Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Allergan PLC, solvency ratios
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).
The solvency profile between 2015 and 2019 is characterized by a general reduction in debt reliance relative to equity and assets, contrasted by a persistent and critical inability to cover interest and fixed charges through earnings.
- Debt Composition and Leverage
- A consistent downward trend in leverage ratios was observed from 2015 through 2018. The debt-to-equity ratio decreased from 0.56 to 0.37, while the debt-to-assets ratio declined from 0.31 to 0.23 over the same period. Debt-to-capital ratios followed a similar trajectory, reaching a low of 0.27 in 2018. A slight reversal occurred in 2019, with debt-to-equity rising to 0.39 and debt-to-assets increasing to 0.24, indicating a modest increase in leverage toward the end of the period.
- Financial Leverage and Operating Leases
- Financial leverage improved steadily from 1.77 in 2015 to a low of 1.56 in 2018, before increasing to 1.63 in 2019. The inclusion of operating lease liabilities had a negligible impact on all solvency metrics, with values remaining nearly identical to those excluding lease liabilities across the five-year timeframe.
- Coverage and Debt Serviceability
- Despite the improvement in balance sheet leverage, debt serviceability ratios remained deeply problematic. Both interest coverage and fixed charge coverage ratios were negative for the entire duration of the analysis. Interest coverage showed extreme volatility, dropping from -2.71 in 2015 to a significant low of -8.48 in 2017, before recovering slightly to -5.54 by 2019. Fixed charge coverage mirrored this pattern, remaining negative throughout the period and reaching its lowest point in 2017 at -6.20.
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Debt to Equity
Allergan PLC, debt to equity 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) | ||||||
| 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) | |
| Total debt | 22,649,000) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Shareholders’ equity | 58,173,600) | 65,114,100) | 73,821,100) | 76,192,700) | 76,591,400) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.39 | 0.37 | 0.41 | 0.43 | 0.56 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to equity = Total debt ÷ Shareholders’ equity
= 22,649,000 ÷ 58,173,600 = 0.39
2 Click competitor name to see calculations.
An examination of the solvency position reveals a consistent deleveraging strategy implemented between 2015 and 2019. Total debt decreased significantly from approximately 42.7 billion USD in 2015 to 22.6 billion USD by the end of 2019, representing a reduction of nearly 47% in total borrowed obligations.
- Total Debt Trend
- A sustained downward trajectory in total debt is observed throughout the analyzed period. The most substantial reduction occurred between 2015 and 2016, followed by steady annual declines, indicating a systematic reduction in financial liabilities.
- Shareholders' Equity Movement
- Shareholders' equity experienced a gradual contraction, declining from 76.6 billion USD in 2015 to 58.2 billion USD in 2019. This downward trend in equity occurred simultaneously with the debt reduction, though the decrease in debt was more pronounced for most of the period.
- Debt to Equity Ratio Interpretation
- The debt to equity ratio showed a general improvement in solvency, falling from 0.56 in 2015 to a period low of 0.37 in 2018. This indicates a shift toward a more conservative capital structure. A slight reversal occurred in 2019, with the ratio increasing to 0.39, reflecting a point where the reduction in shareholders' equity began to outpace the reduction in total debt.
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Debt to Equity (including Operating Lease Liability)
Allergan PLC, debt to equity (including operating lease liability) 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) | ||||||
| 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) | |
| Total debt | 22,649,000) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Current portion of lease liability, operating | 124,400) | —) | —) | —) | —) | |
| Lease liability, operating, excluding current portion | 446,100) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 23,219,500) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Shareholders’ equity | 58,173,600) | 65,114,100) | 73,821,100) | 76,192,700) | 76,591,400) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.40 | 0.37 | 0.41 | 0.43 | 0.56 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= 23,219,500 ÷ 58,173,600 = 0.40
2 Click competitor name to see calculations.
The solvency profile of the company exhibits a general trend toward reduced financial leverage between 2015 and 2019, characterized by a significant reduction in total obligations relative to shareholder equity.
