News Release > Entergy Reports Third Quarter Earnings

Entergy Reports Third Quarter Earnings

10/31/2018

NEW ORLEANS – Entergy Corporation (NYSE: ETR) reported third quarter 2018 earnings per share of $2.92 on an as-reported basis and $3.77 on an operational basis (non-GAAP), which excludes the effects of special items. 

“We are on track to meet our strategic, operational and financial objectives, and our accomplishments this year include major milestones in our transition to a pure-play utility,” said Entergy Chairman and Chief Executive Officer Leo Denault. “With strong results to date, we are affirming our core business UP&O adjusted guidance for the year, and we are raising our consolidated operational guidance.” 

Business highlights included the following:

• Entergy raised its consolidated operational earnings guidance to $6.75–$7.25 per share.
• Entergy Mississippi entered into an agreement to acquire the 810 MW Choctaw Generating Station.
• Entergy Texas filed an unopposed settlement agreement with the PUCT in its 2018 rate case.
• Entergy Arkansas filed a partial settlement agreement in its FRP filing.
• Entergy New Orleans refiled its 2018 rate case with the CCNO.
• Entergy Louisiana signed a long-term agreement to provide power to the expanding Shintech Louisiana, LLC manufacturing complex in Iberville Parish.
• The NRC approved the license transfer of Vermont Yankee.
• Entergy was named to the 2018 Dow Jones Sustainability North America Index and received perfect scores in four areas, including climate strategy; this is the 17th consecutive year Entergy has appeared on the World or North America Index or both. 

Calculations may differ due to rounding

Consolidated Results

For third quarter 2018, the company reported earnings of $536 million, or $2.92 per share, on an as-reported basis and earnings of $693 million, or $3.77 per share, on an operational basis. This compared to third quarter 2017 earnings of $398 million, or $2.21 per share, on an as-reported basis and earnings of $424 million, or $2.35 per share on an operational basis.

Summary discussions by business are below. Additional details, including information on OCF by business, are provided in Appendix A and a comprehensive analysis of quarterly and year-to-date variances by business is provided in Appendix B.

Utility, Parent & Other Results 

For third quarter 2018, the Utility business reported earnings attributable to Entergy Corporation of $505 million, or $2.75 per share, compared to $401 million, or $2.22 per share, in third quarter 2017. Drivers for the quarterly increase included favorable weather and the lower federal income tax rate, partially offset by higher non-fuel O&M. 

The current period results reflected the return of unprotected excess ADIT to customers, which affected several income statement line items but was neutral to earnings. Specifically, this reduced income taxes by $283 million, reduced net revenue by $277 million and increased non-fuel O&M by $6 million. 

Excluding the return of $277 million of unprotected excess ADIT to customers, net revenue increased, driven by favorable weather in third quarter 2018 compared to unfavorable weather a year ago. Rate actions to recover investments that benefit customers also contributed to the increase. Current period results also included regulatory provisions to return benefits of the lower federal tax rate to customers at Entergy Louisiana and Entergy New Orleans. Weather-adjusted billed sales volume increased period over period, but was more than offset by lower volume in the unbilled period. 

On a weather-adjusted basis, billed retail sales increased 1.8 percent, including 0.8 percent and 1.4 percent for residential and commercial sales, respectively. Industrial billed sales volume increased 3.0 percent primarily driven by small industrials and cogeneration sales, as well as continued growth from new and expansion customers. 

Excluding the $283 million unprotected excess ADIT, income taxes were lower driven by the reduction of the federal income tax rate. 

Utility non-fuel O&M increased quarter-over-quarter. The primary drivers were higher spending on fossil operations and higher contract costs. Energy efficiency spending was also higher, but was largely offset in net revenue. 

For third quarter 2018, Parent & Other reported a loss of $(73 million), or (40) cents per share, compared to a loss of $(58 million), or (32) cents per share, in third quarter 2017. 

On a combined basis, Utility, Parent & Other (non-GAAP) contributed $2.35 to third quarter 2018 consolidated EPS compared to $1.90 in third quarter 2017. On an adjusted basis, excluding special items and normalizing weather and income taxes, Utility, Parent & Other contributed $2.27 in third quarter 2018 to consolidated EPS, compared to $2.15 in third quarter 2017. 

Appendix C contains additional details on Utility financial and operating measures, including a reconciliation for non-GAAP Utility, Parent & Other adjusted earnings and EPS. 

Entergy Wholesale Commodities Results 

For third quarter 2018, EWC recorded earnings attributable to Entergy Corporation of $105 million, or 57 cents per share, on an as-reported basis and earned $262 million, or $1.42 per share, on an operational basis. This compared to third quarter 2017 earnings of $55 million, or 31 cents per share, on an as-reported basis and earnings of $81 million, or 45 cents per share, on an operational basis. 

