Analysis of Solvency Ratios
Quarterly Data
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
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- Income Statement
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Price to FCFE (P/FCFE)
- Analysis of Revenues
- Aggregate Accruals
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Solvency Ratios (Summary)
Allergan Inc., solvency ratios (quarterly data)
Based on: 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31), 10-K (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30), 10-Q (reporting date: 2010-03-31).
- Debt to Equity Ratio
- The debt to equity ratio exhibited some variability throughout the observed periods. Initially, it was relatively low at 0.31 in March 2010, then increased notably to 0.49 by September 2010. Following this peak, the ratio declined gradually to around 0.27 by December 2012. A subsequent increase commenced in early 2013, reaching 0.41 by March 2013, followed by a general downward trend toward 0.28 by the end of 2014. Overall, the ratio fluctuated but showed a tendency to decrease toward the end of the period.
- Debt to Capital Ratio
- The debt to capital ratio followed a pattern similar to the debt to equity ratio but with less pronounced peaks. The ratio rose to 0.33 in September 2010, then steadily decreased across the following quarters to 0.21 by December 2012. After a moderate increase to 0.29 in March 2013, it trended downward again, ending at 0.22 in December 2014. This suggests a gradual reduction in the reliance on debt relative to capital over the longer term after an initial increase.
- Debt to Assets Ratio
- This ratio started near 0.20, climbed to a high of 0.27 in December 2010, and then decreased steadily to around 0.17 by the end of 2012. In early 2013, a rise to 0.23 occurred but was followed by a gradual decrease to 0.17 at the end of 2014. The overall trend suggests that the company’s debt relative to total assets declined over the observed period after a mid-cycle peak.
- Financial Leverage Ratio
- The financial leverage ratio exhibited an increase from 1.54 in March 2010 to a peak of 1.92 in September 2010. Thereafter, it decreased and stabilized within a narrow range roughly between 1.57 and 1.75 through the end of 2012. Starting in 2013, the ratio showed a slight declining trend, ending at 1.60 in December 2014. This indicates a reduction in the use of financial leverage after a peak in late 2010, maintaining moderate leverage levels subsequently.
- Interest Coverage Ratio
- Data for interest coverage is absent for the first few quarters but reveals a significant change starting September 2010 at 3.17. There was a slight dip to 2.77 and 2.87 over the following quarters, which was followed by a sharp increase to a range above 16 beginning March 2011. Subsequently, there was a continuous improvement in interest coverage reaching a peak of 29.66 by the end of 2014. This indicates a substantial enhancement in the company's ability to cover interest expenses, suggesting stronger earnings or reduced interest obligations over time.
Debt Ratios
Coverage Ratios
Debt to Equity
Allergan Inc., debt to equity calculation (quarterly data)
| Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | Mar 31, 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||
| Notes payable | ||||||||||||||||||||||||||
| Convertible notes | ||||||||||||||||||||||||||
| Long-term debt, excluding current maturities | ||||||||||||||||||||||||||
| Long-term convertible notes | ||||||||||||||||||||||||||
| Total debt | ||||||||||||||||||||||||||
| Total Allergan, Inc. stockholders’ equity | ||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||
| Debt to equity1 | ||||||||||||||||||||||||||
| 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: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31), 10-K (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30), 10-Q (reporting date: 2010-03-31).
1 Q4 2014 Calculation
Debt to equity = Total debt ÷ Total Allergan, Inc. stockholders’ equity
= ÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends in the company's debt, equity, and leverage ratio over the analyzed periods.
- Total Debt
- Total debt generally exhibits moderate fluctuations, with a significant increase observed during the third quarter of 2010, jumping from approximately 1.53 billion to over 2.2 billion US dollars. Following this peak, debt decreases sharply to around 1.59 billion by the fourth quarter of 2011 and remains relatively stable with minor variations around the 1.55 to 1.6 billion range through mid-2012. Starting from the first quarter of 2013, debt again increases markedly to exceed 2.1 billion and maintains levels slightly above 2.15 billion through the end of 2014, indicating a phase of increased leverage or financing needs.
