Subjects: ERN, CCA, ERP
Entergy Reports Fourth Quarter and Full Year Financial Results; Initiates 2019 Earnings Guidance Based on Single New Measure
NEW ORLEANS, Feb. 20, 2019 /PRNewswire/ -- Entergy Corporation (NYSE: ETR) reported a fourth quarter 2018 loss per share of (36) cents on an as-reported basis and earnings per share of 60 cents on an operational basis (non-GAAP), which excludes the effects of special items. For the full year, the company reported 2018 earnings per share of $4.63 on an as-reported basis and $7.31 on an operational basis. The as-reported results for the quarter and full year reflected asset impairments and other expenses related to the strategic decision to exit the EWC business.
"Today we are reporting strong results for another successful year, and we are firmly on track to achieve our long-term goals," said Entergy Chairman and Chief Executive Officer Leo Denault. "In 2018 we executed on our strategy and met major milestones in our transition to a pure-play utility. We expect 2019 will be no different."
Business highlights included the following:
- Entergy initiated 2019 guidance and 2020-2021 outlooks for its new ETR adjusted EPS measure.
- The APSC and PUCT issued orders approving settlements in E-AR's and E-TX's base rate proceedings.
- In January 2019, Entergy completed the sale of VY to NorthStar.
- Entergy and Holtec filed Pilgrim's license transfer application with the NRC.
- Entergy raised its dividend for the fourth consecutive year.
- The U.S. Chamber of Commerce Foundation named Entergy a finalist in its 2018 Corporate Citizenship Awards in the "Best Economic Empowerment Program" category.
Consolidated Earnings (GAAP and Non-GAAP Measures) | ||||||
Fourth Quarter | Year-to-Date | |||||
2018 | 2017 | Change | 2018 | 2017 | Change | |
(After-tax, $ in millions) | ||||||
As-reported earnings | (66) | (479) | 413 | 849 | 412 | 437 |
Less special items | (176) | (617) | 440 | (493) | (889) | 396 |
Operational earnings (non-GAAP) | 110 | 138 | (27) | 1,341 | 1,300 | 41 |
Estimated weather in billed sales | 25 | 11 | 14 | 67 | (79) | 146 |
(After-tax, per share in $) | ||||||
As-reported earnings | (0.36) | (2.66) | 2.30 | 4.63 | 2.28 | 2.35 |
Less special items | (0.96) | (3.42) | 2.46 | (2.68) | (4.92) | 2.24 |
Operational earnings (non-GAAP) | 0.60 | 0.76 | (0.16) | 7.31 | 7.20 | 0.11 |
Estimated weather in billed sales | 0.13 | 0.06 | 0.07 | 0.37 | (0.44) | 0.80 |
Calculations may differ due to rounding |
Consolidated Results
For fourth quarter 2018, the company reported a loss of $(66 million), or (36) cents per share, on an as-reported basis and earnings of $110 million, or 60 cents per share, on an operational basis. This compared to a fourth quarter 2017 loss of $(479 million), or $(2.66) per share, on an as-reported basis and earnings of $138 million, or 76 cents per share on an operational basis.
For the full year, the company reported 2018 earnings of $849 million, or $4.63 per share, on an as-reported basis and $1,341 million, or $7.31 per share, on an operational basis. This compared to 2017 earnings of $412 million, or $2.28 per share, on an as-reported basis and earnings of $1,300 million, or $7.20 per share, on an operational basis.
Summary discussions by business are below. Additional details, including information on OCF by business, are provided in Appendix A and a comprehensive analysis of quarterly and year-to-date variances by business is provided in Appendix B.
Utility, Parent & Other Results
For fourth quarter 2018, the Utility business reported earnings attributable to Entergy Corporation of $388 million, or $2.12 per share, on an as-reported basis, and earnings of $350 million, or $1.91 per share, on an operational basis. This compared to a fourth quarter 2017 loss of $(47 million), or (26) cents per share, on an as-reported basis, and earnings of $133 million, or 74 cents per share on an operational basis.
Drivers for the increase in quarterly earnings included:
- A fourth quarter 2017 revaluation of certain tax assets as a result of tax reform, net of adjustments for customer sharing, which decreased 2017 earnings by $181 million (considered a special item and excluded from operational earnings),
- In fourth quarter 2018, a $38 million reversal of a portion of the tax reform accrual recorded in 2017 (considered a special item and excluded from operational earnings),
- A fourth quarter 2018 favorable income tax item, net of a portion reserved for sharing with E-AR customers, which increased earnings by approximately $140 million,
- New base rate actions to recover investments that benefit customers and
- Non-fuel O&M expense decreased quarter-over-quarter.
The drivers above were partially offset by:
- Regulatory provisions in 2018 that lowered earnings into the allowed ranges at E-AR and E-MS as required by their FRPs,
- A regulatory charge in 2018 for amounts due to E-TX customers for the benefit of the lower federal tax rate retroactive to January 2018 and
- Higher depreciation expense and taxes other than income taxes.
The current period results also included a $215 million reduction in income taxes, with a corresponding reduction in net revenue, for the amortization of unprotected excess ADIT. This was neutral to earnings.
For fourth quarter 2018, Parent & Other reported a loss of $(81 million), or (44) cents per share, on both an as-reported and operational basis. This compared to a fourth quarter 2017 loss of $(6 million), or (4) cents per share, on an as-reported basis, and a loss of $(58 million), or (33) cents per share, on an operational basis.
As-reported results for 2017 reflected a reduction in income tax expense of $52 million for the revaluation of certain tax assets, which resulted from tax reform. This was considered a special item and excluded from operational earnings.
On a combined basis, Utility, Parent & Other (non-GAAP) contributed $1.68 to fourth quarter 2018 consolidated EPS compared to a loss of (30) cents in fourth quarter 2017. On an adjusted basis, excluding special items and normalizing weather and income taxes, Utility, Parent & Other contributed 51 cents in fourth quarter 2018 to consolidated EPS, compared to 48 cents in fourth quarter 2017.
For full year 2018, the Utility business earned net income attributable to Entergy Corporation of $1,483 million, or $8.09 per share, on an as-reported basis, and earnings of $1,445 million, or $7.88 per share, on an operational basis. This compared to full year 2017 earnings of $762 million, or $4.22 per share, on an as-reported basis, and $942 million, or $5.22 per share on an operational basis.
Drivers for the increase in annual earnings included:
- A fourth quarter 2017 revaluation of certain tax assets, net of customer sharing, discussed above (considered a special item and excluded from operational earnings),
- A fourth quarter 2018 reversal of a tax reform accrual discussed above (considered a special item and excluded from operational earnings),
- Second and fourth quarter 2018 favorable income tax items, net of customer sharing,
- New base rate actions to recover investments that benefit customers and
- Higher retail sales, attributable to weather.
The drivers above were partially offset by:
- Higher operating expenses (non-fuel O&M, taxes other than income taxes and depreciation expense) and
- 2018 regulatory provisions that lowered earnings into the allowed ranges at E-AR and E-MS as required by their FRPs.
Full year 2018 results also reflected the return of unprotected excess ADIT to customers, which affected several income statement line items but was neutral to earnings. Specifically, this reduced income taxes by $775 million, but was offset in net revenue and non-fuel O&M.
For 2018, Parent & Other reported a loss of $(292 million), or $(1.59) per share, on an as-reported and operational basis. This compared to a 2017 loss of $(175 million), or (97) cents per share, on an as-reported basis, and $(228 million), or $(1.26) per share, on an operational basis. As-reported results for 2017 included a decrease in income tax expense, which resulted from tax reform as described above. This was considered a special item and excluded from operational earnings. 2018 results also reflected higher interest expense.
On a combined basis, Utility, Parent & Other (non-GAAP) contributed $6.50 to 2018 consolidated EPS, compared to $3.25 in 2017. On an adjusted basis, normalizing weather and income taxes, Utility, Parent & Other contributed $4.71 to 2018 consolidated EPS, compared to $4.57 in 2017.
Appendix C contains additional details on Utility financial and operating measures, including a reconciliation for non-GAAP Utility, Parent & Other adjusted earnings and EPS.
Entergy Wholesale Commodities Results
For fourth quarter 2018, EWC recorded a loss attributable to Entergy Corporation of $(373 million), or $(2.04) per share, on an as-reported basis and loss $(158 million), or (87) cents per share, on an operational basis. This compared to fourth quarter 2017 loss of $(425 million), or $(2.36) per share, on an as-reported basis and earnings of $63 million, or 35 cents per share, on an operational basis.
