Time Warner Inc. (NYSE:TWX)

The analysis of the current and deferred income tax expenses over the five-year period reveals several notable trends and fluctuations.

Current Income Tax Expense

The current income tax expense exhibits variability across the years, with values reported as follows: 990 million USD in 2013, a decrease to 619 million USD in 2014, then a substantial increase to 1323 million USD in 2015. This is followed by a decline to 1045 million USD in 2016 and a significant rise to 1711 million USD in 2017. The trend indicates cyclical fluctuations, with the highest reported figure in 2017, representing increased current tax obligations compared to prior years.

Deferred Income Tax Expense

The deferred income tax figures show more pronounced volatility. Starting at 759 million USD in 2013, there was a sharp decline to 166 million USD in 2014. The amount increased to 328 million USD in 2015 but then decreased again to 236 million USD in 2016. A significant shift occurred in 2017, where deferred income tax expense turned negative, registering -1010 million USD. This transition to a negative figure indicates a deferred tax benefit or reduction in deferred tax liabilities during that year, which contrasts sharply with positive deferred tax expenses in previous years.

Combined Current and Deferred Income Taxes

The sum of current and deferred income taxes closely mirrors the trends in current tax expenses but is moderated by the deferred tax component. The total income tax expense was highest in 2013 at 1749 million USD, then experienced a marked reduction to 785 million USD in 2014. It surged again to 1651 million USD in 2015 before tapering down to 1281 million USD in 2016 and further declining in 2017 to 701 million USD despite the highest current tax expense in that year. This decline in total tax expense in 2017 is primarily attributable to the significant negative deferred tax amount, which effectively offset part of the current tax cost.

Overall, the data indicates a pattern of oscillating tax expenses with a pronounced impact of deferred taxes, particularly in 2017, where deferred taxes shifted from a cost to a benefit, significantly influencing the total tax expense recognized. This highlights the importance of deferred tax accounting in understanding the company's tax expense dynamics over time.

The data reveals significant fluctuations in the effective tax rate over the five-year period from December 31, 2013, to December 31, 2017, while the U.S. federal statutory income tax rate remains constant at 35% throughout the same timeframe.

U.S. Federal Statutory Income Tax Rate

The statutory rate maintains a steady level at 35% annually, indicating no legislative changes or adjustments in the federal income tax rate applicable to the company during this period.

Effective Tax Rate

There is noticeable variability in the effective tax rate, starting at 33% in 2013, decreasing sharply to 17% in 2014, rising to 30% in 2015, then declining again to 25% in 2016, and reaching a minimum of 11.79% in 2017. This trend suggests the presence of factors such as tax planning strategies, credits, deductions, or changes in earnings composition that influence the effective tax burden beyond the statutory rate.

The decreasing effective tax rate towards the end of the period, especially the marked reduction to near one-third of the statutory rate by 2017, may reflect increased utilization of tax incentives, restructuring benefits, or other mechanisms aimed at reducing taxable income. The divergence between the effective and statutory rates throughout the timeline underscores the dynamic nature of the company's tax position and highlights potential areas of tax optimization or policy impacts.

The data reflects the financial trends of deferred tax-related items over a five-year period ending in 2017. Overall, there is a notable decline in key asset and liability figures, suggesting shifts in the company's tax position and possibly its operational strategy.

Tax attribute carryforwards

There is a sharp decrease from 2013 to 2014, dropping from 1,074 million to 305 million, followed by relative stabilization around the 290 to 435 million range through 2017. This indicates a significant utilization or expiration of tax attributes early in the period, with smaller fluctuations thereafter.

Royalties, participations and residuals

This category remains fairly stable between 2013 and 2015, fluctuating moderately between 429 and 457 million. However, there is a marked decrease in 2016 and 2017, reaching 257 million by the end of 2017, indicating reduced income or changing contractual arrangements related to these items.

Other deferred tax assets (positive values)

Values rise from 1,413 million in 2013 to a peak of 2,024 million in 2014, then decline consistently to 1,343 million by 2017. This pattern suggests a peak in certain miscellaneous deferred tax assets in 2014, followed by a downward correction or asset utilization in subsequent years.

Deferred tax assets before valuation allowances

The total deferred tax assets before allowances decreased from 2,940 million in 2013 to 1,892 million in 2017, with intermittent variation. The decline reflects a decrease in expected future tax benefits over the period.

Valuation allowances

Valuation allowances, which reduce the value of deferred tax assets, fluctuate notably, decreasing from -564 million in 2013 to a low of -233 million in 2015, followed by an increase to -463 million in 2016, then a reduction to -287 million in 2017. The volatility suggests changing assessments of asset realizability and may indicate periods of increased risk or improved outlook.

