Entergy 2002 Annual Report Download - page 54

GOODWILL
Entergy implemented Statement of Financial Accounting
Standards (SFAS) 142, “Goodwill and Other Intangible Assets,”
effective January 1, 2002. The implementation of SFAS 142
resulted in the cessation of Entergy’s amortization of the
remaining plant acquisition adjustment recorded in conjunc-
tion with its acquisition of Entergy Gulf States. Goodwill is now
subject to impairment testing. The following table is a reconcil-
iation of reported earnings applicable to common stock to
earnings applicable to common stock without goodwill amorti-
zation (in thousands, except per share data):
For the years ended December 31, 2002 2001 2000
Reported earnings applicable
to common stock $599,360 $726,196 $679,294
Add back: Goodwill amortization – 16,265 16,265
Adjusted earnings applicable
to common stock without
goodwill amortization $599,360 $742,461 $695,559
Basic earnings per
average common share:
Reported earnings applicable
to common stock $2.69 $3.29 $3.00
Goodwill amortization – 0.07 0.07
Adjusted earnings applicable
to common stock without
goodwill amortization $2.69 $3.36 $3.07
Diluted earnings per
average common share:
Reported earnings applicable
to common stock $2.64 $3.23 $2.97
Goodwill amortization – 0.07 0.07
Adjusted earnings applicable
to common stock without
goodwill amortization $2.64 $3.30 $3.04
NUCLEAR REFUELING OUTAGE COSTS
Entergy records nuclear refueling outage costs in accordance
with regulatory treatment and the matching principle. These
refueling outage expenses are incurred to prepare the units to
operate for the next operating cycle without having to be
taken off line. Except for the River Bend plant, the costs are
deferred during the outage and amortized over the period to
the next outage. In accordance with the regulatory treatment
of the River Bend plant, River Bend’s costs are accrued in
advance and included in the cost of service used to establish
retail rates. Entergy Gulf States relieves the accrual when it
incurs costs during the next River Bend outage.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
AFUDC represents the approximate net composite interest
cost of borrowed funds and a reasonable return on the equity
funds used for construction in the U.S. Utility segment.
Although AFUDC increases both the plant balance and
earnings, it is realized in cash through depreciation provisions
included in rates.
INCOME TAXES
Entergy Corporation and its subsidiaries file a U.S. consolidated
federal income tax return. Income taxes are allocated to the
subsidiaries in proportion to their contribution to consolidated
taxable income. Securities and Exchange Commission (SEC)
regulations require that no Entergy subsidiary pay more taxes
than it would have paid if a separate income tax return had
been filed. In accordance with SFAS 109, “Accounting for
Income Taxes,” deferred income taxes are recorded for all
temporary differences between the book and tax basis of assets
and liabilities, and for certain credits available for carryforward.
Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not
that some portion of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates in the period in which the tax or
rate was enacted.
Investment tax credits are deferred and amortized based
upon the average useful life of the related property, in
accordance with ratemaking treatment.
EARNINGS PER SHARE
The following table presents Entergy’s basic and diluted earnings
per share (EPS) calculation included on the consolidated
income statement (in millions, except per share data):
For the years ended December 31, 2002 2001 2000
$ per $ per $ per
Income before cumulative share share share
effect of accounting change $599.4 $702.7 $679.3
Average number of common
shares outstanding - basic 223.0 $2.69 220.9 $3.18 226.6 $3.00
Average dilutive effect of:
Stock options(1) 3.9 (0.05) 3.6 (0.05) 1.9 (0.03)
Equity awards 0.4 – 0.2 – – –
Average number of common
shares outstanding - diluted 227.3 $2.64 224.7 $3.13 228.5 $2.97
Earnings applicable
to common stock $599.4 $726.2 $679.3
Average number of common
shares outstanding - basic 223.0 $2.69 220.9 $3.29 226.6 $3.00
Average dilutive effect of:
Stock options(1) 3.9 (0.05) 3.6 (0.05) 1.9 (0.03)
Equity awards 0.4 – 0.2 – – –
Average number of common
shares outstanding - diluted 227.3 $2.64 224.7 $3.23 228.5 $2.97
(1) Options to purchase approximately 109,897 and 148,500 shares of common
stock at various prices were outstanding at the end of 2002 and 2001,
respectively, that were not included in the computation of diluted earnings
per share because the exercise prices were greater than the average market price
of the common shares at the end of each of the years presented. At the end of
2000, all outstanding options, totaling 11,468,316, were included in the
computation of diluted earnings per share as a result of the average market
price of the common shares being greater than the exercise prices.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued