Entergy 2006 Annual Report Download - page 111

ENTERGY CORPORATION AND SUBSIDIARIES 2
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Entergy New Orleans’ plan of reorganization proposes to pay inter-
est from September 23, 2005 on the third-party and affiliate accounts
payable at the Louisiana judicial rate of interest in 2005 (6%) and
2006 (8%), and at the Louisiana judicial rate of interest plus 1%
thereafter. The Louisiana judicial rate of interest is 9.5% for 2007.
Pursuant to an agreement with the first mortgage bondholders,
Entergy New Orleans’ plan of reorganization also proposes to pay the
first mortgage bondholders an amount equal to the one year of inter-
est from the bankruptcy petition date that the bondholders had
waived previously in the bankruptcy proceeding. As approved by the
bankruptcy court, Entergy New Orleans has begun paying interest
accruing after September 23, 2006 on its first mortgage bonds. In the
fourth quarter 2006, Entergy New Orleans accrued for the interest
from September 23, 2005 through December 2006 and for the pro-
posed payment to the bondholders in the amount of the one year of
waived interest.
Municipalization is one potential outcome of Entergy New
Orleans’ recovery effort that may be pursued by a stakeholder or
stakeholders, even after Entergy New Orleans exits from bankruptcy.
In June 2006, the Louisiana Legislature passed a law that establishes a
governance structure for a public power authority, if municipalization
of Entergy New Orleans’ utility business is pursued. Entergy New
Orleans’ October 2006 settlement approved by the City Council
allowing phased-in rate increases through 2008, discussed in Note 2
to the financial statements, provides that Entergy New Orleans will
work with the City Council to seek an exception to the Stafford Act
that will afford Stafford Act protections to Entergy New Orleans if
another catastrophic event affects Entergy New Orleans. The Stafford
Act provides for restoration funding from the federal government for
municipal utilities, but does not allow such funding for investor-
owned utilities like Entergy New Orleans.
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 does not affect the amount of net
income Entergy records resulting from Entergy New Orleans’ opera-
tions for any current or prior period, but results in Entergy New
Orleans’ net income for 2005 and 2006 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 has reviewed the car-
rying value of its equity investment in Entergy New Orleans to
determine if an impairment has occurred as a result of the storm, the
flood, the power outages, restoration costs, and changes in customer
load. Entergy determined that no impairment has occurred because
management believes that cost recovery is probable. Entergy will con-
tinue to assess the carrying value of its investment in Entergy
New Orleans as developments occur in Entergy New Orleans’
recovery efforts.
Entergy’s income statement for 2006 and 2005 includes $220 mil-
lion and $207 million, respectively, in operating revenues and $46
million and $117 million, respectively, in purchased power expenses
from transactions between Entergy New Orleans and Entergy’s sub-
sidiaries. Entergy’s balance sheet as of December 31, 2006 and 2005
includes $95 million and $103 million, respectively, of accounts
receivable that are payable to Entergy or its subsidiaries by Entergy
New Orleans, including $69.5 million of prepetition accounts. 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 19. QUARTERLY FINANCIAL DATA (UNAUDITED)
Operating results for the four quarters of 2006 and 2005 for Entergy
Corporation and subsidiaries were (in thousands):
Operating Operating Net
Revenues Income Income
2006
First Quarter $2,568,031 $394,763 $193,628
Second Quarter $2,628,502 $487,573 $281,802
Third Quarter $3,254,719 $644,408 $388,883
Fourth Quarter $2,480,906 $278,898 $268,289
2005
First Quarter $2,110,182 $311,008 $171,996
Second Quarter $2,445,391 $515,574 $286,150
Third Quarter $2,898,258 $654,340 $349,952
Fourth Quarter $2,652,416 $311,067 $ 90,233
EARNINGS PER AVERAGE COMMON SHARE
2006 2005
Basic Diluted Basic Diluted
First Quarter $0.93 $0.92 $0.80 $0.79
Second Quarter $1.35 $1.33 $1.36 $1.33
Third Quarter $1.87 $1.83 $1.68 $1.65
Fourth Quarter $1.31 $1.28 $0.43 $0.42
NOTESto CONSOLIDATED FINANCIAL STATEMENTS concluded
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