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)
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 analysis of financial leverage and debt-related ratios over the five-year period reveals several notable trends and fluctuations.
- Debt to Equity Ratios
- The debt to equity ratio shows a general declining trend from 0.56 in 2015 to 0.39 in 2019, indicating a gradual reduction in reliance on debt financing relative to equity. When including operating lease liabilities, the ratio follows a similar pattern with a slight increase in 2019 to 0.40 from 0.37 in 2018, suggesting a modest rise in total obligations.
- Debt to Capital Ratios
- There is a consistent decrease in the debt to capital ratio from 0.36 in 2015 to 0.28 in 2019, reflecting improved capital structure with less debt proportionately. The inclusion of operating lease liabilities results in a very slight increase in 2019, moving from 0.27 to 0.29, similar to the debt to equity ratio pattern.
- Debt to Assets Ratios
- This ratio also exhibits a downward trend, dropping from 0.31 in 2015 to 0.24 in 2019, which indicates a reduction of debt burden relative to total assets. Including leases slightly raises the 2019 ratio to 0.25, maintaining the consistent minor effect seen in other debt measures.
- Financial Leverage
- Financial leverage ratios decrease from 1.77 in 2015 to a low of 1.56 in 2018 but rise slightly to 1.63 in 2019. This suggests that while the company's assets were less financed by debt and equity in earlier years, there was a mild increase in leverage again in the final year.
- Interest and Fixed Charge Coverage Ratios
- Both interest coverage and fixed charge coverage ratios are negative throughout the period, indicating recurring operating losses or insufficient earnings to cover interest and fixed charges. The interest coverage ratio improves slightly from -8.48 in 2017 to -5.54 in 2019 but remains negative, signifying persistent challenges with earnings relative to interest obligations. Similarly, fixed charge coverage follows the same pattern with improvement from -6.20 in 2017 to -4.48 in 2019 but still denotes inability to adequately cover fixed charges with operational income.
In summary, the company has been reducing its relative debt levels steadily from 2015 through 2019, which is evident across all leverage measures. However, the persistent negative coverage ratios highlight ongoing difficulties in earnings sufficiency to cover interest and other fixed financial costs, suggesting potential operational or profitability issues that overshadow the benefits of lower leverage.
Debt Ratios
Coverage Ratios
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.
The financial data over the five-year period reveals several noteworthy trends related to the company’s debt and equity structure.
- Total debt
- The total debt exhibited a consistent downward trend from 42,726,200 thousand US dollars at the end of 2015 to 22,649,000 thousand US dollars by the end of 2019. This represents a significant reduction in total debt of approximately 47% over the five-year period, indicating a strategic deleveraging or reduction in liabilities.
- Shareholders’ equity
- In contrast to the declining debt levels, shareholders’ equity demonstrated a steady decrease from 76,591,400 thousand US dollars at the end of 2015 down to 58,173,600 thousand US dollars by the end of 2019. The equity decreased by around 24%, which might suggest factors such as accumulated losses, dividend payouts exceeding net income, share buybacks, or other equity-reducing activities during the period.
- Debt to equity ratio
- The debt to equity ratio declined from 0.56 in 2015 to a low of 0.37 in 2018, reflecting an improved capital structure characterized by lower leverage. However, there was a slight uptick to 0.39 in 2019, indicating a minor increase in leverage although the overall debt to equity remained significantly lower compared to 2015. This movement confirms that the company has predominantly moved towards a less leveraged position over the years.
Overall, the data indicates a strategic reduction in debt, which has outpaced the decline in equity, leading to an improved leverage position. The simultaneous decrease in equity is a point of attention, as it may impact the company’s financial flexibility and capital structure stability. The slight increase in the debt to equity ratio in the last year suggests close monitoring may be warranted to understand the balance between debt and equity going forward.
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 financial data reveals a notable decline in total debt over the five-year period, decreasing steadily from 42,726,200 thousand US dollars at the end of 2015 to 23,219,500 thousand US dollars by the end of 2019. This indicates a significant reduction in the company’s leverage and potential improvements in its debt management strategies.
Shareholders' equity has followed a downward trend during the same period, falling from 76,591,400 thousand US dollars in 2015 to 58,173,600 thousand US dollars by the end of 2019. This decline could be attributable to a variety of factors, including accumulated losses, dividend payments exceeding net income, or other equity-reducing activities.
The debt-to-equity ratio, which reflects the relative proportion of debt and equity financing, also shows a decreasing trend from 0.56 in 2015 to 0.37 in 2018, before slightly increasing to 0.40 in 2019. The initial decrease suggests an improvement in the company’s financial leverage position, with debt becoming a smaller component relative to equity. The slight uptick in 2019 may indicate a modest increase in reliance on debt financing or a further decrease in equity.
