_________________________________________________________________________ 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 March 31, 2002 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 April 30, 2002 Entergy Corporation ($0.01 par value) 224,278,357 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, 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 and the availability of capital, the onset of competition, 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, including the use of financial and derivative instruments and volatility of changes in market prices, 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, actions of rating agencies, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q March 31, 2002 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 6 Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations 9 Consolidated Statements of Operations 13 Consolidated Statements of Cash Flows 14 Consolidated Balance Sheets 16 Consolidated Statements of Retained Earnings, Comprehensive Income (Loss), and Paid-In Capital 18 Selected Operating Results 19 Entergy Arkansas, Inc.: Results of Operations 20 Income Statements 23 Statements of Cash Flows 25 Balance Sheets 26 Selected Operating Results 28 Entergy Gulf States, Inc.: Results of Operations 29 Income Statements 31 Statements of Cash Flows 33 Balance Sheets 34 Selected Operating Results 36 Entergy Louisiana, Inc.: Results of Operations 37 Income Statements 39 Statements of Cash Flows 41 Balance Sheets 42 Selected Operating Results 44 Entergy Mississippi, Inc.: Results of Operations 45 Income Statements 47 Statements of Cash Flows 49 Balance Sheets 50 Selected Operating Results 52 Entergy New Orleans, Inc.: Results of Operations 53 Statements of Operations 55 Statements of Cash Flows 57 Balance Sheets 58 Selected Operating Results 60 System Energy Resources, Inc.: Results of Operations 61 Income Statements 63 Statements of Cash Flows 65 Balance Sheets 66 Notes to Financial Statements for Entergy Corporation and Subsidiaries 68 Part II: Item 1. Legal Proceedings 78 Item 5. Other Information 78 Item 6. Exhibits and Reports on Form 8-K 79 Signature 82
DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term ADEQ Arkansas Department of Environmental Quality 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 BCF One billion cubic feet of natural gas BCF/D One billion cubic feet of natural gas per day Board Board of Directors of Entergy Corporation Cajun Cajun Electric Power Cooperative, Inc. capacity factor The percentage of the period that the plant generates power calculated by dividing the output by the capacity and normalizing the time period 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 DOE United States Department of Energy domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively electricity marketed Total physical GWH volumes marketed in the U.S. during the period electricity volatility Average volatility of into-Entergy power prices for the period EPA United States Environmental Protection Agency EPDC Entergy Power Development Corporation 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 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 NYPA by Entergy's domestic non-utility nuclear business Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 2001 of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy gain/loss days Ratio of days where trading gains exceeded trading losses in the aggregate across all commodities gas marketed Physical BCF/D volumes marketed in the U.S. during the period
Abbreviation or Acronym Term gas volatility Average volatility of Henry Hub spot prices for the period Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generation Plant GGART Grand Gulf Accelerated Recovery Tariff GWH Gigawatt hour(s), which equals one million kilowatt-hours Indian Point 2 Indian Point Energy Center Unit 2 - nuclear power plant 970 MW facility located in Westchester County, New York, purchased in September 2001 from Consolidated Edison by Entergy's domestic non-utility nuclear business Indian Point 3 Indian Point 3 nuclear power plant, 980 MW facility located in Westchester County, New York, purchased in November 2000 from NYPA by Entergy's domestic non-utility nuclear business KWH kilowatt-hour(s) LDEQ Louisiana Department of Environmental Quality LPSC Louisiana Public Service Commission miles of pipeline Total miles of transmission and gathering pipeline MMBTU One million British Thermal Units MPSC Mississippi Public Service Commission MW Megawatt(s), which equals one thousand kilowatt(s) Net MW in operation Installed capacity owned or operated 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 production cost Cost in $/MMBTU associated with delivering gas, excluding cost of gas 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 storage capacity Working gas storage capacity 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. System Fuels System Fuels, Inc. throughput Gas in BCF/D transported by the pipeline during the period 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 weather-adjusted usage electric usage excluding the effects of weather deviations
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 discussions of Entergy's three business segments; its critical accounting policies; the status of the transition to retail competition of the domestic utility segment and the continued application of SFAS 71 to that business; state, local, and federal regulatory proceedings that could affect the domestic utility segment; the market risks that each of Entergy's business segments are exposed to; and other significant issues affecting Entergy. Set forth below are updates to the significant factors and known trends discussed in the Form 10-K. Entergy Wholesale Operations In the first quarter of 2002, Entergy recorded a $401.4 million charge to operating expenses ($260.9 million net of tax) in the energy commodity services segment to reflect the effect of Entergy's decision to discontinue additional EWO greenfield power plant development and to reflect asset impairments resulting from the deteriorating economics of wholesale power markets in the United States and the United Kingdom. The charge consists of the following: o as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric. Entergy's rights and obligations under the contracts for 22 of the turbines were sold to an independent special-purpose entity in May 2001. $216.2 million of the charge is a provision for Entergy's estimate of the impairments resulting from the decline in the value of the turbines subject to purchase commitments with the special-purpose entity. Entergy's total potential impairment under this arrangement is limited to the costs of cancellation of these turbines; o $152.5 million of the charge results from the write-off of EWO's equity investment in the Damhead Creek project and the impairment of the values of the Warren Power power plant and the Crete project. This portion of the charge reflects Entergy's estimate of the effects of continued declining spark spreads in the United States and the United Kingdom; and o $32.7 million of the charge results from the write-off of capitalized project development costs for projects that will not be completed. In addition, Entergy expects to record a restructuring charge of up to $45 million net of tax for the EWO business after the specific details of EWO's restructuring plan are finalized, probably in the second quarter of 2002. It is possible that future events and transactions related to EWO's assets and commitments could result in changes to the estimates described above. Also in the first quarter of 2002, EWO sold its interests in projects in Argentina, Chile, and Peru for net proceeds of $135.5 million. The proceeds include notes receivable totaling $86 million. After impairment provisions recorded for these interests in 2001, the net loss realized on the sale in the first quarter of 2002 is insignificant.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS After the decision to discontinue additional greenfield development and the sale of the Latin American investments, EWO continues to operate or construct the following power plants: Investment Percent Status Ownership United Kingdom - Damhead Creek, 800 MW 100% operational U.S. (AR)- Ritchie Unit 2, 544 MW 100% operational U.S. (AR)- Independence Unit 2, 842 MW 14% operational U.S. (MS)- Warren Power, 300 MW 100% operational U.S. (IA)- Top of Iowa Wind Farm, 80 MW 99% operational U.S. (LA)- RS Cogen, 425 MW 50% under construction U.S. (IL)- Crete, 320 MW 50% under construction U.S. (TX)- Harrison County, 550 MW 70% under construction Domestic Utility Transition to Competition Texas As discussed in the Form 10-K, a PUCT-approved settlement delayed the implementation of retail open access in Entergy Gulf States' Texas service territory until at least September 15, 2002. Given current FERC and PUCT activities, management expects that retail open access in Entergy Gulf States' territory is not likely to begin before May 2003. Market Risks Disclosure Following are sections from the "Market Risks Disclosure" in the Form 10-K that have significant updates as of March 31, 2002. Commodity Price Risk Power Generation As discussed in the Form 10-K, energy commodity services enters into forward power sale agreements to hedge its exposure to market price fluctuations. The following represents the percentage of planned electricity output sold forward under physical or financial contract for energy commodity services' generation facilities updated as of March 31, 2002: 2002 2003 % sold % sold Planned GWH forward Planned GWH forward 6,024 89% 8,908 70%
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Marketing and Trading As discussed in the Form 10-K, Entergy-Koch Trading (EKT) and Entergy use VAR models as one measure of a loss in fair value for EKT's natural gas and power trading portfolio and energy commodity services' mark-to-market portfolio. EKT's daily VAR for its trading portfolio at March 31, 2002 was $9.5 million, with a daily average of $7.7 million for the first quarter of 2002. Energy commodity services' consolidated subsidiaries' VAR for mark-to-market derivative instruments was approximately $4.5 million as of March 31, 2002. Mark-to-market Accounting As discussed in the Form 10-K, Entergy and Entergy-Koch mark-to- market commodity instruments held by them for trading and risk management purposes that are considered derivatives under SFAS 133 or energy trading contracts under EITF 98-10. Following are the net mark-to-market assets and the period within which the assets would be realized in cash if they are held to maturity and market prices are unchanged: <TABLE> <CAPTION> Net mark-to- market asset at March 31, 2002 Cumulative cash realization period 2002 2003 2004-2005 <S> <C> <C> <C> <C> Entergy consolidated subsidiaries $68 million 35% 97% 100% Entergy-Koch $164 million 23% 88% 100% </TABLE> Foreign Currency Exchange Rate Risk As discussed in the Form 10-K, System Fuels and Entergy's domestic non-utility nuclear business entered into foreign currency forward contracts to hedge the Euro-denominated payments due under certain purchase contracts. As of March 31, 2002, the notional amounts of the foreign currency forward contracts are 283.4 million Euro and the forward currency rates range from .8636 to .8981 (the weighted average of the rates is .8731). The maturities of these forward contracts depend on the purchase contract payment dates and range in time from June 2002 to May 2005. The mark-to-market valuation of the forward contracts at March 31, 2002 was a net liability of $1.8 million. The counterparty banks obligated on these agreements are rated by Standard and Poor's Rating Services at AA on their senior debt obligations as of March 31, 2002.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flow Operations Net cash flow provided by (used in) operating activities for Entergy, the domestic utility companies, and System Energy for the first quarter of 2002 and 2001 was as follows: First First Company Quarter Quarter 2002 2001 (In Millions) Entergy $353.9 $184.6 Entergy Arkansas $59.0 $30.5 Entergy Gulf States $130.1 $90.7 Entergy Louisiana $101.6 $49.0 Entergy Mississippi $4.3 ($70.7) Entergy New Orleans ($22.9) ($20.6) System Energy $63.4 $72.7 Entergy's consolidated net cash flow provided by operating activities increased in 2002 primarily due to a $191 million increase in operating cash flow provided by the domestic utility. The increase for the domestic utility was primarily due to the effect that payments for higher fuel costs and Arkansas ice storm restoration costs had on 2001 operating cash flow. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K for discussion of a tax accounting election made by Entergy Louisiana in 2001. The election is now expected to provide a cash flow benefit in 2002 and 2003, and is expected to reverse in the years 2004 through 2031. Money pool activity also affected the operating cash flows of the domestic utility companies and System Energy. 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. The following table shows the domestic utility companies and System Energy's receivables from and (payables) to the money pool as of the indicated date. An increase in a company's (payable) to the money pool increases the operating cash flow of that company. An increase in a company's receivable from the money pool decreases the operating cash flow of that company. March 31, December 31, March 31, December 31, Company 2002 2001 2001 2000 (In Millions) Entergy Arkansas $25.8 $23.8 ($75.8) ($30.7) Entergy Gulf States $17.4 $27.7 ($45.9) $23.4 Entergy Louisiana ($40.2) $3.8 $37.3 $22.9 Entergy Mississippi $10.9 $11.5 ($1.0) ($33.3) Entergy New Orleans $4.2 $9.2 ($8.9) ($5.7) System Energy $29.7 $13.9 $175.7 $155.3 See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources - Sources of Capital" in the Form 10-K for a discussion of the limitations on these borrowings.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Investing Activities Net cash used in investing activities decreased in 2002 primarily due to: o cash contributions of approximately $414 million made in 2001 in the formation of Entergy-Koch; and o the maturity in 2002 of $150 million of other temporary investments. Financing Activities Financing activities used cash in 2002 compared to providing cash in 2001 primarily due to: o retirements of long-term debt by the domestic utility exceeding issuances of long-term debt by $338 million in 2002, compared to issuances exceeding retirements by $66 million in 2001; and o a reduction in the amount of draws made on short-term credit facilities in 2002. Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi all obtained credit facilities during the first quarter of 2001 and borrowed under these facilities to their full capacity during the first quarter of 2001. 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 uses and sources of capital. The following are updates to the Form 10-K. Entergy Wholesale Operations As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric Company. The rights and obligations under the contracts for 22 of the turbines were sold to an independent special-purpose entity in May 2001. In conjunction with Entergy's obligations related to this sale, Entergy retained certain rights to reacquire turbines or to cancel the construction of the turbines. Thus far, EWO has placed 17 of the original 36 turbines at sites that are either operating, under construction, or sold. In addition, as allowed by the May 2001 sale agreement, cancellation of four turbines is pending. As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS," Entergy recorded a $216.2 million provision in the first quarter of 2002 for Entergy's estimate of the impairments resulting from the decline in the value of the turbines subject to purchase commitments with the special-purpose entity. Entergy's total potential impairment under this arrangement is limited to the costs of cancellation of these turbines. In April 2002, Entergy paid a total of $351 million to reacquire the rights to the turbines. $83 million of the payments were for the turbines to be placed in the Harrison County project. Entergy expects to receive reimbursement from General Electric of $55 million of the payments. Cancellation is now pending for the 15 turbines remaining from the original 36 turbines that were not sold or previously cancelled. With the reacquisition of the rights to the turbines, EWO's obligations to the special-purpose entity and Entergy Corporation's guarantee of up to $309 million in support of those obligations are terminated.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Sources of Capital As discussed in the Form 10-K, Entergy Corporation, Entergy Arkansas, and Entergy Mississippi each have 364-day credit facilities which expire in May 2002. The facility for Entergy Corporation terminates on May 16, 2002, and Entergy expects to renew and possibly increase the facility prior to its expiration. The facilities for Entergy Arkansas and Entergy Mississippi terminate May 31, 2002, and it is expected that these facilities will be renewed prior to expiration.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Entergy's consolidated loss applicable to common stock was $78.9 million for the three months ended March 31, 2002. The changes in earnings (loss) applicable to common stock by operating segments for the first quarter of 2002 compared to the first quarter of 2001 were as follows: First Quarter Operating Segments Increase/(Decrease) (In Thousands) Domestic Utility ($11,417) Domestic Non-Utility Nuclear 10,105 Energy Commodity Services (233,471) Other, including parent company 1,705 --------- Total ($233,078) ========= Entergy's income (loss) before taxes is discussed below according to the operating segments listed above. See Note 6 to the financial statements for further discussion of Entergy's operating segments and their financial results in the first quarter of 2002. Refer to "SELECTED OPERATING RESULTS OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY GULF STATES, INC., ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC., AND ENTERGY NEW ORLEANS, INC." which follow each company's financial statements in this report for further information with respect to operating statistics. Domestic Utility The decrease in earnings for the domestic utility in the first quarter of 2002 compared with 2001 was primarily due to less favorable sales volume and weather, increased other operation and maintenance expenses, and decreased other income. The decrease in earnings was partially offset by increased unbilled revenue and decreased interest expense. Electric operating revenues The changes in electric operating revenues for the domestic utility for the first quarter of 2002 compared with 2001 are as follows: First Quarter Description Increase/(Decrease) (In Millions) Base rate differences $5.7 Rate riders (15.2) Fuel cost recovery (467.7) Sales volume/weather (21.7) Unbilled revenue 57.7 Other revenue 22.4 Sales for resale (52.7) ------- Total ($471.5) =======
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 recorded as deferred fuel costs on Entergy's financial statements such that these costs generally have no net effect on earnings. The decrease in fuel cost recovery revenue in the first quarter of 2002 is the result of lower fuel and purchased power expenses primarily due to decreases in the market price of natural gas and purchased power. Corresponding to the decrease in fuel cost recovery revenue, fuel and purchased power expenses related to electric sales decreased by $466.8 million in the first quarter of 2002 primarily due to decreases in the market price of natural gas and purchased power in 2002. Sales volume/weather Lower electric sales volume reduced revenues in the first quarter of 2002 due to decreased usage of 806 GWH primarily from the loss of an industrial customer at Entergy Gulf States. The effect of milder weather conditions in the first quarter of 2002 compared to the first quarter of 2001 also caused a slight decrease in electric sales. Electric sales volume in the domestic utility companies' service territories decreased 152 GWH due to the impact of weather conditions in the first quarter of 2002. The number of customers in the domestic utility companies' service territories increased only slightly during these periods. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenues for the first quarters of 2002 and 2001 include the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenues for the first quarter of 2002 compared to the first quarter of 2001 is due to the effect on the March 2001 unbilled calculation of higher unbilled revenue in December 2000 caused by volume/weather. Other revenue Other revenue increased in the first quarter of 2002 primarily due to the provision for rate refund recorded at System Energy in 2001 related to its proposed rate increase. See Note 2 to the financial statements in the Form 10-K for discussion of the final FERC order related to this rate proceeding. Sales for resale Sales for resale decreased for the first quarter of 2002 primarily due to a decrease in the average price of energy coupled with a decrease in sales volume to municipal and co-operative customers and adjoining utility systems. Gas operating revenues Natural gas revenues decreased $64.0 million in the first quarter of 2002 primarily due to a substantial decrease in the market price of natural gas.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other effects on results of operations Results for the first quarter of 2002 for the domestic utility were also affected by the following: o an increase in other operation and maintenance expenses of $35.7 million, which is explained below; o a decrease in other income of $12.7 million, which is primarily due to decreased interest income on deferred fuel balances; and o a decrease in interest expense of $21.3 million, which is explained below. The increase in other operation and maintenance expenses is primarily due to: o an increase of $6.7 million due to lower nuclear insurance premium refunds than in 2001; o an increase in incentive compensation expense of $11.3 million, including incentive compensation accrual true-ups; o an increase in plant maintenance expense of $3.8 million at Entergy Mississippi due to an unscheduled outage at a fossil plant in 2002; and o an increase of $4.6 million in injuries and damages expense. The decrease in interest expense is primarily due to the following: o a decrease of $12.7 million in interest on long-term debt primarily due to the retirement of long-term debt in late 2001 and early 2002; and o a decrease of $8.6 million in other interest expense primarily due to interest recorded on System Energy's reserve for rate refund in 2001. Domestic Non-Utility Nuclear The increase in earnings in the first quarter of 2002 for the domestic non-utility nuclear business was primarily due to the operation of Indian Point 2, which was purchased in September 2001. Following are key performance measures for domestic non-utility nuclear operations during the first quarters of 2002 and 2001: 2002 2001 Net MW in operation at March 31 3,445 2,475 Generation in GWH for the quarter 7,509 5,258 Capacity factor for the quarter 100.3% 98.3% The following fluctuations in the results of operations for domestic non-utility nuclear in the first quarter of 2002 were primarily caused by the acquisition of Indian Point 2: o operating revenues increased $99.5 million to $278.9 million; o fuel expenses increased $10.0 million to $26.5 million; o nuclear refueling outage expenses increased $9.6 million to $9.6 million; o other operation and maintenance expenses increased $50.4 million to $140.7 million; o taxes other than income taxes increased $5.9 million to $16.4 million; and o depreciation and amortization increased $5.6 million to $8.1 million.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Energy Commodity Services The decrease in earnings for energy commodity services in the first quarter of 2002 was primarily due to the $401.4 million ($260.9 million net of tax) charge, discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS - Entergy Wholesale Operations," to reflect the impairment of certain assets, including impairments related to EWO's turbine acquisition plans, and to reflect the change in EWO's development plans. The pre-tax charge is reflected in operation and maintenance expenses in the Consolidated Statement of Operations. Revenues decreased for energy commodity services by $352.2 million in the first quarter of 2002 primarily due to a decrease of $208.1 million resulting from the sale of EWO's interest in Highland Energy in the fourth quarter of 2001. Also contributing to the decrease in revenues for energy commodity services was the contribution of substantially all of Entergy's power marketing and trading business to Entergy-Koch in February 2001. Earnings from Entergy-Koch are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. As a result, in the first quarter of 2002, revenues from this activity were lower by $131.5 million compared to the first quarter of 2001 and purchased power expenses were lower by $132.5 million. The net income effect in the first quarter of 2002 of the lower revenue was more than offset by the equity in earnings from Entergy's interest in Entergy- Koch. Entergy's earnings from this activity increased in the first quarter of 2002 as a result of a full quarter's contribution from Entergy-Koch versus only two months in the first quarter of 2001, as well as strong results in trading. Following are key performance measures for Entergy-Koch's operations in the first quarters of 2002 and 2001: 2002 2001 Entergy-Koch Trading Gas volatility 79% 87% Electricity volatility 46% 73% Gas marketed (BCF/D) 5.3 7.2 Electricity marketed (GWH) 39,828 31,009 Gain/loss days 2.1 2.2 Gulf South Pipeline Throughput (BCF/D) 2.66 2.46 Miles of pipeline 8,800 8,800 Storage capacity (BCF) 68 68 Production cost ($/MMBTU) $0.077 $0.090 As discussed in the Form 10-K, the partnership agreement allocates profits on a disproportionate basis. Substantially all of Entergy- Koch's profits were allocated to Entergy in the first quarter of 2002. Also partially offsetting the decrease in earnings for energy commodity services was a net increase in earnings of $7.3 million ($5.0 million net of tax) related to the mark-to-market of the Damhead Creek power and gas contracts. Income taxes The effective income tax rates for the first quarters of 2002 and 2001 were 26.2% and 40.3%, respectively. The decrease in the effective income tax rate was primarily due to the pre-tax loss decreasing the effect of book and tax timing differences.
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands, Except Share Data) <S> <C> <C> OPERATING REVENUES Domestic electric $1,401,009 $1,872,545 Natural gas 46,377 110,384 Competitive businesses 413,448 669,498 ---------- ---------- TOTAL 1,860,834 2,652,427 ---------- ---------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 468,861 1,125,863 Purchased power 169,486 363,879 Nuclear refueling outage expenses 25,187 17,207 Provision for turbine commitments and asset impairments 401,373 - Other operation and maintenance 524,352 470,459 Decommissioning 8,193 8,901 Taxes other than income taxes 102,370 102,463 Depreciation and amortization 205,124 203,077 Other regulatory charges (credits) - net 1,563 (389) ---------- ---------- TOTAL 1,906,509 2,291,460 ---------- ---------- OPERATING INCOME (LOSS) (45,675) 360,967 ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 6,682 4,943 Gain on sale of assets - net 665 588 Interest and dividend income 23,525 47,476 Equity in earnings of unconsolidated equity affiliates 75,065 25,064 Miscellaneous - net (11,072) 7,917 ---------- ---------- TOTAL 94,865 85,988 ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 123,527 128,971 Other interest - net 25,473 47,914 Distributions on preferred securities of subsidiaries 4,709 4,709 Allowance for borrowed funds used during construction (5,638) (3,939) ---------- ---------- TOTAL 148,071 177,655 ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES (98,881) 269,300 Income taxes (25,898) 108,429 ---------- ---------- CONSOLIDATED NET INCOME (LOSS) (72,983) 160,871 Preferred dividend requirements and other 5,940 6,716 ---------- ---------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK ($78,923) $154,155 ========== ========== Earnings (loss) per average common share: Basic ($0.36) $0.70 Diluted ($0.36) $0.69 Dividends declared per common share $0.33 $0.32 Average number of common shares outstanding: Basic 221,943,451 219,917,139 Diluted 221,943,451 223,785,716 Including potential common shares in 2002 (see Note 9) 226,165,792 - See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING ACTIVITIES Consolidated net income (loss) ($72,983) $160,871 Noncash items included in net income (loss): Reserve for regulatory adjustments 9,718 28,791 Other regulatory charges (credits) - net 1,563 (389) Depreciation, amortization, and decommissioning 213,317 211,978 Deferred income taxes and investment tax credits (193,180) 7,665 Allowance for equity funds used during construction (6,682) (4,943) Gain on sale of assets - net (665) (588) Equity in earnings of unconsolidated equity affiliates (75,065) (25,064) Provision for turbine commitments and asset impairments 401,373 - Changes in working capital: Receivables 73,913 112,551 Fuel inventory (13,232) (48,407) Accounts payable (68,720) (365,644) Taxes accrued 131,838 67,693 Interest accrued (32,415) (33,367) Deferred fuel 45,164 105,184 Other working capital accounts (82,101) 4,182 Provision for estimated losses and reserves (1,169) 2,326 Changes in other regulatory assets (1,277) (73,755) Other 24,506 35,470 --------- --------- Net cash flow provided by operating activities 353,903 184,554 --------- --------- INVESTING ACTIVITIES Construction/capital expenditures (267,110) (264,946) Allowance for equity funds used during construction 6,682 4,943 Nuclear fuel purchases (85,143) (36,753) Proceeds from sale/leaseback of nuclear fuel 92,136 33,740 Proceeds from sale of businesses 38,848 - Investment in other non-regulated/non-utility properties (9,793) (73,990) Decrease (increase) in other investments 39,754 (365,067) Proceeds from other temporary investments 150,000 - Decommissioning trust contributions and realized change in trust assets (15,747) (16,406) Other regulatory investments - (53,637) Other 3,343 24,936 --------- --------- Net cash flow used in investing activities (47,030) (747,180) --------- --------- See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> FINANCING ACTIVITIES Proceeds from the issuance of: Long-term debt 240,017 99,506 Common stock 66,369 15,724 Retirement of long-term debt (577,934) (77,363) Redemption of preferred stock (1,403) (1,999) Changes in short-term borrowings - net 56,333 231,000 Other - 16,673 Dividends paid: Common stock (73,225) (66,655) Preferred stock (5,948) (4,785) --------- --------- Net cash flow provided by (used in) financing activities (295,791) 212,101 --------- --------- Effect of exchange rates on cash and cash equivalents 640 (2,068) --------- --------- Net increase (decrease) in cash and cash equivalents 11,722 (352,593) Cash and cash equivalents at beginning of period 751,573 1,382,424 --------- --------- Cash and cash equivalents at end of period $763,295 $1,029,831 ========= ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $180,072 $206,176 Income taxes $2,090 $1,406 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($11,579) ($8,914) Net assets contributed to Entergy-Koch - $80,145 Long-term debt refunded with proceeds from long-term debt issued in prior period ($47,000) - See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents: Cash $158,188 $129,866 Temporary cash investments - at cost, which approximates market 604,688 618,327 Special deposits 419 3,380 ----------- ----------- Total cash and cash equivalents 763,295 751,573 ----------- ----------- Other temporary investments - 150,000 Notes receivable 47,904 2,137 Accounts receivable: Customer 271,697 294,799 Allowance for doubtful accounts (19,186) (19,255) Other 225,118 286,671 Accrued unbilled revenues 278,260 268,680 ----------- ----------- Total receivables 755,889 830,895 ----------- ----------- Deferred fuel costs 127,280 172,444 Accumulated deferred income taxes 32,038 6,488 Fuel inventory - at average cost 110,729 97,497 Materials and supplies - at average cost 465,143 460,644 Deferred nuclear refueling outage costs 61,768 79,755 Prepayments and other 94,754 129,251 ----------- ----------- TOTAL 2,458,800 2,680,684 ----------- ----------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 677,211 766,103 Decommissioning trust funds 1,773,676 1,775,950 Non-utility property - at cost (less accumulated depreciation) 294,845 295,616 Other 441,850 495,542 ----------- ----------- TOTAL 3,187,582 3,333,211 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Electric 26,411,761 26,359,376 Property under capital lease 750,950 753,310 Natural gas 203,812 201,841 Construction work in progress 1,008,507 882,829 Nuclear fuel under capital lease 279,621 265,464 Nuclear fuel 196,039 232,387 ----------- ----------- TOTAL PROPERTY, PLANT AND EQUIPMENT 28,850,690 28,695,207 Less - accumulated depreciation and amortization 11,961,391 11,805,578 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT - NET 16,889,299 16,889,629 ----------- ----------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 943,918 946,126 Unamortized loss on reacquired debt 164,020 166,546 Other regulatory assets 710,923 707,439 Long-term receivables 27,270 28,083 Goodwill 377,472 377,472 Other 750,572 781,121 ----------- ----------- TOTAL 2,974,175 3,006,787 ----------- ----------- TOTAL ASSETS $25,509,856 $25,910,311 =========== =========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT LIABILITIES Currently maturing long-term debt $570,176 $682,771 Notes payable 407,351 351,018 Accounts payable 523,016 592,529 Customer deposits 190,594 188,230 Taxes accrued 830,699 700,133 Nuclear refueling outage costs 5,125 2,080 Interest accrued 159,993 192,420 Obligations under capital leases 149,300 149,352 Other 198,580 345,387 ----------- ----------- TOTAL 3,034,834 3,203,920 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 3,410,282 3,574,664 Accumulated deferred investment tax credits 465,290 471,090 Taxes accrued 250,000 250,000 Obligations under capital leases 191,879 181,085 Other regulatory liabilities 172,547 135,878 Decommissioning 1,205,125 1,194,333 Transition to competition 233,099 231,512 Regulatory reserves 47,308 37,591 Accumulated provisions 614,691 425,399 Other 818,463 852,269 ----------- ----------- TOTAL 7,408,684 7,353,821 ----------- ----------- Long-term debt 7,058,904 7,321,028 Preferred stock with sinking fund 24,781 26,185 Preferred stock without sinking fund 334,337 334,337 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated deferrable debentures 215,000 215,000 SHAREHOLDERS' EQUITY Common stock, $.01 par value, authorized 500,000,000 shares; issued 248,174,087 shares in 2002 and in 2001 2,482 2,482 Paid-in capital 4,663,931 4,662,704 Retained earnings 3,486,122 3,638,448 Accumulated other comprehensive loss (27,679) (88,794) Less - treasury stock, at cost (24,964,112 shares in 2002 and 27,441,384 shares in 2001) 691,540 758,820 ----------- ----------- TOTAL 7,433,316 7,456,020 ----------- ----------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,509,856 $25,910,311 =========== =========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME (LOSS), AND PAID-IN CAPITAL For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> <C> <C> RETAINED EARNINGS Retained Earnings - Beginning of period $3,638,448 $3,190,639 Add - Earnings (loss) applicable to common stock (78,923) ($78,923) 154,155 $154,155 Deduct: Dividends declared on common stock 73,263 69,246 Capital stock and other expenses 140 - ---------- ---------- Total 73,403 69,246 ---------- ---------- Retained Earnings - End of period $3,486,122 $3,275,548 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Net of Taxes): Balance at beginning of period Accumulated derivative instrument fair value changes ($17,973) - Other accumulated comprehensive income (loss) items (70,821) ($75,033) ---------- ---------- Total (88,794) (75,033) ---------- ---------- Cumulative effect to January 1, 2001 of accounting change regarding fair value of derivative instruments - - (18,021) - Net derivative instrument fair value changes arising during the period 342 342 (24,492) (24,492) Foreign currency translation adjustments 65,956 (378) (2,027) (2,027) Net unrealized investment gains (losses) (5,183) (5,183) 1,605 1,605 ---------- -------- ---------- --------- Balance at end of period: Accumulated derivative instrument fair value changes (17,631) (42,513) Other accumulated comprehensive income (loss) items (10,048) (75,455) ---------- ---------- Total ($27,679) ($117,968) ========== -------- ========== --------- Comprehensive Income (Income) ($84,142) $ 129,241 ======== ========= PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,662,704 $4,660,483 Add: Common stock issuances related to stock plans 1,227 3,440 ---------- ---------- Paid-in Capital - End of period $4,663,931 $4,663,923 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) Increase/ Description 2002 2001 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 501.6 $ 635.0 ($133.4) (21) Commercial 356.8 451.4 (94.6) (21) Industrial 396.1 653.6 (257.5) (39) Governmental 38.6 53.5 (14.9) (28) --------------------------------- Total retail 1,293.1 1,793.5 (500.4) (28) Sales for resale 69.8 122.5 (52.7) (43) Other 38.1 (43.5) 81.6 188 --------------------------------- Total $ 1,401.0 $ 1,872.5 ($471.5) (25) ================================= Billed Electric Energy Sales (GWH): Residential 7,274 7,537 (263) (3) Commercial 5,598 5,574 24 - Industrial 9,590 10,311 (721) (7) Governmental 617 615 2 - --------------------------------- Total retail 23,079 24,037 (958) (4) Sales for resale 2,181 2,449 (268) (11) --------------------------------- Total 25,260 26,486 (1,226) (5) =================================
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the first quarter of 2002 compared with 2001 primarily due to increased other operation and maintenance expenses, decreased interest income, and decreased sales for resale. The overall decrease was partially offset by increased unbilled revenue and a lower effective income tax rate. Revenues and Sales The changes in electric operating revenues for the first quarter of 2002 compared with 2001 are as follows: First Quarter Description Increase/(Decrease) (In Millions) Base rate differences $6.3 Rate riders (8.5) Fuel cost recovery 15.2 Sales volume/weather (8.2) Unbilled revenue 11.6 Other revenue 0.5 Sales for resale (32.9) ------ Total ($16.0) ====== Base rate differences Base rate differences increased revenues for the first quarter of 2002 primarily due to the effect of block rates on residential customers and higher effective prices for commercial and industrial customers due to decreased KWH usage. Rate riders Rate rider revenues have no material effect on net income because specific incurred expenses offset them. Rate rider revenues decreased for the first quarter of 2002 primarily due to a decrease in the Grand Gulf rate rider effective January 2002 compared to the rate rider in effect during the first quarter of 2001. The Grand Gulf rate rider allows Entergy Arkansas to recover 78% of its share of operating costs for Grand Gulf 1. 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 recorded as deferred fuel costs on Entergy Arkansas' financial statements such that these costs generally have no net effect on earnings.
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery revenues increased for the first quarter of 2002 primarily due to an increase in the energy cost recovery rider that became effective in April 2001. The rider utilizes prior year energy costs and projected energy sales for the twelve month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The increase in the energy cost recovery rider allows Entergy Arkansas to recover previously under-recovered fuel expenses. The rider is discussed further in Note 2 to the financial statements in the Form 10-K. Sales volume/weather For the first quarter of 2002, lower electric sales volume decreased revenues due to decreased usage of 95 GWH in the residential and commercial sectors after adjusting for the weather effect and 54 GWH in the industrial sector. The decreased usage resulted in higher effective rates in each sector, which are reflected in base rate differences. The effect of less favorable weather in the first quarter of 2002 compared to the first quarter of 2001 decreased electric sales volume by 57 GWH in the residential and commercial sectors. Unbilled revenue Unbilled revenue increased for the first quarter of 2002 primarily due to the effect of more favorable weather in March 2002 on the unbilled revenue calculation. Sales for resale Sales for resale decreased for the first quarter of 2002 due to a decrease in sales volume to municipalities and co-operatives coupled with a decrease in the average price of energy sold to wholesale customers. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the first quarter of 2002 primarily due to: o decreased market prices of natural gas and purchased power; and o decreased purchased power volume as a result of displacement by lower priced coal and nuclear generation. Other operation and maintenance Other operation and maintenance expenses increased for the first quarter of 2002 primarily due to: o lower nuclear insurance refunds of $3 million; o recording of 2000 ice storm expenses of $2.7 million as recommended by the APSC staff; and o an increase in incentive compensation expense of $2.4 million.
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other regulatory credits - net Other regulatory credits decreased for the first quarter of 2002 primarily due to a decrease in Grand Gulf demand charges as a result of the final FERC order in System Entergy's 1995 rate proceeding. See Note 2 of the financial statements in the Form 10-K for further discussion of the FERC order. Other Other income Other income decreased for the first quarter of 2002 primarily due to a decrease in interest income recorded on the deferred fuel balance resulting from an increase in fuel cost recovery revenue as mentioned above. Income taxes The effective income tax rates for the first quarter of 2002 and 2001 were 27.1% and 42.2%, respectively. The decrease in the effective tax rate was primarily due to updating book and tax timing differences related to research and experimental expenses consistent with amended tax returns.
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. INCOME STATEMENTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING REVENUES Domestic electric $377,823 $393,800 -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 104,253 70,748 Purchased power 71,674 124,098 Nuclear refueling outage expenses 6,862 6,821 Other operation and maintenance 82,035 71,545 Taxes other than income taxes 11,187 8,764 Depreciation, amortization, and decommissioning 46,485 46,632 Other regulatory credits - net (404) (6,455) -------- -------- TOTAL 322,092 322,153 -------- -------- OPERATING INCOME 55,731 71,647 -------- -------- OTHER INCOME Allowance for equity funds used during construction 1,339 1,091 Interest and dividend income 978 4,921 Miscellaneous - net (991) (1,114) -------- -------- TOTAL 1,326 4,898 -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 22,468 22,436 Other interest - net 2,932 3,390 Distributions on preferred securities of subsidiary 1,275 1,275 Allowance for borrowed funds used during construction (947) (711) -------- -------- TOTAL 25,728 26,390 -------- -------- INCOME BEFORE INCOME TAXES 31,329 50,155 Income taxes 8,491 21,177 -------- -------- NET INCOME 22,838 28,978 Preferred dividend requirements and other 1,944 1,944 -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $20,894 $27,034 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING ACTIVITIES Net income $22,838 $28,978 Noncash items included in net income: Other regulatory credits - net (404) (6,455) Depreciation, amortization, and decommissioning 46,485 46,632 Deferred income taxes and investment tax credits (40,621) 19,910 Allowance for equity funds used during construction (1,339) (1,091) Changes in working capital: Receivables 14,061 46,501 Fuel inventory (19,794) (12,143) Accounts payable (24,675) (132,596) Taxes accrued 56,560 4,880 Interest accrued (4,854) (2,397) Deferred fuel costs 51,058 19,888 Other working capital accounts 8,555 18,541 Provision for estimated losses and reserves (3,319) (3,589) Changes in other regulatory assets (10,947) (25,470) Changes in other deferred credits (5,274) 22,254 Other (29,342) 6,704 --------- --------- Net cash flow provided by operating activities 58,988 30,547 --------- --------- INVESTING ACTIVITIES Construction expenditures (44,733) (67,383) Allowance for equity funds used during construction 1,339 1,091 Nuclear fuel purchases (30,451) (19,099) Proceeds from sale/leaseback of nuclear fuel 30,451 19,099 Decommissioning trust contributions and realized change in trust assets (2,823) (2,270) Changes in other temporary investments - net 38,397 - Other regulatory investments - (19,921) --------- --------- Net cash flow used in investing activities (7,820) (88,483) --------- --------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 94,742 - Retirement of long-term debt (170,000) - Changes in short-term borrowings (667) 63,000 Dividends paid: Common stock (5,600) (300) Preferred stock (1,944) - --------- --------- Net cash flow provided by (used in) financing activities (83,469) 62,700 --------- --------- Net increase (decrease) in cash and cash equivalents (32,301) 4,764 Cash and cash equivalents at beginning of period 103,466 7,838 --------- --------- Cash and cash equivalents at end of period $71,165 $12,602 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $30,236 $28,237 Income taxes ($3,873) ($3) Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($6,138) ($3,826) Long-term debt refunded with proceeds from long-term debt issued in prior period ($47,000) - See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. BALANCE SHEETS ASSETS March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents: Cash $8,645 $18,331 Temporary cash investments - at cost, which approximates market 62,520 85,135 ---------- ---------- Total cash and cash equivalents 71,165 103,466 ---------- ---------- Other temporary investments - 38,397 Accounts receivable: Customer 75,001 80,719 Allowance for doubtful accounts (1,667) (1,667) Associated companies 57,466 65,102 Other 22,845 20,889 Accrued unbilled revenues 59,644 62,307 ---------- ---------- Total accounts receivable 213,289 227,350 ---------- ---------- Deferred fuel costs - 17,246 Accumulated deferred income taxes 42,826 22,698 Fuel inventory - at average cost 24,166 4,372 Materials and supplies - at average cost 76,630 75,499 Deferred nuclear refueling outage costs 8,106 14,508 Prepayments and other 7,304 53,386 ---------- ---------- TOTAL 443,486 556,922 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 11,217 11,217 Decommissioning trust funds 347,799 351,114 Non-utility property - at cost (less accumulated depreciation) 1,464 1,465 Other - at cost (less accumulated depreciation) 2,976 2,976 ---------- ---------- TOTAL 363,456 366,772 ---------- ---------- UTILITY PLANT Electric 5,421,884 5,399,294 Property under capital lease 34,997 35,604 Construction work in progress 169,790 157,994 Nuclear fuel under capital lease 91,081 65,556 Nuclear fuel 7,174 8,156 ---------- ---------- TOTAL UTILITY PLANT 5,724,926 5,666,604 Less - accumulated depreciation and amortization 2,646,584 2,615,013 ---------- ---------- UTILITY PLANT - NET 3,078,342 3,051,591 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 179,285 164,146 Unamortized loss on reacquired debt 41,571 40,817 Other regulatory assets 256,343 260,535 Other 20,409 10,797 ---------- ---------- TOTAL 497,608 476,295 ---------- ---------- TOTAL ASSETS $4,382,892 $4,451,580 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY ARKANSAS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT LIABILITIES Currently maturing long-term debt $100,000 $85,000 Notes payable - 667 Accounts payable: Associated companies 24,559 32,868 Other 70,670 87,036 Customer deposits 33,449 32,589 Taxes accrued 160,841 104,281 Interest accrued 25,690 30,544 Deferred fuel costs 33,812 - Obligations under capital leases 52,074 51,973 System Energy refund 11,462 53,732 Other 15,833 17,221 ---------- ---------- TOTAL 528,390 495,911 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 807,360 809,742 Accumulated deferred investment tax credits 81,987 83,239 Obligations under capital leases 74,005 49,187 Transition to competition 154,001 152,414 Accumulated provisions 38,096 41,415 Other 102,150 107,424 ---------- ---------- TOTAL 1,257,599 1,243,421 ---------- ---------- Long-term debt 1,177,475 1,308,075 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 2002 and 2001 470 470 Paid-in capital 591,127 591,127 Retained earnings 651,481 636,226 ---------- ---------- TOTAL 1,359,428 1,344,173 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,382,892 $4,451,580 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 137.2 $ 140.0 ($2.8) (2) Commercial 72.1 68.4 3.7 5 Industrial 81.7 78.3 3.4 4 Governmental 4.0 3.5 0.5 14 ------------------------------------- Total retail 295.0 290.2 4.8 2 Sales for resale Associated companies 41.7 49.6 (7.9) (16) Non-associated companies 34.8 59.8 (25.0) (42) Other 6.3 (5.8) 12.1 209 ------------------------------------- Total $ 377.8 $ 393.8 ($16.0) (4) ===================================== Billed Electric Energy Sales (GWH): Residential 1,721 1,854 (133) (7) Commercial 1,131 1,150 (19) (2) Industrial 1,606 1,660 (54) (3) Governmental 62 57 5 9 ------------------------------------- Total retail 4,520 4,721 (201) (4) Sales for resale Associated companies 2,082 1,128 954 85 Non-associated companies 1,014 1,331 (317) (24) ------------------------------------- Total 7,616 7,180 436 6 =====================================
ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the first quarter of 2002 compared with 2001 primarily due to decreased sales for resale, increased other operation and maintenance expenses, and decreased interest income, partially offset by decreased interest expense. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the first quarter of 2002 compared with 2001 are as follows: First Quarter Description Increase/(Decrease) (In Millions) Base rate differences ($0.4) Fuel cost recovery (208.0) Sales volume/weather (10.9) Unbilled revenue (2.0) Other revenue 0.9 Sales for resale (31.2) ------- Total ($251.6) ======= 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 recorded 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 decreased $154.8 million in the Louisiana jurisdiction due to the current period recovery through the fuel adjustment clause of lower 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 decreased $53.2 million due to a decrease in the fixed fuel factor in March 2002 and due to the termination of a fuel recovery surcharge in February 2002. Sales volume/weather Lower electric sales volume reduced revenues for the first quarter of 2002 primarily due to decreased usage in the industrial sector as a result of the loss of an industrial customer. Under the terms of the contract with this industrial customer, Entergy Gulf States was also required to purchase the electricity produced by the industrial customer's generating units. As a result of the relief of the purchased power obligation, the loss of this customer will not have a negative impact on Entergy Gulf States' earnings.
ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales for resale Sales for resale for the first quarter of 2002 decreased primarily due to a decrease in the average price of resale electricity. Gas operating revenues Gas operating revenues decreased for the first quarter of 2002 primarily due to the substantially decreased market price of natural gas. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the first quarter of 2002 primarily due decreases in the market prices of natural gas and purchased power. Other operation and maintenance Other operation and maintenance expenses increased for the first quarter of 2002 due to: o an increase in incentive compensation expense of $3.4 million; and o an increase in nuclear operation and maintenance expenses of $2.9 million. The increase was partially offset by a decrease in environmental provisions of $2.2 million. Other Other income Other income decreased for the first quarter of 2002 primarily due to decreased interest income recorded on the deferred fuel balance due to recovery of some of the balance. Interest and other charges Interest on long-term debt decreased for the first quarter of 2002 primarily due to the retirement of $148 million of First Mortgage Bonds in January 2002 and lower interest expense on variable- rate First Mortgage Bonds. Income taxes The effective income tax rates for the first quarter of 2002 and 2001 were 38.5% and 37.1%, respectively.
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. INCOME STATEMENTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING REVENUES Domestic electric $447,251 $698,876 Natural gas 16,653 35,600 -------- -------- TOTAL 463,904 734,476 -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 139,854 293,166 Purchased power 65,829 141,953 Nuclear refueling outage expenses 3,056 3,090 Other operation and maintenance 97,575 93,254 Decommissioning 1,573 1,562 Taxes other than income taxes 30,638 30,996 Depreciation and amortization 50,293 49,761 Other regulatory charges (credits) - net 600 (5,488) -------- -------- TOTAL 389,418 608,294 -------- -------- OPERATING INCOME 74,486 126,182 -------- -------- OTHER INCOME Allowance for equity funds used during construction 2,225 1,825 Gain on sale of assets 663 585 Interest and dividend income 2,321 7,933 Miscellaneous - net (1,095) (1,412) -------- -------- TOTAL 4,114 8,931 -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 31,847 38,793 Other interest - net 1,597 2,336 Distributions on preferred securities of subsidiary 1,859 1,859 Allowance for borrowed funds used during construction (2,258) (1,714) -------- -------- TOTAL 33,045 41,274 -------- -------- INCOME BEFORE INCOME TAXES 45,555 93,839 Income taxes 17,517 34,793 -------- -------- NET INCOME 28,038 59,046 Preferred dividend requirements and other 1,234 1,310 -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $26,804 $57,736 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING ACTIVITIES Net income $28,038 $59,046 Noncash items included in net income: Reserve for regulatory adjustments 2,517 2,073 Other regulatory charges (credits) - net 600 (5,488) Depreciation, amortization, and decommissioning 51,866 51,323 Deferred income taxes and investment tax credits (21,724) 35,990 Allowance for equity funds used during construction (2,225) (1,825) Gain on sale of assets (663) (585) Changes in working capital: Receivables 37,958 30,298 Fuel inventory (1,872) (12,574) Accounts payable (33,225) (95,746) Taxes accrued 31,828 (7,338) Interest accrued 963 3,030 Deferred fuel costs 13,781 23,481 Other working capital accounts 14,295 11,818 Provision for estimated losses and reserves (1,629) (1,332) Changes in other regulatory assets 3,562 (10,298) Other 6,058 8,798 -------- -------- Net cash flow provided by operating activities 130,128 90,671 -------- -------- INVESTING ACTIVITIES Construction expenditures (68,038) (60,860) Allowance for equity funds used during construction 2,225 1,825 Nuclear fuel purchases (21,733) (3,937) Proceeds from sale/leaseback of nuclear fuel 21,923 3,937 Decommissioning trust contributions and realized change in trust assets (2,610) (2,807) Changes in other temporary investments - net 44,643 - Other regulatory investments - (33,716) -------- -------- Net cash flow used in investing activities (23,590) (95,558) -------- -------- FINANCING ACTIVITIES Retirement of long-term debt (148,000) - Redemption of preferred stock (1,403) (1,999) Dividends paid: Common stock (14,800) (19,000) Preferred stock (1,242) (1,323) -------- -------- Net cash flow used in financing activities (165,445) (22,322) -------- -------- Net decrease in cash and cash equivalents (58,907) (27,209) Cash and cash equivalents at beginning of period 123,728 68,279 -------- -------- Cash and cash equivalents at end of period $64,821 $41,070 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $33,001 $38,649 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($1,556) ($2,674) See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. BALANCE SHEETS ASSETS March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents: Cash $17,067 $19,503 Temporary cash investments - at cost, which approximates market 47,754 104,225 ---------- ---------- Total cash and cash equivalents 64,821 123,728 ---------- ---------- Other temporary investments - 44,643 Accounts receivable: Customer 74,258 81,136 Allowance for doubtful accounts (2,131) (2,131) Associated companies 21,677 34,032 Other 33,098 53,249 Accrued unbilled revenues 86,170 84,744 ---------- ---------- Total accounts receivable 213,072 251,030 ---------- ---------- Deferred fuel costs 112,949 126,730 Fuel inventory - at average cost 55,883 54,011 Materials and supplies - at average cost 94,322 95,674 Prepayments and other 10,892 22,373 ---------- ---------- TOTAL 551,939 718,189 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 246,436 245,382 Non-utility property - at cost (less accumulated depreciation) 194,466 194,830 Other 16,918 15,970 ---------- ---------- TOTAL 457,820 456,182 ---------- ---------- UTILITY PLANT Electric 7,712,243 7,694,226 Property under capital lease 26,342 28,087 Natural gas 59,552 59,100 Construction work in progress 258,925 221,730 Nuclear fuel under capital lease 61,024 67,688 ---------- ---------- TOTAL UTILITY PLANT 8,118,086 8,070,831 Less - accumulated depreciation and amortization 3,787,191 3,750,770 ---------- ---------- UTILITY PLANT - NET 4,330,895 4,320,061 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 424,459 426,623 Unamortized loss on reacquired debt 33,513 34,321 Other regulatory assets 199,931 201,329 Long-term receivables 25,768 26,576 Other 24,264 26,460 ---------- ---------- TOTAL 707,935 715,309 ---------- ---------- TOTAL ASSETS $6,048,589 $6,209,741 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY GULF STATES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT LIABILITIES Currently maturing long-term debt $39,000 $147,921 Accounts payable: Associated companies 37,372 38,728 Other 103,154 135,023 Customer deposits 44,999 45,876 Taxes accrued 122,432 90,604 Accumulated deferred income taxes 11,181 21,412 Nuclear refueling outage costs 5,125 2,080 Interest accrued 44,377 43,414 Obligations under capital leases 36,515 36,668 Other 20,280 20,995 ---------- ---------- TOTAL 464,435 582,721 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 1,217,727 1,227,084 Accumulated deferred investment tax credits 161,925 163,766 Obligations under capital leases 50,851 60,163 Decommissioning 145,480 144,926 Transition to competition 79,098 79,098 Regulatory reserves 36,108 33,591 Accumulated provisions 62,182 63,811 Other 98,320 93,719 ---------- ---------- TOTAL 1,851,691 1,866,158 ---------- ---------- Long-term debt 1,919,956 1,958,897 Preferred stock with sinking fund 24,781 26,185 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 47,327 47,327 Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares in 2002 and 2001 114,055 114,055 Paid-in capital 1,157,459 1,157,459 Retained earnings 383,885 371,939 ---------- ---------- TOTAL 1,702,726 1,690,780 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,048,589 $6,209,741 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 144.8 $ 188.5 ($ 43.7) (23) Commercial 108.9 145.3 (36.4) (25) Industrial 144.0 280.6 (136.6) (49) Governmental 7.7 9.9 (2.2) (22) ------------------------------ Total retail 405.4 624.3 (218.9) (35) Sales for resale Associated companies 4.5 12.4 (7.9) (64) Non-associated companies 27.8 51.1 (23.3) (46) Other 9.6 11.1 (1.5) (14) ------------------------------ Total $ 447.3 $ 698.9 ($ 251.6) (36) ============================== Billed Electric Energy Sales (GWH): Residential 2,102 2,126 (24) (1) Commercial 1,776 1,744 32 2 Industrial 3,644 4,252 (608) (14) Governmental 111 111 - - ------------------------------ Total retail 7,633 8,233 (600) (7) Sales for resale Associated companies 104 107 (3) (3) Non-associated companies 1,057 959 98 10 ------------------------------ Total 8,794 9,299 (505) (5) ==============================
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the first quarter of 2002 compared with 2001 primarily due to an increase in unbilled revenue, partially offset by an increase in other operation and maintenance expenses. Revenues and Sales The changes in electric operating revenues for the first quarter of 2002 compared with 2001 are as follows: First Quarter Description Increase/(Decrease) (In Millions) Fuel cost recovery ($223.3) Sales volume/weather (0.4) Unbilled revenue 45.1 Other revenue 2.9 Sales for resale (3.3) ------- Total ($179.0) ======= 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 recorded 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 decreased due to recovery, through the fuel adjustment clause, of lower fuel and purchased power expenses primarily due to decreases in the market price of natural gas and purchased power. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the first quarter of 2002 compared to the first quarter of 2001 is due to the effect on the March 2001 unbilled calculation of higher unbilled revenue in December 2000 caused by volume/weather.
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the first quarter of 2002 primarily due to a 59.8% decrease in the market price of natural gas, in addition to decreases in the market price of purchased power and oil. Other operation and maintenance Other operation and maintenance expenses increased for the first quarter of 2002 primarily due to: o lower nuclear insurance refunds of $1.2 million; o an increase in incentive compensation expense of $4.7 million; and o an increase in employee pension and benefits expense of $1.1 million. Other regulatory charges - net Other regulatory charges increased for the first quarter of 2002 primarily due to the amortization of capacity charges associated with power purchases in the summer of 2000. The amortization of these charges will occur through July 2002. Refer to Note 2 to the financial statements for further discussion of deferred capacity charges. Other Other income Interest income decreased for the first quarter of 2002 primarily due to lower interest recorded on deferred fuel costs and money pool investments. Interest and other charges Interest on long-term debt decreased for the first quarter of 2002 due to the refinancing and net redemption of First Mortgage Bonds in the amounts of $18.7 million in 2001 and $63.0 million in the first quarter of 2002. Other interest decreased for the first quarter of 2002 primarily due to interest accrued in 2001 on reserves provided for fuel-related refunds that were made in the summer of 2001. Income taxes The effective income tax rates for the first quarter of 2002 and 2001 were 41.4% and 48.4%, respectively. The decrease in the effective income tax rate is primarily due to higher pre-tax income reducing the effect of book and tax timing differences.
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. INCOME STATEMENTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING REVENUES Domestic electric $369,963 $548,914 -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 62,980 234,423 Purchased power 79,763 135,505 Nuclear refueling outage expenses 3,050 3,262 Other operation and maintenance 78,466 69,813 Decommissioning 2,606 2,606 Taxes other than income taxes 18,433 18,552 Depreciation and amortization 45,462 44,946 Other regulatory charges - net 3,315 540 -------- -------- TOTAL 294,075 509,647 -------- -------- OPERATING INCOME 75,888 39,267 -------- -------- OTHER INCOME Allowance for equity funds used during construction 1,068 935 Interest and dividend income 235 2,669 Miscellaneous - net (879) (733) -------- -------- TOTAL 424 2,871 -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 23,441 24,456 Other interest - net 1,839 3,518 Distributions on preferred securities of subsidiary 1,575 1,575 Allowance for borrowed funds used during construction (861) (709) -------- -------- TOTAL 25,994 28,840 -------- -------- INCOME BEFORE INCOME TAXES 50,318 13,298 Income taxes 20,824 6,439 -------- -------- NET INCOME 29,494 6,859 Preferred dividend requirements and other 1,678 2,378 -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $27,816 $4,481 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING ACTIVITIES Net income $29,494 $6,859 Noncash items included in net income: Reserve for regulatory adjustments - 250 Other regulatory charges - net 3,315 540 Depreciation, amortization, and decommissioning 48,068 47,552 Deferred income taxes and investment tax credits 5,682 (32,902) Allowance for equity funds used during construction (1,068) (935) Changes in working capital: Receivables 10,151 27,171 Accounts payable 14,999 (104,832) Taxes accrued 26,918 49,557 Interest accrued (11,121) (10,899) Deferred fuel costs (28,606) 63,264 Other working capital accounts 2,549 2,198 Provision for estimated losses and reserves 755 1,820 Changes in other regulatory assets 7,705 (4,465) Other (7,238) 3,807 -------- -------- Net cash flow provided by operating activities 101,603 48,985 -------- -------- INVESTING ACTIVITIES Construction expenditures (44,156) (42,193) Allowance for equity funds used during construction 1,068 935 Nuclear fuel purchases (39,762) - Proceeds from sale/leaseback of nuclear fuel 39,762 - Decommissioning trust contributions and realized change in trust assets (5,506) (5,637) Changes in other temporary investments - net 6,152 - -------- -------- Net cash flow used in investing activities (42,442) (46,895) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 145,275 - Retirement of long-term debt (228,968) (16,388) Changes in short-term borrowings - 30,000 Dividends paid: Common stock (2,800) - Preferred stock (1,678) (2,378) -------- -------- Net cash flow provided by (used in) financing activities (88,171) 11,234 -------- -------- Net increase (decrease) in cash and cash equivalents (29,010) 13,324 Cash and cash equivalents at beginning of period 42,408 43,959 -------- -------- Cash and cash equivalents at end of period $13,398 $57,283 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $36,460 $38,950 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($1,457) ($1,224) See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. BALANCE SHEETS ASSETS March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents: Cash $13,398 $28,768 Temporary cash investments - at cost, which approximates market - 13,640 ---------- ---------- Total cash and cash equivalents 13,398 42,408 ---------- ---------- Other temporary investments - 6,152 Notes receivable 8 8 Accounts receivable: Customer 48,317 48,640 Allowance for doubtful accounts (1,771) (1,771) Associated companies 9,483 9,090 Other 22,744 47,965 Accrued unbilled revenues 86,200 71,200 ---------- ---------- Total accounts receivable 164,973 175,124 ---------- ---------- Accumulated deferred income taxes 30,531 42,566 Materials and supplies - at average cost 75,888 77,523 Deferred nuclear refueling outage costs 3,452 4,096 Prepayments and other 10,843 9,000 ---------- ---------- TOTAL 299,093 356,877 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 14,230 14,230 Decommissioning trust funds 123,712 119,663 Non-utility property - at cost (less accumulated depreciation) 21,625 21,671 ---------- ---------- TOTAL 159,567 155,564 ---------- ---------- UTILITY PLANT Electric 5,463,466 5,456,093 Property under capital lease 239,395 239,395 Construction work in progress 132,892 110,792 Nuclear fuel under capital lease 72,487 70,316 ---------- ---------- TOTAL UTILITY PLANT 5,908,240 5,876,596 Less - accumulated depreciation and amortization 2,569,602 2,538,964 ---------- ---------- UTILITY PLANT - NET 3,338,638 3,337,632 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 176,779 179,368 Unamortized loss on reacquired debt 27,116 28,341 Other regulatory assets 68,638 73,754 Long-term receivables 1,503 1,515 Other 18,969 16,650 ---------- ---------- TOTAL 293,005 299,628 ---------- ---------- TOTAL ASSETS $4,090,303 $4,149,701 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY LOUISIANA, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT LIABILITIES Currently maturing long-term debt $71,659 $185,627 Accounts payable: Associated companies 74,455 73,208 Other 107,212 93,460 Customer deposits 62,030 61,359 Taxes accrued 47,328 20,410 Interest accrued 23,403 34,524 Deferred fuel costs 38,887 67,493 Obligations under capital leases 34,171 34,171 Other 15,561 14,119 ---------- ---------- TOTAL 474,706 584,371 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 770,762 776,610 Accumulated deferred investment tax credits 110,591 111,942 Obligations under capital leases 38,316 36,144 Accumulated provisions 69,277 68,522 Other 77,287 82,780 ---------- ---------- TOTAL 1,066,233 1,075,998 ---------- ---------- Long-term debt 1,126,394 1,091,329 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 2002 and 2001 1,088,900 1,088,900 Capital stock expense and other (1,718) (1,718) Retained earnings 165,288 140,321 ---------- ---------- TOTAL 1,352,970 1,328,003 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,090,303 $4,149,701 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 119.4 $ 184.7 ($ 65.3) (35) Commercial 81.0 121.2 (40.2) (33) Industrial 129.5 245.2 (115.7) (47) Governmental 8.0 12.3 (4.3) (35) ------------------------------ Total retail 337.9 563.4 (225.5) (40) Sales for resale Associated companies 3.3 4.1 (0.8) (20) Non-associated companies 3.3 5.8 (2.5) (43) Other 25.4 (24.4) 49.8 204 ------------------------------ Total $ 369.9 $ 548.9 ($179.0) (33) ============================== Billed Electric Energy Sales (GWH): Residential 1,922 1,944 (22) (1) Commercial 1,222 1,217 5 - Industrial 3,578 3,574 4 - Governmental 128 128 - - ------------------------------ Total retail 6,850 6,863 (13) - Sales for resale Associated companies 85 53 32 60 Non-associated companies 53 96 (43) (45) ------------------------------ Total 6,988 7,012 (24) - ==============================
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the first quarter of 2002 compared with 2001 primarily due to increased net revenue, partially offset by increased other operation and maintenance expenses and decreased interest income. Revenues and Sales The changes in electric operating revenues for the first quarter of 2002 compared with 2001 are as follows: First Quarter Description Increase/(Decrease) (In Millions) Base rate differences $2.8 Grand Gulf rate rider (6.7) Fuel cost recovery (9.6) Sales volume/weather (3.2) Unbilled revenue 2.3 Other revenue 2.4 Sales for resale (52.5) ------ Total ($64.5) ====== Grand Gulf rate rider Rate rider revenues have no material effect on net income because specific incurred expenses offset them. Grand Gulf rate rider revenue decreased for the first quarter of 2002 as a result of a lower rate which became effective in October 2001. 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 recorded 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 decreased for the first quarter of 2002 primarily due to lower fuel and purchased power expenses as a result of decreases in the market price of natural gas and purchased power.
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales for resale Sales for resale decreased for the first quarter of 2002 primarily due to a decrease in volume to affiliated customers. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the first quarter of 2002 primarily due to the displacement of oil generation by lower priced gas generation and the decrease in the market price of purchased power. Oil generation was used in the first quarter of 2001 due to significant increases in the market price of natural gas. The decrease was partially offset by an over-recovery of fuel costs, including the effect of increased recoveries approved by the MPSC to recover previous under-recoveries. Other operation and maintenance Other operation and maintenance expenses increased for the first quarter of 2002 primarily due to: o an increase in plant maintenance expense of $3.8 million due to an unscheduled outage at a fossil plant in 2002; o an increase in injuries and damages expense of $1.1 million; and o an insurance reimbursement of $1.4 million received in 2001 in connection with a turbine generator failure. Other regulatory credits Other regulatory credits increased for the first quarter of 2002 primarily due a greater under-recovery of Grand Gulf 1-related costs due to a lower rate implemented in October 2001. Other Other income Interest income decreased for the first quarter of 2002 primarily due to interest recorded in the first quarter of 2001 on the deferred System Energy costs that Entergy Mississippi was not recovering through rates. The deferral of these costs ceased in the third quarter of 2001 as a result of a final FERC order. See Note 2 to the financial statements in the Form 10-K for further discussion of the System Energy rate proceeding and FERC order. Income taxes The effective income tax rates for the first quarter of 2002 and 2001 were 32.8% and 35.8%, respectively. The decrease in the effective income tax rate for 2002 was primarily due to a larger AFUDC tax adjustment in the first quarter of 2002.
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. INCOME STATEMENTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING REVENUES Domestic electric $191,690 $256,158 -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 50,568 110,059 Purchased power 75,336 83,464 Other operation and maintenance 40,900 33,248 Taxes other than income taxes 11,733 11,273 Depreciation and amortization 13,506 13,274 Other regulatory credits - net (17,281) (9,684) -------- -------- TOTAL 174,762 241,634 -------- -------- OPERATING INCOME 16,928 14,524 -------- -------- OTHER INCOME Allowance for equity funds used during construction 1,069 423 Interest and dividend income 1,042 4,693 Miscellaneous - net (734) (547) -------- -------- TOTAL 1,377 4,569 -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 9,962 11,144 Other interest - net 621 1,233 Allowance for borrowed funds used during construction (946) (347) -------- -------- TOTAL 9,637 12,030 -------- -------- INCOME BEFORE INCOME TAXES 8,668 7,063 Income taxes 2,839 2,528 -------- -------- NET INCOME 5,829 4,535 Preferred dividend requirements and other 842 842 -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $4,987 $3,693 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING ACTIVITIES Net income $5,829 $4,535 Noncash items included in net income: Other regulatory credits - net (17,281) (9,684) Depreciation and amortization 13,506 13,274 Deferred income taxes and investment tax credits (3,752) 4,805 Allowance for equity funds used during construction (1,069) (423) Changes in working capital: Receivables 11,193 25,186 Fuel inventory 1,916 (3,547) Accounts payable (10,177) (73,374) Taxes accrued (15,896) (23,597) Interest accrued (822) 2,062 Deferred fuel costs 14,548 (12,807) Other working capital accounts (4,666) (4,563) Provision for estimated losses and reserves (524) (784) Changes in other regulatory assets (12,599) (9,010) Other 24,110 17,250 -------- -------- Net cash flow provided by (used in) operating activities 4,316 (70,677) -------- -------- INVESTING ACTIVITIES Construction expenditures (39,535) (22,163) Allowance for equity funds used during construction 1,069 423 Changes in other temporary investments - net 18,566 - -------- -------- Net cash flow used in investing activities (19,900) (21,740) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 69,689 Changes in short-term borrowings - 25,000 Dividends paid: Common stock (1,700) (2,000) Preferred stock (842) (842) -------- -------- Net cash flow provided by (used in) financing activities (2,542) 91,847 -------- -------- Net decrease in cash and cash equivalents (18,126) (570) Cash and cash equivalents at beginning of period 54,048 5,113 -------- -------- Cash and cash equivalents at end of period $35,922 $4,543 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $10,806 $9,779 See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. BALANCE SHEETS ASSETS March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents: Cash $9,431 $12,883 Temporary cash investments - at cost, which approximates market 26,491 41,165 ---------- ---------- Total cash and cash equivalents 35,922 54,048 ---------- ---------- Other temporary investments - 18,566 Accounts receivable: Customer 43,343 50,370 Allowance for doubtful accounts (1,044) (1,044) Associated companies 14,003 14,201 Other 2,924 2,892 Accrued unbilled revenues 26,300 30,300 ---------- ---------- Total accounts receivable 85,526 96,719 ---------- ---------- Deferred fuel costs 91,610 106,158 Fuel inventory - at average cost 2,908 4,824 Materials and supplies - at average cost 17,263 16,896 Prepayments and other 6,891 8,521 ---------- ---------- TOTAL 240,120 305,732 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 5,531 5,531 Non-utility property - at cost (less accumulated depreciation) 6,690 6,723 ---------- ---------- TOTAL 12,221 12,254 ---------- ---------- UTILITY PLANT Electric 1,956,233 1,939,182 Property under capital lease 202 211 Construction work in progress 125,740 110,450 ---------- ---------- TOTAL UTILITY PLANT 2,082,175 2,049,843 Less - accumulated depreciation and amortization 747,742 741,892 ---------- ---------- UTILITY PLANT - NET 1,334,433 1,307,951 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 22,674 22,387 Unamortized loss on reacquired debt 13,625 13,925 Other regulatory assets 25,815 13,503 Other 6,527 7,274 ---------- ---------- TOTAL 68,641 57,089 ---------- ---------- TOTAL ASSETS $1,655,415 $1,683,026 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY MISSISSIPPI, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT LIABILITIES Currently maturing long-term debt $255,000 $65,000 Accounts payable: Associated companies 41,459 45,554 Other 21,301 27,383 Customer deposits 30,813 29,421 Taxes accrued 15,588 31,484 Accumulated deferred income taxes 11,591 19,277 Interest accrued 16,845 17,667 Obligations under capital leases 37 36 System Energy Refund 7,418 14,836 Other 2,061 1,964 ---------- ---------- TOTAL 402,113 252,622 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 271,881 266,498 Accumulated deferred investment tax credits 17,555 17,908 Obligations under capital leases 165 175 Accumulated provisions 7,103 7,627 Other 42,706 37,678 ---------- ---------- TOTAL 339,410 329,886 ---------- ---------- Long-term debt 399,849 589,762 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 2002 and 2001 199,326 199,326 Capital stock expense and other (59) (59) Retained earnings 264,395 261,108 ---------- ---------- TOTAL 514,043 510,756 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,655,415 $1,683,026 ========== ========== See Notes to Financial Statements. </TABLE>
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 73.0 $ 80.9 ($ 7.9) (10) Commercial 64.1 67.6 (3.5) (5) Industrial 36.2 41.3 (5.1) (12) Governmental 6.4 6.7 (0.3) (4) ------------------------------ Total retail 179.7 196.5 (16.8) (9) Sales for resale Associated companies 5.2 56.6 (51.4) (91) Non-associated companies 3.4 4.4 (1.0) (23) Other 3.4 (1.3) 4.7 362 ------------------------------ Total $ 191.7 $ 256.2 ($ 64.5) (25) ============================== Billed Electric Energy Sales (GWH): Residential 1,126 1,215 (89) (7) Commercial 963 975 (12) (1) Industrial 672 734 (62) (8) Governmental 87 90 (3) (3) ------------------------------ Total retail 2,848 3,014 (166) (6) Sales for resale Associated companies 45 874 (829) (95) Non-associated companies 47 51 (4) (8) ------------------------------ Total 2,940 3,939 (999) (25) ==============================
ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income (Loss) Entergy New Orleans experienced a net loss in the first quarter of 2002 primarily due to accruals for potential rate actions and refunds. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the first quarter of 2002 compared with 2001 are as follows: First Quarter Description Increase/(Decrease) (In Millions) Base rate differences ($3.0) Fuel cost recovery (42.0) Sales volume/weather 1.0 Unbilled revenue 0.7 Other revenue (5.9) Sales for resale (6.8) ------ Total ($56.0) ====== 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 recorded 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 decreased for the first quarter of 2002 primarily due to recovery, through the fuel adjustment clause, of lower fuel and purchased power expenses. The decrease in fuel and purchased power expenses was a result of decreased market prices of natural gas and purchased power. Other revenue Other revenue decreased for the first quarter of 2002 primarily due to accruals for potential rate actions and refunds. Sales for resale Sales for resale decreased for the first quarter of 2002 primarily due to a decrease in the average price of energy.
ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Gas operating revenues Gas operating revenues decreased for the first quarter of 2002 due to the decreased market price of natural gas coupled with decreased sales volume. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the first quarter of 2002 primarily due to a 74% decrease in the market price of natural gas in addition to a decrease in the market price of purchased power. Taxes other than income taxes Taxes other than income taxes decreased for the first quarter of 2002 primarily due to a decrease in local franchise taxes as a result of lower retail revenue. Other Other income Other income decreased for the first quarter of 2002 primarily due to interest recorded in the first quarter of 2001 on deferred System Energy costs that Entergy New Orleans was not recovering through rates. The deferral of these costs ceased in the third quarter of 2001 as a result of a final FERC order. See Note 2 to the financial statements in the Form 10-K for further discussion of the System Energy rate proceeding and FERC order. Income taxes The effective income tax rates for the first quarter of 2002 and 2001 were 33.8% and 56.3%, respectively. The decrease in the tax rate for the first quarter of 2002 is primarily due to the pre-tax loss decreasing the effect of book and tax timing differences.
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING REVENUES Domestic electric $73,223 $129,231 Natural gas 29,724 74,784 -------- -------- TOTAL 102,947 204,015 -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 28,657 108,827 Purchased power 35,509 48,467 Other operation and maintenance 21,912 20,960 Taxes other than income taxes 9,292 13,686 Depreciation and amortization 6,843 6,326 Other regulatory charges - net 2,409 1,531 -------- -------- TOTAL 104,622 199,797 -------- -------- OPERATING INCOME (LOSS) (1,675) 4,218 -------- -------- OTHER INCOME Allowance for equity funds used during construction 430 398 Interest and dividend income 274 1,106 Miscellaneous - net (460) (413) -------- -------- TOTAL 244 1,091 -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 4,468 4,118 Other interest - net 451 426 Allowance for borrowed funds used during construction (394) (320) -------- -------- TOTAL 4,525 4,224 -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (5,956) 1,085 Income taxes (2,016) 611 -------- -------- NET INCOME (LOSS) (3,940) 474 Preferred dividend requirements and other 241 241 -------- -------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK ($4,181) $233 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING ACTIVITIES Net income (loss) ($3,940) $474 Noncash items included in net income (loss): Other regulatory charges - net 2,409 1,531 Depreciation and amortization 6,843 6,326 Deferred income taxes and investment tax credits (1,829) (4,608) Allowance for equity funds used during (430) (398) construction Changes in working capital: Receivables 9,545 (5,036) Fuel inventory 3,020 3,942 Accounts payable 1,060 (18,690) Taxes accrued - 3,560 Interest accrued (4,518) (3,753) Deferred fuel costs (5,617) 11,358 Other working capital accounts (35,351) (10,275) Provision for estimated losses and reserves 63 (2,243) Changes in other regulatory assets 12 (3,093) Other 5,843 320 -------- -------- Net cash flow used in operating activities (22,890) (20,585) -------- -------- INVESTING ACTIVITIES Construction expenditures (13,324) (11,194) Allowance for equity funds used during construction 430 398 Changes in other temporary investments - net 14,859 - -------- -------- Net cash flow provided by (used in) investing activities 1,965 (10,796) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 29,817 Dividends paid: Preferred stock (241) (241) -------- -------- Net cash flow provided by (used in) financing activities (241) 29,576 -------- -------- Net decrease in cash and cash equivalents (21,166) (1,805) Cash and cash equivalents at beginning of period 38,184 6,302 -------- -------- Cash and cash equivalents at end of period $17,018 $4,497 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $9,306 $7,758 See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. BALANCE SHEETS ASSETS March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents: Cash $6,865 $5,237 Temporary cash investments - at cost, which approximates market 10,153 32,947 -------- -------- Total cash and cash equivalents 17,018 38,184 -------- -------- Other temporary investments - 14,859 Accounts receivable: Customer 29,806 33,827 Allowance for doubtful accounts (2,234) (2,234) Associated companies 5,184 10,527 Other 4,500 4,511 Accrued unbilled revenues 19,857 20,027 -------- -------- Total accounts receivable 57,113 66,658 -------- -------- Accumulated deferred income taxes 2,823 4,882 Fuel inventory - at average cost 61 3,081 Materials and supplies - at average cost 8,325 8,273 Prepayments and other 35,500 26,239 -------- -------- TOTAL 120,840 162,176 -------- -------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 3,259 3,259 -------- -------- UTILITY PLANT Electric 605,277 597,575 Natural gas 144,260 142,741 Construction work in progress 45,460 43,166 -------- -------- TOTAL UTILITY PLANT 794,997 783,482 Less - accumulated depreciation and amortization 401,074 396,535 -------- -------- UTILITY PLANT - NET 393,923 386,947 -------- -------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Unamortized loss on reacquired debt 708 761 Other regulatory assets 10,831 10,843 Other 1,900 2,051 -------- -------- TOTAL 13,439 13,655 -------- -------- TOTAL ASSETS $531,461 $566,037 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> ENTERGY NEW ORLEANS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT LIABILITIES Currently maturing long-term debt $25,000 $ - Accounts payable: Associated companies 19,820 18,199 Other 23,079 23,640 Customer deposits 19,080 18,931 Interest accrued 2,514 7,032 Deferred fuel costs 4,579 10,196 System Energy Refund - 33,614 Other 9,226 1,799 -------- -------- TOTAL 103,298 113,411 -------- -------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 18,437 25,326 Accumulated deferred investment tax credits 5,236 5,361 SFAS 109 regulatory liability - net 23,492 19,868 Accumulated provisions 5,865 5,802 Other 24,757 16,735 -------- -------- TOTAL 77,787 73,092 -------- -------- Long-term debt 204,120 229,097 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 2002 and 2001 33,744 33,744 Paid-in capital 36,294 36,294 Retained earnings 56,438 60,619 -------- -------- TOTAL 146,256 150,437 -------- -------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $531,461 $566,037 ======== ======== See Notes to Financial Statements. </TABLE>
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 27.2 $ 41.0 ($ 13.8) (34) Commercial 30.8 48.9 (18.1) (37) Industrial 4.6 8.3 (3.7) (45) Governmental 12.5 20.9 (8.4) (40) ----------------------------- Total retail 75.1 119.1 (44.0) (37) Sales for resale Associated companies 0.3 7.0 (6.7) (96) Non-associated companies 0.5 0.6 (0.1) (17) Other (2.7) 2.5 (5.2) (208) ----------------------------- Total $ 73.2 $ 129.2 ($ 56.0) (43) ============================= Billed Electric Energy Sales (GWH): Residential 403 397 6 2 Commercial 505 488 17 3 Industrial 89 91 (2) (2) Governmental 230 227 3 1 ----------------------------- Total retail 1,227 1,203 24 2 Sales for resale Associated companies 16 63 (47) (75) Non-associated companies 10 13 (3) (23) ----------------------------- Total 1,253 1,279 (26) (2) =============================
SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the first quarter of 2002 compared with 2001 primarily due to decreased interest charges, partially offset by decreased interest income and increased other operation and maintenance expenses. 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 first quarter of 2002 as a result of the suspension of the GGART for Entergy Arkansas in July 2001. The net income impact of the suspended tariff is offset in other regulatory charges. See further discussion of the GGART in Note 2 to the financial statements in the Form 10-K. Expenses Other operation and maintenance Other operation and maintenance expenses increased for the first quarter of 2002 primarily due to: o lower nuclear insurance refunds of $1.7 million; and o an increase in incentive compensation expense of $0.8 million. Depreciation and amortization Depreciation and amortization expenses decreased for the first quarter of 2002 primarily due to a lower depreciation rate used in 2002 as mandated by FERC. See further discussion of the System Energy rate proceeding in Note 2 to the financial statements in the Form 10-K. Other regulatory charges - net Other regulatory charges decreased for the first quarter of 2002 primarily due to the suspension of the GGART for Entergy Arkansas in July 2001. Other Other income Interest income decreased for the first quarter of 2002 as a result of decreased interest earned on System Energy's investments in the money pool due to lower advances to the money pool in 2002.
SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Interest and other charges Interest on long-term debt decreased for the first quarter of 2002 due to the retirement of $135 million of long-term debt in August 2001. Other interest expense decreased for the first quarter of 2002 due to interest recorded in 2001 on System Energy's reserve for rate refund. The refund was made in December 2001. Income taxes The effective income tax rates for the first quarter of 2002 and 2001 were 40.5% and 45.8%, respectively. The decrease in the effective tax rate was primarily due to updating book and tax timing differences related to research and experimental expenses consistent with amended tax returns.
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. INCOME STATEMENTS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING REVENUES Domestic electric $142,330 $151,166 -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 9,604 10,072 Nuclear refueling outage expenses 2,620 4,034 Other operation and maintenance 19,213 16,374 Decommissioning 4,014 4,736 Taxes other than income taxes 6,716 6,708 Depreciation and amortization 27,297 29,481 Other regulatory charges - net 12,926 19,167 -------- -------- TOTAL 82,390 90,572 -------- -------- OPERATING INCOME 59,940 60,594 -------- -------- OTHER INCOME Allowance for equity funds used during construction 550 270 Interest and dividend income 480 5,101 Miscellaneous - net (361) (30) -------- -------- TOTAL 669 5,341 -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 15,107 19,011 Other interest - net 785 8,706 Allowance for borrowed funds used during construction (232) (137) -------- -------- TOTAL 15,660 27,580 -------- -------- INCOME BEFORE INCOME TAXES 44,949 38,355 Income taxes 18,222 17,557 -------- -------- NET INCOME $26,727 $20,798 ======== ======== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> OPERATING ACTIVITIES Net income $26,727 $20,798 Noncash items included in net income: Reserve for regulatory adjustments - 27,644 Other regulatory charges - net 12,926 19,167 Depreciation, amortization, and decommissioning 31,311 34,217 Deferred income taxes and investment tax credits (12,124) (24,524) Allowance for equity funds used during construction (550) (270) Changes in working capital: Receivables (3,000) (37,157) Accounts payable (1,192) 13,389 Taxes accrued 14,918 26,464 Interest accrued (28,374) (23,111) Other working capital accounts (1,338) 905 Provision for estimated losses and reserves (273) (164) Changes in other regulatory assets 8,646 10,306 Other 15,699 5,072 -------- -------- Net cash flow provided by operating activities 63,376 72,736 -------- -------- INVESTING ACTIVITIES Construction expenditures (7,551) (7,607) Allowance for equity funds used during construction 550 270 Nuclear fuel purchases - (10,704) Proceeds from sale/leaseback of nuclear fuel - 10,704 Decommissioning trust contributions and realized change in trust assets (785) (5,692) Changes in other temporary investments - net 22,354 - -------- -------- Net cash flow provided by (used in) investing activities 14,568 (13,029) -------- -------- FINANCING ACTIVITIES Retirement of long-term debt (30,891) (16,800) Dividends paid: Common stock (23,600) (22,800) -------- -------- Net cash flow used in financing activities (54,491) (39,600) -------- -------- Net increase in cash and cash equivalents 23,453 20,107 Cash and cash equivalents at beginning of period 49,579 202,218 -------- -------- Cash and cash equivalents at end of period $73,032 $222,325 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $43,211 $49,725 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($2,428) ($1,190) See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS ASSETS March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT ASSETS Cash and cash equivalents: Cash $1,141 $15 Temporary cash investments - at cost, which approximates market 71,891 49,564 ---------- ---------- Total cash and cash equivalents 73,032 49,579 ---------- ---------- Other temporary investments - 22,354 Accounts receivable: Associated companies 73,778 70,755 Other 1,170 1,193 ---------- ---------- Total accounts receivable 74,948 71,948 ---------- ---------- Materials and supplies - at average cost 52,171 51,665 Deferred nuclear refueling outage costs 6,127 8,728 Prepayments and other 5,233 1,631 ---------- ---------- TOTAL 211,511 205,905 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 136,903 138,546 ---------- ---------- UTILITY PLANT Electric 3,099,276 3,098,446 Property under capital lease 450,014 450,014 Construction work in progress 43,510 36,868 Nuclear fuel under capital lease 55,028 61,905 ---------- ---------- TOTAL UTILITY PLANT 3,647,828 3,647,233 Less - accumulated depreciation and amortization 1,442,571 1,416,337 ---------- ---------- UTILITY PLANT - NET 2,205,257 2,230,896 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 164,213 173,470 Unamortized loss on reacquired debt 47,487 48,381 Other regulatory assets 158,560 157,949 Other 9,520 8,894 ---------- ---------- TOTAL 379,780 388,694 ---------- ---------- TOTAL ASSETS $2,933,451 $2,964,041 ========== ========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDER'S EQUITY March 31, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) <S> <C> <C> CURRENT LIABILITIES Currently maturing long-term debt $81,375 $100,891 Accounts payable: Associated companies 2,642 2,404 Other 12,886 14,316 Taxes accrued 127,440 112,522 Accumulated deferred income taxes 1,350 2,360 Interest accrued 18,721 47,095 Obligations under capital leases 26,503 26,503 Other 1,752 1,583 ---------- ---------- TOTAL 272,669 307,674 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 483,177 498,404 Accumulated deferred investment tax credits 85,171 86,040 Obligations under capital leases 28,525 35,401 Other regulatory liabilities 172,547 135,878 Decommissioning 140,888 140,103 Accumulated provisions 432 705 Other 37,554 39,117 ---------- ---------- TOTAL 948,294 935,648 ---------- ---------- Long-term debt 818,681 830,038 SHAREHOLDER'S EQUITY Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2002 and 2001 789,350 789,350 Retained earnings 104,457 101,331 ---------- ---------- TOTAL 893,807 890,681 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,933,451 $2,964,041 ========== ========== 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) See Note 9 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Entergy London and CitiPower sales transactions. See Note 14 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Saltend sale transaction. 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 Entergy's nuclear power plants. Environmental Issues (Entergy Arkansas) In previous years, Entergy Arkansas has received notices from the EPA and the 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 March 31, 2002, 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 March 31, 2002, a remaining recorded liability of approximately $13.3 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 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 March 31, 2002 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 of New Orleans 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. Off Balance Sheet Turbine Financing Arrangement (Entergy Corporation) As discussed in Note 9 to the financial statements in the Form 10-K, EWO obtained contracts in October 1999 to acquire 36 turbines from General Electric. Entergy's rights and obligations under the contracts for 22 of the turbines were sold to an independent special- purpose entity in May 2001. In the first quarter of 2002, Entergy recorded a $216.2 million ($140.5 million net of tax) provision for Entergy's estimate of the impairments resulting from the decline in the value of the turbines subject to purchase commitments with the special-purpose entity. Entergy's total potential impairment under this arrangement is limited to the costs of cancellation of these turbines. The Consolidated Statement of Operations reflects the pre- tax effect of this liability in operation and maintenance expenses. Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans 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. Nevertheless, no assurance can be given as to the outcome of these cases. Asbestos and Hazardous Material Litigation (Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) Numerous lawsuits have been filed in federal and state courts in Texas and Louisiana primarily by contractor employees in the 1950- 1980 timeframe against Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans, as premises owners of power plants, for damages caused by alleged exposure to asbestos or other hazardous material. 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 and the Continued Application of SFAS 71 Previous developments and information related to electric industry restructuring are presented in Note 2 to the financial statements in the Form 10-K. Texas (Entergy Corporation and Entergy Gulf States) Retail open access legislation is in place in Texas, but the implementation of retail open access in Entergy Gulf States' service territory is delayed until at least September 15, 2002, and given current FERC and PUCT activities, retail open access in Entergy Gulf States' territory is not likely to begin before May 2003. Several proceedings necessary to implement retail open access are still pending, including the proceeding to set the price-to-beat fuel rate that will be charged by Entergy's retail electric service provider. In addition, the LPSC has not approved for the Louisiana jurisdictional operations the transfer of generation assets to, or a power purchase agreement with, Entergy's Texas generation company. Therefore, neither the necessary regulatory actions nor the reasonable determinability of the effect of deregulation has occurred for Entergy Gulf States to discontinue the application of regulatory accounting principles to its Texas generation operations. Retail Rate Proceedings Filings with the APSC (Entergy Corporation and Entergy Arkansas) March 2002 Settlement Agreement As discussed in the Form 10-K, in March 2002, Entergy Arkansas, the APSC staff, and the Arkansas Attorney General submitted a settlement agreement to the APSC for approval. The agreement resolves issues discussed in the Form 10-K under "Retail Rates," "Transition Cost Account," and "December 2000 Ice Storm Cost Recovery." Arkansas Electric Energy Consumers, Inc. opposed the settlement. A hearing before the APSC to consider the settlement was held on April 11, 2002. No assurance can be given as to the timing or outcome of the proceedings before the APSC. Fuel Cost Recovery In March 2002, Entergy Arkansas filed its annually redetermined energy cost rate with the APSC, including a new energy allocation factor. The filing reflected that a decrease was warranted due to a decrease in fuel and purchased power costs in 2001 and the accumulated over-recovery of 2001 energy costs. The decreased energy cost rate is effective April 2002 through March 2003. Filings with the PUCT and Texas Cities (Entergy Corporation and Entergy Gulf States) Recovery of River Bend Costs 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. In June 1999, subsequent to the settlement agreement discussed in the Form 10-K, Entergy Gulf States removed the reserve for River Bend plant costs held in abeyance and reduced the value of the plant asset. The settlement agreement limits potential recovery of the remaining plant asset, less depreciation, to $115 million as of January 1, 2002. In a settlement in its transition to competition proceedings, and consistent with the June 1999 settlement, Entergy Gulf States agreed not to prosecute its appeal until January 1, 2002. Entergy Gulf States also agreed that it will not seek recovery of the abeyed plant costs through any additional charge to Texas ratepayers. Entergy Gulf States is now prosecuting its appeal, and the argument on the appeal occurred in March 2002. In its interim order approving this settlement, however, the PUCT recognized that any additional River Bend investment found prudent, subject to the $115 million cap, could be used as an offset against stranded benefits, should legislation be passed requiring Entergy Gulf States to return stranded benefits to retail customers. In April 2002, the Travis County District Court issued an order affirming the PUCT's order on remand. Entergy Gulf States has appealed this ruling to the Third District Court of Appeals. The financial statement impact of the retail rate settlement agreement on the abeyed plant costs will ultimately depend on several factors, including the possible discontinuance of SFAS 71 accounting treatment for the Texas generation business, the determination of the market value of generation assets, and any future legislation in Texas addressing 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 As determined in the June 1999 retail rate settlement agreement, 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. The settlement that delayed implementation of retail open access in Texas for Entergy Gulf States provides that Entergy Gulf States will continue the use of this methodology until retail open access begins. The amounts collected under Entergy Gulf States' fixed fuel factor until the date retail open access commences are subject to fuel reconciliation proceedings before the PUCT. The interim surcharge discussed below will also be subject to the fuel reconciliation proceeding. In January 2001, Entergy Gulf States filed a fuel reconciliation case covering the period from March 1999 through August 2000. Entergy Gulf States is reconciling approximately $583 million of fuel and purchased power costs. As part of this filing, Entergy Gulf States requested a surcharge to collect $28 million, plus interest, of under-recovered fuel and purchased power costs. A hearing on the merits concluded in August 2001, and the ALJ has recommended that the surcharge be reduced to $7 million. The PUCT considered the ALJ's recommendation in February 2002, but did not reach a final decision. The PUCT remanded certain issues related to the eligibility of costs for Entergy Gulf States 30% non-regulated share of River Bend for further consideration by the State Office of Administrative Hearings. No assurance can be given as to the outcome of this proceeding. In November 2001, Entergy Gulf States filed an application with the PUCT requesting an interim surcharge to collect $71 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through September 2001. Entergy Gulf States made the application pursuant to one of the terms of the settlement agreement that delayed implementation of retail open access in Texas for Entergy Gulf States. In March 2002, Entergy Gulf States revised its request to collect $30.3 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through February 2002. Entergy Gulf States requested that the surcharge begin in April 2002 and extend through August 2002, or until the fuel cost is fully recovered, whichever is sooner. In March 2002, the PUCT issued an order approving the surcharge. The surcharge was implemented in the first billing cycle of April 2002. Filings with the LPSC Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States) In May 2001, Entergy Gulf States filed its eighth required post- merger earnings analysis with the LPSC. This filing is subject to review by the LPSC and may result in a change in rates. In April 2002, the LPSC staff filed testimony recommending a $16.5 million rate refund and a $40.1 million prospective rate reduction. The prospective reduction includes a recommended reduction in return on equity that would not take effect until the later of June 2003 or the date of the LPSC's order. Hearings were held in April 2002. Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana) In May 1997, Entergy Louisiana made its second annual performance-based formula rate plan filing with the LPSC for the 1996 test year. This filing resulted in a total rate reduction of approximately $54.5 million, which was implemented in July 1997. At the same time, rates were reduced by an additional $0.7 million and by an additional $2.9 million effective March 1998. Upon completion of the hearing process in December 1998, the LPSC issued an order requiring an additional rate reduction and refund, although the resulting amounts were not quantified. Entergy Louisiana appealed this order and obtained a preliminary injunction pending a final decision on appeal. The Louisiana Supreme Court rendered a non- unanimous decision in April 2002 affirming the LPSC's order. Entergy Louisiana has filed an application for rehearing. In May 2000, Entergy Louisiana submitted its fifth annual performance-based formula rate plan filing for the 1999 test year. As a result of this filing, Entergy Louisiana implemented a $24.8 million base rate reduction in August 2000. In September 2001, the LPSC approved a settlement in which Entergy Louisiana agreed to increase to $28.2 million the total base rate reduction, effective August 2000. The additional rate reduction and the associated credit were implemented in September 2001. The settlement resolved 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 hearing to address the return on common equity issue was held in March 2002. 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. Subsequently, Entergy Louisiana agreed to implement an additional $3.4 million rate reduction effective August 2001. This stipulation resolved all issues relating to the 2000 test year, except issues relating to its return on common equity and the treatment of certain capacity costs in the formula rate plan process. These issues will be addressed in a hearing scheduled for June 2002. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) Formula Rate Plan Filings In March 2002, Entergy Mississippi submitted its annual performance-based formula rate plan filing for the 2001 test year. The submittal indicated that a $2.8 million rate increase was appropriate under the formula rate plan. In April 2002, the MPSC Staff and Entergy Mississippi entered into a stipulation, which the MPSC approved, that provides for an increase of $1.95 million effective in May 2002. Filings with the Council (Entergy Corporation and Entergy New Orleans) Natural Gas In a resolution adopted in August 2001, the Council ordered Entergy New Orleans to account for $36 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 filed a response to the Council in September 2001. Entergy New Orleans has documented a full reconciliation for the natural gas costs during that period. The ultimate outcome of the proceeding cannot be predicted at this time. 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. 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 $100 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 were held in February and March 2002. The ultimate outcome of the lawsuit and the Council proceeding cannot be predicted at this time. Purchased Power for Summer 2000, 2001, and 2002 (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) The domestic utility companies filed applications with the APSC, the LPSC, the MPSC, and the Council to approve the sale of power by Entergy Gulf States from its unregulated, undivided 30% interest in River Bend formerly owned by Cajun to the other domestic utility companies during the summer of 2000. These applications were approved subject to subsequent prudence reviews. In addition, Entergy Gulf States and Entergy Louisiana filed an application with the LPSC for authorization to purchase capacity and electric power from third parties for the summer of 2000, and filed a similar application for the summer of 2001. The LPSC approved these applications, with reservations of its rights to review the prudence of the purchases and the appropriate categorization of the costs as either capacity or energy charges for purposes of recovery. The LPSC reviewed the 2000 purchases and found that Entergy Louisiana's and Entergy Gulf States' costs were prudently incurred, but decided that approximately 34% of the costs should be categorized as capacity charges, and therefore should be recovered through base rates and not through the fuel adjustment clause. In November 2000, the LPSC ordered refunds of $11.1 million for Entergy Louisiana and $3.6 million for Entergy Gulf States, for which adequate provisions were made. In May 2001, the LPSC determined that 24% of Entergy Louisiana's and Entergy Gulf States' costs relating to summer 2001 purchases should be categorized as capacity charges, and has reviewed certain prudence issues related to the 2001 purchases. The LPSC has questioned the system's contract mix and raised issues relating to potential uprates at nuclear facilities, and hearings on those issues are scheduled for May 2002. Those costs that are categorized as capacity charges will be included in the costs of service used to determine the base rates of Entergy Louisiana and Entergy Gulf States. In 2001, these companies recorded a regulatory asset for the capacity charges incurred in both 2000 and 2001. The capacity charges for 2000 are being amortized through May 2002 for Entergy Gulf States and through July 2002 for Entergy Louisiana. The capacity charges for 2001 will be amortized over a twelve-month period beginning in June 2002 for Entergy Gulf States and August 2002 for Entergy Louisiana. In March 2002, Entergy Louisiana filed an application with the LPSC for the summer of 2002 similar to the applications filed for the summers of 2000 and 2001. A preliminary procedural schedule has been adopted for that docket. Hearings on the issues of the percentage of the costs that should be categorized as capacity charges and the establishment of a regulatory asset will be conducted in June 2002 with the expectation that the LPSC will render a decision on those issues at its July 2002 public meeting. Any other issues associated with the summer 2002 application will be addressed in proceedings to be conducted later in 2002. System Energy's 1995 Rate Proceeding (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in the Form 10-K, FERC denied requests for rehearing in the System Energy rate increase proceeding and the July 2000 order became final. System Energy made a compliance tariff filing in August 2001 and it was accepted by FERC in November 2001. System Energy made refunds to the domestic utility companies in December 2001. A portion of the refund to the domestic utility companies has been or will be refunded to customers. Entergy Arkansas refunded $54.3 million, including interest, through the issuance of refund checks in March 2002 as approved by the APSC. Entergy Mississippi is refunding $14.8 million to its customers through credits to the Grand Gulf Riders. The credits began in October 2001 and will occur through September 2002. Entergy New Orleans refunded $27.0 million to its customers through the issuance of refund checks in the first quarter of 2002. NOTE 3. COMMON STOCK (Entergy Corporation) During the three months ended March 31, 2002, Entergy Corporation issued 2,477,272 shares of its previously repurchased common stock to satisfy stock options exercised. NOTE 4. LONG-TERM DEBT (Entergy Arkansas) On March 1, 2002, Entergy Arkansas retired, at maturity, $85 million of 7% Series First Mortgage Bonds. On March 28, 2002, Entergy Arkansas issued $100 million of 6.70% Series First Mortgage Bonds due April 1, 2032. A portion of the net proceeds was used to satisfy the annual replacement fund requirement under the mortgage relating to the bonds by redeeming $85 million of 8.75% Series First Mortgage Bonds due March 1, 2026. The remaining net proceeds will be used to replace a portion of the cash that was used to meet the maturity of the $85 million 7% Series First Mortgage Bonds retired on March 1, 2002 discussed above. (Entergy Gulf States) On January 1, 2002, Entergy Gulf States retired, at maturity, $148 million of 8.21% Series First Mortgage Bonds with internally generated funds. (Entergy Louisiana) On January 1, 2002, Entergy Louisiana retired, at maturity, $23 million of 7.5% Series First Mortgage Bonds. On March 1, 2002, Entergy Louisiana retired, at maturity, $75 million of 5.80% Series First Mortgage Bonds. On March 27, 2002, Entergy Louisiana issued $150 million of 7.60% Series First Mortgage Bonds due April 1, 2032. A portion of the net proceeds was used to satisfy the annual replacement fund requirement under the mortgage relating to the bonds by redeeming $115 million of 8.75% Series First Mortgage Bonds due March 1, 2026. The remaining net proceeds will be used to reduce short-term debt which, among other things, was incurred to meet the maturities of the First Mortgage Bonds discussed above. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On April 10, 2002, Entergy Corporation's Board of Directors declared a common stock dividend of $0.33 per share, payable on June 1, 2002, to holders of record as of May 14, 2002. NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation) Entergy's reportable segments as of March 31, 2002 are domestic utility, domestic non-utility nuclear, and energy commodity services. "All Other" includes the parent company, Entergy Corporation, and other business activity, which is principally gains or losses on the sales of businesses and the earnings on the proceeds of those sales. Entergy's segment financial information for the first quarter of 2002 and 2001 is as follows (in thousands): <TABLE> <CAPTION> Domestic Domestic Non- Energy All Other* Eliminations Consolidated Utility Utility Commodity Nuclear* Services* <S> <C> <C> <C> <C> <C> <C> 2002 Operating Revenues $1,447,799 $278,896 $125,760 $9,002 ($623) $1,860,834 Equity in earnings of unconsolidated equity affiliates - - 75,065 - - 75,065 Income Taxes (Benefit) 65,376 26,253 (113,386) (4,141) - (25,898) Net Income (Loss) 108,244 40,064 (215,126) (6,165) - (72,983) Total Assets 19,944,025 3,452,783 2,357,299 591,921 (836,172) 25,509,856 2001 Operating Revenues $1,983,707 $179,375 $477,946 $12,390 ($991) $2,652,427 Equity in earnings of unconsolidated equity affiliates - - 25,064 - - 25,064 Income Taxes (Benefit) 85,505 19,919 7,596 (4,591) - 108,429 Net Income (Loss) 120,437 29,959 18,345 (7,870) - 160,871 Total Assets 20,562,033 1,874,783 2,666,089 983,934 (895,080) 25,191,759 </TABLE> Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity. Energy commodity services' net loss for the quarter includes a $401.4 million charge to operating expenses ($260.9 million net of tax) to reflect the effect of Entergy's decision to discontinue additional EWO greenfield power plant development and to reflect asset impairments resulting from the deteriorating economics of wholesale power markets in the United States and the United Kingdom. The charge consists of the following: o as discussed in Note 1, $216.2 million of the charge is a provision for Entergy's estimate of the impairments resulting from the decline in the value of the turbines subject to purchase commitments with a special-purpose entity. Entergy's total potential impairment under this arrangement is limited to the costs of cancellation of the turbines that the special-purpose entity was formed to acquire; o $152.5 million of the charge results from the write-off of EWO's equity investment in the Damhead Creek project ($55.0 million) and the impairment of the values of the Warren Power power plant ($34.2 million) and the Crete project ($63.3 million). This portion of the charge reflects Entergy's estimate of the effects of continued declining spark spreads in the United States and the United Kingdom; and o $32.7 million of the charge results from the write-off of capitalized project development costs for projects that will not be completed. NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS (Entergy Corporation) As discussed in the Form 10-K, Entergy implemented SFAS 142, "Goodwill and Other Intangible Assets" and SFAS 144, "Accounting for the Impairment or Disposal of Long-lived Assets" effective January 1, 2002. The implementation of SFAS 142 resulted in the cessation of the amortization of the remaining plant acquisition adjustment recorded in conjunction with its acquisition of Entergy Gulf States; this will increase Entergy's annual net income by approximately $16.3 million. Entergy will also perform an impairment test on the remaining acquisition adjustment, which is recorded as goodwill on the balance sheet effective January 1, 2002. As SFAS 142 allows, Entergy will complete this impairment test in the second quarter of 2002. Entergy does not believe an impairment will result from this test when it is completed. The following table is a reconciliation of reported earnings (loss) applicable to common stock to earnings (loss) applicable to common stock without goodwill amortization for the three months ended March 31, 2002 and 2001. <TABLE> <CAPTION> 2002 2001 (In Thousands, Except Share Data) <S> <C> <C> Reported earnings (loss) applicable to common stock ($78,923) $154,155 Add back: Goodwill amortization - 4,066 --------- -------- Earnings (loss) applicable to common stock without goodwill amortization ($78,923) $158,221 ========= ======== Basic earnings (loss) per average common share: Reported earnings (loss) applicable to common stock ($0.36) $0.70 Goodwill amortization - 0.02 --------- -------- Earnings (loss) applicable to common stock without goodwill amortization ($0.36) $0.72 ========= ======== Diluted earnings (loss) per average common share: Reported earnings (loss) applicable to common stock ($0.36) $0.69 Goodwill amortization - 0.02 --------- -------- Earnings (loss) applicable to common stock without goodwill amortization ($0.36) $0.71 ========= ======== </TABLE> The implementation of SFAS 144 did not have a significant effect on Entergy's financial position or results of operations. NOTE 8. EQUITY METHOD INVESTMENTS (Entergy Corporation) See Note 13 to the financial statements in the Form 10-K for a discussion of Entergy's equity method investments. In the first quarter of 2002, EWO sold its interests in projects in Argentina, Chile, and Peru, including Generandes Peru S.A. and Compania Electrica San Isidro S.A. EWO had $100.8 million reflected in "Investments in affiliates - at equity" for these investments as of December 31, 2001, and reported $11.6 million of "Equity in earnings of unconsolidated equity affiliates" from these investments for the year ended December 31, 2001. After impairment provisions recorded for these interests in 2001, the net loss realized on the sale in the first quarter of 2002 is insignificant. Approximately $66 million of cumulative translation adjustments were realized in the sale. As discussed in Note 6, in the first quarter of 2002 Entergy recorded an impairment of $63.3 million against the book value of its investment in Crete Energy Ventures, LLC. NOTE 9. EARNINGS PER SHARE (Entergy Corporation) In accordance with SFAS 128, "Earnings per Share," because of the loss incurred for the three months ended March 31, 2002 Entergy did not include potential common shares in the computation of diluted earnings per share for that period. Nevertheless, potential common shares related to Entergy's stock option and other stock compensation plans do exist and the average number of shares outstanding including these potential common shares is presented in the Consolidated Statements of Operations for the period ended March 31, 2002. Including these potential common shares in the calculation of earnings per share for the three months ended March 31, 2002 results in a loss per share of $0.35 for that period. __________________________________ 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. Item 5. Other Information Environmental Regulation (Entergy Gulf States) The State of Louisiana is implementing emission control strategies to address continued ozone non-attainment status of areas in and around Baton Rouge, Louisiana. In March 2002, the LDEQ issued a rule for control of NOx as part of the State Implementation Plan (SIP) to bring this area into attainment with the National Ambient Air Quality standards for ozone by May 2005. It simultaneously issued a proposed revision to this rule. The rule contains provisions that would lead to installation of new NOx control equipment at Entergy Gulf States generating units. Preliminary analyses indicate compliance costs may be as much as $72 million in new capital spending. The proposed revision would reduce these costs by at least $9 million. Most of the capital expenditures would take place in 2003 and 2004. The final revision is expected to be in place by May 2002. Cost estimates will be refined as engineering studies progress before and after promulgation of the NOx rule revisions and approval of the SIP by the EPA. Entergy Gulf States will be required to obtain revised operating permits from the LDEQ and meet new, lower emission limits for NOx. In March 2002, however, a federal district court issued a judgement ordering the EPA to determine the ozone non-attainment status of the Baton Rouge area and, if appropriate, reclassify the area as a result of the determination. The judgement may result in a downgrade from the current status of "serious" to "severe" non-attainment classification. If this occurs, the LDEQ ozone SIP rulemakings could be affected, especially in terms of scheduling. The specific impact of the judgement on Entergy Gulf States will depend on the timing of the EPA approval of the SIP. 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, March 31, 1997 1998 1999 2000 2001 2002 Entergy Arkansas 2.54 2.63 2.08 3.01 3.29 3.16 Entergy Gulf States 1.42 1.40 2.18 2.60 2.36 2.15 Entergy Louisiana 2.74 3.18 3.48 3.33 2.76 3.13 Entergy Mississippi 2.98 3.12 2.44 2.33 2.14 2.21 Entergy New Orleans 2.70 2.65 3.00 2.66 (b) (c) System Energy 2.31 2.52 1.90 2.41 2.12 2.28 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, March 31, 1997 1998 1999 2000 2001 2002 Entergy Arkansas 2.24 2.28 1.80 2.70 2.99 2.89 Entergy Gulf States (a) 1.23 1.20 1.86 2.39 2.21 2.01 Entergy Louisiana 2.36 2.75 3.09 2.93 2.51 2.85 Entergy Mississippi 2.69 2.80 2.18 2.09 1.96 2.03 Entergy New Orleans 2.44 2.41 2.74 2.43 (b) (c) (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock for the twelve months ended 1997, 1998, and 1999. (b) Earnings for the twelve months ended December 31, 2001, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $6.6 million and $9.5 million, respectively. (c) Earnings for the twelve months ended March 31, 2002, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $13.6 million and $16.3 million, respectively. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* 4(a) - Fifty-sixth Supplemental Indenture, dated as of March 1, 2002, to Entergy Louisiana's Mortgage and Deed of Trust, dated as of April 1, 1944 (A-2(d) to Rule 24 Certificate dated April 4, 2002 in 70-9141). 4(b) - Fifty-seventh Supplemental Indenture, dated as of March 1, 2002, to Entergy Arkansas' Mortgage and Deed of Trust, dated as of October 1, 1944 (C-2(a) to Form U5S for the year ended December 31, 2001). 10(a) - Amendment, effective December 10, 2001, to the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries. 10(b) - Amendment, effective December 10, 2001, to the Entergy Corporation and Subsidiaries Equity Awards Plan. 10(c) - Amendment, effective December 10, 2001, to the Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries. 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 March 31, 2002, 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 March 31, 2002. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy Corporation A Current Report on Form 8-K, dated January 8, 2002, was filed with the SEC on January 8, 2002, 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 January 31, 2002, was filed with the SEC on January 31, 2002, 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 March 5, 2002, was filed with the SEC on March 5, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Arkansas A Current Report on Form 8-K, dated March 25, 2002, was filed with the SEC on March 25, 2002, reporting information under Item 5. "Other Events" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Arkansas A Current Report on Form 8-K, dated March 26, 2002, was filed with the SEC on March 26, 2002, 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 11, 2002, was filed with the SEC on April 11, 2002, 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, 2002, was filed with the SEC on April 25, 2002, 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 May 1, 2002, was filed with the SEC on May 1, 2002, reporting information under Item 5. "Other Events and 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 Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) Date: May 10, 2002