_________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2002
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-27031 ENTERGY GULF STATES, INC. 74-0662730
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
1-8474 ENTERGY LOUISIANA, INC. 72-0245590
(a Louisiana corporation)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 840-2734
0-320 ENTERGY MISSISSIPPI, INC. 64-0205830
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040
(a Louisiana corporation)
1600 Perdido Street, Building 505
New Orleans, Louisiana 70112
Telephone (504) 670-3674
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_________________________________________________________________________
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes X No
Common Stock Outstanding Outstanding at April 30, 2002
Entergy Corporation ($0.01 par value) 224,278,357
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., and System Energy Resources, Inc. separately file this
combined Quarterly Report on Form 10-Q. Information contained herein
relating to any individual company is filed by such company on its own
behalf. Each company reports herein only as to itself and makes no other
representations whatsoever as to any other company. This combined
Quarterly Report on Form 10-Q supplements and updates the Annual Report
on Form 10-K for the calendar year ended December 31, 2001, filed by the
individual registrants with the SEC, and should be read in conjunction
therewith.
Forward-Looking Information
The following constitutes a "Safe Harbor" statement under the
Private Securities Litigation Reform Act of 1995: Investors are
cautioned that forward-looking statements contained herein with respect
to the revenues, earnings, performance, strategies, prospects and other
aspects of the business of Entergy Corporation, Entergy Arkansas, Inc.,
Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi,
Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. and
their affiliated companies may involve risks and uncertainties. A number
of factors could cause actual results or outcomes to differ materially
from those indicated by such forward-looking statements. These factors
include, but are not limited to, risks and uncertainties relating to:
the effects of weather, the performance of generating units and
transmission systems, the possession of nuclear materials, fuel and
purchased power prices and availability, the effects of regulatory
decisions and changes in law, litigation, capital spending requirements
and the availability of capital, the onset of competition, the ability to
recover net regulatory assets and other potential stranded costs, the
effects of recent developments in the California electricity market on
the utility industry nationally, advances in technology, changes in
accounting standards, corporate restructuring and changes in capital
structure, the success of new business ventures, changes in the markets
for electricity and other energy-related commodities, including the use
of financial and derivative instruments and volatility of changes in
market prices, changes in interest rates and in financial and foreign
currency markets generally, the economic climate and growth in Entergy's
service territories, changes in corporate strategies, actions of rating
agencies, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2002
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 3
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 6
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 9
Consolidated Statements of Operations 13
Consolidated Statements of Cash Flows 14
Consolidated Balance Sheets 16
Consolidated Statements of Retained Earnings,
Comprehensive Income (Loss), and Paid-In Capital 18
Selected Operating Results 19
Entergy Arkansas, Inc.:
Results of Operations 20
Income Statements 23
Statements of Cash Flows 25
Balance Sheets 26
Selected Operating Results 28
Entergy Gulf States, Inc.:
Results of Operations 29
Income Statements 31
Statements of Cash Flows 33
Balance Sheets 34
Selected Operating Results 36
Entergy Louisiana, Inc.:
Results of Operations 37
Income Statements 39
Statements of Cash Flows 41
Balance Sheets 42
Selected Operating Results 44
Entergy Mississippi, Inc.:
Results of Operations 45
Income Statements 47
Statements of Cash Flows 49
Balance Sheets 50
Selected Operating Results 52
Entergy New Orleans, Inc.:
Results of Operations 53
Statements of Operations 55
Statements of Cash Flows 57
Balance Sheets 58
Selected Operating Results 60
System Energy Resources, Inc.:
Results of Operations 61
Income Statements 63
Statements of Cash Flows 65
Balance Sheets 66
Notes to Financial Statements for Entergy Corporation
and Subsidiaries 68
Part II:
Item 1. Legal Proceedings 78
Item 5. Other Information 78
Item 6. Exhibits and Reports on Form 8-K 79
Signature 82
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
ADEQ Arkansas Department of Environmental Quality
AFUDC Allowance for Funds Used During Construction
ALJ Administrative Law Judge
ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam
Electric Generating Station (nuclear)
APSC Arkansas Public Service Commission
BCF One billion cubic feet of natural gas
BCF/D One billion cubic feet of natural gas per
day
Board Board of Directors of Entergy Corporation
Cajun Cajun Electric Power Cooperative, Inc.
capacity factor The percentage of the period that the plant
generates power calculated by dividing the
output by the capacity and normalizing the
time period
CitiPower CitiPower Pty., an electric distribution
company serving Melbourne, Australia and
surrounding suburbs, which was sold by
Entergy effective December 31, 1998
Council Council of the City of New Orleans,
Louisiana
DOE United States Department of Energy
domestic utility
companies Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, collectively
electricity marketed Total physical GWH volumes marketed in the
U.S. during the period
electricity volatility Average volatility of into-Entergy power
prices for the period
EPA United States Environmental Protection
Agency
EPDC Entergy Power Development Corporation
EWO Entergy Wholesale Operations, which
primarily consists of Entergy's global power
development business
Entergy Entergy Corporation and its various direct
and indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc.
Entergy Gulf States Entergy Gulf States, Inc., including its
wholly owned subsidiaries - Varibus
Corporation, GSG&T, Inc., Prudential Oil &
Gas, Inc., and Southern Gulf Railway Company
Entergy-Koch Entergy-Koch, L.P., a joint venture equally
owned by Entergy and Koch Industries, Inc.
Entergy London Entergy London Investments plc, formerly
Entergy Power UK plc (including its wholly
owned subsidiary, London Electricity plc),
which was sold by Entergy effective December
4, 1998
Entergy Louisiana Entergy Louisiana, Inc.
Entergy Mississippi Entergy Mississippi, Inc.
Entergy New Orleans Entergy New Orleans, Inc.
Entergy Power Entergy Power, Inc.
FERC Federal Energy Regulatory Commission
Fitzpatrick James A. Fitzpatrick nuclear power plant,
825 MW facility located near Oswego, New
York, purchased in November 2000, from NYPA
by Entergy's domestic non-utility nuclear
business
Form 10-K The combined Annual Report on Form 10-K for
the year ended December 31, 2001 of Entergy,
Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy
gain/loss days Ratio of days where trading gains exceeded
trading losses in the aggregate across all
commodities
gas marketed Physical BCF/D volumes marketed in the U.S.
during the period
Abbreviation or Acronym Term
gas volatility Average volatility of Henry Hub spot prices
for the period
Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear
Generation Plant
GGART Grand Gulf Accelerated Recovery Tariff
GWH Gigawatt hour(s), which equals one million
kilowatt-hours
Indian Point 2 Indian Point Energy Center Unit 2 - nuclear
power plant 970 MW facility located in
Westchester County, New York, purchased in
September 2001 from Consolidated Edison by
Entergy's domestic non-utility nuclear
business
Indian Point 3 Indian Point 3 nuclear power plant, 980 MW
facility located in Westchester County, New
York, purchased in November 2000 from NYPA
by Entergy's domestic non-utility nuclear
business
KWH kilowatt-hour(s)
LDEQ Louisiana Department of Environmental
Quality
LPSC Louisiana Public Service Commission
miles of pipeline Total miles of transmission and gathering
pipeline
MMBTU One million British Thermal Units
MPSC Mississippi Public Service Commission
MW Megawatt(s), which equals one thousand
kilowatt(s)
Net MW in operation Installed capacity owned or operated
Net revenue Operating revenue net of fuel, fuel-related,
and purchased power expenses; other
regulatory credits; and amortization of rate
deferrals
NRC Nuclear Regulatory Commission
NYPA New York Power Authority
production cost Cost in $/MMBTU associated with delivering
gas, excluding cost of gas
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935,
as amended
River Bend River Bend Steam Electric Generating Station
(nuclear)
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
as promulgated by the Financial Accounting
Standards Board
storage capacity Working gas storage capacity
System Agreement Agreement, effective January 1, 1983, as
modified, among the domestic utility
companies relating to the sharing of
generating capacity and other power
resources
System Energy System Energy Resources, Inc.
System Fuels System Fuels, Inc.
throughput Gas in BCF/D transported by the pipeline
during the period
Unit Power Sales
Agreement Agreement, dated as of June 10, 1982, as
amended and approved by FERC, among Entergy
Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System
Energy, relating to the sale of capacity and
energy from System Energy's share of Grand
Gulf 1
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
weather-adjusted usage electric usage excluding the effects of
weather deviations
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for
discussions of Entergy's three business segments; its critical
accounting policies; the status of the transition to retail
competition of the domestic utility segment and the continued
application of SFAS 71 to that business; state, local, and federal
regulatory proceedings that could affect the domestic utility
segment; the market risks that each of Entergy's business segments
are exposed to; and other significant issues affecting Entergy. Set
forth below are updates to the significant factors and known trends
discussed in the Form 10-K.
Entergy Wholesale Operations
In the first quarter of 2002, Entergy recorded a $401.4 million
charge to operating expenses ($260.9 million net of tax) in the
energy commodity services segment to reflect the effect of Entergy's
decision to discontinue additional EWO greenfield power plant
development and to reflect asset impairments resulting from the
deteriorating economics of wholesale power markets in the United
States and the United Kingdom. The charge consists of the following:
o as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
- LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power
development business obtained contracts in October 1999 to acquire
36 turbines from General Electric. Entergy's rights and obligations
under the contracts for 22 of the turbines were sold to an
independent special-purpose entity in May 2001. $216.2 million of
the charge is a provision for Entergy's estimate of the impairments
resulting from the decline in the value of the turbines subject to
purchase commitments with the special-purpose entity. Entergy's
total potential impairment under this arrangement is limited to the
costs of cancellation of these turbines;
o $152.5 million of the charge results from the write-off of EWO's
equity investment in the Damhead Creek project and the impairment of
the values of the Warren Power power plant and the Crete project.
This portion of the charge reflects Entergy's estimate of the effects
of continued declining spark spreads in the United States and the
United Kingdom; and
o $32.7 million of the charge results from the write-off of
capitalized project development costs for projects that will not be
completed.
In addition, Entergy expects to record a restructuring charge of up
to $45 million net of tax for the EWO business after the specific
details of EWO's restructuring plan are finalized, probably in the
second quarter of 2002. It is possible that future events and
transactions related to EWO's assets and commitments could result in
changes to the estimates described above.
Also in the first quarter of 2002, EWO sold its interests in
projects in Argentina, Chile, and Peru for net proceeds of $135.5
million. The proceeds include notes receivable totaling $86 million.
After impairment provisions recorded for these interests in 2001, the
net loss realized on the sale in the first quarter of 2002 is
insignificant.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
After the decision to discontinue additional greenfield
development and the sale of the Latin American investments, EWO
continues to operate or construct the following power plants:
Investment Percent Status
Ownership
United Kingdom - Damhead Creek, 800 MW 100% operational
U.S. (AR)- Ritchie Unit 2, 544 MW 100% operational
U.S. (AR)- Independence Unit 2, 842 MW 14% operational
U.S. (MS)- Warren Power, 300 MW 100% operational
U.S. (IA)- Top of Iowa Wind Farm, 80 MW 99% operational
U.S. (LA)- RS Cogen, 425 MW 50% under construction
U.S. (IL)- Crete, 320 MW 50% under construction
U.S. (TX)- Harrison County, 550 MW 70% under construction
Domestic Utility Transition to Competition
Texas
As discussed in the Form 10-K, a PUCT-approved settlement
delayed the implementation of retail open access in Entergy Gulf
States' Texas service territory until at least September 15, 2002.
Given current FERC and PUCT activities, management expects that
retail open access in Entergy Gulf States' territory is not likely to
begin before May 2003.
Market Risks Disclosure
Following are sections from the "Market Risks Disclosure" in the
Form 10-K that have significant updates as of March 31, 2002.
Commodity Price Risk
Power Generation
As discussed in the Form 10-K, energy commodity services enters
into forward power sale agreements to hedge its exposure to market
price fluctuations. The following represents the percentage of
planned electricity output sold forward under physical or financial
contract for energy commodity services' generation facilities updated
as of March 31, 2002:
2002 2003
% sold % sold
Planned GWH forward Planned GWH forward
6,024 89% 8,908 70%
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Marketing and Trading
As discussed in the Form 10-K, Entergy-Koch Trading (EKT) and
Entergy use VAR models as one measure of a loss in fair value for
EKT's natural gas and power trading portfolio and energy commodity
services' mark-to-market portfolio. EKT's daily VAR for its trading
portfolio at March 31, 2002 was $9.5 million, with a daily average of
$7.7 million for the first quarter of 2002. Energy commodity
services' consolidated subsidiaries' VAR for mark-to-market
derivative instruments was approximately $4.5 million as of March 31,
2002.
Mark-to-market Accounting
As discussed in the Form 10-K, Entergy and Entergy-Koch mark-to-
market commodity instruments held by them for trading and risk
management purposes that are considered derivatives under SFAS 133 or
energy trading contracts under EITF 98-10. Following are the net
mark-to-market assets and the period within which the assets would be
realized in cash if they are held to maturity and market prices are
unchanged:
Net mark-to-
market asset
at March 31,
2002 Cumulative cash realization period
2002 2003 2004-2005
Entergy consolidated subsidiaries $68 million 35% 97% 100%
Entergy-Koch $164 million 23% 88% 100%
Foreign Currency Exchange Rate Risk
As discussed in the Form 10-K, System Fuels and Entergy's
domestic non-utility nuclear business entered into foreign currency
forward contracts to hedge the Euro-denominated payments due under
certain purchase contracts. As of March 31, 2002, the notional
amounts of the foreign currency forward contracts are 283.4 million
Euro and the forward currency rates range from .8636 to .8981 (the
weighted average of the rates is .8731). The maturities of these
forward contracts depend on the purchase contract payment dates and
range in time from June 2002 to May 2005. The mark-to-market
valuation of the forward contracts at March 31, 2002 was a net
liability of $1.8 million. The counterparty banks obligated on these
agreements are rated by Standard and Poor's Rating Services at AA on
their senior debt obligations as of March 31, 2002.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Operations
Net cash flow provided by (used in) operating activities for
Entergy, the domestic utility companies, and System Energy for the
first quarter of 2002 and 2001 was as follows:
First First
Company Quarter Quarter
2002 2001
(In Millions)
Entergy $353.9 $184.6
Entergy Arkansas $59.0 $30.5
Entergy Gulf States $130.1 $90.7
Entergy Louisiana $101.6 $49.0
Entergy Mississippi $4.3 ($70.7)
Entergy New Orleans ($22.9) ($20.6)
System Energy $63.4 $72.7
Entergy's consolidated net cash flow provided by operating
activities increased in 2002 primarily due to a $191 million increase
in operating cash flow provided by the domestic utility. The
increase for the domestic utility was primarily due to the effect
that payments for higher fuel costs and Arkansas ice storm
restoration costs had on 2001 operating cash flow.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY
AND CAPITAL RESOURCES" in the Form 10-K for discussion of a tax
accounting election made by Entergy Louisiana in 2001. The election
is now expected to provide a cash flow benefit in 2002 and 2003, and
is expected to reverse in the years 2004 through 2031.
Money pool activity also affected the operating cash flows of
the domestic utility companies and System Energy. The money pool is
an inter-company funding arrangement designed to reduce the domestic
utility companies' and System Energy's dependence on external short-
term borrowings. The money pool provides a means by which, on a
daily basis, the excess funds of Entergy Corporation, the domestic
utility companies, and System Energy may be used by the domestic
utility companies or System Energy to fulfill short-term cash
requirements. The following table shows the domestic utility
companies and System Energy's receivables from and (payables) to the
money pool as of the indicated date. An increase in a company's
(payable) to the money pool increases the operating cash flow of that
company. An increase in a company's receivable from the money pool
decreases the operating cash flow of that company.
