Allergan PLC (NYSE:AGN)

Inventory Turnover

The inventory turnover ratio shows a clear declining trend from the initial value of 4.76 in March 2016 to a low near 2.03 in June 2017. After reaching this low point, the ratio stabilizes around 2.2 to 2.6 through to March 2020. This indicates that the company’s efficiency in managing inventory decreased significantly in early periods and then leveled off at a lower turnover speed, suggesting increased inventory holding times over time.

Receivables Turnover

The receivables turnover ratio displays a downward trend from 6.28 in March 2016 to a trough around 5.08 in June 2019, followed by minor fluctuations and a slight recovery to 5.75 in December 2019 and March 2020. This pattern suggests a gradual elongation in the time it takes to collect receivables, impacting cash flow efficiency, though recent quarters show some improvement.

Working Capital Turnover

Working capital turnover exhibits considerable volatility. Initial values in early 2016 are relatively low (0.56), then increase progressively with peaks such as 27.78 and 58.26 in early 2018 and mid-2019 respectively. The ratio accelerates sharply to exceptionally high levels of 287.3 and 395.48 by late 2019 and early 2020. These spikes may reflect drastic changes in working capital management or one-time adjustments, indicating a significantly improved use of working capital in generating sales or possibly anomalies in reported figures.

Average Inventory Processing Period

The average inventory processing period extends steadily from 77 days in March 2016 to a peak of 180 days in June 2017, indicating that inventory is held longer within that timeframe. Post-peak, the period declines slightly but generally remains elevated around 150 to 167 days through early 2020. This aligns with the decreased inventory turnover and suggests prolonged inventory holding periods over the years.

Average Receivable Collection Period

The average receivable collection period fluctuates moderately around the low 60s to low 70s of days, with values ranging from 58 to 72 days between March 2016 and March 2020. While there is some variability, the collection period generally trends toward slight increases, signifying a minor lengthening in the time customers take to pay.

Operating Cycle

The operating cycle lengthens gradually from 135 days in March 2016 to above 230 days by late 2019 and early 2020. The increase reflects the combined effect of longer inventory holding periods and stretching receivable collection times, indicating higher overall capital tied up in operations and slower conversion of resources into cash.

The financial data reveals several notable trends in the cost of sales, inventories, and inventory turnover ratios over the examined periods.

Cost of Sales

The cost of sales demonstrates significant volatility throughout the periods. Initially, there is a pronounced spike during June 30, 2015, reaching above 2.13 million US dollars, followed by a sharp decrease by December 31, 2015, down to approximately 417 thousand US dollars. Subsequent quarters show a relatively stable range between roughly 440 thousand and 590 thousand US dollars until mid-2018. From March 31, 2019 onward, the cost of sales increases again, peaking at 704 thousand US dollars in December 31, 2019, before slightly declining to 623 thousand US dollars by March 31, 2020. The fluctuations highlight potential seasonality or other factors affecting production or sales expenses.

Inventories

Inventory levels exhibit a marked reduction from around 3.13 million US dollars on March 31, 2015, down to just below 1 million US dollars by December 31, 2015. After this decline, inventories stabilize somewhat, fluctuating between approximately 700 thousand and 950 thousand US dollars until mid-2018. From then on, there is a steady upward trend, with inventory reaching nearly 1.2 million US dollars by March 31, 2020. This gradual increase toward the end of the period may reflect stockpiling strategies or growth in product holdings.

Inventory Turnover

The inventory turnover ratio, calculated for later periods, starts at 4.76 in March 31, 2016, and steadily declines to approximately 2.18 by March 31, 2020. This consistent decrease suggests that inventory is being sold or used less frequently over time, potentially indicating an accumulation of stock or slower sales relative to inventory size. The ratio stabilizes somewhat around 2.2 in the last few quarters, implying a more consistent rate of inventory movement in the most recent periods.

Overall, the data indicates a shift from higher volatility and excessive inventory levels in early periods toward a more stabilized yet gradually increasing inventory base paired with decreasing turnover rates. The cost of sales pattern suggests episodic fluctuations potentially tied to operational or market conditions, while the downward trend in turnover ratio merits attention as it may signal changes in sales efficiency or inventory management practices.

The quarterly financial data reveals several notable trends over the observed periods. Net revenues display a degree of fluctuation without a consistent upward or downward trajectory. After reaching a peak in June 2015, net revenues declined significantly by the end of that year, only to demonstrate partial recovery and variability through the subsequent years. In the most recent quarters, revenue figures approximate earlier levels, indicating relative stabilization but without clear growth momentum.

Accounts receivable show a different pattern. Early periods indicate higher values that sharply decrease by the end of 2015. This decline suggests improved collections or changes in credit policy. After this reduction, accounts receivable stabilize, with moderate fluctuations in subsequent years, maintaining a level generally between 2,500,000 and 3,200,000 thousand US dollars. This stability reflects consistent credit management practices post-adjustment.

The receivables turnover ratio, available from the third quarter of 2015 onwards, indicates efficiency in collecting receivables. Initial ratios around 6.0 suggest moderate collection speed, with a gradual declining trend over time to levels closer to 5.0 in some quarters. This downward trend in turnover ratio implies a slight weakening in collection efficiency or extended credit terms. However, occasional upticks indicate intermittent improvements.

Net Revenues

Highly variable with a prominent peak in mid-2015 followed by declines and partial recoveries.

Accounts Receivable

Substantial reduction by end-2015 followed by stabilization and moderate fluctuations in later periods.

Receivables Turnover

Generally declining trend from about 6.3 to near 5.0, signaling a slight decrease in collection efficiency over time.

In summary, the data indicate that while revenue levels have remained unstable, the company has managed to stabilize its receivables balance after initial reductions. The efficiency in converting accounts receivable into cash appears to have slightly declined, suggesting potential areas for improvement in credit policies or collection practices. The overall financial trends suggest a focus on maintaining liquidity and managing credit risk amid variable sales performance.

Working Capital

The working capital figures exhibit significant volatility over the analyzed periods. It started at a positive value of 3,361,700 thousand USD in March 2015 but then sharply declined to 2837,400 thousand USD in June 2015. Following this, a substantial increase was observed in September 2015 reaching 8,525,700 thousand USD, followed by its sharp decrease again to 287,100 thousand USD at the end of 2015. The first half of 2016 showed negative working capital values (-104,000 and -112,200 thousand USD), suggesting potential liquidity challenges during this period. In the last quarter of 2016, there was an extreme spike to 23,698,400 thousand USD, the highest in the dataset, then it fluctuated notably but stayed mostly positive through 2017 and 2018. However, the data shows negative working capital again in early 2019 (-2,559,900 thousand USD) and some oscillations in later quarters, ending with a modest positive working capital of 40,700 thousand USD in March 2020. Overall, the working capital trend indicates inconsistent liquidity management or significant changes in operating assets and liabilities across the quarters.

Net Revenues

The net revenues demonstrate a generally stable and moderately increasing trend over the periods, albeit with fluctuations that appear to correspond to seasonal quarterly variations. The revenues started at 2,562,600 thousand USD in March 2015 and peaked sharply in June 2015 at 5,755,000 thousand USD. Subsequent quarters show some variability but hover mostly between approximately 3,300,000 and 4,300,000 thousand USD. Notably, a higher revenue level is observed consistently from mid-2017 through 2019, often exceeding 4,000,000 thousand USD quarterly. The last recorded quarter in March 2020 shows a revenue of 3,604,400 thousand USD, aligning with the upper range of prior quarters but lower relative to some peaks in the previous year. This trend suggests relatively robust revenue generation with periodic peaks potentially linked to product cycles or market demand fluctuations.

