Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Time Warner Cable Inc., economic profit calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2011-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2015 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,391 – 12.78% × 45,332 = -2,400
The financial performance from 2011 to 2015 indicates a persistent failure to generate positive economic value, characterized by consistent negative economic profit. While operating profits showed volatility, the overall trend reflects value destruction as the returns on invested capital remained insufficient to cover the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a fluctuating trend without a sustained growth trajectory. A peak was reached in 2012 at 3,807 million US$, followed by a decline and a subsequent recovery in 2014 to 3,745 million US$, before retreating to 3,391 million US$ by 2015. This volatility indicates inconsistent operational efficiency in generating post-tax cash flows.
- Cost of Capital
- The cost of capital demonstrated a general upward trend over the analyzed period. After a slight decrease to 9.58% in 2012, the rate climbed steadily, reaching a period high of 12.78% in 2015. This increasing cost elevated the minimum return required to break even on an economic basis, further compressing the economic profit.
- Invested Capital
- Invested capital remained relatively stable, fluctuating within a narrow range between 44,327 million US$ and 46,124 million US$. The absence of significant expansion in the capital base suggests that the negative economic profit was not driven by aggressive over-investment, but rather by an inability to generate returns that exceeded the cost of the existing capital employed.
- Economic Profit
- Economic profit remained negative throughout the five-year window, signifying that the company failed to create value for its providers of capital. The deficit worsened over time, moving from -1,186 million US$ in 2011 to a maximum loss of -2,400 million US$ in 2015. The simultaneous occurrence of stagnant NOPAT and a rising cost of capital accelerated the erosion of economic value toward the end of the period.
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Net Operating Profit after Taxes (NOPAT)
Time Warner Cable Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2011-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenue and subscriber-related liabilities.
4 Addition of increase (decrease) in restructuring reserves.
5 Addition of increase (decrease) in equity equivalents to net income attributable to TWC shareholders.
6 2015 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 681 × 6.22% = 42
7 2015 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,444 × 35.00% = 506
8 Addition of after taxes interest expense to net income attributable to TWC shareholders.
- Net income attributable to TWC shareholders
- The net income showed an upward trend from 2011 to 2012, increasing from $1665 million to $2155 million. However, in 2013 a decline occurred to $1954 million, followed by a slight recovery in 2014 to $2031 million. The year 2015 saw another decrease to $1844 million, indicating a general volatility with a peak in 2012 and subsequent fluctuations.
- Net operating profit after taxes (NOPAT)
- NOPAT increased from $3328 million in 2011 to $3807 million in 2012, mirroring the peak found in net income for the same year. In 2013, NOPAT declined to $3388 million but rose again in 2014 to $3745 million, approaching the 2012 level. By 2015, NOPAT decreased to $3391 million, showing the same fluctuating pattern observed in net income, with 2012 and 2014 as relatively stronger years.
- Overall financial performance trends
- Both net income and NOPAT exhibited similar cyclical patterns over the five-year period. The highest values were observed in the early part of the timeframe (specifically 2012), followed by periods of decline and partial recovery. This suggests fluctuations in profitability and operating efficiency, potentially reflecting changes in operational effectiveness, market conditions, or other external factors influencing financial outcomes.
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Cash Operating Taxes
Time Warner Cable Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2011-12-31).
The financial data indicates fluctuations in the income tax provision and cash operating taxes of the company over the five-year period ending December 31, 2015.
- Income Tax Provision
- The income tax provision demonstrates an overall upward trend from 2011 through 2014, increasing from 795 million US dollars in 2011 to a peak of 1,217 million in 2014. However, in 2015, there is a slight decline to 1,144 million US dollars. This suggests rising taxable earnings or adjustments in tax liabilities during the initial years followed by a moderate reduction in the last year.
- Cash Operating Taxes
- Cash operating taxes present a more variable pattern. Beginning at 705 million US dollars in 2011, the amount rises sharply to 1,194 million in 2012 and continues to increase to 1,281 million in 2013. Subsequently, it decreases to 973 million in 2014 before partially rebounding to 1,057 million in 2015. This fluctuation may reflect changes in the company's actual cash outflows for taxes, potentially influenced by alterations in tax payment timing, tax credits, or tax planning strategies.
