CenterPoint Energy 2008 Annual Report Download - page 62

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40
• acquisition and merger activities involving us or our competitors; and
• other factors we discuss under ―Risk Factors‖ in Item 1A of this report and in other reports we file from
time to time with the Securities and Exchange Commission.
CONSOLIDATED RESULTS OF OPERATIONS
All dollar amounts in the tables that follow are in millions, except for per share amounts.
Year Ended December 31,
2006
2007
2008
Revenues ................................................................................................................................
$ 9,319
$ 9,623
$ 11,322
Expenses ................................................................................................................................
8,274
8,438
10,049
Operating Income ................................................................................................
1,045
1,185
1,273
Gain (Loss) on Time Warner Investment ................................................................
94
(114)
(139)
Gain (Loss) on Indexed Debt Securities ................................................................
(80)
111
128
Interest and Other Finance Charges ................................................................
(470)
(503)
(466)
Interest on Transition Bonds ................................................................................................
(130)
(123)
(136)
Distribution from AOL Time Warner Litigation Settlement ................................
—
32
—
Additional Distribution to ZENS Holders ................................................................
—
(27)
—
Equity in Earnings of Unconsolidated Affiliates ................................................................
6
16
51
Other Income, net ................................................................................................
29
17
14
Income Before Income Taxes ................................................................................................
494
594
725
Income Tax Expense ................................................................................................
(62)
(195)
(278)
Net Income ................................................................................................
$ 432
$ 399
$ 447
Basic Earnings Per Share ................................................................................................
$ 1.39
$ 1.25
$ 1.33
Diluted Earnings Per Share................................................................................................
$ 1.33
$ 1.17
$ 1.30
2008 Compared to 2007
Net Income. We reported net income of $447 million ($1.30 per diluted share) for 2008 compared to
$399 million ($1.17 per diluted share) for the same period in 2007. The increase in net income of $48 million was
primarily due to an $88 million increase in operating income, a $37 million decrease in interest expense, excluding
transition bond-related interest expense, a $35 million increase in equity in earnings of unconsolidated affiliates
related primarily to SESH and a $17 million increase in the gain on our indexed debt securities. These increases in
net income were partially offset by an $83 million increase in income tax expense, a $25 million increase in the loss
on our Time Warner investment and a $13 million increase in interest expense on transition bonds.
Income Tax Expense. Our 2008 effective tax rate of 38.4% differed from the 2007 effective tax rate of 32.8%
primarily as a result of revisions to the Texas State Franchise Tax Law (Texas margin tax) which was reported as an
operating expense prior to 2008 and is now being reported as an income tax for CenterPoint Houston and a Texas
state tax examination in 2007.
2007 Compared to 2006
Net Income. We reported net income of $399 million ($1.17 per diluted share) for 2007 compared to
$432 million ($1.33 per diluted share) for the same period in 2006. The decrease in net income of $33 million was
primarily due to a $208 million increase in the loss on our Time Warner investment, a $133 million increase in
income tax expense primarily as a result of the favorable tax settlement reached with the Internal Revenue Service
(IRS) in 2006 related to our 2.0% Zero Premium Exchangeable Subordinated Notes due 2029 (ZENS) and
Automatic Common Exchange Securities (ACES) and a $33 million increase in interest expense, excluding
transition bond-related interest expense, due to higher borrowing levels. These decreases in net income were
partially offset by a $191 million increase in the gain on our indexed debt securities, a $140 million increase in
operating income and a $10 million increase in equity in earnings of unconsolidated affiliates.