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 – 12.75% × 45,332 = -2,387
The financial performance from 2011 to 2015 is characterized by a persistent inability to generate positive economic profit, indicating that the returns on invested capital consistently failed to meet the required cost of capital throughout the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited volatility without a clear linear trend. The figure peaked at 3,807 million USD in 2012 and 3,745 million USD in 2014, while dropping to its lowest point of 3,328 million USD in 2011. By the end of 2015, NOPAT stood at 3,391 million USD, suggesting a stagnation in operational profitability over the five-year span.
- Cost of Capital
- There is a general upward trajectory in the cost of capital. After a slight decrease to 9.56% in 2012, the rate rose significantly to 11.71% in 2013 and reached a period high of 12.75% by December 31, 2015. This increasing trend reflects a rising threshold for the return required to create value for shareholders.
- Invested Capital
- The total 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 indicates that the decline in economic profit was not driven by aggressive capital expansion, but rather by operational and capital cost factors.
- Economic Profit Analysis
- Economic profit remained negative for the entire duration, signifying a consistent destruction of shareholder value. While there was a partial recovery in 2012, where the deficit narrowed to -601 million USD, the situation deteriorated sharply thereafter. The negative value widened to -2,387 million USD by 2015. This decline is primarily attributed to the combination of stagnating NOPAT and a rising cost of capital acting upon a large, stable base of invested capital.
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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 | × | 16.80% | = | 11.46% | ||
| 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 | 12.75% | ||||||||||
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 | × | 16.80% | = | 9.92% | ||
| 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 | 11.50% | ||||||||||
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 | × | 16.80% | = | 10.21% | ||
| 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 | 11.71% | ||||||||||
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 | × | 16.80% | = | 7.42% | ||
| 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 | 9.56% | ||||||||||
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 | × | 16.80% | = | 7.95% | ||
| 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 | 10.02% | ||||||||||
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 | (2,387) | (1,423) | (1,802) | (601) | (1,177) | |
| Invested capital2 | 45,332) | 44,929) | 44,327) | 46,124) | 44,961) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.27% | -3.17% | -4.06% | -1.30% | -2.62% | |
| 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 × -2,387 ÷ 45,332 = -5.27%
4 Click competitor name to see calculations.
Between 2011 and 2015, the company consistently failed to generate positive economic value, as evidenced by negative economic profit and economic spread ratios throughout the entire five-year period. This indicates that the returns generated by the business were insufficient to cover the cost of the capital employed.
- Economic Profit Trends
- Economic profit remained in negative territory across all reported years. While a partial recovery occurred in 2012, where losses narrowed to -601 million USD, a subsequent downturn followed. The period concluded with a significant deterioration in 2015, reaching a five-year low of -2,387 million USD. This volatility suggests an inability to stabilize earnings above the cost of capital threshold.
- Invested Capital Stability
- Invested capital remained relatively stagnant, 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 indicates that the fluctuations in economic profit were driven by operational performance or changes in the cost of capital rather than by aggressive expansion or divestment of assets.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, mirrored the volatility of the economic profit. The ratio peaked at -1.30% in 2012 before declining sharply. By December 31, 2015, the spread ratio reached its lowest point at -5.27%. The persistent negative spread confirms a sustained destruction of shareholder value over the analyzed timeframe.
The correlation between the stability of invested capital and the widening negative economic spread suggests a declining efficiency in capital utilization. The acceleration of losses in 2015 represents a significant decline in economic performance relative to the start of the period.
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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 | (2,387) | (1,423) | (1,802) | (601) | (1,177) | |
| 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 | -10.06% | -6.23% | -8.14% | -2.81% | -5.98% | |
| 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 × -2,387 ÷ 23,723 = -10.06%
3 Click competitor name to see calculations.
The financial performance from 2011 to 2015 is characterized by a persistent inability to generate positive economic value, despite a consistent increase in adjusted revenue. While the top-line growth remained steady throughout the period, the economic profit remained negative, indicating that the company's operating returns were insufficient to cover its cost of capital.
- Adjusted Revenue Growth
- A consistent upward trend is observed in adjusted revenue, which grew from US$ 19,681 million in 2011 to US$ 23,723 million by 2015. This represents a steady expansion of the business scale over the five-year duration.
- Economic Profit Volatility
- Economic profit remained negative for the entire duration, exhibiting significant volatility. A brief improvement occurred in 2012, where losses narrowed to US$ 601 million. However, this was followed by a sharp decline in 2013 and a peak deficit of US$ 2,387 million in 2015, marking the most significant value destruction within the analyzed timeframe.
- Economic Profit Margin Trends
- The economic profit margin mirrors the volatility of the absolute economic profit. The margin reached its highest point in 2012 at -2.81%, suggesting a temporary narrowing of the gap between returns and the cost of capital. Subsequently, the margin deteriorated, reaching its lowest point of -10.06% in 2015. The divergence between rising revenues and a declining profit margin indicates that the growth in scale did not translate into improved economic efficiency or value creation.
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