Entergy 2005 Annual Report Download - page 99

ENTERGY CORPORATION AND SUBSIDIARIES 2005
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NOTES to CONSOLIDATED FINANCIAL STATEMENTS concluded
The fair value of debt securities, summarized by contractual
maturities, at December 31, 2005 and 2004 are as follows (in millions):
2005 2004
Less than 1 year $ 80 $ 134
1 year – 5 years 357 592
5 years – 10 years 382 425
10 years – 15 years 116 158
15 years – 20 years 73 60
20 years + 97 88
Total $1,105 $1,457
During the year ended December 31, 2005, the proceeds from
the dispositions of securities amounted to $50 million with gross
gains of $0.7 million and gross losses of $2.3 million, which were
reclassified out of other comprehensive income into earnings during
the period. During the year ended December 31, 2004, the proceeds
from the dispositions of securities amounted to $37 million with
gross gains of $0.7 million and gross losses of $0.7 million, which
were reclassified out of other comprehensive income into earnings
during the period.
NOTE 16. ENTERGY NEW ORLEANS
BANKRUPTCY PROCEEDING
Because of the effects of Hurricane Katrina, on September 23, 2005,
Entergy New Orleans filed a voluntary petition in the United States
Bankruptcy Court for the Eastern District of Louisiana seeking reorgan-
ization relief under the provisions of Chapter 11 of the United States
Bankruptcy Code (Case No. 05-17697). Entergy New Orleans contin-
ues to operate its business as a debtor-in-possession under the jurisdiction
of the bankruptcy court and in accordance with the applicable provisions
of the Bankruptcy Code and the orders of the bankruptcy court.
In September 2005, Entergy New Orleans, as borrower, and
Entergy Corporation, as lender, entered into the Debtor-in-
Possession (DIP) credit agreement, a debtor in possession credit
facility to provide funding to Entergy New Orleans during its busi-
ness restoration efforts. On December 9, 2005, the bankruptcy
court issued its final order approving the DIP credit agreement,
including the priority and lien status of the indebtedness under the
agreement. The credit facility provides for up to $200 million in
loans. The facility enables Entergy New Orleans to request funding
from Entergy Corporation, but the decision to lend money is at the
sole discretion of Entergy Corporation. As of December 31, 2005,
Entergy New Orleans had outstanding borrowings of $90 million
under the DIP credit agreement.
Entergy owns 100 percent of the common stock of Entergy
New Orleans, has continued to supply general and administrative
services, and has provided debtor-in-possession financing to
Entergy New Orleans. Uncertainties surrounding the nature,
timing, and specifics of the bankruptcy proceedings, however, have
caused Entergy to deconsolidate Entergy New Orleans and reflect
Entergy New Orleans’ financial results under the equity method of
accounting retroactive to January 1, 2005. Because Entergy owns all
of the common stock of Entergy New Orleans, this change will not
affect the amount of net income Entergy records resulting from
Entergy New Orleans’ operations for any current or prior period,
but will result in Entergy New Orleans’ net income for 2005 being
presented as “Equity in earnings (loss) of unconsolidated equity
affiliates” rather than its results being included in each individual
income statement line item, as is the case for periods prior to 2005.
Entergy reviewed the carrying value of its investment in Entergy
New Orleans to determine if an impairment had occurred as a result
of the storm, the flood, the power outages, restoration costs and
changes in customer load. Entergy determined that as of December
31, 2005, no impairment had occurred because management
believes that recovery is probable. Entergy will continue to assess
the carrying value of its investment in Entergy New Orleans as
developments occur in Entergy New Orleans’ recovery efforts.
Entergy’s results of operations for 2005 include $207.2 million in
operating revenues, primarily from sales of power by Entergy con-
solidated subsidiaries to Entergy New Orleans, and $117.5 million
in purchased power, primarily from purchases of power by Entergy
consolidated subsidiaries from Entergy New Orleans. As stated
above, however, because Entergy owns all of the common stock of
Entergy New Orleans, the deconsolidation of Entergy New Orleans
does not affect the amount of net income Entergy records resulting
from Entergy New Orleans’ operations.
NOTE 17. QUARTERLY FINANCIAL DATA
(UNAUDITED)
Operating results for the four quarters of 2005 and 2004 were
(in thousands):
Operating Operating Net
Revenues(a) Income(b) Income
2005
First Quarter $2,110,182 $311,008 $178,620
Second Quarter $2,445,389 $515,573 $292,789
Third Quarter $2,898,259 $654,339 $356,388
Fourth Quarter $2,652,417 $311,069 $ 95,961
2004
First Quarter $2,169,983 $379,020 $213,016
Second Quarter $2,379,668 $491,267 $271,011
Third Quarter $2,832,642 $570,316 $288,047
Fourth Quarter $2,303,228 $209,569 $160,975
(a) Operating revenues are lower by $102,461 in the first quarter 2005 and $110,597
in the second quarter 2005 due to the deconsolidation of Entergy New Orleans
retroactive to January 1, 2005. Operating revenues are lower by $110,771 in the
first quarter 2005, $153,533 in the second quarter 2005, $231,472 in the third
quarter 2005, $81,566 in the first quarter 2004, $105,429 in the second quarter
2004, and $130,939 in the third quarter 2004 due to the treatment of a portion of
the Competitive Retail Services business as a discontinued operation.
(b) Operating income is lower by $12,521 in the first quarter 2005 and $17,934 in the
second quarter 2005 due to the deconsolidation of Entergy New Orleans retroactive
to January 1, 2005. Operating income is lower (higher) by $(1,850) in the first
quarter 2005, $(3,897) in the second quarter 2005, $(10,502) in the third quarter
2005, $(186) in the first quarter 2004, $3,045 in the second quarter 2004, and
$1,156 in the third quarter 2004 due to the treatment of a portion of the
Competitive Retail Services business as a discontinued operation.
EARNINGS PER AVERAGE COMMON SHARE
2005 2004
Basic Diluted Basic Diluted
First Quarter $0.80 $0.79 $0.90 $0.88
Second Quarter $1.36 $1.33 $1.16 $1.14
Third Quarter $1.68 $1.65 $1.24 $1.22
Fourth Quarter $0.43 $0.42 $0.71 $0.69