-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U3MwrY9qEl5B5G72VzrElG0I1e1AFGnhUO4pq1pzbcHgf3D4inmhBJXKVcigJ4CP FMY/M9rXBt1I/HZEh1LXUA== 0000065984-96-000158.txt : 19961106 0000065984-96-000158.hdr.sgml : 19961106 ACCESSION NUMBER: 0000065984-96-000158 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961104 SROS: CSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY CORP /DE/ CENTRAL INDEX KEY: 0000065984 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 135550175 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11299 FILM NUMBER: 96653956 BUSINESS ADDRESS: STREET 1: 639 LOYOLA AVE CITY: NEW ORLEANS STATE: LA ZIP: 70113 BUSINESS PHONE: 5045295262 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY GSU HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY CORP /FL/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH UTILITIES INC DATE OF NAME CHANGE: 19890521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY ARKANSAS INC CENTRAL INDEX KEY: 0000007323 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 710005900 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10764 FILM NUMBER: 96653957 BUSINESS ADDRESS: STREET 1: PO BOX 551 STREET 2: 40TH FLOOR CITY: LITTLE ROCK STATE: AR ZIP: 72203 BUSINESS PHONE: 5013774000 MAIL ADDRESS: STREET 1: P O BOX 551 CITY: LITTLE ROCK STATE: AR ZIP: 72203 FORMER COMPANY: FORMER CONFORMED NAME: ARKANSAS POWER & LIGHT CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY GULF STATES INC CENTRAL INDEX KEY: 0000044570 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 740662730 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20371 FILM NUMBER: 96653958 BUSINESS ADDRESS: STREET 1: 350 PINE ST CITY: BEAUMONT STATE: TX ZIP: 77701 BUSINESS PHONE: 4098386631 MAIL ADDRESS: STREET 1: 350 PINE ST CITY: BEAUMONT STATE: TX ZIP: 77701 FORMER COMPANY: FORMER CONFORMED NAME: GULF STATES UTILITIES CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY LOUISIANA INC CENTRAL INDEX KEY: 0000060527 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720245590 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08474 FILM NUMBER: 96653959 BUSINESS ADDRESS: STREET 1: 639 LOYOLA AVE CITY: NEW ORLEANS STATE: LA ZIP: 70113 BUSINESS PHONE: 5045953100 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY MISSISSIPPI INC CENTRAL INDEX KEY: 0000066901 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 640205830 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00320 FILM NUMBER: 96653960 BUSINESS ADDRESS: STREET 1: PO BOX 1640 CITY: JACKSON STATE: MS ZIP: 39215-1640 BUSINESS PHONE: 6019692311 FORMER COMPANY: FORMER CONFORMED NAME: MISSISSIPPI POWER & LIGHT CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY NEW ORLEANS INC CENTRAL INDEX KEY: 0000071508 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 720273040 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05807 FILM NUMBER: 96653961 BUSINESS ADDRESS: STREET 1: 639 LOYOLA AVE CITY: NEW ORLEANS STATE: LA ZIP: 70113 BUSINESS PHONE: 5045953100 MAIL ADDRESS: STREET 1: PO BOX 60340 CITY: NEW ORL STATE: LA ZIP: 70160 FORMER COMPANY: FORMER CONFORMED NAME: NEW ORLEANS PUBLIC SERVICE INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEM ENERGY RESOURCES INC CENTRAL INDEX KEY: 0000202584 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720752777 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09067 FILM NUMBER: 96653962 BUSINESS ADDRESS: STREET 1: ECHELON ONE STREET 2: 1340 ECHELON PKWY CITY: JACKSON STATE: MS ZIP: 39213 BUSINESS PHONE: 6019849000 MAIL ADDRESS: STREET 1: PO BOX 31995 CITY: JACKSON STATE: MS ZIP: 39286-1995 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH ENERGY INC DATE OF NAME CHANGE: 19860803 10-Q 1 _____________________________________________________________________ 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 September 30, 1996 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address of Principal Executive Identification No. Offices and Telephone Number 1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-2703 ENTERGY GULF STATES, INC. 74-0662730 (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 838-6631 1-8474 ENTERGY LOUISIANA, INC. 72-0245590 (a Louisiana corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 0-320 ENTERGY MISSISSIPPI, INC. 64-0205830 (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040 (a Louisiana corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777 (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 _____________________________________________________________________ Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No Common Stock Outstanding Outstanding at October 31, 1996 Entergy Corporation ($0.01 par value) 230,922,289 ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 1996 Page Number Definitions 1 Management's Financial Discussion and Analysis - Liquidity and Capital Resources 3 Management's Financial Discussion and Analysis - Significant Factors and Known Trends 7 Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations 12 Statements of Consolidated Income 15 Statements of Consolidated Cash Flows 16 Consolidated Balance Sheets 18 Selected Operating Results 20 Entergy Arkansas, Inc.: Results of Operations 22 Statements of Income 24 Statements of Cash Flows 25 Balance Sheets 26 Selected Operating Results 28 Entergy Gulf States, Inc.: Results of Operations 30 Statements of Income (Loss) 32 Statements of Cash Flows 33 Balance Sheets 34 Selected Operating Results 36 Entergy Louisiana, Inc.: Results of Operations 37 Statements of Income 38 Statements of Cash Flows 39 Balance Sheets 40 Selected Operating Results 42 Entergy Mississippi, Inc.: Results of Operations 44 Statements of Income 46 Statements of Cash Flows 47 Balance Sheets 48 Selected Operating Results 50 Entergy New Orleans, Inc.: Results of Operations 52 Statements of Income 54 Statements of Cash Flows 55 Balance Sheets 56 Selected Operating Results 58 System Energy Resources, Inc.: Results of Operations 59 Statements of Income 60 Statements of Cash Flows 61 Balance Sheets 62 Notes to Financial Statements for Entergy Corporation and Subsidiaries 64 Part II: Item 1. Legal Proceedings 76 Item 5. Other Information 77 Item 6. Exhibits and Reports on Form 8-K 79 Experts 81 Signature 82 This combined Quarterly Report on Form 10-Q is separately filed by Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations 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, 1995, and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996, filed by the individual registrants with the SEC and should be read in conjunction therewith. DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term ALJ Administrative Law Judge ANO Arkansas Nuclear One Plant ANO 1 Unit No. 1 of ANO ANO 2 Unit No. 2 of ANO Cajun Cajun Electric Power Cooperative, Inc. Capital Funds Agreement Agreement, dated as of June 21, 1974, as amended, between System Energy and Entergy Corporation, and the assignments thereof CitiPower CitiPower Ltd. - an electric distribution company serving Melbourne, Australia, and surrounding suburbs, which was acquired by Entergy on January 5, 1996 Council Council of the City of New Orleans, Louisiana Entergy Arkansas Entergy Arkansas, Inc., formerly Arkansas Power & Light Company Entergy Corporation Entergy Corporation, a Delaware corporation, successor to Entergy Corporation, a Florida corporation Entergy Enterprises Entergy Enterprises, Inc. EIS Entergy Integrated Solutions, Inc., formerly Entergy Systems & Service, Inc. Entergy Gulf States Entergy Gulf States, Inc., formerly Gulf States Utilities Company (including wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil & Gas, Inc., and Southern Gulf Railway Company) Entergy Louisiana Entergy Louisiana, Inc., formerly Louisiana Power & Light Company Entergy Mississippi Entergy Mississippi, Inc., formerly Mississippi Power & Light Company Entergy New Orleans Entergy New Orleans, Inc., formerly New Orleans Public Service Inc. Entergy Operations Entergy Operations, Inc., a subsidiary of Entergy Corporation that has operating responsibility for ANO, Grand Gulf 1, River Bend, and Waterford 3 Entergy or System Entergy Corporation and its various direct and indirect subsidiaries Entergy Services Entergy Services, Inc. EPA U.S. Environmental Protection Agency FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 1995, of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Grand Gulf 1 Unit No. 1 (nuclear) of the Grand Gulf Plant ISES Independence Steam Electric Generating Station KWh Kilowatt-hour(s) LPSC Louisiana Public Service Commission Merger The combination transaction, consummated on December 31, 1993, by which Entergy Gulf States became a subsidiary of Entergy Corporation and Entergy Corporation became a Delaware corporation MPSC Mississippi Public Service Commission MWh Megawatt-hour(s) 1991 NOPSI Settlement Settlement retroactive to October 4, 1991, among Entergy New Orleans, the Council, and the Alliance for Affordable Energy, Inc. (local customer advocate group), which settled certain Grand Gulf 1 prudence issues and certain litigation related to the February 4 Resolution NRC Nuclear Regulatory Commission NSS National Security Systems, Inc. N/A Not applicable operating companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively Owner Participant A corporation that, in connection with the Waterford 3 sale and leaseback transactions, has acquired a beneficial interest in a trust, the Owner Trustee of which is the owner and lessor of undivided interests in Waterford 3 Owner