Anadarko Petroleum Corp. (NYSE:APC)

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Anadarko Petroleum Corp., effective income tax rate (EITR) reconciliation

		Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
	U.S. federal statutory tax rate	35.00%	35.00%	35.00%	35.00%	35.00%
	Effective tax rate	27.00%	30.00%	2,994.00%	55.00%	31.00%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

The effective income tax rate exhibited extreme volatility between 2012 and 2016, contrasting sharply with a stagnant U.S. federal statutory tax rate of 35.00% throughout the same period. While the effective rate ended the period lower than its starting point, it experienced a severe mid-period anomaly that deviated significantly from the statutory benchmark.

Statutory Tax Rate Consistency: The U.S. federal statutory tax rate remained unchanged at 35.00% from 2012 through 2016, providing a constant baseline for evaluating the company's actual tax burden relative to legal requirements.
Effective Tax Rate Fluctuations: An initial upward trajectory is observed from 2012 to 2013, with the effective rate rising from 31.00% to 55.00%. This was followed by an extreme spike in 2014 to 2,994.00%, representing a total decoupling from the statutory rate. By 2015, the rate normalized to 30.00% and continued to decline to 27.00% by the end of 2016.
Analysis of the 2014 Anomaly: The effective tax rate of 2,994.00% in 2014 indicates an extraordinary financial event. Such a high percentage typically suggests that the tax expense was disproportionately large relative to the pre-tax accounting income, likely caused by a significant one-time non-cash tax charge or a substantial adjustment to valuation allowances.
Post-Anomaly Stabilization: Following the 2014 outlier, a downward trend in the effective tax rate is observed. The reduction to 30.00% in 2015 and further to 27.00% in 2016 suggests an increasing ability to utilize tax credits, deductions, or foreign tax benefits to lower the actual tax burden below the federal statutory rate.

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Anadarko Petroleum Corp., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Foreign and state net operating loss carryforwards	648)	586)	558)	599)	477)
U.S. foreign tax credit carryforwards	1,834)	1,254)	166)	325)	450)
Compensation and benefit plans	672)	615)	701)	—)	—)
Mark to market on derivatives	324)	441)	354)	—)	—)
Settlement agreement related to the Tronox Adversary Proceeding	—)	—)	590)	—)	—)
Other	588)	761)	760)	1,717)	2,102)
Gross deferred tax assets	4,066)	3,657)	3,129)	2,641)	3,029)
Valuation allowances on deferred tax assets not expected to be realized	(1,755)	(1,403)	(864)	(818)	(922)
Net deferred tax assets	2,311)	2,254)	2,265)	1,823)	2,107)
Oil and gas exploration and development operations	(5,054)	(5,643)	(8,418)	(8,213)	(8,683)
Midstream and other depreciable properties	(870)	(1,049)	(1,611)	(1,586)	(1,295)
Mineral operations	(550)	(492)	(412)	(410)	(408)
Other	(147)	(470)	(351)	(499)	(152)
Gross deferred tax liabilities	(6,621)	(7,654)	(10,792)	(10,708)	(10,538)
Deferred taxes	(4,310)	(5,400)	(8,527)	(8,885)	(8,431)

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

The net deferred tax position shifted from a liability of -8,431 million US dollars in 2012 to -4,310 million US dollars by 2016, representing a significant reduction in the overall net deferred tax liability over the five-year period.

Deferred Tax Assets Trends: Gross deferred tax assets grew from 3,029 million US dollars in 2012 to 4,066 million US dollars in 2016. This growth was primarily driven by a substantial increase in U.S. foreign tax credit carryforwards, which rose from 166 million US dollars in 2014 to 1,834 million US dollars in 2016. Other contributing factors include a steady increase in foreign and state net operating loss carryforwards, which reached 648 million US dollars by 2016.
Valuation Allowances: A corresponding increase in valuation allowances is observed, growing from -922 million US dollars in 2012 to -1,755 million US dollars in 2016. The acceleration of this allowance between 2014 and 2016 suggests a decreasing expectation that a portion of the gross deferred tax assets would be realized.
Deferred Tax Liabilities Trends: Gross deferred tax liabilities exhibited a downward trend after 2014, decreasing from a peak of -10,792 million US dollars to -6,621 million US dollars in 2016. The primary driver of this reduction was the decline in liabilities associated with oil and gas exploration and development operations, which fell from -8,418 million US dollars in 2014 to -5,054 million US dollars in 2016. Additionally, liabilities for midstream and other depreciable properties decreased from -1,611 million US dollars in 2014 to -870 million US dollars in 2016.

