Reynolds American Inc., FCFE calculation

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)
Net noncash charges	(4,112)	(3,624)	(99)	571)	237)
Other changes that provided (used) cash	(681)	567)	252)	(981)	59)
Net cash flows from operating activities	1,280)	196)	1,623)	1,308)	1,568)
Capital expenditures	(206)	(174)	(204)	(153)	(88)
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)
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)
Free cash flow to equity (FCFE)	(3,291)	8,477)	1,340)	1,044)	2,901)

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 data reveals notable fluctuations in the cash flow metrics over the five-year period.

Net cash flows from operating activities: The net cash flows from operating activities exhibited variability from 2012 to 2016. Initially, the figure decreased from 1568 million in 2012 to 1308 million in 2013. This was followed by an increase to 1623 million in 2014, indicating stronger operational cash generation that year. However, a significant decline occurred in 2015, dropping sharply to 196 million, which suggests potential operational challenges or increased operating expenses. In 2016, the net cash from operations rebounded to 1280 million, restoring a more stable cash flow level near the early years but still short of the 2014 peak.
Free cash flow to equity (FCFE): The free cash flow to equity showed pronounced volatility throughout the period. Starting at 2901 million in 2012, the FCFE fell considerably to 1044 million in 2013 and increased moderately to 1340 million in 2014. A dramatic surge occurred in 2015, with FCFE reaching 8477 million, indicating substantial cash availability to equity holders that year. However, this was followed by a stark reversal in 2016, where FCFE turned negative at -3291 million. This negative figure could imply significant equity outflows, increased capital expenditures, debt repayment, or other financial decisions impacting cash available to shareholders.

Overall, the operating cash flows suggest intermittent instability, particularly in 2015, while the FCFE data demonstrates substantial variation, with a peak in 2015 and a sharp decline thereafter. These patterns may reflect changes in operational efficiency, investment activities, or financing decisions affecting liquidity and shareholder returns during the period analyzed.

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Reynolds American Inc., current P/FCFE calculation, comparison to benchmarks

No. shares of common stock outstanding	1,426,711,959
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in millions)	(3,291)
FCFE per share	-2.31
Current share price (P)	64.47
Valuation Ratio
P/FCFE	—
Benchmarks
P/FCFE, Competitors¹
Coca-Cola Co.	40.79
Mondelēz International Inc.	38.03
PepsiCo Inc.	22.56
Philip Morris International Inc.	31.18

Based on: 10-K (reporting date: 2016-12-31).

¹ Click competitor name to see calculations.

If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.

Reynolds American Inc., historical P/FCFE calculation, comparison to benchmarks

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
No. shares of common stock outstanding¹	1,425,934,305	1,427,341,341	1,062,567,026	1,073,894,304	1,105,896,384
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in millions)²	(3,291)	8,477)	1,340)	1,044)	2,901)
FCFE per share³	-2.31	5.94	1.26	0.97	2.62
Share price^1, 4	60.54	48.50	35.15	24.04	21.97
Valuation Ratio
P/FCFE⁵	—	8.17	27.87	24.73	8.38
Benchmarks
P/FCFE, Competitors⁶
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 Data adjusted for splits and stock dividends.

² See details »

³ 2016 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= -3,291,000,000 ÷ 1,425,934,305 = -2.31

⁴ Closing price as at the filing date of Reynolds American Inc. Annual Report.

⁵ 2016 Calculation
P/FCFE = Share price ÷ FCFE per share
= 60.54 ÷ -2.31 = —

⁶ Click competitor name to see calculations.

The financial data over the five-year period shows notable trends in share price, free cash flow to equity (FCFE) per share, and the price to FCFE ratio (P/FCFE).

Share Price: The share price exhibited a consistent upward trajectory from 21.97 US$ at the end of 2012 to 60.54 US$ by the end of 2016. This represents a substantial increase, nearly tripling in value over the five years, indicating strong investor confidence or positive market valuation of the company.
FCFE per Share: FCFE per share demonstrated considerable volatility. Starting at 2.62 US$ in 2012, it dropped sharply to 0.97 US$ in 2013, followed by a slight recovery to 1.26 US$ in 2014. A significant peak occurred in 2015 with FCFE per share rising to 5.94 US$, indicating an exceptional increase in free cash flow available to shareholders that year. However, this was followed by a negative FCFE per share in 2016 amounting to -2.31 US$, suggesting a cash outflow or substantial capital expenditure that year detracted from free cash flow.
P/FCFE Ratio: The P/FCFE ratio varied considerably across the years it was available. It started at 8.38 in 2012, surged to 24.73 in 2013, and further increased to 27.87 in 2014. This rise during the period of declining and low FCFE per share indicates that the share price did not decline proportionally with the FCFE, possibly reflecting investor optimism or market expectations. The ratio declined sharply to 8.17 in 2015 when FCFE per share peaked, which aligns with a more attractive valuation from a cash flow perspective. Data for 2016 is unavailable, but given the negative FCFE per share and the rising share price, the P/FCFE ratio would likely be difficult to compute or represent a negative or undefined value.

In summary, the share price increased steadily despite fluctuations in FCFE per share, which showed high volatility and even a negative value in the latest year. The P/FCFE ratio reflects this volatility, with elevated values during periods of low or declining FCFE and a significant decline when FCFE peaked, suggesting variations in investor sentiment and valuation relative to free cash flows over the observed period.

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Reynolds American Inc. (NYSE:RAI)

Price to FCFE (P/FCFE)

Free Cash Flow to Equity (FCFE)

Price to FCFE Ratio, Current

Price to FCFE Ratio, Historical