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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
Economic Profit Margin

Allergan PLC, economic profit calculation

US$ in thousands

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18).

2018 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
= hidden – hidden × hidden = hidden

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 declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Allergan PLC, NOPAT calculation

US$ in thousands

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	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 liability⁷
	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)

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18).

2018 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 Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

⁸ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 12.50% = hidden

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
= hidden × 12.50% = hidden

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 declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Allergan PLC, cash operating taxes calculation

US$ in thousands

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	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

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18).

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 increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Allergan PLC, invested capital calculation (financing approach)

US$ in thousands

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Current portion of long-term debt and capital leases
	Long-term debt and capital leases, excluding current portion
	Operating lease liability¹
	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 securities and other long-term investments¹⁰
	Invested capital

Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-18).

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 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 and other long-term investments.

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 2016 to 2017 and from 2017 to 2018.

Allergan PLC, cost of capital calculations


Equity²	÷	=	×		=
Preferred shares, $0.0001 par value per share (book value)	÷	=	×		=
Long-term debt and capital leases, including current portion³	÷	=	×	× (1 – 12.50%)	=
Operating lease liability⁴	÷	=	×	× (1 – 12.50%)	=
Total:

Based on: 10-K (filing date: 2019-02-15).

¹ US$ in thousands

² Equity. See Details »