The combined effect of increasing gross deferred tax assets and significantly decreasing gross deferred tax liabilities resulted in a marked improvement in the net deferred tax position, reducing the net liability by approximately 49% between 2013 and 2016.

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Anadarko Petroleum Corp., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
	Net current deferred tax assets	—)	—)	722)	360)	328)
	Net long-term deferred tax liabilities	4,324)	5,400)	9,249)	9,245)	8,759)

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

The company's deferred tax position is characterized by a substantial prevalence of long-term liabilities relative to current assets. While the current assets showed growth in the early part of the period, the long-term liabilities experienced a significant contraction after 2014.

Net Current Deferred Tax Assets: A consistent upward trend is observed from 2012 to 2014, with values increasing from 328 million USD to 722 million USD. This growth indicates a significant increase in short-term tax benefits or overpayments that could be utilized in future periods prior to the cessation of available data after 2014.
Net Long-Term Deferred Tax Liabilities: Long-term liabilities remained relatively stable and high between 2012 and 2014, fluctuating slightly between 8,759 million USD and 9,249 million USD. Following 2014, a sharp downward trend occurred, with liabilities falling to 5,400 million USD in 2015 and further decreasing to 4,324 million USD by 2016. This represents a total reduction of approximately 53% from the 2014 peak.
Net Tax Position Analysis: The magnitude of the long-term deferred tax liabilities consistently dwarfs the current deferred tax assets throughout the reported timeframe. Despite the substantial reduction in liabilities observed between 2014 and 2016, the company continued to maintain a heavily liability-weighted deferred tax profile.

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Anadarko Petroleum Corp., Financial Data: Reported vs. Adjusted

Anadarko Petroleum Corp., adjustments to financial statements

US$ in millions

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Adjustment to Current Assets
Current assets (as reported)	5,266)	3,982)	11,221)	7,108)	6,795)
Less: Current deferred tax assets, net	—)	—)	722)	360)	328)
Current assets (adjusted)	5,266)	3,982)	10,499)	6,748)	6,467)
Adjustment to Total Assets
Total assets (as reported)	45,564)	46,414)	61,689)	55,781)	52,589)
Less: Current deferred tax assets, net	—)	—)	722)	360)	328)
Total assets (adjusted)	45,564)	46,414)	60,967)	55,421)	52,261)
Adjustment to Total Liabilities
Total liabilities (as reported)	30,067)	30,957)	39,371)	32,131)	30,707)
Less: Noncurrent deferred tax liabilities, net	4,324)	5,400)	9,249)	9,245)	8,759)
Total liabilities (adjusted)	25,743)	25,557)	30,122)	22,886)	21,948)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	12,212)	12,819)	19,725)	21,857)	20,629)
Less: Net deferred tax assets (liabilities)	(4,310)	(5,400)	(8,527)	(8,885)	(8,431)
Stockholders’ equity (adjusted)	16,522)	18,219)	28,252)	30,742)	29,060)
Adjustment to Net Income (loss) Attributable To Common Stockholders
Net income (loss) attributable to common stockholders (as reported)	(3,071)	(6,692)	(1,750)	801)	2,391)
Add: Deferred income tax expense (benefit)	(1,258)	(3,177)	(147)	137)	159)
Net income (loss) attributable to common stockholders (adjusted)	(4,329)	(9,869)	(1,897)	938)	2,550)

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

A comparative analysis of reported and adjusted financial figures reveals a consistent divergence resulting from the removal of deferred taxes. The most significant impact is observed within the liability and equity structures, where the removal of deferred tax obligations substantially alters the perceived solvency and capital position of the entity.

