Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Illinois Tool Works Inc., solvency ratios
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).
- Debt to equity
- The debt to equity ratio exhibited an upward trend from 1.82 in 2017 to a peak of 2.56 in 2019, followed by relatively stable but slightly decreasing values in 2020 and 2021, ending at 2.12.
- Debt to equity (including operating lease liability)
- This ratio closely mirrors the debt to equity ratio without operating lease liabilities, showing an increase until 2019, followed by a slight decline, indicating consistent treatment of lease liabilities within the company's leverage profile.
- Debt to capital
- The debt to capital ratio rose from 0.64 in 2017 to 0.72 in 2019 and 2020, then decreased to 0.68 in 2021. This suggests the company increased its reliance on debt financing through 2019 and 2020 before modestly reducing it in 2021.
- Debt to capital (including operating lease liability)
- This ratio parallels the debt to capital ratio without lease liabilities, reinforcing the view that lease liabilities have a limited incremental effect on total debt capital structure.
- Debt to assets
- The debt to assets ratio remained stable around 0.50 to 0.52 through 2017 to 2020, then decreased slightly to 0.48 in 2021, indicating a marginal reduction in leverage against total assets in the latest period.
- Debt to assets (including operating lease liability)
- Including operating lease liabilities results in slightly higher ratios but follows the same trend pattern, confirming that the liability treatment is consistent across periods.
- Financial leverage
- Financial leverage increased steadily from 3.66 in 2017 to a peak of 4.98 in 2019, followed by a gradual decrease to 4.44 in 2021. This reflects a pattern of increased use of debt or lower equity base until 2019, with partial deleveraging thereafter.
- Interest coverage
- Interest coverage ratios improved overall, rising from 13.58 in 2017 to 17.47 in 2021, despite a slight dip in 2020. This indicates an enhanced ability to meet interest obligations from operating earnings, reflecting potentially improved earnings or reduced interest expenses.
- Fixed charge coverage
- Fixed charge coverage fluctuated slightly but trended upward, from 9.61 in 2017 to 11.39 in 2021, suggesting improved capacity to cover fixed financial obligations over time with periodic minor declines.
Debt Ratios
Coverage Ratios
Debt to Equity
Illinois Tool Works Inc., debt to equity calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 778) | 350) | 4) | 1,351) | 850) | |
| Long-term debt | 6,909) | 7,772) | 7,754) | 6,029) | 7,478) | |
| Total 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) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 2.12 | 2.55 | 2.56 | 2.27 | 1.82 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.29 | 2.42 | — | — | — | |
| Eaton Corp. plc | 0.52 | 0.54 | — | — | — | |
| GE Aerospace | 0.87 | 2.11 | — | — | — | |
| Honeywell International Inc. | 1.06 | 1.28 | — | — | — | |
| Lockheed Martin Corp. | 1.07 | 2.02 | — | — | — | |
| RTX Corp. | 0.43 | 0.44 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Capital Goods | 1.26 | 1.75 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.37 | 1.82 | — | — | — | |
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 2021 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity attributable to ITW
= 7,687 ÷ 3,625 = 2.12
2 Click competitor name to see calculations.
- Total Debt
- The total debt exhibited fluctuations over the five-year period. It started at 8,328 million USD in 2017, decreased to 7,380 million USD in 2018, then rose again to 7,758 million USD in 2019. The upward trend continued in 2020 with 8,122 million USD, followed by a decline to 7,687 million USD in 2021. Overall, total debt remained relatively stable, displaying moderate variability around the 7,500 to 8,300 million USD range.
- Stockholders’ Equity Attributable to ITW
- Equity showed a significant downward trend from 2017 to 2019, declining from 4,585 million USD to a low of 3,026 million USD. In the subsequent years, it recovered slightly, rising to 3,181 million USD in 2020 and further to 3,625 million USD in 2021. Despite this partial recovery, the equity in 2021 remained below the initial 2017 level, indicating a net reduction over the period.
- Debt to Equity Ratio
- The debt to equity ratio increased substantially from 1.82 in 2017 to a peak of 2.56 in 2019, corresponding to the period when equity decreased and debt showed some fluctuations. The ratio remained elevated at 2.55 in 2020 before declining to 2.12 in 2021. This ratio trend reflects an increased leverage position during 2018-2020, followed by a modest deleveraging in the final year analyzed.
