Stock Analysis on Net
Stock Analysis on Net
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Amgen Inc. (NASDAQ:AMGN)

Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)

Amgen Inc., income tax expense (benefit), continuing operations

US$ in millions

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12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Federal 1,284  1,270  8,615  984  1,129 
State 39  17  5  65  40 
Foreign 277  227  275  176  272 
Current provision 1,600  1,514  8,895  1,225  1,441 
Federal (276) (317) (1,120) 372  (290)
State (22) (7) —  (69) (78)
Foreign (6) (39) (157) (87) (34)
Deferred provision (benefit) (304) (363) (1,277) 216  (402)
Provision for income taxes 1,296  1,151  7,618  1,441  1,039 

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

Item Description The company
Current provision Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Amgen Inc.’s current provision decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
Deferred provision (benefit) Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Amgen Inc.’s deferred provision (benefit) increased from 2017 to 2018 and from 2018 to 2019.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Amgen Inc.’s provision for income taxes decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Effective Income Tax Rate (EITR)

Amgen Inc., effective income tax rate (EITR) reconciliation

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Federal statutory tax rate 21.00% 21.00% 35.00% 35.00% 35.00%
Foreign earnings -4.50% -4.30% -15.80% -15.50% -18.10%
Credits, Puerto Rico Excise Tax -2.60% -2.50% -2.20% -2.30% -2.50%
Interest on uncertain tax positions 1.60% 1.20% 0.60% 0.50% 0.00%
Credits, primarily federal R&D -1.00% -0.80% -0.60% -0.70% -1.40%
Share-based payments -0.30% -0.20% -0.70% -1.30% 0.00%
Other, net 0.00% -0.50% -0.70% 0.00% 0.00%
Effective tax rate, before 2017 Tax Act 14.20% 13.90% 15.60% 15.70% 13.00%
2017 Tax Act, net repatriation tax 0.00% 0.00% 71.50% 0.00% 0.00%
2017 Tax Act, net deferred tax remeasurement 0.00% 0.00% -7.70% 0.00% 0.00%
2017 Tax Act, net impact on intercompany sales 0.00% -1.80% 0.00% 0.00% 0.00%
Effective tax rate 14.20% 12.10% 79.40% 15.70% 13.00%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

Item Description The company
Effective tax rate, before 2017 Tax Act Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Amgen Inc.’s effective tax rate, before 2017 Tax Act decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

Amgen Inc., components of deferred tax assets and liabilities

US$ in millions

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
NOL and credit carryforwards 800  810  812  688  620 
Accrued expenses 457  428  362  562  706 
Expenses capitalized for tax 170  185  155  255  199 
Stock-based compensation 91  95  99  167  179 
Undistributed earnings of foreign subsidiaries —  —  —  —  144 
Other 269  174  154  117  161 
Deferred income tax assets 1,787  1,692  1,582  1,789  2,009 
Valuation allowance (517) (509) (497) (381) (327)
Net deferred income tax assets 1,270  1,183  1,085  1,408  1,682 
Acquired intangible assets (1,288) (1,509) (1,748) (3,139) (3,633)
Debt (210) (184) (184) (345) — 
Other (286) (267) (240) (307) (227)
Deferred income tax liabilities (1,784) (1,960) (2,172) (3,791) (3,860)
Deferred income taxes, net (514) (777) (1,087) (2,383) (2,178)

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

Item Description The company
Deferred income tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Amgen Inc.’s deferred income tax assets increased from 2017 to 2018 and from 2018 to 2019.
Net deferred income tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Amgen Inc.’s net deferred income tax assets increased from 2017 to 2018 and from 2018 to 2019.
Deferred income taxes, net Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Amgen Inc.’s deferred income taxes, net increased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

