. See details »

An analysis of the stockholders' equity from 2017 to 2021 reveals a distinct U-shaped trajectory, characterized by a significant contraction in the initial three years followed by a recovery phase through the end of the period.

Stockholders’ Equity Attributable to ITW: A sharp decline occurred between December 31, 2017, and December 31, 2019, with values falling from 4,585 million USD to 3,026 million USD, representing a total decrease of approximately 34%. A reversal of this trend began in 2020, with equity increasing to 3,181 million USD and further climbing to 3,625 million USD by December 31, 2021.
Adjusted Total Stockholders’ Equity: The adjusted equity mirrored the general trend of the attributable equity but exhibited a less severe decline. From a peak of 4,630 million USD in 2017, the value decreased to 3,524 million USD in 2019. Subsequent growth was observed in 2020 and 2021, culminating in a balance of 4,314 million USD.
Variance and Adjustment Analysis: A consistent positive variance exists between the adjusted total stockholders' equity and the equity attributable to ITW. This gap widened significantly after 2017. While the difference was only 45 million USD in 2017, it increased to 535 million USD in 2018 and reached its highest point in 2021 at 689 million USD. This expanding divergence suggests an increase in the impact of adjustments or non-attributable equity components over the five-year period.

Overall, while both metrics recovered significantly by 2021, neither returned to the peak levels observed in 2017, although the adjusted equity came closer to its original baseline than the attributable equity.

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Illinois Tool Works Inc., adjusted capitalization table

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Short-term debt	778)	350)	4)	1,351)	850)
Long-term debt	6,909)	7,772)	7,754)	6,029)	7,478)
Total reported debt	7,687)	8,122)	7,758)	7,380)	8,328)
Stockholders’ equity attributable to ITW	3,625)	3,181)	3,026)	3,254)	4,585)
Total reported capital	11,312)	11,303)	10,784)	10,634)	12,913)
Adjustments to Debt
Add: Operating lease liability (before adoption of FASB Topic 842)¹	—)	—)	—)	203)	284)
Add: Current portion of operating lease liabilities²	61)	55)	51)	—)	—)
Add: Long-term portion of operating lease liabilities³	133)	133)	128)	—)	—)
Adjusted total debt	7,881)	8,310)	7,937)	7,583)	8,612)
Adjustments to Equity
Less: Net deferred income tax assets (liabilities)⁴	(102)	(55)	(152)	(153)	341)
Add: Allowance for doubtful accounts	28)	29)	20)	21)	43)
Add: LIFO reserve⁵	118)	82)	89)	97)	89)
Add: Deferred revenue and customer deposits	394)	222)	188)	215)	205)
Add: Accrued product warranties	46)	45)	45)	45)	45)
Add: Noncontrolling interest	1)	1)	4)	4)	4)
Adjusted total stockholders’ equity	4,314)	3,615)	3,524)	3,789)	4,630)
After Adjustment
Adjusted total capital	12,195)	11,925)	11,461)	11,372)	13,242)

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).

¹ Operating lease liability (before adoption of FASB Topic 842). See details »

² Current portion of operating lease liabilities. See details »

³ Long-term portion of operating lease liabilities. See details »

⁴ Net deferred income tax assets (liabilities). See details »

⁵ LIFO reserve. See details »

The capitalization structure between 2017 and 2021 demonstrates a period of initial contraction followed by a gradual recovery and stabilization. A consistent divergence exists between reported and adjusted values across all metrics, indicating systematic adjustments to debt and equity accounts to arrive at a modified capital base.

Debt Obligations and Adjustments: Total reported debt exhibited volatility, decreasing from 8,328 million USD in 2017 to a low of 7,380 million USD in 2018, before peaking again in 2020 at 8,122 million USD. Adjusted total debt consistently exceeds reported debt across the entire period, with the adjustment remaining relatively stable, generally ranging between 200 million and 300 million USD. This suggests the inclusion of consistent debt-like liabilities in the adjusted calculations.
Stockholders' Equity Trends: A significant reduction in stockholders' equity attributable to the company occurred between 2017 and 2019, falling from 4,585 million USD to 3,026 million USD. A recovery trend began in 2020 and continued through 2021, reaching 3,625 million USD. The adjusted stockholders' equity is notably higher than the reported figures, and this gap widened over time; by 2021, the adjusted equity of 4,314 million USD represented a substantial increase over the reported value.
Total Capitalization and Adjusted Base: Total reported capital mirrored the equity trend, showing a sharp decline in 2018 to 10,634 million USD from 12,913 million USD in 2017. While reported capital remained relatively flat between 2019 and 2021, adjusted total capital showed a more pronounced upward trajectory during the same window, increasing from 11,461 million USD in 2019 to 12,195 million USD in 2021. The consistent upward variance in adjusted total capital reflects the cumulative impact of both the debt and equity adjustments.

