NEW ORLEANS — Entergy Corporation expects second quarter 2012 as-reported earnings of approximately $2.05 per share and operational earnings of approximately $2.10 per share.
Results for second quarter 2011 were $1.76 per share on both an as-reported basis and an operational basis. Entergy also affirmed previously issued operational earnings guidance for 2012.
As-reported results are prepared in accordance with generally accepted accounting principles (GAAP) and are comprised of operational earnings (described below) and special items. The special item in the second quarter of 2012 was due to expenses associated with the proposed spin-off and merger of Entergy’s electric transmission business with ITC Holdings Corp.
The increase in second quarter 2012 earnings was driven by higher earnings at Utility and Entergy Wholesale Commodities, which was partially offset by lower results at the Parent & Other disclosure segment.
The increase in Utility second quarter 2012 operational earnings was driven by an agreement reached with the Internal Revenue Service regarding storm cost financings in Louisiana. The resolution of this item resulted in a significant decrease in income tax expense during the current quarter. The benefits will be shared with customers of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC. As a result, the decrease in income tax expense was partially offset by a regulatory charge reducing Utility net revenue to reflect this customer sharing.
Excluding this regulatory charge, Utility net revenue was modestly better. Retail sales volume in second quarter 2012 reflected warmer-than-normal weather as well as weather-adjusted sales growth across all customer classes. However, the quarter-over-quarter weather effect variance was unfavorable when compared to the well above-normal temperatures experienced throughout the service territory in the second quarter of 2011. Higher non-fuel operation and maintenance expense served as a partial offset to the increased operational earnings.
Entergy Wholesale Commodities
The quarter-over-quarter increase in earnings at Entergy Wholesale Commodities was due primarily to lower decommissioning expense and a lower effective income tax rate. A reduction in the decommissioning liability recorded in the current period was due primarily to an updated decommissioning study for the Pilgrim Nuclear Power Station, which received its 20-year license renewal from the Nuclear Regulatory Commission in late May. These positive items were partially offset by a decrease in EWC net revenue driven by lower pricing associated with the nuclear fleet. Also, providing a partial offset in quarterly results was an increase in non-fuel operation and maintenance expense.
Parent & Other
At the Parent & Other disclosure segment, operational results declined during the quarter due to an increase in income tax expense on Parent & Other activities. Both periods reflected favorable tax items. Second quarter 2012 benefited from a favorable decision received in June 2012 from the U.S. Court of Appeals for the Fifth Circuit affirming Entergy’s entitlement to claim foreign tax credits for the U.K. Windfall Tax. The second quarter of 2011 benefited from a reversal of a tax reserve related to an IRS settlement, which exceeded income tax adjustments recorded in the current period.
Entergy affirmed its previously issued 2012 operational earnings guidance to be in the range of $4.85 to $5.65 per share. Entergy also updated its as-reported earnings guidance for 2012 to a range of $3.49 to $4.29 per share to incorporate the second quarter special item noted above. Special items recorded year-to-date total approximately $(1.36) per share to reflect the first quarter 2012 asset impairment of the Vermont Yankee nuclear power plant and the transmission business spin-off and merger expenses in the first two quarters of the year. As-reported 2012 earnings guidance will be updated throughout the year as these transaction-related expenses continue to be incurred.