Entergy 2007 Annual Report Download - page 100

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Entergy Corporation and Subsidiaries 2007
OT H E R T HAN T E M P O R A R Y IM P A I R M E N T S A N D
UN R E A L I Z E D GA I N S A N D LO S S E S
Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy
Louisiana, and System Energy evaluate these unrealized losses at the
end of each period to determine whether an other than temporary
impairment has occurred. e assessment of whether an investment
has suered an other than temporary impairment is based on a number
of factors including, rst, whether Entergy has the ability and intent to
hold the investment to recover its value, the duration and severity of any
losses, and, then, whether it is expected that the investment will recover
its value within a reasonable period of time. Entergy’s trusts are managed
by third parties who operate in accordance with agreements that dene
investment guidelines and place restrictions on the purchases and sales
of investments. Entergy did not record any signicant impairments in
2007 or 2006 on these assets.
Due to the regulatory treatment of decommissioning collections and
trust fund earnings, Entergy Arkansas, Entergy Gulf States Louisiana,
Entergy Louisiana, and System Energy record regulatory assets or
liabilities for unrealized gains and losses on trust investments. For the
unregulated portion of River Bend, Entergy Gulf States Louisiana has
recorded an osetting amount of unrealized gains or losses in other
deferred credits due to existing contractual commitments with the
former owner.
NOTE 18. ENTERGY NEW ORLEANS
BANKRUPTCY PROCEEDING
As a result of the eects of Hurricane Katrina and the eect of extensive
ooding that resulted from levee breaks in and around the New Orleans
area, on September 23, 2005, Entergy New Orleans led a voluntary
petition in bankruptcy court seeking reorganization relief under Chapter
11 of the U.S. Bankruptcy Code. On May 7, 2007, the bankruptcy
judge entered an order conrming Entergy New Orleans’ plan of
reorganization. With the receipt of CDBG funds, and the agreement on
insurance recovery with one of its excess insurers, Entergy New Orleans
waived the conditions precedent in its plan of reorganization, and the
plan became eective on May 8, 2007. Following are signicant terms in
Entergy New Orleans’ plan of reorganization:
n฀ ฀Entergy New Orleans paid in full, in cash, the allowed third-party
prepetition accounts payable (approximately $29 million, including
interest). Entergy New Orleans paid interest from September 23,
2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006
(8%), and at the Louisiana judicial rate of interest plus 1% for 2007
through the date of payment. e Louisiana judicial rate of interest
for 2007 is 9.5%.
n฀ ฀Entergy New Orleans issued notes due in three years in satisfaction
of its aliate prepetition accounts payable (approximately $74
million, including interest), including its indebtedness to the Entergy
System money pool. Entergy New Orleans included in the principal
amount of the notes accrued interest from September 23, 2005 at the
Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and
at the Louisiana judicial rate of interest plus 1% for 2007 through the
date of issuance of the notes. Entergy New Orleans will pay interest
on the notes from their date of issuance at the Louisiana judicial rate
of interest plus 1%. e Louisiana judicial rate of interest is 9.5% for
2007 and 8.5% for 2008.
n฀ ฀Entergy New Orleans repaid in full, in cash, the outstanding
borrowings under the debtor-in-possession credit agreement
between Entergy New Orleans and Entergy Corporation
(approximately $67 million).
n฀ ฀Entergy New Orleans’ rst mortgage bonds will remain outstanding
with their current maturity dates and interest terms. Pursuant to
an agreement with its rst mortgage bondholders, Entergy New
Orleans paid the rst mortgage bondholders an amount equal to
the one year of interest from the bankruptcy petition date that the
bondholders had waived previously in the bankruptcy proceeding
(approximately $12 million).
n฀ ฀Entergy New Orleans’ preferred stock will remain outstanding on its
current dividend terms, and Entergy New Orleans paid its unpaid
preferred dividends in arrears (approximately $1 million).
n฀ ฀Litigation claims will generally be unaltered, and will generally
proceed as if Entergy New Orleans had not led for bankruptcy
protection, with exceptions for certain claims.
With conrmation of the plan of reorganization, Entergy
reconsolidated Entergy New Orleans in the second quarter 2007,
retroactive to January 1, 2007. Because Entergy owns all of the
common stock of Entergy New Orleans, reconsolidation does not
aect the amount of net income that Entergy records from Entergy
New Orleans’ operations for any current or prior periods, but
does result in Entergy New Orleans’ results being included in each
individual income statement line item in 2007, rather than just its
net income being presented as “Equity in earnings of unconsolidated
equity aliates,” as will remain the case for 2005 and 2006.
Entergy’s income statement for 2006 and 2005 includes $220 million
and $207 million, respectively, in operating revenues and $46 million
and $117 million, respectively, in purchased power expenses from
transactions between Entergy New Orleans and Entergy’s subsidiaries.
Entergy’s balance sheet as of December 31, 2006 includes $95 million
of accounts receivable that are payable to Entergy or its subsidiaries by
Entergy New Orleans, including $69.5 million of prepetition accounts.
Because Entergy owns all of the common stock of Entergy New Orleans,
however, the deconsolidation of Entergy New Orleans in 2005 and 2006
did not aect the amount of net income Entergy records resulting from
Entergy New Orleans’ operations.
NOTE 19. QUARTERLY FINANCIAL DATA (UNAUDITED)
Operating results for the four quarters of 2007 and 2006 for Entergy
Corporation and subsidiaries were (in thousands):
Operating Operating Net
Revenues Income Income
2007:
First Quarter $2,600,230 $431,020 $212,195
Second Quarter $2,769,352 $478,040 $267,602
ird Quarter $3,289,087 $810,332 $461,159
Fourth Quarter $2,825,729 $336,976 $193,893
2006:
First Quarter $2,568,031 $394,763 $193,628
Second Quarter $2,628,502 $487,293 $281,802
ird Quarter $3,254,719 $644,408 $388,883
Fourth Quarter $2,480,906 $278,896 $268,289
EA R N I N G S P E R AV E R A G E CO M M O N SH A R E
2007 2006
Basic Diluted Basic Diluted
First Quarter $1.06 $1.03 $0.93 $0.92
Second Quarter $1.36 $1.32 $1.35 $1.33
ird Quarter $2.37 $2.30 $1.87 $1.83
Fourth Quarter $1.00 $0.96 $1.30 $1.27
e business of the Utility operating companies is subject to seasonal
uctuations with the peak periods occurring during the third quarter.
Notes to Consolidated Financial Statements concluded