As-reported results in both periods reflected impairments and other expenses recorded as a result of the strategic decision to exit the EWC business. In fourth quarter 2018, these items totaled $(214 million), or $(1.17) per share. This amount included a revision to Vermont Yankee's asset retirement obligation as a result of its approved sale, which resulted in in a pre-tax asset impairment of $(173 million). In fourth quarter 2017, these items totaled $(92 million), or (51) cents per share. Fourth quarter 2017 results also reflected the write-down of certain tax assets totaling $(397 million) as a result of tax reform. All of these items were considered special items and excluded from operational earnings.
The current period results included losses on decommissioning trust fund investments, as well as lower net revenue as a result of lower nuclear energy volume. Partially offsetting these items were lower non-fuel O&M expense and lower income tax expense primarily due to lower pre-tax income.
For the full year, EWC reported a loss of $(343 million), or $(1.87) per share, on an as-reported basis, and earnings of $188 million, or $1.02 per share on an operational basis. In 2017, EWC realized a loss of $(175 million), or (97) cents per share, on an as-reported basis, and earnings of $586 million, or $3.24 per share on an operational basis. Both periods reflected the effects of the strategic decision to exit the EWC business as well as the 2017 tax reform item noted above. Other drivers included lower net revenue from the nuclear business, losses on decommissioning trust fund investments and lower depreciation and decommissioning expenses. Additionally, 2018 results included less favorable income tax items, excluding the 2017 tax reform item.
Appendix D contains additional details on EWC financial and operating measures, including a reconciliation for non-GAAP EWC operational adjusted EBITDA.
Earnings Guidance
Entergy initiated its 2019 adjusted earnings guidance range of $5.10 to $5.50 per share. See webcast presentation slides for additional details.
The company has provided 2019 earnings guidance with regard to the non-GAAP measure of Entergy adjusted EPS. This measure excludes from the corresponding GAAP financial measures the effect of adjustments as described below under "Non-GAAP Financial Measures." The company has not provided a reconciliation of such non-GAAP guidance to guidance presented on a GAAP basis because it cannot predict and quantify with a reasonable degree of confidence all of the adjustments that may occur during 2019. One such adjustment will be the exclusion of EWC earnings from Entergy adjusted EPS. We currently estimate that the contribution of EWC to Entergy's as-reported EPS will be approximately $(1.25) per share in 2019. This estimate is subject to substantial uncertainty due to, among other things, the potential effects of the strategic decision to exit the EWC business.
Earnings Teleconference
A teleconference will be held at 10:00 a.m. Central Time on Wednesday, February 20, 2019, to discuss Entergy's quarterly earnings announcement and the company's financial performance. The teleconference may be accessed by visiting Entergy's website at www.entergy.com or by dialing 844-309-6569, conference ID 6799533, no more than 15 minutes prior to the start of the call. The webcast slide presentation is also posted to Entergy's website concurrent with this release, which was issued before market open on the day of the call. A replay of the teleconference will be available on Entergy's website at www.entergy.com and by telephone. The telephone replay will be available through February 27, 2019, by dialing 855-859-2056, conference ID 6799533. This release and the webcast slide presentation are also available on the Entergy Investor Relations mobile web app at iretr.com.
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, including nearly 9,000 megawatts of nuclear power. Entergy delivers electricity to 2.9 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of approximately $11 billion and nearly 13,700 employees.
Entergy Corporation's common stock is listed on the New York and Chicago stock exchanges under the symbol "ETR."
Details regarding Entergy's results of operations, regulatory proceedings and other matters are available in this earnings release, a copy of which will be filed with the SEC, and the webcast slide presentation. Both documents are available on Entergy's Investor Relations website at www.entergy.com/investor_relations and on Entergy's Investor Relations mobile web app at iretr.com.
Entergy maintains a web page as part of its Investor Relations website, entitled "Regulatory and Other Information," which provides investors with key updates of certain regulatory proceedings and important milestones on the execution of its strategy. While some of this information may be considered material information, investors should not rely exclusively on this page for all relevant company information.
For definitions of certain operating measures, as well as GAAP and non-GAAP financial measures and abbreviations and acronyms used in the earnings release materials, see Appendix F.
Non-GAAP Financial Measures
This news release contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Entergy has provided quantitative reconciliations within this release of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Certain non-GAAP financial measures in this news release could differ from GAAP in that the figure or ratio states or includes operational earnings. Operational earnings are not calculated in accordance with GAAP because they exclude the effect of "special items." Special items are unusual or non-recurring items or events or other items or events that management believes do not reflect the ongoing business of Entergy, and may include items such as impairments, and certain gains or losses including those that may occur as a result of strategic decisions such as Entergy's decision to exit the EWC business. In addition, other financial measures including net income (or earnings), adjusted for preferred dividends and tax effected interest expense; net revenue; return on average invested capital; and return on average common equity are included on both an operational and as-reported basis. In each case, the metrics defined as "operational" would exclude the effect of special items as defined above.
Entergy reports the combination of the Utility segment with Parent & Other as Utility, Parent & Other, which is all of Entergy excluding the EWC segment, since management uses this combination in making decisions about its ongoing business in light of its decision to exit the merchant power business. Entergy also reports Utility, Parent & Other adjusted earnings, which combines the Utility segment with Parent & Other, excludes applicable special items and normalizes weather and income tax expense for the periods presented, because it believes that these financial metrics provide useful information to investors in evaluating the ongoing results of Entergy's businesses and assist investors in comparing Entergy's financial performance to the financial performance of other companies in the Utility sector. The methodologies employed to determine the normalized weather and income tax expense adjustments, each of which is further described in this release, involve estimations and the judgement of management.
Beginning with first quarter 2019 financial results, Entergy intends to report earnings using the non-GAAP measure of Entergy adjusted earnings, which excludes the effect of certain "adjustments," including the removal of the Entergy Wholesale Commodities segment in light of its decision to exit the merchant power business. Beginning with this release, Entergy is also providing guidance and outlooks using adjusted earnings on a per share basis. Adjustments are unusual or non-recurring items or events or other items or events that management believes do not reflect the ongoing business of Entergy, such as the EWC segment given its strategic decision to exit the EWC business, and items such as certain costs, expenses, significant tax items, or other specified items. Entergy believes that this financial measure provides useful information to investors in evaluating the ongoing results of Entergy's business, comparing period to period results, and comparing Entergy's financial performance to the financial performance of other companies in the utility sector.
In addition to reporting earnings per share on a consolidated basis, Entergy reports on a per share basis the earnings or loss of each of its segments, together with the combination of the Utility segment and Parent & Other. These per share measures represent the net income or loss of such segment or segments divided by the diluted average number of common shares outstanding for the period. Beginning with Entergy's first quarter 2019 financial results, Entergy intends to report its adjusted earnings on a per share basis. Entergy believes such per share measures provide useful information to investors in understanding the results of operations of those businesses and their contribution to Entergy's consolidated results of operations.
Other non-GAAP measures, including adjusted EBITDA; operational adjusted EBITDA; gross liquidity; debt to capital ratio, excluding securitization debt; net debt to net capital ratio, excluding securitization debt; parent debt to total debt ratio, excluding securitization debt; operational FFO to debt ratio, excluding securitization debt and operational FFO to debt ratio, excluding securitization debt and return of unprotected excess ADIT are measures Entergy uses internally for management and board discussions and performance monitoring activities to gauge the overall strength of its business. Entergy believes the above data provides useful information to investors in evaluating Entergy's ongoing financial results and flexibility and assists investors in comparing Entergy's credit and liquidity to the credit and liquidity of others in the Utility sector.
The non-GAAP financial measures and other reported adjusted items in this release are presented in addition to, and in conjunction with, results presented in accordance with GAAP. These non-GAAP financial measures should not be used to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of Entergy's operations that, when viewed with Entergy's GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting Entergy's business. Investors are strongly encouraged to review Entergy's consolidated financial statements and publicly filed reports in their entirety and to not rely on any single financial measure. Non-GAAP financial measures are not standardized; therefore, it might not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.
Cautionary Note Regarding Forward-Looking Statements
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. Such forward-looking statements include, among other things, Entergy's 2019 earnings guidance; its current financial and operational outlook; and other statements of Entergy's plans, beliefs or expectations included in this news release. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this news release. 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 are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements, including (a) those factors discussed elsewhere in this news release and in Entergy's most recent Annual Report on Form 10-K, any subsequent Quarterly Reports on Form 10-Q and Entergy's other reports and filings made under the Securities Exchange Act of 1934; (b) uncertainties associated with (1) rate proceedings, formula rate plans and other cost recovery mechanisms, including the risk that costs may not be recoverable to the extent anticipated by the utilities and (2) implementation of the ratemaking effects of changes in law; (c) uncertainties associated with efforts to remediate the effects of major storms and recover related restoration costs; (d) risks associated with operating nuclear facilities, including plant relicensing, operating and regulatory costs and risks; (e) changes in decommissioning trust fund values or earnings or in the timing or cost of decommissioning Entergy's nuclear plant sites; (f) legislative and regulatory actions and risks and uncertainties associated with claims or litigation by or against Entergy and its subsidiaries; (g) risks and uncertainties associated with strategic transactions that Entergy or its subsidiaries may undertake, including the risk that any such transaction may not be completed as and when expected and the risk that the anticipated benefits of the transaction may not be realized; (h) effects of changes in federal, state or local laws and regulations and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental or energy policies; and (i) the effects of technological changes and changes in commodity markets, capital markets or economic conditions; and (j) impacts from a terrorist attack, cybersecurity threats, data security breaches or other attempts to disrupt Entergy's business or operations, and other catastrophic events.
Fourth Quarter 2018 Earnings Release Appendices and Financial Statements
Appendices
Appendices are presented in this section as follows:
- A: Consolidated Results and Special Items
- B: Earnings Variance Analysis
- C: Utility Financial and Operating Measures
- D: EWC Financial and Operating Measures
- E: Consolidated Financial Measures
- F: Definitions and Abbreviations and Acronyms
- G: GAAP to Non-GAAP Reconciliations
Financial Statements
Financial statements are presented in this section.
A: Consolidated Results and Special Items
Appendix A-1 provides a comparative summary of consolidated earnings, including a reconciliation of as-reported earnings (GAAP) to operational earnings (non-GAAP).
Appendix A-1: Consolidated Earnings - Reconciliation of GAAP to Non-GAAP Measures Fourth Quarter and Year-to-Date 2018 vs. 2017 (See Appendix A-3 and Appendix A-4 for details on special items, including income tax effects on adjustments) | ||||||
Fourth Quarter | Year-to-Date | |||||
2018 | 2017 | Change | 2018 | 2017 | Change | |
(After-tax, $ in millions) | ||||||
Earnings (loss) | ||||||
Utility | 388 | (47) | 435 | 1,483 | 762 | 722 |
Parent & Other | (81) | (6) | (75) | (292) | (175) | (116) |
EWC | (373) | (425) | 53 | (343) | (175) | (168) |
Consolidated | (66) | (479) | 413 | 849 | 412 | 437 |
Less special items | ||||||
Utility | 38 | (181) | 219 | 38 | (181) | 219 |
Parent & Other | - | 52 | (52) | - | 52 | (52) |
EWC | (214) | (488) | 274 | (531) | (760) | 229 |
Consolidated | (176) | (617) | 440 | (493) | (889) | 396 |
Operational earnings (loss) (non-GAAP) | ||||||
Utility | 350 | 133 | 217 | 1,445 | 942 | 503 |
Parent & Other | (81) | (58) | (23) | (292) | (228) | (64) |
EWC | (158) | 63 | (221) | 188 | 586 | (398) |
Consolidated | 110 | 138 | (27) | 1,341 | 1,300 | 41 |
Estimated weather in billed sales | 25 | 11 | 14 | 67 | (79) | 146 |
Diluted average number of common shares outstanding (in millions) | 183.1 | 180.3 | 183.4 | 180.5 | ||
(After-tax, per share in $) (a) | ||||||
Earnings (loss) | ||||||
Utility | 2.12 | (0.26) | 2.38 | 8.09 | 4.22 | 3.87 |
Parent & Other | (0.44) | (0.04) | (0.40) | (1.59) | (0.97) | (0.62) |
EWC | (2.04) | (2.36) | 0.32 | (1.87) | (0.97) | (0.90) |
Consolidated | (0.36) | (2.66) | 2.30 | 4.63 | 2.28 | 2.35 |
Less special items | ||||||
Utility | 0.21 | (1.00) | 1.21 | 0.21 | (1.00) | 1.21 |
Parent & Other | - | 0.29 | (0.29) | - | 0.29 | (0.29) |
EWC | (1.17) | (2.71) | 1.54 | (2.89) | (4.21) | 1.32 |
Consolidated | (0.96) | (3.42) | 2.46 | (2.68) | (4.92) | 2.24 |
Operational earnings (loss) (non-GAAP) | ||||||
Utility | 1.91 | 0.74 | 1.17 | 7.88 | 5.22 | 2.66 |
Parent & Other | (0.44) | (0.33) | (0.11) | (1.59) | (1.26) | (0.33) |
EWC | (0.87) | 0.35 | (1.22) | 1.02 | 3.24 | (2.22) |
Consolidated | 0.60 | 0.76 | (0.16) | 7.31 | 7.20 | 0.11 |
Estimated weather in billed sales | 0.13 | 0.06 | 0.07 | 0.37 | (0.44) | 0.80 |
Calculations may differ due to rounding | |
(a) | Per share amounts are calculated by dividing the earnings (loss) by the diluted average number of common shares outstanding for the period. |
See Appendix B for detailed earnings variance analysis.
Appendix A-2 provides a comparative summary of OCF by business.
Appendix A-2: Consolidated Operating Cash Flow | ||||||
Fourth Quarter and Year-to-Date 2018 vs. 2017 | ||||||
($ in millions) | ||||||
Fourth Quarter | Year-to-Date | |||||
2018 | 2017 | Change | 2018 | 2017 | Change | |
Utility | 699 | 934 | (235) | 2,693 | 2,939 | (246) |
Parent & Other | (20) | (134) | 114 | (234) | (452) | 218 |
EWC | (153) | 111 | (264) | (74) | 137 | (211) |
Consolidated | 526 | 911 | (385) | 2,385 | 2,624 | (239) |
Calculations may differ due to rounding |
OCF decreased quarter-over-quarter due primarily to the return of the unprotected excess ADIT to customers, as well as lower net revenue at EWC, higher spending on nuclear refueling outages and higher severance and retention payments at EWC.
OCF decreased year-over-year, driven by the return of the unprotected excess ADIT to customers and lower net revenue at EWC. Favorable weather at the Utility and lower severance and retention payments at EWC, partially offset the decrease.
For both the quarter and the full year, intercompany income tax payments contributed to the line of business variances.
Appendix A-3 and Appendix A-4 list special items by business. Amounts are shown on both an earnings and EPS basis. Special items are included in as-reported earnings consistent with GAAP, but are excluded from operational earnings. As a result, operational earnings is considered a non-GAAP measure.
Appendix A-3: Special Items by Driver (shown as positive/(negative) impact on earnings or EPS) | ||||||
Fourth Quarter and Year-to-Date 2018 vs. 2017 | ||||||
(Pre-tax except for income tax effects and total, $ in millions) | ||||||
Fourth Quarter | Year-to-Date | |||||
2018 | 2017 | Change | 2018 | 2017 | Change | |
Utility | ||||||
Tax reform | 38 | (181) | 219 | 38 | (181) | 219 |
Total Utility | 38 | (181) | 219 | 38 | (181) | 219 |
Parent & Other | ||||||
Tax reform | - | 52 | (52) | - | 52 | (52) |
Total Parent & Other | - | 52 | (52) | - | 52 | (52) |
EWC | ||||||
Items associated with the strategic decision to exit the EWC business | (271) | (141) | (131) | (672) | (628) | (44) |
Income tax effect on adjustments above (b) | 57 | 49 | 8 | 141 | 220 | (79) |
Income tax benefit resulting from FitzPatrick transaction | - | - | - | - | 45 | (45) |
Tax reform | - | (397) | 397 | - | (397) | 397 |
Total EWC | (214) | (488) | 274 | (531) | (760) | 229 |
Total special items | (176) | (617) | 440 | (493) | (889) | 396 |
(After-tax, per share in $) (c) | ||||||
Utility | ||||||
Tax reform | 0.21 | (1.00) | 1.21 | 0.21 | (1.00) | 1.21 |
Total Utility | 0.21 | (1.00) | 1.21 | 0.21 | (1.00) | 1.21 |
Parent & Other | ||||||
Tax reform | - | 0.29 | (0.29) | - | 0.29 | (0.29) |
Total Parent & Other | - | 0.29 | (0.29) | - | 0.29 | (0.29) |
EWC | ||||||
Items associated with the strategic decision to exit the EWC business | (1.17) | (0.51) | (0.66) | (2.89) | (2.26) | (0.63) |
Income tax benefit resulting from FitzPatrick transaction | - | - | - | - | 0.25 | (0.25) |
Tax reform | - | (2.20) | 2.20 | - | (2.20) | 2.20 |
Total EWC | (1.17) | (2.71) | 1.54 | (2.89) | (4.21) | 1.32 |
Total special items | (0.96) | (3.42) | 2.46 | (2.68) | (4.92) | 2.24 |
Calculations may differ due to rounding | |
(b) | Income tax effect is calculated by multiplying the pre-tax amount by the estimated income tax rate that is expected to apply. |
(c) | EPS effect is calculated by multiplying the pre-tax amount by the estimated income tax rate that is expected to apply to each adjustment and then dividing by the diluted average number of common shares outstanding for the period. |
Appendix A-4: Special Items by Income Statement Line Item (shown as positive/(negative) impact on earnings) | ||||||
Fourth Quarter and Year-to-Date 2018 vs. 2017 | ||||||
(Pre-tax except for Income taxes and Total, $ in millions) | ||||||
Fourth Quarter | Year-to-Date | |||||
2018 | 2017 | Change | 2018 | 2017 | Change | |
Utility | ||||||
Net revenue | - | 56 | (56) | - | 56 | (56) |
Income taxes (d) | 38 | (236) | 274 | 38 | (236) | 274 |
Total Utility | 38 | (181) | 219 | 38 | (181) | 219 |
Parent & Other | ||||||
Income taxes (d) | - | 52 | (52) | - | 52 | (52) |
Total Parent & Other | - | 52 | (52) | - | 52 | (52) |
EWC | ||||||
Net revenue | - | - | - | - | 91 | (91) |
Non-fuel O&M | (34) | (22) | (11) | (131) | (201) | 70 |
Asset write-off and impairments | (235) | (117) | (118) | (532) | (538) | 6 |
Taxes other than income taxes | (3) | (2) | (1) | (8) | (10) | 1 |
Gain on sale of assets | - | - | - | - | 16 | (16) |
Miscellaneous net (other income) | - | - | - | - | 15 | (15) |
Income taxes (d) | 57 | (347) | 404 | 141 | (133) | 274 |
Total EWC | (214) | (488) | 274 | (531) | (760) | 229 |
Total special items (after-tax) | (176) | (617) | 440 | (493) | (889) | 396 |
Calculations may differ due to rounding | |
(d) | Income taxes included the income tax effect of the special items which were calculated using the estimated income tax rate that is expected to apply to each item. The year-to-date 2017 period also included the income tax benefit which resulted from the FitzPatrick transaction. |
B: Earnings Variance Analysis
Appendix B provides details of current quarter 2018 versus 2017 as-reported and operational earnings variance analysis for Utility, Parent & Other and EWC.
Appendix B-1: As-Reported and Operational Earnings Variance Analysis | |||||||||||
Fourth Quarter 2018 vs. 2017 | |||||||||||
(Pre-tax except for Income taxes, $ in millions) | |||||||||||
Utility | Parent & Other | EWC | Consolidated | ||||||||
As-Reported | Operational | As-Reported | Operational | As- Reported | Operational | As- Reported | Operational | ||||
2017 earnings | (47) | 133 | (6) | (58) | (425) | 63 | (479) | 138 | |||
Net revenue | (315) | (259) | (e) | - | - | (52) | (52) | (f) | (367) | (311) | |
Non-fuel O&M | 33 | 33 | (g) | (2) | (2) | 12 | 23 | (h) | 43 | 54 | |
Asset write-offs and impairments | - | - | - | - | (118) | - | (i) | (118) | - | ||
Decommissioning expense | (2) | (2) | - | - | (5) | (5) | (7) | (7) | |||
Taxes other than income taxes | (7) | (7) | - | - | (1) | - | (8) | (7) | |||
Depreciation/amortization exp. | (13) | (13) | - | - | 3 | 3 | (10) | (10) | |||
Other income (deductions) | (7) | (7) | (4) | (4) | (247) | (247) | (j) | (258) | (258) | ||
Interest exp. and other charges | 4 | 4 | (11) | (11) | (2) | (2) | (9) | (9) | |||
Income taxes | 742 | 468 | (k) | (58) | (6) | (l) | 463 | 58 | (m) | 1,147 | 520 |
2018 earnings | 388 | 350 | (81) | (81) | (373) | (158) | (66) | 110 | |||
Appendix B-2: As-Reported and Operational Earnings Variance Analysis | |||||||||||
Year-to-Date 2018 vs. 2017 | |||||||||||
(Pre-tax except for Income taxes, $ in millions) | |||||||||||
Utility | Parent & Other | EWC | Consolidated | ||||||||
As-Reported | Operational | As-Reported | Operational | As- Reported | Operational | As- Reported | Operational | ||||
2017 earnings | 762 | 942 | (175) | (228) | (175) | 586 | 412 | 1,300 | |||
Net revenue | (693) | (637) | (e) | - | - | (192) | (101) | (f) | (885) | (738) | |
Non-fuel O&M | (81) | (81) | (g) | (10) | (10) | 67 | 13 | (h) | (25) | (78) | |
Asset write-offs and impairments | - | - | - | - | 6 | - | 6 | - | |||
Decommissioning expense | 1 | 1 | - | - | 16 | 16 | (n) | 17 | 17 | ||
Taxes other than income taxes | (26) | (26) | (o) | - | - | 1 | - | (24) | (25) | ||
Depreciation/amortization exp. | (23) | (23) | (p) | - | - | 43 | 43 | (q) | 20 | 20 | |
Other income (deductions) | 22 | 22 | (r) | (7) | (7) | (222) | (207) | (j) | (206) | (192) | |
Interest exp. and other charges | (6) | (6) | (29) | (29) | (s) | (10) | (10) | (45) | (45) | ||
Income taxes | 1,527 | 1,253 | (k) | (70) | (18) | (l) | 123 | (151) | (m) | 1,579 | 1,083 |
2018 earnings | 1,483 | 1,445 | (292) | (292) | (343) | 188 | 849 | 1,341 | |||
Calculations may differ due to rounding |
Utility Net Revenue As-reported Variance Analysis 2018 vs. 2017 (Pre-tax, $ in millions) | ||
Fourth Quarter | Year-to-Date | |
Estimated weather | 15 | 218 |
Volume/unbilled | (7) | (8) |
Retail electric price | 33 | 106 |
Regulatory credit for tax reform | (56) | (56) |
Regulatory charge for lower tax rate | (25) | (102) |
Reg. provisions for E-AR and E-MS FRPs | (44) | (44) |
Regulatory liability for tax sharing | (40) | (40) |
Unprotected excess ADIT | (215) | (770) |
Other, including Grand Gulf recovery | 24 | 3 |
Total | (315) | (693) |
(e) | The fourth quarter and year-to-date earnings decreases from lower Utility net revenue were driven by the return of unprotected excess ADIT to customers (offset in income taxes), as well as a regulatory credit of $56 million in fourth quarter 2017 as a result of tax reform (classified as a special item). Regulatory charges at E-LA, E-TX, and E-NO to return the benefit of the lower federal tax rate to customers, regulatory provisions that lowered earnings into the allowed ranges at E-AR and E-MS as required by their FRPs, and a regulatory liability for tax sharing with E-AR customers (this partially offsets the income tax item discussed in footnote k) contributed to the variances. These decreases were partially offset by the effects of weather. In the fourth quarter, weather-adjusted billed sales volume decreased. However year-to-date weather-adjusted billed sales volume increased, but this was more than offset by lower volume in the unbilled period. 2018 results also included rate changes from E-AR's and E-LA's FRP and E-TX's base rate case. |
(f) | The fourth quarter and year-to-date earnings decreases from lower EWC net revenue reflected lower prices as well as lower volume from EWC's merchant nuclear plants. The year-to-date as-reported variance reflected cost reimbursements from the buyer related to the FitzPatrick sale in first quarter 2017 (classified as a special item and offset in non-fuel O&M). |
(g) | The fourth quarter earnings increase from lower Utility non-fuel O&M was due primarily to lower nuclear costs, lower benefits costs and a gain on the sale of an asset. The year-to-date earnings decrease from higher Utility non-fuel O&M was due primarily to higher spending on fossil and distribution operations, as well as higher transmission and IT costs. Energy efficiency spending and storm reserves were also higher (largely offset in net revenue). This was partially offset by higher nuclear insurance refunds in 2018 compared to 2017, as well as the gain on the sale of an asset in fourth quarter 2018. |
(h) | The fourth quarter earnings increase from lower EWC non-fuel O&M was due primarily to lower labor and contract costs. The year-to-date as-reported earnings increase reflected costs incurred in first quarter 2017 related to the agreement to sell FitzPatrick (classified as a special item and offset in net revenue). This was partially offset by higher severance and retention costs related to the strategic decision to exit the EWC business compared to 2017, as well as the gain on the sale of FitzPatrick in first quarter 2017 (both classified as a special items). |
(i) | The fourth quarter as-reported earnings decrease from higher EWC asset write-offs and impairments resulted from a revision of Vermont Yankee's ARO, partially offset by a gain on proceeds from the settlement of spent fuel litigation at Pilgrim (both classified as special items). |
(j) | The fourth quarter and year-to-date earnings decreases from lower EWC other income (deductions) were due largely to losses on decommissioning trust fund investments, including unrealized losses on equity investments that were previously recorded as other comprehensive income on the balance sheet, now recorded to the income statement. The year-to-date as-reported earnings decrease also reflected the absence of gains on the receipt of the Indian Point 3 and FitzPatrick decommissioning trust funds from NYPA in first quarter 2017 (classified as a special item). |
(k) | The fourth quarter and year-to-date earnings increases from lower Utility income taxes were primarily due to the amortization of the unprotected excess ADIT (offset in net revenue) and an income tax item in fourth quarter 2018 of approximately $170 million resulting from the restructuring of E-AR (this was partly offset by customer sharing recorded as a regulatory charge, included in net revenue). The change in the federal income tax rate also contributed to the increases. The fourth quarter and year-to-date as-reported earnings increases also reflected the write-down of certain tax assets totaling $236 million as a result of tax reform in fourth quarter 2017 (classified as a special item and a portion offset in net revenue) and $38 million in fourth quarter 2018 related to the reversal of a tax accrual (classified as special item). The year-to-date variance also reflected income tax benefits from the settlement of the 2012?2013 IRS audit in second quarter 2018. |
(l) | The fourth quarter and year-to-date earnings decreases reflected a fourth quarter 2017 reduction of income tax totaling $52 million as a result of tax reform (classified as a special item). The change in the federal income tax rate also contributed to the variances. |
(m) | The fourth quarter and year-to-date as-reported earnings increases from lower EWC income taxes reflected the write-down of certain tax assets totaling $397 million as a result of tax reform in fourth quarter 2017 (classified as a special item). The year-to-date as-reported variance also reflected additional income tax expense due to the lower level of special items and a tax benefit in first quarter 2017, which resulted from the sale of FitzPatrick (classified as a special item). The year-to-date operational earnings decrease reflected a $373 million reduction in tax expense in second quarter 2017. The increase was partially offset by $13 million in tax benefits from the settlement of the 2012?2013 IRS audit in second quarter 2018, a reduction in income tax expense of $107 million for a restructuring of its interest in an EWC decommissioning trust fund in third quarter 2018 and a benefit of $23 million from the conclusion of a state income tax audit also in third quarter 2018. Changes in pre-tax income and the federal income tax rate also contributed to the fourth quarter and year-to-date variances. |
(n) | The year-to-date earnings increase from lower EWC decommissioning expense was due primarily to the sale of FitzPatrick in first quarter 2017. |
(o) | The year-to-date earnings decrease from higher Utility taxes other than income taxes was due to higher ad valorem and payroll taxes. |
(p) | The year-to-date earnings decrease from higher Utility depreciation expense was due to higher plant in service, partially offset by updated depreciation rates at SERI (offset in net revenue). |
(q) | The year-to-date earnings increase from lower EWC depreciation expense was due primarily to the decision to operate Palisades until May 2022, thereby extending the period in which the plant is depreciated. |
(r) | The year-to-date earnings increase from higher Utility other income (deductions) was due primarily to higher AFUDC ? equity funds due to higher CWIP balances, partially offset by losses on the decommissioning trust fund investments (largely offset in net revenue). |
(s) | The year-to-date earnings decrease from higher Parent & Other interest expense was due to higher borrowings, combined with higher variable interest rates. |
C: Utility Financial and Operating Measures
Appendix C-1 provides a comparative summary of Utility, Parent & Other adjusted earnings and EPS contribution, each of which excludes the effects of special items and normalizes weather and income tax expense.
Appendix C-1: Utility, Parent & Other Adjusted Earnings and EPS - Reconciliation of GAAP to Non-GAAP Measures | |||||||||||||
Fourth Quarter | Year-to-Date | ||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||
($ in millions) | |||||||||||||
Utility as-reported earnings (loss) | 388 | (47) | 435 | 1,483 | 762 | 722 | |||||||
Parent & Other as-reported (loss) | (81) | (6) | (75) | (292) | (175) | (116) | |||||||
UP&O as-reported earnings | 307 | (54) | 360 | 1,191 | 586 | 605 | |||||||
Less: | |||||||||||||
Special items | 38 | (129) | 167 | 38 | (129) | 167 | |||||||
Estimated weather (t) | 34 | 18 | 15 | 90 | (128) | 218 | |||||||
Tax effect of estimated weather (u) | (9) | (7) | (2) | (23) | 49 | (72) | |||||||
Portion of E-AR and E-MS weather reserved for customers | (15) | - | (15) | (15) | - | (15) | |||||||
Tax effect on E-AR and E-MS customer reserve (u) | 4 | - | 4 | 4 | - | 4 | |||||||
Estimated weather, net of customer reserve (after-tax) | 14 | 11 | 3 | 56 | (79) | 135 | |||||||
Difference between effective and statutory income tax rates (v) | 160 | (22) | 183 | 233 | (31) | 264 | |||||||
UP&O adjusted earnings | 94 | 86 | 8 | 864 | 824 | 40 | |||||||
(After-tax, per share in $) (w) | |||||||||||||
Utility as-reported earnings | 2.12 | (0.26) | 2.38 | 8.09 | 4.22 | 3.87 | |||||||
Parent & Other as-reported (loss) | (0.44) | (0.04) | (0.40) | (1.59) | (0.97) | (0.62) | |||||||
UP&O as-reported earnings | 1.68 | (0.30) | 1.98 | 6.50 | 3.25 | 3.25 | |||||||
Less: | |||||||||||||
Special items | 0.21 | (0.71) | 0.92 | 0.21 | (0.71) | 0.92 | |||||||
Estimated weather, net of customer reserve | 0.08 | 0.06 | 0.01 | 0.31 | (0.44) | 0.75 | |||||||
Difference between effective and statutory income tax rates (v) | 0.88 | (0.12) | 1.00 | 1.27 | (0.17) | 1.44 | |||||||
UP&O adjusted earnings | 0.51 | 0.48 | 0.04 | 4.71 | 4.57 | 0.14 | |||||||
Calculations may differ due to rounding | |
(t) | The effects of weather were estimated using heating degree days and cooling degree days for the billing cycles from certain locations within each jurisdiction and comparing to "normal" weather based on 20-year historical data. The models used to estimate weather are updated periodically and are subject to change. |
(u) | Income tax effect is calculated by multiplying the pre-tax amount by the estimated income tax rates that are expected to apply. |
(v) | Other income tax items represent the adjustment made to income tax expense to reflect a statutory tax rate estimated to be 25.5% in 2018 and 38.5% in 2017. The fourth quarter and year-to-date 2018 periods exclude reductions of $215 million and $775 million, respectively, for the return of unprotected excess ADIT (no earnings impact). |
(w) | EPS effect is calculated by multiplying the pre-tax amount by the estimated income tax rate that is expected to apply to each adjustment and then dividing by the diluted average number of common shares outstanding for the period. |
Appendix C-2 provides comparative summaries of Utility operating and financial measures.
Appendix C-2: Utility Operating and Financial Measures | ||||||||||||
Fourth Quarter and Year-to-Date 2018 vs. 2017 | ||||||||||||
Fourth Quarter | Year-to-Date | |||||||||||
2018 | 2017 | % Change | % Weather | 2018 | 2017 | % Change | % Weather | |||||
GWh billed | ||||||||||||
Residential | 8,250 | 8,024 | 2.8% | (0.1%) | 37,107 | 33,834 | 9.7% | 0.5% | ||||
Commercial | 7,026 | 7,150 | (1.7%) | (1.8%) | 29,426 | 28,745 | 2.4% | 0.1% | ||||
Governmental | 646 | 627 | 3.0% | 3.1% | 2,581 | 2,511 | 2.8% | 1.9% | ||||
Industrial | 11,882 | 11,940 | (0.5%) | (0.5%) | 48,384 | 47,769 | 1.3% | 1.3% | ||||
Total retail sales | 27,804 | 27,741 | 0.2% | (0.6%) | 117,498 | 112,859 | 4.1% | 0.8% | ||||
Wholesale | 2,927 | 3,295 | (11.2%) | 11,715 | 11,550 | 1.4% | ||||||
Total sales | 30,731 | 31,036 | (1.0%) | 129,213 | 124,409 | 3.9% | ||||||
Number of electric retail customers | ||||||||||||
Residential | 2,481,027 | 2,466,671 | 0.6% | |||||||||
Commercial | 356,618 | 354,189 | 0.7% | |||||||||
Governmental | 17,839 | 17,828 | 0.1% | |||||||||
Industrial | 45,790 | 46,193 | (0.9%) | |||||||||
Total retail customers | 2,901,274 | 2,884,881 | 0.6% | |||||||||
Net revenue ($ in millions) | 1,238 | 1,553 | (20.3%) | 5,626 | 6,318 | (11.0%) | ||||||
Non-fuel O&M (per MWh in $) | 22.36 | 23.21 | (3.7%) | 20.52 | 20.66 | (0.7%) | ||||||
Calculations may differ due to rounding | |
Certain prior year data has been reclassified to conform with current year presentation | |
(x) | The effects of weather were estimated using heating degree days and cooling degree days for the billing cycles from certain locations within each jurisdiction and comparing to "normal" weather based on 20-year historical data. The models used to estimate weather are updated periodically and are subject to change. |
D: EWC Financial and Operating Measures
Appendix D-1 provides a comparative summary of EWC operational adjusted EBITDA (non-GAAP).
Appendix D-1: EWC Operational Adjusted EBITDA - Reconciliation of GAAP to Non-GAAP Measures | ||||||
($ in millions) | Fourth Quarter | Year-to-Date | ||||
2018 | 2017 | Change | 2018 | 2017 | Change | |
Net income (loss) | (372) | (425) | 53 | (341) | (172) | (169) |
Add back: interest expense | 8 | 6 | 2 | 34 | 24 | 10 |
Add back: income taxes | (102) | 361 | (463) | (269) | (146) | (123) |
Add back: depreciation and amortization | 34 | 36 | (2) | 150 | 193 | (43) |
Subtract: interest and investment income | (169) | 81 | (250) | 15 | 224 | (209) |
Add back: decommissioning expense | 64 | 60 | 4 | 239 | 255 | (16) |
Adjusted EBITDA (non-GAAP) | (199) | (43) | (156) | (202) | (71) | (131) |
Add back pre-tax special items for: | ||||||
Items associated with the strategic decision to exit the EWC business | 271 | 141 | 130 | 672 | 644 | 28 |
Gain on the sale of FitzPatrick | - | - | - | - | (16) | 16 |
Operational adjusted EBITDA (non-GAAP) | 72 | 98 | (26) | 470 | 557 | (87) |
Calculations may differ due to rounding |
Appendix D-2 provides a comparative summary of EWC operating and financial measures.
Appendix D-2: EWC Operating and Financial Measures | ||||||
Fourth Quarter and Year-to-Date 2018 vs. 2017 (See Appendix G for reconciliation of GAAP to non-GAAP measures) | ||||||
Fourth Quarter | Year-to-Date | |||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |
Owned capacity (MW) | 3,962 | 3,962 | - | 3,962 | 3,962 | - |
GWh billed | 8,022 | 7,885 | 1.7 | 29,875 | 30,501 | (2.1) |
As-reported net revenue ($ in millions) | 281 | 333 | (15.6) | 1,276 | 1,469 | (13.1) |
Operational net revenue (non-GAAP) ($ in millions) | 281 | 333 | (15.6) | 1,276 | 1,378 | (7.4) |
EWC Nuclear Fleet | ||||||
Capacity factor | 78% | 93% | (16.1) | 84% | 83% | 1.2 |
GWh billed | 7,520 | 7,317 | 2.8 | 27,617 | 28,178 | (2.0) |
Production cost per MWh | $18.79 | $18.73 | 0.3 | $17.68 | $18.70 | (5.5) |
Average energy/capacity revenue per MWh (y) | $48.97 | $48.82 | 0.3 | $49.13 | $51.82 | (5.2) |
As-reported net revenue ($ in millions) | 274 | 327 | (16.2) | 1,258 | 1,456 | (13.6) |
Operational net revenue (non-GAAP) ($ in millions) | 274 | 327 | (16.2) | 1,258 | 1,365 | (7.8) |
Refueling outage days | ||||||
FitzPatrick | - | - | - | 42 | ||
Indian Point 2 | - | - | 33 | - | ||
Indian Point 3 | - | - | - | 66 | ||
Palisades | 61 | - | 61 | 27 | ||
Pilgrim | - | - | - | 43 | ||
Calculations may differ due to rounding | |
(y) | Average energy/capacity revenue per MWh excluding FitzPatrick was $50.05 in year-to-date 2017. |
See appendix in the webcast slide presentation for EWC nuclear capacity and generation disclosure.
E: Consolidated Financial Measures
Appendix E provides comparative financial measures. Financial measures in this table include those calculated and presented in accordance with GAAP, as well as those that are considered non-GAAP financial measures.
Appendix E: GAAP and Non-GAAP Financial Measures | |||
Fourth Quarter 2018 vs. 2017 (See Appendix G for reconciliation of GAAP to non-GAAP financial measures) | |||
For 12 months ending December 31 | 2018 | 2017 | Change |
GAAP Measures | |||
ROIC ? as-reported | 5.3% | 3.4% | 1.9% |
ROE ? as-reported | 10.1% | 5.1% | 5.0% |
Non-GAAP Measures | |||
ROIC ? operational | 7.2% | 7.1% | 0.1% |
ROE ? operational | 15.9% | 16.2% | (0.3%) |
As of December 31 ($ in millions) | 2018 | 2017 | Change |
GAAP Measures | |||
Cash and cash equivalents | 481 | 781 | (300) |
Revolver capacity | 4,056 | 4,174 | (118) |
Commercial paper | 1,942 | 1,467 | 475 |
Total debt | 18,133 | 16,677 | 1456 |
Securitization debt | 424 | 545 | (121) |
Debt to capital ratio | 66.7% | 67.1% | (0.4%) |
Off-balance sheet liabilities: | |||
Debt of joint ventures ? Entergy's share | 61 | 67 | (6) |
Leases ? Entergy's share | 448 | 429 | 19 |
Power purchase agreements accounted for as leases | 106 | 136 | (30) |
Total off-balance sheet liabilities | 615 | 632 | (17) |
Non-GAAP Measures | |||
Debt to capital ratio, excluding securitization debt | 66.1% | 66.3% | (0.1%) |
Gross liquidity | 4,537 | 4,955 | (418) |
Net debt to net capital ratio, excluding securitization debt | 65.5% | 65.2% | 0.4% |
Parent debt to total debt ratio, excluding securitization debt | 22.6% | 21.8% | 0.8% |
Operational FFO to debt ratio, excluding securitization debt | 12.0% | 15.9% | (3.9%) |
Operational FFO to debt ratio, excluding securitization debt and return of unprotected excess ADIT | 15.3% | 15.9% | (0.6%) |
F: Definitions and Abbreviations and Acronyms
Appendix F-1 provides definitions of certain operating measures, as well as GAAP and non-GAAP financial measures. Non-GAAP financial measures remove the effects of financial events that are not routine from commonly used financial measures.
Appendix F-1: Definitions | |
Utility Operating and Financial Measures | |
GWh billed | Total number of GWh billed to retail and wholesale customers |
Net revenue | Operating revenues less fuel, fuel related expenses and gas purchased for resale; purchased power and other regulatory charges (credits) ? net |
Non-fuel O&M | Operation and maintenance expenses excluding fuel, fuel-related expenses and gas purchased for resale and purchased power |
Non-fuel O&M per MWh | Non-fuel O&M per MWh of billed sales |
Number of electric retail customers | Number of electric customers at the end of the period |
EWC Operating and Financial Measures | |
Average revenue per MWh on contracted volumes | Revenue on a per unit basis at which generation output reflected in contracts is expected to be sold to third parties (including offsetting positions) at the minimum contract prices and at forward market prices at a point in time, given existing contract prices based on expected dispatch or capacity, excluding the revenue associated with the amortization of the below-market PPA for Palisades; revenue will fluctuate due to factors including market price changes affecting revenue received on positive or negative basis differentials and other risk management costs |
Average revenue under contract (applies to capacity contracts only) (in $/kW-month) | Revenue on a per unit basis at which capacity is expected to be sold to third parties, given existing contract prices and/or auction awards |
Bundled capacity and energy contracts | A contract for the sale of installed capacity and related energy, priced per MWh sold |
Capacity contracts | A contract for the sale of the installed capacity product in regional markets managed by ISO New England, NYISO and MISO |
Capacity factor | Normalized percentage of the period that the nuclear plants generate power |
Expected sold and market total revenue per MWh | Total energy and capacity revenue on a per unit basis at which total planned generation output and capacity is expected to be sold given contract terms and market prices at a point in time, including estimates for market price changes affecting revenue received on positive or negative basis differentials and other risk management costs, divided by total planned MWh of generation, excluding the revenue associated with the amortization of the Palisades below-market PPA |
GWh billed | Total number of GWh billed to customers and financially-settled instruments |
Net revenue | Operating revenues less fuel, fuel-related expenses and purchased power |
Owned capacity (MW) | Installed capacity owned by EWC |
Percent of capacity sold forward | Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions |
Percent of planned generation under contract | Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts or options that mitigate price uncertainty that may or may not require regulatory approval or approval of transmission rights or other conditions precedent; positions that are no longer classified as hedges are netted in the planned generation under contract |
Planned net MW in operation (average) | Amount of installed capacity to generate power and/or sell capacity, assuming intent to shutdown Pilgrim (May 31, 2019), Indian Point 2 (April 30, 2020), Indian Point 3 (April 30, 2021) and Palisades (May 31, 2022) |
Appendix F-1: Definitions | |
EWC Operating and Financial Measures (continued) | |
Planned TWh of generation | Amount of output expected to be generated by EWC resources considering plant operating characteristics and outage schedules, assuming intent to shutdown Pilgrim (May 31, 2019), Indian Point 2 (April 30, 2020), Indian Point 3 (April 30, 2021) and Palisades (May 31, 2022) |
Production cost per MWh | Fuel and non-fuel O&M expenses according to accounting standards that directly relate to the production of electricity per MWh (based on net generation), excluding special items |
Refueling outage days | Number of days lost for a scheduled refueling and maintenance outage during the period |
Unit-contingent | Transaction under which power is supplied from a specific generation asset; if the asset is in operational outage, seller is generally not liable to buyer for any damages, unless the contract specifies certain conditions such as an availability guarantee |
Financial Measures ? GAAP | |
Debt of joint ventures ? Entergy's share | Entergy's share of debt issued by business joint ventures at EWC |
Debt to capital ratio | Total debt divided by total capitalization |
Leases ? Entergy's share | Operating leases held by subsidiaries capitalized at implicit interest rate |
Revolver capacity | Amount of undrawn capacity remaining on corporate and subsidiary revolvers, including Entergy Nuclear Vermont Yankee |
ROE ? as-reported | 12-months rolling net income attributable to Entergy Corporation divided by average common equity |
ROIC ? as-reported | 12-months rolling net income attributable to Entergy Corporation adjusted for preferred dividends and tax-effected interest expense divided by average invested capital |
Securitization debt | Debt associated with securitization bonds issued to recover storm costs from hurricanes Rita, Ike and Gustav at E-TX and Hurricane Isaac at E-NO; the 2009 ice storm at E-AR and investment recovery of costs associated with the cancelled Little Gypsy repowering project at E-LA |
Total debt | Sum of short-term and long-term debt, notes payable and commercial paper and capital leases on the balance sheet |
Appendix F-1: Definitions | |
Financial Measures - Non-GAAP | |
Adjusted EBITDA | Earnings before interest, depreciation and amortization and income taxes and excluding decommissioning expense |
Debt to capital ratio, excluding securitization debt | Total debt divided by total capitalization, excluding securitization debt |
ETR adjusted earnings | As-reported earnings with certain adjustments, which are unusual or non-recurring items or events or other items or events that management believes do not reflect the ongoing business of Entergy, such as the EWC segment given its strategic decision to exit the EWC business, and items such as certain costs, expenses, significant tax items, or other specified items |
FFO | OCF less AFUDC ? borrowed funds, working capital items in OCF (receivables, fuel inventory, accounts payable, prepaid taxes and taxes accrued, interest accrued and other working capital accounts) and securitization regulatory charges |
Gross liquidity | Sum of cash and revolver capacity |
Net debt to net capital ratio, excluding securitization debt | Total debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents, excluding securitization debt |
Operational adjusted EBITDA | Adjusted EBITDA excluding effects of special items |
Operational EPS | As-reported EPS excluding special items |
Operational FFO | FFO excluding the effects of special items |
Operational FFO to debt ratio, excluding securitization debt | 12-months rolling operational FFO as a percentage of end of period total debt excluding securitization debt |
Operational FFO to debt ratio, excluding securitization debt and return of unprotected excess ADIT | 12-months rolling operational FFO as a percentage of end of period total debt excluding securitization debt and return of unprotected excess ADIT |
Parent debt to total debt ratio, excluding securitization debt | End of period Entergy Corporation debt, including amounts drawn on credit revolver and commercial paper facilities, as a percent of consolidated total debt, excluding securitization debt |
ROE ? operational | 12-months rolling operational net income attributable to Entergy Corporation divided by average common equity |
ROIC ? operational | 12-months rolling operational net income attributable to Entergy Corporation adjusted for preferred dividends and tax-effected interest expense divided by average invested capital |
UP&O adjusted earnings | As-reported earnings excluding special items and normalizing weather and income taxes |
Utility, Parent & Other | Combines the Utility segment with Parent & Other, which is all of Entergy excluding the EWC segment |
Appendix F-2 explains abbreviations and acronyms used in the quarterly earnings materials.
Appendix F-2: Abbreviations and Acronyms | |||
ADIT | Accumulated deferred income taxes | ISO | Independent system operator |
AFUDC ? borrowed funds | Allowance for borrowed funds used during construction | IT | Information technology |
AFUDC ? equity funds | Allowance for equity funds used during construction | LPSC | Louisiana Public Service Commission |
ALJ | Administrative law judge | LTM | Last twelve months |
AMI | Advanced metering infrastructure | LTSA | Long-term service agreement |
ANO | Units 1 and 2 of Arkansas Nuclear One owned by E-AR (nuclear) | MISO | Midcontinent Independent System Operator, Inc. |
APSC | Arkansas Public Service Commission | Moody's | Moody's Investor Service |
ARO | Asset retirement obligation | MPSC | Mississippi Public Service Commission |
bps | Basis points | MTEP | MISO Transmission Expansion Planning |
CCGT | Combined cycle gas turbine | Nelson 6 | Unit 6 of Roy S. Nelson plant (coal) |
CCN | Certificate of convenience & necessity | NEPOOL | New England Power Pool |
CCNO | Council of the City of New Orleans, Louisiana | Ninemile 6 | Ninemile Point Unit 6 (CCGT) |
COD | Commercial operation date | Non-fuel O&M | Non-fuel operation and maintenance expense |
CT | Simple cycle combustion turbine | NDT | Nuclear decommissioning trust |
CWIP | Construction work in progress | NOPS | New Orleans Power Station (RICE/natural gas) |
DCRF | Distribution cost recovery factor | NorthStar | NorthStar Decommissioning Holdings, LLC |
E-AR | Entergy Arkansas, LLC | NRC | Nuclear Regulatory Commission |
E-LA | Entergy Louisiana, LLC | NYISO | New York Independent System Operator, Inc. |
E-MS | Entergy Mississippi, LLC | NYPA | New York Power Authority |
E-NO | Entergy New Orleans, LLC | NYSE | New York Stock Exchange |
E-TX | Entergy Texas, Inc. | O&M | Operation and maintenance expense |
EBITDA | Earnings before interest, income taxes, depreciation and amortization | OCF | Net cash flow provided by operating activities |
ENGC | Entergy Nuclear Generation Company | OpCo | Operating Company |
ENP | Entergy Nuclear Palisades, LLC | OPEB | Other post-employment benefits |
EPS | Earnings per share | P&O | Parent & other |
ETR | Entergy Corporation | Palisades | Palisades Power Plant (nuclear) |
EWC | Entergy Wholesale Commodities | Pilgrim | Pilgrim Nuclear Power Station (nuclear) |
FERC | Federal Energy Regulatory Commission | PPA | Power purchase agreement or purchased power agreement |
FFO | Funds from operations | PUCT | Public Utility Commission of Texas |
FitzPatrick | James A. FitzPatrick Nuclear Power Plant (nuclear, sold March 31, 2017) | RICE | Reciprocating Internal Combustion Engine |
FRP | Formula rate plan | RFP | Request for proposals |
GAAP | U.S. generally accepted accounting principles | ROE | Return on equity |
Grand Gulf or GGNS | Unit 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by SERI | ROIC | Return on invested capital |
Indian Point 1 or IP1 | Indian Point Energy Center Unit 1 (nuclear) (shut down in 1974) | RS Cogen | RS Cogen facility (CCGT cogeneration) |
Indian Point 2 or IP2 | Indian Point Energy Center Unit 2 (nuclear) | RSP | Rate Stabilization Plan (E-LA Gas) |
Indian Point 3 or IP3 | Indian Point Energy Center Unit 3 (nuclear) | S&P | Standard & Poor's |
IPEC | Indian Point Energy Center (nuclear) | SCPS | St. Charles Power Station (CCGT) |
ISES 2 | Unit 2 of Independence Steam Electric Station (coal) | SEC | U.S. Securities and Exchange Commission |
IRS | Internal Revenue Service | SERI | System Energy Resources, Inc. |
TCRF | Transmission cost recovery factor | ||
Union | Union Power Station (CCGT) | ||
UPSA | Unit Power Sales Agreement | ||
UP&O | Utility, Parent & Other | ||
VPUC | Vermont Public Utility Commission | ||
VY or Vermont Yankee | Vermont Yankee Nuclear Power Station (nuclear) | ||
WACC | Weighted-average cost of capital | ||
WPEC | Washington Parish Energy Center (CT/natural gas) | ||
G: GAAP to Non-GAAP Reconciliations
Appendix G-1, Appendix G-2 and Appendix G-3 provide reconciliations of various non-GAAP financial measures disclosed in this release to their most comparable GAAP measure.
