Entergy Reports Second Quarter Earnings

Aug 02, 2011, 07:00 ET from Entergy Corporation

NEW ORLEANS, Aug. 2, 2011 /PRNewswire/ -- Entergy Corporation (NYSE: ETR) today reported second quarter 2011 as-reported earnings of $315.6 million, or $1.76 per share, compared with $315.3 million, or $1.65 per share, for second quarter 2010. On an operational basis, Entergy's second quarter 2011 earnings were $315.6 million, or $1.76 per share, compared with $325.7 million, or $1.71 per share, in second quarter 2010.

Consolidated Earnings – Reconciliation of GAAP* to Non-GAAP Measures

Second Quarter and Year-to-Date 2011 vs. 2010

(Per share in U.S. $)

Second Quarter

Year-to-Date

2011

2010

Change

2011

2010

Change

As-Reported Earnings

1.76

1.65

0.11

3.14

2.77

0.37

Less Special Items

(0.06)

0.06

(0.26)

0.26

Operational Earnings

1.76

1.71

0.05

3.14

3.03

0.11

*GAAP refers to United States generally accepted accounting principles.

Operational Earnings Highlights for Second Quarter 2011

  • Utility's results were higher due primarily to higher sales volume and pricing adjustments from previous rate actions, as well as lower interest expense.
  • Entergy Wholesale Commodities' earnings declined as a result of lower net revenue primarily from lower pricing on the nuclear fleet as well as a higher effective income tax rate.
  • Parent & Other's results were higher due to lower income tax expense on Parent & Other activities.

"The Utility business continued on track to achieve its asset portfolio objectives with regulatory filings for a new 550-megawatt combined-cycle gas-fired unit at our Ninemile Point plant site and the pending acquisitions of the 620-megawatt Hot Spring and 450-megawatt Hinds existing combined-cycle plants," said J. Wayne Leonard, Entergy's chairman and chief executive officer. "These highly efficient facilities will provide reliable, low-cost energy to serve the growing needs of our customers while reducing the overall consumption of fossil fuels. At Entergy Wholesale Commodities, license renewal efforts continued. We also announced that we will proceed with the 29th refueling outage at Vermont Yankee following a careful review of the merits of our case and the record from the most recent hearing in Federal District Court.

"We continue to work with regulators to gain approval to join the MISO regional transmission organization that would stretch from Canada to the Gulf of Mexico," Leonard said. "Despite the various hurdles we still face to accomplish our major initiatives, we believe 2011 is shaping up to be a transformational year in achieving our corporate strategy."

Other Business Highlights

  • All Utility operating companies filed reports with retail regulators outlining expected benefits of joining MISO.
  • Entergy Wholesale Commodities announced the sale to Con Edison of 500 MWs of unit and license renewal-contingent energy and firm capacity from the Indian Point Energy Center for a five-year term beginning in 2013.
  • The New York Public Service Commission issued an order resolving the Show Cause proceeding related to notification requirements.
  • Entergy announced that the company's board of directors voted to approve the fabrication of fuel and the refueling of the Vermont Yankee nuclear power plant in October.

Entergy will host a teleconference to discuss this release at 10 a.m. CT on Tuesday, Aug. 2, 2011, with access by telephone, (719) 457-2080, confirmation code 8424061. The call and presentation slides can also be accessed via Entergy's website at www.entergy.com. A replay of the teleconference will be available through Aug. 9, 2011, by dialing (719) 457-0820, confirmation code 8424061. The replay will also be available on Entergy's website at www.entergy.com.

Utility

In second quarter 2011, Utility's as-reported and operational earnings were $248.4 million, or $1.39 per share, compared to $225.8 million, or $1.18 per share, on the same bases in second quarter 2010. Earnings for the Utility in the current quarter reflect higher net revenue due to increased sales volume, including the effects of significantly warmer-than-normal weather, and the net effect of rate adjustments at Entergy Arkansas, Entergy Texas and Entergy New Orleans. Lower interest expense resulting from refinancing of long-term debt at lower interest rates as well as the absence of an interest charge recorded on a fuel audit refund in 2010 also contributed to the Utility's earnings increase.

