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 19.61% in 2015, decreases to 18.96% in 2016, and reaches a low of 17.05% in 2017. It then increases to 18.33% in 2018 before rising again to 19.88% in 2019. These changes, while present, do not appear to correlate directly with the trends in NOPAT or economic profit.

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 may reflect divestitures, asset sales, or a decrease in overall investment in the business. The decline is fairly consistent year-over-year.

Economic Profit

Economic profit is negative across the entire period, ranging from approximately -US$21 million to -US$28.5 million. The magnitude of the negative economic profit generally aligns with the levels of NOPAT, as expected. While there is some variation from year to year, the overall trend is relatively stable, indicating a persistent inability to generate returns exceeding the cost of capital. The most substantial negative economic profit is recorded in 2015, followed closely by 2017.

In summary, the organization consistently fails to generate economic profit. The negative NOPAT, coupled with a cost of capital that remains relatively stable, results in substantial negative economic profit each year. The decreasing invested capital does not appear to improve the economic profit, suggesting that the core operational issues are more significant than capital allocation.

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. A slight reduction in the absolute value of the loss is observed between 2015 and 2016, followed by an increase in 2017, and then a gradual decrease through 2019, though remaining negative.

Invested Capital

Invested capital demonstrates a clear downward trend, decreasing from approximately 127.5 million to 80.3 million US dollars in thousands over the five-year period. This reduction in invested capital could be attributed to asset sales, reduced investment in working capital, or other capital management strategies. The rate of decline appears to accelerate over time.

Economic Spread Ratio

The economic spread ratio consistently presents negative values, indicating that the company is not generating returns sufficient to cover its cost of capital. The ratio fluctuates between -20.76% and -27.24%. A general worsening trend is apparent, with the ratio becoming more negative from 2016 to 2019. This suggests that the gap between the company’s return on invested capital and its cost of capital is widening, potentially signaling increasing financial risk and reduced shareholder value creation.

The combined trends suggest a company facing challenges in generating returns commensurate with its invested capital. The declining invested capital, while potentially a strategic decision, is occurring alongside persistent negative economic profit and a worsening economic spread ratio. Further investigation into the drivers of these trends is warranted.

The financial performance, as indicated by economic profit and its margin, demonstrates a consistent pattern of negative economic profit over the five-year period. While the magnitude of the economic loss fluctuates, it remains a persistent characteristic. The economic profit margin, calculated as a percentage of adjusted net revenues, exhibits a decreasing trend in absolute value, suggesting a relative improvement in performance, though still resulting in substantial losses.

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. The largest loss occurred in 2015, followed by 2017. A slight reduction in the size of the loss is observed from 2015 to 2016, then a return to a higher loss in 2017, before decreasing again in 2018 and 2019.

Adjusted Net Revenues

Adjusted net revenues show a relatively stable pattern, fluctuating between 14.5 million and 16.1 million US dollars in thousands. A slight decrease is noted from 2015 to 2016, followed by an increase in 2017. Revenues remain relatively consistent from 2017 through 2019, with a modest increase in the final year.

Economic Profit Margin

The economic profit margin is consistently negative, indicating that the company’s return on capital employed is less than its cost of capital. The margin decreases in absolute value from -189.26% in 2015 to -132.58% in 2019. This suggests that while the company continues to generate economic losses, the rate of loss relative to revenue is diminishing over time. The most substantial margin loss occurred in 2015, and the least substantial, though still negative, in 2019.

In summary, the company consistently underperforms from an economic profit perspective. However, the improving economic profit margin suggests a potential trend toward reduced losses, even though profitability remains elusive. Further investigation into the factors driving the cost of capital and revenue generation would be necessary to fully understand these trends.