Analysis of Inventory
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Inventory Disclosure
Allergan PLC, balance sheet: inventory
US$ in thousands
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Raw materials | |||||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Inventories, gross | |||||||||||
| Inventory reserves | |||||||||||
| Inventories |
Based on: 10-K (reporting date: 2019-12-31), 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).
The analysis of inventory-related financial data over the five-year period reveals several notable trends in the composition and valuation of inventories.
- Raw Materials
- There is a general upward trend in the value of raw materials from 2015 to 2019. After rising from 242,300 thousand USD in 2015 to a peak of 326,900 thousand USD in 2017, raw materials slightly declined in 2018 to 303,200 thousand USD before a significant increase to 455,200 thousand USD by the end of 2019. This suggests an increased investment or accumulation in the raw material inventories, possibly in anticipation of higher production or sales volumes.
- Work-in-Process (WIP)
- The work-in-process inventory shows fluctuations without a clear upward or downward linear trend. Beginning at 149,700 thousand USD in 2015, it decreases marginally in 2016 and 2018, but shows increases in 2017 and notably in 2019, where it rises sharply to 246,200 thousand USD. The considerable increase in 2019 suggests a buildup in partially completed products, which may indicate adjustments in production scheduling or temporary delays in the manufacturing process.
- Finished Goods
- The value assigned to finished goods inventory experiences substantial variability during the period. Starting at a high of 706,300 thousand USD in 2015, there is a marked drop to 357,700 thousand USD in 2016. Subsequently, the finished goods inventory recovers and increases over the next years, reaching 581,700 thousand USD by 2019. This fluctuation could reflect changing demand levels or shifts in inventory management strategies.
- Inventories, Gross
- The gross inventories, being the sum of raw materials, work-in-process, and finished goods, follow a pattern influenced by the movements in its components. The gross inventory declines sharply from 1,098,300 thousand USD in 2015 to 800,200 thousand USD in 2016, before steadily increasing through to 1,283,100 thousand USD in 2019. This indicates an overall expansion in inventory holdings, with 2019 showing the highest level in the observed period.
- Inventory Reserves
- The inventory reserves, reflecting allowances for obsolescence or valuation adjustments, show an increasing negative balance over the period. Starting at -88,600 thousand USD in 2015, the reserves amount to -150,000 thousand USD by 2019, indicating a growing provision. This may suggest heightened concerns over inventory obsolescence or deteriorating inventory quality, which impacts net inventory valuation.
- Inventories (Net)
- Net inventories, after adjusting for reserves, maintain a trajectory similar to gross inventories but at reduced absolute levels due to the increasing reserves. The net inventory value decreases from 1,009,700 thousand USD in 2015 to 718,000 thousand USD in 2016, followed by a gradual increase up to 1,133,100 thousand USD by 2019. This pattern reinforces the observation of expanding net inventory holdings alongside more conservative valuation adjustments over time.
Overall, the data indicate a period of significant inventory management changes, with initial reductions followed by pronounced growth in inventory levels. The consistent increase in inventory reserves necessitates attention to inventory quality and potential obsolescence risks. The 2019 figures suggest a strategic accumulation of inventories, possibly aligned with business growth or market conditions.