Residential sales in second quarter 2011, on a weather-adjusted basis, decreased 0.5 percent compared to second quarter 2010. Commercial and governmental sales, on a weather-adjusted basis, increased 0.3 percent quarter over quarter. Industrial sales in the second quarter increased 2.8 percent compared to the same quarter of 2010.

Retail sales growth was positive for the quarter at 2.9 percent, or 1.1 percent on a weather-adjusted basis. Results were mixed across the jurisdictions. Entergy Texas produced the strongest sales growth, including a 15.1 percent increase in industrial sales due largely to expansions. Entergy Arkansas sales were down slightly compared to the same period a year ago with a decrease in industrial sales. Residential sales increased 3.7 percent as compared to the second quarter of 2010, but were slightly below last year on a weather-adjusted basis, reflecting an increase in the number of customers but a decrease in the usage per customer. Industrial sales growth leveled off somewhat after significant growth since the beginning of 2010. Entergy's service territory continues to benefit from expansions, while there has been some pullback in the paper and wood segments and small industrials.

Entergy Wholesale Commodities

Entergy Wholesale Commodities earned $64.9 million, or 36 cents per share, on as-reported and operational bases in second quarter 2011 compared to as-reported earnings of $103.9 million, or 55 per cents per share, and operational earnings of $118.3 million, or 63 cents per share, in second quarter 2010. Entergy Wholesale Commodities' operational earnings declined largely as a result of lower net revenue with decreased pricing. A higher effective income tax rate resulting from changes in Michigan tax law stemming from legislation enacted in May 2011 also contributed to the Entergy Wholesale Commodities' earnings decline.

Parent & Other

Parent & Other reported as-reported and operational earnings of $2.3 million, or 1 cent per share, in second quarter 2011 compared to a loss of $14.4 million, or 8 cents per share, on an as-reported basis and a loss of $18.5 million, or 10 cents per share, on an operational basis in the second quarter of 2010. Lower income tax expense on Parent & Other activities was the primary factor driving results for the quarter. Income tax expense was lower due to reversal of a tax reserve.

Earnings Guidance

Entergy affirmed its 2011 earnings guidance in the range of $6.35 to $6.85 per share on both as-reported and operational bases.

Long-term Financial Outlook

Overarching Financial Aspiration

Entergy continues to aspire to deliver superior value to owners as measured by total shareholder return. The company believes top-quartile total shareholder return is achieved by:

  • Operating the business with the highest expectations and standards;
  • Executing on earnings growth opportunities while managing commodity and other business risks;
  • Delivering returns at or above the risk-adjusted cost of capital for each initiative, project, business, etc.;
  • Maintaining credit quality and flexibility;
  • Deploying capital in a disciplined manner, whether for new investments, share repurchases, dividends, or debt retirements; and
  • Being disciplined as either a buyer or a seller consistent with the market or Entergy's proprietary point of view.

Long-term Financial Outlook

Entergy believes it offers a long-term, competitive utility investment opportunity combined with a valuable option represented by a unique, clean, non-utility generation business located in attractive power markets. The current long-term financial outlook includes the following:  

Earnings:

  • Utility net income:  6 to 8 percent compound annual net income growth rate over the 2010 – 2014 horizon (2009 base year).
  • Entergy Wholesale Commodities results:  Revenue projections through 2014 will experience increased volatility due to commodity market activities – one of the most important fundamental drivers for this business. At current sold and forward prices with its existing asset portfolio and in-the-money hedges that will roll off in the coming few years, Entergy Wholesale Commodities is expected to deliver declining adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization and interest and investment income, excluding decommissioning expense, other than temporary impairment losses on decommissioning trust fund assets and special items) for the period through 2014 compared to 2010. However, Entergy Wholesale Commodities offers a valuable long-term option from the potential positive effects of ongoing economic growth (driving increased load, market heat rates, capacity prices and natural gas prices), new environmental legislation and/or enforcement of additional environmental regulation.
  • Corporate results:  Results will vary depending upon factors including future effective income tax and interest rates and the amount / timing of share repurchases.

