___________________________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2001 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address of Principal Executive Identification No. Offices and Telephone Number 1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-27031 ENTERGY GULF STATES, INC. 74-0662730 (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 838-6631 1-8474 ENTERGY LOUISIANA, INC. 72-0245590 (a Louisiana corporation) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 840-2734 0-320 ENTERGY MISSISSIPPI, INC. 64-0205830 (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040 (a Louisiana corporation) 1600 Perdido Street, Building 505 New Orleans, Louisiana 70112 Telephone (504) 670-3674 1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777 (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 ___________________________________________________________________________
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No Common Stock Outstanding Outstanding at July 31, 2001 Entergy Corporation ($0.01 par value) 221,706,367 Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2000, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, filed by the individual registrants with the SEC, and should be read in conjunction therewith. Forward-Looking Information The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that forward-looking statements contained herein with respect to the revenues, earnings, performance, strategies, prospects and other aspects of the business of Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. and their affiliated companies may involve risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks and uncertainties relating to: the effects of weather, the performance of generating units and transmission systems, the possession of nuclear materials, fuel and purchased power prices and availability, the effects of regulatory decisions and changes in law, litigation, capital spending requirements, the onset of competition, including the ability to recover net regulatory assets and other potential stranded costs, the effects of recent developments in the California electricity market on the utility industry nationally, advances in technology, changes in accounting standards, corporate restructuring and changes in capital structure, the success of new business ventures, changes in the markets for electricity and other energy-related commodities, changes in interest rates and in financial and foreign currency markets generally, the economic climate and growth in Entergy's service territories, changes in corporate strategies, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q June 30, 2001 Page Number Definitions 1 Management's Financial Discussion and Analysis - Significant Factors and Known Trends 3 Management's Financial Discussion and Analysis - Liquidity and Capital Resources 7 Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations 12 Consolidated Statements of Income 17 Consolidated Statements of Cash Flows 18 Consolidated Balance Sheets 20 Consolidated Statements of Retained Earnings, Comprehensive Income, and Paid-In Capital 22 Selected Operating Results 23 Entergy Arkansas, Inc.: Results of Operations 24 Income Statements 27 Statements of Cash Flows 29 Balance Sheets 30 Selected Operating Results 32 Entergy Gulf States, Inc.: Results of Operations 33 Income Statements 36 Statements of Cash Flows 37 Balance Sheets 38 Selected Operating Results 40 Entergy Louisiana, Inc.: Results of Operations 41 Income Statements 44 Statements of Cash Flows 45 Balance Sheets 46 Selected Operating Results 48 Entergy Mississippi, Inc.: Results of Operations 49 Income Statements 51 Statements of Cash Flows 53 Balance Sheets 54 Selected Operating Results 56 Entergy New Orleans, Inc.: Results of Operations 57 Income Statements 60 Statements of Cash Flows 61 Balance Sheets 62 Selected Operating Results 64 System Energy Resources, Inc.: Results of Operations 65 Income Statements 66 Statements of Cash Flows 67 Balance Sheets 68 Notes to Financial Statements for Entergy Corporation and Subsidiaries 70 Part II: Item 1. Legal Proceedings 82 Item 4. Submission of Matters to a Vote of Security Holders 82 Item 5. Other Information 84 Item 6. Exhibits and Reports on Form 8-K 85 Signature 87
DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term AFUDC Allowance for Funds Used During Construction ALJ Administrative Law Judge ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear) APSC Arkansas Public Service Commission Board Board of Directors of Entergy Corporation BPS British pounds sterling Cajun Cajun Electric Power Cooperative, Inc. Capital Funds Agreement Agreement, dated as of June 21, 1974, as amended, between System Energy and Entergy Corporation, and the assignments thereof CitiPower CitiPower Pty., an electric distribution company serving Melbourne, Australia and surrounding suburbs, which was sold by Entergy effective December 31, 1998 Council Council of the City of New Orleans, Louisiana domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively EPA United States Environmental Protection Agency EPDC Entergy Power Development Corporation EWG Exempt wholesale generator under PUHCA EWO Entergy Wholesale Operations, which primarily consists of Entergy's global power development business Entergy Entergy Corporation and its various direct and indirect subsidiaries Entergy Arkansas Entergy Arkansas, Inc. Entergy Corporation Entergy Corporation, a Delaware corporation Entergy Gulf States Entergy Gulf States, Inc., including its wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil & Gas, Inc., and Southern Gulf Railway Company Entergy-Koch Entergy-Koch, L.P., a joint venture equally owned by Entergy and Koch Industries, Inc. Entergy London Entergy London Investments plc, formerly Entergy Power UK plc (including its wholly owned subsidiary, London Electricity plc), which was sold by Entergy effective December 4, 1998 Entergy Louisiana Entergy Louisiana, Inc. Entergy Mississippi Entergy Mississippi, Inc. Entergy New Orleans Entergy New Orleans, Inc. Entergy Power Entergy Power, Inc. FERC Federal Energy Regulatory Commission FitzPatrick James A. FitzPatrick nuclear power plant, 825 MW facility located near Oswego, New York, purchased in November 2000, from New York Power Authority by Entergy's domestic non-utility nuclear business FUCO Exempt foreign utility company under PUHCA Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 2000 of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generation Plant GGART Grand Gulf Accelerated Recovery Tariff GWH One million kilowatt-hours Independence Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power
Abbreviation or Acronym Term Indian Point 3 Indian Point 3 nuclear power plant, 980 MW facility located in Westchester County, New York, purchased in November 2000, from New York Power Authority by Entergy's domestic non-utility nuclear business LPSC Louisiana Public Service Commission Merger Agreement Agreement and Plan of Merger dated July 30, 2000 by and between FPL Group, Entergy Corporation, WCB Holding Corporation, Ranger Acquisition Corporation and Ring Acquisition Corporation, which was mutually terminated on April 1, 2001 MPSC Mississippi Public Service Commission MW Megawatt(s) Net revenue Operating revenue net of fuel, fuel-related, and purchased power expenses; other regulatory credits; and amortization of rate deferrals NRC Nuclear Regulatory Commission NYPA New York Power Authority Pilgrim Pilgrim Nuclear Station, 670 MW facility located in Plymouth, Massachusetts purchased in July 1999 from Boston Edison by Entergy's domestic non- utility nuclear business PUCT Public Utility Commission of Texas PUHCA Public Utility Holding Company Act of 1935, as amended River Bend River Bend Steam Electric Generating Station (nuclear) SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards as promulgated by the Financial Accounting Standards Board System Agreement Agreement, effective January 1, 1983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources System Energy System Energy Resources, Inc. Unit Power Sales Agreement Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy's share of Grand Gulf 1 Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant White Bluff White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the increasing competitive pressures facing Entergy and the electric utility industry, as well as market risks and other significant issues affecting Entergy. See "Item 1. Business - BUSINESS OF ENTERGY - Industry Restructuring and Competition" in the Form 10-K for issues concerning the timing and implementation of Entergy's transition to competition, including potential conflicts among Entergy's regulated jurisdictions. Although transition to competition filings have been made in all jurisdictions, proceedings have not yet commenced in all cases. Set forth below are updates to the information contained therein. Business Combination with FPL Group On July 30, 2000, Entergy Corporation and FPL Group, Inc. entered into a Merger Agreement providing for a business combination that would have resulted in the creation of a new company. On April 1, 2001, Entergy Corporation and FPL Group terminated the Merger Agreement by mutual decision. Both companies agreed that no termination fee is payable under the terms of the Merger Agreement, unless within nine months of the termination one party agrees to a substantially similar transaction with another party. Each company will bear its own merger-related expenses. Entergy has filed for withdrawal of its merger-related filings submitted to the FERC, the SEC, and state and local regulatory agencies. Domestic Transition to Competition Federal Regulatory Activity System Agreement Proceedings See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the proposed amendments to the System Agreement filed with FERC by the domestic utility companies. The proposed amendments were designed to facilitate the implementation of retail competition in Arkansas and Texas. As discussed in the Form 10-K, the LPSC and the Council also filed a complaint with FERC seeking revisions to the System Agreement. In June 2001, in connection with these proceedings, the parties filed an offer of settlement with FERC. The offer of settlement provides for the following amendments to the System Agreement: o the Texas retail jurisdictional division of Entergy Gulf States will terminate its participation in the System Agreement, except for the aspects related to transmission equalization, when Texas implements retail open access, which is currently scheduled for January 1, 2002; o five percent of Entergy Gulf States' megawatt capacity allocated to the Texas retail load by the LPSC will be made available to the domestic utility companies remaining under the System Agreement. Each company has until November 15, 2001 to elect to purchase its pro rata share of this capacity. Entergy Arkansas' pro rata share is 27.3%, Entergy Gulf States - Louisiana's pro rata share is 20.2%, Entergy Louisiana's pro rata share is 30.2%, Entergy Mississippi's pro rata share is 15.9%, and Entergy New Orleans' pro rata share is 6.4%. If a company elects to purchase capacity it will be for the period January 1, 2002 through June 30, 2008. If a company elects not to purchase, the other companies are not entitled to purchase that company's share of the capacity; and o the service schedule developed to track changes in energy costs resulting from the Entergy-Gulf States Utilities merger is modified to include one final true-up of fuel costs when the Texas retail jurisdictional division of Entergy Gulf States ceases participation in the System Agreement, after which the service schedule will no longer be applicable for any purpose.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS The proceeding on the complaint filed with FERC in 1995 by the LPSC requesting modification of the System Agreement to exclude curtailable load from the cost allocation determination was not settled. In July 2001, an ALJ issued decisions certifying the offer of settlement to the FERC and generally continuing to include curtailable load served during 1995 in cost allocation determinations. FERC approved the settlement in July 2001. As anticipated by the offer of settlement, the LPSC and the Council commenced a new proceeding at FERC in June 2001. In this proceeding, the LPSC and the Council allege that the rough production cost equalization required by FERC under the System Agreement and the Unit Power Sales Agreement has been disrupted by changed circumstances. The LPSC and the Council have requested that FERC amend the System Agreement or the Unit Power Sales Agreement or both to achieve full production cost equalization or to restore rough production cost equalization. Their complaint does not seek a change in the total amount of the costs allocated under the Unit Power Sales Agreement. Several parties have filed interventions in the proceeding, including the APSC and the MPSC. Entergy filed its response to the complaint in July 2001 denying the allegations of the LPSC and the Council. The APSC and the MPSC also filed responses opposing the relief sought by the LPSC and the Council. In their complaint, the LPSC and Council allege that the domestic utility companies' annual production costs over the period 2002 to 2007 will be over or (under) the average for the domestic utility companies by the following amounts: Entergy Arkansas ($130) to ($278) million Entergy Gulf States - LA $11 to $87 million Entergy Louisiana $139 to $132 million Entergy Mississippi ($27) to $13 million Entergy New Orleans $7 to $46 million This range of results is a function of assumptions regarding such things as future natural gas prices, the future market price of electricity, and other factors. If FERC grants the relief requested, the relief may result in a material increase in production costs allocated to companies whose costs currently are projected to be less than the average and a material decrease in production costs allocated to companies whose costs currently are projected to exceed the average. Management believes that any changes in the allocation of production costs resulting from a FERC decision should result in similar rate changes for retail customers. Therefore, management does not believe that this proceeding will have a material effect on the financial condition of any of the domestic utility companies, although neither the timing nor the outcome of the proceedings at FERC can be predicted at this time. Open Access Transmission and Entergy's Transco Proposal See "Open Access Transmission and Entergy's Transco Proposal" in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of FERC's Order 2000 and Entergy's proposed Transco. In July 2001, FERC issued orders on various proposals for transmission owners in the United States to commit their assets to regional transmission organizations (RTOs). In the orders, FERC indicated that it envisions the establishment of four RTOs in the United States, one in each of the Northeast, Southeast, Midwest, and West. FERC further required utilities within the Northeast and Southeast, including Entergy, to participate in mediation proceedings for the purpose of facilitating the establishment of these two RTOs. In July 2001, the domestic utility companies filed requests with their state and local regulatory commissions to suspend proceedings regarding Transco pending further action in the FERC-mandated mediation proceedings.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS State Regulatory Activity Texas Since the filing of the Form 10-K, several developments have occurred in the Texas retail open access proceedings and in Texas and Louisiana proceedings for the separation of the utility operations of Entergy Gulf States among new corporate and partnership entities. See Note 2 to the financial statements herein for a discussion of these developments. State and Local Rate Regulation The domestic utility companies' retail and wholesale rate matters and other regulatory proceedings are discussed more thoroughly in Note 2 to the financial statements herein and in the Form 10-K. Filings with the APSC In April 2001, Entergy Arkansas filed with the APSC a proposal to recover, costs plus carrying charges associated with power restoration caused by the December 2000 ice storms. In an order issued in June 2001, the APSC decided that it would not give final approval to Entergy's proposed storm cost recovery rider outside of a fully developed cost-of-service study in a general rate proceeding. In a subsequent decision, the APSC ordered Entergy Arkansas to commence such a proceeding by January 2002. The APSC action resulted in the deferral in 2001 of previously expensed storm damage costs as reflected in Entergy Arkansas' financial statements. In July 2001, Entergy Arkansas filed with the APSC its final storm damage cost determination of $195 million associated with power restoration during the December 2000 ice storms. Entergy Arkansas is proposing to recover $170 million, plus carrying charges, over approximately a six and one-half year period. The remainder of the costs is primarily capital expenditures that will be included in rate base in future general rate proceedings. The APSC established a procedural schedule to consider putting an interim rider in place to recover the ice storm costs, subject to refund. The schedule calls for a January 2002 hearing date and the issuance of a decision by February 2002. No assurance can be given as to the timing or outcome of these proceedings before the APSC.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Filings with the Council In June 2001, Entergy New Orleans filed with the Council for changes in gas and electric rates based on a test year ending December 2000. The filing indicated that an increase in both gas and electric rates might be appropriate. Proceedings on Entergy New Orleans' filing have been deferred until June 2002. Continued Application of SFAS 71 and Stranded Cost Exposure See "Continued Application of SFAS 71 and Stranded Cost Exposure" in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the potential effects of discontinuation of SFAS 71 for the generation portion of Entergy's business as well as Entergy's exposure to stranded costs. Resolution of the regulatory proceedings affecting the transition to competition of Entergy Gulf States' Texas generation business will likely require the discontinuance of the application of SFAS 71 accounting treatment to that business, which may occur in the fourth quarter of 2001. The regulatory proceedings are discussed in "Domestic Transition to Competition - State Regulatory and Legislative Activity - Texas" in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K and that discussion is updated in Note 2 to the financial statements herein. Management does not expect a material adverse effect on Entergy's and Entergy Gulf States' results of operations if SFAS 71 accounting treatment for the Texas generation business is discontinued in the fourth quarter of 2001.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flows Operating Activities The following table summarizes net cash flow provided by (used in) operating activities for Entergy, the domestic utility companies, and System Energy: Six Months Ended Six Months Ended Company June 30, 2001 June 30, 2000 (In Millions) Entergy $600.7 $839.8 Entergy Arkansas $160.5 $124.0 Entergy Gulf States $184.9 $138.6 Entergy Louisiana $195.2 $77.2 Entergy Mississippi ($8.4) $18.7 Entergy New Orleans ($1.8) $16.9 System Energy $95.5 $325.1 Entergy's consolidated net cash flow provided by operating activities decreased primarily due to: o a decrease, excluding the effect of money pool activity, of $154 million in cash provided by the domestic utility companies and System Energy; and o net cash used of $35.1 million in operating activities in 2001 by EWO compared with EWO providing $39.7 million of operating cash flow in 2000 due to a net loss generated in 2001 compared with net income in 2000. These decreases in consolidated net operating cash flow were partially offset by an increase in cash provided by the domestic non-utility nuclear business of $47.5 million, primarily from the operation of the FitzPatrick and Indian Point 3 plants, purchased in 2000. Payments for higher fuel costs and for power restoration costs associated with the December 2000 ice storms in Arkansas resulted in the overall decrease in operating cash flow provided by the domestic utility companies and System Energy. These payments were partially funded by borrowings from the money pool and external lines of credit, which are discussed below. Partially offsetting the higher fuel costs and power restoration costs is an increase in fuel cost recovery in 2001, primarily at Entergy Louisiana and Entergy Gulf States. The increase in fuel cost recovery is partially offset by increased fuel cost under-recovery at Entergy Mississippi. Increases in income taxes accrued resulting from book and tax income timing differences also increased operating cash flow in 2001 compared to 2000. Management expects that these timing differences may continue to increase operating cash flow in the immediate future.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Money pool activity also affected the operating cash flows of the domestic utility companies and System Energy. The increases (decreases) in money pool borrowings during 2001 and 2000 are as follows: Six Months Ended Six Months Ended Company June 30, 2001 June 30, 2000 (In Millions) Entergy Arkansas $134.7 ($40.6) Entergy Gulf States $26.6 ($36.1) Entergy Louisiana - ($91.5) Entergy Mississippi - ($50.0) Entergy New Orleans $11.2 ($6.9) For the lenders to the money pool in 2001, Entergy Louisiana's money pool associated company receivables increased $49.1 million and System Energy's money pool associate company receivables increased $101.4 million for the six months ended June 30, 2001. In 2000, System Energy's money pool associate company receivables decreased $176.3 million. System Energy's money pool activity is the primary cause of the decrease in operating cash flow for System Energy for the six months ended June 30, 2001 as compared to the six months ended June 30, 2000. The money pool is an inter-company funding arrangement designed to reduce the domestic utility companies' and System Energy's dependence on external short-term borrowings. The money pool provides a means by which, on a daily basis, the excess funds of Entergy Corporation, the domestic utility companies, and System Energy may be used by the domestic utility companies or System Energy to fulfill short-term cash requirements. See "Capital Resources - Sources of Capital" below for a discussion of the limitations on these borrowings. Investing Activities Net cash used in investing activities increased for the six months ended June 30, 2001 compared to the six months ended June 30, 2000 primarily due to: o capital contributions made in the formation of Entergy-Koch, L.P.; o the maturity of other temporary investments in 2000; o investments used as collateral for letters of credit by the domestic non-utility nuclear business, discussed below in "Uses of Capital - Domestic Non-Utility Nuclear;" and o proceeds from the sale of the Freestone power project in 2000. The following factors partially offset the overall increase in cash used in investing activities: o decreased construction expenditures due to completion of construction of the Saltend and Damhead Creek plants; o decreased payments by EWO for turbines in 2001, discussed below in "Uses of Capital - Entergy Wholesale Operations;" and o decreased under-recovery of deferred fuel costs incurred at certain of the domestic utility companies. Entergy Arkansas, the Texas portion of Entergy Gulf States, and Entergy Mississippi for 2000 only, have treated these costs as regulatory investments because these companies are allowed by their regulatory jurisdictions to recover the accumulated fuel cost regulatory asset over longer than a twelve month period. The companies will earn a return on the under-recovered balances.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Financing Activities Financing activities used cash in 2001 compared with cash provided in 2000 primarily due to: o a higher amount of debt issued by the domestic utility companies in 2000 than in 2001; o no additional borrowings in 2001 under the Saltend and Damhead Creek credit facilities due to the completion of construction of the plants; o decreased borrowings made during 2001 under the Entergy Corporation credit facility compared to borrowings made in 2000; and o increased debt retirements due to repayments on the Saltend and Damhead Creek credit facilities by EWO, partially offset by decreased debt retirements by the domestic utility companies. Partially offsetting the overall increase in cash used in financing activities were the following: o redemption of Entergy Gulf States' preference stock in 2000; o increased common stock issuances; and o decreased repurchases of Entergy Corporation common stock in 2001. Entergy anticipates limited repurchase activity for the remainder of 2001, as it considers various investment opportunities. Capital Resources See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources" in the Form 10-K for a discussion of Entergy's sources of funds and capital requirements. The following are updates to the Form 10-K. Sources of Capital As discussed in the Form 10-K, certain of the domestic utility companies have issued or expect to issue debt in 2001. See Note 4 to the financial statements herein for details regarding long-term debt issued in 2001. Short-term borrowings by the domestic utility companies and System Energy, including borrowings under the money pool, are limited to amounts authorized by the SEC. See Note 4 to the financial statements in the Form 10-K for further discussion of Entergy's short-term borrowing limits. In 2001, Entergy received SEC approval to increase the authorized limits for the following companies, as follows: Company Previous Limit Current Limit Entergy Mississippi $103 million $160 million Entergy New Orleans $ 35 million $100 million Other Entergy subsidiaries $265 million $420 million The approval increased the current SEC authorized short-term borrowing limits for Entergy subsidiaries from $1.343 billion to $1.620 billion. The SEC authorized limits are effective through November 30, 2001. In June 2001, Entergy filed with the SEC to extend the authorization period for the current short-term borrowing limits and the money pool borrowing arrangement.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES The following companies had borrowings outstanding from the money pool at June 30, 2001: Outstanding Company Borrowings Entergy Arkansas $165.4 million Entergy Gulf States $ 26.6 million Entergy Mississippi $ 34.1 million Entergy New Orleans $ 16.9 million Other Entergy subsidiaries $111.5 million Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi each obtained 364-day credit facilities in 2001 as follows: Amount of Amount Drawn as Company Date Obtained Facility of June 30, 2001 Entergy Arkansas January 31, 2001 $63 million - Entergy Louisiana January 31, 2001 $30 million - Entergy Mississippi February 2, 2001 $25 million $10 million Entergy Louisiana decreased its available credit facility to $15 million in May 2001. The facilities have variable interest rates and the average commitment fee is 0.13%. In May 2001, Entergy Corporation amended its 364-day bank credit facility, increasing the capacity from $500 million to $1.275 billion, of which $472 million was drawn as of June 30, 2001. Entergy Corporation will use borrowings from the facility for general corporate purposes and to make additional investments in competitive businesses, including some or all of the purchase price for the Indian Point 2 nuclear unit which Entergy expects to acquire from Consolidated Edison during the third quarter of 2001. In July 2001, the borrowing capacity on the facility was increased to $1.325 billion. Uses of Capital PUHCA Restrictions on Uses of Capital Entergy's ability to invest in domestic and foreign generation businesses is subject to the SEC's regulations under PUHCA. As authorized by the SEC, Entergy is allowed to invest an amount equal to 100% of its average consolidated retained earnings in domestic and foreign generation businesses. As of June 30, 2001, Entergy's investments subject to this rule totaled $832 million constituting 25.4% of its average consolidated retained earnings. See "PUHCA Restrictions on Uses of Capital" in "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K for a discussion of other PUHCA restrictions affecting Entergy, such as its capacity to invest in "energy-related" businesses and its ability to guarantee obligations of its non-utility subsidiaries.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Other Uses of Capital by Entergy Corporation For the six months ended June 30, 2001, Entergy Corporation paid $134.8 million in cash dividends on its common stock and received dividend payments and returns of capital totaling $287.2 million from subsidiaries. Declarations of dividends on Entergy's common stock are made at the discretion of the Board. The Board evaluates the level of Entergy common stock dividends based upon Entergy's earnings, financial strength, and capital requirements. Restrictions on the ability of Entergy's subsidiaries to pay dividends are discussed in Note 8 to the financial statements in the Form 10-K. Domestic Non-Utility Nuclear In connection with the acquisition of the FitzPatrick and Indian Point 3 nuclear power plants, the installment payments due by Entergy to NYPA must be secured by a letter of credit from an eligible financial institution. On November 21, 2000, upon closing the acquisition of the NYPA plants, Entergy delivered a $577 million letter of credit, with NYPA as beneficiary. The letter of credit was backed by cash collateral, and this cash is reflected in the balance sheet at December 31, 2000, as "Special deposits." In January 2001, Entergy replaced $440 million of the cash collateral with an Entergy Corporation guarantee. Most of the cash released by this guarantee was used to fund Entergy's contributions to Entergy-Koch as discussed below under "Joint Ventures." In June 2001, Entergy Corporation obtained new letters of credit totaling $577 million, which replaced the letter of credit initially provided to NYPA. The letters of credit are partially backed by an Entergy Corporation guarantee and partially backed by $272 million of cash collateral. The cash collateral is included in "Other investments" on the balance sheet at June 30, 2001. Entergy Wholesale Operations As part of its turbine acquisition program, an EWO subsidiary (EPDC) sold its rights and obligations under certain turbine acquisition contracts with General Electric Company to a third party in May 2001. The rights to twenty-two turbines were included in the sale. The sale price was approximately $150 million, which corresponded to the amount EPDC had invested in the turbines under construction. The purchaser obtained a revolving financing facility of up to $450 million for the fabrication and acquisition of turbines. EPDC has certain rights to reacquire the turbines from the purchaser, whether pursuant to an interim lease commencing when a turbine is ready for shipment or pursuant to certain purchase rights. The lease payments and purchase price for each turbine have been established pursuant to various agreements between EPDC, the purchaser, and its lenders. If EPDC does not take title to the turbines prior to certain specified dates, the purchaser has certain rights to sell the turbines and EPDC may be held liable for specific defined shortfalls, if any. Certain EPDC obligations under these agreements will be backed by an Entergy Corporation guarantee. In July 2001, EWO signed an agreement to sell the 1,200 MW Saltend power plant to Calpine Corporation for approximately $800 million, which management believes will result in a gain on the sale. The sale is subject to certain conditions and EWO expects to complete the transaction in the third quarter of 2001. A portion of the proceeds from the sale will be used to repay borrowings outstanding under the Saltend project credit facilities and make any payments necessary to terminate the Saltend interest swap agreements. As discussed in the Form 10-K, Entergy plans to spend $3.6 billion in the years 2001 through 2003 in its capital investment plan for the global development business. In many regions of the United States, the spark spread (the difference between the price of electricity and the price of natural gas at certain conversion efficiencies) has declined significantly since earlier this year. EWO is attempting to address this spark spread uncertainty through long-term power sales and tolling agreements. Nevertheless, management can provide no assurance that EWO will be able to obtain long-term agreements for these projects or will be able to operate the projects, if built, profitably.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Entergy-Koch, L.P. In January 2001, subsidiaries of Entergy and Koch Industries, Inc. formed a new limited partnership called Entergy-Koch, L.P. Entergy contributed substantially all of its power marketing and trading business in the United States and the United Kingdom and made other contributions, including equity and loans, totaling $414 million. Koch contributed to the venture its 9,000-mile Koch Gateway Pipeline, gas storage facilities including the Bistineau storage facility near Shreveport, Louisiana, and Koch Energy Trading, which markets and trades electricity, gas, weather derivatives, and other energy-related commodities and services.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Entergy's consolidated earnings applicable to common stock were $238.9 million and $393.1 million for the three and six months ended June 30, 2001, respectively. The changes in earnings applicable to common stock by operating segments for the three and six months ended June 30, 2001, compared to the same periods in 2000, are as follows: Three Months Ended Six Months Ended Operating Segments Increase/(Decrease) Increase/(Decrease) (In Thousands) Domestic Utility and System Energy ($9,887) $26,047 Entergy-Koch/Power Marketing and Trading 38,073 43,102 Domestic Non-Utility Nuclear 21,028 40,953 Entergy Wholesale Operations (EWO) (40,461) (36,450) Other, including parent company (7,039) (16,643) ------ ------- Total $1,714 $57,009 ====== ======= Increases in earnings per average common share: Basic 4% 23% Diluted 2% 21% See Note 6 to the financial statements for additional business segment information. The decreased earnings for the domestic utility and System Energy for the three months ended June 30, 2001 were primarily due to a decrease in unbilled revenues and an increase in interest expenses, partially offset by a decrease in other operation and maintenance expenses, which includes the reversal of Arkansas ice storm costs discussed below. The increased earnings for the domestic utility and System Energy for the six months ended June 30, 2001 were primarily due to: o an increase in net revenues as a result of colder-than-normal weather in the winter of 2001; o higher prices of electricity sold for resale, particularly at Entergy Gulf States; and o a decrease in reserves for potential rate actions at Entergy Louisiana. The increased earnings for the six months ended June 30, 2001 were partially offset by a decrease in unbilled revenues, an increase in interest expense, and a decrease in first quarter 2000 fuel expense from a true-up of the Entergy Arkansas deferred fuel balance.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Prior to 2001, revenues and expenses from the operation of Entergy's power marketing and trading business were consolidated in Entergy's financial statements. On January 31, 2001, Entergy contributed substantially all of its power marketing and trading business to Entergy- Koch. Entergy accounts for its share in the investment under the equity method of accounting. Therefore, in 2001, the Entergy-Koch/Power Marketing and Trading segment includes Entergy's equity in earnings attributable to Entergy-Koch. Certain terms of the partnership arrangement allocate income from various sources, and the taxes on that income, on a disproportionate basis. These disproportionate allocations have been favorable to Entergy in the aggregate in 2001. The increases in earnings at domestic non-utility nuclear in 2001 were primarily due to the ownership of the FitzPatrick and Indian Point 3 plants, which Entergy purchased in November 2000. The decreases in earnings at EWO for the three and six months ended June 30, 2001, were primarily due to: o more liquidated damages received as compensation for lost operating margin due to plant construction delays from the Saltend contractor in 2000 than from the Damhead Creek contractor in 2001; o a decrease in gains on sales of power plants recognized in 2001; o an increase in depreciation expense due to commercial operation of the Saltend and Damhead Creek plants; and o an increase in interest expense. Entergy's share repurchase program also contributed to the increases in earnings per share by decreasing the weighted average number of shares outstanding. Entergy's income before taxes is discussed according to the operating segments listed above. "Competitive businesses" operating revenues in the statements of income include primarily revenues generated by domestic non- utility nuclear, EWO, and, for 2000 only, power marketing and trading. Domestic Utility and System Energy The changes in electric operating revenues for Entergy's domestic utility companies for the three and six months ended June 30, 2001 compared to the same periods in 2000 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes ($0.4) $0.9 Rate riders (1.9) 1.4 Fuel cost recovery 367.1 817.4 Sales volume/weather (9.8) 42.9 Other revenue (including unbilled) (30.4) (57.5) Sales for resale 1.5 40.7 ------ ------ Total $326.1 $845.8 ====== ======
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery The domestic utility companies are allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy's financial statements such that these costs do not have a material net effect on earnings. The increases in fuel cost recovery revenue in 2001 were primarily due to: o increased fuel recovery factors at Entergy Arkansas, Entergy Gulf States in the Texas jurisdiction, and Entergy Mississippi; and o higher fuel and purchased power costs recovered through fuel mechanisms at Entergy Gulf States in the Louisiana jurisdiction, Entergy Louisiana, and Entergy New Orleans due to the increased market prices of natural gas and purchased power. Corresponding to fuel cost recovery revenue increases for the three and six months ended June 30, 2001, fuel and purchased power expenses related to electric sales increased approximately $371.7 million and $810.6 million, respectively, primarily due to: o an increase in the market prices of purchased power and natural gas; and o a decrease in first quarter 2000 fuel expense resulting from a true-up of the Entergy Arkansas deferred fuel balance. Other effects on electric operating revenue Electric sales vary seasonally in response to weather and usually peak in the summer. The effect of colder-than-normal winter weather conditions caused an increase in electric sales in 2001. For the six months ended June 30, 2001, electricity sales volume in the domestic utility companies' service territories increased 649 GWH due to the impact of weather conditions. The number of customers in the domestic utility companies' service territories increased only slightly during these periods. Unbilled revenues decreased for the three and six months ended June 30, 2001, as a result of decreased fuel prices and less favorable sales volume in the period included in the unbilled revenue calculation compared to the calculation in the prior year. Sales for resale increased for the six months ended June 30, 2001 due to higher prices of resale electricity. Gas operating revenues Natural gas revenues increased $66.6 million for the six months ended June 30, 2001, primarily due to increased market prices for natural gas and additional sales volume due to the colder-than-normal winter. The increase in gas revenues was largely offset by an increase of approximately $61.1 million in gas purchased for resale for the same period.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other impacts on results Results for the three and six months ended June 30, 2001 for the domestic utility companies and System Energy were also affected by the following: o decreases in other operation and maintenance expenses of $48.4 million for the three months ended and $47.0 million for the six months ended; o a net decrease in regulatory credits due to increased charges at System Energy as a result of the GGART at Entergy Arkansas and Entergy Mississippi and an accrual of excess earnings in 2001 in the transition cost account at Entergy Arkansas; and o increases in interest expenses of $9.7 million for the three months ended and $20.8 million for the six months ended. Results for the six months ended June 30, 2001 were also affected by the following: o an increase of $14.6 million in other taxes, primarily from increased franchise taxes; and o an increase of $17.1 million in interest income, primarily from carrying charges on deferred fuel costs. The decreases in other operation and maintenance expenses for the three and six months ended June 30, 2001 compared to the same periods in 2000 were primarily due to: o a decrease in property insurance expense primarily due to a reversal, upon recommendation from the APSC, of $24.5 million of ice storm costs previously charged to expense in December 2000 (these costs are now reflected as regulatory assets); o a decrease in plant maintenance expenses of $14.7 million for both the three and six months ended June 30, 2001; and o decreases in injury and damages claims and vegetation maintenance spending. The increases in interest expenses were primarily due to: o debt issued at Entergy Gulf States in June 2000; and o borrowings under credit facilities during 2001, primarily at Entergy Arkansas and Entergy Louisiana. Entergy-Koch/Power Marketing and Trading As previously discussed, substantially all of Entergy's power marketing and trading business was contributed to Entergy-Koch in 2001, and earnings from this joint venture are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. As a result, for the three and six months ended June 30, 2001, this segment experienced decreased revenues of $346.6 million and $674.4 million, respectively, and decreased purchased power expenses of $323 million and $620 million, respectively. The negative impact on earnings for these periods from these decreases, however, was more than offset by the equity in earnings from Entergy's interest in the joint venture. The earnings for this segment increased in 2001 due to increased electricity and gas trading volumes and due to a broader range of commodity sources and options provided to customers by the joint venture in 2001. Certain terms of the partnership arrangement allocate income from various sources, and the taxes on that income, on a disproportionate basis. These disproportionate allocations have been favorable to Entergy in the aggregate in 2001.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Domestic Non-Utility Nuclear Increases in earnings for the domestic non-utility nuclear business were primarily due to revenue increases of $87.9 million and $206.5 million for the three and six months ended June 30, 2001, respectively, primarily due to the operation of the FitzPatrick and Indian Point 3 plants, purchased in November 2000. The following also impacted earnings for domestic non-utility nuclear for the three and six months ended June 30, 2001, all of which were primarily caused by the acquisition of FitzPatrick and Indian Point 3: o other operation and maintenance expenses increased $28.6 million and $84.4 million, respectively; o interest expense, primarily related to debt issued to purchase the FitzPatrick and Indian Point 3 plants, increased $13.3 million and $30.7 million, respectively; o fuel expenses increased $8.6 million and $20 million, respectively; and o interest income increased $6.6 million and $16.9 million, respectively. For the six months ended June 30, 2001, earnings were also impacted by increased taxes other than income taxes of $11.8 million. Entergy Wholesale Operations For the three and six months ended June 30, 2001, operating revenues for EWO increased $280.5 million and $730.8 million, respectively. The increases were primarily due to increases of $160 million and $368 million, respectively, from EWO's interest in Highland Energy and increases of $116 million and $222 million, respectively, from the Saltend and Damhead Creek plants. Highland Energy was acquired in June 2000 and the Saltend and Damhead Creek plants began commercial operation in late November 2000 and early 2001, respectively. For the three and six months ended June 30, 2001, the impact on earnings from the increased revenues is partially offset by increases in fuel and purchased power expenses of $235.7 million and $635.9 million, respectively, and increases in other operation and maintenance expenses of $23.4 million and $60.2 million, respectively. The decreases in earnings for the three and six months ended June 30, 2001, were primarily due to the following: o liquidated damages of $32.9 million ($23.0 million net of tax) received in 2000 from the Saltend contractor as compensation for lost operating margin from the plant due to construction delays; o a $20.5 million ($13.3 million net of tax) gain on the sale of the Freestone project located in Fairfield, Texas, in June 2000; and o increased depreciation expense in 2001 due to the commencement of the commercial operation of the Saltend and Damhead Creek plants. Increases in interest expense of $19.1 million for the three months ended June 30, 2001 and $37.7 million for the six months ended June 30, 2001 also decreased earnings, primarily because the interest related to the Saltend and Damhead Creek plants was capitalized until those plants commenced commercial operation. Partially offsetting the overall decrease were the following in 2001: o liquidated damages of $13.9 million ($9.7 million net of tax) received from the Damhead Creek construction contractor as compensation for lost operating margin from the plant due to construction delays; and o an $11 million ($7.2 million net of tax) gain on the sale of a permitted site in Desoto County, Florida, in May 2001.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS In July 2001, EWO signed an agreement to sell the Saltend power plant for approximately $800 million, which management expects to result in a gain on the sale of the plant. The sale, subject to certain conditions, is anticipated to close during the third quarter of 2001. The sale will reduce the impact on operating results of lower power prices in the United Kingdom. Other Earnings for Other decreased primarily due to $21.8 million ($13.4 million net of tax) of merger-related expenses incurred by Entergy Corporation in the first quarter of 2001 and decreased interest income of $8 million and $11.2 million for the three and six months ended June 30, 2001, respectively. Income taxes The effective income tax rates for the three months ended June 30, 2001 and 2000 were 40.3% and 37.9%, respectively. The effective income tax rates for the six months ended June 30, 2001 and 2000 were 40.3% and 39.6%, respectively.
