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Microsoft Excel LibreOffice Calc

Time Warner Inc. (TWX)


Economic Value Added (EVA)

High level of difficulty

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 Inc., economic profit calculation

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
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden
 
Economic profit4 hidden hidden hidden hidden hidden

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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2017 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= hiddenhidden × hidden = hidden

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Time Warner Inc.’s economic profit declined from 2015 to 2016 and from 2016 to 2017.

Net Operating Profit after Taxes (NOPAT)

Time Warner Inc., NOPAT calculation

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
Net income attributable to Time Warner Inc. shareholders hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden
Increase (decrease) in allowance for doubtful accounts2 hidden hidden hidden hidden hidden
Increase (decrease) in deferred revenue3 hidden hidden hidden hidden hidden
Increase (decrease) in accrued restructuring and severance costs4 hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents5 hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden
Interest expense, operating lease liability6 hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden
Tax benefit of interest expense7 hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes8 hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden
Interest income hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income9 hidden hidden hidden hidden hidden
Investment income, after taxes10 hidden hidden hidden hidden hidden
(Income) loss from discontinued operations, net of tax11 hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden

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).

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.

4 Addition of increase (decrease) in accrued restructuring and severance costs.

5 Addition of increase (decrease) in equity equivalents to net income attributable to Time Warner Inc. shareholders.

6 2017 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

7 2017 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 35.00% = hidden

8 Addition of after taxes interest expense to net income attributable to Time Warner Inc. shareholders.

9 2017 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35.00% = hidden

10 Elimination of after taxes investment income.

11 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Time Warner Inc.’s NOPAT increased from 2015 to 2016 and from 2016 to 2017.

Cash Operating Taxes

Time Warner Inc., cash operating taxes calculation

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
Current and deferred income taxes provided on Income from continuing operations hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden

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
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Time Warner Inc.’s cash operating taxes declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Invested Capital

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Debt due within one year hidden hidden hidden hidden hidden
Long-term debt, excluding due within one year hidden hidden hidden hidden hidden
Operating lease liability1 hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden
Total Time Warner Inc. shareholders’ equity hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden
Allowance for doubtful accounts3 hidden hidden hidden hidden hidden
Deferred revenue4 hidden hidden hidden hidden hidden
Accrued restructuring and severance costs5 hidden hidden hidden hidden hidden
Equity equivalents6 hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax7 hidden hidden hidden hidden hidden
Redeemable noncontrolling interest hidden hidden hidden hidden hidden
Noncontrolling interest hidden hidden hidden hidden hidden
Adjusted total Time Warner Inc. shareholders’ equity hidden hidden hidden hidden hidden
Construction in progress8 hidden hidden hidden hidden hidden
Marketable securities9 hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden

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).

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.

5 Addition of accrued restructuring and severance costs.

6 Addition of equity equivalents to total Time Warner Inc. shareholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.

9 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Time Warner Inc.’s invested capital increased from 2015 to 2016 and from 2016 to 2017.

Cost of Capital

Time Warner Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

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

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2017-02-23).

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2016-02-25).

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2015-02-26).

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2014-02-26).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Time Warner Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden
Performance Ratio
Economic spread ratio3 hidden hidden hidden hidden hidden

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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2017 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Time Warner Inc.’s economic spread ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

Economic Profit Margin

Time Warner Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Add: Increase (decrease) in deferred revenue hidden hidden hidden hidden hidden
Adjusted revenues hidden hidden hidden hidden hidden
Performance Ratio
Economic profit margin2 hidden hidden hidden hidden hidden

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).

1 Economic profit. See details »

2 2017 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × hidden ÷ hidden = hidden

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Time Warner Inc.’s economic profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.