Trustee Each institution and/or individual acting as Owner Trustee under a trust agreement with an Owner Participant in connection with the Waterford 3 sale and leaseback transactions PCBs Polychlorinated biphenyls PUCT Public Utility Commission of Texas PURPA Public Utility Regulatory Policies Act River Bend River Bend Nuclear Plant, owned 70% by Entergy Gulf States RUS Rural Utilities Service SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards as promulgated by the Financial Accounting Standards Board System Energy System Energy Resources, Inc. System Fuels System Fuels, Inc. System or Entergy Entergy Corporation and its various direct and indirect subsidiaries Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flows Net cash flow from operations for Entergy, the operating companies, and System Energy for the nine months ended September 30, 1996, and 1995, was as follows: Nine Months Nine Months Company Ended Ended 9/30/96 9/30/95 (In Millions) Entergy $1,213.9 $1,088.7 Entergy Arkansas $344.2 $282.1 Entergy Gulf States $263.4 $344.3 Entergy Louisiana $284.6 $308.2 Entergy Mississippi $146.6 $139.4 Entergy New Orleans $27.0 $ 70.7 System Energy $223.7 $ 51.2 Entergy Arkansas' cash flow from operations increased for the nine months ended September 30, 1996, due to an increase in retail energy sales and decreased other operations and maintenance expenses. Lower fuel inventory levels in 1996 also contributed to the increase. Entergy Gulf States' cash flow from operations decreased for the nine months ended September 30, 1996, due to increased accounts receivable balances resulting from higher energy sales, and greater amounts of under-recovered fuel costs over the same period in 1995. Entergy Louisiana's cash flow from operations decreased due to a decrease in retail base revenues. Entergy New Orleans' cash flow from operations decreased for the nine months ended September 30, 1996, largely as a result of an income tax refund received in 1995 and lower accounts payable balances in 1996 compared to the same period in 1995. System Energy's net cash flow from operations increased for the nine months ended September 30, 1996, due primarily to refunds made to associated companies in 1995 resulting from a FERC audit settlement in 1994, and lower income tax payments made in 1996 compared to the same period in 1995. Financing Sources System Energy issued two series of first mortgage bonds in August 1996 totaling $235 million, of which $210 million was used to meet a scheduled September 1, 1996 System Energy debt maturity. Excluding this, cash from operations, supplemented by cash on hand, was sufficient to meet substantially all investing and financing requirements of the operating companies and System Energy, including capital expenditures, dividends, and debt/preferred stock maturities for the first nine months of 1996. Entergy's investments in nonregulated energy-related businesses in 1996 were funded with debt and equity capital. Entergy's current ability to fund most of the capital requirements for its domestic utility businesses with cash from operations results from continued efforts to streamline operations and to reduce costs, as well as from collections under rate phase-in plans that exceed current cash requirements for the related costs. (In the income statement, these revenue collections are offset by the amortization of previously deferred costs so that there is no effect on net income.) These phase-in plans will continue to contribute to Entergy's cash position for the next several years. Specifically, the Grand Gulf 1 phase-in plans will expire in 1998 for Entergy Arkansas and Entergy Mississippi, and in 2001 for Entergy New Orleans. Entergy Gulf States' phase-in plan for River Bend will expire in 1998, and Entergy Louisiana's phase-in plan for Waterford 3 expires in November 1996. Should additional cash be needed for investing and financing requirements, the operating companies and System Energy have the ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES ability, subject to regulatory approval and compliance with issuance tests, to issue debt or preferred securities to meet such requirements, as discussed below. In addition, to the extent market interest and dividend rates allow, the operating companies and System Energy will continue to refinance higher cost debt and preferred stock prior to maturity. The operating companies may continue to establish special purpose trusts as financing subsidiaries for the purpose of issuing preferred trust securities, such as the 9% Cumulative Quarterly Income Preferred Securities, issued in 1996 by Entergy Louisiana Capital I, a financing subsidiary of Entergy Louisiana, and the 8.5% Cumulative Quarterly Income Preferred Securities, issued in 1996 by Entergy Arkansas Capital I, a financing subsidiary of Entergy Arkansas. See Note 5 for a further discussion. In May 1996, Entergy Corporation registered 10 million additional shares of common stock pursuant to a new dividend reinvestment and stock purchase plan. The plan became effective in July 1996. See Note 3 for a further discussion. Entergy periodically reviews its capital structure to determine its future needs for debt and equity financing. Certain agreements and restrictions limit the amount of mortgage bonds and preferred stock that can be issued by the operating companies and System Energy. Based on the most restrictive applicable tests and available retired bond credits as of September 30, 1996, and assumed annual interest or dividend rates of 8.5% for bonds and 8.0% for preferred stock, each of the operating companies and System Energy could have issued mortgage bonds or preferred stock up to the following amounts: Mortgage Preferred Company Bonds (a) Stock (In Millions) Entergy Arkansas $784 $660 Entergy Gulf States $867 (b) Entergy Louisiana $745 $828 Entergy Mississippi $504 $451 Entergy New Orleans $ 92 $228 System Energy $161 (c) (a)Includes bonds issuable based on retired bond credits. (b)Entergy Gulf States was precluded from issuing preferred stock under its earnings coverage tests at September 30, 1996. (c)System Energy's charter does not provide for the issuance of preferred stock. Entergy Gulf States has no earnings coverage limitations on the issuance of preference stock. Entergy Arkansas may also issue preferred stock to refund outstanding preferred stock without meeting an earnings coverage test. The operating companies and System Energy have SEC authorization to effect short-term borrowings. See Note 4 to the Form 10-K for information on the operating companies' and System Energy's short- term borrowing authorizations and bank lines of credit. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES In addition, Entergy Services and System Fuels had available bank lines of credit of $70 million and $45 million, respectively, at September 30, 1996. Entergy Corporation had $120 million outstanding under its $300 million bank credit facility at September 30, 1996. $230 million was drawn on this facility for the acquisition of CitiPower in January 1996. On September 13, 1996, Entergy Technology Holding Company (ETHC) obtained a $100 million bank line of credit, which can be drawn on by either ETHC or Entergy Corporation, the proceeds of which are to be used exclusively for exempt telecommunication investments. As of September 30, 1996, no borrowings were outstanding under this facility. Financing Uses As discussed in Part I of the Form 10-K, Entergy Corporation has been expanding its investments in energy-related business opportunities overseas and in the United States. As of September 30, 1996, Entergy Corporation's net equity investment was $814.6 million (reduced by $178 million of accumulated losses) in nonregulated businesses, including CitiPower. In addition to investing in nonregulated businesses, Entergy Corporation's capital requirements result from periodically investing in, or making loans to, its subsidiaries, as well as paying its dividends. To meet such capital requirements, Entergy Corporation will utilize internally generated funds, cash on hand, funds available under its $300 million credit facility, funds received from its dividend reinvestment and stock purchase plan, and other bank financings as may be required. Entergy Corporation receives funds through dividend payments from its domestic utility subsidiaries. During the first nine months of 1996, such dividend payments from subsidiaries totaled $316 million. Due to its financial position, Entergy Gulf States has not paid common stock dividends since the third quarter of 1994 and is not currently expected to pay common stock dividends during the remainder of 1996. Entergy Corporation paid $301.7 million of dividends on its common stock during the first nine months of 1996. Declarations of dividends on common stock are made at the discretion of Entergy Corporation's Board of Directors. Management will not recommend future dividend increases to the Board unless such increases are justified by adequate earnings growth of Entergy Corporation and its subsidiaries. See Note 7 to the Form 10- K for information on dividend restrictions. Entergy Corporation and Entergy Gulf States See Notes 1 and 2 regarding the River Bend rate appeal and litigation with Cajun, including the Cajun Settlement. An adverse ruling in this appeal could result in approximately $280 million of potential write-offs (net of tax) and $199 million in refunds of previously collected revenue. Such write-offs and charges could result in additional substantial net losses being reported in the future by Entergy Corporation and Entergy Gulf States, with resulting adverse adjustments to common equity of Entergy Corporation and Entergy Gulf States. Adverse resolution of these matters could adversely affect Entergy Gulf States' ability to obtain financing, which in turn could affect Entergy Gulf States' liquidity and ability to pay dividends. Although Entergy Corporation's common shareholders have experienced some dilution in earnings as a result of the Merger, Entergy believes that the Merger will ultimately be beneficial to common shareholders in terms of strategic benefits as well as economies and efficiencies produced. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Entergy Corporation and System Energy Under the Capital Funds Agreement, Entergy Corporation has agreed to supply to System Energy sufficient capital to maintain System Energy's equity capital at a minimum of 35% of its total capitalization (excluding short-term debt), to permit the continued commercial operation of Grand Gulf 1, and to pay in full all indebtedness for borrowed money of System Energy when due under any circumstances. In addition, under supplements to the Capital Funds Agreement assigning System Energy's rights as security for specific debt of System Energy, Entergy Corporation has agreed to make cash capital contributions, if required, to enable System Energy to make payments on such debt when due. The Capital Funds Agreement may be terminated by the parties thereto, subject to the consent of certain creditors. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Competition and Industry Challenges See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the increasing competitive pressures facing Entergy and the electric utility industry. On April 24, 1996, FERC issued Order No. 888 affirming its initial proposal that all public utilities subject to its jurisdiction provide comparable wholesale transmission access through the filing of a single open access tariff. FERC established the minimum conditions that must be included in such open access tariffs and also set forth certain provisions concerning the structuring of transactions within power pools, public utility holding companies, and bilateral coordination arrangements. The rules took effect sixty days after they were published in the Federal Register. In addition, FERC ruled that public utilities are entitled to full recovery of prudently incurred costs allocable to FERC jurisdictional customers. If the costs are stranded by retail wheeling, public utilities should first seek recovery of these costs from the appropriate state or local regulators. Concurrent with the issuance of Order No. 888, FERC issued Order No. 889 which prescribes the requirements and procedures for the implementation and maintenance of an open access same-time information system by each public utility. In addition, FERC issued a Notice of Proposed Rulemaking concerning capacity reservation tariffs as the next phase of FERC's efforts to promote wholesale competition. On July 9, 1996, Entergy filed, on behalf of the operating companies, an open access proforma tariff. On September 20, 1996, FERC issued an order revising the original requirement in Order No. 889 that open access same-time information service sites and Standards of Conduct be in place for all transmission providers by November 1, 1996. The Commission has now scheduled a two-step compliance procedure where the operation of open access same-time information service sites must begin on a test basis starting on December 2, 1996, with full commercial operations and compliance with the Standards of Conduct to begin January 3, 1997. As noted in the Form 10-K, Entergy proposed that FERC serve in a federal "back-stop" role for wholesale stranded cost recovery in a holding company or other multi-state situation. FERC's final rule in Order No. 888 recognized that denial of retail stranded cost recovery by a state regulatory authority could inappropriately shift the disallowed costs to affiliated operating companies in other states. FERC encouraged the affected state regulators in such situations to seek a mutually agreeable approach to this potential problem. If the approach results in a filing to modify a jurisdictional agreement, FERC could agree with such a proposal, particularly if other interested parties support the filing. In the event the state or local regulators cannot reach a consensus, FERC would ultimately have to resolve the appropriate treatment of such stranded costs. As discussed in more detail below, Entergy has initiated discussions with its state and local regulators regarding an orderly transition to a more competitive market for electricity. Entergy Mississippi, Entergy Gulf States, Entergy Louisiana, and Entergy Arkansas have made filings with their state and local regulators. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS On August 2, 1996, Entergy Mississippi filed a proposal with the MPSC for a rate rider to assure cost recovery. The rider, which does not change current rates for electric service provided by Entergy Mississippi, would apply to customers within Entergy Mississippi's service area who obtain electricity in the future from a source other than Entergy Mississippi. In order to protect its core customers against the effects of retail access, were that to become available, Entergy Mississippi has designed this rider to assure that commitments made under the current system of regulation are honored and that cost burdens are not unfairly transferred from departing customers to those who remain on the Entergy Mississippi system. On August 22, 1996, the MPSC remanded the Entergy Mississippi proposal and established a generic docket to consider competition for retail electric service. On October 5, 1996, Entergy Gulf States and Entergy Louisiana filed proposals with the LPSC designed to achieve an orderly transition to retail electric competition in Louisiana, while protecting certain classes of ratepayers from unfairly bearing the burden of cost shifting. The proposals do not increase rates for any customer class. However, these proposals do provide for a universal service charge for customers that remain connected to Entergy Gulf States' or Entergy Louisiana's electric facilities and choose to purchase their electricity from another source. In addition, the proposals include a base rate freeze, which would be put into effect for seven years in the Louisiana areas serviced by Entergy Gulf States and Entergy Louisiana. These proposals also allow for the complete amortization of the remaining plant investment associated with River Bend and Waterford 3 over a seven year period. On October 24, 1996, Entergy Arkansas filed a proposal with the Arkansas Public Service Commission designed to achieve an orderly transition to retail electric competition in Arkansas. The proposal includes a rate decrease totaling $123 million over a three year period beginning in mid-1997 and the complete amortization of the remaining plant investment associated with ANO and Entergy Arkansas' portion of Grand Gulf 1 over a seven year period. In addition, the proposal provides for a universal service charge for customers that remain connected to Entergy Arkansas's electric facilities and choose to purchase their electricity from another source. Retail and Wholesale Rate Issues See Note 2 to the Form 10-K and herein for a discussion of (i) the ongoing trend of regulatory-ordered rate reductions including recent LPSC orders for Entergy Gulf States and (ii) incentive and performance-based regulation including a base rate reduction of $16.5 million for Entergy Louisiana. Potential Changes in the Electric Utility Industry Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of legislative and regulatory developments relating to the potential for retail competition in the areas served by the operating companies. Significant Industrial Cogeneration Effects The development of proposals for cogeneration projects by certain industrial customers of Entergy Gulf States and Entergy Louisiana over the last several years has caused Entergy Gulf States and Entergy Louisiana to develop and secure approval for rate tariffs lower than those previously approved by the PUCT and LPSC for such industrial customers. In certain cases, contracts or special tariffs that use flexible pricing have been negotiated with industrial customers to keep these customers on the System. The contracts and tariffs are not at full cost-of-service rates. Although the rates fully recover operating expenses and depreciation, they provide no more than a minimal return on investment. During the nine months ended September 30, 1996, KWh sales to industrial customers of Entergy Gulf States and Entergy Louisiana at less than full cost-of- service rates made up approximately 30% and 38% of total industrial sales, respectively. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS During 1995, Entergy Louisiana received separate notices from two large industrial customers that they will proceed with proposed cogeneration projects for the purpose of fulfilling most of their future electric energy needs. These customers will continue to purchase their energy requirements from Entergy Louisiana until their cogeneration facilities are completed and operational, which is expected to occur in 1997-1998. After that time, these customers will purchase energy from Entergy Louisiana at a reduced level. During the nine months ended September 30, 1996, these two customers represented an aggregate of approximately 18% of Entergy Louisiana's industrial sales and provided 12% of its total industrial base revenues. Domestic and Foreign Energy-Related Investments Entergy Corporation continues to seek opportunities to expand its domestic and foreign businesses that are not regulated by state and local utility regulatory authorities. These investments encompass power development (including investments in foreign utilities) and new technology. Entergy Corporation's strategy is to identify and pursue business opportunities that have the potential to earn a greater return than its domestic regulated utility operations. These investments may involve a greater risk than domestic regulated utility enterprises. In the nine months ended September 30, 1996, Entergy Corporation's domestic and foreign energy-related investments reduced consolidated net income by approximately $8.0 million. The power development investments, in the aggregate, were profitable during the nine months ended September 30, 1996, and management believes that they will continue to provide profits in the current year. However, the income provided by power development investments was offset by losses experienced by new technology investments. In May 1996, Entergy Corporation filed for SEC authorization to provide nuclear plant operations, management, and related services to non-affiliated companies. Entergy Corporation proposes to provide these services through a new subsidiary, Entergy Nuclear, Inc. On August 20, 1996, Entergy Power, Inc. sold 84 megawatts of its interest in Unit No. 2 of ISES and related assets to City Water & Light Plant of Jonesboro, Arkansas, a co-owner of ISES. The sale resulted in a gain of approximately $1 million. On October 3, 1996, Entergy indirectly acquired NSS, a full- service security monitoring company, for $32 million of debt. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, and Note 9, herein, for a discussion of Entergy's major nonregulated business opportunities and foreign energy-related investments. ANO Matters Entergy Operations has made periodic inspections and repairs on the tubes in ANO 2's steam generator, which have experienced cracking. On October 25, 1996, Entergy Corporation's Board of Directors authorized Entergy Operations to negotiate a contract, with appropriate cancellation provisions, for the fabrication and replacement of the steam generator at ANO 2. See Note 1 for additional information. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Deregulated Utility Operations Entergy Gulf States discontinued regulatory accounting principles in 1989 for its wholesale jurisdiction and steam department and in 1991 for the Louisiana deregulated portion of River Bend. The recent improving trend in net income from these operations continued during the three months and nine months ended September 30, 1996, when the related operating income was $3.3 million and $11.3 million, respectively, compared to $1.2 million for the fiscal year ended 1995. The improvement in net income from deregulated operations in the three months and nine months ended September 30, 1996, was principally due to increased revenues, partially offset by increased income taxes. The future impact of the deregulated utility operations on Entergy's and Entergy Gulf States' results of operations and financial position will depend on future operating costs, future efficiency and availability of generating units, and future market prices for energy over the remaining life of the assets. Entergy expects the performance of its deregulated utility operations to continue to improve due to ongoing reductions in operation and maintenance expenses. Property Tax Exemptions As discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, Waterford 3's local property tax exemption expired in December 1995, and River Bend's local property tax exemption will expire in December 1996. In a March 1996 LPSC order, Entergy Louisiana was permitted to defer recovery of the estimated Waterford 3 property tax from January 1996 through June 1996. The order allows for the recovery of the property tax and also for the recovery, from July 1996 through June 1997, of the related deferral. In April 1996, Louisiana authorities set Waterford 3's 1996 property tax assessment at $21.5 million. Entergy Gulf States is working with tax authorities to determine the method for calculating the amount of property taxes to be paid when River Bend's local property tax exemption expires in December 1996. Environmental Issues Entergy Gulf States has been notified by the EPA that it has been designated as a potentially responsible party for the clean-up of certain hazardous waste disposal sites. See Note 1 for additional information. As a consequence of solid waste regulations issued by the Louisiana Department of Environmental Quality in 1993, Entergy Louisiana is upgrading or closing certain of its power plant wastewater impoundments. See Note 1 for additional information. Accounting Issues Continued Application of SFAS 71 - As a result of the 1992 Energy Policy Act, the actions of regulatory commissions, and other factors, the electric utility industry is moving toward a combination of competition and a modified regulatory environment. The operating companies' and System Energy's financial statements currently reflect, for the most part, assets and costs based on existing cost- based ratemaking regulations in accordance with SFAS 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). Continued applicability of SFAS 71 to the operating companies' and System Energy's financial statements requires that rates set by an independent regulator on a cost-of-service basis be charged to and collected from customers. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS In the event that all or a portion of a utility's operations cease to meet those criteria for various reasons, including deregulation, a change in the method of regulation, or a change in the competitive environment for the utility's regulated services, the utility shall discontinue application of SFAS 71 for the relevant portion of its operations by eliminating from the balance sheet the effects of any actions of regulators recorded as regulatory assets and liabilities. The operating companies' and System Energy's financial statements continue to follow SFAS 71 for their regulated operations, except for those portions of Entergy Gulf States' business described in "Deregulated Utility Operations" above. Accounting for Decommissioning Costs - In February 1996, the FASB issued an exposure draft of a proposed SFAS addressing the accounting for decommissioning costs of nuclear generating units as well as liabilities related to the closure and removal of all long- lived assets. See Note 1 for a discussion of proposed changes in the accounting for decommissioning/closure costs and the potential impact of these changes on Entergy. Financial Derivatives Derivative instruments have been used by Entergy on a limited basis. Entergy has a policy that financial derivatives are to be used only to mitigate business risks and not for speculative purposes. At September 30, 1996, Entergy had an insignificant amount of derivative instruments outstanding. _________________________________________ Investors are cautioned that forward-looking statements contained herein with respect to the revenues, earnings, competitive performance, or other prospects for the business of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, or their affiliated companies may be influenced by factors that could cause actual outcomes and results to be materially different than projected. Such factors include, but are not limited to, the effects of weather, the performance of generating units, fuel prices and availability, regulatory decisions and the effects of changes in law, capital spending requirements, the evolution of competition, changes in accounting standards, and other factors. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS On January 5, 1996, Entergy Corporation finalized its acquisition of CitiPower. In accordance with the purchase method of accounting, the results of operations for the three months and nine months ended September 30, 1995, of Entergy Corporation and subsidiaries reported in its Statements of Consolidated Income and Cash Flows do not include CitiPower's results of operations. See Note 9 for additional information regarding CitiPower. Net Income Consolidated net income increased for the three months ended September 30, 1996, primarily due to the reversal of a Cajun-River Bend litigation accrual at Entergy Gulf States, as discussed in Note 1. Excluding this item, net income decreased 5% principally due to higher other operation and maintenance expenses for domestic regulated operations as a result of the recording of additional litigation reserves at Entergy Gulf States and Entergy Louisiana. Consolidated net income decreased for the nine months ended September 30, 1996, primarily due to the $174 million net of tax write-off of River Bend rate deferrals pursuant to SFAS 121 and the one-time recording in 1995 of the cumulative effect of the change in accounting method for incremental nuclear refueling outage maintenance costs at Entergy Arkansas. The effect of these items was partially offset by the reversal of a litigation accrual at Entergy Gulf States, as discussed above. Excluding these items, net income would have increased 9% for the nine months ended September 