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Six Months Ended 2001 2000 2001 2000 (In Thousands, Except Share Data) <S> <C> <C> <C> <C> OPERATING REVENUES Domestic electric $1,990,838 $1,664,688 $3,863,383 $3,017,570 Natural gas 30,548 28,396 140,931 74,292 Competitive businesses 473,890 444,704 1,143,388 857,418 ---------- ---------- ---------- ---------- TOTAL 2,495,276 2,137,788 5,147,702 3,949,280 ---------- ---------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 1,025,619 464,436 2,151,481 962,190 Purchased power 245,895 502,521 609,774 872,064 Nuclear refueling outage expenses 23,077 16,629 40,283 35,186 Other operation and maintenance 448,610 450,223 919,069 827,634 Decommissioning 8,903 6,169 17,804 17,106 Taxes other than income taxes 89,662 83,540 192,125 163,158 Depreciation and amortization 183,372 178,749 386,448 357,025 Other regulatory charges (credits) - net 8,389 (5,900) 3,546 (20,506) Amortization of rate deferrals 4,699 7,883 9,153 15,279 ---------- ---------- ---------- ---------- TOTAL 2,038,226 1,704,250 4,329,683 3,229,136 ---------- ---------- ---------- ---------- OPERATING INCOME 457,050 433,538 818,019 720,144 ---------- ---------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 6,644 8,041 11,587 15,735 Gain on sale of assets - net 11,759 21,057 12,348 21,574 Equity in earnings of unconsolidated equity affiliates 70,780 - 95,543 - Miscellaneous - net 46,527 73,651 102,220 102,633 ---------- ---------- ---------- ---------- TOTAL 135,710 102,749 221,698 139,942 ---------- ---------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 130,732 118,462 259,703 232,121 Other interest - net 51,386 23,369 99,300 43,652 Distributions on preferred securities of subsidiary 4,709 4,709 9,419 9,419 Allowance for borrowed funds used during construction (5,492) (5,889) (9,431) (11,977) ---------- ---------- ---------- ---------- TOTAL 181,335 140,651 358,991 273,215 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 411,425 395,636 680,726 586,871 Income taxes 165,842 149,863 274,272 232,688 ---------- ---------- ---------- ---------- CONSOLIDATED NET INCOME 245,583 245,773 406,454 354,183 Preferred dividend requirements and other 6,677 8,581 13,393 18,131 ---------- ---------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $238,906 $237,192 $393,061 $336,052 ========== ========== ========== ========== Earnings per average common share: Basic $1.08 $1.04 $1.78 $1.45 Diluted $1.06 $1.04 $1.75 $1.45 Dividends declared per common share $0.32 $0.30 $0.63 $0.60 Average number of common shares outstanding: Basic 221,113,598 228,097,385 220,518,674 232,352,915 Diluted 225,706,421 228,152,627 224,749,374 232,382,112 See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES <S> <C> <C> Consolidated net income $406,454 $354,183 Noncash items included in net income: Amortization of rate deferrals 9,153 15,279 Reserve for regulatory adjustments 50,533 37,113 Other regulatory charges (credits) - net 3,546 (20,506) Depreciation, amortization, and decommissioning 404,252 374,131 Deferred income taxes and investment tax credits (6,673) (25,070) Allowance for equity funds used during construction (11,587) (15,735) Gain on sale of assets - net (12,348) (21,574) Equity in earnings of unconsolidated equity affiliates (95,543) - Changes in working capital: Receivables 55,382 (219,406) Fuel inventory (19,701) (28,416) Accounts payable (433,769) 185,462 Taxes accrued 230,308 131,612 Interest accrued (2,697) 26,391 Deferred fuel 217,152 (52,215) Other working capital accounts (115,947) 59,295 Provision for estimated losses and reserves (10,890) (28,396) Changes in other regulatory assets (139,361) (32,028) Other 72,435 99,715 --------- --------- Net cash flow provided by operating activities 600,699 839,835 --------- --------- INVESTING ACTIVITIES Construction/capital expenditures (583,782) (822,584) Allowance for equity funds used during construction 11,587 15,735 Nuclear fuel purchases (97,126) (73,533) Proceeds from sale/leaseback of nuclear fuel 60,632 43,758 Proceeds from sale of businesses 14,000 61,519 Changes in other nonregulated/nonutility properties - net 17,515 (98,493) Increase in other investments (621,801) - Proceeds from other temporary investments - 298,251 Decommissioning trust contributions and realized change in trust assets (38,842) (26,732) Other regulatory investments (56,722) (101,999) Other 43,447 5,624 --------- --------- Net cash flow used in investing activities (1,251,092) (698,454) --------- --------- See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) FINANCING ACTIVITIES <S> <C> <C> Proceeds from the issuance of: Long-term debt 90,382 925,889 Common stock 59,304 9,385 Retirement of long-term debt (126,156) (103,970) Repurchase of common stock (7,813) (392,591) Redemption of preferred and preference stock (4,574) (152,493) Changes in short-term borrowings - net 95,000 315,000 Other 9,133 - Dividends paid: Common stock (134,760) (139,585) Preferred stock (11,214) (16,715) --------- ---------- Net cash flow provided by (used in) financing activities (30,698) 444,920 --------- ---------- Effect of exchange rates on cash and cash equivalents (2,638) (2,946) --------- ---------- Net increase (decrease) in cash and cash equivalents (683,729) 583,355 Cash and cash equivalents at beginning of period 1,382,424 1,213,719 --------- ---------- Cash and cash equivalents at end of period $698,695 $1,797,074 ========= ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $351,033 $224,697 Income taxes $6,038 $94,478 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($8,862) $7,379 Net assets contributed to Entergy-Koch $80,145 - See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS <S> <C> <C> Cash and cash equivalents: Cash $186,365 $157,550 Temporary cash investments - at cost, which approximates market 501,583 640,038 Special deposits 10,747 584,836 ----------- ----------- Total cash and cash equivalents 698,695 1,382,424 ----------- ----------- Notes receivable 832 3,608 Accounts receivable: Customer 498,308 497,821 Allowance for doubtful accounts (11,389) (9,947) Other 186,029 395,518 Accrued unbilled revenues 445,154 415,409 ----------- ----------- Total receivables 1,118,102 1,298,801 ----------- ----------- Deferred fuel costs 450,040 568,331 Fuel inventory - at average cost 113,430 93,679 Materials and supplies - at average cost 434,126 425,357 Rate deferrals 7,430 16,581 Deferred nuclear refueling outage costs 119,119 46,544 Prepayments and other 124,922 122,690 ----------- ----------- TOTAL 3,066,696 3,958,015 ----------- ----------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 573,647 214 Decommissioning trust funds 1,346,003 1,315,857 Non-utility property - at cost (less accumulated depreciation) 288,522 262,952 Non-regulated investments 146,707 189,154 Other - at cost (less accumulated depreciation) 330,476 27,036 ----------- ----------- TOTAL 2,685,355 1,795,213 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Electric 25,498,989 25,137,562 Plant acquisition adjustment 382,532 390,664 Property under capital lease 838,899 831,822 Natural gas 194,769 190,989 Construction work in progress 910,677 936,785 Nuclear fuel under capital lease 260,660 277,673 Nuclear fuel 190,065 157,603 ----------- ----------- TOTAL PROPERTY, PLANT AND EQUIPMENT 28,276,591 27,923,098 Less - accumulated depreciation and amortization 11,725,598 11,477,352 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT - NET 16,550,993 16,445,746 ----------- ----------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 970,223 980,266 Unamortized loss on reacquired debt 175,060 183,627 Deferred fuel costs 53,522 95,661 Other regulatory assets 941,917 792,515 Long-term receivables 32,316 29,575 Other 890,760 1,171,278 ----------- ----------- TOTAL 3,063,798 3,252,922 ----------- ----------- TOTAL ASSETS $25,366,842 $25,451,896 =========== =========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES <S> <C> <C> Currently maturing long-term debt $828,322 $464,215 Notes payable 485,519 388,023 Accounts payable 641,371 1,204,227 Customer deposits 181,717 172,169 Taxes accrued 694,974 451,811 Accumulated deferred income taxes 168,853 225,649 Nuclear refueling outage costs 16,276 10,209 Interest accrued 173,189 172,033 Obligations under capital leases 155,803 156,907 Other 208,525 192,908 ----------- ----------- TOTAL 3,554,549 3,438,151 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 3,307,492 3,249,083 Accumulated deferred investment tax credits 482,702 494,315 Obligations under capital leases 177,737 201,873 FERC settlement - refund obligation 27,134 30,745 Other regulatory liabilities 146,765 104,841 Decommissioning 772,888 749,708 Transition to competition 212,576 191,934 Regulatory reserves 447,322 396,789 Accumulated provisions 337,581 390,116 Other 699,342 853,137 ----------- ----------- TOTAL 6,611,539 6,662,541 ----------- ----------- Long-term debt 7,305,513 7,732,093 Preferred stock with sinking fund 61,185 65,758 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated deferrable debentures 215,000 215,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 334,687 334,688 Common stock, $.01 par value, authorized 500,000,000 shares; issued 248,174,087 shares in 2001 and 248,094,614 shares in 2000 2,482 2,481 Paid-in capital 4,661,334 4,660,483 Retained earnings 3,445,141 3,190,639 Accumulated other comprehensive loss (100,433) (75,033) Less - treasury stock, at cost (26,496,354 shares in 2001 and 28,490,031 shares in 2000) 724,155 774,905 ----------- ----------- TOTAL 7,619,056 7,338,353 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,366,842 $25,451,896 =========== =========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended 2001 2000 (In Thousands) RETAINED EARNINGS <S> <C> <C> <C> <C> Retained Earnings - Beginning of period $3,275,548 $2,814,499 Add - Earnings applicable to common stock 238,906 $238,906 237,192 $237,192 Deduct: Dividends declared on common stock 69,679 68,393 Capital stock and other expenses (366) 803 ---------- ---------- Total 69,313 69,196 ---------- ---------- Retained Earnings - End of period $3,445,141 $2,982,495 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($117,968) ($79,447) Net derivative instrument fair value changes arising during the period 20,645 20,645 - - Foreign currency translation adjustments (1,608) (1,608) (322) (322) Net unrealized investment gains (losses) (1,502) (1,502) 3,683 3,683 ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (21,868) - Other accumulated comprehensive income (loss) items (78,565) (76,086) ---------- ---------- Total ($100,433) -------- ($76,086) -------- Comprehensive Income ========== $256,441 ========== $240,553 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,663,923 $4,636,474 Add: Common stock issuances related to stock plans (2,589) (67) ---------- ---------- Paid-in Capital - End of period $4,661,334 $4,636,407 ========== ========== Six Months Ended 2001 2000 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $3,190,639 $2,786,467 Add - Earnings applicable to common stock 393,061 $393,061 336,052 $336,052 Deduct: Dividends declared on common stock 138,925 140,051 Capital stock and other expenses (366) (27) ---------- ---------- Total 138,559 140,024 ---------- ---------- Retained Earnings - End of period $3,445,141 $2,982,495 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($75,033) ($73,805) Cumulative effect to January 1, 2001 of accounting change regarding fair value of derivative instruments (29,067) - - - Net derivative instrument fair value changes arising during the period 7,199 7,199 - - Foreign currency translation adjustments (3,635) (3,635) (1,029) (1,029) Net unrealized investment gains (losses) 103 103 (1,252) (1,252) ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (21,868) - Other accumulated comprehensive income (loss) items (78,565) (76,086) ---------- ---------- Total ($100,433) -------- ($76,086) -------- Comprehensive Income ========== $396,728 ========== $333,771 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,660,483 $4,636,163 Add: Common stock issuances related to stock plans 851 244 ---------- ---------- Paid-in Capital - End of period $4,661,334 $4,636,407 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 617.2 $ 524.9 $ 92.3 18 Commercial 481.4 387.7 93.7 24 Industrial 652.9 497.1 155.8 31 Governmental 53.7 41.3 12.4 30 --------- --------- ------- Total retail 1,805.2 1,451.0 354.2 24 Sales for resale 94.4 92.9 1.5 2 Other 91.2 120.8 (29.6) (25) --------- --------- ------- Total $ 1,990.8 $ 1,664.7 $ 326.1 20 ========= ========= ======= Billed Electric Energy Sales (GWH): Residential 6,733 6,857 (124) (2) Commercial 5,908 5,880 28 - Industrial 10,710 11,021 (311) (3) Governmental 630 635 (5) (1) --------- --------- ------- Total retail 23,981 24,393 (412) (2) Sales for resale 2,182 2,523 (341) (14) --------- --------- ------- Total 26,163 26,916 (753) (3) ========= ========= ======= Six Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 1,252.2 $ 993.1 $ 259.1 26 Commercial 932.9 734.6 198.3 27 Industrial 1,306.5 950.5 356.0 37 Governmental 107.2 80.1 27.1 34 --------- --------- ------- Total retail 3,598.8 2,758.3 840.5 30 Sales for resale 216.8 176.1 40.7 23 Other 47.8 83.2 (35.4) (43) --------- --------- ------- Total $ 3,863.4 $ 3,017.6 $ 845.8 28 ========= ========= ======= Billed Electric Energy Sales (GWH): Residential 14,269 13,369 900 7 Commercial 11,482 11,160 322 3 Industrial 21,022 21,638 (616) (3) Governmental 1,245 1,222 23 2 --------- --------- ------- Total retail 48,018 47,389 629 1 Sales for resale 4,631 4,795 (164) (3) --------- --------- ------- Total 52,649 52,184 465 1 ========= ========= =======
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended June 30, 2001 compared to the three months ended June 30, 2000 primarily due to decreased other operation and maintenance expenses, which includes the reversal of Arkansas ice storm costs discussed below. The decrease was partially offset by increased other regulatory charges and increased interest charges. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes ($1.3) ($10.6) Rate riders 1.0 4.3 Fuel cost recovery 22.9 42.4 Sales volume/weather 6.4 26.3 Other revenue (including unbilled) 0.9 (8.1) Sales for resale (24.6) (2.1) ----- ----- Total $5.3 $52.2 ===== ===== Base rate changes Base rate changes decreased revenues for the six months ended June 30, 2001 primarily due to the effect of block rates for residential customers and lower prices for industrial and commercial customers. The decrease in rates is offset by increased revenues from favorable volume and weather from those customers as discussed below. Fuel cost recovery Entergy Arkansas is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Arkansas' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenue increased for the three months ended June 30, 2001 primarily due to an increase in the energy cost rate, which became effective in April 2001. The increase in the energy cost rate allows Entergy Arkansas to recover previously under-recovered fuel expenses. Fuel cost recovery revenue increased for the six months ended June 30, 2001 primarily due to increases in the energy cost rate, which became effective in April 2000 and April 2001.
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales volume/weather Electric sales volume increased revenues for the three and six months ended June 30, 2001 due to increased usage of 96 GWH and 190 GWH, respectively, in the residential and commercial sectors. Electric sales vary seasonally in response to weather and usually peak in the summer. Favorable weather also increased electric sales for the six months ended June 30, 2001. The effect of colder-than-normal winter weather in the first quarter of 2001 contributed 322 GWH to the increase in electric sales volume in the residential and commercial sectors for the six months ended June 30, 2001. Other revenue (including unbilled) Unbilled revenue decreased for the six months ended June 30, 2001 primarily due to the effect of less favorable weather on the period included in the June 2001 unbilled revenue calculation compared to the calculation in the prior year. Sales for resale Sales for resale decreased for the three months ended June 30, 2001 primarily due to a decrease in sales volume to affiliated companies as a result of decreased generation, coupled with a decrease in the average market price of energy. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the six months ended June 30, 2001 primarily due to: o increased market prices of natural gas and purchased power; and o the effect on 2000 expenses of a $23.5 million true-up of the deferred fuel balance made in the first quarter of 2000 as a result of the energy cost recovery filing. Other operation and maintenance Other operation and maintenance expenses decreased for the three months ended June 30, 2001 primarily due to: o a decrease in property insurance expense of $24.5 million due to a reversal, upon recommendation from the APSC, of ice storm costs previously charged to expense in December 2000 (these costs are now reflected as regulatory assets on Entergy Arkansas' balance sheet); and o a decrease in overhead line maintenance expense of $4.8 million due to decreased vegetation maintenance spending. Other operation and maintenance expenses decreased for the six months ended June 30, 2001 primarily due to: o a decrease in property insurance expense of $24.5 million due to a reversal, upon recommendation from the APSC, of ice storm costs previously charged to expense in December 2000 (these costs are now reflected as regulatory assets on Entergy Arkansas' balance sheet); o a decrease in overhead line maintenance expense of $6.1 million due to decreased vegetation maintenance spending; and o a decrease in nuclear operation expense of $4.8 million primarily due to decreased industry support and operation spending, staff reduction, and a refueling outage at ANO 1 in March and April 2001.
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other regulatory charges (credits) Other regulatory charges increased for the three and six months ended June 30, 2001 primarily due to a transition cost account accrual of $10.9 million to reflect 2000 excess earnings. The accrual resulted partially from the APSC's recommendation (discussed above) that ice storm costs charged to expense in 2000 should be reversed, which caused an increase in the final determination of excess earnings for 2000. Other regulatory credits also decreased for the six months ended June 30, 2001 due to an increase in the Grand Gulf 1 rider, which allows for increased recovery of Grand Gulf 1 costs effective January 2001. Other Other income Other income decreased for the three and six months ended June 30, 2001 primarily due to a decrease in the allowance for equity funds used during construction due to a lower construction work in progress balance during 2001 compared to the same period in 2000. The construction balance was lower because the ANO 2 replacement steam generators were placed in service in late 2000. The decrease was partially offset by increased interest income recorded on the deferred fuel balance. Interest and other charges Interest and other charges increased for the three and six months ended June 30, 2001 due to: o interest expense on intercompany money pool borrowings; o interest expense on a $63 million credit facility obtained in January 2001; and o an unfavorable decrease in the allowance for borrowed funds used during construction because of the lower construction work in progress balance during 2001. Income taxes The effective income tax rates for the three months ended June 30, 2001 and 2000 were 40.8% and 38.5%, respectively. The effective income tax rates for the six months ended June 30, 2001 and 2000 were 41.3% and 39.6%, respectively. The increases in the effective tax rates were due to decreased tax benefits from the allowance for equity funds used during construction as well as decreased flow-through and permanent tax benefits. The increases were partially offset by increased depreciation tax benefits.
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Six Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES <S> <C> <C> <C> <C> Domestic electric $453,108 $447,823 $846,907 $794,700 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 107,414 102,179 178,162 149,856 Purchased power 120,412 120,163 244,510 218,960 Nuclear refueling outage expenses 7,716 6,439 14,537 12,878 Other operation and maintenance 65,279 99,583 136,824 175,508 Decommissioning - (2,741) (3) (713) Taxes other than income taxes 8,664 8,979 17,428 17,695 Depreciation and amortization 39,388 41,695 86,023 82,996 Other regulatory charges (credits) - net 117 (11,405) (6,339) (22,170) -------- -------- -------- -------- TOTAL 348,990 364,892 671,142 635,010 -------- -------- -------- -------- OPERATING INCOME 104,118 82,931 175,765 159,690 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 1,548 3,842 2,639 7,420 Miscellaneous - net 976 695 4,783 2,239 -------- -------- -------- -------- TOTAL 2,524 4,537 7,422 9,659 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 21,868 23,229 44,304 44,134 Other interest - net 5,115 2,111 8,505 4,408 Distributions on preferred securities of subsidiary 1,275 1,275 2,550 2,550 Allowance for borrowed funds used during construction (1,004) (2,512) (1,715) (4,816) -------- -------- -------- -------- TOTAL 27,254 24,103 53,644 46,276 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 79,388 63,365 129,543 123,073 Income taxes 32,350 24,387 53,527 48,781 -------- -------- -------- -------- NET INCOME 47,038 38,978 76,016 74,292 Preferred dividend requirements and other 1,944 1,944 3,888 3,888 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $45,094 $37,034 $72,128 $70,404 ======== ======== ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES <S> <C> <C> Net income $76,016 $74,292 Noncash items included in net income: Other regulatory credits - net (6,339) (22,170) Depreciation, amortization, and decommissioning 86,020 82,283 Deferred income taxes and investment tax credits 9,611 (7,228) Allowance for equity funds used during construction (2,639) (7,420) Changes in working capital: Receivables 11,851 (51,535) Fuel inventory 6,417 (122) Accounts payable (45,335) (46,445) Taxes accrued 41,001 47,006 Interest accrued (503) 5,535 Deferred fuel costs 38,828 15,754 Other working capital accounts (310) 21,053 Provision for estimated losses and reserves (4,009) (2,577) Changes in other regulatory assets (108,297) (17,793) Changes in other deferred credits 29,225 19 Other 28,913 33,356 -------- -------- Net cash flow provided by operating activities 160,450 124,008 -------- -------- INVESTING ACTIVITIES Construction expenditures (117,970) (156,875) Allowance for equity funds used during construction 2,639 7,420 Nuclear fuel purchases (19,103) (148) Proceeds from sale/leaseback of nuclear fuel 19,103 148 Decommissioning trust contributions and realized change in trust assets (4,379) (5,670) Other regulatory investments (16,796) (14,313) -------- -------- Net cash flow used in investing activities (136,506) (169,438) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 99,487 Dividends paid: Common stock (11,500) (5,600) Preferred stock (1,944) (1,859) -------- -------- Net cash flow provided by (used in) financing activities (13,444) 92,028 -------- -------- Net increase in cash and cash equivalents 10,500 46,598 Cash and cash equivalents at beginning of period 7,838 6,862 -------- -------- Cash and cash equivalents at end of period $18,338 $53,460 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $53,353 $43,037 Income taxes ($3) ($883) Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($3,877) $4,506 See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. BALANCE SHEETS ASSETS June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS <S> <C> <C> Cash and cash equivalents $18,338 $7,838 Accounts receivable: Customer 90,037 98,550 Allowance for doubtful accounts (1,667) (1,667) Associated companies 22,248 22,286 Other 11,052 26,221 Accrued unbilled revenues 77,756 65,887 ---------- ---------- Total accounts receivable 199,426 211,277 ---------- ---------- Deferred fuel costs 80,938 102,970 Fuel inventory - at average cost 3,392 9,809 Materials and supplies - at average cost 76,050 80,682 Deferred nuclear refueling outage costs 28,446 23,541 Prepayments and other 11,901 5,540 ---------- ---------- TOTAL 418,491 441,657 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 11,217 11,217 Decommissioning trust funds 356,354 355,852 Non-utility property - at cost (less accumulated depreciation) 1,467 1,469 Other - at cost (less accumulated depreciation) 2,975 3,032 ---------- ---------- TOTAL 372,013 371,570 ---------- ---------- UTILITY PLANT Electric 5,300,698 5,274,066 Property under capital lease 39,184 40,289 Construction work in progress 146,500 87,389 Nuclear fuel under capital lease 91,008 107,023 Nuclear fuel 10,118 6,720 ---------- ---------- TOTAL UTILITY PLANT 5,587,508 5,515,487 Less - accumulated depreciation and amortization 2,586,180 2,534,463 ---------- ---------- UTILITY PLANT - NET 3,001,328 2,981,024 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 168,713 162,952 Unamortized loss on reacquired debt 42,597 44,428 Other regulatory assets 324,341 221,805 Other 9,823 4,775 ---------- ---------- TOTAL 545,474 433,960 ---------- ---------- TOTAL ASSETS $4,337,306 $4,228,211 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES <S> <C> <C> Currently maturing long-term debt $85,000 $100 Notes payable 667 667 Accounts payable: Associated companies 212,877 94,776 Other 67,877 231,313 Customer deposits 34,643 29,775 Taxes accrued 81,264 40,263 Accumulated deferred income taxes 43,040 55,127 Interest accrued 27,121 27,624 Obligations under capital leases 46,091 45,962 Other 25,214 14,942 ---------- ---------- TOTAL 623,794 540,549 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 748,179 715,891 Accumulated deferred investment tax credits 85,751 88,264 Obligations under capital leases 84,101 101,350 Transition to competition 133,478 119,553 Accumulated provisions 38,384 42,393 Other 93,492 64,267 ---------- ---------- TOTAL 1,183,385 1,131,718 ---------- ---------- Long-term debt 1,158,866 1,239,712 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 60,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 116,350 116,350 Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2001 and 2000 470 470 Paid-in capital 591,127 591,127 Retained earnings 603,314 548,285 ---------- ---------- TOTAL 1,311,261 1,256,232 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,337,306 $4,228,211 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 124.3 $ 112.4 $ 11.9 11 Commercial 81.0 72.3 8.7 12 Industrial 91.8 83.9 7.9 9 Governmental 4.2 3.7 0.5 14 ------- ------- ------ Total retail 301.3 272.3 29.0 11 Sales for resale Associated companies 70.1 93.4 (23.3) (25) Non-associated companies 47.8 49.1 (1.3) (3) Other 33.9 33.0 0.9 3 ------- ------- ------ Total $ 453.1 $ 447.8 $ 5.3 1 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 1,383 1,302 81 6 Commercial 1,213 1,161 52 4 Industrial 1,687 1,714 (27) (2) Governmental 60 58 2 3 ------- ------- ------ Total retail 4,343 4,235 108 3 Sales for resale Associated companies 1,953 2,584 (631) (24) Non-associated companies 1,296 1,341 (45) (3) ------- ------- ------ Total 7,592 8,160 (568) (7) ======= ======= ====== Six Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 264.3 $ 230.1 $ 34.2 15 Commercial 149.5 134.5 15.0 11 Industrial 170.0 157.5 12.5 8 Governmental 7.7 7.0 0.7 10 ------- ------- ------ Total retail 591.5 529.1 62.4 12 Sales for resale Associated companies 119.7 138.5 (18.8) (14) Non-associated companies 107.6 90.9 16.7 18 Other 28.1 36.2 (8.1) (22) ------- ------- ------ Total $ 846.9 $ 794.7 $ 52.2 7 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 3,237 2,852 385 13 Commercial 2,363 2,237 126 6 Industrial 3,347 3,366 (19) (1) Governmental 117 112 5 4 ------- ------- ------ Total retail 9,064 8,567 497 6 Sales for resale Associated companies 3,080 4,265 (1,185) (28) Non-associated companies 2,627 2,491 136 5 ------- ------- ------ Total 14,771 15,323 (552) (4) ======= ======= ======
ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended June 30, 2001 compared to the three months ended June 30, 2000 primarily due to decreased unbilled revenue, increased other operation and maintenance expenses, and increased interest expense, partially offset by increases in sales for resale and interest income. Net income increased for the six months ended June 30, 2001 compared to the six months ended June 30, 2000 primarily due to increases in net revenue and interest income, partially offset by increased interest expense. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes $0.8 ($0.9) Fuel cost recovery 149.4 320.6 Sales volume/weather (3.8) 11.6 Other revenue (including unbilled) (19.0) (12.4) Sales for resale 14.1 50.7 ------ ------ Total $141.5 $369.6 ====== ====== Fuel cost recovery Entergy Gulf States is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Gulf States' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues increased for the three and six months ended June 30, 2001 in both operational jurisdictions of Entergy Gulf States. In the Louisiana jurisdiction, fuel recovery revenues increased $103.1 million and $243.8 million for the three and six months ended June 30, 2001, respectively, due to the current period recovery through the fuel adjustment clause of higher fuel and purchased power costs from prior months. In the Louisiana jurisdiction, these fuel costs are recovered on a two-month lag. In the Texas jurisdiction, fuel cost recovery revenues increased $46.3 million and $76.8 million for the three and six months ended June 30, 2001, respectively, due to increases in the fixed fuel factor in August 2000 and March 2001 and due to a fuel recovery surcharge which became effective in February 2001.
ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales volume/weather Electric sales vary seasonally in response to weather and usually peak in the summer. Electric sales volume increased revenues for the six months ended June 30, 2001 due to more favorable weather. The effect of colder- than-normal winter weather in the first quarter of 2001 and slightly more favorable weather in the second quarter of 2001 across both jurisdictions contributed 229 GWH to the increase in electric sales volume in the residential and commercial sectors. Other revenue (including unbilled) Other revenue decreased for the three months ended June 30, 2001 primarily due to decreases in unbilled revenue as a result of decreased fuel prices in the Louisiana jurisdiction in the period included in the June 2001 unbilled revenue calculation compared to the calculation in the prior period, and decreased wholesale unbilled volume, particularly in the Texas jurisdiction. Other revenue decreased for the six months ended June 30, 2001 primarily due to decreases in unbilled revenue as a result of decreased volume for retail customers in the Louisiana jurisdiction and wholesale customers in the Texas jurisdiction, partially offset by increased fuel prices for the Louisiana jurisdiction. Sales for resale Sales for resale increased for the three and six months ended June 30, 2001 primarily due to: o increased sales volume to municipal and co-op customers; o increased prices for resale electricity in 2001; and o increased sales volume to affiliated customers because more power was available for sale. Included in the sales for resale is the sale to adjoining utility systems of power from the 30% share of River Bend acquired from Cajun, which is not subject to state rate regulation. Gas operating revenues Gas operating revenues increased for the three and six months ended June 30, 2001 due to the increased market price of natural gas and increased sales volume. The increase in gas revenues was largely offset by increased fuel expenses for gas purchased for resale. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the three and six months ended June 30, 2001 due to o higher average market prices for natural gas, which increased 26% and 74%, respectively, over the same periods of 2000; and o higher market prices for purchased power.
ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other operation and maintenance Other operation and maintenance expenses increased for the three months ended June 30, 2001 primarily due to: o increased transmission and distribution expenses of $2.7 million and $2.0 million, respectively; and o increased nuclear operation and maintenance expenses of $3.1 million. Other Other income Other income increased $5.8 million and $9.1 million for the three and six months ended June 30, 2001, respectively, primarily due to increased interest income recorded on the deferred fuel balance. Interest charges Interest charges increased for the three and six months ended June 30, 2001 primarily due to the issuance of $300 million of long-term debt in June 2000. Income taxes The effective income tax rates for the three months ended June 30, 2001 and 2000 were 35.0% and 32.8%, respectively. The effective income tax rates for the six months ended June 30, 2001 and 2000 were 36.1% and 35.4%, respectively.
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Six Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES <S> <C> <C> <C> <C> Domestic electric $721,597 $580,103 $1,420,473 $1,050,905 Natural gas 9,296 6,283 44,896 18,697 -------- -------- ---------- ---------- TOTAL 730,893 586,386 1,465,369 1,069,602 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 306,998 168,989 600,165 360,540 Purchased power 125,903 115,145 267,855 187,280 Nuclear refueling outage expenses 3,021 3,090 6,111 8,583 Other operation and maintenance 108,159 100,340 201,413 197,240 Decommissioning 1,561 1,568 3,123 3,136 Taxes other than income taxes 27,563 27,904 58,559 54,758 Depreciation and amortization 45,190 46,560 94,951 93,378 Other regulatory credits - net (466) (3,645) (7,356) (11,790) Amortization of rate deferrals 1,402 1,402 2,803 2,803 -------- -------- ---------- ---------- TOTAL 619,331 461,353 1,227,624 895,928 -------- -------- ---------- ---------- OPERATING INCOME 111,562 125,033 237,745 173,674 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 2,342 1,745 4,167 3,486 Gain on sale of assets 603 532 1,188 1,047 Miscellaneous - net 5,131 (20) 11,652 3,410 -------- -------- ---------- ---------- TOTAL 8,076 2,257 17,007 7,943 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 39,359 34,812 78,152 67,188 Other interest - net 1,858 1,705 4,195 3,110 Distributions on preferred securities of subsidiary 1,860 1,859 3,719 3,719 Allowance for borrowed funds used during construction (2,441) (1,602) (4,155) (3,213) -------- -------- ---------- ---------- TOTAL 40,636 36,774 81,911 70,804 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 79,002 90,516 172,841 110,813 Income taxes 27,620 29,701 62,413 39,241 -------- -------- ---------- ---------- NET INCOME 51,382 60,815 110,428 71,572 Preferred dividend requirements and other 1,271 3,175 2,581 7,319 -------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $50,111 $57,640 $107,847 $64,253 ======== ======== ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES <S> <C> <C> Net income $110,428 $71,572 Noncash items included in net income: Amortization of rate deferrals 2,803 2,803 Reserve for regulatory adjustments 1,932 (638) Other regulatory credits - net (7,356) (11,790) Depreciation, amortization, and decommissioning 98,074 96,514 Deferred income taxes and investment tax credits 10,793 (12,174) Allowance for equity funds used during construction (4,167) (3,486) Gain on sale of assets (1,188) (1,047) Changes in working capital: Receivables (4,676) (76,632) Fuel inventory (21,056) (6,898) Accounts payable (117,594) 25,972 Taxes accrued 55,386 19,347 Interest accrued 1,544 16,507 Deferred fuel costs 66,419 8,208 Other working capital accounts 7,536 5,945 Provision for estimated losses and reserves (3,164) (3,075) Changes in other regulatory assets (14,365) (18,426) Other 3,539 25,931 -------- -------- Net cash flow provided by operating activities 184,888 138,633 -------- -------- INVESTING ACTIVITIES Construction expenditures (145,421) (138,464) Allowance for equity funds used during construction 4,167 3,486 Nuclear fuel purchases (3,929) (33,510) Proceeds from sale/leaseback of nuclear fuel 3,937 13,797 Decommissioning trust contributions and realized change in trust assets (5,912) (5,489) Other regulatory investments (39,926) (33,057) -------- -------- Net cash flow used in investing activities (187,084) (193,237) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 299,086 Redemption of preferred stock (4,574) (152,493) Dividends paid: Common stock (34,000) (14,200) Preferred stock (2,588) (8,174) -------- -------- Net cash flow provided by (used in) financing activities (41,162) 124,219 -------- -------- Net increase (decrease) in cash and cash equivalents (43,358) 69,615 Cash and cash equivalents at beginning of period 68,279 32,312 -------- -------- Cash and cash equivalents at end of period $24,921 $101,927 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $81,891 $54,877 Income taxes $920 $33,835 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($2,138) $2,128 See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. BALANCE SHEETS ASSETS June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS <S> <C> <C> Cash and cash equivalents: Cash $20,775 $10,726 Temporary cash investments - at cost, which approximates market 4,146 57,553 ---------- ---------- Total cash and cash equivalents 24,921 68,279 ---------- ---------- Accounts receivable: Customer 129,565 125,412 Allowance for doubtful accounts (2,131) (2,131) Associated companies 4,075 27,660 Other 25,960 22,837 Accrued unbilled revenues 157,369 136,384 ---------- ---------- Total accounts receivable 314,838 310,162 ---------- ---------- Deferred fuel costs 261,633 288,126 Fuel inventory - at average cost 58,314 37,258 Materials and supplies - at average cost 99,425 100,018 Rate deferrals 2,803 5,606 Prepayments and other 22,449 22,332 ---------- ---------- TOTAL 784,383 831,781 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 247,329 243,555 Non-utility property - at cost (less accumulated depreciation) 194,160 194,422 Other - at cost (less accumulated depreciation) 15,849 14,826 ---------- ---------- TOTAL 457,338 452,803 ---------- ---------- UTILITY PLANT Electric 7,563,192 7,574,905 Property under capital lease 32,446 38,564 Natural gas 57,281 56,163 Construction work in progress 235,480 144,814 Nuclear fuel under capital lease 47,086 57,472 ---------- ---------- TOTAL UTILITY PLANT 7,935,485 7,871,918 Less - accumulated depreciation and amortization 3,709,549 3,680,662 ---------- ---------- UTILITY PLANT - NET 4,225,936 4,191,256 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 410,597 403,934 Unamortized loss on reacquired debt 36,112 37,903 Other regulatory assets 177,107 169,405 Long-term receivables 28,121 29,586 Other 19,834 17,349 ---------- ---------- TOTAL 671,771 658,177 ---------- ---------- TOTAL ASSETS $6,139,428 $6,134,017 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES <S> <C> <C> Currently maturing long-term debt $272,750 $122,750 Accounts payable: Associated companies 86,716 66,312 Other 120,531 258,529 Customer deposits 39,865 37,489 Taxes accrued 187,754 132,368 Accumulated deferred income taxes 80,566 94,032 Nuclear refueling outage costs 16,276 10,209 Interest accrued 45,083 43,539 Obligations under capital leases 42,277 42,524 Other 19,887 19,418 ---------- ---------- TOTAL 911,705 827,170 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 1,152,598 1,115,119 Accumulated deferred investment tax credits 167,383 171,000 Obligations under capital leases 37,256 53,512 Other regulatory liabilities - 669 Decommissioning 144,062 142,604 Transition to competition 79,098 72,381 Regulatory reserves 62,897 60,965 Accumulated provisions 64,240 67,404 Other 76,107 98,501 ---------- ---------- TOTAL 1,783,641 1,782,155 ---------- ---------- Long-term debt 1,658,996 1,808,879 Preferred stock with sinking fund 26,185 30,758 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 85,000 85,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 47,677 47,677 Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares in 2001 and 2000 114,055 114,055 Paid-in capital 1,153,253 1,153,195 Retained earnings 358,916 285,128 ---------- ---------- TOTAL 1,673,901 1,600,055 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,139,428 $6,134,017 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 194.4 $ 159.1 $ 35.3 22 Commercial 156.7 120.8 35.9 30 Industrial 285.3 208.2 77.1 37 Governmental 10.2 8.0 2.2 28 ------- ------- ------ Total retail 646.6 496.1 150.5 30 Sales for resale Associated companies 16.9 11.9 5.0 43 Non-associated companies 33.5 24.4 9.1 37 Other 24.6 47.7 (23.1) (48) ------- ------- ------ Total $ 721.6 $ 580.1 $ 141.5 24 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 2,017 2,100 (83) (4) Commercial 1,836 1,864 (28) (2) Industrial 4,584 4,545 39 1 Governmental 110 109 1 1 ------- ------- ------ Total retail 8,547 8,618 (71) (1) Sales for resale Associated companies 341 248 93 38 Non-associated companies 736 769 (33) (4) ------- ------- ------ Total 9,624 9,635 (11) - ======= ======= ====== Six Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 382.8 $ 296.9 $ 85.9 29 Commercial 302.0 229.1 72.9 32 Industrial 565.9 392.7 173.2 44 Governmental 20.3 15.8 4.5 28 -------- --------- ------- Total retail 1,271.0 934.5 336.5 36 Sales for resale Associated companies 29.3 18.4 10.9 59 Non-associated companies 84.6 44.8 39.8 89 Other 35.6 53.2 (17.6) (33) -------- --------- ------- Total $1,420.5 $ 1,050.9 $ 369.6 35 ======== ========= ======= Billed Electric Energy Sales (GWH): Residential 4,143 3,934 209 5 Commercial 3,581 3,506 75 2 Industrial 8,836 8,915 (79) (1) Governmental 221 214 7 3 -------- --------- ------- Total retail 16,781 16,569 212 1 Sales for resale Associated companies 448 436 12 3 Non-associated companies 1,695 1,568 127 8 -------- --------- ------- Total 18,924 18,573 351 2 ======== ========= =======
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three and six months ended June 30, 2001 compared to the three and six months ended June 30, 2000 primarily due to decreased net revenue and increased interest expense. The decreases were partially offset by decreased other operation and maintenance expenses. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes $1.9 $17.1 Fuel cost recovery 113.1 310.3 Sales volume/weather (10.5) (0.1) Other revenue (including unbilled) (8.4) (26.9) Sales for resale 3.6 1.4 ----- ------ Total $99.7 $301.8 ===== ====== Base rate changes Base rate changes increased for the six months ended June 30, 2001 primarily due to accruals for potential rate refunds in 2000, partially offset by additional formula rate plan reductions effective August 2000. Fuel cost recovery Entergy Louisiana is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Louisiana's financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues increased for the three and six months ended June 30, 2001 as a result of higher fuel and purchased power expenses primarily due to the increased market prices of natural gas and purchased power. Sales volume/weather Electric sales volume decreased revenues for the three months ended June 30, 2001 due to decreased usage of 365 GWH in the industrial and residential sectors. The decreased usage in the industrial sector resulted in higher rates for that sector, which is reflected in base rate changes.
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other revenue (including unbilled) Unbilled revenue decreased for the three and six months ended June 30, 2001 primarily due to the effect of fuel prices for the period included in the June 2001 unbilled revenue calculation compared to the calculation in the prior year. The decrease for the six months ended was also due to less favorable volume in June 2001. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the three and six months ended June 30, 2001 primarily due to increased market prices of natural gas and purchased power, partially offset by decreased generation requirements. Other operation and maintenance Other operation and maintenance expenses decreased for the three months ended June 30, 2001 primarily due to: o a decrease of $11.0 million in plant maintenance expenses as a result of prior year maintenance outages at Waterford 3 and certain fossil plants; and o a decrease of $2.0 million in injuries and damages expense. Other operation and maintenance expenses decreased for the six months ended June 30, 2001 primarily due to a decrease of $7.0 million in plant maintenance expenses as a result of prior year maintenance outages at Waterford 3 and certain fossil plants. Depreciation and amortization Depreciation and amortization expenses decreased for the three months ended June 30, 2001 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives. Other Other income Interest income increased for the six months ended June 30, 2001 primarily due to interest earned on money pool investments. Interest and other charges Other interest increased for the three and six months ended June 30, 2001 primarily due to interest accrued on reserves provided for fuel- related refunds. The refunds began in July 2001. Interest on long-term debt also increased for the six months ended primarily due to the issuance of an additional $50 million of long-term debt in May 2000.
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Income taxes The effective income tax rates for the three months ended June 30, 2001 and 2000 were 40.3% and 40.1%, respectively. The effective income tax rates for the six months ended June 30, 2001 and 2000 were 41.8% and 41.2%, respectively.
