FOR IMMEDIATE RELEASE
|Kay Jones (Media)
|David Borde (Investor Relations)
NEW ORLEANS – Entergy Corporation (NYSE: ETR) reported second quarter 2017 earnings per share of $2.27 on an as-reported basis and $3.11 on an operational basis (non-GAAP), which excludes the effects of special items. Results included an income tax item which reduced income tax expense and increased earnings.
|Consolidated Earnings (GAAP and Non-GAAP Measures)|
|Second Quarter 2017 (See Appendix A description of special items and Appendix C for reconciliation of GAAP to non-GAAP measures)|
|(Per share in $)|
|Consolidated||Utility||Parent & Other||EWC|
|Segment contribution to as-reported||2.27||1.35||(0.32)||1.24|
|Less special items||(0.84)||–||–||(0.84)|
|Estimated weather in billed sales||(0.09)||(0.09)|
|Income tax item||2.07||–||2.07|
|Utility, Parent & Other adjusted (non-GAAP)||1.12|
“We had another productive quarter executing our strategy to deliver steady, predictable earnings growth at our core utility business, which supports our long-term dividend growth aspiration,” said Entergy Chairman and Chief Executive Officer Leo Denault. “2017 is on pace to be another year with significant accomplishments on multiple fronts, which continue to position us to deliver on our outlooks. We are affirming our full-year Utility, Parent & Other adjusted earnings guidance.”
Business highlights included the following:
- Entergy shifted its consolidated operational earnings guidance range upward by $2.05 per share to $6.80 to $7.40, to take into account a tax item recorded in the quarter. The company affirmed its Utility, Parent & Other adjusted earnings guidance.
- The LPSC approved ELL’s application to construct Lake Charles Power Station and the PUCT approved ETI’s application to construct Montgomery County Power Station.
- The Mississippi and Louisiana commissions approved AMI deployment plans for their jurisdictions.
- EAI and ELL made their annual FRP filings.
- For the second consecutive year, Entergy Corporation was named to The Civic 50, a Points of Light initiative honoring the 50 most community-minded companies in the nation.
|Consolidated Earnings (GAAP and Non-GAAP Measures)|
|Second Quarter and Year-to-Date 2017 vs. 2016 (See Appendix A for reconciliation of GAAP to non-GAAP measures and description of special items)|
|(After-tax, $ in millions)|
|Less special items||(151.3)||9.6||(160.9)||(246.4)||(3.3)||(243.1)|
|Operational earnings (non-GAAP)||561.2||557.7||3.5||738.9||800.6||(61.7)|
|Estimated weather in billed sales||(15.9)||(16.3)||0.4||(45.1)||(41.8)||(3.3)|
|(After-tax, per share in $)|
|Less special items||(0.84)||0.05||(0.89)||(1.37)||(0.02)||(1.35)|
|Operational earnings (non-GAAP)||3.11||3.11||–||4.11||4.47||(0.36)|
|Estimated weather in billed sales||(0.09)||(0.09)||–||(0.25)||(0.23)||(0.02)|
Calculations may differ due to rounding
For second quarter 2017, the company reported earnings of $410 million, or $2.27 per share, on an as-reported basis and $561 million, or $3.11 per share, on an operational basis. This compared to second quarter 2016 earnings of $567 million, or $3.16 per share, on an as-reported basis and $558 million, or $3.11 per share, on an operational basis. Current and prior period results were both favorably impacted by income tax items of a similar magnitude in each period. Summary discussions by business are below.
Utility, Parent & Other Results
For second quarter 2017, the Utility business earned net income attributable to Entergy Corporation of $243 million, or $1.35 per share, compared to $376 million, or $2.09 per share, in second quarter 2016. The prior period results included income tax items which reduced income tax expense and increased EPS by 68 cents, net of a reserve of approximately 6 cents for guaranteed customer sharing. Other drivers for the current quarter results included higher net revenue and other income as well as higher non-fuel O&M.
Net revenue increased quarter-over-quarter, driven by new base rate actions to recover investments that benefit customers. While billed retail sales volume increased 4 percent in the quarter, the net revenue effect was more than offset by a decline in unbilled revenue. On a weather-adjusted basis, growth in residential and commercial billed sales was 3.4 percent and 1.6 percent, respectively. Industrial sales volume increased more than 6 percent with higher sales to both new and expansion customers as well as existing customers. Increases from new and expansion customers were driven by the primary metals and chlor-alkali segments. Increases from existing customers were also driven by the chlor-alkali segment as well as transportation.
Utility non-fuel O&M increased quarter-over-quarter. The primary driver was higher spending on nuclear operations. In addition, other income increased period-over-period due to higher AFUDC and realized earnings on decommissioning trust funds.
Parent & Other recognized a loss of $(57) million, or $(0.32) per share, for the second quarter 2017, compared to a loss of $(59) million, or $(0.32) per share, for second quarter 2016. There were no individually significant quarter-over-quarter drivers.
On a combined basis, Utility, Parent & Other (non-GAAP) contributed $1.03 to second quarter 2017 consolidated EPS and $1.77 to second quarter 2016 EPS. On an adjusted basis, normalizing for the effects of weather and income taxes, Utility, Parent & Other (non-GAAP) contributed $1.12 per share in second quarter 2017 to consolidated EPS, compared to $1.18 in second quarter 2016.
Appendix C contains additional details on Utility financial and operating measures, including a schedule of non-GAAP Utility, Parent & Other adjusted earnings and EPS.
Entergy Wholesale Commodities Results
For second quarter 2017, EWC earned net income attributable to Entergy Corporation of $223 million, or $1.24 per share, compared to $250 million, or $1.39 per share, for second quarter 2016. On an operational basis, EWC earned $375 million, or $2.08 per share, in second quarter 2017, compared to $241 million, or $1.34 per share, in second quarter 2016. Results in both periods included income tax items which increased EPS $2.07 in second quarter 2017 and $1.33 in second quarter 2016.
The decrease in EWC’s as-reported earnings reflected impairments and other items recorded as a result of strategic decisions for the wholesale business. Impairments were for refueling outage costs and fuel purchases as well as capital spending in the period. These were considered special items and were excluded from operational earnings. Second quarter 2016 results also reflected a reversal of expenses which resulted from awards for DOE spent fuel litigation, a portion of which was considered a special item.
In addition, other income increased largely from higher realized earnings on decommissioning trust funds. Higher decommissioning expense, due in part to the agreement with NYPA to transfer decommissioning liabilities and associated trusts to Entergy, partially offset the increase.
The sale of FitzPatrick at the end of first quarter 2017 affected period-over-period variances for multiple line items. In second quarter 2016, the plant contributed 9 cents to as-reported EPS and 6 cents to operational EPS.
Appendix D contains additional details on EWC financial and operating measures, including the calculation of EWC operational adjusted EBITDA (non-GAAP).
Entergy updated its 2017 operational earnings guidance range to be $6.80 to $7.40 per share and affirmed its Utility, Parent & Other adjusted guidance range of $4.25 to $4.55 per share. The updated consolidated operational earnings guidance range was increased by $2.05 per share to reflect the tax item recorded in second quarter 2017, which was not included in the original guidance range. 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 & Other adjusted EPS. These measures exclude from the corresponding GAAP financial measures the effect of special items 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 special items that may occur during 2017. The only anticipated special items that the company can reasonably estimate at this time are those that relate to the decisions to sell or close the company’s merchant nuclear plants; these estimated costs, which are excluded from the earnings guidance, are expected to decrease as-reported EPS by approximately $2.05 per share.
A teleconference will be held at 9 a.m. Central Time on Wednesday, August 2, 2017, 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 56948204, 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 August 9, 2017, by dialing 855-859-2056, conference ID 56948204. 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 $10.8 billion and nearly 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.
Entergy has launched a new web page as part of its Investor Relations website, entitled “Regulatory and Other Information.” Entergy intends for this page to be dedicated to providing investors with key updates of regulatory proceedings and important milestones on the execution of its strategy. The company plans to use its corporate Twitter feed to notify investors of updates to this web page. While some of this information may be considered material information, investors should not rely exclusively on this new 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 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 items or events that management believes do not reflect the ongoing business of Entergy, and may include items such as impairments, 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. 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. 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 shares of common stock outstanding over the period. 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 operation.
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 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 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 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 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.