Time Warner Cable Inc. (NYSE:TWC)

The analysis of the current and deferred income tax expenses over the five-year period reveals several notable trends and fluctuations.

Current Income Tax Expense

The current income tax expense exhibited an overall upward trajectory from 2011 to 2013, starting at 157 million US dollars and reaching a peak of 722 million US dollars in 2013. This growth was followed by a substantial decline in 2014, dropping to 461 million, before experiencing an increase again in 2015 to 551 million. This pattern suggests variability in taxable income or changes in tax regulations impacting the current tax component each year.

Deferred Income Tax Expense

Deferred income tax expense showed a contrasting pattern characterized by significant fluctuations. It started at a high level of 638 million in 2011 and slightly decreased to 562 million in 2012, followed by a notable decline to 363 million in 2013. However, in 2014, the deferred expense surged markedly to 756 million, representing the highest point in the series, before declining again to 593 million in 2015. These oscillations might reflect timing differences in recognizing tax deductions, credits, or liabilities, potentially related to changes in temporary differences between accounting income and taxable income.

Total Income Tax Provision

The total income tax provision, being the sum of current and deferred components, mirrored the combined effect of the aforementioned fluctuations. It increased from 795 million in 2011 to a peak of 1,217 million in 2014, with an intermediate peak of 1,177 million in 2012. The highest total was registered in 2014, largely driven by the spike in deferred taxes, before a moderate decline to 1,144 million in 2015. The total provision's trend indicates an overall increase in tax expense over the period, with particular volatility attributable to changes in deferred tax amounts.

In summary, the data demonstrates substantial variability in both current and deferred income tax expenses across the analyzed years. The deferred income tax expense contributed notably to the fluctuations in the total income tax provision. These patterns suggest the influence of factors such as tax law changes, shifting company profits, or variations in timing differences between reported and taxable income. The significant peaks and troughs call for further examination of specific tax events or accounting adjustments that occurred during the period.

The analysis of the tax rates over the five-year period reveals several notable trends. The U.S. federal statutory income tax rate remained constant at 35% for each year from 2011 to 2015, indicating no changes at the statutory level during this period.

In contrast, the effective tax rate exhibited a gradual upward trend. Starting at 32.29% in 2011, it increased to 35.28% in 2012, which is very close to the statutory rate, and then experienced a steady rise over the subsequent years, reaching 38.29% by 2015. This progressive increase suggests that the company's actual tax expense as a percentage of pre-tax income grew over time, surpassing the fixed statutory tax rate by the end of the period.

Trends in Tax Rates

The static nature of the federal statutory tax rate contrasts with the increasing effective tax rate, possibly reflecting changes in taxable income composition, limitations on tax deductions, or variations in tax credits over the years.

The effective tax rate exceeding the statutory rate in later years indicates additional tax burdens or reduced tax benefits impacting the company’s overall tax expense.

Implications

The rising effective tax rate could affect net profitability, as higher tax expenses reduce after-tax earnings. It may also signal changes in tax planning strategies or regulatory impacts.

Monitoring this divergence is important for understanding the company's tax position and potential risks linked to tax liabilities.

Net operating loss carryforwards

The net operating loss carryforwards exhibited a volatile trend, peaking at 322 million US dollars at the end of 2012 before declining sharply in subsequent years to reach 24 million US dollars by the end of 2015. This suggests a significant reduction in accumulated losses available to offset future taxable income.

Tax credit carryforwards

Tax credit carryforwards remained relatively stable throughout the observed periods, fluctuating marginally between 31 and 37 million US dollars. This indicates a consistent level of tax credits available for future use without substantial changes.

Other deferred income tax assets, gross

The "Other" category within gross deferred income tax assets showed a decreasing trend from 680 million US dollars in 2011 down to 470 million in 2012, followed by a moderate recovery to 604 million by 2015. The fluctuation indicates variations in the underlying components of these assets over time.

Deferred income tax assets, gross

Gross deferred income tax assets peaked at 828 million US dollars in 2012 before decreasing to 660 million by 2015, reflecting a decline in recognized deferred tax assets or potential changes in underlying temporary differences or valuation assumptions.

Valuation allowances

Valuation allowances decreased in magnitude from -67 million US dollars in 2011 to -18 million in 2012, then fluctuated mildly around -28 million before reaching -23 million by 2015. This suggests adjustments to the allowance for doubtful deferred tax assets, potentially improving asset quality or realizability.

Net deferred income tax assets

Net deferred income tax assets fluctuated, rising from 717 million US dollars in 2011 to a peak of 810 million in 2012, followed by a decline to 637 million in 2015. This pattern mirrors changes in gross assets and valuation allowances, indicating variations in deferred tax positions net of risks.

Cable franchise rights and customer relationships, net

A continuous increase in the negative balance of cable franchise rights and customer relationships was observed, from -6,698 million US dollars in 2011 to -8,627 million in 2015. This reflects growing amortization or impairment charges, or increased carrying costs associated with these intangible assets.

Property, plant and equipment

Property, plant, and equipment showed a consistent increase in the negative balance, from -3,941 million US dollars in 2011 to -4,740 million in 2015, indicating steady capital expenditures and asset base expansion or accumulation of depreciation.

Other deferred income tax liabilities

The "Other" category within deferred income tax liabilities experienced notable volatility, with values ranging from -9 million US dollars in 2011 to a significant -328 million in 2013, then decreasing to -100 million by 2015. This implies temporary fluctuations in the components contributing to these liabilities.

Deferred income tax liabilities

Deferred income tax liabilities exhibited a steady increase from -10,648 million US dollars in 2011 to -13,467 million in 2015, indicating growing obligations related to taxable temporary differences.

Net deferred income tax assets (liabilities)

The net balance of deferred income tax assets and liabilities presented an increasing negative trend, moving from -9,931 million US dollars in 2011 to -12,830 million in 2015. This reflects an expanding net liability position, suggestive of a greater future tax burden arising from differences in accounting and tax treatments.

Current Deferred Income Tax Assets

The current deferred income tax assets showed a general upward trend from 2011 through 2013, increasing from 267 million USD in 2011 to 334 million USD in 2013. However, in 2014, this figure decreased to 269 million USD. Data for 2015 is missing, which limits the ability to assess the most recent trend for this item.

Noncurrent Deferred Income Tax Liabilities

Noncurrent deferred income tax liabilities consistently increased over the five-year period from 2011 to 2015. Starting at 10,198 million USD in 2011, the liabilities rose steadily each year, reaching 12,830 million USD by the end of 2015. This persistent growth suggests an increasing deferred tax liability over the period.

Overall Observations

The contrasting movements between current deferred income tax assets and noncurrent deferred income tax liabilities may reflect changes in timing differences for tax recognition or variations in taxable temporary differences. While current assets peaked in 2013 before declining, noncurrent liabilities exhibited steady growth, indicating a possible shift in the company's tax position affecting deferred tax balances over the analyzed period.

The analysis of the financial data over the five-year period reveals notable differences between reported and adjusted figures, particularly in assets, liabilities, equity, and net income attributable to shareholders.

Current Assets

Reported current assets demonstrate a clear declining trend from 6,398 million USD in 2011 to a low of 2,144 million USD in 2013, followed by a moderate recovery to 2,459 million USD in 2015. Adjusted current assets follow a similar pattern but consistently present lower values each year compared to reported figures until 2015 when both align at 2,459 million USD.

Total Assets

Reported total assets remain relatively stable throughout the period, fluctuating around the 48,000 to 49,800 million USD range without a strong directional trend. Adjusted total assets mirror this stability but are consistently slightly lower than reported totals, indicating adjustments reduce asset valuations by a modest margin.

Total Liabilities

Reported total liabilities exhibit a gentle downward trend from 40,739 million USD in 2011 to 40,278 million USD in 2015. In stark contrast, adjusted total liabilities show a more pronounced decrease over the same period, declining from 30,541 million USD to 27,448 million USD, reflecting significant downward adjustments in liabilities compared to reported figures.

Shareholders’ Equity

Reported equity exhibits variability but an overall increase from 7,530 million USD in 2011 to 8,995 million USD in 2015, with a notable dip observed in 2013. Adjusted equity figures are substantially higher than reported throughout the period, rising steadily from 17,461 million USD to 21,825 million USD. This suggests that deferred tax and other adjustments significantly enhance the equity base when compared to reported numbers.

Net Income Attributable to Shareholders

The reported net income shows moderate fluctuations, peaking at 2,155 million USD in 2012 before declining to 1,844 million USD in 2015. In contrast, adjusted net income is consistently higher and follows a peak in 2014 at 2,787 million USD, with a decline to 2,437 million USD in 2015. Adjustments therefore contribute to increasing the recognized profitability of the company compared to reported numbers.

Overall, the data illustrate that adjustments for deferred income taxes and related factors materially impact the financial statements. Adjusted metrics generally reveal stronger equity positions and higher profitability, alongside lower liabilities, compared to reported figures. The trends also indicate a significant contraction in current assets by 2013 across both reported and adjusted data, followed by partial recovery. Maintaining stable total assets alongside decreasing adjusted liabilities and rising adjusted equity suggests improving financial health when considering adjusted figures rather than solely reported data.

The analysis of the financial ratios presents a clear depiction of the company’s evolving financial health over the five-year period ending in 2015.

Liquidity

The reported current ratio shows a declining trend from 1.19 in 2011 to a low of 0.41 in 2013, indicating a reduction in short-term liquidity and ability to cover current liabilities with current assets. After 2013, there is a partial recovery, rising to 0.62 by 2015. The adjusted current ratio, which accounts for income tax adjustments, follows a similar trend but at generally lower levels, reaching the same point of 0.62 in 2015. This reduction and subsequent partial recovery suggest ongoing liquidity challenges which were somewhat mitigated towards the end of the period.

Profitability

Reported net profit margin fluctuates, peaking at 10.08% in 2012 before decreasing to 7.78% in 2015. The adjusted net profit margin remains consistently higher than the reported margin, indicating that the adjustments for tax timing positively affect perceived profitability. Despite fluctuations, the adjusted margin shows an overall decline from 12.7% in 2012 to 10.28% in 2015. This implies that profitability, while initially rising, faced pressure in the latter years.

Asset Efficiency

Both reported and adjusted total asset turnover ratios depict a gradual strengthening from 0.41 in 2011 to 0.48 in 2015. This improvement suggests enhanced efficiency in utilizing assets to generate revenue over the period, remaining a positive aspect despite other financial challenges.

Financial Leverage

The reported financial leverage ratio initially increases from 6.41 in 2011 to a peak of 6.95 in 2013, then decreases to 5.48 by 2015, indicating a slightly reduced reliance on debt financing in recent years. However, the adjusted financial leverage ratio, significantly lower than the reported figures throughout, shows a consistent downtrend from 2.75 in 2011 to 2.26 in 2015, reflecting a conservative capital structure when considering deferred tax adjustments.

Return on Equity (ROE)

Reported ROE is relatively high but demonstrates a declining trend from 29.61% in 2012 down to 20.5% in 2015. The adjusted ROE, lower than the reported figures, decreases more gradually from 14.89% to 11.17% over the same period. The decline in both reported and adjusted ROE suggests that profitability relative to shareholders’ equity has diminished, though it remains positive.