Amgen Inc., adjustments to financial statements

US$ in millions

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Liabilities
Total liabilities (as reported) 50,034  53,916  54,713  47,751  43,493 
Less: Noncurrent deferred tax liabilities, net 606  864  1,166  2,436  2,239 
Total liabilities (adjusted) 49,428  53,052  53,547  45,315  41,254 
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 9,673  12,500  25,241  29,875  28,083 
Less: Net deferred tax assets (liabilities) (514) (777) (1,087) (2,383) (2,178)
Stockholders’ equity (adjusted) 10,187  13,277  26,328  32,258  30,261 
Adjustment to Net Income
Net income (as reported) 7,842  8,394  1,979  7,722  6,939 
Add: Deferred income tax expense (benefit) (304) (363) (1,277) 216  (402)
Net income (adjusted) 7,538  8,031  702  7,938  6,537 

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

Amgen Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Amgen Inc., adjusted financial ratios

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net Profit Margin
Reported net profit margin 35.32% 37.25% 9.08% 35.27% 33.13%
Adjusted net profit margin 33.95% 35.64% 3.22% 36.26% 31.21%
Financial Leverage
Reported financial leverage 6.17 5.31 3.17 2.60 2.55
Adjusted financial leverage 5.86 5.00 3.04 2.41 2.37
Return on Equity (ROE)
Reported ROE 81.07% 67.15% 7.84% 25.85% 24.71%
Adjusted ROE 74.00% 60.49% 2.67% 24.61% 21.60%
Return on Assets (ROA)
Reported ROA 13.13% 12.64% 2.48% 9.95% 9.69%
Adjusted ROA 12.62% 12.09% 0.88% 10.23% 9.13%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Amgen Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 but then slightly deteriorated 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.		 Amgen Inc.’s 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. Amgen Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Amgen Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

Amgen Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

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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)
Net income 7,842  8,394  1,979  7,722  6,939 
Product sales 22,204  22,533  21,795  21,892  20,944 
Profitability Ratio
Net profit margin1 35.32% 37.25% 9.08% 35.27% 33.13%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 7,538  8,031  702  7,938  6,537 
Product sales 22,204  22,533  21,795  21,892  20,944 
Profitability Ratio
Adjusted net profit margin2 33.95% 35.64% 3.22% 36.26% 31.21%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

2019 Calculations

1 Net profit margin = 100 × Net income ÷ Product sales
= 100 × 7,842 ÷ 22,204 = 35.32%

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Product sales
= 100 × 7,538 ÷ 22,204 = 33.95%

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

Adjusted Financial Leverage

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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)
Total assets 59,707  66,416  79,954  77,626  71,576 
Stockholders’ equity 9,673  12,500  25,241  29,875  28,083 
Solvency Ratio
Financial leverage1 6.17 5.31 3.17 2.60 2.55
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Total assets 59,707  66,416  79,954  77,626  71,576 
Adjusted stockholders’ equity 10,187  13,277  26,328  32,258  30,261 
Solvency Ratio
Adjusted financial leverage2 5.86 5.00 3.04 2.41 2.37

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

2019 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 59,707 ÷ 9,673 = 6.17

2 Adjusted financial leverage = Total assets ÷ Adjusted stockholders’ equity
= 59,707 ÷ 10,187 = 5.86

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.		 Amgen Inc.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
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 7,842  8,394  1,979  7,722  6,939 
Stockholders’ equity 9,673  12,500  25,241  29,875  28,083 
Profitability Ratio
ROE1 81.07% 67.15% 7.84% 25.85% 24.71%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 7,538  8,031  702  7,938  6,537 
Adjusted stockholders’ equity 10,187  13,277  26,328  32,258  30,261 
Profitability Ratio
Adjusted ROE2 74.00% 60.49% 2.67% 24.61% 21.60%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

2019 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 7,842 ÷ 9,673 = 81.07%

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × 7,538 ÷ 10,187 = 74.00%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Amgen Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
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 7,842  8,394  1,979  7,722  6,939 
Total assets 59,707  66,416  79,954  77,626  71,576 
Profitability Ratio
ROA1 13.13% 12.64% 2.48% 9.95% 9.69%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 7,538  8,031  702  7,938  6,537 
Total assets 59,707  66,416  79,954  77,626  71,576 
Profitability Ratio
Adjusted ROA2 12.62% 12.09% 0.88% 10.23% 9.13%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

2019 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 7,842 ÷ 59,707 = 13.13%

2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × 7,538 ÷ 59,707 = 12.62%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Amgen Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.