EBITDA or not EBITDA? TW answers question: Time Warner switches to earnings yardstick that takes capital-expenditure hit out of revenue/profit equation.(earnings before interest, taxes, depreciation, and amortization; earnings before interest, taxes, and amortization)

Broadcasting & Cable, February, 1998 by Higgins, John M.

After media giants spent years convincing Wall Street to dance to a tune other than the net income used to judge most industries, Time Warner executives are trying to change that tune by twisting their definition of the all-important cash flow. Time Warner contends that the switch--which involves how capital spending affects reported profits--will give investors a superior gauge of operating performance and value.

Analysts scrambling to revise their models counter that, at the least, the move will make it more difficult to compare Time Warner operations with those of media companies that still use the old reporting method. At worst, analysts suspect that Time Warner is looking to inflate--by several percentage points--the growth rates it brags...

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