FOR IMMEDIATE RELEASE
|Emily Parenteau (Media)
|David Borde (Investor Relations)
NEW ORLEANS – Entergy Corporation (NYSE: ETR) reported a fourth quarter 2017 loss per share of $(2.66) on an as-reported basis and earnings per share of 76 cents on an operational basis (non-GAAP), which excludes the effects of special items. For the full year, the company reported 2017 earnings per share of $2.28 on an as-reported basis and $7.20 on an operational basis. The as-reported results for the quarter and full year reflected the revaluation of net deferred tax assets as a result of tax reform, in addition to asset impairments and other expenses related to strategic decisions in the EWC business.
“2017 was another productive year with significant accomplishments for our company, and Utility, Parent & Other adjusted earnings exceeded our guidance range,” said Entergy Chairman and Chief Executive Officer Leo Denault. “As we look ahead to the next three years, our success continues to be less dependent on strategic initiatives and more on our own operational execution.”
Business highlights included the following:
- Entergy initiated 2018 consolidated operational EPS guidance of $6.25 to $6.85 and Utility, Parent & Other adjusted EPS guidance of $4.50 to $4.90.
- The APSC issued an order approving E-AR’s 2018 test year FRP settlement agreement.
- E-AR, E-TX and E-NO received approvals for AMI deployment.
- E-LA held its groundbreaking for the Lake Charles Power Station.
- NYISO concluded there will be no reliability issues resulting from IPEC retirement.
- Entergy raised its dividend for the third consecutive year.
- Center for Climate and Energy Solutions, of which Entergy is a member, ranked again in the top five environmental think tanks globally.
|Consolidated Earnings (GAAP and Non-GAAP Measures)|
|Fourth 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||(616.7)||(1,824.6)||1,207.9||(888.6)||(1,855.3)||966.7|
|Operational earnings (non-GAAP)||137.6||55.5||82.1||1,300.2||1,271.7||28.5|
|Estimated weather in billed sales||11.3||19.1||(7.8)||(78.6)||11.1||(89.7)|
|(After-tax, per share in $)|
|Less special items||(3.42)||(10.19)||6.77||(4.92)||(10.37)||5.45|
|Operational earnings (non-GAAP)||0.76||0.31||0.45||7.20||7.11||0.09|
|Estimated weather in billed sales||0.06||0.11||(0.05)||(0.44)||0.06||(0.50)|
Calculations may differ due to rounding
For fourth quarter 2017, the company reported a 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. This compared to fourth quarter 2016 loss of $(1,769 million), or $(9.88) per share, on an as-reported basis and earnings of $56 million, or 31 cents per share on an operational basis.
For the full year, the company reported 2017 earnings of $412 million, or $2.28 per share, on an as-reported basis and $1,300 million, or $7.20 per share, on an operational basis. This compared to a 2016 loss of $(584 million), or $(3.26) per share, on an as-reported basis and earnings of $1,272 million, or $7.11 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 is provided in Appendix B.
Utility, Parent & Other Results
For fourth quarter 2017, the Utility business reported a loss attributable to Entergy Corporation 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. This compared to fourth quarter 2016 earnings of $120 million, or 67 cents per share, on an as-reported basis and an operational basis.
The fourth quarter 2017 as-reported loss reflected a decrease in net income of $180.7 million, which resulted from tax reform, for the write-down of certain tax assets that are not subject to the ratemaking process. This was considered a special item and excluded from operational earnings. The Utility also recorded a $3,665 million increase in its net regulatory liabilities associated with the reduction in certain of its net deferred tax liabilities. This revaluation did not impact earnings.
Net revenue increased quarter-over-quarter primarily as a result of favorable sales growth, including volume in the unbilled period, and the absence of regulatory charges recorded in fourth quarter 2016.
On a weather-adjusted basis, billed sales increased 3.2 percent, including 0.4 percent and 0.6 percent for residential and commercial billed sales, respectively. Industrial billed sales volume increased 7.0 percent with higher sales to both new and expansion customers as well as existing customers. The increase was driven largely by the chlor-alkali and primary metals segments. Sales to petroleum refining and industrial gases customers were also higher.
Utility non-fuel O&M increased quarter-over-quarter, driven by higher expenses for nuclear operations. In addition, other income was higher period-over-period due to AFUDC-equity funds and realized earnings on decommissioning trust funds.
For fourth quarter 2017, Parent & Other reported a loss of $(6 million), or (4) cents per share, on an as-reported basis and $(58 million), or (33) cents per share, on an operational basis. This compared to a fourth quarter 2016 loss of $(57 million), or (32) cents per share, on an as-reported basis and an operational basis.
As-reported results for 2017 reflected a reduction in income tax expense of $52 million primarily for the revaluation of certain consolidated deferred tax assets, which resulted from tax reform. This was considered a special item and excluded from operational earnings.