As-reported results in both periods reflected impairments and other expenses recorded as a result of strategic decisions for the wholesale business. These items totaled $(157 million), or (85) cents per share, in third quarter 2018, compared to $(26 million), or (14) cents per share, a year ago. The current period results included an upward revision to Pilgrim’s asset retirement obligation, which resulted from an updated decommissioning study. The revision in the ARO resulted in a pre-tax asset impairment of $(117 million). Third quarter 2018 results also included a pre-tax write-off of materials and supplies at Pilgrim totaling $(25 million). These costs, along with other costs associated with strategic decisions for the wholesale business, were considered special items and excluded from operational earnings.   

In addition, the current period results included two income tax items which reduced income taxes and increased earnings by $130 million, or 71 cents per share. Other income also increased largely due to higher realized gains on decommissioning trust funds. Partially offsetting the increase was lower net revenue as a result of lower nuclear energy pricing, as well as lower nuclear energy volume. 

Appendix D contains additional details on EWC financial and operating measures, including a reconciliation for non-GAAP EWC operational adjusted EBITDA. 

Earnings Guidance 

Entergy updated its 2018 consolidated operational earnings guidance range to $6.75 to $7.25 per share and affirmed its Utility, Parent & Other adjusted guidance range of $4.50 to $4.90 per share. The updated consolidated operational earnings guidance range reflects a midpoint increase of 45 cents and a narrowing of the range to 50 cents (versus previous range of 60 cents). The updated guidance considers the effects of weather through September 30, 2018; higher-than-planned income tax items, including a potential item in the fourth quarter of 2018; and the effect of market performance to date in 2018 on EWC nuclear decommissioning trust returns. See webcast presentation slides for additional details. 

The company has provided 2018 earnings guidance with regard to the non-GAAP measures of consolidated operational EPS and Utility, Parent & Other adjusted EPS. These measures exclude from the corresponding GAAP financial measures the effect of special items as described below under “Non-GAAP Financial Measures.” The company has not provided a reconciliation of such non-GAAP guidance to guidance presented on a GAAP basis because it cannot predict and quantify with a reasonable degree of confidence all of the special items that may occur during 2018. The only anticipated special items that the company can reasonably estimate at this time are those that relate to the decisions to sell or close the company’s merchant nuclear plants; these estimated costs, which are excluded from the earnings guidance, are expected to decrease as-reported EPS by approximately $(2.95) per share in 2018. 

Earnings Teleconference 

A teleconference will be held at 10:00 a.m. Central Time on Wednesday, October 31, 2018, to discuss Entergy’s quarterly earnings announcement and the company’s financial performance. The teleconference may be accessed by visiting Entergy’s website at www.entergy.com or by dialing 844-309-6569, conference ID 2269758, no more than 15 minutes prior to the start of the call. The webcast slide presentation is also posted to Entergy’s website concurrent with this release, which was issued before market open on the day of the call. A replay of the teleconference will be available on Entergy’s website at www.entergy.com and by telephone. The telephone replay will be available through November 7, 2018, by dialing 855-859-2056, conference ID 2269758. This release and the webcast slide presentation are also available on the Entergy Investor Relations mobile web app at iretr.com. 

Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 9,000 megawatts of nuclear power. Entergy delivers electricity to 2.9 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of approximately $11 billion and more than 13,000 employees. 

Entergy Corporation’s common stock is listed on the New York and Chicago stock exchanges under the symbol “ETR.” 

Details regarding Entergy’s results of operations, regulatory proceedings and other matters are available in this earnings release, a copy of which will be filed with the SEC, and the webcast slide presentation. Both documents are available on Entergy’s Investor Relations website at www.entergy.com/investor_relations and on Entergy’s Investor Relations mobile web app at iretr.com. 

Entergy maintains a web page as part of its Investor Relations website, entitled “Regulatory and Other Information,” which provides investors with key updates of certain regulatory proceedings and important milestones on the execution of its strategy. While some of this information may be considered material information, investors should not rely exclusively on this page for all relevant company information. 

For definitions of certain operating measures, as well as GAAP and non-GAAP financial measures and abbreviations and acronyms used in the earnings release materials, see Appendix F. 

Non-GAAP Financial Measures 

This news release contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Entergy has provided quantitative reconciliations within this release of the non-GAAP financial measures to the most directly comparable GAAP financial measures. 