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Six Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES <S> <C> <C> <C> <C> Domestic electric $547,784 $448,067 $1,096,698 $794,888 -------- -------- ---------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 190,046 48,748 424,469 131,940 Purchased power 132,485 145,243 267,990 234,119 Nuclear refueling outage expenses 3,262 3,410 6,524 6,820 Other operation and maintenance 71,269 85,098 141,083 148,173 Decommissioning 2,606 2,606 5,212 5,211 Taxes other than income taxes 18,165 17,953 36,717 34,715 Depreciation and amortization 40,498 42,182 85,444 84,329 Other regulatory charges - net 540 240 1,080 480 -------- -------- ---------- -------- TOTAL 458,871 345,480 968,519 645,787 -------- -------- ---------- -------- OPERATING INCOME 88,913 102,587 128,179 149,101 -------- -------- ---------- -------- OTHER INCOME Allowance for equity funds used during construction 1,226 1,196 2,161 1,879 Gain on sale of assets 152 - 152 - Miscellaneous - net 744 435 2,680 543 -------- -------- ---------- -------- TOTAL 2,122 1,631 4,993 2,422 -------- -------- ---------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 24,734 23,779 49,190 47,942 Other interest - net 3,570 1,896 7,087 3,946 Distributions on preferred securities of subsidiary 1,575 1,575 3,150 3,150 Allowance for borrowed funds used during construction (922) (911) (1,632) (1,868) -------- -------- ---------- -------- TOTAL 28,957 26,339 57,795 53,170 -------- -------- ---------- -------- INCOME BEFORE INCOME TAXES 62,078 77,879 75,377 98,353 Income taxes 25,044 31,192 31,483 40,474 -------- -------- ---------- -------- NET INCOME 37,034 46,687 43,894 57,879 Preferred dividend requirements and other 2,378 2,378 4,757 4,757 -------- -------- ---------- -------- EARNINGS APPLICABLE TO COMMON STOCK $34,656 $44,309 $39,137 $53,122 ======== ======== ========== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES <S> <C> <C> Net income $43,894 $57,879 Noncash items included in net income: Reserve for regulatory adjustments (3,698) - Other regulatory charges - net 1,080 480 Depreciation, amortization, and decommissioning 90,656 89,540 Deferred income taxes and investment tax credits (55,432) 15,191 Allowance for equity funds used during construction (2,161) (1,879) Gain on sale of assets (152) - Changes in working capital: Receivables (15,569) (12,108) Accounts payable (66,985) (57,456) Taxes accrued 103,346 25,659 Interest accrued (7,192) 10,250 Deferred fuel costs 121,877 (80,801) Other working capital accounts (24,616) 29,378 Provision for estimated losses and reserves 2,133 3,375 Changes in other regulatory assets (3,779) 6,663 Other 11,750 (8,977) -------- ------- Net cash flow provided by operating activities 195,152 77,194 -------- ------- INVESTING ACTIVITIES Construction expenditures (99,550) (90,488) Allowance for equity funds used during construction 2,161 1,879 Nuclear fuel purchases - (29,806) Proceeds from sale/leaseback of nuclear fuel - 29,806 Decommissioning trust contributions and realized change in trust assets (9,043) (4,030) -------- ------- Net cash flow used in investing activities (106,432) (92,639) -------- ------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 149,003 Retirement of long-term debt (35,088) (100,000) Dividends paid: Common stock (13,300) (6,200) Preferred stock (4,757) (4,757) -------- ------- Net cash flow provided by (used in) financing activities (53,145) 38,046 -------- ------- Net increase in cash and cash equivalents 35,575 22,601 Cash and cash equivalents at beginning of period 43,959 7,734 -------- ------- Cash and cash equivalents at end of period $79,534 $30,335 ======== ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $63,521 $40,981 Income taxes $550 $17,572 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($1,430) $545 See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. BALANCE SHEETS ASSETS June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS <S> <C> <C> Cash and cash equivalents: Cash $22,250 $14,138 Temporary cash investments - at cost, which approximates market 57,284 29,821 ---------- ---------- Total cash and cash equivalents 79,534 43,959 ---------- ---------- Notes receivable 8 1,510 Accounts receivable: Customer 101,588 111,292 Allowance for doubtful accounts (1,771) (1,771) Associated companies 79,005 30,518 Other 6,784 13,698 Accrued unbilled revenues 136,400 152,700 ---------- ---------- Total accounts receivable 322,006 306,437 ---------- ---------- Deferred fuel costs - 84,051 Accumulated deferred income taxes 34,854 - Materials and supplies - at average cost 77,465 77,389 Deferred nuclear refueling outage costs 10,168 16,425 Prepayments and other 18,804 9,996 ---------- ---------- TOTAL 542,839 539,767 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 14,230 14,230 Decommissioning trust funds 117,876 110,263 Non-utility property - at cost (less accumulated depreciation) 21,762 21,700 ---------- ---------- TOTAL 153,868 146,193 ---------- ---------- UTILITY PLANT Electric 5,383,873 5,357,920 Property under capital lease 238,427 238,427 Construction work in progress 126,277 85,299 Nuclear fuel under capital lease 47,571 63,923 ---------- ---------- TOTAL UTILITY PLANT 5,796,148 5,745,569 Less - accumulated depreciation and amortization 2,497,084 2,441,937 ---------- ---------- UTILITY PLANT - NET 3,299,064 3,303,632 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 205,887 204,810 Unamortized loss on reacquired debt 30,792 33,244 Other regulatory assets 53,583 50,881 Long-term receivables 2,851 - Other 15,302 10,882 ---------- ---------- TOTAL 308,415 299,817 ---------- ---------- TOTAL ASSETS $4,304,186 $4,289,409 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES <S> <C> <C> Currently maturing long-term debt $113,968 $35,088 Accounts payable: Associated companies 45,063 71,948 Other 104,741 144,841 Customer deposits 60,877 60,227 Taxes accrued 126,653 23,307 Accumulated deferred income taxes - 20,545 Interest accrued 28,344 35,536 Deferred fuel cost 37,826 - Obligations under capital leases 34,274 34,274 Other 80,048 102,614 ---------- ---------- TOTAL 631,794 528,380 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 763,330 757,362 Accumulated deferred investment tax credits 114,668 117,393 Obligations under capital leases 13,297 29,649 Regulatory reserves 7,758 11,456 Accumulated provisions 66,334 64,201 Other 75,762 61,724 ---------- ---------- TOTAL 1,041,149 1,041,785 ---------- ---------- Long-term debt 1,162,858 1,276,696 Preferred stock with sinking fund 35,000 35,000 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 70,000 70,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 100,500 100,500 Common stock, no par value, authorized 250,000,000 shares; issued and outstanding 165,173,180 shares in 2001 and 2000 1,088,900 1,088,900 Capital stock expense and other (2,171) (2,171) Retained earnings 176,156 150,319 ---------- ---------- TOTAL 1,363,385 1,337,548 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,304,186 $4,289,409 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 163.5 $ 143.3 $ 20.2 14 Commercial 114.9 94.9 20.0 21 Industrial 218.2 160.8 57.4 36 Governmental 10.5 8.4 2.1 25 --------- ------- ------- Total retail 507.1 407.4 99.7 24 Sales for resale Associated companies 7.3 0.2 7.1 3,550 Non-associated companies 6.5 10.0 (3.5) (35) Other 26.9 30.5 (3.6) (12) --------- ------- ------- Total $ 547.8 $ 448.1 $ 99.7 22 ========= ======= ======= Billed Electric Energy Sales (GWH): Residential 1,839 1,939 (100) (5) Commercial 1,291 1,296 (5) - Industrial 3,583 3,881 (298) (8) Governmental 120 117 3 3 --------- ------- ------- Total retail 6,833 7,233 (400) (6) Sales for resale Associated companies 108 3 105 3,500 Non-associated companies 79 110 (31) (28) --------- ------- ------- Total 7,020 7,346 (326) (4) ========= ======= ======= Six Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 348.3 $ 262.3 $ 86.0 33 Commercial 236.0 178.1 57.9 33 Industrial 463.4 313.5 149.9 48 Governmental 22.8 16.4 6.4 39 --------- ------- ------- Total retail 1,070.5 770.3 300.2 39 Sales for resale Associated companies 11.4 0.7 10.7 1,529 Non-associated companies 12.3 21.6 (9.3) (43) Other 2.5 2.3 0.2 9 --------- ------- ------- Total $ 1,096.7 $ 794.9 $ 301.8 38 ========= ======= ======= Billed Electric Energy Sales (GWH): Residential 3,783 3,672 111 3 Commercial 2,508 2,444 64 3 Industrial 7,157 7,642 (485) (6) Governmental 248 231 17 7 --------- ------- ------- Total retail 13,696 13,989 (293) (2) Sales for resale Associated companies 161 17 144 847 Non-associated companies 174 313 (139) (44) --------- ------- ------- Total 14,031 14,319 (288) (2) ========= ======= =======
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three and six months ended June 30, 2001 compared to the three and six months ended June 30, 2000 primarily due to decreased other operation and maintenance expenses and increased interest income, partially offset by decreased unbilled revenues and increased interest charges. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes $1.0 ($1.0) Grand Gulf rate rider (2.9) (2.9) Fuel cost recovery 44.0 67.4 Sales volume/weather 0.8 7.1 Other revenue (including unbilled) (1.7) (4.3) Sales for resale 17.3 65.6 ----- ------ Total $58.5 $131.9 ===== ====== Fuel cost recovery Entergy Mississippi is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Mississippi's financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues increased for the three and six months ended June 30, 2001 primarily due to an increase in the energy cost recovery rider to collect the under-recovered fuel and purchased power costs incurred as of September 30, 2000. The recovery of $136.7 million, plus carrying charges, will occur over a 24-month period which began in January 2001. The increase was also due to an additional increase in the energy cost recovery rider effective April 2001. Sales volume/weather Electric sales volume increased revenues for the six months ended June 30, 2001 due to increased usage of 318 GWH in the residential and commercial sectors. Other revenue (including unbilled) Unbilled revenue decreased for the six months ended June 30, 2001 primarily due to the effect of less favorable weather for the period included in the June 2001 unbilled revenue calculation compared to the calculation in the prior year.
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales for resale Sales for resale increased for the three and six months ended June 30, 2001 primarily due to increased net generation resulting in more energy available for sale, partially offset by decreased prices for resale electricity. The increase came from sales to affiliates, which are generally made at a low margin. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the three and six months ended June 30, 2001 primarily due to increased generation requirements and increased market prices of natural gas and purchased power. Other operation and maintenance Other operation and maintenance expenses decreased for the three and six months ended June 30, 2001 primarily due to a decrease of $6 million and $10 million, respectively, in plant maintenance expenses due to outage costs at certain fossil plants in 2000. The decreases were partially offset by the following increases: o increased charitable donations of $1.2 million and $1.6 million for the three and six months ended, respectively; and o increased steam expenses of $1 million for the six months ended. Other Other income Interest income increased for the three and six months ended June 30, 2001 primarily due to interest recorded on the deferred fuel balance as a result of an MPSC order providing for a 24-month recovery of the September 2000 under-recovered deferred fuel balance of $136.7 million. Interest and other charges Interest on long-term debt increased for the three and six months ended June 30, 2001 primarily due to the issuance of $120 million of long- term debt in February 2000 and the issuance of $70 million of long-term debt in January 2001. Income taxes The effective income tax rates for the three months ended June 30, 2001 and 2000 were 33.4% and 35.8%, respectively. The effective income tax rate for each of the six months ended June 30, 2001 and 2000 was 33.9%.
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Six Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES <S> <C> <C> <C> <C> Domestic electric $274,148 $215,606 $530,306 $398,381 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 95,493 31,043 205,552 75,330 Purchased power 94,374 95,038 177,838 171,866 Other operation and maintenance 39,473 43,082 72,721 78,705 Taxes other than income taxes 11,792 11,091 23,065 21,267 Depreciation and amortization 10,941 11,977 24,215 23,702 Other regulatory credits - net (9,572) (5,409) (19,256) (14,487) -------- -------- -------- -------- TOTAL 242,501 186,822 484,135 356,383 -------- -------- -------- -------- OPERATING INCOME 31,647 28,784 46,171 41,998 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 592 613 1,015 1,250 Miscellaneous - net 4,001 2,380 8,146 4,411 -------- -------- -------- -------- TOTAL 4,593 2,993 9,161 5,661 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 12,159 10,561 23,303 20,014 Other interest - net 1,079 676 2,312 1,696 Allowance for borrowed funds used during construction (516) (479) (863) (983) -------- -------- -------- -------- TOTAL 12,722 10,758 24,752 20,727 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 23,518 21,019 30,580 26,932 Income taxes 7,845 7,516 10,373 9,132 -------- -------- -------- -------- NET INCOME 15,673 13,503 20,207 17,800 Preferred dividend requirements and other 842 842 1,685 1,685 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $14,831 $12,661 $18,522 $16,115 ======== ======== ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES <S> <C> <C> Net income $20,207 $17,800 Noncash items included in net income: Other regulatory credits - net (19,256) (14,487) Depreciation and amortization 24,215 23,702 Deferred income taxes and investment tax credits 11,402 2,554 Allowance for equity funds used during construction (1,015) (1,250) Changes in working capital: Receivables 699 (14,566) Fuel inventory (6,951) (885) Accounts payable (5,983) (32,666) Taxes accrued (15,104) 8,947 Interest accrued 2,884 1,908 Deferred fuel costs (21,692) 21,117 Other working capital accounts (4,495) 2,557 Provision for estimated losses and reserves (4,733) (591) Changes in other regulatory assets (23,075) (18,550) Other 34,461 23,127 -------- -------- Net cash flow provided by (used in) operating activities (8,436) 18,717 -------- -------- INVESTING ACTIVITIES Construction expenditures (60,961) (63,770) Allowance for equity funds used during construction 1,015 1,250 Other regulatory investments - (54,629) -------- -------- Net cash flow used in investing activities (59,946) (117,149) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 69,624 119,175 Changes in short-term borrowings 10,000 - Dividends paid: Common stock (5,500) (5,800) Preferred stock (1,685) (1,685) -------- -------- Net cash flow provided by financing activities 72,439 111,690 -------- -------- Net increase in cash and cash equivalents 4,057 13,258 Cash and cash equivalents at beginning of period 5,113 4,787 -------- -------- Cash and cash equivalents at end of period $9,170 $18,045 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $21,406 $18,600 Income taxes - ($5,830) See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. BALANCE SHEETS ASSETS June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS <S> <C> <C> Cash and cash equivalents $9,170 $5,113 Accounts receivable: Customer 53,699 44,517 Allowance for doubtful accounts (1,044) (1,044) Associated companies 2,941 10,741 Other 3,583 9,964 Accrued unbilled revenues 37,900 33,600 ---------- ---------- Total accounts receivable 97,079 97,778 ---------- ---------- Deferred fuel costs 128,781 64,950 Fuel inventory - at average cost 10,387 3,436 Materials and supplies - at average cost 18,034 18,485 Prepayments and other 10,104 3,004 ---------- ---------- TOTAL 273,555 192,766 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 5,531 5,531 Non-utility property - at cost (less accumulated depreciation) 6,787 6,851 ---------- ---------- TOTAL 12,318 12,382 ---------- ---------- UTILITY PLANT Electric 1,899,572 1,885,501 Property under capital lease 240 290 Construction work in progress 74,235 44,085 ---------- ---------- TOTAL UTILITY PLANT 1,974,047 1,929,876 Less - accumulated depreciation and amortization 740,789 733,977 ---------- ---------- UTILITY PLANT - NET 1,233,258 1,195,899 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 28,691 25,544 Unamortized loss on reacquired debt 14,523 15,122 Deferred fuel costs 53,522 95,661 Other regulatory assets 160,607 140,679 Other 8,537 5,886 ---------- ---------- TOTAL 265,880 282,892 ---------- ---------- TOTAL ASSETS $1,785,011 $1,683,939 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES <S> <C> <C> Currently maturing long-term debt $65,000 $- Notes payable 10,000 - Accounts payable: Associated companies 91,372 92,980 Other 22,558 26,933 Customer deposits 28,010 26,368 Taxes accrued 16,758 31,862 Accumulated deferred income taxes 50,048 47,734 Interest accrued 15,983 13,099 Obligations under capital leases 46 79 Other 3,055 2,540 ---------- ---------- TOTAL 302,830 241,595 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 320,320 306,295 Accumulated deferred investment tax credits 18,658 19,408 Obligations under capital leases 193 211 Accumulated provisions 2,073 6,806 Other 44,510 31,339 ---------- ---------- TOTAL 385,754 364,059 ---------- ---------- Long-term debt 589,587 584,467 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 50,381 50,381 Common stock, no par value, authorized 15,000,000 shares; issued and outstanding 8,666,357 shares in 2001 and 2000 199,326 199,326 Capital stock expense and other (59) (59) Retained earnings 257,192 244,170 ---------- ---------- TOTAL 506,840 493,818 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,785,011 $1,683,939 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 89.1 $ 73.4 $ 15.7 21 Commercial 80.9 65.3 15.6 24 Industrial 49.2 39.3 9.9 25 Governmental 8.0 6.3 1.7 27 ------- ------- ------ Total retail 227.2 184.3 42.9 23 Sales for resale Associated companies 26.0 7.0 19.0 271 Non-associated companies 5.1 6.8 (1.7) (25) Other 15.8 17.5 (1.7) (10) ------- ------- ------ Total $ 274.1 $ 215.6 $ 58.5 27 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 1,037 1,013 24 2 Commercial 1,024 1,008 16 2 Industrial 751 786 (35) (4) Governmental 93 89 4 4 ------- ------- ------ Total retail 2,905 2,896 9 - Sales for resale Associated companies 459 82 377 460 Non-associated companies 57 62 (5) (8) ------- ------- ------ Total 3,421 3,040 381 13 ======= ======= ====== Six Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 170.0 $ 139.5 $ 30.5 22 Commercial 148.5 124.7 23.8 19 Industrial 90.5 76.7 13.8 18 Governmental 14.6 12.1 2.5 21 ------- ------- ------ Total retail 423.6 353.0 70.6 20 Sales for resale Associated companies 82.7 13.0 69.7 536 Non-associated companies 9.6 13.7 (4.1) (30) Other 14.4 18.7 (4.3) (23) ------- ------- ------ Total $ 530.3 $ 398.4 $ 131.9 33 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 2,252 2,036 216 11 Commercial 1,999 1,926 73 4 Industrial 1,485 1,529 (44) (3) Governmental 183 169 14 8 ------- ------- ------ Total retail 5,919 5,660 259 5 Sales for resale Associated companies 1,332 207 1,125 543 Non-associated companies 107 139 (32) (23) ------- ------- ------ Total 7,358 6,006 1,352 23 ======= ======= ======
ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended June 30, 2001 compared to the three months ended June 30, 2000 primarily due to decreased net revenue and increased interest expense, partially offset by decreased other operation and maintenance expense. Net income decreased for the six months ended June 30, 2001 compared to the six months ended June 30, 2000 primarily due to increased other operation and maintenance expense and increased interest expense, partially offset by increased unbilled revenue. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes ($2.8) ($3.7) Fuel cost recovery 37.7 76.7 Sales volume/weather (2.7) (2.1) Other revenue (including unbilled) 2.7 4.2 Sales for resale (10.4) (7.6) ----- ----- Total $24.5 $67.5 ===== ===== Base rate changes Base rate changes decreased revenues for the three and six months ended June 30, 2001 primarily due to rate reductions effective October 2000. Fuel cost recovery Entergy New Orleans is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy New Orleans' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues increased for the three and six months ended June 30, 2001 primarily due to the increased market prices of natural gas and purchased power. Sales volume/weather Electric sales volume decreased revenues for the three and six months ended June 30, 2001 due to decreased usage of 36 GWH and 57 GWH, respectively, primarily in the residential and governmental sectors.
ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other revenue (including unbilled) Unbilled revenues increased for the three months ended June 30, 2001 primarily due to increased volume in June 2001, partially offset by the effect of decreased fuel prices for the period included in the June 2001 unbilled revenue calculation compared to the calculation in the prior year. Unbilled revenues increased for the six months ended June 30, 2001 primarily due to the effect of higher fuel prices for the period included in the June 2001 unbilled revenue calculation. Sales for resale Sales for resale decreased for the three and six months ended June 30, 2001 primarily due to a decrease in net generation resulting in less energy available for sale, partially offset by increased prices for resale electricity. Gas operating revenues Gas operating revenues increased for the six months ended June 30, 2001 primarily due to the increased market price of natural gas and increased sales due to a colder-than-normal winter. The increase in gas revenues was largely offset by increased expenses for gas purchased for resale. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the three and six months ended June 30, 2001 primarily due to the increased market prices of natural gas and purchased power. Other operation and maintenance Other operation and maintenance expenses increased for the six months ended June 30, 2001 primarily due to increases in uncollectible receivable write-offs of $1.0 million and maintenance of customer records of $1.2 million. Taxes other than income taxes Taxes other than income taxes increased for three and six months ended June 30, 2001 primarily due to an increase in local franchise taxes as a result of higher retail revenue. Amortization of rate deferrals Amortization of rate deferrals decreased for the three and six months ended June 30, 2001 primarily due to a scheduled rate change in the amortization of Grand Gulf 1 phase-in expenses. The Grand Gulf 1 phase-in plan will be complete in November 2001. Other Interest and other charges Interest on long-term debt increased for the three and six months ended June 30, 2001 primarily due to $30 million issuances of long-term debt in July 2000 and February 2001.
ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Income taxes For the three months ended June 30, 2001 and 2000, the effective income tax rates were 40.8% and 43.0%, respectively. For the six months ended June 30, 2001 and 2000, the effective income tax rates were 43.3% and 45.1%, respectively. The decreases for the three and six months ended June 30, 2001 in the effective tax rate were primarily due to the decrease in pre-tax income increasing the impact of flow-through items.
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Six Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES <S> <C> <C> <C> <C> Domestic electric $139,057 $114,539 $268,289 $200,797 Natural gas 21,252 22,112 96,035 55,595 -------- -------- -------- -------- TOTAL 160,309 136,651 364,324 256,392 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 51,860 40,231 160,687 82,032 Purchased power 58,859 38,784 107,326 73,895 Other operation and maintenance 21,615 22,806 42,576 39,657 Taxes other than income taxes 11,308 9,184 24,994 18,696 Depreciation and amortization 6,181 5,809 12,507 11,510 Other regulatory credits - net (2,185) (1,732) (3,706) (3,333) Amortization of rate deferrals 3,298 6,482 6,349 12,476 -------- -------- -------- -------- TOTAL 150,936 121,564 350,733 234,933 -------- -------- -------- -------- OPERATING INCOME 9,373 15,087 13,591 21,459 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 453 270 851 595 Miscellaneous - net 320 819 1,014 1,417 -------- -------- -------- -------- TOTAL 773 1,089 1,865 2,012 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 4,450 3,319 8,568 6,638 Other interest - net 386 410 812 826 Allowance for borrowed funds used during construction (386) (207) (706) (445) -------- -------- -------- -------- TOTAL 4,450 3,522 8,674 7,019 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 5,696 12,654 6,782 16,452 Income taxes 2,327 5,437 2,938 7,418 -------- -------- -------- -------- NET INCOME 3,369 7,217 3,844 9,034 Preferred dividend requirements and other 241 241 482 482 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $3,128 $6,976 $3,362 $8,552 ======== ======== ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES <S> <C> <C> Net income $3,844 $9,034 Noncash items included in net income: Amortization of rate deferrals 6,349 12,476 Reserve for regulatory adjustments (1,176) - Other regulatory credits - net (3,706) (3,333) Depreciation and amortization 12,507 11,510 Deferred income taxes and investment tax credits (2,588) 2,405 Allowance for equity funds used during construction (851) (595) Changes in working capital: Receivables (4,101) (2,623) Fuel inventory 4,096 1,920 Accounts payable (12,011) 6,956 Taxes accrued 3,971 2,348 Interest accrued 307 (417) Deferred fuel costs 11,719 (16,493) Other working capital accounts (8,049) (4,787) Provision for estimated losses and reserves (2,136) (509) Changes in other regulatory assets (12,295) (4,977) Other 2,357 3,983 -------- -------- Net cash flow provided by (used in) operating activities (1,763) 16,898 -------- -------- INVESTING ACTIVITIES Construction expenditures (28,898) (17,463) Allowance for equity funds used during construction 851 595 -------- -------- Net cash flow used in investing activities (28,047) (16,868) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 29,769 - Dividends paid: Preferred stock (241) (241) -------- -------- Net cash flow provided by (used in) financing activities 29,528 (241) -------- -------- Net decrease in cash and cash equivalents (282) (211) Cash and cash equivalents at beginning of period 6,302 4,454 -------- -------- Cash and cash equivalents at end of period $6,020 $4,243 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $8,845 $7,702 Income taxes - ($2,386) See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. BALANCE SHEETS ASSETS June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS <S> <C> <C> Cash and cash equivalents $6,020 $6,302 Accounts receivable: Customer 64,240 67,264 Allowance for doubtful accounts (770) (770) Associated companies 1,272 2,800 Other 3,609 3,709 Accrued unbilled revenues 35,591 26,838 -------- -------- Total accounts receivable 103,942 99,841 -------- -------- Deferred fuel costs 16,515 28,234 Accumulated deferred income taxes 1,140 - Fuel inventory - at average cost 108 4,204 Materials and supplies - at average cost 8,947 9,630 Rate deferrals 4,627 10,974 Prepayments and other 9,779 1,416 -------- -------- TOTAL 151,078 160,601 -------- -------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 3,259 3,259 -------- -------- UTILITY PLANT Electric 573,244 572,061 Natural gas 137,489 134,826 Construction work in progress 53,537 36,489 -------- -------- TOTAL UTILITY PLANT 764,270 743,376 Less - accumulated depreciation and amortization 397,960 394,271 -------- -------- UTILITY PLANT - NET 366,310 349,105 -------- -------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Unamortized loss on reacquired debt 868 974 Other regulatory assets 56,971 44,676 Long-term receivables 1,343 - Other 2,039 616 -------- -------- TOTAL 61,221 46,266 -------- -------- TOTAL ASSETS $581,868 $559,231 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES <S> <C> <C> Accounts payable: Associated companies $43,015 $24,637 Other 27,177 57,566 Customer deposits 18,322 18,311 Taxes accrued 9,794 5,823 Accumulated deferred income taxes - 6,543 Interest accrued 6,426 6,119 Other 3,072 3,211 -------- -------- TOTAL 107,806 122,210 -------- -------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 47,838 43,754 Accumulated deferred investment tax credits 5,614 5,868 SFAS 109 regulatory liability - net 14,578 12,607 Other regulatory liabilities 227 537 Accumulated provisions 6,335 8,471 Other 12,670 12,356 -------- -------- TOTAL 87,262 83,593 -------- -------- Long-term debt 229,042 199,031 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 19,780 19,780 Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2001 and 2000 33,744 33,744 Paid-in capital 36,294 36,294 Retained earnings 67,940 64,579 -------- -------- TOTAL 157,758 154,397 -------- -------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $581,868 $559,231 ======== ======== See Notes to Financial Statements. </TABLE>
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 45.8 $ 36.7 $ 9.1 25 Commercial 48.0 34.4 13.6 40 Industrial 8.4 5.0 3.4 68 Governmental 20.9 14.8 6.1 41 ------- ------- ------ Total retail 123.1 90.9 32.2 35 Sales for resale Associated companies 1.7 11.0 (9.3) (85) Non-associated companies 1.1 2.2 (1.1) (50) Other 13.1 10.4 2.7 26 ------- ------- ------ Total $ 139.0 $ 114.5 $ 24.5 21 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 457 503 (46) (9) Commercial 545 550 (5) (1) Industrial 104 95 9 9 Governmental 247 264 (17) (6) ------- ------- ------ Total retail 1,353 1,412 (59) (4) Sales for resale Associated companies 26 218 (192) (88) Non-associated companies 15 35 (20) (57) ------- ------- ------ Total 1,394 1,665 (271) (16) ======= ======= ====== Six Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 86.8 $ 64.2 $ 22.6 35 Commercial 96.9 68.1 28.8 42 Industrial 16.7 10.1 6.6 65 Governmental 41.8 28.9 12.9 45 ------- ------- ------ Total retail 242.2 171.3 70.9 41 Sales for resale Associated companies 8.7 13.6 (4.9) (36) Non-associated companies 1.7 4.4 (2.7) (61) Other 15.7 11.5 4.2 37 ------- ------- ------ Total $ 268.3 $ 200.8 $ 67.5 34 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 854 876 (22) (3) Commercial 1,033 1,047 (14) (1) Industrial 196 186 10 5 Governmental 475 497 (22) (4) ------- ------- ------ Total retail 2,558 2,606 (48) (2) Sales for resale Associated companies 90 301 (211) (70) Non-associated companies 27 79 (52) (66) ------- ------- ------ Total 2,675 2,986 (311) (10) ======= ======= ======
SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the six months ended June 30, 2001 compared to the six months ended June 30, 2000 due to an increase in the provision for rate refunds, partially offset by decreased interest expense. Revenues Operating revenues recover operating expenses, depreciation, and capital costs attributable to Grand Gulf 1. Capital costs are computed by allowing a return on System Energy's common equity funds allocable to its net investment in Grand Gulf 1 and adding to such amount System Energy's effective interest cost for its debt. Operating revenues decreased for the three and six months ended June 30, 2001 primarily due to the increase in the provision for rate refund. System Energy's proposed rate increase, which is subject to refund, is discussed in Note 2 to the financial statements in the Form 10-K. Expenses Other regulatory charges Other regulatory charges increased for the three and six months ended June 30, 2001 primarily due to charges associated with the GGART in place at Entergy Arkansas and Entergy Mississippi. The GGART is discussed in Note 2 to the financial statements. Other Interest charges Interest on long-term debt decreased for the three and six months ended June 30, 2001 primarily due to a decrease in interest expense associated with the sale-leaseback of Grand Gulf 1 and a decrease in interest expense due to the retirement of long-term debt in 2000. Other interest expense increased for the three and six months ended June 30, 2001 primarily due to interest on the potential refund of System Energy's proposed rate increase. Income taxes The effective income tax rates for the three months ended June 30, 2001 and 2000 were 45.7% and 48.9%, respectively. The effective income tax rates for the six months ended June 30, 2001 and 2000 were 45.7% and 47.9%, respectively. The decreases for the three and six months ended June 30, 2001 in the effective tax rate were primarily due to the decrease in pre- tax income increasing the impact of flow-through items.
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2001 and 2000 (Unaudited) Three Months Ended Six Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES <S> <C> <C> <C> <C> Domestic electric $152,902 $159,389 $304,068 $316,479 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 7,822 10,858 17,894 21,540 Nuclear refueling outage expenses 3,988 3,690 8,022 6,904 Other operation and maintenance 21,433 23,059 37,806 38,332 Decommissioning 4,736 4,736 9,472 9,472 Taxes other than income taxes 6,460 6,225 13,168 12,168 Depreciation and amortization 27,227 27,875 56,708 55,931 Other regulatory charges - net 19,955 16,051 39,122 30,796 -------- -------- -------- -------- TOTAL 91,621 92,494 182,192 175,143 -------- -------- -------- -------- OPERATING INCOME 61,281 66,895 121,876 141,336 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 484 374 754 1,106 Miscellaneous - net 4,723 5,096 9,794 9,192 -------- -------- -------- -------- TOTAL 5,207 5,470 10,548 10,298 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 18,756 22,636 37,767 46,762 Other interest - net 8,929 7,298 17,636 14,141 Allowance for borrowed funds used during construction (224) (177) (361) (653) -------- -------- -------- -------- TOTAL 27,461 29,757 55,042 60,250 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 39,027 42,608 77,382 91,384 Income taxes 17,825 20,822 35,382 43,811 -------- -------- -------- -------- NET INCOME $21,202 $21,786 $42,000 $47,573 ======== ======== ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES <S> <C> <C> Net income $42,000 $47,573 Noncash items included in net income: Reserve for regulatory adjustments 53,475 37,751 Other regulatory charges - net 39,122 30,796 Depreciation, amortization, and decommissioning 66,180 65,403 Deferred income taxes and investment tax credits (44,214) (39,621) Allowance for equity funds used during construction (754) (1,106) Changes in working capital: Receivables (101,734) 186,754 Accounts payable (11,514) (14,193) Taxes accrued 62,571 2,751 Interest accrued (18,683) (9,375) Other working capital accounts (7,612) 12,218 Provision for estimated losses and reserves (425) (106) Changes in other regulatory assets 20,394 19,298 Other (3,295) (13,084) -------- -------- Net cash flow provided by operating activities 95,511 325,059 -------- -------- INVESTING ACTIVITIES Construction expenditures (22,758) (24,557) Allowance for equity funds used during construction 754 1,106 Nuclear fuel purchases (37,592) (7) Proceeds from sale/leaseback of nuclear fuel 37,592 7 Decommissioning trust contributions and realized change in trust assets (11,676) (11,544) -------- -------- Net cash flow used in investing activities (33,680) (34,995) -------- -------- FINANCING ACTIVITIES Retirement of long-term debt (16,800) (2,947) Dividends paid: Common stock (43,000) (47,000) -------- -------- Net cash flow used in financing activities (59,800) (49,947) -------- -------- Net increase in cash and cash equivalents 2,031 240,117 Cash and cash equivalents at beginning of period 202,218 35,152 -------- -------- Cash and cash equivalents at end of period $204,249 $275,269 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $71,878 $54,870 Income taxes $3,463 $37,045 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($1,417) $199 See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS ASSETS June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS <S> <C> <C> Cash and cash equivalents: Cash $15 $44 Temporary cash investments - at cost, which approximates market 204,234 202,174 ---------- ---------- Total cash and cash equivalents 204,249 202,218 ---------- ---------- Accounts receivable: Associated companies 315,361 212,551 Other 1,118 2,194 ---------- ---------- Total accounts receivable 316,479 214,745 ---------- ---------- Materials and supplies - at average cost 52,276 52,235 Deferred nuclear refueling outage costs 12,117 6,577 Prepayments and other 4,547 2,639 ---------- ---------- TOTAL 589,668 478,414 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 167,831 157,572 ---------- ---------- UTILITY PLANT Electric 3,095,868 3,093,033 Property under capital lease 449,851 449,851 Construction work in progress 43,934 24,029 Nuclear fuel under capital lease 74,994 49,256 ---------- ---------- TOTAL UTILITY PLANT 3,664,647 3,616,169 Less - accumulated depreciation and amortization 1,466,886 1,407,885 ---------- ---------- UTILITY PLANT - NET 2,197,761 2,208,284 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 170,913 195,634 Unamortized loss on reacquired debt 50,169 51,957 Other regulatory assets 178,844 174,517 Other 8,457 8,172 ---------- ---------- TOTAL 408,383 430,280 ---------- ---------- TOTAL ASSETS $3,363,643 $3,274,550 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDER'S EQUITY June 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES <S> <C> <C> Currently maturing long-term debt $182,691 $151,800 Accounts payable: Associated companies 1,435 2,722 Other 13,358 23,585 Taxes accrued 131,101 68,530 Accumulated deferred income taxes 3,811 1,648 Interest accrued 25,324 44,007 Obligations under capital leases 32,119 32,119 Other 1,551 1,674 ---------- ---------- TOTAL 391,390 326,085 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 334,917 391,505 Accumulated deferred investment tax credits 87,778 89,516 Obligations under capital leases 42,875 17,137 FERC settlement - refund obligation 27,134 30,745 Other regulatory liabilities 146,672 103,634 Decommissioning 164,874 153,197 Regulatory reserves 375,843 322,368 Accumulated provisions 264 689 Other 16,270 15,394 ---------- ---------- TOTAL 1,196,627 1,124,185 ---------- ---------- Long-term debt 883,201 930,854 SHAREHOLDER'S EQUITY Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2001 and 2000 789,350 789,350 Retained earnings 103,075 104,076 ---------- ---------- TOTAL 892,425 893,426 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $3,363,643 $3,274,550 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on Entergy's estimated construction expenditures (including nuclear fuel but excluding AFUDC), long-term debt and preferred stock maturities, and cash sinking fund requirements. Sales Warranties and Indemnities (Entergy Corporation) In the Entergy London and CitiPower sales transactions, Entergy or its subsidiaries made certain warranties to the purchasers. These warranties include representations regarding litigation, accuracy of financial accounts, and the adequacy of existing tax provisions. Notice of a claim on the CitiPower warranties must have been given by December 2000, and Entergy's potential liability is limited to A$100 million ($51 million). Notice of a claim on the Entergy London warranties had to be given for certain items by December 1999, and for the tax warranties, must have been given by June 30, 2001. Entergy's liability is limited to BPS1.4 billion ($2.0 billion) on certain tax warranties and BPS140 million ($200 million) on the remaining warranties relating to the Entergy London sale. Entergy also agreed to maintain the net asset value of the subsidiary that sold Entergy London at $700 million through June 30, 2001. For both of the sales, the notice period is extended if a taxing authority has begun a review before expiration of the notice period. Entergy received notice in June 2001 from both purchasers regarding issues that have not been resolved by the respective taxing authorities concerning reviews that commenced before the notice deadlines. Entergy responded to both purchasers, and denies that valid claims by the purchasers have been made under the warranties. Management periodically reviews reserve levels for these warranties and as of June 30, 2001 believes it has adequately provided for the ultimate resolution of these matters. Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on nuclear liability, property and replacement power insurance, related NRC regulations, the disposal of spent nuclear fuel, other high- level radioactive waste, and decommissioning costs associated with ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf 1, Pilgrim, Indian Point 3, and FitzPatrick. Environmental Issues (Entergy Arkansas) In previous years, Entergy Arkansas has received notices from the EPA and the Arkansas Department of Environmental Quality (ADEQ) alleging that Entergy Arkansas, along with others, may be a potentially responsible party (PRP) for clean-up costs associated with a site in Arkansas. As of June 30, 2001, a remaining recorded liability of approximately $5.0 million existed related to the cleanup of that site. (Entergy Gulf States) Entergy Gulf States has been designated as a PRP for the cleanup of certain hazardous waste disposal sites. Entergy Gulf States is currently negotiating with the EPA and state authorities regarding the cleanup of these sites. As of June 30, 2001, a remaining recorded liability of approximately $17.0 million existed related to the cleanup of the remaining sites at which the EPA has designated Entergy Gulf States as a PRP. (Entergy Louisiana and Entergy New Orleans) During 1993, the Louisiana Department of Environmental Quality (LDEQ) issued new rules for solid waste regulation, including regulation of wastewater impoundments. Entergy Louisiana and Entergy New Orleans have determined that certain of their power plant wastewater impoundments were affected by these regulations and have chosen to upgrade or close them. Recorded liabilities in the amounts of $5.8 million for Entergy Louisiana and $0.5 million for Entergy New Orleans existed at June 30, 2001 for wastewater upgrades and closures. Completion of this work is awaiting LDEQ approval. City Franchise Ordinances (Entergy New Orleans) Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to franchise ordinances. These ordinances contain a continuing option for the City to purchase Entergy New Orleans' electric and gas utility properties. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three separate but substantially identical transactions for the sale and leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3, which were refinanced in 1997. Upon the occurrence of certain events, Entergy Louisiana may be obligated to pay amounts sufficient to permit the Owner Participants to withdraw from these lease transactions and may be required to assume the outstanding bonds issued to finance, in part, the lessors' acquisition of the undivided interests in Waterford 3. See Note 10 to the financial statements in the Form 10-K for further information. Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi) Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, and/or sex. The defendant companies are vigorously defending these suits and deny any liability to the plaintiffs. However, no assurance can be given as to the outcome of these cases. Reimbursement Agreement (System Energy) Under a bank letter of credit and reimbursement agreement, System Energy has agreed to a number of covenants relating to the maintenance of certain capitalization and fixed charge coverage ratios. System Energy agreed, during the term of the agreement, to maintain its equity at not less than 33% of its adjusted capitalization (defined in the agreement to include certain amounts not included in capitalization for financial statement purposes). In addition, System Energy must maintain, with respect to each fiscal quarter during the term of the agreement, a ratio of adjusted net income to interest expense (calculated, in each case, as specified in the agreement) of at least 1.60 times earnings. System Energy was in compliance with the above covenants at June 30, 2001. See Note 9 to the financial statements in the Form 10-K for further information. Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) In addition to those proceedings discussed elsewhere herein and in the Form 10-K, Entergy and the domestic utility companies are involved in a number of other legal proceedings and claims in the ordinary course of their businesses. While management is unable to predict the outcome of these other legal proceedings and claims, it is not expected that their ultimate resolution individually or collectively will have a material adverse effect on the results of operations, cash flows, or financial condition of these entities. NOTE 2. RATE AND REGULATORY MATTERS Electric Industry Restructuring Previous developments and information related to electric industry restructuring are presented in Note 2 to the financial statements in the Form 10-K. Arkansas (Entergy Corporation and Entergy Arkansas) As discussed in Note 2 to the financial statements in the Form 10-K, the target date for retail open access has been delayed until no sooner than October 1, 2003 and no later than October 1, 2005. In October 2000, in compliance with the currently enacted deregulation law, Entergy Arkansas filed a market power study in accordance with the guidelines adopted by the APSC. In December 2000, Entergy Arkansas filed an application for approval to transfer Entergy Arkansas' transmission assets to the Transco. In February 2001, Entergy Arkansas filed supplemental testimony to address the effects of the proposed Transco on Entergy Arkansas' market power. In July 2001, Entergy Arkansas filed a request, which the APSC approved, to suspend proceedings regarding Transco pending further action in the FERC-mandated mediation proceedings. Texas (Entergy Corporation and Entergy Gulf States) As discussed in Note 2 to the financial statements in the Form 10-K, the Texas legislature enacted a law providing for retail open access by most investor-owned electric utilities, including Entergy Gulf States, on January 1, 2002, unless delayed by the PUCT. As described below, the PUCT staff and certain cities served by Entergy Gulf States filed separate petitions with the PUCT in August 2001 requesting relief that may result in a delay in retail competition in the power region in which Entergy Gulf States operates in Texas. With retail open access, generation and a new retail electric provider operation will be competitive businesses, but transmission and distribution operations will continue to be regulated. The new retail electric providers will be the primary point of contact with customers. Business Separation Plan Entergy Gulf States' business separation plan provides for the separation of its generation, transmission, distribution and retail electric functions. It has been amended during the course of various PUCT and LPSC proceedings and is subject to further change and regulatory proceedings as described below. The amended plan currently provides that Entergy Gulf States will be separated into the following principal companies: o a Texas distribution company, which will own and operate Entergy Gulf States' electric distribution system in Texas; o a Texas generation company (which may be more than one legal entity), which initially will purchase capacity and energy from the generating assets allocated to Texas load (Texas generating assets), and eventually will own those assets; o Texas retail electric providers, which will provide competitive retail electric service in Texas; and o Entergy Gulf States-Louisiana. Entergy Gulf States-Louisiana will: o own and operate Entergy Gulf States' electric distribution system in Louisiana, the Texas generating assets (until they are transferred to the Texas generation company), the remainder of Entergy Gulf States' generating assets, and Entergy Gulf States' other businesses that are not separated, and own Entergy Gulf States' transmission assets allocated to Louisiana (until they are transferred to the intermediate transmission company described in the next bullet); and o indirectly own a portion of an intermediate transmission company, which will own Entergy Gulf States' electric transmission assets allocated to Texas, and later Entergy Gulf States' transmission assets allocated to Louisiana. Entergy Gulf States' assets and liabilities (other than its long-term debt and liabilities) will be allocated among these companies generally based upon categorizing them by function. Entergy Gulf States will allocate assets and liabilities not associated with a single function based upon specified factors. In an April 2001 filing with the LPSC discussing its separation methodology, Entergy Gulf States included a balance sheet separated by jurisdiction and function. The balance sheet was based on September 30, 1999 balances. In this balance sheet, Entergy Gulf States allocated approximately 27% of the net utility plant balance to Texas generation, approximately 12% to Texas distribution, approximately 6% to Texas transmission, approximately 7% to Louisiana transmission, and less than 1% to Texas retail. Applying these percentages to Entergy Gulf States' June 30, 2001 net utility plant book value of $4.2 billion, for illustrative purposes only, results in net book values of approximately $1.2 billion for Texas generation, approximately $580 million for Texas distribution, approximately $180 million for Texas transmission, approximately $210 million for Louisiana transmission, approximately $20 million for Texas retail, and would result in approximately $2.0 billion for the remainder of Entergy Gulf States-Louisiana. The actual allocations could materially differ from these figures because of a number of factors, including changes to the plan and the allocation methodology. In addition, the actual allocations will be based on allocation factors and account balances as of a different date. The business separation plan provides that Entergy Gulf States- Louisiana will retain liability for all of its long-term debt and liabilities and that the property transferred to the Texas companies will be released from the lien of Entergy Gulf States' mortgage on the basis of property additions, retired bond credits, or both. Pursuant to separate agreements, the Texas distribution company and the intermediate transmission company will each assume a portion of Entergy Gulf States' long-term debt and liabilities, which assumptions will not act to release Entergy Gulf States-Louisiana's liability. The Texas distribution company and the intermediate transmission company will undertake to pay the outstanding assumed long-term debt and liabilities by the end of 2002 and 2004, respectively. Entergy must provide a contingent indemnity with respect to the intermediate transmission company's assumed portion of Entergy Gulf States' long-term debt and liabilities in the event that the obligations under the debt assumption agreement have not been extinguished prior to the end of 2002. Texas generation company will be required to pay an allocated portion of the outstanding principal amount of Entergy Gulf States' long-term debt and liabilities each time that Texas generating assets are transferred to it, which must be completed no later than 2004. After the transfer of the Texas distribution and transmission assets contemplated by the current business separation plan, the distribution and transmission businesses conducted by the Texas distribution company and the intermediate transmission company, respectively, will continue to be regulated as to rates by the PUCT and the FERC, respectively. Accordingly, management believes that the Texas distribution company and the intermediate transmission company will be able to fund the payment of the assumed debt by the end of 2002 from a combination of cash flow from operations and third party financing. Entergy Gulf States filed the business separation plan with the PUCT in January 2000 and amended that plan in November 2000 and January 2001. In May 2001, the PUCT approved the amended business separation plan. The outcome of the LPSC proceedings described below, which have resulted in amendments to the plan beyond what was approved by the PUCT, will be reported to the PUCT and the Office of Public Utility Counsel and may require additional PUCT action before the business separation plan is final. In addition, the petitions described below that may result in a delay in retail competition may affect the approval. The LPSC opened a docket to identify the changes in corporate structure and operations of Entergy Gulf States, and their potential impact on Louisiana retail ratepayers, resulting from restructuring in Texas and Arkansas. In those proceedings, Entergy Gulf States and the LPSC staff reached a settlement on certain Texas business separation plan issues, and after a May 2001 hearing, the LPSC issued an interim order in July 2001 approving the settlement. In July 2001, Entergy Gulf States and the LPSC staff completed an additional settlement on business separation plan issues relating to the separation of Texas distribution and transmission. A hearing on the distribution and transmission settlement has been held and a decision is expected in September 2001. With respect to issues related to the separation of generation, Entergy Gulf States and the LPSC staff are preparing a revised procedural schedule to address remaining issues in a timely manner. The procedural schedule initially will focus on the power sale agreement described below. Generation-related Issues Regarding the generation-related issues referred to in the preceding paragraph, Entergy Gulf States has not yet reached agreement with the LPSC staff on certain matters related to the separation of the Texas generating assets. Entergy Gulf States has proposed that Texas generating assets be a jurisdictional portion (approximately 45 - 50%) of each generating plant and that Entergy Gulf States-Louisiana continue to operate the plants. Entergy Gulf States has also suggested that certain generating assets be allocated by specific plant such that the Texas generating assets have approximately the Texas jurisdictional portion of the capacity and value of all of Entergy Gulf States' generating assets. Until the Texas generating assets are transferred to the Texas generation company, which, as currently proposed, will occur by the end of 2004, Entergy Gulf States-Louisiana expects to sell most of the capacity and energy from these assets to the Texas generation company under a power sale agreement. The power sale agreement is expected to require the Texas generation company to pay all costs, including a reasonable return on equity, for the capacity and energy of the Texas generating assets. The Texas generation company is expected to sell most of this capacity and energy to Entergy's affiliated Texas retail electric providers at a negotiated rate and sell any remainder to the market. Entergy's affiliated Texas retail electric providers will use the capacity and energy to provide retail electric service to retail customers in Texas, including its "price- to-beat" obligation, which requires it to sell electricity to residential and small commercial customers in the service territory of the Texas distribution company at a rate equal to the existing base rates plus a fuel component. Up to 20% of capacity and energy from the Texas generating assets must be sold to third parties under PUCT rules, or to Entergy's domestic utility companies that elect to purchase it, as described below: o Under the Texas restructuring legislation and a recent stipulation, Entergy Gulf States will sell at auction entitlements to approximately 425 megawatts of its installed generation capacity in Texas currently scheduled to begin in September 2001. In its August 3, 2001 petition discussed below, however, the PUCT staff has requested that the PUCT suspend Entergy Gulf States' capacity auctions pending consideration of the petition. The obligation to auction capacity entitlements continues for up to 60 months after retail open access occurs, or until 40% of current customers have chosen an alternative supplier, whichever comes first. o Under the settlement of System Agreement proceedings, which are described in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS", Entergy's domestic utility companies have the option to purchase up to 5% of the megawatt capacity of the Texas generating assets. Each company has until November 2001 to elect to purchase its pro rata share of this capacity. If the capacity purchase is elected, it will be for the period January 2002 through June 2008. Beginning January 2002, the market power measures in the Texas restructuring law will prohibit the Texas generation company and its affiliates from owning and controlling more than 20% of the installed generation capacity located in, or capable of delivering electricity to, a power region. The implications of this limit are uncertain. It is possible that the Texas generation company or its affiliates could be required to auction additional capacity entitlements, divest some of the Texas generating assets, or seek other means of mitigation if found to have ownership in excess of this limit. Other PUCT Proceedings In March 2001, Entergy Gulf States filed with the PUCT a non-unanimous settlement agreement in its unbundled cost of service proceeding that establishes the Texas distribution company's revenue requirement. The settlement agreement is among Entergy Gulf States, the PUCT staff, and other parties. Pursuant to a generic rule prescribed by the PUCT, the Texas distribution company's allowed return on equity will be 11.25%. The capital structure prescribed by the PUCT is 60% debt and 40% equity. A rider to recover nuclear decommissioning costs will be implemented. Also in the settlement agreement, the parties agree that Entergy Gulf States' Texas jurisdictional stranded costs and benefits are $0, and no charge to recover stranded costs or credit to refund excess mitigation will be implemented. Nevertheless, if new legislation passes in Texas that requires or expressly authorizes the PUCT to require Entergy Gulf States to pass-through or share stranded benefits with its customers, that legislation will control this issue. Entergy Gulf States agreed in the settlement to refund any excess earnings resulting from the restructuring law's annual report process for 2000 and 2001. After a hearing in April 2001, the PUCT voted to approve a rate order consistent with the terms of the settlement. A written interim order was signed in May 2001 and a final order is expected in the fall of 2001. In June 2001, Entergy filed an application with the PUCT seeking certification of the Southwest Power Pool (SPP) as a power region under the Texas restructuring law. The proceeding has been abated, however, due to FERC's recent order on the establishment of regional transmission organizations (RTOs), discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS". If Entergy Gulf States' power region in Texas is not certified by the PUCT before retail open access is introduced on January 1, 2002, Entergy's affiliated Texas retail electric provider could be required to maintain rates at the price-to-beat levels for residential and small commercial customers in Entergy Gulf States' service territory beyond January 1, 2007. Entergy's affiliated Texas retail electric provider could also be required to offer rates to industrial and large commercial customers in Entergy Gulf States' service territory that are no higher than the rates that, on a bundled basis, were in effect on January 1, 1999, subject to fuel factor adjustments. Entergy's affiliated Texas retail electric provider might also face requests for restrictions in its ability to compete for retail customers in parts of its power region in Texas outside of its current service area. Neither the timing nor the outcome of the power region certification proceeding can be predicted at this time. In July 2001, Entergy Gulf States filed an application for approval of the fuel factor portion of Entergy's affiliated Texas retail electric provider's price-to-beat rates. The non-fuel component of the price-to- beat rate is based on Entergy Gulf States' current base rates. The fuel factor component established in this proceeding will be subject to a gas price update in October 2001. Entergy Gulf States has recommended that the PUCT approve its current average fuel factor, which currently is higher than the average fuel factor included in the filing, in order to maintain an adequate competitive margin. The request is currently pending before the PUCT and an order is expected by December 2001. The PUCT has designated an Entergy-affiliated Texas retail electric provider to serve as the provider of last resort (POLR) for residential and small non-residential customers in the service territory of Southwestern Electric Power Company (SWEPCO), and for industrial and large commercial customers in Entergy Gulf States' Texas service territory. The contract with the PUCT containing the rates at which the designated retail electric provider will provide service to these customer classes has been signed. A proceeding has been initiated to designate SWEPCO's affiliated retail electric provider as the POLR for the residential and small non-residential customers in Entergy Gulf States' Texas service territory. If SWEPCO's affiliate is not designated as the POLR for Entergy Gulf States' Texas service territory, it is possible that the PUCT could designate the Entergy- affiliated Texas retail electric provider to serve as the POLR for those customers at the price-to-beat rate. Neither the timing nor the outcome of these proceedings can be predicted at this time. The Texas legislation requires Entergy Gulf States to conduct a customer choice "Pilot Project" for retail customers. The full implementation originally scheduled for June 1, 2001 was delayed until July 31, 2001. The PUCT is scheduled to evaluate the results of the Pilot Project beginning in November 2001. If the PUCT determines, based upon the results of the evaluation, that the Entergy Gulf States' power region is unable to offer fair competition and reliable service to all retail customer classes on January 1, 2002, the PUCT is required to delay customer choice for the power region. The PUCT can also choose to continue the Pilot Project. If retail open access is delayed, the PUCT has the option to thereafter establish new rates for all electric utilities in the power region under cost-of-service ratemaking. On August 3, 2001, the PUCT staff filed a petition requesting that the PUCT determine whether the market is ready for retail competition in the portion of Texas within the Southeastern Electric Reliability Council (SERC), which includes Entergy Gulf States' service territory. In its petition, the PUCT staff states that the retail electric power pilot programs in SERC have not been successful to date in creating competition. The petition also states that, in light of information received by the PUCT staff indicating a lack of interest in SERC by the retail electric provider community at this time and the uncertainty surrounding the status of an RTO in SERC, it is unlikely that the competitive situation in SERC will improve to any significant degree before the current date for full customer choice to begin in SERC. The PUCT staff also requests an expedited procedural schedule. Entergy Gulf States' initial response to the PUCT staff's petition is due by August 13, 2001. Certain cities served by Entergy Gulf States also filed a petition asking the PUCT to delay competition for Entergy Gulf States. Entergy Gulf States is unable to predict whether PUCT action on this petition will result in delays or modifications of the implementation of competition or the Entergy Gulf States business separation plan. Other Regulatory Proceedings and Uncertainties In addition to the PUCT and LPSC proceedings relating to the business separation plan described above, certain aspects of the business separation plan will also have to be approved by the SEC under PUHCA. Entergy Gulf States filed an application for SEC approval in August 2001. In addition, as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS", FERC has approved a settlement providing for certain amendments to the System Agreement required by the Texas restructuring. Certain aspects of the Texas restructuring will require additional FERC approvals. Entergy Gulf States will also have to obtain the approval of the NRC to transfer ownership of any interest in River Bend. The regulatory proceedings described above have affected, and are likely to continue to affect, the final form and timing of implementation of the business separation plan. It is possible that these approvals or related regulatory orders o may not be received in time to implement the plan on January 1, 2002; o may be obtained with requirements or conditions that differ from the business separation plan described above or that conflict with each other; or o may be obtained with conditions that are unacceptable to Entergy or that do not permit timely implementation. Entergy Gulf States' business separation plan has already been amended during the course of the PUCT and LPSC proceedings described above and is subject to further change as a result of the regulatory approval process or otherwise. As a result, no assurance can be given that the business separation plan will be implemented as described above or that it will not change significantly before implementation. Louisiana (Entergy Corporation and Entergy Louisiana) As discussed in Note 2 to the financial statements in the Form 10-K, the LPSC directed the LPSC staff, outside consultants, and counsel to work together to analyze and resolve issues related to competition and to recommend a plan for consideration by the LPSC. In July 2001, the LPSC staff submitted a final response to the LPSC. In its report the LPSC staff concludes that retail competition is not in the public interest at this time for any customer class. Nevertheless, the LPSC staff recommends that retail open access be made available for certain large industrial customers as early as January 2003. An eligible customer choosing to go to competition would be required to provide its utility with a minimum of six months notice prior to the date of retail open access. The LPSC staff report also recommends that all customers who do not currently co- or self- generate, or have co- or self-generation under construction as of a date to be specified by the LPSC, remain liable for their share of stranded costs. This proposal is currently pending consideration by the LPSC. Retail Rate Proceedings Previous developments and information related to retail rate proceedings are presented in Note 2 to the financial statements in the Form 10-K. Filings with the APSC (Entergy Corporation and Entergy Arkansas) In March 2001, Entergy Arkansas filed its annually redetermined energy cost rate with the APSC in accordance with the energy cost rate formula, including a new energy allocation factor. The filing reflected that an increase was warranted due to the increase in fuel and purchased power costs in 2000 and the accumulated under-recovery of 2000 energy costs. The increased energy cost rate is effective April 2001 through March 2002. As discussed in Note 2 to the financial statements in the Form 10-K, Entergy Arkansas is operating under the terms of a settlement agreement approved by the APSC that allows the collection of excess earnings in a transition cost account. In June 2001, upon recommendation from the APSC, Entergy Arkansas recorded an adjustment for 2000 excess earnings in the transition cost account of $10.9 million ($6.7 million after tax). Interest of $3.0 million ($1.8 million after tax) was also recorded in the transition cost account for the first six months of 2001. December 2000 Ice Storms In mid- and late December 2000, two separate ice storms left 226,000 and 212,500 Entergy Arkansas customers, respectively, without electric power in its service area. The storms were the most severe natural disasters ever to affect Entergy Arkansas, causing damage to transmission and distribution lines, equipment, poles, and facilities. In April 2001, Entergy Arkansas filed with the APSC a proposal to recover, over approximately a five and one-half year period, costs plus carrying charges associated with power restoration caused by the December 2000 ice storms. In an order issued in June 2001, the APSC decided that it would not give final approval to Entergy's proposed storm cost recovery rider outside of a fully developed cost-of-service study in a general rate proceeding. The APSC action resulted in the deferral in 2001 of previously expensed storm damage costs as reflected in Entergy Arkansas' financial statements. In a subsequent decision, the APSC ordered Entergy Arkansas to commence such a proceeding by January 2002. In the subsequent order, the APSC also established a procedural schedule to consider putting an interim rider in place to recover the ice storm costs, subject to refund. The schedule calls for a January 2002 hearing date and the issuance of a decision by February 2002. In accord with the schedule, Entergy Arkansas filed its final storm damage cost determination, which reflects costs of approximately $195 million. The filing asks for recovery of approximately $170 million through the rider over approximately a six and one-half year period. The remainder of the costs is primarily capital expenditures that will be included in rate base in future general rate proceedings. No assurance can be given as to the timing or outcome of these proceedings before the APSC. Filings with the PUCT and Texas Cities Recovery of River Bend Costs (Entergy Corporation and Entergy Gulf States) In March 1998, the PUCT disallowed recovery of $1.4 billion of company- wide abeyed River Bend plant costs, which have been held in abeyance since 1988. Entergy Gulf States appealed the PUCT's decision on this matter to the Travis County District Court in Texas. Subsequent to the June 1999 settlement agreement discussed in Note 2 to the financial statements in the Form 10-K, Entergy Gulf States removed the reserve for River Bend plant costs held in abeyance and reduced the net book value of the plant asset. The June 1999 settlement agreement limits potential recovery of the remaining plant asset, less depreciation, to $115 million as of January 1, 2002. In the unbundled cost of service settlement discussed above, and consistent with the June 1999 settlement, Entergy Gulf States agrees not to prosecute its appeal until January 1, 2002. Entergy Gulf States also agrees that it will not seek recovery of the abeyed plant costs through any additional charge to Texas ratepayers. The financial statement impact of the settlement agreement on the abeyed plant costs will ultimately depend on several factors, including the probable discontinuance of SFAS 71 accounting treatment to the Texas generation business, the determination of the market value of generation assets, and the possible enactment of legislation in Texas requiring the pass-through or sharing of any stranded benefits with Texas ratepayers. No assurance can be given that additional reserves or write-offs will not be required in the future. PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States) As determined in the June 1999 settlement agreement discussed in Note 2 to the financial statements in the Form 10-K, Entergy Gulf States adopted a methodology for calculating its fixed fuel factor based on the market price of natural gas. This calculation and any necessary adjustments occur semi-annually and will continue until December 2001 unless the PUCT orders otherwise. In July 2001, Entergy Gulf States filed with the PUCT a petition to abolish the fuel factor methodology and to permit instead Entergy Gulf States' existing fixed fuel factor to remain in effect until the fuel factor component of its price-to-beat rate takes effect. Entergy Gulf States cannot predict whether the PUCT will grant the petition. The amounts collected under Entergy Gulf States' fixed fuel factor through the date retail open access commences are subject to fuel reconciliation proceedings before the PUCT. In January 2001, Entergy Gulf States filed a fuel reconciliation case covering the period from March 1, 1999 to August 31, 2000. Entergy Gulf States is reconciling approximately $583 million of fuel and purchased power costs. As part of this filing, Entergy Gulf States requested the collection of $28 million, plus interest, of under-recovered fuel and purchased power costs. A procedural schedule has been established calling for a hearing in August 2001. The PUCT has deferred additional fuel surcharges for several utilities including Entergy Gulf States until the final fuel reconciliation that is scheduled to be filed in March 2003. Therefore, no assurance can be given as to the collection of the surcharge prior to that time. In March 2001, Entergy Gulf States filed an application with the PUCT requesting an interim surcharge to collect $82 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through January 2001. In May 2001, the PUCT denied Entergy Gulf States' request to implement the interim fuel surcharge and ordered that the uncollected fuel surcharge be carried over subject to the final fuel reconciliation that is scheduled to be filed in March 2003. Filings with the LPSC Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States) In June 2001, the LPSC approved a settlement between Entergy Gulf States and the LPSC staff to refund $25.9 million, including interest, resolving issues in Entergy Gulf States' third, sixth, and seventh post- merger earnings reviews filed with the LPSC in May 1996, 1999, and 2000, respectively. The refund is being made over a three month period beginning July 2001. The settlement resolved the prospective return on common equity issue on remand from the Louisiana Supreme Court in the third earnings review. Refund issues from the sixth and seventh earnings reviews were also resolved; however, certain prospective issues remain in dispute. The LPSC approved an 11.1% return on common equity through June 2003, which Entergy Gulf States was allowed to include in its eighth post-merger earnings analysis discussed below. In May 2001, Entergy Gulf States filed its eighth required post-merger earnings analysis with the LPSC. This filing will be subject to review by the LPSC, which may result in a change in rates. A procedural schedule has not yet been established. Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana) In May 2000, Entergy Louisiana submitted its fifth annual performance- based formula rate plan filing. The filing used a 1999 test year. As a result of this filing, Entergy Louisiana implemented a $24.8 million base rate reduction in August 2000. Entergy Louisiana has reached a proposed settlement with the LPSC staff in which Entergy Louisiana has agreed to increase to $28.2 million the total base rate reduction, effective August 2000. The settlement resolves all issues in the proceeding except for Entergy Louisiana's claim for an increase in its allowed return on common equity from 10.5% to 11.6%. A procedural schedule has not yet been established by the LPSC for its consideration of the proposed settlement and the return on common equity issue. In April 2001, Entergy Louisiana submitted its sixth annual performance-based formula rate plan filing, which used a 2000 test year. The filing indicated that an immaterial base rate reduction might be appropriate. This filing will be subject to review by the LPSC. A procedural schedule has not yet been established by the LPSC. Fuel Adjustment Clause Litigation (Entergy Corporation and Entergy Louisiana) In May 1998, a group of ratepayers filed a complaint against Entergy Corporation, Entergy Power, and Entergy Louisiana in state court in Orleans Parish purportedly on behalf of all Entergy Louisiana ratepayers. The plaintiffs seek treble damages for alleged injuries arising from alleged violations by the defendants of Louisiana's antitrust laws in connection with the costs included in fuel filings with the LPSC and passed through to ratepayers. Plaintiffs also requested that the LPSC initiate a review of Entergy Louisiana's monthly fuel adjustment charge filings and force restitution to ratepayers of all costs that the plaintiffs allege were improperly included in those fuel adjustment filings. A few parties intervened in the LPSC proceeding. In direct testimony, plaintiffs purport to quantify many of their claims for the period 1989 through 1998 in an amount totaling $544 million, plus interest. Entergy Louisiana has agreed to settle both of these proceedings. The LPSC approved the settlement agreement following a fairness hearing before an ALJ in November 2000. The state court certified the plaintiff class and approved the settlement after a fairness hearing in April 2001. Under the terms of the settlement agreement, Entergy Louisiana agreed to refund to customers approximately $72 million to resolve all claims arising out of or relating to Entergy Louisiana's fuel adjustment clause filings from January 1, 1975 through December 31, 1999, except with respect to purchased power and associated costs included in the fuel adjustment clause filings for the period May 1 through September 30, 1999. Entergy Louisiana previously recorded reserves for the refund, which Entergy Louisiana began making over a three month period beginning in July of 2001 through the fuel adjustment clause. Also under the terms of the settlement, Entergy Louisiana consents to future fuel cost recovery under a long-term gas contract based on a formula that would likely result in an under-recovery of actual costs for the remainder of the contract's term, which runs through 2013. The future under-recovery cannot be precisely estimated at this time because it will depend upon factors that are not certain, such as the price of gas and the amount of gas purchased under the long-term contract. In recent years, Entergy Louisiana has made purchases under that contract totaling from $91 million to $121 million annually. Had the proposed settlement terms been applicable to such purchases, the under-recoveries would have ranged from $4 million to $9 million per year. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) In March 2001, Entergy Mississippi submitted its annual performance- based formula rate plan filing for the 2000 test year. The submittal indicated that a $6.7 million rate increase adjustment was appropriate under the formula rate plan. In April 2001, the MPSC Staff and Entergy Mississippi entered into a stipulation that provides for an increase of $5.6 million, which was approved by the MPSC and was effective May 2001. Filings with the Council (Entergy Corporation and Entergy New Orleans) Rate Proceedings In June 2001, Entergy New Orleans filed with the Council for changes in gas and electric rates based on a test year ending December 31, 2000. The filing indicated that an increase in both gas and electric rates might be appropriate. Proceedings on Entergy New Orleans' filing have been deferred until June 2002. Fuel Adjustment Clause Litigation In April 1999, a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seek treble damages for alleged injuries arising from the defendants' alleged violations of Louisiana's antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans' fuel adjustment filings with the Council. In particular, plaintiffs allege that Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorneys' fees. Exceptions to the plaintiffs' allegations were filed by Entergy, asserting, among other things, that jurisdiction over these issues rests with the Council and FERC. If necessary, at the appropriate time, Entergy will also raise its defenses to the antitrust claims. At present, the suit in state court is stayed by stipulation of the parties. Plaintiffs also filed this complaint with the Council in order to initiate a review by the Council of the plaintiffs' allegations and to force restitution to ratepayers of all costs they allege were improperly and imprudently included in the fuel adjustment filings. Discovery has begun in the proceedings before the Council. Testimony was filed on behalf of the plaintiffs in this proceeding in April 2000 and has been supplemented. The testimony, as supplemented, asserts, among other things, that Entergy New Orleans and other defendants have engaged in fuel procurement and power purchasing practices and included costs in Entergy New Orleans' fuel adjustment that could have resulted in New Orleans customers being overcharged by more than $98 million over a period of years. In June 2001, the Council's Advisors filed testimony on these issues in which they allege that Entergy New Orleans ratepayers may have been overcharged by more than $32 million, the vast majority of which is reflected in the plaintiffs' claim. However, it is not clear precisely what periods and damages are being alleged in the proceeding. Entergy intends to defend this matter vigorously, both in court and before the Council. Hearings are to be held in November 2001. The ultimate outcome of the lawsuit and the Council proceeding cannot be predicted at this time. Natural Gas Purchases In a resolution adopted August 2, 2001, the Council ordered Entergy New Orleans to account for $30.1 million of certain natural gas costs charged to its gas distribution customers from July 1997 through May 2001. The resolution suggests that refunds may be due to the gas distribution customers if Entergy New Orleans cannot account satisfactorily for these costs. Entergy New Orleans' response to the Council is due within 45 days of the adoption of the resolution. The ultimate outcome of the proceeding cannot be predicted at this time. Proposed System Energy Rate Increase (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in Note 2 to the financial statements in the Form 10-K, System Energy applied to FERC in May 1995 for a $65.5 million rate increase. The request sought changes to System Energy's rate schedule, including increases in the revenue requirement associated with decommissioning costs, the depreciation rate, and the rate of return on common equity. In December 1995, System Energy implemented the rate increase, subject to refund, for which a portion has been reserved. After a hearing, FERC issued an order in July 2000 in the proceeding. FERC affirmed the ALJ's adoption of a 10.8% return on equity, but modified the return to reflect changes in capital market conditions since the ALJ's decision. FERC adjusted the rate of return to 10.58% for the period December 1995 to the date of FERC's decision, and prospectively adjusted the rate of return to 10.94% from the date of FERC's decision. FERC's decision also changed other aspects of System Energy's proposed rate schedule, including the depreciation rate and decommissioning costs and their methodology. In July 2001, FERC denied requests for rehearing, including System Energy's request. Management is currently evaluating its possible responses to this denial. System Energy has provided reserves for a potential refund to the rate level of the initial ALJ decision, including interest. Management has analyzed the financial effect of FERC's July 2000 order, and concluded that a refund to the FERC decision rate level is not expected to have a material adverse effect on Entergy's, System Energy's, or the domestic utility companies' results of operations. Grand Gulf Accelerated Recovery Tariff (Entergy Arkansas) In April 1998, FERC approved the GGART that Entergy Arkansas filed as part of the settlement agreement that the APSC approved in December 1997. The GGART was designed to allow Entergy Arkansas to pay down a portion of its Grand Gulf purchased power obligation in advance of the implementation of retail access in Arkansas. The GGART provides for the acceleration of $165.3 million of its obligation over the period January 1, 1999 through June 30, 2004. In April 2001, FERC approved Entergy Arkansas' filing that requested cessation of the GGART effective July 1, 2001. Entergy Arkansas made the filing pursuant to the terms of a December 2000 settlement agreement with the APSC, which is discussed in Note 2 to the financial statements in the Form 10-K. NOTE 3. COMMON STOCK (Entergy Corporation) During the six months ended June 30, 2001, Entergy Corporation repurchased 203,500 shares of common stock in the open market for an aggregate purchase price of approximately $7.9 million. During the six months ended June 30, 2001, Entergy Corporation issued 2,197,177 shares of its previously repurchased common stock to satisfy stock options exercised and employee stock purchases. In addition, Entergy Corporation received proceeds of approximately $2.1 million from the issuance of 79,473 shares of common stock to satisfy stock options exercised. NOTE 4. LONG-TERM DEBT (Entergy Arkansas) On July 17, 2001, Entergy Arkansas issued $100 million of 6.125% Series First Mortgage Bonds due July 1, 2005. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness associated with ice storm expenses. (Entergy Gulf States) On August 1, 2001, Entergy Gulf States retired, at maturity, $122.8 million of 6.41% Series First Mortgage Bonds with internally generated funds, primarily from the Entergy inter-company money pool funding arrangement. (Entergy Louisiana) On April 1, 2001, Entergy Louisiana retired, at maturity, $18.7 million of 7.875% Series First Mortgage Bonds with internally generated funds. (Entergy Mississippi) On January 31, 2001, Entergy Mississippi issued $70 million of 6.25% Series First Mortgage Bonds due February 1, 2003. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness incurred from money pool borrowings for capital expenditures and working capital needs. (Entergy New Orleans) On February 23, 2001, Entergy New Orleans issued $30 million of 6.65% Series First Mortgage Bonds due March 1, 2004. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness incurred from money pool borrowings for capital expenditures and working capital needs. (System Energy) On August 1, 2001, System Energy retired, at maturity, $135 million of 7.71% Series First Mortgage Bonds with internally generated funds. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On July 27, 2001, Entergy Corporation's Board of Directors declared a common stock dividend of $0.315 per share, payable on September 1, 2001, to holders of record on August 14, 2001. NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation) Entergy's reportable segments as of June 30, 2001, are domestic utility and System Energy, Entergy-Koch, Entergy Wholesale Operations (EWO), and domestic non-utility nuclear. Prior to the first quarter of 2001, Entergy also reported its power marketing and trading segment that engaged in the marketing of wholesale electricity, gas, other generating fuels, electric capacity, and financial instruments. On January 31, 2001, Entergy contributed substantially all of the power marketing and trading business to Entergy-Koch, and now reports results from the joint venture as equity in earnings of unconsolidated equity affiliates in the financial statements. See Note 9 to the financial statements for further discussion of the investment in Entergy-Koch, L.P. EWO, which includes Entergy's global power development business, and domestic non-utility nuclear were formerly reported in "all other," but are now reportable segments. "All Other" now includes the parent company, Entergy Corporation, and other business activity. Other business activity in the All Other column is principally gains or losses on the sales of businesses and the earnings on the proceeds of those sales. <TABLE> <CAPTION> Entergy's segment financial information for the three months ended June 30, 2001 and 2000 is as follows (in thousands): Domestic Entergy- EWO* Domestic All Other* Eliminations Consolidated Utility Koch/ Non-Utility and System Power Nuclear * Energy Marketing and Trading* <S> <C> <C> <C> <C> <C> <C> <C> 2001 Operating Revenues $2,022,354 $625 $315,407 $150,041 $8,092 ($1,243) $2,495,276 Equity in Earnings (Loss) of Unconsol. Equity Affiliates - 71,478 (698) - - - 70,780 Income Taxes 115,228 26,664 308 21,403 2,239 - 165,842 Net Income (Loss) 175,155 43,463 (13,284) 33,101 7,148 - 245,583 2000 Operating Revenues $1,697,577 $347,257 $34,901 $62,119 $8,514 ($12,580) $2,137,788 Income Taxes 120,306 3,055 11,646 8,480 6,376 - 149,863 Net Income 186,946 5,390 27,177 12,073 14,187 - 245,773 </TABLE> <TABLE> <CAPTION> Entergy's segment financial information for the six months ended June 30, 2001 and 2000 is as follows (in thousands): Domestic Entergy- EWO* Domestic All Other* Eliminations Consolidated Utility Koch/ Non- and System Power Utility Energy Marketing Nuclear * and Trading* <S> <C> <C> <C> <C> <C> <C> <C> 2001 Operating Revenues $4,006,062 $625 $793,352 $329,416 $20,482 ($2,235) $5,147,702 Equity in Earnings (Loss) of Unconsol. Equity Affiliates - 97,146 (1,603) - - - 95,543 Income Taxes (Benefit) 200,733 36,838 (2,269) 42,089 (3,119) - 274,272 Net Income (Loss) 295,593 60,028 (11,504) 64,484 (2,147) - 406,454 Total Assets 20,706,094 620,192 1,984,206 2,093,291 958,379 (995,320) 25,366,842 2000 Operating Revenues $3,098,921 $675,042 $62,532 $122,949 $14,276 ($24,440) $3,949,280 Income Taxes 191,497 8,929 8,217 17,044 7,001 - 232,688 Net Income 274,284 16,926 24,946 23,531 14,496 - 354,183 Total Assets 20,228,032 724,066 1,758,639 604,973 1,542,609 (534,043) 24,324,276 </TABLE> Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily inter-segment activity. NOTE 7. ENTERGY-FPL GROUP MERGER (Entergy Corporation) On July 30, 2000, Entergy Corporation and FPL Group, Inc. entered into a Merger Agreement providing for a business combination that would have resulted in the creation of a new company. On April 1, 2001, Entergy Corporation and FPL Group, Inc. terminated the Merger Agreement by mutual decision. Both companies agreed that no termination fee is payable under the terms of the Merger Agreement, unless within nine months of the termination one party agrees to a substantially similar transaction with another party. Each company will bear its own merger-related expenses. Entergy has filed for withdrawal of its merger-related filings submitted to the FERC, the SEC, and state and local regulatory agencies. NOTE 8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which was implemented effective January 1, 2001. This statement requires that all derivatives be recognized in the balance sheet, either as assets or liabilities, at fair value. The changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. For fair-value hedge transactions in which Entergy is hedging changes in an asset's, liability's, or firm commitment's fair value, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash-flow hedge transactions in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current-period earnings. Entergy utilizes derivative financial instruments primarily for the following purposes: o to ensure adequate power supplies and to mitigate certain risks in the domestic utility business; and o to hedge cash flows for certain risks in its competitive businesses, including certain interest rate, currency, and commodity price risks. The implementation of SFAS 133 did not materially impact the power marketing and trading business, as its derivative portfolio was already marked-to-market under the provisions of EITF 98-10, "Measuring the Value of Energy-Related Contracts". Effective January 1, 2001, Entergy recorded a net-of-tax cumulative-effect-type adjustment of approximately $18.0 million reducing accumulated other comprehensive income to recognize at fair value all derivative instruments that are designated as cash-flow hedging instruments, primarily interest rate swaps and foreign currency forward contracts related to Entergy's competitive businesses. FASB is considering certain interpretations of SFAS 133 that could affect the power industry. Entergy's interpretation of these issues in its initial implementation of SFAS 133 is based on management's application of existing accounting literature. To the extent that FASB ultimately interprets these issues differently than Entergy, Entergy's financial statements could be materially affected in future periods, although the amount of the possible effect cannot be quantified at this time. NOTE 9. INVESTMENT IN ENTERGY-KOCH, L.P. (Entergy Corporation) On January 31, 2001, subsidiaries of Entergy and Koch Industries, Inc. formed Entergy-Koch, L.P., a limited partnership equally owned by Entergy and Koch Industries, Inc. An eight-member board of directors, equally appointed by Entergy and Koch Industries, Inc., governs Entergy-Koch, L.P. As part of the joint venture agreement, Entergy contributed substantially all of its power marketing and trading business in the United States and the United Kingdom and made other contributions, including equity and loans, totaling $414 million. Koch contributed to the venture its 9,000- mile Koch Gateway Pipeline (which has been renamed the Gulf South Pipeline), gas storage facilities, including the Bistineau storage facility near Shreveport, Louisiana, and Koch Energy Trading, which marketed and traded electricity, gas, weather derivatives, and other energy-related commodities and services. Entergy's investment in Entergy-Koch, L.P. is accounted for under the equity method of accounting. Certain terms of the partnership arrangement allocate income from various sources, and the taxes on that income, on a disproportionate basis. These disproportionate allocations have been favorable to Entergy in the aggregate in 2001. __________________________________ In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited condensed financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. However, the business of the domestic utility companies and System Energy is subject to seasonal fluctuations with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
ENTERGY CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. Legal Proceedings See "PART I, Item 1, Other Regulation and Litigation" in the Form 10-K for a discussion of legal proceedings affecting Entergy. Set forth below are updates to the information contained in the Form 10-K. Ratepayer Lawsuits (Entergy Corporation, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) See "Ratepayer Lawsuits, Entergy Louisiana Fuel Clause Lawsuit" in Item 1 of Part I of the Form 10-K for a discussion of the complaints filed by ratepayers with the LPSC and in Louisiana state court in Orleans Parish. See "Filings with the LPSC, Fuel Adjustment Clause Litigation" and "Filings with the Council, Fuel Adjustment Clause Litigation" in Note 2 to the financial statements herein for developments that have occurred since the filing of the Form 10-K. See "Ratepayer Lawsuits, Vidalia Project Sub-Docket" in Item 1 of Part I of the Form 10-K and in Item 1 of Part II of the 2001 first quarter Form 10-Q for a discussion of the sub-docket established in the Entergy Louisiana Fuel Clause Lawsuit at the LPSC. Franchise Service Area Litigation (Entergy Gulf States) See "Franchise Service Area Litigation" in Item 1 of Part I of the Form 10-K for a discussion of the litigation with Beaumont Power & Light (BP&L). In May 2000, the PUCT voted to remand the proceeding back to the ALJ to allow BP&L to provide further evidence. A hearing on the merits of the case has been scheduled for October 2001. Hindusthan Development Corporation, Ltd. (Entergy Corporation) See "Hindusthan Development Corporation, Ltd." in Item 1 of Part I of the Form 10-K for a discussion of the arbitration proceeding in India against Entergy Power Asia Ltd. (EPAL), a wholly-owned subsidiary of Entergy Corporation. In the second quarter of 2001, EPAL and HDC settled the arbitration for an immaterial amount, and the claim has been dismissed. Item 4. Submission of Matters to a Vote of Security Holders Election of Board of Directors Entergy Corporation The annual meeting of stockholders of Entergy Corporation was held on May 11, 2001. The following matters were voted on and received the specified number of votes for, abstentions, votes withheld (against), and broker non-votes: 1. Election of Directors: Broker Name of Nominee Votes For Abstentions Votes Withheld Non-Votes Maureen S. Bateman 176,556,569 N/A 12,652,626 N/A W. Frank Blount 176,655,654 N/A 12,553,541 N/A George W. Davis 176,606,967 N/A 12,602,228 N/A Norman C. Francis 176,572,938 N/A 12,636,257 N/A J. Wayne Leonard 176,664,856 N/A 12,544,339 N/A Robert v.d. Luft 176,622,393 N/A 12,586,802 N/A Kathleen A. Murphy 176,634,842 N/A 12,574,353 N/A Broker Name of Nominee Votes For Abstentions Votes Withheld Non-Votes Paul W. Murrill 176,592,924 N/A 12,616,271 N/A James R. Nichols 176,669,396 N/A 12,539,799 N/A William A. Percy, II 176,597,119 N/A 12,612,076 N/A D. H. Reilley 176,601,257 N/A 12,607,938 N/A Wm. Clifford Smith 176,662,576 N/A 12,546,619 N/A Bismark A. Steinhagan 176,635,906 N/A 12,573,289 N/A (Entergy Arkansas) A consent in lieu of the annual meeting of common stockholders was executed on June 27, 2001. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Arkansas: Hugh T. McDonald, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy Gulf States) A consent in lieu of the annual meeting of common stockholders was executed on June 27, 2001. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Gulf States: E. Renae Conley, Joseph F. Domino, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy Louisiana) A consent in lieu of the annual meeting of common stockholders was executed on June 27, 2001. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Louisiana: E. Renae Conley, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy Mississippi) A consent in lieu of the annual meeting of common stockholders was executed on June 27, 2001. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Mississippi: Carolyn C. Shanks, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy New Orleans) A consent in lieu of the annual meeting of common stockholders was executed on June 27, 2001. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy New Orleans: Daniel F. Packer, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (System Energy) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2001. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of System Energy: Jerry W. Yelverton, Donald C. Hintz, and C. John Wilder. Item 5. Other Information Environmental Regulation (Entergy Gulf States, Entergy Louisiana) The State of Louisiana is considering future emission control strategies to address continued ozone non-attainment status of areas in and around Baton Rouge, Louisiana. In May 2001 the Louisiana Department of Environmental Quality issued an advance notice of rulemaking for control of NOx as part of a developing plan to bring this area into attainment with the air quality standards for ozone by May 2005. The notice contains certain provisions that would lead to installation of new NOx control equipment at Entergy Gulf States and Entergy Louisiana generating units. Preliminary analyses indicate compliance costs are likely to be approximately $120 million but could be as much as approximately $300 million overall. Entergy Gulf States and Entergy Louisiana at this time are expected to incur roughly similar shares of these additional costs. Most of the related expenditures would take place in 2003 and 2004. The final rule is expected to be in place by December 2001. Cost estimates will be refined as engineering studies progress before and after promulgation of the final rule and approval of the state implementation plan by EPA. Entergy Gulf States and Entergy Louisiana will be required to obtain revised operating permits and meet new, lower emission limits for NOx. Entergy expects to file before October 2002 revised permit applications containing its detailed compliance strategy. Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The domestic utility companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends pursuant to Item 503 of Regulation S-K of the SEC as follows: Ratios of Earnings to Fixed Charges Twelve Months Ended December 31, June 30, 1996 1997 1998 1999 2000 2001 Entergy Arkansas 2.93 2.54 2.63 2.08 3.01 3.02 Entergy Gulf States 1.47 1.42 1.40 2.18 2.60 2.81 Entergy Louisiana 3.16 2.74 3.18 3.48 3.33 3.04 Entergy Mississippi 3.40 2.98 3.12 2.44 2.33 2.29 Entergy New Orleans 3.51 2.70 2.65 3.00 2.66 1.97 System Energy 2.21 2.31 2.52 1.90 2.41 2.36 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, June 30, 1996 1997 1998 1999 2000 2001 Entergy Arkansas 2.44 2.24 2.28 1.80 2.70 2.71 Entergy Gulf States (a) 1.19 1.23 1.20 1.86 2.39 2.69 Entergy Louisiana 2.64 2.36 2.75 3.09 2.93 2.69 Entergy Mississippi 2.95 2.69 2.80 2.18 2.09 2.08 Entergy New Orleans 3.22 2.44 2.41 2.74 2.43 1.82 (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* 4(a) - Third Amended and Restated Credit Agreement, dated as of May 17, 2001, among Entergy, the Banks (Citibank, N.A., ABN AMRO Bank N.V., The Bank of New York, Bayerische Hypo- und Vereinsbank AG (New York Branch), The Industrial Bank of Japan, Ltd., The Fuji Bank, Limited, Bayerische Landesbank Girozentrale, The Chase Manhattan Bank, The Royal Bank of Scotland PLC, The Bank of Nova Scotia, Bank One, N.A., Barclays Bank PLC, Mellon Bank, N.A., Royal Bank of Canada, Union Bank of California, N.A., IntesaBCI (Los Angeles Foreign Branch), KBC Bank N.V., and Westdeutsche Landesbank Girozentrale), and Citibank, N.A., as Agent 99(a) - Entergy Arkansas' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(b) - Entergy Gulf States' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(c) - Entergy Louisiana's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(d) - Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(e) - Entergy New Orleans' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(f) - System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined. ___________________________ Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of Entergy Corporation and its subsidiaries on a consolidated basis. * Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended June 30, 2001, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being filed with this report on Form 10-Q for the quarter ended June 30, 2001. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy A Current Report on Form 8-K, dated April 2, 2001, was filed with the SEC on April 2, 2001, reporting information under Item 5. "Other Events" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Corporation A Current Report on Form 8-K, dated April 3, 2001, was filed with the SEC on April 3, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated April 25, 2001, was filed with the SEC on April 25, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated July 3, 2001, was filed with the SEC on July 3, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated July 5, 2001, was filed with the SEC on July 5, 2001, reporting information under Item 5. "Other Events" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Corporation A Current Report on Form 8-K, dated July 5, 2001, was filed with the SEC on July 5, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy A Current Report on Form 8-K, dated July 6, 2001, was filed with the SEC on July 13, 2001, reporting information under Item 5. "Other Events". Entergy Corporation A Current Report on Form 8-K, dated July 31, 2001, was filed with the SEC on July 31, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure".
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries. ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY GULF STATES, INC. ENTERGY LOUISIANA, INC. ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. SYSTEM ENERGY RESOURCES, INC. /s/ Nathan E. Langston Nathan E. Langston Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) Date: August 10, 2001