Illinois Tool Works (ITW) 10-K risk factor changes: FY2021 vs FY2020

These measures and the continued volatility of the global economy adversely affected our results of operations for 2020, and while [removed: we expect that] [added: most of] our [added: segments achieved strong] results [removed: will continue to be adversely impacted beyond 2020,] [added: in 2021,] we are currently unable to quantify the full and long-term impact of the pandemic on our financial condition, results of operations and liquidity.

Further actions may be required in response to evolving conditions such as renewed travel restrictions, quarantine, and stay-at-home orders as well as uncertainty regarding the [added: emergence of new variants and the] timing of widespread availability of [removed: a vaccine.][added: testing, vaccines and treatments.]

We cannot predict [removed: when or] whether [removed: these businesses will resume full operations or whether] there will be [removed: related or unrelated] [added: pandemic-related] facility closures in the future.

The COVID-19 pandemic continues to have the potential to significantly and extendedly alter demand for our products and to disrupt our supply chain as a result of shifts in demand, illness, quarantine, travel [removed: restrictions] [added: restrictions, transportation disruptions, increased border controls] or [added: closures, or] financial hardship.

We have been able to procure the critical raw materials and components necessary to continue production, but [added: prices for some raw materials have increased significantly and] there is no guarantee that we will be able to [removed: do so] [added: procure critical raw materials] in the [removed: future.][added: future without materially adversely impacting our operating margins.]

If the Company suffers a liquidity shortage, we may be forced to reduce our workforce, decrease or suspend dividend payments [removed: to our stockholders] or [added: share repurchases, or] adopt other measures.

Slower economic growth, financial market instability, [added: inflation,] natural disasters, public health crises (such as the COVID-19 pandemic), [removed: high unemployment,] [added: labor market challenges, supply chain disruptions,] government [added: deficit reduction, sequestration and other austerity measures impacting the]

[removed: deficit reduction, sequestration and other austerity measures impacting the] markets the Company serves can adversely affect the [removed: Company’s] [added: Company's] businesses by reducing demand for the Company's products and services, limiting financing available to the Company's customers, causing production delays, increasing order cancellations and the difficulty in collecting accounts receivable, increasing price competition, or increasing the risk that counterparties to the Company's contractual arrangements will become insolvent or otherwise unable to fulfill their obligations.

- transportation delays and [removed: interruptions;][added: disruptions;]

The [removed: recent] global geopolitical and trade environment has resulted in raw material inflation and potential for increased escalation of domestic and international tariffs and retaliatory trade policies.

Additionally, other core activities of the enterprise strategy related to portfolio discipline and organic growth, including customer-back innovation and strategic sales excellence, may not [removed: have the desired impact on future operating results.]

Share [removed: repurchases, which the Company plans to resume in 2021 after they were temporarily suspended in March of 2020,] [added: repurchases] constitute a significant component of the [removed: Company’s] [added: Company's] capital allocation strategy.

Important factors that could cause the Company to limit, suspend or delay its share repurchases include unfavorable trading market conditions, the price of the Company's common stock, the nature of other investment opportunities presented to the Company from time to time, [added: regulatory developments relating to share repurchase programs,] the ability to obtain financing at attractive rates and the availability of U.S. cash.

The Company's intellectual property rights may be challenged or [removed: infringed upon by third parties, particularly in countries where property rights are not highly developed or protected, or] the Company may be unable to maintain, renew or enter into new license agreements with third-party owners of intellectual property on reasonable terms.

Unauthorized use of the Company's intellectual property rights [added: by third parties, particularly in countries where property rights are not highly developed] or [added: protected, or] inability to preserve existing intellectual property rights could adversely impact the Company's competitive position and results of operations.

The Company has recorded significant goodwill and other identifiable intangible assets on its balance sheet as a result of [removed: acquisitions.][added: acquisitions, including the acquisition of the MTS Test & Simulation business in 2021.]

[removed: Significant] [added: The Company has experienced supply chain] disruptions [added: related] to the [added: COVID-19 pandemic, and continued disruptions to the] supply chain could adversely affect the Company's [added: ability to meet commitments to customers.]

[removed: Prices for raw materials necessary for production have fluctuated significantly in the past and significant] [added: Significant price] increases could adversely affect the Company's results of operations and [removed: profit] [added: operating] margins.

In particular, [added: inflation,] changes in trade policies, the imposition of duties and tariffs, potential retaliatory countermeasures, public health crises (such as the COVID-19 pandemic) and severe weather events could adversely impact the price or availability of raw materials.

[removed: Due to pricing pressure or other factors, the] [added: The] Company may not be able to pass along increased raw material and components parts prices to its customers in the form of price increases or its ability to do so could be delayed.

[removed: In addition,] [added: Although the cyber-attacks experienced to date have not had a material impact, future] security breaches could result in unauthorized disclosure of confidential information or personal data belonging to our employees, partners, customers or suppliers, which could cause reputational and legal harm as we are subject to data privacy laws, including the EU General Data Protection Regulation, in the various countries in which we operate.

The Company has engaged in various acquisitions in the past, [removed: and could choose to acquire additional businesses in the future,] such as the recently [removed: announced agreement with Amphenol Corporation ("Amphenol"), whereby the Company will acquire] [added: completed acquisition of] the [added: MTS] Test & Simulation [removed: business of MTS Systems Corporation ("MTS") following] [added: business, and could choose to acquire additional businesses in] the [removed: closing of Amphenol's acquisition of MTS.][added: future.]

The Company [added: has] had significant divestiture activity in [removed: 2012, 2013 and 2014] [added: the past] in accordance with its portfolio management initiative, and it [removed: divested additional businesses in 2019 as it] continues portfolio refinements to maintain portfolio discipline.

[removed: Potential adverse] [added: Adverse] outcomes in legal proceedings [added: or enforcement actions] may adversely affect results.

Even if it maintains adequate insurance programs, [removed: claims] [added: claims, judgements, fines or settlements] could have a material adverse effect on the Company's financial condition, liquidity and results of operations and on its ability to obtain suitable, adequate or cost-effective insurance in the future.

In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply of energy, product demand and manufacturing and could increase insurance and other operating [removed: costs.][added: costs, including, potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events.]

[removed: Any] [added: As recent years have seen a substantial increase in the global enforcement of anti-corruption laws and adoption of new human rights laws, any] such improper actions could subject the Company to civil or criminal investigations, could lead to substantial civil or criminal monetary and non-monetary penalties against the Company or its subsidiaries, or could damage its reputation.

[removed: Forward-looking statements may be identified by the use of words such as "believe," "expect," "plan," "intend," "may," "strategy," "prospects," "estimate," "will," "should," "could," "project," "target,"] "anticipate," "guidance," "forecast," and other similar words, [removed: including,] [added: and may include,] without limitation, statements regarding the [added: duration and] potential effects of the COVID-19 [removed: pandemic,] [added: pandemic and global supply chain challenges,] related government actions and the Company's strategy in response thereto on the Company's business, future financial [added: and operating] performance, [added: free cash flow,] economic and regulatory conditions in various geographic regions, the impact of foreign currency fluctuations, the timing and amount of benefits from the Company's enterprise strategy initiatives, the timing and amount of [added: dividends and] share repurchases, the protection of the Company's intellectual property, the likelihood of future goodwill or intangible asset impairment charges, the impact of adopting new accounting pronouncements, the adequacy of internally generated funds and credit facilities to service debt and finance the Company's capital allocation priorities, the sufficiency of U.S. generated cash to fund cash requirements in the U.S., the cost and availability of additional financing, the availability of raw materials and energy and the impact of [removed: tariffs and] raw material cost inflation, [added: enterprise initiatives,] the Company's portion of future benefit payments related to pension and postretirement benefits, the [removed: Company’s] [added: Company's] information technology infrastructure, potential acquisitions and divestitures and the expected performance of acquired businesses and impact of divested businesses, the impact of U.S. [added: and global] tax legislation and the estimated timing and amount related to the resolution of tax matters, the cost of compliance with environmental regulations, the impact of failure of the Company's employees to comply with applicable laws and regulations, and the outcome of outstanding legal proceedings.

- multiple and potentially conflicting laws, regulations and policies that are subject to change;

have the desired impact on future operating results.

Prices for raw materials necessary for production have fluctuated significantly in the past and the Company is currently experiencing upward pricing pressure on raw materials such as steel, resins and chemicals.

Minor security breaches have occurred from time to time and are expected to occur in the future.

The Company's businesses expose it to potential costs and adverse rulings associated with commercial, intellectual property, toxic tort and other product liability claims.

The Company's global operations also subject it to government investigations in numerous countries.

We cannot predict the outcome of claims, investigations and lawsuits and we may incur costs, judgments or fines or enter into settlements that could adversely impact our businesses, reputation or future financial results.

Forward-looking statements may be identified by the use of words such as "believe," "expect," "plans," "intend," "may," "strategy," "prospects," "estimate," "will," "should," "could," "project," "target,"

In addition, because the pandemic has decreased customer demand in certain of our end markets, some of our businesses are operating at reduced capacity.

ability to meet commitments to customers.

The Company's businesses expose it to potential toxic tort and other types of product liability claims that are inherent in the design, manufacture and sale of its products and the products of third-party vendors.

As of December 31, [removed: 2020,] [added: 2021,] the Company employed approximately [removed: 43,000] [added: 45,000] people.

[removed: ITW's innovation efforts are] focused on understanding customer needs, particularly those in "80" markets with solid long-term growth fundamentals, and creating unique solutions to address those needs.

These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately [removed: 18,500] [added: 19,300] granted and pending patents;

- The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at ITW, delivering an average of one percent reduction in spend each year from 2013 through [removed: 2020] [added: 2021] and continues to be a key contributor to the Company's ongoing enterprise strategy.

[removed: The ITW Business Model and unique set of capabilities are a source of strong and enduring competitive advantage,] but for the Company to truly [removed: finish the job and] reach its full potential, every one of its divisions must also be operating at its full potential.

However, due to the COVID-19 [removed: pandemic in 2020,] [added: pandemic,] the Company [removed: has] deferred any further significant divestiture activity until [removed: market conditions normalize.][added: 2022 or later.]

