Reynolds American Inc. (NYSE:RAI)

The financial data reveals several notable trends in intangible assets and goodwill over the analyzed periods.

Customer Lists

Values appear only for the last two years, remaining constant at 240 million US dollars, indicating either a recently recognized asset or previously unreported values that stabilized without change.

Contract Manufacturing Agreements

These assets consistently hold a steady value of 151 million US dollars throughout all reported years, suggesting no new agreements or impairments affecting this asset category during the period.

Trademarks (Finite-lived)

There is a gradual increase from 96 million in 2012 up to 124 million in 2016, reflecting either acquisitions or revaluations contributing to growth in trademark assets.

Other Intangibles

Reported only from 2014 onward at a stable 15 million US dollars, indicating either recognition of a new asset class or previously unrecorded intangibles now accounted for.

Finite-lived Intangible Assets, Gross

Shows a rising trend from 247 million in 2012 to a peak of 530 million in 2015 and 2016, more than doubling over four years, suggesting substantial additions or acquisitions of finite-lived intangible assets.

Accumulated Amortization

There is a steady increase in amortization from -214 million in 2012 to -271 million in 2016, representing ongoing valuation consumption of finite-lived assets, reflecting systematic amortization practices.

Finite-lived Intangible Assets, Net

This net figure rises modestly from 33 million in 2012 to 50 million in 2014, then surges to 282 million in 2015 before slightly declining to 259 million in 2016. This pattern indicates significant asset additions and amortization balance dynamics, with the 2015 spike likely due to acquisitions or reclassifications.

Trademarks (Indefinite-lived)

Consistent values around 2,300 million US dollars from 2012 to 2014, followed by a dramatic increase to nearly 29,100 million in 2015 and 2016, pointing to a major revaluation, acquisition, or a corporate event significantly enhancing this asset category.

Other Indefinite-lived Intangibles

Remain fairly stable, around 104 million in early years, decreasing slightly to 87 million by 2015 and 2016, indicating minor adjustments or impairments.

Indefinite-lived Intangible Assets Total

Shows a similar dramatic increase aligned with trademarks, rising from approximately 2,400 million to over 29,100 million between 2014 and 2015, reinforcing the notion of a significant corporate development impacting this asset class.

Total Intangible Assets

Remains relatively flat around 2,400 million until 2014, then experiences a substantial jump to nearly 29,500 million by 2015, maintaining that level into 2016, consistent with the trends observed in indefinite-lived intangibles.

Goodwill

Remains stable at roughly 8,000 million US dollars through 2014, then roughly doubles to close to 16,000 million by 2015 and 2016, evidencing a major acquisition or merger event leading to goodwill recognition.

Intangible Assets and Goodwill Combined

The total increases steadily around 10,400 million from 2012 to 2014 before experiencing a sharp rise to over 45,400 million in 2015 and 2016. This significant growth aligns with the observed increases in intangible assets and goodwill, pointing to major corporate transactions during this period.

Overall, the data suggests the company underwent substantial changes around 2015, likely due to acquisitions or mergers, resulting in large increases in intangible assets, particularly indefinite-lived assets and goodwill. Prior to 2015, asset values remain relatively stable with gradual increases and standard amortization, while post-2015 data reflect a step change in asset base magnitude.

The financial data reveals significant shifts over the five-year period, particularly between 2014 and 2015, indicating notable changes in asset and equity values both in reported and goodwill adjusted terms.

Total Assets

The reported total assets show a gradual decline from US$16,557 million in 2012 to US$15,196 million in 2014, followed by a sharp increase to US$53,224 million in 2015 and a slight decrease to US$51,095 million in 2016. This pattern suggests a major acquisition or revaluation event occurring between 2014 and 2015. Adjusted total assets, which exclude goodwill, also decrease from US$8,546 million in 2012 to US$7,180 million in 2014, then sharply rise to US$37,231 million in 2015 before dipping slightly to US$35,103 million in 2016. The adjusted figures portray a similar trend but at a much lower scale, reflecting the exclusion of intangible assets like goodwill that significantly impact the reported assets.

