Name: Reynolds American Inc. (NYSE:RAI) | Income Statement
Creator: Stock Analysis on Net

Income Statement

The income statement presents information on the financial results of a company business activities over a period of time. The income statement communicates how much revenue the company generated during a period and what cost it incurred in connection with generating that revenue.

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Reynolds American Inc., consolidated income statement

US$ in millions

12 months ended:	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Net sales, includes excise taxes	16,620)	14,625)	11,785)	11,629)	11,885)
Net sales, related party	226)	259)	311)	337)	342)
Net sales, includes excise taxes	16,846)	14,884)	12,096)	11,966)	12,227)
Cost of products sold, excludes excise taxes	(4,841)	(4,688)	(4,058)	(3,678)	(4,321)
Excise taxes	(4,343)	(4,209)	(3,625)	(3,730)	(3,923)
Gross profit	7,662)	5,987)	4,413)	4,558)	3,983)
Selling, general and administrative expenses	(1,931)	(2,098)	(1,871)	(1,389)	(1,470)
Gain on divestitures	4,861)	3,181)	—)	—)	—)
Amortization expense	(23)	(18)	(11)	(5)	(21)
Asset impairment and exit charges	—)	(99)	—)	—)	—)
Trademark and other intangible asset impairment charges	—)	—)	—)	(32)	(129)
Restructuring charge	—)	—)	—)	—)	(149)
Operating income	10,569)	6,953)	2,531)	3,132)	2,214)
Interest and debt expense	(626)	(570)	(286)	(259)	(234)
Interest income	8)	6)	3)	5)	7)
Other income (expense), net	(260)	(5)	14)	(137)	(34)
Income from continuing operations before income taxes	9,691)	6,384)	2,262)	2,741)	1,953)
Provision for income taxes	(3,618)	(3,131)	(817)	(1,023)	(681)
Income from continuing operations	6,073)	3,253)	1,445)	1,718)	1,272)
Income from discontinued operations, net of tax	—)	—)	25)	—)	—)
Net income	6,073)	3,253)	1,470)	1,718)	1,272)

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).

The financial performance between 2012 and 2016 is characterized by a period of relative stability followed by an aggressive expansion in both top-line revenue and bottom-line profitability. Total net sales remained steady from 2012 to 2014 before experiencing a significant upward trajectory in 2015 and 2016, culminating in a peak of 16,846 million in the final year of the period.

Revenue and Gross Margin Trends: Total net sales grew by approximately 38% between 2012 and 2016. This growth is accompanied by a substantial increase in gross profit, which rose from 3,983 million in 2012 to 7,662 million in 2016. The cost of products sold, excluding excise taxes, grew at a much slower rate than revenue, indicating an improvement in production efficiency or pricing power over the five-year period.
Operating Income and Extraordinary Gains: Operating income exhibited a dramatic increase, rising from 2,214 million in 2012 to 10,569 million in 2016. This growth was not solely organic; the figures for 2015 and 2016 were heavily influenced by substantial gains on divestitures, amounting to 3,181 million and 4,861 million respectively. Without these non-recurring gains, the operating income growth would have been more moderate, though still positive.
Expense Management and Operational Costs: Selling, general, and administrative expenses showed a gradual increase from 1,470 million in 2012 to 1,931 million in 2016. However, as a percentage of net sales, these expenses declined, suggesting increased operational leverage. Asset impairment and restructuring charges were concentrated in the early part of the period (2012-2015) and ceased by 2016.
Debt and Taxation Impact: Interest and debt expenses more than doubled over the period, increasing from 234 million in 2012 to 626 million in 2016, reflecting an increase in the cost of borrowing or a higher debt load. Consequently, the provision for income taxes grew proportionally with the increase in pre-tax income, rising from 681 million in 2012 to 3,618 million in 2016.
Net Income Trajectory: Net income followed the pattern of operating income, showing a steep ascent from 1,272 million in 2012 to 6,073 million in 2016. The most significant acceleration occurred between 2014 and 2016, where net income more than quadrupled, driven by the combination of increased sales and the realization of significant divestiture gains.

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