Financial Statements and Supplementary Data for [removed: more] [added: further] information regarding [removed: the Company's divestitures.][added: divestiture activity.]

Driving strong operational excellence in the quality of 80/20 Front-to-Back practice across the Company, division by division, will produce further customer-facing performance improvement in a number of [removed: the Company's] divisions and additional structural margin expansion at the enterprise level.

While it was the challenges brought about by the COVID-19 pandemic that dominated the Company's attention [added: starting] in 2020, it was the collection of capabilities and competitive advantages that have been built and honed over the past [removed: eight] [added: nine] years through the execution of ITW's enterprise strategy that provided the Company with the options to respond.

[removed: From] [added: For] the [removed: early days] [added: duration] of the [added: COVID-19] pandemic, the Company [removed: focused its efforts] [added: is focusing] on the following priorities: (1) protect the health and support the well-being of ITW's colleagues; (2) continue to serve the Company's customers with excellence to the best of its ability; (3) maintain financial strength, liquidity and strategic optionality; and (4) leverage the Company's strengths to position it to fully participate in the recovery.

As the Company continues to make progress toward its full potential, the Company will explore opportunities to reinforce or further expand the long-term organic growth potential of ITW through the addition of selective high-quality acquisitions, such as the [removed: recently announced agreement with Amphenol Corporation ("Amphenol"), whereby the Company will acquire] [added: acquisition of] the Test & Simulation business of MTS Systems Corporation ("MTS") [removed: following the closing of Amphenol's acquisition of MTS.][added: from Amphenol Corporation on December 1, 2021.]

[removed: Upon completion] [added: The operating results] of [removed: this acquisition, this] [added: the MTS Test & Simulation] business [removed: will be] [added: were] reported within the Company's Test & Measurement and Electronics segment.

- Product line simplification (PLS) \- focuses businesses on eliminating the complexity and overhead costs associated with smaller product lines and customers, and focuses businesses on supporting and growing their largest customers and product [removed: lines; in the short-term, PLS may result in a decrease in revenue and overhead costs while improving operating margin.][added: lines.]

The [removed: primary driver of the Company's] [added: Company delivered strong] financial [removed: performance is] [added: results in 2021 primarily due to] the continued successful execution of enterprise [removed: initiatives] [added: initiatives, including the "Win the Recovery" actions initiated over the course of the past year,] and continued focus on the highly differentiated ITW Business Model.

[removed: Additionally, all segments, other than the] [added: The] Food Equipment, Automotive OEM and Welding [removed: segments, which] [added: segments] had more pronounced [added: unfavorable] impacts from the COVID-19 [removed: pandemic, had operating margins that improved compared to the prior year.][added: pandemic in 2020.]

Refer to the Cash Flow [removed: and After-tax Return on Average Invested Capital sections] [added: section] of Liquidity and Capital Resources for a reconciliation of [removed: these] [added: free cash flow, which is a] non-GAAP [removed: measures.][added: measure.]

[removed: For the duration of] [added: As] the [removed: COVID-19 pandemic,] [added: global pandemic continues,] the Company [removed: is focusing] [added: continues to focus its efforts] on [removed: the following priorities:] (1) [removed: protect] [added: protecting] the health and support the well-being of ITW's colleagues; (2) [removed: continue to serve] [added: serving] the Company's customers with [removed: excellence to the best of its ability;] [added: excellence;] (3) maintain financial strength, liquidity and strategic optionality; and (4) leverage the Company's strengths to position it to fully participate in the [removed: recovery phase.][added: recovery.]

[removed: The Company has adapted] customer service systems and practices to seamlessly serve its customers under [removed: “work] [added: "work] from [removed: home”] [added: home"] requirements in many parts of the world.

While the vast majority of the Company's facilities [added: have] remained open and operational during the [removed: pandemic in 2020,] [added: pandemic,] many of these facilities were operating at a reduced [removed: capacity.][added: capacity at various times since the outset of the pandemic.]

The full extent of the COVID-19 outbreak and its impact on the markets served by the Company and on the Company's operations and financial position continues to be highly [removed: uncertain.][added: uncertain as conditions continue to fluctuate around the world, with vaccine administration rising in certain regions and spikes in infections (including the spread of variants) also being experienced.]

A prolonged outbreak [removed: will] [added: could] continue to interrupt the operations of the Company and its customers and suppliers.

[removed: The] [added: As the global trade environment, including the regulatory environment, continues to evolve, the] Company will continue to evaluate the impact of enacted and proposed tariffs on its businesses, as well as pricing actions to mitigate the impact of any raw material cost increases resulting from these tariffs.

The Company's consolidated results of operations for [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] were as follows:

| | | | 2020 | | | | | | 2019 | | | | | | | | | | | | Inc (Dec) | | | | | | Organic | | | [removed: Acquisition/ Divestiture] [added: Acquisition/Divestiture] | | | Restructuring | | | [removed: | | |] Foreign Currency | | | Total | | |

Refer to Note [removed: 6.][added: 4.]

Income [removed: Taxes in Item 8.][added: Taxes, Note 10.]

- [removed: Free] [added: Operating] cash flow was [added: $2.8 billion and free cash flow was] $2.6 billion for 2020.

Refer to the Cash Flow section of Liquidity and Capital Resources for a reconciliation of [removed: this] [added: free cash flow, which is a] non-GAAP measure.

The Company temporarily suspended its share repurchase program starting in March 2020 due to the COVID-19 [removed: pandemic.][added: pandemic, and resumed share repurchases in 2021.]

[removed: -] [added: |] After-tax return on average invested capital [removed: was 26.2% for 2020.][added: | | | 29.5 | | % | | | | 26.2 | | % | | | | 28.7 | | % |]

| | | | [removed: 2019] [added: 2021] | | | | | | [removed: 2018] [added: 2020] | | | | | | | | | | | | Inc (Dec) | | | | | | Organic | | | Acquisition/ Divestiture | | | Restructuring | | | | | | Foreign Currency | | | Total | | |

| Operating margin % | | | 24.1 | | % | | | | [removed: 24.3] [added: 22.9] | | % | | | | | | | | | | [removed: (20)] [added: 120] bps | | | | | | [removed: 10] [added: 100] bps | | | — | | | [removed: (30)] [added: 20] bps | | | | | | — | | | [removed: (20)] [added: 120] bps | | |

- Operating revenue [removed: declined] [added: grew] due to [added: higher organic revenue and] the [removed: unfavorable] [added: favorable] effect of foreign currency [removed: translation, lower organic revenue and divestitures.][added: translation.]

[removed: Product] [added: Additionally, product] line simplification activities reduced organic revenue by [removed: 60] [added: 20] basis points.

◦North American organic revenue [removed: decreased 1.8% as a decline in the Automotive OEM, Specialty Products, Welding and Polymers & Fluids segments was partially offset by] [added: increased 13.5% due to] growth in [added: all segments, primarily driven by] the [removed: Food Equipment,] [added: Welding,] Test & Measurement and Electronics and [removed: Construction Products] [added: Food Equipment] segments.

◦Europe, Middle East and Africa organic revenue [removed: decreased 2.2% as five segments declined, partially offset by] [added: increased 8.7% due to] growth in [added: six segments, primarily driven by] the Food Equipment and Construction Products segments.

[removed: Excluding the unfavorable impact of higher restructuring expenses of 30 basis points, operating] [added: - Operating] margin [added: of 24.1%] increased [removed: 10] [added: 120] basis points primarily due to [added: positive operating leverage of 250 basis points and] benefits from the Company's enterprise initiatives [removed: that contributed 120 basis points and favorable price/cost] of [removed: 10] [added: 110] basis points, partially offset by [removed: negative operating leverage] [added: unfavorable price/cost] of [removed: 50] [added: 150] basis [removed: points, product mix] [added: points] and higher [added: overhead expenses, including] employee-related expenses.

- The [added: Company's] effective tax rate for [added: 2021, 2020 and] 2019 was [removed: 23.3% compared to 24.5% in 2018.][added: 19.0%, 22.0% and 23.3%, respectively.]

Additionally, the effective tax rates for [removed: 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] included [removed: $28] [added: discrete income tax benefits of $17 million, $27] million and [removed: $10] [added: $28] million, respectively, related to excess tax benefits from stock-based compensation.

- [removed: Free] [added: Operating] cash flow was [removed: $2.7] [added: $2.6] billion [added: and free cash flow was $2.3 billion] for [removed: 2019.][added: 2021.]

ITW's innovation efforts are

The ITW Business Model and unique set of capabilities are a source of strong and enduring competitive advantage,

The Company intends to reinitiate the divestiture process in 2022 for certain businesses with combined annual revenues of approximately $0.5 billion.

The Company expects these efforts to contribute meaningfully to

accelerate its progress toward full-potential organic growth.

Acquisitions in Item 8.

Financial Statements and Supplementary Data for further information regarding this acquisition.

In the short-term, PLS may result in a decrease in revenue and overhead costs while improving operating margin.

The Company has adapted

Despite rising raw material costs and a challenging global supply chain environment, the Company generated operating revenue growth of 15.0 percent and organic revenue growth of 12.3 percent, as all segments had organic revenue growth in 2021.

Organic revenue for the Automotive OEM segment grew mid-single digits, but was adversely impacted by auto production reductions associated with the supply chain challenges affecting its customers, especially during the second half of 2021.

Operating income grew 20.6 percent in 2021.

Operating margin was 24.1 percent in 2021 as all segments achieved margin expansion compared to the prior year period.

On December 1, 2021, the Company completed the acquisition of the MTS Test & Simulation business for a purchase price of $750 million, subject to certain closing adjustments.

The MTS Test & Simulation business had operating revenue of $46 million for the one month ended December 31, 2021.

The Company expects the MTS Test & Simulation business to be neutral to diluted earnings per share in the next twelve months, but expects improved earnings and operating margin performance in later years through the application of the Company's 80/20 Front-to-Back process.

The operating results of the MTS Test & Simulation business were reported within the Test & Measurement and Electronics segment.

The acquisition of the MTS Test & Simulation business did not have a material impact on the Company's results of operations or financial position for any period presented.

Acquisitions in Item 8.

2021 compared to 2020

| Operating revenue | | | $ | 14,455 | | | | | $ | 12,574 | | | | | | | | | | | 15.0 | | % | | | | 12.3 | | % | 0.4 | | % | — | | % | | | | 2.3 | | % | 15.0 | | % |

| Operating income | | | $ | 3,477 | | | | | $ | 2,882 | | | | | | | | | | | 20.6 | | % | | | | 17.0 | | % | 0.2 | | % | 0.8 | | % | | | | 2.6 | | % | 20.6 | | % |

- Organic revenue increased 12.3% as the Company saw continued improvement in both the breadth and pace of the recovery.

The Automotive OEM segment was essentially flat.

◦Asia Pacific organic revenue increased 13.5% due to growth in all segments.

China organic revenue grew 15.1% with growth in six segments, partially offset by a decline in the Construction Products segment.

- Operating income of $3.5 billion increased 20.6% primarily due to higher organic revenue.

- The Company's effective tax rate was 19.0% in 2021 compared to 22.0% in 2020.

The 2021 effective tax rate benefited from a discrete income tax benefit of $21 million in the third quarter related to the utilization of capital losses and a discrete income tax benefit of $112 million in the second quarter of 2021 related to the remeasurement of net deferred tax assets due to the enactment of the U.K. Finance Bill 2021, which increases the U.K. income tax rate from 19% to 25% effective April 1, 2023.

- Diluted earnings per share (EPS) of $8.51 increased 28.4%.

Excluding the favorable impact of the $21 million discrete income tax benefit in the third quarter of 2021 and the $112 million discrete income tax benefit in the second quarter of 2021, EPS increased 22.0%.

- The Company increased the quarterly dividend on common stock from $1.14 to $1.22 per share in 2021, or from $4.56 to $4.88 per share on an annualized basis.

Refer to Note 7.

on a quarterly and annual basis.

Unallocated expenses in 2021 are higher primarily due to higher employee-related expenses and transaction costs related to the previously discussed acquisition of the MTS Test & Simulation business.

2021 compared to 2020

| Operating revenue | | | $ | 2,800 | | | | | $ | 2,571 | | | | | | | | | | | 8.9 | | % | | | | 5.8 | | % | — | | % | — | | % | 3.1 | | % | 8.9 | | % |

| Operating income | | | $ | 545 | | | | | $ | 457 | | | | | | | | | | | 19.3 | | % | | | | 13.0 | | % | — | | % | 3.0 | | % | 3.3 | | % | 19.3 | | % |

- Organic revenue increased 5.8%.

The impact of Automotive OEM customers adjusting production schedules to account for the shortage of semiconductor chips and other components negatively impacted organic revenue in 2021, especially during the second half of the year.

The Company expects any earnings per share dilution from divestitures would be

offset by incremental share repurchases.

These efforts are just beginning to take hold and the Company expects them to contribute meaningfully to accelerate its progress toward full-potential organic growth.

The Company delivered solid financial results in 2020 despite the extraordinary challenges posed by the COVID-19 pandemic, as the Company experienced solid recovery progress in many of its end markets in the third and fourth quarters of 2020 versus the second quarter.

In 2020, despite the decline in operating revenue of 10.9 percent, the Company generated operating income of $2.9 billion, operating margin was 22.9 percent, free cash flow was $2.6 billion and after-tax return on average invested capital was 26.2 percent.

Refer to the After-tax Return on Average Invested Capital section of Liquidity and Capital Resources for a reconciliation of this non-GAAP measure.

2019 compared to 2018

| Operating revenue | | | $ | 14,109 | | | | | $ | 14,768 | | | | | | | | | | | (4.5) | | % | | | | (1.9) | | % | (0.3) | | % | — | | % | | | | (2.3) | | % | (4.5) | | % |

| Operating income | | | $ | 3,402 | | | | | $ | 3,584 | | | | | | | | | | | (5.1) | | % | | | | (1.3) | | % | (0.1) | | % | (1.4) | | % | | | | (2.3) | | % | (5.1) | | % |

- Organic revenue decreased 1.9% primarily driven by a decline in the Automotive OEM, Specialty Products, Welding and Construction Products segments.

◦Asia Pacific organic revenue declined 1.6% as a decrease in the Construction Products, Automotive OEM, Food Equipment and Test & Measurement and Electronics segments was partially offset by an increase in the Welding, Polymers & Fluids and Specialty Products segments.

- Operating income of $3.4 billion decreased 5.1% primarily due to unfavorable foreign currency translation, higher restructuring expenses and lower organic revenue.

- Operating margin of 24.1% decreased 20 basis points.

The 2019 effective tax rate benefited from a discrete tax benefit of $21 million in the third quarter for the U.S. federal provision to return adjustment resulting primarily from changes in estimates related to the "Tax Cuts and Jobs Act." The 2018 effective tax rate benefited from a discrete tax benefit of $37 million in the third quarter related to the release of a valuation allowance against the deferred tax assets of a non-U.S. subsidiary, which was partially offset by a discrete tax charge of $22 million in the third quarter related to foreign tax credits.

- Diluted earnings per share (EPS) of $7.74, an increase of 1.8%, included a $0.09 gain in 2019 from the disposal of businesses.

- The Company increased the quarterly dividend by 7.0% in 2019.

- After-tax return on average invested capital was 28.7% for 2019.

| Operating revenue | | | $ | 3,063 | | | | | $ | 3,338 | | | | | | | | | | | (8.2) | | % | | | | (5.4) | | % | — | | % | — | | % | (2.8) | | % | (8.2) | | % |

| Operating income | | | $ | 659 | | | | | $ | 751 | | | | | | | | | | | (12.2) | | % | | | | (7.0) | | % | — | | % | (2.6) | | % | (2.6) | | % | (12.2) | | % |

| Operating margin % | | | 21.5 | | % | | | | 22.5 | | % | | | | | | | | | | (100) bps | | | | | | (40) bps | | | — | | | (60) bps | | | — | | | (100) bps | | |

- Organic revenue declined 5.4% versus worldwide auto builds which decreased 6%.

Additionally, organic revenue was negatively impacted by approximately 100 basis points due to unexpected customer shutdowns in North America in the second half of 2019.

Additionally, 2019 was negatively impacted by unexpected customer shutdowns.

| Operating revenue | | | $ | 2,188 | | | | | $ | 2,214 | | | | | | | | | | | (1.2) | | % | | | | 1.1 | | % | — | | % | — | | % | (2.3) | | % | (1.2) | | % |

| Operating income | | | $ | 578 | | | | | $ | 572 | | | | | | | | | | | 1.1 | | % | | | | 4.5 | | % | — | | % | (1.2) | | % | (2.2) | | % | 1.1 | | % |

| Operating revenue | | | $ | 2,121 | | | | | $ | 2,171 | | | | | | | | | | | (2.3) | | % | | | | (0.3) | | % | (0.2) | | % | — | | % | | | | (1.8) | | % | (2.3) | | % |

| Operating income | | | $ | 542 | | | | | $ | 523 | | | | | | | | | | | 3.7 | | % | | | | 5.7 | | % | — | | % | (0.2) | | % | | | | (1.8) | | % | 3.7 | | % |

- Operating revenue for 2019 included $58 million related to the business divested in 2019.

- Organic revenue decreased 0.3% in 2019.

Excluding semi-conductor, the test and measurement businesses increased 3.5%.

◦Electronics organic revenue grew 0.4%.

The electronics assembly businesses decreased 1.4% primarily due to lower demand in Asia.

| Operating revenue | | | $ | 1,638 | | | | | $ | 1,691 | | | | | | | | | | | (3.1) | | % | | | | (1.2) | | % | (1.1) | | % | — | | % | (0.8) | | % | (3.1) | | % |

| Operating income | | | $ | 453 | | | | | $ | 474 | | | | | | | | | | | (4.4) | | % | | | | (2.1) | | % | (0.4) | | % | (1.7) | | % | (0.2) | | % | (4.4) | | % |

- Operating revenue for 2019 included $62 million related to the business divested in 2019.

- Organic revenue decreased 1.2% as equipment declined 2.6%, partially offset by growth in consumables of 0.8%.

| Operating revenue | | | $ | 1,669 | | | | | $ | 1,724 | | | | | | | | | | | (3.2) | | % | | | | — | | % | (0.4) | | % | — | | % | | | | (2.8) | | % | (3.2) | | % |

| Operating income | | | $ | 381 | | | | | $ | 369 | | | | | | | | | | | 3.1 | | % | | | | 7.9 | | % | (0.1) | | % | (1.5) | | % | | | | (3.2) | | % | 3.1 | | % |

- Organic revenue was flat as growth in the polymers businesses was offset by declines in the automotive aftermarket and fluids businesses.

| Operating revenue | | | $ | 1,625 | | | | | $ | 1,700 | | | | | | | | | | | (4.4) | | % | | | | (1.0) | | % | — | | % | — | | % | (3.4) | | % | (4.4) | | % |

Refer to Note [removed: 10.][added: 11.]

The cumulative unrealized pre-tax gain (loss) recorded in Accumulated other comprehensive income (loss) related to the net investment hedge was a [removed: loss] [added: gain] of [removed: $120] [added: $183] million as of December 31, [removed: 2020] [added: 2021] and a [removed: gain] [added: loss] of [removed: $239] [added: $120] million as of December 31, [removed: 2019.][added: 2020.]

As of December 31, [removed: 2020,] [added: 2021,] the Company employed approximately [removed: 43,000] [added: 45,000] people.

This segment primarily serves the electronics, general industrial, [removed: industrial capital goods,] automotive original equipment manufacturers and tiers, [added: industrial capital goods,] energy and consumer durables markets.

These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately [removed: 18,500] [added: 19,300] granted and pending patents;

- The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at ITW, delivering an average of one percent reduction in spend each year from 2013 through [removed: 2020] [added: 2021] and continues to be a key contributor to the Company's ongoing enterprise strategy.

The ITW Business Model and unique set of capabilities are a source of strong and enduring competitive advantage, but for the Company to truly [removed: finish the job and] reach its full potential, every one of its divisions must also be operating at its full potential.