Deferred tax assets (net of valuation allowances)

The net deferred tax assets follow a decreasing trend, dropping from 2,376 million in 2013 to 1,605 million in 2017, reflecting overall diminished usable tax assets during the period.

Assets acquired in business combinations (deferred tax liabilities)

There is a steady reduction in liability balances related to acquired assets, from -3,350 million in 2013 to -1,688 million in 2017. This trend could indicate the amortization or derecognition of these liabilities over time.

Unbilled television receivables (deferred tax liabilities)

Liabilities related to unbilled receivables increase marginally between 2013 and 2015 from -941 to -1,117 million, then decline to -794 million by 2017, implying a fluctuating but generally diminishing tax liability recognition against this category.

Other deferred tax liabilities

Other liabilities show increased volatility, widening from -280 million in 2013 to -856 million in 2016, then improving to -596 million in 2017. This suggests varying recognition of additional deferred tax obligations over the years.

Total deferred tax liabilities

The sum of deferred tax liabilities decreases from -4,571 million in 2013 to -3,078 million in 2017, indicating a reduction in overall tax obligations potentially due to tax planning or asset derecognition.

Net deferred tax asset (liability)

The net deferred tax position remains a liability throughout the period, with the magnitude decreasing from -2,195 million in 2013 to -1,473 million in 2017. Although liabilities exceed assets, the reduction suggests an improving net tax position over the years.

In summary, the data reveals an overall decrease in deferred tax assets and liabilities with fluctuations in valuation allowances and certain liability categories. This pattern may reflect ongoing utilization of tax carryforwards, amortization of acquired asset-related liabilities, and adjustments in the expected realization of tax benefits. The net deferred tax liability reduction highlights an improving but still negative tax position by the end of the reported period.

Current Deferred Tax Assets

The current deferred tax assets decreased significantly from 447 million US dollars in 2013 to 184 million US dollars in 2014. Data for the subsequent years is unavailable, making it difficult to discern a complete trend for this category.

Noncurrent Deferred Tax Assets

Noncurrent deferred tax assets data is only available from 2015 onward. These assets showed a declining trend, starting at 134 million US dollars in 2015, decreasing to 125 million in 2016, and further declining to 111 million in 2017. This gradual reduction indicates a consistent decrease in long-term deferred tax asset values over the period.

Noncurrent Deferred Tax Liabilities

The noncurrent deferred tax liabilities exhibit volatility over the observed periods. Starting at 2642 million US dollars in 2013, they decreased to 2204 million in 2014. However, liabilities rose again to 2454 million in 2015 and further increased to 2678 million in 2016 before sharply declining to 1584 million in 2017. Despite fluctuations, the overall trend across the five years appears downward when comparing the initial and final data points, primarily due to the marked drop in 2017.

Current Assets

The reported current assets display a generally increasing trend from 12,844 million USD in 2013 to 15,219 million USD in 2017, with a slight dip in 2015. The adjusted current assets follow a similar pattern, starting at 12,397 million USD in 2013 and rising steadily to 15,219 million USD by 2017. The adjustment narrows the differences primarily in the earlier years, converging with the reported values by 2017.

Total Assets

The reported total assets decreased from 67,994 million USD in 2013 to 63,259 million USD in 2014, then remained relatively stable around 63,000 to 66,000 million USD until increasing to 69,209 million USD in 2017. The adjusted total assets mirror this trend, starting at 67,547 million USD in 2013, dipping in 2014, and rising towards 69,098 million USD by 2017. Adjusted figures are consistently slightly lower than the reported figures throughout the period, indicating adjustments that reduce asset values marginally.

Total Liabilities

The reported total liabilities increased steadily from 38,090 million USD in 2013 to a peak of 41,600 million USD in 2016, before slightly declining to 40,798 million USD in 2017. The adjusted total liabilities show a similar upward trend but with systematically lower values, starting at 35,448 million USD in 2013 and rising to 39,214 million USD in 2017. The divergence between reported and adjusted liabilities suggests recognition of certain liabilities differently or exclusion of some components in adjustments.

Shareholders’ Equity

The reported equity decreased significantly from 29,904 million USD in 2013 to 23,619 million USD in 2015, then grew to 28,375 million USD by 2017. In contrast, the adjusted shareholders’ equity figures are higher throughout the period, starting at 32,099 million USD in 2013 and increasing steadily to 29,848 million USD in 2017. This implies that the adjustments likely account for additional equity elements or correct understatements in the reported equity figures.

