The Digital Express Company disclosed a net income of $12,000 on revenues of $400,000 for fiscal year ending December 31, 2007. The company had $500,000 of 6% debt outstanding during the year. In addition, the company had depreciation and amortization expenses of $32,000. The company's 2007 tax rate was 40%. The management believes a pro forma disclosure of EBITDA would be useful to investors.
a. Determine EBITDA for 2007.
b. Determine net income divided by sales and EBITDA divided by sales for 2007.
c. What disclosure must management provide in addition to the pro forma EBITDA calculations?
Condensed income statements for Comcast Corp., the largest U.S. cable operator, and DirecTV Group, Inc., a satellite-based entertainment company, for a recent year are provided below (in millions).
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Comcast Corp.
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DirecTV Group Inc.
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|
Revenues
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$20,307
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$11,360
|
|
Operating expenses (excluding depreciation)
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$ 7,462
|
$ 8,668
|
|
Selling, general, and administrative expenses
|
5,314
|
3,973
|
|
Depreciation expense
|
3,420
|
670
|
|
Amortization expense
|
1,203
|
168
|
|
Total expenses
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$17,399
|
$13,479
|
|
Operating income (loss)
|
$ 2,908
|
$ (2,119)
|
|
Interest income (expense)
|
(1,112)
|
359
|
|
Income (loss) before tax
|
$ 1,796
|
$ (1,760)
|
|
Income tax (expense) benefit
|
(826)
|
704
|
|
Net income
|
$ 970
|
$ (1,056)
|
a. Determine EBITDA for each company.
b. Determine EBITDA divided by revenues for each company.
c. Compare and contrast Comcast with DirecTV based on your answers to parts (a) and (b).