Common-Size Income Statement
Quarterly Data
Reynolds American Inc., common-size consolidated income statement (quarterly data)
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
The financial performance over the analyzed period demonstrates a significant expansion in gross and operating margins, characterized by a reduction in the relative cost of goods and excise tax burdens. Profitability shows a steady baseline increase, punctuated by substantial non-recurring gains from divestitures.
- Gross Margin Evolution
- Gross profit margins exhibited a strong upward trend, rising from approximately 33% in early 2012 to a peak of 46.56% by September 2016. This improvement was driven by two primary factors: a gradual decrease in the cost of products sold (excluding excise taxes), which declined from roughly 34% to 30%, and a consistent reduction in excise taxes as a percentage of net sales, falling from over 32% in 2012 to approximately 25% by early 2017.
- Operating Expense and Efficiency
- Selling, general, and administrative expenses remained relatively stable, typically fluctuating between 10% and 12% of net sales. However, periodic spikes were observed in December 2012 (17.53%) and December 2014 (23.25%), suggesting quarterly cyclicality or specific year-end adjustments. Core operating income, excluding extraordinary gains, improved from the 17% to 23% range in 2012 to a consistent 33% to 35% range by late 2016.
- Impact of Non-Recurring Items
- Significant volatility in operating and net income was caused by substantial gains on divestitures. Most notably, in June 2015 and March 2016, these gains represented 103.22% and 123.16% of net sales, respectively. These events caused operating income to surge to 128.73% and 155.61% during those specific quarters, though these figures do not reflect the company's sustainable operational performance.
- Financial Costs and Net Profitability
- Interest and debt expenses showed a gradual increase over the period, rising from an average of 2% of net sales in 2012 to approximately 3.8% by March 2017. Despite this increase in financing costs, the underlying net income margin improved significantly. Excluding the impact of divestiture spikes, the net income margin rose from a baseline of approximately 9% to 14% in 2012 to a more stable 19% to 20% by the end of the analyzed period.
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