Entergy 2004 Annual Report Download - page 80

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Entergy Corporation and Subsidiaries 2004
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued
their undivided interest in Grand Gulf. Both refinancings are at
lower interest rates, and Entergy Louisiana’s and System Energy’s
lease payments have been reduced to reflect the lower interest costs.
As of December 31, 2004, Entergy Louisiana and System Energy
had future minimum lease payments, recorded as long-term debt
(reflecting an overall implicit rate of 7.45% and 5.01%, respectively)
as follows (in thousands): Entergy System
Year Louisiana Energy
2005 $ 14,554 $ 45,423
2006 18,261 46,019
2007 18,754 46,552
2008 22,606 47,128
2009 32,452 47,760
Years thereafter 334,062 302,402
Minimum lease payments $440,689 $535,284
Less: Amount representing interest 192,964 138,165
Present value of net
minimum lease payments $ 247,725 $397,119
NOTE 10. RETIREMENT, OTHER POSTRETIREMENT
BENEFITS, AND DEFINED CONTRIBUTION PLANS
Pension Plans
Entergyhas seven pensionplans 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
CorporationRetirement Plan III,” “Entergy Corporation
Retirement Plan IV for Non-Bargaining Employees,” and “Entergy
CorporationRetirement Plan IV for Bargaining Employees.”
Except for the EntergyCorporation Retirement Plan III, the
pension plans are noncontributory and provide pension
benefits that arebased 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, 2004 and
2003, Entergy recognized an additional minimum pension liability
for the excess of the accumulated benefit obligation over the fair
market value of plan assets. In accordance with SFAS 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 or to other
comprehensive income for Entergy’s non-regulated business.
Entergy’s domestic utility companies’ and System Energy’s pension
costs are recovered from customers as a component of cost of
service in eachof its jurisdictions. Entergyuses a December 31
measurement date for its pensionplans.
Components of Net Pension Cost
Total 2004, 2003, and 2002 pension costs of Entergy Corporation
and its subsidiaries, including amounts capitalized, included the
following components (in thousands):
2004 2003 2002
Service cost - benefits
earned during the period $ 76,946 $ 70,337 $ 56,947
Interest cost on projected
benefit obligation 148,092 134,403 128,387
Expected return on assets (153,584) (155,460) (158,202)
Amortization of transition asset (763) (763) (763)
Amortization of prior service cost 5,143 5,886 5,993
Recognized net loss 21,687 6,399 5,504
Curtailment loss – 14,864 –
Special termination benefits – 32,006 –
Net pension costs $ 97,521 $ 107,672 $ 37,866
Pension Obligations, Plan Assets, Funded
Status, Amounts Not Yet Recognized and
Recognized in the Balance Sheet as of
December 31, 2004and 2003 (in thousands):
2004 2003
Change in Projected Benefit
Obligation (PBO)
Balance at beginning of year $2,349,565 $1,992,207
Service cost 76,946 70,337
Interest cost 148,092 134,403
Amendments 3,709 227
Actuarial loss 171,146 205,949
Benefits paid (117,234) (97,574)
Employee contributions 1,212 1,059
Curtailment loss – 10,951
Special terminationbenefits – 32,006
Balance at end of year $2,633,436 $2,349,565
Change in Plan Assets
Fair value of assets at
beginning of year $1,744,975 $1,451,802
Actual return on plan assets 170,964 355,043
Employer contributions 72,825 34,645
Employee contributions 1,212 1,059
Benefits paid (117,234) (97,574)
Fair value of assets
at end of year $1,872,742 $1,744,975
Funded status $ (760,694) $ (604,590)
Amounts not yet recognized
in the balance sheet
Unrecognized transition asset (662) (1,426)
Unrecognized prior service cost 29,053 30,467
Unrecognized net loss 542,391 410,321
Accrued pension cost recognized
in the balance sheet $ (189,912) $ (165,228)
Amounts recognized in
the balance sheet
Accrued pensioncost $ (189,912) $ (165,228)
Additional minimum
pension liability (244,280) (180,212)
Intangible asset 26,167 30,832
Accumulated other
comprehensive income 10,781 15,359
Regulatory asset 207,332 134,021
Net amount recognized $ (189,912) $ (165,228)