Appendix G-1: Reconciliation of GAAP to Non-GAAP Financial Measures ? EWC Operational Net Revenue | ||||||||||||||
($ in millions except where noted) | Fourth Quarter | Year-to-Date | ||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
EWC | ||||||||||||||
As-reported net revenue | (A) | 281 | 333 | 1,276 | 1,469 | |||||||||
Special items included in net revenue: | ||||||||||||||
EWC Nuclear costs associated with the strategic decision to exit the EWC business | - | - | - | 91 | ||||||||||
Total special items included in net revenue | (B) | - | - | - | 91 | |||||||||
Operational net revenue | (A-B) | 281 | 333 | 1,276 | 1,378 | |||||||||
EWC Nuclear | ||||||||||||||
As-reported EWC Nuclear net revenue | (C) | 274 | 327 | 1,258 | 1,456 | |||||||||
Special items included in EWC Nuclear net revenue: | ||||||||||||||
EWC Nuclear costs associated with the strategic decision to exit the EWC business | - | - | - | 91 | ||||||||||
Total special items included in EWC Nuclear net revenue | (D) | - | - | - | 91 | |||||||||
Operational EWC Nuclear net revenue | (C-D) | 274 | 327 | 1,258 | 1,365 | |||||||||
Calculations may differ due to rounding |
Appendix G-2: Reconciliation of GAAP to Non-GAAP Financial Measures ? ROIC, ROE | |||
($ in millions except where noted) | Fourth Quarter | ||
2018 | 2017 | ||
As-reported net income (loss) attributable to Entergy Corporation, rolling 12 months | (A) | 849 | 412 |
Preferred dividends | 14 | 14 | |
Tax-effected interest expense | 527 | 407 | |
As-reported net income (loss) attributable to Entergy Corporation, rolling 12 months adjusted for preferred dividends and tax-effected interest expense | (B) | 1,390 | 833 |
Special items in prior quarters | (317) | (272) | |
Items associated with the strategic decision to exit the EWC business | (214) | (91) | |
Tax reform | 38 | (525) | |
Total special items, rolling 12 months | (C) | (493) | (889) |
Operational earnings, rolling 12 months adjusted for preferred dividends and tax effected interest expense (non-GAAP) | (B-C) | 1,882 | 1,721 |
Operational earnings, rolling 12 months (non-GAAP) | (A-C) | 1,341 | 1,300 |
Average invested capital | (D) | 26,032 | 24,213 |
Average common equity | (E) | 8,418 | 8,037 |
ROIC ? as-reported | (B/D) | 5.3% | 3.4% |
ROIC ? operational | [(B-C)/D] | 7.2% | 7.1% |
ROE ? as-reported | (A/E) | 10.1% | 5.1% |
ROE ? operational | [(A-C)/E] | 15.9% | 16.2% |
Calculations may differ due to rounding |
Appendix G-3: Reconciliation of GAAP to Non-GAAP Financial Measures ? Debt Ratios excluding Securitization Debt; Gross Liquidity; FFO to Debt, excluding Securitization Debt and Return of Unprotected Excess ADIT | |||
($ in millions except where noted) | Fourth Quarter | ||
2018 | 2017 | ||
Total debt | (A) | 18,133 | 16,677 |
Less securitization debt | (B) | 424 | 545 |
Total debt, excluding securitization debt | (C) | 17,709 | 16,132 |
Less cash and cash equivalents | (D) | 481 | 781 |
Net debt, excluding securitization debt | (E) | 17,228 | 15,351 |
Total capitalization | (F) | 27,196 | 24,867 |
Less securitization debt | (B) | 424 | 545 |
Total capitalization, excluding securitization debt | (G) | 26,772 | 24,322 |
Less cash and cash equivalents | (D) | 481 | 781 |
Net capital, excluding securitization debt | (H) | 26,291 | 23,541 |
Debt to capital ratio | (A/F) | 66.7% | 67.1% |
Debt to capital ratio, excluding securitization debt | (C/G) | 66.1% | 66.3% |
Net debt to net capital ratio, excluding securitization debt | (E/H) | 65.5% | 65.2% |
Revolver capacity | (I) | 4,056 | 4,174 |
Gross liquidity | (D+I) | 4,537 | 4,955 |
Entergy Corporation notes: | |||
Due September 2020 | 450 | 450 | |
Due July 2022 | 650 | 650 | |
Due September 2026 | 750 | 750 | |
Total parent long-term debt | (J) | 1,850 | 1,850 |
Revolver draw | (K) | 220 | 210 |
Commercial paper | (L) | 1,942 | 1,467 |
Unamortized debt issuance and discounts | (M) | (10) | (11) |
Total parent debt | (J+K+L+M) | 4,002 | 3,516 |
Parent debt to total debt ratio, excluding securitization debt | [(J+K+L+M)/C] | 22.6% | 21.8% |
Calculations may differ due to rounding |
Appendix G-3: Reconciliation of GAAP to Non-GAAP Financial Measures ? Debt Ratios excluding Securitization Debt; Gross Liquidity; FFO to Debt, excluding Securitization Debt and Return of Unprotected Excess ADIT (continued) | |||
($ in millions except where noted) | Fourth Quarter | ||
2018 | 2017 | ||
Total debt | (A) | 18,133 | 16,677 |
Less securitization debt | (B) | 424 | 545 |
Total debt, excluding securitization debt | (C) | 17,709 | 16,132 |
Net cash flow provided by operating activities, rolling 12 months | (D) | 2,385 | 2,624 |
AFUDC ? borrowed funds, rolling 12 months | (E) | (61) | (45) |
Working capital items in net cash flow provided by operating activities (rolling 12 months): | |||
Receivables | 99 | (98) | |
Fuel inventory | 46 | (3) | |
Accounts payable | 97 | 102 | |
Taxes accrued | 39 | 34 | |
Interest accrued | 5 | 1 | |
Other working capital accounts | (164) | (4) | |
Securitization regulatory charges | 124 | 116 | |
Total | (F) | 246 | 148 |
FFO, rolling 12 months | (G)=(D+E-F) | 2,079 | 2,431 |
Add back special items (rolling 12 months pre-tax): | |||
Items associated with the strategic decision to exit the EWC business | 43 | 126 | |
Operational FFO, rolling 12 months | (H) | 2,122 | 2,557 |
Operational FFO to debt ratio, excluding securitization debt | (H/C) | 12.0% | 15.9% |
Estimated return of unprotected excess ADIT (rolling 12 months pre-tax) | (I) | 592 | - |
Operational FFO to debt ratio, excluding securitization debt and return of unprotected excess ADIT | [(H)+(I)/(C)] | 15.3% | 15.9% |
Calculations may differ due to rounding |
SOURCE Entergy Corporation
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