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Economic Profit

Allergan PLC, economic profit calculation

USD $ in thousands

 
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net operating profit after taxes (NOPAT)1
Cost of capital2 % % % % %
Invested capital3
Economic profit4

Source: Based on data from Allergan PLC Annual Reports

2017 Calculations

1 NOPAT. See Details »

2 Cost of capital. See Details »

3 Invested capital. See Details »

4 Economic profit = NOPAT – Cost of capital × Invested capital
= % × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Allergan PLC's economic profit increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

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Net Operating Profit after Taxes (NOPAT)

Allergan PLC, NOPAT calculation

USD $ in thousands

 
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net income (loss) attributable to shareholders
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for doubtful accounts2
Increase (decrease) in deferred revenue3
Increase (decrease) in accrued product warranties4
Increase (decrease) in restructuring accrual5
Increase (decrease) in equity equivalents6
Interest expense
Interest expense, operating lease obligations7
Adjusted interest expense
Tax benefit of interest expense8
Adjusted interest expense, after taxes9
Interest income
Dividend income
Investment income, before taxes
Tax expense (benefit) of investment income10
Investment income, after taxes11
(Income) loss from discontinued operations, net of tax12
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

Source: Based on data from Allergan PLC Annual Reports

2017 Calculations

1 Elimination of deferred tax expense. See Details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in deferred revenue.

4 Addition of increase (decrease) in accrued product warranties.

5 Addition of increase (decrease) in restructuring accrual.

6 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to shareholders.

7 Addition of interest expense on capitalized operating leases. See Details »

8 Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 13% =

9 Addition of after taxes interest expense to net income (loss) attributable to shareholders.

10 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 13% =

11 Elimination of after taxes investment income.

12 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Allergan PLC's NOPAT increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

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Cash Operating Taxes

Allergan PLC, cash operating taxes calculation

USD $ in thousands

 
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Provision (benefit) for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Source: Based on data from Allergan PLC Annual Reports

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Allergan PLC's cash operating taxes declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

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Invested Capital

Allergan PLC, invested capital calculation (financing approach)

USD $ in thousands

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current portion of long-term debt and capital leases
Long-term debt and capital leases, excluding current portion
PV of operating lease payments1
Total reported debt & leases
Shareholders' equity
Net deferred tax (assets) liabilities2
Allowance for doubtful accounts3
Deferred revenue4
Accrued product warranties5
Restructuring accrual6
Equity equivalents7
Accumulated other comprehensive (income) loss, net of tax8
Noncontrolling interest
Adjusted shareholders' equity
Construction in progress9
Marketable securities10
Invested capital

Source: Based on data from Allergan PLC Annual Reports

1 Addition of capitalized operating leases. See Details »

2 Elimination of deferred taxes from assets and liabilities. See Details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of deferred revenue.

5 Addition of accrued product warranties.

6 Addition of restructuring accrual.

7 Addition of equity equivalents to shareholders' equity.

8 Removal of accumulated other comprehensive income.

9 Subtraction of construction in progress.

10 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Allergan PLC's invested capital declined from 2015 to 2016 and from 2016 to 2017.

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Cost of Capital

Allergan PLC, cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 ÷ = × % = %
Preferred shares, $0.0001 par value per share (book value) ÷ = × % = %
Long-term debt and capital leases, including current portion3 ÷ = × % × (1 – 13%) = %
PV of operating lease payments4 ÷ = × % × (1 – 13%) = %
Total: %

Source: Based on data from Allergan PLC Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Long-term debt and capital leases, including current portion. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 ÷ = × % = %
Preferred shares, $0.0001 par value per share (book value) ÷ = × % = %
Long-term debt and capital leases, including current portion3 ÷ = × % × (1 – 13%) = %
PV of operating lease payments4 ÷ = × % × (1 – 13%) = %
Total: %

Source: Based on data from Allergan PLC Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Long-term debt and capital leases, including current portion. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 ÷ = × % = %
Preferred shares, $0.0001 par value per share (book value) ÷ = × % = %
Long-term debt and capital leases, including current portion3 ÷ = × % × (1 – 13%) = %
PV of operating lease payments4 ÷ = × % × (1 – 13%) = %
Total: %

Source: Based on data from Allergan PLC Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Long-term debt and capital leases, including current portion. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 ÷ = × % = %
Preferred shares, $0.0001 par value per share (book value) ÷ = × % = %
Long-term debt and capital leases, including current portion3 ÷ = × % × (1 – 13%) = %
PV of operating lease payments4 ÷ = × % × (1 – 13%) = %
Total: %

Source: Based on data from Allergan PLC Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Long-term debt and capital leases, including current portion. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 ÷ = × % = %
Preferred shares, $0.0001 par value per share (book value) ÷ = × % = %
Long-term debt and capital leases, including current portion3 ÷ = × % × (1 – 13%) = %
PV of operating lease payments4 ÷ = × % × (1 – 13%) = %
Total: %

Source: Based on data from Allergan PLC Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Long-term debt and capital leases, including current portion. See Details »

4 PV of operating lease payments. See Details »

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Economic Spread

Allergan PLC, economic spread calculation

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in thousands)
Economic profit1
Invested capital2
Ratio
Economic spread3 % % % % %

Source: Based on data from Allergan PLC Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

3 Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × ÷ = %

Ratio Description The company
Economic spread The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Allergan PLC's economic spread improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

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Economic Profit Margin

Allergan PLC, economic profit margin calculation

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in thousands)
Economic profit1
Net revenues
Increase (decrease) in deferred revenue
Ratio
Economic profit margin2 % % % % %

Source: Based on data from Allergan PLC Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ (Net revenues + Change in deferred revenue)
= 100 × ÷ ( + ) = %

Ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company's profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Allergan PLC's economic profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

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