Debt to Equity (including Operating Lease Liability)
Illinois Tool Works Inc., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 778) | 350) | 4) | 1,351) | 850) | |
| Long-term debt | 6,909) | 7,772) | 7,754) | 6,029) | 7,478) | |
| Total debt | 7,687) | 8,122) | 7,758) | 7,380) | 8,328) | |
| Current portion of operating lease liabilities | 61) | 55) | 51) | —) | —) | |
| Long-term portion of operating lease liabilities | 133) | 133) | 128) | —) | —) | |
| Total debt (including operating lease liability) | 7,881) | 8,310) | 7,937) | 7,380) | 8,328) | |
| Stockholders’ equity attributable to ITW | 3,625) | 3,181) | 3,026) | 3,254) | 4,585) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 2.17 | 2.61 | 2.62 | 2.27 | 1.82 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.46 | — | — | — | |
| Eaton Corp. plc | 0.55 | 0.57 | — | — | — | |
| GE Aerospace | 0.94 | 2.20 | — | — | — | |
| Honeywell International Inc. | 1.11 | 1.32 | — | — | — | |
| Lockheed Martin Corp. | 1.19 | 2.21 | — | — | — | |
| RTX Corp. | 0.46 | 0.47 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 1.32 | 1.81 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.54 | 2.00 | — | — | — | |
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 2021 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity attributable to ITW
= 7,881 ÷ 3,625 = 2.17
2 Click competitor name to see calculations.
- Total Debt (Including Operating Lease Liability)
- The total debt exhibited fluctuations over the analyzed period. Starting at 8,328 million USD at the end of 2017, it decreased notably in 2018 to 7,380 million USD, followed by an increase to 7,937 million USD in 2019. The debt further rose slightly in 2020, reaching 8,310 million USD, before moderately declining to 7,881 million USD in 2021. Overall, the debt levels remained within a narrow range around 7,800 to 8,300 million USD after the initial dip in 2018.
- Stockholders' Equity Attributable to ITW
- Stockholders' equity showed a consistent downward trend from 2017 through 2019, with values decreasing from 4,585 million USD to 3,026 million USD. A modest recovery was observed beginning in 2020, with equity rising slightly to 3,181 million USD and further improving to 3,625 million USD by the end of 2021. Despite this recent upturn, equity levels remained below those of 2017, indicating some erosion over the longer term with initial significant declines followed by stabilization and partial recovery.
- Debt to Equity Ratio (Including Operating Lease Liability)
- The debt to equity ratio experienced a clear increasing trend from 2017 through 2019, climbing from 1.82 to 2.62. It remained relatively stable at 2.61 in 2020, suggesting consistent leverage levels during that year. In 2021, the ratio decreased to 2.17, which indicates a reduction in leverage relative to equity. This pattern reflects the impact of both declining equity and variable debt over the timeframe, with peak leverage occurring around 2019-2020 and some deleveraging happening subsequently.
Debt to Capital
Illinois Tool Works Inc., debt to capital calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 778) | 350) | 4) | 1,351) | 850) | |
| Long-term debt | 6,909) | 7,772) | 7,754) | 6,029) | 7,478) | |
| Total 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 capital | 11,312) | 11,303) | 10,784) | 10,634) | 12,913) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.68 | 0.72 | 0.72 | 0.69 | 0.64 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | 1.35 | 1.40 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.71 | — | — | — | |
| Eaton Corp. plc | 0.34 | 0.35 | — | — | — | |
| GE Aerospace | 0.47 | 0.68 | — | — | — | |
| Honeywell International Inc. | 0.51 | 0.56 | — | — | — | |
| Lockheed Martin Corp. | 0.52 | 0.67 | — | — | — | |
| RTX Corp. | 0.30 | 0.31 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Capital Goods | 0.56 | 0.64 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.58 | 0.65 | — | — | — | |
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 2021 Calculation
Debt to capital = Total debt ÷ Total capital
= 7,687 ÷ 11,312 = 0.68
2 Click competitor name to see calculations.
- Total Debt
-
Total debt exhibits a fluctuating trend over the five-year period. It decreased from 8,328 million US dollars in 2017 to 7,380 million US dollars in 2018, followed by a rise to 7,758 million US dollars in 2019. The upward movement continued in 2020 reaching 8,122 million US dollars, but then total debt declined again to 7,687 million US dollars in 2021. Overall, total debt showed variability but ended slightly lower than the initial level recorded in 2017.
- Total Capital
-
Total capital demonstrated a downward movement from 12,913 million US dollars in 2017 to 10,634 million US dollars in 2018, representing a notable decrease. Subsequently, total capital exhibited modest increases in the following years, reaching 10,784 million US dollars in 2019, 11,303 million US dollars in 2020, and stabilizing at 11,312 million US dollars in 2021. Despite these recoveries, the total capital in 2021 remained below the 2017 level, indicating a partial recovery after the initial decline.
- Debt to Capital Ratio
-
The debt to capital ratio showed an overall increasing trend from 0.64 in 2017 to a peak of 0.72 in both 2019 and 2020. This ratio initially increased from 0.64 to 0.69 in 2018, reflecting a higher proportion of debt relative to total capital. The ratio remained elevated at 0.72 for two consecutive years, suggesting sustained leverage. In 2021, the ratio decreased to 0.68, indicating a slight reduction in leverage but still higher compared to the 2017 starting point.
- Summary
-
The analysis reflects a period of financial variability with total debt showing fluctuations but a mild downward adjustment from the starting and ending points. Total capital experienced a significant initial drop followed by gradual recovery that did not fully reach previous levels by 2021. The leverage, as measured by the debt to capital ratio, intensified over the years until 2020, then slightly reduced in 2021. These trends imply an increase in financial risk exposure through leverage during most of the timeframe, with some improvement in the final year observed.
Debt to Capital (including Operating Lease Liability)
Illinois Tool Works Inc., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 778) | 350) | 4) | 1,351) | 850) | |
| Long-term debt | 6,909) | 7,772) | 7,754) | 6,029) | 7,478) | |
| Total debt | 7,687) | 8,122) | 7,758) | 7,380) | 8,328) | |
| Current portion of operating lease liabilities | 61) | 55) | 51) | —) | —) | |
| Long-term portion of operating lease liabilities | 133) | 133) | 128) | —) | —) | |
| Total debt (including operating lease liability) | 7,881) | 8,310) | 7,937) | 7,380) | 8,328) | |
| Stockholders’ equity attributable to ITW | 3,625) | 3,181) | 3,026) | 3,254) | 4,585) | |
| Total capital (including operating lease liability) | 11,506) | 11,491) | 10,963) | 10,634) | 12,913) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.68 | 0.72 | 0.72 | 0.69 | 0.64 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 1.34 | 1.39 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.71 | — | — | — | |
| Eaton Corp. plc | 0.36 | 0.36 | — | — | — | |
| GE Aerospace | 0.49 | 0.69 | — | — | — | |
| Honeywell International Inc. | 0.53 | 0.57 | — | — | — | |
| Lockheed Martin Corp. | 0.54 | 0.69 | — | — | — | |
| RTX Corp. | 0.31 | 0.32 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.57 | 0.64 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | 0.67 | — | — | — | |
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 2021 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 7,881 ÷ 11,506 = 0.68
2 Click competitor name to see calculations.
- Total debt (including operating lease liability)
- The total debt level experienced fluctuations over the reviewed period. Starting at $8,328 million in 2017, it decreased to $7,380 million in 2018, followed by an increase to $7,937 million in 2019. The upward trend continued in 2020, reaching $8,310 million, before declining again to $7,881 million in 2021. This pattern indicates a degree of variability in debt management, with the debt level ultimately remaining near the initial value across the five years.
- Total capital (including operating lease liability)
- Total capital showed a notable decrease from $12,913 million in 2017 to $10,634 million in 2018, representing a significant contraction. After this decline, total capital steadily increased over the subsequent years, rising to $10,963 million in 2019, $11,491 million in 2020, and slightly increasing to $11,506 million in 2021. Despite the recovery, the capital base in 2021 remained below the 2017 level, suggesting a restructuring or changes in the capital structure during the period.
- Debt to capital (including operating lease liability)
- The debt-to-capital ratio exhibited an overall increasing trend from 0.64 in 2017 to a peak of 0.72 in 2019 and 2020, indicating that debt composed a greater proportion of total capital during these years. This suggests increased leverage or a shift towards debt financing. In 2021, the ratio declined to 0.68, reflecting a partial reversal in leverage levels, corresponding with the reduction in debt and stabilization of capital during that year.
Debt to Assets
Illinois Tool Works Inc., debt to assets calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 778) | 350) | 4) | 1,351) | 850) | |
| Long-term debt | 6,909) | 7,772) | 7,754) | 6,029) | 7,478) | |
| Total debt | 7,687) | 8,122) | 7,758) | 7,380) | 8,328) | |
| Total assets | 16,077) | 15,612) | 15,068) | 14,870) | 16,780) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.48 | 0.52 | 0.51 | 0.50 | 0.50 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | 0.42 | 0.42 | — | — | — | |
| Caterpillar Inc. | 0.46 | 0.47 | — | — | — | |
| Eaton Corp. plc | 0.25 | 0.25 | — | — | — | |
| GE Aerospace | 0.18 | 0.30 | — | — | — | |
| Honeywell International Inc. | 0.30 | 0.35 | — | — | — | |
| Lockheed Martin Corp. | 0.23 | 0.24 | — | — | — | |
| RTX Corp. | 0.20 | 0.20 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Capital Goods | 0.28 | 0.32 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.30 | 0.33 | — | — | — | |
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 2021 Calculation
Debt to assets = Total debt ÷ Total assets
= 7,687 ÷ 16,077 = 0.48
2 Click competitor name to see calculations.
- Total Debt
- The total debt exhibits a fluctuating pattern over the analyzed period. Beginning at $8,328 million in 2017, it decreased to $7,380 million in 2018, then increased again to $7,758 million in 2019, followed by a further rise to $8,122 million in 2020, before declining to $7,687 million in 2021. Overall, total debt remained close to the $8 billion level with minor variations year-over-year.
- Total Assets
- The total assets show a generally positive trend across the time frame under review. Starting from $16,780 million in 2017, total assets decreased to $14,870 million in 2018 but then steadily increased each year thereafter, reaching $16,077 million in 2021. This reflects a recovery and growth in asset base after an initial decline.
- Debt to Assets Ratio
- The debt to assets ratio remained relatively stable, fluctuating slightly around the 0.5 mark. It started at 0.5 in 2017 and 2018, increased marginally to 0.51 in 2019 and 0.52 in 2020, and then declined to 0.48 in 2021. The ratio indicates that approximately half of the asset base is financed through debt, with a slight peak around 2020 followed by a modest reduction in 2021.
- Summary
- The data indicates that while total debt experienced modest fluctuations, total assets have generally increased after an initial dip, leading to an overall stable leverage position as evidenced by the debt to assets ratio. The slight decrease in leverage in 2021 suggests some deleveraging or asset growth outpacing debt accumulation in the most recent period.
Debt to Assets (including Operating Lease Liability)
Illinois Tool Works Inc., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term debt | 778) | 350) | 4) | 1,351) | 850) | |
| Long-term debt | 6,909) | 7,772) | 7,754) | 6,029) | 7,478) | |
| Total debt | 7,687) | 8,122) | 7,758) | 7,380) | 8,328) | |
| Current portion of operating lease liabilities | 61) | 55) | 51) | —) | —) | |
| Long-term portion of operating lease liabilities | 133) | 133) | 128) | —) | —) | |
| Total debt (including operating lease liability) | 7,881) | 8,310) | 7,937) | 7,380) | 8,328) | |
| Total assets | 16,077) | 15,612) | 15,068) | 14,870) | 16,780) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.49 | 0.53 | 0.53 | 0.50 | 0.50 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 0.43 | 0.43 | — | — | — | |
| Caterpillar Inc. | 0.46 | 0.48 | — | — | — | |
| Eaton Corp. plc | 0.27 | 0.27 | — | — | — | |
| GE Aerospace | 0.19 | 0.31 | — | — | — | |
| Honeywell International Inc. | 0.32 | 0.36 | — | — | — | |
| Lockheed Martin Corp. | 0.26 | 0.26 | — | — | — | |
| RTX Corp. | 0.21 | 0.21 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.29 | 0.33 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | 0.36 | — | — | — | |
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 2021 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 7,881 ÷ 16,077 = 0.49
2 Click competitor name to see calculations.
- Total Debt (including operating lease liability)
- The total debt levels experienced some fluctuations during the observed period. It decreased from $8,328 million in 2017 to $7,380 million in 2018, indicating a reduction in the company's leverage. However, debt rose again to $7,937 million in 2019 and $8,310 million in 2020, reflecting a gradual increase in debt obligations. In 2021, the debt level slightly declined to $7,881 million, showing some repayment or reduction initiatives towards the end of the period.