30, 1996, due to higher energy sales, decreased other operation and maintenance expenses for domestic regulated operations as a result of restructuring programs implemented in 1995, as discussed in Note 7, and ongoing operating efficiency improvement programs throughout Entergy. Significant factors affecting the results of operations and causing variances between the three months and nine months ended September 30, 1996, and 1995 are discussed under "Revenues and Sales," "Expenses," and "Other" below. Revenues and Sales The changes in electric operating revenues associated with Entergy's domestic regulated operations for the three months and nine months ended September 30, 1996, are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues $(25.5) $(77.8) Rate riders (3.0) 10.6 Fuel cost recovery 106.4 334.5 Sales volume/weather .1 102.5 Other revenue (including unbilled) (20.7) (65.2) Sales for resale (6.7) 38.7 ----- ------ Total $50.6 $343.3 ===== ====== ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Electric operating revenues increased for the three months and nine months ended September 30, 1996, as a result of higher fuel adjustment revenues, which do not affect net income, partially offset by rate reductions at various operating companies. Higher retail sales and an increase in sales for resale also contributed to the increase for the nine months ended September 30, 1996. The increase in sales for resale was primarily the result of increased energy sales outside of Entergy's service area. Higher retail sales for the nine months ended September 30, 1996, was principally caused by non- weather related volume growth. Gas operating revenues increased for the three months and nine months ended September 30, 1996, due to a higher unit purchase price for gas purchased for resale. In addition, increased gas sales contributed to the increase in revenues for the nine months ended September 30, 1996, largely due to the colder than normal winter weather in the first quarter of 1996. Nonregulated and foreign energy related business revenues increased for the three months and nine months ended September 30, 1996, due mainly to the January 1996 acquisition of CitiPower. Expenses Operating expenses for the three months and nine months ended September 30, 1996, include the operating expenses of CitiPower, which were not included in the prior year's financial statements. Excluding the operating expenses of CitiPower, Entergy's operating expenses increased for the three months and nine months ended September 30, 1996, as discussed below. The following discussion excludes the impact of the acquisition of CitiPower. For the three months ended September 30, 1996, fuel and purchased power expenses increased as a result of higher gas prices. Income tax expense increased primarily due to higher pretax income excluding the River Bend rate deferral write-off and the prior year change in accounting method. Other operation and maintenance expenses increased for the three months ended September 30, 1996, largely due to an increase in litigation reserves at Entergy Gulf States and Entergy Louisiana. Nuclear refueling outage expenses decreased primarily due to the absence in 1996 of a refueling outage at Grand Gulf 1. For the nine months ended September 30, 1996, fuel and purchased power expenses increased as a result of higher gas prices as discussed above and an increase in energy sales. Income tax expense increased primarily due to higher pretax income excluding the River Bend rate deferral write-off and the prior year change in accounting method. Other operation and maintenance expenses decreased for the nine months ended September 30, 1996, due to lower payroll related expenses, resulting from restructuring programs implemented in 1995 as discussed in Note 7, in addition to ongoing operating efficiency improvement programs throughout Entergy. Rate deferrals charged against operating expenses in 1996 represent the deferral of Waterford 3 local property taxes and the deferral of a portion of the proposed System Energy rate increase at Entergy Mississippi and Entergy New Orleans. Nuclear refueling outage expenses decreased primarily due to the absence in 1996 of a refueling outage at Grand Gulf 1. The increase in decommissioning costs and depreciation rates is partially attributable to the 1995 System Energy FERC rate increase filing, subject to refund. See Note 2 for a discussion of the System Energy proposed rate increase. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Excluding CitiPower, interest on long-term debt decreased for the three months and nine months ended September 30, 1996, due primarily to ongoing retirement and refinancing of higher cost debt at the operating companies and System Energy. Other interest - net increased for the three months ended September 30, 1996, as a result of interest charges recorded by Entergy Gulf States in connection with a fuel cost refund. Borrowings by Entergy Corporation from a $300 million line of credit related to the CitiPower investment contributed to the increase in other interest - net for the nine months ended September 30, 1996. Other Other income increased for the three months ended September 30, 1996, primarily due to the Entergy Gulf States' reversal of a Cajun- River Bend litigation accrual, as discussed in Note 1. Other income decreased for the nine months ended September 30, 1996, as a result of the write-off of River Bend rate deferrals pursuant to SFAS 121, as discussed in Note 8, and a decrease in Grand Gulf 1 carrying charges at Entergy Arkansas due to a decline in the deferral balance, partially offset by the Entergy Gulf States' reversal of a Cajun-River Bend litigation accrual.
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME For the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 --------- --------- --------- --------- (In Thousands, Except Share Data) Operating Revenues: Electric $1,966,969 $1,916,364 $5,054,647 $4,711,342 Natural gas 21,402 15,073 107,866 75,861 Steam products 15,144 12,095 45,936 35,518 Nonregulated and foreign energy-related businesses 134,758 11,487 381,341 34,615 ----------- ----------- ----------- ----------- Total 2,138,273 1,955,019 5,589,790 4,857,336 ----------- ----------- ----------- ----------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 527,769 465,126 1,309,082 1,062,698 Purchased power 177,824 104,159 525,134 275,902 Nuclear refueling outage expenses 12,196 19,591 40,144 72,772 Other operation and maintenance 394,526 353,563 1,127,823 1,089,996 Depreciation, amortization, and decommissioning 196,937 177,482 586,604 518,894 Taxes other than income taxes 90,572 76,213 269,485 226,735 Income taxes 168,384 172,057 352,890 309,200 Rate deferrals (3,767) - (34,842) - Amortization of rate deferrals 142,512 152,781 324,236 311,171 ----------- ----------- ----------- ----------- Total 1,706,953 1,520,972 4,500,556 3,867,368 ----------- ----------- ----------- ----------- Operating Income 431,320 434,047 1,089,234 989,968 --------- --------- --------- --------- Other Income (Deductions): Allowance for equity funds used during construction 2,399 2,206 7,753 7,053 Write-off of River Bend rate deferrals - - (194,498) - Miscellaneous - net 72,389 15,678 97,002 53,511 Income taxes (25,011) (6,274) (15,658) (16,174) --------- --------- --------- --------- Total 49,777 11,610 (105,401) 44,390 --------- --------- --------- --------- Interest Charges: Interest on long-term debt 164,795 157,760 512,342 479,433 Other interest - net 17,221 6,302 39,166 20,954 Distributions on preferred securities 1,947 - 1,947 - Allowance for borrowed funds used during construction (2,032) (1,978) (6,499) (6,182) Preferred and preference dividend requirements of subsidiaries and other 19,286 20,455 55,745 59,355 --------- --------- --------- --------- Total 201,217 182,539 602,701 553,560 --------- --------- --------- --------- Income before the Cumulative Effect of Accounting Change 279,880 263,118 381,132 480,798 Cumulative Effect of Accounting Change (net of income taxes) - - - 35,415 --------- --------- --------- --------- Net Income $279,880 $263,118 $381,132 $516,213 ========= ========= ========= ========= Earnings per average common share before cumulative effect of accounting change $1.22 $1.16 $1.67 $2.11 Earnings per average common share $1.22 $1.16 $1.67 $2.27 Dividends declared per common share $0.45 $0.45 $1.35 $1.35 Average number of common shares outstanding 228,603,813 227,751,471 228,141,842 227,639,262 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) Operating Activities: Net income $381,132 $516,213 Noncash items included in net income: Write-off of River Bend rate deferrals 194,498 - Cumulative effect of a change in accounting principle - (35,415) Change in rate deferrals/excess capacity-net 316,184 285,174 Depreciation, amortization, and decommissioning 586,604 518,894 Deferred income taxes and investment tax credits (57,324) (2,923) Allowance for equity funds used during construction (7,753) (7,053) Changes in working capital: Receivables (160,616) (188,087) Fuel inventory (260) (33,839) Accounts payable (73,293) (70,656) Taxes accrued 226,147 219,714 Interest accrued (14,350) (7,768) Other working capital accounts (131,331) (129,399) Decommissioning trust contributions (36,675) (21,189) Provision for estimated losses and reserves 45,729 (38,260) Other (54,747) 83,253 --------- --------- Net cash flow provided by operating activities 1,213,945 1,088,659 --------- --------- Investing Activities: Construction/capital