Inventory Disclosure
Adjustment to Inventory: Conversion from LIFO to FIFO
Adjusted Financial Ratios: LIFO vs. FIFO (Summary)
Adjusted Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Phillips 66, balance sheet: inventory

US$ in millions

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Crude oil and petroleum products	3,452)	3,238)	3,106)	2,883)	3,214)
Materials and supplies	324)	305)	289)	267)	263)
Inventories	3,776)	3,543)	3,395)	3,150)	3,477)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

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Item	Description	The company
Inventories	Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer.	Phillips 66 inventories increased from 2017 to 2018 and from 2018 to 2019.

Adjusting LIFO Inventory to FIFO (Current) Cost

US$ in millions

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Adjustment to Inventories
Inventories at LIFO (as reported)	3,776)	3,543)	3,395)	3,150)	3,477)
Add: Inventory LIFO reserve	4,300)	2,900)	4,300)	3,300)	1,300)
Inventories at FIFO (adjusted)	8,076)	6,443)	7,695)	6,450)	4,777)
Adjustment to Current Assets
Current assets (as reported)	14,395)	13,209)	14,390)	12,680)	12,256)
Add: Inventory LIFO reserve	4,300)	2,900)	4,300)	3,300)	1,300)
Current assets (adjusted)	18,695)	16,109)	18,690)	15,980)	13,556)
Adjustment to Total Assets
Total assets (as reported)	58,720)	54,302)	54,371)	51,653)	48,580)
Add: Inventory LIFO reserve	4,300)	2,900)	4,300)	3,300)	1,300)
Total assets (adjusted)	63,020)	57,202)	58,671)	54,953)	49,880)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	24,910)	24,653)	25,085)	22,390)	23,100)
Add: Inventory LIFO reserve	4,300)	2,900)	4,300)	3,300)	1,300)
Stockholders’ equity (adjusted)	29,210)	27,553)	29,385)	25,690)	24,400)
Adjustment to Net Income Attributable To Phillips 66
Net income attributable to Phillips 66 (as reported)	3,076)	5,595)	5,106)	1,555)	4,227)
Add: Increase (decrease) in inventory LIFO reserve	1,400)	(1,400)	1,000)	2,000)	(1,700)
Net income attributable to Phillips 66 (adjusted)	4,476)	4,195)	6,106)	3,555)	2,527)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

Phillips 66 inventory value on Dec 31, 2019 would be $8,076) (in millions) if the FIFO inventory method was used instead of LIFO. Phillips 66 inventories, valued on a LIFO basis, on Dec 31, 2019 were $3,776). Phillips 66 inventories would have been $4,300) higher than reported on Dec 31, 2019 if the FIFO method had been used instead.

Phillips 66, Financial Data: Reported vs. Adjusted

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Phillips 66, adjusted financial ratios

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Current Ratio
Reported current ratio (LIFO)	1.24	1.48	1.42	1.34	1.63
Adjusted current ratio (FIFO)	1.61	1.80	1.85	1.69	1.80
Net Profit Margin
Reported net profit margin (LIFO)	2.87%	5.02%	4.99%	1.85%	4.27%
Adjusted net profit margin (FIFO)	4.17%	3.76%	5.97%	4.22%	2.55%
Total Asset Turnover
Reported total asset turnover (LIFO)	1.83	2.05	1.88	1.63	2.04
Adjusted total asset turnover (FIFO)	1.70	1.95	1.74	1.53	1.98
Financial Leverage
Reported financial leverage (LIFO)	2.36	2.20	2.17	2.31	2.10
Adjusted financial leverage (FIFO)	2.16	2.08	2.00	2.14	2.04
Return on Equity (ROE)
Reported ROE (LIFO)	12.35%	22.70%	20.35%	6.95%	18.30%
Adjusted ROE (FIFO)	15.32%	15.23%	20.78%	13.84%	10.36%
Return on Assets (ROA)
Reported ROA (LIFO)	5.24%	10.30%	9.39%	3.01%	8.70%
Adjusted ROA (FIFO)	7.10%	7.33%	10.41%	6.47%	5.07%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

Financial ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Phillips 66 adjusted current ratio deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Phillips 66 adjusted net profit margin ratio deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Phillips 66 adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Phillips 66 adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Phillips 66 adjusted ROE deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Phillips 66 adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.