Return on Assets (ROA)

Reported ROA shows modest growth from 3.45% in 2011 to a peak of 4.33% in 2012, then a slight decline to 3.74% by 2015. In contrast, adjusted ROA is consistently higher than the reported values, increasing from 4.8% in 2011 to a high of 5.78% in 2014 before easing to 4.95% in 2015. This indicates that asset utilization for generating net income, when accounting for tax adjustments, improved over the years but experienced a minor decrease at the end of the period.

In summary, the company displayed mixed financial performance with notable liquidity constraints mid-period, moderate profitability declines, and gradual improvements in asset efficiency and leverage. Adjusted measures, factoring in deferred income taxes, tend to portray a slightly healthier financial position than reported figures alone, particularly in terms of profitability and leverage. Return metrics declined over time, signaling challenges in maintaining returns to equity holders despite better asset utilization.

The financial data presents insights into the company's liquidity position over a five-year period through both reported and adjusted figures. The analysis focuses on current assets and current ratios, which serve as indicators of short-term financial health.

Current Assets

The reported current assets show a significant downward trend from 6,398 million US dollars in 2011 to 2,144 million in 2013, reflecting a reduction of approximately 66%. After 2013, there is a slight recovery, with values rising to 2,316 million in 2014 and 2,459 million in 2015. Similarly, the adjusted current assets follow this pattern, decreasing from 6,131 million in 2011 to a low of 1,810 million in 2013 before gradually increasing to 2,459 million by 2015. The adjustment results in lower asset values across all years compared to reported figures, suggesting certain deductions or reclassifications were made to the current assets.

Current Ratio

The reported current ratio mirrors the trends in current assets, decreasing from a ratio of 1.19 in 2011 to a low of 0.41 in 2013, which signals weakened liquidity and potentially increased difficulty in meeting short-term obligations. This is followed by a gradual improvement to 0.62 in 2015. The adjusted current ratio is consistently below the reported ratio, starting at 1.14 in 2011 and dropping to 0.35 in 2013, before improving to match the 0.62 level in 2015. The lower adjusted ratios indicate a more conservative assessment of liquidity, possibly due to excluding deferred income tax or other adjustments affecting the asset base or liabilities.

Overall Trends and Implications

Both the reported and adjusted data indicate a significant deterioration in liquidity up to the year 2013, with the current ratio falling well below 1.00, which generally signals liquidity risk. The gradual recovery in both current assets and current ratios from 2013 to 2015 suggests some reversal in this trend. The convergence of reported and adjusted current ratios by 2015 may indicate stabilization in the adjustments applied or improved financial conditions reducing the distinction between reported and adjusted bases.

Reported Net Income Attributable to TWC Shareholders

The reported net income demonstrates an overall increasing trend from 2011 to 2014, rising from $1,665 million to a peak of $2,155 million in 2012, followed by a slight decline in 2013 and 2014, with a decrease to $1,844 million by 2015. This pattern indicates some volatility with a downward shift observed in the latter part of the period.

Adjusted Net Income Attributable to TWC Shareholders

The adjusted net income shows an upward trajectory over the five-year period, beginning at $2,303 million in 2011, increasing to $2,717 million in 2012, then experiencing a dip in 2013 to $2,317 million. Subsequently, it recovered and peaked at $2,787 million in 2014 before decreasing again to $2,437 million in 2015. This more stable adjustment compared to reported income suggests that adjustments for taxes provide a smoother earnings profile.

Reported Net Profit Margin

The reported net profit margin generally follows a pattern similar to reported net income, starting at 8.46% in 2011, increasing to 10.08% in 2012, and then fluctuating between approximately 8.8% and 8.9% in 2013 and 2014 before falling to 7.78% in 2015. The decline in margin in 2015 indicates reduced profitability relative to revenues in that year.

Adjusted Net Profit Margin

The adjusted net profit margin is consistently higher than the reported margin throughout the period, starting at 11.71% in 2011 and peaking at 12.7% in 2012. It dips to 10.47% in 2013 but rebounds to 12.22% in 2014, followed by a decline to 10.28% in 2015. The adjusted margin suggests that when accounting for deferred tax impacts, the company’s profitability is stronger than indicated by the reported figures but still experiences a similar downward trend toward the end of the observed period.

