_____________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2002
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-27031 ENTERGY GULF STATES, INC. 74-0662730
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
1-8474 ENTERGY LOUISIANA, INC. 72-0245590
(a Louisiana corporation)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 840-2734
0-320 ENTERGY MISSISSIPPI, INC. 64-0205830
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040
(a Louisiana corporation)
1600 Perdido Street, Building 505
New Orleans, Louisiana 70112
Telephone (504) 670-3674
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_____________________________________________________________________
Indicate by check mark whether the registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrants were required to file
such reports), and (2) have been subject to such filing requirements
for the past 90 days.
Yes X No
Common Stock Outstanding Outstanding at July 31, 2002
Entergy Corporation ($0.01 par value) 224,028,796
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf
States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc.,
Entergy New Orleans, Inc., and System Energy Resources, Inc.
separately file this combined Quarterly Report on Form 10-Q.
Information contained herein relating to any individual company is
filed by such company on its own behalf. Each company reports herein
only as to itself and makes no other representations whatsoever as to
any other company. This combined Quarterly Report on Form 10-Q
supplements and updates the Annual Report on Form 10-K for the
calendar year ended December 31, 2001, and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002, filed by the
individual registrants with the SEC, and should be read in
conjunction therewith.
Forward-Looking Information
The following constitutes a "Safe Harbor" statement under the
Private Securities Litigation Reform Act of 1995: Investors are
cautioned that forward-looking statements contained herein with
respect to the revenues, earnings, performance, strategies, prospects
and other aspects of the business of Entergy Corporation, Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc.,
Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System
Energy Resources, Inc. and their affiliated companies may involve
risks and uncertainties. A number of factors could cause actual
results or outcomes to differ materially from those indicated by such
forward-looking statements. These factors include, but are not
limited to, risks and uncertainties relating to: the effects of
weather, the performance of generating units and transmission
systems, the possession of nuclear materials, fuel and purchased
power prices and availability, the effects of regulatory decisions
and changes in law, litigation, capital spending requirements and the
availability of capital, the onset of competition, the ability to
recover net regulatory assets and other potential stranded costs, the
effects of the California electricity market on the utility industry
nationally, advances in technology, changes in accounting standards,
corporate restructuring and changes in capital structure, the success
of new business ventures, changes in the markets for electricity and
other energy-related commodities, including the use of financial and
derivative instruments and volatility of changes in market prices,
changes in the number of participants and the risk profile of such
participants in the energy marketing and trading business, changes in
interest rates and in financial and foreign currency markets
generally, the economic climate and growth in Entergy's service
territories, changes in corporate strategies, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2002
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 4
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 9
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 14
Consolidated Statements of Income 21
Consolidated Statements of Cash Flows 22
Consolidated Balance Sheets 24
Consolidated Statements of Retained Earnings,
Comprehensive Income, and Paid-In Capital 26
Selected Operating Results 27
Entergy Arkansas, Inc.:
Results of Operations 28
Income Statements 32
Statements of Cash Flows 33
Balance Sheets 34
Selected Operating Results 36
Entergy Gulf States, Inc.:
Results of Operations 37
Income Statements 40
Statements of Cash Flows 41
Balance Sheets 42
Selected Operating Results 44
Entergy Louisiana, Inc.:
Results of Operations 45
Income Statements 48
Statements of Cash Flows 49
Balance Sheets 50
Selected Operating Results 52
Entergy Mississippi, Inc.:
Results of Operations 53
Income Statements 56
Statements of Cash Flows 57
Balance Sheets 58
Selected Operating Results 60
Entergy New Orleans, Inc.:
Results of Operations 61
Statements of Operations 64
Statements of Cash Flows 65
Balance Sheets 66
Selected Operating Results 68
System Energy Resources, Inc.:
Results of Operations 69
Income Statements 71
Statements of Cash Flows 73
Balance Sheets 74
Notes to Financial Statements for Entergy Corporation and
Subsidiaries 76
Part II:
Item 1. Legal Proceedings 89
Item 4. Submission of Matters to a Vote of
Security Holders 89
Item 5. Other Information 91
Item 6. Exhibits and Reports on Form 8-K 93
Signature 96
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
ADEQ Arkansas Department of Environmental Quality
AFUDC Allowance for Funds Used During Construction
ALJ Administrative Law Judge
ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam
Electric Generating Station (nuclear)
APSC Arkansas Public Service Commission
BCF/D One billion cubic feet of natural gas per
day
Board Board of Directors of Entergy Corporation
Cajun Cajun Electric Power Cooperative, Inc.
capacity factor The percentage of the period that the plant
generates power calculated by dividing the
output by the capacity and normalizing the
time period
CitiPower CitiPower Pty., an electric distribution
company serving Melbourne, Australia and
surrounding suburbs, which was sold by
Entergy effective December 31, 1998
Council Council of the City of New Orleans,
Louisiana
Damhead Creek 800 MW (gas) combined cycle electric
generating facility that entered commercial
operations in the first quarter of 2001,
located in the United Kingdom, and wholly-
owned by an indirect subsidiary of EPDC
DOE United States Department of Energy
domestic utility
companies Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, collectively
electricity marketed Total physical GWH volumes marketed in the
U.S. during the period
electricity volatility Measure of price fluctuation over time using
standard deviation of daily price
differences for into-Entergy and into-
Cinergy power prices for the upcoming month
EPA United States Environmental Protection
Agency
EPDC Entergy Power Development Corporation, a
wholly-owned subsidiary of Entergy
Corporation
EWO Entergy Wholesale Operations, which consists
primarily of Entergy's power development
business
Entergy Entergy Corporation and its direct and
indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc.
Entergy Gulf States Entergy Gulf States, Inc., including its
wholly owned subsidiaries - Varibus
Corporation, GSG&T, Inc., Prudential Oil &
Gas, Inc., and Southern Gulf Railway Company
Entergy-Koch Entergy-Koch, L.P., a joint venture equally
owned by Entergy and Koch Industries, Inc.
Entergy London Entergy London Investments plc, formerly
Entergy Power UK plc (including its wholly
owned subsidiary, London Electricity plc),
which was sold by Entergy effective December
4, 1998
Entergy Louisiana Entergy Louisiana, Inc.
Entergy Mississippi Entergy Mississippi, Inc.
Entergy New Orleans Entergy New Orleans, Inc.
Entergy Power Entergy Power, Inc.
FERC Federal Energy Regulatory Commission
Fitzpatrick James A. Fitzpatrick nuclear power plant,
825 MW facility located near Oswego, New
York, purchased in November 2000 from NYPA
by Entergy's domestic non-utility nuclear
business
Abbreviation or Acronym Term
Form 10-K The combined Annual Report on Form 10-K for
the year ended December 31, 2001 of Entergy,
Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy
gain/loss days Ratio of the number of days when Entergy-
Koch recognized a net gain from commodity
trading activities to the number of days
when Entergy-Koch recognized a net loss from
commodity trading activities
gas marketed Total volume of physical gas purchased plus
volume of physical gas sold by Entergy-Koch
in the U.S. denominated in billions of cubic
feet per day
gas volatility Measure of price fluctuation over time using
standard deviation of daily price
differences for Henry Hub natural gas prices
for the upcoming month
Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear
Generation Plant
GGART Grand Gulf Accelerated Recovery Tariff
GWH Gigawatt hour(s), which equals one million
kilowatt-hours
Indian Point 2 Indian Point Energy Center Unit 2 - nuclear
power plant, 970 MW facility located in
Westchester County, New York, purchased in
September 2001 from Consolidated Edison by
Entergy's domestic non-utility nuclear
business
Indian Point 3 Indian Point Energy Center Unit 3 - nuclear
power plant, 980 MW facility located in
Westchester County, New York, purchased in
November 2000 from NYPA by Entergy's
domestic non-utility nuclear business
KWH kilowatt-hour(s)
LDEQ Louisiana Department of Environmental
Quality
LPSC Louisiana Public Service Commission
miles of pipeline Total miles of transmission and gathering
pipeline
MMBTU One million British Thermal Units
MPSC Mississippi Public Service Commission
MW Megawatt(s), which equals one thousand
kilowatt(s)
Net MW in operation Installed capacity owned or operated
Net revenue Operating revenue net of fuel, fuel-related,
and purchased power expenses; other
regulatory credits; and amortization of rate
deferrals
NRC Nuclear Regulatory Commission
NYPA New York Power Authority
production cost Cost in $/MMBTU associated with delivering
gas, excluding the cost of the gas
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935,
as amended
RTO Regional transmission organization
River Bend River Bend Steam Electric Generating Station
(nuclear)
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
as promulgated by the Financial Accounting
Standards Board
spark spread The dollar difference between electricity
prices per unit and natural gas prices after
assuming a conversion ratio for the number
of natural gas units necessary to generate
one unit of electricity
storage capacity Working gas storage capacity
System Agreement Agreement, effective January 1, 1983, as
modified, among the domestic utility
companies relating to the sharing of
generating capacity and other power
resources
System Energy System Energy Resources, Inc.
System Fuels System Fuels, Inc.
Abbreviation or Acronym Term
throughput Gas in BCF/D transported by the pipeline
during the period
Unit Power Sales
Agreement Agreement, dated as of June 10, 1982, as
amended and approved by FERC, among Entergy
Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System
Energy, relating to the sale of capacity and
energy from System Energy's share of Grand
Gulf 1
Vermont Yankee Vermont Yankee nuclear power plant, 510 MW
facility located in Vernon, Vermont,
purchased in July 2002 from Vermont Yankee
Nuclear Power Corporation by Entergy's
domestic non-utility nuclear business
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for
discussions of Entergy's three business segments; its critical
accounting policies; the status of the transition to retail
competition in the domestic utility segment and the continued
application of SFAS 71 to that business; state, local, and federal
regulatory proceedings that could affect the domestic utility
segment; the market risks that each of Entergy's business segments
are exposed to; and other significant issues affecting Entergy. Set
forth below are updates to the significant factors and known trends
discussed in the Form 10-K.
Entergy Wholesale Operations
In the first six months of 2002, Entergy recorded charges of
$419.5 million to operating expenses ($271.5 million net of tax),
including $18.1 million ($10.6 million net of tax) in the second
quarter, in the energy commodity services segment to reflect the
effect of Entergy's decision to discontinue additional EWO greenfield
power plant development and to reflect asset impairments resulting
from the deteriorating economics of wholesale power markets in the
United States and the United Kingdom. The charges consist of the
following:
o as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
- LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power
development business obtained contracts in October 1999 to acquire 36
turbines from General Electric. Entergy's rights and obligations
under the contracts for 22 of the turbines were sold to an
independent special-purpose entity in May 2001. $180.2 million of
the charges is a provision for the net costs resulting from
cancellation or sale of the turbines subject to purchase commitments
with the special-purpose entity;
o $167.5 million of the charges results from the write-off of
EPDC's equity investment in the Damhead Creek project and the
impairment of the values of its Warren Power power plant and its
Crete and RS Cogen projects. This portion of the charges reflects
Entergy's estimate of the effects of reduced spark spreads in the
United States and the United Kingdom;
o $39.1 million of the charges relates to the restructuring of
EWO, which is comprised of $22.5 million of impairments of EWO
administrative fixed assets, $10.7 million of estimated sublease
losses, and $5.9 million of employee-related costs. Management
expects the restructuring of EWO to be substantially complete by the
end of 2002; and
o $32.7 million of the charges results from the write-off of
capitalized project development costs for projects that will not be
completed.
Entergy does not expect further adjustments to these charges in the
future, other than those that could result from changes in asset
values due to dispositions or changes in market conditions, and
potential benefits from the sale of three turbines currently under
option to a third party.
Also, in the first quarter of 2002, EWO sold its interests in
projects in Argentina, Chile, and Peru for net proceeds of $135.5
million. The proceeds include notes receivable totaling $86 million,
on which EWO received $46 million of payments in the second quarter.
The remaining balance is due in the third quarter 2003. After
impairment provisions recorded for these interests in 2001, the net
loss realized on the sale is insignificant.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
After the decision to discontinue additional greenfield
development and the sale of the Latin American investments, EWO
continues to operate or construct the following power plants:
Investment Capacity (MW) Percent Ownership Status
United Kingdom - Damhead Creek 800 100% operational
(see Note*)
U.S. (AR)- Ritchie Unit 2 544 100% operational
U.S. (AR)- Independence Unit 2 842 14% operational
U.S. (MS)- Warren Power 300 100% operational
U.S. (IA)- Top of Iowa Wind Farm 80 99% operational
U.S. (IL)- Crete 320 50% operational
U.S. (LA)- RS Cogen 425 50% under construction
U.S. (TX)- Harrison County 550 70% under construction
Note*- As discussed above, EPDC has written off its equity investment
in Damhead Creek. The credit facility financing Damhead Creek is non-
recourse to Entergy, and there is no requirement for Entergy or EPDC
to make additional capital contributions or provide credit support to
Damhead Creek. Therefore, consistent with Entergy's decisions
concerning EWO's business and because Entergy no longer has equity at
risk in the Damhead Creek investment, Entergy earnings are no longer
affected by Damhead Creek since the end of March 2002. However,
Damhead Creek revenues and expenses continue to be included in the
accompanying results of operations. Accordingly, commodity price
risk disclosures in this section have been revised to eliminate
Damhead Creek amounts on a forward-looking basis.
Domestic Utility Transition to Competition
Texas
As discussed in the Form 10-K, a PUCT-approved settlement
delayed the implementation of retail open access in Entergy Gulf
States' Texas service territory until at least September 15, 2002.
Management now estimates that the SeTrans RTO will not be operational
prior to January 2004. Therefore, retail open access in Entergy Gulf
States' Texas service territory within the context of a functional
FERC-approved RTO is not likely to begin before January 2004. Given
the delay in retail open access in its Texas service territory,
Entergy Gulf States cannot predict what, if any, additional changes
to previously approved plans may be required by the PUCT or the LPSC.
State and Local Rate Regulation
Entergy New Orleans
In May 2002, Entergy New Orleans filed a cost of service study
and revenue requirement filing with the Council. Using 2001 as the
test year, the filing indicated that a revenue deficiency exists and
that a $28.9 million electric rate increase and a $15.3 million gas
rate increase are appropriate. The Council has not established a
procedural schedule. As discussed in the Form 10-K, and as shown in
Item 5 of this Form 10-Q, Entergy New Orleans' earnings for the year
ended December 31, 2001 and for the twelve months ended June 30, 2002
were not adequate to cover its fixed charges. Under its mortgage
covenants, Entergy New Orleans does not currently have the capacity
to issue new debt. Since the settlement of Entergy New Orleans' last
rate proceeding, which was approved by the Council in 1998, its fixed
charge coverage has declined and its debt ratio has increased. While
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Entergy New Orleans has made investments and incurred expenses
necessary to improve customer service since the last rate proceeding,
its base revenues have not increased. Absent constructive
rate-making in the pending proceeding, it is likely that the cost of
and access to the capital necessary to finance Entergy New Orleans'
current level of service will be adversely affected.
Entergy Arkansas
In May 2002, the APSC approved the March 2002 settlement
agreement submitted by Entergy Arkansas, the APSC Staff, and the
Arkansas attorney general. The APSC also approved in June 2002 a
contribution by Entergy Arkansas of $5.9 million to the transition
cost account (TCA) as a result of the 2001 earnings evaluation report
filing. The settlement agreement allowed Entergy Arkansas to offset
ice storm recovery costs with the balance in the TCA on a rate class
basis. Entergy Arkansas recorded a regulatory asset of $15.8 million
due to ice storm costs exceeding the available TCA funds.
Entergy Gulf States
In May 2001, Entergy Gulf States filed its eighth required post-
merger earnings review with the LPSC. This filing is subject to
review by the LPSC and may result in a change in rates. In April
2002, the LPSC staff filed testimony recommending a $16.5 million
rate refund and a $40.1 million prospective rate reduction. The
prospective reduction includes a recommended reduction in the rate of
return on common equity (ROE) that would not take effect until the
later of June 2003 or the date of the LPSC's order. Hearings were
held in April 2002 and will continue in August 2002.
In May 2002, Entergy Gulf States filed its ninth and last
required post-merger earnings analysis with the LPSC. The filing was
based on the 2001 test year and resulted in a rate decrease of $11.5
million, which was implemented effective June 2002. This filing is
subject to review by the LPSC and may result in additional or
different changes in rates than those sought in the filing. No
procedural schedule has been adopted.
Negotiations with the LPSC staff for a statewide formula rate
plan in Louisiana are ongoing.
Entergy Louisiana
In July 2002, the LPSC approved a settlement between Entergy
Louisiana and the LPSC Staff that resolves all remaining issues in
the 2000 and 2001 formula rate plan proceedings. Entergy Louisiana
agreed to a $5 million annual rate reduction effective August 2001.
The prospective rate reduction will be implemented beginning in
August 2002 and the refund for the retroactive period will occur in
September 2002. As part of the settlement, Entergy Louisiana's
rates, including its previously authorized ROE of 10.5%, will remain
in effect until changed pursuant to a new formula rate plan or a
revenue requirement analysis to be filed by June 30, 2003.
Negotiations with the LPSC staff for a statewide formula rate
plan in Louisiana are ongoing.
Market Risks Disclosure
Following are sections from the "Market Risks Disclosure" in the
Form 10-K that have significant updates as of June 30, 2002.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Commodity Price Risk
Power Generation
As discussed in the Form 10-K, energy commodity services enters
into forward power sale agreements to hedge its exposure to market
price fluctuations. The following represents the percentage of
planned electricity output sold forward under physical or financial
contracts for energy commodity services' generation facilities
updated as of June 30, 2002:
2002 2003
% sold % sold
Planned GWH forward Planned GWH forward
1,237 46% 2,966 20%
Marketing and Trading
As discussed in the Form 10-K, Entergy-Koch Trading (EKT) and
Entergy use value-at-risk (VAR) models as one measure of a potential
loss in fair value for EKT's natural gas and power trading portfolio
and energy commodity services' mark-to-market portfolio. EKT's daily
VAR for its trading portfolio at June 30, 2002 and March 31, 2002 was
$13.6 million and $9.5 million, respectively, with a daily average of
$10.0 million for the second quarter of 2002 and $7.7 million for the
first quarter of 2002. Energy commodity services' consolidated
subsidiaries' VAR for mark-to-market derivative instruments was
approximately $0.8 million and $4.5 million as of June 30, 2002 and
March 31, 2002, respectively.
Mark-to-market Accounting
As discussed in the Form 10-K, Entergy and Entergy-Koch mark-to-
market commodity instruments held by them for trading and risk
management purposes that are considered derivatives under SFAS 133 or
energy trading contracts under EITF 98-10. Following are the net
mark-to-market assets (liabilities) and the period within which the
assets (liabilities) would be realized in cash if they are held to
maturity and market prices do not change:
Net mark-to-
market asset
(liability) at
June 30, 2002 Cumulative cash realization period
2002 2003 2004-2005
Entergy consolidated subsidiaries ($8) million 84% 35% 100%
Entergy-Koch $118 million 31% 73% 100%
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Foreign Currency Exchange Rate Risk
As discussed in the Form 10-K, Entergy Gulf States, System
Fuels, and Entergy's domestic non-utility nuclear business enter into
foreign currency forward contracts to hedge the Euro-denominated
payments due under certain purchase contracts. As of June 30, 2002,
the total notional amount of the foreign currency forward contracts
is 268.9 million Euro and the forward currency rates range from .8624
to .9904 (the weighted average of the rates is .8784). The
maturities of these forward contracts depend on the purchase contract
payment dates and range in time from July 2002 to May 2005. The mark-
to-market valuation of the forward contracts at June 30, 2002 was a
net asset of $27.5 million. The counterparty banks obligated on
252.4 million Euro of the notional amount of these agreements are
rated by Standard and Poor's Rating Services at AA on their senior
debt obligations as of June 30, 2002. The counterparty bank
obligated on 16.5 million Euro of the notional amount of these
agreements, which are Entergy Gulf States contracts, are rated by
Standard and Poor's Rating Services at A+ on their senior debt
obligations as of June 30, 2002.
For the Entergy Gulf States contracts, the total notional amount
of the foreign currency forward contracts are 33.7 million Euro and
the forward currency rates range from .8742 to .9831 (the weighted
average of the rates is .8772). The maturities of the Entergy Gulf
States forward contracts depend on the purchase contract payment
dates and range in time from January 2003 to July 2004. The mark-to-
market valuation of the forward contracts at June 30, 2002 was a net
asset of $3.5 million.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Operations
Net cash flow provided by (used in) operating activities for
Entergy, the domestic utility companies, and System Energy for the
six months ended June 30, 2002 and 2001 was as follows:
Company 2002 2001
(In Millions)
Entergy $803.0 $600.7
Entergy Arkansas $133.8 $160.5
Entergy Gulf States $242.8 $184.9
Entergy Louisiana $190.6 $195.2
Entergy Mississippi $59.2 ($8.4)
Entergy New Orleans ($15.0) ($1.8)
System Energy $121.6 $95.5
Entergy's consolidated net cash flow provided by operating
activities increased for the six months ended June 30, 2002 compared
to the six months ended June 30, 2001 primarily due to:
o an $85 million increase in operating cash flow provided by
domestic utility primarily resulting from an increase in fuel-related
accounts payable in 2002 due to larger payments on these payables in
2001; and
o an $89 million increase in operating cash flow provided by
domestic non-utility nuclear, primarily due to nuclear refueling
outages at Pilgrim and Indian Point 3 in 2001 combined with increased
net income in 2002 primarily resulting from the operation of Indian
Point 2.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY
AND CAPITAL RESOURCES" in the Form 10-K for discussion of a change in
a method of accounting for tax purposes made by Entergy Louisiana in
2001. The new tax accounting method is now expected to provide a
cumulative cash flow benefit of approximately $700 million - $800
million through 2004, which is expected to reverse in the years 2005
through 2031. The timing of the reversal of this benefit depends on
several variables, including the price of power. Approximately half
of the consolidated cash flow benefit for Entergy Corporation
occurred in 2001 and the remainder will occur in 2002. In accordance
with Entergy's intercompany tax allocation agreement, most of the
cash flow benefit for Entergy Louisiana will occur in 2002. While
Entergy believes it is entitled to make this change in its method of
accounting for tax purposes, Entergy recognizes that it is a case of
first impression and may be subject to an Internal Revenue Service
audit.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Money pool activity also affected the operating cash flows of
the domestic utility companies and System Energy. The money pool is
an inter-company funding arrangement designed to reduce the domestic
utility companies' and System Energy's dependence on external short-
term borrowings. The money pool provides a means by which, on a
daily basis, the excess funds of Entergy Corporation, the domestic
utility companies, and System Energy may be used by the domestic
utility companies or System Energy to fulfill short-term cash
requirements. The following table shows the domestic utility
companies and System Energy's receivables from and (payables) to the
money pool as of the indicated date. An increase in a company's
(payable) to the money pool increases the operating cash flow of that
company. An increase in a company's receivable from the money pool
decreases the operating cash flow of that company.
June 30, December 31, June 30, December 31,
Company 2002 2001 2001 2000
(In Millions)
Entergy Arkansas $25.1 $23.8 ($165.4) ($30.7)
Entergy Gulf States ($7.9) $27.7 ($26.6) $23.4
Entergy Louisiana ($84.5) $3.8 $72.0 $22.9
Entergy Mississippi ($3.8) $11.5 ($34.1) ($33.3)
Entergy New Orleans ($5.3) $9.2 ($16.9) ($5.7)
System Energy $62.8 $13.9 $256.7 $155.3
See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND
CAPITAL RESOURCES - Capital Resources - Sources of Capital" in the
Form 10-K for a discussion of the limitations on these borrowings.
Investing Activities
Net cash used in investing activities decreased for the six
months ended June 30, 2002 compared to the six months ended June 30,
2001 primarily due to:
o cash contributions of approximately $414 million made in 2001 in
the formation of Entergy-Koch;
o cash of $272 million invested in 2001 to provide collateral for
the NYPA line of credit in conjunction with the acquisition of the
FitzPatrick and Indian Point 3 nuclear power plants; and
o the maturity in 2002 of $150 million of other temporary
investments.
Partially offsetting the decrease in net cash used in investing
activities was an increase of $153 million in construction
expenditures for the six months ended June 30, 2002 compared to the
same period in 2001 primarily related to turbine purchases for EWO's
Harrison County project, as discussed below.
Financing Activities
Net cash used in financing activities increased for the six
months ended June 30, 2002 compared to the six months ended June 30,
2001 primarily due to:
o net retirements of long-term debt by the domestic utility
segment of $403 million in 2002, compared to net issuances of long-
term debt of $48 million in 2001; and
o the retirement of $268 million of long-term debt by EWO in April
2002 related to the purchase of the rights to the turbines discussed
below.
Partially offsetting the increase in net cash used in financing
activities was an increase in the amount of draws made on short-term
credit facilities by Entergy Corporation in 2002.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
See MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES - Capital Resources" in the Form 10-K for a discussion of
Entergy's uses and sources of capital. The following are updates to
the Form 10-K.
Uses of Capital
Capital Expenditures
See "ANO Matters" in Part I of the Form 10-K for discussion of
the ANO 1 steam generators and reactor vessel closure head. On July
25, 2002, the Board authorized Entergy Arkansas and Entergy
Operations to replace the ANO 1 steam generators and reactor vessel
closure head. Entergy management estimates the cost of the
fabrication and replacement to be approximately $235 million, of
which approximately $135 million will be incurred through 2004.
Management expects a contractor for the installation of the
replacement steam generators and reactor vessel closure head to be
selected by December 2002. Management expects that the replacement
will occur during a planned refueling outage in 2005.
Entergy's current capital investment plan through 2004 includes
$2.9 billion in spending by the domestic utility for maintenance
capital; $0.4 billion in spending by energy commodity services
comprised of $0.1 billion for after-tax turbine contract cancellation
costs and $0.3 billion for previous investment commitments; and $0.7
billion in spending by the domestic non-utility nuclear business
comprised of $0.5 billion for maintenance capital and $0.2 billion
for the purchase of Vermont Yankee (discussed below). These amounts
reflect the approval by the Board of the ANO 1 steam generator
replacement project and the decision announced during 2002 to end new
greenfield development by EWO. In addition to these amounts, Entergy
estimates that an additional $2.8 billion will be available for other
investments which have not yet been identified. This amount is based
upon Entergy's current estimate of operating cash flows and dividends
over the period from 2002 through 2004, and includes approximately
$1.4 billion of additional debt which Entergy believes it can issue
and still maintain its targeted 50% net debt to net capital ratio.
Entergy Wholesale Operations
As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power
development business obtained contracts in October 1999 to acquire 36
turbines from General Electric Company. The rights and obligations
under the contracts for 22 of the turbines were sold to an
independent special-purpose entity in May 2001. In conjunction with
Entergy's obligations related to this sale, Entergy retained certain
rights to reacquire turbines or to cancel the construction of the
turbines. In April 2002, Entergy paid a total of $351 million to
reacquire the rights to the turbines. $83 million of the payments
were for the turbines to be placed in the Harrison County project,
which is in construction and scheduled to be completed in 2003.
Entergy subsequently received a reimbursement from General Electric
of $28 million of prior payments. With the reacquisition of the
rights to the turbines, EWO's obligations to the special-purpose
entity and Entergy Corporation's guarantee of up to $309 million in
support of those obligations were terminated.
EWO placed 17 of the original 36 turbines at sites that are
either operating, under construction, or sold. Of the remaining 19
turbines, four were sold to a third party, three were optioned to
another third party, and 12 were cancelled. As discussed in
"MANAGEMENT'S DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN
TRENDS," Entergy recorded a $180.2 million provision in the first six
months of 2002 for the net costs resulting from cancellation or sale
of the turbines that were subject to purchase commitments with the
special-purpose entity.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Share Repurchases
In accordance with its stock option plans, Entergy periodically
grants stock options to its employees, which may be exercised to
obtain shares of Entergy common stock. In order to reduce the
increase in outstanding common shares caused by option exercises,
Entergy plans to purchase up to 10 million shares of its common stock
through mid-2004 on a discretionary basis through open market
purchases or privately negotiated transactions. As of July 31, 2002,
Entergy has repurchased 663,100 shares of common stock pursuant to
this plan for a total purchase price of $27.8 million.
Vermont Yankee
In July 2002, Entergy's domestic non-utility nuclear business
purchased the 510 MW Vermont Yankee nuclear power plant located in
Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation for
$180 million. Entergy received the plant, nuclear fuel, inventories,
and related real estate. The liability to decommission the plant, as
well as related decommissioning trust funds of approximately $310
million, were also transferred to Entergy. The acquisition included
a 10-year power purchase agreement (PPA) under which the former
owners will buy the power produced by the plant.
Damhead Creek Credit Facility
As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO increased its
borrowings under the Damhead Creek credit facility in 2000 by
approximately $164 million to finance construction of the plant.
Damhead Creek commenced commercial operation in 2001. The Damhead
Creek credit facility requires that the annual debt service coverage
ratio be at least 1.05 to 1 for the previous 12 months at semi-annual
dates commencing with June 30, 2002. Given the low electricity
prices currently affecting the UK market, Damhead Creek would not
have met the annual debt service coverage ratio test in respect of
the 12 months ended June 30, 2002, but the lenders amended the
facility so that the coverage ratio calculations would not commence
until December 31, 2002. Damhead Creek is currently in negotiations
with the lenders to develop and implement a debt restructuring for
the project prior to December 2002. If a debt restructuring agreement
cannot be reached, however, Damhead Creek will likely not meet the
debt service coverage ratio provisions of the credit facility on
December 31, 2002. In the event the annual debt service coverage
ratio is deficient at December 31, 2002, Damhead Creek will seek a
waiver of the default from the lenders. There is no requirement for
Entergy or EPDC to make capital contributions or provide credit
support to Damhead Creek following the occurrence of an event of
default.
Sources of Capital
Entergy Corporation renewed its 364-day credit facility on May
16, 2002 and increased the available capacity from $1.325 billion to
$1.425 billion. On July 15, 2002, the available capacity was
increased to $1.450 billion. Entergy Arkansas and Entergy
Mississippi each renewed their respective 364-day credit facilities
on May 31, 2002. Amounts drawn on short-term credit facilities are
as follows:
Expiration Amount of Amount Drawn as of
Company Date Facility June 30, 2002
Entergy Corporation May 2003 $1.450 billion $645 million
Entergy Arkansas May 2003 $63 million -
Entergy Louisiana January 2003 $15 million $15 million
Entergy Mississippi May 2003 $25 million $25 million
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy Corporation has used borrowings from its credit facility for
general corporate purposes and to make additional investments in
competitive businesses.
The domestic utility companies and System Energy have
approximately $990 million of currently maturing long-term debt that
matures primarily in the first half of 2003. It is expected that the
majority of these amounts will be refinanced prior to or at maturity.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Entergy's consolidated earnings applicable to common stock were
$241.7 million and $162.7 million for the three and six months ended
June 30, 2002, respectively, compared to $238.9 million and $393.1
million for the three and six months ended June 30, 2001,
respectively. The changes in earnings (loss) applicable to common
stock by operating segments for the three and six months ended June
30, 2002 compared to the three and six months ended June 30, 2001
were as follows:
Three Months Ended Six Months Ended
Operating Segments Increase/(Decrease) Increase/(Decrease)
(In Thousands)
Domestic Utility $26,372 $14,954
Domestic Non-Utility Nuclear 20,430 29,112
Energy Commodity Services (31,867) (265,338)
Other, including parent company (12,188) (9,060)
------- ---------
Total $2,747 ($230,332)
======= =========
Entergy's income before taxes is discussed below according to
the operating segments listed above. See Note 6 to the financial
statements for further discussion of Entergy's operating segments and
their financial results for the three and six months ended June 30,
2002 and 2001.
Refer to "SELECTED OPERATING RESULTS OF ENTERGY CORPORATION AND
SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY GULF STATES, INC.,
ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC., AND ENTERGY NEW
ORLEANS, INC." which follow each company's financial statements in
this report for further information with respect to operating
statistics.
Domestic Utility
The increase in earnings for domestic utility for the three
months ended June 30, 2002 compared with the same period in 2001 was
primarily due to more favorable sales volume and weather, increased
unbilled revenues, and decreased interest expense. The increase in
earnings was partially offset by increased other operation and
maintenance expenses.
The increase in earnings for domestic utility for the six months
ended June 30, 2002 compared with the same period in 2001 was
primarily due to increased unbilled revenues and decreased interest
expense. The increase in earnings was partially offset by increased
other operation and maintenance expenses and decreased other income.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues
The changes in electric operating revenues for domestic utility
for the three and six months ended June 30, 2002 compared to the
three and six months ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($12.7) ($8.0)
Rate riders (11.4) (26.5)
Fuel cost recovery (348.0) (814.7)
Sales volume/weather 23.2 1.5
Unbilled revenue 46.2 103.9
Other revenue 8.1 30.4
Sales for resale (9.5) (62.2)
------- -------
Total ($304.1) ($775.6)
======= =======
Fuel cost recovery
The domestic utility companies are allowed to recover certain
fuel and purchased power costs through fuel mechanisms included in
electric rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy's financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues decreased for the three and six
months ended June 30, 2002 as a result of decreased recovery, through
various fuel recovery mechanisms, of lower fuel and purchased power
expenses primarily due to decreases in the market price of natural
gas and purchased power. Also contributing to the decreases were a
decrease in the fixed fuel factor in March 2002 and the termination
of a fuel recovery surcharge in February 2002 in the Texas
jurisdiction of Entergy Gulf States.
Corresponding to the decreases in fuel cost recovery revenues,
fuel and purchased power expenses related to electric sales decreased
by $344.7 million and $821.5 million for the three and six months
ended June 30, 2002, respectively, primarily due to decreases in the
market price of natural gas and purchased power in 2002.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Higher electric sales volume increased revenues for the three
months ended June 30, 2002 due to increased usage of 483 GWH in the
residential and commercial sectors, after adjusting for the weather
effect. Partially offsetting this increase was a decrease in usage
of 416 GWH in the industrial sector primarily from contractual
modifications that reclassified the sales associated with certain
Entergy Gulf States customers from retail to wholesale. The effect
of favorable weather in the second quarter of 2002 compared to the
second quarter of 2001 increased electric sales volume by 190 GWH in
the residential and commercial sectors. The number of customers in
the domestic utility companies' service territories increased only
slightly during these periods.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the three months ended June
30, 2002 and 2001 includes the reversal of the estimates for March
2002 and March 2001, respectively. The increase for the three months
ended June 30, 2002 compared to the three months ended June 30, 2001
is due to the effect on the June 2001 unbilled calculation of higher
unbilled revenue in March 2001 caused by higher fuel rates.
Unbilled revenue for the six months ended June 30, 2002 and 2001
includes the reversal of the estimates for December 2001 and December
2000, respectively. The increase for the six months ended June 30,
2002 compared to the six months ended June 30, 2001 is due to the
effect on the June 2001 unbilled calculation of higher unbilled
revenue in December 2000 caused by higher fuel rates and
volume/weather.
Sales for resale
Sales for resale decreased for the six months ended June 30,
2002 primarily due to a decrease in the average price of energy sold
to wholesale customers coupled with a decrease in sales volume to
municipal and co-operative customers. The decrease is partially
offset by the contractual modifications that resulted in the
reclassified Entergy Gulf States sales noted above in sales
volume/weather.
Gas operating revenues
Natural gas revenues decreased $69.6 million for the six months
ended June 30, 2002 primarily due to a decrease in the market price
of natural gas.
Other effects on results of operations
Results for the three and six months ended June 30, 2002 for
domestic utility were also affected by the following:
o increases in other operation and maintenance expenses of $203.7
million for the three months ended and $239.4 million for the six
months ended primarily due to increased expenses at Entergy Arkansas.
Entergy Arkansas had increased expenses of $157.1 million for the
three months ended and $159.9 million for the six months ended due to
the March 2002 Settlement Agreement and 2001 earnings review that
became final in the second quarter of 2002, allowing Entergy Arkansas
to recover a large majority of 2000 and 2001 ice storm repair
expenses through previously-collected TCA amounts. Entergy Arkansas
also had increased expenses of $24.5 million due to the reversal
in 2001 of ice storm costs previously charged to expense in December
2000. These increases are partially offset by the increased other
regulatory credits discussed below;
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
o increases in other regulatory credits of $183.7 million for the
three months ended and $181.8 million for the six months ended
primarily due to the March 2002 Settlement Agreement allowing Entergy
Arkansas to recover a large majority of 2000 and 2001 ice storm
repair expenses through the previously-collected TCA amounts;
o decreases in interest expense of $21.9 million for the three
months ended and $43.2 million for the six months ended, which are
explained below;
o increases in depreciation and amortization expense of $18.7
million for the three months ended and $18.2 million for the six
months ended, which are primarily due to revisions made to the useful
lives of certain intangible plant assets to more appropriately
reflect their actual lives which lowered expense in 2001 in
accordance with regulatory treatment; and
o a decrease in interest income of $24.0 million for the six
months ended primarily due to lower interest earned on declining
deferred fuel balances.
The March 2002 Settlement Agreement is discussed further in Note 2 to
the financial statements.
The decreases in interest expense for the three and six months
ended June 30, 2002 are primarily due to the following:
o decreases of $16.7 million for the three months ended and $29.4
million for the six months ended in interest on long-term debt
primarily due to the retirement of long-term debt in late 2001 and
early 2002; and
o decreases of $5.2 million for the three months ended and $13.8
million for the six months ended in other interest expense primarily
due to interest recorded on System Energy's reserve for rate refund
in 2001. The refund was made in December 2001.
Domestic Non-Utility Nuclear
The increases in earnings for the three and six months ended
June 30, 2002 compared to the same periods in 2001 for domestic non-
utility nuclear were primarily due to the operation of Indian Point
2, which was purchased in September 2001, combined with improved
operational performance by the nuclear fleet. Following are key
performance measures for domestic non-utility nuclear during the
three and six months ended June 30, 2002 and 2001:
Three Months Ended Six Months Ended
2002 2001 2002 2001
Net MW in operation at June 30 3,445 2,475 3,445 2,475
Generation in GWH for the period 7,449 4,208 14,958 9,467
Capacity factor for the period 98.5% 77.8% 99.4% 88.0%
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following fluctuations in the results of operations for
domestic non-utility nuclear for the three months ended June 30, 2002
were primarily caused by the acquisition of Indian Point 2 and the
increase in capacity factors shown above:
o operating revenues increased $147.0 million to $297.1 million;
o fuel expenses increased $13.5 million to $27.2 million;
o nuclear refueling outage expenses increased $4.8 million to $9.9
million;
o other operation and maintenance expenses increased $79.8 million
to $143.4 million;
o taxes other than income taxes increased $3.0 million to $6.7
million; and
o depreciation and amortization expenses increased $6.3 million to
$8.9 million.
The following fluctuations in the results of operations for domestic
non-utility nuclear for the six months ended June 30, 2002 were
primarily caused by the acquisition of Indian Point 2 and the
increase in capacity factors shown above:
o operating revenues increased $246.6 million to $576.0 million;
o fuel expenses increased $23.5 million to $53.6 million;
o nuclear refueling outage expenses increased $14.4 million to
$19.5 million;
o other operation and maintenance expenses increased $130.2
million to $284.1 million;
o taxes other than income taxes increased $8.9 million to $23.1
million; and
o depreciation and amortization expenses increased $11.9 million
to $17.0 million.
Energy Commodity Services
The decreases in earnings for energy commodity services for the
three and six months ended June 30, 2002 were primarily due to the
charges, discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS - Entergy Wholesale Operations,"
to reflect the impairment of certain assets, including impairments
related to EWO's turbine acquisition plans, and to reflect the change
in EWO's development plans. $401.4 million ($260.9 million net of
tax) was recorded in the first quarter of 2002, and an additional
$18.1 million ($10.6 million net of tax) was recorded in the second
quarter of 2002. The second quarter amount includes an offsetting
net of tax benefit of $18.5 million related to the sale of four
turbines to a third party. The pre-tax charges are reflected in
operation and maintenance expenses in the Consolidated Statement of
Operations.
Revenues decreased for energy commodity services by $235.0
million and $587.1 million for the three and six months ended June
30, 2002, respectively, primarily due to decreases of $159.8 million
and $367.9 million for the three and six months ended June 30, 2002,
respectively, resulting from the sale of EWO's interest in Highland
Energy in the fourth quarter of 2001 combined with decreases of $60.0
million and $136.3 million for the three and six months ended June
30, 2002, respectively, resulting from the sale of EWO's interest in
the Saltend plant in August 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Also contributing to the decreases in revenues for energy
commodity services was the contribution of substantially all of
Entergy's power marketing and trading business to Entergy-Koch in
February 2001. Earnings from Entergy-Koch are reported as equity in
earnings of unconsolidated equity affiliates in the financial
statements. As a result, for the six months ended June 30, 2002,
revenues from this activity were lower by $134.9 million compared to
the same period in 2001 and purchased power expenses were lower by
$130.6 million. The net income effect of the lower revenue for the
six months ended June 30, 2002 was offset by the equity in earnings
from Entergy's interest in Entergy-Koch. The equity in earnings from
Entergy's interest in Entergy-Koch was $55.1 million lower for the
three months ended June 30, 2002 compared to the three months ended
June 30, 2001 primarily due to lower earnings from the trading
business. Entergy-Koch Trading had lower trading earnings due to
lower volatility in the power market and lower profitability on gas
trading in the second quarter of 2002 compared to the second quarter
of 2001. Following are key performance measures for Entergy-Koch's
operations for the quarter and year-to-date period ended June 30,
2002 and 2001:
Second Quarter Year-To-Date
2002 2001 2002 2001
Entergy-Koch Trading
Gas volatility 53% 52% 67% 71%
Electricity volatility 44% 78% 45% 76%
Gas marketed (BCF/D) 4.8 6.8 5.1 7.0
Electricity marketed (GWH) 26,877 26,386 66,705 57,395
Gain/loss days 1.7 4.3 1.9 2.9
Gulf South Pipeline
Throughput (BCF/D) 2.31 2.26 2.50 2.36
Production cost ($/MMBTU) $0.096 $0.095 $0.084 $0.093
As discussed in the Form 10-K, the partnership agreement allocates
profits on a disproportionate basis. Substantially all of Entergy-
Koch's profits were allocated to Entergy for the three and six months
ended June 30, 2002.
Also partially offsetting the decrease in earnings for energy
commodity services for the six months ended June 30, 2002 was a net
increase in earnings of $7.3 million ($5.0 million net of tax)
related to the mark-to-market of the Damhead Creek power and gas
contracts in the first quarter of 2002.
Other, including parent company
Earnings for Other, including the parent company, decreased for
the three months ended June 30, 2002 primarily due to lower interest
income in 2002 resulting from lower yields on invested cash. The
reclassification to the energy commodity services segment for
internal reporting purposes of $12.5 million of the 2001 write-down
of investments in Latin American projects also contributed to the
decrease. The decrease was partially offset by an increase in
earnings related to the cessation of amortization of goodwill in
January 2002 upon implementation of SFAS 142.
Earnings for Other, including the parent company, decreased for
the six months ended June 30, 2002 primarily due to lower interest
income in 2002 resulting from lower yields on invested cash,
partially offset by an increase in earnings related to the cessation
of amortization of goodwill in January 2002 upon implementation of
SFAS 142.
Refer to Note 7 to the financial statements herein for further
discussion of the implementation of SFAS 142.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Income taxes
The effective income tax rates for the three months ended June
30, 2002 and 2001 were 37.5% and 40.3%, respectively. The decrease
in the second quarter results primarily from the realization of tax
benefits in 2002 related to the impairment provisions recorded in
2001 on EWO's Latin American assets. The effective income tax rates
for the six months ended June 30, 2002 and 2001 were 41.3% and 40.3%,
respectively.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands, Except Share Data)
OPERATING REVENUES
Domestic electric $1,686,758 $1,990,838 $3,087,767 $3,863,383
Natural gas 24,982 30,548 71,360 140,931
Competitive businesses 384,841 484,889 798,288 1,154,392
---------- ---------- ---------- ----------
TOTAL 2,096,581 2,506,275 3,957,415 5,158,706
---------- ---------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 471,413 1,025,619 940,274 2,151,481
Purchased power 233,518 245,895 403,004 609,774
Nuclear refueling outage expenses 24,687 23,077 49,874 40,283
Provision for turbine commitments, asset impairments
and restructuring charges 18,169 - 419,542 -
Other operation and maintenance 727,017 436,110 1,251,369 906,569
Decommissioning 8,198 8,903 16,391 17,804
Taxes other than income taxes 82,194 89,662 184,565 192,125
Depreciation and amortization 205,876 183,372 410,999 386,448
Other regulatory charges (credits) - net (170,645) 13,088 (169,082) 12,699
---------- ---------- ---------- ----------
TOTAL 1,600,427 2,025,726 3,506,936 4,317,183
---------- ---------- ---------- ----------
OPERATING INCOME 496,154 480,549 450,479 841,523
---------- ---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 8,323 6,644 15,004 11,587
Gain on sale of assets - net 1,009 760 1,674 1,344
Interest and dividend income 27,710 33,595 51,237 81,071
Equity in earnings of unconsolidated equity affiliates 17,740 70,780 92,804 95,543
Miscellaneous - net (109) 432 (11,182) 8,649
---------- ---------- ---------- ----------
TOTAL 54,673 112,211 149,537 198,194
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 121,393 130,732 244,919 259,703
Other interest - net 34,897 51,386 60,371 99,300
Distributions on preferred securities of subsidiary 4,709 4,709 9,419 9,419
Allowance for borrowed funds used during construction (6,291) (5,492) (11,930) (9,431)
---------- ---------- ---------- ----------
TOTAL 154,708 181,335 302,779 358,991
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 396,119 411,425 297,237 680,726
Income taxes 148,534 165,842 122,636 274,272
---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME 247,585 245,583 174,601 406,454
Preferred dividend requirements and other 5,932 6,677 11,872 13,393
---------- ---------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $241,653 $238,906 $162,729 $393,061
========== ========== ========== ==========
Earnings per average common share:
Basic $1.08 $1.08 $0.73 $1.78
Diluted $1.06 $1.06 $0.72 $1.75
Dividends declared per common share $0.33 $0.32 $0.66 $0.63
Average number of common shares outstanding:
Basic 224,330,654 221,113,598 223,143,647 220,518,674
Diluted 228,847,752 225,706,421 227,588,889 224,749,374
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income $174,601 $406,454
Noncash items included in net income:
Reserve for regulatory adjustments 12,684 50,533
Other regulatory charges (credits) - net (169,082) 12,699
Depreciation, amortization, and decommissioning 427,390 404,252
Deferred income taxes and investment tax credits (171,328) (6,673)
Allowance for equity funds used during construction (15,004) (11,587)
Gain on sale of assets - net (1,674) (1,344)
Equity in earnings of unconsolidated equity affiliates (92,804) (95,543)
Provision for turbine commitments, asset impairments
and restructuring charges 419,542 -
Changes in working capital:
Receivables (139,808) 55,382
Fuel inventory (7,332) (19,701)
Accounts payable (9,974) (433,769)
Taxes accrued 255,629 230,308
Interest accrued (31,416) (2,697)
Deferred fuel 549 217,152
Other working capital accounts (43,475) (115,947)
Provision for estimated losses and reserves (8,576) (10,890)
Changes in other regulatory assets 186,824 (139,361)
Other 16,237 61,431
-------- ----------
Net cash flow provided by operating activities 802,983 600,699
-------- ----------
INVESTING ACTIVITIES
Construction/capital expenditures (736,670) (583,782)
Allowance for equity funds used during construction 15,004 11,587
Nuclear fuel purchases (161,090) (97,126)
Proceeds from sale/leaseback of nuclear fuel 132,472 60,632
Proceeds from sale of businesses 147,115 14,000
Investment in other non-regulated/non-utility properties (19,057) 17,515
Decrease (increase) in other investments 39,460 (621,801)
Proceeds from other temporary investments 150,000 -
Decommissioning trust contributions and realized change in trust assets (27,894) (38,842)
Other regulatory investments (29,755) (56,722)
Other (2,690) 52,580
-------- ----------
Net cash flow used in investing activities (493,105) (1,241,959)
-------- ----------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 299,431 90,382
Common stock 112,705 59,304
Retirement of long-term debt (910,908) (126,156)
Repurchase of common stock - (7,813)
Redemption of preferred stock (1,403) (4,574)
Changes in short-term borrowings - net 334,333 95,000
Dividends paid:
Common stock (147,329) (134,760)
Preferred stock (11,872) (11,214)
-------- ---------
Net cash flow used in financing activities (325,043) (39,831)
-------- ---------
Effect of exchange rates on cash and cash equivalents (5,748) (2,638)
-------- ---------
Net decrease in cash and cash equivalents (20,913) (683,729)
Cash and cash equivalents at beginning of period 751,573 1,382,424
-------- ---------
Cash and cash equivalents at end of period $730,660 $698,695
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $333,750 $351,033
Income taxes $33,877 $6,038
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($28,584) ($8,862)
Net assets contributed to Entergy-Koch - $80,145
Long-term debt refunded with proceeds from
long-term debt issued in prior period ($47,000) -
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $144,446 $129,866
Temporary cash investments - at cost,
which approximates market 585,875 618,327
Special deposits 339 3,380
----------- -----------
Total cash and cash equivalents 730,660 751,573
----------- -----------
Other temporary investments - 150,000
Notes receivable 3,244 2,137
Accounts receivable:
Customer 343,479 294,799
Allowance for doubtful accounts (19,709) (19,255)
Other 272,012 286,671
Accrued unbilled revenues 403,842 268,680
----------- -----------
Total receivables 999,624 830,895
----------- -----------
Deferred fuel costs 201,651 172,444
Accumulated deferred income taxes - 6,488
Fuel inventory - at average cost 104,829 97,497
Materials and supplies - at average cost 468,538 460,644
Deferred nuclear refueling outage costs 69,750 79,755
Prepayments and other 120,481 129,251
----------- -----------
TOTAL 2,698,777 2,680,684
----------- -----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 706,700 766,103
Decommissioning trust funds 1,761,487 1,775,950
Non-utility property - at cost (less accumulated depreciation) 293,869 295,616
Other 424,245 495,542
----------- -----------
TOTAL 3,186,301 3,333,211
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Electric 26,608,136 26,359,376
Property under capital lease 749,011 753,310
Natural gas 208,201 201,841
Construction work in progress 1,238,512 882,829
Nuclear fuel under capital lease 273,850 265,464
Nuclear fuel 247,760 232,387
----------- -----------
TOTAL PROPERTY, PLANT AND EQUIPMENT 29,325,470 28,695,207
Less - accumulated depreciation and amortization 12,122,894 11,805,578
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - NET 17,202,576 16,889,629
----------- -----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 927,990 946,126
Unamortized loss on reacquired debt 160,822 166,546
Other regulatory assets 538,750 707,439
Long-term receivables 26,437 28,083
Goodwill 377,472 377,472
Other 882,209 781,121
----------- -----------
TOTAL 2,913,680 3,006,787
----------- -----------
TOTAL ASSETS $26,001,334 $25,910,311
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $1,092,562 $682,771
Notes payable 685,351 351,018
Accounts payable 584,762 592,529
Customer deposits 199,571 188,230
Taxes accrued 739,538 550,133
Accumulated deferred income taxes 11,294 -
Nuclear refueling outage costs 8,150 2,080
Interest accrued 161,004 192,420
Obligations under capital leases 150,016 149,352
Other 265,379 345,387
----------- -----------
TOTAL 3,897,627 3,053,920
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,387,719 3,574,664
Accumulated deferred investment tax credits 459,499 471,090
Taxes accrued 450,000 400,000
Obligations under capital leases 183,452 181,085
Other regulatory liabilities 179,921 135,878
Decommissioning 1,217,677 1,194,333
Transition to competition 79,098 231,512
Regulatory reserves 50,275 37,591
Accumulated provisions 410,548 425,399
Other 896,821 852,269
----------- -----------
TOTAL 7,315,010 7,503,821
----------- -----------
Long-term debt 6,558,538 7,321,028
Preferred stock with sinking fund 24,781 26,185
Preferred stock without sinking fund 334,337 334,337
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 215,000
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, authorized 500,000,000
shares; issued 248,174,087 shares in 2002 and in 2001 2,482 2,482
Paid-in capital 4,666,754 4,662,704
Retained earnings 3,653,841 3,638,448
Accumulated other comprehensive loss (17,241) (88,794)
Less - treasury stock, at cost (23,500,208 shares in 2002 and
27,441,384 shares in 2001) 649,795 758,820
----------- -----------
TOTAL 7,656,041 7,456,020
----------- -----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $26,001,334 $25,910,311
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND
PAID-IN CAPITAL
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,486,122 $3,275,548
Add - Earnings applicable to common stock 241,653 $241,653 238,906 $238,906
Deduct:
Dividends declared on common stock 74,093 69,679
Capital stock and other expenses (159) (366)
---------- ----------
Total 73,934 69,313
---------- ----------
Retained Earnings - End of period $3,653,841 $3,445,141
========== ==========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes ($17,631) ($42,513)
Other accumulated comprehensive (loss) items (10,048) (75,455)
---------- ----------
Total (27,679) (117,968)
---------- ----------
Net derivative instrument fair value changes
arising during the period 14,003 14,003 20,645 20,645
Foreign currency translation adjustments 2,101 (64,233) (1,608) (1,608)
Net unrealized investment (losses) (5,666) (5,666) (1,502) (1,502)
---------- -------- ---------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes (3,628) (21,868)
Other accumulated comprehensive (loss) items (13,613) (78,565)
---------- ----------
Total ($17,241) ($100,433)
========== -------- ========== --------
Comprehensive Income $185,757 $256,441
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,663,931 $4,663,923
Add: Common stock issuances related to stock plans 2,823 (2,589)
---------- ----------
Paid-in Capital - End of period $4,666,754 $4,661,334
========== ==========
Six Months Ended
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,638,448 $3,190,639
Add - Earnings applicable to common stock 162,729 $162,729 393,061 $393,061
Deduct:
Dividends declared on common stock 147,355 138,925
Capital stock and other expenses (19) (366)
---------- ----------
Total 147,336 138,559
---------- ----------
Retained Earnings - End of period $3,653,841 $3,445,141
========== ==========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (Net of Taxes):
Balance at beginning of period:
Accumulated derivative instrument fair value changes ($17,973) -
Other accumulated comprehensive (loss) items (70,821) ($75,033)
---------- ----------
Total (88,794) (75,033)
---------- ----------
Cumulative effect to January 1, 2001 of accounting
change regarding fair value of derivative instruments - - (18,021) -
Net derivative instrument fair value changes
arising during the period 14,345 14,345 (3,847) (3,847)
Foreign currency translation adjustments 68,057 1,723 (3,635) (3,635)
Net unrealized investment gains (losses) (10,849) (10,849) 103 103
---------- -------- ---------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes (3,628) (21,868)
Other accumulated comprehensive (loss) items (13,613) (78,565)
---------- ----------
Total ($17,241) ($100,433)
========== -------- ========== --------
Comprehensive Income $167,948 $385,682
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,662,704 $4,660,483
Add: Common stock issuances related to stock plans 4,050 851
---------- ----------
Paid-in Capital - End of period $4,666,754 $4,661,334
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Domestic Electric Operating
Revenues:
Residential $ 549.6 $ 617.2 ($67.6) (11)
Commercial 405.6 481.4 (75.8) (16)
Industrial 465.7 652.9 (187.2) (29)
Governmental 43.1 53.7 (10.6) (20)
--------- --------- -------
Total retail 1,464.0 1,805.2 (341.2) (19)
Sales for resale 84.9 94.4 (9.5) (10)
Other 137.8 91.2 46.6 51
--------- --------- -------
Total $ 1,686.7 $ 1,990.8 ($304.1) (15)
========= ========= =======
Billed Electric Energy
Sales (GWH):
Residential 7,202 6,733 469 7
Commercial 6,112 5,908 204 3
Industrial 10,294 10,710 (416) (4)
Governmental 654 630 24 4
--------- --------- -------
Total retail 24,262 23,981 281 1
Sales for resale 2,444 2,182 262 12
--------- --------- -------
Total 26,706 26,163 543 2
========= ========= =======
Six Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Domestic Electric Operating
Revenues:
Residential $ 1,051.2 $ 1,252.2 ($201.0) (16)
Commercial 762.5 932.9 (170.4) (18)
Industrial 861.8 1,306.5 (444.7) (34)
Governmental 81.7 107.2 (25.5) (24)
--------- --------- -------
Total retail 2,757.2 3,598.8 (841.6) (23)
Sales for resale 154.6 216.8 (62.2) (29)
Other 176.0 47.8 128.2 268
--------- --------- -------
Total $ 3,087.8 $ 3,863.4 ($775.6) (20)
========= ========= =======
Billed Electric Energy
Sales (GWH):
Residential 14,476 14,269 207 1
Commercial 11,710 11,482 228 2
Industrial 19,884 21,022 (1,138) (5)
Governmental 1,271 1,245 26 2
--------- --------- -------
Total retail 47,341 48,018 (677) (1)
Sales for resale 4,658 4,631 27 1
--------- --------- -------
Total 51,999 52,649 (650) (1)
========= ========= =======
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 2002
compared to the three months ended June 30, 2001 primarily due to
decreased unbilled revenue, increased other operation and maintenance
expenses, increased depreciation and amortization expenses, decreased
other income, and the effect of the March 2002 Settlement Agreement
and the 2001 earnings review that were approved by the APSC in the
second quarter of 2002. The settlement agreement allowed Entergy
Arkansas to recover 2000 and 2001 ice storm repair expenses through
previously-collected TCA amounts. The effect of this settlement
agreement increased other operation and maintenance expenses, other
regulatory credits, and provisions for rate refunds. The net impact
of the settlement agreement and the 2001 earnings review is an $8.5
million decrease in net income. The March 2002 Settlement Agreement
is discussed further in Note 2 to the financial statements.
Net income decreased for the six months ended June 30, 2002
compared to the six months ended June 30, 2001 primarily due to
decreased sales for resale, increased other operation and maintenance
expenses, increased depreciation and amortization expenses, decreased
other income, and the effect of the March 2002 Settlement Agreement
discussed above. The overall decrease was partially offset by
increased unbilled revenue.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2002 compared with the three and six months
ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($0.7) $4.7
Rate riders (6.6) (15.0)
Fuel cost recovery (29.4) (13.3)
Sales volume/weather (0.4) (8.6)
Unbilled revenue (5.1) 6.5
Provisions for rate refunds (18.1) (18.1)
Other revenue 0.6 1.0
Sales for resale (25.5) (58.4)
------ -------
Total ($85.2) ($101.2)
====== =======
Base rate differences
Base rate differences increased revenues for the six months
ended June 30, 2002 primarily due to the effect of block rates on
residential customers and higher effective prices for commercial and
industrial customers due to decreased KWH usage.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Rate riders
Rate rider revenues have no material effect on net income
because specific incurred expenses offset them.
Rate rider revenues decreased for the three and six months ended
June 30, 2002 primarily due to a decrease in the Grand Gulf rate
rider effective January 2002 compared to the rate rider in effect
during the three and six months ended June 30, 2001. The Grand Gulf
rate rider allows Entergy Arkansas to recover 78% of its share of
operating costs for Grand Gulf 1.
Fuel cost recovery
Entergy Arkansas is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Arkansas'
financial statements such that these costs generally have no net
effect on earnings.
Fuel cost recovery revenues decreased for the three and six
months ended June 30, 2002 primarily due to a decrease in the energy
cost recovery rider that became effective in April 2002. The rider
utilizes prior year energy costs and projected energy sales for the
twelve-month period commencing on April 1 of each year to develop an
energy cost rate, which is redetermined annually and includes a true-
up adjustment reflecting the over-recovery or under-recovery,
including carrying charges, of the energy cost for the prior calendar
year. The rider is discussed further in Note 2 to the financial
statements in the Form 10-K.
Sales volume/weather
Electric sales volume decreased revenues for the six months
ended June 30, 2002 primarily due to decreased usage of 115 GWH in
the industrial sector. The effect of less favorable weather in the
first half of 2002 compared with the first half of 2001 decreased
electric sales volume by 123 GWH in the residential and commercial
sectors. The decreased usage resulted in higher effective rates in
each sector, which are reflected in base rate differences.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the three months ended June
30, 2002 and 2001 includes the reversal of the estimates for March
2002 and March 2001, respectively. The decrease for the three months
ended June 30, 2002 compared to the three months ended June 30, 2001
is due to the effect on the June 2001 calculation of higher unbilled
revenue in March 2001 caused by increased volume.
Unbilled revenue for the six months ended June 30, 2002 and 2001
includes the reversal of the estimates for December 2001 and December
2000, respectively. The increase in unbilled revenue for the six
months ended June 30, 2002 compared to the six months ended June 30,
2001 is due to the effect on the June 2002 unbilled calculation of
higher unbilled revenue in June 2002 caused by increased volume.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Provisions for rate refunds
Revenues decreased for the three and six months ended June 30,
2002 due to the provisions for rate refunds to large general service
customers pursuant to the March 2002 Settlement Agreement. The
refunds are scheduled to be distributed beginning in August 2002.
The March 2002 Settlement Agreement is discussed further in Note 2 to
the financial statements.
Sales for resale
Sales for resale decreased for the three and six months ended
June 30, 2002 due to a decrease in the average price of energy sold
to wholesale customers coupled with a decrease in sales volume to
municipalities and co-operatives.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three months
ended June 30, 2002 primarily due to:
o decreased market prices of natural gas and purchased power; and
o decreased coal generation due to planned and unplanned
maintenance outages.
Fuel and purchased power expenses decreased for the six months
ended June 30, 2002 primarily due to decreased market prices of
natural gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the three
months ended June 30, 2002 primarily due to:
o increased expenses consisting of $157.1 million due primarily to
the March 2002 Settlement Agreement and 2001 earnings review allowing
Entergy Arkansas to recover a large majority of 2000 and 2001 ice
storm repair expenses through the previously-collected TCA amounts
and $24.5 million due to the reversal in 2001 of ice storm costs
previously charged to expense in December 2000;
o increased salaries and office expense of $2.7 million; and
o increased nuclear plant expense of $1.6 million due to
additional security costs.
Other operation and maintenance expenses increased for the six
months ended June 30, 2002 primarily due to:
o increased expenses consisting of $159.9 million due primarily to
the March 2002 Settlement Agreement and 2001 earnings review allowing
Entergy Arkansas to recover a large majority of 2000 and 2001 ice
storm repair expenses through the previously-collected TCA amounts
and $24.5 million due to the reversal in 2001 of ice storm costs
previously charged to expense in December 2000;
o lower nuclear insurance refunds of $3.1 million; and
o increased vegetation management spending of $2.1 million.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The March 2002 Settlement Agreement is discussed further in Note
2 to the financial statements.
Depreciation, amortization, and decommissioning
Depreciation and amortization increased for the three and six
months ended June 30, 2002 primarily due to revisions made to the
useful lives of certain intangible plant assets to more appropriately
reflect their actual lives which lowered expense in 2001 in
accordance with regulatory treatment.
Other regulatory charges (credits) - net
Other regulatory credits increased for the three and six months
ended June 30, 2002 primarily due to the March 2002 Settlement
Agreement allowing Entergy Arkansas to recover 2000 and 2001 ice
storm repair expenses through the previously-collected TCA amounts.
The increase in other regulatory credits is offset by an increase
other operation and maintenance expenses discussed above. The March
2002 Settlement Agreement is discussed further in Note 2 to the
financial statements.
Other
Other income (deductions)
Other income decreased for the three and six months ended June
30, 2002 primarily due to:
o a decrease in interest income recorded on the deferred fuel
balance resulting from increased recovery; and
o reversal of the first quarter 2002 recording of 2000 ice storm
expenses in other operation and maintenance of $2.7 million, as
originally recommended by the APSC staff, in accordance with the
March 2002 Settlement Agreement. The March 2002 Settlement Agreement
is discussed further in Note 2 to the financial statements.
Income taxes
The effective income tax rates for the three months ended June
30, 2002 and 2001 were 53.4% and 40.8%, respectively. The effective
income tax rates for the six months ended June 30, 2002 and 2001 were
42.1% and 41.3%, respectively. The increase in the effective tax
rate for the three months ended June 30, 2002 was primarily due to
the effect of increased flow-through and permanent book and tax
timing differences related to the March 2002 Settlement Agreement in
addition to increased depreciation book and tax timing differences.
ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $367,926 $453,108 $745,749 $846,907
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 69,210 107,414 173,463 178,162
Purchased power 88,281 120,412 159,955 244,510
Nuclear refueling outage expenses 6,197 7,716 13,058 14,537
Other operation and maintenance 254,080 65,279 336,115 136,824
Taxes other than income taxes 9,385 8,664 20,573 17,428
Depreciation, amortization, and decommissioning 46,696 39,388 93,182 86,020
Other regulatory charges (credits) - net (175,317) 117 (175,722) (6,339)
-------- -------- -------- --------
TOTAL 298,532 348,990 620,624 671,142
-------- -------- -------- --------
OPERATING INCOME 69,394 104,118 125,125 175,765
-------- -------- -------- --------
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction 1,962 1,548 3,300 2,639
Interest and dividend income 587 1,790 1,565 6,711
Miscellaneous - net (3,538) (814) (4,528) (1,928)
-------- -------- -------- --------
TOTAL (989) 2,524 337 7,422
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 18,916 21,868 41,385 44,304
Other interest - net 8,116 5,115 11,047 8,505
Distributions on preferred securities of subsidiary 1,275 1,275 2,550 2,550
Allowance for borrowed funds used during construction (1,237) (1,004) (2,184) (1,715)
-------- -------- -------- --------
TOTAL 27,070 27,254 52,798 53,644
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 41,335 79,388 72,664 129,543
Income taxes 22,088 32,350 30,579 53,527
-------- -------- -------- --------
NET INCOME 19,247 47,038 42,085 76,016
Preferred dividend requirements and other 1,944 1,944 3,888 3,888
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $17,303 $45,094 $38,197 $72,128
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $42,085 $76,016
Noncash items included in net income:
Other regulatory credits - net (175,722) (6,339)
Depreciation, amortization, and decommissioning 93,182 86,020
Deferred income taxes and investment tax credits (34,997) 9,611
Allowance for equity funds used during construction (3,300) (2,639)
Changes in working capital:
Receivables 1,059 11,851
Fuel inventory (11,267) 6,417
Accounts payable (24,542) (45,335)
Taxes accrued 53,092 41,001
Interest accrued (5,708) (503)
Deferred fuel costs 65,783 38,828
Other working capital accounts 15,105 (310)
Provision for estimated losses and reserves (5,756) (4,009)
Changes in other regulatory assets 152,331 (108,297)
Changes in other deferred credits (22,204) 29,225
Other (5,379) 28,913
-------- --------
Net cash flow provided by operating activities 133,762 160,450
-------- --------
INVESTING ACTIVITIES
Construction expenditures (131,681) (117,970)
Allowance for equity funds used during construction 3,300 2,639
Nuclear fuel purchases (60,075) (19,103)
Proceeds from sale/leaseback of nuclear fuel 60,075 19,103
Decommissioning trust contributions and realized
change in trust assets (5,434) (4,379)
Changes in other temporary investments - net 38,397 -
Other regulatory investments - (16,796)
-------- --------
Net cash flow used in investing activities (95,418) (136,506)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 94,557 -
Retirement of long-term debt (170,000) -
Changes in short-term borrowings (667) -
Dividends paid:
Common stock (14,100) (11,500)
Preferred stock (3,888) (1,944)
-------- --------
Net cash flow used in financing activities (94,098) (13,444)
-------- --------
Net increase (decrease) in cash and cash equivalents (55,754) 10,500
Cash and cash equivalents at beginning of period 103,466 7,838
-------- --------
Cash and cash equivalents at end of period $47,712 $18,338
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $58,161 $53,353
Income taxes $9,356 ($3)
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($12,481) ($3,877)
Long-term debt refunded with proceeds from
long-term debt issued in prior period ($47,000) -
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $10,540 $18,331
Temporary cash investments - at cost,
which approximates market 37,172 85,135
---------- ----------
Total cash and cash equivalents 47,712 103,466
---------- ----------
Other temporary investments - 38,397
Accounts receivable:
Customer 77,846 80,719
Allowance for doubtful accounts (1,667) (1,667)
Associated companies 52,305 65,102
Other 17,160 20,889
Accrued unbilled revenues 80,647 62,307
---------- ----------
Total accounts receivable 226,291 227,350
---------- ----------
Deferred fuel costs - 17,246
Accumulated deferred income taxes 36,961 22,698
Fuel inventory - at average cost 15,639 4,372
Materials and supplies - at average cost 78,717 75,499
Deferred nuclear refueling outage costs 16,928 14,508
Prepayments and other 6,918 53,386
---------- ----------
TOTAL 429,166 556,922
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 11,217 11,217
Decommissioning trust funds 344,067 351,114
Non-utility property - at cost (less accumulated depreciation) 1,462 1,465
Other 2,976 2,976
---------- ----------
TOTAL 359,722 366,772
---------- ----------
UTILITY PLANT
Electric 5,462,186 5,399,294
Property under capital lease 34,370 35,604
Construction work in progress 196,974 157,994
Nuclear fuel under capital lease 102,940 65,556
Nuclear fuel 10,481 8,156
---------- ----------
TOTAL UTILITY PLANT 5,806,951 5,666,604
Less - accumulated depreciation and amortization 2,668,964 2,615,013
---------- ----------
UTILITY PLANT - NET 3,137,987 3,051,591
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 178,010 164,146
Unamortized loss on reacquired debt 40,736 40,817
Other regulatory assets 94,340 260,535
Other 18,918 10,797
---------- ----------
TOTAL 332,004 476,295
---------- ----------
TOTAL ASSETS $4,258,879 $4,451,580
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $100,000 $85,000
Notes payable - 667
Accounts payable:
Associated companies 29,903 32,868
Other 65,459 87,036
Customer deposits 38,197 32,589
Taxes accrued 157,373 104,281
Interest accrued 24,836 30,544
Deferred fuel costs 48,537 -
Obligations under capital leases 52,191 51,973
System Energy refund 6,650 53,732
Other 34,245 17,221
---------- ----------
TOTAL 557,391 495,911
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 808,165 809,742
Accumulated deferred investment tax credits 80,735 83,239
Obligations under capital leases 85,119 49,187
Transition to competition - 152,414
Accumulated provisions 35,659 41,415
Other 85,220 107,424
---------- ----------
TOTAL 1,094,898 1,243,421
---------- ----------
Long-term debt 1,178,359 1,308,075
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 116,350 116,350
Common stock, $0.01 par value, authorized 325,000,000
shares; issued and outstanding 46,980,196 shares in 2002
and 2001 470 470
Paid-in capital 591,127 591,127
Retained earnings 660,284 636,226
---------- ----------
TOTAL 1,368,231 1,344,173
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,258,879 $4,451,580
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 112.4 $ 124.3 ($11.9) (10)
Commercial 71.2 81.0 (9.8) (12)
Industrial 76.8 91.8 (15.0) (16)
Governmental 3.8 4.2 (0.4) (10)
------- ------- ------
Total retail 264.2 301.3 (37.1) (12)
Sales for resale
Associated companies 51.4 70.1 (18.7) (27)
Non-associated companies 41.0 47.8 (6.8) (14)
Other 11.3 33.9 (22.6) (67)
------- ------- ------
Total $ 367.9 $ 453.1 ($85.2) (19)
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 1,402 1,383 19 1
Commercial 1,219 1,213 6 -
Industrial 1,626 1,687 (61) (4)
Governmental 62 60 2 3
------- ------- ------
Total retail 4,309 4,343 (34) (1)
Sales for resale
Associated companies 1,804 1,953 (149) (8)
Non-associated companies 1,189 1,296 (107) (8)
------- ------- ------
Total 7,302 7,592 (290) (4)
======= ======= ======
Six Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 249.6 $ 264.3 ($14.7) (6)
Commercial 143.3 149.5 (6.2) (4)
Industrial 158.5 170.0 (11.5) (7)
Governmental 7.8 7.7 0.1 1
------- ------- -------
Total retail 559.2 591.5 (32.3) (5)
Sales for resale
Associated companies 93.1 119.7 (26.6) (22)
Non-associated companies 75.8 107.6 (31.8) (30)
Other 17.6 28.1 (10.5) (37)
------- ------- -------
Total $ 745.7 $ 846.9 ($101.2) (12)
======= ======= =======
Billed Electric Energy
Sales (GWH):
Residential 3,123 3,237 (114) (4)
Commercial 2,350 2,363 (13) (1)
Industrial 3,232 3,347 (115) (3)
Governmental 124 117 7 6
------- ------- -------
Total retail 8,829 9,064 (235) (3)
Sales for resale
Associated companies 3,886 3,080 806 26
Non-associated companies 2,236 2,627 (391) (15)
------- ------- -------
Total 14,951 14,771 180 1
======= ======= =======
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended June 30, 2002
compared to the three months ended June 30, 2001 primarily due to
increased unbilled revenue, increased other regulatory credits, and
decreased interest expense, partially offset by decreased sales for
resale, increased depreciation and amortization expenses, and
decreased interest income.
Net income decreased for the six months ended June 30, 2002
compared to the six months ended June 30, 2001 primarily due to
decreased sales for resale, increased depreciation and amortization
expenses, and decreased interest income, partially offset by
increased unbilled revenue, increased other regulatory credits, and
decreased interest expense.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2002 compared with the three and six months
ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($1.9) ($2.3)
Fuel cost recovery (171.1) (379.0)
Sales volume/weather 3.3 (7.6)
Unbilled revenue 18.9 16.9
Other revenue 2.4 3.2
Sales for resale (13.7) (44.9)
------- -------
Total ($162.1) ($413.7)
======= =======
Fuel cost recovery
Entergy Gulf States is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Gulf
States' financial statements such that these costs generally have no
net effect on earnings.
Fuel cost recovery revenues decreased for the three and six
months ended June 30, 2002 in both operational jurisdictions of
Entergy Gulf States. In the Louisiana jurisdiction, fuel recovery
revenues decreased $109.4 million and $264.1 million for the three
and six months ended June 30, 2002, respectively, due to the lower
prices of fuel and purchased power in 2002 compared with 2001 and the
impact of the current period recovery through the fuel adjustment
clause of lower fuel and purchased power costs from prior months. In
the Louisiana jurisdiction, these fuel costs are recovered on a two-
month lag. In the Texas jurisdiction, fuel cost recovery revenues
decreased $61.7 million and $114.9 million for the three and six
months ended June 30, 2002, respectively, due to a decrease in the
fixed fuel factor in March 2002 and the completion of a fuel recovery
surcharge in February 2002.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Lower electric sales volume reduced revenues for the six months
ended June 30, 2002 primarily due to decreased usage in the
industrial sector as a result of contractual modifications that
reclassified the sales associated with certain customers from retail
to wholesale. Under the terms of the former contract with these
customers, Entergy Gulf States was also required to purchase the
electricity produced by the customers' generating units. As a result
of the cessation of the purchased power obligation, the
reclassification of these sales will not have a negative impact on
Entergy Gulf States' earnings.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the three months ended June
30, 2002 and 2001 includes the reversal of the estimates for March
2002 and March 2001, respectively. The increase for the three months
ended June 30, 2002 compared to the three months ended June 30, 2001
is due to the effect on the June 2001 calculation of higher unbilled
revenue in March 2001 caused by higher fuel rates.
Unbilled revenue for the six months ended June 30, 2002 and 2001
includes the reversal of the estimates for December 2001 and December
2000, respectively. The increase in unbilled revenue for the six
months ended June 30, 2002 compared to the six months ended June 30,
2001 is due to the effect on the June 2001 unbilled calculation of
higher unbilled revenue in December 2000 caused by volume/weather.
Sales for resale
Sales for resale decreased for the three and six months ended
June 30, 2002 primarily due to a decrease in the average price of
resale electricity as a result of lower market prices of natural gas
used in generation. The decrease is partially offset by the
contractual modifications that resulted in the reclassified sales
noted above in sales volume/weather.
Gas operating revenues
Gas operating revenues decreased for the six months ended June
30, 2002 primarily due to the decreased market price of natural gas.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three and
six months ended June 30, 2002 primarily due to decreases in the
market prices of natural gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the six
months ended June 30, 2002 due to increases in:
o injuries and damages expense of $3.0 million;
o plant maintenance expenses at certain fossil plants of $2.8
million;
o pension and benefits expense of $2.5 million; and
o nuclear operation and maintenance expenses of $2.4 million.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The increase in other operation and maintenance expenses was
partially offset by decreases in:
o regulatory expenses of $4.2 million primarily due to the payment
in 2001 of the Texas System Benefit Fund assessment;
o transmission expenses of $2.2 million; and
o uncollectible receivable write-offs of $1.3 million.
Taxes other than income taxes
Taxes other than income taxes increased for the three and six
months ended June 30, 2002 primarily due to lower sales and use tax
audit assessments in 2001.
Depreciation and amortization
Depreciation and amortization increased for the three and six
months ended June 30, 2002 primarily due to revisions made to the
useful lives of certain intangible plant assets to more appropriately
reflect their actual lives which lowered expense in 2001 in
accordance with regulatory treatment.
Other regulatory charges (credits) - net
Other regulatory credits increased for the three and six months
ended June 30, 2002 primarily due to the recognition in income of the
Louisiana portion of the unamortized deferred gain on the 1988 sale
of Nelson Units 1 and 2. The deferred gain was recognized because
the LPSC no longer requires that the gain reduce Entergy Gulf States'
cost of service.
Other
Other income
Other income decreased for the three and six months ended June
30, 2002 primarily due to decreased interest income recorded on the
deferred fuel balance due to partial recovery of the balance.
Interest and other charges
Interest on long-term debt decreased for the three and six
months ended June 30, 2002 primarily due to lower interest expense on
variable-rate First Mortgage Bonds and the retirement of $148 million
of First Mortgage Bonds in January 2002.
Income taxes
The effective income tax rates for the three months ended June
30, 2002 and 2001 were 38.7% and 35.0%, respectively. The effective
income tax rates for the six months ended June 30, 2002 and 2001 were
38.6% and 36.1%, respectively.
ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $559,538 $721,597 $1,006,789 $1,420,473
Natural gas 8,025 9,296 24,678 44,896
-------- -------- ---------- ----------
TOTAL 567,563 730,893 1,031,467 1,465,369
-------- -------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 145,046 306,998 284,900 600,165
Purchased power 108,349 125,903 174,178 267,855
Nuclear refueling outage expenses 3,023 3,021 6,079 6,111
Other operation and maintenance 107,377 108,159 204,952 201,413
Decommissioning 1,579 1,561 3,152 3,123
Taxes other than income taxes 30,674 27,563 61,312 58,559
Depreciation and amortization 50,400 45,190 100,693 94,951
Other regulatory charges (credits) - net (12,626) 936 (12,026) (4,553)
-------- -------- ---------- ----------
TOTAL 433,822 619,331 823,240 1,227,624
-------- -------- ---------- ----------
OPERATING INCOME 133,741 111,562 208,227 237,745
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 2,757 2,342 4,983 4,167
Gain on sale of assets 1,009 603 1,673 1,188
Interest and dividend income 2,610 6,293 4,931 14,226
Miscellaneous - net (351) (1,162) (1,448) (2,574)
-------- -------- ---------- ----------
TOTAL 6,025 8,076 10,139 17,007
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 32,649 39,359 64,497 78,152
Other interest - net 1,146 1,858 2,743 4,195
Distributions on preferred securities of subsidiary 1,859 1,860 3,719 3,719
Allowance for borrowed funds used during construction (2,354) (2,441) (4,614) (4,155)
-------- -------- ---------- ----------
TOTAL 33,300 40,636 66,345 81,911
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 106,466 79,002 152,021 172,841
Income taxes 41,230 27,620 58,747 62,413
-------- -------- ---------- ----------
NET INCOME 65,236 51,382 93,274 110,428
Preferred dividend requirements and other 1,226 1,271 2,460 2,581
-------- -------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $64,010 $50,111 $90,814 $107,847
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $93,274 $110,428
Noncash items included in net income:
Reserve for regulatory adjustments 5,070 1,932
Other regulatory credits - net (12,026) (4,553)
Depreciation, amortization, and decommissioning 103,845 98,074
Deferred income taxes and investment tax credits (15,641) 10,793
Allowance for equity funds used during construction (4,983) (4,167)
Gain on sale of assets (1,673) (1,188)
Changes in working capital:
Receivables (12,275) (4,676)
Fuel inventory (2,893) (21,056)
Accounts payable (1,512) (117,594)
Taxes accrued 61,696 55,386
Interest accrued (7,221) 1,544
Deferred fuel costs 8,060 66,419
Other working capital accounts 11,213 7,536
Provision for estimated losses and reserves (1,238) (3,164)
Changes in other regulatory assets 7,499 (14,365)
Other 11,617 3,539
-------- --------
Net cash flow provided by operating activities 242,812 184,888
-------- --------
INVESTING ACTIVITIES
Construction expenditures (161,118) (145,421)
Allowance for equity funds used during construction 4,983 4,167
Nuclear fuel purchases (21,733) (3,929)
Proceeds from sale/leaseback of nuclear fuel 21,923 3,937
Decommissioning trust contributions and realized
change in trust assets (5,464) (5,912)
Changes in other temporary investments - net 44,643 -
Other regulatory investments (29,755) (39,926)
-------- --------
Net cash flow used in investing activities (146,521) (187,084)
-------- --------
FINANCING ACTIVITIES
Retirement of long-term debt (148,000) -
Redemption of preferred stock (1,404) (4,574)
Dividends paid:
Common stock (31,400) (34,000)
Preferred stock (2,460) (2,588)
-------- --------
Net cash flow used in financing activities (183,264) (41,162)
-------- --------
Net decrease in cash and cash equivalents (86,973) (43,358)
Cash and cash equivalents at beginning of period 123,728 68,279
-------- --------
Cash and cash equivalents at end of period $36,755 $24,921
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $75,495 $81,891
Income taxes $17,700 $920
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($6,413) ($2,138)
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $30,895 $19,503
Temporary cash investments - at cost,
which approximates market 5,860 104,225
---------- ----------
Total cash and cash equivalents 36,755 123,728
---------- ----------
Other temporary investments - 44,643
Accounts receivable:
Customer 101,579 81,136
Allowance for doubtful accounts (2,131) (2,131)
Associated companies 4,630 34,032
Other 36,111 53,249
Accrued unbilled revenues 123,116 84,744
---------- ----------
Total accounts receivable 263,305 251,030
---------- ----------
Deferred fuel costs 148,425 126,730
Fuel inventory - at average cost 56,904 54,011
Materials and supplies - at average cost 94,553 95,674
Prepayments and other 20,496 22,373
---------- ----------
TOTAL 620,438 718,189
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 244,433 245,382
Non-utility property - at cost (less accumulated depreciation) 193,080 194,830
Other 17,315 15,970
---------- ----------
TOTAL 454,828 456,182
---------- ----------
UTILITY PLANT
Electric 7,758,403 7,694,226
Property under capital lease 25,039 28,087
Natural gas 61,171 59,100
Construction work in progress 286,037 221,730
Nuclear fuel under capital lease 54,647 67,688
---------- ----------
TOTAL UTILITY PLANT 8,185,297 8,070,831
Less - accumulated depreciation and amortization 3,819,300 3,750,770
---------- ----------
UTILITY PLANT - NET 4,365,997 4,320,061
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 424,420 426,623
Unamortized loss on reacquired debt 32,706 34,321
Other regulatory assets 196,033 201,329
Long-term receivables 24,935 26,576
Other 20,183 26,460
---------- ----------
TOTAL 698,277 715,309
---------- ----------
TOTAL ASSETS $6,139,540 $6,209,741
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $339,000 $147,921
Accounts payable:
Associated companies 49,378 38,728
Other 122,861 135,023
Customer deposits 46,549 45,876
Taxes accrued 152,300 90,604
Accumulated deferred income taxes 23,819 21,412
Nuclear refueling outage costs 8,150 2,080
Interest accrued 36,193 43,414
Obligations under capital leases 37,113 36,668
Other 22,465 20,995
---------- ----------
TOTAL 837,828 582,721
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 1,216,031 1,227,084
Accumulated deferred investment tax credits 160,084 163,766
Obligations under capital leases 42,572 60,163
Decommissioning 146,510 144,926
Transition to competition 79,098 79,098
Regulatory reserves 38,661 33,591
Accumulated provisions 62,573 63,811
Other 74,174 93,719
---------- ----------
TOTAL 1,819,703 1,866,158
---------- ----------
Long-term debt 1,620,014 1,958,897
Preferred stock with sinking fund 24,781 26,185
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 85,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 47,327 47,327
Common stock, no par value, authorized 200,000,000
shares; issued and outstanding 100 shares in 2002 and 2001 114,055 114,055
Paid-in capital 1,157,459 1,157,459
Retained earnings 431,295 371,939
Accumulated other comprehensive income 2,078 -
---------- ----------
TOTAL 1,752,214 1,690,780
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,139,540 $6,209,741
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 164.0 $ 194.4 ($30.4) (16)
Commercial 123.3 156.7 (33.4) (21)
Industrial 182.1 285.3 (103.2) (36)
Governmental 8.3 10.2 (1.9) (19)
--------- --------- ------
Total retail 477.7 646.6 (168.9) (26)
Sales for resale
Associated companies 1.0 16.9 (15.9) (94)
Non-associated companies 35.7 33.5 2.2 7
Other 45.1 24.6 20.5 83
--------- --------- ------
Total $ 559.5 $ 721.6 ($162.1) (22)
========= ========= ======
Billed Electric Energy
Sales (GWH):
Residential 2,190 2,017 173 9
Commercial 1,942 1,836 106 6
Industrial 4,075 4,584 (509) (11)
Governmental 118 110 8 7
--------- --------- ------
Total retail 8,325 8,547 (222) (3)
Sales for resale
Associated companies 25 341 (316) (93)
Non-associated companies 1,155 736 419 57
--------- --------- ------
Total 9,505 9,624 (119) (1)
========= ========= ======
Six Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 308.8 $ 382.8 ($74.0) (19)
Commercial 232.2 302.0 (69.8) (23)
Industrial 326.1 565.9 (239.8) (42)
Governmental 16.1 20.3 (4.2) (21)
--------- --------- ------
Total retail 883.2 1,271.0 (387.8) (31)
Sales for resale
Associated companies 5.5 29.3 (23.8) (81)
Non-associated companies 63.5 84.6 (21.1) (25)
Other 54.6 35.6 19.0 53
--------- --------- ------
Total $ 1,006.8 $ 1,420.5 ($413.7) (29)
========= ========= ======
Billed Electric Energy
Sales (GWH):
Residential 4,292 4,143 149 4
Commercial 3,718 3,581 137 4
Industrial 7,719 8,836 (1,117) (13)
Governmental 229 221 8 4
--------- --------- ------
Total retail 15,958 16,781 (823) (5)
Sales for resale
Associated companies 129 448 (319) (71)
Non-associated companies 2,213 1,695 518 31
--------- --------- ------
Total 18,300 18,924 (624) (3)
========= ========= ======
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and six months ended June 30,
2002 compared with the three and six months ended June 30, 2001
primarily due to an increase in unbilled revenue, more favorable
volume on billed sales, an increase in interest income, and decreases
in taxes other than income taxes and interest charges. The increases
were partially offset by increases in other operation and maintenance
expenses and depreciation and amortization expenses.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2002 compared with the three and six months
ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($10.4) ($10.4)
Fuel cost recovery (99.6) (322.9)
Sales volume/weather 16.1 15.7
Unbilled revenue 33.1 78.2
Other revenue 1.0 3.9
Sales for resale (4.6) (7.8)
------ -------
Total ($64.4) ($243.3)
====== =======
Base rate differences
Base rate differences decreased for the three and six months
ended June 30, 2002 primarily due to an increase in accruals for
potential rate refunds, decreased rates for special-use industrial
customers as a result of increased KWH usage, and additional formula
rate plan reductions which became effective in October 2001.
Fuel cost recovery
Entergy Louisiana is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Louisiana's
financial statements such that these costs generally have no net
effect on earnings.
Fuel cost recovery revenues decreased for the three and six
months ended June 30, 2002 due to recovery of lower fuel and
purchased power expenses through the fuel adjustment clause,
primarily due to decreases in the market price of natural gas and
purchased power.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Higher electric sales volume increased revenues for the three
months ended June 30, 2002 due to increased usage of 192 GWH in the
residential and commercial sectors, after adjusting for the weather
effect, and 209 GWH in the industrial sector. The increased usage
resulted in lower effective rates for the industrial sector, which is
reflected in base rate differences. The effect of favorable weather
in the second quarter of 2002 compared to the second quarter of 2001
increased electric sales volume by 50 GWH in the residential and
commercial sectors.
Higher electric sales volume increased revenues for the six
months ended June 30, 2002 due to increased usage of 236 GWH in the
residential and commercial sectors, after adjusting for the weather
effect, and 213 GWH in the industrial sector. The increased usage
resulted in lower effective rates for the industrial sector, which is
reflected in base rate differences.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for the three months ended June
30, 2002 and 2001 includes the reversal of the estimates for March
2002 and March 2001, respectively. The increase for the three months
ended June 30, 2002 compared to the three months ended June 30, 2001
is due to the effect on the June 2001 calculation of higher unbilled
revenue in March 2001 caused by higher fuel rates.
Unbilled revenue for the six months ended June 30, 2002 and 2001
includes the reversal of the estimates for December 2001 and December
2000, respectively. The increase in unbilled revenue for the six
months ended June 30, 2002 compared to the six months ended June 30,
2001 is due to the effect on the June 2001 unbilled calculation of
higher unbilled revenue in December 2000 caused by higher fuel rates
and volume/weather.
Sales for resale
Sales for resale decreased for the three and six months ended
June 30, 2002 primarily due to a decrease in volume to adjoining
utility systems and affiliated customers.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three and
six months ended June 30, 2002 primarily due to a 29% and 44%
decrease, respectively, in the market price of natural gas. The
decreases were also due to decreases in the average market price of
purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the
three months ended June 30, 2002 primarily due to:
o an increase in employee pension and benefits expense of $1.5
million;
o an increase in maintenance expense at certain fossil plants of
$4.2 million; and
o an increase in transmission expenses of $1.4 million.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other operation and maintenance expenses increased for the six
months ended June 30, 2002 primarily due to:
o lower nuclear insurance refunds of $1.3 million;
o an increase in incentive compensation expense of $3.5 million;
o an increase in maintenance expense at certain fossil plants of
$4.1 million;
o an increase in employee pension and benefits expense of $2.6
million; and
o an increase in transmission expenses of $1.7 million.
Taxes other than income taxes
Taxes other than income taxes decreased for the three and six
months ended June 30, 2002 primarily due to franchise tax
adjustments. As a result of a favorable court decision, Entergy
Louisiana expects to receive a refund for certain franchise taxes
previously expensed and paid under protest.
Depreciation and amortization
Depreciation and amortization increased for the three and six
months ended June 30, 2002 primarily due to revisions made to the
useful lives of certain intangible plant assets to more
appropriately reflect their actual lives which lowered expense in
2001 in accordance with regulatory treatment.
Other regulatory charges - net
Other regulatory charges increased for the three and six months
ended June 30, 2002 primarily due to the amortization of capacity
charges associated with power purchases in the summer of 2000. The
amortization of these charges will occur through July 2002. Refer
to Note 2 to the financial statements for further discussion of
deferred capacity charges.
Other
Other income
Interest income increased for the three and six months ended
June 30, 2002 primarily due to the interest related to franchise tax
adjustments discussed above.
Interest and other charges
Interest on long-term debt decreased for the three and six
months ended June 30, 2002 due to the refinancing and net redemption
of First Mortgage Bonds in the amounts of $18.7 million in 2001 and
$63.0 million in the first quarter of 2002.
Other interest decreased for the three and six months ended June
30, 2002 primarily due to interest accrued in 2001 on reserves
provided for fuel-related refunds that were made in the summer of
2001 and adjustments to interest expense previously recorded on
franchise tax accruals.
Income taxes
The effective income tax rates for the three months ended June
30, 2002 and 2001 were 37.0% and 40.3%, respectively. The effective
income tax rates for the six months ended June 30, 2002 and 2001 were
38.3% and 41.8%, respectively. The decreases in the effective income
tax rates were primarily due to higher pre-tax income reducing the
effect of book and tax timing differences.
ENTERGY LOUISIANA, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $483,389 $547,784 $853,352 $1,096,698
-------- -------- -------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 85,709 190,046 148,690 424,469
Purchased power 121,899 132,485 201,662 267,990
Nuclear refueling outage expenses 2,961 3,262 6,012 6,524
Other operation and maintenance 81,193 71,269 159,659 141,083
Decommissioning 2,606 2,606 5,211 5,212
Taxes other than income taxes 5,546 18,165 23,979 36,717
Depreciation and amortization 45,679 40,498 91,141 85,444
Other regulatory charges - net 3,315 540 6,630 1,080
-------- -------- -------- ----------
TOTAL 348,908 458,871 642,984 968,519
-------- -------- -------- ----------
OPERATING INCOME 134,481 88,913 210,368 128,179
-------- -------- -------- ----------
OTHER INCOME
Allowance for equity funds used during construction 1,364 1,226 2,432 2,161
Gain on sale of assets - 152 - 152
Interest and dividend income 6,583 1,465 6,819 4,134
Miscellaneous - net (741) (721) (1,620) (1,454)
-------- -------- -------- ----------
TOTAL 7,206 2,122 7,631 4,993
-------- -------- -------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 21,815 24,734 45,255 49,190
Other interest - net (1,161) 3,570 679 7,087
Distributions on preferred securities of subsidiary 1,575 1,575 3,150 3,150
Allowance for borrowed funds used during construction (1,006) (922) (1,867) (1,632)
-------- -------- -------- ----------
TOTAL 21,223 28,957 47,217 57,795
-------- -------- -------- ----------
INCOME BEFORE INCOME TAXES 120,464 62,078 170,782 75,377
Income taxes 44,619 25,044 65,442 31,483
-------- -------- -------- ----------
NET INCOME 75,845 37,034 105,340 43,894
Preferred dividend requirements and other 1,678 2,378 3,357 4,757
-------- -------- -------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $74,167 $34,656 $101,983 $39,137
======== ======== ======== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $105,340 $43,894
Noncash items included in net income:
Reserve for regulatory adjustments - (3,698)
Other regulatory charges - net 6,630 1,080
Depreciation, amortization, and decommissioning 96,352 90,656
Deferred income taxes and investment tax credits 27,874 (55,432)
Allowance for equity funds used during construction (2,432) (2,161)
Gain on sale of assets - (152)
Changes in working capital:
Receivables (57,646) (15,569)
Accounts payable 55,199 (66,985)
Taxes accrued 58,644 103,346
Interest accrued (12,986) (7,192)
Deferred fuel costs (77,570) 121,877
Other working capital accounts (17,889) (24,616)
Provision for estimated losses and reserves 1,845 2,133
Changes in other regulatory assets 17,967 (3,779)
Other (10,689) 11,750
-------- --------
Net cash flow provided by operating activities 190,639 195,152
-------- --------
INVESTING ACTIVITIES
Construction expenditures (97,001) (99,550)
Allowance for equity funds used during construction 2,432 2,161
Nuclear fuel purchases (50,473) -
Proceeds from sale/leaseback of nuclear fuel 50,473 -
Decommissioning trust contributions and realized
change in trust assets (8,824) (9,043)
Changes in other temporary investments - net 6,152 -
-------- --------
Net cash flow used in investing activities (97,241) (106,432)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 144,874 -
Retirement of long-term debt (228,968) (35,088)
Changes in short-term borrowings 15,000 -
Dividends paid:
Common stock (48,600) (13,300)
Preferred stock (3,357) (4,757)
-------- --------
Net cash flow used in financing activities (121,051) (53,145)
-------- --------
Net increase (decrease) in cash and cash equivalents (27,653) 35,575
Cash and cash equivalents at beginning of period 42,408 43,959
-------- --------
Cash and cash equivalents at end of period $14,755 $79,534
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $58,943 $63,521
Income taxes ($9,983) $550
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($3,975) ($1,430)
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $14,755 $28,768
Temporary cash investments - at cost,
which approximates market - 13,640
---------- ----------
Total cash and cash equivalents 14,755 42,408
---------- ----------
Other temporary investments - 6,152
Notes receivable 8 8
Accounts receivable:
Customer 77,803 48,640
Allowance for doubtful accounts (1,771) (1,771)
Associated companies 12,376 9,090
Other 11,262 47,965
Accrued unbilled revenues 133,100 71,200
---------- ----------
Total accounts receivable 232,770 175,124
---------- ----------
Deferred fuel costs 10,077 -
Accumulated deferred income taxes 5,387 42,566
Materials and supplies - at average cost 73,289 77,523
Deferred nuclear refueling outage costs 14,441 4,096
Prepayments and other 26,763 9,000
---------- ----------
TOTAL 377,490 356,877
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 14,230 14,230
Decommissioning trust funds 124,512 119,663
Non-utility property - at cost (less accumulated depreciation) 21,580 21,671
---------- ----------
TOTAL 160,322 155,564
---------- ----------
UTILITY PLANT
Electric 5,499,463 5,456,093
Property under capital lease 239,395 239,395
Construction work in progress 147,067 110,792
Nuclear fuel under capital lease 67,917 70,316
---------- ----------
TOTAL UTILITY PLANT 5,953,842 5,876,596
Less - accumulated depreciation and amortization 2,611,859 2,538,964
---------- ----------
UTILITY PLANT - NET 3,341,983 3,337,632
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 172,847 179,368
Unamortized loss on reacquired debt 26,800 28,341
Other regulatory assets 62,308 73,754
Long-term receivables 1,503 1,515
Other 16,882 16,650
---------- ----------
TOTAL 280,340 299,628
---------- ----------
TOTAL ASSETS $4,160,135 $4,149,701
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $254,865 $185,627
Notes payable 15,000 -
Accounts payable:
Associated companies 116,337 73,208
Other 105,530 93,460
Customer deposits 62,763 61,359
Taxes accrued 79,054 20,410
Interest accrued 21,538 34,524
Deferred fuel costs - 67,493
Obligations under capital leases 34,171 34,171
Other 20,275 14,119
---------- ----------
TOTAL 709,533 584,371
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 766,318 776,610
Accumulated deferred investment tax credits 109,241 111,942
Obligations under capital leases 33,745 36,144
Accumulated provisions 70,367 68,522
Other 76,347 82,780
---------- ----------
TOTAL 1,056,018 1,075,998
---------- ----------
Long-term debt 943,247 1,091,329
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized 250,000,000
shares; issued and outstanding 165,173,180 shares in 2002
and 2001 1,088,900 1,088,900
Capital stock expense and other (1,718) (1,718)
Retained earnings 193,655 140,321
---------- ----------
TOTAL 1,381,337 1,328,003
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,160,135 $4,149,701
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 150.6 $ 163.5 ($12.9) (8)
Commercial 100.5 114.9 (14.4) (13)
Industrial 160.1 218.2 (58.1) (27)
Governmental 8.8 10.5 (1.7) (16)
------- --------- ------
Total retail 420.0 507.1 (87.1) (17)
Sales for resale
Associated companies 5.8 7.3 (1.5) (21)
Non-associated companies 3.4 6.5 (3.1) (48)
Other 54.2 26.9 27.3 101
------- --------- ------
Total $ 483.4 $ 547.8 ($64.4) (12)
======= ========= ======
Billed Electric Energy
Sales (GWH):
Residential 2,020 1,839 181 10
Commercial 1,352 1,291 61 5
Industrial 3,792 3,583 209 6
Governmental 122 120 2 2
------- --------- ------
Total retail 7,286 6,833 453 7
Sales for resale
Associated companies 68 108 (40) (37)
Non-associated companies 40 79 (39) (49)
------- --------- ------
Total 7,394 7,020 374 5
======= ========= ======
Six Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 270.0 $ 348.3 ($78.3) (22)
Commercial 181.5 236.0 (54.5) (23)
Industrial 289.6 463.4 (173.8) (38)
Governmental 16.8 22.8 (6.0) (26)
------- --------- ------
Total retail 757.9 1,070.5 (312.6) (29)
Sales for resale
Associated companies 9.1 11.4 (2.3) (20)
Non-associated companies 6.8 12.3 (5.5) (45)
Other 79.6 2.5 77.1 3,084
------- --------- ------
Total $ 853.4 $ 1,096.7 ($243.3) (22)
======= ========= ======
Billed Electric Energy
Sales (GWH):
Residential 3,942 3,783 159 4
Commercial 2,574 2,508 66 3
Industrial 7,370 7,157 213 3
Governmental 250 248 2 1
------- --------- ------
Total retail 14,136 13,696 440 3
Sales for resale
Associated companies 153 161 (8) (5)
Non-associated companies 93 174 (81) (47)
------- --------- ------
Total 14,382 14,031 351 3
======= ========= ======
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 2002
compared to the three months ended June 30, 2001 primarily due to
decreased interest income and increased depreciation and amortization
expenses, partially offset by increased other revenue.
Net income decreased for the six months ended June 30, 2002
compared to the six months ended June 30, 2001 primarily due to
decreased interest income, increased depreciation and amortization
expenses, and increased other operation and maintenance expenses.
The decrease was partially offset by increased other revenue,
increased unbilled revenue, and decreased interest expense.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2002 compared with the three and six months
ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences $0.8 $3.6
Grand Gulf rate rider (4.8) (11.5)
Fuel cost recovery (14.4) (24.0)
Sales volume/weather 1.5 (1.7)
Unbilled revenue 1.1 3.4
Other revenue 3.4 5.8
Sales for resale - (52.5)
------ ------
Total ($12.4) ($76.9)
====== ======
Grand Gulf rate rider
Rate rider revenues have no material effect on net income
because specific incurred expenses offset them.
Grand Gulf rate rider revenue decreased for the three and six
months ended June 30, 2002 as a result of a lower rate which became
effective in October 2001.
Fuel cost recovery
Entergy Mississippi is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates, recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy Mississippi's financial
statements such that these costs generally have no net effect on
earnings.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues decreased for the three and six
months ended June 30, 2002 primarily due to lower fuel and purchased
power expenses as a result of decreases in the market prices of
natural gas and purchased power.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and reversed the
following month. Unbilled revenue for the six months ended June 30,
2002 and 2001 includes the reversal of the estimates for December
2001 and December 2000, respectively. The increase in unbilled
revenue for the six months ended June 30, 2002 compared to the six
months ended June 30, 2001 is due to the effect on the June 2001
unbilled calculation of higher unbilled revenue in December 2000
caused by volume/weather.
Other revenue
Other revenue increased for the three and six months ended June
30, 2002 primarily due to increased forfeiture revenue as a result of
Entergy Mississippi charging late fees to its customers beginning in
October 2001.
Sales for resale
Sales for resale decreased for the six months ended June 30,
2002 primarily due to a decrease in sales volume to affiliated
customers, coupled with a decrease in the average price of energy.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three and
six months ended June 30, 2002 primarily due to the displacement of
oil generation by lower priced gas generation and the decrease in the
market price of purchased power. Oil generation was used in the
first and second quarters of 2001 due to significant increases in the
market price of natural gas. The decrease was partially offset by an
over-recovery of fuel costs, including the effect of increased
recoveries approved by the MPSC in 2001 to recover previous under-
recoveries.
Other operation and maintenance
Other operation and maintenance expenses increased for the six
months ended June 30, 2002 primarily due to:
o an increase of $5.6 million in plant maintenance expense due to
an unscheduled outage at a fossil plant in 2002;
o an increase in injuries and damages expense of $1.3 million; and
o an insurance reimbursement of $1.4 million received in 2001 in
connection with a turbine generator failure.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Depreciation and amortization
Depreciation and amortization increased for the three and six
months ended June 30, 2002 primarily due to revisions made to the
useful lives of certain intangible plant assets to more appropriately
reflect their actual lives which lowered expense in 2001 in
accordance with regulatory treatment.
Other regulatory credits - net
Other regulatory credits decreased for the three months ended
June 30, 2002 primarily due to the settlement of the System Energy
rate proceeding in 2001 which ceased the deferral of costs associated
with purchases from System Energy. See Note 2 to the financial
statements in the Form 10-K for further discussion of the System
Energy rate proceeding and FERC order.
Other
Other income
Interest income decreased for the three and six months ended
June 30, 2002 primarily due to interest recorded in 2001 on the
deferred System Energy costs that Entergy Mississippi was not
recovering through rates. The deferral of these costs ceased in the
third quarter of 2001 as a result of a final FERC order.
Interest and other charges
Interest and other charges decreased for the six months ended
June 30, 2002 primarily due to:
o lower interest expense on decreased intercompany money pool
borrowings;
o lower interest expense on a $25 million credit facility obtained
in February 2001, which was drawn on for most of the first half of
2001 compared with only being drawn in June during 2002;
o lower interest expense on variable-rate First Mortgage Bonds;
and
o an increase in the allowance for borrowed funds used for
construction because of a higher construction work in progress
balance during 2002.
Income taxes
The effective income tax rates for the three months ended June
30, 2002 and 2001 were 36.7% and 33.4%, respectively. The effective
income tax rates for the six months ended June 30, 2002 were 35.5%
and 33.9%, respectively. The increase in the effective tax rate for
the three months ended June 30, 2002 was primarily due to increased
book and tax depreciation timing differences.
ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $261,743 $274,148 $453,433 $530,306
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 93,129 95,493 143,698 205,552
Purchased power 74,146 94,374 149,482 177,838
Other operation and maintenance 40,763 39,473 81,663 72,721
Taxes other than income taxes 11,774 11,792 23,507 23,065
Depreciation and amortization 13,745 10,941 27,251 24,215
Other regulatory credits - net (1,067) (9,572) (18,349) (19,256)
-------- -------- -------- --------
TOTAL 232,490 242,501 407,252 484,135
-------- -------- -------- --------
OPERATING INCOME 29,253 31,647 46,181 46,171
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,076 592 2,146 1,015
Interest and dividend income 1,185 4,559 2,227 9,252
Miscellaneous - net (371) (558) (1,105) (1,106)
-------- -------- -------- --------
TOTAL 1,890 4,593 3,268 9,161
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 11,250 12,159 21,212 23,303
Other interest - net 735 1,079 1,356 2,312
Allowance for borrowed funds used during construction (975) (516) (1,920) (863)
-------- -------- -------- --------
TOTAL 11,010 12,722 20,648 24,752
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 20,133 23,518 28,801 30,580
Income taxes 7,381 7,845 10,220 10,373
-------- -------- -------- --------
NET INCOME 12,752 15,673 18,581 20,207
Preferred dividend requirements and other 842 842 1,685 1,685
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $11,910 $14,831 $16,896 $18,522
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $18,581 $20,207
Noncash items included in net income:
Other regulatory credits - net (18,349) (19,256)
Depreciation and amortization 27,251 24,215
Deferred income taxes and investment tax credits (7,826) 11,402
Allowance for equity funds used during construction (2,146) (1,015)
Changes in working capital:
Receivables (2,620) 699
Fuel inventory (758) (6,951)
Accounts payable 7,488 (5,983)
Taxes accrued 2,793 (15,104)
Interest accrued (102) 2,884
Deferred fuel costs 22,792 (21,692)
Other working capital accounts 122 (4,495)
Provision for estimated losses and reserves (1,153) (4,733)
Changes in other regulatory assets (10,604) (23,075)
Other 23,735 34,461
-------- --------
Net cash flow provided by (used in) operating activities 59,204 (8,436)
-------- --------
INVESTING ACTIVITIES
Construction expenditures (77,812) (60,961)
Allowance for equity funds used during construction 2,146 1,015
Changes in other temporary investments - net 18,566 -
-------- --------
Net cash flow used in investing activities (57,100) (59,946)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 69,624
Retirement of long-term debt (65,000) -
Changes in short-term borrowings 25,000 10,000
Dividends paid:
Common stock (4,500) (5,500)
Preferred stock (1,685) (1,685)
-------- --------
Net cash flow provided by (used in) financing activities (46,185) 72,439
-------- --------
Net increase (decrease) in cash and cash equivalents (44,081) 4,057
Cash and cash equivalents at beginning of period 54,048 5,113
-------- --------
Cash and cash equivalents at end of period $9,967 $9,170
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $21,272 $21,406
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $9,967 $12,883
Temporary cash investments - at cost,
which approximates market - 41,165
---------- ----------
Total cash and cash equivalents 9,967 54,048
---------- ----------
Other temporary investments - 18,566
Accounts receivable:
Customer 52,493 50,370
Allowance for doubtful accounts (1,044) (1,044)
Associated companies 6,186 14,201
Other 3,704 2,892
Accrued unbilled revenues 38,000 30,300
---------- ----------
Total accounts receivable 99,339 96,719
---------- ----------
Deferred fuel costs 83,366 106,158
Fuel inventory - at average cost 5,582 4,824
Materials and supplies - at average cost 17,601 16,896
Prepayments and other 2,408 8,521
---------- ----------
TOTAL 218,263 305,732
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 5,531 5,531
Non-utility property - at cost (less accumulated depreciation) 6,658 6,723
---------- ----------
TOTAL 12,189 12,254
---------- ----------
UTILITY PLANT
Electric 1,985,589 1,939,182
Property under capital lease 193 211
Construction work in progress 132,329 110,450
---------- ----------
TOTAL UTILITY PLANT 2,118,111 2,049,843
Less - accumulated depreciation and amortization 759,376 741,892
---------- ----------
UTILITY PLANT - NET 1,358,735 1,307,951
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 23,444 22,387
Unamortized loss on reacquired debt 13,333 13,925
Other regulatory assets 23,050 13,503
Other 6,311 7,274
---------- ----------
TOTAL 66,138 57,089
---------- ----------
TOTAL ASSETS $1,655,325 $1,683,026
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $190,000 $65,000
Notes payable 25,000 -
Accounts payable:
Associated companies 41,831 45,554
Other 38,594 27,383
Customer deposits 32,727 29,421
Taxes accrued 34,277 31,484
Accumulated deferred income taxes 8,357 19,277
Interest accrued 17,565 17,667
Obligations under capital leases 37 36
System Energy refund 4,669 14,836
Other 3,539 1,964
---------- ----------
TOTAL 396,596 252,622
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 272,825 266,498
Accumulated deferred investment tax credits 17,203 17,908
Obligations under capital leases 156 175
Accumulated provisions 6,474 7,627
Other 38,983 37,678
---------- ----------
TOTAL 335,641 329,886
---------- ----------
Long-term debt 399,936 589,762
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 50,381 50,381
Common stock, no par value, authorized 15,000,000
shares; issued and outstanding 8,666,357 shares in
2002 and 2001 199,326 199,326
Capital stock expense and other (59) (59)
Retained earnings 273,504 261,108
---------- ----------
TOTAL 523,152 510,756
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,655,325 $1,683,026
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 85.6 $ 89.1 ($3.5) (4)
Commercial 76.1 80.9 (4.8) (6)
Industrial 41.4 49.2 (7.8) (16)
Governmental 7.3 8.0 (0.7) (9)
------- ------- ------
Total retail 210.4 227.2 (16.8) (7)
Sales for resale
Associated companies 27.0 26.0 1.0 4
Non-associated companies 4.1 5.1 (1.0) (20)
Other 20.2 15.8 4.4 28
------- ------- ------
Total $ 261.7 $ 274.1 ($12.4) (5)
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 1,086 1,037 49 5
Commercial 1,046 1,024 22 2
Industrial 705 751 (46) (6)
Governmental 92 93 (1) (1)
------ ------ -----
Total retail 2,929 2,905 24 1
Sales for resale
Associated companies 563 459 104 23
Non-associated companies 50 57 (7) (12)
------ ------ -----
Total 3,542 3,421 121 4
====== ====== =====
Six Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 158.6 $ 170.0 ($11.4) (7)
Commercial 140.2 148.5 (8.3) (6)
Industrial 77.6 90.5 (12.9) (14)
Governmental 13.6 14.6 (1.0) (7)
------- ------- ------
Total retail 390.0 423.6 (33.6) (8)
Sales for resale
Associated companies 32.3 82.7 (50.4) (61)
Non-associated companies 7.5 9.6 (2.1) (22)
Other 23.6 14.4 9.2 64
------- ------- ------
Total $ 453.4 $ 530.3 ($76.9) (15)
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 2,212 2,252 (40) (2)
Commercial 2,010 1,999 11 1
Industrial 1,377 1,485 (108) (7)
Governmental 179 183 (4) (2)
------ ------ -----
Total retail 5,778 5,919 (141) (2)
Sales for resale
Associated companies 608 1,332 (724) (54)
Non-associated companies 97 107 (10) (9)
------ ------ -----
Total 6,483 7,358 (875) (12)
====== ====== =====
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Loss
Entergy New Orleans experienced a net loss for the six months
ended June 30, 2002 primarily due to accruals for potential rate
actions and refunds and increased interest charges, partially offset
by decreased taxes other than income taxes.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and six
months ended June 30, 2002 compared with the three and six months
ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate differences ($0.5) ($3.6)
Fuel cost recovery (33.5) (75.5)
Sales volume/weather 2.7 3.7
Unbilled revenue (1.8) (1.1)
Other revenue (0.2) (6.0)
Sales for resale (1.3) (8.1)
------ ------
Total ($34.6) ($90.6)
====== ======
Fuel cost recovery
Entergy New Orleans is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates, recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy New Orleans' financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues decreased for the three and six
months ended June 30, 2002 primarily due to recovery, through the
fuel adjustment clause, of lower fuel and purchased power expenses.
The decrease in fuel and purchased power expenses was a result of
decreased market prices of natural gas and purchased power.
Other revenue
Other revenue decreased for the six months ended June 30, 2002
primarily due to accruals for potential rate actions and refunds.
Sales for resale
Sales for resale decreased for the six months ended June 30,
2002 primarily due to a decrease in the average price of resale
energy coupled with decreased sales volume to affiliated customers.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Gas operating revenues
Gas operating revenues decreased for the three and six months
ended June 30, 2002 primarily due to the decreased market price of
natural gas coupled with decreased sales volume.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the three and
six months ended June 30, 2002 primarily due to the decreased market
prices of natural gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the three
months ended June 30, 2002 primarily due to an increase in rate
proceedings costs of $1.1 million.
Other operation and maintenance expenses increased for the six
months ended June 30, 2002 primarily due to:
o an increase in rate proceedings costs of $1.3 million; and
o an increase in injuries and damages expense of $1.0 million.