- Total Stockholders’ Equity
- Stockholders’ equity demonstrates an overall upward trend throughout the period. Initial values near 4.94 billion rise intermittently but steadily, despite some fluctuations in the 2010-2011 span. Notably, equity climbs from approximately 5.34 billion in the first quarter of 2013 to 7.75 billion by the end of 2014, reflecting sustained growth in the company’s net assets and possibly retained earnings or equity issuances.
- Debt to Equity Ratio
- The debt to equity ratio shows considerable variability correlated with movements in total debt and equity. The ratio peaks at 0.49 during September 2010, corresponding with the spike in debt and a dip in equity, signifying elevated financial leverage at that point. Subsequently, the ratio declines steadily to 0.27 by the end of 2012, denoting a reduction in leverage and an improvement in the capital structure. In 2013, the ratio increases again to a maximum of 0.41 in the first quarter but then declines persistently to 0.28 by the close of 2014, indicating enhanced equity growth relative to debt and a stronger balance sheet position toward the end of the period.
Overall, the financial data depicts the company managing its capital structure with periods of increased borrowing followed by phases of strengthening equity. The declining trend in the debt to equity ratio after mid-2013 suggests a strategic shift favoring lower leverage and potentially a more conservative financial posture, supported by consistent growth in equity.
Debt to Capital
Allergan Inc., debt to capital calculation (quarterly data)
| Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | Mar 31, 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||
| Notes payable | ||||||||||||||||||||||||||
| Convertible notes | ||||||||||||||||||||||||||
| Long-term debt, excluding current maturities | ||||||||||||||||||||||||||
| Long-term convertible notes | ||||||||||||||||||||||||||
| Total debt | ||||||||||||||||||||||||||
| Total Allergan, Inc. stockholders’ equity | ||||||||||||||||||||||||||
| Total capital | ||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||
| Debt to capital1 | ||||||||||||||||||||||||||
| 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: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31), 10-K (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30), 10-Q (reporting date: 2010-03-31).
1 Q4 2014 Calculation
Debt to capital = Total debt ÷ Total capital
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt of the company exhibited variability over the analyzed quarters. Initially, total debt increased notably from approximately 1.52 billion to 2.20 billion US dollars between March and December 2010. A significant reduction followed in 2011, stabilizing around 1.59 billion US dollars through the end of that year and into mid-2012. However, total debt surged again sharply in early 2013, reaching over 2.16 billion US dollars. For the remainder of the period analyzed, total debt remained relatively stable, fluctuating slightly but maintaining a level near 2.15 billion US dollars.
- Total Capital
- Total capital showed a consistent upward trend across the entire period. Starting at approximately 6.46 billion US dollars in the first quarter of 2010, it gradually increased to nearly 7.39 billion by the end of 2012. This upward movement continued through 2013 and 2014, reaching just under 10 billion US dollars by the end of the analyzed period. The steady growth in total capital indicates ongoing expansion or accumulation of assets and equity financing.
- Debt to Capital Ratio
- The debt to capital ratio reflected the fluctuations observed in total debt relative to total capital. It peaked at 0.33 in the third quarter of 2010, coinciding with the period of elevated debt. After this peak, the ratio declined steadily, reaching a low around 0.21 by the end of 2012, suggesting improved leverage and a stronger capital base relative to debt. However, the ratio increased again in early 2013 to about 0.29 before trending downward in the subsequent quarters. By the end of 2014, the debt to capital ratio settled at 0.22, indicating a moderate and improving use of leverage over the longer term.
