What drove the decline in Entergy's 2002 net income?

Net income fell to $623.1 million from $750.5 million. The filing attributes the decrease mainly to net charges of $238.3 million after tax in the Energy Commodity Services segment, reflecting the decision to discontinue additional greenfield power plant development and asset impairments in the U.S. and U.K. wholesale power markets.

How did Entergy's business segments perform in 2002?

U.S. Utility earnings increased to $583 million from $550 million, and Non-Utility Nuclear earnings increased to $201 million from $128 million. Energy Commodity Services recorded a loss of $146 million in 2002, compared with earnings of $106 million in 2001.

What is the status of the Indian Point nuclear plants?

The NRC denied a Riverkeeper petition seeking suspension of operations at Indian Point, and that decision became final on December 13, 2002; Riverkeeper has petitioned the Second Circuit for review. A FEMA report stated it could not provide reasonable assurance of adequate emergency planning absent updated state and county plans, with a May 2, 2003 date for corrective actions. The filing states the NRC could order shutdown if it determines there is no such assurance.

What regulatory and rate matters could affect future results?

The filing identifies several pending matters: the Entergy New Orleans rate case (originally seeking $44 million, with an agreement in principle for a $30.2 million base rate increase subject to City Council approval), the FERC System Agreement proceeding, the Standard Market Design rulemaking, Entergy Gulf States' Texas retail open access proposal, and FERC orders on interconnection costs that Entergy estimates could shift about $280 million of costs to its other transmission customers.

What accounting changes take effect in 2003?

Entergy adopted SFAS 143 on January 1, 2003. The filing expects the domestic utility companies' asset retirement obligations to increase by about $1.1 billion, with offsetting regulatory assets and liabilities and no net income effect. For Non-Utility Nuclear, it expects liabilities to decrease by about $520 million and a one-time cumulative-effect earnings increase of about $160 million, and a roughly $25 million one-time earnings reduction for the non-cost-based portion of River Bend.

ETR 10-K FY2002 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 19, 2003. Cited figures are marked; the original filing is the authoritative source.

Entergy Corporation, a Delaware holding company, filed this combined 10-K for fiscal 2002 with six subsidiary utilities and System Energy Resources.

Entergy reported 2002 consolidated operating revenues of $8.31 billion^a, operating income of $1.19 billion, and net income of $623.1 million, down from $750.5 million in 2001. Earnings applicable to common stock were $599.4 million, or $2.64 diluted EPS. The decline reflects a $428.5 million pre-tax ($238.3 million after-tax) charge in the Energy Commodity Services segment, tied to discontinuing greenfield power development and asset impairments in U.S. and U.K. wholesale power markets, partially offset by gains on the Damhead Creek and Spain asset sales.

The U.S. Utility segment earned $583 million^b in 2002 versus $550 million in 2001, and Non-Utility Nuclear earnings rose to $201 million from $128 million, driven by the Indian Point 2 and Vermont Yankee acquisitions. Entergy reduced its net debt to net capital ratio to 46.3% from 49.7%, held $1.34 billion in cash at year-end, and reported cash from operations of $2.18 billion.

Operating cash flow benefited from a Entergy Louisiana tax accounting election that produced a cumulative cash benefit of approximately $867 million^c through 2002, which the filing states is expected to reverse over 2003 through 2031. The filing also flags material forward-looking risks: pending rate proceedings (including Entergy New Orleans, whose rate case seeks a $44 million increase with an agreement in principle for $30 million), FERC proceedings on the System Agreement and Standard Market Design rulemaking, the NRC and FEMA review of Indian Point emergency plans, and the adoption of SFAS 143 in 2003, which the company expects to increase utility asset retirement obligations and to decrease Non-Utility Nuclear liabilities.

02—Key points

Key Highlights

2002 net income of $623.1 million versus $750.5 million in 2001; diluted EPS of $2.64 versus $3.23 (EPS figures are as shown in the filing for 2002 and 2001).
Energy Commodity Services charges of $428.5 million pre-tax ($238.3 million after-tax) for discontinued greenfield power development and wholesale power asset impairments in the U.S. and U.K.
U.S. Utility earnings rose to $583 million from $550 million; Non-Utility Nuclear earnings rose to $201 million from $128 million following the Indian Point 2 and Vermont Yankee acquisitions.
Operating cash flow of $2.18 billion, supported by an Entergy Louisiana tax accounting election with a cumulative cash benefit of about $867 million through 2002.
Net debt to net capital ratio improved to 46.3% from 49.7%; cash and equivalents of $1.34 billion at December 31, 2002.
Planned construction and capital investment of $924 million (U.S. Utility), $201 million (Non-Utility Nuclear) and $24 million (Energy Commodity Services) in 2003; Entergy plans about $3.4 billion of capital spending over 2003-2005.
Quarterly dividend increased 6% to $0.35 per share in October 2002; 2002 common dividends paid totaled $299 million, and 2,885,000 shares were repurchased for $118.5 million.

03—Questions

Frequently Asked Questions

What drove the decline in Entergy's 2002 net income?
Net income fell to $623.1 million from $750.5 million. The filing attributes the decrease mainly to net charges of $238.3 million after tax in the Energy Commodity Services segment, reflecting the decision to discontinue additional greenfield power plant development and asset impairments in the U.S. and U.K. wholesale power markets.
How did Entergy's business segments perform in 2002?
U.S. Utility earnings increased to $583 million from $550 million, and Non-Utility Nuclear earnings increased to $201 million from $128 million. Energy Commodity Services recorded a loss of $146 million in 2002, compared with earnings of $106 million in 2001.
What is the status of the Indian Point nuclear plants?
The NRC denied a Riverkeeper petition seeking suspension of operations at Indian Point, and that decision became final on December 13, 2002; Riverkeeper has petitioned the Second Circuit for review. A FEMA report stated it could not provide reasonable assurance of adequate emergency planning absent updated state and county plans, with a May 2, 2003 date for corrective actions. The filing states the NRC could order shutdown if it determines there is no such assurance.
What regulatory and rate matters could affect future results?
The filing identifies several pending matters: the Entergy New Orleans rate case (originally seeking $44 million, with an agreement in principle for a $30.2 million base rate increase subject to City Council approval), the FERC System Agreement proceeding, the Standard Market Design rulemaking, Entergy Gulf States' Texas retail open access proposal, and FERC orders on interconnection costs that Entergy estimates could shift about $280 million of costs to its other transmission customers.
What accounting changes take effect in 2003?
Entergy adopted SFAS 143 on January 1, 2003. The filing expects the domestic utility companies' asset retirement obligations to increase by about $1.1 billion, with offsetting regulatory assets and liabilities and no net income effect. For Non-Utility Nuclear, it expects liabilities to decrease by about $520 million and a one-time cumulative-effect earnings increase of about $160 million, and a roughly $25 million one-time earnings reduction for the non-cost-based portion of River Bend.

04—Continue

← View all 10-K filings