Time Warner Inc. (NYSE:TWX)

The financial data over the five-year period demonstrates several notable trends in profitability, capital costs, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows some variability but remains relatively stable across the years. An initial value of 5,150 million USD is observed in 2013, with a slight increase to 5,167 million USD in 2014. Subsequently, there is a decline to 4,751 million USD in 2015, followed by gradual growth to 4,943 million USD in 2016 and 5,040 million USD in 2017. Overall, the trend indicates a slight downward fluctuation mid-period with a modest recovery by the end.

Cost of Capital

The cost of capital fluctuates moderately within a narrow range. It begins at 11.4% in 2013, experiences a minimal rise to 11.43% in 2014, declines to 10.84% in 2015, then increases to 11.51% in 2016, and slightly reduces to 11.47% in 2017. These changes suggest some variability but no major shifts in the company’s capital cost environment.

Invested Capital

The invested capital demonstrates a decreasing trend initially, dropping from 56,262 million USD in 2013 to 52,455 million USD in 2014. Subsequently, it shows a gradual increase each year, reaching 53,163 million USD in 2015, 54,961 million USD in 2016, and 57,150 million USD in 2017. This pattern reflects an initial reduction followed by progressive reinvestment or asset growth over the latter part of the analyzed period.

Economic Profit

Economic profit remains negative throughout the period, indicating the company consistently fails to generate returns above its cost of capital. The deficit narrows from -1,266 million USD in 2013 to -826 million USD in 2014, suggesting improved value creation in that year. However, it then widens to -1,011 million USD in 2015 and continues to deteriorate to -1,384 million USD in 2016 and -1,513 million USD in 2017. This decline signals increasing economic losses despite fluctuations in operating profit and invested capital.

Net Income Attributable to Time Warner Inc. Shareholders

A consistent upward trend in net income is observable over the five-year period. Starting at $3,691 million in 2013, net income increased marginally each year, reaching $3,927 million in 2016. A notable rise occurred in 2017, with net income sharply increasing to $5,247 million, indicating a significant enhancement in profitability in that year.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a relatively stable but slightly fluctuating pattern. From $5,150 million in 2013, it increased slightly to $5,167 million in 2014, followed by a decline to $4,751 million in 2015. The figure then recovered somewhat in 2016 and 2017, reaching $5,040 million by the end of 2017. Overall, NOPAT remained within a narrow range, suggesting moderate operational profit stability with some variation over the years.

Comparative Observations

While net income demonstrated a robust growth trajectory, especially in the final year, NOPAT displayed greater stability but without a clear upward trend. The divergence between the increasing net income and relatively stable NOPAT in the last year might indicate changes in non-operating factors such as financing activities, tax adjustments, or other income components contributing positively to net income.

Current and Deferred Income Taxes on Income from Continuing Operations

The amount of current and deferred income taxes provided on income from continuing operations exhibited a fluctuating trend over the five-year period. In 2013, the value was 1,749 million US dollars, which decreased significantly to 785 million in 2014. It then increased again to 1,651 million in 2015, followed by a decline to 1,281 million in 2016. By the end of 2017, this measure further dropped to 701 million US dollars, marking the lowest point in the observed range. Overall, the data suggest variability with no clear upward or downward long-term trend, but a general reduction from the starting value.

Cash Operating Taxes

Cash operating taxes showed a more consistent upward trend compared to the income taxes provided on continuing operations. Starting at 1,442 million US dollars in 2013, there was a notable increase to 1,048 million in 2014, which appears to be a decline; however, the following years reversed this pattern with values rising to 1,757 million in 2015 and then slightly decreasing to 1,465 million in 2016. The amount surged substantially in 2017 to 2,078 million US dollars, representing the highest value within the period. This trend indicates growing cash tax liabilities over time, with some minor fluctuations in the middle years.

Comparison Insights

Comparing both tax-related measures reveals divergent patterns: while current and deferred income taxes showed a volatile yet generally declining trend, cash operating taxes tended to increase, especially markedly in the final year. This divergence may indicate changes in tax accounting, timing differences, or shifts in taxable income and cash tax payment obligations across the reporting years.

Total Reported Debt & Leases

The total reported debt and leases exhibited a generally increasing trend from 2013 to 2016, rising from $21,765 million to $25,355 million. However, in 2017, there was a slight decrease to $24,720 million. This indicates an overall growth in debt commitments over the period, with a minor reduction in the final year.

Total Time Warner Inc. Shareholders’ Equity

Shareholders’ equity showed a declining trend from 2013 through 2015, decreasing from $29,904 million to $23,619 million. In 2016, the equity slightly increased to $24,335 million and further rebounded more significantly in 2017 to $28,375 million. This pattern suggests a period of equity contraction followed by recovery toward the end of the analyzed timeframe.

Invested Capital

Invested capital declined from $56,262 million in 2013 to $52,455 million in 2014, followed by a modest increase in subsequent years, reaching $57,150 million in 2017. The leveling and eventual rise in invested capital imply a stabilization and renewed investment activities after an initial drop.

Overall Observations

Over the five-year period, the company’s financial structure demonstrated changes characterized by an initial increase in debt and decrease in equity and invested capital, followed by a stabilization and partial recovery. The reduction in shareholders’ equity between 2013 and 2015 could be indicative of challenges faced, while the subsequent increases in equity and invested capital suggest restored confidence and investment. The relatively stable debt levels near the end of the period highlight a controlled leverage approach.

Economic Profit

The economic profit consistently remained negative throughout the analyzed period. There was an improvement from -1266 million US$ in 2013 to -826 million US$ in 2014. However, after 2014, the economic profit worsened again, reaching -1011 million US$ in 2015, then declining further to -1384 million US$ in 2016, and ultimately to -1513 million US$ in 2017. This indicates increasing economic losses over the last three years of the period.

Invested Capital

The invested capital showed a fluctuating but generally upward trend. It decreased from 56,262 million US$ in 2013 to 52,455 million US$ in 2014, then experienced minor increases reaching 53,163 million US$ in 2015 and 54,961 million US$ in 2016. The capital further grew to 57,150 million US$ by 2017. Overall, there was a moderate increase in invested capital by the end of the period compared to the beginning.

Economic Spread Ratio

The economic spread ratio was negative for all years and mirrored the trend observed in economic profit. It showed an improvement from -2.25% in 2013 to -1.57% in 2014, indicating a less negative spread. However, the ratio deteriorated subsequently, falling to -1.9% in 2015, then sharply declining to -2.52% in 2016 and further to -2.65% in 2017. This suggests worsening returns relative to the cost of capital across the latter years.

Summary of Trends

The data reflects a challenging financial performance with persistent negative economic profit and spread ratios throughout the five-year period. Despite an initial improvement in 2014, both economic profit and economic spread deteriorated subsequently, indicating increasing inefficiencies or higher capital costs relative to returns. Meanwhile, invested capital showed a mild growth trend after a decline in 2014, suggesting continued or renewed investments despite the negative economic returns. These patterns may warrant further investigation into operational efficiencies and capital allocation strategies.

Adjusted Revenues

The adjusted revenues show a generally increasing trend over the five-year period. Beginning at approximately 29,738 million US dollars in 2013, there was a decline in 2014 to 27,360 million US dollars. However, revenues recovered and gradually increased thereafter, reaching 31,400 million US dollars by the end of 2017. This indicates a positive growth trajectory after a brief dip in 2014.

Economic Profit

The economic profit consistently remained negative throughout the period, indicating losses. Starting at -1,266 million US dollars in 2013, the losses decreased to -826 million US dollars in 2014, signaling some improvement. However, from 2015 onwards, economic profit worsened again, falling to -1,011 million in 2015, further declining to -1,384 million in 2016, and reaching the lowest value of -1,513 million in 2017. This reflects increasing economic losses despite growth in revenues.

Economic Profit Margin

The economic profit margin mirrors the trend observed in economic profit, remaining negative across all years. It started at -4.26% in 2013, improved to -3.02% in 2014, but then deteriorated progressively each subsequent year to -4.82% by 2017. This consistent negative margin suggests ongoing difficulties in generating economic profit relative to revenues.

Overall Analysis

While the company experienced an overall increase in adjusted revenues from 2014 to 2017 after a decline in 2014, the economic profit and corresponding margin demonstrated persistent and worsening losses. The brief improvement in 2014 was not sustained, with economic profitability declining in the following years. This indicates that revenue growth did not translate into economic profit, implying challenges in controlling costs, improving operational efficiency, or generating returns above the cost of capital.