Anadarko Petroleum Corp. (NYSE:APC)

The financial data reveals several notable trends in the company's operational efficiency and working capital management over the five-year period ending in 2016.

Inventory Turnover

The inventory turnover ratio gradually declined from 15.31 in 2012 to 13.65 in 2014, showing a slight recovery to 14.75 in 2015 before significantly dropping to 9.27 in 2016. This decline suggests a decrease in the efficiency with which inventory was managed, potentially indicating slower inventory movement or excess stock in 2016.

Receivables Turnover

The receivables turnover ratio increased markedly from 9.03 in 2012 to a peak of 14.65 in 2014, maintaining a similar level in 2015 before dropping sharply to 8.39 in 2016. This trend indicates improved collection efficiency until 2015, followed by a deterioration in 2016, possibly signaling challenges in collecting payments from customers.

Payables Turnover

The payables turnover ratio remained relatively stable, fluctuating between 0.83 and 1.27 over the years. A slight upward trend is noted from 0.9 in 2014 to 1.27 in 2016, indicating the company may have been paying suppliers faster towards the end of the period.

Working Capital Turnover

Working capital turnover showed a strong increasing trend from 4.75 in 2012 to a peak of 16.59 in 2014, suggesting improved utilization of working capital. Data is missing for 2015, but the ratio dropped considerably to 4.36 in 2016, reflecting decreased efficiency in generating sales from working capital in the final year.

Average Inventory Processing Period

The average inventory processing period increased slightly from 24 days in 2012 to 27 days in 2014, decreased marginally to 25 days in 2015, then rose significantly to 39 days in 2016. This aligns with the inventory turnover decline and suggests slowing inventory movement in 2016.

Average Receivable Collection Period

There was a steady reduction in the receivable collection period from 40 days in 2012 to 25 days in 2014 and 2015, implying faster collections. However, this reversed sharply in 2016, with the period increasing to 44 days, indicating slower receipt of payments.

Operating Cycle

The operating cycle shortened from 64 days in 2012 to 50 days in 2015, reflecting improved overall operational efficiency. However, it extended comprehensively to 83 days in 2016, the highest over the period, due to the combined effects of slower inventory processing and receivable collections.

Average Payables Payment Period

The period for payment to suppliers lengthened from 405 days in 2012 to 438 days in 2013, then decreased each year reaching 288 days in 2016. This trend indicates a move towards quicker supplier payments after 2013, reducing the company's use of supplier credit as a financing source.

Cash Conversion Cycle

The cash conversion cycle was consistently negative, ranging from -341 days in 2012 to -205 days in 2016. While the negative cycle suggests that the company collects cash well before it needs to pay suppliers, the upward movement towards zero reflects a shortening of this advantage, primarily driven by faster payments to suppliers and slower receivables collection in 2016.

Cost of Sales Revenues

The cost of sales revenues exhibited an overall increasing trend from 2012 to 2014, rising from 2,694 million USD to a peak of 3,317 million USD. However, from 2014 onwards, there was a decline to 3,185 million USD in 2015 and further down to 2,900 million USD in 2016. This indicates a peak in production or sales-related costs in 2014, followed by a gradual reduction over the next two years.

Inventories

Inventory levels generally increased over the analyzed period, starting at 176 million USD in 2012 and reaching 313 million USD by the end of 2016. There was steady growth from 2012 to 2014, a slight dip in 2015, and a significant increase in 2016. This rise in inventory, particularly the notable jump in 2016, suggests accumulation of stock which may point to slower sales or changes in production planning.

Inventory Turnover Ratio

The inventory turnover ratio showed a declining trend over the five years. It decreased from a high of 15.31 in 2012 to 13.65 in 2014, with a slight recovery to 14.75 in 2015, before falling sharply to 9.27 in 2016. This downward movement, especially the significant drop in 2016, implies that inventory was being converted to sales less frequently, indicating potential challenges in inventory management or demand fluctuations.

Sales Revenues

Sales revenues exhibited an increasing trend from 2012 through 2014, rising from 13,307 million US dollars in 2012 to a peak of 16,375 million US dollars in 2014. Subsequently, the revenues declined significantly in 2015, falling to 9,486 million US dollars, and continued to decrease in 2016 to 8,447 million US dollars. This pattern indicates a notable contraction in sales after 2014.

Accounts Receivable, Net of Allowance, Customers

The accounts receivable balance showed some volatility during the five-year period. Beginning at 1,473 million US dollars in 2012, it remained relatively stable in 2013 at 1,481 million US dollars, then decreased markedly to 1,118 million US dollars in 2014 and further down to 652 million US dollars in 2015. In 2016, the accounts receivable balance increased again to 1,007 million US dollars. The decline from 2013 to 2015 followed by a partial rebound suggests changes in credit policies or customer payment behaviors during these years.

Receivables Turnover Ratio

The receivables turnover ratio improved steadily from 9.03 in 2012 to a peak of 14.65 in 2014, indicating increasingly effective collection of receivables relative to sales during that period. The ratio remained stable in 2015 at 14.55 but then dropped significantly in 2016 to 8.39, the lowest in the five-year span. This decreasing turnover ratio in 2016 points to a slower collection cycle or potential challenges in managing receivables following the downturn in sales.

Cost of sales revenues

The cost of sales revenues exhibited an overall upward trend from 2012 to 2014, increasing from 2694 million USD to 3317 million USD. However, from 2014 onwards, there was a decline, with the cost reducing to 3185 million USD in 2015 and further decreasing to 2900 million USD in 2016.

Accounts payable

Accounts payable followed a somewhat fluctuating trend. It rose steadily from 2989 million USD in 2012 to peak at 3683 million USD in 2014. Subsequently, it declined sharply in the following years, dropping to 2850 million USD in 2015 and further to 2288 million USD by the end of 2016.

Payables turnover ratio

The payables turnover ratio showed variability over the period. It started at 0.9 in 2012, slightly decreased to 0.83 in 2013, then recovered back to 0.9 in 2014. A notable increase occurred afterwards, with the ratio rising to 1.12 in 2015 and further increasing to 1.27 in 2016. This indicates an acceleration in the company's payment of its payables over time, especially in the last two years of the data set.

Working Capital

The working capital displays a declining trend from 2012 to 2015, starting at 2801 million USD in 2012 and decreasing steadily to a negative value of -199 million USD in 2015. In 2016, there is a marked recovery where working capital increases sharply to 1938 million USD, suggesting a turnaround in short-term financial health.

Sales Revenues

Sales revenues show growth from 2012 through 2014, rising from 13,307 million USD to a peak of 16,375 million USD. However, this upward trend reverses significantly in 2015 and 2016, with revenues dropping to 9,486 million USD and further down to 8,447 million USD respectively, indicating a substantial decline in sales performance.

Working Capital Turnover

The working capital turnover ratio increases notably from 4.75 in 2012 to 16.59 in 2014, reflecting increased efficiency in utilizing working capital to generate sales during this period. Data for 2015 is unavailable, but in 2016, the ratio decreases sharply to 4.36, aligning with the observed drop in sales revenues and indicating reduced operational efficiency or changes in working capital management.

Inventory Turnover

The inventory turnover ratio exhibited a declining trend from 15.31 in 2012 to 13.65 in 2014, indicating a gradual decrease in the frequency of inventory being sold and replaced within the year. A slight recovery occurred in 2015 with the turnover rising to 14.75, suggesting improved inventory management or sales efficiency during that period. However, a significant decline took place in 2016, with the ratio dropping sharply to 9.27, pointing to a material reduction in turnover efficiency.

Average Inventory Processing Period

Corresponding to the inventory turnover trend, the average inventory processing period increased over the years. Starting at 24 days in 2012, the period extended incrementally to 27 days by 2014. A slight improvement was noted in 2015 when the period slightly contracted to 25 days, aligning with the temporary improvement in turnover. In 2016, however, there was a marked increase to 39 days, reflecting slower inventory movement and longer holding periods.

Overall Analysis

The combined analysis of inventory turnover and average inventory processing period suggests that the company maintained reasonably efficient inventory management from 2012 to 2015, with only minor fluctuations. The sudden and substantial deterioration in 2016 reveals potential operational challenges, such as decreased sales, overstocking, or inefficiencies in inventory handling. This shift could imply a need for review and adjustment of inventory strategies to restore previous efficiency levels.

Receivables Turnover

The receivables turnover ratio exhibited an overall increasing trend from 2012 through 2015, rising from 9.03 in 2012 to a peak of 14.65 in 2014 and slightly declining to 14.55 in 2015. This upward movement suggests an improved efficiency in collecting receivables during this period. However, in 2016, there was a notable decline in the turnover ratio to 8.39, indicating a significant reduction in collection efficiency compared to the previous years.

Average Receivable Collection Period

The average receivable collection period decreased from 40 days in 2012 to 25 days in both 2014 and 2015, which aligns with the increasing receivables turnover ratio seen during these years. This reflects a quicker conversion of receivables into cash. Nonetheless, in 2016, the collection period extended sharply to 44 days, signaling an appreciable slowdown in the collection process.

Overall Analysis

Between 2012 and 2015, the data indicates an enhancement in the management of receivables, with faster collections and higher turnover ratios suggesting improved operational efficiency and cash flow management. Conversely, 2016 demonstrates a reversal of this trend, with a marked decrease in turnover and an increase in collection days, which may imply potential challenges in credit management or changes in customer payment behaviors that require further investigation.

Average inventory processing period

The average inventory processing period showed a generally stable trend from 2012 to 2015, fluctuating slightly between 24 and 27 days. However, in 2016, there was a notable increase to 39 days, indicating a significant extension in inventory processing time during that year.

Average receivable collection period

The average receivable collection period decreased from 40 days in 2012 to a low of 25 days in both 2014 and 2015, demonstrating improved efficiency in collecting receivables during this time. Nonetheless, in 2016 this period sharply increased to 44 days, surpassing the 2012 level and suggesting a deterioration in receivable collections.

Operating cycle

The operating cycle mirrored the overall trends in both inventory processing and receivable collection periods. It experienced a downward trend from 64 days in 2012 to 50 days in 2015, reflecting enhanced operational efficiency. However, there was a substantial increase to 83 days in 2016, indicating an overall lengthening of the operating cycle, which may point to operational challenges or delays in either inventory management or receivables.

Payables Turnover

The payables turnover ratio exhibited a mild fluctuation from 2012 to 2014, starting at 0.9 in 2012, dropping to 0.83 in 2013, and returning to 0.9 in 2014. Subsequently, a notable increase occurred over the next two years, rising to 1.12 in 2015 and reaching 1.27 in 2016. This upward trend in the later years suggests an improvement in the frequency with which the company settles its payables, indicating potentially enhanced efficiency in managing supplier payments.

Average Payables Payment Period

The average payables payment period, expressed in number of days, mirrored the inverse of the payables turnover pattern. Starting at 405 days in 2012, it increased to 438 days in 2013, indicating a longer duration to pay suppliers. It then decreased back to 405 days in 2014 and continued to decline more sharply in 2015 and 2016, reaching 327 days and then 288 days respectively. This downward trend signifies a reduction in the time taken to clear payables, consistent with the rise in payables turnover, and reflects an acceleration in the company's payment process to its creditors.

Overall Analysis

Collectively, these metrics depict a shift toward more rapid payment of obligations in the latter part of the period analyzed. After a period of slower payables turnover and longer payment days during 2012-2013, the company improved its payment practices substantially from 2014 onwards. This behavioral change could be due to strategic decisions to optimize creditor relationships or adjustments in liquidity management policies. The consistent improvement in these ratios in 2015 and 2016 suggests a deliberate emphasis on timely payments and possibly stronger cash flow management during that period.

Average Inventory Processing Period

The average inventory processing period showed a gradual increase from 24 days in 2012 to 27 days in 2014, indicating a slight slowdown in inventory turnover. This was followed by a brief improvement to 25 days in 2015 before rising sharply to 39 days in 2016, suggesting potential challenges in inventory management or sales pace during the final year.

Average Receivable Collection Period

The receivables collection period decreased significantly from 40 days in 2012 to 25 days by 2014, reflecting improved efficiency in collecting receivables. This efficiency was maintained in 2015; however, in 2016, there was a notable increase to 44 days, implying a decline in the effectiveness of receivables collection or changes in credit policy.

Average Payables Payment Period

The payment period for accounts payable expanded markedly from an already extended 405 days in 2012 to a peak of 438 days in 2013. Following this, there was a steady reduction to 327 days in 2015 and further down to 288 days in 2016, indicating a trend toward faster payments to suppliers and potentially improving relationships or altered payment terms.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the period, highlighting that the company is able to generate cash from operations before it needs to pay its suppliers. The negative cycle increased in magnitude from -341 days in 2012 to -376 days in 2013, then slightly improved to -353 days in 2014. From 2015 onwards, there was a consistent upward trend toward less negative values, reaching -205 days in 2016. This trend suggests a reduction in the company's cash flow advantage but still reflects strong working capital management compared to standard industry norms.