- Total Assets
- Total assets showed an initial decline from $16,780 million in 2017 to $14,870 million in 2018, suggesting a contraction or asset disposals. Afterwards, a gradual recovery took place with total assets increasing to $15,068 million in 2019, $15,612 million in 2020, and further to $16,077 million in 2021, nearly reaching its initial level from 2017. This indicates ongoing investment or asset growth over the latter years.
- Debt to Assets Ratio (including operating lease liability)
- The debt to assets ratio remained relatively stable around 0.5 throughout the period, with minor variations. It held steady at 0.5 in 2017 and 2018 but then increased slightly to 0.53 in 2019 and 2020, indicating a proportionally higher leverage relative to assets during these years. By 2021, the ratio decreased to 0.49, suggesting an improvement in capital structure with a slightly lower dependency on debt financing relative to total assets.
Financial Leverage
Illinois Tool Works Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 5.02 | 5.11 | — | — | — | |
| Eaton Corp. plc | 2.07 | 2.13 | — | — | — | |
| GE Aerospace | 4.93 | 7.13 | — | — | — | |
| Honeywell International Inc. | 3.47 | 3.68 | — | — | — | |
| Lockheed Martin Corp. | 4.64 | 8.43 | — | — | — | |
| RTX Corp. | 2.21 | 2.25 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Capital Goods | 4.55 | 5.54 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.52 | 5.49 | — | — | — | |
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 2021 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity attributable to ITW
= 16,077 ÷ 3,625 = 4.44
2 Click competitor name to see calculations.
- Total Assets
- The total assets exhibit a general decline from 2017 to 2018, decreasing from $16,780 million to $14,870 million. Following this reduction, the asset base stabilizes with a gradual increase over the subsequent years, reaching $16,077 million by the end of 2021. This suggests an initial contraction followed by a recovery phase in asset holdings.
- Stockholders’ Equity Attributable to the Company
- Stockholders' equity shows a pronounced downward trend from 2017 through 2019, falling sharply from $4,585 million to $3,026 million, reflecting a significant reduction in equity during this period. A modest recovery begins thereafter, with equity rising to $3,181 million in 2020 and further to $3,625 million in 2021. Overall, equity levels remain notably below the 2017 figure by the end of the period reviewed.
- Financial Leverage (Ratio)
- Financial leverage increased substantially between 2017 and 2019, moving from 3.66 to 4.98, indicating a higher reliance on debt relative to equity. This peak leverage slightly subsided in 2020 and 2021, decreasing to 4.44 by the end of 2021, though still elevated compared to the 2017 level. The trend implies a period of increased financial risk or aggressive capital structure strategy initially, followed by a slight deleveraging effort.
Interest Coverage
Illinois Tool Works Inc., interest coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 2,694) | 2,109) | 2,521) | 2,563) | 1,687) | |
| Add: Income tax expense | 632) | 595) | 767) | 831) | 1,583) | |
| Add: Interest expense | 202) | 206) | 221) | 257) | 260) | |
| Earnings before interest and tax (EBIT) | 3,528) | 2,910) | 3,509) | 3,651) | 3,530) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 17.47 | 14.13 | 15.88 | 14.21 | 13.58 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | -0.88 | -5.71 | — | — | — | |
| Caterpillar Inc. | 17.88 | 8.80 | — | — | — | |
| Eaton Corp. plc | 21.11 | 12.72 | — | — | — | |
| GE Aerospace | -0.96 | 2.59 | — | — | — | |
| Honeywell International Inc. | 22.09 | 17.75 | — | — | — | |
| Lockheed Martin Corp. | 14.27 | 14.93 | — | — | — | |
| RTX Corp. | 4.71 | -0.65 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Capital Goods | 3.98 | 1.99 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 5.14 | 1.25 | — | — | — | |
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 2021 Calculation
Interest coverage = EBIT ÷ Interest expense
= 3,528 ÷ 202 = 17.47
2 Click competitor name to see calculations.
The analysis of the financial data indicates several notable trends over the five-year period ending in 2021.
