Allergan PLC (NYSE:AGN)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes has consistently been negative throughout the periods analyzed, indicating sustained operational losses. The magnitude of losses decreased from approximately -3.5 billion US dollars in 2015 to around -2 billion in 2016. However, a significant deterioration occurred in 2017, with losses increasing markedly to over -10.5 billion. Subsequent years showed improvement with reduced losses of approximately -5.7 billion in 2018 and -5.4 billion in 2019, although NOPAT remained negative.

Cost of Capital

The cost of capital demonstrated a slight overall variability, starting at 16.29% in 2015 and decreasing to a low of 14.25% in 2017. This was followed by a moderate increase to 15.24% in 2018 and rising further to 16.49% in 2019. The trend suggests fluctuations in the company’s weighted average cost of capital, peaking at the beginning and end of the period.

Invested Capital

The invested capital exhibited a clear declining trend over the five-year span. Starting at approximately 127.5 billion US dollars in 2015, it reduced consistently each year, reaching about 80.3 billion by 2019. This downward trend may reflect asset disposals, divestitures, or reduction in capital expenditures.

Economic Profit

The economic profit remained deeply negative throughout all years, signaling that the returns did not exceed the cost of capital. The largest negative economic profit occurred in 2017, exceeding -25 billion US dollars, despite the decline in invested capital and cost of capital in that year. Although economic profit improved somewhat in 2018 and 2019, it remained significantly below zero, indicating continued value destruction.

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.

Over the five-year period ending in 2019, the data reveals consistent financial challenges as reflected in the economic profit and related metrics.

Economic Profit

The economic profit values recorded negative figures throughout, demonstrating sustained economic losses. While the magnitude of these losses fluctuated, it generally remained substantial. Notably, the economic profit improved slightly from -24,276,059 thousand US$ in 2015 to -19,550,809 thousand US$ in 2016, indicating a temporary reduction in economic loss. However, the loss intensified again in 2017 to -25,305,574 thousand US$, followed by a decreasing trend in 2018 and 2019, reaching -18,590,451 thousand US$ by the end of the period, which suggests some recovery yet a persistent negative economic profit.

Invested Capital

There is a distinct downward trend in invested capital over the given years. Starting at 127,501,981 thousand US$ in 2015, it steadily decreased each year to reach 80,268,300 thousand US$ by 2019. This reduction could indicate strategic divestments, asset sales, or optimization efforts to reduce capital deployment in the business.

Economic Spread Ratio

The economic spread ratio remained negative throughout, indicating that the returns on invested capital fell short of the cost of capital each year. The ratio exhibited volatility: an initial improvement from -19.04% in 2015 to -17.57% in 2016 was followed by an increased deficit to -24.44% in 2017. Subsequent years showed moderate improvement but remained deeply negative at -21.47% in 2018 and -23.16% in 2019. This persistent negative spread indicates ongoing challenges in generating sufficient returns relative to the capital employed.

In summary, the data reflects a company experiencing chronic economic losses with insufficient returns on invested capital, accompanied by a strategic reduction in invested capital over the period under review. Despite some fluctuations and a modest recovery in the latter years, the financial indicators confirm ongoing difficulties in achieving positive economic profit and favorable economic spreads.

The analysis of the financial data over the five-year period reveals notable trends in both economic profit and adjusted net revenues.

Economic Profit

The economic profit consistently remained negative throughout the observed period, indicating a persistent economic loss. The values show significant declines in 2017 and 2019, with the lowest economic profit recorded in 2017 at approximately -25.3 billion US dollars. Although the losses slightly improved in 2018 and 2019 compared to 2017, the economic profit levels were still substantially negative, suggesting ongoing challenges in generating value beyond the cost of capital.

Adjusted Net Revenues

Adjusted net revenues exhibited moderate growth with some fluctuations during the period. Starting at roughly 15.06 billion US dollars in 2015, revenues declined slightly in 2016 to 14.57 billion US dollars, but increased again through 2017 to 15.96 billion US dollars. They remained relatively stable in 2018 and 2019, ending at approximately 16.08 billion US dollars. This pattern implies stable operational performance in terms of revenue generation with a slight upward trajectory in the latter years.

Economic Profit Margin

The economic profit margin also remained negative throughout the period, reflecting the ongoing inability to achieve profitable economic returns relative to net revenues. The margin improved somewhat after 2017, moving from -158.53% down to -115.62% in 2019. Although this indicates a gradual reduction in economic losses relative to revenues, the margins are still considerably negative, underlining persistent inefficiencies or high capital costs.

Overall, while adjusted net revenues showed a mild increasing trend over the five years, the company continued to experience substantial economic losses, as reflected by negative economic profit and profit margins. The modest improvements in economic profit and margin after 2017 suggest some progress towards better financial efficiency, yet the persistent negative figures indicate ongoing financial challenges that warrant strategic attention.