Net Income Attributable to Shareholders

The reported net income increased modestly from 3,691 million USD in 2013 to 5,247 million USD in 2017, with a consistent upward trend yearly. Meanwhile, adjusted net income starts at a higher figure of 4,450 million USD in 2013, experiences a slight decline and stabilization around 4,160 million USD during 2015-2016, and modestly increases to 4,237 million USD in 2017. The adjusted net income figures in earlier years notably exceed reported net income, suggesting adjustments for timing or recognition differences in income and tax expenses, with reported net income surpassing adjusted values by 2017.

Overall Trends and Insights

The data exhibits consistent patterns where adjusted financial data generally starts with values close to or above reported values for assets and equity in early years but aligns more closely with reported data in later periods. Liabilities are adjusted downward systematically, suggesting conservative recognition in reported liabilities. Adjustments to net income reflect timing or classification changes in tax and income recognition, with a persistent premium on adjusted net income in earlier years, normalizing towards the end. Growth in assets, equity, and income indicates overall financial strengthening over the period despite fluctuations in liabilities. The adjustments reveal an effort to present a more conservative and arguably more accurate financial position by accounting for deferred taxes and other items affecting income and equity portrayal over time.

Liquidity Trends

The reported current ratio exhibited a general decline from 1.53 in 2013 to 1.08 in 2017, indicating a decreasing short-term liquidity position over the period. The adjusted current ratio followed a nearly identical pattern, declining from 1.48 to 1.08, which suggests that deferred income tax adjustments had minimal impact on liquidity measures.

Profitability Margins

The reported net profit margin showed some fluctuation, initially increasing from 12.39% in 2013 to 13.99% in 2014, then slightly decreasing and ending with a notable increase to 16.78% in 2017. Conversely, the adjusted net profit margin started higher at 14.94% in 2013 but exhibited a steady decline to 13.55% in 2017. This divergence suggests the deferred income tax adjustments may have influenced profitability metrics, with reported figures indicating improved profitability by the end of the period, while adjusted figures reflect a gradual weakening margin.

Asset Utilization

The reported total asset turnover ratio remained relatively stable throughout the five years, hovering around 0.44 to 0.45, indicating consistent efficiency in using assets to generate revenue. The adjusted ratio mirrored the reported figures closely, with a slight increase to 0.45 in 2016 and 2017, affirming stable asset utilization regardless of tax adjustments.

Leverage Ratios

Reported financial leverage increased from 2.27 in 2013 to a peak of 2.71 in 2016 before declining to 2.44 in 2017. Adjusted financial leverage displayed a similar pattern but remained consistently lower than reported values, ranging from 2.10 in 2013 to 2.31 in 2017. This indicates a trend of growing leverage up to 2016 with a subsequent reduction, and suggests that deferred tax elements decrease the perceived financial risk slightly.

Return on Equity (ROE)

The reported ROE increased steadily from 12.34% in 2013 to 18.49% in 2017, reflecting improved overall profitability relative to equity. In contrast, the adjusted ROE rose from 13.86% to peak at 16.04% in 2015 but then declined to 14.20% by 2017. This divergence implies that tax adjustments reduced the reported profitability after considering deferred taxes, suggesting a more conservative profitability estimate when adjusted.

Return on Assets (ROA)

Reported ROA showed an upward trend from 5.43% in 2013 to 7.58% in 2017, indicating increasing efficiency in asset utilization to generate profit. The adjusted ROA remained relatively stable, fluctuating between 6.13% and 6.59%, with a slight downward bias toward the end. The marginal difference between reported and adjusted ROA figures suggests that deferred income taxes moderately influence asset-related profitability assessments.

Reported Current Assets

The reported current assets exhibited a generally increasing trend over the examined period. Beginning at $12,844 million in 2013, the value slightly rose to $13,180 million in 2014, then experienced a decline to $12,513 million in 2015. After that, the assets increased consecutively to reach $13,485 million in 2016 and $15,219 million in 2017, marking a notable growth towards the end of the period.

Adjusted Current Assets

The adjusted current assets mirrored the pattern of reported current assets closely, with values identical from 2015 onward. The figures started at $12,397 million in 2013, grew to $12,996 million in 2014, both slightly lower than the reported values. From 2015 to 2017, both the adjusted and reported values of current assets were the same, reflecting alignment in reported and adjusted figures in later years.

Reported Current Ratio

The reported current ratio showed a fluctuating but overall declining trend over the five-year span. It began at a relatively strong liquidity position of 1.53 in 2013, decreased to 1.43 in 2014, then increased to 1.56 in 2015. Subsequently, the ratio declined to 1.39 in 2016 and further dropped to 1.08 in 2017, indicating a significant reduction in short-term liquidity by the end of the period.

