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Horizon Pharma Inc (NAS:HZNP)
Beneish M-Score
0.68 (As of Today)

Warning Sign:

Beneish M-Score 0.68 higher than -2.22, which implies that it might have manipulated its financial results.

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Horizon Pharma Inc has a M-score of 0.77 signals that the company is a manipulator.

HZNP' s 10-Year Beneish M-Score Range
Min: -17.06   Max: 8.89
Current: 0.68

-17.06
8.89

During the past 6 years, the highest Beneish M-Score of Horizon Pharma Inc was 8.89. The lowest was -17.06. And the median was 0.37.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Horizon Pharma Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 1.3363+0.528 * 0.7717+0.404 * 0.8941+0.892 * 5.2804+0.115 * 0.8414
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.3141+4.679 * -0.1518-0.327 * 1.3069
=0.77

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $51.79 Mil.
Revenue was 66.062 + 51.926 + 26.373 + 26.218 = $170.58 Mil.
Gross Profit was 41.252 + 44.307 + 24.825 + 20.905 = $131.29 Mil.
Total Current Assets was $197.68 Mil.
Total Assets was $328.36 Mil.
Property, Plant and Equipment(Net PPE) was $4.03 Mil.
Depreciation, Depletion and Amortization(DDA) was $16.29 Mil.
Selling, General & Admin. Expense(SGA) was $133.88 Mil.
Total Current Liabilities was $204.37 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was -27.769 + -206.25 + -102.901 + -5.492 = $-342.41 Mil.
Non Operating Income was -15.582 + -204.735 + -68.761 + 1.118 = $-287.96 Mil.
Cash Flow from Operations was 16.761 + -0.757 + -11.178 + -9.441 = $-4.62 Mil.
Accounts Receivable was $7.34 Mil.
Revenue was 11.131 + 8.693 + 5.959 + 6.521 = $32.30 Mil.
Gross Profit was 8.737 + 4.924 + 2.816 + 2.711 = $19.19 Mil.
Total Current Assets was $86.63 Mil.
Total Assets was $158.52 Mil.
Property, Plant and Equipment(Net PPE) was $3.50 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.25 Mil.
Selling, General & Admin. Expense(SGA) was $80.71 Mil.
Total Current Liabilities was $43.55 Mil.
Long-Term Debt was $31.94 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(51.792 / 170.579) / (7.34 / 32.304)
=0.30362471 / 0.22721644
=1.3363

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(44.307 / 32.304) / (41.252 / 170.579)
=0.59398217 / 0.76966684
=0.7717

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (197.675 + 4.031) / 328.364) / (1 - (86.634 + 3.5) / 158.517)
=0.38572438 / 0.43139222
=0.8941

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=170.579 / 32.304
=5.2804

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(7.253 / (7.253 + 3.5)) / (16.291 / (16.291 + 4.031))
=0.67450944 / 0.80164354
=0.8414

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(133.877 / 170.579) / (80.71 / 32.304)
=0.7848387 / 2.4984522
=0.3141

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((0 + 204.371) / 328.364) / ((31.938 + 43.551) / 158.517)
=0.62239161 / 0.47622022
=1.3069

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-342.412 - -287.96 - -4.615) / 328.364
=-0.1518

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Horizon Pharma Inc has a M-score of 0.77 signals that the company is likely to be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Horizon Pharma Inc Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.53671.1732
GMI -0.13270.4609
AQI 0.5251.4455
SGI 2.72043.9278
DEPI 0.94350.8406
SGAI 0.71810.34
LVGI 0.96581.6032
TATA -0.0597-0.1054
M-score -2.39-0.41

Horizon Pharma Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.165216.81754.80770.53672.97553.71250.88031.19911.13381.3363
GMI -22.0398-3.0692-2.6925-0.13310.0460.31740.47490.45090.53530.7717
AQI 0.48310.51420.43020.5250.89090.88441.27211.44551.08430.8941
SGI 1.83672.64184.78322.72043.26683.17863.16873.84294.62335.2804
DEPI 1.13121.21941.12470.94350.90510.78630.82820.84060.82860.8414
SGAI 1.09011.0460.5660.71820.47970.43880.40340.34750.32340.3141
LVGI 1.5261.67871.96130.96581.01720.96031.43331.60321.43031.3069
TATA -0.4273-0.4734-0.3059-0.0597-0.0394-0.0579-0.0735-0.1054-0.0966-0.1518
M-score -17.058.770.56-2.390.701.37-1.23-0.470.170.77
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