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)	6,073)	3,253)	1,470)	1,718)	1,272)
Add: Long-term investments, net of tax	14)	—)	2)	5)	7)
Net income (adjusted)	6,087)	3,253)	1,472)	1,723)	1,279)

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Reynolds American Inc., adjusted profitability ratios

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Net Profit Margin
Reported net profit margin	36.05%	21.86%	12.15%	14.36%	10.40%
Adjusted net profit margin	36.13%	21.86%	12.17%	14.40%	10.46%
Return on Equity (ROE)
Reported ROE	27.97%	17.82%	32.51%	33.25%	24.20%
Adjusted ROE	28.04%	17.82%	32.55%	33.35%	24.33%
Return on Assets (ROA)
Reported ROA	11.89%	6.11%	9.67%	11.15%	7.68%
Adjusted ROA	11.91%	6.11%	9.69%	11.19%	7.72%

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Reynolds American Inc. adjusted net profit margin ratio improved from 2014 to 2015 and from 2015 to 2016.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by 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 total assets.	Reynolds American Inc. adjusted ROA deteriorated from 2014 to 2015 but then improved from 2015 to 2016 exceeding 2014 level.

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	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: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income	6,087)	3,253)	1,472)	1,723)	1,279)
Net sales, includes excise taxes	16,846)	14,884)	12,096)	11,966)	12,227)
Profitability Ratio
Adjusted net profit margin²	36.13%	21.86%	12.17%	14.40%	10.46%

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 × 6,087 ÷ 16,846 = 36.13%

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

	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: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income	6,087)	3,253)	1,472)	1,723)	1,279)
Shareholders’ equity	21,711)	18,252)	4,522)	5,167)	5,257)
Profitability Ratio
Adjusted ROE²	28.04%	17.82%	32.55%	33.35%	24.33%

2016 Calculations

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

² Adjusted ROE = 100 × Adjusted net income ÷ Shareholders’ equity
= 100 × 6,087 ÷ 21,711 = 28.04%

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

	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: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income	6,087)	3,253)	1,472)	1,723)	1,279)
Total assets	51,095)	53,224)	15,196)	15,402)	16,557)
Profitability Ratio
Adjusted ROA²	11.91%	6.11%	9.69%	11.19%	7.72%

2016 Calculations

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

² Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × 6,087 ÷ 51,095 = 11.91%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by 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. (NYSE:RAI)

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