Allergan PLC (NYSE:AGN)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes displayed a volatile trend over the periods analyzed. Starting at approximately -3.5 billion in 2015, the loss decreased significantly to around -2 billion in 2016. However, 2017 saw a sharp deterioration with a substantial loss exceeding -10.5 billion. Following this peak negative point, there was a partial recovery in 2018 and 2019, with losses reducing to approximately -5.7 billion and -5.4 billion, respectively. Although the losses remain significant, the downward trend after 2017 suggests some operational improvement or cost management.

Cost of Capital

The cost of capital exhibited moderate fluctuations during the period, ranging from a high of 16.6% in 2015 down to a low of 14.51% in 2017. Subsequent years saw an uptick, with the rate increasing again to 16.8% by the end of 2019. These variations imply relative changes in the perceived risk or the financial environment affecting the company's capital costs.

Invested Capital

Invested capital showed a steady and continuous decline throughout the timeframe. Beginning at approximately 127.5 billion USD at the end of 2015, this figure decreased progressively each year, reaching about 80.3 billion USD by the end of 2019. This downward trajectory indicates a contraction in the company's capital investment base, which may reflect asset sales, divestitures, or a strategic reduction in capital employed.

Economic Profit

Economic profit remained deeply negative across all years, signaling value destruction relative to the cost of capital. The losses exceeded 24.6 billion USD in 2015 and while they fluctuated, the economic profit did not show a clear improving trend, remaining near 19 to 25 billion USD negative throughout the periods. The persistent large negative economic profit underscores ongoing challenges in generating returns above the cost of capital.

Summary

Overall, the data reflects a company facing significant profitability challenges and high capital costs over the analyzed years. Despite a reduction in losses after 2017, both net operating profit and economic profit figures indicate consistent financial underperformance relative to the invested capital. The declining invested capital suggests strategic shifts or asset reductions, which coupled with the increasing cost of capital towards the end of the period, could contribute to continued pressure on financial returns. These conditions highlight the need for focused operational improvements and capital allocation efficiency to enhance future economic value.

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.

Economic Profit

The company experienced consistent negative economic profit throughout the five-year period. Although the amount improved from -24,664,244 thousand US dollars in 2015 to -18,840,618 thousand in 2019, the figures indicate continued economic losses annually.

Invested Capital

Invested capital showed a downward trend across the years, decreasing steadily from 127,501,981 thousand US dollars in 2015 to 80,268,300 thousand US dollars in 2019. This reduction suggests a possible divestment, asset sales, or optimization of capital deployment over the period.

Economic Spread Ratio

The economic spread ratio, reflecting the difference between return on invested capital and cost of capital, remained negative each year. The ratio fluctuated, with the largest negative value reported in 2017 at -24.69%. It improved slightly by 2018 to -21.75% but worsened again to -23.47% by 2019, indicating persistent challenges in generating returns that exceed capital costs.

Overall Trends and Insights

The data highlights ongoing difficulties in value creation as demonstrated by negative economic profit and economic spread ratio figures. Despite a gradual reduction in invested capital, the company did not achieve a positive turnaround in economic profitability. The persistent negative economic spread ratio underscores an inability to generate sufficient returns relative to the cost of capital, which may call for strategic reassessment of capital investment and operational efficiency.

The financial data reveals several notable trends over the five-year period ending December 31, 2019. The company's adjusted net revenues exhibited a relatively stable pattern with a slight upward trend. Revenues began at approximately $15.06 billion in 2015, experienced a minor decline in 2016 to around $14.57 billion, and subsequently increased each year, reaching nearly $16.08 billion by 2019. This growth, however, was modest and showed limited volatility.

Despite the positive trajectory in revenues, economic profit remained deeply negative across all years. The economic profit started at approximately negative $24.66 billion in 2015 and fluctuated throughout the years, ultimately improving slightly to about negative $18.84 billion by 2019. This persistent negative economic profit indicates that the company consistently incurred losses exceeding its capital costs.

Furthermore, the economic profit margin, which measures economic profit as a percentage of adjusted net revenues, corroborates this ongoing loss situation. Starting at negative 163.74% in 2015, it improved marginally year over year, reaching negative 117.17% in 2019. Although the margin trend indicates a reduction in economic loss relative to revenues, the levels remain significantly below zero, highlighting continued inefficiency in generating economic value despite relatively steady revenue figures.

Adjusted Net Revenues

Remained stable with a slight increase over the five-year period, ranging from $14.57 billion to $16.08 billion.

Economic Profit

Consistently negative, although the magnitude of losses decreased somewhat from approximately negative $24.66 billion in 2015 to negative $18.84 billion in 2019.

Economic Profit Margin

Persistently negative, indicating economic losses exceeded revenues when considering capital costs; however, there was gradual improvement from negative 163.74% to negative 117.17%.

In summary, the company's financial performance reflects stable revenue generation but ongoing challenges in achieving positive economic profit. The gradual improvement in economic profit and its margin is a positive sign, yet economic losses remain substantial and represent an area requiring attention to enhance overall financial health.