Capital deployment:

  • A balanced capital investment / return program. Entergy continues to see value-added investment opportunities at the Utility in the coming years, as well as an investment outlook at Entergy Wholesale Commodities that supports continued safe, secure and reliable operations and opportunistic investments. Entergy aspires to fund this capital program without issuing traditional common equity, while maintaining a competitive capital return program. Given the company's financial profile with a mix of utility and non-utility businesses, return of capital is expected to be provided similar to the past through a combination of common stock dividends and share repurchases. Absent other attractive investment opportunities, capital deployment through dividends and share repurchases could total as much as $4$5 billion from 2010 – 2014 under the current long-term business outlook. The amount of share repurchases may vary as a result of material changes in business results, capital spending or new investment opportunities.

Credit quality:

  • Strong liquidity.
  • Solid credit metrics that support ready access to capital on reasonable terms.

Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, and it is the second-largest nuclear generator in the United States. Entergy delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $11 billion and approximately 15,000 employees.

Additional information regarding Entergy's quarterly results of operations, regulatory proceedings and other operations is available in Entergy's investor news release dated Aug. 2, 2011, a copy of which has been filed today with the Securities and Exchange Commission on Form 8-K and is available on Entergy's investor relations website at www.entergy.com/investor_relations.

In this news release, and from time to time, Entergy Corporation makes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements involve a number of risks and uncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including (a) those factors discussed in: (i) Entergy's Form 10-K for the year ended December 31, 2010; (ii) Entergy's Form 10-Q for the quarter ended March 31, 2011; and (iii) Entergy's other reports and filings made under the Securities Exchange Act of 1934; (b) uncertainties associated with rate proceedings, formula rate plans and other cost recovery mechanisms; (c) uncertainties associated with efforts to remediate the effects of major storms and recover related restoration costs; (d) nuclear plant relicensing, operating and regulatory risks, including any changes resulting from the nuclear crisis in Japan following its catastrophic earthquake and tsunami; (e) legislative and regulatory actions and risks and uncertainties associated with claims or litigation by or against Entergy and its subsidiaries; and (f) conditions in commodity and capital markets during the periods covered by the forward-looking statements, in addition to other factors described elsewhere in this release and in subsequent securities filings.

Appendix A provides a reconciliation of GAAP as-reported earnings to non-GAAP operational earnings.

Appendix A:  Consolidated Earnings – Reconciliation of GAAP to Non-GAAP Measures

Second Quarter and Year-to-Date 2011 vs. 2010

(Per share in U.S. $)

Second Quarter

Year-to-Date

2011

2010

Change

2011

2010

Change

As-Reported

Utility

1.39

1.18

0.21

2.30

1.91

0.39

Entergy Wholesale Commodities

0.36

0.55

(0.19)

1.04

1.01

0.03

Parent & Other

0.01

(0.08)

0.09

(0.20)

(0.15)

(0.05)

 Consolidated As-Reported Earnings

1.76

1.65

0.11

3.14

2.77

0.37

Less Special Items

Utility

Entergy Wholesale Commodities

(0.08)

0.08

(0.36)

0.36

Parent & Other

0.02

(0.02)

0.10

(0.10)

 Consolidated Special Items

(0.06)

0.06

(0.26)

0.26

Operational

Utility

1.39

1.18

0.21

2.30

1.91

0.39

Entergy Wholesale Commodities

0.36

0.63

(0.27)

1.04

1.37

(0.33)

Parent & Other

0.01

(0.10)

0.11

(0.20)

(0.25)

0.05

 Consolidated Operational Earnings

1.76

1.71

0.05

3.14

3.03

0.11

Entergy Corporation

Consolidated Income Statement

Three Months Ended June 30

(in thousands)

2011

2010

(unaudited)

Operating Revenues:

    Electric

$2,212,038

$2,214,108

    Natural gas

28,891

31,136

    Competitive businesses

562,350

617,706

                     Total

2,803,279

2,862,950

Operating Expenses:

   Operation and maintenance:

        Fuel, fuel-related expenses, and gas purchased for resale

563,333

631,546

        Purchased power

451,227

416,458

        Nuclear refueling outage expenses

62,966

64,221

        Other operation and maintenance

712,496

700,204

    Decommissioning

55,497

52,467

    Taxes other than income taxes

129,215

126,968

    Depreciation and amortization

264,206

255,567

    Other regulatory charges (credits) – net

5,601

(10,722)

                     Total

2,244,541

2,236,709

Operating Income

558,738

626,241

Other Income (Deductions):