However, due to the COVID-19 [removed: pandemic in 2020,] [added: pandemic,] the Company [removed: has] deferred any further significant divestiture activity until [removed: market conditions normalize.][added: 2022 or later.]

Financial Statements and Supplementary Data for [removed: more] [added: further] information regarding [removed: the Company's divestitures.][added: divestiture activity.]

Driving strong operational excellence in the quality of 80/20 Front-to-Back practice across the Company, division by division, will produce further customer-facing performance improvement in a number of [removed: the Company's] divisions and additional structural margin expansion at the enterprise level.

While it was the challenges brought about by the COVID-19 pandemic that dominated the Company's attention [added: starting] in 2020, it was the collection of capabilities and competitive advantages that have been built and honed over the past [removed: eight] [added: nine] years through the execution of ITW's enterprise strategy that provided the Company with the options to respond.

[removed: From the early days of] [added: As] the [removed: pandemic,] [added: global pandemic continues,] the Company [removed: focused] [added: continues to focus] its efforts on [removed: the following priorities:] (1) [removed: protect] [added: protecting] the health and support the well-being of ITW's colleagues; (2) [removed: continue to serve] [added: serving] the Company's customers with [removed: excellence to the best of its ability;] [added: excellence;] (3) maintain financial strength, liquidity and strategic optionality; and (4) leverage the Company's strengths to position it to fully participate in the recovery.

[removed: These efforts are just beginning to take hold and the] [added: The] Company expects [removed: them] [added: these efforts] to contribute meaningfully to accelerate its progress toward full-potential organic growth.

As the Company continues to make progress toward its full potential, the Company will explore opportunities to reinforce or further expand the long-term organic growth potential of ITW through the addition of selective high-quality acquisitions, such as the [removed: recently announced agreement with Amphenol Corporation ("Amphenol"), whereby the Company will acquire] [added: acquisition of] the Test & Simulation business of MTS Systems Corporation ("MTS") [removed: following the closing of Amphenol's acquisition of MTS.][added: from Amphenol Corporation on December 1, 2021.]

[removed: Upon completion] [added: The operating results] of [removed: this acquisition, this] [added: the MTS Test & Simulation] business [removed: will be] [added: were] reported within the Company's Test & Measurement and Electronics segment.

Total backlog was [removed: $1.6] [added: $2.9] billion and [removed: $1.5] [added: $1.6] billion as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] respectively.

Due to the predominately short-term nature of the Company's arrangements with its customers, backlog orders [removed: scheduled for shipment] [added: expected to be completed] beyond calendar year [removed: 2021 were] [added: 2022 are] not [removed: material] [added: significant and represent approximately 5% of total backlog] as of December 31, [removed: 2020.][added: 2021.]

The Company owns approximately [removed: 3,800] [added: 3,900] unexpired U.S. patents and [removed: 9,000] [added: 9,700] foreign patents covering articles, methods and machines.

Some of the Company's more significant trademarks include ITW, which is also used in conjunction with the trademarks of many of the Company's businesses; Deltar and Shakeproof in the Automotive OEM segment; Hobart in the Food Equipment segment; Instron [added: and MTS] in the Test & Measurement and Electronics segment; Miller in the Welding segment; Rain-X and Permatex in the Polymers & Fluids segment; Paslode in the Construction Products segment; and Hi-Cone in the Specialty Products segment.

As of December 31, [removed: 2020,] [added: 2021,] the Company employed approximately [removed: 43,000] [added: 45,000] people, with approximately [removed: 16,000] [added: 17,000] people located in the United States and the remainder in multiple other countries where the Company's businesses operate.

ITW's Enterprise Safety Strategy is based on the following core principles: (i) a goal of zero [removed: accidents,] [added: accidents;] (ii) shared ownership for safety (business and individual); (iii) proactive approach focused on accident prevention; and (iv) continuous improvement philosophy.

Among its many actions and initiatives, the Company redesigned production processes to ensure proper social distancing practices, adjusted shift schedules and assignments to help colleagues who have child and elder care needs, and implemented aggressive workplace sanitation practices and a coordinated response to ensure access to personal protective equipment to [added: minimize infection risk.]

[removed: The] [added: Moreover, the Company's commitment to its employees was reinforced when the] Company [removed: also] decided not to initiate any enterprise-wide employment reduction mandates or programs at any point in [removed: 2020.][added: 2020 or 2021.]

[removed: Less than three percent of the Company's U.S. employees are represented by a labor union, while outside] [added: Outside] the U.S., employees in certain countries are represented by an employee representative organization, such as a union, works council or employee association.

The Company's [added: Sustainability Report (formerly called the] Corporate Social Responsibility [removed: Report,] [added: Report),] published annually and available on the Company's website (www.itw.com), contains more information about the Company's human capital and its programs, goals and progress.

Information [added: in the Sustainability Report or] on the Company's website is not incorporated herein by reference.

Executive Officers of the Company as of February [removed: 12, 2021] [added: 11, 2022] were as follows:

| Name | | | Age | | | Present Position | | | Year Elected to Present Position | | | Other Positions Held During [removed: 2016-2020] [added: 2017-2021] | | |

| E. Scott Santi | | | [removed: 59] [added: 60] | | | Chairman & Chief Executive Officer | | | 2015 | | | | | |

| Axel Beck | | | [removed: 55] [added: 56] | | | Executive Vice President | | | 2020 | | | [removed: Vice President/General Manager, food equipment businesses, 2011-2016,] Group President, food equipment businesses, [removed: 2016-2020] [added: 2016-2020.] | | |

| Kenneth Escoe | | | [removed: 45] [added: 46] | | | Executive Vice President | | | 2020 | | | Vice President/General Manager, [removed: welding businesses, 2014-2016, Vice President/General Manager,] specialty products businesses, [removed: 2016-2019,] [added: 2016-2019;] Group President, specialty products businesses, [removed: 2019-2020] [added: 2019-2020.] | | |

| John R. Hartnett | | | [removed: 60] [added: 61] | | | Executive Vice President | | | 2012 | | | | | |

| Michael M. Larsen | | | [removed: 52] [added: 53] | | | Senior Vice President & Chief Financial Officer | | | 2013 | | | | | |

| Mary K. Lawler | | | [removed: 55] [added: 56] | | | Senior Vice President & Chief Human Resources Officer | | | 2014 | | | | | |

| Christopher O'Herlihy | | | [removed: 57] [added: 58] | | | Vice Chairman | | | 2015 | | | | | |

| Randall J. Scheuneman | | | [removed: 53] [added: 54] | | | Vice President & Chief Accounting Officer | | | 2009 | | | | | |

| Lei Schlitz | | | [removed: 54] [added: 55] | | | Executive Vice President | | | 2015 | | | | | |

| Sharon Szafranski | | | [removed: 54] [added: 55] | | | Executive Vice President | | | 2020 | | | Vice President/General Manager, [removed: food equipment businesses, 2010-2016, Vice President/General Manager,] test & measurement and electronics businesses, [removed: 2016-2019,] [added: 2016-2019;] Group President, test & measurement and electronics businesses, [removed: 2019-2020] [added: 2019-2020.] | | |

| Michael R. Zimmerman | | | [removed: 60] [added: 61] | | | Executive Vice President | | | 2015 | | | | | |

The Company electronically files reports with the Securities and Exchange Commission [removed: ("SEC").][added: (the "SEC").]

The Company intends to reinitiate the divestiture process in 2022 for certain businesses with combined annual revenues of approximately $0.5 billion.

Refer to Note 4.

Acquisitions in Item 8.

Financial Statements and Supplementary Data for further information regarding this acquisition.

The increase in backlog as of December 31, 2021 was primarily due to increased customer orders and the global supply chain disruptions impacting the Company's customers, and the acquisition of the MTS Test & Simulation business.

Refer to Note 3.

Acquisitions in Item 8.

Financial Statements and Supplementary Data for further information regarding this acquisition.

Less than three percent of the Company's U.S. employees are represented by a labor union.

| Javier Gracia Carbonell | | | 49 | | | Executive Vice President | | | 2022 | | | Vice President/General Manager, construction businesses, 2017-2020; Group President, construction businesses, 2020-2021. | | |

| Patricia A. Hartzell | | | 45 | | | Executive Vice President | | | 2022 | | | Vice President/General Manager, test and measurement & electronics businesses, 2017-2020; Group President, test and measurement & electronics businesses, 2020-2021. | | |

| Jennifer Schott | | | 48 | | | Senior Vice President, General Counsel & Secretary | | | 2021 | | | Vice President, Assistant General Counsel & Assistant Secretary, Discover Financial Services, 2016-2019; Deputy General Counsel & Assistant Secretary, Caterpillar, Inc. 2019-2021. | | |

The Company expects any earnings per share dilution from divestitures would be offset by incremental share repurchases.

minimize infection risk.

Moreover, the Company's commitment to its employees was reinforced when the Company chose to leverage its strong financial foundation by continuing to employ all ITW colleagues through the entirety of the second quarter of 2020 when the economic effects of the pandemic were at their most widespread and severe.

| Norman D. Finch Jr. | | | 56 | | | Senior Vice President, General Counsel & Secretary | | | 2017 | | | Vice President, General Counsel and Secretary, Sealed Air Corporation, a global manufacturer of products related to food safety and security, facility hygiene and product protection, 2013-2017 | | |

| Steven L. Martindale | | | 64 | | | Executive Vice President | | | 2008 | | | | | |

For the fiscal year ended December 31, [removed: 2020][added: 2021]

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, [removed: 2020] [added: 2021] was approximately [removed: $55.1] [added: $70.1] billion based on the New York Stock Exchange closing sales price as of June 30, [removed: 2020.][added: 2021.]

| Portions of the [removed: 2021] [added: 2022] Proxy Statement for Annual Meeting of Stockholders to be held on May [removed: 7, 2021.] [added: 6, 2022.] | | | | | | Part III | | |

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| [Item [removed: 16.](#ibd00c01e6e3e4016aeed4572c8aeb4ea_253)] [added: 16.](#ib46d86bff16b447d894b1f95e3b44acd_229)] | | | [Form 10-K [removed: Summary](#ibd00c01e6e3e4016aeed4572c8aeb4ea_253)] [added: Summary](#ib46d86bff16b447d894b1f95e3b44acd_229)] | | | [removed: [84](#ibd00c01e6e3e4016aeed4572c8aeb4ea_253)] [added: [81](#ib46d86bff16b447d894b1f95e3b44acd_229)] | | |

Shares of common stock outstanding at January 31, 2022: 312,926,939.

| | | | [PART I](#ib46d86bff16b447d894b1f95e3b44acd_10) | | | | | |

| | | | [PART II](#ib46d86bff16b447d894b1f95e3b44acd_31) | | | | | |

| [Item 6](#ib46d86bff16b447d894b1f95e3b44acd_37). | | | [\[Reserved\]](#ib46d86bff16b447d894b1f95e3b44acd_37) | | | [18](#ib46d86bff16b447d894b1f95e3b44acd_37) | | |

| [Item 9C.](#ib46d86bff16b447d894b1f95e3b44acd_2048) | | | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#ib46d86bff16b447d894b1f95e3b44acd_2048) | | | [77](#ib46d86bff16b447d894b1f95e3b44acd_2048) | | |

| | | | [PART III](#ib46d86bff16b447d894b1f95e3b44acd_202) | | | | | |

| | | | [PART IV](#ib46d86bff16b447d894b1f95e3b44acd_220) | | | | | |

| | | | [Signatures](#ib46d86bff16b447d894b1f95e3b44acd_232) | | | [82](#ib46d86bff16b447d894b1f95e3b44acd_232) | | |

Shares of common stock outstanding at January 31, 2021: 316,662,263.

| | | | [PART I](#ibd00c01e6e3e4016aeed4572c8aeb4ea_10) | | | | | |

| | | | [PART II](#ibd00c01e6e3e4016aeed4572c8aeb4ea_31) | | | | | |

| [Item 6](#ibd00c01e6e3e4016aeed4572c8aeb4ea_37). | | | [Selected Financial Data](#ibd00c01e6e3e4016aeed4572c8aeb4ea_37) | | | [18](#ibd00c01e6e3e4016aeed4572c8aeb4ea_37) | | |

| | | | [PART III](#ibd00c01e6e3e4016aeed4572c8aeb4ea_226) | | | | | |

| | | | [PART IV](#ibd00c01e6e3e4016aeed4572c8aeb4ea_244) | | | | | |

| | | | [Signatures](#ibd00c01e6e3e4016aeed4572c8aeb4ea_256) | | | [85](#ibd00c01e6e3e4016aeed4572c8aeb4ea_256) | | |

As of December 31, [removed: 2020,] [added: 2021,] the Company operated approximately [removed: 440] [added: 460] plants and office facilities, excluding regional sales offices and warehouse facilities.

Approximately [removed: 290] [added: 300] of the facilities were located outside of the United States.

Principal foreign countries include [removed: China,] Germany, [added: China,] France, and the United Kingdom.

There were approximately [removed: 5,245] [added: 4,967] holders of record of common stock as of January 31, [removed: 2021.][added: 2022.]

[removed: ][added: ]

*Assumes $100 invested on [removed: 12/31/15] [added: 12/31/16] in stock or index, including reinvestment of dividends.

Copyright© [removed: 2021] [added: 2022] Standard & Poor's, a division of S&P Global.

The [removed: 2020] [added: 2021] Peer Group consists of the following 17 public companies:

[removed: Although] Fortive Corporation was added to the Company's peer group in [removed: 2017, it] [added: 2017 and] was excluded from the [removed: five year] [added: 2020 Peer Group five-year] cumulative total return as there was insufficient historical data due to its spin-off from Danaher Corporation in 2016.

Repurchases of Common Stock— On August 3, 2018, the Company's Board of Directors authorized a [removed: new] stock repurchase program which provides for the repurchase of up to $3.0 billion of the Company's common stock over an open-ended period [removed: of time (the "2018 Program").]

As of December 31, [removed: 2020,] [added: 2021,] there were approximately [removed: $1.2 billion] [added: $240 million] of authorized repurchases remaining under the 2018 [removed: program.][added: Program.]

The 2021 Peer Group is consistent with the 2020 Peer Group.

For the 2021 Peer Group, Fortive Corporation was included in the five-year cumulative total return above.

of time (the "2018 Program").

On May 7, 2021, the Company's Board of Directors authorized a new stock repurchase program which provides for the repurchase of up to an additional $3.0 billion of the Company's common stock over an open-ended period of time (the "2021 Program").

As of December 31, 2021, there were $3.0 billion of authorized repurchases remaining under the 2021 Program.

Share repurchase activity under the Company's share repurchase programs for the fourth quarter of 2021 was as follows:

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| In millions except per share amounts | | | | | | | | | | | | | | | | | | | | | | | |

| Period | | | Total Number of Shares Purchased | | | | | | Average Price Paid Per Share | | | | | | Total Number of Shares Purchased as Part of Publicly Announced Programs | | | | | | Maximum Value of Shares That May Yet Be Purchased Under Programs | | |

| October 2021 | | | — | | | | | | $ | 227.47 | | | | | — | | | | | | $ | 3,480 | |

| November 2021 | | | 0.7 | | | | | | $ | 236.12 | | | | | 0.7 | | | | | | $ | 3,336 | |

| December 2021 | | | 0.4 | | | | | | $ | 239.66 | | | | | 0.4 | | | | | | $ | 3,240 | |

| Total | | | 1.1 | | | | | | | | | | | | 1.1 | | | | | | | | |

In 2020, the Compensation Committee added Ecolab Inc. as it meets the Company's industry and size criteria, and Trane Technologies plc, which is the company resulting from the spin-off of Ingersoll-Rand plc and its combination with certain businesses of Gardner Denver, Inc. As a result, Ingersoll-Rand plc was removed, as well as Raytheon Company, which merged with United Technologies Corporation and no longer meets the Company's industry and size criteria.

Due to the COVID-19 pandemic, the Company temporarily suspended its share repurchase program starting in March 2020.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| In millions except per share amounts | | | 2020 | | | | | | 2019 | | | | | | 2018 | | | | | | 2017 | | | | | | 2016 | | |

| Operating revenue | | | $ | 12,574 | | | | | $ | 14,109 | | | | | $ | 14,768 | | | | | $ | 14,314 | | | | | $ | 13,599 | |

| Income from continuing operations | | | 2,109 | | | | | | 2,521 | | | | | | 2,563 | | | | | | 1,687 | | | | | | 2,035 | | |

| Income per share from continuing operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Basic | | | 6.66 | | | | | | 7.78 | | | | | | 7.65 | | | | | | 4.90 | | | | | | 5.73 | | |

| Diluted | | | 6.63 | | | | | | 7.74 | | | | | | 7.60 | | | | | | 4.86 | | | | | | 5.70 | | |

| Total assets at year-end | | | 15,612 | | | | | | 15,068 | | | | | | 14,870 | | | | | | 16,780 | | | | | | 15,201 | | |

| Long-term debt at year-end | | | 7,772 | | | | | | 7,754 | | | | | | 6,029 | | | | | | 7,478 | | | | | | 7,177 | | |

| Cash dividends declared per common share | | | 4.42 | | | | | | 4.14 | | | | | | 3.56 | | | | | | 2.86 | | | | | | 2.40 | | |

In the fourth quarter of 2017, the Company recorded a one-time additional income tax expense of $658 million, or $1.90 per diluted share, related to the enactment of the United States "Tax Cuts and Jobs Act" (the "Act") on December 22, 2017.

The provisions of the Act significantly revised the U.S. corporate income tax rules.

The additional tax expense recorded in the fourth quarter of 2017 primarily related to a one-time repatriation tax of $676 million on the deemed repatriation of post-1986 undistributed earnings of foreign subsidiaries and $53 million of additional foreign withholding taxes related to the expected repatriation of foreign held cash and equivalents.

These additional tax charges were partially offset by an $82 million one-time income tax benefit related to the remeasurement of deferred tax assets and liabilities in the fourth quarter of 2017 due to the reduction of the U.S. corporate federal tax rate from a maximum of 35% to a flat rate of 21% beginning in 2018 under the Act.

Certain reclassifications of prior year data have been made to conform to current year reporting, including the adoption of new accounting guidance as discussed below.

In March 2016, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance that included several changes to simplify the accounting for stock-based compensation, including the accounting for income taxes, forfeitures, statutory tax withholding requirements and classification of tax benefits in the statement of cash flows.

Among the more significant changes, the new guidance requires that the income tax effects associated with the settlement of stock-based awards after adoption of the guidance be recognized through income tax expense rather than directly in equity.

Excess tax benefits recognized in equity under the prior guidance were $29 million for the year ended December 31, 2016.

The Company adopted the new guidance effective January 1, 2017 and applied the new guidance prospectively.

Excess tax benefits of $27 million, $28 million, $10 million and $50 million were included in Income taxes in the statement of income for the years ended December 31, 2020, 2019, 2018 and 2017, respectively.

The expected effect on income tax expense or net cash provided from operating activities related to future stock-based award settlements will vary each period and will depend on inputs such as the stock price at the time of settlement and the number of awards settled in the period presented.

Additional information on the comparability of results is included in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

ITW management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, [removed: 2020.][added: 2021.]

Based on our assessment we believe that, as of December 31, [removed: 2020,] [added: 2021,] the Company's internal control over financial reporting is effective based on those criteria.

The effectiveness of the Company's internal control over financial reporting as of December 31, [removed: 2020] [added: 2021] has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report herein.

| /s/ E. Scott Santi E. Scott Santi Chairman & Chief Executive Officer February [removed: 12, 2021] [added: 11, 2022] | | | | | | /s/ Michael M. Larsen Michael M. Larsen Senior Vice President & Chief Financial Officer February [removed: 12, 2021] [added: 11, 2022] | | |

We have audited the accompanying consolidated statements of financial position of Illinois Tool Works Inc. and subsidiaries (the "Company") as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] and the related notes (collectively referred to as the "financial statements").