- Total Debt
- Consistent downward trend over five years, reducing by approximately 46%.
- Shareholders’ Equity
- Steady decline over five years, decreasing by roughly 24%, which may suggest erosion in net asset base.
- Debt to Equity Ratio
- Declined from 0.56 to 0.37 between 2015 and 2018, indicating deleveraging, then slightly rose to 0.40 in 2019, reflecting minor shifts in financing structure.
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.
- Total Debt
- The total debt exhibits a consistent downward trend from 2015 to 2019. Starting at approximately 42.7 billion USD in 2015, it declined significantly to about 22.6 billion USD by the end of 2019. This represents a reduction of nearly 47% over the five-year period, indicating efforts to deleverage or reduce financial liabilities.
- Total Capital
- Total capital also shows a declining pattern across the same timeframe. From around 119.3 billion USD in 2015, it decreased to approximately 80.8 billion USD in 2019. This decline of roughly 32% suggests a contraction in the overall capital base, which may reflect reductions in equity, retained earnings, or a combination of factors influencing the company's capital structure.
- Debt to Capital Ratio
- The debt to capital ratio gradually decreased from 0.36 in 2015 to a low of 0.27 in 2018, followed by a slight increase to 0.28 in 2019. This overall decline in the ratio up to 2018 suggests an improved capital structure with a reduced proportion of debt relative to total capital. The minor uptick in 2019 could indicate stabilization or a slight shift in leverage strategy.
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.
The financial data reveals a consistent downward trend in the company's total debt over the five-year period from 2015 to 2019. Specifically, total debt decreased significantly from approximately 42.7 billion USD at the end of 2015 to about 23.2 billion USD by the end of 2019. This represents a reduction of nearly 46% in total debt levels.
Similarly, total capital exhibited a declining pattern but at a less pronounced rate compared to total debt. From a starting point of roughly 119.3 billion USD in 2015, total capital declined steadily each year and reached approximately 81.4 billion USD by the end of 2019. This downward trajectory implies a consistent reduction in overall capital employed.
The ratio of debt to capital, reflecting leverage, demonstrated a general decrease from 0.36 in 2015 to a low of 0.27 in 2018, before a slight increase to 0.29 in 2019. This indicates a moderate improvement in capital structure over the observed period, denoting reduced reliance on debt financing relative to total capital until 2018, followed by a marginal uptick in leverage.
- Total Debt Trends
- Substantial decline by nearly half over five years, indicating a strong deleveraging effort.
- Total Capital Trends
- Steady decrease, suggesting possible asset divestitures, capital return strategies, or other structural adjustments reducing capital base.
- Debt to Capital Ratio
- Improvement in leverage position through 2018, with a slight increase in 2019; overall leverage remains moderate with levels below 0.3 in the final years.
Overall, the data reflects a strategic focus on reducing debt and deleveraging, coupled with a shrinking capital base. The marginal rise in debt to capital ratio in the last year warrants monitoring to understand whether this represents a temporary fluctuation or a shift in financing strategy.
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.
- Total Debt
- The total debt has exhibited a consistent downward trend over the five-year period. Starting at $42,726,200 thousand in 2015, it decreased significantly to $22,649,000 thousand by the end of 2019. This represents a substantial reduction, indicating efforts toward deleveraging or repayment of obligations.
- Total Assets
- Total assets also displayed a steady decline during the same period. From $135,840,700 thousand in 2015, assets fell each year to reach $94,699,100 thousand by 2019. The downward trajectory suggests asset disposals, write-downs, or other changes reducing the company's asset base.
- Debt to Assets Ratio
- The debt to assets ratio declined from 0.31 in 2015 to 0.24 in 2019, with a slight stabilization around 0.23-0.25 in the intermediate years. This decline indicates an improvement in the company's leverage position relative to its asset size, reflecting the faster reduction in debt compared to assets.
- Overall Trends and Insights
- Both debt and assets have decreased over the period studied, with debt reducing at a relatively faster pace, as evidenced by the declining debt to assets ratio. The company appears to be strengthening its balance sheet by lowering financial leverage, although the shrinking asset base could warrant further analysis to understand the underlying causes, such as divestitures or impairments.
Debt to Assets (including Operating Lease Liability)
Allergan PLC, debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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.
- Total Debt (Including Operating Lease Liability)
- The total debt amount exhibits a consistent downward trend from 2015 through 2019. Starting at approximately $42.7 billion in 2015, the debt decreased significantly to about $23.2 billion by the end of 2019. This nearly 46% reduction indicates a strong deleveraging effort over the five-year period.
- Total Assets
- Total assets show a steady decline throughout the period under review. From a peak of approximately $135.8 billion in 2015, assets decreased each year, reaching roughly $94.7 billion in 2019. This downward trajectory represents a decrease of about 30%, suggesting asset base contraction during these years.
- Debt to Assets Ratio (Including Operating Lease Liability)
- The debt to assets ratio decreased from 0.31 in 2015 to a low of 0.23 in 2018, indicating an improvement in the relative debt position compared to the asset base. However, in 2019, this ratio slightly increased to 0.25. Overall, the ratio remained relatively stable around the mid-20th percentile, reflecting balanced leverage management despite the declining asset values and total debt.
Financial Leverage
Allergan PLC, financial leverage calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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.
- Total assets
- The total assets exhibit a consistent downward trend over the five-year period, declining from approximately 135.8 billion US dollars at the end of 2015 to about 94.7 billion US dollars by the end of 2019. This represents a significant decrease in asset base, with the most pronounced reductions occurring between 2017 and 2019.
- Shareholders’ equity
- Shareholders’ equity similarly shows a declining pattern throughout the period. Starting at roughly 76.6 billion US dollars in 2015, it decreases steadily year-on-year to approximately 58.2 billion US dollars by the end of 2019. The reduction in equity is consistent with the decrease observed in total assets, indicating potential pressures on retained earnings or capital structure changes.
- Financial leverage
- Financial leverage, measured as a ratio, generally decreases from 1.77 in 2015 to 1.56 in 2018, showing a trend toward lower leverage during this period. However, there is a slight increase to 1.63 in 2019, suggesting a modest rise in leverage after several years of decline. This pattern may reflect changes in debt management or shifts in financing strategy.
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 analysis of the financial data over the five-year period reveals several significant trends in the company's earnings before interest and tax (EBIT), interest expenses, and interest coverage ratio.
- Earnings Before Interest and Tax (EBIT)
- The EBIT values are consistently negative throughout the entire period, indicating the company operating at an operating loss each year. The losses peaked in 2017 with a value of approximately -9.29 billion US dollars, representing the most substantial deficit observed within the timeframe. After this peak loss, the EBIT shows a marked improvement in subsequent years, decreasing in magnitude to about -5.95 billion in 2018 and further to around -4.34 billion in 2019. This trend suggests a gradual recovery or reduction in operating losses, although EBIT remains negative.
- Interest Expense
- The interest expense also exhibits a declining trend over the analyzed years. Starting at approximately 1.19 billion US dollars in 2015, the expense increases slightly to 1.30 billion in 2016, followed by a consistent decrease each year, reaching about 783 million in 2019. The downward trend in interest expense may reflect debt reduction, refinancing at lower interest rates, or both.
- Interest Coverage Ratio
- The interest coverage ratio is negative throughout the period, indicating EBIT does not cover the interest expense at any point. The ratio is particularly volatile and shows an extreme low in 2017 at approximately -8.48, corresponding to the highest recorded operating loss and a moderate interest expense. Although the ratio improves in 2018 and 2019, it remains deeply negative at -6.53 and -5.54 respectively, suggesting persisting difficulties in covering interest obligations through operating earnings.
Overall, the company has experienced sustained operating losses with gradual EBIT improvements after 2017 but remains unable to cover interest expenses from operating profits. The consistent reduction in interest expenses and improved, yet still negative, interest coverage ratio may indicate measures to manage financial costs amid ongoing operational challenges.
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.
- Earnings before fixed charges and tax
- The earnings before fixed charges and tax show a fluctuation pattern with generally negative values throughout the period. Initially, there is an improvement from -3,187,000 in 2015 to -1,488,700 in 2016, indicating a reduction in losses. However, the figure worsens sharply in 2017 to -9,218,800, followed by a recovery trend in the subsequent years to -5,882,500 in 2018 and -4,184,400 in 2019. Despite the recovery, the earnings remain significantly negative, suggesting persistent operational challenges.
- Fixed charges
- Fixed charges display a gradual decline over the period. They start at 1,508,343 in 2015, increase slightly to 1,661,471 in 2016, and then consistently decrease through to 934,300 in 2019. This downward trend may reflect a reduction in interest expenses or other fixed financial obligations over the years.
- Fixed charge coverage ratio
- The fixed charge coverage ratio remains negative for the entire period, indicating that earnings before fixed charges and tax are insufficient to cover fixed charges. The ratio improves somewhat from -2.11 in 2015 to -0.90 in 2016, showing a better ability to cover fixed costs temporarily. However, it deteriorates sharply to -6.20 in 2017, before partially recovering to -5.73 in 2018 and -4.48 in 2019. The persistent negative coverage ratio highlights ongoing difficulties in meeting fixed financial obligations from operational earnings.