Entergy 2002 Annual Report Download - page 74

In July 1997, Entergy Louisiana caused the Waterford 3 lessors
to issue $307.6 million aggregate principal amount of Waterford 3
Secured Lease Obligation Bonds, 8.09% Series due 2017, to
refinance the outstanding bonds originally issued to finance the
purchase of the undivided interests by the lessors. The lease
payments have been reduced to reflect the lower interest costs.
As of December 31, 2002, System Energy and Entergy
Louisiana had future minimum lease payments, recorded as
long-term debt (reflecting an overall implicit rate of 7.02% and
7.45%, respectively) as follows (in thousands):
System Entergy
Energy Louisiana
2003 $ 48,524 $ 59,709
2004 36,133 31,739
2005 52,253 14,554
2006 52,253 18,261
2007 52,253 18,754
Years thereafter 418,022 389,121
Total 659,438 532,138
Less: Amount
representing interest 244,595 234,188
Present value of net
minimum lease payments $414,843 $297,950
NOTE 11. RETIREMENT AND OTHER
POSTRETIREMENT BENEFITS
PENSION PLANS
Entergy has seven pension plans covering substantially all of its
employees: “Entergy Corporation Retirement Plan for Non-
Bargaining Employees,” “Entergy Corporation Retirement
Plan for Bargaining Employees,” “Entergy Corporation
Retirement Plan II for Non-Bargaining Employees,” “Entergy
Corporation Retirement Plan II for Bargaining Employees,”
“Entergy Corporation Retirement Plan III,” “Entergy
Corporation Retirement Plan IV for Non-Bargaining
Employees,” and “Entergy Corporation Retirement Plan IV for
Bargaining Employees.” Except for the Entergy Corporation
Retirement Plan III, the pension plans are noncontributory
and provide pension benefits that are based on employees’
credited service and compensation during the final years
before retirement. The Entergy Corporation Retirement Plan III
includes a mandatory employee contribution of 3% of earnings
during the first 10 years of plan participation, and allows
voluntary contributions from 1% to 10% of earnings for a
limited group of employees. Entergy Corporation and its
subsidiaries fund pension costs in accordance with contribution
guidelines established by the Employee Retirement Income
Security Act of 1974, as amended, and the Internal Revenue
Code of 1986, as amended. The assets of the plans include
common and preferred stocks, fixed-income securities, interest
in a money market fund, and insurance contracts. As of
December 31, 2002, Entergy recognized an additional mini-
mum pension liability for the excess of the accumulated benefit
obligation over the fair market value of plan assets. In accor-
dance with FASB 87, an offsetting intangible asset, up to the
amount of any unrecognized prior service cost, was also recorded,
with the remaining offset to the liability recorded as a regulatory
asset reflective of the recovery mechanism for pension costs
in Entergy’s jurisdictions. Entergy’s pension costs are recovered
from customers as a component of cost of service in each of
its jurisdictions.
Total 2002, 2001, and 2000 pension costs of Entergy
Corporation and its subsidiaries, including amounts capitalized,
included the following components (in thousands):
2002 2001 2000
Service cost - benefits earned
during the period $ 56,947 $ 49,166 $ 37,130
Interest cost on projected
benefit obligation 128,387 118,448 108,782
Expected return on assets (158,202) (157,889) (145,717)
Amortization of transition asset (763) (7,142) (9,740)
Amortization of prior service cost 5,993 5,735 12,953
Recognized net (gain)/loss 5,504 (6,573) (8,576)
Net pension costs/(income) $ 37,866 $ 1,745 $ (5,168)
The funded status of Entergy’s pension plans as of December 31,
2002 and 2001 was (in thousands):
2002 2001
Change in Projected Benefit
Obligation (PBO)
Balance at beginning of year $1,720,492 $1,602,673
Service cost 56,947 49,166
Interest cost 128,387 118,448
Acquisition of subsidiary 33,398 212
Actuarial loss 144,531 16,369
Benefits paid (91,548) (88,476)
Acquisition – 22,100
Balance at end of year $1,992,207 $1,720,492
Change in Plan Assets
Fair value of assets
at beginning of year $1,686,836 $1,843,115
Actual return on plan assets (191,136) (80,335)
Employer contributions 12,857 10,532
Employee contributions 1,125 2,000
Acquisition of subsidiary 33,668 –
Benefits paid (91,548) (88,476)
Fair value of assets at end of year $1,451,802 $1,686,836
Funded status $ (540,405) $ (33,656)
Unrecognized transition asset (2,189) (3,202)
Unrecognized prior service cost 37,351 40,330
Unrecognized net (gain)/loss 413,043 (70,934)
Accrued pension cost $ (92,200) $ (67,462)
Amounts recognized in
balance sheet
Accrued pension cost $ (92,200) $ (67,462)
Additional minimum
pension liability (208,151) –
Intangible asset 33,346 –
Accumulated other
comprehensive income 17,016 –
Regulatory asset 157,789 –
Net amount recognized $ (92,200) $ (67,462)
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued