Edwards Lifesciences Corp. (NYSE:EW)

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Edwards Lifesciences Corp., effective income tax rate (EITR) reconciliation

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
United States federal statutory income tax rate	21.00%	21.00%	21.00%	21.00%	35.00%
Effective income tax rate, before impact related to 2017 U.S. Tax Reform	11.69%	10.18%	10.01%	3.07%	15.19%
Effective income tax rate	11.69%	10.18%	10.25%	5.15%	43.61%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The financial profile of the effective income tax rate exhibits significant volatility between 2017 and 2021, characterized by a sharp initial spike followed by a period of stabilization and gradual increase. This trajectory is closely linked to changes in the United States federal statutory tax rate and the subsequent accounting impacts of tax legislation.

Statutory Tax Rate Transition: A structural shift in the tax environment occurred between 2017 and 2018, where the United States federal statutory income tax rate decreased from 35.00% to 21.00%. This rate remained constant through 2021.
Impact of 2017 Tax Reform: The most pronounced variance is observed in 2017, where the effective income tax rate reached 43.61%, significantly exceeding the statutory rate of 35.00% and the pre-reform effective rate of 15.19%. This discrepancy indicates a substantial one-time impact related to the 2017 U.S. Tax Reform. Following this event, the effective income tax rate dropped precipitously to 5.15% in 2018.
Effective Income Tax Rate Trends: Excluding the 2017 reform impacts, the effective tax rate demonstrated a sharp decline to 3.07% in 2018 before entering a steady upward trend. This rate climbed to 10.01% in 2019, 10.18% in 2020, and 11.69% in 2021. This suggests a gradual normalization of the tax burden over the four-year period following the reform.
Convergence of Tax Metrics: A convergence is observed between the effective income tax rate and the rate before the impact of the 2017 reform starting in 2020. By 2020 and 2021, the two figures became identical at 10.18% and 11.69%, respectively, signaling that the lingering accounting effects of the 2017 tax changes had been fully absorbed or neutralized.

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Edwards Lifesciences Corp., components of deferred tax assets and liabilities

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Compensation and benefits	109,800)	88,600)	91,600)	71,400)	53,900)
Benefits from uncertain tax positions	33,900)	27,000)	22,500)	22,200)	66,100)
Net tax credit carryforwards	142,000)	125,500)	108,400)	94,400)	78,800)
Net operating loss carryforwards	69,400)	64,100)	57,600)	42,100)	47,300)
Accrued liabilities	108,000)	105,000)	6,100)	78,800)	29,200)
Inventories	13,500)	16,300)	12,900)	7,200)	6,800)
Cash flow and net investment hedges	—)	3,300)	—)	—)	13,300)
State income taxes	400)	500)	500)	600)	5,800)
Investments	700)	1,800)	1,500)	1,600)	1,600)
Lease liability obligations	6,600)	7,700)	18,400)	—)	—)
Other	1,300)	3,600)	1,900)	4,100)	1,700)
Deferred tax assets, before valuation allowance	485,600)	443,400)	321,400)	322,400)	304,500)
Valuation allowance	(82,500)	(71,600)	(65,800)	(46,700)	(41,600)
Deferred tax assets	403,100)	371,800)	255,600)	275,700)	262,900)
Property, plant, and equipment	(64,100)	(53,400)	(22,600)	(24,500)	(20,000)
Cash flow and net investment hedges	(6,400)	—)	(6,800)	(4,500)	—)
Deferred tax on foreign earnings	(26,300)	(29,200)	(100)	(600)	(3,100)
Right-of-use assets	(6,100)	(7,000)	(17,500)	—)	—)
Inventories	—)	—)	—)	(3,900)	(4,200)
Other intangible assets	(75,500)	(76,300)	(71,000)	(77,100)	(49,500)
Other	(2,600)	(3,100)	(2,200)	(100)	(100)
Deferred tax liabilities	(181,000)	(169,000)	(120,200)	(110,700)	(76,900)
Net deferred tax assets (liabilities)	222,100)	202,800)	135,400)	165,000)	186,000)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

Between 2017 and 2021, a net deferred tax asset position was maintained, despite fluctuations in individual components. The net deferred tax assets shifted from 186.0 million US dollars in 2017 to 222.1 million US dollars by the end of 2021, characterized by a mid-period decline followed by a significant recovery in 2020 and 2021.

Analysis of Deferred Tax Assets: Gross deferred tax assets exhibited a strong upward trajectory, increasing from 304.5 million US dollars in 2017 to 485.6 million US dollars in 2021. This growth was primarily driven by compensation and benefits, which more than doubled from 53.9 million US dollars to 109.8 million US dollars over the five-year period. Net tax credit carryforwards also showed consistent annual growth, rising from 78.8 million US dollars to 142.0 million US dollars. Conversely, accrued liabilities demonstrated high volatility, peaking at 108.0 million US dollars in 2021 after a sharp decline to 6.1 million US dollars in 2019.
Valuation Allowance Trends: The valuation allowance grew steadily from 41.6 million US dollars in 2017 to 82.5 million US dollars in 2021. This increase indicates a more conservative estimation regarding the realizability of certain deferred tax assets, effectively offsetting a portion of the gross asset growth.
Analysis of Deferred Tax Liabilities: Deferred tax liabilities increased significantly in magnitude, rising from 76.9 million US dollars in 2017 to 181.0 million US dollars in 2021. The primary driver of this increase was property, plant, and equipment, where liabilities grew from 20.0 million US dollars to 64.1 million US dollars. Other intangible assets remained a substantial and relatively stable component of the liabilities, fluctuating between 49.5 million US dollars and 77.1 million US dollars. Additionally, deferred tax on foreign earnings saw a notable spike in 2020, reaching 29.2 million US dollars compared to only 0.1 million US dollars in 2019.
Net Deferred Tax Position: The net deferred tax asset position experienced a downward trend from 2017 to 2019, reaching a low of 135.4 million US dollars. However, a sharp reversal occurred in 2020 and 2021, with the net position climbing to 222.1 million US dollars. This recovery was largely supported by the acceleration of gross deferred tax assets, which outpaced the growth of deferred tax liabilities during the final two years of the analyzed period.

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Edwards Lifesciences Corp., deferred tax assets and liabilities, classification

US$ in thousands

		Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
	Deferred tax assets	246,700)	230,900)	172,200)	174,000)	213,600)
	Deferred tax liabilities	24,600)	28,100)	36,800)	9,000)	27,600)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The financial position regarding deferred income taxes reflects a consistent net asset posture from 2017 through 2021, characterized by deferred tax assets that significantly outweigh deferred tax liabilities throughout the period.

Deferred Tax Assets Trend: Deferred tax assets experienced a period of volatility, starting at 213,600 thousand US dollars in 2017 and declining to a low of 172,200 thousand US dollars by 2019. This downward trend reversed sharply in 2020, with values climbing to 230,900 thousand US dollars and continuing to rise to 246,700 thousand US dollars by the end of 2021. This represents a total increase of approximately 15.5% over the five-year horizon.
Deferred Tax Liabilities Trend: Deferred tax liabilities exhibited significant fluctuations without a definitive linear trajectory. A sharp reduction occurred in 2018, where liabilities dropped to 9,000 thousand US dollars from 27,600 thousand US dollars in 2017. A peak was reached in 2019 at 36,800 thousand US dollars, followed by a gradual decline to 24,600 thousand US dollars by 2021.
Net Deferred Tax Position: The net deferred tax asset position remained robust across the analyzed timeframe. While the net position dipped to its lowest point in 2019 due to the simultaneous decrease in assets and increase in liabilities, it recovered strongly in the subsequent two years. By December 31, 2021, the net deferred tax asset position reached its highest point in the sequence, indicating an increase in future tax benefits relative to future tax obligations.

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Edwards Lifesciences Corp., Financial Data: Reported vs. Adjusted

Edwards Lifesciences Corp., adjustments to financial statements

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Adjustment to Total Assets
Total assets (as reported)	8,502,600)	7,237,100)	6,488,100)	5,323,700)	5,695,800)
Less: Noncurrent deferred tax assets, net	246,700)	230,900)	172,200)	174,000)	213,600)
Total assets (adjusted)	8,255,900)	7,006,200)	6,315,900)	5,149,700)	5,482,200)
Adjustment to Total Liabilities
Total liabilities (as reported)	2,666,700)	2,662,800)	2,339,800)	2,183,300)	2,739,600)
Less: Noncurrent deferred tax liabilities, net	24,600)	28,100)	36,800)	9,000)	27,600)
Total liabilities (adjusted)	2,642,100)	2,634,700)	2,303,000)	2,174,300)	2,712,000)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	5,835,900)	4,574,300)	4,148,300)	3,140,400)	2,956,200)
Less: Net deferred tax assets (liabilities)	222,100)	202,800)	135,400)	165,000)	186,000)
Stockholders’ equity (adjusted)	5,613,800)	4,371,500)	4,012,900)	2,975,400)	2,770,200)
Adjustment to Net Income
Net income (as reported)	1,503,100)	823,400)	1,046,900)	722,200)	583,600)
Add: Deferred income tax expense (benefit)	(44,000)	(52,200)	10,500)	(21,200)	27,100)
Net income (adjusted)	1,459,100)	771,200)	1,057,400)	701,000)	610,700)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The removal of deferred tax accounts results in a consistent downward adjustment of total assets, total liabilities, and stockholders' equity throughout the period from 2017 to 2021. This suggests that the reported financial position is significantly influenced by deferred tax assets and liabilities, the exclusion of which provides a more conservative view of the organization's capital structure.

Asset and Liability Adjustments: Total assets exhibited a steady growth trend, increasing from 5,695,800 thousand USD in 2017 to 8,502,600 thousand USD in 2021. The adjusted total assets remained consistently lower than reported figures, with the variance expanding over time. By 2021, the difference between reported and adjusted assets reached 246,700 thousand USD. Similarly, adjusted total liabilities were consistently lower than reported liabilities, although the margin of difference remained relatively small compared to the asset adjustments, fluctuating between 9,000 thousand USD and 36,800 thousand USD.
Stockholders' Equity Trends: Reported stockholders' equity showed a strong upward trajectory, growing from 2,956,200 thousand USD in 2017 to 5,835,900 thousand USD in 2021. The adjusted equity figures are consistently lower, reflecting the net impact of deferred tax removal. The gap between reported and adjusted equity widened toward the end of the period, reaching 222,100 thousand USD in 2021, which indicates that a meaningful portion of the reported equity is composed of deferred tax positions.
Net Income Variability: Net income demonstrated overall growth, despite a contraction in 2020, peaking at 1,503,100 thousand USD in 2021. The relationship between reported and adjusted net income was inconsistent. In 2017 and 2019, adjusted net income exceeded reported net income, whereas in 2018, 2020, and 2021, reported net income was higher than the adjusted figure. This fluctuation indicates that the tax adjustments have a variable impact on profitability, alternating between providing a lift and a reduction to the reported bottom line depending on the fiscal year.

The cumulative effect of these adjustments reveals that while the company has scaled its balance sheet and profitability significantly over five years, the reliance on deferred tax accounting creates a visible disparity between reported and adjusted financial health. The widening gap in equity and assets suggests that deferred tax assets are growing in tandem with the overall expansion of the company.

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Edwards Lifesciences Corp., Financial Ratios: Reported vs. Adjusted

Edwards Lifesciences Corp., adjusted financial ratios

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net Profit Margin
Reported net profit margin	28.73%	18.77%	24.08%	19.40%	16.99%
Adjusted net profit margin	27.89%	17.58%	24.32%	18.83%	17.78%
Total Asset Turnover
Reported total asset turnover	0.62	0.61	0.67	0.70	0.60
Adjusted total asset turnover	0.63	0.63	0.69	0.72	0.63
Financial Leverage
Reported financial leverage	1.46	1.58	1.56	1.70	1.93
Adjusted financial leverage	1.47	1.60	1.57	1.73	1.98
Return on Equity (ROE)
Reported ROE	25.76%	18.00%	25.24%	23.00%	19.74%
Adjusted ROE	25.99%	17.64%	26.35%	23.56%	22.05%
Return on Assets (ROA)
Reported ROA	17.68%	11.38%	16.14%	13.57%	10.25%
Adjusted ROA	17.67%	11.01%	16.74%	13.61%	11.14%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

The removal of deferred taxes reveals a consistent discrepancy between reported and adjusted financial performance metrics from 2017 to 2021. Generally, the adjustments lead to higher values in asset efficiency and leverage, while the impact on profitability and returns fluctuates depending on the fiscal year, suggesting that deferred tax assets or liabilities have a variable influence on the reported bottom line.

Net Profit Margin: Reported net profit margins exhibited significant volatility, rising from 16.99% in 2017 to a peak of 28.73% in 2021, despite a notable contraction to 18.77% in 2020. The adjusted margins follow a similar trajectory, though the relationship between reported and adjusted figures inverted over time; adjusted margins were higher in 2017 and 2019, but lower than reported margins in 2018, 2020, and 2021.
Total Asset Turnover: A consistent pattern is observed where adjusted total asset turnover exceeds reported figures across all five years. The ratio peaked in 2018 at 0.72 (adjusted) before stabilizing between 0.63 and 0.69. This indicates that the removal of deferred taxes consistently presents a more favorable view of asset utilization efficiency.
Financial Leverage: A sustained downward trend in financial leverage is evident, with reported leverage decreasing from 1.93 in 2017 to 1.46 in 2021. Adjusted leverage remained marginally higher than reported leverage throughout the period, mirroring the same decline. This trend suggests a systemic reduction in the company's reliance on debt relative to its equity base.
Return on Equity (ROE) and Return on Assets (ROA): Both ROE and ROA demonstrated synchronized movements, peaking in 2019 and 2021, with a shared dip in 2020. Adjusted ROE was higher than reported ROE in every year except 2020, where the reported ROE of 18.00% exceeded the adjusted 17.64%. Similarly, adjusted ROA remained higher than reported ROA from 2017 through 2019, but fell slightly below reported levels in 2020 and 2021. This suggests that the impact of deferred taxes on returns shifted from a drag on performance in the early period to a neutral or supportive factor by 2021.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income	1,503,100)	823,400)	1,046,900)	722,200)	583,600)
Net sales	5,232,500)	4,386,300)	4,348,000)	3,722,800)	3,435,300)
Profitability Ratio
Net profit margin¹	28.73%	18.77%	24.08%	19.40%	16.99%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	1,459,100)	771,200)	1,057,400)	701,000)	610,700)
Net sales	5,232,500)	4,386,300)	4,348,000)	3,722,800)	3,435,300)
Profitability Ratio
Adjusted net profit margin²	27.89%	17.58%	24.32%	18.83%	17.78%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Net profit margin = 100 × Net income ÷ Net sales
= 100 × 1,503,100 ÷ 5,232,500 = 28.73%

² Adjusted net profit margin = 100 × Adjusted net income ÷ Net sales
= 100 × 1,459,100 ÷ 5,232,500 = 27.89%

The financial performance from 2017 to 2021 is characterized by an overall upward trajectory in profitability, despite a notable contraction during the 2020 fiscal year. The period concludes with a significant expansion in both absolute earnings and profit margins.

Net Income Trends: Reported net income grew from 583.6 million in 2017 to 1.5 billion in 2021. Adjusted net income followed a similar pattern, starting at 610.7 million in 2017 and reaching 1.46 billion by 2021. A temporary decline occurred in 2020, where reported net income dropped to 823.4 million and adjusted net income fell to 771.2 million, before rebounding sharply in the final year of the period.
Net Profit Margin Analysis: The reported net profit margin exhibited significant growth, increasing from 16.99% in 2017 to 28.73% in 2021. The adjusted net profit margin mirrored this trend, rising from 17.78% in 2017 to a peak of 27.89% in 2021. Both metrics experienced a synchronized dip in 2020, with the adjusted margin falling to 17.58% and the reported margin to 18.77%.
Comparison of Reported and Adjusted Metrics: The relationship between reported and adjusted figures shifted over the five-year period. In 2017 and 2019, adjusted net income and margins were higher than their reported counterparts. However, in 2018, 2020, and 2021, the reported figures exceeded the adjusted values. This indicates a fluctuation in the nature of non-recurring items or tax adjustments that impacted the final net profit calculations.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net sales	5,232,500)	4,386,300)	4,348,000)	3,722,800)	3,435,300)
Total assets	8,502,600)	7,237,100)	6,488,100)	5,323,700)	5,695,800)
Activity Ratio
Total asset turnover¹	0.62	0.61	0.67	0.70	0.60
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Net sales	5,232,500)	4,386,300)	4,348,000)	3,722,800)	3,435,300)
Adjusted total assets	8,255,900)	7,006,200)	6,315,900)	5,149,700)	5,482,200)
Activity Ratio
Adjusted total asset turnover²	0.63	0.63	0.69	0.72	0.63

