Analysis of Debt
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Allergan Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Aggregate Accruals
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Total Debt (Carrying Amount)
Allergan Inc., balance sheet: debt
US$ in thousands
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||
|---|---|---|---|---|---|---|
| Notes payable | ||||||
| Convertible notes | ||||||
| Long-term debt, excluding current maturities | ||||||
| Total notes payable and long-term debt (carrying amount) |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
The analysis of the annual debt data reveals several notable trends and changes over the period from December 31, 2010, to December 31, 2014.
- Notes Payable
- The notes payable experienced fluctuations over the observed years. Starting at 28,100 thousand US dollars in 2010, the balance increased sharply in 2011 to 83,900 thousand. Subsequently, it declined significantly in 2012 to 48,800 thousand, before gradually rising again to 55,600 thousand in 2013 and reaching 72,100 thousand in 2014. This trend suggests variability in short-term borrowing or payable obligations with a general upward trajectory after 2012.
- Convertible Notes
- Convertible notes were present only in 2010, with a substantial amount of 642,500 thousand US dollars. There is no reported data for this item in subsequent years, indicating the possible repayment, conversion, or extinguishment of this liability following 2010.
- Long-term Debt, Excluding Current Maturities
- This category shows a relatively stable level around 1,512,000 thousand US dollars during 2010 to 2012, with minor decreases reflected in 2011 and 2012. However, there is a significant jump in 2013 to 2,098,300 thousand, which slightly decreased to 2,085,300 thousand in 2014. This sharp increase may imply new long-term borrowings or refinancing activities undertaken in 2013.
- Total Notes Payable and Long-term Debt (Carrying Amount)
- The total debt amount exhibits a decline from 2,204,800 thousand in 2010 to 1,599,300 thousand in 2011, and then a further slight decrease to 1,561,200 thousand in 2012. Following this period, the total debt sharply increased to 2,153,900 thousand in 2013 and remained relatively stable in 2014 at 2,157,400 thousand. This pattern indicates a consolidation phase with reduced debt levels until 2012, followed by a substantial increase and stabilization in subsequent years.
Overall, the debt profile indicates a phase of reduction or restructuring between 2010 and 2012, including the elimination of convertible notes. From 2013 onwards, there was a marked increase in long-term debt and total carrying debt amount, suggesting significant financing activities or capital structure changes during this later period. The notes payable component showed variability but remained relatively moderate compared to long-term debt amounts.
Total Debt (Fair Value)
| Dec 31, 2014 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Notes payable | |
| Convertible notes | |
| Long-term debt | |
| Total notes payable and long-term debt (fair value) | |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | |
Based on: 10-K (reporting date: 2014-12-31).
Weighted-average Interest Rate on Debt
Weighted-average effective interest rate on debt:
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| Total | |||
Based on: 10-K (reporting date: 2014-12-31).
1 US$ in thousands
2 Weighted-average interest rate = 100 × ÷ =
Interest Costs Incurred
Allergan Inc., interest costs incurred
US$ in thousands
| 12 months ended: | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest expense | |||||||||||
| Interest capitalized | |||||||||||
| Interest costs incurred |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
The data on annual interest costs incurred reveals several notable trends and fluctuations over the five-year period ending December 31, 2014. It encompasses three related financial items: interest expense, interest capitalized, and the total interest costs incurred.
- Interest Expense
-
The interest expense shows an overall declining trend from 2010 through 2012, decreasing from $78,700 thousand in 2010 to $63,600 thousand in 2012. However, the trend reverses in 2013, with an increase to $75,000 thousand, followed by a moderate decline to $69,400 thousand in 2014. This pattern suggests some variability potentially linked to changes in debt levels or interest rates within these years.
- Interest Capitalized
-
Interest capitalized started at a relatively low amount of $500 thousand in 2010 and doubled to $1,000 thousand in 2011. It then slightly decreased to $900 thousand in 2012 before rising significantly to $1,800 thousand in 2013. The most pronounced increase occurred in 2014, with interest capitalized reaching $5,600 thousand. This sharp rise in capitalized interest in 2014 may indicate increased investment in capital assets or longer project durations.
- Interest Costs Incurred
-
The total interest costs incurred, which is the sum of interest expense and interest capitalized, mirror the movement of interest expense but with smoother fluctuations due to the effect of capitalized interest. Costs decreased from $79,200 thousand in 2010 to $64,500 thousand in 2012, followed by an increase to $76,800 thousand in 2013. A slight decrease to $75,000 thousand in 2014 is observed despite the sharp rise in capitalized interest, indicating that the growth in capitalized interest mitigated potentially higher interest expenses.
Overall, the data demonstrates a general decline in reported interest expenses until 2012, followed by a rebound in 2013 and 2014. The significant growth in interest capitalized during the final year suggests shifting company financial strategies or project-related expenditures that influence how interest costs are allocated. The net effect on total interest costs incurred reflects these dynamics, with considerable year-on-year variability.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
2014 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= ÷ =
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= ÷ =
The financial data indicates notable improvement in the company's ability to meet its interest obligations over the five-year period ending in 2014. Both the interest coverage ratio without capitalized interest and the adjusted interest coverage ratio with capitalized interest show consistent upward trends.
- Interest Coverage Ratio (without capitalized interest)
- This ratio increased significantly from 3.17 in 2010 to 29.66 in 2014. The most substantial growth occurred between 2010 and 2012, with the ratio rising from just above 3 to over 25. Following this, the ratio stabilized at a high level, reaching nearly 30 by the end of 2014. This improvement suggests that earnings before interest and taxes (EBIT) have grown faster than interest expenses, enhancing the company's debt service capacity during this period.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted ratio follows a similar trajectory, increasing from 3.15 in 2010 to 27.45 in 2014. This consistency with the unadjusted ratio indicates that capitalized interest does not materially distort the company's ability to cover interest expenses. The upward trend demonstrates strengthened financial health and reduced risk related to interest payments.
Overall, the increasing interest coverage ratios imply stronger operational earnings and improved financial stability, providing a greater buffer to absorb interest costs. The steady increases throughout the period reflect effective management of debt and an enhanced capacity to meet financial obligations without strain.