Shareholders’ Equity

Reported shareholders’ equity remains relatively stable and slightly declining from US$5,257 million in 2012 to US$4,522 million in 2014, before experiencing a sharp rise to US$18,252 million in 2015 and further to US$21,711 million in 2016. The surge corresponds with the increase in reported total assets, confirming a substantial equity infusion or acquisition. Conversely, adjusted shareholders’ equity, which excludes goodwill, is notably negative from 2012 through 2014, trending from -US$2,754 million to -US$3,494 million, implying an impairment or excessive allocation of intangible assets. However, it turns positive in 2015 at US$2,259 million and further improves to US$5,719 million in 2016, indicating a recovery or adjustment in the asset base and equity composition post-acquisition.

Overall Trends and Insights

The data reflects a major transformative event around 2015, likely a significant acquisition that dramatically inflated reported total assets and shareholders’ equity due to goodwill and other intangible asset recordings. Prior to this event, both reported and adjusted figures show a declining trend in assets and equity, with adjusted equity consistently negative, possibly indicating underlying asset quality issues or previous impairment losses. Post-2015, the improvements in adjusted figures suggest a strengthening balance sheet after adjustments for goodwill, enhancing the financial fundamentals. This dual presentation underscores the importance of considering both reported and adjusted metrics for a comprehensive assessment of financial health and asset quality.

Total Asset Turnover

The reported total asset turnover showed a gradual increase from 0.74 in 2012 to a peak of 0.80 in 2014, followed by a sharp decline to 0.28 in 2015, and a slight recovery to 0.33 in 2016. The adjusted total asset turnover mirrored this trend but at significantly higher levels, starting at 1.43 in 2012 and reaching 1.68 in 2014, then decreasing markedly to 0.40 in 2015 and rising slightly to 0.48 in 2016. This indicates that when goodwill adjustments are considered, the company's asset efficiency is substantially higher but subject to the same volatility and reduction in asset turnover in the latter years.

Financial Leverage

Reported financial leverage ratios fluctuated moderately, with a high of 3.36 in 2014, declining thereafter to 2.35 by 2016. Adjusted financial leverage data is only available for 2015 and 2016, showing an exceptionally high leverage of 16.48 in 2015 and a significant decrease to 6.14 in 2016. This suggests that excluding goodwill impacts reveals much higher leverage, but also a strong reduction within the last reported year, implying altered capital structure or balance sheet adjustments post adjustment.

Return on Equity (ROE)

The reported ROE rose from 24.2% in 2012 to a peak of 33.25% in 2013, then stabilized near 32.51% in 2014 before dropping sharply to 17.82% in 2015 and partially recovering to 27.97% in 2016. The adjusted ROE figures, available only for 2015 and 2016, are substantially higher, at 144% and 106.19%, respectively, indicating that removing goodwill effects reveals dramatically enhanced equity returns, although these still declined over the two-year span.

Return on Assets (ROA)

Reported ROA showed a strong increase from 7.68% in 2012 to 11.15% in 2013, then a decline to 6.11% in 2015 followed by a rebound to 11.89% in 2016. Adjusted ROA values were consistently higher than reported figures across all years with values starting at 14.88% in 2012, peaking at 23.24% in 2013, then decreasing to 8.74% in 2015 and improving again to 17.3% in 2016. This pattern demonstrates that goodwill adjustments uncover higher asset profitability but still reflect significant volatility.

The analysis of the annual financial data reveals notable trends in both reported and goodwill adjusted measures over the period from 2012 to 2016.

Total Assets

Reported total assets exhibit a slight decline from 16,557 million US dollars in 2012 to 15,196 million in 2014, followed by a sharp increase to 53,224 million in 2015, before decreasing again to 51,095 million in 2016. In contrast, adjusted total assets show a consistent downward trend from 8,546 million in 2012 to 7,180 million in 2014, then a substantial rise to 37,231 million in 2015, and a moderate decrease to 35,103 million in 2016.

