Allergan PLC (NYSE:AGN)

The financial performance, as measured by economic profit, demonstrates consistent negative values over the five-year period. Net operating profit after taxes (NOPAT) remains negative throughout, contributing significantly to the overall negative economic profit. Invested capital exhibits a declining trend, while the cost of capital fluctuates within a relatively narrow range.

Net Operating Profit After Taxes (NOPAT)

NOPAT is negative for each year presented. The most substantial negative value occurs in 2017, at -US$10,550,503 thousand, representing the poorest operating performance within the observed timeframe. While NOPAT improves slightly in 2018 and 2019, it remains considerably negative. The initial years, 2015 and 2016, show NOPAT values of -US$3,502,617 thousand and -US$2,001,620 thousand respectively.

Cost of Capital

The cost of capital shows some variability. It begins at 16.90% in 2015, decreases to 14.76% in 2017, and then increases to 17.11% in 2019. The fluctuations suggest potential changes in the company’s risk profile or broader market conditions impacting financing costs. The range is relatively contained, between 14.76% and 17.11%.

Invested Capital

A consistent downward trend is observed in invested capital. Starting at US$127,501,981 thousand in 2015, it declines to US$80,268,300 thousand by 2019. This reduction in invested capital could be due to asset sales, reduced capital expenditures, or other strategic decisions. The rate of decline appears to accelerate in the later years of the period.

Economic Profit

Economic profit is negative across all five years, ranging from -US$19,087,192 thousand in 2019 to -US$25,833,737 thousand in 2017. The negative economic profit indicates that the company is not generating returns exceeding its cost of capital. The values generally track the fluctuations in NOPAT and invested capital, with 2017 exhibiting the largest negative economic profit due to the combination of high negative NOPAT and a substantial invested capital base.

The consistent negative economic profit suggests a fundamental challenge in generating value for investors. The declining invested capital, while potentially improving capital efficiency, has not been sufficient to offset the negative NOPAT and achieve positive economic profit. Continued monitoring of NOPAT and the factors influencing the cost of capital are crucial.

Net Income (Loss) Attributable to Shareholders

The net income attributable to shareholders shows significant volatility over the observed period. Starting from approximately 3.9 billion US dollars at the end of 2015, it experienced a substantial increase to nearly 15 billion US dollars by the end of 2016. This peak was followed by a sharp reversal into negative territory, with losses amounting to approximately 4.1 billion US dollars in 2017. The negative trend continued in subsequent years, with losses deepening to around 5.1 billion and 5.3 billion US dollars in 2018 and 2019, respectively.

Net Operating Profit After Taxes (NOPAT)

The NOPAT metric also reflects a deteriorating operating performance over the period. It began in 2015 with a negative figure of about 3.5 billion US dollars, improved slightly in 2016 to approximately minus 2 billion US dollars, indicating a reduction in operating losses. However, in 2017, NOPAT deteriorated sharply, reaching a loss exceeding 10.5 billion US dollars. This was followed by some improvement yet continued negative results in 2018 and 2019, with losses of about 5.7 billion and 5.4 billion US dollars, respectively.

Overall Financial Trends

The company’s financial performance exhibits considerable instability over the five-year span. The marked peak in net income in 2016 appears anomalous given the general trend of losses in other years. Both net income and operating profitability suffer from large losses in recent years following the 2016 peak, suggesting potential challenges affecting operational efficiency and profitability after 2016.

The divergence between net income and NOPAT indicates that non-operating factors, such as one-time gains or losses, may have influenced net income, particularly in 2016. The sustained negative operating profit after taxes highlights fundamental operational difficulties that warrant further investigation.

The data reveals significant fluctuations in the provision (benefit) for income taxes over the five years analyzed. Initially, there is a substantial tax benefit recorded, with the provision showing negative values each year from 2015 through 2018, indicating the company recognized income tax benefits rather than expenses during this period. The magnitude of the benefit peaks in 2017 with an amount exceeding -6.6 million US dollars, suggesting an extraordinary tax gain or adjustment that year. However, in 2019, this trend reverses, and the provision shifts to a positive value of approximately 146 thousand US dollars, reflecting a tax expense rather than a benefit.

In contrast, the cash operating taxes exhibit a more variable and less consistent pattern. The cash taxes paid decreased from about 398 thousand US dollars in 2015 to roughly 295 thousand in 2016 but then surged to approximately 1.24 million in 2017. This rise contrasts with the significant tax benefit recorded in the provision for the same year. A striking observation is seen in 2018 when the cash operating taxes turn negative, indicating a tax refund or credit of nearly 399 thousand US dollars. Following this, the cash taxes return to a positive figure of approximately 897 thousand US dollars in 2019.

Overall, the provision for income taxes and cash operating taxes demonstrate divergent movements during several years, which may indicate timing differences, adjustments, or tax strategy effects on reported versus actual cash tax payments. The large tax benefits recorded in provisions in earlier years, especially 2017, suggest one-time tax events or re-measurements impacting the income statement, while the cash operating taxes reflect the actual tax payments made or refunded, exhibiting a more volatile profile with a notable negative value in 2018.