Adjusted Current Ratio

The adjusted current ratio closely followed the trend of the reported current ratio, with slightly lower values in the initial years. Starting at 1.48 in 2013 and decreasing to 1.41 in 2014, it then increased to 1.56 in 2015, matching the reported ratio. In 2016 and 2017, the adjusted ratios were identical to the reported ratios, showing similar liquidity trends without adjustment impact in the later years.

Net Income Trends

The reported net income attributable to shareholders shows a consistent upward trend over the five-year period. It increased modestly from 3,691 million US dollars in 2013 to 3,926 million in 2016, followed by a significant rise to 5,247 million by the end of 2017.

Adjusted net income, which accounts for deferred income tax effects, displays a less consistent pattern. It started higher than the reported figure at 4,450 million in 2013, declined to 3,993 million in 2014, then gradually increased each subsequent year to 4,237 million in 2017. Notably, adjusted net income remains below the reported net income in 2017, unlike earlier years where it was typically higher.

Net Profit Margin Analysis

The reported net profit margin steadily improved over the period, beginning at 12.39% in 2013 and increasing to 16.78% in 2017. This indicates an improvement in profitability relative to revenue from a reported perspective.

Conversely, the adjusted net profit margin declined over time, starting at 14.94% in 2013 and decreasing to 13.55% in 2017. This suggests that when adjusting for deferred income taxes, the company's profitability as a percentage of revenue has slightly diminished over the five years.

Comparative Insights

The divergence between reported and adjusted metrics indicates that deferred income tax adjustments have a significant impact on the company's income figures and profitability analysis. The reported data suggests stronger profitability growth, especially in 2017, compared to the more moderate growth or slight decline observed in adjusted figures.

The sharper increase in reported net income and margin in 2017 compared to adjusted figures highlights the potential influence of tax-related accounting treatments, which should be considered when evaluating overall financial performance.

Total Assets

The reported total assets showed a decreasing trend from 67,994 million US dollars at the end of 2013 to 63,259 million in 2014. This was followed by a slight increase to 63,848 million in 2015, continued growth to 65,966 million in 2016, and further rise reaching 69,209 million in 2017. The adjusted total assets mirrored this pattern closely, starting at 67,547 million in 2013, decreasing to 63,075 million in 2014, and then gradually increasing to 69,098 million by 2017, showing a consistent recovery and growth over the latter years.

Total Asset Turnover Ratio

The reported total asset turnover ratio remained relatively stable over the five-year period. It was 0.44 in 2013, dipped slightly to 0.43 in 2014, then returned to 0.44 for 2015 and 2016, and increased marginally to 0.45 in 2017. The adjusted total asset turnover displayed a similar trend, except for a slight increase to 0.45 in 2016 instead of remaining at 0.44, maintaining at 0.45 in 2017. This indicates a consistent efficiency in using assets to generate revenue with minor improvement towards the end of the period.

Total Assets

The reported total assets experienced a decline from 67,994 million US dollars at the end of 2013 to 63,259 million in 2014, showing a notable reduction. This was followed by a period of gradual recovery, with assets increasing slightly to 63,848 million in 2015, then rising further to 65,966 million in 2016, and reaching 69,209 million in 2017. The adjusted total assets mirrored this trend closely, starting at 67,547 million in 2013, decreasing to 63,075 million in 2014, and then progressively increasing each year to eventually reach 69,098 million in 2017. Overall, the asset base showed resilience after the initial decline in 2014, ending the period on a higher note than where it began.

Shareholders' Equity

Reported shareholders’ equity declined sharply from 29,904 million in 2013 to 24,476 million in 2014, continuing to decrease slightly to 23,619 million in 2015. After 2015, equity stabilized and showed moderate growth, increasing to 24,335 million in 2016 and further to 28,375 million in 2017. Adjusted shareholders’ equity followed a similar trajectory but consistently reported higher values than the reported figures. The adjusted equity decreased from 32,099 million in 2013 to 26,496 million in 2014 and 25,939 million in 2015, then rose steadily to 26,888 million in 2016 and 29,848 million in 2017. The adjustment contributed to a generally stronger equity position throughout the period.