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 5,232,500 ÷ 8,502,600 = 0.62

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 5,232,500 ÷ 8,255,900 = 0.63

The financial trajectory from 2017 to 2021 reflects a significant expansion of the asset base coupled with fluctuating levels of asset utilization efficiency. While total assets grew substantially over the five-year period, the asset turnover ratios indicate a peak in efficiency in 2018 followed by a period of moderation and stabilization.

Adjusted Total Assets: An overall upward trend is observed in adjusted total assets, which increased from US$ 5,482,200 thousand in 2017 to US$ 8,255,900 thousand by 2021. Following a brief contraction in 2018, where assets dipped to US$ 5,149,700 thousand, there was a consistent year-over-year increase, signaling a period of aggressive balance sheet growth.
Adjusted Total Asset Turnover: The adjusted total asset turnover ratio peaked in 2018 at 0.72, which correlates with the lowest adjusted asset balance recorded during the period. Subsequently, the ratio declined to 0.69 in 2019 and stabilized at 0.63 in both 2020 and 2021. This pattern suggests that the rapid expansion of the asset base since 2018 has not been matched by a proportional increase in revenue generation.
Comparison of Reported and Adjusted Metrics: The adjusted total asset turnover ratio is consistently higher than the reported total asset turnover ratio across all years. This persistent variance indicates that the adjustments applied to the total assets remove specific items that would otherwise dilute the efficiency metric, providing a more optimized view of operational asset productivity.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Total assets	8,502,600)	7,237,100)	6,488,100)	5,323,700)	5,695,800)
Stockholders’ equity	5,835,900)	4,574,300)	4,148,300)	3,140,400)	2,956,200)
Solvency Ratio
Financial leverage¹	1.46	1.58	1.56	1.70	1.93
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets	8,255,900)	7,006,200)	6,315,900)	5,149,700)	5,482,200)
Adjusted stockholders’ equity	5,613,800)	4,371,500)	4,012,900)	2,975,400)	2,770,200)
Solvency Ratio
Adjusted financial leverage²	1.47	1.60	1.57	1.73	1.98

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 8,502,600 ÷ 5,835,900 = 1.46

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 8,255,900 ÷ 5,613,800 = 1.47

The financial position demonstrates a steady expansion of the asset base and stockholders' equity over the period from 2017 to 2021. Following a brief contraction in assets during 2018, there was a sustained increase in both reported and adjusted asset totals, with adjusted total assets rising from US$ 5,482,200 thousand in 2017 to US$ 8,255,900 thousand by the end of 2021.

Asset and Equity Growth: A consistent upward trajectory is observed in adjusted stockholders' equity, which grew from US$ 2,770,200 thousand in 2017 to US$ 5,613,800 thousand in 2021. This expansion of the equity base indicates a strengthening of the company's internal funding and a reduction in the relative dependency on external financing.
Adjusted Financial Leverage Trend: The adjusted financial leverage ratio exhibits a general downward trend, decreasing from 1.98 in 2017 to 1.47 in 2021. Despite a slight increase from 1.57 in 2019 to 1.60 in 2020, the overall movement suggests a deliberate deleveraging process, resulting in a more conservative capital structure and lower financial risk.
Comparison of Reported and Adjusted Metrics: A persistent variance is noted between reported and adjusted figures. Adjusted total assets and adjusted stockholders' equity are consistently lower than the reported values. This discrepancy results in the adjusted financial leverage ratio remaining slightly higher than the reported leverage ratio throughout the five-year period, although both metrics trend in synchronization.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income	1,503,100)	823,400)	1,046,900)	722,200)	583,600)
Stockholders’ equity	5,835,900)	4,574,300)	4,148,300)	3,140,400)	2,956,200)
Profitability Ratio
ROE¹	25.76%	18.00%	25.24%	23.00%	19.74%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	1,459,100)	771,200)	1,057,400)	701,000)	610,700)
Adjusted stockholders’ equity	5,613,800)	4,371,500)	4,012,900)	2,975,400)	2,770,200)
Profitability Ratio
Adjusted ROE²	25.99%	17.64%	26.35%	23.56%	22.05%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 1,503,100 ÷ 5,835,900 = 25.76%

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × 1,459,100 ÷ 5,613,800 = 25.99%

The financial performance from 2017 through 2021 is characterized by substantial growth in both net income and shareholders' equity, although profitability ratios experienced a notable contraction in 2020 before rebounding to record levels in 2021.

