Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Time Warner Inc. (NYSE:TWX)

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Analysis of Income Taxes

Advanced level


Accounting Policy on Income Taxes

Income taxes are provided using the asset and liability method, such that income taxes (i.e., deferred tax assets, deferred tax liabilities, taxes currently payable/refunds receivable and tax expense) are recorded based on amounts refundable or payable in the current year and include the results of any difference between GAAP and tax reporting. Deferred income taxes reflect the tax effect of net operating losses, capital losses and tax credit carryforwards and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under tax laws and rates. Valuation allowances are established when management determines that it is more likely than not that some portion or all of the deferred tax asset will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment. The subsequent realization of net operating loss and general business credit carryforwards acquired in acquisitions accounted for using the purchase method of accounting is recognized in the Consolidated Statement of Operations. Tax credits received for the production of film or television programming are offset against the cost of inventory capitalized. Deferred tax assets are included in Other assets in the Consolidated Balance Sheet.

From time to time, Time Warner engages in transactions in which the tax consequences may be subject to uncertainty. Examples of such transactions include business acquisitions and dispositions, including dispositions designed to be tax free, and certain financing transactions. Significant judgment is required in assessing and estimating the tax consequences of these transactions. Time Warner prepares and files tax returns based on its interpretation of tax laws and regulations. In the normal course of business, Time Warner’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. In determining Time Warner’s tax provision for financial reporting purposes, Time Warner establishes a reserve for uncertain tax positions unless such positions are determined to be more likely than not of being sustained upon examination based on their technical merits. There is considerable judgment involved in determining whether positions taken on Time Warner’s tax returns are more likely than not of being sustained.

Time Warner adjusts its tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. Time Warner’s policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense.

Source: 10-K (filing date: 2018-02-22).


Income Tax Expense (Benefit)

Time Warner Inc., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Federal
Foreign
State and local
Current
Federal
Foreign
State and local
Deferred
Current and deferred income taxes provided on Income from continuing operations

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Time Warner Inc.’s current decreased from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Time Warner Inc.’s deferred decreased from 2015 to 2016 and from 2016 to 2017.
Current and deferred income taxes provided on Income from continuing operations Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Time Warner Inc.’s current and deferred income taxes provided on Income from continuing operations decreased from 2015 to 2016 and from 2016 to 2017.

Effective Income Tax Rate (EITR)

Time Warner Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
U.S. federal statutory income tax rate
Effective tax rate

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

Item Description The company
Effective tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Time Warner Inc.’s effective tax rate decreased from 2015 to 2016 and from 2016 to 2017.

Components of Deferred Tax Assets and Liabilities

Time Warner Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Tax attribute carryforwards
Royalties, participations and residuals
Other
Deferred tax assets before valuation allowances
Valuation allowances
Deferred tax assets
Assets acquired in business combinations
Unbilled television receivables
Other
Deferred tax liabilities
Net deferred tax asset (liability)

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

Item Description The company
Deferred tax assets before valuation allowances Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Time Warner Inc.’s deferred tax assets before valuation allowances increased from 2015 to 2016 but then decreased significantly from 2016 to 2017.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Time Warner Inc.’s deferred tax assets decreased from 2015 to 2016 and from 2016 to 2017.
Net deferred tax asset (liability) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Time Warner Inc.’s net deferred tax asset (liability) decreased from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Deferred Tax Assets and Liabilities, Classification

Time Warner Inc., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current deferred tax assets
Noncurrent deferred tax assets
Noncurrent deferred tax liabilities

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

Item Description The company
Noncurrent deferred tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Time Warner Inc.’s noncurrent deferred tax assets decreased from 2015 to 2016 and from 2016 to 2017.
Noncurrent deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Time Warner Inc.’s noncurrent deferred tax liabilities increased from 2015 to 2016 but then decreased significantly from 2016 to 2017.

Adjustments to Financial Statements: Removal of Deferred Taxes

Time Warner Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Current Assets
Current assets (as reported)
Less: Current deferred tax assets, net
Current assets (adjusted)
Adjustment to Total Assets
Total assets (as reported)
Less: Current deferred tax assets, net
Less: Noncurrent deferred tax assets, net
Total assets (adjusted)
Adjustment to Total Liabilities
Total liabilities (as reported)
Less: Noncurrent deferred tax liabilities, net
Total liabilities (adjusted)
Adjustment to Total Time Warner Inc. Shareholders’ Equity
Total Time Warner Inc. shareholders’ equity (as reported)
Less: Net deferred tax assets (liabilities)
Total Time Warner Inc. shareholders’ equity (adjusted)
Adjustment to Net Income Attributable To Time Warner Inc. Shareholders
Net income attributable to Time Warner Inc. shareholders (as reported)
Add: Deferred income tax expense (benefit)
Net income attributable to Time Warner Inc. shareholders (adjusted)

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).


Time Warner Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Time Warner Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current Ratio
Reported current ratio
Adjusted current ratio
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Time Warner Inc.’s adjusted current ratio deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Time Warner Inc.’s adjusted net profit margin ratio deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Time Warner Inc.’s adjusted total asset turnover ratio improved from 2015 to 2016 and from 2016 to 2017.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Time Warner Inc.’s adjusted financial leverage ratio decreased from 2015 to 2016 and from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Time Warner Inc.’s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Time Warner Inc.’s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

Time Warner Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Current assets
Current liabilities
Liquidity Ratio
Current ratio1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets
Current liabilities
Liquidity Ratio
Adjusted current ratio2

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

2017 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= ÷ =

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷ =

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Time Warner Inc.’s adjusted current ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Time Warner Inc. shareholders
Revenues
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Time Warner Inc. shareholders
Revenues
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

2017 Calculations

1 Net profit margin = 100 × Net income attributable to Time Warner Inc. shareholders ÷ Revenues
= 100 × ÷ =

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Time Warner Inc. shareholders ÷ Revenues
= 100 × ÷ =

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Time Warner Inc.’s adjusted net profit margin ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Revenues
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenues
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

2017 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Time Warner Inc.’s adjusted total asset turnover ratio improved from 2015 to 2016 and from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Total assets
Total Time Warner Inc. shareholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted total Time Warner Inc. shareholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

2017 Calculations

1 Financial leverage = Total assets ÷ Total Time Warner Inc. shareholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Time Warner Inc. shareholders’ equity
= ÷ =

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Time Warner Inc.’s adjusted financial leverage ratio decreased from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Time Warner Inc. shareholders
Total Time Warner Inc. shareholders’ equity
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Time Warner Inc. shareholders
Adjusted total Time Warner Inc. shareholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

2017 Calculations

1 ROE = 100 × Net income attributable to Time Warner Inc. shareholders ÷ Total Time Warner Inc. shareholders’ equity
= 100 × ÷ =

2 Adjusted ROE = 100 × Adjusted net income attributable to Time Warner Inc. shareholders ÷ Adjusted total Time Warner Inc. shareholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Time Warner Inc.’s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Time Warner Inc. shareholders
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Time Warner Inc. shareholders
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

2017 Calculations

1 ROA = 100 × Net income attributable to Time Warner Inc. shareholders ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Adjusted net income attributable to Time Warner Inc. shareholders ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Time Warner Inc.’s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.