Summary of Trends

Overall, both reported and adjusted net income and profit margins depict a rise in profitability through 2012, followed by a period of moderate fluctuation and a notable downward shift in 2015. The adjusted figures consistently exceed reported measures, reflecting the impact of deferred income tax adjustments in enhancing perceived profitability. The decline in 2015 across all metrics may warrant further investigation into underlying operational or economic factors influencing the company’s financial performance during that year.

The data presents a financial overview spanning five years, highlighting both reported and adjusted total assets along with their respective turnover ratios.

Total Assets

The reported total assets exhibit a slight fluctuation across the period. Starting at 48,276 million US dollars in 2011, the value rises to a peak of 49,809 million in 2012, followed by a decline to 48,273 million in 2013. Subsequently, the assets show a gradual increase, finishing at 49,277 million in 2015.

The adjusted total assets follow a similar trend to the reported figures but maintain marginally lower values throughout. Beginning at 48,009 million in 2011, it declines to 47,939 million by 2013 before rising steadily to reach 49,277 million in 2015, aligning with the reported figure in the final year.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios demonstrate a consistent upward trend from 2011 to 2015. Starting at 0.41 in 2011, turnover ratios increase incrementally each year to reach 0.48 in 2015. This indicates improved efficiency in generating revenues from the asset base over the observed period.

The parity between reported and adjusted turnover ratios throughout the period suggests that adjustments related to income tax accounting do not materially affect operational efficiency metrics.

In summary, the asset base remained relatively stable with minor fluctuations, while the efficiency in utilizing these assets improved steadily over the five years. Adjusted figures closely mirror reported data, indicating consistency in financial adjustments applied.

The data presents a comparison between reported and adjusted financial figures over a five-year period ending in 2015, revealing notable trends in assets, shareholders' equity, and financial leverage.

Assets

Reported total assets exhibited modest fluctuation over the period, increasing from 48,276 million USD in 2011 to 49,277 million USD in 2015, with a slight decrease observed in 2013. Adjusted total assets followed a similar pattern, starting at 48,009 million USD in 2011 and reaching 49,277 million USD in 2015, indicating relatively stable asset levels after adjustments for deferred income taxes.

Shareholders' Equity

Reported total shareholders’ equity showed variability, initially decreasing from 7,530 million USD in 2011 to 6,943 million USD in 2013, then increasing significantly to 8,995 million USD by 2015. In contrast, adjusted shareholders’ equity, which accounts for income tax adjustments, displayed a steady upward trend throughout the period, rising from 17,461 million USD in 2011 to 21,825 million USD in 2015. This adjustment reveals a much larger equity base consistently increasing year over year, which suggests that deferred taxes significantly impact the reported equity.

Financial Leverage

Reported financial leverage (ratio of total assets to shareholders' equity) increased from 6.41 in 2011 to a peak of 6.95 in 2013, followed by a noticeable decline to 5.48 in 2015. Conversely, adjusted financial leverage was substantially lower, starting at 2.75 in 2011 and decreasing steadily to 2.26 in 2015. This decline indicates a gradual reduction in leverage when considering deferred income tax adjustments, implying a strengthening equity position relative to assets.

Overall, the adjusted figures suggest a more conservative and robust financial position compared to the reported numbers, highlighting the material effect of income tax adjustments on the company’s financial structure. The trend towards lower financial leverage after adjustments underscores improved solvency and potentially reduced financial risk over the examined period.

The analysis of the financial data over the five-year period reveals varying trends in reported and adjusted net income, shareholders’ equity, and return on equity (ROE) for Time Warner Cable Inc.

