Reynolds American (Reynolds American) Operating Income : $5,753 Mil (TTM As of Mar. 2017)

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What is Reynolds American Operating Income?

Reynolds American's Operating Income for the three months ended in Mar. 2017 was $1,326 Mil. Its Operating Income for the trailing twelve months (TTM) ended in Mar. 2017 was $5,753 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. Reynolds American's Operating Income for the three months ended in Mar. 2017 was $1,326 Mil. Reynolds American's Revenue for the three months ended in Mar. 2017 was $2,949 Mil. Therefore, Reynolds American's Operating Margin % for the quarter that ended in Mar. 2017 was 44.96%.

Reynolds American's 5-Year average Growth Rate for Operating Margin % was 0.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. Reynolds American's annualized ROC % for the quarter that ended in Mar. 2017 was 7.31%. Reynolds American's annualized ROC (Joel Greenblatt) % for the quarter that ended in Mar. 2017 was 391.86%.

Reynolds American Operating Income Historical Data

The historical data trend for Reynolds American's Operating Income can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Reynolds American Operating Income Chart

Reynolds American Annual Data

Trend

Dec07

Dec08

Dec09

Dec10

Dec11

Dec12

Dec13

Dec14

Dec15

Dec16

Operating Income

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2,214.00

3,132.00

2,531.00

6,953.00

10,569.00

Reynolds American Quarterly Data
	Jun12	Sep12	Dec12	Mar13	Jun13	Sep13	Dec13	Mar14	Jun14	Sep14	Dec14	Mar15	Jun15	Sep15	Dec15	Mar16	Jun16	Sep16	Dec16	Mar17
Operating Income	Get a 7-Day Free Trial															6,142.00	1,415.00	1,526.00	1,486.00	1,326.00

Reynolds American Operating Income Calculation

Operating Income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Operating Income for the trailing twelve months (TTM) ended in Mar. 2017 adds up the quarterly data reported by the company within the most recent 12 months, which was $5,753 Mil.

Reynolds American (NYSE:RAI) Operating Income Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition.

Reynolds American's annualized ROC % for the quarter that ended in Mar. 2017 is calculated as:

	ROC % (Q: Mar. 2017 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Dec. 2016 )	+	Invested Capital (Q: Mar. 2017 ))	/ count )
=	5304 * ( 1 - 33.62% )	/	( (47776	+	48608)	/ 2 )
=	3520.7952	/	48192
=	7.31 %

where

	Invested Capital		(Q: Dec. 2016 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	51095	-	4066	-	( 2051	-	max(0, 4985	-	4238	+	2051	))
=	47776

	Invested Capital		(Q: Mar. 2017 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	51959	-	4139	-	( 3154	-	max(0, 5891	-	5103	+	3154	))
=	48608

Note: The Operating Income data used here is four times the quarterly (Mar. 2017) data.

2. Joel Greenblatt's definition of Return on Capital:

Reynolds American's annualized ROC (Joel Greenblatt) % for the quarter that ended in Mar. 2017 is calculated as:

	ROC (Joel Greenblatt) %		(Q: Mar. 2017 )
=	EBIT	/	Average of (Net fixed Assets	+	Net Working Capital)
=	EBIT	/	Average of (Property, Plant and Equipment	+	Net Working Capital)
			Q: Dec. 2016		Q: Mar. 2017
=	EBIT	/	( ( (Property, Plant and Equipment + Net Working Capital)	+	(Property, Plant and Equipment + Net Working Capital) )	/	count )
=	5296	/	( ( (1348 + max(-2420, 0))	+	(1355 + max(-3493, 0)) )	/	2 )
=	5296	/	( ( 1348	+	1355 )	/	2 )
=	5296	/	1351.5
=	391.86 %

where Working Capital is:

	Working Capital		(Q: Dec. 2016 )
=	(Accounts Receivable	+	Total Inventories	+	Other Current Assets)	-	(Accounts Payable & Accrued Expense	+	Defer. Rev.	+	Other Current Liabilities)
=	(66	+	1645	+	353)	-	(4066	+	66	+	352)
=	-2420

	Working Capital		(Q: Mar. 2017 )
=	(Accounts Receivable	+	Total Inventories	+	Other Current Assets)	-	(Accounts Payable & Accrued Expense	+	Defer. Rev.	+	Other Current Liabilities)
=	(55	+	1592	+	250)	-	(4139	+	122	+	1129)
=	-3493

When net working capital is negative, 0 is used.

Note: The EBIT data used here is four times the quarterly (Mar. 2017) EBIT data.

3. Operating Income is also linked to Operating Margin %:

Reynolds American's Operating Margin % for the quarter that ended in Mar. 2017 is calculated as:

Operating Margin %	=	Operating Income (Q: Mar. 2017 )	/	Revenue (Q: Mar. 2017 )
	=	1326	/	2949
	=	44.96 %

4. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the Operating Income growth rate using Operating Income per share data.

Be Aware

Compared with a company's EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company's revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)'s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia's Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus's Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.

Reynolds American Operating Income Related Terms

Thank you for viewing the detailed overview of Reynolds American's Operating Income provided by GuruFocus.com. Please click on the following links to see related term pages.

Reynolds American (Reynolds American) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Defensive » Tobacco Products » Reynolds American Inc (NYSE:RAI) » Definitions » Operating Income

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

http://www.reynoldsamerican.com

Reynolds American controls roughly one third of the U.S. cigarette market and is the second-largest domestic cigarette manufacturer behind Altria. Its brands include Camel, Pall Mall, and Newport. Reynolds also owns the Grizzly and Kodiak smokeless tobacco brands. Another subsidiary, Santa Fe Natural Tobacco, manufactures superpremium Natural American Spirit cigarettes. In 2013, Reynolds entered the electronic cigarette market with its Vuse brand, which captured a significant share of this small but growing market.

Executives

John J Zillmer	director	ARAMARK CORP, 1101 MARKET ST, PHILADELPHIA PA 19107
Debra Ann Crew	officer: President and CEO	STANLEY BLACK & DECKER, INC., 1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Ronald S Rolfe	director	825 8TH AVENUE, 38TH FLOOR, NEW YORK NY 10019
Nowell Lionel L Iii	director	401 NORTH MAIN STREET, WINSTON-SALEM NC 27101
Holly K Koeppel	director	401 NORTH MAIN STREET, WINSTON-SALEM NC 27101
Susan M. Cameron	director	C/O TUPPERWARE BRANDS CORP, PO BOX 2353, ORLANDO FL 32802-2353
Murray S Kessler	director	714 GREEN VALLEY ROAD, GREENSBORO NC 27408
Nana Mensah	director	1301 AVENUE OF THE AMERICAS, NEW YORK NY 10019
Thomas C Wajnert	director	401 NORTH MAIN STREET, WINSTON SALEM NC 27102
Richard E Thornburgh	director	401 N. MAIN STREET, WINSTON-SALEM NC 27101
Nicholas V Scheele	director	FORD MOTOR COMPANY, ONE AMERICAN ROAD, DEARBORN MI 48126
Betsy S Atkins	director
Joseph P Viviano	director	4351 GULF SHORE BLVD. N, 17N LERIVAGE, NAPLES FL 34103
Monteiro De Castro Antonio	director	BRITISH AMERICAN TOBACCO - GLOBE HOUSE, 4 TEMPLE PLACE, LONDON X0 WC2R2PG
Chain John T Jr	director	401 N. MAIN ST., C/O RJ REYNOLDS TOBACCO HOLDINGS, WINSTON SALEM NC 27102