We also have audited the [removed: Company's] [added: Company’s] internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on criteria established in [removed: *Internal] [added: Internal] Control — Integrated Framework [removed: (2013)*] [added: (2013)] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on criteria established in [removed: *Internal] [added: Internal] Control — Integrated Framework [removed: (2013)*] [added: (2013)] issued by COSO.

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying [removed: *Management] [added: Management] Report on Internal Control Over Financial [removed: Reporting*.][added: Reporting.]

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the [removed: financial statements and (2) involved our especially challenging, subjective, or complex judgments.]

Income Taxes — Refer to Note [removed: 6] [added: 7] to the financial statements

The Company's income tax expense for [removed: 2020] [added: 2021] was [removed: $595] [added: $632] million and the liability recorded for unrecognized tax benefits as of December 31, [removed: 2020,] [added: 2021,] was [removed: $346] [added: $360] million.

◦Evaluating external [removed: information,] [added: information] including applicable tax law, new interpretations, and related changes to assess the completeness and reasonableness of management's considerations.

| In millions except per share amounts | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Operating Revenue | | | $ | [removed: 12,574] [added: 14,455] | | | | | $ | [removed: 14,109] [added: 12,574] | | | | | $ | [removed: 14,768] [added: 14,109] | |

| Cost of revenue | | | [removed: 7,375] [added: 8,489] | | | | | | [removed: 8,187] [added: 7,375] | | | | | | [removed: 8,604] [added: 8,187] | | |

| Selling, administrative, and research and development expenses | | | [removed: 2,163] [added: 2,356] | | | | | | [removed: 2,361] [added: 2,163] | | | | | | [removed: 2,391] [added: 2,361] | | |

| Amortization and impairment of intangible assets | | | [removed: 154] [added: 133] | | | | | | [removed: 159] [added: 154] | | | | | | [removed: 189] [added: 159] | | |

| Operating Income | | | [removed: 2,882] [added: 3,477] | | | | | | [removed: 3,402] [added: 2,882] | | | | | | [removed: 3,584] [added: 3,402] | | |

| Interest expense | | | [removed: (206)] [added: (202)] | | | | | | [removed: (221)] [added: (206)] | | | | | | [removed: (257)] [added: (221)] | | |

| Other income (expense) | | | [removed: 28] [added: 51] | | | | | | [removed: 107] [added: 28] | | | | | | [removed: 67] [added: 107] | | |

| Income Before Taxes | | | [removed: 2,704] [added: 3,326] | | | | | | [removed: 3,288] [added: 2,704] | | | | | | [removed: 3,394] [added: 3,288] | | |

| Income taxes | | | [removed: 595] [added: 632] | | | | | | [removed: 767] [added: 595] | | | | | | [removed: 831] [added: 767] | | |

| Net Income | | | $ | [removed: 2,109] [added: 2,694] | | | | | $ | [removed: 2,521] [added: 2,109] | | | | | $ | [removed: 2,563] [added: 2,521] | |

| Basic | | | $ | [removed: 6.66] [added: 8.55] | | | | | $ | [removed: 7.78] [added: 6.66] | | | | | $ | [removed: 7.65] [added: 7.78] | |

| Diluted | | | $ | [removed: 6.63] [added: 8.51] | | | | | $ | [removed: 7.74] [added: 6.63] | | | | | $ | [removed: 7.60] [added: 7.74] | |

| In millions | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Other [removed: Comprehensive Income (Loss):] [added: comprehensive income (loss)] | | | [added: 140] | | | | | | [added: 63] | | | | | | [added: (28)] | | |

| Foreign currency translation adjustments, net of tax | | | [removed: 4] [added: 5] | | | | | | [removed: (2)] [added: 4] | | | | | | [removed: (328)] [added: (2)] | | |

| Pension and other postretirement benefit adjustments, net of tax | | | [removed: 59] [added: 135] | | | | | | [removed: (26)] [added: 59] | | | | | | [removed: (17)] [added: (26)] | | |

| Comprehensive Income | | | $ | [removed: 2,172] [added: 2,834] | | | | | $ | [removed: 2,493] [added: 2,172] | | | | | $ | [removed: 2,218] [added: 2,493] | |

| In millions except per share amounts | | | [added: 2021 | | | | | |] 2020 | | | | | | 2019 | | |

| Cash and equivalents | | | $ | [removed: 2,564] [added: 1,527] | | | | | $ | [removed: 1,981] [added: 2,564] | |

| Trade receivables | | | [removed: 2,506] [added: 2,840] | | | | | | [removed: 2,461] [added: 2,506] | | |

| Inventories | | | [removed: 1,189] [added: 1,694] | | | | | | [removed: 1,164] [added: 1,189] | | |

| Prepaid expenses and other current assets | | | [removed: 264] [added: 313] | | | | | | [removed: 296] [added: 264] | | |

| [removed: Assets] [added: Transfer (to)/from assets] held for sale | | | — | | | | | | [removed: 351] [added: 2] | | | [added: | | | (2) | | |]

| Total current assets | | | [removed: 6,523] [added: 6,374] | | | | | | [removed: 6,253] [added: 6,523] | | |

| Net plant and equipment | | | [removed: 1,777] [added: 1,809] | | | | | | [removed: 1,729] [added: 1,777] | | |

| Goodwill | | | [removed: 4,690] [added: 4,965] | | | | | | [removed: 4,492] [added: 4,690] | | |

financial statements and (2) involved our especially challenging, subjective, or complex judgments.

| Net Income | | | $ | 2,694 | | | | | $ | 2,109 | | | | | $ | 2,521 | |

| | | | $ | 16,077 | | | | | $ | 15,612 | |

| | | | $ | 16,077 | | | | | $ | 15,612 | |

| Balance as of December 31, 2021 | | | $ | 6 | | $ | 1,432 | | $ | 24,325 | | $ | (20,636) | | $ | (1,502) | | $ | 1 | | $ | 3,626 | |

| Net income | | | $ | 2,694 | | | | | $ | 2,109 | | | | | $ | 2,521 | |

| Amortization and impairment of intangible assets | | | 133 | | | | | | 154 | | | | | | 159 | | |

Acquisitions for additional information regarding the Company's acquisitions.

In other limited arrangements, the Company may recognize revenue over time.

This may include arrangements for service performed over time where operating revenue is recognized over time as the service is provided to the customer.

It may also include the sale of highly specialized systems that include a high degree of customization and installation at the customer site which are recognized over time if the product does not have an alternative use and the Company has an enforceable right to payment for work performed to date.

Revenue for transactions meeting these criteria is recognized over time as work is performed based on the costs incurred to date relative to the total estimated costs at completion.

The deferred revenue and customer deposits as of December 31, 2021 included $108 million related to the MTS Test & Simulation business, which was acquired on December 1, 2021.

Acquisitions for additional information regarding this acquisition.

| In millions | | | 2021 | | | | | | 2020 | | |

| In millions | | | 2021 | | | | | | 2020 | | |

Refer to Note 10.

| Acquisitions and divestitures | | | 5 | | | | | | — | | | | | | — | | |

The Company adopted this new guidance effective January 1, 2020

In October 2021, the FASB issued authoritative guidance which improves the accounting for acquired revenue contracts with customers in a business combination.

The new guidance provides an exception to measure contract assets and contract liabilities acquired in a business combination in accordance with existing revenue recognition guidance rather than at fair value.

The Company early adopted this new guidance in the fourth quarter of 2021.

The new guidance is effective prospectively upon adoption and must also be applied retrospectively to all interim periods in the year of adoption.

Acquisitions for additional information regarding the Company's acquisitions.

During 2021, the Company experienced solid recovery progress in many of its end markets; however, the disruptions caused by the COVID-19 pandemic continue to have an adverse impact on the Company's global operations.

The full extent of the COVID-19 outbreak and its impact on the markets served by the Company and on the Company's operations continues to be highly uncertain as conditions continue to fluctuate around the world, with vaccine administration rising in certain regions and spikes in infections (including the spread of variants) also being experienced.

(3) Acquisitions

Net cash paid for acquisitions during 2021 and 2019 was $731 million and $4 million, respectively.

There were no acquisitions in 2020.

The cash paid in 2021 related to the acquisition of the Test & Simulation business of MTS Systems Corporation ("MTS") from Amphenol Corporation ("Amphenol"), as discussed below.

Acquisitions, individually and in the aggregate, did not materially affect the Company's results of operations or financial position for any period presented.

On December 1, 2021, the Company completed the acquisition of the MTS Test & Simulation business for a purchase price of $750 million, subject to certain closing adjustments.

The MTS Test & Simulation business is a leading global supplier of high-performance testing and simulation systems and is highly complementary to the Company's existing Test & Measurement and Electronics segment.

The operating results of the MTS Test & Simulation business were reported within the Test & Measurement and Electronics segment from the date of acquisition, with operating revenue of $46 million for the one month ended December 31, 2021.

The Company is in process of allocating the purchase price to the acquired assets and liabilities as of the acquisition date, including intangible assets and goodwill.

Based on its initial allocation, the Company recorded goodwill of $371 million and intangible assets of $321 million.

The intangible assets included $93 million related to

indefinite-lived trademarks and brands and $228 million related to amortizable intangible assets that are expected to be amortized on a straight-line basis over estimated useful lives ranging from 0.3 to 12 years, with a weighted-average life of 10 years.

The Company does not expect any of the goodwill related to the transaction to be tax deductible.

The fair values of the intangible assets were estimated based on discounted cash flow and market-based valuation models using Level 2 and Level 3 inputs and assumptions.

February 12, 2021

| | | | | | | | | | | | | | | | | | |

| Liabilities held for sale | | | — | | | | | | 71 | | |

| Balance as of December 31, 2017 | | | $ | 6 | | $ | 1,218 | | $ | 20,210 | | $ | (15,562) | | $ | (1,287) | | $ | 4 | | $ | 4,589 | |

| Adoption of new accounting guidance | | | — | | | — | | | (370) | | | — | | | (45) | | | — | | | (415) | | |

| Inventories | | | 43 | | | | | | 98 | | | | | | (108) | | |

Prior to 2018, the allowance for doubtful accounts included reserves for uncollectible accounts and customer credits.

Under the new revenue guidance adopted on January 1, 2018, the reserve for customer credits is reported as a liability and included in Accrued expenses in the Statement of Financial Position.

Accordingly, after January 1, 2018, the allowance for doubtful accounts was comprised of reserves for uncollectible accounts.

| Adoption of new revenue recognition guidance | | | — | | | | | | — | | | | | | (23) | | |

| Transfer (to)/from assets held for sale | | | 2 | | | | | | (2) | | | | | | — | | |

| | | | | | |

| --- | --- | --- | --- | --- | --- |

*Adopted in 2018*

In May 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance to change the criteria for revenue recognition.

The core principle of the new guidance is that revenue should be recognized to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company's sales arrangements with customers are predominantly short-term in nature and generally provide for transfer of control and risks and rewards of ownership at the time of product shipment or delivery of service.

As such, the timing of revenue recognition under both the prior and new guidance is the same for the majority of the Company's transactions.

Effective January 1, 2018, the Company adopted the new revenue recognition guidance under the modified retrospective method and recorded a cumulative-effect adjustment reducing retained earnings by $9 million as of January 1, 2018.

In October 2016, the FASB issued authoritative guidance requiring the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs rather than when transferred to a third party as required under the prior guidance.

The provisions of the new guidance are being applied prospectively to intra-entity asset transfers on or after January 1, 2018 and may result in future tax rate volatility.

Upon adoption of the new guidance on January 1, 2018, the Company recorded a cumulative-effect adjustment reducing deferred tax assets and retained earnings by $406 million.

In February 2018, the FASB issued authoritative guidance which allows for an optional one-time reclassification of the stranded tax effects resulting from the change in the U.S. federal corporate income tax rate under the "Tax Cuts and Jobs Act" (the "Act") from accumulated other comprehensive income ("AOCI") to retained earnings.

The guidance was effective January 1, 2019, with early adoption permitted.

The Company elected to early adopt this guidance as of January 1, 2018 and to reclassify the stranded tax effects related to the Act, which resulted in an increase of $45 million to both retained earnings and accumulated other comprehensive loss.

*Adopted in 2019*

In February 2016, the FASB issued authoritative guidance to change the criteria for recognizing leasing transactions.

The primary change under the new guidance is that a lessee is required to recognize a lease liability and corresponding right-of-use asset for its operating leases.

The new guidance also requires additional disclosures.

Upon adoption, the Company recorded an operating lease liability of $205 million and a corresponding right-of-use asset.

*Adopted in 2020*

In August 2018, the FASB issued new accounting guidance which revised certain annual disclosure requirements for defined benefit pension and other postretirement plans with the objective of improving the effectiveness of these disclosures.

The new guidance eliminates several existing disclosure requirements, adds or expands other disclosures, and is required to be applied retrospectively to all periods presented.

The Company adopted the new guidance for the year ended December 31, 2020, which resulted in modified disclosures.

Pension and Other Postretirement Benefits for disclosures related to the Company's defined benefit pension and other postretirement benefit plans.

The Company expects the disruptions caused by the COVID-19 outbreak to continue to have an adverse impact on the Company's operating results in 2021.

However, the full extent of the COVID-19 outbreak and its impact on the markets served by the Company and on the Company’s operations continues to be highly uncertain.

The assets and liabilities related to the held for sale businesses that were included in assets and liabilities held for sale in the Statement of Financial Position as of December 31, 2019, were as follows:

| In millions | | | | | |

| Trade receivables | | | $ | 81 | |

The Company's management, with the participation of the Company's Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, [removed: 2020.][added: 2021.]

Based on such evaluation, the Company's Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer have concluded that, as of December 31, [removed: 2020,] [added: 2021,] the Company's disclosure controls and procedures were effective.

In connection with the evaluation by management, including the Company's Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer, no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended December 31, [removed: 2020] [added: 2021] were identified that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

PART III

None.

PART III

Information regarding the Directors of the Company who are standing for reelection and any persons nominated to become Directors of the Company is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors" in the Company's Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

Information regarding the Audit Committee and its Financial Experts is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Board of Directors and Its Committees" and "Audit Committee Report" in the Company's Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

Information regarding the Company's code of ethics that applies to the Company's Chairman & Chief Executive Officer, Senior Vice President & Chief Financial Officer, and key financial and accounting personnel is incorporated by reference from the information under the caption "Proposal 1 - Election of Directors - Corporate Governance Policies and Practices" in the Company's Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

Information regarding executive compensation is incorporated by reference from the information under the captions "NEO Compensation," "Proposal 1 - Election of Directors - Director Compensation," and "Compensation Discussion and Analysis" in the Company's Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Ownership of ITW Stock" and "NEO Compensation - Equity Compensation Plan Information" in the Company's Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

Information regarding certain relationships and related transactions is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Ownership of ITW Stock," "Certain Relationships and Related Party Transactions" and "Proposal 1 - Election of Directors - Corporate Governance Policies and Practices" in the [removed: Company’s] [added: Company's] Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

Information regarding director independence is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Corporate Governance Policies and Practices" and "Appendix A - Categorical Standards for Director Independence" in the Company's Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

This information is incorporated by reference from the information under the caption "Proposal 2 - Ratification of the Appointment of Independent Registered Public Accounting Firm" in the Company's Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting of Stockholders.

| [3(a)(i)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm) | | | | | | [Amended and Restated Certificate of Incorporation of Illinois Tool Works Inc., filed as Exhibit 3.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm)[s] [added: Company's] Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm) | | |

| [3(a)(ii)](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm) | | | | | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation of Illinois Tool Works Inc., filed as Exhibit 3(a)(ii) to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm)[s] [added: Company's] Current Report on Form 8-K filed on May 12, 2016 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm) | | |

| [3(b)](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3bi.htm) | | | | | | [By-laws of Illinois Tool Works Inc., as amended and restated as of May 6, 2016, filed as Exhibit 3(b)(i) to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3bi.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3bi.htm)[s] [added: Company's] Current Report on Form 8-K filed on May 12, 2016 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3bi.htm) | | |

| [removed: [4(a)](http://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex44.htm)] [added: [4(a)](http://www.sec.gov/Archives/edgar/data/0000049826/000119312520213047/d95049dex44.htm)] | | | | | | [Indenture between Illinois Tool Works Inc. and The First National Bank of Chicago, as Trustee, dated as of November 1, 1986, filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3 filed on August 7, 2020 (Commission File No. 333-242331) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/0000950124-99-000281.txt)] [added: reference.](http://www.sec.gov/Archives/edgar/data/0000049826/000119312520213047/d95049dex44.htm)] | | |

| [removed: [4(b)](http://www.sec.gov/Archives/edgar/data/49826/0000950124-99-000281.txt)] [added: [4(b)](http://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm)] | | | | | | [First Supplemental Indenture between Illinois Tool Works Inc. and Harris Trust and Savings Bank, as Trustee, dated as of May 1, 1990, filed as Exhibit 4.5 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm)[s] [added: Company's] Registration Statement on Form S-3 filed on August 7, 2020 (Commission File No. 333-242331) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm) | | |

| [4(c)](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm) | | | | | | [removed: [Officers](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm) [Certificate] [added: [Officers' Certificate] dated August 31, 2011, establishing the terms, and setting forth the forms, of the 3.375% Notes due 2021 and the 4.875% Notes due 2041, filed as Exhibit 4.3 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm)[s] [added: Company's] Current Report on Form 8-K filed on September 1, 2011 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm) | | |

| [4(e)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm) | | | | | | [removed: [Officers](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm) [Certificate] [added: [Officers' Certificate] dated February 25, 2014, establishing the terms, and setting forth the forms, of the 0.9% Notes due 2017, the 1.95% Notes due 2019, and the 3.5% Notes due 2024, filed as Exhibit 4.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 26, 2014 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm) | | |

| [4(f)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm) | | | | | | [removed: [Officers](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm) [Certificate] [added: [Officers' Certificate] dated May 20, 2014, establishing the terms, and setting forth the forms, of the 1.75% Euro Notes due 2022 and the 3.0% Euro Notes due 2034, filed as Exhibit 4.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)[s] [added: Company's] Current Report on Form 8-K filed on May 22, 2014 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm) | | |

| [4(g)](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm) | | | | | | [removed: [Officers](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm) [Certificate] [added: [Officers' Certificate] dated May 19, 2015, establishing the terms, and setting forth the forms, of the 1.25% Euro Notes due 2023 and the 2.125% Euro Notes due 2030, filed as Exhibit 4.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)[s] [added: Company's] Current Report on Form 8-K filed on May 22, 2015 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm) | | |

| [4(i)](https://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm) | | | | | | [removed: [Officers](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm) [Certificate] [added: [Officers' Certificate] dated June 5, 2019, establishing the terms, and setting forth the forms, of the 0.250% Notes due 2024, the 0.625% Notes due 2027 and the 1.000% Notes due 2031, filed as Exhibit 4.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)[s] [added: Company's] Current Report on Form 8-K filed on June 5, 2019 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm) | | |

| [removed: [4(j)](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)] [added: [4(j)](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm)] | | | | | | [Description of the Company's common stock, filed as Exhibit 4(j) to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm) | | |

| [removed: [10(a)](http://www.sec.gov/Archives/edgar/data/49826/000004982619000098/itw-2019creditfacility.htm)] [added: [10(a)(i)](http://www.sec.gov/Archives/edgar/data/49826/000004982619000098/itw-2019creditfacility.htm)] | | | | | | [Five Year Credit Agreement dated as of September 27, 2019 among Illinois Tool Works Inc., JPMorgan Chase Bank, N.A., as Agent, Citibank, N.A., as Syndication Agent, and a syndicate of lenders, filed as Exhibit 10(a) to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982619000098/itw-2019creditfacility.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982619000098/itw-2019creditfacility.htm)[s] [added: Company's] Current Report on Form 8-K filed on October 3, [removed: 2019](http://www.sec.gov/Archives/edgar/data/49826/000004982619000098/itw-2019creditfacility.htm) [(Commission] [added: 2019 (Commission] File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982619000098/itw-2019creditfacility.htm) | | |

