FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (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, 1996 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) 529-5262 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-2703 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) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 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) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 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, 1996 Entergy Corporation ($0.01 par value) 228,043,846
ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q March 31, 1996 Page Number Definitions 1 Management's Financial Discussion and Analysis - Liquidity and Capital Resources 3 Management's Financial Discussion and Analysis - Significant Factors and Known Trends 6 Management's Financial Discussion and Analysis for Entergy Corporation and Subsidiaries 9 Statements of Consolidated Income (Loss) for Entergy Corporation and Subsidiaries 13 Statements of Consolidated Cash Flows for Entergy Corporation and Subsidiaries 14 Consolidated Balance Sheets for Entergy Corporation and Subsidiaries 16 Management's Financial Discussion and Analysis for Entergy Arkansas, Inc. 18 Statements of Income for Entergy Arkansas, Inc. 20 Statements of Cash Flows for Entergy Arkansas, Inc. 21 Balance Sheets for Entergy Arkansas, Inc. 22 Management's Financial Discussion and Analysis for Entergy Gulf States, Inc. 24 Statements of Income (Loss) for Entergy Gulf States, Inc. 26 Statements of Cash Flows for Entergy Gulf States, Inc. 27 Balance Sheets for Entergy Gulf States, Inc. 28 Management's Financial Discussion and Analysis for Entergy Louisiana, Inc. 30 Statements of Income for Entergy Louisiana, Inc. 32 Statements of Cash Flows for Entergy Louisiana, Inc. 33 Balance Sheets for Entergy Louisiana, Inc. 34 Management's Financial Discussion and Analysis for Entergy Mississippi, Inc. 36 Statements of Income for Entergy Mississippi, Inc. 38 Statements of Cash Flows for Entergy Mississippi, Inc. 39 Balance Sheets for Entergy Mississippi, Inc. 40 Management's Financial Discussion and Analysis for Entergy New Orleans, Inc. 42 Statements of Income for Entergy New Orleans, Inc. 44 Statements of Cash Flows for Entergy New Orleans, Inc. 45 Balance Sheets for Entergy New Orleans, Inc. 46 Management's Financial Discussion and Analysis for System Energy Resources, Inc. 49 Statements of Income for System Energy Resources, Inc. 50 Statements of Cash Flows for System Energy Resources, Inc. 51 Balance Sheets for System Energy Resources, Inc. 52 Notes to Financial Statements for Entergy Corporation and Subsidiaries 54 Part II: Item 1. Legal Proceedings 63 Item 5. Other Information 64 Item 6. Exhibits and Reports on Form 8-K 65 Experts 68 Signature 69
This combined Quarterly Report on Form 10-Q is separately filed by Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. Information contained herein relating to any individual company is filed by such company on its own behalf. None of these companies make any representations as to information relating to the other companies. 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, 1995, filed by the individual registrants with the SEC and should be read in conjunction therewith. On April 22, 1996, Entergy Corporation filed amendments to its articles of incorporation to change the names of its operating companies. DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term ALJ Administrative Law Judge ANO Arkansas Nuclear One Plant ANO 2 Unit No. 2 of ANO Cajun Cajun Electric Power Cooperative, Inc. Capital Funds Agreement Agreement, dated as of June 21, 1974, as amended, between System Energy and Entergy Corporation, and the assignments thereof CitiPower CitiPower Ltd. - an electric distribution company serving Melbourne, Australia, and surrounding suburbs, which was acquired by Entergy on January 5, 1996 Council Council of the City of New Orleans, Louisiana Entergy Arkansas Entergy Arkansas, Inc., formerly Arkansas Power & Light Entergy Corporation Entergy Corporation, a Delaware corporation, successor to Entergy Corporation, a Florida Corporation Entergy Gulf States Entergy Gulf States, Inc., formerly Gulf States Utilities (including wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil & Gas, Inc., and Southern Gulf Railway Company) Entergy Louisiana Entergy Louisiana, Inc., formerly Louisiana Power & Light Entergy Mississippi Entergy Mississippi, Inc., formerly Mississippi Power & Light Entergy New Orleans Entergy New Orleans, Inc., formerly New Orleans Public Service, Inc. Entergy Operations Entergy Operations, Inc., a subsidiary of Entergy Corporation that has operating responsibility for ANO, Grand Gulf 1, River Bend, and Waterford 3 Entergy or System Entergy Corporation and its various direct and indirect subsidiaries Entergy Services Entergy Services, Inc. FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 1995, of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Grand Gulf 1 Unit No. 1 (nuclear) of the Grand Gulf Plant KWh Kilowatt-hour(s) LPSC Louisiana Public Service Commission Merger The combination transaction, consummated on December 31, 1993, by which Entergy Gulf States became a subsidiary of Entergy Corporation and Entergy Corporation became a Delaware Corporation Money Pool System Money Pool, which allows certain System companies to borrow from, or lend to, certain other System companies MPSC Mississippi Public Service Commission MWh Megawatt-hour(s) NRC Nuclear Regulatory Commission operating companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively Owner Participant A corporation that, in connection with the Waterford 3 sale and leaseback transactions, has acquired a beneficial interest in a trust, the Owner Trustee of which is the owner and lessor of undivided interests in Waterford 3 Owner Trustee Each institution and/or individual acting as Owner Trustee under a trust agreement with an Owner Participant in connection with the Waterford 3 sale and leaseback transactions PUCT Public Utility Commission of Texas PURPA Public Utility Regulatory Policies Act River Bend River Bend Nuclear Plant, owned 70% by Entergy Gulf States SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards as promulgated by the Financial Accounting Standards Board System Energy System Energy Resources, Inc. System Fuels System Fuels, Inc. System or Entergy Entergy Corporation and its various direct and indirect subsidiaries Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Cash Flows Net cash flow from operations for Entergy Corporation, the operating companies, and System Energy for the three months ended March 31, 1996 and 1995, was as follows: Three Months Three Months Company Ended 3/31/96 Ended 3/31/95 (In Millions) Entergy Corporation $268.3 $275.6 Entergy Arkansas $111.8 $124.8 Entergy Gulf States $ 34.8 $129.9 Entergy Louisiana $ 88.7 $103.7 Entergy Mississippi $ 29.7 $ 51.8 Entergy New Orleans $ (2.9) $ 18.6 System Energy $ 67.7 $(26.2) For the first quarter of 1996, Entergy Gulf States' and Entergy Louisiana's net cash flow from operations decreased due primarily to higher accounts receivable balances in the three months ended March 31, 1996 than in the same period in 1995, as a result of increased sales in 1996. In addition, Entergy Gulf States had a greater amount of under-recovered fuel costs in the first quarter of 1996 compared to the same period in 1995. An increase in Entergy Mississippi's under-recovered Grand Gulf 1 costs slightly offset by higher sales resulted in an overall decrease in Entergy Mississippi's cash flow from operations for the first quarter of 1996. Entergy Mississippi's accounts receivable balances were higher for the first quarter of 1996 compared to the same period in 1995, also contributing to the decrease. For the first quarter of 1996, Entergy New Orleans' prepayment of certain ad valorem taxes, in addition to an increase in under-recovered fuel cost, resulted in a decrease in its cash flow from operations. System Energy's net cash flow from operations increased for the first quarter of 1996, due primarily to refunds made to associated companies in 1995 resulting from a FERC audit settlement in 1994. Financing Sources As discussed in Note 8, on January 5, 1996, Entergy acquired CitiPower for approximately $1.2 billion. The acquisition was funded by a $294 million equity investment, while the remainder was funded by the issuance of non-recourse debt. Entergy funded the majority of the equity portion of the investment with funds borrowed from a $300 million line of credit. Excluding the CitiPower investment, cash from operations, supplemented by cash on hand, was sufficient to meet substantially all investing and financing requirements, including capital expenditures, dividends, and debt/preferred stock maturities for the first three months of 1996. Entergy's ability to fund most of its capital requirements with cash from operations results from continued efforts to streamline operations and to reduce costs, as well as from collections under rate phase-in plans that exceed current cash requirements for the related costs. (In the income statement, these revenue collections are offset by the amortization of previously deferred costs so that there is no effect on net income.) The operating companies and System Energy have the ability, subject to regulatory approval, to meet capital requirements through future debt or preferred stock issuances, as discussed below. In addition, to the extent market interest and dividend rates allow, the operating companies and System Energy will refinance high-cost debt and preferred stock prior to maturity.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES In April 1996, Entergy Corporation filed for authorization from the SEC to issue and sell up to 10 million additional shares of common stock through March 2001, under a new dividend reinvestment plan. SEC authorization is not expected until mid-1996. Entergy Corporation periodically reviews its capital structure to determine its future needs for debt and equity financing. Certain agreements and restrictions limit the amount of mortgage bonds and preferred stock that can be issued by the operating companies and System Energy. Based on the most restrictive applicable tests as of March 31, 1996, and assumed annual interest or dividend rates of 8.75% for bonds and 8.25% for preferred stock, each of the operating companies and System Energy could have issued mortgage bonds or preferred stock up to the following amounts: Mortgage Preferred Company Bonds Stock ------------------- ------------ ------------- (In Millions) Entergy Arkansas $ 354 $ 576 Entergy Gulf States (a) (a) Entergy Louisiana $ 49 $ 821 Entergy Mississippi $ 261 $ 334 Entergy New Orleans $ 52 $ 190 System Energy $ 121 (b) (a) Entergy Gulf States was precluded from issuing mortgage bonds and preferred stock under its earnings coverage tests at March 31, 1996. (b) System Energy's charter does not provide for the issuance of preferred stock. In addition to these amounts, the operating companies and System Energy have the ability, subject to certain conditions, to issue bonds against retired bonds. Such amounts may be significant and, in some cases, no earnings coverage test is required. As a result of the River Bend rate deferrals being written off in the first quarter of 1996 (see Note 7), Entergy Gulf States is currently precluded from issuing first mortgage bonds under its earnings coverage test and issuing preferred stock under its charter. However, Entergy Gulf States has the ability to issue up to approximately $598 million of first mortgage bonds against previously retired bonds. Entergy Gulf States has no earnings coverage limitations on the issuance of preference stock. Entergy Arkansas may also issue preferred stock to refund outstanding preferred stock without meeting an earnings coverage test. The operating companies and System Energy have SEC authorization to effect short-term borrowings. See Note 4 to Entergy's Form 10-K for information on the operating companies' and System Energy's short- term borrowing authorizations and bank lines of credit. At March 31, 1996, outstanding short-term borrowings from the Money Pool were as follows (in millions): Company Money Pool Entergy Louisiana $48.0 Entergy Mississippi $17.4 Entergy Operations $ 7.6 Entergy Services $27.8 System Fuels $25.0
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES In addition, Entergy Services and System Fuels had $22 million and $30 million, respectively, outstanding on their respective available bank lines of credit of $34 million and $45 million at March 31, 1996. Entergy Corporation had $270 million outstanding on its $300 million bank credit facility at March 31, 1996, of which $230 million was used for the acquisition of CitiPower in January 1996. Financing Uses As discussed in Part I of Entergy's Form 10-K, Entergy Corporation has been expanding its investments in nonregulated business opportunities overseas and in the United States. As of March 31, 1996, Entergy Corporation had invested $865.4 million in equity capital (reduced by $172 million of accumulated losses) in nonregulated businesses, which includes the acquisition of CitiPower. In addition to investing in nonregulated businesses, Entergy Corporation's capital requirements result from periodically investing in, or making loans to, its subsidiaries, and sustaining its dividends. To meet such capital requirements, Entergy Corporation will utilize internally generated funds, cash on hand, funds remaining on its $300 million credit facility, and other bank financings as may be required. Entergy Corporation receives funds through dividend payments from its domestic utility subsidiaries. During the first quarter of 1996, such common stock dividend payments from subsidiaries totaled $48.7 million. Due to its weakened financial position, Entergy Gulf States has not paid common stock dividends since the third quarter of 1994. Entergy Gulf States is not currently expected to pay common stock dividends during 1996. Entergy Corporation paid $99.7 million of dividends on its common stock during the first quarter of 1996. Declarations of dividends on common stock are made at the discretion of Entergy Corporation's Board of Directors. It is anticipated that management will not recommend future dividend increases to the Board unless such increases are justified by sustained earnings growth of Entergy Corporation and its subsidiaries. See Note 7 to Entergy's Form 10-K for information on dividend restrictions. Entergy Corporation and Entergy Gulf States See Notes 1 and 2 regarding River Bend rate appeals and litigation with Cajun. Adverse rulings in the River Bend rate appeal could result in approximately $286 million of potential write-offs (net of tax) and $188 million in refunds of previously collected revenue. Such write-offs and charges could result in additional substantial net losses being reported in the future by Entergy Corporation and Entergy Gulf States, with resulting adverse adjustments to common equity of Entergy Corporation and Entergy Gulf States. Adverse resolution of these matters could adversely affect Entergy Gulf States' ability to obtain financing, which in turn could affect Entergy Gulf States' liquidity and ability to pay dividends. Although Entergy Corporation's common shareholders have experienced some dilution in earnings as a result of the Merger, Entergy believes that the Merger will ultimately be beneficial to common shareholders in terms of strategic benefits as well as economies and efficiencies produced. Entergy Corporation and System Energy Under the Capital Funds Agreement, Entergy Corporation has agreed to supply to System Energy sufficient capital to maintain System Energy's equity capital at a minimum of 35% of its total capitalization (excluding short-term debt), to permit the continued commercial operation of Grand Gulf 1, and to pay in full all indebtedness for borrowed money of System Energy when due under any circumstances. In addition, under supplements to the Capital Funds Agreement assigning System Energy's rights as security for specific debt of System Energy, Entergy Corporation has agreed to make cash capital contributions, if required, to enable System Energy to make payments on such debt when due. The Capital Funds Agreement can be terminated by the parties thereto, subject to consent of certain creditors.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Competition and Industry Challenges See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in Entergy's Form 10-K for a discussion of the increasing competitive pressures facing Entergy and the electric utility industry. On April 24, 1996, FERC issued new rules requiring electric utilities to open their transmission lines to other power producers. The rules will take effect sixty days after they are published in the Federal Register. Retail and Wholesale Rate Issues See Note 2 to Entergy's Form 10-K and herein for a discussion of the ongoing trend of regulatory ordered rate reductions as well as incentive and performance-based regulation. Potential Changes in the Electric Utility Industry Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in Entergy's Form 10-K for a discussion of legislative and regulatory developments relating to the potential for retail competition in the areas served by the operating companies. Significant Industrial Cogeneration Effects Cogeneration projects developed or considered by certain of Entergy Gulf States' and Entergy Louisiana's industrial customers over the last several years have caused Entergy Gulf States and Entergy Louisiana to develop and secure approval for rate tariffs lower than those previously approved by the PUCT and LPSC for such industrial customers. In certain cases, contracts or special tariffs that use flexible pricing have been negotiated with industrial customers to keep these customers on the System. The contracts and tariffs are not at full cost-of-service rates. Although the rates may fully recover expenses, they provide only a minimal return, if any, on investment. In the first quarter of 1996, KWh sales to Entergy Gulf States' and Entergy Louisiana's industrial customers at less than full cost-of-service rates made up approximately 28% and 40% of Entergy Gulf States' and Entergy Louisiana's total industrial sales, respectively. During 1995, Entergy Louisiana received separate notices from two large industrial customers that they will proceed with proposed cogeneration projects for the purpose of fulfilling their future electric energy needs. These customers will continue to purchase their energy requirements from Entergy Louisiana until their cogeneration facilities are completed and operational, which is expected to occur in 1997-1998. After that time, these customers will still purchase energy from Entergy Louisiana, but at a reduced level. During the first quarter of 1996, these two customers represented an aggregate of approximately 18% of Entergy Louisiana's industrial sales and provided 12% of its total industrial base revenues. Domestic and Foreign Energy-Related Investments Entergy Corporation seeks opportunities to expand its domestic energy-related businesses that are not regulated by state and local utility regulatory authorities, as well as foreign energy-related investments. Such investments are expected to provide returns in excess of domestic regulated utility investments. These investments include power development and new technology related to the utility business. Entergy Corporation's strategy is to identify and pursue business opportunities that have the potential to earn a greater return than its regulated utility operations. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION ANDANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" for a discussion of Entergy Corporation's investments in domestic and foreign energy-related businesses. These investments may involve a greater risk than domestically regulated utility enterprises. In the first quarter of 1996, Entergy Corporation's investments in domestic and foreign energy-related investments reduced consolidated net income by approximately $2.1 million. The power development investments were profitable during the first quarter of 1996 and management believes that they will generally continue to provide profits in the current year. However, the income provided by power development investments was offset by losses experienced by new technology investments. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in Entergy's Form 10-K, and Note 8, herein, for a discussion of Entergy's major nonregulated business opportunities and foreign energy-related investments. ANO Matters Entergy Operations has made inspections and repairs from time to time on the boiler tubes in ANO 2's steam generators, which have experienced cracking. Entergy Operations is gathering information and assessing various options for the repair or replacement of ANO 2's steam generators. See Note 1 for additional information. Deregulated Utility Operations Entergy Gulf States discontinued regulatory accounting principles in 1989 for its wholesale jurisdiction and steam department and in 1991 for the Louisiana deregulated portion of River Bend. The recent improving trend in net income from these operations continued during the first quarter of 1996 when the related operating income was $6.2 million compared to $1.2 million for the fiscal year ended 1995. The improvement in net income from deregulated operations in the first quarter of 1996 was due to increased revenues and reduced operation and maintenance expenses, partially offset by increased income taxes. Refer to Entergy Gulf States' Results of Operations for discussion of these trends. The future impact of the deregulated utility operations on Entergy's and Entergy Gulf States' results of operations and financial position will depend on future operating costs, the future efficiency and availability of generating units, and the future market prices for energy over the remaining life of the assets. Entergy expects the performance of its deregulated utility operations to continue to improve due to on-going reductions in operation and maintenance expenses. The deregulated operations will be subject to the requirements of SFAS 121, as discussed in Note 7, in determining the recognition of any asset impairment. Property Tax Exemptions As discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - - SIGNIFICANT FACTORS AND KNOWN TRENDS" in Entergy's Form 10-K, Waterford 3's local property tax exemption expired in December 1995 and River Bend's local property tax exemption will expire in December 1996. In a March 1996 LPSC order, Entergy Louisiana was permitted to defer the estimated Waterford 3 property tax from January 1996 through June 1996. The order allows for the recovery of the property tax and also for the recovery, from July 1996 through June 1997, of the related deferral. In April 1996, Louisiana authorities set Waterford 3's 1996 property tax at $20.8 million.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Environmental Issues Entergy Gulf States has been notified by the U. S. Environmental Protection Agency (EPA) that it has been designated as a potentially responsible party for the clean-up of certain hazardous waste disposal sites. See Note 1 for additional information. As a consequence of rules for solid waste regulation issued by the Louisiana Department of Environmental Quality in 1993, Entergy Louisiana is upgrading or closing certain of its power plant wastewater impoundments. See Note 1 for additional information. Accounting Issues Continued Application of SFAS 71 - As a result of the Energy Policy Act, the actions of regulatory commissions, and other factors, the electric utility industry is moving toward a combination of competition and a modified regulatory environment. The System's financial statements currently reflect, for the most part, assets and costs based on existing cost-based ratemaking regulations in accordance with SFAS 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). Continued applicability of SFAS 71 to the System's financial statements requires that rates set by an independent regulator on a cost-of-service basis can actually be charged to and collected from customers. In the event that all or a portion of a utility's operations cease to meet those criteria for various reasons, including deregulation, a change in the method of regulation, or a change in the competitive environment for the utility's regulated services, the utility should discontinue application of SFAS 71 for the relevant portion of its obligations. The discontinuation should be reported by elimination from the balance sheet of the effects of any actions of regulators recorded as regulatory assets and liabilities. As of March 31, 1996, and for the foreseeable future, the System's financial statements continue to follow SFAS 71, except for certain portions of Entergy Gulf States' business. Accounting for Decommissioning Costs -. In February 1996, the FASB issued an exposure draft of a proposed SFAS addressing the accounting for decommissioning costs of nuclear generating units as well as liabilities related to the closure and removal of all long- lived assets. See Note 1 for a discussion of proposed changes in the accounting for decommissioning/closure costs and the potential impact of these changes on Entergy.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS ENTERGY Net Income Consolidated net income decreased for the three months ended March 31, 1996 due to the $174 million net of tax write-off of River Bend rate deferrals pursuant to SFAS 121 and the cumulative effect of the prior year change in accounting method for incremental nuclear refueling outage maintenance costs at Entergy Arkansas. Excluding the above mentioned items, net income would have increased $32.4 million in the first quarter of 1996 due primarily to increased energy sales to retail customers. Significant factors affecting the results of operations and causing variances between the three months ended March 31, 1996, and 1995 are discussed under "Revenues and Sales" and "Expenses" below. Revenues and Sales Detailed below are Entergy's electric revenues associated with its domestic regulated operations by source and KWh sales for the three months ended March 31, 1996, and 1995: <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 507.1 $ 441.5 $ 65.6 15 Commercial 354.5 324.7 29.8 9 Industrial 460.3 414.1 46.2 11 Governmental 38.7 35.1 3.6 10 -------- -------- ------- Total retail 1,360.6 1,215.4 145.2 12 Sales for resale 90.1 70.0 20.1 29 Other (37.6) (7.9) (29.7) 376 -------- -------- ------- Total $1,413.1 $1,277.5 $ 135.6 11 ======== ======== ======= Billed Electric Energy Sales (Millions of KWh): Residential 6,667 5,860 807 14 Commercial 4,792 4,473 319 7 Industrial 10,445 10,035 410 4 Governmental 556 539 17 3 -------- -------- -------- Total retail 22,460 20,907 1,553 7 Sales for resale 2,575 1,844 731 40 -------- -------- -------- Total 25,035 22,751 2,284 10 ======== ======== ======== </TABLE> Electric operating revenues increased for the three months ended March 31, 1996, as a result of higher fuel adjustment revenues, which do not affect net income, and increases in retail sales and sales for resale, partially offset by rate reductions at Entergy Louisiana and Entergy New Orleans. Cold weather in 1996 and non-weather related volume growth contributed to the increase in retail electric operating revenues. The increase in sales for resale was primarily the result of increased energy sales outside of Entergy's service area.
ENTERGY CORPORATION AND S.UBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The changes in electric operating revenues associated with Entergy's domestic regulated operations for the three months ended March 31, 1996, are as follows: Three Months Ended Description Increase/(Decrease) (In Millions) Change in base revenues $(26.0) Rate riders 2.6 Fuel cost recovery 101.5 Sales volume/weather 67.1 Other revenue (including unbilled) (29.7) Sales for resale 20.1 -------- Total $135.6 ======== Gas operating revenues increased for the three months ended March 31, 1996, because of increased sales related to colder than normal winter weather and increased fuel adjustment revenues. Nonregulated and foreign-energy related business revenues increased for the three months ended March 31, 1996, as a result of the January 1996 acquisition of CitiPower. See Note 8 for additional information regarding CitiPower. Expenses Operating expenses for the three months ended March 31, 1996, include the operating expenses of CitiPower, which are not included in the prior year financial statements. See Note 8 for additional information regarding CitiPower. Excluding the operating expenses of CitiPower, Entergy's operating expenses increased for the three months ended March 31, 1996, due primarily to increased fuel and purchased power expenses, depreciation and decommissioning expenses, and higher income tax expense. These increases were offset in part by lower operating and maintenance expenses and the effect of certain rate deferrals. Fuel and purchased power expenses increased as a result of the increase in energy sales as discussed above. Depreciation and decommissioning expenses increased as a result of increased depreciation rates and decommissioning costs as reflected in the 1995 System Energy/FERC rate increase filing. Income tax expenses increased primarily due to higher pretax income excluding the River Bend rate deferral write-off and the prior year change in accounting method. In addition, taxes other than income taxes increased primarily due to the expiration of Waterford 3's local property tax exemption in December 1995. Other operation and maintenance expenses decreased for the three months ended March 31, 1996, due to lower payroll related expenses, resulting from restructuring programs, as discussed in Note 6, in addition to ongoing operating efficiency improvement programs throughout Entergy. The deferral of Waterford 3 local property taxes, the deferral of a portion of the proposed System Energy rate increase at Entergy Mississippi and Entergy New Orleans, and the deferral of least cost planning expenses at Entergy New Orleans resulted in a reduction to Entergy's operating expenses in 1996. Other Income decreased for the three months ended March 31, 1996, as a result of the write-off of River Bend rate deferrals pursuant to SFAS 121, as discussed in Note 7.
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Interest charges increased for the three months ended March 31, 1996, due primarily to interest on long-term debt related to the investment in CitiPower and borrowings by Entergy Corporation from the $300 million line of credit, which were used to fund the acquisition of CitiPower. Excluding these increases, interest expense decreased $4.5 million due to ongoing retirement and refinancing of high cost debt at the operating companies.
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (LOSS) For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ------- ------- (In Thousands, Except Share Data) Operating Revenues: Electric $1,413,068 $1,277,490 Natural gas 57,473 40,670 Steam products 15,578 10,632 Nonregulated and foreign energy-related 112,873 8,608 businesses ---------- ---------- Total 1,598,992 1,337,400 ---------- ---------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 375,764 288,960 Purchased power 158,157 82,509 Nuclear refueling outage expenses 14,209 19,014 Other operation and maintenance 353,212 359,593 Depreciation, amortization, and 194,567 170,480 decommissioning Taxes other than income taxes 88,971 76,635 Income taxes 62,586 29,621 Rate deferrals (19,802) - Amortization of rate deferrals 91,511 81,768 ---------- ---------- Total 1,319,175 1,108,580 ---------- ---------- Operating Income 279,817 228,820 ---------- ---------- Other Income (Deductions): Allowance for equity funds used during construction 2,558 2,494 Write-off of River Bend rate deferrals (194,498) - Miscellaneous - net 10,778 17,556 Income taxes 14,906 (6,619) ---------- ---------- Total (166,256) 13,431 ---------- ---------- Interest Charges: Interest on long-term debt 172,843 160,631 Other interest - net 11,847 8,990 Allowance for borrowed funds used during construction (2,138) (2,197) Preferred and preference dividend requirements of subsidiaries and other 18,081 19,850 ---------- ---------- Total 200,633 187,274 ---------- ---------- Income (Loss) before the Cumulative Effect of Accounting Change (87,072) 54,977 Cumulative Effect of Accounting Change (net of income taxes) - 35,415 ---------- -------- Net Income (Loss) ($87,072) $90,392 ========== ======== Earnings (Loss) per average common share before cumulative effect of accounting change ($0.38) $0.24 Earnings (Loss) per average common share ($0.38) $0.40 Dividends declared per common share $0.90 $0.90 Average number of common shares outstanding 227,780,604 227,415,009 See Notes to Financial Statements. </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) Operating Activities: Net income (loss) ($87,072) $90,392 Noncash items included in net income (loss): Write-off of River Bend rate deferrals 194,498 - Cumulative effect of a change in accounting principle - (35,415) Change in rate deferrals/excess capacity-net 105,388 81,057 Depreciation, amortization, and decommissioning 194,567 170,480 Deferred income taxes and investment tax credits (45,013) (20,030) Allowance for equity funds used during (2,558) (2,494) construction Changes in working capital: Receivables 37,148 104,230 Fuel inventory 23,212 (9,605) Accounts payable (32,984) (70,433) Taxes accrued 65,289 63,030 Interest accrued (65,276) (13,246) Other working capital accounts (81,209) (33,005) Decommissioning trust contributions (12,146) (5,666) Provision for estimated losses and reserves 5,667 11,314 Other (31,202) (55,028) ----------- -------- Net cash flow provided by operating activities 268,309 275,581 ----------- -------- Investing Activities: Construction/capital expenditures (131,435) (108,367) Allowance for equity funds used during construction 2,558 2,494 Nuclear fuel purchases (65,430) (9,672) Proceeds from sale/leaseback of nuclear fuel 46,872 39,440 Acquisition of CitiPower (1,156,112) - Investment in nonregulated/nonutility properties (5,171) (23,246) ----------- -------- Net cash flow used in investing activities (1,308,718) (99,351) ----------- -------- Financing Activities: Proceeds from the issuance of: First mortgage bonds 198,250 - General and refunding mortgage bonds 39,608 - Bank notes and other long-term debt 946,167 - Retirement of: First mortgage bonds (133,687) (20,825) General and refunding mortgage bonds - (29,200) Other long-term debt (92,744) (25) Redemption of preferred stock (19,704) (24,250) Changes in short-term borrowings - net 277,000 (38,625) Common stock dividends paid (99,714) (101,969) ----------- -------- Net cash flow provided by (used in) financing 1,115,176 (214,894) activities ----------- -------- Effect of exchange rates on cash and cash equivalents 40 - Net increase (decrease) in cash and cash equivalents 74,807 (38,664) Cash and cash equivalents at beginning of period 533,590 613,907 ----------- -------- Cash and cash equivalents at end of period $608,397 $575,243 =========== ======== </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $239,354 $172,220 Income taxes $12,032 $2,564 Noncash investing and financing activities: Capital lease obligations incurred - $27,804 Change in unrealized appreciation/depreciation of decommissioning trust assets ($4,265) $9,972 See Notes to Financial Statements. </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) ASSETS Utility Plant: Electric $22,332,245 $21,698,593 Plant acquisition adjustment - GSU 467,623 471,690 Electric plant under leases 676,275 675,425 Property under capital leases - electric 140,400 145,146 Natural gas 167,919 166,872 Steam products 77,558 77,551 Construction work in progress 539,412 482,950 Nuclear fuel under capital leases 296,514 312,782 Nuclear fuel 67,500 49,100 ----------- ----------- Total 24,765,446 24,080,109 Less - accumulated depreciation and 8,413,266 8,259,318 amortization ----------- ----------- Utility plant - net 16,352,180 15,820,791 ----------- ----------- Other Property and Investments: Decommissioning trust funds 295,618 277,716 Other 454,572 434,619 ----------- ----------- Total 750,190 712,335 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 38,979 42,822 Temporary cash investments - at cost, which approximates market 392,248 490,768 Special deposits 177,170 - ----------- ----------- Total cash and cash equivalents 608,397 533,590 Notes receivable 6,087 6,907 Accounts receivable: Customer (less allowance for doubtful accounts of $8.2 million in 1996 and $7.1 million in 1995) 353,939 333,343 Other 67,118 59,176 Accrued unbilled revenues 283,916 293,461 Deferred fuel 70,099 25,924 Fuel inventory - at average cost 98,955 122,167 Materials and supplies - at average cost 355,712 345,330 Rate deferrals 422,760 420,221 Prepayments and other 160,297 175,121 ----------- ----------- Total 2,427,280 2,315,240 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 733,902 1,033,282 SFAS 109 regulatory asset - net 1,199,525 1,279,495 Unamortized loss on reacquired debt 223,187 224,131 Other regulatory assets 376,162 329,397 Long-term receivables 225,130 224,726 Citipower license (net of $3.3 million of 616,947 - amortization) Other 344,750 326,533 ----------- ----------- Total 3,719,603 3,417,564 ----------- ----------- TOTAL $23,249,253 $22,265,930 =========== =========== See Notes to Financial Statements. </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, $.01 par value, authorized 500,000,000 shares; issued 230,017,485 shares $ 2,300 $ 2,300 Paid-in capital 4,201,117 4,201,483 Retained earnings 2,042,902 2,335,579 Cumulative foreign currency translation adjustment 17,255 - Less - treasury stock (1,983,639 shares in 1996 and 2,251,318 in 1995) 59,961 67,642 ----------- ----------- Total common shareholders' equity 6,203,613 6,471,720 Subsidiary's preference stock 150,000 150,000 Subsidiaries' preferred stock: Without sinking fund 550,955 550,955 With sinking fund 233,755 253,460 Long-term debt 7,637,897 6,777,124 ----------- ----------- Total 14,776,220 14,203,259 ----------- ----------- Other Noncurrent Liabilities: Obligations under capital leases 285,717 303,664 Other 348,071 326,804 ----------- ----------- Total 633,788 630,468 ----------- ----------- Current Liabilities: Currently maturing long-term debt 715,568 558,650 Notes payable 322,667 45,667 Accounts payable 468,047 460,379 Customer deposits 146,481 140,054 Taxes accrued 273,117 207,828 Accumulated deferred income taxes 97,427 72,847 Interest accrued 130,321 195,445 Dividends declared 109,970 12,194 Obligations under capital leases 150,799 151,140 Other 210,889 247,039 ----------- ----------- Total 2,625,286 2,091,243 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 3,631,832 3,777,644 Accumulated deferred investment tax credits 605,796 612,701 Other 976,331 950,615 ----------- ----------- Total 5,213,959 5,340,960 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL $23,249,253 $22,265,930 ============ ============ See Notes to Financial Statements. </TABLE>
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended March 31, 1996, due primarily to the one-time recording in 1995 of the cumulative effect of the change in accounting method for incremental nuclear refueling outage maintenance costs. Excluding the above mentioned item, net income would have increased $8.6 million for the three months ended March 31, 1996, due primarily to an increase in sales for resale and retail energy sales. Significant factors affecting the results of operations and causing variances between the three months ended March 31, 1996, and 1995 are discussed under "Revenues and Sales" and "Expenses" below. Revenues and Sales Detailed below are Entergy Arkansas' operating revenues by source and KWh sales for the three months ended March 31, 1996, and 1995: <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Monthe Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 132.2 $ 124.2 $ 8.0 6 Commercial 70.6 68.3 2.3 3 Industrial 77.7 77.6 0.1 - Governmental 4.1 4.0 0.1 2 ------- ------- ------- Total retail 284.6 274.1 10.5 4 Sales for resale Associated companies 59.8 29.1 30.7 105 Non-associated companies 48.8 38.6 10.2 26 Other (10.1) (2.2) (7.9) * ------- ------- ------- Total $ 383.1 $ 339.6 $ 43.5 13 ======= ======= ======= Billed Electric Energy Sales (Millions of KWh): Residential 1,571 1,426 145 10 Commercial 996 947 49 5 Industrial 1,525 1,439 86 6 Governmental 56 53 3 6 ------- ------- ------- Total retail 4,148 3,865 283 7 Sales for resale Associated companies 2,654 1,359 1,295 95 Non-associated companies 1,674 956 718 75 ------- ------- ------- Total 8,476 6,180 2,296 37 ======= ======= ======= </TABLE> * Greater than 200%. Electric operating revenues increased for the three months ended March 31, 1996, primarily due to increased sales for resale to associated companies, caused by changes in generation availability and requirements among the operating companies. The increase in retail energy sales resulted from increased customers and associated usage, while the remainder resulted from colder than normal weather.
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The changes in electric operating revenues for the three months ended March 31, 1996, are as follows: Three Months Ended Description Increase/(Decrease) (In Millions) Change in base revenues $(3.2) Rate riders (1.8) Fuel cost recovery (1.8) Sales volume/weather 12.3 Other revenue (including unbilled) (2.9) Sales for resale 40.9 ----- Total $43.5 ===== Expenses Operating expenses increased for the three months ended March 31, 1996, due to an increase in fuel, purchased power, and income tax expenses partially offset by a decrease in other operation and maintenance expenses. The increase in fuel and purchased power expenses is largely due to an increase in generation and purchases related to the increase in sales for resale in the first three months of 1996. Income tax expense increased because of higher pretax income. The decrease in other operation and maintenance expenses is primarily the result of work and materials associated with non-outage related maintenance during ANO 1's refueling outage, which began in mid-February 1995 and lasted through the first quarter of 1995. In addition, ANO 2 underwent a 30 day mid-cycle outage during the first three months of 1995, which also required additional work and materials. ENTERGY ARKANSAS, INC. STATEMENTS OF INCOME For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ------- ------- Operating Revenues $383,081 $339,596 -------- -------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 65,200 41,167 Purchased power 98,625 81,747 Nuclear refueling outage expenses 7,542 9,185 Other operation and maintenance 83,265 93,658 Depreciation, amortization, and 41,030 39,352 decommissioning Taxes other than income taxes 9,018 10,111 Income taxes 3,591 (3,339) Amortization of rate deferrals 36,446 38,033 -------- -------- Total 344,717 309,914 -------- -------- Operating Income 38,364 29,682 ------- ------- Other Income (Deductions): Allowance for equity funds used during construction 1,090 915 Miscellaneous - net 8,239 15,532 Income taxes (3,228) (6,097) -------- -------- Total 6,101 10,350 -------- -------- Interest Charges: Interest on long-term debt 24,835 26,933 Other interest - net 1,027 3,116 Allowance for borrowed funds used during construction (665) (731) -------- -------- Total 25,197 29,318 -------- -------- Income before the Cumulative Effect of Accounting Change 19,268 10,714 Cumulative Effect of Accounting Change (net of income taxes) - 35,415 -------- -------- Net Income 19,268 46,129 Preferred Stock Dividend Requirements and Other 4,458 4,561 -------- -------- Earnings Applicable to Common Stock $ 14,810 $ 41,568 ======== ======== See Notes to Financial Statements. </TABLE>
ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) Operating Activities: Net income $19,268 $46,129 Noncash items included in net income: Cumulative effect of a change in accounting principle - (35,415) Change in rate deferrals/excess capacity-net 35,953 30,665 Depreciation, amortization, and decommissioning 41,030 39,352 Deferred income taxes and investment tax credits (18,102) (2,071) Allowance for equity funds used during construction (1,090) (915) Changes in working capital: Receivables 24,582 37,541 Fuel inventory 3,174 (14,460) Accounts payable (3,762) 32,917 Taxes accrued 26,025 8,488 Interest accrued (14,743) 636 Other working capital accounts 2,326 (35,323) Decommissioning trust contributions (4,140) (2,386) Provision for estimated losses and reserves 529 2,968 Other 733 16,716 -------- -------- Net cash flow provided by operating activities 111,783 124,842 -------- -------- Investing Activities: Construction expenditures (32,250) (41,651) Allowance for equity funds used during construction 1,090 915 Nuclear fuel purchases (19,081) (76) Proceeds from sale/leaseback of nuclear fuel 18,470 76 -------- -------- Net cash flow used in investing activities (31,771) (40,736) -------- -------- Financing Activities: Proceeds from issuance of first mortgage bonds 84,256 - Retirement of first mortgage bonds (30,437) (400) Redemption of preferred stock - (5,000) Dividends paid: Common stock - (32,800) Preferred stock (8,917) (4,727) -------- -------- Net cash flow provided by (used in) 44,902 (42,927) financing activities -------- -------- Net increase in cash and cash equivalents 124,914 41,179 Cash and cash equivalents at beginning of period 11,798 80,756 -------- -------- Cash and cash equivalents at end of period $136,712 $121,935 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $37,479 $25,916 Income taxes $6,460 - Noncash investing and financing activities: Capital lease obligations incurred - $76 Change in unrealized appreciation/depreciation of decommissioning trust assets ($4,363) $6,234 See Notes to Financial Statements. </TABLE>
ENTERGY ARKANSAS, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) ASSETS Utility Plant: Electric $ 4,445,035 $ 4,438,519 Property under capital leases 46,795 48,968 Construction work in progress 129,400 119,874 Nuclear fuel under capital lease 104,526 98,691 ----------- ----------- Total 4,725,756 4,706,052 Less - accumulated depreciation and 1,876,766 1,846,112 amortization ----------- ----------- Utility plant - net 2,848,990 2,859,940 ----------- ----------- Other Property and Investments: Investment in subsidiary companies - 11,122 11,122 at equity Decommissioning trust fund 173,493 166,832 Other - at cost (less accumulated 5,148 5,085 depreciation) ----------- ----------- Total 189,763 183,039 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 5,221 7,780 Temporary cash investments - at cost, which approximates market: Associated companies 16,524 908 Other 32,797 3,110 Special deposits 82,170 - ----------- ----------- Total cash and cash 136,712 11,798 equivalents Accounts receivable: Customer (less allowance for doubtful accounts of $2.1 million in 1996 and 1995) 67,329 75,445 Associated companies 39,589 40,577 Other 7,418 6,962 Accrued unbilled revenues 77,622 93,556 Fuel inventory - at average cost 54,282 57,456 Materials and supplies - at average cost 76,865 75,030 Rate deferrals 137,011 131,634 Deferred excess capacity 12,295 11,088 Deferred nuclear refueling outage costs 24,213 32,824 Prepayments and other 13,904 15,215 ----------- ----------- Total 647,240 551,585 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 190,105 228,390 Deferred excess capacity 1,732 5,984 SFAS 109 regulatory asset - net 225,281 219,906 Unamortized loss on reacquired debt 57,805 58,684 Other regulatory assets 72,344 68,160 Other 29,741 28,727 ----------- ----------- Total 577,008 609,851 ----------- ----------- TOTAL $ 4,263,001 $ 4,204,415 ============ ============ See Notes to Financial Statements. </TABLE>
ENTERGY ARKANSAS, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares $ 470 $ 470 Paid-in capital 590,794 590,844 Retained earnings 491,896 492,386 ----------- ----------- Total common shareholder's equity 1,083,160 1,083,700 Preferred stock: Without sinking fund 176,350 176,350 With sinking fund 49,027 49,027 Long-term debt 1,250,122 1,281,203 ----------- ----------- Total 2,558,659 2,590,280 ----------- ----------- Other Noncurrent Liabilities: Obligations under capital leases 96,641 93,574 Other 71,503 67,444 ----------- ----------- Total 168,144 161,018 ----------- ----------- Current Liabilities: Currently maturing long-term debt 115,870 28,700 Notes payable 667 667 Accounts payable: Associated companies 40,880 42,156 Other 117,764 120,250 Customer deposits 19,347 18,594 Taxes accrued 66,184 40,159 Accumulated deferred income taxes 59,814 48,992 Interest accrued 15,497 30,240 Dividends declared 15,300 4,458 Co-owner advances 29,858 34,450 Deferred fuel cost 21,050 17,837 Obligations under capital leases 54,678 54,697 Other 21,103 26,238 ----------- ----------- Total 578,012 467,438 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 801,114 823,471 Accumulated deferred investment tax credits 111,737 112,890 Other 45,335 49,318 ----------- ----------- Total 958,186 985,679 ----------- ----------- Commitments and Contingencies (Note 1) TOTAL $ 4,263,001 $ 4,204,415 ============ ============ See Notes to Financial Statements. </TABLE>
ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended March 31, 1996, due to the $174 million net of tax write-off of River Bend rate deferrals required by the adoption of SFAS 121. Excluding the write- off, net income for the three months ended March 31, 1996, would have increased $19 million primarily due to increased electric retail energy sales, partially offset by increased income tax expenses. Significant factors affecting the results of operations and causing variances between the three months ended March 31, 1996, and 1995 are discussed under "Revenues and Sales," "Expenses," and "Other" below. Revenues and Sales Detailed below are Entergy Gulf States' electric operating revenues by source and KWh sales for the three months ended March 31, 1996, and 1995: <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Department Operating Revenues: Residential $ 134.7 $ 116.5 $ 18.2 16 Commercial 102.5 92.3 10.2 11 Industrial 160.6 142.3 18.3 13 Governmental 7.0 6.2 0.8 13 --------- -------- -------- Total retail 404.8 357.3 47.5 13 Sales for resale Associated companies 2.8 10.2 (7.4) (73) Non-associated companies 19.0 14.8 4.2 28 Other (0.4) (3.5) 3.1 (89) --------- -------- -------- Total Electric Department $ 426.2 $ 378.8 $ 47.4 13 ======== ======== ======== Billed Electric Energy Sales (Millions of KWh): Residential 1,825 1,561 264 17 Commercial 1,462 1,342 120 9 Industrial 3,901 3,670 231 6 Governmental 92 88 4 5 ------- ------- ----- Total retail 7,280 6,661 619 9 Sales for resale Associated companies 56 501 (445) (89) Non-associated companies 500 473 27 6 ------- ------- ----- Total Electric Department 7,836 7,635 201 3 Steam Department 416 397 19 5 ------- ------- ----- Total 8,252 8,032 220 3 ======= ======= ===== </TABLE> Electric operating revenues increased for the three months ended March 31, 1996, as a result of higher fuel adjustment revenues, which do not affect net income, and increased customer usage, partially attributable to colder winter weather than in the same period of 1995. Other electric revenues decreased due to a settlement with the United States Department of Energy regarding service and pricing arrangements.
ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The changes in electric operating revenues for the three months ended March 31, 1996, are as follows: Three Months Ended Description Increase/(Decrease) (In Millions) Change in base revenues $(2.7) Fuel cost recovery 33.9 Sales volume/weather 26.8 Other revenue (including unbilled (7.4) Sales for resale (3.2) ------ Total $ 47.4 ====== Gas operating revenues increased for the three months ended March 31, 1996, primarily due to an increase in residential sales as a result of colder weather than in the same period of 1995. Expenses Operating expenses increased for the three months ended March 31, 1996, as a result of higher fuel expenses, including purchased power, and higher income taxes. Fuel expenses increased because of higher gas prices and increased energy requirements resulting from higher energy sales. Income taxes increased primarily due to higher pre-tax income for the three months ended March 31, 1996, excluding the net effect of the write-off of River Bend rate deferrals discussed below. Other Other income decreased due to the write-off of River Bend rate deferrals pursuant to the adoption of SFAS 121, which became effective January 1, 1996. See Note 7 for a further discussion. Income taxes on other income decreased as a result of this write-off.