Asset and Liability Adjustments: Between 2012 and 2014, reported current and total assets were consistently higher than adjusted values, though these figures converged and became identical in 2015 and 2016. Conversely, a substantial gap persists in total liabilities throughout the entire period. Adjusted total liabilities remain significantly lower than reported liabilities, with the largest variance occurring in 2012, where reported liabilities were approximately 8.76 billion US$ higher than the adjusted figure. This indicates that a primary component of the company's reported debt profile consists of deferred tax liabilities.
Impact on Stockholders' Equity: The removal of deferred tax liabilities leads to a marked increase in adjusted stockholders' equity. From 2012 to 2016, adjusted equity remained consistently higher than reported equity, suggesting that the tax-adjusted view presents a stronger equity base. However, a downward trend is evident across both metrics starting after 2013, with a sharp decline in 2015, reflecting a deterioration in the company's retained earnings or capital position despite the adjustments.
Net Income Volatility: The adjustment for deferred taxes reveals a heightened volatility in profitability. In the profitable years of 2012 and 2013, adjusted net income exceeded reported net income. However, during the period of losses from 2014 to 2016, the adjusted losses were more severe than those reported. Most notably, in 2015, the reported loss of 6.69 billion US$ increased to an adjusted loss of 9.87 billion US$, indicating that deferred tax accounting provided a significant cushioning effect on reported earnings during the company's most acute financial downturn.

Overall, the adjustments demonstrate that while the removal of deferred taxes improves the balance sheet by reducing liabilities and increasing equity, it simultaneously exposes a more volatile and severe loss profile in the income statement during periods of financial distress.

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Anadarko Petroleum Corp., Financial Ratios: Reported vs. Adjusted

Anadarko Petroleum Corp., adjusted financial ratios

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Current Ratio
Reported current ratio	1.58	0.95	1.10	1.25	1.70
Adjusted current ratio	1.58	0.95	1.03	1.18	1.62
Net Profit Margin
Reported net profit margin	-36.36%	-70.55%	-10.69%	5.39%	17.97%
Adjusted net profit margin	-51.25%	-104.04%	-11.58%	6.31%	19.16%
Total Asset Turnover
Reported total asset turnover	0.19	0.20	0.27	0.27	0.25
Adjusted total asset turnover	0.19	0.20	0.27	0.27	0.25
Financial Leverage
Reported financial leverage	3.73	3.62	3.13	2.55	2.55
Adjusted financial leverage	2.76	2.55	2.16	1.80	1.80
Return on Equity (ROE)
Reported ROE	-25.15%	-52.20%	-8.87%	3.66%	11.59%
Adjusted ROE	-26.20%	-54.17%	-6.71%	3.05%	8.77%
Return on Assets (ROA)
Reported ROA	-6.74%	-14.42%	-2.84%	1.44%	4.55%
Adjusted ROA	-9.50%	-21.26%	-3.11%	1.69%	4.88%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

The financial performance and position from 2012 to 2016 are characterized by a significant deterioration in profitability and a steady increase in financial leverage, with the removal of deferred taxes highlighting deeper underlying losses and lower reported solvency risk.

Liquidity and Asset Efficiency: The current ratio exhibited a downward trend from 2012 to 2015, falling from 1.70 to 0.95, before recovering to 1.58 in 2016. The adjustment for deferred taxes had a negligible impact on these figures, with reported and adjusted current ratios converging to the same value by 2015. Similarly, total asset turnover remained identical between reported and adjusted figures, showing a slight contraction from 0.25 in 2012 to 0.19 in 2016, indicating a decline in the efficiency of asset utilization.
Profitability Margins: Net profit margins experienced a severe decline, shifting from positive territory in 2012 and 2013 to substantial losses by 2015. A significant divergence is observed between reported and adjusted margins; the removal of deferred taxes exacerbated the losses. For instance, in 2015, the reported net profit margin of -70.55% dropped to an adjusted margin of -104.04%, suggesting that deferred tax accounting provided a cushion that masked the full extent of operational losses.
Financial Leverage and Solvency: A consistent upward trend in financial leverage is evident, with reported leverage increasing from 2.55 in 2012 to 3.73 in 2016. However, the adjusted financial leverage is systematically lower than the reported figures throughout the period, rising from 1.80 to 2.76. This indicates that deferred tax liabilities contributed significantly to the reported leverage ratios, and their removal presents a more favorable view of the company's solvency position.
Return on Investment (ROE and ROA): Both Return on Equity (ROE) and Return on Assets (ROA) transitioned from positive returns in 2012 to negative returns by 2014. The adjusted ROE was consistently lower than the reported ROE in both positive and negative years, reaching -26.20% in 2016 compared to the reported -25.15%. In contrast, the adjusted ROA showed a more pronounced decline during the loss-making years, falling to -9.50% in 2016 against a reported -6.74%, further underscoring the negative impact of removing deferred tax benefits during the period of financial distress.

