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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Allergan PLC, economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net operating profit after taxes (NOPAT)¹	(5,356,995)	(5,673,614)	(10,550,503)	(2,001,620)	(3,502,617)
Cost of capital²	15.07%	13.96%	13.08%	14.45%	14.91%
Invested capital³	80,268,300)	91,098,773)	103,552,681)	111,246,522)	127,501,981)

Economic profit⁴	(17,452,003)	(18,386,688)	(24,095,112)	(18,072,083)	(22,509,521)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -5,356,995 – 15.07% × 80,268,300 = -17,452,003

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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 economic profit increased from 2017 to 2018 and from 2018 to 2019.

Allergan PLC, NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net income (loss) attributable to shareholders	(5,271,000)	(5,096,400)	(4,125,500)	14,973,400)	3,915,200)
Deferred income tax expense (benefit)¹	(660,900)	(1,262,000)	(7,788,700)	(2,045,700)	(1,811,600)
Increase (decrease) in allowance for doubtful accounts²	9,100)	8,700)	17,300)	(4,900)	75,800)
Increase (decrease) in deferred revenue³	(9,500)	(1,800)	22,200)	(2,500)	(8,100)
Increase (decrease) in accrued product warranties⁴	1,300)	(800)	600)	(300)	36,000)
Increase (decrease) in restructuring reserve⁵	(62,300)	(100,100)	77,700)	(35,200)	34,200)
Increase (decrease) in equity equivalents⁶	(722,300)	(1,356,000)	(7,670,900)	(2,088,600)	(1,673,700)
Interest expense	783,000)	911,200)	1,095,600)	1,295,600)	1,193,300)
Interest expense, operating lease liability⁷	14,263)	12,384)	13,182)	10,477)	5,967)
Adjusted interest expense	797,263)	923,584)	1,108,782)	1,306,077)	1,199,267)
Tax benefit of interest expense⁸	(99,658)	(115,448)	(138,598)	(163,260)	(149,908)
Adjusted interest expense, after taxes⁹	697,605)	808,136)	970,184)	1,142,817)	1,049,358)
Interest income	(76,800)	(45,200)	(67,700)	(69,900)	(11,400)
Dividend income	—)	—)	(85,200)	(68,200)	—)
Investment income, before taxes	(76,800)	(45,200)	(152,900)	(138,100)	(11,400)
Tax expense (benefit) of investment income¹⁰	9,600)	5,650)	19,113)	17,263)	1,425)
Investment income, after taxes¹¹	(67,200)	(39,550)	(133,788)	(120,838)	(9,975)
(Income) loss from discontinued operations, net of tax¹²	—)	—)	402,900)	(15,914,500)	(6,787,700)
Net income (loss) attributable to noncontrolling interest	5,900)	10,200)	6,600)	6,100)	4,200)
Net operating profit after taxes (NOPAT)	(5,356,995)	(5,673,614)	(10,550,503)	(2,001,620)	(3,502,617)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

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 reserve.

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

⁷ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 570,500 × 2.50% = 14,263

⁸ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 797,263 × 12.50% = 99,658

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

¹⁰ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 76,800 × 12.50% = 9,600

¹¹ Elimination of after taxes investment income.

¹² Elimination of discontinued operations.

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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 NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Allergan PLC, cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Provision (benefit) for income taxes	146,400)	(1,770,700)	(6,670,400)	(1,897,000)	(1,561,900)
Less: Deferred income tax expense (benefit)	(660,900)	(1,262,000)	(7,788,700)	(2,045,700)	(1,811,600)
Add: Tax savings from interest expense	99,658)	115,448)	138,598)	163,260)	149,908)
Less: Tax imposed on investment income	9,600)	5,650)	19,113)	17,263)	1,425)
Cash operating taxes	897,358)	(398,902)	1,237,785)	294,697)	398,183)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

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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 cash operating taxes decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

Allergan PLC, invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Current portion of long-term debt and capital leases	4,532,500)	868,300)	4,231,800)	2,797,900)	2,432,800)
Long-term debt and capital leases, excluding current portion	18,116,500)	22,929,400)	25,843,500)	29,970,800)	40,293,400)
Operating lease liability¹	570,500)	356,873)	382,081)	290,222)	162,581)
Total reported debt & leases	23,219,500)	24,154,573)	30,457,381)	33,058,922)	42,888,781)
Shareholders’ equity	58,173,600)	65,114,100)	73,821,100)	76,192,700)	76,591,400)
Net deferred tax (assets) liabilities²	3,786,800)	4,438,100)	6,033,300)	12,735,800)	7,936,200)
Allowance for doubtful accounts³	110,800)	101,700)	93,000)	75,700)	80,600)
Deferred revenue⁴	26,600)	36,100)	37,900)	15,700)	18,200)
Accrued product warranties⁵	29,200)	27,900)	28,700)	28,100)	36,000)
Restructuring reserve⁶	23,500)	85,800)	185,900)	108,200)	145,300)
Equity equivalents⁷	3,976,900)	4,689,600)	6,378,800)	12,963,500)	8,216,300)
Accumulated other comprehensive (income) loss, net of tax⁸	(1,207,200)	(1,345,200)	(1,920,700)	1,038,400)	494,100)
Noncontrolling interest	22,800)	16,900)	16,000)	7,800)	(2,100)
Adjusted shareholders’ equity	60,966,100)	68,475,400)	78,295,200)	90,202,400)	85,299,700)
Construction in progress⁹	(442,400)	(466,700)	(507,000)	(446,100)	(578,400)
Marketable securities and other long-term investments¹⁰	(3,474,900)	(1,064,500)	(4,692,900)	(11,568,700)	(108,100)
Invested capital	80,268,300)	91,098,773)	103,552,681)	111,246,522)	127,501,981)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Addition of capitalized operating leases.

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 reserve.

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 and other long-term investments.

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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 invested capital decreased from 2017 to 2018 and from 2018 to 2019.

Allergan PLC, cost of capital calculations

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	65,142,399)	65,142,399)	÷	89,464,599)	=	0.73	0.73	×	19.56%	=	14.24%
Preferred shares, $0.0001 par value per share (book value)	—)	—)	÷	89,464,599)	=	0.00	0.00	×	0.00%	=	0.00%
Long-term debt and capital leases, including current portion³	23,751,700)	23,751,700)	÷	89,464,599)	=	0.27	0.27	×	3.50% × (1 – 12.50%)	=	0.81%
Operating lease liability⁴	570,500)	570,500)	÷	89,464,599)	=	0.01	0.01	×	2.50% × (1 – 12.50%)	=	0.01%
Total:	89,464,599)					1.00					15.07%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

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

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	46,256,695)	46,256,695)	÷	69,993,768)	=	0.66	0.66	×	19.56%	=	12.93%
Preferred shares, $0.0001 par value per share (book value)	—)	—)	÷	69,993,768)	=	0.00	0.00	×	0.00%	=	0.00%
Long-term debt and capital leases, including current portion³	23,380,200)	23,380,200)	÷	69,993,768)	=	0.33	0.33	×	3.47% × (1 – 12.50%)	=	1.01%
Operating lease liability⁴	356,873)	356,873)	÷	69,993,768)	=	0.01	0.01	×	3.47% × (1 – 12.50%)	=	0.02%
Total:	69,993,768)					1.00					13.96%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

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

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	54,185,762)	54,185,762)	÷	90,292,543)	=	0.60	0.60	×	19.56%	=	11.74%
Preferred shares, $0.0001 par value per share (book value)	4,929,700)	4,929,700)	÷	90,292,543)	=	0.05	0.05	×	5.50%	=	0.30%
Long-term debt and capital leases, including current portion³	30,795,000)	30,795,000)	÷	90,292,543)	=	0.34	0.34	×	3.45% × (1 – 12.50%)	=	1.03%
Operating lease liability⁴	382,081)	382,081)	÷	90,292,543)	=	0.00	0.00	×	3.45% × (1 – 12.50%)	=	0.01%
Total:	90,292,543)					1.00					13.08%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in thousands

² Equity. See details »