Debt to Assets
Allergan Inc., debt to assets calculation (quarterly data)
| Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | Mar 31, 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||
| Notes payable | ||||||||||||||||||||||||||
| Convertible notes | ||||||||||||||||||||||||||
| Long-term debt, excluding current maturities | ||||||||||||||||||||||||||
| Long-term convertible notes | ||||||||||||||||||||||||||
| Total debt | ||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||
| Debt to assets1 | ||||||||||||||||||||||||||
| 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: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31), 10-K (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30), 10-Q (reporting date: 2010-03-31).
1 Q4 2014 Calculation
Debt to assets = Total debt ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
- Total Debt
- The total debt exhibited fluctuations over the observed period. Initially, total debt rose significantly from approximately 1.52 billion to 2.20 billion USD between the first quarter of 2010 and the fourth quarter of 2010. This was followed by a decline to around 1.59 billion USD by the fourth quarter of 2011, remaining relatively stable throughout 2012. A sharp increase occurred again in early 2013, reaching above 2.16 billion USD, and maintained a level just above 2.14 billion USD through the end of 2014.
- Total Assets
- Total assets generally trended upwards over the entire period. Starting at about 7.63 billion USD in early 2010, assets increased steadily with some variability, reaching over 10.5 billion USD by the fourth quarter of 2013. Further growth was noted into 2014 with assets surpassing 12.4 billion USD by year-end. This represents a consistent asset base expansion throughout the timeline.
- Debt to Assets Ratio
- The debt to assets ratio showed considerable variation linked to the changes in debt and assets. During 2010, the ratio increased from 0.20 to 0.27, correlating with the rise in debt relative to assets. This ratio declined to approximately 0.19 by late 2011 and normalized around 0.17 to 0.18 during 2012, indicating improved leverage due to growth in assets and stable debt levels. In 2013, the ratio increased again, peaking near 0.23 early in the year, before gradually declining to 0.17 by the end of 2014, reflecting a trend toward reduced leverage as asset growth outpaced debt increases.
- Summary
- Overall, the data indicates a pattern of cyclical increases in total debt interspersed with periods of relative stability. Asset levels showed consistent growth, contributing to an overall decline in leverage ratio toward the end of the period despite intermittent increases in total debt. The company appeared to manage its balance sheet by growing assets sufficiently to mitigate the impact of fluctuating debt levels on financial leverage.
Financial Leverage
Allergan Inc., financial leverage calculation (quarterly data)
| Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | Mar 31, 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||
| Total Allergan, Inc. stockholders’ equity | ||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||
| Financial leverage1 | ||||||||||||||||||||||||||
| 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: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31), 10-K (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30), 10-Q (reporting date: 2010-03-31).
1 Q4 2014 Calculation
Financial leverage = Total assets ÷ Total Allergan, Inc. stockholders’ equity
= ÷ =
2 Click competitor name to see calculations.
The quarterly financial data displays the evolution of key balance sheet figures over a five-year period.
- Total assets
-
The total assets exhibit a generally increasing trend from March 31, 2010, through the end of 2014. Beginning at approximately 7.6 billion USD in early 2010, the asset base shows incremental growth with slight fluctuations in some quarters, reaching about 12.4 billion USD by the last quarter of 2014.
This steady rise indicates an expansion or accumulation of resources, reflecting potential business growth, acquisitions, or capital investments during this period.
- Total Allergan, Inc. stockholders’ equity
-
Stockholders’ equity initially fluctuates between March 2010 and December 2012, exhibiting periods of increase as well as noticeable declines, such as the dip observed around September and December 2010. From 2013 onwards, there is a clear upward trend in equity, increasing from roughly 5.3 billion USD in early 2013 to 7.7 billion USD by the final quarter of 2014.
This strengthening of equity suggests improved retained earnings or capital injections, enhancing the company’s net worth for shareholders.
- Financial leverage
-
The financial leverage ratio, calculated as total assets divided by total stockholders’ equity, demonstrates variability over the period. It starts at around 1.54 in March 2010, shows a peak near 1.92 in September 2010, then moderates and fluctuates between approximately 1.57 and 1.75 through 2011 and 2012.
From 2013 to the end of 2014, the ratio gradually declines and stabilizes in the range of 1.60 to 1.64. This suggests a modest reduction in reliance on debt financing or other liabilities relative to equity over time, reflecting a potential strengthening of the company's capital structure.
Overall, the data illustrates a company that has expanded its asset base consistently while enhancing shareholder equity and managing its financial leverage to maintain a relatively stable capital structure towards the end of the period.
Interest Coverage
Allergan Inc., interest coverage calculation (quarterly data)
| Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | Mar 31, 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||||||||||||||||||||||
| Net earnings (loss) attributable to Allergan, Inc. | ||||||||||||||||||||||||||
| Add: Net income attributable to noncontrolling interest | ||||||||||||||||||||||||||
| Less: Discontinued operations | ||||||||||||||||||||||||||
| Add: Income tax expense | ||||||||||||||||||||||||||
| Add: Interest expense | ||||||||||||||||||||||||||
| Earnings before interest and tax (EBIT) | ||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||
| Interest coverage1 | ||||||||||||||||||||||||||
| Benchmarks | ||||||||||||||||||||||||||
| Interest Coverage, Competitors2 | ||||||||||||||||||||||||||
| Amgen Inc. | ||||||||||||||||||||||||||
| Danaher Corp. | ||||||||||||||||||||||||||
| Gilead Sciences Inc. | ||||||||||||||||||||||||||
| Johnson & Johnson | ||||||||||||||||||||||||||
| Regeneron Pharmaceuticals Inc. | ||||||||||||||||||||||||||
| Thermo Fisher Scientific Inc. | ||||||||||||||||||||||||||
| Vertex Pharmaceuticals Inc. | ||||||||||||||||||||||||||
Based on: 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31), 10-K (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30), 10-Q (reporting date: 2010-03-31).
1 Q4 2014 Calculation
Interest coverage
= (EBITQ4 2014
+ EBITQ3 2014
+ EBITQ2 2014
+ EBITQ1 2014)
÷ (Interest expenseQ4 2014
+ Interest expenseQ3 2014
+ Interest expenseQ2 2014
+ Interest expenseQ1 2014)
= ( + + + )
÷ ( + + + )
=
2 Click competitor name to see calculations.
The earnings before interest and tax (EBIT) exhibited notable variability throughout the observed periods. Starting from $248.6 million in the first quarter of 2010, EBIT increased sharply to $347.4 million in the second quarter of 2010 but then experienced a significant negative dip to a loss of $707.3 million in the third quarter of 2010. Following this, the EBIT recovered and demonstrated an upward trend with fluctuations, reaching $649.5 million by the last quarter of 2014. This indicates that, despite a severe setback in late 2010, the company generally improved its operating profitability over the years, with several quarters showing robust earnings performance, especially from 2012 onwards.
Interest expense remained relatively stable with slight fluctuations, ranging approximately between $13.9 million and $27.8 million over the studied periods. The highest interest expense occurred in the fourth quarter of 2010 at $27.8 million, coinciding with the period of negative EBIT, which suggests an unfavorable financial environment or increased borrowing cost during that time. In the subsequent years, interest expenses oscillated moderately around $15 million to $20 million per quarter, without a clear upward or downward trend.
The interest coverage ratio, which reflects the company’s ability to meet interest obligations from operating earnings, was not available for many periods in 2010 but showed significant insights from the first quarter of 2011 onwards. Notably, the ratio improved substantially from 3.17 in the first quarter of 2011 to above 20 in most quarters from 2011 to 2014, reaching as high as 29.66 by the last quarter of 2014. This increasing interest coverage ratio indicates enhanced earnings strength relative to interest expenses, suggesting improved financial stability and reduced risk of interest payment difficulties over time. The high coverage levels in later years demonstrate that the company was generating sufficient operating profit to comfortably cover its interest expenses.