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Current assets	5,266)	3,982)	11,221)	7,108)	6,795)
Current liabilities	3,328)	4,181)	10,234)	5,703)	3,994)
Liquidity Ratio
Current ratio¹	1.58	0.95	1.10	1.25	1.70
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets	5,266)	3,982)	10,499)	6,748)	6,467)
Current liabilities	3,328)	4,181)	10,234)	5,703)	3,994)
Liquidity Ratio
Adjusted current ratio²	1.58	0.95	1.03	1.18	1.62

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= 5,266 ÷ 3,328 = 1.58

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 5,266 ÷ 3,328 = 1.58

An analysis of liquidity metrics from 2012 to 2016 reveals a period of significant volatility in current assets and a corresponding fluctuation in the current ratio. A consistent decline in liquidity was observed from 2012 through 2015, reaching a minimum threshold before a substantial recovery occurred in 2016.

Current Asset Trends: Reported current assets experienced moderate growth between 2012 and 2013, followed by a substantial peak of 11,221 million US$ in 2014. This was followed by a precipitous decline to 3,982 million US$ in 2015, marking a significant contraction in short-term asset holdings, before trending upward again to 5,266 million US$ in 2016.
Current Ratio Performance: The reported current ratio exhibited a steady downward trajectory, falling from 1.70 in 2012 to 0.95 in 2015. The decline below 1.00 in 2015 indicates a period where current liabilities exceeded current assets, suggesting a temporary tightening of the liquidity position. This trend reversed sharply in 2016, with the ratio recovering to 1.58.
Impact of Asset Adjustments: Between 2012 and 2014, adjusted current assets and the resulting adjusted current ratio were consistently lower than reported figures, indicating that certain asset components were removed to provide a more conservative liquidity assessment. The adjusted current ratio remained lower than the reported ratio during this period, though the gap narrowed over time. By 2015 and 2016, the adjusted and reported values converged entirely, showing no difference between the two metrics in the final two years of the period.

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to common stockholders	(3,071)	(6,692)	(1,750)	801)	2,391)
Sales revenues	8,447)	9,486)	16,375)	14,867)	13,307)
Profitability Ratio
Net profit margin¹	-36.36%	-70.55%	-10.69%	5.39%	17.97%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to common stockholders	(4,329)	(9,869)	(1,897)	938)	2,550)
Sales revenues	8,447)	9,486)	16,375)	14,867)	13,307)
Profitability Ratio
Adjusted net profit margin²	-51.25%	-104.04%	-11.58%	6.31%	19.16%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ Net profit margin = 100 × Net income (loss) attributable to common stockholders ÷ Sales revenues
= 100 × -3,071 ÷ 8,447 = -36.36%

² Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to common stockholders ÷ Sales revenues
= 100 × -4,329 ÷ 8,447 = -51.25%

The financial performance from 2012 to 2016 is characterized by a severe transition from profitability to significant net losses. A consistent downward trajectory in both reported and adjusted net income is evident, with the most acute deterioration occurring between 2013 and 2015.

Net Income and Adjusted Net Income Trends: Reported net income declined from a peak of 2,391 million USD in 2012 to a loss of 3,071 million USD by 2016. Adjusted net income followed a similar but more volatile path, falling from 2,550 million USD in 2012 to a maximum loss of 9,869 million USD in 2015. While 2016 showed a reduction in total losses compared to the previous year, the company remained significantly below its 2012 and 2013 performance levels.
Net Profit Margin Analysis: The reported net profit margin collapsed from 17.97% in 2012 to -36.36% in 2016. The adjusted net profit margin exhibited even more extreme variance, starting at 19.16% in 2012 and plummeting to -104.04% in 2015. This indicates that the adjusted losses in 2015 exceeded the total revenue generated during that period.
Divergence Between Reported and Adjusted Metrics: A widening gap between reported and adjusted figures is observable, particularly during the period of maximum loss. In 2015, the adjusted net loss was approximately 3.17 billion USD greater than the reported net loss. This disparity suggests the presence of significant non-recurring items or accounting adjustments that exacerbated the adjusted loss relative to the reported figures.

The data indicates a systemic decline in profitability, with 2015 representing the nadir of financial performance. Although the losses narrowed in 2016, the adjusted net profit margin of -51.25% confirms that the company had not returned to a sustainable level of operational profitability by the end of the analyzed period.

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Sales revenues	8,447)	9,486)	16,375)	14,867)	13,307)
Total assets	45,564)	46,414)	61,689)	55,781)	52,589)
Activity Ratio
Total asset turnover¹	0.19	0.20	0.27	0.27	0.25
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Sales revenues	8,447)	9,486)	16,375)	14,867)	13,307)
Adjusted total assets	45,564)	46,414)	60,967)	55,421)	52,261)
Activity Ratio
Adjusted total asset turnover²	0.19	0.20	0.27	0.27	0.25

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ Total asset turnover = Sales revenues ÷ Total assets
= 8,447 ÷ 45,564 = 0.19

² Adjusted total asset turnover = Sales revenues ÷ Adjusted total assets
= 8,447 ÷ 45,564 = 0.19

An analysis of the asset base and asset turnover from 2012 to 2016 reveals a period of expansion followed by a significant contraction and a subsequent decline in asset utilization efficiency.

Total Asset Trends: Reported total assets experienced growth between 2012 and 2014, rising from 52,589 million US$ to a peak of 61,689 million US$. However, a substantial reduction occurred in 2015, where assets fell to 46,414 million US$, representing a decrease of approximately 24.7% from the 2014 peak. This downward trajectory continued slightly into 2016, ending at 45,564 million US$. Adjusted total assets mirrored this pattern closely, with the variance between reported and adjusted figures disappearing entirely by 2015.
Asset Turnover Performance: The total asset turnover ratio showed a slight improvement from 0.25 in 2012 to 0.27 in 2013 and 2014. This stability was disrupted in 2015, when the ratio dropped to 0.20, and further declined to 0.19 by 2016. The adjusted total asset turnover remained identical to the reported ratio throughout the entire five-year period, indicating that adjustments to the asset base had no material impact on the efficiency metric.
Correlation Analysis: The data indicates that the contraction in the asset base during 2015 and 2016 was not sufficient to maintain or improve the asset turnover ratio. The simultaneous decline in both the total asset value and the turnover ratio suggests that revenue generation declined at a faster rate than the reduction of assets, leading to diminished operational efficiency in the latter two years of the analyzed period.

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Total assets	45,564)	46,414)	61,689)	55,781)	52,589)
Stockholders’ equity	12,212)	12,819)	19,725)	21,857)	20,629)
Solvency Ratio
Financial leverage¹	3.73	3.62	3.13	2.55	2.55
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	45,564)	46,414)	60,967)	55,421)	52,261)
Adjusted stockholders’ equity	16,522)	18,219)	28,252)	30,742)	29,060)
Solvency Ratio
Adjusted financial leverage²	2.76	2.55	2.16	1.80	1.80

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 45,564 ÷ 12,212 = 3.73

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 45,564 ÷ 16,522 = 2.76

An analysis of the financial position from 2012 to 2016 reveals a period of asset expansion followed by a significant contraction, coupled with a consistent increase in financial leverage. While adjusted figures provide a more favorable view of the solvency position, the overall trend indicates a weakening equity base relative to total assets.

Asset Base Trends: Total assets, both reported and adjusted, experienced steady growth from 2012 to 2014, peaking at 61,689 million USD. This trend reversed sharply in 2015, with total assets decreasing to 46,414 million USD, and continuing a slight decline to 45,564 million USD by the end of 2016.
Equity Variations: Reported stockholders' equity showed a peak in 2013 at 21,857 million USD before declining steadily to 12,212 million USD in 2016. Adjusted stockholders' equity remained consistently higher than reported equity throughout the period, suggesting significant tax-related adjustments. Adjusted equity peaked in 2013 at 30,742 million USD before falling to 16,522 million USD in 2016, mirroring the downward trajectory of the reported equity.
Financial Leverage Analysis: A clear upward trend in financial leverage is observed across both reported and adjusted metrics. Reported financial leverage remained stable at 2.55 through 2013, then accelerated to 3.13 in 2014, 3.62 in 2015, and 3.73 in 2016. Adjusted financial leverage followed an identical pattern, starting at 1.80 in 2012-2013 and rising to 2.76 by 2016. The fact that adjusted leverage remains lower than reported leverage indicates that the adjustments to equity mitigate the perceived risk, although the increasing ratio across both measures points to a rising debt-to-equity profile.

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to common stockholders	(3,071)	(6,692)	(1,750)	801)	2,391)
Stockholders’ equity	12,212)	12,819)	19,725)	21,857)	20,629)
Profitability Ratio
ROE¹	-25.15%	-52.20%	-8.87%	3.66%	11.59%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to common stockholders	(4,329)	(9,869)	(1,897)	938)	2,550)
Adjusted stockholders’ equity	16,522)	18,219)	28,252)	30,742)	29,060)
Profitability Ratio
Adjusted ROE²	-26.20%	-54.17%	-6.71%	3.05%	8.77%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ ROE = 100 × Net income (loss) attributable to common stockholders ÷ Stockholders’ equity
= 100 × -3,071 ÷ 12,212 = -25.15%

² Adjusted ROE = 100 × Adjusted net income (loss) attributable to common stockholders ÷ Adjusted stockholders’ equity
= 100 × -4,329 ÷ 16,522 = -26.20%

A significant deterioration in financial performance is observed between 2012 and 2016, characterized by a transition from positive profitability to substantial net losses and a corresponding erosion of stockholders' equity.

Net Income Performance: Profitability declined sharply after 2012, with reported net income falling from US$2,391 million to a deficit of US$6,692 million by 2015. Adjusted net income intensified this trend, recording a deeper loss of US$9,869 million in 2015. While 2016 showed a reduction in losses, the figures remained deeply negative, with adjusted net losses at US$4,329 million.
Stockholders' Equity Trends: A consistent downward trajectory in equity is evident starting after 2013. Reported stockholders' equity decreased from a peak of US$21,857 million in 2013 to US$12,212 million in 2016. Adjusted equity followed a similar pattern of contraction, falling from US$30,742 million in 2013 to US$16,522 million in 2016, representing a significant reduction in the company's capital base over the period.
Return on Equity (ROE) Analysis: Both reported and adjusted ROE exhibited a severe decline, mirroring the collapse in net income. Reported ROE fell from 11.59% in 2012 to a low of -52.20% in 2015, before partially recovering to -25.15% in 2016. Adjusted ROE tracked this volatility closely, reaching its lowest point at -54.17% in 2015. The proximity between reported and adjusted ROE throughout the period suggests that the primary drivers of the return decline were operational losses rather than singular accounting adjustments.

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to common stockholders	(3,071)	(6,692)	(1,750)	801)	2,391)
Total assets	45,564)	46,414)	61,689)	55,781)	52,589)
Profitability Ratio
ROA¹	-6.74%	-14.42%	-2.84%	1.44%	4.55%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to common stockholders	(4,329)	(9,869)	(1,897)	938)	2,550)
Adjusted total assets	45,564)	46,414)	60,967)	55,421)	52,261)
Profitability Ratio
Adjusted ROA²	-9.50%	-21.26%	-3.11%	1.69%	4.88%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ ROA = 100 × Net income (loss) attributable to common stockholders ÷ Total assets
= 100 × -3,071 ÷ 45,564 = -6.74%

² Adjusted ROA = 100 × Adjusted net income (loss) attributable to common stockholders ÷ Adjusted total assets
= 100 × -4,329 ÷ 45,564 = -9.50%

Financial performance between 2012 and 2016 is characterized by a significant transition from profitability to substantial losses, coinciding with a volatile asset base. The period exhibits a sharp deterioration in both reported and adjusted earnings, which fundamentally impacted return on assets (ROA) metrics.

Net Income Trends: Reported net income declined from US$ 2,391 million in 2012 to a loss of US$ 3,071 million by 2016. Adjusted net income reflects an even more pronounced downturn, with the loss peaking at US$ 9,869 million in 2015. The gap between reported and adjusted figures suggests that non-recurring or adjusting items intensified the impact of losses during the peak decline in 2015.
Asset Base Fluctuations: Total assets experienced an upward trend through 2014, reaching a peak reported value of US$ 61,689 million. This growth was followed by a sharp contraction in 2015 to US$ 46,414 million, representing a reduction of approximately 25% in the asset base. Adjusted total assets mirrored this trajectory closely, indicating that adjustments to the asset base were minimal across the five-year period.
Return on Assets (ROA) Analysis: A precipitous decline is observed in both ROA metrics. Reported ROA fell from 4.55% in 2012 to a trough of -14.42% in 2015, before improving to -6.74% in 2016. The Adjusted ROA demonstrated higher volatility and a more severe decline, dropping from 4.88% in 2012 to -21.26% in 2015. The significant divergence between the two metrics in 2015 underscores a period of acute financial distress where adjusted losses far outpaced the remaining asset value.

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