01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Entergy Corporation's 2010 Form 10-K (filed February 28, 2011) reports consolidated net income of $1.27 billiona, up from $1.25 billion in 2009, on operating revenues of $11.49 billion (up 6.9% from $10.75 billion).
Earnings per diluted share from continuing operations were $6.66b, up from $6.30. The Utility segment drove results, with net income of $829.7 million versus $708.9 million in 2009, helped by higher retail rates, favorable weather and volume, and the Act 55 storm cost financings. Entergy Wholesale Commodities (EWC) earnings fell to $489.4 million from $641.1 million, mainly because nuclear realized prices declined to $59.16/MWh from $61.07/MWh and nuclear volumes dropped with a 90% capacity factor versus 93%.
The company's cash flow from operations rose to $3.93 billionc from $2.93 billion, aided by $703 million received from the Louisiana Utilities Restoration Corporation. Entergy returned capital to shareholders through $604 million in common dividends and $879 million in share repurchases. The Board raised the quarterly dividend to $0.83 per share from $0.75 starting in 2010.
Liquidity remains solid, with $1.29 billiond of cash and a $3.5 billion revolving credit facility of which $1.8 billion was available at year-end. Key risks include the EWC nuclear fleet's exposure to lower market power prices (96% of 2011 planned output is sold forward at about $53/MWh, but only 40% of 2013 output is sold), the planned unwinding of the non-utility nuclear spin-off (which produced $64 million in write-offs), the Waterford 3 steam generator replacement delay, the System Agreement litigation and the planned exit of Entergy Arkansas and Entergy Mississippi, the Vermont Yankee operating-license uncertainty, and a potential Department of Justice civil investigation.
02—Key points
Key Highlights
- Consolidated net income rose to $1.27 billion ($1,250.2 million attributable to Entergy) from $1.25 billion, and diluted EPS from continuing operations rose to $6.66 from $6.30.
- Utility segment net income grew to $829.7 million from $708.9 million on higher net revenue of $5.05 billion (up from $4.69 billion), driven by an 8% increase in billed electricity usage and retail rate increases.
- Entergy Wholesale Commodities net income fell to $489.4 million from $641.1 million, as nuclear realized price per MWh declined to $59.16 and capacity factor slipped to 90% from 93%.
- Cash flow from operating activities increased 34% to $3.93 billion, supported by $703 million of Act 55 storm cost financing proceeds from the LURC, partly offset by $323 million higher pension contributions.
- Shareholder returns remained significant: $604 million paid in common dividends, $879 million of share repurchases in 2010, and the quarterly dividend increased to $0.83 from $0.75.
- EWC has sold forward 96% of planned 2011 nuclear output at about $53/MWh, but only 40% of 2013 output at roughly $50/MWh, leaving long-term revenue exposure as merchant contracts expire by 2012 and prices stay weak.
- Litigation and regulatory risks remain elevated, including the System Agreement cost equalization proceedings, a $144 million LPSC damages claim, the Vermont Yankee license and state approval uncertainty, the Waterford 3 steam generator replacement delay (originally $511 million), and an ongoing DOJ civil investigation.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $11.49B$10.75B | +6.9% |
| Operating Expenses | $9.26B$8.46B | +9.5% |
| Operating Income | $2.27B$2.28B | −0.8% |
| Interest Expense | $610.15M$603.68M | +1.1% |
| Net Income | $1.27B$1.25B | +1.5% |
| EPS (Basic) | $3.36$3.19 | +5.2% |
| EPS (Diluted) | $3.33$3.15 | +5.7% |
| Shares Outstanding (Basic) | 372.02M385.54M | −3.5% |
| Shares Outstanding (Diluted) | 375.63M391.68M | −4.1% |
05—Questions
Frequently Asked Questions
How did Entergy's overall profitability change in 2010 compared with 2009?
Consolidated net income increased slightly to $1,270.3 million from $1,251.1 million, and diluted EPS from continuing operations rose 5.7% to $6.66. The Utility segment's improvement of about $121 million more than offset a roughly $152 million decline at Entergy Wholesale Commodities, and Parent & Other's loss narrowed from $98.9 million to $48.8 million.
Why did Entergy Wholesale Commodities earnings decline, and what is the outlook?
EWC net income fell because nuclear realized prices dropped to $59.16/MWh from $61.07/MWh, nuclear volume declined due to more outage days, and net revenue fell by $164 million. Management expects prices to decline again in 2011 because forward contracts are priced at about $53/MWh for 2011 and $49/MWh for 2012, below recent levels, and most long-term contracts expire by the end of 2012.
How is Entergy funding its capital program and returning cash to shareholders?
Entergy had $1.29 billion of cash at year-end 2010 and $1.8 billion of unused capacity on its $3.5 billion credit facility. Planned 2011 construction and capital investments total about $2.6 billion across 2011-2013 averages of roughly $2.5 billion annually. The company paid $604 million in dividends and repurchased $879 million of stock in 2010, with an additional $500 million repurchase program authorized in October 2010.
What are the largest legal, regulatory, or operational uncertainties investors should monitor?
Key uncertainties include the FERC-supervised System Agreement cost allocation (with Entergy Arkansas and Entergy Mississippi exiting in 2013 and 2015), the LPSC's $144 million damages claim tied to Entergy Arkansas's non-requirements sales, the Waterford 3 steam generator replacement now delayed beyond spring 2011, the Vermont Yankee license and state approval uncertainty after 2012, and a DOJ civil investigation launched in September 2010. Management says the ultimate outcomes cannot be predicted at this time.
Did the nuclear spin-off plan affect 2010 results?
Yes. In April 2010 Entergy decided to unwind the infrastructure for its planned spin-off of the non-utility nuclear business. This produced about $64 million of capital cost write-offs, $16 million of other unwinding costs, and a $39 million write-off of debt financing costs, along with a $19 million tax benefit.
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