ENTERGY GULF STATES, INC. STATEMENTS OF INCOME (LOSS) For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ------- ------- (In Thousands) Operating Revenues: Electric $426,177 $378,791 Natural gas 14,876 9,923 Steam products 15,578 10,632 -------- -------- Total 456,631 399,346 -------- -------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 117,409 114,921 Purchased power 67,834 40,557 Nuclear refueling outage expenses 2,360 3,031 Other operation and maintenance 96,741 101,404 Depreciation, amortization, and 51,251 50,339 decommissioning Taxes other than income taxes 26,334 25,379 Income taxes 11,983 (162) Amortization of rate deferrals 17,644 16,506 -------- -------- Total 391,556 351,975 -------- -------- Operating Income 65,075 47,371 -------- -------- Other Income (Deductions): Allowance for equity funds used during construction 493 251 Write-off of River Bend rate deferrals (194,498) - Miscellaneous - net 4,940 5,914 Income taxes 18,743 (865) ---------- -------- Total (170,322) 5,300 ---------- -------- Interest Charges: Interest on long-term debt 46,488 48,270 Other interest - net 950 1,010 Allowance for borrowed funds used during construction (428) (244) ---------- -------- Total 47,010 49,036 ---------- -------- Net Income (Loss) (152,257) 3,635 Preferred and Preference Stock Dividend Requirements and Other 7,219 7,590 ---------- -------- Loss Applicable to Common Stock ($159,476) ($3,955) ========== ======== See Notes to Financial Statements. </TABLE>
ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) Net income (loss) ($152,257) $3,635 Noncash items included in net income: Write-off of River Bend rate deferrals 194,498 - Change in rate deferrals 17,644 16,506 Depreciation, amortization, and 51,251 50,339 decommissioning Deferred income taxes and investment tax (6,812) 914 credits Allowance for equity funds used during (493) (251) construction Changes in working capital: Receivables 8,020 58,324 Fuel inventory 6,822 894 Accounts payable (902) (10,624) Taxes accrued (6,976) 11,043 Interest accrued (21,462) 4,466 Reserve for rate refund - 10,560 Other working capital accounts (56,512) (4,667) Decommissioning trust contributions (1,481) (739) Provision for estimated losses and reserves 2,648 (3,587) Other 777 (6,925) -------- -------- Net cash flow provided by operating activities 34,765 129,888 -------- -------- Investing Activities: Construction expenditures (36,419) (19,136) Allowance for equity funds used during construction 493 251 Nuclear fuel purchases (22,188) - Proceeds from sale/leaseback of nuclear fuel 23,375 - -------- -------- Net cash flow used in investing activities (34,739) (18,885) -------- -------- Financing Activities: Proceeds from the issuance of long-term debt 780 2,277 Retirement of first mortgage bonds (20,000) - Redemption of preferred and preference stock (4,204) (2,250) Dividends paid on preferred and preference (7,132) (7,514) stock -------- -------- Net cash flow used in financing activities (30,556) (7,487) -------- -------- Net increase (decrease) in cash and cash (30,530) 103,516 equivalents Cash and cash equivalents at beginning of period 234,604 104,644 -------- -------- Cash and cash equivalents at end of period $204,074 $208,160 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest - net of amount capitalized $66,212 $41,860 Change in unrealized appreciation/depreciation of decommissioning trust assets - $759 See Notes to Financial Statements. </TABLE>
ENTERGY GULF STATES, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) ASSETS Utility Plant: Electric $ 6,962,426 $ 6,942,983 Natural gas 45,782 45,789 Steam products 77,558 77,551 Property under capital leases 76,617 77,918 Construction work in progress 164,427 148,043 Nuclear fuel under capital lease 66,439 69,853 ----------- ----------- Total 7,393,249 7,362,137 Less - accumulated depreciation and 2,713,779 2,664,943 amortization ----------- ----------- Utility plant - net 4,679,470 4,697,194 ----------- ----------- Other Property and Investments: Decommissioning trust fund 34,859 32,943 Other - at cost (less accumulated depreciation) 29,230 28,626 ----------- ----------- Total 64,089 61,569 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 7,882 13,751 Temporary cash investments - at cost, which approximates market: Associated companies 61,097 46,336 Other 135,095 174,517 ----------- ----------- Total cash and cash equivalents 204,074 234,604 Accounts receivable: Customer (less allowance for doubtful accounts of $1.6 million in 1996 and 1995) 107,171 110,187 Associated companies 1,391 1,395 Other 16,854 15,497 Accrued unbilled revenues 67,024 73,381 Deferred fuel costs 61,887 31,154 Accumulated deferred income taxes 37,721 43,465 Fuel inventory - at average cost 25,319 32,141 Materials and supplies - at average cost 93,097 91,288 Rate deferrals 95,614 97,164 Prepayments and other 9,676 15,566 ----------- ----------- Total 719,828 745,842 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 203,222 419,904 SFAS 109 regulatory asset-net 370,522 453,628 Unamortized loss on reacquired debt 59,475 61,233 Other regulatory assets 26,718 27,836 Long-term receivables 225,130 224,727 Other 168,119 169,125 ----------- ----------- Total 1,053,186 1,356,453 ----------- ----------- TOTAL $ 6,516,573 $ 6,861,058 =========== =========== See Notes to Financial Statements. </TABLE>
ENTERGY GULF STATES, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares $ 114,055 $ 114,055 Paid-in capital 1,152,592 1,152,505 Retained earnings 198,228 357,704 ----------- ----------- Total common shareholder's equity 1,464,875 1,624,264 Preference stock 150,000 150,000 Preferred stock: Without sinking fund 136,444 136,444 With sinking fund 83,450 87,654 Long-term debt 2,141,303 2,175,471 ----------- ----------- Total 3,976,072 4,173,833 ----------- ----------- Other Noncurrent Liabilities: Obligations under capital leases 105,638 108,078 Other 81,636 78,245 ----------- ----------- Total 187,274 186,323 ----------- ----------- Current Liabilities: Currently maturing long-term debt 160,425 145,425 Accounts payable: Associated companies 42,574 31,349 Other 124,401 136,528 Customer deposits 22,179 21,983 Taxes accrued 30,437 37,413 Interest accrued 35,375 56,837 Nuclear refueling reserve 6,193 22,627 Obligations under capital lease 37,418 37,773 Other 73,031 86,653 ----------- ----------- Total 532,033 576,588 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 1,084,204 1,177,144 Accumulated deferred investment tax credits 206,805 208,618 Deferred River Bend finance charges 51,957 58,047 Other 478,228 480,505 ----------- ----------- Total 1,821,194 1,924,314 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL $ 6,516,573 $ 6,861,058 =========== =========== See Notes to Financial Statements. </TABLE>
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended March 31, 1996, due primarily to increased revenues and decreased other operation and maintenance expenses, partially offset by increased income taxes. Significant factors affecting the results of operations and causing variances between the three months ended March 31, 1996, and 1995 are discussed under "Revenues and Sales" and "Expenses" below. Revenues and Sales Detailed below are Entergy Louisiana's operating revenues by source and KWh sales for the three months ended March 31, 1996, and 1995. <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 135.3 $ 111.9 $ 23.4 21 Commercial 86.0 76.0 10.0 13 Industrial 175.6 148.9 26.7 18 Governmental 8.5 7.7 0.8 10 ------- ------- ------ Total retail 405.4 344.5 60.9 18 Sales for resale Associated companies 0.2 0.2 - - Non-associated companies 14.5 10.5 4.0 38 Other (2.3) (1.7) (0.6) 35 ------- ------- ------ Total $ 417.8 $ 353.5 $ 64.3 18 ======= ======= ====== Billed Electric Energy Sales (Millions of KWh): Residential 1,826 1,587 239 15 Commercial 1,092 1,019 73 7 Industrial 4,213 4,079 134 3 Governmental 115 110 5 5 ------- ------- ------ Total retail 7,246 6,795 451 7 Sales for resale Associated companies 3 10 (7) (70) Non-associated companies 233 214 19 9 ------- ------- ------ Total 7,482 7,019 463 7 ======= ======= ====== </TABLE> Electric operating revenues increased for the three months ended March 31, 1996, primarily due to higher fuel adjustment revenues, which do not affect net income, and higher retail sales, partially offset by a decrease in rates. Colder weather and increased customer usage in the first three months of 1996 contributed to the increase in retail sales. A base rate reduction ordered in the second quarter of 1995, and a subsequent settlement of related issues during the fourth quarter of 1995, partially offset the effect of these increases.
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The changes in electric operating revenues for the three months ended March 31, 1996, are as follows: Three Months Ended Description Increase/(Decrease) (In Millions) Change in base revenues $(13.8) Fuel cost recovery 54.3 Sales volume/weather 20.4 Other revenue (including unbilled) (0.6) Sales for resale 4.0 ------ Total $64.3 ====== Expenses Operating expenses increased for the three months ended March 31, 1996, due primarily to an increase in fuel and purchased power expenses, income taxes, and taxes other than income taxes offset by a decrease in other operation and maintenance expenses and the recording of rate deferrals in 1996. The increase in fuel and purchased power is primarily due to increased energy sales as noted in "Revenues and Sales" above. Income taxes increased for the three months ended March 31, 1996, because of higher pre-tax income. Taxes other than income taxes increased as the result of the expiration of Waterford 3's local property tax exemption in December 1995, and was offset by the recording of the LPSC-approved rate deferral for these taxes discussed in Note 2. Other operation and maintenance expenses decreased for the three months of 1996 due to lower payroll expenses. Payroll expenses decreased as a result of the restructuring program announced and accrued for during 1994 and 1995, which included a reduction in the number of Entergy Louisiana employees throughout 1995 and into 1996.
ENTERGY LOUISIANA, INC. STATEMENTS OF INCOME For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ------- ------- (In Thousands) Operating Revenues $417,767 $353,462 -------- -------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 90,680 52,050 Purchased power 100,875 74,995 Nuclear refueling outage expenses 4,000 4,517 Other operation and maintenance 65,770 73,004 Depreciation, amortization, and 41,741 38,507 decommissioning Taxes other than income taxes 19,734 15,716 Income taxes 22,528 18,696 Rate deferrals (6,859) - Amortization of rate deferrals 6,660 6,660 -------- -------- Total 345,129 284,145 -------- -------- Operating Income 72,638 69,317 -------- -------- Other Income (Deductions): Allowance for equity funds used during construction 277 564 Miscellaneous - net 286 372 Income taxes (26) (25) -------- -------- Total 537 911 -------- -------- Interest Charges: Interest on long-term debt 30,717 32,572 Other interest - net 2,336 2,085 Allowance for borrowed funds used during construction (408) (491) -------- -------- Total 32,645 34,166 -------- -------- Net Income 40,530 36,062 Preferred Stock Dividend Requirements and Other 4,915 5,591 -------- -------- Earnings Applicable to Common Stock $35,615 $ 30,471 ======== ======== See Notes to Financial Statements. </TABLE>
ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) Operating Activities: Net income $40,530 $36,062 Noncash items included in net income: Change in rate deferrals 6,660 6,660 Depreciation, amortization, and decommissioning 41,741 38,507 Deferred income taxes and investment tax credits (4,169) (9,077) Allowance for equity funds used during construction (277) (564) Changes in working capital: Receivables 6,447 26,639 Accounts payable (2,740) (25,464) Taxes accrued 40,406 37,282 Interest accrued (17,143) (7,458) Other working capital accounts (11,327) 633 Decommissioning trust contributions (4,393) (1,204) Other (6,997) 1,708 -------- -------- Net cash flow provided by operating activities 88,738 103,724 -------- -------- Investing Activities: Construction expenditures (26,235) (20,055) Allowance for equity funds used during 277 564 construction -------- -------- Net cash flow used in investing activities (25,958) (19,491) -------- -------- Financing Activities: Proceeds from the issuance of first mortgage bonds 113,994 - Retirement of: First mortgage bonds (35,000) - Other long-term debt (44) (25) Redemption of preferred stock (7,500) (7,500) Changes in short-term borrowings - net (28,468) (7,954) Dividends paid: Common stock (14,400) (55,700) Preferred stock (5,151) (5,491) -------- -------- Net cash flow provided by (used in) financing 23,431 (76,670) activities -------- -------- Net increase in cash and cash equivalents 86,211 7,563 Cash and cash equivalents at beginning of period 34,370 28,718 -------- -------- Cash and cash equivalents at end of period $120,581 $36,281 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $48,555 $40,325 Noncash investing and financing activities: Capital lease obligations incurred - $75 Change in unrealized appreciation/depreciation of decommissioning trust assets ($94) $1,294 See Notes to Financial Statements. </TABLE>
ENTERGY LOUISIANA, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) ASSETS Utility Plant: Electric $ 4,897,057 $ 4,886,898 Property under capital leases 231,121 231,121 Construction work in progress 95,320 87,567 Nuclear fuel under capital lease 63,516 72,864 Nuclear fuel 1,506 1,506 ----------- ----------- Total 5,288,520 5,279,956 Less - accumulated depreciation and 1,774,850 1,742,306 amortization ----------- ----------- Utility plant - net 3,513,670 3,537,650 ----------- ----------- Other Property and Investments: Nonutility property 20,060 20,060 Decommissioning trust fund 43,496 38,560 Investment in subsidiary companies - at equity 14,230 14,230 Other 869 1,113 ----------- ----------- Total 78,655 73,963 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 4,481 3,952 Temporary cash investments - at cost, which approximates market 21,100 30,418 Special deposits 95,000 - ----------- ----------- Total cash and cash equivalents 120,581 34,370 Accounts receivable: Customer (less allowance for doubtful accounts of $1.4 million in 1996 and 1995) 79,780 72,328 Associated companies 1,361 8,033 Other 8,506 8,979 Accrued unbilled revenues 55,378 62,132 Deferred fuel costs 13,984 10,200 Materials and supplies - at average cost 81,375 79,799 Rate deferrals 18,949 25,609 Deferred nuclear refueling outage costs 17,320 21,344 Prepayments and other 9,801 9,118 ----------- ----------- Total 407,035 331,912 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: SFAS 109 regulatory asset - net 303,419 301,520 Unamortized loss on reacquired debt 38,474 39,474 Other regulatory assets 31,998 23,935 Other 24,486 23,069 ----------- ----------- Total 398,377 387,998 ----------- ----------- TOTAL $ 4,397,737 $ 4,331,523 =========== =========== See Notes to Financial Statements. </TABLE>
ENTERGY LOUISIANA, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, $0.01 par value, authorized 250,000,000 shares; issued and outstanding 165,173,180 shares $ 1,088,900 $ 1,088,900 Capital stock expense and other (4,880) (4,836) Retained earnings 57,564 72,150 ----------- ----------- Total common shareholder's equity 1,141,584 1,156,214 Preferred stock Without sinking fund 160,500 160,500 With sinking fund 92,509 100,009 Long-term debt 1,389,283 1,385,171 ----------- ----------- Total 2,783,876 2,801,894 ----------- ----------- Other Noncurrent Liabilities: Obligations under capital leases 35,516 43,362 Other 51,840 50,835 ----------- ----------- Total 87,356 94,197 ----------- ----------- Current Liabilities: Currently maturing long-term debt 111,258 35,260 Notes payable Associated companies 47,991 61,459 Other - 15,000 Accounts payable: Associated companies 40,695 37,494 Other 63,981 69,922 Customer deposits 57,275 56,924 Taxes accrued 59,018 18,612 Accumulated deferred income taxes 3,403 3,366 Interest accrued 27,059 44,202 Dividends declared 40,713 5,149 Obligations under capital leases 28,000 28,000 Other 7,738 17,397 ----------- ----------- Total 487,131 392,785 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 806,422 807,278 Accumulated deferred investment tax credits 144,145 145,561 Deferred interest - Waterford 3 lease obligation 24,145 23,947 Other 64,662 65,861 ----------- ----------- Total 1,039,374 1,042,647 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL $ 4,397,737 $ 4,331,523 ============ ============ See Notes to Financial Statements. </TABLE>
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended March 31, 1996, primarily due to an increase in electric operating revenues and a decrease in other operation and maintenance expenses, partially offset by an increase in income tax expense. Significant factors affecting the results of operations and causing variances between the three months ended March 31, 1996, and 1995 are discussed under "Revenues and Sales" and "Expenses" below. Revenues and Sales Detailed below are Entergy Mississippi's operating revenues by source and KWh sales for the three months ended March 31, 1996, and 1995: <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 77.5 $ 67.1 $ 10.4 15 Commercial 62.3 55.6 6.7 12 Industrial 40.8 40.2 0.6 1 Governmental 6.9 6.5 0.4 6 ------- -------- -------- Total retail 187.5 169.4 18.1 11 Sales for resale Associated companies 13.6 6.6 7.0 106 Non-associated companies 5.3 4.2 1.1 26 Other (2.5) 0.4 (2.9) * ------- -------- -------- Total $ 203.9 $ 180.6 $ 23.3 13 ======== ======== ======== Billed Electric Energy Sales (Millions of KWh): Residential 1,055 933 122 13 Commercial 777 724 53 7 Industrial 694 723 (29) (4) Governmental 81 78 3 4 ------- -------- -------- Total retail 2,607 2,458 149 6 Sales for resale Associated companies 269 159 110 69 Non-associated companies 116 141 (25) (18) ------- -------- -------- Total 2,992 2,758 234 8 ======== ======== ======== </TABLE> * - Greater than 200%. Electric operating revenues increased for the three months ended March 31, 1996, due to an increase in revenues from the Grand Gulf 1 rate rider, the fuel adjustment clause, and electric sales. In connection with an annual MPSC review, in October 1995, Entergy Mississippi's Grand Gulf 1 rate rider was adjusted upward as a result of its undercollection of Grand Gulf 1 costs. Therefore, Grand Gulf 1 rate rider revenues for the three months ended March 31, 1996, were greater than revenues for the same period last year. Fuel adjustment clause revenues increased due to higher fuel costs, as discussed below. The increase in retail sales volume is primarily attributed to colder than normal
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS weather during the first three months of 1996 compared to the same period in 1995. Sales for resale, specifically sales to associated companies, increased primarily due to changes in the generation requirements and availability among the operating companies. The changes in electric operating revenues for the three months ended March 31, 1996, are as follows: Three Months Ended Description Increase/(Decrease) (In Millions) Change in base revenues $(0.8) Grand Gulf rate rider 4.2 Fuel cost recovery 8.4 Sales volume/weather 4.6 Other revenue (including unbilled) (1.2) Sales for resale 8.1 ----- Total $23.3 ===== Expenses Fuel and purchased power expenses increased for the three months ended March 31, 1996, due to an increase in the demand for gas caused by the colder than normal weather and the resulting shortage of this fuel. The gas shortage in combination with Entergy Mississippi's need to burn excess oil inventory resulted in increased oil-fired generation during the first three months of 1996. Oil tends to be a more expensive fuel than gas or coal. Other operation and maintenance expenses decreased for the three months ended March 31, 1996, due to lower payroll expenses. Payroll expenses decreased as a result of the restructuring programs announced and accrued for during 1994 and 1995, which included a reduction in the number of Entergy Mississippi employees throughout 1995 and into 1996. Income taxes increased for the three months ended March 31, 1996, primarily due to a higher pretax income resulting from increased revenue and reduced other operation and maintenance expenses. Rate deferrals charged against operating expenses in 1996 represent the deferral of Entergy Mississippi's portion of the proposed System Energy rate increase. In December 1995, Entergy Mississippi received an order from the MPSC to defer such costs. The deferral will end once a final order is issued by the FERC in the System Energy request for a rate increase. Entergy Mississippi will amortize the deferral of the actual FERC authorized rate increase over 48 months beginning October 1998. The amortization of rate deferrals increased for the three months ended March 31, 1996, in accordance with the Grand Gulf 1 related deferral plan. The plan allows for the recovery of more Grand Gulf 1-related costs in 1996 than in 1995.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF INCOME For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ------- ------- (In Thousands) Operating Revenues $203,902 $180,559 -------- -------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 39,746 30,389 Purchased power 67,312 57,044 Other operation and maintenance 27,649 32,218 Depreciation and amortization 10,027 9,397 Taxes other than income taxes 9,585 10,589 Income taxes 6,016 3,363 Rate deferrals (7,151) - Amortization of rate deferrals 26,264 15,289 -------- -------- Total 179,448 158,289 -------- -------- Operating Income 24,454 22,270 -------- -------- Other Income (Deductions): Allowance for equity funds used during construction 273 259 Miscellaneous - net (78) 61 Income taxes 30 (23) -------- -------- Total 225 297 -------- -------- Interest Charges: Interest on long-term debt 11,039 11,092 Other interest - net 940 1,906 Allowance for borrowed funds used during construction (224) (205) -------- -------- Total 11,755 12,793 -------- -------- Net Income 12,924 9,774 Preferred Stock Dividend Requirements and Other 1,248 1,707 -------- -------- Earnings Applicable to Common Stock $ 11,676 $ 8,067 ======== ======== See Notes to Financial Statements. </TABLE>
ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) Operating Activities: Net income $12,924 $9,774 Noncash items included in net income: Change in rate deferrals 31,475 14,755 Depreciation and amortization 10,027 9,397 Deferred income taxes and investment tax credits (7,907) (3,740) Allowance for equity funds used during construction (273) (259) Changes in working capital: Receivables 4,269 14,012 Fuel inventory 1,055 (1,892) Accounts payable 4,350 10,730 Taxes accrued (10,253) (9,035) Interest accrued (9,419) (7,887) Other working capital accounts 4,977 10,856 Other (11,501) 5,129 -------- -------- Net cash flow provided by operating activities 29,724 51,840 -------- -------- Investing Activities: Construction expenditures (19,297) (12,275) Allowance for equity funds used during construction 273 259 -------- -------- Net cash flow used in investing activities (19,024) (12,016) -------- -------- Financing Activities: Retirement of: General and refunding mortgage bonds - (40,000) First mortgage bonds (25,000) - Redemption of preferred stock (8,000) (8,000) Changes in short-term borrowings - net 17,436 12,319 Dividends paid: Common stock (7,700) (8,300) Preferred stock (1,392) (1,790) -------- -------- Net cash flow used in financing activities (24,656) (45,771) -------- -------- Net decrease in cash and cash equivalents (13,956) (5,947) Cash and cash equivalents at beginning of period 16,945 9,598 -------- -------- Cash and cash equivalents at end of period $2,989 $3,651 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $20,860 $20,278 Income taxes $4,932 $1,600 See Notes to Financial Statements. </TABLE>
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) ASSETS Utility Plant: Electric $ 1,563,264 $ 1,559,955 Construction work in progress 63,943 55,443 ----------- ----------- Total 1,627,207 1,615,398 ----------- ----------- Less - accumulated depreciation and 616,324 613,712 amortization ----------- ----------- Utility plant - net 1,010,883 1,001,686 ----------- ----------- Other Property and Investments: Investment in subsidiary companies - at equity 5,531 5,531 Other 5,613 5,615 ----------- ----------- Total 11,144 11,146 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 2,989 2,574 Temporary cash investments - at cost, which approximates market: Associated companies - 3,248 Other - 11,123 ----------- ----------- Total cash and cash equivalents 2,989 16,945 Accounts receivable: Customer (less allowance for doubtful accounts of $1.6 million in 1996 and 1995) 48,090 46,214 Associated companies 4,639 1,134 Other 458 1,967 Accrued unbilled revenues 39,009 47,150 Fuel inventory - at average cost 5,626 6,681 Materials and supplies - at average cost 19,431 19,233 Rate deferrals 134,866 130,622 Prepayments and other 5,682 11,536 ----------- ----------- Total 260,790 281,482 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 211,353 247,072 SFAS 109 regulatory asset - net 8,504 6,445 Unamortized loss on reacquired debt 9,892 10,105 Other regulatory assets 30,164 17,736 Other 6,472 6,311 ----------- ----------- Total 266,385 287,669 ----------- ----------- TOTAL $ 1,549,202 $ 1,581,983 ============ ============ See Notes to Financial Statements. </TABLE>
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, no par value, authorized 15,000,000 shares; issued and outstanding 8,666,357 shares $ 199,326 $ 199,326 Capital stock expense and other (243) (218) Retained earnings 226,139 231,463 ----------- ----------- Total common shareholder's equity 425,222 430,571 Preferred stock Without sinking fund 57,881 57,881 With sinking fund 8,770 16,770 Long-term debt 494,932 494,404 ----------- ----------- Total 986,805 999,626 ----------- ----------- Other Noncurrent Liabilities 10,027 11,625 ----------- ----------- Current Liabilities: Currently maturing long-term debt 36,015 61,015 Notes payable - associated companies 17,436 - Accounts payable: Associated companies 34,581 24,391 Other 26,260 32,100 Customer deposits 24,958 24,339 Taxes accrued 18,386 28,639 Accumulated deferred income taxes 55,713 54,090 Interest accrued 12,415 21,834 Other 14,733 6,875 ----------- ----------- Total 240,497 253,283 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 273,378 278,581 Accumulated deferred investment tax credits 26,553 27,978 Other 11,942 10,890 ----------- ----------- Total 311,873 317,449 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL $ 1,549,202 $ 1,581,983 =========== =========== See Notes to Financial Statements. </TABLE>
ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended March 31, 1996, due primarily to higher electric and gas revenues. Significant factors affecting the results of operations and causing variances between the three months ended March 31, 1996, and 1995 are discussed under "Revenues and Sales" and "Expenses" below. Revenues and Sales Detailed below are Entergy New Orleans' electric operating revenues by source and KWh sales for the three months ended March 31, 1996, and 1995. <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 27.3 $ 21.8 $ 5.5 25 Commercial 33.2 32.5 0.7 2 Industrial 5.6 5.1 0.5 10 Governmental 12.2 10.7 1.5 14 ------- ------- ------- Total retail 78.3 70.1 8.2 12 Sales for resale Associated companies 1.9 1.3 0.6 46 Non-associated companies 2.5 1.9 0.6 32 Other (2.4) 4.8 (7.2) (150) ------- ------- ------- Total $ 80.3 $ 78.1 $ 2.2 3 ======= ======= ======= Billed Electric Energy Sales (Millions of KWh): Residential 391 352 39 11 Commercial 465 440 25 6 Industrial 111 123 (12) (10) Governmental 212 210 2 1 ------- ------- ------- Total retail 1,179 1,125 54 5 Sales for resale Associated companies 45 66 (21) (32) Non-associated companies 52 60 (8) (13) ------- ------- ------- Total 1,276 1,251 25 2 ======= ======= ======= </TABLE> Electric operating revenues increased for the three months ended March 31, 1996, principally because of an increase in fuel adjustment revenues and retail energy sales. Fuel adjustment revenues increased due to the higher energy sales and higher fuel prices. The majority of the retail sales increase resulted from colder weather in the first three months of 1996 than in the same period in 1995.
ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The changes in electric operating revenues for the three months ended March 31, 1996, are as follows: Three Months Ended Description Increase/(Decrease) (In Millions) Change in base revenues $(5.5) Fuel cost recovery 6.7 Sales volume/weather 3.0 Other revenue (including unbilled) (3.2) Sales for resale 1.2 ----- Total $ 2.2 ===== For the three months ended March 31, 1996, gas operating revenues increased due primarily to increased gas sales as a result of the colder winter and a higher unit purchase price for gas purchased for resale. Expenses Operating expenses increased for the three months ended March 31, 1996, due primarily to increases in fuel expense, gas purchased for resale, and purchased power expense, partially offset by the recording of rate deferrals in 1996. Fuel expense increased due to significantly higher prices for gas used in generation as a result of widespread cold weather in 1996. Gas purchased for resale increased as a result of higher gas sales and a higher unit purchase price, which was caused by the increased demand for gas due to the weather. Purchased power expense increased in the first three months of 1996, as a result of additional power being purchased due primarily to changes in generation availability among the operating companies, partially offset by a decrease in the cost of the power purchased. The rate deferrals recorded were associated with the deferral of costs related to least cost planning, which are expected to be recovered in future rates and the deferral of a portion of the System Energy rate increase being billed to Entergy New Orleans. See Note 2 for a discussion of Entergy New Orleans' deferral of the System Energy rate increase.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF INCOME For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ------- ------- (In Thousands) Operating Revenues: Electric $80,291 $78,140 Natural gas 42,597 30,746 ------- ------- Total 122,888 108,886 ------- ------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 41,436 30,978 Purchased power 38,739 29,682 Other operation and maintenance 16,424 16,753 Depreciation and amortization 4,971 4,828 Taxes other than income taxes 6,863 7,227 Income taxes 3,985 3,275 Rate deferrals (5,793) - Amortization of rate deferrals 4,496 5,280 ------- ------- Total 111,121 98,023 ------- ------- Operating Income 11,767 10,863 ------- ------- Other Income (Deductions): Allowance for equity funds used during construction 74 26 Miscellaneous - net 774 416 Income taxes (298) (160) ------- ------- Total 550 282 ------- ------- Interest Charges: Interest on long-term debt 4,059 4,329 Other interest - net 282 592 Allowance for borrowed funds used during construction (59) (21) ------- ------- Total 4,282 4,900 ------- ------- Net Income 8,035 6,245 Preferred Stock Dividend Requirements and Other 241 400 ------- ------- Earnings Applicable to Common Stock $ 7,794 $ 5,845 ======= ======= See Notes to Financial Statements. </TABLE>
ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) Operating Activities: Net income $8,035 $6,245 Noncash items included in net income: Change in rate deferrals 7,565 6,382 Depreciation and amortization 4,971 4,828 Deferred income taxes and investment tax credits 2,270 (3,309) Allowance for equity funds used during (74) (26) Changes in working capital: Receivables 5,675 3,091 Accounts payable (5,397) 3,676 Taxes accrued 2,584 (30) Interest accrued (2,917) (955) Income tax refund - 6,531 Other working capital accounts (18,263) (4,680) Other (7,339) (3,175) -------- -------- Net cash flow provided by (used in) operating (2,890) 18,578 activities -------- -------- Investing Activities: Construction expenditures (7,919) (5,028) Allowance for equity funds used during construction 74 26 -------- -------- Net cash flow used in investing activities (7,845) (5,002) -------- -------- Financing Activities: Proceeds from the issuance of general and refunding mortgage bonds 39,608 - Retirement of: First mortgage bonds (23,250) - General and refunding mortgage bonds - (9,200) Redemption of preferred stock - (1,500) Dividends paid: Common stock (3,300) - Preferred stock (482) (413) -------- -------- Net cash flow provided by (used in) financing 12,576 (11,113) activities -------- -------- Net increase in cash and cash equivalents 1,841 2,463 Cash and cash equivalents at beginning of period 49,746 8,031 -------- -------- Cash and cash equivalents at end of period $51,587 $10,494 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $7,054 $5,702 See Notes to Financial Statements. </TABLE>
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) ASSETS Utility Plant: Electric $ 483,427 $ 483,581 Natural gas 122,137 121,083 Construction work in progress 21,850 17,525 ----------- ----------- Total 627,414 622,189 Less - accumulated depreciation and 337,044 335,021 amortization ----------- ----------- Utility plant - net 290,370 287,168 ----------- ----------- Other Property and Investments: Investment in subsidiary companies - at equity 3,259 3,259 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 1,105 1,693 Temporary cash investments - at cost, which approximates market: Associated companies 17,120 10,860 Other 33,362 37,193 ----------- ----------- Total cash and cash equivalents 51,587 49,746 Accounts receivable: Customer (less allowance for doubtful accounts of $0.5 million in 1996 and $0.8 million in 27,761 29,168 1995) Associated companies 149 551 Other 498 843 Accrued unbilled revenues 13,721 17,242 Deferred electric fuel and resale gas costs 14,651 2,647 Materials and supplies - at average cost 9,213 8,950 Rate deferrals 36,320 35,191 Prepayments and other 11,021 4,529 ----------- ----------- Total 164,921 148,867 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 129,222 137,916 SFAS 109 regulatory asset-net 7,291 6,813 Unamortized loss on reacquired debt 1,825 1,932 Other regulatory assets 10,153 9,204 Other 1,338 1,047 ----------- ----------- Total 149,829 156,912 ----------- ----------- TOTAL $ 608,379 $ 596,206 =========== =========== See Notes to Financial Statements. </TABLE>
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares $ 33,744 $ 33,744 Paid-in capital 36,294 36,306 Retained earnings subsequent to the elimination of the accumulated deficit on November 30, 1988 80,155 81,261 ----------- ----------- Total common shareholder's equity 150,193 151,311 Preferred stock - without sinking fund 19,780 19,780 Long-term debt 168,839 155,958 ----------- ----------- Total 338,812 327,049 ----------- ----------- Other Noncurrent Liabilities 18,267 17,745 ----------- ----------- Current Liabilities: Currently maturing long-term debt 42,000 38,250 Accounts payable: Associated companies 7,366 13,851 Other 25,762 24,674 Customer deposits 18,291 18,214 Accumulated deferred income taxes 16,218 9,174 Taxes accrued 8,138 5,554 Interest accrued 2,194 5,111 Dividends declared 5,600 482 Other 14,282 13,863 ----------- ----------- Total 139,851 129,173 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 77,517 81,654 Accumulated deferred investment tax credits 8,459 8,618 Other 25,473 31,967 ----------- ----------- Total 111,449 122,239 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL $ 608,379 $ 596,206 =========== =========== See Notes to Financial Statements. </TABLE>
SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income for the three months ended March 31, 1996, remained relatively unchanged as compared to the same period for 1995. Significant factors affecting the results of operations and causing variances between the three months ended March 31, 1996, and 1995 are discussed under "Revenues" and "Expenses" below. 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 allocable to its investment in Grand Gulf 1. Operating revenues were higher for the three months ended March 31, 1996, due primarily to increased depreciation, amortization, and decommissioning expenses. The increase was the result of an increase in decommissioning costs and increased depreciation rates as reflected in the 1995 System Energy FERC rate increase filing, subject to refund. See Note 2 for a discussion of the proposed rate increase. Expenses Operating expenses increased for the three months ended March 31, 1996, due to an increase in depreciation, amortization, and decommissioning expenses and income tax expenses, partially offset by a decrease in nuclear refueling outage expenses and other operation and maintenance expenses. Depreciation, amortization, and decommissioning expenses increased for the three months ended March 31, 1996, due to an increase in depreciation of electric plant in service and decommissioning charges as discussed in "Revenues" above. Total income taxes increased for the three months ended March 31, 1996 as a result of higher pre-tax income. The decrease in nuclear refueling outage expense was attributed to the effect of refueling outage expenses incurred in the first quarter of 1995. The decrease in other operation and maintenance expenses is due to timing differences in construction expenditures.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF INCOME For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ------- ------- (In Thousands) Operating Revenues $156,424 $151,664 -------- -------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 12,840 12,335 Nuclear refueling outage expenses 308 2,281 Other operation and maintenance 21,433 25,099 Depreciation, amortization, and decommissioning 31,999 25,398 Taxes other than income taxes 6,906 7,174 Income taxes 20,692 19,305 -------- -------- Total 94,178 91,592 -------- -------- Operating Income 62,246 60,072 -------- -------- Other Income (Deductions): Allowance for equity funds used during construction 350 480 Miscellaneous - net 839 725 Income taxes (315) 551 -------- -------- Total 874 1,756 -------- -------- Interest Charges: Interest on long-term debt 37,953 37,434 Other interest - net 1,991 2,333 Allowance for borrowed funds used during construction (354) (504) -------- -------- Total 39,590 39,263 -------- -------- Net Income $ 23,530 $ 22,565 ======== ======== See Notes to Financial Statements. </TABLE>
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 1996 and 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 -------- -------- (In Thousands) Operating Activities: Net income $23,530 $22,565 Noncash items included in net income: Depreciation, amortization, and decommissioning 31,999 25,398 Deferred income taxes and investment tax credits (8,897) (5,501) Allowance for equity funds used during construction (350) (480) Changes in working capital: Receivables (2,870) (95,228) Accounts payable 17,326 39,786 Taxes accrued 13,735 12,510 Interest accrued (10,825) (2,660) Other working capital accounts (4,711) (23,839) Decommissioning trust contributions (2,131) (1,304) FERC Settlement - refund obligation (956) - Provision for estimated losses and reserves 13,954 - Other (2,137) 2,574 -------- -------- Net cash flow provided by (used in) operating 67,667 (26,179) activities -------- -------- Investing Activities: Construction expenditures (1,384) (7,734) Allowance for equity funds used during construction 350 480 Nuclear fuel purchases (733) - -------- -------- Net cash flow used in investing activities (1,767) (7,254) -------- -------- Financing Activities: Proceeds from the issuance of long-term debt 89,192 - Retirement of long-term debt (92,700) - Changes in short-term borrowings - net (2,990) - Common stock dividends paid (23,300) - -------- -------- Net cash flow used in financing activities (29,798) - -------- -------- Net increase (decrease) in cash and cash equivalents 36,102 (33,433) Cash and cash equivalents at beginning of period 240 89,703 -------- -------- Cash and cash equivalents at end of period $36,342 $56,270 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $48,911 $40,903 Noncash investing and financing activities: Capital lease obligation incurred - $27,653 Change in unrealized appreciation/depreciation of decommissioning trust assets $192 $1,685 See Notes to Financial Statements. </TABLE>
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) ASSETS Utility Plant: Electric $ 2,983,843 $ 2,977,303 Electric plant under lease 445,155 444,305 Construction work in progress 29,931 35,946 Nuclear fuel under capital lease 62,033 71,374 ----------- ----------- Total 3,520,962 3,528,928 Less - accumulated depreciation and 890,222 861,752 amortization ----------- ----------- Utility plant - net 2,630,740 2,667,176 ----------- ----------- Other Property and Investments: Decommissioning trust fund 43,770 40,927 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 192 240 Temporary cash investments - at cost, which approximates market: Associated companies 12,259 - Other 23,891 - ----------- ----------- Total cash and cash equivalents 36,342 240 Accounts receivable: Associated companies 75,532 72,458 Other 4,633 4,837 Materials and supplies - at average cost 68,398 67,661 Prepayments and other 19,217 16,050 ----------- ----------- Total 204,122 161,246 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: SFAS 109 regulatory asset-net 284,507 291,181 Unamortized loss on reacquired debt 55,716 52,702 Other regulatory assets 203,053 203,731 Other 14,388 14,049 ----------- ----------- Total 557,664 561,663 ----------- ----------- TOTAL $ 3,436,296 $ 3,431,012 =========== =========== See Notes to Financial Statements. </TABLE>
<TABLE> <CAPTION> SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS March 31, 1996 and December 31, 1995 (Unaudited) <S> <C> <C> 1996 1995 ----------- ----------- (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares $ 789,350 $ 789,350 Paid-in capital - 7 Retained earnings 75,151 85,920 ----------- ----------- Total common shareholder's equity 864,501 875,277 Long-term debt 1,221,152 1,219,917 ----------- ----------- Total 2,085,653 2,095,194 Other Noncurrent Liabilities: Obligations under capital leases 34,033 44,107 Other 31,767 16,068 ----------- ----------- Total 65,800 60,175 ----------- ----------- Current Liabilities: Currently maturing long-term debt 250,000 250,000 Notes payable-associated companies - 2,990 Accounts payable: Associated companies 16,033 17,458 Other 37,814 19,063 Taxes accrued 86,383 72,648 Interest accrued 25,918 36,743 Dividends declared 11,000 - Obligations under capital lease 28,000 28,000 Other 3,404 4,211 ----------- ----------- Total 458,552 431,113 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 586,471 602,182 Accumulated deferred investment tax credits 106,250 107,119 FERC Settlement - refund obligation 55,892 56,848 Other 77,678 78,381 ----------- ----------- Total 826,291 844,530 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL $ 3,436,296 $ 3,431,012 =========== =========== See Notes to Financial Statements. </TABLE>
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Cajun - River Bend (Entergy Corporation and Entergy Gulf States) Entergy Gulf States has significant business relationships with Cajun, including co-ownership of River Bend (operated by Entergy Gulf States) and Big Cajun 2, Unit 3 (operated by Cajun). Entergy Gulf States and Cajun, respectively, own 70% and 30% undivided interests in River Bend and 42% and 58% undivided interests in Big Cajun 2, Unit 3. These relationships have spawned a number of significant and long-standing disputes and claims between the parties. In a recent development, as more fully described below, a preliminary agreement setting forth terms for the resolution of such disputes has been reached by Entergy Gulf States, the Bankruptcy Trustee for Cajun, and the Rural Utilities Service (RUS). In June 1989, Cajun filed a civil action against Entergy Gulf States in the United States District Court for the Middle District of Louisiana (District Court). Cajun's complaint seeks to annul, rescind, terminate, and/or dissolve the Joint Ownership Participation and Operating Agreement (Operating Agreement) entered into on August 28, 1979 relating to River Bend. The suit also seeks to recover Cajun's alleged $1.6 billion investment in the unit plus attorneys' fees, interest, and costs. Two member cooperatives of Cajun have brought an independent action to declare the Operating Agreement void, based upon their failure to get prior LPSC approval alleged to be necessary. Entergy Gulf States believes the suits are without merit and is contesting them vigorously. A trial on the portion of the suit by Cajun to rescind the Operating Agreement began in April 1994 and was completed in March 1995. On October 24, 1995, the District Court issued a memorandum opinion ruling in favor of Entergy Gulf States. The District Court found that Cajun had not proved that Entergy Gulf States fraudulently induced it to execute the Operating Agreement and that Cajun failed to timely assert its claim. A final judgment on this portion of the suit will not be entered until all claims asserted by Cajun have been heard. The trial of the second portion of the suit was previously scheduled to begin on July 2, 1996. If the ultimate outcome of this litigation requires Entergy Gulf States to pay substantial damages, it would probably be unable to make such payments and could be forced to seek relief from its creditors under the United States Bankruptcy Code. Cajun has not paid its full share of capital costs, operating and maintenance expenses, and other costs for repairs and improvements to River Bend since 1992. Cajun's unpaid portion of River Bend operating and maintenance expenses (including nuclear fuel) and capital costs for the first three months of 1996 was approximately $22.1 million. The cumulative cost to Entergy Gulf States resulting from Cajun's failure to pay its full share of River Bend-related costs, reduced by the proceeds from the sale by Entergy Gulf States of Cajun's share of River Bend power, and payments into the registry of the District Court for Entergy Gulf States' portion of expenses for Big Cajun 2, Unit 3, was $29.1 million as of March 31, 1996, compared with $31.1 million as of December 31, 1995. Cajun's unpaid portion of the River Bend related costs is reflected in long-term receivables with an offsetting reserve in other deferred credits. Cajun's bankruptcy may affect the ultimate collectibility of the amounts owed to Entergy Gulf States, including any amounts that may be awarded in litigation. Cajun continues to pay its share of decommissioning costs for River Bend. See Note 8 of Entergy's Form 10-K for additional information regarding the Cajun litigation, Cajun's December 21, 1994 bankruptcy filing, related filings, and the ongoing potential effects of these matters upon Entergy Gulf States. In the bankruptcy proceedings, Cajun filed a motion on January 10, 1995, to reject the Operating Agreement as a burdensome executory contract. Entergy Gulf States responded on January 10, 1995, with a memorandum opposing Cajun's motion. Should the court grant Cajun's motion to reject the Operating Agreement, Cajun would be relieved of its financial obligations under the contract, while Entergy Gulf States would likely have a substantial damage claim arising from any such rejection. Although Entergy Gulf States believes that Cajun's motion to reject the Operating Agreement is without merit, it is not possible to predict the outcome of these proceedings. On March 8, 1996, Southwestern Electric Power Company (SWEPCO), Entergy Gulf States, and certain member cooperatives of Cajun filed a joint proposal to bring an end to the Cajun bankruptcy proceeding. The proposal was submitted in response to a bid procedure established by the Cajun bankruptcy trustee. On April 22, 1996, the Cajun bankruptcy trustee filed a plan of reorganization with the bankruptcy court based on the proposal of two non-affiliated companies to take over the non-nuclear operations of Cajun. The timing and completion of the reorganization plan depends on bankruptcy court approval and any required regulatory approvals. On April 26, 1996, Entergy Gulf States, the Cajun bankruptcy trustee, and the RUS, Cajun's largest creditor, agreed to terms for the settlement of all disputes between Cajun and Entergy Gulf States. The terms include, but are not limited to, the following: (i) Cajuns' interest in River Bend will be turned over to the RUS, which will have the option to retain the interest, sell it to a third party, or transfer it to Entergy Gulf States at no cost; (ii) Cajun will set aside a total of $125 million for the decommissioning of its interest in River Bend; (iii) Cajun will transfer certain transmission assets to Entergy Gulf States; (iv) Cajun will settle transmission disputes and be released from claims for payment under transmission arrangements with Entergy Gulf States as discussed under "Cajun - Transmission Service" below; and (v) all funds paid by Entergy Gulf States into the registry of the District Court will be returned to Entergy Gulf States. The settlement is subject to approvals by the RUS, the Board of Directors of Entergy Corporation and Entergy Gulf States, the U.S. Bankruptcy Court, and appropriate regulatory agencies. Cajun - Transmission Service (Entergy Corporation and Entergy Gulf States) Entergy Gulf States and Cajun are parties to FERC proceedings relating to transmission service charge disputes. See Note 8 in Entergy's Form 10-K for additional information regarding these FERC proceedings, FERC orders issued as a result of such proceedings, and the potential effects of these proceedings upon Entergy Gulf States. Under Entergy Gulf States' interpretation of a 1992 FERC order, as modified by FERC's August 3, 1995, and October 2, 1995 orders, Cajun would owe Entergy Gulf States approximately $66.3 million as of March 31, 1996. Entergy Gulf States further estimates that if it were to prevail in its May 1992 motion for rehearing and on certain other issues decided adversely to Entergy Gulf States in the February 1995, August 1995, and October 1995 FERC orders, which Entergy Gulf States has appealed, Cajun would owe Entergy Gulf States approximately $146.6 million as of March 31, 1996. If Cajun were to prevail in its May 1992 motion for rehearing to FERC, and if Entergy Gulf States were not to prevail in its May 1992 motion for rehearing to FERC, and if Cajun were to prevail in appealing FERC's August and October 1995 orders, Entergy Gulf States estimates it would owe Cajun approximately $99.5 million as of March 31, 1996. The above amounts are exclusive of a $7.3 million payment by Cajun on December 31, 1990, which the parties agreed to apply to the disputed transmission service charges. Pending FERC's ruling on the May 1992 motions for rehearing, Entergy Gulf States has continued to bill Cajun utilizing the historical billing methodology and has recorded underpaid transmission charges, including interest, in the amount of $138.9 million as of March 31, 1996. This amount is reflected in long-term receivables with an offsetting reserve in other deferred credits. Cajun's bankruptcy may affect Entergy Gulf States' collection of the above amounts. FERC has determined that the collection of the pre- petition debt of Cajun is an issue properly decided in the bankruptcy proceeding. Refer to "Cajun - River Bend Litigation" above for a discussion of the potential settlement of the Cajun and Entergy Gulf States disputes. Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 8 to Entergy's Form 10-K for information on the operating companies' and System Energy's construction expenditures (excluding nuclear fuel) for the years 1996, 1997, and 1998, and long- term debt and preferred stock maturities and cash sinking fund requirements for the period 1996-1998. 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 8 to Entergy's Form 10-K for information on nuclear liability, property and replacement power insurance, related NRC regulations, the disposal of spent nuclear fuel, other high-level radioactive waste, and decommissioning costs associated with ANO, River Bend, Waterford 3, and Grand Gulf 1. The SEC has questioned certain of the financial accounting practices of the electric utility industry regarding the recognition, measurement, and classification of decommissioning costs for nuclear plants in the financial statements of electric utilities. In response to these questions, the FASB has been reviewing the accounting for decommissioning and has expanded the scope of its review to include liabilities related to the closure and removal of all long-lived assets. An exposure draft of the proposed SFAS (which is proposed to be effective in 1997) was issued in February 1996. The proposed SFAS would require measurement of the liability for closure and removal of long-lived assets (including decommissioning) based on discounted future cash flows. Those future cash flows should be determined by estimating current costs and adjusting for inflation, efficiencies that may be gained from experience with similar activities, and consideration of reasonable future advances in technology. It also would require that changes in the decommissioning/closure cost liability resulting from changes in assumptions should be recognized with a corresponding adjustment to the plant asset, and depreciation should be revised prospectively. The proposed SFAS states that the initial recognition of the decommissioning/closure cost liability would result in an asset that should be presented with other plant costs on the financial statements because the cost of decommissioning/closing the plant would be recognized as part of the total cost of the plant asset. In addition there would be a regulatory asset recognized on the financial statements to the extent the initial decommissioning/closure liability has increased due to the passage of time, and such costs are probable of future recovery. If current electric utility industry accounting practices with respect to nuclear decommissioning and other closure costs are changed, annual provisions for such costs could increase, the estimated cost for decommissioning/closure could be recorded as a liability rather than as accumulated depreciation, and trust fund income from decommissioning trusts could be reported as investment income rather than as a reduction to decommissioning expense. ANO Matters (Entergy Corporation and Entergy Arkansas) See Note 8 to Entergy's Form 10-K for information on cracks in certain steam generator tubes at ANO 2 that were discovered and repaired during an outage in March 1992. Further inspections and repairs were conducted at subsequent refueling and mid-cycle outages, including the most recent refueling outage in October 1995. During the October 1995 inspection, additional cracks in the tubes were discovered. ANO 2's output has been reduced 23 megawatts due to steam generator fouling and tube plugging. The unit may be approaching the current limit for the number of steam generator tubes that can be plugged with the unit in operation. If the established limit is reached, Entergy Operations could be required during future outages to insert sleeves in some of the steam generator tubes that were previously plugged. Entergy Operations is in the process of gathering information and assessing various options for the repair or the replacement of ANO 2's steam generators. Certain of these options could, in the future, require significant capital expenditures and result in additional outages. However, a decision as to the repair or replacement of ANO 2's steam generators is not expected prior to 1997. Entergy Operations periodically meets with the NRC to discuss the results of inspections of the generator tubes, as well as the timing of future inspections. Environmental Issues (Entergy Arkansas) In May 1995, Entergy Arkansas was named as a defendant in a suit by Reynolds Metals Company (Reynolds), seeking to recover a share of the costs associated with the clean-up of hazardous substances at a site south of Arkadelphia, Arkansas. Reynolds alleges that it has spent $11.2 million to clean-up the site, and that the site was contaminated with polychlorinated biphenyls for which Entergy Arkansas bears some responsibility. Entergy Arkansas, voluntarily, at its expense, completed remediation at a nearby substation site and believes that it has no liability for contamination at the site that is subject to the Reynolds suit and is contesting the lawsuit. Regardless of the outcome, Entergy Arkansas not believe this matter would have a materially adverse effect on its financial condition or results of operations. See "Environmental Regulation" in Item 1 of Part I of Entergy's Form 10-K for information on polychlorinated biphenyls contamination at former Reynolds plant sites in Arkansas to which Entergy Arkansas had supplied power. (Entergy Gulf States) Entergy Gulf States has been designated as a potentially responsible party for the clean-up of certain hazardous waste disposal sites. Entergy Gulf States is currently negotiating with the EPA and state authorities regarding the clean-up of certain of these sites. Through March 31, 1996, $7.9 million has been expended on the clean-up. As of March 31, 1996, a remaining recorded liability of $21.7 million existed relating to the clean-up of the sites at which Entergy Gulf States has been designated a potentially responsible party. See Note 8 to Entergy's Form 10-K for additional discussion of the sites where Entergy Gulf States has been designated as a potentially responsible party by the EPA and related litigation. (Entergy Louisiana) During 1993, the Louisiana Department of Environmental Quality issued new rules for solid waste regulation, including regulation of waste water impoundments. Entergy Louisiana has determined that certain of its power plant waste water impoundments were affected by these regulations and chose to upgrade or close them. A remaining recorded liability in the amount of $10.2 million existed at March 31, 1996, for waste water upgrades and closures to be completed by the end of 1996. Cumulative expenditures relating to the upgrades and closures of waste water impoundments were $6.3 million as of March 31, 1996. See Note 8 to Entergy's Form 10-K for additional discussion of Entergy Louisiana's waste water impoundment upgrades and closures. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three transactions for the sale and leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3. Upon the occurrence of certain events, Entergy Louisiana may be obligated to pay amounts sufficient to permit the Owner Participants to withdraw from the lease transactions, and Entergy Louisiana may be required to assume the outstanding bonds issued by the Owner Trustee to finance, in part, its acquisition of the undivided interests in Waterford 3. See Note 9 to Entergy's Form 10-K for further information. Reimbursement Agreement (System Energy) Under a bank letter of credit and reimbursement agreement, System Energy has agreed to a number of covenants relating to the maintenance of certain capitalization and fixed charge coverage ratios. System Energy agreed, during the term of the agreement, to maintain its equity at not less than 33% of its adjusted capitalization (defined in the agreement to include certain amounts not included in capitalization for financial statement purposes). In addition, System Energy must maintain, with respect to each fiscal quarter during the term of the agreement, a ratio of adjusted net income to interest expense (calculated, in each case, as specified in the agreement) of at least 1.60 times earnings. See Note 8 to Entergy's Form 10-K for further information. NOTE 2. RATE AND REGULATORY MATTERS River Bend (Entergy Corporation and Entergy Gulf States) In May 1988, the PUCT granted Entergy Gulf States a permanent increase in annual revenues of $59.9 million resulting from the inclusion in rate base of approximately $1.6 billion of company-wide River Bend plant investment and approximately $182 million of related Texas retail jurisdiction deferred River Bend costs (Allowed Deferrals). In addition, the PUCT disallowed as imprudent $63.5 million of company-wide River Bend plant costs and placed in abeyance, with no finding as to prudence, approximately $1.4 billion of company-wide River Bend plant investment and approximately $157 million of Texas retail jurisdiction deferred River Bend operating and carrying costs (Abeyed Deferrals). As discussed in Note 2 to Entergy's Form 10-K, various appeals of the PUCT's order have been filed (Rate Appeal). Entergy Gulf States filed an appeal with the Texas Supreme Court and, on February 9, 1996, the Texas Supreme Court agreed to hear the appeal. Oral arguments were held on March 19, 1996. The timing of a decision by the Texas Supreme Court is not certain. As of March 31, 1996, the River Bend plant costs disallowed for retail ratemaking purposes in Texas and the River Bend plant costs held in abeyance totaled (net of taxes and depreciation) approximately $12 million and $274 million, respectively. Allowed Deferrals were approximately $81 million, net of taxes and amortization, as of March 31, 1996. Entergy Gulf States estimates it has collected approximately $188 million of revenues as of March 31, 1996, as a result of the originally ordered rate treatment by the PUCT of these deferred costs. If recovery of the Allowed Deferrals is not upheld, future revenues based thereon could be lost, and no assurance can be given as to whether or not refunds to customers of revenue received based upon such deferred costs would be required. During the first quarter of 1996, Entergy Gulf States wrote off Abeyed Deferrals of $169 million in accordance with SFAS 121, which became effective January 1, 1996, but it has made no write-offs or reserves for the River Bend plant-related costs. A general remand by the Texas Supreme Court in the Rate Appeal would enable Entergy Gulf States to seek recovery of the Abeyed Deferrals. Based on advice from Clark, Thomas & Winters, A Professional Corporation, legal counsel of record in the Rate Appeal, management believes that it is reasonably possible that the case will be remanded to the PUCT, and that the PUCT will be allowed to rule on the prudence of the abeyed River Bend plant costs. Management and legal counsel are unable to predict the amount, if any, of abeyed and previously disallowed River Bend plant costs that ultimately might be disallowed by the PUCT. As of March 31, 1996, a net of tax write-off of up to $286 million could be required if the PUCT ultimately issues an adverse ruling on the abeyed and disallowed plant costs. The following factors support management's position that a loss contingency requiring accrual has not occurred, and its belief that all, or substantially all, of the abeyed plant costs will ultimately be recovered: 1. The $1.4 billion of abeyed River Bend plant costs have never been ruled imprudent and disallowed by the PUCT; 2. Analysis by Sandlin Associates, which supports the prudence of substantially all of the abeyed construction costs; 3. Historical inclusion by the PUCT of prudent construction costs in rate base; and 4. The analysis of Entergy Gulf States' internal legal staff, which has considerable experience in Texas rate case litigation. Additionally, based on advice from Clark, Thomas & Winters, A Professional Corporation, legal counsel of record in the Rate Appeal, management believes that it is reasonably possible that the Allowed Deferrals will continue to be recovered in rates, and that it is reasonably possible that the Abeyed Deferrals will be recovered in rates to the extent that the $1.4 billion of abeyed River Bend plant is recovered. Filings with the LPSC (Entergy Corporation and Entergy Gulf States) See Note 2 in Entergy's Form 10-K for a discussion of Entergy Gulf States' required earnings analysis filing with the LPSC for the test year preceding the Merger (1993). Entergy Gulf States has appealed to the Louisiana Supreme Court the 1994 LPSC order for an annual rate reduction of $12.7 million. During the appeal, the preliminary injunction Entergy Gulf States received from the District Court, relating to the $8.3 million earnings effect of a 1994 change in accounting for unbilled revenues, will remain in effect. On May 31, 1995, Entergy Gulf States filed its first required post-Merger earnings analysis with the LPSC. Hearings on this review were held in December 1995 and a decision is expected in mid-1996. (Entergy Corporation and Entergy Louisiana) See Note 2 in Entergy's Form 10-K for a discussion of Entergy Louisiana's performance-based formula rate plan approved in a June 1995 LPSC rate order, Entergy Louisiana's subsequent appeal of the LPSC's order, and the final settlement of this appeal. On April 15, 1996, as required by the performance-based formula rate plan, Entergy Louisiana made its annual earnings filing for the 1995 test year. The filing indicates a required rate reduction due to overearnings in 1995. In addition, rates will be reduced as a result of the expiration of the Waterford 3 phase-in-plan discussed below. These rate reductions will be largely offset by the recovery of the Waterford 3 property tax. Hearings on these issues are expected to begin in June 1996. The property tax exemption for Waterford 3 ended in December 1995 and Entergy Louisiana will be required to pay $20.8 million in property taxes to St. Charles Parish for the 1996 tax year. In a March 1996 LPSC order, Entergy Louisiana was permitted to defer the rate recovery of these taxes for the period January 1996 through June 1996. The order allows for the recovery of the property tax and also for the recovery, from July 1996 through June 1997, of the related deferral. In addition, Entergy Louisiana's phase-in-plan for Waterford 3 will expire in November 1996. Entergy Louisiana was recovering deferred costs annually of approximately $28.4 million. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) On March 15, 1996, Entergy Mississippi filed its annual earnings review with the MPSC under its formula rate plan. On April 18, 1996, the MPSC issued an order approving and adopting a joint stipulation and placing the prospective rate reduction of $5.9 million into effect on May 1, 1996. Filings with the Council (Entergy Corporation and Entergy New Orleans) Pursuant to the 1994 NOPSI Settlement, Entergy New Orleans is required to make earnings filings with the Council for the 1995 and 1996 rate years. A review of Entergy New Orleans' earnings for the test year ending September 30, 1995, required Entergy New Orleans to credit customers $6.2 million over a 12-month period which began in March 1996. Hearings before the Council on the reasonableness and prudence of Entergy New Orleans' deferred Least Cost Integrated Resource Planning expenses for cost recovery purposes were previously scheduled for April 1996, but have been delayed. Proposed Rate Increase (System Energy) System Energy filed an application with FERC on May 12, 1995, for a $65.5 million rate increase. The request seeks changes to System Energy's rate schedule, including increases in the revenue requirement associated with decommissioning costs, the depreciation rate, and the rate of return on common equity. On December 12, 1995, System Energy implemented a $65.5 million rate increase, subject to refund. Hearings on System Energy's request began in January 1996 and were completed in February 1996. The ALJ's initial decision is expected in the latter part of 1996. (Entergy Mississippi) Entergy Mississippi's allocation of the proposed System Energy wholesale rate increase is $21.6 million. In July 1995, Entergy Mississippi filed a schedule with the MPSC that defers the retail recovery of the System Energy rate increase. The deferral plan, which was approved by the MPSC, began in December 1995, the effective date of the System Energy rate increase, and will end after the issuance of a final order by FERC. The deferred rate increase is to be amortized over 48 months beginning October 1998. (Entergy New Orleans) Entergy New Orleans' allocation of the proposed System Energy wholesale rate increase is $11.1 million. In February 1996, Entergy New Orleans filed a plan with the City to defer 50% of the amount of the System Energy rate increase. The deferral began in February 1996 and will end after the issuance of a final order by FERC. LPSC Fuel Cost Review (Entergy Corporation and Entergy Gulf States) See Note 2 to Entergy's Form 10-K, for a discussion of the LPSC's review of Entergy Gulf States' fuel costs for the period October 1988 through September 1991 and Entergy Gulf States' subsequent appeal of $13.9 million of fuel costs disallowed by the LPSC. The LPSC is currently conducting the second phase of its review of Entergy Gulf States' fuel costs for the period October 1991 through December 1994. On June 30, 1995, the LPSC consultants filed testimony recommending a disallowance of $38.7 million of fuel costs. Hearings began in December 1995 and were completed in March 1996. A decision is expected in the second quarter of 1996. NOTE 3. COMMON STOCK (Entergy Corporation) During the first quarter of 1996, Entergy Corporation issued 267,679 shares of its previously repurchased common stock, reducing the amount held as treasury stock by $7.7 million. Entergy Corporation issued these shares to meet the requirements of its various stock plans. NOTE 4. LONG-TERM DEBT (Entergy Corporation) An Entergy subsidiary signed an agreement with several banks on January 5, 1996, to obtain a revolving credit facility in the aggregate amount of $1.2 billion Australian dollars ($870 million US dollars) for the acquisition of CitiPower. The facility was drawn down on that same date, bears interest at an average rate of 8.18%, is non-recourse to Entergy, and matures on June 30, 2000. As part of the CitiPower acquisition, a bank letter of credit and other agreements were secured by Entergy Corporation totaling $79 million as of March 31, 1996. (Entergy Arkansas) On April 26, 1996, Entergy Arkansas redeemed, prior to their maturities, $23.8 million of its 10.375% Series First Mortgage Bonds due October 1, 2020 (all of the outstanding bonds of such series) and $58.4 million of its 10.00% Series First Mortgage Bonds due February 1, 2020, in each case at a price of 100% of their principal amounts, using funds deposited with the mortgage trustee pursuant to the annual maintenance and replacement fund requirement as provided under Entergy Arkansas' mortgage. (Entergy Louisiana) On April 26, 1996, Entergy Louisiana redeemed, in full, prior to its maturity, $95 million of its 10.125% Series First Mortgage Bonds due April 1, 2020 at a price of 100% of its principal amount, using funds deposited with the mortgage trustee pursuant to the annual replacement fund requirement as provided under Entergy Louisiana's mortgage. (Entergy New Orleans) On May 1, 1996, Entergy New Orleans retired, at 100% of the principal amount thereof, $30 million of its 10.95% Series General & Refunding Mortgage Bonds due May 1, 1997, $15 million of which was a scheduled sinking fund requirement. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On March 24, 1996, Entergy Corporation's Board of Directors declared a common stock dividend of 45 cents per share payable on June 1, 1996, to holders of record on May 10, 1996. NOTE 6. RESTRUCTURING COSTS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) In 1994 and 1995 Entergy implemented various restructuring programs to reduce the number of employees and consolidate offices and facilities. The programs were designed to reduce costs and improve operating efficiencies in order to enable Entergy to become a low-cost producer. The balances as of December 31, 1995, and March 31, 1996, for restructuring liabilities associated with these programs are shown below by company along with the actual termination benefits paid under the programs. <TABLE> <CAPTION> <S> <C> <C> <C> <C> Restructuring Restructuring Liability as of Adjustments Payments Liability as of December 31, Made in Made in March 31, Company 1995 1996 1996 1996 (In Millions) AP&L $8.3 - ($3.4) $4.9 GSU 5.4 - (2.4) 3.0 LP&L 2.2 - (1.2) 1.0 MP&L 2.5 (0.4) (0.5) 1.6 NOPSI 0.6 - (0.3) 0.3 Other 5.2 0.4 (1.2) 4.4 ------ ---- ----- ----- Total $ 24.2 - ($9.0) $15.2 ====== ==== ===== ===== </TABLE> The restructuring charges shown above primarily include employee severance costs related to the expected termination of approximately 2,750 employees in various groups. As of March 31, 1996, 2,350 employees had either been terminated or accepted voluntary separation packages under the restructuring plan. NOTE 7. ACCOUNTING ISSUES New Accounting Standard - In March 1995, the FASB issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of", which became effective January 1, 1996. This statement describes circumstances which may result in assets being impaired, in addition to providing criteria for recognition and measurement of asset impairment. In the first quarter of 1996, Entergy Gulf States' regulatory assets of $169 million (net of tax) related to Texas retail deferred River Bend operating and carrying costs and $5 million (net of tax) related to Louisiana retail deferred River Bend operating costs were written off under the provisions of SFAS 121. See Note 1 to Entergy's Form 10-K for additional details regarding other assets and operations potentially impacted in the future by the requirements of SFAS 121 and the process for periodically reviewing those assets and operations for impairment. NOTE 8. ENTERGY CORPORATION-CITIPOWER ACQUISITION (Entergy Corporation) On January 5, 1996, Entergy Corporation finalized its acquisition of CitiPower, an electric distribution company serving Melbourne, Australia, and surrounding suburbs. The purchase price of CitiPower was approximately $1.2 billion, of which $294 million represented an equity investment by Entergy Corporation, and the remainder represented debt. Entergy Corporation funded the majority of the equity portion of the investment by using $230 million of its $300 million bank revolving credit facility. CitiPower is one of five electric distribution businesses in the state of Victoria. CitiPower's distribution area accounts for approximately ten percent of Victoria's population. For the fiscal year ended June 30, 1995, CitiPower supplied approximately 4.4 million MWh of electricity to over 230,000 customer sites. Approximately 36,000, or 16%, of these sites were commercial customers. In accordance with the purchase method of accounting, the three month results of operations for Entergy Corporation reported in its Statements of Consolidated Income and Cash Flows do not reflect CitiPower's results of operations for any period prior to January 5, 1996. If the acquisition had occurred on January 1, 1995, Entergy Corporation's operating revenues would have increased by approximately $100 million for the first quarter, but the effects on the overall results of operations would have been immaterial. This pro forma information is not necessarily indicative of the results of operations that would have occurred had the acquisition been consummated for the period for which it is being given effect. CitiPower's results of operations for the period from January 5, 1996, through March 31, 1996, are included in Entergy Corporation's Consolidated Financial Statements and is stated separately below: Period from January 5, 1996 to March 31, 1996 (In Thousands) Operating revenues $ 91,636 Operating expenses $ 73,630 Interest charges $ 17,753 Net income $ 253 _________________________________________ In the opinion 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 reclassifying 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 Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans is subject to seasonal fluctuations, with the peak period occurring during the summer months. 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 Merger-Related Proceedings (Entergy Corporation and Entergy Gulf States) See "Nuclear Operations" in Item 1 of Part I of Entergy's Form 10-K for information relating to the proceeding pending before the NRC Atomic Safety and Licensing Board (ASLB), which was instigated by Cajun and concerns the two Merger-related license amendments issued by the NRC for River Bend. In March 1996, the ASLB, responding to Cajun's request, dismissed the pending proceedings without prejudice. Cajun - River Bend (Entergy Corporation and Entergy Gulf States) See Note 8 of Entergy's Form 10-K and Note 1 for a discussion of the Cajun litigation and bankruptcy proceedings. On March 8, 1996, SWEPCO, Entergy Gulf States, and certain member cooperatives of Cajun submitted a joint proposal to bring an end to the Cajun bankruptcy proceeding. The proposal was made in response to a bid procedure established by the Cajun bankruptcy trustee. On April 22, 1996, the Cajun bankruptcy trustee filed a plan of reorganization with the bankruptcy court based on a proposal by two non-affiliated companies to take over the non-nuclear operations of Cajun. On April 19, 1996, SWEPCO, Entergy Gulf States and certain Cajun member cooperatives filed a separate plan of reorganization with the court based upon their earlier proposal. The timing and completion of the reorganization plan depends on bankruptcy court approval and any required regulatory approvals. On April 26, 1996, Entergy Gulf States, the Cajun bankruptcy trustee, and the Rural Utilities Service (RUS), Cajun's largest creditor, agreed to terms for the settlement of all disputes between Cajun and Entergy Gulf States. The terms include, but are not limited to, the following: (i) Cajuns' interest in River Bend will be turned over to the RUS, which will have the option to retain the interest, sell it to a third party, or transfer it to Entergy Gulf States; (ii) Cajun will set aside a total of $125 million for the decommissioning of its interest in River Bend; (iii) Cajun will transfer certain transmission assets to Entergy Gulf States; (iv) Cajun will settle transmission disputes and be released from claims for payment under transmission arrangements with Entergy Gulf States; and (v) all funds paid by Entergy Gulf States into the registry of the District Court will be returned to Entergy Gulf States. The settlement is subject to further approvals by the RUS, the Board of Directors of Entergy Corporation, the U.S. Bankruptcy Court, and appropriate regulatory agencies. Panda Energy Corporation Complaint (Entergy Corporation) See "Other Regulation and Litigation" in Item 1 of Part I of Entergy's Form 10-K for information relating to the litigation brought by Panda Energy Corporation (Panda) naming Entergy Corporation, Entergy Enterprises, Entergy Power, Entergy Power Asia, Ltd., and Entergy Power Development Corporation as defendants. Panda was seeking damages of $4.8 billion. Entergy believes that this litigation is unfounded, but entered into arrangements on April 30, 1996, to settle the matter for $350,000. Yet, the settlement provided that it may be revoked by Entergy if the court rules in the case. On the same day, the judge advised that he would grant summary judgment for the defendants, because he does not believe that the plaintiff has sustained any provable damages. Entergy will consider whether to revoke the settlement in this case in light of the judge's determination. Item 4. Submission of Matters to a Vote of Security Holders Amended and Restated Articles of Incorporation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) A consent in lieu of a special meeting of common stockholders was executed on April 22, 1996. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of Entergy Arkansas', Entergy Gulf States', Entergy Louisiana's, Entergy Mississippi's, and Entergy New Orleans' common stock. The common stockholder by such consent, approved the amendment of its Amended and Restated Articles of Incorporation to change the name of Arkansas Power & Light to Entergy Arkansas, Inc., the name of Gulf States Utilities Company to Entergy Gulf States, Inc., the name of Louisiana Power & Light to Entergy Louisiana, Inc., the name of Mississippi Power & Light to Entergy Mississippi, Inc., and the name of New Orleans Public Service, Inc. to Entergy New Orleans, Inc. Item 5. Other Information Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The operating 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: <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> Ratios of Earnings to Fixed Charges Twelve Months Ended December 31, March 31, ------------------------------------------------ --------- 1991 1992 1993 1994 1995 1996 ------ ------ ------ ------ ------ ------ Entergy Arkansas 2.25 2.28 3.11(c) 2.32 2.56 2.70 Entergy Gulf States 1.56 1.72 1.54 .36(d) 1.86 1.11 Entergy Louisiana 2.40 2.79 3.06 2.91 3.18 3.26 Entergy Mississippi 2.36 2.37 3.79(c) 2.12 2.92 3.07 Entergy New Orleans 5.66(b) 2.66 4.68(c) 1.91 3.93 4.18 System Energy 1.74 2.04 1.87 1.23 2.07 2.08 </TABLE> <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C> Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, March 31, ---------------------------------------------------- --------- 1991 1992 1993 1994 1995 1996 ------- ------ ------ ------- ------ ------ Entergy Arkansas 1.87 1.86 2.54(c) 1.97 2.12 2.23 Entergy Gulf States 1.19 1.37 1.21 .29(d) 1.54 0.92(d) (a) Entergy Louisiana 1.95 2.18 2.39 2.43 2.60 2.66 Entergy Mississippi 1.94 1.97 3.08(c) 1.81 2.51 2.64 Entergy New Orleans 4.97(b) 2.36 4.12(c) 1.73 3.56 3.80 </TABLE> (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock. (b) Earnings for the year ended December 31, 1991, include the $90 million effect of the 1991 NOPSI Settlement. (c) Earnings for the year ended December 31, 1993, include $81 million, $52 million, and $18 million for Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans, respectively, related to the change in accounting principle to provide for the accrual of estimated unbilled revenues. (d) Earnings for the year ended December 31, 1994, for Entergy Gulf States were not adequate to cover fixed charges by $144.8 million. Earnings for the years ended December 31, 1994, and March 31, 1996, for Entergy Gulf States were not adequate to cover combined fixed charges and preferred dividends by $197.1 million and $22.0 million, respectively.
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* 3(a) - Amended and Restated Articles of Incorporation of Entergy Arkansas and amendments thereto through April 22, 1996, 3(b) - Restated Articles of Incorporation of Entergy Gulf States and amendments thereto through April 22, 1996. 3(c) - Restated Articles of Incorporation of Entergy Louisiana and amendments thereto through April 22, 1996. 3(d) - Restated Articles of Incorporation of Entergy Mississippi and amendments thereto through April 22, 1996. 3(e) - Restatement of Articles of Incorporation of Entergy New Orleans and amendments thereto through April 22, 1996. ** 4(a) - Amended and Restated Installment Sale Agreement, dated as of February 15, 1996, between System Energy and Claiborne County, Mississippi (filed as Exhibit B-6(a) to Rule 24 Certificate dated March 4, 1996 in File No. 70-8511). ** 4(b) - Sixth Supplemental Indenture, dated as of March 1, 1996, to Entergy New Orleans' Mortgage and Deed of Trust, dated as of May 1, 1987 (filed as Exhibit 4(a) to Form 8-K dated March 22, 1996 in File No. 0-5807). ** 4(c) - Fifty-third Supplemental Indenture, dated as of March 1, 1996, to Entergy Arkansas' Mortgage and Deed of Trust, dated as of October 1, 1944 (filed as Exhibit C- 2 to Form U5S for the year ended December 31, 1995). ** 4(d) - Fifty-first Supplemental Indenture, dated as of March 1, 1996, to Entergy Louisiana's Mortgage and Deed of Trust, dated as of April 1, 1944 (filed as Exhibit A- 2(a) to Rule 24 Certificate dated April 4, 1996 in File No. 70-8487). ** 4(e) - Share Sale Agreement (Revised) of December 12, 1995, relating to acquisition of CitiPower Limited, among State Electricity Commission of Victoria, the State of Victoria, Entergy Victoria LDC, Entergy Victoria Holding LDC and Entergy Corporation (filed as Exhibit C-1(o) to Form U5S for the year ended December 31, 1995 pursuant to Rule 104). ** 4(f) - Multi-Option Syndicated Facility Agreement, dated as of January 5, 1996, among CitiPower Limited as Borrower, Commonwealth Bank of Australia as Facility Agent, Bank of America N.T. & S.A. as Arranger, and Commonwealth Bank of Australia as Security Trustee (filed as Exhibit C-1(p) to Form U5S for the year ended December 31, 1995). ** 4(g) - Undertaking Agreement, dated as of March 7, 1996, of Entergy Corporation to Commonwealth Bank of Australia as Facility-Agent, of CitiPower Limited's obligations up to maximum of $7,367,000 under the Multi-Option Syndicated Facility Agreement (filed as Exhibit C-1(q) to Form U5S for the year ended December 31, 1995). 23(a) - Consent of Clark, Thomas & Winters (A Professional Corporation). 23(b) - Consent of Sandlin Associates. 27(a) - Financial Data Schedule for Entergy Corporation and Subsidiaries as of March 31, 1996. 27(b) - Financial Data Schedule for Entergy Arkansas as of March 31, 1996. 27(c) - Financial Data Schedule for Entergy Gulf States as of March 31, 1996. 27(d) - Financial Data Schedule for Entergy Louisiana as of March 31, 1996. 27(e) - Financial Data Schedule for Entergy Mississippi as of March 31, 1996. 27(f) - Financial Data Schedule for Entergy New Orleans as of March 31, 1996. 27(g) - Financial Data Schedule for System Energy as of March 31, 1996. 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. ** 99(g) - Annual Reports on Form 10-K of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy for the fiscal year ended December 31, 1995, portions of which are incorporated herein by reference as described elsewhere in this document (filed with the SEC in File Nos. 1-11299, 1-10764, 1- 2703, 1-8474, 0-320, 0-5807, and 1-9067, respectively). ** 99(h) - Opinion of Clark, Thomas & Winters, a professional corporation, dated September 30, 1992 regarding the effect of the October 1, 1991 judgment in Entergy Gulf States v. PUCT in the District Court of Travis County, Texas (99-1 in Registration No. 33-48889). ** 99(i) - Opinion of Clark, Thomas & Winters, a professional corporation, dated August 8, 1994 regarding recovery of costs deferred pursuant to PUCT order in Docket 6525 (filed as Exhibit 99(j) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 in File No. 1-2703). 99(j) - Opinion of Clark, Thomas & Winters, a professional corporation, confirming its opinions dated September 30, 1992 and August 8, 1994. ___________________________ * Reference is made to a duplicate list of exhibits being filed as a part of Form 10-Q for the quarter ended March 31, 1996, which list, prepared in accordance with Item 102 of Regulation S-T of the Securities and Exchange Commission, immediately precedes the exhibits being filed with Form 10-Q for the quarter ended March 31, 1996. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy New Orleans A current report on Form 8-K, dated March 20, 1996, was filed with the SEC on March 22, 1996, reporting information under Item 5. "Other Events." Entergy and Entergy Gulf States A current report on Form 8-K, dated March 22, 1996, was filed with the SEC on March 22, 1996, reporting information under Item 5. "Other Events." Entergy and Entergy Gulf States A current report on Form 8-K, dated April 19, 1996, was filed with the SEC on April 22, 1996, reporting information under Item 5. "Other Events." and Item 7. "Financial Statements and Exhibits." Entergy and Entergy Gulf States A current report on Form 8-K, dated April 29, 1996, was filed with the SEC on April 30, 1996, reporting information under Item 5. "Other Events."
EXPERTS The statements attributed to Clark, Thomas & Winters, A Professional Corporation, as to legal conclusions with respect to Entergy Gulf States' rate regulation in Texas in Note 2 to Entergy Corporation and Subsidiaries Consolidated Financial Statements, "Rate and Regulatory Matters," have been reviewed by such firm and are included herein upon the authority of such firm as experts. The statements attributed to Sandlin Associates regarding the analysis of River Bend construction costs of Entergy Gulf States in Note 2 to Entergy Corporation and Subsidiaries Consolidated Financial Statements, "Rate and Regulatory Matters," have been reviewed by such firm and are included herein upon the authority of such firm as experts.
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/ Louis E. Buck, Jr. Louis E. Buck, Jr. Vice President, Chief Accounting Officer and Assistant Secretary (For each Registrant and for each as Principal Accounting Officer) Date: May 6, 1996