Phillips 66, Financial Ratios: Reported vs. Adjusted

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	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Current assets	14,395)	13,209)	14,390)	12,680)	12,256)
Current liabilities	11,646)	8,935)	10,107)	9,463)	7,531)
Liquidity Ratio
Current ratio¹	1.24	1.48	1.42	1.34	1.63
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted current assets	18,695)	16,109)	18,690)	15,980)	13,556)
Current liabilities	11,646)	8,935)	10,107)	9,463)	7,531)
Liquidity Ratio
Adjusted current ratio²	1.61	1.80	1.85	1.69	1.80

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= 14,395 ÷ 11,646 = 1.24

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 18,695 ÷ 11,646 = 1.61

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Liquidity ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Phillips 66 adjusted current ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Phillips 66	3,076)	5,595)	5,106)	1,555)	4,227)
Sales and other operating revenues	107,293)	111,461)	102,354)	84,279)	98,975)
Profitability Ratio
Net profit margin¹	2.87%	5.02%	4.99%	1.85%	4.27%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Phillips 66	4,476)	4,195)	6,106)	3,555)	2,527)
Sales and other operating revenues	107,293)	111,461)	102,354)	84,279)	98,975)
Profitability Ratio
Adjusted net profit margin²	4.17%	3.76%	5.97%	4.22%	2.55%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ Net profit margin = 100 × Net income attributable to Phillips 66 ÷ Sales and other operating revenues
= 100 × 3,076 ÷ 107,293 = 2.87%

² Adjusted net profit margin = 100 × Adjusted net income attributable to Phillips 66 ÷ Sales and other operating revenues
= 100 × 4,476 ÷ 107,293 = 4.17%

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Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Phillips 66 adjusted net profit margin ratio deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Sales and other operating revenues	107,293)	111,461)	102,354)	84,279)	98,975)
Total assets	58,720)	54,302)	54,371)	51,653)	48,580)
Activity Ratio
Total asset turnover¹	1.83	2.05	1.88	1.63	2.04
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Sales and other operating revenues	107,293)	111,461)	102,354)	84,279)	98,975)
Adjusted total assets	63,020)	57,202)	58,671)	54,953)	49,880)
Activity Ratio
Adjusted total asset turnover²	1.70	1.95	1.74	1.53	1.98

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ Total asset turnover = Sales and other operating revenues ÷ Total assets
= 107,293 ÷ 58,720 = 1.83

² Adjusted total asset turnover = Sales and other operating revenues ÷ Adjusted total assets
= 107,293 ÷ 63,020 = 1.70

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Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Phillips 66 adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets	58,720)	54,302)	54,371)	51,653)	48,580)
Stockholders’ equity	24,910)	24,653)	25,085)	22,390)	23,100)
Solvency Ratio
Financial leverage¹	2.36	2.20	2.17	2.31	2.10
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted total assets	63,020)	57,202)	58,671)	54,953)	49,880)
Adjusted stockholders’ equity	29,210)	27,553)	29,385)	25,690)	24,400)
Solvency Ratio
Adjusted financial leverage²	2.16	2.08	2.00	2.14	2.04

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 58,720 ÷ 24,910 = 2.36

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 63,020 ÷ 29,210 = 2.16

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Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Phillips 66 adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Phillips 66	3,076)	5,595)	5,106)	1,555)	4,227)
Stockholders’ equity	24,910)	24,653)	25,085)	22,390)	23,100)
Profitability Ratio
ROE¹	12.35%	22.70%	20.35%	6.95%	18.30%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Phillips 66	4,476)	4,195)	6,106)	3,555)	2,527)
Adjusted stockholders’ equity	29,210)	27,553)	29,385)	25,690)	24,400)
Profitability Ratio
Adjusted ROE²	15.32%	15.23%	20.78%	13.84%	10.36%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ ROE = 100 × Net income attributable to Phillips 66 ÷ Stockholders’ equity
= 100 × 3,076 ÷ 24,910 = 12.35%

² Adjusted ROE = 100 × Adjusted net income attributable to Phillips 66 ÷ Adjusted stockholders’ equity
= 100 × 4,476 ÷ 29,210 = 15.32%

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Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Phillips 66 adjusted ROE deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Phillips 66	3,076)	5,595)	5,106)	1,555)	4,227)
Total assets	58,720)	54,302)	54,371)	51,653)	48,580)
Profitability Ratio
ROA¹	5.24%	10.30%	9.39%	3.01%	8.70%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Phillips 66	4,476)	4,195)	6,106)	3,555)	2,527)
Adjusted total assets	63,020)	57,202)	58,671)	54,953)	49,880)
Profitability Ratio
Adjusted ROA²	7.10%	7.33%	10.41%	6.47%	5.07%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ ROA = 100 × Net income attributable to Phillips 66 ÷ Total assets
= 100 × 3,076 ÷ 58,720 = 5.24%

² Adjusted ROA = 100 × Adjusted net income attributable to Phillips 66 ÷ Adjusted total assets
= 100 × 4,476 ÷ 63,020 = 7.10%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Phillips 66 adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.

Phillips 66 (NYSE:PSX)

Analysis of Inventory

Inventory Disclosure

Adjustment to Inventory: Conversion from LIFO to FIFO

Phillips 66, Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: LIFO vs. FIFO (Summary)

Phillips 66, Financial Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)