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Illinois Tool Works Inc., adjusted operating revenue

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Operating revenue	14,455)	12,574)	14,109)	14,768)	14,314)
Adjustment
Add: Increase (decrease) in deferred revenue and customer deposits	172)	34)	(27)	10)	25)
After Adjustment
Adjusted operating revenue	14,627)	12,608)	14,082)	14,778)	14,339)

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).

Analysis of revenue trends from 2017 to 2021 indicates a period of volatility characterized by a cyclical pattern. Operating revenue increased between 2017 and 2018, followed by a moderate decline in 2019 and a sharp contraction in 2020. A strong recovery was observed in 2021, with revenue levels returning to a range comparable to the 2017-2019 period.

Revenue Trajectory and Volatility: Operating revenue peaked in 2018 at 14,768 million USD. A downward trend followed, reaching a five-year minimum of 12,574 million USD in 2020, which represents a decrease of approximately 14.8% from the 2018 peak. The subsequent increase to 14,455 million USD in 2021 reflects a robust recovery of roughly 15% year-over-year.
Correlation Between Operating and Adjusted Revenues: Adjusted operating revenue closely tracks the movement of standard operating revenue across all reported years. From 2017 through 2020, the variance between the two metrics remained minimal, with adjustments ranging from a minor decrease of 27 million USD in 2019 to a slight increase of 34 million USD in 2020.
Significant Divergence in 2021: A notable shift in adjustment magnitude occurred in 2021, where adjusted operating revenue exceeded operating revenue by 172 million USD. This divergence is the most significant in the provided period, suggesting the application of substantial normalizing adjustments to the 2021 revenue figures that were not present to the same degree in previous fiscal years.

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Illinois Tool Works Inc., adjusted net income

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Net income	2,694)	2,109)	2,521)	2,563)	1,687)
Adjustments
Add: Deferred income tax expense (benefit)¹	(148)	(30)	32)	34)	64)
Add: Increase (decrease) in allowance for doubtful accounts	(1)	9)	(1)	(22)	—)
Add: Increase (decrease) in LIFO reserve²	36)	(7)	(8)	8)	3)
Add: Increase (decrease) in deferred revenue and customer deposits	172)	34)	(27)	10)	25)
Add: Increase (decrease) in accrued product warranties	1)	—)	—)	—)	—)
Add: Other comprehensive income (loss)	140)	63)	(28)	(345)	520)
After Adjustment
Adjusted net income	2,894)	2,178)	2,489)	2,248)	2,299)

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).

¹ Deferred income tax expense (benefit). See details »

² Increase (decrease) in LIFO reserve. See details »

The financial performance between 2017 and 2021 is characterized by an overall upward trajectory in both reported and adjusted net income, interrupted by a synchronized contraction in 2020.

Reported Net Income Trends: Net income experienced significant volatility during the analyzed period. A substantial increase occurred between 2017 and 2018, where values rose from 1,687 million US$ to 2,563 million US$. This was followed by a slight decline in 2019 and a more pronounced decrease to 2,109 million US$ in 2020. A strong recovery was observed in 2021, with net income reaching a period high of 2,694 million US$.
Adjusted Net Income Trends: Adjusted net income exhibited a more stable growth pattern than reported net income. Following a marginal dip between 2017 and 2018, the figure rose to 2,489 million US$ in 2019. A downturn occurred in 2020, mirroring the reported income trend, with values falling to 2,178 million US$. The period concluded with a significant increase to 2,894 million US$ in 2021.
Evaluation of Income Adjustments: The relationship between reported and adjusted net income shifted multiple times. In 2017, a large positive adjustment of 612 million US$ was present. In 2018 and 2019, the trend reversed, as reported net income exceeded adjusted net income, indicating the presence of non-recurring gains. The trend reverted to positive adjustments in 2020 and 2021, with the adjusted figure exceeding reported income by 200 million US$ in the final year.

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