Inventories

3 Months Ended

Mar. 31, 2020

Inventories [Abstract]

Inventories

NOTE 3 – INVENTORIES

The composition of our inventory is as follows (in millions):

	March 31,		December 31,
	2020		2019
Finished goods inventory at average cost:
Valves, automation, measurement and instrumentation	$	355	$	355
Carbon steel pipe, fittings and flanges		246		268
All other products		277		268
		878		891
Less: Excess of average cost over LIFO cost (LIFO reserve)		(152)		(155)
Less: Other inventory reserves		(35)		(35)
	$	691	$	701

The Company uses the last-in, first-out (“LIFO”) method of valuing U.S. inventories. The use of the LIFO method has the effect of reducing net income during periods of rising inventory costs (inflationary periods) and increasing net income during periods of falling inventory costs (deflationary periods). Valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory determination. Our inventory quantities are expected to be reduced for the current year, resulting in a liquidation of a LIFO inventory layer that was carried at a lower cost prevailing from a prior year, as compared with current costs in the current year (a “LIFO decrement”). A LIFO decrement results in the erosion of layers created in earlier years, and, therefore, a LIFO layer is not created for years that have decrements. For the three months ended March 31, 2020, the effect of this LIFO decrement decreased cost of sales by approximately $3 million.