Net Income

Reported net income attributable to shareholders showed an overall positive trend from 2011 to 2015, starting at 1,665 million US dollars in 2011 and peaking at 2,155 million US dollars in 2012 before experiencing fluctuations and a slight decline to 1,844 million US dollars by the end of 2015. Adjusted net income figures were consistently higher than reported net income across all years, indicating significant adjustments primarily related to deferred income tax. Adjusted net income also increased from 2,303 million US dollars in 2011 to a peak of 2,787 million US dollars in 2014, followed by a decrease to 2,437 million US dollars in 2015, suggesting volatility in the factors affecting net income adjustments in recent years.

Shareholders’ Equity

The reported total shareholders’ equity exhibited a declining trend during the first three years, moving from 7,530 million US dollars in 2011 down to 6,943 million US dollars in 2013, before rebounding sharply to 8,995 million US dollars by 2015. In contrast, the adjusted shareholders’ equity demonstrated continuous growth year over year, starting at 17,461 million US dollars in 2011 and reaching 21,825 million US dollars in 2015. The consistent rise in adjusted equity values suggests that deferred income tax adjustments have a substantial positive impact on the equity base, reflecting underlying asset revaluations or deferred tax liabilities adjustments.

Return on Equity (ROE)

ROE calculations based on reported data showed a peak in 2012 at 29.61%, followed by a gradual decrease to 20.5% by 2015. This indicates a reduction in profitability relative to the shareholders’ equity, possibly influenced by the declines in reported net income and fluctuations in reported equity. Adjusted ROE values were significantly lower than reported ROE throughout the period and showed a downward trend from 13.19% in 2011 to 11.17% in 2015, with a slight peak in 2014. Lower adjusted ROE values reflect the impact of more conservative profitability measures when tax-related adjustments are accounted for, suggesting that real earnings power is somewhat less pronounced than reported figures alone would imply.

Overall, the data indicates that while reported income and equity values show some volatility and a modest downward trend in profitability ratios, the adjusted figures—which incorporate deferred income tax changes—reveal stronger and more stable equity growth but relatively modest and declining returns on that equity. The divergence between reported and adjusted figures highlights the financial effect of deferred income tax adjustments on the company’s financial position and performance metrics over the analyzed period.

The analysis of the financial data reveals several notable trends and patterns over the five-year period from 2011 to 2015.

Net Income Attributable to Shareholders

Reported net income shows moderate fluctuations, peaking in 2012 at 2,155 million US dollars, followed by a decline over the subsequent years, reaching 1,844 million US dollars in 2015. Adjusted net income is consistently higher than reported net income each year, indicating that adjustments, likely for deferred income taxes, positively impact the profitability measure. Adjusted net income also peaks in 2014 at 2,787 million US dollars before declining to 2,437 million US dollars in 2015 but remains above the reported figure throughout.

Total Assets

Total assets, both reported and adjusted, remain relatively stable across the period with minor fluctuations. Reported total assets increase modestly from 48,276 million US dollars in 2011 to 49,277 million US dollars in 2015. Adjusted total assets follow a similar trend but are consistently slightly lower than reported assets in the earlier years before converging in 2015, suggesting that adjustments related to income taxes have a marginal effect on the asset base valuation.

Return on Assets (ROA)

The reported ROA mirrors the trend in reported net income, peaking at 4.33% in 2012 and then showing a gradual decline to 3.74% by 2015. Adjusted ROA, consistently higher than reported ROA, peaks at 5.78% in 2014 and decreases to 4.95% in 2015. The adjusted ROA’s higher values compared to the reported ROA suggest that excluding deferred income tax effects provides a more favorable view of asset profitability.

Overall, the data indicates that adjustments for deferred income taxes result in higher reported profitability metrics (net income and ROA) throughout the period. While total assets show stability, profitability displays more variability with marked peaks in the early to mid-period years followed by declines in 2015. These trends underscore the importance of considering adjusted figures for a clearer understanding of operational performance unclouded by tax timing effects.