Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Celgene Corp., solvency ratios
Based on: 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), 10-K (reporting date: 2014-12-31).
- Debt to Equity Ratio
- The debt to equity ratio exhibits an overall increasing trend from 1.05 in 2014 to 3.29 in 2018, with a peak in 2015 at 2.41 followed by slight fluctuations before a significant increase in 2018. This indicates a growing reliance on debt financing relative to shareholders' equity over the period.
- Debt to Capital Ratio
- This ratio steadily rises from 0.51 in 2014 to 0.77 in 2018, reflecting a gradual increase in the proportion of debt in the company’s total capital structure. The incremental growth suggests a strategic shift towards more leveraged financing.
- Debt to Assets Ratio
- The debt to assets ratio increases consistently from 0.40 in 2014 to 0.57 in 2018. This implies that a growing share of the company's assets is financed through debt, indicating increased financial risk related to asset-backed debt obligations.
- Financial Leverage Ratio
- Financial leverage shows a notable upward trend, rising from 2.66 in 2014 to 5.76 in 2018. This significant increase suggests that the company is using more borrowed funds relative to equity, enhancing potential returns but also financial risk.
- Interest Coverage Ratio
- The interest coverage ratio declines from 14.22 in 2014 to a low of 5.74 in 2016, then improves to 9.26 in 2017 before decreasing again to 7.52 in 2018. This pattern reveals a decreased ability to cover interest expenses with operating earnings during the middle years, followed by some recovery and then moderate decline, indicating fluctuations in earnings relative to interest obligations.
- Fixed Charge Coverage Ratio
- This ratio follows a similar pattern to interest coverage, decreasing from 10.77 in 2014 to 5.17 in 2016, recovering to 8.30 in 2017, and then declining again to 6.66 in 2018. It reflects variability in the company's ability to meet fixed charges such as lease and debt payments, paralleling interest coverage trends and highlighting periods of strained financial coverage capacity.
Debt Ratios
Coverage Ratios
Debt to Equity
Celgene Corp., debt to equity calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 501) | —) | 501) | —) | 606) | |
| Long-term debt, net of discount, excluding current portion | 19,769) | 15,838) | 13,789) | 14,250) | 6,266) | |
| Total debt | 20,270) | 15,838) | 14,289) | 14,250) | 6,872) | |
| Stockholders’ equity | 6,161) | 6,921) | 6,599) | 5,919) | 6,525) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 3.29 | 2.29 | 2.17 | 2.41 | 1.05 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= 20,270 ÷ 6,161 = 3.29
2 Click competitor name to see calculations.
- Total debt
- The total debt of the company exhibited a significant upward trend from 2014 to 2018, increasing from $6,872 million to $20,270 million. This represents nearly a threefold increase over the five-year period, with the most substantial jump occurring between 2014 and 2015, where debt more than doubled. Subsequent years show a continuous rise, though at a slower pace, indicating an increasing reliance on borrowed funds.
- Stockholders’ equity
- Stockholders’ equity demonstrated fluctuations during the same period. It started at $6,525 million in 2014, decreased to $5,919 million in 2015, then experienced a slight recovery to reach $6,599 million in 2016 and $6,921 million in 2017. However, by 2018, equity declined again to $6,161 million. Overall, there is a modest downward trend when comparing the start and end values, suggesting some erosion in the company’s net asset base.
- Debt to equity ratio
- The debt to equity ratio increased markedly over the five years, starting at 1.05 in 2014 and climbing to 3.29 in 2018. This rising ratio aligns with the growth in total debt and the comparatively stable or slightly declining equity, indicating increased financial leverage. The most notable increases occurred between 2014 and 2015 and then again from 2017 to 2018, reflecting a growing use of debt relative to shareholders’ equity.
Debt to Capital
Celgene Corp., debt to capital calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 501) | —) | 501) | —) | 606) | |
| Long-term debt, net of discount, excluding current portion | 19,769) | 15,838) | 13,789) | 14,250) | 6,266) | |
| Total debt | 20,270) | 15,838) | 14,289) | 14,250) | 6,872) | |
| Stockholders’ equity | 6,161) | 6,921) | 6,599) | 5,919) | 6,525) | |
| Total capital | 26,431) | 22,759) | 20,889) | 20,169) | 13,396) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.77 | 0.70 | 0.68 | 0.71 | 0.51 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to capital = Total debt ÷ Total capital
= 20,270 ÷ 26,431 = 0.77
2 Click competitor name to see calculations.
- Total debt
- The total debt of the company has exhibited a consistent upward trajectory over the analyzed five-year period. Beginning at 6,872 million USD in 2014, the debt more than doubled by 2015 to reach 14,250 million USD. It remained relatively stable into 2016, with a slight increase to 14,289 million USD, before rising further to 15,838 million USD in 2017. By the end of 2018, total debt had markedly increased to 20,270 million USD, representing a nearly threefold increase compared to the starting point in 2014.