March 31, December 31, March 31, December 31,
Company 2002 2001 2001 2000
(In Millions)
Entergy Arkansas $25.8 $23.8 ($75.8) ($30.7)
Entergy Gulf States $17.4 $27.7 ($45.9) $23.4
Entergy Louisiana ($40.2) $3.8 $37.3 $22.9
Entergy Mississippi $10.9 $11.5 ($1.0) ($33.3)
Entergy New Orleans $4.2 $9.2 ($8.9) ($5.7)
System Energy $29.7 $13.9 $175.7 $155.3
See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND
CAPITAL RESOURCES - Capital Resources - Sources of Capital" in the
Form 10-K for a discussion of the limitations on these borrowings.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Investing Activities
Net cash used in investing activities decreased in 2002
primarily due to:
o cash contributions of approximately $414 million made in 2001 in
the formation of Entergy-Koch; and
o the maturity in 2002 of $150 million of other temporary
investments.
Financing Activities
Financing activities used cash in 2002 compared to providing
cash in 2001 primarily due to:
o retirements of long-term debt by the domestic utility exceeding
issuances of long-term debt by $338 million in 2002, compared to
issuances exceeding retirements by $66 million in 2001; and
o a reduction in the amount of draws made on short-term credit
facilities in 2002. Entergy Arkansas, Entergy Louisiana, and Entergy
Mississippi all obtained credit facilities during the first quarter
of 2001 and borrowed under these facilities to their full capacity
during the first quarter of 2001.
Capital Resources
See MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES - Capital Resources" in the Form 10-K for a discussion of
Entergy's uses and sources of capital. The following are updates to
the Form 10-K.
Entergy Wholesale Operations
As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power
development business obtained contracts in October 1999 to acquire 36
turbines from General Electric Company. The rights and obligations
under the contracts for 22 of the turbines were sold to an
independent special-purpose entity in May 2001. In conjunction with
Entergy's obligations related to this sale, Entergy retained certain
rights to reacquire turbines or to cancel the construction of the
turbines. Thus far, EWO has placed 17 of the original 36 turbines at
sites that are either operating, under construction, or sold. In
addition, as allowed by the May 2001 sale agreement, cancellation of
four turbines is pending. As discussed in "MANAGEMENT'S DISCUSSION
AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS," Entergy
recorded a $216.2 million provision in the first quarter of 2002 for
Entergy's estimate of the impairments resulting from the decline in
the value of the turbines subject to purchase commitments with the
special-purpose entity. Entergy's total potential impairment under
this arrangement is limited to the costs of cancellation of these
turbines.
In April 2002, Entergy paid a total of $351 million to reacquire
the rights to the turbines. $83 million of the payments were for the
turbines to be placed in the Harrison County project. Entergy
expects to receive reimbursement from General Electric of $55 million
of the payments. Cancellation is now pending for the 15 turbines
remaining from the original 36 turbines that were not sold or
previously cancelled. With the reacquisition of the rights to the
turbines, EWO's obligations to the special-purpose entity and Entergy
Corporation's guarantee of up to $309 million in support of those
obligations are terminated.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Sources of Capital
As discussed in the Form 10-K, Entergy Corporation, Entergy
Arkansas, and Entergy Mississippi each have 364-day credit
facilities which expire in May 2002. The facility for Entergy
Corporation terminates on May 16, 2002, and Entergy expects to renew
and possibly increase the facility prior to its expiration. The
facilities for Entergy Arkansas and Entergy Mississippi terminate May
31, 2002, and it is expected that these facilities will be renewed
prior to expiration.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Entergy's consolidated loss applicable to common stock was $78.9
million for the three months ended March 31, 2002. The changes in
earnings (loss) applicable to common stock by operating segments for
the first quarter of 2002 compared to the first quarter of 2001 were
as follows:
First Quarter
Operating Segments Increase/(Decrease)
(In Thousands)
Domestic Utility ($11,417)
Domestic Non-Utility Nuclear 10,105
Energy Commodity Services (233,471)
Other, including parent company 1,705
---------
Total ($233,078)
=========
Entergy's income (loss) before taxes is discussed below
according to the operating segments listed above. See Note 6 to the
financial statements for further discussion of Entergy's operating
segments and their financial results in the first quarter of 2002.
Refer to "SELECTED OPERATING RESULTS OF ENTERGY CORPORATION AND
SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY GULF STATES, INC.,
ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC., AND ENTERGY NEW
ORLEANS, INC." which follow each company's financial statements in
this report for further information with respect to operating
statistics.
Domestic Utility
The decrease in earnings for the domestic utility in the first
quarter of 2002 compared with 2001 was primarily due to less
favorable sales volume and weather, increased other operation and
maintenance expenses, and decreased other income. The decrease in
earnings was partially offset by increased unbilled revenue and
decreased interest expense.
Electric operating revenues
The changes in electric operating revenues for the domestic
utility for the first quarter of 2002 compared with 2001 are as
follows:
First Quarter
Description Increase/(Decrease)
(In Millions)
Base rate differences $5.7
Rate riders (15.2)
Fuel cost recovery (467.7)
Sales volume/weather (21.7)
Unbilled revenue 57.7
Other revenue 22.4
Sales for resale (52.7)
-------
Total ($471.5)
=======
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery
The domestic utility companies are allowed to recover certain
fuel and purchased power costs through fuel mechanisms included in
electric rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy's financial
statements such that these costs generally have no net effect on
earnings.
The decrease in fuel cost recovery revenue in the first quarter
of 2002 is the result of lower fuel and purchased power expenses
primarily due to decreases in the market price of natural gas and
purchased power.
Corresponding to the decrease in fuel cost recovery revenue,
fuel and purchased power expenses related to electric sales decreased
by $466.8 million in the first quarter of 2002 primarily due to
decreases in the market price of natural gas and purchased power in
2002.
Sales volume/weather
Lower electric sales volume reduced revenues in the first
quarter of 2002 due to decreased usage of 806 GWH primarily from the
loss of an industrial customer at Entergy Gulf States. The effect of
milder weather conditions in the first quarter of 2002 compared to
the first quarter of 2001 also caused a slight decrease in electric
sales. Electric sales volume in the domestic utility companies'
service territories decreased 152 GWH due to the impact of weather
conditions in the first quarter of 2002. The number of customers in
the domestic utility companies' service territories increased only
slightly during these periods.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenues for the first quarters of 2002
and 2001 include the reversal of the estimates for December 2001 and
December 2000, respectively. The increase in unbilled revenues for
the first quarter of 2002 compared to the first quarter of 2001 is
due to the effect on the March 2001 unbilled calculation of higher
unbilled revenue in December 2000 caused by volume/weather.
Other revenue
Other revenue increased in the first quarter of 2002 primarily
due to the provision for rate refund recorded at System Energy in
2001 related to its proposed rate increase. See Note 2 to the
financial statements in the Form 10-K for discussion of the final
FERC order related to this rate proceeding.
Sales for resale
Sales for resale decreased for the first quarter of 2002
primarily due to a decrease in the average price of energy coupled
with a decrease in sales volume to municipal and co-operative
customers and adjoining utility systems.
Gas operating revenues
Natural gas revenues decreased $64.0 million in the first
quarter of 2002 primarily due to a substantial decrease in the market
price of natural gas.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other effects on results of operations
Results for the first quarter of 2002 for the domestic utility
were also affected by the following:
o an increase in other operation and maintenance expenses of $35.7
million, which is explained below;
o a decrease in other income of $12.7 million, which is primarily
due to decreased interest income on deferred fuel balances; and
o a decrease in interest expense of $21.3 million, which is
explained below.
The increase in other operation and maintenance expenses is
primarily due to:
o an increase of $6.7 million due to lower nuclear insurance
premium refunds than in 2001;
o an increase in incentive compensation expense of $11.3 million,
including incentive compensation accrual true-ups;
o an increase in plant maintenance expense of $3.8 million at
Entergy Mississippi due to an unscheduled outage at a fossil plant in
2002; and
o an increase of $4.6 million in injuries and damages expense.
The decrease in interest expense is primarily due to the
following:
o a decrease of $12.7 million in interest on long-term debt
primarily due to the retirement of long-term debt in late 2001 and
early 2002; and
o a decrease of $8.6 million in other interest expense primarily
due to interest recorded on System Energy's reserve for rate refund
in 2001.
Domestic Non-Utility Nuclear
The increase in earnings in the first quarter of 2002 for the
domestic non-utility nuclear business was primarily due to the
operation of Indian Point 2, which was purchased in September 2001.
Following are key performance measures for domestic non-utility
nuclear operations during the first quarters of 2002 and 2001:
2002 2001
Net MW in operation at March 31 3,445 2,475
Generation in GWH for the quarter 7,509 5,258
Capacity factor for the quarter 100.3% 98.3%
The following fluctuations in the results of operations for
domestic non-utility nuclear in the first quarter of 2002 were
primarily caused by the acquisition of Indian Point 2:
o operating revenues increased $99.5 million to $278.9 million;
o fuel expenses increased $10.0 million to $26.5 million;
o nuclear refueling outage expenses increased $9.6 million to $9.6
million;
o other operation and maintenance expenses increased $50.4 million
to $140.7 million;
o taxes other than income taxes increased $5.9 million to $16.4
million; and
o depreciation and amortization increased $5.6 million to $8.1
million.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Energy Commodity Services
The decrease in earnings for energy commodity services in the
first quarter of 2002 was primarily due to the $401.4 million ($260.9
million net of tax) charge, discussed in "MANAGEMENT'S DISCUSSION AND
ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS - Entergy Wholesale
Operations," to reflect the impairment of certain assets, including
impairments related to EWO's turbine acquisition plans, and to
reflect the change in EWO's development plans. The pre-tax charge is
reflected in operation and maintenance expenses in the Consolidated
Statement of Operations.
Revenues decreased for energy commodity services by
$352.2 million in the first quarter of 2002 primarily due to a
decrease of $208.1 million resulting from the sale of EWO's interest
in Highland Energy in the fourth quarter of 2001. Also contributing
to the decrease in revenues for energy commodity services was the
contribution of substantially all of Entergy's power marketing and
trading business to Entergy-Koch in February 2001. Earnings from
Entergy-Koch are reported as equity in earnings of unconsolidated
equity affiliates in the financial statements. As a result, in the
first quarter of 2002, revenues from this activity were lower by
$131.5 million compared to the first quarter of 2001 and purchased
power expenses were lower by $132.5 million. The net income effect
in the first quarter of 2002 of the lower revenue was more than
offset by the equity in earnings from Entergy's interest in Entergy-
Koch. Entergy's earnings from this activity increased in the first
quarter of 2002 as a result of a full quarter's contribution from
Entergy-Koch versus only two months in the first quarter of 2001, as
well as strong results in trading. Following are key performance
measures for Entergy-Koch's operations in the first quarters of 2002
and 2001:
2002 2001
Entergy-Koch Trading
Gas volatility 79% 87%
Electricity volatility 46% 73%
Gas marketed (BCF/D) 5.3 7.2
Electricity marketed (GWH) 39,828 31,009
Gain/loss days 2.1 2.2
Gulf South Pipeline
Throughput (BCF/D) 2.66 2.46
Miles of pipeline 8,800 8,800
Storage capacity (BCF) 68 68
Production cost ($/MMBTU) $0.077 $0.090
As discussed in the Form 10-K, the partnership agreement allocates
profits on a disproportionate basis. Substantially all of Entergy-
Koch's profits were allocated to Entergy in the first quarter of
2002.
Also partially offsetting the decrease in earnings for energy
commodity services was a net increase in earnings of $7.3 million
($5.0 million net of tax) related to the mark-to-market of the
Damhead Creek power and gas contracts.
Income taxes
The effective income tax rates for the first quarters of 2002
and 2001 were 26.2% and 40.3%, respectively. The decrease in the
effective income tax rate was primarily due to the pre-tax loss
decreasing the effect of book and tax timing differences.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands, Except Share Data)
OPERATING REVENUES
Domestic electric $1,401,009 $1,872,545
Natural gas 46,377 110,384
Competitive businesses 413,448 669,498
---------- ----------
TOTAL 1,860,834 2,652,427
---------- ----------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 468,861 1,125,863
Purchased power 169,486 363,879
Nuclear refueling outage expenses 25,187 17,207
Provision for turbine commitments and asset impairments 401,373 -
Other operation and maintenance 524,352 470,459
Decommissioning 8,193 8,901
Taxes other than income taxes 102,370 102,463
Depreciation and amortization 205,124 203,077
Other regulatory charges (credits) - net 1,563 (389)
---------- ----------
TOTAL 1,906,509 2,291,460
---------- ----------
OPERATING INCOME (LOSS) (45,675) 360,967
---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 6,682 4,943
Gain on sale of assets - net 665 588
Interest and dividend income 23,525 47,476
Equity in earnings of unconsolidated equity affiliates 75,065 25,064
Miscellaneous - net (11,072) 7,917
---------- ----------
TOTAL 94,865 85,988
---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 123,527 128,971
Other interest - net 25,473 47,914
Distributions on preferred securities of subsidiaries 4,709 4,709
Allowance for borrowed funds used during construction (5,638) (3,939)
---------- ----------
TOTAL 148,071 177,655
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (98,881) 269,300
Income taxes (25,898) 108,429
---------- ----------
CONSOLIDATED NET INCOME (LOSS) (72,983) 160,871
Preferred dividend requirements and other 5,940 6,716
---------- ----------
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK ($78,923) $154,155
========== ==========
Earnings (loss) per average common share:
Basic ($0.36) $0.70
Diluted ($0.36) $0.69
Dividends declared per common share $0.33 $0.32
Average number of common shares outstanding:
Basic 221,943,451 219,917,139
Diluted 221,943,451 223,785,716
Including potential common shares in 2002 (see Note 9) 226,165,792 -
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income (loss) ($72,983) $160,871
Noncash items included in net income (loss):
Reserve for regulatory adjustments 9,718 28,791
Other regulatory charges (credits) - net 1,563 (389)
Depreciation, amortization, and decommissioning 213,317 211,978
Deferred income taxes and investment tax credits (193,180) 7,665
Allowance for equity funds used during construction (6,682) (4,943)
Gain on sale of assets - net (665) (588)
Equity in earnings of unconsolidated equity affiliates (75,065) (25,064)
Provision for turbine commitments and asset impairments 401,373 -
Changes in working capital:
Receivables 73,913 112,551
Fuel inventory (13,232) (48,407)
Accounts payable (68,720) (365,644)
Taxes accrued 131,838 67,693
Interest accrued (32,415) (33,367)
Deferred fuel 45,164 105,184
Other working capital accounts (82,101) 4,182
Provision for estimated losses and reserves (1,169) 2,326
Changes in other regulatory assets (1,277) (73,755)
Other 24,506 35,470
--------- ---------
Net cash flow provided by operating activities 353,903 184,554
--------- ---------
INVESTING ACTIVITIES
Construction/capital expenditures (267,110) (264,946)
Allowance for equity funds used during construction 6,682 4,943
Nuclear fuel purchases (85,143) (36,753)
Proceeds from sale/leaseback of nuclear fuel 92,136 33,740
Proceeds from sale of businesses 38,848 -
Investment in other non-regulated/non-utility properties (9,793) (73,990)
Decrease (increase) in other investments 39,754 (365,067)
Proceeds from other temporary investments 150,000 -
Decommissioning trust contributions and realized change in trust assets (15,747) (16,406)
Other regulatory investments - (53,637)
Other 3,343 24,936
--------- ---------
Net cash flow used in investing activities (47,030) (747,180)
--------- ---------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 240,017 99,506
Common stock 66,369 15,724
Retirement of long-term debt (577,934) (77,363)
Redemption of preferred stock (1,403) (1,999)
Changes in short-term borrowings - net 56,333 231,000
Other - 16,673
Dividends paid:
Common stock (73,225) (66,655)
Preferred stock (5,948) (4,785)
--------- ---------
Net cash flow provided by (used in) financing activities (295,791) 212,101
--------- ---------
Effect of exchange rates on cash and cash equivalents 640 (2,068)
--------- ---------
Net increase (decrease) in cash and cash equivalents 11,722 (352,593)
Cash and cash equivalents at beginning of period 751,573 1,382,424
--------- ---------
Cash and cash equivalents at end of period $763,295 $1,029,831
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $180,072 $206,176
Income taxes $2,090 $1,406
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($11,579) ($8,914)
Net assets contributed to Entergy-Koch - $80,145
Long-term debt refunded with proceeds from
long-term debt issued in prior period ($47,000) -
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $158,188 $129,866
Temporary cash investments - at cost,
which approximates market 604,688 618,327
Special deposits 419 3,380
----------- -----------
Total cash and cash equivalents 763,295 751,573
----------- -----------
Other temporary investments - 150,000
Notes receivable 47,904 2,137
Accounts receivable:
Customer 271,697 294,799
Allowance for doubtful accounts (19,186) (19,255)
Other 225,118 286,671
Accrued unbilled revenues 278,260 268,680
----------- -----------
Total receivables 755,889 830,895
----------- -----------
Deferred fuel costs 127,280 172,444
Accumulated deferred income taxes 32,038 6,488
Fuel inventory - at average cost 110,729 97,497
Materials and supplies - at average cost 465,143 460,644
Deferred nuclear refueling outage costs 61,768 79,755
Prepayments and other 94,754 129,251
----------- -----------
TOTAL 2,458,800 2,680,684
----------- -----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 677,211 766,103
Decommissioning trust funds 1,773,676 1,775,950
Non-utility property - at cost (less accumulated depreciation) 294,845 295,616
Other 441,850 495,542
----------- -----------
TOTAL 3,187,582 3,333,211
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Electric 26,411,761 26,359,376
Property under capital lease 750,950 753,310
Natural gas 203,812 201,841
Construction work in progress 1,008,507 882,829
Nuclear fuel under capital lease 279,621 265,464
Nuclear fuel 196,039 232,387
----------- -----------
TOTAL PROPERTY, PLANT AND EQUIPMENT 28,850,690 28,695,207
Less - accumulated depreciation and amortization 11,961,391 11,805,578
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - NET 16,889,299 16,889,629
----------- -----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 943,918 946,126
Unamortized loss on reacquired debt 164,020 166,546
Other regulatory assets 710,923 707,439
Long-term receivables 27,270 28,083
Goodwill 377,472 377,472
Other 750,572 781,121
----------- -----------
TOTAL 2,974,175 3,006,787
----------- -----------
TOTAL ASSETS $25,509,856 $25,910,311
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $570,176 $682,771
Notes payable 407,351 351,018
Accounts payable 523,016 592,529
Customer deposits 190,594 188,230
Taxes accrued 830,699 700,133
Nuclear refueling outage costs 5,125 2,080
Interest accrued 159,993 192,420
Obligations under capital leases 149,300 149,352
Other 198,580 345,387
----------- -----------
TOTAL 3,034,834 3,203,920
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,410,282 3,574,664
Accumulated deferred investment tax credits 465,290 471,090
Taxes accrued 250,000 250,000
Obligations under capital leases 191,879 181,085
Other regulatory liabilities 172,547 135,878
Decommissioning 1,205,125 1,194,333
Transition to competition 233,099 231,512
Regulatory reserves 47,308 37,591
Accumulated provisions 614,691 425,399
Other 818,463 852,269
----------- -----------
TOTAL 7,408,684 7,353,821
----------- -----------
Long-term debt 7,058,904 7,321,028
Preferred stock with sinking fund 24,781 26,185
Preferred stock without sinking fund 334,337 334,337
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 215,000
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, authorized 500,000,000
shares; issued 248,174,087 shares in 2002 and in 2001 2,482 2,482
Paid-in capital 4,663,931 4,662,704
Retained earnings 3,486,122 3,638,448
Accumulated other comprehensive loss (27,679) (88,794)
Less - treasury stock, at cost (24,964,112 shares in 2002 and
27,441,384 shares in 2001) 691,540 758,820
----------- -----------
TOTAL 7,433,316 7,456,020
----------- -----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,509,856 $25,910,311
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME (LOSS),
AND PAID-IN CAPITAL
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,638,448 $3,190,639
Add - Earnings (loss) applicable to common stock (78,923) ($78,923) 154,155 $154,155
Deduct:
Dividends declared on common stock 73,263 69,246
Capital stock and other expenses 140 -
---------- ----------
Total 73,403 69,246
---------- ----------
Retained Earnings - End of period $3,486,122 $3,275,548
========== ==========
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (Net of Taxes):
Balance at beginning of period
Accumulated derivative instrument fair value changes ($17,973) -
Other accumulated comprehensive income (loss) items (70,821) ($75,033)
---------- ----------
Total (88,794) (75,033)
---------- ----------
Cumulative effect to January 1, 2001 of accounting
change regarding fair value of derivative instruments - - (18,021) -
Net derivative instrument fair value changes
arising during the period 342 342 (24,492) (24,492)
Foreign currency translation adjustments 65,956 (378) (2,027) (2,027)
Net unrealized investment gains (losses) (5,183) (5,183) 1,605 1,605
---------- -------- ---------- ---------
Balance at end of period:
Accumulated derivative instrument fair value changes (17,631) (42,513)
Other accumulated comprehensive income (loss) items (10,048) (75,455)
---------- ----------
Total ($27,679) ($117,968)
========== -------- ========== ---------
Comprehensive Income (Income) ($84,142) $ 129,241
======== =========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,662,704 $4,660,483
Add: Common stock issuances related to stock plans 1,227 3,440
---------- ----------
Paid-in Capital - End of period $4,663,931 $4,663,923
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $ 501.6 $ 635.0 ($133.4) (21)
Commercial 356.8 451.4 (94.6) (21)
Industrial 396.1 653.6 (257.5) (39)
Governmental 38.6 53.5 (14.9) (28)
---------------------------------
Total retail 1,293.1 1,793.5 (500.4) (28)
Sales for resale 69.8 122.5 (52.7) (43)
Other 38.1 (43.5) 81.6 188
---------------------------------
Total $ 1,401.0 $ 1,872.5 ($471.5) (25)
=================================
Billed Electric Energy
Sales (GWH):
Residential 7,274 7,537 (263) (3)
Commercial 5,598 5,574 24 -
Industrial 9,590 10,311 (721) (7)
Governmental 617 615 2 -
---------------------------------
Total retail 23,079 24,037 (958) (4)
Sales for resale 2,181 2,449 (268) (11)
---------------------------------
Total 25,260 26,486 (1,226) (5)
=================================
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the first quarter of 2002 compared with
2001 primarily due to increased other operation and maintenance
expenses, decreased interest income, and decreased sales for resale.
The overall decrease was partially offset by increased unbilled
revenue and a lower effective income tax rate.
Revenues and Sales
The changes in electric operating revenues for the first quarter
of 2002 compared with 2001 are as follows:
First Quarter
Description Increase/(Decrease)
(In Millions)
Base rate differences $6.3
Rate riders (8.5)
Fuel cost recovery 15.2
Sales volume/weather (8.2)
Unbilled revenue 11.6
Other revenue 0.5
Sales for resale (32.9)
------
Total ($16.0)
======
Base rate differences
Base rate differences increased revenues for the first quarter
of 2002 primarily due to the effect of block rates on residential
customers and higher effective prices for commercial and industrial
customers due to decreased KWH usage.
Rate riders
Rate rider revenues have no material effect on net income
because specific incurred expenses offset them.
Rate rider revenues decreased for the first quarter of 2002
primarily due to a decrease in the Grand Gulf rate rider effective
January 2002 compared to the rate rider in effect during the first
quarter of 2001. The Grand Gulf rate rider allows Entergy Arkansas
to recover 78% of its share of operating costs for Grand Gulf 1.
Fuel cost recovery
Entergy Arkansas is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Arkansas'
financial statements such that these costs generally have no net
effect on earnings.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues increased for the first quarter of
2002 primarily due to an increase in the energy cost recovery rider
that became effective in April 2001. The rider utilizes prior year
energy costs and projected energy sales for the twelve month period
commencing on April 1 of each year to develop an energy cost rate,
which is redetermined annually and includes a true-up adjustment
reflecting the over-recovery or under-recovery, including carrying
charges, of the energy cost for the prior calendar year. The
increase in the energy cost recovery rider allows Entergy Arkansas to
recover previously under-recovered fuel expenses. The rider is
discussed further in Note 2 to the financial statements in the Form
10-K.
Sales volume/weather
For the first quarter of 2002, lower electric sales volume
decreased revenues due to decreased usage of 95 GWH in the
residential and commercial sectors after adjusting for the weather
effect and 54 GWH in the industrial sector. The decreased usage
resulted in higher effective rates in each sector, which are
reflected in base rate differences. The effect of less favorable
weather in the first quarter of 2002 compared to the first quarter of
2001 decreased electric sales volume by 57 GWH in the residential and
commercial sectors.
Unbilled revenue
Unbilled revenue increased for the first quarter of 2002
primarily due to the effect of more favorable weather in March 2002
on the unbilled revenue calculation.
Sales for resale
Sales for resale decreased for the first quarter of 2002 due to
a decrease in sales volume to municipalities and co-operatives
coupled with a decrease in the average price of energy sold to
wholesale customers.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the first
quarter of 2002 primarily due to:
o decreased market prices of natural gas and purchased power; and
o decreased purchased power volume as a result of displacement by
lower priced coal and nuclear generation.
Other operation and maintenance
Other operation and maintenance expenses increased for the first
quarter of 2002 primarily due to:
o lower nuclear insurance refunds of $3 million;
o recording of 2000 ice storm expenses of $2.7 million as
recommended by the APSC staff; and
o an increase in incentive compensation expense of $2.4 million.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other regulatory credits - net
Other regulatory credits decreased for the first quarter of 2002
primarily due to a decrease in Grand Gulf demand charges as a result
of the final FERC order in System Entergy's 1995 rate proceeding.
See Note 2 of the financial statements in the Form 10-K for further
discussion of the FERC order.
Other
Other income
Other income decreased for the first quarter of 2002 primarily
due to a decrease in interest income recorded on the deferred fuel
balance resulting from an increase in fuel cost recovery revenue as
mentioned above.
Income taxes
The effective income tax rates for the first quarter of 2002 and
2001 were 27.1% and 42.2%, respectively. The decrease in the
effective tax rate was primarily due to updating book and tax timing
differences related to research and experimental expenses consistent
with amended tax returns.
ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING REVENUES
Domestic electric $377,823 $393,800
-------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 104,253 70,748
Purchased power 71,674 124,098
Nuclear refueling outage expenses 6,862 6,821
Other operation and maintenance 82,035 71,545
Taxes other than income taxes 11,187 8,764
Depreciation, amortization, and decommissioning 46,485 46,632
Other regulatory credits - net (404) (6,455)
-------- --------
TOTAL 322,092 322,153
-------- --------
OPERATING INCOME 55,731 71,647
-------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,339 1,091
Interest and dividend income 978 4,921
Miscellaneous - net (991) (1,114)
-------- --------
TOTAL 1,326 4,898
-------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 22,468 22,436
Other interest - net 2,932 3,390
Distributions on preferred securities of subsidiary 1,275 1,275
Allowance for borrowed funds used during construction (947) (711)
-------- --------
TOTAL 25,728 26,390
-------- --------
INCOME BEFORE INCOME TAXES 31,329 50,155
Income taxes 8,491 21,177
-------- --------
NET INCOME 22,838 28,978
Preferred dividend requirements and other 1,944 1,944
-------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $20,894 $27,034
======== ========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $22,838 $28,978
Noncash items included in net income:
Other regulatory credits - net (404) (6,455)
Depreciation, amortization, and decommissioning 46,485 46,632
Deferred income taxes and investment tax credits (40,621) 19,910
Allowance for equity funds used during construction (1,339) (1,091)
Changes in working capital:
Receivables 14,061 46,501
Fuel inventory (19,794) (12,143)
Accounts payable (24,675) (132,596)
Taxes accrued 56,560 4,880
Interest accrued (4,854) (2,397)
Deferred fuel costs 51,058 19,888
Other working capital accounts 8,555 18,541
Provision for estimated losses and reserves (3,319) (3,589)
Changes in other regulatory assets (10,947) (25,470)
Changes in other deferred credits (5,274) 22,254
Other (29,342) 6,704
--------- ---------
Net cash flow provided by operating activities 58,988 30,547
--------- ---------
INVESTING ACTIVITIES
Construction expenditures (44,733) (67,383)
Allowance for equity funds used during construction 1,339 1,091
Nuclear fuel purchases (30,451) (19,099)
Proceeds from sale/leaseback of nuclear fuel 30,451 19,099
Decommissioning trust contributions and realized
change in trust assets (2,823) (2,270)
Changes in other temporary investments - net 38,397 -
Other regulatory investments - (19,921)
--------- ---------
Net cash flow used in investing activities (7,820) (88,483)
--------- ---------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 94,742 -
Retirement of long-term debt (170,000) -
Changes in short-term borrowings (667) 63,000
Dividends paid:
Common stock (5,600) (300)
Preferred stock (1,944) -
--------- ---------
Net cash flow provided by (used in) financing activities (83,469) 62,700
--------- ---------
Net increase (decrease) in cash and cash equivalents (32,301) 4,764
Cash and cash equivalents at beginning of period 103,466 7,838
--------- ---------
Cash and cash equivalents at end of period $71,165 $12,602
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $30,236 $28,237
Income taxes ($3,873) ($3)
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($6,138) ($3,826)
Long-term debt refunded with proceeds from
long-term debt issued in prior period ($47,000) -
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $8,645 $18,331
Temporary cash investments - at cost,
which approximates market 62,520 85,135
---------- ----------
Total cash and cash equivalents 71,165 103,466
---------- ----------
Other temporary investments - 38,397
Accounts receivable:
Customer 75,001 80,719
Allowance for doubtful accounts (1,667) (1,667)
Associated companies 57,466 65,102
Other 22,845 20,889
Accrued unbilled revenues 59,644 62,307
---------- ----------
Total accounts receivable 213,289 227,350
---------- ----------
Deferred fuel costs - 17,246
Accumulated deferred income taxes 42,826 22,698
Fuel inventory - at average cost 24,166 4,372
Materials and supplies - at average cost 76,630 75,499
Deferred nuclear refueling outage costs 8,106 14,508
Prepayments and other 7,304 53,386
---------- ----------
TOTAL 443,486 556,922
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 11,217 11,217
Decommissioning trust funds 347,799 351,114
Non-utility property - at cost (less accumulated depreciation) 1,464 1,465
Other - at cost (less accumulated depreciation) 2,976 2,976
---------- ----------
TOTAL 363,456 366,772
---------- ----------
UTILITY PLANT
Electric 5,421,884 5,399,294
Property under capital lease 34,997 35,604
Construction work in progress 169,790 157,994
Nuclear fuel under capital lease 91,081 65,556
Nuclear fuel 7,174 8,156
---------- ----------
TOTAL UTILITY PLANT 5,724,926 5,666,604
Less - accumulated depreciation and amortization 2,646,584 2,615,013
---------- ----------
UTILITY PLANT - NET 3,078,342 3,051,591
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 179,285 164,146
Unamortized loss on reacquired debt 41,571 40,817
Other regulatory assets 256,343 260,535
Other 20,409 10,797
---------- ----------
TOTAL 497,608 476,295
---------- ----------
TOTAL ASSETS $4,382,892 $4,451,580
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 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 24,559 32,868
Other 70,670 87,036
Customer deposits 33,449 32,589
Taxes accrued 160,841 104,281
Interest accrued 25,690 30,544
Deferred fuel costs 33,812 -
Obligations under capital leases 52,074 51,973
System Energy refund 11,462 53,732
Other 15,833 17,221
---------- ----------
TOTAL 528,390 495,911
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 807,360 809,742
Accumulated deferred investment tax credits 81,987 83,239
Obligations under capital leases 74,005 49,187
Transition to competition 154,001 152,414
Accumulated provisions 38,096 41,415
Other 102,150 107,424
---------- ----------
TOTAL 1,257,599 1,243,421
---------- ----------
Long-term debt 1,177,475 1,308,075
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 116,350 116,350
Common stock, $0.01 par value, authorized 325,000,000
shares; issued and outstanding 46,980,196 shares in 2002
and 2001 470 470
Paid-in capital 591,127 591,127
Retained earnings 651,481 636,226
---------- ----------
TOTAL 1,359,428 1,344,173
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,382,892 $4,451,580
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 137.2 $ 140.0 ($2.8) (2)
Commercial 72.1 68.4 3.7 5
Industrial 81.7 78.3 3.4 4
Governmental 4.0 3.5 0.5 14
-------------------------------------
Total retail 295.0 290.2 4.8 2
Sales for resale
Associated companies 41.7 49.6 (7.9) (16)
Non-associated companies 34.8 59.8 (25.0) (42)
Other 6.3 (5.8) 12.1 209
-------------------------------------
Total $ 377.8 $ 393.8 ($16.0) (4)
=====================================
Billed Electric Energy
Sales (GWH):
Residential 1,721 1,854 (133) (7)
Commercial 1,131 1,150 (19) (2)
Industrial 1,606 1,660 (54) (3)
Governmental 62 57 5 9
-------------------------------------
Total retail 4,520 4,721 (201) (4)
Sales for resale
Associated companies 2,082 1,128 954 85
Non-associated companies 1,014 1,331 (317) (24)
-------------------------------------
Total 7,616 7,180 436 6
=====================================
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the first quarter of 2002 compared with
2001 primarily due to decreased sales for resale, increased other
operation and maintenance expenses, and decreased interest income,
partially offset by decreased interest expense.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the first quarter
of 2002 compared with 2001 are as follows:
First Quarter
Description Increase/(Decrease)
(In Millions)
Base rate differences ($0.4)
Fuel cost recovery (208.0)
Sales volume/weather (10.9)
Unbilled revenue (2.0)
Other revenue 0.9
Sales for resale (31.2)
-------
Total ($251.6)
=======
Fuel cost recovery
Entergy Gulf States is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Gulf
States' financial statements such that these costs generally have no
net effect on earnings.
