Reynolds American Inc. (NYSE:RAI)

Asset Turnover

Both reported and adjusted total asset turnover ratios show stability from 2012 to 2014, ranging from approximately 0.74 to 0.82. However, a significant decline occurred in 2015, dropping sharply to about 0.28, with a slight recovery in 2016 to approximately 0.33. This suggests a reduced efficiency in using assets to generate revenue during the latter years.

Current Ratio

The reported current ratio decreased from 1.28 in 2012 to 0.85 in 2016, indicating a weakening short-term liquidity position over the period. The adjusted current ratio follows a similar downward pattern, decreasing from 1.1 to 0.89. Noticeably, there was a dip below 1.0 during 2014 and 2016, which may imply potential liquidity concerns at those points in time.

Debt to Equity

The reported debt to equity ratio remained close to 1.0 from 2012 through 2015, peaking slightly at 1.12 in 2014, before declining to 0.61 in 2016. The adjusted debt to equity ratio shows a more pronounced decrease, falling from about 1.15 in 2014 to 0.42 in 2016. The reduction in leverage indicates a trend toward less reliance on equity financing or a deleveraging strategy in the later years.

Debt to Capital

Reported debt to capital ratios increased marginally from 0.49 to 0.53 between 2012 and 2014, then declined to 0.38 by 2016. Adjusted debt to capital follows a similar trend, with a peak at 0.54 in 2014 before dropping to 0.29 in 2016. This suggests an overall reduction in capital structure risk over time after a brief increase.

Financial Leverage

Reported financial leverage hovered around three times equity from 2012 to 2014 but decreased steadily thereafter, reaching 2.35 by 2016. The adjusted ratio reflects a sharper decline from 3.32 in 2014 to 1.62 in 2016, reinforcing the observation of decreasing leverage and potentially more conservative financial management in recent years.

Net Profit Margin

The reported net profit margin showed an upward trajectory, starting at 10.4% in 2012 and sharply increasing to 36.05% in 2016. The adjusted margin exhibits greater volatility, peaking at 19.25% in 2013, dipping under 8% in 2014, then rising again to nearly 39% by 2016. This pattern indicates significant fluctuations in profitability but a general enhancement in profit generation capacity towards the end of the period.

Return on Equity (ROE)

Reported ROE increased from 24.2% in 2012 to a high of 33.25% in 2013, remained relatively elevated through 2014, then declined to 17.82% in 2015 before recovering somewhat to 27.97% in 2016. Adjusted ROE displays greater variability, with a peak of 42.21% in 2013, a sharp drop to 9.3% in 2015, and a moderate recovery to about 20.72% in 2016. These fluctuations suggest varying effectiveness in equity utilization, influenced by underlying earnings volatility and leverage changes.

Return on Assets (ROA)

Reported ROA rose from 7.68% in 2012 to 11.15% in 2013, fell to 6.11% by 2015, then rebounded to nearly 12% in 2016. Adjusted ROA shows a similar pattern with higher volatility: a peak of 15.31% in 2013, a decline to 4.91% in 2015, and an increase to 12.76% in 2016. This indicates fluctuations in asset efficiency and profitability, consistent with trends seen in asset turnover and profit margins.

Summary

Overall, the data reflects a period of fluctuating operational efficiency and profitability, with a notable dip in asset turnover in 2015 that partially recovered in 2016. Liquidity ratios depict a weakening short-term financial position, while leverage ratios indicate a trend toward deleveraging after 2014. Profitability metrics, including net profit margin and returns on equity and assets, experienced significant volatility but generally improved by 2016, suggesting enhanced financial performance despite operational challenges within the period.

Net Sales and Adjusted Net Sales

Both net sales including excise taxes and adjusted net sales showed relatively stable values around 12,000 million US dollars from 2012 through 2014. Starting in 2015, there was a marked increase, reaching approximately 14,884 million in 2015 and further rising to 16,846 million in 2016 for net sales, with adjusted net sales showing a similar upward trajectory, culminating at 16,918 million in 2016. This indicates a significant growth phase beginning in 2015.

Total Assets and Adjusted Total Assets

Total assets remained fairly steady between 2012 and 2014, fluctuating slightly around the 15,000 to 16,500 million US dollar range. In 2015, a large jump occurred, with total assets increasing sharply to about 53,224 million, and remained relatively stable in 2016 with a slight decline to approximately 51,095 million. Adjusted total assets mirrored this pattern with a significant rise in 2015 and stabilization in 2016 near the 51,200 to 52,400 million range. This surge suggests a major asset acquisition or revaluation during this period.

Total Asset Turnover Ratios

The reported total asset turnover ratio showed a gradual improvement from 0.74 in 2012 to 0.80 in 2014, indicating increased efficiency in generating sales from assets. However, a sharp decline occurred in 2015, dropping to 0.28, and a slight recovery to 0.33 in 2016. Adjusted total asset turnover followed the same trend, improving slightly from 0.77 to 0.82 between 2012 and 2014, then declining abruptly to 0.28 in 2015 and improving modestly to 0.33 in 2016. The decline corresponds with the significant asset increase, suggesting that asset growth outpaced sales growth, thus lowering turnover efficiency.

Summary of Trends

The company experienced steady sales and asset base from 2012 to 2014. In 2015, there was a notable expansion in both sales and asset values, with sales increasing nearly 25% and total assets more than tripling compared to previous years. Despite sales growth, the asset turnover ratio substantially decreased due to the disproportionate increase in assets. This indicates that the company’s asset base grew faster than its sales during this period, potentially reflecting strategic investments or acquisitions that have yet to fully translate into proportional revenue increases.

The financial data reveals notable fluctuations in the liquidity position over the five-year period.

Current Assets

Current assets experienced a decline from 4,812 million US dollars in 2012 to a low of 3,323 million US dollars in 2014, followed by a sharp increase to 6,187 million US dollars in 2015, and then a decrease again to 4,238 million in 2016.

Current Liabilities

Current liabilities show a general upward trend, rising from 3,769 million US dollars in 2012 to 4,985 million US dollars in 2016, except for a slight dip in 2013 before a more significant jump in 2015.

Reported Current Ratio

The reported current ratio reflects these changes, starting at a relatively healthy 1.28 in 2012, declining to below 1.0 in 2014 (0.94), improving somewhat in 2015 (1.17), but then falling to a concerning 0.85 in 2016. This indicates intermittent liquidity pressure, particularly in the latter years.

Adjusted Current Assets and Liabilities

Adjusted current assets parallel the trend seen in unadjusted current assets but are consistently lower in value, suggesting some reclassification or exclusion of certain assets. Adjusted current liabilities remain quite close to the unadjusted figures, indicating less volatility in adjustments for liabilities.

Adjusted Current Ratio

The adjusted current ratio generally corroborates the reported ratio trends, starting at 1.10 in 2012, dropping to 0.80 in 2014, marginally improving to 1.01 in 2015, and then decreasing again to 0.89 in 2016. While slightly higher than the reported ratio in later years, it still signals liquidity challenges.

Overall, the pattern suggests that liquidity management faced challenges, particularly in 2014 and 2016, where both reported and adjusted current ratios dropped below 1.0, indicating that current liabilities exceeded current assets during those periods. The sharp increase in current assets in 2015 temporarily improved liquidity, but the subsequent decline underscores potential volatility in working capital components. The company may need to focus on stabilizing current assets and controlling current liabilities to maintain better liquidity ratios going forward.

The financial data over the five-year period reveals significant fluctuations in both debt and equity components, along with corresponding shifts in leverage ratios.

Total Debt

From 2012 to 2014, total debt remained relatively stable, hovering around US$5 billion. However, there was a sharp increase in 2015, more than tripling to approximately US$17.4 billion, followed by a reduction to about US$13.2 billion in 2016. This pattern suggests a major financing event or acquisition around 2015, with some subsequent deleveraging or repayment in 2016.

Shareholders’ Equity

Equity levels displayed a declining trend from 2012 to 2014, decreasing from roughly US$5.3 billion to US$4.5 billion. Contrasting this, a dramatic increase occurred in 2015, reaching approximately US$18.3 billion, and the upward momentum continued into 2016 with equity growing further to around US$21.7 billion. This indicates substantial capital inflow or retained earnings buildup during these later years, potentially connected to the same event affecting debt.