- Total capital
- Total capital has also grown steadily from 13,396 million USD in 2014 to 26,431 million USD in 2018. The increase was most notable in 2015, where the total capital rose sharply to 20,169 million USD, then showed more moderate growth rates in the following years of 2016 and 2017, reaching 20,889 million USD and 22,759 million USD respectively. The growth accelerated again in 2018, with total capital reaching its highest level within this timeframe.
- Debt to capital ratio
- The debt to capital ratio displays an increasing trend throughout the period. Starting at 0.51 in 2014, it surged to 0.71 in 2015, indicating a significant shift towards higher leverage. After a slight decrease to 0.68 in 2016, the ratio rose again to 0.70 in 2017 and further increased to 0.77 in 2018. This consistent rise in the ratio suggests that the company's reliance on debt financing increased relative to its total capital over the five years.
- Overall analysis
- The financial data reveals a clear pattern of increasing debt levels accompanied by a steady growth in total capital. The sharper rise in total debt compared to total capital resulted in an increasing debt to capital ratio, indicating a trend towards higher financial leverage. This could suggest strategic decisions to finance growth or operations increasingly through debt rather than equity or retained earnings. The trend highlights an elevated risk profile from a capital structure perspective, which may warrant monitoring in terms of debt servicing capacity and financial flexibility going forward.
Debt to Assets
Celgene Corp., debt to assets calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 501) | —) | 501) | —) | 606) | |
| Long-term debt, net of discount, excluding current portion | 19,769) | 15,838) | 13,789) | 14,250) | 6,266) | |
| Total debt | 20,270) | 15,838) | 14,289) | 14,250) | 6,872) | |
| Total assets | 35,480) | 30,141) | 28,086) | 27,053) | 17,340) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.57 | 0.53 | 0.51 | 0.53 | 0.40 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Debt to assets = Total debt ÷ Total assets
= 20,270 ÷ 35,480 = 0.57
2 Click competitor name to see calculations.
- Total Debt
- The total debt of the company shows a significant upward trend over the five-year period. Beginning at $6,872 million at the end of 2014, the debt more than doubled by the end of 2015 to $14,250 million. It remained relatively stable in 2016 before increasing to $15,838 million in 2017 and then rising sharply to $20,270 million by the end of 2018. This indicates an increasing reliance on debt financing over the period.
- Total Assets
- Total assets exhibited substantial growth throughout the same timeframe. Starting at $17,340 million in 2014, assets increased steadily each year, reaching $35,480 million by the end of 2018. This growth reflects an expansion of the company's asset base, nearly doubling in size over five years, suggesting investments or acquisitions contributing to asset accumulation.
- Debt to Assets Ratio
- The debt to assets ratio fluctuated but showed an overall increasing pattern. It started at 0.40 in 2014, rose sharply to 0.53 in 2015, then dipped slightly to 0.51 in 2016. The ratio increased again to 0.53 in 2017 and further to 0.57 in 2018. This trend indicates that debt has been growing at a faster rate than assets, thereby increasing financial leverage and risk profile over time.
Financial Leverage
Celgene Corp., financial leverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 35,480) | 30,141) | 28,086) | 27,053) | 17,340) | |
| Stockholders’ equity | 6,161) | 6,921) | 6,599) | 5,919) | 6,525) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 5.76 | 4.36 | 4.26 | 4.57 | 2.66 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= 35,480 ÷ 6,161 = 5.76
2 Click competitor name to see calculations.
- Total assets
- The total assets of the company show a consistent upward trend from 2014 through 2018. Starting at 17,340 million US dollars in 2014, total assets increased significantly to 27,053 million in 2015. Growth continued at a more moderate pace reaching 28,086 million in 2016, then to 30,141 million in 2017, and finally reaching 35,480 million in 2018. This reflects an overall expansion in the asset base over the five-year period.
- Stockholders’ equity
- Stockholders’ equity exhibits fluctuation during the same timeframe. Beginning at 6,525 million US dollars in 2014, equity declined to 5,919 million in 2015. It then rose to 6,599 million in 2016 and increased slightly to 6,921 million in 2017. However, there was a notable decrease in 2018 to 6,161 million. Despite this volatility, equity values remained generally stable around the 6,000 to 7,000 million range after 2014.
- Financial leverage
- Financial leverage shows a marked increase across the observed period, indicating a rising dependence on debt relative to equity. From a ratio of 2.66 in 2014, leverage sharply increased to 4.57 in 2015. It then slightly decreased to 4.26 in 2016 but edged back up to 4.36 in 2017. In 2018, leverage escalated further to 5.76, the highest level recorded in the five years. This suggests growing financial risk and greater use of borrowed funds in the company’s capital structure.