Fuel cost recovery revenues decreased $154.8 million in the
Louisiana jurisdiction due to the current period recovery through the
fuel adjustment clause of lower fuel and purchased power costs from
prior months. In the Louisiana jurisdiction, these fuel costs are
recovered on a two-month lag. In the Texas jurisdiction, fuel cost
recovery revenues decreased $53.2 million due to a decrease in the
fixed fuel factor in March 2002 and due to the termination of a fuel
recovery surcharge in February 2002.
Sales volume/weather
Lower electric sales volume reduced revenues for the first
quarter of 2002 primarily due to decreased usage in the industrial
sector as a result of the loss of an industrial customer. Under the
terms of the contract with this industrial customer, Entergy Gulf
States was also required to purchase the electricity produced by the
industrial customer's generating units. As a result of the relief of
the purchased power obligation, the loss of this customer will not
have a negative impact on Entergy Gulf States' earnings.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales for resale
Sales for resale for the first quarter of 2002 decreased
primarily due to a decrease in the average price of resale
electricity.
Gas operating revenues
Gas operating revenues decreased for the first quarter of 2002
primarily due to the substantially decreased market price of natural
gas.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the first
quarter of 2002 primarily due decreases in the market prices of
natural gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the first
quarter of 2002 due to:
o an increase in incentive compensation expense of $3.4 million;
and
o an increase in nuclear operation and maintenance expenses of
$2.9 million.
The increase was partially offset by a decrease in
environmental provisions of $2.2 million.
Other
Other income
Other income decreased for the first quarter of 2002 primarily
due to decreased interest income recorded on the deferred fuel
balance due to recovery of some of the balance.
Interest and other charges
Interest on long-term debt decreased for the first quarter of
2002 primarily due to the retirement of $148 million of First
Mortgage Bonds in January 2002 and lower interest expense on variable-
rate First Mortgage Bonds.
Income taxes
The effective income tax rates for the first quarter of 2002 and
2001 were 38.5% and 37.1%, respectively.
ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING REVENUES
Domestic electric $447,251 $698,876
Natural gas 16,653 35,600
-------- --------
TOTAL 463,904 734,476
-------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 139,854 293,166
Purchased power 65,829 141,953
Nuclear refueling outage expenses 3,056 3,090
Other operation and maintenance 97,575 93,254
Decommissioning 1,573 1,562
Taxes other than income taxes 30,638 30,996
Depreciation and amortization 50,293 49,761
Other regulatory charges (credits) - net 600 (5,488)
-------- --------
TOTAL 389,418 608,294
-------- --------
OPERATING INCOME 74,486 126,182
-------- --------
OTHER INCOME
Allowance for equity funds used during construction 2,225 1,825
Gain on sale of assets 663 585
Interest and dividend income 2,321 7,933
Miscellaneous - net (1,095) (1,412)
-------- --------
TOTAL 4,114 8,931
-------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 31,847 38,793
Other interest - net 1,597 2,336
Distributions on preferred securities of subsidiary 1,859 1,859
Allowance for borrowed funds used during construction (2,258) (1,714)
-------- --------
TOTAL 33,045 41,274
-------- --------
INCOME BEFORE INCOME TAXES 45,555 93,839
Income taxes 17,517 34,793
-------- --------
NET INCOME 28,038 59,046
Preferred dividend requirements and other 1,234 1,310
-------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $26,804 $57,736
======== ========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $28,038 $59,046
Noncash items included in net income:
Reserve for regulatory adjustments 2,517 2,073
Other regulatory charges (credits) - net 600 (5,488)
Depreciation, amortization, and decommissioning 51,866 51,323
Deferred income taxes and investment tax credits (21,724) 35,990
Allowance for equity funds used during construction (2,225) (1,825)
Gain on sale of assets (663) (585)
Changes in working capital:
Receivables 37,958 30,298
Fuel inventory (1,872) (12,574)
Accounts payable (33,225) (95,746)
Taxes accrued 31,828 (7,338)
Interest accrued 963 3,030
Deferred fuel costs 13,781 23,481
Other working capital accounts 14,295 11,818
Provision for estimated losses and reserves (1,629) (1,332)
Changes in other regulatory assets 3,562 (10,298)
Other 6,058 8,798
-------- --------
Net cash flow provided by operating activities 130,128 90,671
-------- --------
INVESTING ACTIVITIES
Construction expenditures (68,038) (60,860)
Allowance for equity funds used during construction 2,225 1,825
Nuclear fuel purchases (21,733) (3,937)
Proceeds from sale/leaseback of nuclear fuel 21,923 3,937
Decommissioning trust contributions and realized
change in trust assets (2,610) (2,807)
Changes in other temporary investments - net 44,643 -
Other regulatory investments - (33,716)
-------- --------
Net cash flow used in investing activities (23,590) (95,558)
-------- --------
FINANCING ACTIVITIES
Retirement of long-term debt (148,000) -
Redemption of preferred stock (1,403) (1,999)
Dividends paid:
Common stock (14,800) (19,000)
Preferred stock (1,242) (1,323)
-------- --------
Net cash flow used in financing activities (165,445) (22,322)
-------- --------
Net decrease in cash and cash equivalents (58,907) (27,209)
Cash and cash equivalents at beginning of period 123,728 68,279
-------- --------
Cash and cash equivalents at end of period $64,821 $41,070
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $33,001 $38,649
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($1,556) ($2,674)
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $17,067 $19,503
Temporary cash investments - at cost,
which approximates market 47,754 104,225
---------- ----------
Total cash and cash equivalents 64,821 123,728
---------- ----------
Other temporary investments - 44,643
Accounts receivable:
Customer 74,258 81,136
Allowance for doubtful accounts (2,131) (2,131)
Associated companies 21,677 34,032
Other 33,098 53,249
Accrued unbilled revenues 86,170 84,744
---------- ----------
Total accounts receivable 213,072 251,030
---------- ----------
Deferred fuel costs 112,949 126,730
Fuel inventory - at average cost 55,883 54,011
Materials and supplies - at average cost 94,322 95,674
Prepayments and other 10,892 22,373
---------- ----------
TOTAL 551,939 718,189
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 246,436 245,382
Non-utility property - at cost (less accumulated depreciation) 194,466 194,830
Other 16,918 15,970
---------- ----------
TOTAL 457,820 456,182
---------- ----------
UTILITY PLANT
Electric 7,712,243 7,694,226
Property under capital lease 26,342 28,087
Natural gas 59,552 59,100
Construction work in progress 258,925 221,730
Nuclear fuel under capital lease 61,024 67,688
---------- ----------
TOTAL UTILITY PLANT 8,118,086 8,070,831
Less - accumulated depreciation and amortization 3,787,191 3,750,770
---------- ----------
UTILITY PLANT - NET 4,330,895 4,320,061
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 424,459 426,623
Unamortized loss on reacquired debt 33,513 34,321
Other regulatory assets 199,931 201,329
Long-term receivables 25,768 26,576
Other 24,264 26,460
---------- ----------
TOTAL 707,935 715,309
---------- ----------
TOTAL ASSETS $6,048,589 $6,209,741
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $39,000 $147,921
Accounts payable:
Associated companies 37,372 38,728
Other 103,154 135,023
Customer deposits 44,999 45,876
Taxes accrued 122,432 90,604
Accumulated deferred income taxes 11,181 21,412
Nuclear refueling outage costs 5,125 2,080
Interest accrued 44,377 43,414
Obligations under capital leases 36,515 36,668
Other 20,280 20,995
---------- ----------
TOTAL 464,435 582,721
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 1,217,727 1,227,084
Accumulated deferred investment tax credits 161,925 163,766
Obligations under capital leases 50,851 60,163
Decommissioning 145,480 144,926
Transition to competition 79,098 79,098
Regulatory reserves 36,108 33,591
Accumulated provisions 62,182 63,811
Other 98,320 93,719
---------- ----------
TOTAL 1,851,691 1,866,158
---------- ----------
Long-term debt 1,919,956 1,958,897
Preferred stock with sinking fund 24,781 26,185
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 85,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 47,327 47,327
Common stock, no par value, authorized 200,000,000
shares; issued and outstanding 100 shares in 2002 and 2001 114,055 114,055
Paid-in capital 1,157,459 1,157,459
Retained earnings 383,885 371,939
---------- ----------
TOTAL 1,702,726 1,690,780
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,048,589 $6,209,741
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 144.8 $ 188.5 ($ 43.7) (23)
Commercial 108.9 145.3 (36.4) (25)
Industrial 144.0 280.6 (136.6) (49)
Governmental 7.7 9.9 (2.2) (22)
------------------------------
Total retail 405.4 624.3 (218.9) (35)
Sales for resale
Associated companies 4.5 12.4 (7.9) (64)
Non-associated companies 27.8 51.1 (23.3) (46)
Other 9.6 11.1 (1.5) (14)
------------------------------
Total $ 447.3 $ 698.9 ($ 251.6) (36)
==============================
Billed Electric Energy
Sales (GWH):
Residential 2,102 2,126 (24) (1)
Commercial 1,776 1,744 32 2
Industrial 3,644 4,252 (608) (14)
Governmental 111 111 - -
------------------------------
Total retail 7,633 8,233 (600) (7)
Sales for resale
Associated companies 104 107 (3) (3)
Non-associated companies 1,057 959 98 10
------------------------------
Total 8,794 9,299 (505) (5)
==============================
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the first quarter of 2002 compared with
2001 primarily due to an increase in unbilled revenue, partially
offset by an increase in other operation and maintenance expenses.
Revenues and Sales
The changes in electric operating revenues for the first quarter
of 2002 compared with 2001 are as follows:
First Quarter
Description Increase/(Decrease)
(In Millions)
Fuel cost recovery ($223.3)
Sales volume/weather (0.4)
Unbilled revenue 45.1
Other revenue 2.9
Sales for resale (3.3)
-------
Total ($179.0)
=======
Fuel cost recovery
Entergy Louisiana is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The
difference between revenues collected and current fuel and purchased
power costs is recorded as deferred fuel costs on Entergy Louisiana's
financial statements such that these costs generally have no net
effect on earnings.
Fuel cost recovery revenues decreased due to recovery, through
the fuel adjustment clause, of lower fuel and purchased power
expenses primarily due to decreases in the market price of natural
gas and purchased power.
Unbilled revenue
As discussed in Note 1 to the financial statements in the Form
10-K, unbilled revenues are estimated monthly and are reversed the
following month. Unbilled revenue for 2002 and 2001 includes the
reversal of the estimates for December 2001 and December 2000,
respectively. The increase in unbilled revenue for the first quarter
of 2002 compared to the first quarter of 2001 is due to the effect on
the March 2001 unbilled calculation of higher unbilled revenue in
December 2000 caused by volume/weather.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the first
quarter of 2002 primarily due to a 59.8% decrease in the market
price of natural gas, in addition to decreases in the market price
of purchased power and oil.
Other operation and maintenance
Other operation and maintenance expenses increased for the
first quarter of 2002 primarily due to:
o lower nuclear insurance refunds of $1.2 million;
o an increase in incentive compensation expense of $4.7 million;
and
o an increase in employee pension and benefits expense of $1.1
million.
Other regulatory charges - net
Other regulatory charges increased for the first quarter of
2002 primarily due to the amortization of capacity charges
associated with power purchases in the summer of 2000. The
amortization of these charges will occur through July 2002. Refer
to Note 2 to the financial statements for further discussion of
deferred capacity charges.
Other
Other income
Interest income decreased for the first quarter of 2002
primarily due to lower interest recorded on deferred fuel costs and
money pool investments.
Interest and other charges
Interest on long-term debt decreased for the first quarter of
2002 due to the refinancing and net redemption of First Mortgage
Bonds in the amounts of $18.7 million in 2001 and $63.0 million in
the first quarter of 2002.
Other interest decreased for the first quarter of 2002 primarily
due to interest accrued in 2001 on reserves provided for fuel-related
refunds that were made in the summer of 2001.
Income taxes
The effective income tax rates for the first quarter of 2002 and
2001 were 41.4% and 48.4%, respectively. The decrease in the
effective income tax rate is primarily due to higher pre-tax income
reducing the effect of book and tax timing differences.
