Microsoft Excel LibreOffice Calc

Comcast Corp. (CMCSA)

Economic Value Added (EVA)

Difficulty: Advanced

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

Comcast Corp., economic profit calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net operating profit after taxes (NOPAT)1 14,650  12,227  11,580  11,341  8,591 
Cost of capital2 9.99% 10.03% 9.92% 10.16% 10.17%
Invested capital3 162,011  155,853  145,651  137,591  130,059 
Economic profit4 (1,535) (3,401) (2,863) (2,636) (4,630)

Based on: 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-12).

2017 Calculations

1 NOPAT. See Details »

2 Cost of capital. See Details »

3 Invested capital. See Details »

4 Economic profit = NOPAT – Cost of capital × Invested capital
= 14,650 – 9.99% × 162,011 = -1,535

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. Comcast Corp.’s economic profit declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Net Operating Profit after Taxes (NOPAT)

Comcast Corp., NOPAT calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net income attributable to Comcast Corporation 22,714  8,695  8,163  8,380  6,816 
Deferred income tax expense (benefit)1 (10,655) 1,444  958  1,165  16 
Increase (decrease) in allowance for doubtful accounts2 38  24  21  (16) 23 
Increase (decrease) in deferred revenue3 420  (170) 387  17  47 
Increase (decrease) in equity equivalents4 (10,197) 1,298  1,366  1,166  86 
Interest expense 3,086  2,942  2,702  2,617  2,574 
Interest expense, operating lease obligations5 162  169  150  115  110 
Adjusted interest expense 3,248  3,111  2,852  2,732  2,684 
Tax benefit of interest expense6 (1,137) (1,089) (998) (956) (939)
Adjusted interest expense, after taxes7 2,111  2,022  1,854  1,776  1,744 
(Gain) loss on marketable securities (253) (213) (81) (296) (576)
Investment income, before taxes (253) (213) (81) (296) (576)
Tax expense (benefit) of investment income8 89  75  28  104  202 
Investment income, after taxes9 (164) (138) (53) (192) (374)
Net income (loss) attributable to noncontrolling interest 186  350  250  212  319 
Net operating profit after taxes (NOPAT) 14,650  12,227  11,580  11,341  8,591 

Based on: 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-12).

2017 Calculations

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.

4 Addition of increase (decrease) in equity equivalents to net income attributable to Comcast Corporation.

5 Addition of interest expense on capitalized operating leases. See Details »

6 Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 3,248 × 35.00% = 1,137

7 Addition of after taxes interest expense to net income attributable to Comcast Corporation.

8 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 253 × 35.00% = 89

9 Elimination of after taxes investment income.

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. Comcast Corp.’s NOPAT increased from 2015 to 2016 and from 2016 to 2017.

Cash Operating Taxes

Comcast Corp., cash operating taxes calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Income tax expense (benefit) (7,578) 5,308  4,959  3,873  3,980 
Less: Deferred income tax expense (benefit) (10,655) 1,444  958  1,165  16 
Add: Tax savings from interest expense 1,137  1,089  998  956  939 
Less: Tax imposed on investment income 89  75  28  104  202 
Cash operating taxes 4,125  4,878  4,971  3,561  4,702 

Based on: 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-12).

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. Comcast Corp.’s cash operating taxes declined from 2015 to 2016 and from 2016 to 2017.

Invested Capital

Comcast Corp., invested capital calculation (financing approach)

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current portion of long-term debt 5,134  5,480  3,627  4,217  3,280 
Long-term debt, less current portion 59,422  55,566  48,994  44,017  44,567 
PV of operating lease payments1 3,335  3,189  2,730  1,855  1,780 
Total reported debt & leases 67,891  64,235  55,351  50,089  49,627 
Total Comcast Corporation shareholders’ equity 68,606  53,943  52,269  52,711  50,694 
Net deferred tax (assets) liabilities2 24,202  34,813  33,566  32,764  31,699 
Allowance for doubtful accounts3 288  250  226  205  221 
Deferred revenue4 1,552  1,132  1,302  915  898 
Equity equivalents5 26,042  36,195  35,094  33,884  32,818 
Accumulated other comprehensive (income) loss, net of tax6 (379) (98) 174  146  (56)
Redeemable noncontrolling interests and redeemable subsidiary preferred stock 1,357  1,446  1,221  1,066  957 
Noncontrolling interests 843  2,231  1,709  357  364 
Adjusted total Comcast Corporation shareholders’ equity 96,469  93,717  90,467  88,164  84,777 
Construction in process7 (1,752) (1,901) –  –  – 
Investments, fair value method8 (597) (198) (167) (662) (4,345)
Invested capital 162,011  155,853  145,651  137,591  130,059 

Based on: 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-12).

