Entergy 2003 Annual Report Download - page 89

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87
ENTERGY CORPORATION AND SUBSIDIARIES 2003
87
Fair Values
COMMODITY INSTRUMENTS
Fair value estimates of Energy Commodity Services’
commodity instruments are made at discrete points in
time based on relevant market information. Market quotes
are used in determining fair value whenever they are
available. When market quotes are not available (e.g., in
the case of a long-dated commodity contract), other infor-
mation is used, including transactional data and internally
developed models. Fair value estimates based on these
other methodologies are necessarily subjective in nature
and involve uncertainties and matters of significant
judgment. Therefore, actual results may differ from these
estimates. At December 31, 2003 and 2002, the recorded
values of Energy Commodity Services’ energy-related
commodity contracts were as follows (in thousands):
2003 2002
Assets Liabilities Assets Liabilities
Consolidated subsidiaries $ – $ – $ 4,071 $ 8,395
Equity method investees (1) $872,959 $866,412 $754,678 $663,765
(1) As required by equity method accounting principles, only Entergy’s net investment
in these investees is reflected in its balance sheet, and these assets and liabilities are
not reflected in Entergy’s balance sheet. See Note 13 to the consolidated financial
statements for more information on Entergy’s equity method investees.
Following are the cumulative periods in which Entergy-
Koch Trading’s net mark-to-market assets would be realized
in cash if they are held to maturity and market prices are
unchanged (in millions):
Maturities and Sources
for Fair Value of Trading 0-12 13-24 25+
Contracts at December 31, 2003 months months months Total
Prices actively quoted $126.3 $(87.1) $(14.6) $24.6
Prices provided by
other sources 4.8 (10.1) 5.6 0.3
Prices based on models (28.0) 14.2 4.9 (8.9)
Total $ 103.1 $ (83.0) $ (4.1) $ 16.0
FINANCIAL INSTRUMENTS
The estimated fair value of Entergy’s financial instruments
is determined using bid prices reported by dealer markets
and by nationally recognized investment banking firms.
The estimated fair value of derivative financial instruments
is based on market quotes. Considerable judgment is
required in developing some of the estimates of fair value.
Therefore, estimates are not necessarily indicative of the
amounts that Entergy could realize in a current market
exchange. In addition, gains or losses realized on financial
instruments held by regulated businesses may be reflected
in future rates and therefore do not necessarily accrue to
the benefit or detriment of stockholders.
Entergy considers the carrying amounts of most of
its financial instruments classified as current assets and
liabilities to be a reasonable estimate of their fair value
because of the short maturity of these instruments.
Additional information regarding financial instruments
and their fair values is included in Notes 5 and 7 to the
consolidated financial statements.
NOTE 16. QUARTERLY FINANCIAL DATA
(UNAUDITED)
Operating results for the four quarters of 2003 and 2002
were (in thousands):
Operating Net
Operating Income Income
Revenues (Loss) (Loss)
2003
First Quarter $2,037,723 $363,403 $400,923(a)
Second Quarter 2,353,909 461,576 211,517
Third Quarter 2,700,125 619,005 371,650
Fourth Quarter 2,103,163 40,571 (33,623)
2002
First Quarter $1,860,834 $ (55,670) $ (72,983)
Second Quarter 2,096,581 486,159 247,585
Third Quarter 2,468,875 653,695 366,800
Fourth Quarter 1,878,745 57,537 81,670
(a) Net income before the cumulative effect of accounting change for the first quarter
of 2003 was $258,001.
EARNINGS PER AVERAGE COMMON SHARE
2003 2002
Basic Diluted Basic Diluted
First Quarter $ 1.77(b) $ 1.73(b) $(0.36) $(0.36)
Second Quarter $ 0.91 $ 0.89 $ 1.08 $ 1.06
Third Quarter $ 1.60 $ 1.57 $ 1.61 $ 1.59
Fourth Quarter $(0.19) $(0.18) $ 0.36 $ 0.35
(b) Basic and diluted earnings per average common share before the cumulative effect
of accounting change for the first quarter of 2003 were $1.13 and $1.10, respectively.