Certain non-GAAP financial measures in this news release could differ from GAAP only in that the figure or ratio states or includes operational earnings. Operational earnings are not calculated in accordance with GAAP because they exclude the effect of “special items.” Special items are unusual or non-recurring items or events or other items or events that management believes do not reflect the ongoing business of Entergy, and may include items such as impairments, gains or losses on certain asset sales, and other gains or losses occurring as a result of strategic decisions such as Entergy’s decisions to shut down or sell its merchant nuclear plants. In addition, other financial measures including net income (or earnings), adjusted for preferred dividends and tax-effected interest expense; net revenue; return on average invested capital; and return on average common equity are included on both an operational and as-reported basis. In each case, the metrics defined as “operational” would exclude the effect of special items as defined above. 

Entergy reports the combination of the Utility segment with Parent & Other as Utility, Parent & Other, which is all of Entergy excluding the EWC segment, since management uses this combination in making decisions about its ongoing business in light of its decision to exit the merchant power business. Entergy also reports Utility, Parent & Other adjusted earnings, which combines the Utility segment with Parent & Other, excludes applicable special items and normalizes weather and income tax expense for the periods presented, because it believes that these financial metrics provide useful information to investors in evaluating the ongoing results of Entergy’s businesses and assist investors in comparing Entergy’s financial performance to the financial performance of other companies in the Utility sector. The methodologies employed to determine the normalized weather and income tax expense adjustments, each of which is further described in this release, involve estimations and the judgement of management. 

In addition to reporting earnings per share on a consolidated basis, Entergy reports on a per share basis the earnings or loss of each of its segments, together with the combination of the Utility segment and Parent & Other. These per share measures represent the net income or loss of such segment or segments divided by the diluted average number of shares of common stock outstanding for the period. Entergy believes such per share measures provide useful information to investors in understanding the results of operations of those businesses and their contribution to Entergy’s consolidated results of operations. 

Other non-GAAP measures, including adjusted EBITDA; operational adjusted EBITDA; gross liquidity; debt to capital ratio, excluding securitization debt; net debt to net capital ratio, excluding securitization debt; parent debt to total debt ratio, excluding securitization debt; operational FFO to debt ratio, excluding securitization debt and operational FFO to debt ratio, excluding securitization debt and return of unprotected excess ADIT are measures Entergy uses internally for management and board discussions and cash budgeting and performance monitoring activities to gauge the overall strength of its business. Entergy believes the above data provides useful information to investors in evaluating Entergy’s ongoing financial results and flexibility and assists investors in comparing Entergy’s credit and liquidity to the credit and liquidity of others in the Utility sector. 

The non-GAAP financial measures and other reported adjusted items in this release are presented in addition to, and in conjunction with, results presented in accordance with GAAP. These non-GAAP financial measures should not be used to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of Entergy’s operations that, when viewed with Entergy’s GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting Entergy’s business. Investors are strongly encouraged to review Entergy’s consolidated financial statements and publicly filed reports in their entirety and to not rely on any single financial measure. Non-GAAP financial measures are not standardized; therefore, it might not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. 

Cautionary Note Regarding Forward-Looking Statements 

In this news release, and from time to time, Entergy Corporation makes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, among other things, Entergy’s 2018 earnings guidance; its current financial and operational outlook; and other statements of Entergy’s plans, beliefs or expectations included in this news release. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this news release. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 

Forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements, including (a) those factors discussed elsewhere in this news release and in Entergy’s most recent Annual Report on Form 10-K, any subsequent Quarterly Reports on Form 10-Q and Entergy’s other reports and filings made under the Securities Exchange Act of 1934; (b) uncertainties associated with (1) rate proceedings, formula rate plans and other cost recovery mechanisms, including the risk that costs may not be recoverable to the extent anticipated by the utilities and (2) implementation of the ratemaking effects of changes in law; (c) uncertainties associated with efforts to remediate the effects of major storms and recover related restoration costs; (d) nuclear plant relicensing, operating and regulatory costs and risks, including any changes resulting from the nuclear crisis in Japan following its catastrophic earthquake and tsunami; (e) changes in decommissioning trust fund values or earnings or in the timing or cost of decommissioning Entergy’s nuclear plant sites; (f) legislative and regulatory actions and risks and uncertainties associated with claims or litigation by or against Entergy and its subsidiaries; (g) risks and uncertainties associated with strategic transactions that Entergy or its subsidiaries may undertake, including the risk that any such transaction may not be completed as and when expected and the risk that the anticipated benefits of the transaction may not be realized; (h) effects of changes in federal, state or local laws and regulations and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental or energy policies; and (i) the effects of technological changes and changes in commodity markets, capital markets or economic conditions, during the periods covered by the forward-looking statements. 

-30-