Stock Analysis on Net
Stock Analysis on Net

Reynolds American Inc. (NYSE:RAI)

$22.49

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

Economic Value Added (EVA)

Microsoft Excel

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

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Economic Profit

Reynolds American Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2016 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Reynolds American Inc. economic profit decreased from 2014 to 2015 but then increased from 2015 to 2016 exceeding 2014 level.

Net Operating Profit after Taxes (NOPAT)

Reynolds American Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Net income
Deferred income tax expense (benefit)1
Increase (decrease) in LIFO reserve2
Increase (decrease) in deferred revenue, related party3
Increase (decrease) in equity equivalents4
Interest and debt expense
Interest expense, operating lease liability5
Adjusted interest and debt expense
Tax benefit of interest and debt expense6
Adjusted interest and debt expense, after taxes7
(Gain) loss on marketable securities
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income8
Investment income, after taxes9
(Income) loss from discontinued operations, net of tax10
Net operating profit after taxes (NOPAT)

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).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in LIFO reserve. See details »

3 Addition of increase (decrease) in deferred revenue, related party.

4 Addition of increase (decrease) in equity equivalents to net income.

5 2016 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

6 2016 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 35.00% =

7 Addition of after taxes interest expense to net income.

8 2016 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 35.00% =

9 Elimination of after taxes investment income.

10 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Reynolds American Inc. NOPAT increased from 2014 to 2015 and from 2015 to 2016.

Cash Operating Taxes

Reynolds American Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest and debt expense
Less: Tax imposed on investment income
Cash operating taxes

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
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Reynolds American Inc. cash operating taxes increased from 2014 to 2015 but then slightly decreased from 2015 to 2016.

Invested Capital

Reynolds American Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Current maturities of long-term debt
Long-term debt, less current maturities
Operating lease liability1
Total reported debt & leases
Shareholders’ equity
Net deferred tax (assets) liabilities2
LIFO allowance3
Deferred revenue, related party4
Equity equivalents5
Accumulated other comprehensive (income) loss, net of tax6
Adjusted shareholders’ equity
Construction-in-process7
Marketable securities8
Invested capital

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).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of LIFO reserve. See details »

4 Addition of deferred revenue, related party.

5 Addition of equity equivalents to shareholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction-in-process.

8 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Reynolds American Inc. invested capital increased from 2014 to 2015 but then slightly decreased from 2015 to 2016.

Cost of Capital

Reynolds American Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2016-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2015-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2014-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2013-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2012-12-31).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Reynolds American Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Altria Group Inc.
Coca-Cola Co.
PepsiCo Inc.
Philip Morris International Inc.

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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2016 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Reynolds American Inc. economic spread ratio deteriorated from 2014 to 2015 but then improved from 2015 to 2016 exceeding 2014 level.

Economic Profit Margin

Reynolds American Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Selected Financial Data (US$ in millions)
Economic profit1
 
Net sales, includes excise taxes
Add: Increase (decrease) in deferred revenue, related party
Adjusted net sales, includes excise taxes
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Altria Group Inc.
Coca-Cola Co.
PepsiCo Inc.
Philip Morris International Inc.

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).

1 Economic profit. See details »

2 2016 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales, includes excise taxes
= 100 × ÷ =

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Reynolds American Inc. economic profit margin deteriorated from 2014 to 2015 but then improved from 2015 to 2016 exceeding 2014 level.