    Allowance for equity funds used during construction

20,753

17,630

    Interest and dividend income

35,921

34,955

    Miscellaneous – net

(16,962)

(16,780)

                     Total

39,712

35,805

Interest Expense:

    Interest expense

136,049

148,179

    Allowance for borrowed funds used during construction

(9,150)

(10,323)

                     Total

126,899

137,856

Income Before Income Taxes

471,551

524,190

Income Taxes

150,953

203,907

Consolidated Net Income

320,598

320,283

Preferred Dividend Requirements of Subsidiaries

5,015

5,017

Net Income Attributable to Entergy Corporation

$315,583

$315,266

Earnings Per Average Common Share

    Basic

$1.77

$1.67

    Diluted

$1.76

$1.65

Average Number of Common Shares Outstanding Basic

177,808,890

188,776,240

Average Number of Common Shares Outstanding Diluted

178,925,180

190,717,958

Entergy Corporation

Consolidated Income Statement

Six Months Ended June 30

(in thousands)

2011

2010

(unaudited)

Operating Revenues:

    Electric

$4,077,936

$4,221,038

    Natural gas

100,014

127,163

    Competitive businesses

1,166,538

1,274,095

                     Total

5,344,488

5,622,296

Operating Expenses:

   Operation and maintenance:

        Fuel, fuel-related expenses, and gas purchased for resale

1,071,026

1,190,214

        Purchased power

813,845

891,361

        Nuclear refueling outage expenses

126,951

126,510

        Other operation and maintenance

1,368,245

1,402,692

    Decommissioning

110,762

104,043

    Taxes other than income taxes

254,449

262,380

    Depreciation and amortization

529,090

524,771

    Other regulatory charges (credits) – net

491

17,370

                     Total

4,274,859

4,519,341

Operating Income

1,069,629

1,102,955

Other Income (Deductions):

    Allowance for equity funds used during construction

38,042

30,926

    Interest and dividend income

62,668

83,164

    Miscellaneous – net

(26,360)

(17,302)

                     Total

74,350

96,788

Interest Expense:

    Interest expense

272,183

327,379

    Allowance for borrowed funds used during construction

(17,684)

(18,325)

                     Total

254,499

309,054

Income Before Income Taxes

889,480

890,689

Income Taxes

315,203

351,592

Consolidated Net Income

574,277

539,097

Preferred Dividend Requirements of Subsidiaries

10,031

10,033

Net Income Attributable to Entergy Corporation

$564,246

$529,064

Earnings Per Average Common Share

    Basic

$3.16

$2.80

    Diluted

$3.14

$2.77

Average Number of Common Shares Outstanding Basic

178,318,784

188,988,284

Average Number of Common Shares Outstanding Diluted

179,502,551

190,999,699

Entergy Corporation

Utility Electric Energy Sales & Customers

Three Months Ended June 30

2011

2010

%

Change

%

Weather-Adjusted

(Millions of kWh)

Electric Energy Sales:

Residential

7,993

7,705

3.7

(0.5)

Commercial

6,944

6,803

2.1

0.2

Governmental

604

581

4.0

2.5

Industrial

10,140

9,862

2.8

2.8

   Total to Ultimate Customers

25,681

24,951

2.9

1.1

Wholesale

1,036

971

6.7

   Total Sales

26,717

25,922

3.1

Six Months Ended June 30

2011

2010

%

Change

%

Weather-Adjusted

(Millions of kWh)

Electric Energy Sales:

Residential

17,034

17,350

(1.8)

0.6

Commercial

13,394

13,275

0.9

(0.2)

Governmental

1,186

1,173

1.1

Industrial

19,657

18,596

5.7

5.7

   Total to Ultimate Customers

51,271

50,394

1.7

2.3

Wholesale

1,983

2,287

(13.3)

   Total Sales

53,254

52,681

1.1

June 30

2011

2010

%

Change

Electric Customers  (End of period):

Residential

2,368,321

2,351,556

0.7

Commercial

337,359

334,179

1.0

Governmental

16,303

16,134

1.0

Industrial

44,476

45,841

(3.0)

   Total Ultimate Customers

2,766,459

2,747,710

0.7

Wholesale

19

25

(24.0)

   Total Customers

2,766,478

2,747,735

0.7

SOURCE Entergy Corporation



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