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

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	82,254,088)	82,254,088)	÷	120,534,910)	=	0.68	0.68	×	19.56%	=	13.35%
Preferred shares, $0.0001 par value per share (book value)	4,929,700)	4,929,700)	÷	120,534,910)	=	0.04	0.04	×	5.50%	=	0.22%
Long-term debt and capital leases, including current portion³	33,060,900)	33,060,900)	÷	120,534,910)	=	0.27	0.27	×	3.61% × (1 – 12.50%)	=	0.87%
Operating lease liability⁴	290,222)	290,222)	÷	120,534,910)	=	0.00	0.00	×	3.61% × (1 – 12.50%)	=	0.01%
Total:	120,534,910)					1.00					14.45%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in thousands

² Equity. See details »

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

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	117,644,469)	117,644,469)	÷	165,394,949)	=	0.71	0.71	×	19.56%	=	13.91%
Preferred shares, $0.0001 par value per share (book value)	4,929,700)	4,929,700)	÷	165,394,949)	=	0.03	0.03	×	5.50%	=	0.16%
Long-term debt and capital leases, including current portion³	42,658,200)	42,658,200)	÷	165,394,949)	=	0.26	0.26	×	3.67% × (1 – 12.50%)	=	0.83%
Operating lease liability⁴	162,581)	162,581)	÷	165,394,949)	=	0.00	0.00	×	3.67% × (1 – 12.50%)	=	0.00%
Total:	165,394,949)					1.00					14.91%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in thousands

² Equity. See details »

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

⁴ Operating lease liability. See details »

Allergan PLC, economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit¹	(17,452,003)	(18,386,688)	(24,095,112)	(18,072,083)	(22,509,521)
Invested capital²	80,268,300)	91,098,773)	103,552,681)	111,246,522)	127,501,981)
Performance Ratio
Economic spread ratio³	-21.74%	-20.18%	-23.27%	-16.25%	-17.65%
Benchmarks
Economic Spread Ratio, Competitors⁴
AbbVie Inc.	7.26%	—	—	—	—
Amgen Inc.	13.97%	—	—	—	—
Bristol-Myers Squibb Co.	-3.69%	—	—	—	—
Danaher Corp.	-6.78%	—	—	—	—
Eli Lilly & Co.	15.73%	—	—	—	—
Gilead Sciences Inc.	7.19%	—	—	—	—
Johnson & Johnson	4.00%	—	—	—	—
Merck & Co. Inc.	11.22%	—	—	—	—
Pfizer Inc.	5.75%	—	—	—	—
Regeneron Pharmaceuticals Inc.	28.28%	—	—	—	—
Thermo Fisher Scientific Inc.	-3.79%	—	—	—	—
Zoetis Inc.	4.28%	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -17,452,003 ÷ 80,268,300 = -21.74%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	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 economic spread ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Allergan PLC, economic profit margin calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit¹	(17,452,003)	(18,386,688)	(24,095,112)	(18,072,083)	(22,509,521)

Net revenues	16,088,900)	15,787,400)	15,940,700)	14,570,600)	15,071,000)
Add: Increase (decrease) in deferred revenue	(9,500)	(1,800)	22,200)	(2,500)	(8,100)
Adjusted net revenues	16,079,400)	15,785,600)	15,962,900)	14,568,100)	15,062,900)
Performance Ratio
Economic profit margin²	-108.54%	-116.48%	-150.94%	-124.05%	-149.44%
Benchmarks
Economic Profit Margin, Competitors³
AbbVie Inc.	13.70%	—	—	—	—
Amgen Inc.	23.53%	—	—	—	—
Bristol-Myers Squibb Co.	-14.17%	—	—	—	—
Danaher Corp.	-21.98%	—	—	—	—
Eli Lilly & Co.	15.15%	—	—	—	—
Gilead Sciences Inc.	10.21%	—	—	—	—
Johnson & Johnson	4.73%	—	—	—	—
Merck & Co. Inc.	12.85%	—	—	—	—
Pfizer Inc.	13.43%	—	—	—	—
Regeneron Pharmaceuticals Inc.	23.48%	—	—	—	—
Thermo Fisher Scientific Inc.	-7.81%	—	—	—	—
Zoetis Inc.	6.73%	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × -17,452,003 ÷ 16,079,400 = -108.54%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company 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 economic profit margin improved from 2017 to 2018 and from 2018 to 2019.

Allergan PLC (NYSE:AGN)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin