Kay Jones (Media)
David Borde (Investor Relations)
2016 results consistent with guidance; accomplishments set stage for future growth
NEW ORLEANS – Entergy Corporation (NYSE: ETR) reported a fourth quarter 2016 loss of $(9.88) per share on an as-reported basis and earnings of 31 cents per share on an operational basis. For the full year, the company reported a loss of $(3.26) per share on an as-reported basis and operational earnings of $7.11 per share. The as-reported losses for the quarter and full year resulted from asset impairments reflecting the effects of strategic decisions in the EWC business.
“2016 was a pivotal year for our company – a year in which our objectives were ambitious and our execution was on the mark,” said Entergy chairman and chief executive officer Leo Denault. “We completed our plan to exit the merchant power business and transition to a pure-play utility. While previously disclosed charges at our EWC business led to an as-reported loss, adjusted earnings at our core Utility, Parent & Other business increased by more than 40 percent in 2016. Our strong operational results for the year are the outcome of disciplined execution on our strategy over the past few years, a strategy intended to fundamentally reposition our company and set it on a steady, predictable earnings and dividend trajectory.”
Business highlights included the following:
- Entergy initiated 2017 consolidated operational EPS guidance of $4.75 to $5.35 and Utility, Parent & Other adjusted EPS guidance of $4.25 to $4.55.
- Entergy raised its dividend for the second consecutive year.
- The LPSC approved ELL’s application to construct the St. Charles Power Station.
- ELL and EMI made filings requesting approval for AMI investment.
- Entergy made several announcements related to its wholesale strategy, including agreements which will result in the early closure of Indian Point Units 2 and 3 (in 2020 and 2021, respectively) and Palisades (in 2018).
- Moody’s placed the ratings of Entergy Corporation under “review for upgrade” and S&P revised its outlook on Entergy to “positive” from “stable.”
- For the 19th consecutive year, the Edison Electric Institute awarded Entergy’s storm team with emergency response awards for recovery and/or assistance.
|Consolidated Earnings (GAAP and Non-GAAP Measures)|
|Fourth Quarter and Year-to-Date 2016 vs. 2015 (See Appendix A for reconciliation of GAAP to non-GAAP measures and description of special items)|
|As-Reported Earnings (Loss) ($ in millions)||(1,769.1)||99.6||(1,868.7)||(583.6)||(176.6)||(407.1)|
|Less Special Items||(1,824.6)||(183.0)||(1,641.5)||(1,855.3)||(1,252.4)||(602.9)|
|Estimated Weather Impact (after-tax)||19.1||(6.1)||25.2||11.1||34.6||(23.5)|
|As-Reported Earnings (Loss) (per share in $)||(9.88)||0.56||(10.44)||(3.26)||(0.99)||(2.27)|
|Less Special Items||(10.19)||(1.02)||(9.17)||(10.37)||(6.99)||(3.38)|
|Estimated Weather Impact||0.11||(0.03)||0.14||0.06||0.19||(0.13)|
Totals may not foot due to rounding
For fourth quarter 2016, the company reported a loss of $(9.88) per share on an as-reported basis and EPS of 31 cents on an operational basis, compared to fourth quarter 2015 EPS of 56 cents on an as-reported basis and operational EPS of $1.58. For the full year, the company reported an as-reported loss of $(3.26) per share and operational EPS of $7.11, compared to a 2015 as-reported loss of (99) cents per share and operational EPS of $6.00. Summary discussions by business are below.
Utility, Parent & Other Results
For fourth quarter 2016, Utility, Parent & Other EPS were 35 cents on an as-reported basis and 27 cents on an adjusted basis. In fourth quarter 2015, Utility, Parent & Other as-reported EPS were $1.42 and a (12) cents per share loss on an adjusted basis. 2015 results included a significant income tax item, a portion of which was reserved for sharing with customers of ELL. Last year’s results also reflected charges for outstanding regulatory matters; there were similar, but smaller, charges in the current period.
The current period results reflected continued growth in the Utility business, including effects of new rate actions that recover investments that benefit customers and improve returns.
Net revenue increased quarter-over-quarter driven largely by the Union acquisition, EAI’s rate case and EMI’s FRP. Revenue increases for Union included amounts to recover operating expenses for the assets.
Billed retail sales volume increased quarter-over-quarter. The increase was partly due to weather, but the Utility realized higher billed sales, even on a weather-adjusted basis, across all customer classes. However, estimated volume in the current unbilled period was lower than fourth quarter 2015.
Utility non-fuel O&M was higher than fourth quarter 2015 due partly to an increase in nuclear generation spending and higher fossil spending primarily related to Union. Pension and OPEB expenses declined quarter-over-quarter.
For the full year, 2016 Utility, Parent & Other EPS were $5.10 on an as-reported basis and $4.38 on an adjusted basis. In comparison, 2015 earnings were $4.97 per share on an as-reported basis and $3.08 per share on an adjusted basis. As-reported results for 2015 included significantly higher income tax items and more favorable weather. Results for 2016 also reflected the effects of continued investment as well as lower operating expenses and lower charges for outstanding regulatory matters.
Appendix C contains additional details on Utility financial and operational measures, including a schedule of Utility, Parent & Other adjusted earnings and EPS which excludes special items and weather and normalizes income taxes.
Entergy Wholesale Commodities Results
For fourth quarter 2016, EWC recorded a $(10.23) per share loss on an as-reported basis and an operational loss of (4) cents per share. For the comparable period in 2015, EWC recorded an as-reported loss of (86) cents per share and operational EPS of 16 cents.
The decrease in EWC’s as-reported results was due largely to impairments and other expenses recorded as a result of strategic decisions for the wholesale business, including decisions to close Palisades and IPEC. Fourth quarter 2015 results also included a gain on the sale of Rhode Island State Energy Center. All of these were considered special items and excluded from operational earnings.
The quarter-over-quarter decline was also due partly to income tax items recorded in 2015, lower price and volume for nuclear assets and higher decommissioning expense (due partly to the establishment of decommissioning liabilities for Indian Point 3 and FitzPatrick in 2016 as a result of a trust transfer agreement Entergy entered into with NYPA). In the current period, EWC results also reflected expense reductions which resulted from recording final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs.
For the full year, EWC reported a loss of $(8.36) per share on an as-reported basis and operational EPS of $2.01. In 2015, EWC realized an as-reported loss of $(5.96) per share and operational EPS of $1.03. Both periods reflected the effects of strategic decisions for the EWC business. Other drivers included lower net revenue from the nuclear business, higher decommissioning expense and lower realized earnings on decommissioning trusts. Conversely, 2016 results included significant income tax benefits recorded in the second quarter.
Appendix D contains additional details on EWC financial and operational measures, including a schedule of EWC operational adjusted EBITDA calculations.
Entergy initiated its 2017 operational guidance in the range of $4.75 to $5.35 per share and Utility, Parent & Other adjusted EPS guidance range of $4.25 to $4.55. See webcast presentation slides for additional details.
The company has provided 2017 earnings guidance with regard to the non-GAAP measures of operational EPS and Utility, Parent and Other Adjusted EPS. These measures exclude from the corresponding GAAP financial measures the effect of special items, such as impairment charges, gains or losses on asset sales, and other gains or losses occurring as a result of strategic decisions such as the company’s recent decisions to shut down or sell its merchant nuclear plants. The company has not provided a reconciliation of such non-GAAP guidance to guidance presented on a GAAP basis because it cannot reasonably estimate all of the special items that may occur for the periods presented. The company’s current estimate for special items in 2017 relates to the decisions to close or sell its merchant nuclear plants; those anticipated special items are expected to decrease as-reported EPS by approximately $2.35 per share. Other special items may occur during the periods presented, the impact of which cannot reasonably be estimated at this time.
A teleconference will be held at 10 a.m. central time on Wednesday, Feb. 15, 2017, to discuss Entergy’s fourth quarter 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 52887956, 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 Feb. 22, 2017, by dialing 855-859-2056, conference ID 52887956. 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 10,000 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 $10.8 billion and more than 13,000 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.
For definitions of certain operational performance measures, as well as GAAP and non-GAAP financial measures and abbreviations and acronyms used in the earnings release materials, see Appendix F and Appendix G.
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 and the presentation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Certain non-GAAP measures in this news release could differ from GAAP only 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 non-routine items or events that management believes do not reflect the ongoing business of Entergy, and may include items such as impairment charges, gains or losses on asset sales, and other gains or losses occurring as a result of strategic decisions such as Entergy’s recent decisions to shut down or sell its merchant nuclear plants. Operational earnings per share are presented for each of Entergy’s reportable business segments as well as on a consolidated basis. In addition, other financial measures including net income (or earnings), adjusted for preferred dividends and tax effected interest expense; non-fuel operation and maintenance expenses; average total 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 also reports Utility, Parent & Other adjusted earnings and earnings per share, which exclude from GAAP earnings the special items described above and weather and normalizes tax expense for the periods presented. Management believes that financial metrics calculated using operational earnings or otherwise adjusted as described above could provide useful information to investors in evaluating the ongoing results of Entergy’s businesses and could assist investors in comparing Entergy’s operating performance to the operating performance of others in the Utility sector.
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; debt to operational adjusted EBITDA, excluding securitization debt; operational FFO to debt ratio, excluding securitization debt; are measures Entergy uses internally for management and board discussions and cash budgeting and performance monitoring activities to gauge the overall strength of its business. Entergy believes the above data could provide useful information to investors in evaluating Entergy’s ongoing financial results and flexibility, and could assist 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, could 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 2017 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 press 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 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; (c) uncertainties associated with efforts to remediate the effects of major storms and recover related restoration costs; (d) nuclear plant relicensing, operating and regulatory costs and risks, including any changes resulting from the nuclear crisis in Japan following its catastrophic earthquake and tsunami; (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, during the periods covered by the forward-looking statements.