- Total Debt (including operating lease liability)
- A consistent downward trajectory is observed in total debt levels, which decreased from US$ 42,726,200 thousand in 2015 to US$ 23,219,500 thousand by the end of 2019. This represents a cumulative reduction of approximately 45.6% over the five-year period, indicating a sustained period of deleveraging.
- Shareholders’ Equity
- Shareholders' equity experienced a gradual decline throughout the analyzed period, falling from US$ 76,591,400 thousand in 2015 to US$ 58,173,600 thousand in 2019. While equity decreased by approximately 23.9%, the pace of this decline was substantially slower than the reduction in total debt.
- Debt to Equity Ratio
- The Debt to Equity ratio improved from 0.56 in 2015 to 0.40 in 2019. The ratio reached a minimum of 0.37 in 2018, reflecting the peak of the deleveraging trend before a marginal increase to 0.40 in 2019. Because the reduction in total debt outpaced the decline in shareholders' equity, the company effectively lowered its financial risk and reduced its reliance on external borrowing relative to its equity base over the period.
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Debt to Capital
Allergan PLC, debt to capital 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) | ||||||
| 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) | |
| Total debt | 22,649,000) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Shareholders’ equity | 58,173,600) | 65,114,100) | 73,821,100) | 76,192,700) | 76,591,400) | |
| Total capital | 80,822,600) | 88,911,800) | 103,896,400) | 108,961,400) | 119,317,600) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.28 | 0.27 | 0.29 | 0.30 | 0.36 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to capital = Total debt ÷ Total capital
= 22,649,000 ÷ 80,822,600 = 0.28
2 Click competitor name to see calculations.
Between 2015 and 2019, a consistent deleveraging trend is observed, characterized by a significant reduction in both total debt and total capital. The company has systematically lowered its reliance on borrowed funds relative to its total capital structure, resulting in an improved solvency profile.
- Total Debt Reduction
- Total debt experienced a steady decline from US$ 42,726,200 thousand in 2015 to US$ 22,649,000 thousand by 2019. This represents a reduction of approximately 47% over the five-year period, indicating a concerted effort to decrease long-term liabilities.
- Total Capital Contraction
- Total capital decreased from US$ 119,317,600 thousand in 2015 to US$ 80,822,600 thousand in 2019. While the overall capital base shrunk, the rate of decline was less aggressive than the reduction in total debt, which contributed to the overall shift in the capital structure.
- Debt to Capital Ratio Performance
- The debt to capital ratio declined from 0.36 in 2015 to a low of 0.27 in 2018, before experiencing a marginal increase to 0.28 in 2019. The overall downward movement indicates that debt was reduced more rapidly than total capital for the majority of the period, thereby lowering the financial risk associated with leverage.
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Debt to Capital (including Operating Lease Liability)
Allergan PLC, debt to capital (including operating lease liability) 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) | ||||||
| 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) | |
| Total debt | 22,649,000) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Current portion of lease liability, operating | 124,400) | —) | —) | —) | —) | |
| Lease liability, operating, excluding current portion | 446,100) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 23,219,500) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Shareholders’ equity | 58,173,600) | 65,114,100) | 73,821,100) | 76,192,700) | 76,591,400) | |
| Total capital (including operating lease liability) | 81,393,100) | 88,911,800) | 103,896,400) | 108,961,400) | 119,317,600) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.29 | 0.27 | 0.29 | 0.30 | 0.36 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 23,219,500 ÷ 81,393,100 = 0.29
2 Click competitor name to see calculations.
A consistent reduction in both total debt and total capital is evident over the five-year period ending December 31, 2019. Total debt, including operating lease liabilities, declined from approximately 42.7 billion USD in 2015 to 23.2 billion USD in 2019. Concurrently, total capital decreased from 119.3 billion USD to 81.4 billion USD.
- Debt to Capital Ratio Trend
- The ratio exhibits a general downward trajectory, decreasing from 0.36 in 2015 to 0.29 in 2019. The most significant improvement in this metric occurred between 2015 and 2018, during which the ratio reached a period low of 0.27.
- Solvency and Leverage Analysis
- The contraction in total debt outpaced the reduction in total capital for the majority of the observed period, indicating a strategic deleveraging of the balance sheet. Although a slight increase in the ratio was observed between 2018 and 2019, moving from 0.27 to 0.29, the overall solvency profile remains stronger than it was at the start of the period.
- Capital Structure Observations
- The simultaneous decline in total debt and total capital suggests a reduction in the overall size of the capital base. However, because the debt component decreased more substantially in absolute terms, the proportion of debt relative to total capital shifted downward, reducing the entity's financial leverage.
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Debt to Assets
Allergan PLC, debt to assets 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) | ||||||
| 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) | |
| Total debt | 22,649,000) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Total assets | 94,699,100) | 101,787,600) | 118,341,900) | 128,986,300) | 135,840,700) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.24 | 0.23 | 0.25 | 0.25 | 0.31 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to assets = Total debt ÷ Total assets
= 22,649,000 ÷ 94,699,100 = 0.24
2 Click competitor name to see calculations.
An analysis of solvency indicators from 2015 to 2019 reveals a consistent downward trend in both total debt and total assets. While the asset base contracted over the five-year period, total debt decreased at a more rapid pace, resulting in an overall improvement in the solvency profile.
- Total Debt Reduction
- A significant and continuous reduction in total debt is observed, falling from 42,726,200 thousand USD in 2015 to 22,649,000 thousand USD by 2019. The most substantial contraction occurred between 2015 and 2016, with a decrease of approximately 9.96 billion USD.
- Total Asset Contraction
- Total assets exhibited a steady decline throughout the analyzed period, decreasing from 135,840,700 thousand USD in 2015 to 94,699,100 thousand USD in 2019. This indicates a systematic reduction in the size of the balance sheet.
- Debt to Assets Ratio Performance
- The debt to assets ratio improved from 0.31 in 2015 to 0.24 in 2019. The most notable improvement occurred between 2015 and 2016, where the ratio dropped to 0.25. Between 2016 and 2019, the ratio remained relatively stable, fluctuating marginally between 0.23 and 0.25, suggesting that debt levels were managed in proportion to the declining asset base.
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Debt to Assets (including Operating Lease Liability)
Allergan PLC, debt to assets (including operating lease liability) 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) | ||||||
| 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) | |
| Total debt | 22,649,000) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Current portion of lease liability, operating | 124,400) | —) | —) | —) | —) | |
| Lease liability, operating, excluding current portion | 446,100) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 23,219,500) | 23,797,700) | 30,075,300) | 32,768,700) | 42,726,200) | |
| Total assets | 94,699,100) | 101,787,600) | 118,341,900) | 128,986,300) | 135,840,700) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.25 | 0.23 | 0.25 | 0.25 | 0.31 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 23,219,500 ÷ 94,699,100 = 0.25
2 Click competitor name to see calculations.
The solvency profile exhibits a concurrent reduction in both total debt and total assets over the five-year period from 2015 to 2019. While the absolute levels of leverage declined significantly, the proportional relationship between debt and assets remained relatively stable following an initial improvement between 2015 and 2016.
- Total Debt Reduction
- A consistent downward trend in total debt, including operating lease liabilities, is observed. Obligations decreased from 42,726,200 thousand USD in 2015 to 23,219,500 thousand USD by the end of 2019, indicating a substantial reduction in the total amount of borrowed capital over the period.
- Total Asset Contraction
- Total assets underwent a steady decline throughout the analysis period, falling from 135,840,700 thousand USD in 2015 to 94,699,100 thousand USD in 2019. This contraction occurred annually and mirrors the downward trajectory of the debt levels.
- Debt to Assets Ratio Analysis
- The debt to assets ratio improved from 0.31 in 2015 to 0.25 in 2016. Between 2016 and 2019, the ratio remained remarkably stable, fluctuating minimally between a low of 0.23 in 2018 and 0.25 in 2019. The stability of this ratio suggests that the reduction in total debt was paced proportionally with the contraction of the asset base.
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Financial Leverage
Allergan PLC, financial leverage 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) | ||||||
| Total assets | 94,699,100) | 101,787,600) | 118,341,900) | 128,986,300) | 135,840,700) | |
| Shareholders’ equity | 58,173,600) | 65,114,100) | 73,821,100) | 76,192,700) | 76,591,400) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 1.63 | 1.56 | 1.60 | 1.69 | 1.77 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Financial leverage = Total assets ÷ Shareholders’ equity
= 94,699,100 ÷ 58,173,600 = 1.63
2 Click competitor name to see calculations.
The company's balance sheet experienced a consistent contraction between 2015 and 2019, characterized by a steady decline in both total assets and shareholders' equity. While the financial leverage ratio generally improved for the majority of the period, a reversal occurred in the final year.
- Asset and Equity Contraction
- Total assets decreased monotonically from US$ 135.8 billion in 2015 to US$ 94.7 billion in 2019. Concurrently, shareholders' equity declined from US$ 76.6 billion in 2015 to US$ 58.2 billion in 2019. This overall reduction indicates a significant shrinking of the company's resource base and equity cushion over the five-year period.
- Financial Leverage Trends
- The financial leverage ratio exhibited a consistent downward trend from 2015 through 2018, decreasing from 1.77 to 1.56. This suggests a period of reduced reliance on debt relative to equity to finance assets. However, this trajectory reversed in 2019, with the ratio increasing to 1.63.
- Capital Structure Analysis
- The uptick in the leverage ratio in 2019 occurred despite the continued decline in total assets. This indicates that shareholders' equity decreased at a faster rate than total assets during the final year, leading to an increase in the leverage multiple and a shift in the company's solvency profile.
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Interest Coverage
Allergan PLC, interest coverage 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) | ||||||
| Net income (loss) attributable to shareholders | (5,271,000) | (5,096,400) | (4,125,500) | 14,973,400) | 3,915,200) | |
| Add: Net income attributable to noncontrolling interest | 5,900) | 10,200) | 6,600) | 6,100) | 4,200) | |
| Less: Income (loss) from discontinued operations, net of tax | —) | —) | (402,900) | 15,914,500) | 6,787,700) | |
| Add: Income tax expense | 146,400) | (1,770,700) | (6,670,400) | (1,897,000) | (1,561,900) | |
| Add: Interest expense | 783,000) | 911,200) | 1,095,600) | 1,295,600) | 1,193,300) | |
| Earnings before interest and tax (EBIT) | (4,335,700) | (5,945,700) | (9,290,800) | (1,536,400) | (3,236,900) | |
| Solvency Ratio | ||||||
| Interest coverage1 | -5.54 | -6.53 | -8.48 | -1.19 | -2.71 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Interest coverage = EBIT ÷ Interest expense
= -4,335,700 ÷ 783,000 = -5.54
2 Click competitor name to see calculations.
The solvency analysis for the period ending December 31, 2019, reveals a persistent inability to cover interest obligations from operating profits. Earnings before interest and tax (EBIT) remained negative throughout the five-year observation window, resulting in negative interest coverage ratios across all reported periods.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating losses were consistent, with a significant escalation occurring in 2017 when EBIT reached its lowest point of -9.29 billion. Although losses narrowed to -4.34 billion by 2019, the continuous lack of positive operating income indicates a fundamental reliance on external financing or cash reserves to service debt obligations.
- Interest Expense Management
- Interest expenses peaked in 2016 at 1.30 billion and have since followed a steady downward trajectory, ending at 783 million in 2019. This reduction in the cost of debt has marginally reduced the financial burden on the organization, although it was insufficient to bring the interest coverage ratio into positive territory.