Reported Debt to Equity Ratio

This ratio was near parity initially, fluctuating slightly from 0.97 to 1.12 between 2012 and 2014, reflecting balanced debt and equity structure. In 2015, the ratio decreased to 0.96 despite the large increase in debt, due to the surge in equity, and further declined to 0.61 in 2016, indicating a stronger equity base relative to debt and a reduced leverage risk profile.

Adjusted Total Debt and Equity

Adjusted figures mirror similar trends. Adjusted total debt remained near US$5.1 billion through 2014, surged to US$17.5 billion in 2015, then fell to about US$13.2 billion in 2016. Adjusted shareholders’ equity decreased between 2012 and 2014 but then experienced an even more pronounced increase in 2015 to approximately US$27.6 billion, continuing upward to US$31.6 billion in 2016.

Adjusted Debt to Equity Ratio

This ratio decreased significantly from early years (1.02 in 2012) to a notably low 0.42 in 2016, reflecting an increasing preference for equity relative to debt and a considerable reduction in financial leverage by the end of the period.

Overall, the data suggests a pivotal shift occurring around 2015 involving a considerable increase in both debt and equity, likely due to significant corporate actions such as mergers, acquisitions, or refinancing. The subsequent reduction in debt and sharp rise in equity point toward strengthened capitalization and a conservative approach to leverage by 2016, improving the company’s financial stability and risk position.

Debt Levels

Total debt remained relatively stable between 2012 and 2014, fluctuating slightly around 5,000 million US dollars. However, there was a significant increase in 2015, where total debt more than tripled to approximately 17,447 million US dollars, followed by a decrease to 13,165 million US dollars in 2016.

Total Capital

Total capital showed a declining trend from 2012 to 2014, decreasing from around 10,352 million to 9,605 million US dollars. It then sharply increased in 2015 to 35,699 million US dollars and slightly decreased to 34,876 million US dollars in 2016, indicating substantial growth in capital base during that period.

Reported Debt to Capital Ratio

The reported debt to capital ratio was relatively stable from 2012 to 2015, ranging from 0.49 to 0.53, indicating a consistent leverage level. In 2016, this ratio decreased notably to 0.38, suggesting a reduction in leverage relative to capital.

Adjusted Debt and Capital

Adjusted total debt mirrored the pattern of reported total debt, with stability from 2012 through 2014, a sharp increase in 2015, followed by a decline in 2016. Adjusted total capital fluctuated more widely, declining slightly through 2014 but then experiencing a pronounced increase in 2015 and maintaining that higher level in 2016.

Adjusted Debt to Capital Ratio

The adjusted debt to capital ratio showed more variability than the reported ratio. It was around the 0.50 mark in 2012 and 2013, increased to 0.54 in 2014, but subsequently dropped sharply to 0.39 in 2015 and further decreased to 0.29 in 2016. This trend suggests a significant improvement in the company's leverage position when adjustments are considered, particularly after 2014.

Summary

The data indicates that the company experienced a major capital restructuring or transaction around 2015, reflected in a large spike in both debt and total capital figures. Despite the increase in absolute debt, leverage ratios declined notably in 2016, especially when considering adjusted figures. This pattern implies an improved financial structure with lower relative debt burden after 2014, possibly due to capital infusions or debt repayments that improved the debt-to-capital balance.

The data indicates several notable trends in the financial position over the observed periods.

Total Assets

Total assets experienced a slight decrease from 16,557 million US dollars at the end of 2012 to 15,196 million US dollars in 2014. However, there was a significant increase in 2015, with total assets reaching 53,224 million US dollars, followed by a slight decline to 51,095 million US dollars in 2016.

Shareholders’ Equity

Shareholders’ equity declined gradually from 5,257 million US dollars in 2012 to 4,522 million US dollars in 2014. A substantial increase occurred in 2015, reaching 18,252 million US dollars and further rising to 21,711 million US dollars in 2016, suggesting a strengthening equity base.

Reported Financial Leverage

This ratio showed moderate fluctuations, starting at 3.15 in 2012, decreasing to 2.98 in 2013, rising again to 3.36 in 2014, and then declining to 2.35 by 2016. The overall trend indicates a reduction in reliance on debt relative to equity by the end of the period.

Adjusted Total Assets

Adjusted total assets followed a pattern similar to reported total assets, decreasing modestly from 15,899 million US dollars in 2012 to 14,716 million US dollars in 2014, then experiencing a significant increase to 52,372 million US dollars in 2015, with a marginal decrease to 51,259 million US dollars in 2016.

Adjusted Shareholders’ Equity

There was a decline in adjusted shareholders’ equity from 5,044 million US dollars in 2012 to 4,429 million US dollars in 2014. From 2015 onwards, a marked increase was observed, with adjusted equity rising sharply to 27,643 million US dollars in 2015 and 31,562 million US dollars in 2016, indicating enhanced financial strength after adjustments.

Adjusted Financial Leverage

The adjusted financial leverage ratio demonstrated a downward trend, starting at 3.15 in 2012, decreasing to 2.76 in 2013, slightly increasing to 3.32 in 2014, and then declining significantly to 1.62 by 2016. This indicates a gradual reduction in leverage and a stronger equity position, especially when adjusted values are taken into account.

Overall, the data reveals initial declines in both assets and equity up to 2014, followed by substantial growth in both categories in 2015 and 2016. Financial leverage ratios indicate that the company has progressively reduced its leverage, particularly when considering adjusted figures, which signifies an improved balance between debt and equity financing toward the end of the period.

The financial data over the five-year period reveals several notable trends in profitability and sales performance. Net income experienced fluctuations, starting at 1,272 million US dollars in 2012 and reaching a peak of 6,073 million US dollars in 2016. After a dip in 2014, net income showed significant growth, particularly between 2015 and 2016. This trend is mirrored by net sales, which displayed a steady upward trajectory from 12,227 million US dollars in 2012 to 16,846 million US dollars in 2016, with a consistent increase year over year except for a slight decline in 2013.

The reported net profit margin corresponds closely with the net income and sales trends. The margin improved from 10.4% in 2012 to 36.05% in 2016, highlighting an overall improvement in profitability relative to sales. The margin dipped in 2014 but increased substantially thereafter, indicating enhanced operational efficiency or favorable pricing strategies.

Analyzing the adjusted figures offers further insights. Adjusted net income shows more pronounced variations, with a peak in 2013 at 2,305 million US dollars followed by a sharp decline in 2014 to 939 million US dollars. Subsequently, there is a recovery and strong growth leading to 6,541 million US dollars in 2016. Adjusted net sales generally follow the same upward pattern as the reported sales but are slightly higher in the final years, suggesting some reclassification or adjustments that favor higher sales figures.

The adjusted net profit margin exhibits significant volatility, dropping as low as 7.77% in 2014 and then climbing to a high of 38.66% by 2016. This oscillation points to variability in one-time charges or adjustments impacting profitability, but the overall trajectory suggests improving underlying earnings quality and margin expansion over the period.

Net Income Trend

Fluctuated with a low point in 2014 and strong growth culminating in more than a fourfold increase by 2016.

Net Sales Trend

Generally stable with consistent growth from 2013 onward, increasing by nearly 38% from 2012 to 2016.

Reported Net Profit Margin

Improved steadily except for a 2014 decline, peaking at over 36% in 2016, indicating enhanced profitability.

Adjusted Net Income

More volatile than reported net income, with a pronounced dip in 2014 but strong recovery and significant growth by 2016.

Adjusted Net Sales

Show a consistent increase similar to reported sales, slightly higher in later years suggesting adjustments were favorable.

Adjusted Net Profit Margin

Fluctuated considerably, hitting a low in 2014 but ultimately achieving the highest margin in 2016, indicating improved earnings quality.

Overall, the data demonstrates a strong recovery and sustained growth in both sales and profitability after a mid-period dip, with profitability improving at a faster rate than sales. This suggests effective cost management or favorable market conditions leading to increased earnings margins toward the end of the observed period.

Net Income

The net income exhibited significant growth over the period observed. Starting at 1,272 million US dollars in 2012, it increased to 1,718 million in 2013, reaching a slight decline to 1,470 million in 2014. However, from 2014 onwards, there was a marked upward trajectory with net income more than doubling in 2015 to 3,253 million and nearly doubling again in 2016 to 6,073 million. This indicates strong profitability improvement in the latter years.

Shareholders' Equity

Shareholders’ equity showed a relatively stable pattern in the early years, moving from 5,257 million in 2012 to 5,167 million in 2013, then declining to 4,522 million in 2014. A significant increase occurred in 2015, when equity surged to 18,252 million, and it further rose to 21,711 million in 2016. The substantial increase in equity in these two years suggests capital injections, revaluation, or other equity-related activities that greatly enhanced the company’s net assets.

Reported Return on Equity (ROE)

The reported ROE reflects fluctuations consistent with changes in net income and shareholders’ equity. It rose from 24.2% in 2012 to a peak of 33.25% in 2013, slightly decreased to 32.51% in 2014, then dropped substantially to 17.82% in 2015 before recovering to 27.97% in 2016. The decline in 2015 corresponds temporally with the sharp increase in equity, diluting the return rate despite higher income.

Adjusted Net Income

Adjusted net income generally follows a pattern similar to reported net income but with more pronounced volatility. It grew from 1,306 million in 2012 to a peak of 2,305 million in 2013, then sharply declined to 939 million in 2014. A recovery ensued with 2,571 million in 2015 and a strong surge to 6,541 million in 2016. These variations suggest adjustments may affect comparability across years and highlight substantial earnings variability.

Adjusted Shareholders' Equity

Adjusted shareholders' equity shows similar trends to the reported equity but with some differences in magnitude. It was 5,044 million in 2012, increased to 5,461 million in 2013, then dropped to 4,429 million in 2014. A notable increase to 27,643 million occurred in 2015, followed by a rise to 31,562 million in 2016. The higher values compared to reported equity indicate adjustments that augment the equity base, likely reflecting different accounting treatments or revaluations.

Adjusted Return on Equity (ROE)

The adjusted ROE exhibited more pronounced fluctuations. Beginning at 25.89% in 2012, it surged to a peak of 42.21% in 2013, then considerably dropped to 21.20% in 2014 and further declined to 9.3% in 2015. In 2016, there was a partial recovery to 20.72%. The steep decreases align with the substantial increases in adjusted equity, indicating that despite higher adjusted earnings in later years, the equity enlargement tempered return ratios.

The financial data reveals several notable trends over the five-year period. Net income exhibited a general upward trajectory, increasing significantly from US$1,272 million in 2012 to US$6,073 million in 2016, with a notable peak in 2015 at US$3,253 million prior to the largest jump in 2016. Total assets initially declined slightly from US$16,557 million in 2012 to US$15,196 million in 2014, followed by an extraordinary increase in 2015 to US$53,224 million and a minor decrease the following year to US$51,095 million. This abrupt change in total assets between 2014 and 2015 suggests a major acquisition, capital investment, or revaluation event.

Regarding profitability metrics, the reported return on assets (ROA) showed variability. The ROA increased from 7.68% in 2012 to a peak of 11.15% in 2013, declined to 6.11% by 2015, and then rose sharply to 11.89% in 2016. This pattern indicates fluctuating efficiency in generating profits from asset bases during the period, with a substantial recovery in 2016 despite the increased asset base.

Analyzing the adjusted figures, adjusted net income also followed a similar pattern to reported net income but with more pronounced fluctuations. It increased strongly from US$1,306 million in 2012 to US$2,305 million in 2013, dropped markedly to US$939 million in 2014, then rose again to US$2,571 million in 2015, and culminated in a significant jump to US$6,541 million in 2016. Adjusted total assets mirrored the pattern of reported total assets closely, with a peak in 2015 at US$52,372 million and a slight decline in 2016.

The adjusted ROA displayed more volatility than the reported ROA, rising sharply from 8.21% in 2012 to 15.31% in 2013, plummeting to 6.38% in 2014, further decreasing to 4.91% in 2015, and then rebounding to 12.76% in 2016. This volatility in adjusted ROA reflects the impact of adjustments on both net income and asset base, highlighting periods of relatively lower profitability in 2014 and 2015 despite large asset levels, followed by marked improvement in 2016.

Overall, the data suggests a period of structural change around 2015, characterized by a significant asset base expansion alongside volatile profitability measures. By 2016, both net income and returns on assets rebounded strongly, indicating an improved capacity to generate earnings from the enlarged asset base and a favorable shift in operational performance or financial adjustments.