Allergan PLC (NYSE:AGN)

The financial performance, as measured by economic profit, demonstrates a consistent pattern of negative value creation over the five-year period. Net operating profit after taxes (NOPAT) remains negative throughout, contributing significantly to the overall negative economic profit. Invested capital exhibits a declining trend, while the cost of capital fluctuates within a relatively narrow range.

Net Operating Profit After Taxes (NOPAT)

NOPAT is negative for each year presented. The largest negative value is observed in 2017, at -US$10,550,503 thousand, indicating the most substantial underperformance relative to operating costs and taxes during that year. While NOPAT shows a slight improvement from 2018 to 2019, it remains considerably negative. The initial years, 2015 and 2016, also show significant negative NOPAT, though less pronounced than in 2017.

Cost of Capital

The cost of capital experiences moderate fluctuations. It begins at 19.60% in 2015, decreases to 18.95% in 2016, and reaches a low of 17.04% in 2017. It then increases to 18.31% in 2018 before rising again to 19.87% in 2019. These changes suggest some variability in the risk profile or financing structure of the entity, but the overall range is not exceptionally wide.

Invested Capital

A consistent downward trend is observed in invested capital. Starting at US$127,501,981 thousand in 2015, it decreases steadily to US$80,268,300 thousand in 2019. This reduction in invested capital could be due to asset sales, reduced investment in working capital, or other capital management strategies. The decline is substantial, representing a significant contraction in the capital base.

Economic Profit

Economic profit is negative across the entire period, ranging from -US$21,305,885 thousand in 2019 to -US$28,489,615 thousand in 2015. The negative economic profit consistently exceeds the absolute value of NOPAT, due to the multiplication effect of the cost of capital applied to the invested capital. While the magnitude of the loss decreases slightly from 2015 to 2019, it remains substantial, indicating that the entity is not generating returns sufficient to cover its cost of capital.

In summary, the entity consistently destroys economic value, as evidenced by the negative economic profit. The declining invested capital base does not appear to be sufficient to offset the negative NOPAT and the associated cost of capital, resulting in continued underperformance.

Net Income (Loss) Attributable to Shareholders

The net income attributable to shareholders shows significant volatility over the observed period. Starting from approximately 3.9 billion US dollars at the end of 2015, it experienced a substantial increase to nearly 15 billion US dollars by the end of 2016. This peak was followed by a sharp reversal into negative territory, with losses amounting to approximately 4.1 billion US dollars in 2017. The negative trend continued in subsequent years, with losses deepening to around 5.1 billion and 5.3 billion US dollars in 2018 and 2019, respectively.

Net Operating Profit After Taxes (NOPAT)

The NOPAT metric also reflects a deteriorating operating performance over the period. It began in 2015 with a negative figure of about 3.5 billion US dollars, improved slightly in 2016 to approximately minus 2 billion US dollars, indicating a reduction in operating losses. However, in 2017, NOPAT deteriorated sharply, reaching a loss exceeding 10.5 billion US dollars. This was followed by some improvement yet continued negative results in 2018 and 2019, with losses of about 5.7 billion and 5.4 billion US dollars, respectively.

Overall Financial Trends

The company’s financial performance exhibits considerable instability over the five-year span. The marked peak in net income in 2016 appears anomalous given the general trend of losses in other years. Both net income and operating profitability suffer from large losses in recent years following the 2016 peak, suggesting potential challenges affecting operational efficiency and profitability after 2016.

The divergence between net income and NOPAT indicates that non-operating factors, such as one-time gains or losses, may have influenced net income, particularly in 2016. The sustained negative operating profit after taxes highlights fundamental operational difficulties that warrant further investigation.

The data reveals significant fluctuations in the provision (benefit) for income taxes over the five years analyzed. Initially, there is a substantial tax benefit recorded, with the provision showing negative values each year from 2015 through 2018, indicating the company recognized income tax benefits rather than expenses during this period. The magnitude of the benefit peaks in 2017 with an amount exceeding -6.6 million US dollars, suggesting an extraordinary tax gain or adjustment that year. However, in 2019, this trend reverses, and the provision shifts to a positive value of approximately 146 thousand US dollars, reflecting a tax expense rather than a benefit.

In contrast, the cash operating taxes exhibit a more variable and less consistent pattern. The cash taxes paid decreased from about 398 thousand US dollars in 2015 to roughly 295 thousand in 2016 but then surged to approximately 1.24 million in 2017. This rise contrasts with the significant tax benefit recorded in the provision for the same year. A striking observation is seen in 2018 when the cash operating taxes turn negative, indicating a tax refund or credit of nearly 399 thousand US dollars. Following this, the cash taxes return to a positive figure of approximately 897 thousand US dollars in 2019.

Overall, the provision for income taxes and cash operating taxes demonstrate divergent movements during several years, which may indicate timing differences, adjustments, or tax strategy effects on reported versus actual cash tax payments. The large tax benefits recorded in provisions in earlier years, especially 2017, suggest one-time tax events or re-measurements impacting the income statement, while the cash operating taxes reflect the actual tax payments made or refunded, exhibiting a more volatile profile with a notable negative value in 2018.

The financial data reveals several important trends over the five-year period ending December 31, 2019. The total reported debt and leases exhibit a consistent downward trajectory. Starting from approximately $42.89 billion in 2015, the debt decreases every year, reaching about $23.22 billion by the end of 2019. This represents a significant reduction in the company's leverage or obligations associated with debt and leases over the period.

Shareholders’ equity also demonstrates a declining pattern throughout these years. From $76.59 billion at the end of 2015, it slightly decreases to $76.19 billion in 2016 and continues this downward trend to $58.17 billion by 2019. This consistent reduction indicates possible challenges with retained earnings, equity issuance, or other comprehensive income affecting the equity base.

The invested capital, which encompasses the company's overall capital invested in operations, similarly shows a decreasing trend. Beginning at approximately $127.50 billion in 2015, invested capital reduces each year, culminating at about $80.27 billion in 2019. This decline suggests a potential shrinking scale of invested assets or capital employed, which could relate to asset divestitures, depreciation outpacing capital expenditure, or capital structure adjustments.

Total reported debt & leases

Substantial reduction by nearly 46% from 2015 to 2019, indicating active debt repayment or lease obligation reduction.

Shareholders’ equity

Gradual decline of roughly 24% over the period, possibly signaling diminished profitability, dividend distribution exceeding earnings, share repurchases, or adverse comprehensive income impacts.

Invested capital

Marked decrease of approximately 37%, reflecting either asset shrinkage, depreciation exceeding reinvestment, or strategic restructuring.

In summary, all three key financial measures present downward trends, with debt levels showing the most pronounced reduction, followed by invested capital and shareholders’ equity. The data implies an overall contraction in the scale of the business's financial operations and capitalization, alongside a strategic effort to reduce leverage.

The financial performance, as indicated by economic value added metrics, demonstrates a consistent pattern of negative economic profit over the five-year period. Simultaneously, invested capital exhibits a declining trend. The economic spread ratio, calculated from these figures, reflects the relationship between economic profit and invested capital, and reveals a concerning trend of diminishing returns.

Economic Profit

Economic profit consistently registers as negative across the observed period, ranging from approximately -21.3 million to -28.5 million US dollars in thousands. While the magnitude of the loss fluctuates year-to-year, it remains a persistent negative value, indicating that the company’s returns are not exceeding its cost of capital. The lowest point occurred in 2015, with a slight improvement in 2016, followed by a resurgence in losses in 2017, and a gradual, but incomplete, recovery in 2018 and 2019.

Invested Capital

Invested capital demonstrates a clear downward trajectory, decreasing from approximately 127.5 million to 80.3 million US dollars in thousands between 2015 and 2019. This reduction in invested capital could be attributed to asset sales, reduced investment in new projects, or other capital management strategies. However, the decline occurs concurrently with negative economic profit, raising questions about the effectiveness of capital allocation.

Economic Spread Ratio

The economic spread ratio, expressed as a percentage, consistently falls into negative territory throughout the period. The ratio fluctuates between -20.74% and -27.23%. A notable trend is the increasing negativity of the ratio from 2016 to 2019, culminating in -26.54%. This indicates a widening gap between the company’s rate of return and its cost of capital, suggesting a deterioration in the efficiency of capital deployment. The ratio’s movement suggests that the company is becoming less effective at generating returns relative to the capital it has invested.

In summary, the observed trends suggest a consistent underperformance relative to the cost of capital, coupled with a reduction in the amount of capital employed. The worsening economic spread ratio highlights a growing concern regarding the company’s ability to generate value for its investors.

The financial performance, as indicated by economic profit and its margin, demonstrates a consistent pattern of negative economic profit over the five-year period. However, the magnitude of the economic loss appears to be decreasing, alongside an improving economic profit margin.

Economic Profit

Economic profit consistently registers as a negative value throughout the observed period, ranging from approximately -28.5 million to -21.3 million US dollars in thousands. While substantial losses are present each year, the absolute value of the loss shows a decreasing trend from 2015 to 2019. The largest loss occurred in 2015, with a gradual reduction in subsequent years, suggesting some improvement in value creation, albeit still negative.

Adjusted Net Revenues

Adjusted net revenues exhibit relative stability, fluctuating between 14.6 million and 16.1 million US dollars in thousands. A slight upward trend is observable, with revenues increasing from 2016 to 2019, though the increases are not substantial. This suggests revenue growth is not the primary driver of the changes in economic profit.

Economic Profit Margin

The economic profit margin is consistently negative, ranging from -189.14% to -132.50%. A clear upward trend is evident, indicating that the company is becoming less unprofitable on each dollar of revenue. The margin improved from -189.14% in 2015 to -132.50% in 2019. This improvement coincides with the decreasing absolute value of economic profit and the slight increase in adjusted net revenues, suggesting a positive correlation between these factors and the economic profit margin.

In summary, while the company continues to experience economic losses, the trend suggests a gradual improvement in its ability to generate economic profit. The increasing economic profit margin, coupled with the decreasing magnitude of economic loss, indicates a positive, though still incomplete, shift in financial performance.