Cash Flow Statement

The cash flow statement provides information about a company cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company balance sheet.

The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities.

Reynolds American Inc., consolidated cash flow statement

US$ in millions

12 months ended:	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Net income	6,073)	3,253)	1,470)	1,718)	1,272)
Income from discontinued operations, net of tax	—)	—)	(25)	—)	—)
Gain on divestitures	(4,861)	(3,181)	—)	—)	—)
Loss on early extinguishment of debt and related expenses	239)	—)	—)	124)	21)
Asset impairment and exit charges, net of cash payments	—)	94)	—)	—)	—)
Depreciation and amortization expense	123)	122)	106)	103)	131)
Trademark and other intangible asset impairment charges	—)	—)	—)	32)	129)
Deferred income tax expense (benefit)	387)	(659)	(180)	312)	(44)
Accounts and other receivables	24)	86)	(3)	(18)	11)
Inventories	89)	31)	(154)	(143)	(17)
Related party, net	(5)	14)	—)	10)	5)
Accounts payable	42)	32)	(43)	(2)	74)
Accrued liabilities, including other working capital	(160)	(242)	30)	78)	(65)
Tobacco settlement accruals	(314)	239)	92)	(763)	(40)
Pension and postretirement	(415)	91)	317)	(185)	129)
Other, net	58)	316)	13)	42)	(38)
Other changes that provided (used) cash	(681)	567)	252)	(981)	59)
Adjustments to reconcile to net cash flows from operating activities	(4,793)	(3,057)	178)	(410)	296)
Net cash flows from operating activities	1,280)	196)	1,623)	1,308)	1,568)
Capital expenditures	(206)	(174)	(204)	(153)	(88)
Proceeds from settlement of investments	266)	332)	4)	6)	—)
Acquisition, net of cash acquired	—)	(17,220)	—)	—)	—)
Proceeds from divestitures	5,015)	7,056)	—)	—)	—)
Proceeds from termination of joint venture	—)	—)	35)	31)	30)
Other, net	3)	1)	(40)	3)	4)
Net cash flows (used in) from investing activities	5,078)	(10,005)	(205)	(113)	(54)
Dividends paid on common stock	(2,369)	(1,583)	(1,411)	(1,335)	(1,307)
Repurchase of common stock	(226)	(124)	(440)	(775)	(1,101)
Repayments of long-term debt	(500)	(450)	—)	(1,035)	(1,076)
Early extinguishment of debt	(3,650)	—)	—)	—)	—)
Premiums paid for early extinguishment of debt	(207)	—)	—)	(155)	(20)
Proceeds from termination of interest rate swaps	66)	—)	—)	—)	—)
Proceeds from BAT Share Purchase	—)	4,673)	—)	—)	—)
Issuance of long-term debt	—)	8,975)	—)	1,097)	2,539)
Debt issuance costs and financing fees	(8)	(70)	(79)	(18)	(22)
Borrowings under revolving credit facility	—)	1,400)	1,000)	—)	—)
Repayments of borrowings under revolving credit facility	—)	(1,400)	(1,000)	—)	—)
Principal borrowings under term-loan credit facility	—)	—)	—)	500)	750)
Repayments under term-loan credit facility	—)	—)	—)	(500)	(750)
Excess tax benefit on stock-based compensation plans	28)	17)	12)	14)	39)
Payment to settle forward starting interest rate contracts	—)	—)	—)	—)	(23)
Net cash flows from (used in) financing activities	(6,866)	11,438)	(1,918)	(2,207)	(971)
Effect of exchange rate changes on cash and cash equivalents	(8)	(28)	(34)	10)	3)
Net change in cash and cash equivalents	(516)	1,601)	(534)	(1,002)	546)
Cash and cash equivalents at beginning of year	2,567)	966)	1,500)	2,502)	1,956)
Cash and cash equivalents at end of year	2,051)	2,567)	966)	1,500)	2,502)

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 annual financial data reflects significant fluctuations in net income, cash flows, and various operational and financing activities over the five-year period. Net income exhibited an overall upward trend, increasing substantially from $1,272 million in 2012 to $6,073 million in 2016, with a notable spike in 2015 and 2016. This increase in earnings corresponds with large gains on divestitures recorded in 2015 and 2016, amounting to -$3,181 million and -$4,861 million respectively, representing substantial non-recurring income components that boosted profitability in those years.

Depreciation and amortization expenses remained relatively stable, ranging from $103 million to $131 million, indicating consistent capital asset usage. Impairment charges, including trademark and other intangible asset impairments, were significant only in the early years, decreasing over time and suggesting reduced asset write-downs. Deferred income tax expense (benefit) showed volatility, alternating between negative and positive values, which likely impacted net income variability.

Working capital components revealed mixed dynamics. Accounts and other receivables and inventories fluctuated without a clear trend, while accounts payable and accrued liabilities showed inconsistent changes, with accrued liabilities notably decreasing in 2015 and 2016. Tobacco settlement accruals reversed from a large negative impact in 2013 to positive adjustments in subsequent years, reflecting changing settlement obligations. Pension and postretirement provisions oscillated between positive and negative values, indicating fluctuating pension-related costs or funding levels. Other changes in working capital contributed irregularly to cash flow variations.

Operating cash flows did not mirror the net income trend, showing a decline in 2015 to $196 million from over $1,300 million in earlier years, then recovering to $1,280 million in 2016. This disconnect suggests the presence of significant non-cash items or changes in working capital affecting cash generation. Capital expenditures increased steadily from $88 million in 2012 to $206 million in 2016, highlighting ongoing investment in property, plant, and equipment.

Investing activities were marked by a pronounced outflow of $10,005 million in 2015, driven primarily by a $17,220 million acquisition, alongside substantial proceeds from divestitures in 2015 and 2016 totaling $7,056 million and $5,015 million respectively. The unusual negative investing outflow in 2015 reversed to a positive inflow in 2016, reflecting a shift from acquisition to asset sales and settlements.

Financing activities showed wide swings, moving from net cash outflows in most years to a large inflow of $11,438 million in 2015, likely associated with debt issuance and proceeds from the BAT share purchase. Dividends paid increased consistently each year, peaking at $2,369 million in 2016, indicating a growing return to shareholders. Common stock repurchases declined substantially after 2012, suggesting a scaling back of share buybacks. Early extinguishment of debt and related premiums surfaced as considerable expenses in 2016, totaling over $3,857 million, reflecting active debt restructuring or refinancing efforts. Borrowings and repayments under various credit facilities showed episodic activity, with notable issuances and repayments influencing cash flow patterns.

Overall cash and cash equivalents exhibited volatility but ended the period with a balance of $2,051 million in 2016, slightly below the 2012 level, despite notable operating and financing cash flow fluctuations. Exchange rate effects on cash balances were minimal throughout the period.

In summary, the financial data reveals a company experiencing significant income growth influenced by divestitures and acquisitions, accompanied by fluctuating cash flows and active financing maneuvers. Capital investment remained steady, while cash management reflected responses to strategic asset transactions and debt restructuring efforts.

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Reynolds American Inc. (NYSE:RAI)

Cash Flow Statement