Taxes other than income taxes
Taxes other than income taxes decreased for the three and six
months ended June 30, 2002 primarily due to a decrease in local
franchise taxes as a result of lower retail revenue.
Other regulatory charges - net
Other regulatory charges increased for the six months ended June
30, 2002 primarily due to a greater over-recovery of Grand Gulf costs
compared to 2001. The increase was partially offset by the
completion of the Grand Gulf 1 Rate Deferral Plan in September 2001.
Other
Other income
Other income decreased for the six months ended June 30, 2002
primarily due to interest recorded in the first half of 2001 on
deferred System Energy costs that Entergy New Orleans was not
recovering through rates. The deferral of these costs ceased in the
third quarter of 2001 as a result of a final FERC order. See Note 2
to the financial statements in the Form 10-K for further discussion
of the System Energy rate proceeding and FERC order.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Interest and other charges
Other interest increased for the three and six months ended June
30, 2002 primarily due to interest recorded for potential rate
actions and refunds.
Income taxes
The effective income tax rates for the three months ended June
30, 2002 and 2001 were 44.7% and 40.9%, respectively. There was no
meaningful effective income tax rate for the six months ended June
30, 2002 as a result of the net loss generated, while book and tax
timing differences caused income tax expense for the period. The
effective income tax rate for the six months ended June 30, 2001 was
43.3%. The increase for the three months ended June 30, 2002 in the
effective tax rate was primarily due to increased book and tax
depreciation timing differences.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $104,465 $139,057 $177,688 $268,289
Natural gas 16,957 21,252 46,681 96,035
-------- -------- -------- --------
TOTAL 121,422 160,309 224,369 364,324
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 21,811 51,860 50,468 160,687
Purchased power 45,313 58,859 80,822 107,326
Other operation and maintenance 23,200 21,615 45,112 42,576
Taxes other than income taxes 9,134 11,308 18,426 24,994
Depreciation and amortization 6,891 6,181 13,734 12,507
Other regulatory charges - net 1,922 1,113 4,331 2,643
-------- -------- -------- --------
TOTAL 108,271 150,936 212,893 350,733
-------- -------- -------- --------
OPERATING INCOME 13,151 9,373 11,476 13,591
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 463 453 893 851
Interest and dividend income 89 1,055 363 2,161
Miscellaneous - net (377) (735) (837) (1,147)
-------- -------- -------- --------
TOTAL 175 773 419 1,865
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 4,469 4,450 8,937 8,568
Other interest - net 3,547 386 3,998 812
Allowance for borrowed funds used during construction (472) (386) (866) (706)
-------- -------- -------- --------
TOTAL 7,544 4,450 12,069 8,674
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 5,782 5,696 (174) 6,782
Income taxes 2,583 2,327 567 2,938
-------- -------- -------- --------
NET INCOME (LOSS) 3,199 3,369 (741) 3,844
Preferred dividend requirements and other 241 241 482 482
-------- -------- -------- --------
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $2,958 $3,128 ($1,223) $3,362
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income (loss) ($741) $3,844
Noncash items included in net income (loss):
Other regulatory charges - net 4,331 2,643
Depreciation and amortization 13,734 12,507
Deferred income taxes and investment tax credits 3,098 (2,588)
Allowance for equity funds used during construction (893) (851)
Changes in working capital:
Receivables 654 (4,101)
Fuel inventory 3,057 4,096
Accounts payable 14,518 (12,011)
Taxes accrued - 3,971
Interest accrued 2,295 307
Deferred fuel costs (18,517) 11,719
Other working capital accounts (40,041) (8,049)
Provision for estimated losses and reserves (2,258) (2,136)
Changes in other regulatory assets 12 (12,295)
Other 5,733 1,181
------- -------
Net cash flow used in operating activities (15,018) (1,763)
------- -------
INVESTING ACTIVITIES
Construction expenditures (31,036) (28,898)
Allowance for equity funds used during construction 893 851
Changes in other temporary investments - net 14,859 -
------- -------
Net cash flow used in investing activities (15,284) (28,047)
------- -------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 29,769
Dividends paid:
Preferred stock (482) (241)
------- -------
Net cash flow provided by (used in) financing activities (482) 29,528
------- -------
Net decrease in cash and cash equivalents (30,784) (282)
Cash and cash equivalents at beginning of period 38,184 6,302
------- -------
Cash and cash equivalents at end of period $7,400 $6,020
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $10,377 $8,845
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $7,400 $5,237
Temporary cash investments - at cost,
which approximates market - 32,947
-------- --------
Total cash and cash equivalents 7,400 38,184
-------- --------
Other temporary investments - 14,859
Accounts receivable:
Customer 32,545 33,827
Allowance for doubtful accounts (2,234) (2,234)
Associated companies - 10,527
Other 6,885 4,511
Accrued unbilled revenues 28,808 20,027
-------- --------
Total accounts receivable 66,004 66,658
-------- --------
Deferred fuel costs 8,321 -
Accumulated deferred income taxes - 4,882
Fuel inventory - at average cost 24 3,081
Materials and supplies - at average cost 7,496 8,273
Prepayments and other 41,359 26,239
-------- --------
TOTAL 130,604 162,176
-------- --------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 3,259 3,259
-------- --------
UTILITY PLANT
Electric 610,725 597,575
Natural gas 147,030 142,741
Construction work in progress 52,366 43,166
-------- --------
TOTAL UTILITY PLANT 810,121 783,482
Less - accumulated depreciation and amortization 404,936 396,535
-------- --------
UTILITY PLANT - NET 405,185 386,947
-------- --------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Unamortized loss on reacquired debt 655 761
Other regulatory assets 10,831 10,843
Other 1,276 2,051
-------- --------
TOTAL 12,762 13,655
-------- --------
TOTAL ASSETS $551,810 $566,037
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $25,000 $ -
Accounts payable:
Associated companies 22,399 18,199
Other 33,958 23,640
Customer deposits 19,087 18,931
Accumulated deferred income taxes 1,847 -
Interest accrued 9,327 7,032
Deferred fuel costs - 10,196
System Energy Refund - 33,614
Other 9,559 1,799
-------- --------
TOTAL 121,177 113,411
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 17,035 25,326
Accumulated deferred investment tax credits 5,119 5,361
SFAS 109 regulatory liability - net 25,674 19,868
Accumulated provisions 3,544 5,802
Other 25,904 16,735
-------- --------
TOTAL 77,276 73,092
-------- --------
Long-term debt 204,143 229,097
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 19,780 19,780
Common stock, $4 par value, authorized 10,000,000
shares; issued and outstanding 8,435,900 shares in 2002 33,744 33,744
and 2001
Paid-in capital 36,294 36,294
Retained earnings 59,396 60,619
-------- --------
TOTAL 149,214 150,437
-------- --------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $551,810 $566,037
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Monts Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 37.0 $ 45.8 ($8.8) (19)
Commercial 34.7 48.0 (13.3) (28)
Industrial 5.3 8.4 (3.1) (37)
Governmental 14.8 20.9 (6.1) (29)
------- ------- ------
Total retail 91.8 123.1 (31.3) (25)
Sales for resale
Associated companies 1.0 1.7 (0.7) (41)
Non-associated companies 0.5 1.1 (0.6) (55)
Other 11.2 13.2 (2.0) (15)
------- ------- ------
Total $ 104.5 $ 139.1 ($34.6) (25)
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 504 457 47 10
Commercial 554 545 9 2
Industrial 96 104 (8) (8)
Governmental 260 247 13 5
------- ------- ------
Total retail 1,414 1,353 61 5
Sales for resale
Associated companies 15 26 (11) (42)
Non-associated companies 9 15 (6) (40)
------- ------- ------
Total 1,438 1,394 44 3
======= ======= ======
Six Months Ended Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 64.2 $ 86.8 ($22.6) (26)
Commercial 65.4 96.9 (31.5) (33)
Industrial 9.9 16.7 (6.8) (41)
Governmental 27.4 41.8 (14.4) (34)
------- ------- ------
Total retail 166.9 242.2 (75.3) (31)
Sales for resale
Associated companies 1.3 8.7 (7.4) (85)
Non-associated companies 1.0 1.7 (0.7) (41)
Other 8.5 15.7 (7.2) (46)
------- ------- ------
Total $ 177.7 $ 268.3 ($90.6) (34)
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 907 854 53 6
Commercial 1,059 1,033 26 3
Industrial 185 196 (11) (6)
Governmental 490 475 15 3
------- ------- ------
Total retail 2,641 2,558 83 3
Sales for resale
Associated companies 31 90 (59) (66)
Non-associated companies 20 27 (7) (26)
------- ------- ------
Total 2,692 2,675 17 1
======= ======= ======
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months and six months ended
June 30, 2002 compared with the three months and six months ended
June 30, 2001 primarily due to decreased interest charges, partially
offset by decreased interest income.
Revenues
Operating revenues recover operating expenses, depreciation, and
capital costs attributable to Grand Gulf 1. Capital costs are
computed by allowing a return on System Energy's common equity funds
allocable to its net investment in Grand Gulf 1 and adding to such
amount System Energy's effective interest cost for its debt.
Operating revenues decreased for the three and six months ended
June 30, 2002 as a result of the suspension of the GGART for Entergy
Arkansas in July 2001. The net income impact of the suspended tariff
is substantially offset in other regulatory charges. See further
discussion of the GGART in Note 2 to the financial statements in the
Form 10-K.
Expenses
Nuclear refueling outage expenses
Nuclear refueling outage expenses decreased for the three and
six months ended June 30, 2002 due to lower monthly amortization of
outage expenses resulting from lower expenses incurred during the
April/May 2001 refueling and maintenance outage compared to the
previous outage.
Other operation and maintenance
Other operation and maintenance expenses increased for the six
months ended June 30, 2002 primarily due to:
o lower nuclear insurance refunds of $1.7 million; and
o an increase in outside services employed of $1.3 million.
Depreciation and amortization
Depreciation and amortization expenses decreased for the three
and six months ended June 30, 2002 primarily due to a lower
depreciation rate used in 2002 as mandated by FERC. See further
discussion of the System Energy rate proceeding in Note 2 to the
financial statements in the Form 10-K.
Other regulatory charges - net
Other regulatory charges decreased for the three and six months
ended June 30, 2002 primarily due to the suspension of the GGART for
Entergy Arkansas in July 2001.
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Other income
Interest income decreased for the three and six months ended
June 30, 2002 as a result of decreased interest earned on System
Energy's investments in the money pool due to lower advances to the
money pool in 2002 compared to the same period in 2001.
Interest and other charges
Interest on long-term debt decreased for the three and six
months ended June 30, 2002 primarily due to the retirement of $135
million of long-term debt in August 2001, combined with a decrease in
interest expense related to the sale-leaseback of Grand Gulf 1.
Other interest expense decreased for the three and six months
ended June 30, 2002 due to interest recorded in 2001 on System
Energy's reserve for rate refund. The refund was made in December
2001.
Income taxes
The effective income tax rates for the three months ended June
30, 2002 and 2001 were 43.1% and 45.7%, respectively. The effective
income tax rates for the six months ended June 30, 2002 and 2001 were
41.8% and 45.7%, respectively. The decrease in the effective tax
rate for the six months ended June 30, 2002 was primarily due to
updating book and tax timing differences related to research and
experimental expenses consistent with amended tax returns in addition
to book and tax timing differences related to depreciation.
SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2002 and 2001
(Unaudited)
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $142,892 $152,902 $285,222 $304,068
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 9,362 7,822 18,966 17,894
Nuclear refueling outage expenses 2,618 3,988 5,238 8,022
Other operation and maintenance 23,042 21,433 42,255 37,806
Decommissioning 4,014 4,736 8,028 9,472
Taxes other than income taxes 6,861 6,460 13,577 13,168
Depreciation and amortization 24,745 27,227 52,042 56,708
Other regulatory charges - net 13,128 19,955 26,054 39,122
-------- -------- -------- --------
TOTAL 83,770 91,621 166,160 182,192
-------- -------- -------- --------
OPERATING INCOME 59,122 61,281 119,062 121,876
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 700 484 1,250 754
Interest and dividend income 609 4,743 1,089 9,844
Miscellaneous - net (29) (20) (390) (50)
-------- -------- -------- --------
TOTAL 1,280 5,207 1,949 10,548
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 15,544 18,756 30,651 37,767
Other interest - net 718 8,929 1,503 17,636
Allowance for borrowed funds used during construction (247) (224) (479) (361)
-------- -------- -------- --------
TOTAL 16,015 27,461 31,675 55,042
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 44,387 39,027 89,336 77,382
Income taxes 19,137 17,825 37,359 35,382
-------- -------- -------- --------
NET INCOME $25,250 $21,202 $51,977 $42,000
======== ======== ======== ========
See Notes to Financial Statements.
(Page left blank intentionally)
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $51,977 $42,000
Noncash items included in net income:
Reserve for regulatory adjustments - 53,475
Other regulatory charges - net 26,054 39,122
Depreciation, amortization, and decommissioning 60,070 66,180
Deferred income taxes and investment tax credits (22,881) (44,214)
Allowance for equity funds used during construction (1,250) (754)
Changes in working capital:
Receivables (38,756) (101,734)
Accounts payable (1,293) (11,514)
Taxes accrued 50,002 62,571
Interest accrued (27,075) (18,683)
Other working capital accounts 2,448 (7,612)
Provision for estimated losses and reserves (291) (425)
Changes in other regulatory assets 15,148 20,394
Other 7,451 (3,295)
-------- --------
Net cash flow provided by operating activities 121,604 95,511
-------- --------
INVESTING ACTIVITIES
Construction expenditures (18,036) (22,758)
Allowance for equity funds used during construction 1,250 754
Nuclear fuel purchases - (37,592)
Proceeds from sale/leaseback of nuclear fuel - 37,592
Decommissioning trust contributions and realized
change in trust assets (2,854) (11,676)
Changes in other temporary investments - net 22,354 -
-------- --------
Net cash flow provided by (used in) investing activities 2,714 (33,680)
-------- --------
FINANCING ACTIVITIES
Retirement of long-term debt (30,891) (16,800)
Dividends paid:
Common stock (49,900) (43,000)
-------- --------
Net cash flow used in financing activities (80,791) (59,800)
-------- --------
Net increase in cash and cash equivalents 43,527 2,031
Cash and cash equivalents at beginning of period 49,579 202,218
-------- --------
Cash and cash equivalents at end of period $93,106 $204,249
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $57,121 $71,878
Income taxes - $3,463
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($5,715) ($1,417)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $92 $15
Temporary cash investments - at cost,
which approximates market 93,014 49,564
---------- ----------
Total cash and cash equivalents 93,106 49,579
---------- ----------
Other temporary investments - 22,354
Accounts receivable:
Associated companies 109,553 70,755
Other 1,151 1,193
---------- ----------
Total accounts receivable 110,704 71,948
---------- ----------
Materials and supplies - at average cost 52,659 51,665
Deferred nuclear refueling outage costs 3,551 8,728
Prepayments and other 3,963 1,631
---------- ----------
TOTAL 263,983 205,905
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 135,685 138,546
---------- ----------
UTILITY PLANT
Electric 3,100,775 3,098,446
Property under capital lease 450,014 450,014
Construction work in progress 51,370 36,868
Nuclear fuel under capital lease 48,347 61,905
---------- ----------
TOTAL UTILITY PLANT 3,650,506 3,647,233
Less - accumulated depreciation and amortization 1,467,793 1,416,337
---------- ----------
UTILITY PLANT - NET 2,182,713 2,230,896
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 154,944 173,470
Unamortized loss on reacquired debt 46,593 48,381
Other regulatory assets 161,327 157,949
Other 8,865 8,894
---------- ----------
TOTAL 371,729 388,694
---------- ----------
TOTAL ASSETS $2,954,110 $2,964,041
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
June 30, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $81,375 $100,891
Accounts payable:
Associated companies 993 2,404
Other 14,434 14,316
Taxes accrued 162,524 112,522
Accumulated deferred income taxes 353 2,360
Interest accrued 20,020 47,095
Obligations under capital leases 26,503 26,503
Other 2,180 1,583
---------- ----------
TOTAL 308,382 307,674
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 468,808 498,404
Accumulated deferred investment tax credits 84,302 86,040
Obligations under capital leases 21,844 35,401
Other regulatory liabilities 179,921 135,878
Decommissioning 142,957 140,103
Accumulated provisions 414 705
Other 36,024 39,117
---------- ----------
TOTAL 934,270 935,648
---------- ----------
Long-term debt 818,700 830,038
SHAREHOLDER'S EQUITY
Common stock, no par value, authorized 1,000,000 shares;
issued and outstanding 789,350 shares in 2002 and 2001 789,350 789,350
Retained earnings 103,408 101,331
---------- ----------
TOTAL 892,758 890,681
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,954,110 $2,964,041
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the financial statements in the Form 10-K for
information on Entergy's estimated construction expenditures
(including nuclear fuel but excluding AFUDC), as updated by the
following paragraph, long-term debt and preferred stock maturities,
and cash sinking fund requirements.
ANO 1 Steam Generator Replacement (Entergy Corporation and Entergy
Arkansas)
See "ANO Matters" in Part I of the Form 10-K for discussion of
the ANO 1 steam generators and reactor vessel closure head. On July
25, 2002, the Board authorized Entergy Arkansas and Entergy
Operations to replace the ANO 1 steam generators and reactor vessel
closure head. Entergy management estimates the cost of the
fabrication and replacement to be approximately $235 million, of
which approximately $135 million will be incurred through 2004.
Management expects a contractor for the installation of the
replacement steam generators and reactor vessel closure head to be
selected by December 2002. Management expects that the replacement
will occur during a planned refueling outage in 2005.
Sales Warranties and Indemnities (Entergy Corporation)
See Note 9 to the financial statements in the Form 10-K for
information on certain warranties made by Entergy or its subsidiaries
in the Entergy London and CitiPower sales transactions. See Note 14
to the financial statements in the Form 10-K for information on
certain warranties made by Entergy or its subsidiaries in the Saltend
sale transaction.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
See Note 9 to the financial statements in the Form 10-K for
information on nuclear liability, property and replacement power
insurance, related NRC regulations, the disposal of spent nuclear
fuel, other high-level radioactive waste, and decommissioning costs
associated with Entergy's nuclear power plants. Regarding nuclear
insurance, the Price-Anderson Act expired on August 1, 2002, and the
U.S. Congress is currently considering a number of proposals for its
renewal. Entergy's current nuclear operating licenses will not be
affected by the expiration, because operating licenses issued prior
to August 2002 are not affected by the expiration.
In July 2002, Entergy's domestic non-utility nuclear business
purchased the Vermont Yankee nuclear power plant from Vermont Yankee
Nuclear Power Corporation (VYNPC). Entergy's domestic non-utility
nuclear business has accepted assignment of the Vermont Yankee spent
fuel disposal contract with the DOE previously held by VYNPC. VYNPC
has paid or retained liability for the DOE fees for all generation
prior to the purchase date of Vermont Yankee. Vermont Yankee
currently has sufficient spent fuel storage capacity until
approximately 2007.
As part of the Vermont Yankee purchase, VYNPC transferred a $310
million decommissioning trust fund, along with the liability to
decommission Vermont Yankee, to Entergy's domestic non-utility
nuclear business. Entergy believes that Vermont Yankee's
decommissioning trust fund will be adequate to cover future
decommissioning costs for the plant without any additional deposits
to the trust.
Environmental Issues
(Entergy Arkansas)
In previous years, Entergy Arkansas has received notices from
the EPA and the ADEQ alleging that Entergy Arkansas, along with
others, may be a potentially responsible party (PRP) for clean-up
costs associated with a site in Arkansas. As of June 30, 2002, a
remaining recorded liability of approximately $5.0 million existed
related to the cleanup of that site.
(Entergy Gulf States)
Entergy Gulf States has been designated as a PRP for the cleanup
of certain hazardous waste disposal sites. Entergy Gulf States is
currently negotiating with the EPA and state authorities regarding
the cleanup of these sites. As of June 30, 2002, a remaining
recorded liability of approximately $14.7 million existed related to
the cleanup of the remaining sites at which the EPA has designated
Entergy Gulf States as a PRP.
(Entergy Louisiana and Entergy New Orleans)
During 1993, the LDEQ issued new rules for solid waste
regulation, including regulation of wastewater impoundments. Entergy
Louisiana and Entergy New Orleans have determined that certain of
their power plant wastewater impoundments were affected by these
regulations and have chosen to upgrade or close them. Recorded
liabilities in the amounts of $5.8 million for Entergy Louisiana and
$0.5 million for Entergy New Orleans existed at June 30, 2002 for
wastewater upgrades and closures. Completion of this work is
awaiting LDEQ approval.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the
City of New Orleans pursuant to franchise ordinances. These
ordinances contain a continuing option for the City of New Orleans to
purchase Entergy New Orleans' electric and gas utility properties.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
separate but substantially identical transactions for the sale and
leaseback of undivided interests (aggregating approximately 9.3%) in
Waterford 3, which were refinanced in 1997. Upon the occurrence of
certain events, Entergy Louisiana may be obligated to pay amounts
sufficient to permit the termination of the lease transactions and
may be required to assume the outstanding bonds issued to finance, in
part, the lessors' acquisition of the undivided interests in
Waterford 3. See Note 10 to the financial statements in the Form 10-
K for further information.
Off Balance Sheet Turbine Financing Arrangement (Entergy
Corporation)
As discussed in Note 9 to the financial statements in the Form
10-K, EWO obtained contracts in October 1999 to acquire 36 turbines
from General Electric. Entergy's rights and obligations under the
contracts for 22 of the turbines were sold to an independent special-
purpose entity in May 2001. For the six months ended June 30, 2002,
Entergy recorded a $180.2 million ($117.1 million net of tax)
provision for Entergy's estimate of the impairments resulting from
cancellation or sale of the turbines subject to purchase commitments
with the special-purpose entity. The Consolidated Statement of
Operations reflects the pre-tax effect of this liability in operation
and maintenance expenses.
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are
defendants in numerous lawsuits filed by former employees asserting
that they were wrongfully terminated and/or discriminated against on
the basis of age, race, sex, or other protected characteristics. The
defendant companies are vigorously defending these suits and deny any
liability to the plaintiffs. Nevertheless, no assurance can be given
as to the outcome of these cases.
Asbestos and Hazardous Material Litigation (Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans)
Numerous lawsuits have been filed in federal and state courts in
Texas and Louisiana primarily by contractor employees in the 1950-
1980 timeframe against Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans, as premises owners of power plants, for damages
caused by alleged exposure to asbestos or other hazardous material.
See Note 9 to the financial statements in the Form 10-K for further
information.
Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
In addition to those proceedings discussed elsewhere herein and
in the Form 10-K, Entergy and the domestic utility companies are
involved in a number of other legal proceedings and claims in the
ordinary course of their businesses. While management is unable to
predict the outcome of these other legal proceedings and claims, it
is not reasonably expected that their ultimate resolution
individually or collectively will have a material adverse effect on
the results of operations, cash flows, or financial condition of
these entities.
NOTE 2. RATE AND REGULATORY MATTERS
Electric Industry Restructuring and the Continued Application of SFAS
71
Previous developments and information related to electric
industry restructuring are presented in Note 2 to the financial
statements in the Form 10-K.
Texas
(Entergy Corporation and Entergy Gulf States)
Retail open access legislation is in place in Texas, but the
implementation of retail open access in Entergy Gulf States' service
territory is delayed until at least September 15, 2002. Management
does not expect that retail open access in Entergy Gulf States' Texas
service territory within the context of a functional FERC-approved
RTO is likely to begin before January 2004. Several proceedings
necessary to implement retail open access are still pending,
including the proceeding to set the price-to-beat fuel rate that will
be charged by Entergy's retail electric service provider. In
addition, the LPSC has not approved for the Louisiana jurisdictional
operations the transfer of generation assets to, or a power purchase
agreement with, Entergy's Texas generation company. Given the delay,
Entergy Gulf States cannot predict what, if any, additional changes
to previously approved plans may be required by the PUCT or the LPSC.
Therefore, neither the necessary regulatory actions nor the
opportunity for a reasonable determination of the effect of
deregulation has occurred that are prerequisites for Entergy Gulf
States to discontinue the application of regulatory accounting
principles to its Texas generation operations.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
March 2002 Settlement Agreement
As discussed in the Form 10-K, in March 2002, Entergy Arkansas,
the APSC staff, and the Arkansas Attorney General submitted a
settlement agreement to the APSC for approval. The settlement
agreement proposed a resolution of issues discussed in the Form 10-K
under "Retail Rates," "Transition Cost Account," and "December 2000
Ice Storm Cost Recovery." In May 2002, the APSC approved the March
2002 settlement agreement without revision.
Transition Cost Account
In May 2002, Entergy Arkansas filed its 2001 earnings evaluation
report with the APSC. In June 2002, the APSC approved a contribution
of $5.9 million to the TCA. The balance in the TCA after this
contribution was $155.5 million, including interest, through June
2002. A principal provision in the March 2002 settlement agreement
is to offset $137.4 million of ice storm recovery costs with the TCA
on a rate class basis. In accordance with the settlement agreement
and following the APSC's approval of Entergy Arkansas' 2001 earnings
review, Entergy Arkansas filed to return $18.1 million of the TCA to
certain large general service class customers that paid more into the
TCA than their allocation of storm costs. The APSC approved the
return of funds to the large general service customer class in the
form of refund checks in August 2002.
December 2000 Ice Storm Cost Recovery
The March 2002 settlement agreement provisions allow Entergy
Arkansas to offset incremental ice storm expenses with the funds
accumulated in the TCA on a rate class basis, and any excess of ice
storm costs over the amount available in the TCA will be deferred for
recovery. The allocated ice storm expenses exceed the available TCA
funds by $15.8 million. This excess amount was recorded as a
regulatory asset in June 2002 and will be amortized over a 30-year
period.
Fuel Cost Recovery
In March 2002, Entergy Arkansas filed its annually redetermined
energy cost rate with the APSC, including a new energy allocation
factor. The filing reflected a decrease due to reduced fuel and
purchased power costs in 2001 and the accumulated over-recovery of
2001 energy costs. The decreased energy cost rate is effective April
2002 through March 2003.
Filings with the PUCT and Texas Cities (Entergy Corporation and
Entergy Gulf States)
Recovery of River Bend Costs
In March 1998, the PUCT disallowed recovery of $1.4 billion of
company-wide abeyed River Bend plant costs, which have been held in
abeyance since 1988. Entergy Gulf States appealed the PUCT's
decision on this matter to the Travis County District Court in Texas.
In June 1999, subsequent to the settlement agreement discussed in the
Form 10-K, Entergy Gulf States removed the reserve for River Bend
plant costs held in abeyance and reduced the value of the plant
asset. The settlement agreement limits potential recovery of the
remaining plant asset, less depreciation, to $115 million as of
January 1, 2002. In a settlement in its transition to competition
proceedings, and consistent with the June 1999 settlement, Entergy
Gulf States agreed not to prosecute its appeal until January 1, 2002.
Entergy Gulf States also agreed that it will not seek recovery of the
abeyed plant costs through any additional charge to Texas ratepayers.
In its interim order approving this settlement, however, the PUCT
recognized that any additional River Bend investment found prudent,
subject to the $115 million cap, could be used as an offset against
stranded benefits, should legislation be passed requiring Entergy
Gulf States to return stranded benefits to retail customers. Entergy
Gulf States is now prosecuting its appeal and in April 2002, the
Travis County District Court issued an order affirming the PUCT's
order on remand. Entergy Gulf States has appealed this ruling to the
Third District Court of Appeals. The financial statement impact of
the retail rate settlement agreement on the remaining abeyed plant
costs will ultimately depend on several factors, including the
possible discontinuance of SFAS 71 accounting treatment for the Texas
generation business, the determination of the market value of
generation assets, and any future legislation in Texas addressing the
pass-through or sharing of any stranded benefits with Texas
ratepayers. While Entergy Gulf States expects to prevail in its
lawsuit, no assurance can be given that additional reserves or write-
offs will not be required in the future.
PUCT Fuel Cost Review
As determined in the June 1999 retail rate settlement agreement,
Entergy Gulf States adopted a methodology for calculating its fixed
fuel factor based on the market price of natural gas. This
calculation and any necessary adjustments occur semi-annually. The
settlement that delayed implementation of retail open access in Texas
for Entergy Gulf States provides that Entergy Gulf States will
continue the use of this methodology until retail open access begins.
The amounts collected under Entergy Gulf States' fixed fuel factor
until the date retail open access commences are subject to fuel
reconciliation proceedings before the PUCT. The interim surcharge
discussed below will also be subject to the fuel reconciliation
proceeding.
In January 2001, Entergy Gulf States filed a fuel reconciliation
case covering the period from March 1999 through August 2000.
Entergy Gulf States is reconciling approximately $583.0 million of
fuel and purchased power costs. As part of this filing, Entergy Gulf
States requested a surcharge to collect $28.0 million, plus interest,
of under-recovered fuel and purchased power costs. A hearing on the
merits concluded in August 2001, and the ALJ has recommended that the
surcharge be reduced to $7.0 million. The PUCT considered the ALJ's
recommendation in February 2002, but did not reach a final decision.
The PUCT remanded certain issues related to the eligibility of costs
for Entergy Gulf States 30% non-regulated share of River Bend for
further consideration by the ALJ. After considering the remanded
issues in June 2002, the PUCT issued an oral ruling indicating that
the surcharge request should be reduced to approximately $5.0
million. Approximately $4.7 million of the total reduction to the
requested surcharge relates to nuclear fuel costs that the PUCT
deferred ruling on at this time. The PUCT issued a written order
supporting its decisions, which will be subject to rehearing. No
assurance can be given as to the final outcome of this proceeding.
In November 2001, Entergy Gulf States filed an application with
the PUCT requesting an interim surcharge to collect $71 million, plus
interest, of under-recovered fuel and purchased power expenses
incurred from September 2000 through September 2001. Entergy Gulf
States made the application pursuant to one of the terms of the
settlement agreement that delayed implementation of retail open
access in Texas for Entergy Gulf States. In March 2002, Entergy Gulf
States revised its request to collect $30.3 million, plus interest,
of under-recovered fuel and purchased power expenses incurred from
September 2000 through February 2002. Entergy Gulf States requested
that the surcharge begin in April 2002 and extend through August
2002, or until the fuel cost is fully recovered, whichever is sooner.
In March 2002, the PUCT issued an order approving the surcharge. The
surcharge was implemented in the first billing cycle of April 2002.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf
States)
In May 2001, Entergy Gulf States filed its eighth required post-
merger earnings review with the LPSC. This filing is subject to
review by the LPSC and may result in a change in rates. In April
2002, the LPSC staff filed testimony recommending a $16.5 million
rate refund and a $40.1 million prospective rate reduction. The
prospective reduction includes a recommended reduction in the rate of
return on common equity (ROE) that would not take effect until the
later of June 2003 or the date of the LPSC's order. Hearings were
held in April 2002 and will continue in August 2002.
In May 2002, Entergy Gulf States filed its ninth and last
required post-merger earnings analysis with the LPSC. The filing was
based on the 2001 test year and resulted in a rate decrease of $11.5
million, which was implemented effective June 2002. This filing is
subject to review by the LPSC and may result in additional or
different changes in rates than those sought in the filing. No
procedural schedule has been adopted.
In June 2002, an ALJ issued a proposed recommendation to the
LPSC with regard to issues raised in Entergy Gulf States' fifth
annual post-merger earnings review. The ALJ recommended adoption of
the LPSC Staff's position on most issues, including the
recommendation that Entergy Gulf States' authorized ROE be set at
10.0%. However, due to a settlement agreement currently in effect,
Entergy Gulf States' currently authorized ROE of 11.1% will remain in
effect through May 2003. Entergy Gulf States cannot predict the
timing or outcome of this proceeding.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In May 1997, Entergy Louisiana made its second annual
performance-based formula rate plan filing with the LPSC for the 1996
test year. This filing resulted in a total rate reduction of
approximately $54.5 million, which was implemented in July 1997. At
the same time, rates were reduced by an additional $0.7 million and
by an additional $2.9 million effective March 1998. Upon completion
of the hearing process in December 1998, the LPSC issued an order
requiring an additional rate reduction and refund, although the
resulting amounts were not quantified. Entergy Louisiana appealed
this order and obtained a preliminary injunction pending a final
decision on appeal. The Louisiana Supreme Court rendered a non-
unanimous decision in April 2002 affirming the LPSC's order. Entergy
Louisiana has filed an application for rehearing.
In May 2000, Entergy Louisiana submitted its fifth annual
performance-based formula rate plan filing for the 1999 test year.
As a result of this filing, Entergy Louisiana implemented a $24.8
million base rate reduction in August 2000. In September 2001, the
LPSC approved a settlement in which Entergy Louisiana agreed to
increase to $28.2 million the total base rate reduction, effective
August 2000. The additional rate reduction and the associated credit
were implemented in September 2001. The settlement resolved all
issues in the proceeding except for Entergy Louisiana's claim for an
increase in its allowed return on common equity from 10.5% to 11.6%.
A hearing to address the return on common equity issue was held in
March 2002. This issue was resolved in the June 2002 settlement
between Entergy Louisiana and the LPSC discussed below.
In April 2001, Entergy Louisiana submitted its sixth annual
performance-based formula rate plan filing, which used a 2000 test
year. The filing indicated that an immaterial base rate reduction
might be appropriate. Subsequently, Entergy Louisiana agreed to
implement a $3.4 million rate reduction effective August 2001. This
stipulation resolved all issues relating to the 2000 test year,
except issues relating to its return on common equity and the
treatment of certain capacity costs in the formula rate plan process.
These issues were addressed in a hearing in June 2002 and were
resolved in the settlement discussed below.
In June 2002, Entergy Louisiana and the LPSC Staff reached a
settlement that resolved all remaining issues in the 2000 and 2001
formula rate plan proceedings. Entergy Louisiana has agreed to a $5
million annual rate reduction effective August 2001. The prospective
rate reduction will be implemented beginning in August 2002 and the
refund for the retroactive period will occur in September 2002. As
part of the settlement, Entergy Louisiana's rates, including its
previously authorized ROE of 10.5%, would then remain in effect until
changed pursuant to a new formula rate plan filing or a revenue
requirement analysis to be filed by June 30, 2003. The settlement
was approved by the LPSC in July 2002.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
Formula Rate Plan Filings
In March 2002, Entergy Mississippi submitted its annual
performance-based formula rate plan filing for the 2001 test year.
The submittal indicated that a $2.8 million rate increase was
appropriate under the formula rate plan. In April 2002, the MPSC
Staff and Entergy Mississippi entered into a stipulation, which the
MPSC approved, that provided for an increase of $1.95 million
effective in May 2002.
Filings with the Council (Entergy Corporation and Entergy New
Orleans)
Retail Rate Filings
In May 2002, Entergy New Orleans filed a cost of service study
and revenue requirement filing with the Council for the 2001 test
year. The filing indicated that a revenue deficiency exists and that
a $28.9 million electric rate increase and a $15.3 million gas rate
increase are appropriate. Additionally, Entergy New Orleans has
proposed a $6.0 million public benefit fund. The Council has not
established a procedural schedule for consideration of the filing.
Natural Gas
In a resolution adopted in August 2001, the Council ordered
Entergy New Orleans to account for $36 million of certain natural gas
costs charged to its gas distribution customers from July 1997
through May 2001. The resolution suggests that refunds may be due to
the gas distribution customers if Entergy New Orleans cannot account
satisfactorily for these costs. Entergy New Orleans filed a response
to the Council in September 2001. Entergy New Orleans has documented
a full reconciliation for the natural gas costs during that period.
The ultimate outcome of the proceeding cannot be predicted at this
time.
Fuel Adjustment Clause Litigation
In April 1999, a group of ratepayers filed a complaint against
Entergy New Orleans, Entergy Corporation, Entergy Services, and
Entergy Power in state court in Orleans Parish purportedly on behalf
of all Entergy New Orleans ratepayers. The plaintiffs seek treble
damages for alleged injuries arising from the defendants' alleged
violations of Louisiana's antitrust laws in connection with certain
costs passed on to ratepayers in Entergy New Orleans' fuel adjustment
filings with the Council. In particular, plaintiffs allege that
Entergy New Orleans improperly included certain costs in the
calculation of fuel charges and that Entergy New Orleans imprudently
purchased high-cost fuel from other Entergy affiliates. Plaintiffs
allege that Entergy New Orleans and the other defendant Entergy
companies conspired to make these purchases to the detriment of
Entergy New Orleans' ratepayers and to the benefit of Entergy's
shareholders, in violation of Louisiana's antitrust laws. Plaintiffs
also seek to recover interest and attorneys' fees. Entergy filed
exceptions to the plaintiffs' allegations, asserting, among other
things, that jurisdiction over these issues rests with the Council
and FERC. If necessary, at the appropriate time, Entergy will also
raise its defenses to the antitrust claims. At present, the suit in
state court is stayed by stipulation of the parties.
Plaintiffs also filed this complaint with the Council in order
to initiate a review by the Council of the plaintiffs' allegations
and to force restitution to ratepayers of all costs they allege were
improperly and imprudently included in the fuel adjustment filings.
Testimony was filed on behalf of the plaintiffs in this proceeding in
April 2000 and has been supplemented. The testimony, as
supplemented, asserts, among other things, that Entergy New Orleans
and other defendants have engaged in fuel procurement and power
purchasing practices and included costs in Entergy New Orleans' fuel
adjustment that could have resulted in New Orleans customers being
overcharged by more than $100 million over a period of years. In
June 2001, the Council's advisors filed testimony on these issues in
which they allege that Entergy New Orleans ratepayers may have been
overcharged by more than $32 million, the vast majority of which is
reflected in the plaintiffs' claim. However, it is not clear
precisely what periods and damages are being alleged in the
proceeding. Entergy intends to defend this matter vigorously, both
in court and before the Council. Hearings were held in February and
March 2002. The ultimate outcome of the lawsuit and the Council
proceeding cannot be predicted at this time.
Purchased Power for Summer 2000, 2001, and 2002 (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
The domestic utility companies requested that the APSC, the LPSC,
the MPSC, and the Council to approve the sale of power by Entergy
Gulf States from its unregulated, undivided 30% interest in River
Bend formerly owned by Cajun to the other domestic utility
companies during the summer of 2000. These applications were
approved subject to subsequent prudence reviews. In addition,
Entergy Gulf States and Entergy Louisiana filed an application with
the LPSC for authorization to purchase capacity and electric power
from third parties for the summer of 2000, and filed a similar
application for the summer of 2001. The LPSC approved these
applications, with reservation of its rights to review the prudence
of the purchases and the appropriate categorization of the costs as
either capacity or energy charges for purposes of recovery.
The LPSC reviewed the 2000 purchases and found that Entergy
Louisiana's and Entergy Gulf States' costs were prudently incurred,
but decided that approximately 34% of the costs should be categorized
as capacity charges, and therefore should be recovered through base
rates and not through the fuel adjustment clause. In November 2000,
the LPSC ordered refunds of $11.1 million for Entergy Louisiana and
$3.6 million for Entergy Gulf States, for which adequate provisions
were made. In May 2001, the LPSC determined that 24% of Entergy
Louisiana's and Entergy Gulf States' costs relating to summer 2001
purchases should be categorized as capacity charges, and has reviewed
certain prudence issues related to the 2001 purchases. The LPSC has
questioned the system's contract mix and raised issues relating to
potential uprates at nuclear facilities. Hearings on those issues
were conducted in May 2002, and briefs have been filed by the
parties. Those costs that are categorized as capacity charges will
be included in the costs of service used to determine the base rates
of Entergy Louisiana and Entergy Gulf States. In 2001, these
companies recorded a regulatory asset for the capacity charges
incurred in both 2000 and 2001. The capacity charges for 2000 were
amortized through May 2002 for Entergy Gulf States and through July
2002 for Entergy Louisiana. The capacity charges for 2001 are being
amortized over a twelve-month period, which began in June 2002 for
Entergy Gulf States and will begin in August 2002 for Entergy
Louisiana.
In March 2002, Entergy Louisiana and Entergy Gulf States filed
an application with the LPSC for the summer of 2002 similar to the
applications filed for the summers of 2000 and 2001. A procedural
schedule has been adopted for that docket. Entergy Louisiana,
Entergy Gulf States, and the LPSC Staff reached a settlement in which
those parties agreed that 14% of Entergy Louisiana's and Entergy Gulf
States' costs relating to summer 2002 purchases should be categorized
as capacity charges. A fairness hearing was held in May 2002 and no
party to this proceeding opposed the settlement. The LPSC approved
the settlement at its July 2002 public meeting. A procedural
schedule has been adopted to address any prudence issues relating to
summer 2002 purchases. A hearing is expected in October 2002.
System Energy's 1995 Rate Proceeding (Entergy Corporation, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy)
As discussed in the Form 10-K, FERC denied requests for
rehearing in the System Energy rate increase proceeding and the July
2000 order became final. System Energy made a compliance tariff
filing in August 2001 and it was accepted by FERC in November 2001.
System Energy made refunds to the domestic utility companies in
December 2001. A portion of the refund to the domestic utility
companies has been or will be refunded to customers. Entergy
Arkansas refunded $54.3 million, including interest, through the
issuance of refund checks in March 2002 as approved by the APSC.
Entergy Mississippi is refunding $14.8 million to its customers
through credits to the Grand Gulf Riders. The credits began in
October 2001 and will occur through September 2002. Entergy New
Orleans refunded $27.0 million to its customers through the issuance
of refund checks in the first quarter of 2002. Entergy Louisiana
will refund $4.9 million, including interest, to its customers
through a credit on the September 2002 bills as approved by the LPSC.
NOTE 3. COMMON STOCK (Entergy Corporation)
The average number of common shares outstanding for the
presentation of diluted earnings per share was greater by 4,517,098
and 4,592,823 shares for the three months ended June 30, 2002 and
2001, respectively, and 4,445,242 and 4,230,700 shares for the six
months ended June 30, 2002 and 2001, respectively, than the number of
such shares for the presentation of basic earnings per share due to
Entergy's stock option and other stock compensation plans discussed
more thoroughly in Note 5 to the financial statements in the Form 10-
K. The dilutive effect of the stock options on earnings per share
for the three months ended June 2002 and 2001 was $.02 for both
periods. The dilutive effect of the stock options on earnings per
share for the six months ended June 30, 2002 and 2001 was $.01 and
$.03, respectively.
During the six months ended June 30, 2002, Entergy Corporation
issued 3,941,176 shares of its previously repurchased common stock to
satisfy stock option exercises.
NOTE 4. LONG-TERM DEBT
(Entergy Corporation)
As discussed in Note 7 to the financial statements in the Form
10-K, the Damhead Creek credit facility requires that the annual debt
service coverage ratio be at least 1.05 to 1 for the previous 12
months at semi-annual dates commencing with June 30, 2002. Given the
low electricity prices currently affecting the UK market, Damhead
Creek would not have met the annual debt service coverage ratio test
in respect of the 12 months ended June 30, 2002, but the lenders
amended the facility so that the coverage ratio calculations would
not commence until December 31, 2002. Damhead Creek is currently in
negotiations with the lenders to develop and implement a debt
restructuring for the project prior to December 2002. If a debt
restructuring agreement cannot be reached, however, Damhead Creek
will likely not meet the debt service coverage ratio provisions of
the credit facility on December 31, 2002. In the event the annual
debt service coverage ratio is deficient at December 31, 2002,
Damhead Creek will seek a waiver of the default from the lenders.
There is no requirement for Entergy or EPDC to make capital
contributions or provide credit support to Damhead Creek following
the occurrence of an event of default.
(Entergy Arkansas)
On March 1, 2002, Entergy Arkansas retired, at maturity, $85
million of 7% Series First Mortgage Bonds with internally generated
funds.
On March 28, 2002, Entergy Arkansas issued $100 million of 6.70%
Series First Mortgage Bonds due April 1, 2032. A portion of the net
proceeds was used to satisfy the annual replacement fund requirement
under the mortgage relating to the bonds by redeeming $85 million of
8.75% Series First Mortgage Bonds due March 1, 2026. The remaining
net proceeds were used to replace a portion of the cash that was used
to meet the maturity of the $85 million 7% Series First Mortgage
Bonds retired on March 1, 2002 discussed above.
(Entergy Gulf States)
On January 1, 2002, Entergy Gulf States retired, at maturity,
$148 million of 8.21% Series First Mortgage Bonds with internally
generated funds.
(Entergy Louisiana)
On January 1, 2002, Entergy Louisiana retired, at maturity, $23
million of 7.5% Series First Mortgage Bonds. On March 1, 2002,
Entergy Louisiana retired, at maturity, $75 million of 5.80% Series
First Mortgage Bonds.
On March 27, 2002, Entergy Louisiana issued $150 million of
7.60% Series First Mortgage Bonds due April 1, 2032. A portion of
the net proceeds was used to satisfy the annual replacement fund
requirement under the mortgage relating to the bonds by redeeming
$115 million of 8.75% Series First Mortgage Bonds due March 1, 2026.
The remaining net proceeds will be used to reduce short-term debt
which, among other things, was incurred to meet the maturities of the
First Mortgage Bonds discussed above.
On June 1, 2002, Entergy Louisiana remarketed $55 million St.
Charles Parish Pollution Control Revenue Refunding Bonds due 2030,
accruing interest at a rate of 4.9% through May 31, 2005.
On July 1, 2002, Entergy Louisiana retired, at maturity, $56.4
million of 7.74% Series First Mortgage Bonds with internally
generated funds.
(Entergy Mississippi)
On June 1, 2002, Entergy Mississippi retired, at maturity, $65
million of 6.875% Series First Mortgage Bonds with internally
generated funds.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On July 26, 2002, Entergy Corporation's Board of Directors
declared a common stock dividend of $0.33 per share, payable on
September 1, 2002, to holders of record as of August 13, 2002.
NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation)
Entergy's reportable segments as of June 30, 2002 are domestic
utility, domestic non-utility nuclear, and energy commodity services.
"All Other" includes the parent company, Entergy Corporation, and
other business activity, which is principally gains or losses on the
sales of businesses and the earnings on the proceeds of those sales.
Entergy's segment financial information for the three months
ended June 30, 2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Eliminations Consolidated
Utility Utility Commodity Other*
Nuclear* Services*
2002
Operating Revenues $1,712,248 $297,072 $81,071 $8,586 ($2,396) $2,096,581
Equity in earnings of
unconsolidated equity affiliates - - 17,740 - - 17,740
Income Taxes (Benefit) 136,536 35,656 (20,171) (3,487) - 148,534
Net Income (Loss) 200,782 53,531 (1,688) (5,040) - 247,585
2001
Operating Revenues $2,022,354 $150,041 $327,031 $8,092 ($1,243) $2,506,275
Equity in earnings of
unconsolidated equity affiliates - - 70,780 - - 70,780
Income Taxes 115,228 21,403 26,972 2,239 - 165,842
Net Income 175,155 33,101 30,179 7,148 - 245,583
Entergy's segment financial information for the six months ended
June 30, 2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Other* Eliminations Consolidated
Utility Utility Commodity
Nuclear* Services*
2002
Operating Revenues $3,160,047 $575,968 $206,832 $17,587 ($3,019) $3,957,415
Equity in earnings of
unconsolidated equity affiliates - - 92,804 - - 92,804
Income Taxes (Benefit) 201,912 61,909 (133,508) (7,677) - 122,636
Net Income (Loss) 309,026 93,596 (216,814) (11,207) - 174,601
Total Assets 19,993,613 3,790,815 2,469,812 977,658 (1,230,564) 26,001,334
2001
Operating Revenues $4,006,062 $329,416 $804,981 $20,482 ($2,235) $5,158,706
Equity in earnings of
unconsolidated equity affiliates - - 95,543 - - 95,543
Income Taxes (Benefit) 200,733 42,089 34,569 (3,119) - 274,272
Net Income (Loss) 295,593 64,484 48,524 (2,147) - 406,454
Total Assets 20,706,094 2,093,291 2,604,398 958,379 (995,320) 25,366,842
Businesses marked with * are sometimes referred to as the
"competitive businesses," with the exception of the parent company,
Entergy Corporation. Eliminations are primarily intersegment
activity.
Energy commodity services' net loss for the six months ended
June 30, 2002 includes charges of $419.5 million to operating
expenses ($271.5 million net of tax), including $18.1 million ($10.6
million net of tax) in the second quarter, to reflect the effect of
Entergy's decision to discontinue additional EWO greenfield power
plant development and to reflect asset impairments resulting from the
deteriorating economics of wholesale power markets in the United
States and the United Kingdom. The charges consist of the following:
o as discussed in Note 1, $180.2 million (($36) million in the
second quarter) of the charges is a provision for the net costs
resulting from cancellation or sale of the turbines subject to
purchase commitments with a special-purpose entity;
o $167.5 million ($15 million in the second quarter) of the
charges result from the write-off of EPDC's equity investment in the
Damhead Creek project ($55.0 million) and the impairment of the
values of the Warren Power power plant, the Crete project, and the RS
Cogen project ($112.5 million combined). This portion of the charges
reflects Entergy's estimate of the effects of reduced spark spreads
in the United States and the United Kingdom. These estimates are
based on various sources of information, including discounted cash
flow projections and current market prices;
o $39.1 million ($39.1 million in the second quarter) of the
charges relates to the restructuring of EWO, including impairments of
EWO administrative fixed assets, estimated sublease losses, and
employee-related costs for approximately 135 affected employees.
These restructuring costs, which are included in the "Provision for
turbine commitments, asset impairments and restructuring charges" in
the accompanying consolidated statement of income as of June 30,
2002, were comprised of the following (in millions):
Accrual for
Expected Paid
Cash in Non- Total
Payments Cash Cash Expense
Fixed asset impairments - - $22.5 $22.5
Sublease losses $10.7 - - 10.7
Severance and related costs 5.9 - - 5.9
----- ----- -----
Total $16.6 - $22.5 $39.1
===== ===== =====
Management expects the restructuring of EWO to be
substantially complete by the end of 2002; and
o $32.7 million (none in the second quarter) of the charges
results from the write-off of capitalized project development costs
for projects that will not be completed.
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS (Entergy Corporation)
As discussed in the Form 10-K, Entergy implemented SFAS 142,
"Goodwill and Other Intangible Assets" and SFAS 144, "Accounting for
the Impairment or Disposal of Long-lived Assets" effective January 1,
2002. The implementation of SFAS 142 resulted in the cessation of
Entergy's amortization of the remaining plant acquisition adjustment
recorded in conjunction with its acquisition of Entergy Gulf States;
this will increase Entergy's annual net income by approximately $16.3
million. The following table is a reconciliation of reported
earnings applicable to common stock to earnings applicable to common
stock without goodwill amortization for the three and six months
ended June 30, 2002 and 2001.
Three Months Ended Six Months Ended
2002 2001 2002 2001
(In Thousands, Except Share Data)
Reported earnings (loss) applicable to common stock $241,653 $238,906 $162,729 $393,061
Add back: Goodwill amortization - 4,066 - 8,133
Earnings (loss) applicable to common stock without -------- -------- -------- --------
goodwill amortization $241,653 $242,972 $162,729 $401,194
======== ======== ======== ========
Basic earnings (loss) per average common share:
Reported earnings (loss) applicable to common stock $1.08 $1.08 $0.73 $1.78
Goodwill amortization - 0.02 - 0.04
Earnings (loss) applicable to common stock without -------- -------- -------- --------
goodwill amortization $1.08 $1.10 $0.73 $1.82
======== ======== ======== ========
Diluted earnings (loss) per average common share:
Reported earnings (loss) applicable to common stock $1.06 $1.06 $0.72 $1.75
Goodwill amortization - 0.02 - 0.04
Earnings (loss) applicable to common stock without -------- -------- -------- --------
goodwill amortization $1.06 $1.08 $0.72 $1.79
======== ======== ======== ========
NOTE 8. EQUITY METHOD INVESTMENTS (Entergy Corporation)
See Note 13 to the financial statements in the Form 10-K for a
discussion of Entergy's equity method investments.
In the first quarter of 2002, EWO sold its interests in projects
in Argentina, Chile, and Peru, including Generandes Peru S.A. and
Compania Electrica San Isidro S.A. EWO had $100.8 million reflected
in "Investments in affiliates - at equity" for these investments as
of December 31, 2001, and reported $11.6 million of "Equity in
earnings of unconsolidated equity affiliates" from these investments
for the year ended December 31, 2001. After impairment provisions
recorded for these interests in 2001, the net loss realized on the
sale in the first quarter of 2002 is insignificant. Approximately
$66 million of cumulative translation adjustments were realized in
the sale.
As discussed in Note 6, for the six months ended June 30, 2002,
Entergy recorded an impairment of $78.3 million against the book
value of its investments in Crete Energy Ventures, LLC and RS Cogen
LLC.
__________________________________
In the opinion of the management of Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy, the accompanying
unaudited financial statements contain all adjustments (consisting
primarily of normal recurring accruals and reclassification of
previously reported amounts to conform to current classifications)
necessary for a fair statement of the results for the interim periods
presented. However, the business of the domestic utility companies
and System Energy is subject to seasonal fluctuations with the peak
periods occurring during the third quarter. The results for the
interim periods presented should not be used as a basis for
estimating results of operations for a full year.
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1, Other Regulation and Litigation" in the
Form 10-K for a discussion of legal proceedings affecting Entergy.
Murphy Oil Lawsuit (Entergy Corporation)
Residents located near the Murphy Oil Refinery in Meraux,
Louisiana filed several lawsuits in state court in St. Bernard
Parish, Louisiana against Murphy Oil, Entergy Louisiana, and others
for injuries they allegedly suffered as a result of an explosion at
the refinery in June 1995. The lawsuits were consolidated and a
class of plaintiffs was certified. Plaintiffs alleged, among other
things, that an electrical fault at an Entergy Louisiana substation
contributed to causing the explosion. Murphy Oil filed a cross-claim
against Entergy Louisiana based on the same allegation, in which
Murphy Oil seeks recovery of any damages it has paid to the
plaintiffs. Claiborne P. Deming, who became a director of Entergy
Corporation in 2002, is the President and Chief Executive Officer of
Murphy Oil.
Murphy Oil and other defendants settled with the plaintiffs for
$8.8 million, but Entergy Louisiana did not participate in the
settlement. Entergy Louisiana believes the claims against it are
without merit and is vigorously defending itself. Entergy Louisiana
also has insurance in place for claims of this type. The proceeding
is currently recessed pending rescheduling for trial involving the
remaining parties in the proceeding.
Franchise Service Area Litigation (Entergy Gulf States)
See "Franchise Service Area Legislation" in Item 1 of Part I of
the Form 10-K for a discussion of the litigation with Beaumont Power
& Light (BP&L). In July 2002, the ALJ in that proceeding recommended
denial of BP&L's certificate of convenience and necessity request.
The PUCT has not yet issued a decision.
Ratepayer Lawsuits (Entergy New Orleans)
See "Entergy New Orleans Rate of Return Lawsuit" in Item 1 of
Part I of the Form 10-K for a discussion of the litigation filed by
ratepayers against Entergy New Orleans. The hearing scheduled for
June 2002 was postponed and the proceeding has been continued without
date.
Franchise Fee Litigation (Entergy Corporation and Entergy Gulf
States)
See "Franchise Fee Legislation" in Item 1 of Part I of the Form
10-K for a discussion of the lawsuit filed by the City of Nederland.
The proceeding has now been abated.
Item 4. Submission of Matters to a Vote of Security Holders
Election of Board of Directors
Entergy Corporation
The annual meeting of stockholders of Entergy Corporation was
held on May 10, 2002. The following matters were voted on and
received the specified number of votes for, abstentions, votes
withheld (against), and broker non-votes:
1. Election of Directors:
Votes Broker
Name of Nominee Votes For Abstentions Withheld Non-Votes
Maureen S. Bateman 181,918,377 N/A 3,014,980 N/A
W. Frank Blount 177,813,782 N/A 7,119,575 N/A
George W. Davis 181,933,748 N/A 2,999,609 N/A
Simon D. deBree 183,053,198 N/A 1,880,159 N/A
Claiborne P. Deming 183,088,815 N/A 1,844,542 N/A
Norman C. Francis 183,072,393 N/A 1,860,964 N/A
J. Wayne Leonard 183,168,265 N/A 1,765,092 N/A
Robert v.d. Luft 183,156,928 N/A 1,776,429 N/A
Kathleen A. Murphy 181,950,155 N/A 2,983,202 N/A
Paul W. Murrill 183,097,772 N/A 1,835,585 N/A
James R. Nichols 183,182,464 N/A 1,750,893 N/A
William A. Percy, II 183,164,972 N/A 1,768,385 N/A
Dennis H. Reilley 181,933,742 N/A 2,999,615 N/A
Wm. Clifford Smith 183,159,657 N/A 1,773,700 N/A
Bismark A. Steinhagen 181,962,498 N/A 2,970,859 N/A
2. Stockholder proposal that Management and Directors change the
format of Entergy's proxy card in two areas: 149,636,941 votes
against; 15,596,344 broker non-votes; 16,554,434 votes for; and
3,145,638 abstentions.
3. Stockholder proposal that the Board of Directors seek
shareholder approval prior to adopting any poison pill:
132,733,146 votes for; 34,192,716 votes against; 15,596,345
broker non-votes; and 2,411,150 abstentions.
(Entergy Arkansas)
A consent in lieu of the annual meeting of common stockholders
was executed on June 28, 2002. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Arkansas: Hugh T. McDonald, Donald C.
Hintz, Richard J. Smith, and C. John Wilder.
(Entergy Gulf States)
A consent in lieu of the annual meeting of common stockholders
was executed on June 28, 2002. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Gulf States: Joseph F. Domino, E.
Renae Conley, Donald C. Hintz, Richard J. Smith, and C. John Wilder.
(Entergy Louisiana)
A consent in lieu of the annual meeting of common stockholders
was executed on June 28, 2002. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Louisiana: E. Renae Conley, Donald C.
Hintz, Richard J. Smith, and C. John Wilder.
(Entergy Mississippi)
A consent in lieu of the annual meeting of common stockholders
was executed on June 28, 2002. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy Mississippi: Carolyn C. Shanks, Donald
C. Hintz, Richard J. Smith, and C. John Wilder.
(Entergy New Orleans)
A consent in lieu of the annual meeting of common stockholders
was executed on June 28, 2002. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of Entergy New Orleans: Daniel F. Packer, Donald
C. Hintz, Richard J. Smith, and C. John Wilder.
(System Energy)
A consent in lieu of the annual meeting of common stockholders
was executed on June 28, 2002. The consent was signed on behalf of
Entergy Corporation, the holder of all issued and outstanding shares
of common stock. The common stockholder, by such consent, elected
the following individuals to serve as directors constituting the
Board of Directors of System Energy: Jerry W. Yelverton, Donald C.
Hintz, and C. John Wilder.
Item 5. Other Information
Environmental Regulation (Entergy Gulf States)
The State of Louisiana is implementing emission control
strategies to address continued ozone non-attainment status of areas
in and around Baton Rouge, Louisiana. In March 2002, the LDEQ issued
a final rule for control of NOx as part of the State Implementation
Plan (SIP) to bring this area into attainment with the National
Ambient Air Quality standards for ozone by May 2005. The rule
contains provisions that will lead to installation of new NOx control
equipment at Entergy Gulf States generating units. The latest
analyses indicate compliance costs may be as much as $44 million in
new capital spending. Most of the related expenditures would take
place in 2003 and 2004. A final revision to the rule was issued in
July 2002. Cost estimates will be refined to include this final
revision, but preliminary analyses indicate that compliance costs
will be lower. Entergy Gulf States will be required to obtain
revised operating permits from the LDEQ and meet new, lower emission
limits for NOx.
In March 2002 however, a federal district court issued a
judgment ordering EPA to determine the ozone non-attainment status of
the Baton Rouge area and, if appropriate, reclassify the area as a
result of the determination. As a result of the Court's order, the
EPA issued on June 24, 2002 a final rule determining that the Baton
Rouge area did not attain the ozone national air quality standard,
and reclassifying the area from a "serious" to a "severe" non-
attainment area for ozone. Also on June 24, 2002, however, the EPA
proposed to delay the effective date of its ozone non-attainment
decision until October 4, 2002, in order to consider LDEQ's December
31, 2001 request for an extension of the ozone attainment deadline
based on transport or migration of ozone into the Baton Rouge area
from Texas (the Attainment Plan/Transport SIP).
On July 28, 2002 the EPA announced that it will issue a proposed
rule approving Baton Rouge's Attainment Plan/Transport SIP, extending
the ozone attainment date until November 15, 2005, and withdrawing
the "severe" ozone non-attainment designation. The proposed rule has
been published in the Federal Register, and is now subject to public
comment before a final rule is promulgated. Additionally, in
litigation involving the District of Columbia metropolitan area ozone
attainment status, the federal appeals court for the Washington D.C.
Circuit ruled on July 2, 2002 that the EPA's regulations providing
for attainment deadline extensions based on ozone transport are
invalid. That decision is not controlling authority for the Baton
Rouge transport extension, and it is also subject to further appeal.
Accordingly, EPA's authority to extend Baton Rouge's deadline for
ozone compliance based on ozone transport is uncertain at this time.
Accordingly, the final schedule for Entergy Gulf States' compliance
with the new NOx emission limits, and for corresponding expenditures,
also cannot be determined at this time.
Wholesale Rate Matters (Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy)
As discussed in Part I, Item 1 of the Form 10-K, Entergy is
involved in litigation before the FERC and the LPSC regarding
production cost equalization under the System Agreement.
Negotiations among the parties have not resolved the proceeding
before the FERC, and that proceeding is now set for hearing in
February 2003. In the ex-parte proceeding commenced by the LPSC, the
procedural schedule has changed and an evidentiary hearing is now set
to commence in November 2002.
FERC Notice of Proposed Rulemaking (Entergy, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans)
On July 31, 2002, FERC issued a notice of proposed rulemaking to
establish a standardized transmission service and wholesale electric
market design. The proposed rules would
o establish a network access transmission service applicable to
all transmission users;
o require utilities to take the transmission component of bundled
transmission service under an open access transmission tariff;
o require transmission facilities to be operated by an independent
transmission provider;
o require that the independent transmission provider administer
the day-ahead and real-time energy and ancillary services markets;
o establish an access charge for embedded transmission costs;
o use location marginal pricing for transmission congestion
management and provide tradable congestion revenue rights;
o establish open imbalance energy markets;
o establish procedures to mitigate market power in the day-ahead
and real-time markets
o require under certain conditions that generation owners submit
offers to supply energy at prices that do not exceed specified price
ceilings; and
o establish procedures to assure adequate transmission, generation
and demand-side resources.
Comments on the proposed rule are due by mid-October 2002. Some of
the retail regulators in Entergy's service territory have publicly
expressed opposition to the proposed rulemaking. Management is in
the process of evaluating this complex and lengthy proposal.
Sarbanes-Oxley Act and Other Corporate Governance Standards
(Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
In response to recent corporate collapses resulting from
accounting irregularities and perceived failures of ethics and
controls, the U.S. Congress passed the Sarbanes-Oxley Act on July 25,
2002. President Bush signed the Act on July 30, 2002. The stated
purpose of the Act is to increase the reliability and accuracy of
corporate reporting and accounting and audit practices and to ensure
the independence of securities analyst advice and recommendations.
The Act purports to strengthen accounting oversight and corporate
accountability by enhancing disclosure requirements, increasing
accounting and auditor regulation, creating new federal crimes and
increasing penalties for existing federal crimes. In addition, on
August 1, 2002, the New York Stock Exchange adopted, subject to
approval by the Securities and Exchange Commission, new standards and
changes in corporate governance and practices for companies whose
securities are listed on that exchange. Management and the Board are
reviewing the new law and regulations so that Entergy can adopt new
policies or procedures necessary to comply with the new law and
regulations as their various provisions become effective.
Labor Relations (Entergy Gulf States)
The contract covering the approximately 270 employees at River
Bend who are represented by the International Brotherhood of
Electrical Workers Union expired in June 2002. The employees
continue to work without a contract as negotiations continue.
Entergy Corporation and Entergy Gulf States Merger
See "Entergy Corporation and Entergy Gulf States Merger" in Part
I, Item 1 of the Form 10-K for a discussion of the appeal to the D.C.
Circuit by the APSC, Arkansas Cities and Cooperatives, Arkansas
Electric Energy Consumers, the MPSC, and the State of Mississippi of
the FERC's approval of the merger of Entergy Corporation and Gulf
States Utilities. In May 2002 the D.C. Circuit denied the petitions
for review, thereby upholding the FERC's decision approving the
merger.
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
The domestic utility companies and System Energy have calculated
ratios of earnings to fixed charges and ratios of earnings to
combined fixed charges and preferred dividends pursuant to Item 503
of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, June 30,
1997 1998 1999 2000 2001 2002
Entergy Arkansas 2.54 2.63 2.08 3.01 3.29 2.86
Entergy Gulf States 1.42 1.40 2.18 2.60 2.36 2.36
Entergy Louisiana 2.74 3.18 3.48 3.33 2.76 3.79
Entergy Mississippi 2.98 3.12 2.44 2.33 2.14 2.17
Entergy New Orleans 2.70 2.65 3.00 2.66 (b) (c)
System Energy 2.31 2.52 1.90 2.41 2.12 2.45
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, June 30,
1997 1998 1999 2000 2001 2002
Entergy Arkansas 2.24 2.28 1.80 2.70 2.99 2.59
Entergy Gulf States (a) 1.23 1.20 1.86 2.39 2.21 2.20
Entergy Louisiana 2.36 2.75 3.09 2.93 2.51 3.49
Entergy Mississippi 2.69 2.80 2.18 2.09 1.96 1.98
Entergy New Orleans 2.44 2.41 2.74 2.43 (b) (c)
(a) "Preferred Dividends" in the case of Entergy Gulf States also
include dividends on preference stock for the twelve months
ended 1997, 1998, and 1999.
(b) Earnings for the twelve months ended December 31, 2001, for
Entergy New Orleans were not adequate to cover fixed charges
and combined fixed charges and preferred dividends by $6.6
million and $9.5 million, respectively.
(c) Earnings for the twelve months ended June 30, 2002, for
Entergy New Orleans were not adequate to cover fixed charges
and combined fixed charges and preferred dividends by $13.5
million and $15.7 million, respectively.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
4(a) - Credit Agreement, dated as of May 16, 2002, among Entergy
Corporation, the Banks (Citibank, N.A., ABN AMRO Bank
N.V., The Bank of New York, Barclays Bank PLC, Mizuho
Corporate Bank Limited, BNP Paribas, Bayerische Hypo-und
Vereinsbank AG (New York Branch), J. P. Morgan Chase
Bank, The Royal Bank of Scotland plc, Societe Generale,
Wachovia Bank (National Association), Bank One, NA,
Mellon Bank, N.A., The Bank of Nova Scotia, Morgan
Stanley Bank, Union Bank of California, N.A., Deutsche
Bank AG New York Branch, KBC Bank N.V., Lehman Commercial
Paper Inc., Regions Bank, and Westdeutsche Landesbank
Girozentrale), and Citibank, N.A., as Administrative
Agent.
4(b)- Assumption Agreement, dated July 15, 2002, among Entergy
Corporation, CO BANK, ACB, (as Additional Lender), and
Citibank, N.A., (as Administrative Agent).
99(a) - Entergy Arkansas' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(b) - Entergy Gulf States' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(c) - Entergy Louisiana's Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(d) - Entergy Mississippi's Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy
Corporation agrees to furnish to the Commission upon request any
instrument with respect to long-term debt that is not registered or
listed herein as an Exhibit because the total amount of securities
authorized under such agreement does not exceed ten percent of
Entergy Corporation and its subsidiaries on a consolidated basis.
* Reference is made to a duplicate list of exhibits being
filed as a part of this report on Form 10-Q for the quarter
ended June 30, 2002, which list, prepared in accordance
with Item 102 of Regulation S-T of the SEC, immediately
precedes the exhibits being filed with this report on Form
10-Q for the quarter ended June 30, 2002.
(b) Reports on Form 8-K
Entergy Corporation
A Current Report on Form 8-K, dated April 11, 2002,
was filed with the SEC on April 11, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated April 25, 2002,
was filed with the SEC on April 25, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated May 1, 2002, was
filed with the SEC on May 1, 2002, reporting
information under Item 5. "Other Events and
Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated June 14, 2002,
was filed with the SEC on June 14, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated June 21, 2002,
was filed with the SEC on June 21, 2002, reporting
information under Item 5. "Other Events and
Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated July 8, 2002, was
filed with the SEC on July 8, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated July 30, 2002,
was filed with the SEC on July 30, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. The signature
for each undersigned company shall be deemed to relate only to
matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Nathan E. Langston
Nathan E. Langston
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)
Date: August 12, 2002