FOR IMMEDIATE RELEASE
Kay Jones (Media)
David Borde (Investor Relations)
NEW ORLEANS – Entergy Corporation (NYSE: ETR) reported third quarter 2017 earnings per share of $2.21 on an as-reported basis and $2.35 on an operational basis (non-GAAP), which excludes the effects of special items.
“Today we are reporting a strong third quarter, and we now expect to finish the year in the top half of our Utility, Parent & Other adjusted earnings guidance range,” said Entergy Chairman and Chief Executive Officer Leo Denault. “We have completed most of our key deliverables for the year that support our strategy to achieve steady, predictable growth at the Utility, while managing risk and an orderly exit of our merchant power business. We are affirming our 2017 guidance and our longer-term outlooks.”
Business highlights included the following:
- Entergy Arkansas reached an unopposed settlement with the Arkansas Attorney General and other intervenors on the recovery of nuclear costs in its 2017 and 2018 test year FRP filings. The settlement is subject to approval by the APSC.
- Entergy Arkansas and Entergy Texas filed settlement agreements for their AMI proceedings.
- Entergy Louisiana filed its application to extend and modify its annual formula rate plan.
- The PUCT approved Entergy Texas’ DCRF settlement agreement.
- The utility companies successfully restored power to approximately 250,000 customers in the wake of Hurricane Harvey.
- Entergy plans to operate Palisades Power Plant until no later than May 31, 2022, under the existing power purchase agreement with Consumers Energy.
- Entergy was named to the 2017 Dow Jones Sustainability North America Index; this is the 16th consecutive year Entergy has appeared on the World or North America Index or both.
|Consolidated Earnings (GAAP and Non-GAAP Measures)|
|Third Quarter and Year-to-Date 2017 vs. 2016 (See Appendix A for reconciliation of GAAP to non-GAAP earnings and description of special items)|
|(After-tax, $ in millions)|
|Less special items||(25.5)||(27.5)||1.9||(271.9)||(30.7)||(241.2)|
|Operational earnings (non-GAAP)||423.7||415.6||8.1||1,162.6||1,216.2||(53.5)|
|Estimated weather in billed sales||(44.7)||33.8||(78.5)||(89.9)||(8.0)||(81.9)|
|(After-tax, per share in $)|
|Less special items||(0.14)||(0.15)||0.01||(1.51)||(0.17)||(1.34)|
|Operational earnings (non-GAAP)||2.35||2.31||0.04||6.45||6.77||(0.32)|
|Estimated weather in billed sales||(0.25)||0.18||(0.43)||(0.50)||(0.04)||(0.46)|
Calculations may differ due to rounding
For third quarter 2017, the company reported earnings of $398 million, or $2.21 per share, on an as-reported basis and $424 million, or $2.35 per share, on an operational basis. This compared to third quarter 2016 earnings of $388 million, or $2.16 per share, on an as-reported basis and $416 million, or $2.31 per share, on an operational basis. Summary discussions by business are below.
Utility, Parent & Other Results
For third quarter 2017, the Utility business earned net income attributable to Entergy Corporation of $401 million, or $2.22 per share, compared to $443 million, or $2.47 per share, in third quarter 2016. Drivers for the quarterly decrease included lower net revenue and higher operating expenses.
Net revenue decreased quarter-over-quarter, driven by unfavorable weather in the current quarter compared to favorable weather a year ago. For third quarter 2017, cooling degree days were 16 percent below normal, compared to 14 percent above normal in third quarter 2016. Excluding the effects of weather, net revenue was higher reflecting weather-adjusted sales growth and new rate actions to recover investments that benefit customers.
On a weather-adjusted basis, billed sales increased 3.5 percent, including 3.8 percent and 2.5 percent for residential and commercial billed sales, respectively. Industrial billed sales volume increased 4.0 percent with higher sales to both new and expansion customers as well as existing customers. The increase was driven largely by the primary metals and chlor-alkali segments. Sales to petroleum refining and industrial gases customers were also higher.
Utility non-fuel O&M increased quarter-over-quarter, driven by higher spending on nuclear operations including nuclear refueling outage expenses. Depreciation and amortization as well as taxes other than income taxes were also higher. In addition, other income increased period-over-period due partly to higher AFUDC-equity funds.
Parent & Other recognized a loss of $(58) million, or (32) cents per share, for third quarter 2017, compared to a loss of $(63) million, or (35) cents per share, for third quarter 2016.
On a combined basis, Utility, Parent & Other (non-GAAP) contributed $1.90 to third quarter 2017 consolidated EPS and $2.12 to third quarter 2016 consolidated EPS. On an adjusted basis, normalizing weather and income taxes, Utility, Parent & Other (non-GAAP) contributed $2.15 per share in third quarter 2017 to consolidated EPS, compared to $1.98 in third quarter 2016.
Appendix C contains additional details on Utility financial and operating measures, including reconciliation for non-GAAP Utility, Parent & Other adjusted earnings and EPS.
Entergy Wholesale Commodities Results
For third quarter 2017, EWC earned net income attributable to Entergy Corporation of $55 million, or 31 cents per share, compared to $8 million, or 4 cents per share, for third quarter 2016. On an operational basis, EWC earned $81 million, or 45 cents per share, in third quarter 2017, compared to $35 million, or 19 cents per share, in third quarter 2016.
The sale of FitzPatrick at the end of first quarter 2017 affected period-over-period variances for multiple line items. In third quarter 2016, the plant contributed a (15) cent loss to as-reported EPS and 2 cents to operational EPS.
Excluding FitzPatrick, revenue from nuclear plants increased due to higher capacity prices. Current period earnings also reflected the impacts of previous impairments, specifically lower fuel and refueling outage expenses. Other income increased largely from higher realized earnings on decommissioning trust funds. Partially offsetting the increases was higher decommissioning expense due in part to the agreement with NYPA to transfer the Indian Point Unit 3 decommissioning liability and associated trust to Entergy.
Appendix D contains additional details on EWC financial and operating measures, including the calculation of EWC operational adjusted EBITDA (non-GAAP).
Entergy affirmed its 2017 operational earnings guidance range of $6.80 to $7.40 per share and its Utility, Parent & Other adjusted guidance range of $4.25 to $4.55 per share. 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 $(2.10) per share.
A teleconference will be held from 10:00 a.m. to 10:40 a.m. Central Time on Tuesday, Oct. 24, 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 56951898, 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 Oct. 31, 2017, by dialing 855-859-2056, conference ID 56951898. 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.
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 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; 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.