Entergy 2006 Annual Report Download - page 46

2005 COMPARED TO 2004
Following are income statement variances for Utility, Non-Utility
Nuclear, Parent & Other business segments, and Entergy comparing
2005 to 2004 showing how much the line item increased or (decreased)
in comparison to the prior period (in thousands):
Non-Utility Parent &
Utility Nuclear Other Entergy
2004 Consolidated
Net Income (Loss) $643,408 $245,029 $ 21,087 $909,524
Net revenue (operating
revenue less fuel expense,
purchased power, and
other regulatory charges
(credits) – net) (168,559) 57,496 (16,384) (127,447)
Other operation and
maintenance expenses (98,636) (7,839) (39,651) (146,126)
Taxes other than
income taxes (22,400) 2,182 (896) (21,114)
Depreciation (39,883) 9,680 (6,994) (37,197)
Other income 2,261 (6,314) 89,505 85,452
Interest charges (19,643) (2,783) 22,156 (270)
Other expenses (886) (8,897) (44) (9,827)
Provision for asset impairments – – (55,000) (55,000)
Discontinued operations
(net-of-tax) – – (44,753) (44,753)
Income taxes (1,202) 21,245 173,936 193,979
2005 Consolidated
Net Income (Loss) $659,760 $282,623 $(44,052) $898,331
The uncertainties inherent in Entergy New Orleans’ bankruptcy
proceedings 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 did not affect the amount of net income Entergy records
resulting from Entergy New Orleans’ operations for any current or
prior period, but did result 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 2004.
Transactions in 2005 and 2006 between Entergy New Orleans and
other Entergy subsidiaries are not eliminated in consolidation as they
are in 2004. The variance explanations for 2005 compared to 2004
below reflect the 2004 results of operations of Entergy New Orleans
as if it were deconsolidated in 2004, consistent with the 2005 presen-
tation as “Equity in earnings (loss) of unconsolidated equity
affiliates.” Entergy’s as reported consolidated results for 2004 and
the amounts included in those consolidated results for Entergy
New Orleans, which exclude inter-company items, are set forth in the
table below (in thousands):
For the Year Ended
December 31, 2004
Amounts
Entergy required to
Corporation deconsolidate
and Entergy
Subsidiaries New Orleans
(as-reported) in 2004*
Operating Revenues $ 9,685,521 $(435,194)
Operating Expenses:
Fuel, fuel-related expenses, and gas purchased
for resale and purchased power 4,189,818 (206,240)
Other operation and maintenance 2,268,332 (102,451)
Taxes other than income taxes 403,635 (43,577)
Depreciation and amortization 893,574 (29,657)
Other regulatory credits – net (90,611) 4,670
Other operating expenses 370,601 –
Total operating expenses 8,035,349 (377,255)
Other Income 125,999 (2,044)
Interest and Other Charges 501,301 (16,008)
Income from Continuing Operations
Before Income Taxes and Cumulative
Effect of Accounting Changes 1,274,870 (18,798)
Income Taxes 365,305 (16,868)
Consolidated Net Income $ 909,524 $ –
* Reflects the entry necessary to deconsolidate Entergy New Orleans for 2004.
The column includes intercompany eliminations.
Net Revenue
Utility
Following is an analysis of the change in net revenue, which
is Entergy’s measure of gross margin, comparing 2005 to 2004
(in millions):
2004 Net Revenue
(does not include $233.6 from Entergy New Orleans) $4,010.3
Price applied to unbilled sales 40.8
Rate refund provisions 36.4
Volume/weather 3.6
2004 deferrals (15.2)
Other (0.5)
2005 Net Revenue $4,075.4
The price applied to unbilled sales variance resulted primarily from an
increase in the fuel cost component included in the price applied to
unbilled sales. The increase in the fuel cost component is attributable
to an increase in the market prices of natural gas and purchased
power. See “Critical Accounting Estimates - Unbilled Revenue” and
Note 1 to the financial statements for further discussion of the
accounting for unbilled revenues.
The rate refund provisions variance is due primarily to accruals
recorded in 2004 for potential rate action at Entergy Gulf States and
Entergy Louisiana.
The volume/weather variance includes the effect of more favorable
weather in 2005 compared to 2004 substantially offset by a decrease
in weather-adjusted usage due to the effects of Hurricanes Katrina and
Rita and a decrease in usage during the unbilled sales period.
The 2004 deferrals variance is due to the deferrals related to
Entergy’s voluntary severance program, in accordance with a stipula-
tion with the LPSC staff. The deferrals are being amortized over a
four-year period effective January 2004.
MANAGEMENT’S FINANCIAL DISCUSSION and ANALYSIS continued
ENTERGY CORPORATION AND SUBSIDIARIES 2
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