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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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Time Warner Cable Inc., economic profit calculation

US$ in millions

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	12.79%	11.54%	11.75%	9.58%	10.05%
Invested capital³	45,332)	44,929)	44,327)	46,124)	44,961)

Economic profit⁴	(2,406)	(1,439)	(1,818)	(613)	(1,190)

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 – 12.79% × 45,332 = -2,406

The financial performance from 2011 to 2015 indicates a consistent inability to generate positive economic profit, suggesting that operating returns were insufficient to cover the cost of the capital employed. While operating profits exhibited some volatility, the overall trajectory of economic value creation deteriorated over the five-year period.

Net Operating Profit After Taxes (NOPAT): NOPAT demonstrated a fluctuating pattern, reaching a peak of 3,807 million USD in 2012. Following this peak, a downward trend occurred in 2013, followed by a partial recovery to 3,745 million USD in 2014, and a subsequent decline to 3,391 million USD by 2015. The period closed with NOPAT levels nearly identical to those recorded in 2011.
Invested Capital and Cost of Capital: Invested capital remained relatively stagnant, maintaining a narrow range between 44,327 million USD and 46,124 million USD. In contrast, the cost of capital experienced a general upward trend. After a slight decrease to 9.58% in 2012, the rate climbed steadily, reaching a period high of 12.79% in 2015.
Economic Profit and Value Destruction: Economic profit remained negative throughout the entire analysis period, signifying a continuous destruction of shareholder value. The most significant deficit occurred in 2015, with an economic profit of -2,406 million USD. This negative trend was exacerbated by the combination of increasing capital costs and fluctuating NOPAT, which widened the gap between the actual operating profit and the required return on invested capital.

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Time Warner Cable Inc., NOPAT calculation

US$ in millions

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.

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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Time Warner Cable Inc., cash operating taxes calculation

US$ in millions

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).

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

US$ in millions

	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.

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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Time Warner Cable Inc., cost of capital calculations

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	52,402)	52,402)	÷	76,796)	=	0.68	0.68	×	16.86%	=	11.50%
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					12.79%

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 »

Dec 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,062)	42,062)	÷	71,236)	=	0.59	0.59	×	16.86%	=	9.96%
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					11.54%

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 »

Dec 31, 2013

	Capital (fair value)¹	Weights					Cost of capital
Equity²	40,225)	40,225)	÷	66,185)	=	0.61	0.61	×	16.86%	=	10.25%
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					11.75%

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 »

Dec 31, 2012

	Capital (fair value)¹	Weights					Cost of capital
Equity²	25,692)	25,692)	÷	58,165)	=	0.44	0.44	×	16.86%	=	7.45%
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 »

Dec 31, 2011

	Capital (fair value)¹	Weights					Cost of capital
Equity²	24,392)	24,392)	÷	51,530)	=	0.47	0.47	×	16.86%	=	7.98%
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					10.05%

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 »

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	(2,406)	(1,439)	(1,818)	(613)	(1,190)
Invested capital²	45,332)	44,929)	44,327)	46,124)	44,961)
Performance Ratio
Economic spread ratio³	-5.31%	-3.20%	-4.10%	-1.33%	-2.65%
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 × -2,406 ÷ 45,332 = -5.31%

⁴ Click competitor name to see calculations.

The financial performance from 2011 to 2015 is characterized by a consistent failure to generate economic value, as evidenced by negative economic profit and a negative economic spread ratio across the entire five-year period. While invested capital remained relatively stable, the company experienced significant volatility in its ability to cover the cost of that capital, culminating in a substantial deterioration of value creation by the end of 2015.

Economic Profit: Economic profit remained negative throughout the analyzed period, indicating that the returns generated were insufficient to cover the cost of capital. A brief improvement was noted in 2012, where losses narrowed to -613 million US dollars from -1,190 million US dollars in 2011. However, this trend reversed sharply in 2013, with losses widening to -1,818 million US dollars. After a partial recovery in 2014, the economic profit reached its lowest point in 2015 at -2,406 million US dollars, representing a significant increase in value destruction.
Invested Capital: The capital base remained remarkably stable, fluctuating within a narrow range between 44,327 million US dollars and 46,124 million US dollars. This stability suggests that the decline in economic profit was not driven by massive expansions in the asset base, but rather by a failure to optimize the returns on the existing invested capital.
Economic Spread Ratio: The economic spread ratio remained negative for all five years, mirroring the trend of the economic profit. The ratio peaked at -1.33% in 2012, suggesting the narrowest gap between the return on invested capital and the cost of capital. Subsequently, the spread widened, reaching -4.10% in 2013 and ending at its most negative level of -5.31% in 2015. This downward trajectory indicates a growing divergence between the actual returns generated and the required minimum rate of return.

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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	(2,406)	(1,439)	(1,818)	(613)	(1,190)

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	-10.14%	-6.31%	-8.22%	-2.87%	-6.05%
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 × -2,406 ÷ 23,723 = -10.14%

³ Click competitor name to see calculations.

The financial performance from 2011 to 2015 is characterized by a persistent inability to generate positive economic profit despite a consistent upward trend in adjusted revenue. The expansion of revenue has not been sufficient to offset the cost of capital, leading to sustained economic value destruction throughout the observed period.

Economic Profit Trends: Economic profit remained negative for all five years, exhibiting significant volatility. A temporary improvement occurred in 2012, where losses narrowed to US$ 613 million, but this was followed by a widening of losses, culminating in a five-year low of US$ 2,406 million by December 31, 2015.
Adjusted Revenue Growth: Adjusted revenue demonstrated steady and uninterrupted growth, increasing from US$ 19,681 million in 2011 to US$ 23,723 million in 2015. This indicates a consistent expansion of the top line over the analysis period.
Economic Profit Margin Analysis: The economic profit margin remained negative throughout the period, reflecting a failure to achieve returns exceeding the cost of capital. While the margin improved to -2.87% in 2012, it deteriorated sharply thereafter, reaching its lowest point of -10.14% in 2015. The divergence between rising revenues and a declining profit margin suggests that the growth in scale did not translate into improved economic efficiency.

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Time Warner Cable Inc. (NYSE:TWC)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin