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Reynolds American Inc. (NYSE:RAI)

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

Common-Size Income Statement

Reynolds American Inc., common-size consolidated income statement

Microsoft Excel
12 months ended: Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012
Net sales, includes excise taxes 98.66 98.26 97.43 97.18 97.20
Net sales, related party 1.34 1.74 2.57 2.82 2.80
Net sales, includes excise taxes 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of products sold, excludes excise taxes -28.74 -31.50 -33.55 -30.74 -35.34
Excise taxes -25.78 -28.28 -29.97 -31.17 -32.08
Gross profit 45.48% 40.22% 36.48% 38.09% 32.58%
Selling, general and administrative expenses -11.46 -14.10 -15.47 -11.61 -12.02
Gain on divestitures 28.86 21.37 0.00 0.00 0.00
Amortization expense -0.14 -0.12 -0.09 -0.04 -0.17
Asset impairment and exit charges 0.00 -0.67 0.00 0.00 0.00
Trademark and other intangible asset impairment charges 0.00 0.00 0.00 -0.27 -1.06
Restructuring charge 0.00 0.00 0.00 0.00 -1.22
Operating income 62.74% 46.71% 20.92% 26.17% 18.11%
Interest and debt expense -3.72 -3.83 -2.36 -2.16 -1.91
Interest income 0.05 0.04 0.02 0.04 0.06
Other income (expense), net -1.54 -0.03 0.12 -1.14 -0.28
Income from continuing operations before income taxes 57.53% 42.89% 18.70% 22.91% 15.97%
Provision for income taxes -21.48 -21.04 -6.75 -8.55 -5.57
Income from continuing operations 36.05% 21.86% 11.95% 14.36% 10.40%
Income from discontinued operations, net of tax 0.00 0.00 0.21 0.00 0.00
Net income 36.05% 21.86% 12.15% 14.36% 10.40%

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).

Between 2012 and 2016, a significant expansion in profitability is observed, characterized by a steady increase in gross profit margins and a dramatic rise in net income as a percentage of net sales. The financial trajectory indicates a transition from a stable operational base to a period of high abnormal returns driven by strategic divestitures.

Gross Profitability and Cost Structure
Gross profit as a percentage of net sales grew consistently from 32.58% in 2012 to 45.48% in 2016. This expansion was supported by a reduction in the cost of products sold, which decreased from 35.34% to 28.74% of net sales over the period. Concurrently, excise taxes as a percentage of net sales declined from 32.08% to 25.78%, contributing significantly to the overall margin improvement.
Operating Income and Non-Recurring Gains
Operating income showed a substantial upward trend, rising from 18.11% in 2012 to 62.74% in 2016. While selling, general, and administrative expenses remained relatively stable—fluctuating between 11.46% and 15.47%—the primary driver for the surge in operating income was the introduction of gains on divestitures. These gains appeared in 2015 at 21.37% and increased to 28.86% in 2016, fundamentally altering the operating profit profile.
Financial Expenses and Tax Provisions
Interest and debt expenses exhibited an increasing trend, rising from 1.91% of net sales in 2012 to 3.72% in 2016, peaking at 3.83% in 2015. The provision for income taxes also increased sharply in the latter two years, jumping from 6.75% in 2014 to 21.04% in 2015 and 21.48% in 2016, reflecting the higher taxable income resulting from divestiture gains.
Net Income Performance
Net income as a percentage of net sales grew from 10.40% in 2012 to 36.05% in 2016. This growth was non-linear, with a moderate increase between 2012 and 2014, followed by a sharp acceleration in 2015 and 2016. This acceleration aligns with the realization of divestiture gains, which offset the increases in interest expenses and tax provisions.

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