Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Paying user area
Try for free
Reynolds American Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Return on Equity (ROE) since 2005
- Aggregate Accruals
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Reynolds American Inc. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Reynolds American Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2016 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows a fluctuating but overall increasing trend. Starting from 1,384 million US dollars in 2012, it rose to a peak of 2,217 million in 2013, then decreased to 1,432 million in 2014. A notable increase occurred in 2015, reaching 2,912 million, followed by a significant jump in 2016 to 6,935 million. This indicates marked improvement in profitability, particularly in the last recorded year.
- Cost of Capital
- The cost of capital remained relatively stable over the five-year period, varying narrowly between 7.65% and 8.12%. It started at 7.79% in 2012, slightly increased to 8.12% in 2014, dipped to its lowest point of 7.65% in 2015, and rose again to 8.08% in 2016. This consistency suggests a stable financing environment or risk profile.
- Invested Capital
- Invested capital held steady between 2012 and 2014, with values around 10,375 to 9,728 million US dollars. However, a dramatic increase is observed in 2015, jumping to 45,105 million and slightly declining to 44,972 million in 2016. This substantial rise indicates significant capital deployment or acquisitions, potentially linked to strategic expansion or restructuring.
- Economic Profit
- Economic profit reflected variability throughout the period. It started at 576 million in 2012 and increased substantially to 1,392 million in 2013. The figure then fell to 642 million in 2014, turning negative in 2015 at -539 million, before rebounding sharply to 3,302 million in 2016. The negative economic profit in 2015, despite increased invested capital, suggests challenges in generating returns above the cost of capital that year. The recovery in 2016, alongside higher NOPAT, implies improved efficiency or profitability derived from the large investment base.
Net Operating Profit after Taxes (NOPAT)
Reynolds American Inc., NOPAT calculation
US$ in millions
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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in LIFO reserve. See details »
3 Addition of increase (decrease) in deferred revenue, related party.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2016 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2016 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 35.00% =
7 Addition of after taxes interest expense to net income.
8 2016 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 35.00% =
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
- Net Income
- Net income exhibited a positive trend over the five-year period. Starting at 1,272 million US dollars in 2012, it increased to 1,718 million US dollars in 2013, representing a strong growth. A decline occurred in 2014 to 1,470 million US dollars, followed by a substantial rise in 2015 to 3,253 million US dollars. The upward momentum continued sharply in 2016, reaching 6,073 million US dollars. Overall, this reflects significant growth with some volatility, especially the strong rebound after 2014.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT values followed a pattern similar to net income but with greater relative fluctuations. Beginning at 1,384 million US dollars in 2012, NOPAT increased notably to 2,217 million US dollars in 2013. It then declined to 1,432 million US dollars in 2014, mirroring the dip in net income. A strong recovery was observed in 2015, with NOPAT more than doubling from the prior year to 2,912 million US dollars. This trend continued with an even sharper increase to 6,935 million US dollars in 2016, surpassing the net income growth rate during the same period. This indicates improving operational efficiency or profitability after taxes, especially in the later years.
- Overall Analysis
- Both net income and NOPAT demonstrated significant growth between 2012 and 2016, with a noticeable dip in 2014 followed by rapid recovery and acceleration in the subsequent years. The company's profitability, both at the net income level and operational profit after tax level, suggests effective management of operations and potentially enhanced revenue streams or cost efficiencies post-2014. The sharper rise in NOPAT compared to net income in 2015 and 2016 may indicate improved operational performance relative to other income components such as non-operating expenses or taxes. These patterns imply a strong financial performance trajectory in the latter part of the analyzed period.
Cash Operating Taxes
Reynolds American Inc., cash operating taxes calculation
US$ in millions
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).
- Provision for income taxes
- The provision for income taxes exhibited an overall increasing trend from 2012 to 2016. The value rose notably from 681 million in 2012 to 1023 million in 2013, indicating a significant increase early in the period. However, in 2014, the provision decreased to 817 million, signaling a temporary decline. Subsequently, there was a sharp and substantial increase to 3131 million in 2015, followed by a further increase to 3618 million in 2016. This pattern suggests a considerable rise in tax liability or changes in tax provision accounting during the latter years.
- Cash operating taxes
- Cash operating taxes showed some fluctuations but generally increased over the five-year span. Starting at 805 million in 2012, the amount remained relatively stable at 801 million in 2013. It rose to 1096 million in 2014, marking the beginning of a more pronounced increase. In 2015, cash operating taxes surged dramatically to 3988 million, representing a significant outflow compared to prior years. However, there was a decline to 3456 million in 2016, indicating some reduction in cash taxes paid, though still well above earlier period levels. This suggests modifications in operational cash tax payments or timing differences.
Invested Capital
Reynolds American Inc., invested capital calculation (financing approach)
US$ in millions
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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of LIFO reserve. See details »
4 Addition of deferred revenue, related party.
5 Addition of equity equivalents to shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-process.
8 Subtraction of marketable securities.
- Total reported debt & leases
-
The total reported debt and leases remained relatively stable between 2012 and 2014, with values hovering slightly above 5,100 million US dollars. However, there was a significant increase in 2015, where the figure more than tripled to 17,473 million US dollars. This substantial rise was followed by a decline in 2016 to 13,190 million US dollars, though the amount remained considerably higher than in the initial three years.
- Shareholders’ equity
-
Shareholders’ equity displayed a slight downward trend from 2012 to 2014, decreasing from 5,257 million US dollars to 4,522 million US dollars. In 2015, it experienced a substantial increase to 18,252 million US dollars, continuing to rise in 2016 to 21,711 million US dollars. This growth mirrors the pattern seen in total reported debt but extends to an even higher level by the end of the period.
- Invested capital
-
Invested capital remained relatively constant and stable from 2012 through 2014, with values just below and around the 10,000 million US dollars mark. There was a marked escalation in 2015 to 45,105 million US dollars, sustaining a similar level in 2016 at 44,972 million US dollars. This sharp increase corresponds with the shifts in both debt and equity, indicating a considerable expansion in the company's capital base during this period.
- Overall Analysis
-
The financial data reveals a period of relative stability from 2012 to 2014, followed by a pronounced transformation starting in 2015. Both total reported debt and shareholders’ equity saw massive increases, which drove a nearly fourfold surge in invested capital. Although total debt decreased somewhat in 2016, it remained significantly elevated compared to the earlier years. The simultaneous rise in equity suggests that the company may have undertaken major financing and capital restructuring initiatives during 2015, resulting in a substantial enlargement of its financial structure. This shift likely reflects strategic decisions impacting the capital composition, potentially involving acquisitions, capital infusion, or other large-scale financial activities.
Cost of Capital
Reynolds American Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2014-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2013-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2012-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Reynolds American Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2016 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The data reveals notable fluctuations and trends in the financial performance over the five-year period.
- Economic Profit
- The economic profit exhibits significant volatility, starting at 576 million USD in 2012, rising sharply to 1392 million USD in 2013, and then declining to 642 million USD in 2014. In 2015, it turned negative, registering a loss of 539 million USD, before rebounding strongly to a peak of 3302 million USD in 2016. This pattern indicates a period of instability in value creation, with a remarkable recovery in the final year observed.
- Invested Capital
- The invested capital remains relatively stable from 2012 to 2014, fluctuating slightly between approximately 9.7 and 10.5 billion USD. However, there is a pronounced increase in 2015, where the invested capital jumps to about 45.1 billion USD and remains at a similar level in 2016. This large increase suggests a significant expansion or acquisition during that period, altering the scale of capital deployment substantially.
- Economic Spread Ratio
- The economic spread ratio mirrors the trends seen in economic profit, starting at a positive 5.55% in 2012, increasing markedly to 13.28% in 2013, then declining to 6.59% in 2014. It drops into negative territory at -1.19% in 2015, before recovering to 7.34% in 2016. This ratio trend highlights the company's varying efficiency in generating returns over its cost of capital, with a clear dip in 2015 aligning with the negative economic profit observed.
Overall, the data demonstrates a period of financial fluctuation characterized by an initial strong performance followed by a downturn in 2015, likely associated with the significant surge in invested capital. The recovery in 2016, both in economic profit and economic spread ratio, indicates improved profitability and economic value creation despite the increased capital base.
Economic Profit Margin
Reynolds American Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales, includes excise taxes | ||||||
| Add: Increase (decrease) in deferred revenue, related party | ||||||
| Adjusted net sales, includes excise taxes | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
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).
1 Economic profit. See details »
2 2016 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales, includes excise taxes
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed significant fluctuations over the five-year period. Starting at $576 million in 2012, it increased sharply to $1,392 million in 2013. However, this was followed by a decline in 2014, with economic profit falling to $642 million. The downward trend continued into 2015, where the company experienced a negative economic profit of -$539 million. In 2016, there was a strong recovery, with economic profit rising substantially to $3,302 million, the highest value within the period.
- Adjusted Net Sales (includes excise taxes)
- The adjusted net sales exhibited a generally upward trend throughout the period. Starting at $12,227 million in 2012, sales slightly decreased to $11,972 million in 2013, then modestly increased to $12,080 million in 2014. A significant jump occurred in 2015, with net sales rising to $14,885 million, followed by continued growth to $16,918 million in 2016. This indicates a steady expansion in revenue generation, especially pronounced in the last two years.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations seen in economic profit. Beginning at 4.71% in 2012, it more than doubled to 11.63% in 2013. In 2014, the margin decreased to 5.31%, and further dropped to -3.62% in 2015, reflecting the negative economic profit for that year. The margin then rebounded strongly to 19.52% in 2016, marking the highest profitability margin in the observed timeframe.
- Overall Analysis
- The financial data signals volatility in profitability over the five years, with a notable downturn in 2015 characterized by negative economic profit and margin. However, the strong recovery in 2016, with pronounced increases in both economic profit and margin alongside growing net sales, suggests effective operational or strategic improvements. The consistent rise in adjusted net sales in the latter years indicates growing market demand or successful sales initiatives. The patterns observed highlight the company's resilience and ability to rebound from adverse conditions.