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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Phillips 66 pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2012
- Current Ratio since 2012
- Price to Earnings (P/E) since 2012
- Price to Sales (P/S) since 2012
- Aggregate Accruals
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Economic Profit
12 months ended: | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
---|---|---|---|---|---|---|
Net operating profit after taxes (NOPAT)1 | ||||||
Cost of capital2 | ||||||
Invested capital3 | ||||||
Economic profit4 |
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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
Net Operating Profit after Taxes (NOPAT)
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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income attributable to Phillips 66.
5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2019 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Phillips 66.
8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data reveals distinct trends in net income and net operating profit after taxes (NOPAT) over the five-year period.
- Net Income Attributable to Phillips 66
- Net income experienced significant volatility throughout the period. Starting at US$4,227 million in 2015, net income decreased sharply to US$1,555 million in 2016, representing a notable decline. However, in the following years, net income rebounded strongly, rising to US$5,106 million in 2017 and further increasing to US$5,595 million in 2018. In 2019, net income declined again to US$3,076 million. This pattern indicates fluctuating profitability with considerable short-term variations.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows a more consistent upward trend over the same period. Beginning at US$3,281 million in 2015, NOPAT increased steadily to US$4,480 million in 2016, US$4,664 million in 2017, US$5,129 million in 2018, and finally US$5,344 million in 2019. This gradual growth suggests improving core operational efficiency and profitability despite the fluctuations in net income.
In summary, while net income experienced notable fluctuations, particularly with a steep drop in 2016 followed by a peak in 2018, NOPAT demonstrated a steady and gradual improvement throughout the period. This contrast may indicate effects from non-operational factors influencing net income, whereas operating performance exhibited consistent enhancement.
Cash Operating Taxes
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).
The financial data reveals considerable fluctuations in both income tax expense (benefit) and cash operating taxes over the five-year period.
- Income Tax Expense (Benefit)
- There is a notable volatility in income tax expense figures, beginning with a high expense of 1,764 million USD in 2015, dropping sharply to 547 million USD in 2016. In 2017, the data shows a significant income tax benefit reflected by a negative value of -1,693 million USD. This is followed by a rebound to a positive expense of 1,572 million USD in 2018, before declining again to 801 million USD in 2019. This pattern indicates substantial variability, which could be due to changes in taxable income, tax rate adjustments, or extraordinary tax items within the company’s operational framework.
- Cash Operating Taxes
- The cash operating taxes also display considerable variation. The taxes paid almost drop from 1,407 million USD in 2015 to just 70 million USD in 2016, then rise to 363 million USD in 2017. A sharp increase occurs in 2018 to 1,429 million USD, followed by a decrease to 716 million USD in 2019. This trend, although somewhat aligned with the income tax expense, suggests fluctuating cash outflows related to tax operations, potentially reflecting changes in operational profitability, deferred tax payments, or differences between cash and accounting tax treatments.
Overall, the data suggests a highly dynamic tax position with considerable year-to-year changes. The negative income tax figure in 2017 particularly stands out as an anomaly, indicating either a tax benefit or adjustment that significantly reduced the tax expense for that year. The disparity between cash operating taxes and income tax expense in some years also implies timing differences between recorded tax expense and actual tax payments.
Invested Capital
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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of LIFO reserve. See details »
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- The total reported debt and leases show a continuous upward trend from 2015 through 2019. The value increased steadily each year from $10,643 million in 2015 to $13,024 million in 2019, indicating a rise in the company’s financial obligations over the period.
- Stockholders’ equity
- Stockholders' equity experienced fluctuations during the period. It decreased slightly from $23,100 million in 2015 to $22,390 million in 2016, then increased to a peak of $25,085 million in 2017. This was followed by a marginal decline in 2018 and a minor recovery in 2019, ending at $24,910 million. Overall, equity remained relatively stable with modest variations.
- Invested capital
- Invested capital showed a consistent growth trend over the five years. Beginning at $42,469 million in 2015, it rose each year and reached $50,827 million in 2019. This increase suggests ongoing capital investment and expansion activities.
Cost of Capital
Phillips 66, cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | ||||||
Invested capital2 | ||||||
Performance Ratio | ||||||
Economic spread ratio3 | ||||||
Benchmarks | ||||||
Economic Spread Ratio, Competitors4 | ||||||
Chevron Corp. | ||||||
ConocoPhillips | ||||||
Exxon Mobil Corp. | ||||||
Occidental Petroleum Corp. |
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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
Economic Profit Margin
Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | ||||||
Sales and other operating revenues | ||||||
Performance Ratio | ||||||
Economic profit margin2 | ||||||
Benchmarks | ||||||
Economic Profit Margin, Competitors3 | ||||||
Chevron Corp. | ||||||
ConocoPhillips | ||||||
Exxon Mobil Corp. | ||||||
Occidental Petroleum Corp. |
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).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales and other operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.