Stock Analysis on Net

Time Warner Cable Inc. (NYSE:TWC)

This company has been moved to the archive! The financial data has not been updated since April 28, 2016.

Economic Value Added (EVA)

Microsoft Excel

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

Microsoft Excel
12 months ended: Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Net operating profit after taxes (NOPAT)1 3,391 3,745 3,388 3,807 3,328
Cost of capital2 10.35% 9.43% 9.57% 8.01% 8.36%
Invested capital3 45,332 44,929 44,327 46,124 44,961
 
Economic profit4 (1,301) (491) (855) 115 (429)

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
= 3,39110.35% × 45,332 = -1,301

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Time Warner Cable Inc. economic profit increased from 2013 to 2014 but then decreased significantly from 2014 to 2015.

Net Operating Profit after Taxes (NOPAT)

Time Warner Cable Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Net income attributable to TWC shareholders 1,844 2,031 1,954 2,155 1,665
Deferred income tax expense (benefit)1 593 756 363 562 638
Increase (decrease) in allowance for doubtful accounts2 (15) 32 12 3 (12)
Increase (decrease) in deferred revenue and subscriber-related liabilities3 26 10 5 14 6
Increase (decrease) in restructuring reserves4 4 (35) 16 (6) 11
Increase (decrease) in equity equivalents5 608 763 396 573 643
Interest expense 1,402 1,419 1,555 1,614 1,524
Interest expense, operating lease liability6 42 44 43 41 42
Adjusted interest expense 1,444 1,463 1,598 1,655 1,566
Tax benefit of interest expense7 (506) (512) (559) (579) (548)
Adjusted interest expense, after taxes8 939 951 1,038 1,075 1,018
Net income (loss) attributable to noncontrolling interest 4 2
Net operating profit after taxes (NOPAT) 3,391 3,745 3,388 3,807 3,328

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.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Time Warner Cable Inc. NOPAT increased from 2013 to 2014 but then slightly decreased from 2014 to 2015 not reaching 2013 level.

Cash Operating Taxes

Time Warner Cable Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Income tax provision 1,144 1,217 1,085 1,177 795
Less: Deferred income tax expense (benefit) 593 756 363 562 638
Add: Tax savings from interest expense 506 512 559 579 548
Cash operating taxes 1,057 973 1,281 1,194 705

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).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Time Warner Cable Inc. cash operating taxes decreased from 2013 to 2014 but then slightly increased from 2014 to 2015.

Invested Capital

Time Warner Cable Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Current maturities of long-term debt 5 1,017 1,767 1,518 2,122
Long-term debt, excluding current maturities 22,497 22,701 23,285 25,171 24,320
Operating lease liability1 681 740 724 689 696
Total reported debt & leases 23,183 24,458 25,776 27,378 27,138
Total TWC shareholders’ equity 8,995 8,013 6,943 7,279 7,530
Net deferred tax (assets) liabilities2 12,830 12,291 11,764 10,963 9,931
Allowance for doubtful accounts3 94 109 77 65 62
Deferred revenue and subscriber-related liabilities4 224 198 188 183 169
Restructuring reserves5 12 8 43 27 33
Equity equivalents6 13,160 12,606 12,072 11,238 10,195
Accumulated other comprehensive (income) loss, net of tax7 414 324 (44) 663 559
Noncontrolling interests 4 4 4 4 7
Adjusted total TWC shareholders’ equity 22,573 20,947 18,975 19,184 18,291
Construction in progress8 (424) (476) (424) (438) (468)
Invested capital 45,332 44,929 44,327 46,124 44,961

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.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Time Warner Cable Inc. invested capital increased from 2013 to 2014 and from 2014 to 2015.

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 × 13.29% = 9.07%
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 10.35%

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 × 13.29% = 7.84%
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 9.43%

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 × 13.29% = 8.07%
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 9.57%

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 × 13.29% = 5.87%
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 8.01%

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 × 13.29% = 6.29%
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 8.36%

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

Microsoft Excel
Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Selected Financial Data (US$ in millions)
Economic profit1 (1,301) (491) (855) 115 (429)
Invested capital2 45,332 44,929 44,327 46,124 44,961
Performance Ratio
Economic spread ratio3 -2.87% -1.09% -1.93% 0.25% -0.95%
Benchmarks
Economic Spread Ratio, Competitors4
Alphabet Inc.
Comcast Corp.
Meta Platforms Inc.
Netflix 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 × -1,301 ÷ 45,332 = -2.87%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Time Warner Cable Inc. economic spread ratio improved from 2013 to 2014 but then deteriorated significantly from 2014 to 2015.

Economic Profit Margin

Time Warner Cable Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011
Selected Financial Data (US$ in millions)
Economic profit1 (1,301) (491) (855) 115 (429)
 
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 -5.48% -2.15% -3.87% 0.54% -2.18%
Benchmarks
Economic Profit Margin, Competitors3
Alphabet Inc.
Comcast Corp.
Meta Platforms Inc.
Netflix 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 × -1,301 ÷ 23,723 = -5.48%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Time Warner Cable Inc. economic profit margin improved from 2013 to 2014 but then deteriorated significantly from 2014 to 2015.