Entergy 2004 Annual Report Download - page 25

Entergy Corporation and Subsidiaries 2004
Entergy Corporation is an investor-owned public utility holding
company that operates primarily through three business segments.
•U.S. Utility generates, transmits, distributes, and sells
electric power in a four-state service territory that includes
portions of Arkansas, Mississippi, Texas, and Louisiana,
including the City of New Orleans; and operates a small
natural gas distribution business.
•Non-Utility Nuclear owns and operates five nuclear
power plants located in the northeastern United States and sells
the electric power produced by those plants to wholesale
customers. This business also provides services to other nuclear
power plant owners.
•Energy Commodity Services includes Entergy-Koch
and Entergy’s non-nuclear wholesale assets business. Entergy-
Koch engaged in two major businesses: energy commodity
marketing and trading through Entergy-Koch Trading, and gas
transportation and storage through Gulf South Pipeline.
Entergy-Koch sold both of these businesses in the fourth quarter
of 2004, and Entergy-Koch is no longer an operating entity. The
non-nuclear wholesale assets business sells to wholesale
customers the electric power produced by power plants that it
owns while it focuses on improving performance and exploring
sales or restructuring opportunities for its power plants.
Suchopportunities are evaluated consistent with Entergy’s
market-based point-of-view. The non-nuclear wholesale assets
business terminated newgreenfield power development activity
in 2002.
Following arethe percentages of Entergy’s consolidated revenues
and net income generated by these segments and the percentage of
total assets held by them:
%of Revenue
Segment 2004 2003 2002
U.S. Utility 81 82 82
Non-Utility Nuclear 13 14 14
Energy Commodity Services 2 2 4
Parent & Other 4 2 –
% of Net Income
Segment 2004 2003 2002
U.S. Utility 72 52 97
Non-Utility Nuclear 26 32 32
Energy Commodity Services – 19 (23)
Parent & Other 2 (3) (6)
%of Total Assets
Segment 2004 2003 2002
U.S. Utility 80 79 79
Non-Utility Nuclear 16 15 16
Energy Commodity Services 3 7 8
Parent & Other 1 (1) (3)
RESULTS OF OPERATIONS
Earnings applicable to common stock for the years ended
December 31, 2004, 2003, and 2002 by operating segment are as
follows (in thousands):
Operating Segment 2004 2003 2002
U.S. Utility $643,408 $469,050 $ 583,251
Non-Utility Nuclear 245,029 300,799 200,505
Energy Commodity Services 3,481 180,454 (145,830)
Parent & Other 17,606 (23,360) (38,566)
Total $909,524 $926,943 $ 599,360
Following is a discussion of Entergy’s income before taxes
according to the business segments listed above. Earnings for 2004
include a $97 million tax benefit that resulted from the sale
of preferred stock and less than 1% of the common stock in
asubsidiary in the non-nuclear wholesale assets business; and a
$36 million net-of-tax impairment charge in the non-nuclear
wholesale assets business, both of which are discussed below.
Earnings for 2003 include the $137.1 million net-of-tax
cumulative effect of changes in accounting principle that increased
earnings in the first quarter of 2003, almost entirely resulting from
the implementationof Statement of Financial Accounting
Standards (SFAS) 143. Earnings werenegatively affected in the
fourth quarter of 2003 by voluntary severance program expenses of
$122.8 millionnet-of-tax. As partof an initiativeto achieve
productivityimprovements with a goal of reducing costs, primarily
in the Non-Utility Nuclear and U.S. Utility businesses, in the
second half of 2003 Entergyoffered a voluntaryseverance
program to employees in various departments. Approximately
1,100 employees, including 650 employees in nuclear operations
fromthe Non-Utility Nuclear and U.S. Utility businesses,
accepted the offers.
Earnings for 2002 were negatively affected by net charges
($238.3 million net-of-tax) reflecting the effect of Entergy’s
decision to discontinue additional greenfield power plant
development and asset impairments resulting from the deteriorating
economics of wholesale power markets principally in the United
States and the United Kingdom. The net charges are discussed
morefully below in the Energy Commodity Services discussion.
See Note 11 to the consolidated financial statements for further
discussion of Entergy’s business segments and their financial results
in 2004, 2003, and 2002.
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MANAGEMENT’S FINANCIAL DISCUSSION and ANALYSIS