Reynolds American (Reynolds American) Interest Coverage : 8.90 (As of Mar. 2017)

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What is Reynolds American Interest Coverage?

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income by its Interest Expense. Reynolds American's Operating Income for the three months ended in Mar. 2017 was $1,326 Mil. Reynolds American's Interest Expense for the three months ended in Mar. 2017 was $-149 Mil. Reynolds American's interest coverage for the quarter that ended in Mar. 2017 was 8.90. The higher the ratio, the stronger the company's financial strength is.

The historical rank and industry rank for Reynolds American's Interest Coverage or its related term are showing as below:

RAI's Interest Coverage is not ranked ^*
in the Tobacco Products industry.
Industry Median: 12.84
* Ranked among companies with meaningful Interest Coverage only.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Reynolds American Interest Coverage Historical Data

The historical data trend for Reynolds American's Interest Coverage 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.

Note: For Interest Coverage, "No debt" indicates no long-term debt. An indication of "No Debt" does not necessarily mean that the company has no long-term debt obligations; it could be due to missing data in the quarterly or annual report. Use caution when interpreting this information.

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Reynolds American Interest Coverage Chart

Reynolds American Annual Data

Trend

Dec07

Dec08

Dec09

Dec10

Dec11

Dec12

Dec13

Dec14

Dec15

Dec16

Interest Coverage

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9.46

12.09

8.85

12.20

16.88

Reynolds American Quarterly Data
	Jun12	Sep12	Dec12	Mar13	Jun13	Sep13	Dec13	Mar14	Jun14	Sep14	Dec14	Mar15	Jun15	Sep15	Dec15	Mar16	Jun16	Sep16	Dec16	Mar17
Interest Coverage	Get a 7-Day Free Trial															35.30	9.31	10.17	9.91	8.90

Competitive Comparison of Reynolds American's Interest Coverage

For the Tobacco subindustry, Reynolds American's Interest Coverage, along with its competitors' market caps and Interest Coverage data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Reynolds American's Interest Coverage Distribution in the Tobacco Products Industry

For the Tobacco Products industry and Consumer Defensive sector, Reynolds American's Interest Coverage distribution charts can be found below:

* The bar in red indicates where Reynolds American's Interest Coverage falls into.

Reynolds American Interest Coverage Calculation

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage

-1

Operating Income

Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

The company did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt & Capital Lease Obligation is 0, then

The company had no debt ⁽¹⁾.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Reynolds American's Interest Coverage for the fiscal year that ended in Dec. 2016 is calculated as

Here, for the fiscal year that ended in Dec. 2016, Reynolds American's Interest Expense was $-626 Mil. Its Operating Income was $10,569 Mil. And its Long-Term Debt & Capital Lease Obligation was $12,664 Mil.

Interest Coverage	=	-1	*	Operating Income (A: Dec. 2016 )	/	Interest Expense (A: Dec. 2016 )
	=	-1	*	10569	/	-626
	=	16.88

Reynolds American's Interest Coverage for the quarter that ended in Mar. 2017 is calculated as

Here, for the three months ended in Mar. 2017, Reynolds American's Interest Expense was $-149 Mil. Its Operating Income was $1,326 Mil. And its Long-Term Debt & Capital Lease Obligation was $12,651 Mil.

Interest Coverage	=	-1	*	Operating Income (Q: Mar. 2017 )	/	Interest Expense (Q: Mar. 2017 )
	=	-1	*	1326	/	-149
	=	8.90

The higher the ratio, the stronger the company's Financial Strength is.

Reynolds American (NYSE:RAI) Interest Coverage Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company's overage Financial Strength .

Reynolds American Interest Coverage Related Terms

Thank you for viewing the detailed overview of Reynolds American's Interest Coverage 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 » Interest Coverage

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