- Earnings before interest and tax (EBIT)
- EBIT demonstrated overall stability with some fluctuations. Starting at 3530 million US dollars in 2017, the figure increased slightly to 3651 million in 2018 but then declined marginally to 3509 million in 2019. A more pronounced decrease occurred in 2020, with EBIT dropping to 2910 million, likely reflecting external economic pressures in that year. However, by 2021, EBIT showed a strong recovery, rising again to 3528 million, approaching the levels seen in 2017 and 2018.
- Interest expense
- Interest expense consistently decreased throughout the period. Beginning at 260 million US dollars in 2017, it edged down to 257 million in 2018 and more notably declined in subsequent years, reaching 202 million in 2021. This steady reduction suggests improved debt management or lower borrowing costs over time.
- Interest coverage ratio
- The interest coverage ratio improved substantially from 13.58 in 2017 to 17.47 in 2021. This upward trend indicates enhanced ability to service interest expenses from operating earnings. The peak in 2019 at 15.88, a slight dip in 2020 to 14.13, and a strong recovery in 2021 reflect the fluctuations observed in EBIT, combined with the steady decline in interest expenses.
In summary, despite a dip in operating earnings in 2020, the company maintained and improved its capacity to cover interest obligations, helped by reducing interest expenses. The recovery in EBIT in 2021 strengthened the financial position as reflected in the highest interest coverage ratio during the period under review.
Fixed Charge Coverage
Illinois Tool Works Inc., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 2,694) | 2,109) | 2,521) | 2,563) | 1,687) | |
| Add: Income tax expense | 632) | 595) | 767) | 831) | 1,583) | |
| Add: Interest expense | 202) | 206) | 221) | 257) | 260) | |
| Earnings before interest and tax (EBIT) | 3,528) | 2,910) | 3,509) | 3,651) | 3,530) | |
| Add: Rental expense for operating leases | 118) | 113) | 113) | 124) | 120) | |
| Earnings before fixed charges and tax | 3,646) | 3,023) | 3,622) | 3,775) | 3,650) | |
| Interest expense | 202) | 206) | 221) | 257) | 260) | |
| Rental expense for operating leases | 118) | 113) | 113) | 124) | 120) | |
| Fixed charges | 320) | 319) | 334) | 381) | 380) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 11.39 | 9.48 | 10.84 | 9.91 | 9.61 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | -0.64 | -4.75 | — | — | — | |
| Caterpillar Inc. | 12.73 | 6.58 | — | — | — | |
| Eaton Corp. plc | 10.40 | 6.24 | — | — | — | |
| GE Aerospace | -0.22 | 1.93 | — | — | — | |
| Honeywell International Inc. | 13.67 | 11.49 | — | — | — | |
| Lockheed Martin Corp. | 9.95 | 11.12 | — | — | — | |
| RTX Corp. | 3.66 | -0.22 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Capital Goods | 3.06 | 1.66 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.44 | 1.12 | — | — | — | |
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 2021 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,646 ÷ 320 = 11.39
2 Click competitor name to see calculations.
- Earnings Before Fixed Charges and Tax
- The earnings before fixed charges and tax demonstrated a fluctuating trend over the five-year period. There was a modest increase from 3650 million USD in 2017 to 3775 million USD in 2018. However, a decline followed in 2019 and 2020, reaching a low of 3023 million USD in 2020. Subsequently, the earnings rebounded in 2021, rising back to 3646 million USD, close to the initial 2017 level.
- Fixed Charges
- Fixed charges remained relatively stable throughout the years, with a slight decrease observed from 380 million USD in 2017 to 320 million USD in 2021. The lowest fixed charges occurred in 2020 at 319 million USD, indicating limited variability in fixed financial obligations despite changes in earnings.
- Fixed Charge Coverage Ratio
- The fixed charge coverage ratio showed an overall upward trend, reflecting improving ability to cover fixed charges with earnings. Starting at 9.61 in 2017, it increased to 9.91 in 2018 and further to 10.84 in 2019. There was a dip in 2020 to 9.48, coinciding with the lowest earnings before fixed charges and tax, but it sharply rose to 11.39 in 2021, indicating a stronger margin of safety in covering fixed charges.