Time Warner Cable Inc. (NYSE:TWC)

An analysis of the credit risk profile from 2011 to 2015 reveals a period of expansion in gross receivables followed by a correction in both the total receivables balance and the associated allowance for doubtful accounts. While the absolute values for both metrics increased for the majority of the period, the rate of increase in the allowance for doubtful accounts outpaced the growth of gross receivables, particularly in 2014.

Gross Receivables Trend

Gross receivables demonstrated a consistent upward trajectory from December 31, 2011, to December 31, 2014, rising from 829 million US$ to a peak of 1,058 million US$. This represents a growth of approximately 27.6% over three years. In 2015, a reversal occurred as gross receivables declined to 1,010 million US$, suggesting either a reduction in credit extended to customers or an improvement in the efficiency of collections.

Allowance for Doubtful Accounts Performance

The allowance for doubtful accounts increased steadily from 62 million US$ in 2011 to 77 million US$ in 2013, followed by a significant surge to 109 million US$ in 2014. This sharp increase in 2014 indicates a heightened anticipation of credit losses. By the end of 2015, the allowance was reduced to 94 million US$, aligning with the overall decrease in gross receivables observed during that year.

Allowance as a Percentage of Gross Receivables

The ratio of the allowance to gross receivables remained relatively stable between 2011 and 2013, fluctuating within a narrow range of 6.86% to 7.48%. A notable shift occurred in 2014, when the ratio spiked to 10.30%, marking the highest credit risk valuation in the period analyzed. Although the ratio moderated to 9.31% in 2015, it remained significantly higher than the levels maintained during the 2011-2013 period, suggesting a permanent shift in the risk assessment of the receivables portfolio or a change in the underlying credit quality of the customer base.