Overall, while the income tax provision generally increased over the period with a minor decline at the end, the cash operating taxes followed a less consistent path, showing considerable volatility. The divergence between the income tax provision and cash operating taxes in certain years may indicate differences between accounting for tax expenses and actual cash paid, affecting cash flow management and tax planning effectiveness.
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Invested Capital
Time Warner Cable Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2011-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of deferred revenue and subscriber-related liabilities.
5 Addition of restructuring reserves.
6 Addition of equity equivalents to total TWC shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
- Total reported debt & leases
-
The reported debt and leases demonstrate a consistent declining trend over the observed period. Starting at 27,138 million USD at the end of 2011, the debt slightly increased to 27,378 million USD in 2012, then steadily decreased each year thereafter, reaching 23,183 million USD by the end of 2015. This indicates a reduction in the company's leverage or obligations related to debt and lease commitments over five years.
- Total shareholders’ equity
-
Shareholders’ equity shows some fluctuations but a general upward trend across the period. Initially, the equity value decreased from 7,530 million USD in 2011 to 6,943 million USD in 2013. Afterward, the equity figures improved significantly, increasing to 8,013 million USD in 2014 and further to 8,995 million USD by the end of 2015. This growth suggests strengthening of the company's net asset position or profitability retention over time.
- Invested capital
-
Invested capital remained relatively stable throughout the period, with minor fluctuations. It started at 44,961 million USD in 2011, peaked at 46,124 million USD in 2012, then decreased to 44,327 million USD in 2013. It showed slight increases in subsequent years, ending at 45,332 million USD in 2015. This stability reflects consistency in the company's overall capital base employed in operations.
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Cost of Capital
Time Warner Cable Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 52,402) | 52,402) | ÷ | 76,796) | = | 0.68 | 0.68 | × | 16.84% | = | 11.49% | ||
| Debt3 | 23,713) | 23,713) | ÷ | 76,796) | = | 0.31 | 0.31 | × | 6.22% × (1 – 35.00%) | = | 1.25% | ||
| Operating lease liability4 | 681) | 681) | ÷ | 76,796) | = | 0.01 | 0.01 | × | 6.22% × (1 – 35.00%) | = | 0.04% | ||
| Total: | 76,796) | 1.00 | 12.78% | ||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 42,062) | 42,062) | ÷ | 71,236) | = | 0.59 | 0.59 | × | 16.84% | = | 9.94% | ||
| Debt3 | 28,434) | 28,434) | ÷ | 71,236) | = | 0.40 | 0.40 | × | 5.95% × (1 – 35.00%) | = | 1.54% | ||
| Operating lease liability4 | 740) | 740) | ÷ | 71,236) | = | 0.01 | 0.01 | × | 5.95% × (1 – 35.00%) | = | 0.04% | ||
| Total: | 71,236) | 1.00 | 11.53% | ||||||||||
Based on: 10-K (reporting date: 2014-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 40,225) | 40,225) | ÷ | 66,185) | = | 0.61 | 0.61 | × | 16.84% | = | 10.23% | ||
| Debt3 | 25,236) | 25,236) | ÷ | 66,185) | = | 0.38 | 0.38 | × | 5.88% × (1 – 35.00%) | = | 1.46% | ||
| Operating lease liability4 | 724) | 724) | ÷ | 66,185) | = | 0.01 | 0.01 | × | 5.88% × (1 – 35.00%) | = | 0.04% | ||
| Total: | 66,185) | 1.00 | 11.73% | ||||||||||
Based on: 10-K (reporting date: 2013-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 25,692) | 25,692) | ÷ | 58,165) | = | 0.44 | 0.44 | × | 16.84% | = | 7.44% | ||
| Debt3 | 31,784) | 31,784) | ÷ | 58,165) | = | 0.55 | 0.55 | × | 5.89% × (1 – 35.00%) | = | 2.09% | ||
| Operating lease liability4 | 689) | 689) | ÷ | 58,165) | = | 0.01 | 0.01 | × | 5.89% × (1 – 35.00%) | = | 0.05% | ||
| Total: | 58,165) | 1.00 | 9.58% | ||||||||||
Based on: 10-K (reporting date: 2012-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 24,392) | 24,392) | ÷ | 51,530) | = | 0.47 | 0.47 | × | 16.84% | = | 7.97% | ||
| Debt3 | 26,442) | 26,442) | ÷ | 51,530) | = | 0.51 | 0.51 | × | 6.04% × (1 – 35.00%) | = | 2.01% | ||
| Operating lease liability4 | 696) | 696) | ÷ | 51,530) | = | 0.01 | 0.01 | × | 6.04% × (1 – 35.00%) | = | 0.05% | ||
| Total: | 51,530) | 1.00 | 10.04% | ||||||||||
Based on: 10-K (reporting date: 2011-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Time Warner Cable Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (2,400) | (1,434) | (1,813) | (609) | (1,186) | |
| Invested capital2 | 45,332) | 44,929) | 44,327) | 46,124) | 44,961) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.30% | -3.19% | -4.09% | -1.32% | -2.64% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Trade Desk Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2011-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2015 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,400 ÷ 45,332 = -5.30%