Financial Leverage

The reported financial leverage ratio increased from 2.27 in 2013 to a peak of 2.71 in 2016, indicating a trend toward greater indebtedness relative to equity during this period. In 2017, this ratio declined to 2.44, suggesting some reduction in leverage. The adjusted financial leverage followed a parallel pattern but showed consistently lower ratios than the reported ones, moving from 2.10 in 2013 up to 2.46 in 2015 and 2.45 in 2016, then decreasing to 2.31 in 2017. These adjusted ratios indicate a somewhat more conservative leverage profile after accounting for tax adjustments.

Summary of Trends

Overall, the data reflect an initial contraction in assets and equity in 2014, followed by a rebound in subsequent years across both reported and adjusted metrics. Shareholders’ equity, both reported and adjusted, saw stronger declines initially but showed signs of recovery beginning in 2016. Financial leverage ratios increased steadily through 2016 before declining in 2017, implying a cautious approach to debt management towards the end of the period. The adjustments for deferred income taxes consistently enhanced the equity levels and reduced financial leverage ratios, suggesting that the adjustments provide a more favorable financial position and lower risk profile compared to reported figures alone.

Net Income Trends

Reported net income attributable to shareholders shows a generally increasing trend, rising from 3,691 million US dollars in 2013 to 5,247 million US dollars in 2017, with a notable jump in the final year. Adjusted net income exhibits more stability, fluctuating between 3,993 million and 4,450 million US dollars over the period, but showing a slight overall increase from 2013 to 2017.

Shareholders’ Equity Trends

Reported total shareholders’ equity decreased from 29,904 million US dollars in 2013 to 23,619 million US dollars in 2015, followed by a moderate recovery to 28,375 million US dollars in 2017. Adjusted shareholders’ equity follows a similar pattern but consistently presents higher values than the reported figures, beginning at 32,099 million in 2013 and ending at 29,848 million US dollars in 2017.

Return on Equity (ROE) Patterns

The reported ROE demonstrated a positive upward trajectory from 12.34% in 2013 to 18.49% in 2017, indicating improving profitability relative to shareholders’ equity. In contrast, the adjusted ROE showed less pronounced growth, ranging from 13.86% in 2013 to a peak near 16.04% in 2015 before declining to 14.2% in 2017.

Comparative Insights

The divergence between reported and adjusted figures suggests the presence of non-recurring or deferred tax impacts influencing the adjustments. Reported net income surpassed adjusted income particularly in the last year, which may drive the strong increase in reported ROE. The decrease in reported shareholders’ equity between 2013 and 2015, followed by recovery, contrasts with the steadier adjusted equity trend, implying that the adjustments likely smooth volatility in equity values. The adjusted ROE’s decline in the latest years while reported ROE rises could indicate changes in tax treatments or one-time items influencing reported earnings more positively than the adjusted results.

Net Income Trends

The reported net income attributable to Time Warner Inc. shareholders shows a generally increasing trend from 2013 to 2017, rising from 3,691 million US dollars in 2013 to 5,247 million US dollars in 2017, with the most notable jump occurring between 2016 and 2017. In contrast, the adjusted net income presents a less consistent progression, starting at 4,450 million US dollars in 2013, declining to 3,993 million US dollars in 2014, then gradually increasing to 4,237 million US dollars in 2017. Overall, reported net income surpasses adjusted net income in later years, particularly evident in 2017.

Asset Developments

Both reported and adjusted total assets exhibit a fluctuating yet generally upward trajectory over the examined period. Reported total assets decrease from 67,994 million US dollars in 2013 to 63,259 million US dollars in 2014, then gradually increase to 69,209 million US dollars by 2017. Adjusted total assets follow a similar pattern, starting at 67,547 million US dollars in 2013, dipping to 63,075 million US dollars in 2014, then rising steadily to 69,098 million US dollars in 2017. The close alignment between reported and adjusted total assets values suggests minimal adjustments related to deferred income taxes.

Return on Assets (ROA) Analysis

The reported ROA shows a generally positive trend, increasing from 5.43% in 2013 to 7.58% in 2017, indicating improving efficiency in generating net income from total assets. However, the adjusted ROA reveals a more stable yet slightly declining pattern, starting at 6.59% in 2013 and gradually decreasing to 6.13% in 2017. This divergence implies that reported figures reflect an increasing profitability relative to assets, possibly influenced by the timing effects of tax adjustments, whereas adjusted ROA demonstrates a more conservative and steady profitability measure over the years.

Overall Observations

The data indicates that reported financial metrics generally show stronger growth in profitability and return measures compared to the adjusted figures, which tend to be more moderated. Asset levels remain relatively stable with moderate growth after an initial dip in 2014. The discrepancy between reported and adjusted results may arise from timing differences in tax recognition, highlighting the impact of deferred income tax adjustments on reported income and asset returns.