Total Asset Turnover

Reported total asset turnover ratios slightly rise from 0.74 in 2012 to 0.80 in 2014, indicating improving efficiency in utilizing assets to generate revenue. However, a significant drop to 0.28 in 2015 indicates a drastic reduction in asset efficiency, recovering modestly to 0.33 in 2016. Adjusted total asset turnover ratios follow a similar pattern but at higher levels, increasing from 1.43 in 2012 to 1.68 in 2014, then falling sharply to 0.40 in 2015, with a small recovery to 0.48 in 2016.

The sudden increases in total assets recorded in 2015 for both reported and adjusted figures suggest a possible acquisition or reclassification event impacting the reported asset base. Correspondingly, the sharp declines in asset turnover ratios in 2015 and 2016 indicate that the additional assets were not immediately translated into proportional revenue generation, reflecting potential integration challenges or underutilization.

Overall, the adjusted figures consistently show higher turnover ratios than the reported ones, implying that adjustments, likely related to goodwill, reveal a more efficient asset base when excluding intangible or non-cash assets. The trend of declining turnover after 2014 highlights a significant shift in operational efficiency possibly linked to the changes in asset composition.

The analysis of the financial data over the five-year period reveals several noteworthy trends regarding the reported and goodwill-adjusted figures.

Total Assets

Reported total assets exhibited a slight decline from 16,557 million USD in 2012 to 15,196 million USD in 2014, followed by a sharp increase in 2015 to 53,224 million USD, then a small decrease to 51,095 million USD in 2016.

Adjusted total assets, which exclude goodwill, show a more pronounced decrease from 8,546 million USD in 2012 to 7,180 million USD in 2014. Similar to reported assets, there is a significant jump in 2015 to 37,231 million USD, followed by a decline to 35,103 million USD in 2016. Overall, adjusted assets are consistently lower than reported assets due to the exclusion of goodwill.

Shareholders’ Equity

Reported shareholders’ equity declined from 5,257 million USD in 2012 to 4,522 million USD in 2014, then sharply increased to 18,252 million USD in 2015 and further to 21,711 million USD in 2016. This suggests a considerable equity infusion or valuation event during 2015.

In contrast, adjusted shareholders’ equity was negative from 2012 through 2014, declining further from -2,754 million USD to -3,494 million USD, indicative of liabilities exceeding assets when goodwill is excluded. However, the adjusted equity turns positive in 2015 at 2,259 million USD and improves substantially to 5,719 million USD in 2016, reflecting an improvement in core equity value without goodwill.

Financial Leverage Ratios

Reported financial leverage ratios show moderate fluctuation, starting at 3.15 in 2012, slightly decreasing to 2.98 in 2013, increasing again to 3.36 in 2014, then declining to 2.35 by 2016. This suggests some variation in the relationship between total assets and equity but an overall trend towards reducing leverage in the last observed year.

Adjusted financial leverage data is only available for 2015 and 2016, with a notably high ratio of 16.48 in 2015, dropping substantially to 6.14 in 2016. The elevated leverage in 2015 indicates significantly greater reliance on debt or liabilities relative to equity when goodwill is excluded, with a marked improvement in the following year.

In summary, the period shows a significant restructuring or transaction event around 2015, which heavily impacted total assets and equity values. Excluding goodwill reveals more conservative and, at times, negative equity positions in earlier years, with notable recovery in the latter years. Financial leverage trends similarly indicate initial high leverage in adjusted terms, moderating towards the end of the period.

The financial data reveals significant fluctuations in shareholders' equity and return on equity (ROE) over the five-year period from 2012 to 2016. Both reported and adjusted figures show contrasting trends that merit close examination.