On a combined basis, the Utility, Parent & Other (non-GAAP) operational view contributed 41 cents to consolidated EPS in fourth quarter 2017, compared to 35 cents in fourth quarter 2016. On an adjusted basis, excluding special items and normalizing weather and income taxes, Utility, Parent & Other contributed 48 cents in fourth quarter 2017 to consolidated EPS, compared to 27 cents in fourth quarter 2016.
For full year 2017, the Utility business earned net income attributable to Entergy Corporation of $762 million, or $4.22 per share, on an as-reported basis, and earnings of $942 million, or $5.22 per share, on an operational basis. This compared to full year 2016 earnings of $1,134 million, or $6.34 per share, on both an as-reported basis and an operational basis. As-reported results for 2017 included an increase in income tax expense, which resulted from tax reform described above. This was considered a special item and excluded from operational earnings.
Utility net revenue increased due partly to new rate actions to recover investments that benefit customers. The effects of weather were negative year-over-year, but were partially offset by positive weather-adjusted sales growth. Operating expenses also increased. Results in 2016 included an income tax item for resolution of previous positions.
For 2017, Parent & Other reported a loss of $(176 million), or (97) cents per share, on an as-reported basis and $(228 million), or ($1.26) per share, on an operational basis. This compared to a 2016 loss of $(223 million), or ($1.24) per share, on an as-reported basis and an operational basis. As-reported results for 2017 included a decrease in income tax expense, which resulted from tax reform described above. This was considered a special item and excluded from operational earnings.
On a combined basis, the Utility, Parent & Other operational view contributed $3.96 to 2017 consolidated EPS, compared to $5.10 in 2016. On an adjusted basis, normalizing weather and income taxes, Utility, Parent & Other contributed $4.57 to 2017 consolidated EPS, compared to $4.38 in 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 fourth quarter 2017, EWC recorded a loss attributable to Entergy Corporation of $(425 million), or $(2.36) per share, on an as-reported basis and earned $63 million, or 35 cents per share, on an operational basis. This compared to a fourth quarter 2016 loss of $(1,832 million), or $(10.23) per share, on an as-reported basis and a loss of $(8 million), or (4) cents per share, on an operational basis.
The fourth quarter 2017 as-reported loss reflected the write-down of net deferred tax assets totaling $(397 million) as a result of tax reform. Both periods also reflected impairments and other expenses recorded as a result of strategic decisions for the wholesale business. These items were considered special items and excluded from operational earnings.
The sale of FitzPatrick at the end of first quarter 2017 affected period-over-period variances for multiple line items. In fourth quarter 2016, the plant contributed a (15) cent loss to as-reported EPS and an (11) cent loss to operational EPS.
Excluding FitzPatrick, quarterly earnings increased. The most significant driver was higher realized earnings on decommissioning trust funds.
For the full year, in 2017 EWC recorded a loss attributable to Entergy Corporation 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. For 2016, EWC reported a loss of $(1,495 million), or $(8.36) per share, on an as-reported basis and earnings of $360 million, or $2.01 per share, on an operational basis. As-reported losses reflected the write-down of net deferred tax assets in 2017 and impairments and other expenses recorded as a result of strategic decisions for the wholesale business in both periods. These items were considered special items and excluded from operational earnings.
The sale of FitzPatrick at the end of first quarter 2017 affected year-over-year variances for multiple line items. In 2017, the plant contributed EPS of 23 cents to as-reported results and a (4) cent loss to operational EPS. In 2016, the plant contributed a (21) cent loss to as-reported EPS and a (1) cents loss to operational EPS.
Excluding FitzPatrick, both years included income tax items which increased EPS $2.07 in second quarter 2017 and $1.33 in second quarter 2016. Results in both periods also reflected the impacts of previous impairments, specifically lower fuel and refueling outage expenses. In addition, 2017 reflected higher realized earnings on decommissioning trusts as well as higher decommissioning expense primarily from the establishment of decommissioning liabilities at Indian Point 3 in August 2016.
Appendix D contains additional details on EWC financial and operating measures, including the calculation of EWC operational adjusted EBITDA (non-GAAP).
Entergy initiated its 2018 operational earnings guidance range of $6.25 to $6.85 per share and Utility, Parent & Other adjusted guidance range of $4.50 to $4.90 per share. This assumes balanced regulatory treatment for the recently enacted tax reform legislation. See webcast presentation slides for additional details.
The company has provided 2018 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 2018. 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 $(2.35) per share in 2018.
A teleconference will be held at 9:00 a.m. Central Time on Friday, Feb. 23, 2018, 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 3691689, 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 March 2, 2018, by dialing 855-859-2056, conference ID 3691689. 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 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 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. 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.
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 for 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 ratio, excluding securitization debt; and 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 2018 earnings guidance; its current financial and operational outlook; impacts of tax reform legislation on earnings, cash flow, credit metrics, credit ratings, financing plans, assumed regulatory treatment, and valuation of deferred tax assets and liabilities; 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) 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.