ENTERGY LOUISIANA, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING REVENUES
Domestic electric $369,963 $548,914
-------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 62,980 234,423
Purchased power 79,763 135,505
Nuclear refueling outage expenses 3,050 3,262
Other operation and maintenance 78,466 69,813
Decommissioning 2,606 2,606
Taxes other than income taxes 18,433 18,552
Depreciation and amortization 45,462 44,946
Other regulatory charges - net 3,315 540
-------- --------
TOTAL 294,075 509,647
-------- --------
OPERATING INCOME 75,888 39,267
-------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,068 935
Interest and dividend income 235 2,669
Miscellaneous - net (879) (733)
-------- --------
TOTAL 424 2,871
-------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 23,441 24,456
Other interest - net 1,839 3,518
Distributions on preferred securities of subsidiary 1,575 1,575
Allowance for borrowed funds used during construction (861) (709)
-------- --------
TOTAL 25,994 28,840
-------- --------
INCOME BEFORE INCOME TAXES 50,318 13,298
Income taxes 20,824 6,439
-------- --------
NET INCOME 29,494 6,859
Preferred dividend requirements and other 1,678 2,378
-------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $27,816 $4,481
======== ========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $29,494 $6,859
Noncash items included in net income:
Reserve for regulatory adjustments - 250
Other regulatory charges - net 3,315 540
Depreciation, amortization, and decommissioning 48,068 47,552
Deferred income taxes and investment tax credits 5,682 (32,902)
Allowance for equity funds used during construction (1,068) (935)
Changes in working capital:
Receivables 10,151 27,171
Accounts payable 14,999 (104,832)
Taxes accrued 26,918 49,557
Interest accrued (11,121) (10,899)
Deferred fuel costs (28,606) 63,264
Other working capital accounts 2,549 2,198
Provision for estimated losses and reserves 755 1,820
Changes in other regulatory assets 7,705 (4,465)
Other (7,238) 3,807
-------- --------
Net cash flow provided by operating activities 101,603 48,985
-------- --------
INVESTING ACTIVITIES
Construction expenditures (44,156) (42,193)
Allowance for equity funds used during construction 1,068 935
Nuclear fuel purchases (39,762) -
Proceeds from sale/leaseback of nuclear fuel 39,762 -
Decommissioning trust contributions and realized
change in trust assets (5,506) (5,637)
Changes in other temporary investments - net 6,152 -
-------- --------
Net cash flow used in investing activities (42,442) (46,895)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 145,275 -
Retirement of long-term debt (228,968) (16,388)
Changes in short-term borrowings - 30,000
Dividends paid:
Common stock (2,800) -
Preferred stock (1,678) (2,378)
-------- --------
Net cash flow provided by (used in) financing activities (88,171) 11,234
-------- --------
Net increase (decrease) in cash and cash equivalents (29,010) 13,324
Cash and cash equivalents at beginning of period 42,408 43,959
-------- --------
Cash and cash equivalents at end of period $13,398 $57,283
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $36,460 $38,950
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($1,457) ($1,224)
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $13,398 $28,768
Temporary cash investments - at cost,
which approximates market - 13,640
---------- ----------
Total cash and cash equivalents 13,398 42,408
---------- ----------
Other temporary investments - 6,152
Notes receivable 8 8
Accounts receivable:
Customer 48,317 48,640
Allowance for doubtful accounts (1,771) (1,771)
Associated companies 9,483 9,090
Other 22,744 47,965
Accrued unbilled revenues 86,200 71,200
---------- ----------
Total accounts receivable 164,973 175,124
---------- ----------
Accumulated deferred income taxes 30,531 42,566
Materials and supplies - at average cost 75,888 77,523
Deferred nuclear refueling outage costs 3,452 4,096
Prepayments and other 10,843 9,000
---------- ----------
TOTAL 299,093 356,877
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 14,230 14,230
Decommissioning trust funds 123,712 119,663
Non-utility property - at cost (less accumulated depreciation) 21,625 21,671
---------- ----------
TOTAL 159,567 155,564
---------- ----------
UTILITY PLANT
Electric 5,463,466 5,456,093
Property under capital lease 239,395 239,395
Construction work in progress 132,892 110,792
Nuclear fuel under capital lease 72,487 70,316
---------- ----------
TOTAL UTILITY PLANT 5,908,240 5,876,596
Less - accumulated depreciation and amortization 2,569,602 2,538,964
---------- ----------
UTILITY PLANT - NET 3,338,638 3,337,632
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 176,779 179,368
Unamortized loss on reacquired debt 27,116 28,341
Other regulatory assets 68,638 73,754
Long-term receivables 1,503 1,515
Other 18,969 16,650
---------- ----------
TOTAL 293,005 299,628
---------- ----------
TOTAL ASSETS $4,090,303 $4,149,701
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $71,659 $185,627
Accounts payable:
Associated companies 74,455 73,208
Other 107,212 93,460
Customer deposits 62,030 61,359
Taxes accrued 47,328 20,410
Interest accrued 23,403 34,524
Deferred fuel costs 38,887 67,493
Obligations under capital leases 34,171 34,171
Other 15,561 14,119
---------- ----------
TOTAL 474,706 584,371
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 770,762 776,610
Accumulated deferred investment tax credits 110,591 111,942
Obligations under capital leases 38,316 36,144
Accumulated provisions 69,277 68,522
Other 77,287 82,780
---------- ----------
TOTAL 1,066,233 1,075,998
---------- ----------
Long-term debt 1,126,394 1,091,329
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized 250,000,000
shares; issued and outstanding 165,173,180 shares in 2002
and 2001 1,088,900 1,088,900
Capital stock expense and other (1,718) (1,718)
Retained earnings 165,288 140,321
---------- ----------
TOTAL 1,352,970 1,328,003
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,090,303 $4,149,701
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 119.4 $ 184.7 ($ 65.3) (35)
Commercial 81.0 121.2 (40.2) (33)
Industrial 129.5 245.2 (115.7) (47)
Governmental 8.0 12.3 (4.3) (35)
------------------------------
Total retail 337.9 563.4 (225.5) (40)
Sales for resale
Associated companies 3.3 4.1 (0.8) (20)
Non-associated companies 3.3 5.8 (2.5) (43)
Other 25.4 (24.4) 49.8 204
------------------------------
Total $ 369.9 $ 548.9 ($179.0) (33)
==============================
Billed Electric Energy
Sales (GWH):
Residential 1,922 1,944 (22) (1)
Commercial 1,222 1,217 5 -
Industrial 3,578 3,574 4 -
Governmental 128 128 - -
------------------------------
Total retail 6,850 6,863 (13) -
Sales for resale
Associated companies 85 53 32 60
Non-associated companies 53 96 (43) (45)
------------------------------
Total 6,988 7,012 (24) -
==============================
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the first quarter of 2002 compared with
2001 primarily due to increased net revenue, partially offset by
increased other operation and maintenance expenses and decreased
interest income.
Revenues and Sales
The changes in electric operating revenues for the first quarter
of 2002 compared with 2001 are as follows:
First Quarter
Description Increase/(Decrease)
(In Millions)
Base rate differences $2.8
Grand Gulf rate rider (6.7)
Fuel cost recovery (9.6)
Sales volume/weather (3.2)
Unbilled revenue 2.3
Other revenue 2.4
Sales for resale (52.5)
------
Total ($64.5)
======
Grand Gulf rate rider
Rate rider revenues have no material effect on net income
because specific incurred expenses offset them.
Grand Gulf rate rider revenue decreased for the first quarter of
2002 as a result of a lower rate which became effective in October
2001.
Fuel cost recovery
Entergy Mississippi is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates, recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy Mississippi's financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues decreased for the first quarter of
2002 primarily due to lower fuel and purchased power expenses as a
result of decreases in the market price of natural gas and purchased
power.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales for resale
Sales for resale decreased for the first quarter of 2002
primarily due to a decrease in volume to affiliated customers.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the first
quarter of 2002 primarily due to the displacement of oil generation
by lower priced gas generation and the decrease in the market price
of purchased power. Oil generation was used in the first quarter of
2001 due to significant increases in the market price of natural gas.
The decrease was partially offset by an over-recovery of fuel costs,
including the effect of increased recoveries approved by the MPSC to
recover previous under-recoveries.
Other operation and maintenance
Other operation and maintenance expenses increased for the first
quarter of 2002 primarily due to:
o an increase in plant maintenance expense of $3.8 million due to
an unscheduled outage at a fossil plant in 2002;
o an increase in injuries and damages expense of $1.1 million; and
o an insurance reimbursement of $1.4 million received in 2001 in
connection with a turbine generator failure.
Other regulatory credits
Other regulatory credits increased for the first quarter of 2002
primarily due a greater under-recovery of Grand Gulf 1-related costs
due to a lower rate implemented in October 2001.
Other
Other income
Interest income decreased for the first quarter of 2002
primarily due to interest recorded in the first quarter of 2001 on
the deferred System Energy costs that Entergy Mississippi was not
recovering through rates. The deferral of these costs ceased in the
third quarter of 2001 as a result of a final FERC order. See Note 2
to the financial statements in the Form 10-K for further discussion
of the System Energy rate proceeding and FERC order.
Income taxes
The effective income tax rates for the first quarter of 2002 and
2001 were 32.8% and 35.8%, respectively. The decrease in the
effective income tax rate for 2002 was primarily due to a larger
AFUDC tax adjustment in the first quarter of 2002.
ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING REVENUES
Domestic electric $191,690 $256,158
-------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 50,568 110,059
Purchased power 75,336 83,464
Other operation and maintenance 40,900 33,248
Taxes other than income taxes 11,733 11,273
Depreciation and amortization 13,506 13,274
Other regulatory credits - net (17,281) (9,684)
-------- --------
TOTAL 174,762 241,634
-------- --------
OPERATING INCOME 16,928 14,524
-------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,069 423
Interest and dividend income 1,042 4,693
Miscellaneous - net (734) (547)
-------- --------
TOTAL 1,377 4,569
-------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 9,962 11,144
Other interest - net 621 1,233
Allowance for borrowed funds used during construction (946) (347)
-------- --------
TOTAL 9,637 12,030
-------- --------
INCOME BEFORE INCOME TAXES 8,668 7,063
Income taxes 2,839 2,528
-------- --------
NET INCOME 5,829 4,535
Preferred dividend requirements and other 842 842
-------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $4,987 $3,693
======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $5,829 $4,535
Noncash items included in net income:
Other regulatory credits - net (17,281) (9,684)
Depreciation and amortization 13,506 13,274
Deferred income taxes and investment tax credits (3,752) 4,805
Allowance for equity funds used during construction (1,069) (423)
Changes in working capital:
Receivables 11,193 25,186
Fuel inventory 1,916 (3,547)
Accounts payable (10,177) (73,374)
Taxes accrued (15,896) (23,597)
Interest accrued (822) 2,062
Deferred fuel costs 14,548 (12,807)
Other working capital accounts (4,666) (4,563)
Provision for estimated losses and reserves (524) (784)
Changes in other regulatory assets (12,599) (9,010)
Other 24,110 17,250
-------- --------
Net cash flow provided by (used in) operating activities 4,316 (70,677)
-------- --------
INVESTING ACTIVITIES
Construction expenditures (39,535) (22,163)
Allowance for equity funds used during construction 1,069 423
Changes in other temporary investments - net 18,566 -
-------- --------
Net cash flow used in investing activities (19,900) (21,740)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 69,689
Changes in short-term borrowings - 25,000
Dividends paid:
Common stock (1,700) (2,000)
Preferred stock (842) (842)
-------- --------
Net cash flow provided by (used in) financing activities (2,542) 91,847
-------- --------
Net decrease in cash and cash equivalents (18,126) (570)
Cash and cash equivalents at beginning of period 54,048 5,113
-------- --------
Cash and cash equivalents at end of period $35,922 $4,543
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $10,806 $9,779
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $9,431 $12,883
Temporary cash investments - at cost,
which approximates market 26,491 41,165
---------- ----------
Total cash and cash equivalents 35,922 54,048
---------- ----------
Other temporary investments - 18,566
Accounts receivable:
Customer 43,343 50,370
Allowance for doubtful accounts (1,044) (1,044)
Associated companies 14,003 14,201
Other 2,924 2,892
Accrued unbilled revenues 26,300 30,300
---------- ----------
Total accounts receivable 85,526 96,719
---------- ----------
Deferred fuel costs 91,610 106,158
Fuel inventory - at average cost 2,908 4,824
Materials and supplies - at average cost 17,263 16,896
Prepayments and other 6,891 8,521
---------- ----------
TOTAL 240,120 305,732
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 5,531 5,531
Non-utility property - at cost (less accumulated depreciation) 6,690 6,723
---------- ----------
TOTAL 12,221 12,254
---------- ----------
UTILITY PLANT
Electric 1,956,233 1,939,182
Property under capital lease 202 211
Construction work in progress 125,740 110,450
---------- ----------
TOTAL UTILITY PLANT 2,082,175 2,049,843
Less - accumulated depreciation and amortization 747,742 741,892
---------- ----------
UTILITY PLANT - NET 1,334,433 1,307,951
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 22,674 22,387
Unamortized loss on reacquired debt 13,625 13,925
Other regulatory assets 25,815 13,503
Other 6,527 7,274
---------- ----------
TOTAL 68,641 57,089
---------- ----------
TOTAL ASSETS $1,655,415 $1,683,026
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $255,000 $65,000
Accounts payable:
Associated companies 41,459 45,554
Other 21,301 27,383
Customer deposits 30,813 29,421
Taxes accrued 15,588 31,484
Accumulated deferred income taxes 11,591 19,277
Interest accrued 16,845 17,667
Obligations under capital leases 37 36
System Energy Refund 7,418 14,836
Other 2,061 1,964
---------- ----------
TOTAL 402,113 252,622
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 271,881 266,498
Accumulated deferred investment tax credits 17,555 17,908
Obligations under capital leases 165 175
Accumulated provisions 7,103 7,627
Other 42,706 37,678
---------- ----------
TOTAL 339,410 329,886
---------- ----------
Long-term debt 399,849 589,762
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 50,381 50,381
Common stock, no par value, authorized 15,000,000
shares; issued and outstanding 8,666,357 shares in 2002
and 2001 199,326 199,326
Capital stock expense and other (59) (59)
Retained earnings 264,395 261,108
---------- ----------
TOTAL 514,043 510,756
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,655,415 $1,683,026
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 73.0 $ 80.9 ($ 7.9) (10)
Commercial 64.1 67.6 (3.5) (5)
Industrial 36.2 41.3 (5.1) (12)
Governmental 6.4 6.7 (0.3) (4)
------------------------------
Total retail 179.7 196.5 (16.8) (9)
Sales for resale
Associated companies 5.2 56.6 (51.4) (91)
Non-associated companies 3.4 4.4 (1.0) (23)
Other 3.4 (1.3) 4.7 362
------------------------------
Total $ 191.7 $ 256.2 ($ 64.5) (25)
==============================
Billed Electric Energy
Sales (GWH):
Residential 1,126 1,215 (89) (7)
Commercial 963 975 (12) (1)
Industrial 672 734 (62) (8)
Governmental 87 90 (3) (3)
------------------------------
Total retail 2,848 3,014 (166) (6)
Sales for resale
Associated companies 45 874 (829) (95)
Non-associated companies 47 51 (4) (8)
------------------------------
Total 2,940 3,939 (999) (25)
==============================
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income (Loss)
Entergy New Orleans experienced a net loss in the first quarter
of 2002 primarily due to accruals for potential rate actions and
refunds.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the first quarter
of 2002 compared with 2001 are as follows:
First Quarter
Description Increase/(Decrease)
(In Millions)
Base rate differences ($3.0)
Fuel cost recovery (42.0)
Sales volume/weather 1.0
Unbilled revenue 0.7
Other revenue (5.9)
Sales for resale (6.8)
------
Total ($56.0)
======
Fuel cost recovery
Entergy New Orleans is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates, recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy New Orleans' financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues decreased for the first quarter of
2002 primarily due to recovery, through the fuel adjustment clause,
of lower fuel and purchased power expenses. The decrease in fuel and
purchased power expenses was a result of decreased market prices of
natural gas and purchased power.
Other revenue
Other revenue decreased for the first quarter of 2002 primarily
due to accruals for potential rate actions and refunds.
Sales for resale
Sales for resale decreased for the first quarter of 2002
primarily due to a decrease in the average price of energy.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Gas operating revenues
Gas operating revenues decreased for the first quarter of 2002
due to the decreased market price of natural gas coupled with
decreased sales volume.
Expenses
Fuel and purchased power
Fuel and purchased power expenses decreased for the first
quarter of 2002 primarily due to a 74% decrease in the market price
of natural gas in addition to a decrease in the market price of
purchased power.
Taxes other than income taxes
Taxes other than income taxes decreased for the first quarter of
2002 primarily due to a decrease in local
franchise taxes as a result of lower retail revenue.