expenditures (425,652) (401,031) Allowance for equity funds used during construction 7,753 7,053 Nuclear fuel purchases (118,958) (207,211) Proceeds from sale/leaseback of nuclear fuel 107,035 224,265 Acquisition of CitiPower (1,156,112) - Investment in nonregulated/nonutility properties (4,151) (25,979) Proceeds from sale of Hub River stock 16,503 - Proceeds from sale of ISES 39,398 - Other (31,285) (19,216) --------- --------- Net cash flow used in investing activities (1,565,469) (422,119) --------- --------- Financing Activities: Proceeds from the issuance of: General and refunding mortgage bonds 39,608 109,285 First mortgage bonds 431,906 - Bank notes and other long-term debt 1,004,243 43,538 Common stock 36,869 - Preferred securities of subsidiaries' trusts 125,963 - Retirement of: First mortgage bonds (695,392) (45,800) General and refunding mortgage bonds (56,000) (54,200) Other long-term debt (143,373) (96,949) Redemption of preferred stock (91,879) (39,605) Changes in short-term borrowings - net 75,025 (171,219) Common stock dividends paid (301,675) (306,465) --------- --------- Net cash flow provided by (used in) financing activities 425,295 (561,415) --------- --------- Effect of exchange rates on cash and cash equivalents 66 - --------- --------- Net increase in cash and cash equivalents 73,837 105,125 Cash and cash equivalents at beginning of period 533,590 613,907 --------- --------- Cash and cash equivalents at end of period $607,427 $719,032 ========= =========
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized 526,252 476,637 Income taxes 236,288 161,938 Noncash investing and financing activities: Capital lease obligations incurred 16,358 - Change in unrealized appreciation (depreciation) of decommissioning trust assets (12,460) 13,221 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) ASSETS Utility Plant: Electric $22,588,066 $21,698,593 Plant acquisition adjustment - Entergy Gulf States 459,492 471,690 Electric plant under leases 678,658 675,425 Property under capital leases - electric 149,863 145,146 Natural gas 168,136 166,872 Steam products 79,701 77,551 Construction work in progress 464,888 482,950 Nuclear fuel under capital leases 276,308 312,782 Nuclear fuel 61,212 49,100 ----------- ----------- Total 24,926,324 24,080,109 Less - accumulated depreciation and amortization 8,699,397 8,259,318 ----------- ----------- Utility plant - net 16,226,927 15,820,791 ----------- ----------- Other Property and Investments: Decommissioning trust funds 318,088 277,716 Other 459,489 434,619 ----------- ----------- Total 777,577 712,335 ----------- ----------- Current Assets: Cash and cash equivalents: Cash 99,309 42,822 Temporary cash investments - at cost, which approximates market 447,294 490,768 Special deposits 60,824 - ----------- ----------- Total cash and cash equivalents 607,427 533,590 Notes receivable 1,332 6,907 Accounts receivable: Customer (less allowance for doubtful accounts of $8.4 million in 1996 and $7.1 million in 1995) 458,357 333,343 Other 73,380 59,176 Accrued unbilled revenues 373,114 293,461 Deferred fuel 92,543 25,924 Fuel inventory 122,610 122,167 Materials and supplies - at average cost 345,833 345,330 Rate deferrals 440,816 420,221 Prepayments and other 129,810 175,121 ----------- ----------- Total 2,645,222 2,315,240 ----------- ----------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 507,824 1,033,282 SFAS 109 regulatory asset - net 1,206,786 1,279,495 Unamortized loss on reacquired debt 222,264 224,131 Other regulatory assets 378,088 350,601 Long-term receivables 218,246 224,726 CitiPower license (net of $11.5 million of amortization) 609,027 - Other 352,129 305,329 ----------- ----------- Total 3,494,364 3,417,564 ----------- ----------- TOTAL $23,144,090 $22,265,930 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, $.01 par value, authorized 500,000,000 shares; issued 231,455,342 shares in 1996 and 230,017,485 shares in 1995 $2,315 $2,300 Paid-in capital 4,240,038 4,201,483 Retained earnings 2,406,339 2,335,579 Cumulative foreign currency translation adjustment 20,670 - Less - treasury stock (1,973,468 shares in 1996 and 2,251,318 in 1995) 59,627 67,642 ----------- ----------- Total common shareholders' equity 6,609,735 6,471,720 Subsidiary's preference stock 150,000 150,000 Subsidiaries' preferred stock: Without sinking fund 490,955 550,955 With sinking fund 221,986 253,460 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated deferrable debentures 130,000 - Long-term debt 7,642,768 6,777,124 ----------- ----------- Total 15,245,444 14,203,259 ----------- ----------- Other Noncurrent Liabilities: Obligations under capital leases 275,323 303,664 Other 372,787 326,804 ----------- ----------- Total 648,110 630,468 ----------- ----------- Current Liabilities: Currently maturing long-term debt 355,305 558,650 Notes payable 120,692 45,667 Accounts payable 429,018 460,379 Customer deposits 152,551 140,054 Taxes accrued 433,975 207,828 Accumulated deferred income taxes 85,186 72,847 Interest accrued 181,394 195,445 Dividends declared 10,475 12,194 Obligations under capital leases 151,204 151,140 Other 132,127 247,039 ----------- ----------- Total 2,051,927 2,091,243 ----------- ----------- Deferred Credits: Accumulated deferred income taxes 3,649,399 3,777,644 Accumulated deferred investment tax credits 594,969 612,701 Other 954,241 950,615 ----------- ----------- Total 5,198,609 5,340,960 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL $23,144,090 $22,265,930 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three Months and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Increase/ Description 1996 1995 (Decrease % (In Millions) Electric Operating Revenues: Residential $ 800.6 $ 793.7 $ 6.9 1 Commercial 473.7 451.4 22.3 5 Industrial 548.6 504.3 44.3 9 Governmental 48.5 42.7 5.8 14 --------- --------- ------ Total retail 1,871.4 1,792.1 79.3 4 Sales for resale 106.7 113.3 (6.6) (6) Other (11.1) 11.0 (22.1) (201) --------- --------- ------ Total $ 1,967.0 $ 1,916.4 $ 50.6 3 ========= ========= ====== Billed Electric Energy Sales (Millions of KWh): Residential 9,631 9,923 (292) (3) Commercial 6,378 6,310 68 1 Industrial 11,716 11,257 459 4 Governmental 703 644 59 9 --------- --------- ------ Total retail 28,428 28,134 294 1 Sales for resale 3,007 3,945 (938) (24) --------- --------- ------ Total 31,435 32,079 (644) (2) ========= ========= ====== Nine Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 1,824.1 $ 1,715.2 $ 108.9 6 Commercial 1,208.3 1,133.4 74.9 7 Industrial 1,505.9 1,351.3 154.6 11 Governmental 128.5 115.4 13.1 11 --------- --------- ------- Total retail 4,666.8 4,315.3 351.5 8 Sales for resale 300.2 261.5 38.7 15 Other 87.6 134.5 (46.9) (35) --------- --------- ------- Total $ 5,054.6 $ 4,711.3 $ 343.3 7 ========= ========= ======= Billed Electric Energy Sales (Millions of KWh): Residential 22,603 21,830 773 4 Commercial 16,254 15,741 513 3 Industrial 33,145 31,617 1,528 5 Governmental 1,850 1,747 103 6 --------- --------- ------ Total retail 73,852 70,935 2,917 4 Sales for resale 8,817 7,482 1,335 18 --------- --------- ------ Total 82,669 78,417 4,252 5 ========= ========= ====== ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income for the three months ended September 30, 1996, remained relatively unchanged as compared to the same period in 1995. Net income decreased for the nine months ended September 30, 1996, due primarily to the one-time recording in 1995 of the cumulative effect of the change in accounting method for incremental nuclear refueling outage maintenance costs. Excluding the above mentioned item, net income would have increased $13.3 million for the nine months ended September 30, 1996, due primarily to increased retail energy sales and decreased other operation and maintenance expense. Significant factors affecting the results of operations and causing variances between the three months and nine months ended September 30, 1996, and 1995 are discussed under "Revenues and Sales," "Expenses," and "Other" below. Revenues and Sales The changes in electric operating revenues for the three months and nine months ended September 30, 1996, are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues $(1.5) $(10.5) Rate riders (7.2) (6.9) Fuel cost recovery 1.0 6.5 Sales volume/weather (7.0) 17.5 Other revenue (including unbilled) (3.2) (8.0) Sales for resale 16.7 99.5 ----- ----- Total $(1.2) $98.1 ===== ===== Electric operating revenues decreased slightly for the three months ended September 30, 1996, primarily due to milder weather as compared to the same period in 1995 and a decrease in Grand Gulf 1 rate rider revenues, partially offset by an increase in sales for resale due to changing generation availability and requirements among the operating companies. Electric operating revenues increased for the nine months ended September 30, 1996, primarily due to increased retail energy sales and sales for resale. The increase in retail energy sales resulted from increased customer usage, partially attributable to more severe weather as compared to the same period in 1995. The increase in sales for resale is due to higher generation availability compared to the same period of 1995. Expenses Operating expenses increased for the three months and nine months ended September 30, 1996, due to an increase in fuel, purchased power, and income tax expense, partially offset by reduced amortization of previous rate deferrals. The increase in fuel and purchased power expenses is largely due to an increase in generation and purchases related to the increase in sales for resale in 1996. Income tax expense increased for the nine months ended September 30, 1996, because of higher pretax income. The increase in operating expenses for the nine months ended September 30, 1996, was partially offset by a decrease in other operation and maintenance expenses resulting from non-outage related maintenance performed during ANO 1's refueling outage in the first quarter of 1995. In addition, ANO 2 underwent a 30 day mid-cycle outage during the first three months of 1995 that also required additional non-outage related maintenance. Other Miscellaneous other income - net decreased for the three months and nine months ended September 30, 1996, due to reduced Grand Gulf 1 carrying charges as a result of a decline in the deferral balance.
ENTERGY ARKANSAS, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 --------- --------- --------- --------- (In Thousands) Operating Revenues $529,276 $530,448 $1,380,347 $1,282,208 --------- --------- ----------- ----------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 84,869 77,987 216,544 182,793 Purchased power 114,106 100,803 334,362 266,726 Nuclear refueling outage expenses 7,087 7,923 22,170 25,011 Other operation and maintenance 88,629 92,079 257,765 271,523 Depreciation, amortization, and decommissioning 42,112 42,603 123,928 121,557 Taxes other than income taxes 8,546 8,546 27,989 28,641 Income taxes 40,343 38,188 73,648 58,662 Amortization of rate deferrals 52,608 68,243 119,078 136,170 --------- --------- ----------- ----------- Total 438,300 436,372 1,175,484 1,091,083 --------- --------- ----------- ----------- Operating Income 90,976 94,076 204,863 191,125 --------- --------- --------- --------- Other Income (Deductions): Allowance for equity funds used during construction 875 770 3,026 2,376 Miscellaneous - net 7,735 10,036 23,865 36,388 Income taxes (3,059) (3,941) (9,492) (14,279) --------- --------- --------- --------- Total 5,551 6,865 17,399 24,485 --------- --------- --------- --------- Interest Charges: Interest on long-term debt 24,395 26,566 74,162 80,110 Other interest - net 1,211 906 3,498 4,646 Distributions on preferred securities of subsidiary 652 - 652 - Allowance for borrowed funds used during construction (522) (494) (1,821) (1,667) --------- --------- --------- --------- Total 25,736 26,978 76,491 83,089 --------- --------- --------- --------- Income before the Cumulative Effect of Accounting Change 70,791 73,963 145,771 132,521 Cumulative Effect of Accounting Change (net of income taxes) - - - 35,415 --------- --------- --------- --------- Net Income 70,791 73,963 145,771 167,936 Preferred Stock Dividend Requirements and Other 4,359 4,511 13,243 13,617 --------- --------- --------- --------- Earnings Applicable to Common Stock $66,432 $69,452 $132,528 $154,319 ========= ========= ========= ========= See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) Operating Activities: Net income $145,771 $167,936 Noncash items included in net income: Cumulative effect of a change in accounting principle - (35,415) Change in rate deferrals/excess capacity-net 104,544 93,740 Depreciation, amortization, and decommissioning 123,928 121,557 Deferred income taxes and investment tax credits (50,194) (38,002) Allowance for equity funds used during construction (3,026) (2,376) Changes in working capital: Receivables (37,379) (82,496) Fuel inventory 427 (32,524) Accounts payable (13,901) 34,625 Taxes accrued 54,444 51,147 Interest accrued (1,418) 253 Other working capital accounts 25,140 (17,191) Decommissioning trust contributions (11,831) (10,563) Provision for estimated losses and reserves 4,069 4,423 Other 3,633 26,994 --------- --------- Net cash flow provided by operating activities 344,207 282,108 --------- --------- Investing Activities: Construction expenditures (102,709) (117,203) Allowance for equity funds used during construction 3,026 2,376 Nuclear fuel purchases (26,064) (41,843) Proceeds from sale/leaseback of nuclear fuel 25,437 41,832 --------- --------- Net cash flow used in investing activities (100,310) (114,838) --------- --------- Financing Activities: Proceeds from issuance of first mortgage bonds 84,256 - Proceeds from issuance of preferred securities of subsidiary trust 58,168 - Retirement of first mortgage bonds (112,807) (25,800) Redemption of preferred stock (4,000) (7,000) Changes in short-term borrowings - net - (34,000) Dividends paid: Common stock (66,600) (83,600) Preferred stock (13,342) (13,833) --------- --------- Net cash flow used in financing activities (54,325) (164,233) --------- --------- Net increase in cash and cash equivalents 189,572 3,037 Cash and cash equivalents at beginning of period 11,798 80,756 --------- --------- Cash and cash equivalents at end of period $201,370 $83,793 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized 69,503 74,689 Income taxes 77,041 55,710 Noncash investing and financing activities: Capital lease obligations incurred 16,358 - Change in unrealized appreciation/depreciation of decommissioning trust assets (8,645) 6,811 See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) ASSETS Utility Plant: Electric $4,526,314 $4,438,519 Property under capital leases 59,496 48,968 Construction work in progress 95,417 119,874 Nuclear fuel under capital lease 87,696 98,691 ---------- ---------- Total 4,768,923 4,706,052 Less - accumulated depreciation and amortization 1,937,335 1,846,112 ---------- ---------- Utility plant - net 2,831,588 2,859,940 ---------- ---------- Other Property and Investments: Investment in subsidiary companies - at equity 11,169 11,122 Decommissioning trust fund 179,624 166,832 Other - at cost (less accumulated depreciation) 5,017 5,085 ---------- ---------- Total 195,810 183,039 ---------- ---------- Current Assets: Cash and cash equivalents: Cash 19,856 7,780 Temporary cash investments - at cost, which approximates market: Associated companies 32,028 908 Other 88,662 3,110 Special deposits 60,824 - ---------- ---------- Total cash and cash equivalents 201,370 11,798 Accounts receivable: Customer (less allowance for doubtful accounts of $2.1 million in 1996 and 1995) 92,599 75,445 Associated companies 45,466 40,577 Other 7,288 6,962 Accrued unbilled revenues 108,566 93,556 Fuel inventory - at average cost 57,029 57,456 Materials and supplies - at average cost 74,112 75,030 Rate deferrals 147,765 131,634 Deferred excess capacity 8,822 11,088 Deferred nuclear refueling outage costs 14,009 32,824 Prepayments and other 7,620 15,215 ---------- ---------- Total 764,646 551,585 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 113,534 228,390 Deferred excess capacity 2,431 5,984 SFAS 109 regulatory asset - net 231,155 219,906 Unamortized loss on reacquired debt 57,556 58,684 Other regulatory assets 73,655 68,160 Other 31,671 28,727 ---------- ---------- Total 510,002 609,851 ---------- ---------- TOTAL $4,302,046 $4,204,415 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares $470 $470 Paid-in capital 590,794 590,844 Retained earnings 558,314 492,386 ---------- ---------- Total common shareholder's equity 1,149,578 1,083,700 Preferred stock: Without sinking fund 176,350 176,350 With sinking fund 45,027 49,027 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 - Long-term debt 1,256,206 1,281,203 ---------- ---------- Total 2,687,161 2,590,280 ---------- ---------- Other Noncurrent Liabilities: Obligations under capital leases 94,431 93,574 Other 75,043 67,444 ---------- ---------- Total 169,474 161,018 ---------- ---------- Current Liabilities: Currently maturing long-term debt 32,150 28,700 Notes payable 667 667 Accounts payable: Associated companies 58,389 42,156 Other 90,116 120,250 Customer deposits 20,846 18,594 Taxes accrued 94,603 40,159 Accumulated deferred income taxes 60,606 48,992 Interest accrued 28,822 30,240 Dividends declared 4,359 4,458 Co-owner advances 32,013 34,450 Deferred fuel cost 16,106 17,837 Obligations under capital leases 52,747 54,697 Other 25,966 26,238 ---------- ---------- Total 517,390 467,438 ---------- ---------- Deferred Credits: Accumulated deferred income taxes 776,534 823,471 Accumulated deferred investment tax credits 109,431 112,890 Other 42,056 49,318 ---------- ---------- Total 928,021 985,679 ---------- ---------- Commitments and Contingencies (Note 1) TOTAL $4,302,046 $4,204,415 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three Months and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Increase Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 187.0 $ 200.1 ($13.1) (7) Commercial 102.4 103.3 (0.9) (1) Industrial 109.6 111.4 (1.8) (2) Governmental 5.0 5.1 (0.1) (2) ------- ------- ----- Total retail 404.0 419.9 (15.9) (4) Sales for resale Associated companies 68.9 52.1 16.8 32 Non-associated companies 60.7 60.8 (0.1) - Other (4.3) (2.3) (2.0) 87 ------- ------- ----- Total $ 529.3 $ 530.5 ($1.2) - ======= ======= ===== Billed Electric Energy Sales (Millions of KWh): Residential 1,971 2,092 (121) (6) Commercial 1,353 1,359 (6) - Industrial 1,759 1,752 7 - Governmental 66 70 (4) (6) ------- ------- ----- Total retail 5,149 5,273 (124) (2) Sales for resale Associated companies 2,855 2,484 371 15 Non-associated companies 1,726 1,661 65 4 ------- ------- ----- Total 9,730 9,418 312 3 ======= ======= ===== Nine Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 437.4 $ 433.3 $ 4.1 1 Commercial 250.4 245.5 4.9 2 Industrial 274.6 273.9 0.7 - Governmental 13.2 13.1 0.1 1 --------- --------- ------ Total