Working Capital Turnover Ratio

The working capital turnover ratio data is sparsely populated but reveals notable extremes. The ratio was very high in March 2015 at 52.49, indicating efficient use of working capital relative to net revenues. Following missing data for several quarters, the ratio reappears at low values of 0.56 in December 2016, increasing gradually to a notable 27.78 by September 2017, and remaining elevated thereafter. Extremely high turnover ratios are observed in March and June 2020 (287.3 and 395.48 respectively), suggesting a very low working capital base relative to revenue, which may reflect working capital minimization or timing effects on the reported figures. The wide fluctuation and high ratio values at the end of the period highlight a potential strategic shift or temporal working capital compression to support revenue activity.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates a clear declining trend starting from March 31, 2016, with a value of 4.76. It decreases steadily over the subsequent quarters, reaching a low point around December 31, 2016, at 2.55. After this period, the ratio fluctuates slightly but remains relatively low, from 2.59 to 2.18, through to March 31, 2020. This indicates a reduction in the frequency at which inventory is sold or used during the year.

Average Inventory Processing Period

Corresponding with the decline in inventory turnover, the average inventory processing period increases significantly starting from March 31, 2016, when it was 77 days. It escalates sharply to 143 days by December 31, 2015, and peaks around June 30, 2017, at 180 days. Following this peak, although some quarters show slight decreases, the period remains elevated and fluctuates between approximately 141 and 167 days until March 31, 2020. This trend reflects that the company is holding inventory for longer durations before processing or selling it.

Overall Insights

The inverse relationship between inventory turnover and the average inventory processing period is clearly evident. The decline in turnover ratio coupled with the increase in processing period suggests a possible slowdown in inventory movement. This could imply challenges in sales velocity, potential overstocking, or shifts in inventory management strategies. The sustained levels in later years indicate that these inventory trends stabilized but did not return to the earlier higher turnover or shorter processing periods, potentially indicating a new operating pattern or market conditions impacting inventory management.

Receivables Turnover

The receivables turnover ratio shows a gradual decline from March 2016 to September 2019, decreasing from 6.28 to a low of 5.04. This suggests a slowdown in the frequency of collecting receivables over this period. Notably, there was some fluctuation, with slight improvements observed intermittently, such as an increase to 5.8 in June 2017 and to 5.75 in December 2019. Overall, the trend indicates a reduction in efficiency in converting receivables into cash over the analyzed timeframe.

Average Receivable Collection Period

The average collection period in days mirrors the inverse pattern of the receivables turnover ratio, with values generally rising from 58 days in March 2016 to a peak of 72 days in September 2019. Periods of collection lengthening correspond to declines in turnover efficiency. While there are minor decreases at certain points—such as a drop from 70 to 64 days between December 2019 and March 2020—the overall tendency points to longer timeframes for collecting receivables. This indicates potential challenges in managing accounts receivable or changes in customer payment behaviors.

Summary

The analyzed data reveals a general deterioration in the efficiency of receivables management over the nearly five-year period. The declining turnover ratio alongside the increasing average collection period indicates that the company faced increasing difficulty in converting receivables into cash promptly. This trend may require attention to credit policies or collection procedures to improve liquidity and reduce credit risk.

Average Inventory Processing Period

The average inventory processing period exhibits an overall upward trend from 2015 to 2020. Initially recorded at 77 days in March 2016, it increases progressively to a peak of 180 days in June 2017. Following this peak, the period declines somewhat but remains elevated, fluctuating between 150 and 167 days through to March 2020. This indicates a lengthening in the time inventory remains in the system, suggesting slower inventory turnover or changes in inventory management.

Average Receivable Collection Period

The average receivable collection period remains relatively stable over the analyzed timeframe, with some moderate fluctuations. Starting from 58 days in March 2016, it experiences a gradual increase, reaching around 66 to 68 days between late 2016 and early 2018. Afterward, the period oscillates mostly between 60 and 72 days, ending at 64 days in March 2020. These fluctuations suggest consistent but slightly variable efficiency in collecting receivables over the quarters.

Operating Cycle

The operating cycle shows a clear increasing trend, starting at 135 days in March 2016 and advancing to a high of 244 days in June 2017. After this peak, the cycle decreases slightly but remains substantially elevated relative to the start, fluctuating between 207 and 238 days through to March 2020. The prolonged operating cycle reflects the combined effects of both inventory processing and receivable collection periods extending over time, indicating a slower overall business cycle.