Shareholders' Equity Trends

Reported shareholders’ equity experienced a decline from 2012 to 2014, decreasing from $5,257 million to $4,522 million. This downward trend reversed sharply in 2015 and 2016, with equity rising markedly to $18,252 million and then to $21,711 million, respectively. In contrast, adjusted shareholders’ equity values were negative during the initial years, moving from -$2,754 million in 2012 to -$3,494 million in 2014, indicating a deficit when adjustments—likely for goodwill—are considered. From 2015 onward, adjusted equity became positive, increasing first to $2,259 million and then to $5,719 million in 2016, reflecting substantial improvement in the company's net asset position after adjustments.

Return on Equity (ROE) Analysis

Reported ROE started high at 24.2% in 2012 and increased to a peak of 33.25% in 2013, followed by a slight decline to 32.51% in 2014. A notable dip occurred in 2015, dropping to 17.82%, before rebounding to 27.97% in 2016. Adjusted ROE figures are incomplete for the earlier years but show extremely elevated values in 2015 and 2016, at 144% and 106.19%, respectively. These very high adjusted ROE figures suggest that removing the effect of goodwill adjustments greatly enhanced the perceived profitability relative to equity during this period.

Insights and Interpretations

The initial decline in both reported and adjusted shareholders’ equity may indicate challenges in capital retention or losses affecting net assets, particularly when adjusting for goodwill. The sharp increase post-2014 suggests either capital infusions, improved earnings retention, or revaluation effects. The negative adjusted equity in early years implies that goodwill or other intangible asset impairments might have significantly affected the company's net asset calculation.

The divergence between reported and adjusted ROE in the last two years highlights the impact of accounting adjustments on performance metrics, emphasizing the importance of considering these adjustments for a more accurate view of shareholder returns. The very high adjusted ROE figures could also be indicative of a relatively low adjusted equity base, amplifying the ratio.

The financial data exhibits notable trends in assets and returns over the five-year period. Total reported assets initially experienced a gradual decline from 16,557 million US dollars in 2012 to 15,196 million in 2014, followed by a significant increase to 53,224 million in 2015 and a slight decrease to 51,095 million in 2016. Adjusted total assets, which exclude goodwill, show a similar pattern, decreasing from 8,546 million in 2012 to 7,180 million in 2014 before sharply rising to 37,231 million in 2015 and then slightly declining to 35,103 million in 2016.

Regarding profitability as measured by return on assets (ROA), the reported ROA started at 7.68% in 2012, improved to 11.15% in 2013, slightly decreased to 9.67% in 2014, dipped notably to 6.11% in 2015, and rebounded to 11.89% in 2016. The adjusted ROA, which accounts for the removal of goodwill effects, follows a higher and more volatile trajectory, beginning at 14.88% in 2012, climbing markedly to 23.24% in 2013, declining to 20.47% in 2014, decreasing more substantially to 8.74% in 2015, and recovering to 17.3% in 2016.

Total Assets Trends

The initial steady decrease in both reported and adjusted total assets from 2012 to 2014 may indicate asset divestitures or revaluations prior to a major acquisition or restructuring that occurred in 2015, reflected by the sharp asset increase that year. The subsequent slight decline in 2016 suggests stabilization after this growth event.

Return on Assets Analysis

Reported ROA shows variability but maintains a positive range overall, indicating profitability remained solid despite large asset base changes. The adjusted ROA offers a clearer perspective of asset efficiency excluding goodwill, revealing higher return percentages that are more sensitive to operational fluctuations, especially noticeable with a dip in 2015 coinciding with the asset surge.

Goodwill Impact

The difference between reported and adjusted totals and ROA values highlights the substantial impact of goodwill on the balance sheet and profitability metrics. Adjustment for goodwill provides insight into the core asset performance, suggesting that goodwill increases in 2015 may have inflated asset values and diluted returns temporarily.

Performance Implications

Overall, the data indicates the company underwent significant structural changes impacting asset base and profitability. The recovery in adjusted ROA in 2016 after a low point in 2015 signals improved operational efficiency or integration success post-acquisition or restructuring, while the stabilization of asset values suggests a new equilibrium was reached.