Debt to Equity
since 2005
Calculation
Reynolds American Inc., debt to equity, long-term trends, calculation
| Debt to equity | = | Long-term debt1 | ÷ | Shareholders’ equity1 | |
|---|---|---|---|---|---|
| Dec 31, 2016 | 0.61 | = | 13,165) | ÷ | 21,711) |
| Dec 31, 2015 | 0.96 | = | 17,447) | ÷ | 18,252) |
| Dec 31, 2014 | 1.12 | = | 5,083) | ÷ | 4,522) |
| Dec 31, 2013 | 0.99 | = | 5,099) | ÷ | 5,167) |
| Dec 31, 2012 | 0.97 | = | 5,095) | ÷ | 5,257) |
| Dec 31, 2011 | 0.59 | = | 3,663) | ÷ | 6,251) |
| Dec 31, 2010 | 0.63 | = | 4,101) | ÷ | 6,510) |
| Dec 31, 2009 | 0.68 | = | 4,436) | ÷ | 6,498) |
| Dec 31, 2008 | 0.75 | = | 4,686) | ÷ | 6,237) |
| Dec 31, 2007 | 0.60 | = | 4,515) | ÷ | 7,466) |
| Dec 31, 2006 | 0.67 | = | 4,733) | ÷ | 7,043) |
| Dec 31, 2005 | 0.27 | = | 1,748) | ÷ | 6,553) |
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), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31), 10-K (reporting date: 2009-12-31), 10-K (reporting date: 2008-12-31), 10-K (reporting date: 2007-12-31), 10-K (reporting date: 2006-12-31), 10-K (reporting date: 2005-12-31).
1 US$ in millions
The financial trajectory from 2005 to 2016 is characterized by three distinct phases of capital structure adjustment, moving from a low-leverage position to a peak in leverage in 2014, followed by a significant structural expansion of the balance sheet in 2015 and 2016.
- Long-term Debt Trends
- Long-term debt experienced an initial sharp increase between 2005 and 2006, rising from 1,748 million to 4,733 million. Following this, debt levels remained relatively stable with a slight downward trend through 2011, reaching a low of 3,663 million. A secondary increase occurred between 2012 and 2014, with debt stabilizing around 5,000 million. A substantial spike is observed in 2015, where debt surged to 17,447 million, before moderating to 13,165 million in 2016.
- Shareholders’ Equity Trends
- Equity levels remained consistent between 2005 and 2011, fluctuating within the 6,000 to 7,500 million range. A period of contraction followed from 2012 to 2014, with equity declining to 4,522 million. This trend reversed abruptly in 2015, coinciding with the increase in debt, as equity climbed to 18,252 million and continued its ascent to 21,711 million by 2016.
- Debt to Equity Ratio Analysis
- The debt to equity ratio reflects the shifting balance between borrowed capital and owner's equity. The ratio rose from a low of 0.27 in 2005 to a peak of 1.12 in 2014, indicating an increasing reliance on debt relative to equity over nearly a decade. Despite the massive increase in absolute debt in 2015, the ratio declined to 0.96 because the increase in shareholders' equity was proportionally greater. By 2016, the ratio improved significantly to 0.61, suggesting a strengthened equity position and a reduction in overall financial leverage.
The overall data indicates a strategic expansion of the balance sheet in the final two years of the period. While absolute debt levels reached historic highs in 2015, the simultaneous and larger expansion of shareholders' equity resulted in a deleveraging effect by 2016, returning the debt to equity ratio to levels similar to those seen between 2006 and 2011.
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Comparison to Competitors
Reynolds American Inc., debt to equity, long-term trends, comparison to competitors
| Reynolds American Inc. | Coca-Cola Co. | Mondelēz International Inc. | PepsiCo Inc. | Philip Morris International Inc. | |
|---|---|---|---|---|---|
| Dec 31, 2016 | 0.61 | 1.98 | 0.68 | 3.33 | — |
| Dec 31, 2015 | 0.96 | 1.73 | 0.55 | 2.79 | — |
| Dec 31, 2014 | 1.12 | 1.38 | 0.60 | 1.66 | — |
| Dec 31, 2013 | 0.99 | 1.12 | 0.53 | 1.22 | — |
| Dec 31, 2012 | 0.97 | 0.99 | 0.60 | 1.27 | — |
| Dec 31, 2011 | 0.59 | 0.90 | 0.76 | 1.30 | 80.98 |
| Dec 31, 2010 | 0.63 | 0.76 | 0.80 | 1.18 | 4.71 |
| Dec 31, 2009 | 0.68 | 0.48 | 0.73 | 0.47 | 2.70 |
| Dec 31, 2008 | 0.75 | 0.45 | 0.91 | 0.68 | 1.59 |
| Dec 31, 2007 | 0.60 | 0.43 | 0.77 | 0.24 | — |
| Dec 31, 2006 | 0.67 | 0.27 | 0.36 | 0.18 | — |
| Dec 31, 2005 | 0.27 | 0.35 | 0.36 | 0.37 | — |
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), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31), 10-K (reporting date: 2009-12-31), 10-K (reporting date: 2008-12-31), 10-K (reporting date: 2007-12-31), 10-K (reporting date: 2006-12-31), 10-K (reporting date: 2005-12-31).
Comparison to Sector (Food, Beverage & Tobacco)
Reynolds American Inc., debt to equity, long-term trends, comparison to sector (food, beverage & tobacco)
| Reynolds American Inc. | Food, Beverage & Tobacco | |
|---|---|---|
| Dec 31, 2016 | 0.61 | 2.76 |
| Dec 31, 2015 | 0.96 | 2.32 |
| Dec 31, 2014 | 1.12 | 1.86 |
| Dec 31, 2013 | 0.99 | 1.36 |
| Dec 31, 2012 | 0.97 | 1.23 |
| Dec 31, 2011 | 0.59 | 1.15 |
| Dec 31, 2010 | 0.63 | 1.02 |
| Dec 31, 2009 | 0.68 | 0.74 |
| Dec 31, 2008 | 0.75 | 0.80 |
| Dec 31, 2007 | 0.60 | 0.52 |
| Dec 31, 2006 | 0.67 | 0.29 |
| Dec 31, 2005 | 0.27 | 0.36 |
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), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31), 10-K (reporting date: 2009-12-31), 10-K (reporting date: 2008-12-31), 10-K (reporting date: 2007-12-31), 10-K (reporting date: 2006-12-31), 10-K (reporting date: 2005-12-31).
Comparison to Industry (Consumer Staples)
Reynolds American Inc., debt to equity, long-term trends, comparison to industry (consumer staples)
| Reynolds American Inc. | Consumer Staples | |
|---|---|---|
| Dec 31, 2016 | 0.61 | 1.09 |
| Dec 31, 2015 | 0.96 | 1.00 |
| Dec 31, 2014 | 1.12 | 0.96 |
| Dec 31, 2013 | 0.99 | 0.87 |
| Dec 31, 2012 | 0.97 | 0.83 |
| Dec 31, 2011 | 0.59 | 0.80 |
| Dec 31, 2010 | 0.63 | 0.74 |
| Dec 31, 2009 | 0.68 | 0.69 |
| Dec 31, 2008 | 0.75 | 0.68 |
| Dec 31, 2007 | 0.60 | 0.55 |
| Dec 31, 2006 | 0.67 | 0.52 |
| Dec 31, 2005 | 0.27 | 0.59 |
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), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31), 10-K (reporting date: 2009-12-31), 10-K (reporting date: 2008-12-31), 10-K (reporting date: 2007-12-31), 10-K (reporting date: 2006-12-31), 10-K (reporting date: 2005-12-31).