1 Addition of capitalized operating leases. See Details »

2 Elimination of deferred taxes from assets and liabilities. See Details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of deferred revenue.

5 Addition of equity equivalents to total Comcast Corporation shareholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in process.

8 Subtraction of investments, fair value method.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Comcast Corp.’s invested capital increased from 2015 to 2016 and from 2016 to 2017.

Cost of Capital

Comcast Corp., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 197,531  197,531  ÷ 272,566  = 0.72 0.72 × 12.79% = 9.27%
Debt3 71,700  71,700  ÷ 272,566  = 0.26 0.26 × 4.04% × (1 – 35.00%) = 0.69%
PV of operating lease payments4 3,335  3,335  ÷ 272,566  = 0.01 0.01 × 4.04% × (1 – 35.00%) = 0.03%
Total: 272,566  1.00 9.99%

Based on: 10-K (filing date: 2018-01-31).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 178,803  178,803  ÷ 248,292  = 0.72 0.72 × 12.79% = 9.21%
Debt3 66,300  66,300  ÷ 248,292  = 0.27 0.27 × 4.50% × (1 – 35.00%) = 0.78%
PV of operating lease payments4 3,189  3,189  ÷ 248,292  = 0.01 0.01 × 4.50% × (1 – 35.00%) = 0.04%
Total: 248,292  1.00 10.03%

Based on: 10-K (filing date: 2017-02-03).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 145,127  145,127  ÷ 205,857  = 0.70 0.70 × 12.79% = 9.02%
Debt3 58,000  58,000  ÷ 205,857  = 0.28 0.28 × 4.70% × (1 – 35.00%) = 0.86%
PV of operating lease payments4 2,730  2,730  ÷ 205,857  = 0.01 0.01 × 4.70% × (1 – 35.00%) = 0.04%
Total: 205,857  1.00 9.92%

Based on: 10-K (filing date: 2016-02-05).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 150,889  150,889  ÷ 208,044  = 0.73 0.73 × 12.79% = 9.27%
Debt3 55,300  55,300  ÷ 208,044  = 0.27 0.27 × 4.95% × (1 – 35.00%) = 0.86%
PV of operating lease payments4 1,855  1,855  ÷ 208,044  = 0.01 0.01 × 4.95% × (1 – 35.00%) = 0.03%
Total: 208,044  1.00 10.16%

Based on: 10-K (filing date: 2015-02-27).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 143,986  143,986  ÷ 197,566  = 0.73 0.73 × 12.79% = 9.32%
Debt3 51,800  51,800  ÷ 197,566  = 0.26 0.26 × 4.80% × (1 – 35.00%) = 0.82%
PV of operating lease payments4 1,780  1,780  ÷ 197,566  = 0.01 0.01 × 4.80% × (1 – 35.00%) = 0.03%
Total: 197,566  1.00 10.17%

Based on: 10-K (filing date: 2014-02-12).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Economic Spread

Comcast Corp., economic spread calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit1 (1,535) (3,401) (2,863) (2,636) (4,630)
Invested capital2 162,011  155,853  145,651  137,591  130,059 
Ratio
Economic spread3 -0.95% -2.18% -1.97% -1.92% -3.56%

Based on: 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-12).

2017 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

3 Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × -1,535 ÷ 162,011 = -0.95%

Ratio Description The company
Economic spread The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Comcast Corp.’s economic spread deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Economic Profit Margin

Comcast Corp., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit1 (1,535) (3,401) (2,863) (2,636) (4,630)
Revenue 84,526  80,403  74,510  68,775  64,657 
Add: Increase (decrease) in deferred revenue 420  (170) 387  17  47 
Adjusted revenue 84,946  80,233  74,897  68,792  64,704 
Ratio
Economic profit margin2 -1.81% -4.24% -3.82% -3.83% -7.16%

Based on: 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27), 10-K (filing date: 2014-02-12).

2017 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -1,535 ÷ 84,946 = -1.81%

Ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s 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. Comcast Corp.’s economic profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.