Analysis of Investments
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Reynolds American Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Debt
- Aggregate Accruals
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Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Reynolds American Inc., adjustment to net income
US$ in millions
| 12 months ended: | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | |
|---|---|---|---|---|---|---|
| Net income (as reported) | ||||||
| Add: Long-term investments, net of tax | ||||||
| Net income (adjusted) |
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).
The financial data reveals a significant upward trend in both reported net income and adjusted net income over the five-year period from 2012 to 2016. This trend indicates an overall improvement in profitability.
- Reported Net Income
- In 2012, the reported net income was 1,272 million US dollars. It increased moderately to 1,718 million US dollars in 2013, marking a roughly 35% growth. However, in 2014, there was a decline to 1,470 million US dollars, representing a decrease of about 14.4% from the previous year. This decline was followed by a notable recovery and surge, with reported net income reaching 3,253 million US dollars in 2015. The upward trend accelerated further in 2016, culminating in a reported net income of 6,073 million US dollars, nearly doubling the previous year's amount.
- Adjusted Net Income
- Adjusted net income values closely parallel the reported net income figures, starting at 1,279 million US dollars in 2012 and increasing to 1,723 million in 2013. The slight dip in 2014 to 1,472 million US dollars mirrors the drop in reported net income. The adjusted net income then rises substantially to 3,253 million in 2015 and continues its rapid growth to reach 6,087 million US dollars in 2016. The close alignment between adjusted and reported net income suggests limited non-recurring or extraordinary adjustments affecting net income during this period.
Overall, the financial results demonstrate strong growth in profitability, particularly from 2014 onwards. The data suggests effective management or strategic initiatives may have been implemented post-2014 to drive earnings higher. The consistent growth in both reported and adjusted net income reflects stable operational performance and possibly improved market conditions or cost efficiencies.
Adjusted Profitability Ratios: Mark to Market Available-for-sale Securities (Summary)
Reynolds American Inc., adjusted profitability ratios
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).
- Net Profit Margin Trends
- The reported net profit margin experienced a general upward trend during the analyzed period, starting at 10.4% in 2012 and rising sharply to 36.05% by 2016. A notable increase occurred between 2014 and 2015, where the margin jumped from 12.15% to 21.86%, followed by an additional significant rise in 2016. The adjusted net profit margin closely mirrors the reported figures, indicating consistency between reported and adjusted profitability metrics.
- Return on Equity (ROE) Patterns
- Return on equity displayed variability over the years. It peaked at 33.25% in 2013 before slightly declining to 32.51% in 2014. However, a sharp drop occurred in 2015 to 17.82%, representing the lowest point within the timeframe. ROE rebounded somewhat in 2016, reaching 27.97%. Adjusted ROE values track closely with reported figures, reflecting minimal impact from adjustments on this metric.
- Return on Assets (ROA) Analysis
- Return on assets showed fluctuating performance. It increased from 7.68% in 2012 to 11.15% in 2013, then declined steadily to 6.11% in 2015. A recovery occurred in 2016, with ROA climbing to 11.89%. Adjusted ROA figures align tightly with reported values, suggesting adjustments have little effect on asset efficiency ratios.
- Comparative Notes on Adjusted vs. Reported Metrics
- Across all examined profitability and efficiency ratios, the adjusted measures are consistently marginally higher than the reported figures but generally follow identical trends. This suggests that the core financial performance trends for the company remain stable after accounting for investment adjustments.
Reynolds American Inc., Profitability Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
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 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Net sales, includes excise taxes
= 100 × ÷ =
- Net Income Trends
- The reported net income demonstrates a general upward trajectory from 2012 to 2016. Starting at 1,272 million US dollars in 2012, net income increased to 1,718 million in 2013, followed by a slight decline to 1,470 million in 2014. Thereafter, a significant rise occurred reaching 3,253 million in 2015 and further increasing sharply to 6,073 million in 2016. The adjusted net income closely parallels the reported figures, with slightly higher values, indicating consistent adjustments that do not materially alter the overall trend.
- Net Profit Margin Analysis
- The reported net profit margin shows a pattern that mirrors net income growth, beginning at 10.4% in 2012. This margin improved markedly to 14.36% in 2013, decreased in 2014 to 12.15%, and then experienced a sharp increase to 21.86% in 2015. The margin surged to 36.05% in 2016, suggesting improved profitability or efficiency. Adjusted net profit margins are marginally higher but follow the same trend, indicating that adjustments have a minimal impact on margin representation.
- Overall Financial Performance Insights
- The data reflects a period of strong financial performance improvement, particularly evident in the latter two years. Both reported and adjusted figures indicate a significant enhancement in profitability and net income after 2014. The convergence of reported and adjusted metrics suggests transparent reporting with minor adjustments for non-recurring or special items. This trend may be indicative of successful operational improvements, cost control measures, or favorable market conditions impacting revenue and profitability positively during the period analyzed.
Adjusted Return on Equity (ROE)
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 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Shareholders’ equity
= 100 × ÷ =
The financial data indicates significant fluctuations over the five-year period ending in 2016 in both net income and return on equity (ROE) for the company.
- Net Income Trends
- Reported net income showed a general upward trend, starting at 1,272 million US dollars in 2012 and increasing to 6,073 million US dollars by 2016. There was a moderate increase from 2012 to 2013 followed by a slight decline in 2014. A sharp rise occurred in 2015, more than doubling from the previous year's total, which continued strongly into 2016, nearly doubling again.
- Adjusted net income closely mirrors the reported net income across all years, suggesting that adjustments made for investment purposes had minimal impact on the net income figures. The adjusted net income values are marginally higher than the reported figures but follow the identical trend pattern.
- Return on Equity (ROE) Patterns
- Both reported and adjusted ROE present a similar trend to net income. The ROE showed an initial increase from 24.2% in 2012 to a peak of approximately 33.3% in 2013, followed by a slight decrease in 2014. A pronounced decline in ROE occurred in 2015, dropping to about 17.8%, which contrasts the strong net income growth for the same year. In 2016, ROE recovered significantly to roughly 28%.
- The close alignment of reported and adjusted ROE values suggests that the adjustments applied did not meaningfully affect the evaluation of equity profitability.
- Insights
- The pronounced increase in net income from 2014 onwards reflects an improvement in the company’s profitability, though the 2015 ROE dip could imply changes in equity base or other capital structure factors affecting returns that year.
- The consistent relationship between reported and adjusted figures indicates reliability and comparability in the company’s financial reporting practices over the analyzed period.
Adjusted Return on Assets (ROA)
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 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × ÷ =
The financial data reveals a general upward trend in both reported and adjusted net income from 2012 to 2016. Reported net income increased from 1,272 million US dollars in 2012 to 6,073 million US dollars in 2016, demonstrating a significant growth over the five-year period. The adjusted net income closely mirrors this trajectory, starting at 1,279 million US dollars in 2012 and rising to 6,087 million US dollars by 2016.
The return on assets (ROA) figures, both reported and adjusted, exhibit some volatility throughout the period. Initially, ROA improved from 7.68% reported in 2012 to a peak of 11.15% in 2013, before declining to 6.11% in 2015. However, there is a noticeable rebound in 2016, with ROA rising sharply to 11.89% in reported terms and 11.91% when adjusted.
- Net Income Trends
- Both reported and adjusted net incomes showed consistent growth, with a marked acceleration from 2014 to 2016. The steep increase in net income during 2015 and 2016 indicates enhanced profitability, possibly due to improved operational performance or other favorable financial factors.
- Return on Assets Variability
- ROA peaked in 2013 but subsequently declined through 2015, suggesting a decrease in efficiency or asset utilization during that period. The strong recovery in 2016 implies a significant improvement in asset profitability, restoring the efficiency to levels above those seen earlier in the period.
- Comparison of Reported vs. Adjusted Figures
- The adjusted figures consistently track very closely with the reported ones, indicating minimal impact from adjustments on net income and ROA. This consistency reinforces the reliability of the reported results for financial analysis.
In summary, the data indicates a company that experienced growth in profitability with some fluctuations in asset efficiency, ultimately achieving strong financial performance by the end of 2016. The improvements in both net income and ROA suggest a positive trajectory in operational effectiveness and financial health.