The financial data reveals several important trends over the five-year period ending December 31, 2019. The total reported debt and leases exhibit a consistent downward trajectory. Starting from approximately $42.89 billion in 2015, the debt decreases every year, reaching about $23.22 billion by the end of 2019. This represents a significant reduction in the company's leverage or obligations associated with debt and leases over the period.

Shareholders’ equity also demonstrates a declining pattern throughout these years. From $76.59 billion at the end of 2015, it slightly decreases to $76.19 billion in 2016 and continues this downward trend to $58.17 billion by 2019. This consistent reduction indicates possible challenges with retained earnings, equity issuance, or other comprehensive income affecting the equity base.

The invested capital, which encompasses the company's overall capital invested in operations, similarly shows a decreasing trend. Beginning at approximately $127.50 billion in 2015, invested capital reduces each year, culminating at about $80.27 billion in 2019. This decline suggests a potential shrinking scale of invested assets or capital employed, which could relate to asset divestitures, depreciation outpacing capital expenditure, or capital structure adjustments.

Total reported debt & leases

Substantial reduction by nearly 46% from 2015 to 2019, indicating active debt repayment or lease obligation reduction.

Shareholders’ equity

Gradual decline of roughly 24% over the period, possibly signaling diminished profitability, dividend distribution exceeding earnings, share repurchases, or adverse comprehensive income impacts.

Invested capital

Marked decrease of approximately 37%, reflecting either asset shrinkage, depreciation exceeding reinvestment, or strategic restructuring.

In summary, all three key financial measures present downward trends, with debt levels showing the most pronounced reduction, followed by invested capital and shareholders’ equity. The data implies an overall contraction in the scale of the business's financial operations and capitalization, alongside a strategic effort to reduce leverage.

The financial performance, as indicated by economic value added metrics, demonstrates a consistent pattern of negative economic profit over the five-year period. Simultaneously, invested capital exhibits a declining trend. The economic spread ratio, calculated from these figures, reflects the relationship between economic profit and invested capital, and reveals a worsening trend in profitability relative to capital employed.

Economic Profit

Economic profit consistently registers as negative across the observed period, ranging from approximately -US$19.1 million to -US$25.0 million. While the magnitude of the loss fluctuates year-to-year, it remains a persistent negative value. A slight improvement is observed between 2015 and 2016, followed by a return to higher negative values in 2017, and a gradual, but limited, reduction in the subsequent two years.

Invested Capital

Invested capital demonstrates a clear downward trend, decreasing from approximately US$127.5 million in 2015 to US$80.3 million in 2019. This represents a substantial reduction in the capital base over the five-year period. The rate of decline appears to accelerate from 2017 onwards.

Economic Spread Ratio

The economic spread ratio consistently shows negative values, indicating that the company’s return on invested capital is less than its cost of capital. The ratio worsens over time, moving from -19.64% in 2015 to -23.78% in 2019. This suggests a growing disparity between the returns generated and the cost of funding those returns. The most significant decline in the ratio occurs between 2016 and 2017, and again between 2018 and 2019.

The combined trends suggest that while the company is reducing its invested capital, it is not achieving sufficient profitability to offset its cost of capital. The declining economic spread ratio highlights a deteriorating financial position in terms of value creation.

The financial performance, as indicated by economic profit and its margin, demonstrates a consistent pattern of negative economic profit over the five-year period. While the magnitude of the economic loss fluctuates, the company does not generate returns exceeding its cost of capital during this timeframe. The economic profit margin, calculated as a percentage of adjusted net revenues, reflects this ongoing underperformance.

Economic Profit

Economic profit exhibits substantial negative values throughout the period, ranging from approximately -US$19.1 million to -US$25.8 million. A slight improvement is observed between 2015 and 2016, followed by a worsening in 2017. Subsequent years show a gradual, though limited, reduction in the absolute value of the economic loss, suggesting a potential, albeit slow, trend toward improved capital efficiency.

Adjusted Net Revenues

Adjusted net revenues demonstrate relative stability, fluctuating between US$14.6 million and US$16.1 million. A modest upward trend is discernible, with revenues increasing from US$14.6 million in 2016 to US$16.1 million in 2019. This revenue growth, however, has not been sufficient to offset the cost of capital and generate positive economic profit.

Economic Profit Margin

The economic profit margin consistently registers negative values, ranging from -118.71% to -166.28%. The margin demonstrates a decreasing trend in absolute terms, moving from -166.28% in 2015 to -118.71% in 2019. This indicates that, while economic losses remain significant, the proportion of revenue consumed by these losses has diminished over time. The largest margin improvement occurred between 2018 and 2019.

In summary, the company consistently fails to generate economic profit. Although adjusted net revenues show a slight increase and the economic profit margin improves marginally, substantial negative economic profit persists throughout the analyzed period. Further investigation into the factors contributing to the high cost of capital and the inability to translate revenue growth into economic profit is warranted.