| [10(b)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit2.htm) | | | | | | [Illinois Tool Works Inc. 2011 Long-Term Incentive Plan, filed as Exhibit 99.2 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit2.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit2.htm)[s] [added: Company's] Current Report on Form 8-K filed on December 16, 2010 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit2.htm) | | |

| [10(d)*](http://www.sec.gov/Archives/edgar/data/49826/000004982612000012/itw8k991awardagreement.htm) | | | | | | [Form of stock option terms filed as Exhibit 99.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982612000012/itw8k991awardagreement.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982612000012/itw8k991awardagreement.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 7, 2012 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982612000012/itw8k991awardagreement.htm) | | |

| [10(e)*](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm) | | | | | | [Form of stock option terms filed as Exhibit 99.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 13, 2014 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm) | | |

| [removed: [10(i)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex993awardsagrmnt4q2016.htm)] [added: [10(m)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)] | | | | | | [Form of performance share unit terms filed as Exhibit [removed: 99.3] [added: 99.2] to the Company's Current Report on Form 8-K filed on February [removed: 9, 2017] [added: 5, 2020] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex993awardsagrmnt4q2016.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)] | | |

| [removed: [10(j)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex994awardsagrmnt4q2016.htm)] [added: [10(n)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)] | | | | | | [Form of performance cash [removed: grant] [added: terms] filed as Exhibit [removed: 99.4] [added: 99.3] to the Company's Current Report on Form 8-K filed on February [removed: 9, 2017] [added: 5, 2020] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex994awardsagrmnt4q2016.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)] | | |

| [removed: [10(k)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] [added: [10(i)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] | | | | | | [Form of stock option terms filed as Exhibit 99.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 14, 2019 (Commission File No. 1-4797) and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm) | | |

| [removed: [10(l)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm)] [added: [10(j)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm)] | | | | | | [Form of performance share unit terms filed as Exhibit 99.2 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 14, 2019 (Commission File No. 1-4797) and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm) | | |

| [removed: [10(m)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9932019universalperforman.htm)] [added: [10(k)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9932019universalperforman.htm)] | | | | | | [Form of performance cash terms filed as Exhibit 99.3 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9932019universalperforman.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9932019universalperforman.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 14, 2019 (Commission File No. 1-4797) and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9932019universalperforman.htm) | | |

| [removed: [10(n)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)] [added: [10(l)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)] | | | | | | [Form of stock option terms filed as Exhibit 99.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 5, 2020 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm) | | |

| [removed: [10(o)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)] [added: [10(o)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)] | | | | | | [Form of [removed: performance share] [added: restricted stock] unit terms filed as Exhibit [removed: 99.2] [added: 99.4] to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)[s] [added: Company's] Current Report on Form 8-K filed on February 5, 2020 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)] | | |

| [removed: [10(p)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)] [added: [10(s)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit3.htm)] | | | | | | [removed: [Form of performance cash terms] [added: [Illinois Tool Works Inc. 2011 Change-in-Control Severance Compensation Policy,] filed as Exhibit 99.3 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)[s] [added: Company's] Current Report on Form 8-K filed on [removed: February 5, 2020] [added: December 16, 2010] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit3.htm)] | | |

| [removed: [10(q)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)] [added: [10(p)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)] | | | | | | [removed: [Form of restricted stock unit terms] [added: [Illinois Tool Works Inc. 2011 Executive Incentive Plan,] filed as Exhibit [removed: 99.4] [added: 99.1] to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)[s] [added: Company's] Current Report on Form 8-K filed on [removed: February 5, 2020] [added: December 16, 2010] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)] | | |

| [removed: [10(r)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)] [added: [10(u)*](http://www.sec.gov/Archives/edgar/data/49826/000129993311001474/exhibit2.htm)] | | | | | | [Illinois Tool Works Inc. 2011 [removed: Executive] [added: Cash] Incentive Plan, filed as Exhibit 99.1 to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)[s Current Report on] [added: Company's] Form 8-K filed on [removed: December 16, 2010] [added: May 12, 2011] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993311001474/exhibit2.htm)] | | |

| [removed: [10(s)*](http://www.sec.gov/Archives/edgar/data/49826/000004982609000096/exhibit10.htm)] [added: [10(q)*](http://www.sec.gov/Archives/edgar/data/49826/000004982609000096/exhibit10.htm)] | | | | | | [Illinois Tool Works Inc. Executive Contributory Retirement Income Plan as amended and restated, effective January 1, 2010, filed as Exhibit 10 to the Company's Current Report on Form 8-K filed on November 5, 2009 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982609000096/exhibit10.htm) | | |

| [removed: [10(t)*](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxpy.htm)] [added: [10(r)*](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxpy.htm)] | | | | | | [Illinois Tool Works Inc. Nonqualified Pension Plan, effective January 1, 2008, as amended and approved by the Board of Directors on December 22, 2008, filed as Exhibit 10(p) to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxpy.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxpy.htm)[s] [added: Company's] Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxpy.htm) | | |

| [removed: [10(u)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit3.htm)] [added: [10(t)*](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)] | | | | | | [Illinois Tool Works Inc. [removed: 2011 Change-in-Control Severance Compensation Policy,] [added: Amended and Restated Directors](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm) [Deferred Fee Plan effective May 2, 2014,] filed as Exhibit [removed: 99.3] [added: 10.1] to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit3.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit3.htm)[s Current] [added: Company's Quarterly] Report on Form [removed: 8-K filed on December 16, 2010] [added: 10-Q for the quarterly period ended June 30, 2014] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit3.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)] | | |

| [removed: [10(v)*](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)] [added: [10(v)*](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm)] | | | | | | [removed: [Illinois Tool Works Inc. Amended and Restated Directors’ Deferred Fee] [added: [First Amendment to the ITW Executive Contributory Retirement Income] Plan [removed: effective May 2, 2014,] [added: dated February 15, 2013,] filed as Exhibit [removed: 10.1] [added: 10.2] to the [removed: Company](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)[s] [added: Company's] Quarterly Report on Form 10-Q for the quarterly period ended [removed: June 30, 2014] [added: March 31, 2013] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm)] | | |

| [removed: [21](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex21.htm)] [added: [21](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex21.htm)] | | | | | | [Subsidiaries and Affiliates of the [removed: Company.](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex21.htm)] [added: Company.](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex21.htm)] | | |

| [removed: [23](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex23.htm)] [added: [23](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex23.htm)] | | | | | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex23.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex23.htm)] | | |

| [removed: [24](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex24.htm)] [added: [24](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex24.htm)] | | | | | | [Powers of [removed: Attorney.](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex24.htm)] [added: Attorney.](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex24.htm)] | | |

| [removed: [31](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex31.htm)] [added: [31](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex31.htm)] | | | | | | [Rule 13a-14(a) [removed: Certifications.](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex31.htm)] [added: Certifications.](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex31.htm)] | | |

| [removed: [32](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex32.htm)] [added: [32](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex32.htm)] | | | | | | [Section 1350 [removed: Certification.](https://www.sec.gov/Archives/edgar/data/49826/000004982621000007/itw-20201231xex32.htm)] [added: Certification.](https://www.sec.gov/Archives/edgar/data/49826/000004982622000006/a20211231-ex32.htm)] | | |

| | | | The following financial information from Illinois Tool Works Inc.'s Annual Report on Form 10-K for the year ended December 31, [removed: 2020,] [added: 2021,] formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Statement of Income, (ii) Statement of Comprehensive Income, (iii) Statement of Changes in Stockholders' Equity (iv) Statement of Financial Position, (v) Statement of Cash Flows and (vi) related Notes to Financial Statements. | | |

*The following report of the Company's independent registered public accounting firm (PCAOB ID:34) is included as part of Item 8.

Financial Statements and Supplementary Data:*

| [10(a)(ii)](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm) | | | | | | [Suspension of Rights Agreement dated September 22, 2021 between Illinois Tool Works Inc. and JPMorgan Chase Bank, N.A., as Agent, under the Five Year Credit Agreement dated as of September 27, 2019, among Illinois Tool Works Inc., as Borrower, and JPMorgan Chase Bank, N.A., as Agent, and the Lenders thereto (as amended or otherwise modified from time to time)](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm)[, file](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm)[d](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm) [as Exhibit 10.1 to the](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm) [Company's Quarterly Report o](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm)[n](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm) [Form 10-Q for the quarterly period ended September](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm) [30, 20](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm)[21 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm) | | |

| [10(w)*](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm) | | | | | | [Consulting Agreement dated June 9, 2021 between Illinois Tool Works Inc. and SLM Advisory Services LLC](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm)[, filed as Exhibit 10(a) to the Company's](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm) [Q](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm)[uarterly](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm) [R](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm)[eport on Form 10-Q/A for the quarterly period ended June 30, 2021 (Commission File No. 1-](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm)[4797) and inc](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm)[orporated her](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm)[ein by reference](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm)[.](http://www.sec.gov/Archives/edgar/data/49826/000004982621000059/exhibit10-consultingagreem.htm) | | |

| [10(w)*](http://www.sec.gov/Archives/edgar/data/49826/000129993311001474/exhibit2.htm) | | | | | | [Illinois Tool Works Inc. 2011 Cash Incentive Plan, filed as Exhibit 99.1 to the Company](http://www.sec.gov/Archives/edgar/data/49826/000129993311001474/exhibit2.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000129993311001474/exhibit2.htm)[s Form 8-K filed on May 12, 2011 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993311001474/exhibit2.htm) | | |

| [10(x)*](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm) | | | | | | [First Amendment to the ITW Executive Contributory Retirement Income Plan dated February 15, 2013, filed as Exhibit 10.2 to the Company](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm)['](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm)[s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm) | | |

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this [removed: 12th] [added: 11th] day of February [removed: 2021.][added: 2022.]

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on this [removed: 12th] [added: 11th] day of February [removed: 2021.][added: 2022.]

| DARRELL L. FORD | | | | | | Director | | |

| KEVIN M. WARREN | | | | | | Director | | |