4 Click competitor name to see calculations.
The financial performance from 2011 to 2015 is characterized by a consistent failure to generate positive economic value, as evidenced by negative economic profit and a negative economic spread ratio throughout the entire five-year period. This indicates that the returns generated on invested capital were insufficient to cover the company's cost of capital, resulting in a steady erosion of shareholder value.
- Economic Profit Trends
- Economic profit remained negative for the duration of the analyzed period, exhibiting significant volatility. A temporary improvement was noted in 2012, where the deficit narrowed to -609 million USD. However, this was followed by a downward trajectory, culminating in a period low of -2,400 million USD by December 31, 2015. The recurring negative values suggest a systemic inability to achieve returns above the required threshold.
- Invested Capital Stability
- The amount of invested capital remained relatively stable, fluctuating within a narrow range between 44,327 million USD and 46,124 million USD. The lack of significant growth or contraction in the capital base implies that the decline in economic performance was not driven by massive capital expansions, but rather by a degradation in the efficiency of the existing asset base.
- Economic Spread Ratio Analysis
- The economic spread ratio closely mirrored the fluctuations in economic profit, maintaining a negative percentage throughout the period. The ratio improved to its highest point of -1.32% in 2012 but deteriorated sharply thereafter, reaching its lowest point of -5.30% in 2015. This widening negative spread confirms an increasing gap between the actual return on capital and the cost of that capital over time.
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Economic Profit Margin
Time Warner Cable Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (2,400) | (1,434) | (1,813) | (609) | (1,186) | |
| Revenue | 23,697) | 22,812) | 22,120) | 21,386) | 19,675) | |
| Add: Increase (decrease) in deferred revenue and subscriber-related liabilities | 26) | 10) | 5) | 14) | 6) | |
| Adjusted revenue | 23,723) | 22,822) | 22,125) | 21,400) | 19,681) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -10.12% | -6.28% | -8.19% | -2.85% | -6.02% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Trade Desk Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2011-12-31).
1 Economic profit. See details »
2 2015 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -2,400 ÷ 23,723 = -10.12%
3 Click competitor name to see calculations.
The financial performance from 2011 to 2015 indicates a persistent inability to generate positive economic value, characterized by negative economic profit despite steady growth in top-line revenue. The divergence between increasing revenue and deepening economic losses suggests that the cost of capital consistently exceeded the net operating profit after tax during this period.
- Adjusted Revenue Trends
- A consistent upward trajectory is observed in adjusted revenue, which grew annually from 19,681 million US dollars in 2011 to 23,723 million US dollars in 2015. This represents a steady expansion of the company's scale of operations over the five-year period.
- Economic Profit Analysis
- Economic profit remained negative throughout the analyzed timeframe, indicating a continuous destruction of shareholder value. Although a partial recovery occurred in 2012, where losses narrowed to 609 million US dollars, a subsequent downward trend emerged, culminating in a peak deficit of 2,400 million US dollars by December 31, 2015.
- Economic Profit Margin Evaluation
- The economic profit margin exhibits significant volatility and an overall deterioration. The margin improved to its highest point of -2.85% in 2012 but declined sharply thereafter, reaching -10.12% in 2015. This trend demonstrates that revenue growth failed to mitigate the factors driving economic losses, as the margin of value destruction expanded relative to total revenue.
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