- Interest Coverage Ratio Analysis
- The interest coverage ratio remained negative throughout the period, signifying that operating earnings were insufficient to meet interest payments. The ratio deteriorated sharply to its lowest level of -8.48 in 2017, mirroring the peak in operating losses. A gradual recovery is observed between 2017 and 2019, with the ratio improving from -8.48 to -5.54, though the company remained in a position of insolvency regarding its interest coverage.
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Fixed Charge Coverage
Allergan PLC, fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Statutory tax rate | 12.50% | 12.50% | 12.50% | 12.50% | 12.50% | |
| Selected Financial Data (US$ in thousands) | ||||||
| Net income (loss) attributable to shareholders | (5,271,000) | (5,096,400) | (4,125,500) | 14,973,400) | 3,915,200) | |
| Add: Net income attributable to noncontrolling interest | 5,900) | 10,200) | 6,600) | 6,100) | 4,200) | |
| Less: Income (loss) from discontinued operations, net of tax | —) | —) | (402,900) | 15,914,500) | 6,787,700) | |
| Add: Income tax expense | 146,400) | (1,770,700) | (6,670,400) | (1,897,000) | (1,561,900) | |
| Add: Interest expense | 783,000) | 911,200) | 1,095,600) | 1,295,600) | 1,193,300) | |
| Earnings before interest and tax (EBIT) | (4,335,700) | (5,945,700) | (9,290,800) | (1,536,400) | (3,236,900) | |
| Add: Operating lease expense | 151,300) | 63,200) | 72,000) | 47,700) | 49,900) | |
| Earnings before fixed charges and tax | (4,184,400) | (5,882,500) | (9,218,800) | (1,488,700) | (3,187,000) | |
| Interest expense | 783,000) | 911,200) | 1,095,600) | 1,295,600) | 1,193,300) | |
| Operating lease expense | 151,300) | 63,200) | 72,000) | 47,700) | 49,900) | |
| Dividends on preferred shares | —) | 46,400) | 278,400) | 278,400) | 232,000) | |
| Dividends on preferred shares, tax adjustment1 | —) | 6,629) | 39,771) | 39,771) | 33,143) | |
| Dividends on preferred shares, after tax adjustment | —) | 53,029) | 318,171) | 318,171) | 265,143) | |
| Fixed charges | 934,300) | 1,027,429) | 1,485,771) | 1,661,471) | 1,508,343) | |
| Solvency Ratio | ||||||
| Fixed charge coverage2 | -4.48 | -5.73 | -6.20 | -0.90 | -2.11 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors3 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
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 2019 Calculation
Dividends on preferred shares, tax adjustment = (Dividends on preferred shares × Statutory tax rate) ÷ (1 − Statutory tax rate)
= (0 × 12.50%) ÷ (1 − 12.50%) = 0
2 2019 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= -4,184,400 ÷ 934,300 = -4.48
3 Click competitor name to see calculations.
The financial data indicates a sustained period of solvency pressure characterized by negative earnings before fixed charges and taxes and a resulting negative fixed charge coverage ratio from 2015 through 2019.
- Earnings before fixed charges and tax
- A consistent deficit is observed throughout the analyzed five-year period. Operational earnings reached their lowest point in 2017, with a deficit of 9.22 billion US dollars. While a trend of narrowing losses is evident from 2018 through 2019, ending at negative 4.18 billion US dollars, the figures remain negative, indicating that earnings are insufficient to cover fixed obligations.
- Fixed charges
- Fixed obligations peaked in 2016 at 1.66 billion US dollars. Following this point, a steady downward trajectory is observed, with charges decreasing annually to reach 934.3 million US dollars by December 31, 2019. This represents a significant reduction in the absolute cost of fixed charges over the latter half of the period.
- Fixed charge coverage ratio
- The coverage ratio remained negative for the entire duration, reflecting a fundamental inability to service fixed charges through earnings. The ratio exhibited significant volatility, reaching a minimum of -6.20 in 2017 before moderately improving to -4.48 by 2019. Despite this marginal improvement, the persistent negative values indicate a continuous reliance on external financing or cash reserves to meet fixed financial commitments.
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