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 Operating Leases

Microsoft Excel

An operating lease is treated like a rental contract. Neither the leased asset nor the associated liability is reported on the lessee balance sheet, but the rights may be very similar to the rights of an owner. The lessee only records the lease payments as a rental expense in income statement.


Present Value of Future Operating Lease Payments (before Adoption of FASB Topic 842)

Reynolds American Inc., future operating lease payments (before adoption of FASB Topic 842)

US$ in millions

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Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Total undiscounted future operating lease payments 27 28 30 68 65
Discount rate1 5.00% 4.60% 4.50% 4.50% 4.70%
 
Total present value of future operating lease payments 25 26 28 61 58

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 Weighted-average interest rate for Reynolds American Inc. debt

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.00%
2017 20 2017 20 19
2018 3 2018 3 3
2019 2 2019 2 2
2020 1 2020 1 1
2021 1 2021 1 1
Total: 27 27 25

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

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 4.60%
2016 19 2016 19 18
2017 3 2017 3 3
2018 2 2018 2 2
2019 2 2019 2 2
2020 2 2020 2 2
Total: 28 28 26

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

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 4.50%
2015 19 2015 19 18
2016 3 2016 3 3
2017 3 2017 3 3
2018 2 2018 2 2
2019 2 2019 2 2
2020 1 2020 1 1
Total: 30 30 28

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

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 4.50%
2014 22 2014 22 21
2015 17 2015 17 16
2016 14 2016 14 12
2017 9 2017 9 8
2018 5 2018 5 4
2019 1 2019 1 1
Total: 68 68 61

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

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 4.70%
2013 20 2013 20 19
2014 18 2014 18 16
2015 14 2015 14 12
2016 9 2016 9 7
2017 4 2017 4 3
Total: 65 65 58

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


Adjustments to Financial Statements for Operating Leases

Reynolds American Inc., adjustments to financial statements

US$ in millions

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Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Adjustment to Total Assets
Total assets (as reported) 51,095 53,224 15,196 15,402 16,557
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1 25 26 28 61 58
Total assets (adjusted) 51,120 53,250 15,224 15,463 16,615
Adjustment to Total Debt
Total debt (as reported) 13,165 17,447 5,083 5,099 5,095
Add: Operating lease liability (before adoption of FASB Topic 842)2 25 26 28 61 58
Total debt (adjusted) 13,190 17,473 5,111 5,160 5,153

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, 2 Equal to total present value of future operating lease payments.


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


Adjusted Financial Ratios for Operating Leases (Summary)

Reynolds American Inc., adjusted financial ratios

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Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Total Asset Turnover1
Reported total asset turnover 0.33 0.28 0.80 0.78 0.74
Adjusted total asset turnover 0.33 0.28 0.79 0.77 0.74
Debt to Equity2
Reported debt to equity 0.61 0.96 1.12 0.99 0.97
Adjusted debt to equity 0.61 0.96 1.13 1.00 0.98
Return on Assets3 (ROA)
Reported ROA 11.89% 6.11% 9.67% 11.15% 7.68%
Adjusted ROA 11.88% 6.11% 9.66% 11.11% 7.66%

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 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 debt to equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Reynolds American Inc. adjusted debt to equity ratio improved from 2014 to 2015 and from 2015 to 2016.
Adjusted ROA A profitability ratio calculated as 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 Total Asset Turnover

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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 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 Operating Leases
Selected Financial Data (US$ in millions)
Net sales, includes excise taxes 16,846 14,884 12,096 11,966 12,227
Adjusted total assets 51,120 53,250 15,224 15,463 16,615
Activity Ratio
Adjusted total asset turnover2 0.33 0.28 0.79 0.77 0.74

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 ÷ 51,120 = 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 Debt to Equity

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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)
Total debt 13,165 17,447 5,083 5,099 5,095
Shareholders’ equity 21,711 18,252 4,522 5,167 5,257
Solvency Ratio
Debt to equity1 0.61 0.96 1.12 0.99 0.97
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Adjusted total debt 13,190 17,473 5,111 5,160 5,153
Shareholders’ equity 21,711 18,252 4,522 5,167 5,257
Solvency Ratio
Adjusted debt to equity2 0.61 0.96 1.13 1.00 0.98

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 Debt to equity = Total debt ÷ Shareholders’ equity
= 13,165 ÷ 21,711 = 0.61

2 Adjusted debt to equity = Adjusted total debt ÷ Shareholders’ equity
= 13,190 ÷ 21,711 = 0.61

Solvency ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Reynolds American Inc. adjusted debt-to-equity ratio improved from 2014 to 2015 and from 2015 to 2016.

Adjusted Return on Assets (ROA)

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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
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 Operating Leases
Selected Financial Data (US$ in millions)
Net income 6,073 3,253 1,470 1,718 1,272
Adjusted total assets 51,120 53,250 15,224 15,463 16,615
Profitability Ratio
Adjusted ROA2 11.88% 6.11% 9.66% 11.11% 7.66%

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 × Net income ÷ Adjusted total assets
= 100 × 6,073 ÷ 51,120 = 11.88%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as 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.