Other
Other income
Other income decreased for the first quarter of 2002 primarily
due to interest recorded in the first quarter of 2001 on deferred
System Energy costs that Entergy New Orleans was not recovering
through rates. The deferral of these costs ceased in the third
quarter of 2001 as a result of a final FERC order. See Note 2 to the
financial statements in the Form 10-K for further discussion of the
System Energy rate proceeding and FERC order.
Income taxes
The effective income tax rates for the first quarter of 2002 and
2001 were 33.8% and 56.3%, respectively. The decrease in the tax
rate for the first quarter of 2002 is primarily due to the pre-tax
loss decreasing the effect of book and tax timing differences.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING REVENUES
Domestic electric $73,223 $129,231
Natural gas 29,724 74,784
-------- --------
TOTAL 102,947 204,015
-------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 28,657 108,827
Purchased power 35,509 48,467
Other operation and maintenance 21,912 20,960
Taxes other than income taxes 9,292 13,686
Depreciation and amortization 6,843 6,326
Other regulatory charges - net 2,409 1,531
-------- --------
TOTAL 104,622 199,797
-------- --------
OPERATING INCOME (LOSS) (1,675) 4,218
-------- --------
OTHER INCOME
Allowance for equity funds used during construction 430 398
Interest and dividend income 274 1,106
Miscellaneous - net (460) (413)
-------- --------
TOTAL 244 1,091
-------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 4,468 4,118
Other interest - net 451 426
Allowance for borrowed funds used during construction (394) (320)
-------- --------
TOTAL 4,525 4,224
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES (5,956) 1,085
Income taxes (2,016) 611
-------- --------
NET INCOME (LOSS) (3,940) 474
Preferred dividend requirements and other 241 241
-------- --------
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK ($4,181) $233
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income (loss) ($3,940) $474
Noncash items included in net income (loss):
Other regulatory charges - net 2,409 1,531
Depreciation and amortization 6,843 6,326
Deferred income taxes and investment tax credits (1,829) (4,608)
Allowance for equity funds used during (430) (398)
construction
Changes in working capital:
Receivables 9,545 (5,036)
Fuel inventory 3,020 3,942
Accounts payable 1,060 (18,690)
Taxes accrued - 3,560
Interest accrued (4,518) (3,753)
Deferred fuel costs (5,617) 11,358
Other working capital accounts (35,351) (10,275)
Provision for estimated losses and reserves 63 (2,243)
Changes in other regulatory assets 12 (3,093)
Other 5,843 320
-------- --------
Net cash flow used in operating activities (22,890) (20,585)
-------- --------
INVESTING ACTIVITIES
Construction expenditures (13,324) (11,194)
Allowance for equity funds used during construction 430 398
Changes in other temporary investments - net 14,859 -
-------- --------
Net cash flow provided by (used in) investing activities 1,965 (10,796)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 29,817
Dividends paid:
Preferred stock (241) (241)
-------- --------
Net cash flow provided by (used in) financing activities (241) 29,576
-------- --------
Net decrease in cash and cash equivalents (21,166) (1,805)
Cash and cash equivalents at beginning of period 38,184 6,302
-------- --------
Cash and cash equivalents at end of period $17,018 $4,497
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $9,306 $7,758
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $6,865 $5,237
Temporary cash investments - at cost,
which approximates market 10,153 32,947
-------- --------
Total cash and cash equivalents 17,018 38,184
-------- --------
Other temporary investments - 14,859
Accounts receivable:
Customer 29,806 33,827
Allowance for doubtful accounts (2,234) (2,234)
Associated companies 5,184 10,527
Other 4,500 4,511
Accrued unbilled revenues 19,857 20,027
-------- --------
Total accounts receivable 57,113 66,658
-------- --------
Accumulated deferred income taxes 2,823 4,882
Fuel inventory - at average cost 61 3,081
Materials and supplies - at average cost 8,325 8,273
Prepayments and other 35,500 26,239
-------- --------
TOTAL 120,840 162,176
-------- --------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 3,259 3,259
-------- --------
UTILITY PLANT
Electric 605,277 597,575
Natural gas 144,260 142,741
Construction work in progress 45,460 43,166
-------- --------
TOTAL UTILITY PLANT 794,997 783,482
Less - accumulated depreciation and amortization 401,074 396,535
-------- --------
UTILITY PLANT - NET 393,923 386,947
-------- --------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Unamortized loss on reacquired debt 708 761
Other regulatory assets 10,831 10,843
Other 1,900 2,051
-------- --------
TOTAL 13,439 13,655
-------- --------
TOTAL ASSETS $531,461 $566,037
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $25,000 $ -
Accounts payable:
Associated companies 19,820 18,199
Other 23,079 23,640
Customer deposits 19,080 18,931
Interest accrued 2,514 7,032
Deferred fuel costs 4,579 10,196
System Energy Refund - 33,614
Other 9,226 1,799
-------- --------
TOTAL 103,298 113,411
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 18,437 25,326
Accumulated deferred investment tax credits 5,236 5,361
SFAS 109 regulatory liability - net 23,492 19,868
Accumulated provisions 5,865 5,802
Other 24,757 16,735
-------- --------
TOTAL 77,787 73,092
-------- --------
Long-term debt 204,120 229,097
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 19,780 19,780
Common stock, $4 par value, authorized 10,000,000
shares; issued and outstanding 8,435,900 shares in 2002
and 2001 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings 56,438 60,619
-------- --------
TOTAL 146,256 150,437
-------- --------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $531,461 $566,037
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
Increase/
Description 2002 2001 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 27.2 $ 41.0 ($ 13.8) (34)
Commercial 30.8 48.9 (18.1) (37)
Industrial 4.6 8.3 (3.7) (45)
Governmental 12.5 20.9 (8.4) (40)
-----------------------------
Total retail 75.1 119.1 (44.0) (37)
Sales for resale
Associated companies 0.3 7.0 (6.7) (96)
Non-associated companies 0.5 0.6 (0.1) (17)
Other (2.7) 2.5 (5.2) (208)
-----------------------------
Total $ 73.2 $ 129.2 ($ 56.0) (43)
=============================
Billed Electric Energy
Sales (GWH):
Residential 403 397 6 2
Commercial 505 488 17 3
Industrial 89 91 (2) (2)
Governmental 230 227 3 1
-----------------------------
Total retail 1,227 1,203 24 2
Sales for resale
Associated companies 16 63 (47) (75)
Non-associated companies 10 13 (3) (23)
-----------------------------
Total 1,253 1,279 (26) (2)
=============================
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the first quarter of 2002 compared with
2001 primarily due to decreased interest charges, partially offset by
decreased interest income and increased other operation and
maintenance expenses.
Revenues
Operating revenues recover operating expenses, depreciation, and
capital costs attributable to Grand Gulf 1. Capital costs are
computed by allowing a return on System Energy's common equity funds
allocable to its net investment in Grand Gulf 1 and adding to such
amount System Energy's effective interest cost for its debt.
Operating revenues decreased for the first quarter of 2002 as a
result of the suspension of the GGART for Entergy Arkansas in July
2001. The net income impact of the suspended tariff is offset in
other regulatory charges. See further discussion of the GGART in
Note 2 to the financial statements in the Form 10-K.
Expenses
Other operation and maintenance
Other operation and maintenance expenses increased for the first
quarter of 2002 primarily due to:
o lower nuclear insurance refunds of $1.7 million; and
o an increase in incentive compensation expense of $0.8 million.
Depreciation and amortization
Depreciation and amortization expenses decreased for the first
quarter of 2002 primarily due to a lower depreciation rate used in
2002 as mandated by FERC. See further discussion of the System
Energy rate proceeding in Note 2 to the financial statements in the
Form 10-K.
Other regulatory charges - net
Other regulatory charges decreased for the first quarter of 2002
primarily due to the suspension of the GGART for Entergy Arkansas in
July 2001.
Other
Other income
Interest income decreased for the first quarter of 2002 as a
result of decreased interest earned on System Energy's investments in
the money pool due to lower advances to the money pool in 2002.
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Interest and other charges
Interest on long-term debt decreased for the first quarter of
2002 due to the retirement of $135 million of long-term debt in
August 2001.
Other interest expense decreased for the first quarter of 2002
due to interest recorded in 2001 on System Energy's reserve for rate
refund. The refund was made in December 2001.
Income taxes
The effective income tax rates for the first quarter of 2002 and
2001 were 40.5% and 45.8%, respectively. The decrease in the
effective tax rate was primarily due to updating book and tax timing
differences related to research and experimental expenses consistent
with amended tax returns.
SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING REVENUES
Domestic electric $142,330 $151,166
-------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 9,604 10,072
Nuclear refueling outage expenses 2,620 4,034
Other operation and maintenance 19,213 16,374
Decommissioning 4,014 4,736
Taxes other than income taxes 6,716 6,708
Depreciation and amortization 27,297 29,481
Other regulatory charges - net 12,926 19,167
-------- --------
TOTAL 82,390 90,572
-------- --------
OPERATING INCOME 59,940 60,594
-------- --------
OTHER INCOME
Allowance for equity funds used during construction 550 270
Interest and dividend income 480 5,101
Miscellaneous - net (361) (30)
-------- --------
TOTAL 669 5,341
-------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 15,107 19,011
Other interest - net 785 8,706
Allowance for borrowed funds used during construction (232) (137)
-------- --------
TOTAL 15,660 27,580
-------- --------
INCOME BEFORE INCOME TAXES 44,949 38,355
Income taxes 18,222 17,557
-------- --------
NET INCOME $26,727 $20,798
======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
2002 2001
(In Thousands)
OPERATING ACTIVITIES
Net income $26,727 $20,798
Noncash items included in net income:
Reserve for regulatory adjustments - 27,644
Other regulatory charges - net 12,926 19,167
Depreciation, amortization, and decommissioning 31,311 34,217
Deferred income taxes and investment tax credits (12,124) (24,524)
Allowance for equity funds used during construction (550) (270)
Changes in working capital:
Receivables (3,000) (37,157)
Accounts payable (1,192) 13,389
Taxes accrued 14,918 26,464
Interest accrued (28,374) (23,111)
Other working capital accounts (1,338) 905
Provision for estimated losses and reserves (273) (164)
Changes in other regulatory assets 8,646 10,306
Other 15,699 5,072
-------- --------
Net cash flow provided by operating activities 63,376 72,736
-------- --------
INVESTING ACTIVITIES
Construction expenditures (7,551) (7,607)
Allowance for equity funds used during construction 550 270
Nuclear fuel purchases - (10,704)
Proceeds from sale/leaseback of nuclear fuel - 10,704
Decommissioning trust contributions and realized
change in trust assets (785) (5,692)
Changes in other temporary investments - net 22,354 -
-------- --------
Net cash flow provided by (used in) investing activities 14,568 (13,029)
-------- --------
FINANCING ACTIVITIES
Retirement of long-term debt (30,891) (16,800)
Dividends paid:
Common stock (23,600) (22,800)
-------- --------
Net cash flow used in financing activities (54,491) (39,600)
-------- --------
Net increase in cash and cash equivalents 23,453 20,107
Cash and cash equivalents at beginning of period 49,579 202,218
-------- --------
Cash and cash equivalents at end of period $73,032 $222,325
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $43,211 $49,725
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($2,428) ($1,190)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
March 31, 2002 and December 31, 2001
(Unaudited)
2002 2001
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $1,141 $15
Temporary cash investments - at cost,
which approximates market 71,891 49,564
---------- ----------
Total cash and cash equivalents 73,032 49,579
---------- ----------
Other temporary investments - 22,354
Accounts receivable:
Associated companies 73,778 70,755
Other 1,170 1,193
---------- ----------
Total accounts receivable 74,948 71,948
---------- ----------
Materials and supplies - at average cost 52,171 51,665
Deferred nuclear refueling outage costs 6,127 8,728
Prepayments and other 5,233 1,631
---------- ----------
TOTAL 211,511 205,905
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 136,903 138,546
---------- ----------
UTILITY PLANT
Electric 3,099,276 3,098,446
Property under capital lease 450,014 450,014
Construction work in progress 43,510 36,868
Nuclear fuel under capital lease 55,028 61,905
---------- ----------
TOTAL UTILITY PLANT 3,647,828 3,647,233
Less - accumulated depreciation and amortization 1,442,571 1,416,337
---------- ----------
UTILITY PLANT - NET 2,205,257 2,230,896
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 164,213 173,470
Unamortized loss on reacquired debt 47,487 48,381
Other regulatory assets 158,560 157,949
Other 9,520 8,894
---------- ----------
TOTAL 379,780 388,694
---------- ----------
TOTAL ASSETS $2,933,451 $2,964,041
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
March 31, 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 2,642 2,404
Other 12,886 14,316
Taxes accrued 127,440 112,522
Accumulated deferred income taxes 1,350 2,360
Interest accrued 18,721 47,095
Obligations under capital leases 26,503 26,503
Other 1,752 1,583
---------- ----------
TOTAL 272,669 307,674
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 483,177 498,404
Accumulated deferred investment tax credits 85,171 86,040
Obligations under capital leases 28,525 35,401
Other regulatory liabilities 172,547 135,878
Decommissioning 140,888 140,103
Accumulated provisions 432 705
Other 37,554 39,117
---------- ----------
TOTAL 948,294 935,648
---------- ----------
Long-term debt 818,681 830,038
SHAREHOLDER'S EQUITY
Common stock, no par value, authorized 1,000,000 shares;
issued and outstanding 789,350 shares in 2002 and 2001 789,350 789,350
Retained earnings 104,457 101,331
---------- ----------
TOTAL 893,807 890,681
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,933,451 $2,964,041
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the financial statements in the Form 10-K for
information on Entergy's estimated construction expenditures
(including nuclear fuel but excluding AFUDC), long-term debt and
preferred stock maturities, and cash sinking fund requirements.
Sales Warranties and Indemnities (Entergy Corporation)
See Note 9 to the financial statements in the Form 10-K for
information on certain warranties made by Entergy or its subsidiaries
in the Entergy London and CitiPower sales transactions. See Note 14
to the financial statements in the Form 10-K for information on
certain warranties made by Entergy or its subsidiaries in the Saltend
sale transaction.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
See Note 9 to the financial statements in the Form 10-K for
information on nuclear liability, property and replacement power
insurance, related NRC regulations, the disposal of spent nuclear
fuel, other high-level radioactive waste, and decommissioning costs
associated with Entergy's nuclear power plants.
Environmental Issues
(Entergy Arkansas)
In previous years, Entergy Arkansas has received notices from
the EPA and the ADEQ alleging that Entergy Arkansas, along with
others, may be a potentially responsible party (PRP) for clean-up
costs associated with a site in Arkansas. As of March 31, 2002, a
remaining recorded liability of approximately $5.0 million existed
related to the cleanup of that site.
(Entergy Gulf States)
Entergy Gulf States has been designated as a PRP for the cleanup
of certain hazardous waste disposal sites. Entergy Gulf States is
currently negotiating with the EPA and state authorities regarding
the cleanup of these sites. As of March 31, 2002, a remaining
recorded liability of approximately $13.3 million existed related to
the cleanup of the remaining sites at which the EPA has designated
Entergy Gulf States as a PRP.
(Entergy Louisiana and Entergy New Orleans)
During 1993, the LDEQ issued new rules for solid waste
regulation, including regulation of wastewater impoundments. Entergy
Louisiana and Entergy New Orleans have determined that certain of
their power plant wastewater impoundments were affected by these
regulations and have chosen to upgrade or close them. Recorded
liabilities in the amounts of $5.8 million for Entergy Louisiana and
$0.5 million for Entergy New Orleans existed at March 31, 2002 for
wastewater upgrades and closures. Completion of this work is
awaiting LDEQ approval.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the
City of New Orleans pursuant to franchise ordinances. These
ordinances contain a continuing option for the City of New Orleans to
purchase Entergy New Orleans' electric and gas utility properties.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
separate but substantially identical transactions for the sale and
leaseback of undivided interests (aggregating approximately 9.3%) in
Waterford 3, which were refinanced in 1997. Upon the occurrence of
certain events Entergy Louisiana may be obligated to pay amounts
sufficient to permit the Owner Participants to withdraw from these
lease transactions and may be required to assume the outstanding
bonds issued to finance, in part, the lessors' acquisition of the
undivided interests in Waterford 3. See Note 10 to the financial
statements in the Form 10-K for further information.
Off Balance Sheet Turbine Financing Arrangement (Entergy Corporation)
As discussed in Note 9 to the financial statements in the Form
10-K, EWO obtained contracts in October 1999 to acquire 36 turbines
from General Electric. Entergy's rights and obligations under the
contracts for 22 of the turbines were sold to an independent special-
purpose entity in May 2001. In the first quarter of 2002, Entergy
recorded a $216.2 million ($140.5 million net of tax) provision for
Entergy's estimate of the impairments resulting from the decline in
the value of the turbines subject to purchase commitments with the
special-purpose entity. Entergy's total potential impairment under
this arrangement is limited to the costs of cancellation of these
turbines. The Consolidated Statement of Operations reflects the pre-
tax effect of this liability in operation and maintenance expenses.
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are
defendants in numerous lawsuits filed by former employees asserting
that they were wrongfully terminated and/or discriminated against on
the basis of age, race, and/or sex. The defendant companies are
vigorously defending these suits and deny any liability to the
plaintiffs. Nevertheless, no assurance can be given as to the
outcome of these cases.
Asbestos and Hazardous Material Litigation (Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans)
Numerous lawsuits have been filed in federal and state courts in
Texas and Louisiana primarily by contractor employees in the 1950-
1980 timeframe against Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans, as premises owners of power plants, for damages
caused by alleged exposure to asbestos or other hazardous material.
See Note 9 to the financial statements in the Form 10-K for further
information.
Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
In addition to those proceedings discussed elsewhere herein and
in the Form 10-K, Entergy and the domestic utility companies are
involved in a number of other legal proceedings and claims in the
ordinary course of their businesses. While management is unable to
predict the outcome of these other legal proceedings and claims, it
is not expected that their ultimate resolution individually or
collectively will have a material adverse effect on the results of
operations, cash flows, or financial condition of these entities.
NOTE 2. RATE AND REGULATORY MATTERS
Electric Industry Restructuring and the Continued Application of SFAS
71
Previous developments and information related to electric
industry restructuring are presented in Note 2 to the financial
statements in the Form 10-K.
Texas
(Entergy Corporation and Entergy Gulf States)
Retail open access legislation is in place in Texas, but the
implementation of retail open access in Entergy Gulf States' service
territory is delayed until at least September 15, 2002, and given
current FERC and PUCT activities, retail open access in Entergy Gulf
States' territory is not likely to begin before May 2003. Several
proceedings necessary to implement retail open access are still
pending, including the proceeding to set the price-to-beat fuel rate
that will be charged by Entergy's retail electric service provider.
In addition, the LPSC has not approved for the Louisiana
jurisdictional operations the transfer of generation assets to, or a
power purchase agreement with, Entergy's Texas generation company.
Therefore, neither the necessary regulatory actions nor the
reasonable determinability of the effect of deregulation has occurred
for Entergy Gulf States to discontinue the application of regulatory
accounting principles to its Texas generation operations.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
March 2002 Settlement Agreement
As discussed in the Form 10-K, in March 2002, Entergy Arkansas,
the APSC staff, and the Arkansas Attorney General submitted a
settlement agreement to the APSC for approval. The agreement
resolves issues discussed in the Form 10-K under "Retail Rates,"
"Transition Cost Account," and "December 2000 Ice Storm Cost
Recovery." Arkansas Electric Energy Consumers, Inc. opposed the
settlement. A hearing before the APSC to consider the settlement was
held on April 11, 2002. No assurance can be given as to the timing
or outcome of the proceedings before the APSC.
Fuel Cost Recovery
In March 2002, Entergy Arkansas filed its annually redetermined
energy cost rate with the APSC, including a new energy allocation
factor. The filing reflected that a decrease was warranted due to a
decrease in fuel and purchased power costs in 2001 and the
accumulated over-recovery of 2001 energy costs. The decreased energy
cost rate is effective April 2002 through March 2003.
Filings with the PUCT and Texas Cities (Entergy Corporation and
Entergy Gulf States)
Recovery of River Bend Costs
In March 1998, the PUCT disallowed recovery of $1.4 billion of
company-wide abeyed River Bend plant costs which have been held in
abeyance since 1988. Entergy Gulf States appealed the PUCT's
decision on this matter to the Travis County District Court in Texas.
In June 1999, subsequent to the settlement agreement discussed in the
Form 10-K, Entergy Gulf States removed the reserve for River Bend
plant costs held in abeyance and reduced the value of the plant
asset. The settlement agreement limits potential recovery of the
remaining plant asset, less depreciation, to $115 million as of
January 1, 2002. In a settlement in its transition to competition
proceedings, and consistent with the June 1999 settlement, Entergy
Gulf States agreed not to prosecute its appeal until January 1, 2002.
Entergy Gulf States also agreed that it will not seek recovery of the
abeyed plant costs through any additional charge to Texas ratepayers.
Entergy Gulf States is now prosecuting its appeal, and the argument
on the appeal occurred in March 2002. In its interim order approving
this settlement, however, the PUCT recognized that any additional
River Bend investment found prudent, subject to the $115 million cap,
could be used as an offset against stranded benefits, should
legislation be passed requiring Entergy Gulf States to return
stranded benefits to retail customers. In April 2002, the Travis
County District Court issued an order affirming the PUCT's order on
remand. Entergy Gulf States has appealed this ruling to the Third
District Court of Appeals. The financial statement impact of the
retail rate settlement agreement on the abeyed plant costs will
ultimately depend on several factors, including the possible
discontinuance of SFAS 71 accounting treatment for the Texas
generation business, the determination of the market value of
generation assets, and any future legislation in Texas addressing the
pass-through or sharing of any stranded benefits with Texas
ratepayers. No assurance can be given that additional reserves or
write-offs will not be required in the future.
PUCT Fuel Cost Review
As determined in the June 1999 retail rate settlement agreement,
Entergy Gulf States adopted a methodology for calculating its fixed
fuel factor based on the market price of natural gas. This
calculation and any necessary adjustments occur semi-annually. The
settlement that delayed implementation of retail open access in Texas
for Entergy Gulf States provides that Entergy Gulf States will
continue the use of this methodology until retail open access begins.
The amounts collected under Entergy Gulf States' fixed fuel factor
until the date retail open access commences are subject to fuel
reconciliation proceedings before the PUCT. The interim surcharge
discussed below will also be subject to the fuel reconciliation
proceeding.
In January 2001, Entergy Gulf States filed a fuel reconciliation
case covering the period from March 1999 through August 2000.
Entergy Gulf States is reconciling approximately $583 million of fuel
and purchased power costs. As part of this filing, Entergy Gulf
States requested a surcharge to collect $28 million, plus interest,
of under-recovered fuel and purchased power costs. A hearing on the
merits concluded in August 2001, and the ALJ has recommended that the
surcharge be reduced to $7 million. The PUCT considered the ALJ's
recommendation in February 2002, but did not reach a final decision.
The PUCT remanded certain issues related to the eligibility of costs
for Entergy Gulf States 30% non-regulated share of River Bend for
further consideration by the State Office of Administrative Hearings.
No assurance can be given as to the outcome of this proceeding.
In November 2001, Entergy Gulf States filed an application with
the PUCT requesting an interim surcharge to collect $71 million, plus
interest, of under-recovered fuel and purchased power expenses
incurred from September 2000 through September 2001. Entergy Gulf
States made the application pursuant to one of the terms of the
settlement agreement that delayed implementation of retail open
access in Texas for Entergy Gulf States. In March 2002, Entergy Gulf
States revised its request to collect $30.3 million, plus interest,
of under-recovered fuel and purchased power expenses incurred from
September 2000 through February 2002. Entergy Gulf States requested
that the surcharge begin in April 2002 and extend through August
2002, or until the fuel cost is fully recovered, whichever is sooner.
In March 2002, the PUCT issued an order approving the surcharge. The
surcharge was implemented in the first billing cycle of April 2002.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf
States)
In May 2001, Entergy Gulf States filed its eighth required post-
merger earnings analysis with the LPSC. This filing is subject to
review by the LPSC and may result in a change in rates. In April
2002, the LPSC staff filed testimony recommending a $16.5 million
rate refund and a $40.1 million prospective rate reduction. The
prospective reduction includes a recommended reduction in return on
equity that would not take effect until the later of June 2003 or the
date of the LPSC's order. Hearings were held in April 2002.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In May 1997, Entergy Louisiana made its second annual
performance-based formula rate plan filing with the LPSC for the 1996
test year. This filing resulted in a total rate reduction of
approximately $54.5 million, which was implemented in July 1997. At
the same time, rates were reduced by an additional $0.7 million and
by an additional $2.9 million effective March 1998. Upon completion
of the hearing process in December 1998, the LPSC issued an order
requiring an additional rate reduction and refund, although the
resulting amounts were not quantified. Entergy Louisiana appealed
this order and obtained a preliminary injunction pending a final
decision on appeal. The Louisiana Supreme Court rendered a non-
unanimous decision in April 2002 affirming the LPSC's order. Entergy
Louisiana has filed an application for rehearing.
In May 2000, Entergy Louisiana submitted its fifth annual
performance-based formula rate plan filing for the 1999 test year.
As a result of this filing, Entergy Louisiana implemented a $24.8
million base rate reduction in August 2000. In September 2001, the
LPSC approved a settlement in which Entergy Louisiana agreed to
increase to $28.2 million the total base rate reduction, effective
August 2000. The additional rate reduction and the associated credit
were implemented in September 2001. The settlement resolved all
issues in the proceeding except for Entergy Louisiana's claim for an
increase in its allowed return on common equity from 10.5% to 11.6%.
A hearing to address the return on common equity issue was held in
March 2002.
In April 2001, Entergy Louisiana submitted its sixth annual
performance-based formula rate plan filing, which used a 2000 test
year. The filing indicated that an immaterial base rate reduction
might be appropriate. Subsequently, Entergy Louisiana agreed to
implement an additional $3.4 million rate reduction effective August
2001. This stipulation resolved all issues relating to the 2000 test
year, except issues relating to its return on common equity and the
treatment of certain capacity costs in the formula rate plan process.
These issues will be addressed in a hearing scheduled for June 2002.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
Formula Rate Plan Filings
In March 2002, Entergy Mississippi submitted its annual
performance-based formula rate plan filing for the 2001 test year.
The submittal indicated that a $2.8 million rate increase was
appropriate under the formula rate plan. In April 2002, the MPSC
Staff and Entergy Mississippi entered into a stipulation, which the
MPSC approved, that provides for an increase of $1.95 million
effective in May 2002.
Filings with the Council (Entergy Corporation and Entergy New
Orleans)
Natural Gas
In a resolution adopted in August 2001, the Council ordered
Entergy New Orleans to account for $36 million of certain natural gas
costs charged to its gas distribution customers from July 1997
through May 2001. The resolution suggests that refunds may be due to
the gas distribution customers if Entergy New Orleans cannot account
satisfactorily for these costs. Entergy New Orleans filed a response
to the Council in September 2001. Entergy New Orleans has documented
a full reconciliation for the natural gas costs during that period.
The ultimate outcome of the proceeding cannot be predicted at this
time.
Fuel Adjustment Clause Litigation
In April 1999, a group of ratepayers filed a complaint against
Entergy New Orleans, Entergy Corporation, Entergy Services, and
Entergy Power in state court in Orleans Parish purportedly on behalf
of all Entergy New Orleans ratepayers. The plaintiffs seek treble
damages for alleged injuries arising from the defendants' alleged
violations of Louisiana's antitrust laws in connection with certain
costs passed on to ratepayers in Entergy New Orleans' fuel adjustment
filings with the Council. In particular, plaintiffs allege that
Entergy New Orleans improperly included certain costs in the
calculation of fuel charges and that Entergy New Orleans imprudently
purchased high-cost fuel from other Entergy affiliates. Plaintiffs
allege that Entergy New Orleans and the other defendant Entergy
companies conspired to make these purchases to the detriment of
Entergy New Orleans' ratepayers and to the benefit of Entergy's
shareholders, in violation of Louisiana's antitrust laws. Plaintiffs
also seek to recover interest and attorneys' fees. Exceptions to the
plaintiffs' allegations were filed by Entergy, asserting, among other
things, that jurisdiction over these issues rests with the Council
and FERC. If necessary, at the appropriate time, Entergy will also
raise its defenses to the antitrust claims. At present, the suit in
state court is stayed by stipulation of the parties.
Plaintiffs also filed this complaint with the Council in order
to initiate a review by the Council of the plaintiffs' allegations
and to force restitution to ratepayers of all costs they allege were
improperly and imprudently included in the fuel adjustment filings.
Testimony was filed on behalf of the plaintiffs in this proceeding in
April 2000 and has been supplemented. The testimony, as
supplemented, asserts, among other things, that Entergy New Orleans
and other defendants have engaged in fuel procurement and power
purchasing practices and included costs in Entergy New Orleans' fuel
adjustment that could have resulted in New Orleans customers being
overcharged by more than $100 million over a period of years. In
June 2001, the Council's advisors filed testimony on these issues in
which they allege that Entergy New Orleans ratepayers may have been
overcharged by more than $32 million, the vast majority of which is
reflected in the plaintiffs' claim. However, it is not clear
precisely what periods and damages are being alleged in the
proceeding. Entergy intends to defend this matter vigorously, both
in court and before the Council. Hearings were held in February and
March 2002. The ultimate outcome of the lawsuit and the Council
proceeding cannot be predicted at this time.
Purchased Power for Summer 2000, 2001, and 2002 (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
The domestic utility companies filed applications with the APSC,
the LPSC, the MPSC, and the Council to approve the sale of power by
Entergy Gulf States from its unregulated, undivided 30% interest in
River Bend formerly owned by Cajun to the other domestic utility
companies during the summer of 2000. These applications were
approved subject to subsequent prudence reviews. In addition,
Entergy Gulf States and Entergy Louisiana filed an application with
the LPSC for authorization to purchase capacity and electric power
from third parties for the summer of 2000, and filed a similar
application for the summer of 2001. The LPSC approved these
applications, with reservations of its rights to review the prudence
of the purchases and the appropriate categorization of the costs as
either capacity or energy charges for purposes of recovery.
The LPSC reviewed the 2000 purchases and found that Entergy
Louisiana's and Entergy Gulf States' costs were prudently incurred,
but decided that approximately 34% of the costs should be categorized
as capacity charges, and therefore should be recovered through base
rates and not through the fuel adjustment clause. In November 2000,
the LPSC ordered refunds of $11.1 million for Entergy Louisiana and
$3.6 million for Entergy Gulf States, for which adequate provisions
were made. In May 2001, the LPSC determined that 24% of Entergy
Louisiana's and Entergy Gulf States' costs relating to summer 2001
purchases should be categorized as capacity charges, and has reviewed
certain prudence issues related to the 2001 purchases. The LPSC has
questioned the system's contract mix and raised issues relating to
potential uprates at nuclear facilities, and hearings on those issues
are scheduled for May 2002. Those costs that are categorized as
capacity charges will be included in the costs of service used to
determine the base rates of Entergy Louisiana and Entergy Gulf
States. In 2001, these companies recorded a regulatory asset for the
capacity charges incurred in both 2000 and 2001. The capacity
charges for 2000 are being amortized through May 2002 for Entergy
Gulf States and through July 2002 for Entergy Louisiana. The
capacity charges for 2001 will be amortized over a twelve-month
period beginning in June 2002 for Entergy Gulf States and August 2002
for Entergy Louisiana.
In March 2002, Entergy Louisiana filed an application with the
LPSC for the summer of 2002 similar to the applications filed for the
summers of 2000 and 2001. A preliminary procedural schedule has been
adopted for that docket. Hearings on the issues of the percentage of
the costs that should be categorized as capacity charges and the
establishment of a regulatory asset will be conducted in June 2002
with the expectation that the LPSC will render a decision on those
issues at its July 2002 public meeting. Any other issues associated
with the summer 2002 application will be addressed in proceedings to
be conducted later in 2002.
System Energy's 1995 Rate Proceeding (Entergy Corporation, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy)
As discussed in the Form 10-K, FERC denied requests for
rehearing in the System Energy rate increase proceeding and the July
2000 order became final. System Energy made a compliance tariff
filing in August 2001 and it was accepted by FERC in November 2001.
System Energy made refunds to the domestic utility companies in
December 2001. A portion of the refund to the domestic utility
companies has been or will be refunded to customers. Entergy
Arkansas refunded $54.3 million, including interest, through the
issuance of refund checks in March 2002 as approved by the APSC.
Entergy Mississippi is refunding $14.8 million to its customers
through credits to the Grand Gulf Riders. The credits began in
October 2001 and will occur through September 2002. Entergy New
Orleans refunded $27.0 million to its customers through the issuance
of refund checks in the first quarter of 2002.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the three months ended March 31, 2002, Entergy
Corporation issued 2,477,272 shares of its previously repurchased
common stock to satisfy stock options exercised.
NOTE 4. LONG-TERM DEBT
(Entergy Arkansas)
On March 1, 2002, Entergy Arkansas retired, at maturity, $85
million of 7% Series First Mortgage Bonds.
On March 28, 2002, Entergy Arkansas issued $100 million of 6.70%
Series First Mortgage Bonds due April 1, 2032. A portion of the net
proceeds was used to satisfy the annual replacement fund requirement
under the mortgage relating to the bonds by redeeming $85 million of
8.75% Series First Mortgage Bonds due March 1, 2026. The remaining
net proceeds will be used to replace a portion of the cash that was
used to meet the maturity of the $85 million 7% Series First Mortgage
Bonds retired on March 1, 2002 discussed above.
(Entergy Gulf States)
On January 1, 2002, Entergy Gulf States retired, at maturity,
$148 million of 8.21% Series First Mortgage Bonds with internally
generated funds.
(Entergy Louisiana)
On January 1, 2002, Entergy Louisiana retired, at maturity, $23
million of 7.5% Series First Mortgage Bonds. On March 1, 2002,
Entergy Louisiana retired, at maturity, $75 million of 5.80% Series
First Mortgage Bonds.
On March 27, 2002, Entergy Louisiana issued $150 million of
7.60% Series First Mortgage Bonds due April 1, 2032. A portion of
the net proceeds was used to satisfy the annual replacement fund
requirement under the mortgage relating to the bonds by redeeming
$115 million of 8.75% Series First Mortgage Bonds due March 1, 2026.
The remaining net proceeds will be used to reduce short-term debt
which, among other things, was incurred to meet the maturities of the
First Mortgage Bonds discussed above.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On April 10, 2002, Entergy Corporation's Board of Directors
declared a common stock dividend of $0.33 per share, payable on June
1, 2002, to holders of record as of May 14, 2002.
NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation)
Entergy's reportable segments as of March 31, 2002 are domestic
utility, domestic non-utility nuclear, and energy commodity services.
"All Other" includes the parent company, Entergy Corporation, and
other business activity, which is principally gains or losses on the
sales of businesses and the earnings on the proceeds of those sales.
Entergy's segment financial information for the first quarter of
2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Other* Eliminations Consolidated
Utility Utility Commodity
Nuclear* Services*
2002
Operating Revenues $1,447,799 $278,896 $125,760 $9,002 ($623) $1,860,834
Equity in earnings of
unconsolidated equity affiliates - - 75,065 - - 75,065
Income Taxes (Benefit) 65,376 26,253 (113,386) (4,141) - (25,898)
Net Income (Loss) 108,244 40,064 (215,126) (6,165) - (72,983)
Total Assets 19,944,025 3,452,783 2,357,299 591,921 (836,172) 25,509,856
2001
Operating Revenues $1,983,707 $179,375 $477,946 $12,390 ($991) $2,652,427
Equity in earnings of
unconsolidated equity affiliates - - 25,064 - - 25,064
Income Taxes (Benefit) 85,505 19,919 7,596 (4,591) - 108,429
Net Income (Loss) 120,437 29,959 18,345 (7,870) - 160,871
Total Assets 20,562,033 1,874,783 2,666,089 983,934 (895,080) 25,191,759
Businesses marked with * are sometimes referred to as the
"competitive businesses," with the exception of the parent company,
Entergy Corporation. Eliminations are primarily intersegment
activity.
Energy commodity services' net loss for the quarter includes a
$401.4 million charge to operating expenses ($260.9 million net of
tax) to reflect the effect of Entergy's decision to discontinue
additional EWO greenfield power plant development and to reflect
asset impairments resulting from the deteriorating economics of
wholesale power markets in the United States and the United Kingdom.
The charge consists of the following:
o as discussed in Note 1, $216.2 million of the charge is a
provision for Entergy's estimate of the impairments resulting from
the decline in the value of the turbines subject to purchase
commitments with a special-purpose entity. Entergy's total potential
impairment under this arrangement is limited to the costs of
cancellation of the turbines that the special-purpose entity was
formed to acquire;
o $152.5 million of the charge results from the write-off of EWO's
equity investment in the Damhead Creek project ($55.0 million) and
the impairment of the values of the Warren Power power plant ($34.2
million) and the Crete project ($63.3 million). This portion of the
charge reflects Entergy's estimate of the effects of continued
declining spark spreads in the United States and the United Kingdom;
and
o $32.7 million of the charge results from the write-off of
capitalized project development costs for projects that will not be
completed.
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS (Entergy Corporation)
As discussed in the Form 10-K, Entergy implemented SFAS 142,
"Goodwill and Other Intangible Assets" and SFAS 144, "Accounting for
the Impairment or Disposal of Long-lived Assets" effective January 1,
2002. The implementation of SFAS 142 resulted in the cessation of
the amortization of the remaining plant acquisition adjustment
recorded in conjunction with its acquisition of Entergy Gulf States;
this will increase Entergy's annual net income by approximately $16.3
million. Entergy will also perform an impairment test on the
remaining acquisition adjustment, which is recorded as goodwill on
the balance sheet effective January 1, 2002. As SFAS 142 allows,
Entergy will complete this impairment test in the second quarter of
2002. Entergy does not believe an impairment will result from this
test when it is completed. The following table is a reconciliation
of reported earnings (loss) applicable to common stock to earnings
(loss) applicable to common stock without goodwill amortization for
the three months ended March 31, 2002 and 2001.
2002 2001
(In Thousands,
Except Share Data)
Reported earnings (loss) applicable to common stock ($78,923) $154,155
Add back: Goodwill amortization - 4,066
--------- --------
Earnings (loss) applicable to common stock without
goodwill amortization ($78,923) $158,221
========= ========
Basic earnings (loss) per average common share:
Reported earnings (loss) applicable to common stock ($0.36) $0.70
Goodwill amortization - 0.02
--------- --------
Earnings (loss) applicable to common stock without
goodwill amortization ($0.36) $0.72
========= ========
Diluted earnings (loss) per average common share:
Reported earnings (loss) applicable to common stock ($0.36) $0.69
Goodwill amortization - 0.02
--------- --------
Earnings (loss) applicable to common stock without
goodwill amortization ($0.36) $0.71
========= ========
The implementation of SFAS 144 did not have a significant effect
on Entergy's financial position or results of operations.
NOTE 8. EQUITY METHOD INVESTMENTS (Entergy Corporation)
See Note 13 to the financial statements in the Form 10-K for a
discussion of Entergy's equity method investments.
In the first quarter of 2002, EWO sold its interests in projects
in Argentina, Chile, and Peru, including Generandes Peru S.A. and
Compania Electrica San Isidro S.A. EWO had $100.8 million reflected
in "Investments in affiliates - at equity" for these investments as
of December 31, 2001, and reported $11.6 million of "Equity in
earnings of unconsolidated equity affiliates" from these investments
for the year ended December 31, 2001. After impairment provisions
recorded for these interests in 2001, the net loss realized on the
sale in the first quarter of 2002 is insignificant. Approximately $66
million of cumulative translation adjustments were realized in the
sale.
As discussed in Note 6, in the first quarter of 2002 Entergy
recorded an impairment of $63.3 million against the book value of its
investment in Crete Energy Ventures, LLC.
NOTE 9. EARNINGS PER SHARE (Entergy Corporation)
In accordance with SFAS 128, "Earnings per Share," because of
the loss incurred for the three months ended March 31, 2002 Entergy
did not include potential common shares in the computation of diluted
earnings per share for that period. Nevertheless, potential common
shares related to Entergy's stock option and other stock compensation
plans do exist and the average number of shares outstanding including
these potential common shares is presented in the Consolidated
Statements of Operations for the period ended March 31, 2002.
Including these potential common shares in the calculation of
earnings per share for the three months ended March 31, 2002 results
in a loss per share of $0.35 for that period.
__________________________________
In the opinion of the management of Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy, the accompanying
unaudited condensed financial statements contain all adjustments
(consisting primarily of normal recurring accruals and
reclassification of previously reported amounts to conform to current
classifications) necessary for a fair statement of the results for
the interim periods presented. However, the business of the domestic
utility companies and System Energy is subject to seasonal
fluctuations with the peak periods occurring during the third
quarter. The results for the interim periods presented should not be
used as a basis for estimating results of operations for a full year.
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1, Other Regulation and Litigation" in the
Form 10-K for a discussion of legal proceedings affecting Entergy.
Item 5. Other Information
Environmental Regulation (Entergy Gulf States)
The State of Louisiana is implementing emission control
strategies to address continued ozone non-attainment status of areas
in and around Baton Rouge, Louisiana. In March 2002, the LDEQ issued
a rule for control of NOx as part of the State Implementation Plan
(SIP) to bring this area into attainment with the National Ambient
Air Quality standards for ozone by May 2005. It simultaneously
issued a proposed revision to this rule. The rule contains
provisions that would lead to installation of new NOx control
equipment at Entergy Gulf States generating units. Preliminary
analyses indicate compliance costs may be as much as $72 million in
new capital spending. The proposed revision would reduce these costs
by at least $9 million. Most of the capital expenditures would take
place in 2003 and 2004. The final revision is expected to be in
place by May 2002. Cost estimates will be refined as engineering
studies progress before and after promulgation of the NOx rule
revisions and approval of the SIP by the EPA. Entergy Gulf States
will be required to obtain revised operating permits from the LDEQ
and meet new, lower emission limits for NOx. In March 2002, however,
a federal district court issued a judgement ordering the EPA to
determine the ozone non-attainment status of the Baton Rouge area
and, if appropriate, reclassify the area as a result of the
determination. The judgement may result in a downgrade from the
current status of "serious" to "severe" non-attainment
classification. If this occurs, the LDEQ ozone SIP rulemakings could
be affected, especially in terms of scheduling. The specific impact
of the judgement on Entergy Gulf States will depend on the timing of
the EPA approval of the SIP.
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
The domestic utility companies and System Energy have calculated
ratios of earnings to fixed charges and ratios of earnings to
combined fixed charges and preferred dividends pursuant to Item 503
of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, March 31,
1997 1998 1999 2000 2001 2002
Entergy Arkansas 2.54 2.63 2.08 3.01 3.29 3.16
Entergy Gulf States 1.42 1.40 2.18 2.60 2.36 2.15
Entergy Louisiana 2.74 3.18 3.48 3.33 2.76 3.13
Entergy Mississippi 2.98 3.12 2.44 2.33 2.14 2.21
Entergy New Orleans 2.70 2.65 3.00 2.66 (b) (c)
System Energy 2.31 2.52 1.90 2.41 2.12 2.28
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, March 31,
1997 1998 1999 2000 2001 2002
Entergy Arkansas 2.24 2.28 1.80 2.70 2.99 2.89
Entergy Gulf States (a) 1.23 1.20 1.86 2.39 2.21 2.01
Entergy Louisiana 2.36 2.75 3.09 2.93 2.51 2.85
Entergy Mississippi 2.69 2.80 2.18 2.09 1.96 2.03
Entergy New Orleans 2.44 2.41 2.74 2.43 (b) (c)
(a) "Preferred Dividends" in the case of Entergy Gulf States also
include dividends on preference stock for the twelve months
ended 1997, 1998, and 1999.
(b) Earnings for the twelve months ended December 31, 2001, for
Entergy New Orleans were not adequate to cover fixed charges
and combined fixed charges and preferred dividends by $6.6
million and $9.5 million, respectively.
(c) Earnings for the twelve months ended March 31, 2002, for
Entergy New Orleans were not adequate to cover fixed charges
and combined fixed charges and preferred dividends by $13.6
million and $16.3 million, respectively.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
4(a) - Fifty-sixth Supplemental Indenture, dated as of March 1,
2002, to Entergy Louisiana's Mortgage and Deed of Trust,
dated as of April 1, 1944 (A-2(d) to Rule 24 Certificate
dated April 4, 2002 in 70-9141).
4(b) - Fifty-seventh Supplemental Indenture, dated as of March
1, 2002, to Entergy Arkansas' Mortgage and Deed of Trust,
dated as of October 1, 1944 (C-2(a) to Form U5S for the
year ended December 31, 2001).
10(a) - Amendment, effective December 10, 2001, to the 1998
Equity Ownership Plan of Entergy Corporation and
Subsidiaries.
10(b) - Amendment, effective December 10, 2001, to the Entergy
Corporation and Subsidiaries Equity Awards Plan.
10(c) - Amendment, effective December 10, 2001, to the Executive
Deferred Compensation Plan of Entergy Corporation and
Subsidiaries.
99(a) - Entergy Arkansas' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(b) - Entergy Gulf States' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(c) - Entergy Louisiana's Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(d) - Entergy Mississippi's Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy
Corporation agrees to furnish to the Commission upon request any
instrument with respect to long-term debt that is not registered or
listed herein as an Exhibit because the total amount of securities
authorized under such agreement does not exceed ten percent of
Entergy Corporation and its subsidiaries on a consolidated basis.
* Reference is made to a duplicate list of exhibits being
filed as a part of this report on Form 10-Q for the quarter
ended March 31, 2002, which list, prepared in accordance
with Item 102 of Regulation S-T of the SEC, immediately
precedes the exhibits being filed with this report on Form
10-Q for the quarter ended March 31, 2002.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Corporation
A Current Report on Form 8-K, dated January 8, 2002,
was filed with the SEC on January 8, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated January 31, 2002,
was filed with the SEC on January 31, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated March 5, 2002,
was filed with the SEC on March 5, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Arkansas
A Current Report on Form 8-K, dated March 25, 2002,
was filed with the SEC on March 25, 2002, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Arkansas
A Current Report on Form 8-K, dated March 26, 2002,
was filed with the SEC on March 26, 2002, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation
A Current Report on Form 8-K, dated April 11, 2002,
was filed with the SEC on April 11, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated April 25, 2002,
was filed with the SEC on April 25, 2002, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated May 1, 2002, was
filed with the SEC on May 1, 2002, reporting
information under Item 5. "Other Events and
Regulation FD Disclosure".
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. The signature
for each undersigned company shall be deemed to relate only to
matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Nathan E. Langston
Nathan E. Langston
Senior Vice President and Chief
Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)
Date: May 10, 2002