Stock Analysis on Net
Stock Analysis on Net

Reynolds American Inc. (NYSE:RAI)

This company has been moved to the archive! The financial data has not been updated since May 3, 2017.

Analysis of Income Taxes

Microsoft Excel

Income Tax Expense (Benefit)

Reynolds American Inc., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Federal 2,794 3,313 809 563 647
State and other 437 477 188 148 78
Current 3,231 3,790 997 711 725
Federal 350 (597) (151) 254 (45)
State and other 37 (62) (29) 58 1
Deferred 387 (659) (180) 312 (44)
Provision for income taxes 3,618 3,131 817 1,023 681

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Reynolds American Inc. current increased from 2014 to 2015 but then slightly decreased from 2015 to 2016.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Reynolds American Inc. deferred decreased from 2014 to 2015 but then increased from 2015 to 2016 exceeding 2014 level.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Reynolds American Inc. provision for income taxes increased from 2014 to 2015 and from 2015 to 2016.

Effective Income Tax Rate (EITR)

Reynolds American Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
U.S. federal income tax rate 35.00% 35.00% 35.00% 35.00% 35.00%
Effective tax rate 37.30% 49.00% 36.10% 37.30% 34.90%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Item Description The company
Effective tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Reynolds American Inc. effective tax rate increased from 2014 to 2015 but then slightly decreased from 2015 to 2016 not reaching 2014 level.

Components of Deferred Tax Assets and Liabilities

Reynolds American Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Pension and other postretirement liabilities 759 916 823 522 726
Tobacco settlement accruals 955 1,088 711 677 990
Other accrued liabilities 169 175 127 71 62
Other noncurrent liabilities 210 283 139 150 153
Deferred tax assets 2,093 2,462 1,800 1,420 1,931
Valuation allowance — (8) (37) (36) (33)
Deferred tax assets, less valuation allowance 2,093 2,454 1,763 1,384 1,898
LIFO inventories (257) (266) (150) (156) (158)
Property and equipment (290) (259) (260) (232) (242)
Trademarks and other intangibles (10,972) (11,002) (913) (916) (936)
Other (181) (131) (111) (120) (115)
Deferred tax liabilities (11,700) (11,658) (1,434) (1,424) (1,451)
Net deferred tax asset (liability) (9,607) (9,204) 329 (40) 447

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Item Description The company
Deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Reynolds American Inc. deferred tax assets increased from 2014 to 2015 but then slightly decreased from 2015 to 2016 not reaching 2014 level.
Deferred tax assets, less valuation allowance Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Reynolds American Inc. deferred tax assets, less valuation allowance increased from 2014 to 2015 but then slightly decreased from 2015 to 2016 not reaching 2014 level.
Net deferred tax asset (liability) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Reynolds American Inc. net deferred tax asset (liability) decreased from 2014 to 2015 and from 2015 to 2016.

Deferred Tax Assets and Liabilities, Classification

Reynolds American Inc., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Current deferred tax assets — 1,032 703 606 908
Noncurrent deferred tax assets — — 9 12 —
Noncurrent deferred tax liabilities 9,607 10,236 383 658 461

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Item Description The company
Noncurrent deferred tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.
Noncurrent deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Reynolds American Inc. noncurrent deferred tax liabilities increased from 2014 to 2015 but then slightly decreased from 2015 to 2016.

Adjustments to Financial Statements: Removal of Deferred Taxes

Reynolds American Inc., adjustments to financial statements

US$ in millions

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Adjustment to Current Assets
Current assets (as reported) 4,238 6,187 3,323 3,655 4,812
Less: Current deferred tax assets, net — 1,032 703 606 908
Current assets (adjusted) 4,238 5,155 2,620 3,049 3,904
Adjustment to Total Assets
Total assets (as reported) 51,095 53,224 15,196 15,402 16,557
Less: Current deferred tax assets, net — 1,032 703 606 908
Less: Noncurrent deferred tax assets, net — — 9 12 —
Total assets (adjusted) 51,095 52,192 14,484 14,784 15,649
Adjustment to Total Liabilities
Total liabilities (as reported) 29,384 34,972 10,674 10,235 11,300
Less: Noncurrent deferred tax liabilities, net 9,607 10,236 383 658 461
Total liabilities (adjusted) 19,777 24,736 10,291 9,577 10,839
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported) 21,711 18,252 4,522 5,167 5,257
Less: Net deferred tax assets (liabilities) (9,607) (9,204) 329 (40) 447
Shareholders’ equity (adjusted) 31,318 27,456 4,193 5,207 4,810
Adjustment to Net Income
Net income (as reported) 6,073 3,253 1,470 1,718 1,272
Add: Deferred income tax expense (benefit) 387 (659) (180) 312 (44)
Net income (adjusted) 6,460 2,594 1,290 2,030 1,228

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Reynolds American Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Reynolds American Inc., adjusted financial ratios

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Current Ratio
Reported current ratio 0.85 1.17 0.94 1.19 1.28
Adjusted current ratio 0.85 0.97 0.74 0.99 1.04
Net Profit Margin
Reported net profit margin 36.05% 21.86% 12.15% 14.36% 10.40%
Adjusted net profit margin 38.35% 17.43% 10.66% 16.96% 10.04%
Total Asset Turnover
Reported total asset turnover 0.33 0.28 0.80 0.78 0.74
Adjusted total asset turnover 0.33 0.29 0.84 0.81 0.78
Financial Leverage
Reported financial leverage 2.35 2.92 3.36 2.98 3.15
Adjusted financial leverage 1.63 1.90 3.45 2.84 3.25
Return on Equity (ROE)
Reported ROE 27.97% 17.82% 32.51% 33.25% 24.20%
Adjusted ROE 20.63% 9.45% 30.77% 38.99% 25.53%
Return on Assets (ROA)
Reported ROA 11.89% 6.11% 9.67% 11.15% 7.68%
Adjusted ROA 12.64% 4.97% 8.91% 13.73% 7.85%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Reynolds American Inc. adjusted current ratio improved from 2014 to 2015 but then slightly deteriorated from 2015 to 2016 not reaching 2014 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Reynolds American Inc. adjusted net profit margin ratio improved from 2014 to 2015 and from 2015 to 2016.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Reynolds American Inc. adjusted total asset turnover ratio deteriorated from 2014 to 2015 but then slightly improved from 2015 to 2016.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Reynolds American Inc. adjusted financial leverage ratio decreased from 2014 to 2015 and from 2015 to 2016.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Reynolds American Inc. adjusted ROE deteriorated from 2014 to 2015 but then improved from 2015 to 2016 not reaching 2014 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Reynolds American Inc. adjusted ROA deteriorated from 2014 to 2015 but then improved from 2015 to 2016 exceeding 2014 level.

Reynolds American Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Current assets 4,238 6,187 3,323 3,655 4,812
Current liabilities 4,985 5,291 3,544 3,076 3,769
Liquidity Ratio
Current ratio1 0.85 1.17 0.94 1.19 1.28
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets 4,238 5,155 2,620 3,049 3,904
Current liabilities 4,985 5,291 3,544 3,076 3,769
Liquidity Ratio
Adjusted current ratio2 0.85 0.97 0.74 0.99 1.04

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 4,238 ÷ 4,985 = 0.85

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 4,238 ÷ 4,985 = 0.85

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Reynolds American Inc. adjusted current ratio improved from 2014 to 2015 but then slightly deteriorated from 2015 to 2016 not reaching 2014 level.

Adjusted Net Profit Margin

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income 6,073 3,253 1,470 1,718 1,272
Net sales, includes excise taxes 16,846 14,884 12,096 11,966 12,227
Profitability Ratio
Net profit margin1 36.05% 21.86% 12.15% 14.36% 10.40%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 6,460 2,594 1,290 2,030 1,228
Net sales, includes excise taxes 16,846 14,884 12,096 11,966 12,227
Profitability Ratio
Adjusted net profit margin2 38.35% 17.43% 10.66% 16.96% 10.04%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

1 Net profit margin = 100 × Net income ÷ Net sales, includes excise taxes
= 100 × 6,073 ÷ 16,846 = 36.05%

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Net sales, includes excise taxes
= 100 × 6,460 ÷ 16,846 = 38.35%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Reynolds American Inc. adjusted net profit margin ratio improved from 2014 to 2015 and from 2015 to 2016.

Adjusted Total Asset Turnover

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net sales, includes excise taxes 16,846 14,884 12,096 11,966 12,227
Total assets 51,095 53,224 15,196 15,402 16,557
Activity Ratio
Total asset turnover1 0.33 0.28 0.80 0.78 0.74
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales, includes excise taxes 16,846 14,884 12,096 11,966 12,227
Adjusted total assets 51,095 52,192 14,484 14,784 15,649
Activity Ratio
Adjusted total asset turnover2 0.33 0.29 0.84 0.81 0.78

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

1 Total asset turnover = Net sales, includes excise taxes ÷ Total assets
= 16,846 ÷ 51,095 = 0.33

2 Adjusted total asset turnover = Net sales, includes excise taxes ÷ Adjusted total assets
= 16,846 ÷ 51,095 = 0.33

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Reynolds American Inc. adjusted total asset turnover ratio deteriorated from 2014 to 2015 but then slightly improved from 2015 to 2016.

Adjusted Financial Leverage

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Total assets 51,095 53,224 15,196 15,402 16,557
Shareholders’ equity 21,711 18,252 4,522 5,167 5,257
Solvency Ratio
Financial leverage1 2.35 2.92 3.36 2.98 3.15
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets 51,095 52,192 14,484 14,784 15,649
Adjusted shareholders’ equity 31,318 27,456 4,193 5,207 4,810
Solvency Ratio
Adjusted financial leverage2 1.63 1.90 3.45 2.84 3.25

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= 51,095 ÷ 21,711 = 2.35

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= 51,095 ÷ 31,318 = 1.63

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Reynolds American Inc. adjusted financial leverage ratio decreased from 2014 to 2015 and from 2015 to 2016.

Adjusted Return on Equity (ROE)

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income 6,073 3,253 1,470 1,718 1,272
Shareholders’ equity 21,711 18,252 4,522 5,167 5,257
Profitability Ratio
ROE1 27.97% 17.82% 32.51% 33.25% 24.20%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 6,460 2,594 1,290 2,030 1,228
Adjusted shareholders’ equity 31,318 27,456 4,193 5,207 4,810
Profitability Ratio
Adjusted ROE2 20.63% 9.45% 30.77% 38.99% 25.53%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

1 ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × 6,073 ÷ 21,711 = 27.97%

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted shareholders’ equity
= 100 × 6,460 ÷ 31,318 = 20.63%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Reynolds American Inc. adjusted ROE deteriorated from 2014 to 2015 but then improved from 2015 to 2016 not reaching 2014 level.

Adjusted Return on Assets (ROA)

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income 6,073 3,253 1,470 1,718 1,272
Total assets 51,095 53,224 15,196 15,402 16,557
Profitability Ratio
ROA1 11.89% 6.11% 9.67% 11.15% 7.68%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 6,460 2,594 1,290 2,030 1,228
Adjusted total assets 51,095 52,192 14,484 14,784 15,649
Profitability Ratio
Adjusted ROA2 12.64% 4.97% 8.91% 13.73% 7.85%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 6,073 ÷ 51,095 = 11.89%

2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × 6,460 ÷ 51,095 = 12.64%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Reynolds American Inc. adjusted ROA deteriorated from 2014 to 2015 but then improved from 2015 to 2016 exceeding 2014 level.