Interest Coverage
Celgene Corp., interest coverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 4,046) | 2,940) | 1,999) | 1,602) | 2,000) | |
| Add: Income tax expense | 786) | 1,374) | 373) | 422) | 328) | |
| Add: Interest expense | 741) | 522) | 500) | 311) | 176) | |
| Earnings before interest and tax (EBIT) | 5,573) | 4,836) | 2,873) | 2,334) | 2,504) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 7.52 | 9.26 | 5.74 | 7.51 | 14.22 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Interest coverage = EBIT ÷ Interest expense
= 5,573 ÷ 741 = 7.52
2 Click competitor name to see calculations.
- Earnings before Interest and Tax (EBIT)
- The EBIT shows an overall upward trend from 2014 to 2018. It decreased slightly from US$2,504 million in 2014 to US$2,334 million in 2015, followed by a substantial increase in 2016 to US$2,873 million. From 2016 onwards, the EBIT rose sharply to reach US$4,836 million in 2017 and further increased to US$5,573 million in 2018. This indicates strong operational performance growth, especially in the last two years.
- Interest Expense
- Interest expense consistently increased during the period under review. It rose from US$176 million in 2014 to US$311 million in 2015, subsequently climbing to US$500 million in 2016. The upward trend continued with US$522 million recorded in 2017 and further increased to US$741 million in 2018. This rising interest expense indicates growing borrowing costs or increased debt levels.
- Interest Coverage Ratio
- The interest coverage ratio, which measures the company's ability to meet interest obligations from its EBIT, shows a declining trend between 2014 and 2016, falling from 14.22 in 2014 to 5.74 in 2016. This decline reflects the combined effects of decreasing EBIT in 2015 and increasing interest expenses. However, there is partial recovery in 2017, with the ratio increasing to 9.26, before declining again to 7.52 in 2018. Despite the recent fluctuations, the ratio remains above 5, indicating that EBIT sufficiently covers interest expenses but with reduced margin compared to earlier periods.
- Summary
- Overall, the data reveals an improving operational performance as reflected in the increasing EBIT after 2015. Nevertheless, increasing interest expenses have pressured the interest coverage ratio, which, despite fluctuations, remains at levels implying adequate coverage. The trends suggest that while the company has strengthened its earnings capacity, it has also taken on higher interest obligations, which could warrant monitoring to ensure sustained financial stability.
Fixed Charge Coverage
Celgene Corp., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 4,046) | 2,940) | 1,999) | 1,602) | 2,000) | |
| Add: Income tax expense | 786) | 1,374) | 373) | 422) | 328) | |
| Add: Interest expense | 741) | 522) | 500) | 311) | 176) | |
| Earnings before interest and tax (EBIT) | 5,573) | 4,836) | 2,873) | 2,334) | 2,504) | |
| Add: Rental expense under operating leases | 113) | 69) | 70) | 66) | 62) | |
| Earnings before fixed charges and tax | 5,686) | 4,905) | 2,942) | 2,400) | 2,566) | |
| Interest expense | 741) | 522) | 500) | 311) | 176) | |
| Rental expense under operating leases | 113) | 69) | 70) | 66) | 62) | |
| Fixed charges | 854) | 591) | 570) | 377) | 238) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 6.66 | 8.30 | 5.17 | 6.37 | 10.77 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 5,686 ÷ 854 = 6.66
2 Click competitor name to see calculations.
- Earnings before fixed charges and tax
- Over the five-year period, earnings before fixed charges and tax generally exhibited an upward trend. Starting at 2,566 million US dollars in 2014, the figure declined slightly to 2,400 million US dollars in 2015, followed by a moderate increase to 2,942 million in 2016. Subsequently, a significant rise occurred, reaching 4,905 million in 2017 and peaking at 5,686 million in 2018, indicating enhanced operating performance over the recent years.
- Fixed charges
- Fixed charges showed a consistent increase throughout the period. Beginning at 238 million US dollars in 2014, fixed charges rose noticeably each year, reaching 377 million in 2015, and continuing upward to 570 million in 2016. The rising trend persisted through 2017 with 591 million and further increased to 854 million in 2018. This suggests higher interest expenses or other fixed financial obligations incurred by the company over time.
- Fixed charge coverage ratio
- The fixed charge coverage ratio demonstrated variability across the period with an overall declining trend from 2014 to 2016 and fluctuating subsequently. Initially, the ratio was strong at 10.77 in 2014 but decreased considerably to 6.37 in 2015 and further to 5.17 in 2016, reflecting a reduction in earnings relative to fixed charges. An improvement occurred in 2017, with the ratio climbing to 8.3, before declining again to 6.66 in 2018. Despite fluctuations, the ratio remained above 5, indicating the company’s earnings before interest and taxes were sufficient to cover fixed charges multiple times, though with decreasing buffer in recent years.
- Overall insights
- The company experienced growth in earnings before fixed charges and tax alongside a steady increase in fixed charges, leading to a somewhat volatile but generally sufficient fixed charge coverage ratio. The growth in earnings supports the capacity to meet higher fixed financial obligations, though the declining coverage ratio suggests attention may be needed to manage the balance between earning capacity and fixed costs effectively.