SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date earliest event reported) July 30, 2000
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-11299 ENTERGY CORPORATION 13-5550175
(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 Building
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
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
This Form 8-K contains forward-looking statements within the
meaning of the safe harbor provisions of the United States Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
such forward-looking statements with respect to revenues, earnings,
performance, strategies, prospects and other aspects of the businesses
of Entergy Corporation and FPL Group, Inc. are based on current
expectations that are subject to risk 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:
changes in laws or regulations, changing governmental policies and
regulatory actions with respect to allowed rates of return including
but not limited to return on equity and equity ratio limits, industry
and rate structure, operation of nuclear power facilities, acquisition,
disposal, depreciation and amortization of assets and facilities,
operation and construction of plant facilities, recovery of fuel and
purchased power costs, decommissioning costs, present or prospective
wholesale and retail competition (included but not limited to retail
wheeling and transmission costs), political and economic risks, changes
in and compliance with environmental and safety laws and policies,
weather conditions (including natural disasters such as hurricanes),
population growth rates and demographic patterns, competition for
retail and wholesale customers, availability, pricing and
transportation of fuel and other energy commodities, market demand for
energy from plants or facilities, changes in tax rates or policies or
in rates of inflation or in accounting standards, unanticipated delays
or changes in costs for capital projects, unanticipated changes in
operating expenses and capital expenditures, capital market conditions,
competition for new energy development opportunities and legal and
administrative proceedings (whether civil, such as environmental, or
criminal) and settlements and other factors. Readers are referred to
Entergy Corporation's and FPL Group, Inc.'s most recent reports filed
with the Securities and Exchange Commission.
Item 5. Other Events
Entergy Corporation, a Delaware corporation ("Entergy"), FPL
Group, Inc., a Florida corporation ("FPL"), WCB Holding Corp., a
Delaware corporation, 50% of whose outstanding capital stock is owned
by FPL and 50% of whose outstanding capital stock is owned by Entergy
(the "Company"), Ranger Acquisition Corp., a Florida corporation and a
wholly -owned subsidiary of the Company ("Merger Sub A"), and Ring
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of the Company ("Merger Sub B"), entered into an Agreement and Plan of
Merger, dated as of July 30, 2000 (the "Agreement"). Each of FPL and
Entergy are sometimes referred to as a "party". The description of the
Agreement set forth herein does not purport to be complete and is
qualified in its entirety by the provisions of the Agreement.
Capitalized terms not defined herein shall have the meaning set forth
in the Agreement.
Pursuant to the terms of the Agreement, Merger Sub A will
merge with and into FPL (the "FPL Merger"). FPL will be the surviving
corporation in the FPL Merger and will become a wholly-owned subsidiary
of the Company. Merger Sub B will merge with and into Entergy (the
"Entergy Merger", and together with the FPL Merger, the "Mergers").
Entergy will be the surviving corporation in the Entergy Merger and
will also become a wholly-owned subsidiary of the Company. The Mergers
were unanimously approved by both the FPL Board of Directors and the
Entergy Board of Directors. Entergy and FPL will seek to consummate
the Mergers by late 2001.
Under the terms of the Agreement, at the effective time of the
Mergers (the "Effective Time"), each outstanding share of FPL common
stock (other than shares held by FPL, Entergy or the Company) will be
converted into the right to receive one (1) share of Company common
stock, and each outstanding share of Entergy common stock (other than
shares held by Entergy, FPL or the Company) will be converted into the
right to receive 0.585 of a share of the Company common stock. In
addition, at the Effective Time, each share of Company common stock
issued and outstanding immediately prior to the Effective Time will be
cancelled.
The Mergers are subject to customary closing conditions,
including, without limitation, the receipt of the required approvals of
the shareholders of Entergy and FPL, there being no injunction,
restraining order or law in effect which prevents the consummation of
the Mergers, the Form S-4 being effective and not the subject of any
stop order or proceeding seeking a stop order, the shares of Company
common stock issuable in the Mergers having been approved for listing
on the NYSE and all necessary governmental approvals having been
received and all necessary governmental filings having been made,
including the consent or approval of certain state utility regulators,
the approvals of the Federal Energy Regulatory Commission, the
Securities and Exchange Commission under the Public Utility Holding
Company Act of 1935 and the Nuclear Regulatory Commission, and the
filing of the requisite notification with the Federal Trade Commission
and the Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
The Agreement contains certain covenants of the parties
applicable during the period pending the consummation of the Mergers.
Generally, each party and its subsidiaries are obligated to carry on
its business in the ordinary course consistent with past practice.
The Agreement contains certain restrictions on each party including
limitations on or procedures for: amendments to the corporate charter
documents of FPL or Entergy or any of their respective subsidiaries,
declaration and payment of dividends, issuance of securities,
acquisitions, capital expenditures, dispositions, incurrence or
guarantee of indebtedness, trading or marketing of energy, modification
of employee benefits, modifications of existing agreements or course of
dealings with governmental authorities, changes in accounting policies
and maintenance of insurance. Entergy and FPL each generally will be
permitted to take actions pursuant to restructuring legislation in
their respective states of operation and reorganize their transmission
businesses.
The Agreement prohibits, with certain exceptions, either party
and its subsidiaries from initiating, soliciting or knowingly
encouraging, or knowingly taking any other action designed to
facilitate, any inquiries or the making of any Entergy Takeover
Proposal or FPL Takeover Proposal, as the case may be (hereinafter
referred to as a "Takeover Proposal"), or participate in any
negotiations or substantive discussions regarding any Takeover
Proposal. If, at any time prior to receipt of such party's shareholder
approval, the party's Board of Directors determines in good faith,
after consultation with its legal and financial advisors, that a
Takeover Proposal that was not solicited in violation of the Agreement
is, or is reasonably likely to lead to, an Entergy Superior Proposal or
FPL Superior Proposal, as the case may be (hereinafter referred to as a
"Superior Proposal"), then, after providing prior written notice of its
decision to take such action to the other party and otherwise complying
with the applicable provisions of the Agreement, the party may: (i)
furnish information with respect to itself and its subsidiaries to the
person making such proposal pursuant to a customary confidentiality
agreement containing terms no less favorable than those set forth in
the confidentiality agreement between FPL and Entergy and (ii)
participate in discussions or negotiations regarding such proposal.
The Agreement requires that each party, its subsidiaries and their
representatives immediately terminate any existing activities,
discussions or negotiations with any parties with respect to any
Takeover Proposal.
Neither the Board of Directors of a party nor any committee
thereof shall: (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to the other party, the approval or
recommendation of the Mergers, by such Board of Directors, (ii) approve
or recommend, or propose publicly to approve or recommend, any Takeover
Proposal, or (iii) cause such party to enter into any agreement (an
"Acquisition Agreement") related to any Takeover Proposal. In response
to a Takeover Proposal that is not obtained in violation of the
Agreement, at any time prior to receipt of such party's shareholder
approval, the Board of Directors of such party may, if it determines in
good faith after consulting with outside counsel that the failure to
take such action would be reasonably likely to result in a breach of
the Board of Directors' fiduciary obligations to its shareholders under
applicable law, (i) withdraw or modify, or propose publicly to withdraw
or modify, the approval or recommendation by such Board of Directors or
any committee thereof of the Mergers, (ii) approve or recommend, or
propose to approve or recommend, any Superior Proposal, or (iii)
terminate the Agreement. However, such actions can only be taken if,
in the case of each of clauses (ii) and (iii), such Board of Directors
determines in good faith that such Takeover Proposal constitutes a
Superior Proposal and, in the case of clause (iii), (A) such party has
notified the other in writing of its determination that such Takeover
Proposal constitutes a Superior Proposal and (B) at least seven
business days following receipt by such party of such notice, the Board
of Directors of such party determines that such Superior Proposal
remains a Superior Proposal.
At the Effective Time, the Board of Directors of the Company
will consist of eight directors designated by FPL and seven directors
designated by Entergy. The first vacancy on the Board that occurs
with respect to a FPL Designee following the 12-month anniversary of
the Effective Time and prior to the third annual shareholders' meeting
of the Company that occurs following the end of the calendar year in
which the Effective Time occurs will not be filled and, instead, the
number of directors will be reduced by one. Any increase or decrease
in the size of the Board of Directors or change to the above-mentioned
mechanism would require the affirmative vote of at least two-thirds of
the entire Board of Directors. Following the Effective Time, (i) a
subcommittee consisting of the remaining members of the Board appointed
by FPL will recommend replacements for a Board vacancy of a member
designated by FPL, and (ii) a subcommittee consisting of the remaining
members of the Board appointed by Entergy will recommend replacements
for a Board vacancy of a member designated by Entergy. The Board is
required to honor the subcommittee's recommendations to fill vacancies
during such period. Any changes to this procedure will require the
affirmative vote of at least two-thirds of the entire Board of
Directors. The provisions described in this paragraph will no longer
be applicable following the earlier of (a) the time at which the size
of the Board is reduced by one and (b) the third annual shareholders'
meeting of the Company that occurs following the end of the calendar
year in which the Effective Time occurs.
From the Effective Time until the first anniversary of the
Effective Time, pursuant to the terms of the employment agreements
entered into between the Company and each of James L. Broadhead and J.
Wayne Leonard, (i) Mr. Broadhead will be Chairman of the Board of the
Company (serving in an executive capacity) and (ii) Mr. Leonard will be
CEO and President of the Company. Following the first anniversary of
the Effective Time and prior to the third annual shareholders' meeting
of the Company following the calendar year in which the Effective Time
occurs, (i) Mr. Broadhead will be Chairman of the Board of the Company
(serving in a non-executive capacity) and (ii) Mr. Leonard will be CEO
and President of the Company. At the Effective Time, each of Robert
v.d. Luft and an FPL designee will be appointed to the position of Vice
Chairman of the Board of the Company.
At the Effective Time, the name of the Company will be a new
name agreed upon between the Boards of Directors of FPL and Entergy
prior to the Effective Time. The Company will maintain its principal
corporate offices and headquarters in Juno Beach, Florida, and will
maintain its utility headquarters in New Orleans, Louisiana.
The Agreement may be terminated under certain circumstances,
including: (i) if the Mergers have not occurred by April 30, 2002;
provided that the termination date will be extended until October 31,
2002 if the only closing condition not satisfied at April 30, 2002 is
that relating to obtaining all required regulatory and governmental
approvals; (ii) if the requisite shareholder approvals have not been
obtained; (iii) if any temporary restraining order or preliminary or
permanent injunction or other order by any court preventing, or
applicable law prohibiting, consummation of the Mergers is in effect
and is final and nonappealable; provided that the party seeking to
terminate the Agreement must have used its reasonable best efforts to
prevent the entry of and to remove such restraint ; (iv) if the other
party has breached any representations, warranties or covenants, and
such breaches, individually or in the aggregate, (A) give rise to the
failure of the closing condition that the representations and
warranties be true or that the covenants be complied with at the
Effective Time, and (B) are incapable of being cured by such breaching
party or are not cured by such breaching party within 30 days following
receipt of written notice from the other party of such breach or
failure to perform; (v) if the applicable Board determines in good
faith that a Takeover Proposal constitutes a Superior Proposal;
provided that, in order for the termination of the Agreement to be
deemed effective, the terminating party must have complied with the
applicable provisions of the Agreement and paid the required
Termination Fee (described below); (vi) if the other party, or any of
the other party's directors or officers, participate in discussions or
negotiations relating to a Takeover Proposal; (vii) if the other
party's Board of Directors (a) withdraws or modifies, or proposes
publicly to withdraw or modify, the approval or recommendation by such
Board of Directors of the Agreement or the Mergers, (b) fails to
reaffirm such approval or recommendation within 10 business days of
receipt of the terminating party's written request at any time when a
Takeover Proposal relating to the other party shall have been made and
not rejected by the Board of Directors of such other party or (c)
approves or recommends, or proposes to approve or recommend, a Takeover
Proposal; or (viii) if any condition to the obligation of such party to
consummate the Mergers becomes incapable of satisfaction prior to
closing; provided that the failure of such condition is not the result
of a material breach of the Agreement by the party seeking to terminate
the Agreement.
A party will become obligated to pay the other party a
termination fee of $215 million (the "Termination Fee") if (i)
following a party's shareholders meeting, a Takeover Proposal is made
for such party, thereafter the Agreement is terminated by either FPL or
Entergy due to the Effective Time not occurring prior to the
termination date, and within 12 months after the termination of the
Agreement, such party enters into an Acquisition Agreement or
consummates a Takeover Proposal with the party who submitted the
Takeover Proposal referred to above, (ii) prior to or during the such
party's shareholders meeting, a Takeover Proposal for such party is
made, thereafter the Agreement is terminated by either FPL or Entergy
because approval of the shareholders of the party receiving the
Takeover Proposal was not obtained, and within 24 months thereafter
such party enters into an Acquisition Agreement or consummates a
Takeover Proposal with any third party, (iii) the Agreement is termi
nated by a party pursuant to the provision permitting termination for a
Superior Proposal, or (iv) the Agreement is terminated by a party
because the Board of Directors of the other party (A) withdraws or
modifies, or proposes publicly to withdraw or modify, its approval or
recommendation of the Agreement or the Mergers, or (B) approves or
recommends, or proposes to approve or recommend, a Takeover Proposal.
If the Termination Fee becomes payable to a party in
accordance with the above-described provisions, the party paying the
Termination Fee will be obligated to reimburse the other party for its
fees and expenses in connection with the Mergers, up to a maximum of
$25 million.
Reference is made the Entergy's Form 8-K dated July 31, 2000,
which attached as Exhibits 2.1 and 99.1 respectively, copies of the
Merger Agreement and a joint press release of Entergy and FPL
announcing the execution of the Merger Agreement. Entergy is filing
this Form 8-K to provide additional information about the transactions
contemplated by the Agreement before Entergy commences repurchases of
shares of common stock.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The following selected unaudited pro forma combined condensed
consolidated financial statements (pro forma financial statements) have
been prepared to reflect the merger of Entergy and FPL Group in a
transaction accounted for as an acquisition of Entergy under the
purchase method of accounting. The pro forma adjustments are reflected
in the unaudited combined condensed consolidated pro forma balance
sheets (pro forma balance sheets) as if the merger occurred on June 30,
2000. The unaudited combined condensed consolidated pro forma
statements of income (pro forma income statements) for the six months
ended June 30, 2000 and the year ended December 31, 1999 assume that
the merger was completed January 1, 1999. These pro forma financial
statements are for illustrative purposes only. They are not
necessarily indicative of the financial position or operating results
that would have occurred had these transactions been completed on the
dates assumed above; nor is the information necessarily indicative of
future financial position or operating results. Results of operations
and financial position in the first year after the consummation could
differ significantly from the pro forma financial statements, which are
based on past operations.
The following pro forma financial statements should be read in
conjunction with the consolidated historical financial statements and
related notes of Entergy and FPL Group, which are included in their
respective Annual Reports on Form 10-K for the year ended December 31,
1999 and subsequent Quarterly Reports on Form 10-Q. Entergy has
provided all the information included in this Form 8-K regarding
Entergy and its subsidiaries. FPL Group has provided all the
information included in this Form 8-K regarding FPL Group and its
subsidiaries. Neither Entergy nor FPL Group assumes any responsibility
for the accuracy or completeness of the information provided by the
other party.
Unaudited Pro Forma Combined Condensed Consolidated Statements of Income
Six Months Ended June 30, 2000
(millions, except per share amounts)
Entergy
FPL Group, Inc. Corporation Pro Forma Pro Forma
(as reported) (as reported) Adjustments Combined
Operating Revenues ..................... $ 3,138 $ 3,949 $ 7,087
-------- -------- ---- --------
Operating Expenses:
Fuel, purchased power and interchange 1,146 1,834 2,980
Other operations and maintenance ..... 593 843 1,436
Depreciation and amortization ........ 525 389 $ (8) A 909
(4) B
7 B
Taxes other than income taxes ........ 291 163 454
-------- -------- ---- --------
Total operating expenses ........... 2,555 3,229 (5) 5,779
-------- -------- ---- --------
Operating Income ....................... 583 720 5 1,308
-------- -------- ---- --------
Other Income (Deductions)
Interest charges ..................... (126) (264) (390)
Preferred stock dividends ............ (7) (27) (34)
Other - net 34 140 174
-------- -------- ---- --------
Total other income (deductions) - net (99) (151) (250)
-------- -------- ---- --------
Income before income taxes ............. 484 569 5 1,058
Income taxes ........................... 159 233 2 C 394
-------- -------- ---- --------
Net income ............................. $ 325 $ 336 $ 3 $ 664
======== ======== ==== ========
Earnings per share
(basic and assuming dilution) .......... $ 1.91 $ 1.45 $ 2.17
Average number of shares outstanding..... 170 232 306 D
Unaudited Pro Forma Combined Consensed Consolidated Statements of Income
Year Ended December 31, 1999
(millions, except per share amounts)
Entergy
FPL Group, Inc. Corporation Pro Forma Pro Forma
(as reported) (as reported) Adjustments Combined
Operating Revenues ..................... $ 6,438 $ 8,773 $ 15,211
-------- --------- ----- --------
Operating Expenses:
Fuel, purchased power and interchange 2,365 4,526 6,891
Other operations and maintenance ..... 1,322 1,789 3,111
Depreciation and amortization ........ 1,040 867 $ (16) A 1,897
(8) B
14 B
Impairment loss on Maine assets ...... 176 - 176
Taxes other than income taxes ........ 615 339 954
-------- --------- ----- --------
Total operating expenses ........... 5,518 7,521 (10) 13,029
-------- --------- ----- --------
Operating Income ....................... 920 1,252 10 2,182
-------- --------- ----- --------
Other Income (Deductions)
Interest charges ..................... (222) (536) (758)
Preferred stock dividends ............ (15) (62) (77)
Divestiture of cable investments ..... 257 - 257
Other - net .......................... 80 255 335
-------- --------- ----- --------
Total other income (deductions) - net 100 (343) (243)
-------- --------- ----- --------
Income before income taxes ............. 1,020 909 10 1,939
Income taxes ........................... 323 357 3 C 683
-------- --------- ----- --------
Net income ............................. $ 697 $ 552 $ 7 $ 1,256
======== ========= ===== ========
Earnings per share
(basic and assuming dilution)........... $ 4.07 $ 2.25 $ 3.99
Average number of shares outstanding.... 171 245 315 D
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheets
June 30, 2000
(millions)
Entergy
FPL Group,Inc. Corporation Pro Forma Pro Forma
(as reported) (as reported) Adjustments Combined
Property, Plant and Equipment:
Electric utility plant in service and other property,
including nuclear fuel and construction work in
progress ........................................ $ 20,220 $ 27,442 $ (399) A $ 47,113
(150) B
Less accumulated depreciation and amortization ..... (10,764) (11,248) (22,012)
-------- --------- ------- --------
Total property, plant and equipment - net ........ 9,456 16,194 (549) 25,101
-------- --------- ------- --------
Current Assets:
Cash and cash equivalents .......................... 234 1,797 2,031
Customer receivables, net of allowances ............ 578 1,022 1,600
Materials, supplies and fossil fuel inventory ...... 320 481 801
Deferred clause expenses ........................... 259 395 654
Other - net ........................................ 219 186 405
-------- --------- ------- --------
Total other assets ............................... 1,610 3,881 5,491
-------- --------- ------- --------
Other Assets:
Special use funds .................................. 1,449 1,284 2,733
Other investments .................................. 782 264 1,046
Other .............................................. 899 2,701 416 B 4,016
-------- --------- ------- --------
Total other assets ............................... 3,130 4,249 416 7,795
-------- --------- ------- --------
Total Assets ......................................... $ 14,196 $ 24,324 $ (133) $ 38,387
======== ========= ======= ========
Capitalization:
Common shareholders' equity ........................ $ 5,499 $ 6,934 $(6,903) E $ 12,134
6,650 E
(46) F
Preferred stock without sinking fund requirements .. 226 336 562
Preferred stock with sinking fund requirements ..... - 69 69
Long-term debt ..................................... 3,479 7,593 11,072
-------- --------- ------- --------
Total capitalization ............................. 9,204 14,932 (299) 23,837
-------- --------- ------- --------
Current liabilities:
Debt due within one year ........................... 823 630 1,453
Accounts payable ................................... 547 797 1,344
Deferred clause revenues ........................... 74 - 74
Accrued interest, taxes and other .................. 984 1,380 253 F 2,617
-------- --------- ------- --------
Total current liabilities ........................ 2,428 2,807 253 5,488
-------- --------- ------- --------
Other Liabilities and deferred credits:
Accumulated deferred income taxes .................. 1,176 3,224 (58) C 4,313
(29) F
Unamortized regulatory and investment credits ...... 289 506 795
Other .............................................. 1,099 2,855 3,954
-------- --------- ------- --------
Total other liabilities and deferred credits ..... 2,564 6,585 (87) 9,062
-------- --------- ------- --------
Commitments and contingencies
Total capitalization and liabilities ................. $ 14,196 $ 24,324 $ (133) $ 38,387
======== ========= ======= ========
Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial
Statements
The pro forma financial statements have been prepared using
preliminary assessments of the fair values of the assets and
liabilities acquired and, accordingly, may change significantly as the
valuations are completed. The pro forma adjustments may also change
to reflect changes in circumstances during the period of time required
to obtain the necessary approvals for the merger. The pro forma
financial statements do not reflect the anticipated recurring cost
savings resulting from the merger or the effect of Entergy and FPL
Group's announced share repurchase programs. Certain amounts in
Entergy's financial statements have been reclassified to conform to
FPL Group's presentation.
A.A plant acquisition adjustment (goodwill) resulting from a prior
acquisition by Entergy and the related depreciation expense have
been eliminated.
B.Based on preliminary estimates of the fair values of certain
unregulated generating assets, net reductions in book value of
approximately $150 million are reflected in the pro forma balance
sheets to record those assets at their fair values. Depreciation
expense has been reduced in the pro forma income statement on a
straight-line basis over the average remaining useful life of 20
years. The assets and liabilities of Entergy's regulated
operations will not be revalued because they are subject to cost-
based regulation.
Complete valuations of Entergy's operating assets and related
contracts and the pension and postretirement accounts have not been
performed. As a result, the purchase price in excess of the
amounts assigned to identifiable assets and liabilities of $416
million has been recorded as goodwill for purposes of these pro
forma financial statements. The estimated lives associated with
the assets to which this excess might ultimately be allocated are
expected to range from 20 to 40 years. Therefore, for pro forma
purposes, an amortization period of 30 years has been used.
Actual goodwill, if any, recorded upon consummation of the Mergers
will consider the fair value of Entergy's assets and liabilities at
that future date and may differ significantly from the amount
recorded in these pro forma financial statements.
C.Deferred income taxes have been recorded on the pro forma balance
sheets to reflect tax effect of differences between the book and
tax bases of assets and liabilities acquired. An adjustment has
been made to the pro forma income statements to reflect the tax
effect of the pro forma adjustments using FPL Group's statutory tax
rate of 38.575%. Goodwill created by the acquisition is
nondeductible for tax purposes.
D.The number of shares used in the calculation of the pro forma per
share data is based on the weighted average of shares outstanding
during the period, with the shares of Entergy adjusted to give
effect to the exchange ratio described in Note E below.
E.Under the terms of the Agreement, each holder of FPL Group common
stock will receive one share of the new holding company for each share
of FPL Group common stock, and each holder of Entergy common stock
will receive 0.585 of a share of the new holding company for each
share of Entergy common stock, in a tax-free, stock-for-stock
exchange. A value of $51 per share has been assumed in determining
the purchase price, based on the closing prices of FPL Group's common
stock two trading days prior and two trading days following the
announcement of the Mergers.
Below is a reconciliation of the pro forma adjustment to Entergy's
common shareholders' equity:
Entergy's common shareholders' equity,
June 30, 2000 (as reported) $6,934
Non-recurring merger costs to be expensed
by Entergy, net of tax (see Note F) (31)
------
Net pro forma adjustment $6,903
======
F.Adjustments totaling $253 million have been made and are reflected
in accrued interest, taxes and other on the pro forma balance
sheets to accrue for transaction costs associated with the
acquisition and amounts due under certain of Entergy's employment
contracts and employee benefit plans resulting from a change in
control. Of this amount, $178 million represents direct costs of
the transaction and is reflected in the purchase price allocation.
The remaining $75 million represents merger-related costs which are
required to be expensed. Because these costs are non-recurring,
they have not been reflected in the pro forma income statements,
but are reflected in common shareholders' equity on the pro forma
balance sheets ($46 million after taxes). Entergy's and FPL
Group's portions of these merger costs to be expensed are $31
million and $15 million after taxes, respectively.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Entergy Corporation
Entergy Arkansas, Inc.
Entergy Gulf States, Inc.
Entergy Louisiana, Inc.
Entergy Mississippi, Inc.
Entergy New Orleans, Inc.
System Energy Resources, Inc.
By: /s/ Nathan E. Langston
Nathan E. Langston
Vice President and
Chief Accounting Officer
Dated: August 3, 2000