Net Income Performance: A general upward trend is observed in earnings, with reported net income increasing from US$ 583.6 million in 2017 to US$ 1.503 billion in 2021. Adjusted net income followed a similar trajectory, rising from US$ 610.7 million to US$ 1.459 billion over the same period. A temporary decline occurred in 2020, where reported net income fell to US$ 823.4 million, representing a departure from the otherwise consistent growth pattern.
Stockholders' Equity Growth: Equity demonstrated continuous expansion throughout the five-year period. Reported stockholders' equity nearly doubled, rising from US$ 2.956 billion in 2017 to US$ 5.836 billion by the end of 2021. Adjusted stockholders' equity mirrored this growth, increasing from US$ 2.770 billion to US$ 5.614 billion, indicating a steady strengthening of the company's capital base.
Adjusted Return on Equity (ROE) Trends: The Adjusted ROE exhibited volatility, beginning at 22.05% in 2017 and peaking at 26.35% in 2019. A significant downturn is observed in 2020, where Adjusted ROE dropped to 17.64%, coinciding with the dip in net income and a simultaneous increase in the equity denominator. A strong recovery followed in 2021, with Adjusted ROE reaching 25.99%.
Comparison of Reported and Adjusted Metrics: Adjusted ROE generally exceeded reported ROE in 2017, 2018, 2019, and 2021, suggesting that adjustments to net income and equity typically improved the perceived efficiency of capital utilization. However, in 2020, this relationship inverted, with reported ROE at 18.00% slightly higher than the adjusted ROE of 17.64%, indicating that the factors necessitating adjustments had a relatively positive impact on reported results during that specific fiscal year.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income	1,503,100)	823,400)	1,046,900)	722,200)	583,600)
Total assets	8,502,600)	7,237,100)	6,488,100)	5,323,700)	5,695,800)
Profitability Ratio
ROA¹	17.68%	11.38%	16.14%	13.57%	10.25%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	1,459,100)	771,200)	1,057,400)	701,000)	610,700)
Adjusted total assets	8,255,900)	7,006,200)	6,315,900)	5,149,700)	5,482,200)
Profitability Ratio
Adjusted ROA²	17.67%	11.01%	16.74%	13.61%	11.14%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × 1,503,100 ÷ 8,502,600 = 17.68%

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × 1,459,100 ÷ 8,255,900 = 17.67%

The financial performance from 2017 to 2021 is characterized by significant growth in net income and a steady expansion of the asset base, resulting in an overall increase in asset efficiency despite a temporary contraction in 2020.

Adjusted Net Income Trends: Adjusted net income exhibited a strong upward trajectory, rising from US$ 610.7 million in 2017 to US$ 1.459 billion in 2021. A notable fluctuation occurred in 2020, when adjusted net income decreased to US$ 771.2 million from a 2019 peak of US$ 1.057 billion, before recovering sharply in the final year.
Asset Base Growth: Adjusted total assets grew consistently over the analyzed period, increasing from US$ 5.482 billion in 2017 to US$ 8.256 billion in 2021. This suggests a continuous investment in infrastructure or acquisitions to support operational scaling.
Adjusted Return on Assets (ROA) Analysis: The Adjusted ROA demonstrated volatility with a general positive trend, starting at 11.14% in 2017 and reaching a high of 17.67% in 2021. The ratio improved steadily through 2019 (16.74%) but experienced a decline in 2020 to 11.01%, mirroring the dip in adjusted net income. The surge to 17.67% in 2021 indicates a high level of efficiency in converting the expanded asset base into profit.
Comparative Performance of Reported vs. Adjusted ROA: The variance between reported and adjusted ROA remained minimal throughout the period. While the adjusted figure provided a slightly higher perspective of efficiency between 2017 and 2019, the two metrics converged almost entirely by 2021, with reported ROA at 17.68% and adjusted ROA at 17.67%.

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