retail 975.6 965.8 9.8 1 Sales for resale Associated companies 204.2 132.4 71.8 54 Non-associated companies 167.6 139.9 27.7 20 Other 32.9 44.1 (11.2) (25) --------- --------- ------ Total $ 1,380.3 $ 1,282.2 $ 98.1 8 ========= ========= ====== Billed Electric Energy Sales (Millions of KWh): Residential 4,816 4,668 148 3 Commercial 3,387 3,282 105 3 Industrial 4,850 4,706 144 3 Governmental 180 189 (9) (5) --------- --------- ------ Total retail 13,233 12,845 388 3 Sales for resale Associated companies 8,622 6,239 2,383 38 Non-associated companies 5,434 3,860 1,574 41 --------- --------- ------ Total 27,289 22,944 4,345 19 ========= ========= ====== ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended September 30, 1996, primarily due to the reversal of an accrual for the Cajun-River Bend litigation. In September 1994, Entergy Gulf States recorded a reserve for the anticipated costs of the Cajun-River Bend litigation. Based on the Bankruptcy Court's approval of the settlement (refer to Note 1), the litigation accrual was reversed resulting in miscellaneous income. Excluding the effects of the reversal of the litigation reserve, net income for the three months ended September 30, 1996 would have decreased approximately 11% due to an increase in other operation and maintenance expenses and other interest expense. Net income decreased for the nine months ended September 30, 1996, due to the $174 million net of tax write-off of River Bend rate deferrals required by the adoption of SFAS 121. Excluding the write- off and the third quarter reversal of the Cajun-River Bend litigation accrual, net income for the nine months ended September 30, 1996, would have increased due to reduced other operation and maintenance expenses. Significant factors affecting the results of operations and causing variances between the three months and nine months ended September 30, 1996, and 1995 are discussed under "Revenues and Sales," "Expenses," and "Other" below. Revenues and Sales The changes in electric operating revenues for the three months and nine months ended September 30, 1996, are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues $(11.2) $(30.4) Fuel cost recovery 44.1 135.4 Sales volume/weather 13.8 60.2 Other revenue (including unbilled) 4.0 (8.3) Sales for resale (3.6) (21.3) ----- ------ Total $47.1 $135.6 ===== ====== Electric operating revenues increased for the three months and nine months ended September 30, 1996, as a result of higher fuel adjustment revenues, which do not affect net income, increased number of customers, and increased customer usage. These increases were partially offset by a rate reduction ordered for Texas in 1995 and lower sales for resale to associated companies, due to changing generation availability and requirements among the operating companies. Gas operating revenues and steam operating revenues increased for the three months and nine months ended September 30, 1996, primarily due to higher fuel prices and increased usage. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Operating expenses increased for the three months and nine months ended September 30, 1996, as a result of higher fuel expenses, including purchased power, and higher income taxes. Fuel and purchased power expenses, taken together, increased because of higher gas prices. In addition, increased energy requirements resulting from higher energy sales contributed to the increase in fuel and purchased power for the nine months ended September 30, 1996. Income taxes increased primarily due to higher pre-tax income, excluding the net effect of the write-off of River Bend rate deferrals discussed below. For the three months ended September 30, 1996, other operation and maintenance expenses increased as a result of increased litigation reserves and higher lease expenses relating to computer equipment. These increases were partially offset by lower payroll-related expenses due to employee attrition. Other operation and maintenance expenses decreased for the nine months ended September 30, 1996, principally due to lower payroll-related expenses associated with restructuring programs recorded in 1995. Other interest charges increased for the three months and nine months ended September 30, 1996 due to interest charges recorded in connection with a fuel cost refund. Other Other income increased for the three months ended September 30, 1996, due to the reversal of the Cajun-River Bend litigation accrual, as discussed above. Other income decreased for the nine months ended September 30, 1996, primarily due to the write-off of River Bend rate deferrals pursuant to the adoption of SFAS 121, which became effective January 1, 1996. See Note 8 for further discussion. This decrease was partially offset by the reversal of the Cajun-River Bend litigation accrual, as discussed above.
ENTERGY GULF STATES, INC. STATEMENTS OF INCOME (LOSS) For the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 --------- --------- ----------- ----------- (In Thousands) Operating Revenues: Electric $572,040 $524,982 $1,501,707 $1,366,070 Natural gas 4,946 3,210 26,685 17,654 Steam products 15,144 12,095 45,936 35,518 --------- --------- ----------- ----------- Total 592,130 540,287 1,574,328 1,419,242 --------- --------- ----------- ----------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 171,451 149,535 413,917 391,364 Purchased power 68,619 44,798 223,213 123,273 Nuclear refueling outage expenses 1,132 2,580 6,064 8,354 Other operation and maintenance 102,333 95,042 296,805 304,918 Depreciation, amortization, and decommissioning 51,417 50,606 154,172 151,337 Taxes other than income taxes 26,837 26,951 78,376 77,082 Income taxes 44,582 40,737 85,435 63,715 Amortization of rate deferrals 18,319 16,507 54,281 49,519 --------- --------- ----------- ----------- Total 484,690 426,756 1,312,263 1,169,562 --------- --------- ----------- ----------- Operating Income 107,440 113,531 262,065 249,680 --------- --------- --------- --------- Other Income (Deductions): Allowance for equity funds used during construction 705 253 1,937 770 Write-off of River Bend rate deferrals - - (194,498) - Miscellaneous - net 55,140 6,213 65,770 17,823 Income taxes (17,988) (2,110) (1,277) (5,139) --------- --------- --------- --------- Total 37,857 4,356 (128,068) 13,454 --------- --------- --------- --------- Interest Charges: Interest on long-term debt 44,583 47,426 137,547 144,053 Other interest - net 10,349 2,588 12,258 4,681 Allowance for borrowed funds used during construction (600) (239) (1,656) (700) --------- --------- --------- --------- Total 54,332 49,775 148,149 148,034 --------- --------- --------- --------- Net Income (Loss) 90,965 68,112 (14,152) 115,100 Preferred and Preference Stock Dividend Requirements and Other 7,212 7,341 21,497 22,357 --------- --------- --------- --------- Earnings (Loss) Applicable to Common Stock $83,753 $60,771 ($35,649) $92,743 ========= ========= ========= ========= See Notes to Financial Statements.
ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) Net income (loss) ($14,152) $115,100 Noncash items included in net income (loss): Write-off of River Bend rate deferrals 194,498 - Change in rate deferrals 54,281 49,519 Depreciation, amortization, and decommissioning 154,172 151,337 Deferred income taxes and investment tax credits 86,063 69,060 Allowance for equity funds used during construction (1,937) (770) Changes in working capital: Receivables (24,352) 41,808 Fuel inventory (11,734) (3,598) Accounts payable (35,908) (21,476) Taxes accrued 12,664 35,701 Interest accrued 3,591 4,254 Reserve for rate refund - (51,268) Other working capital accounts (123,596) (53,032) Decommissioning trust contributions (4,442) (2,959) Provision for estimated losses and reserves (3,085) 7,417 Other (22,663) 3,174 --------- --------- Net cash flow provided by operating activities 263,400 344,267 --------- --------- Investing Activities: Construction expenditures (122,349) (112,237) Allowance for equity funds used during construction 1,937 770 Nuclear fuel purchases (22,193) - Proceeds from sale/leaseback of nuclear fuel 23,592 - --------- --------- Net cash flow used in investing activities (119,013) (111,467) --------- --------- Financing Activities: Proceeds from the issuance of long-term debt 780 2,277 Retirement of: First mortgage bonds (79,234) - Other long-term debt (50,425) (50,425) Redemption of preferred and preference stock (10,179) (4,850) Dividends paid on preferred and preference stock (21,328) (22,208) --------- --------- Net cash flow used in financing activities (160,386) (75,206) --------- --------- Net increase (decrease) in cash and cash equivalents (15,999) 157,594 Cash and cash equivalents at beginning of period 234,604 104,644 --------- --------- Cash and cash equivalents at end of period $218,605 $262,238 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized 128,496 136,526 Income taxes 80 288 Noncash investing and financing activities: Change in unrealized appreciation (depreciation) of decommissioning trust assets (765) 1,738 See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) ASSETS Utility Plant: Electric $7,037,184 $6,942,983 Natural gas 45,435 45,789 Steam products 79,701 77,551 Property under capital leases 74,384 77,918 Construction work in progress 166,053 148,043 Nuclear fuel under capital lease 53,737 69,853 ---------- ---------- Total 7,456,494 7,362,137 Less - accumulated depreciation and amortization 2,802,750 2,664,943 ---------- ---------- Utility plant - net 4,653,744 4,697,194 ---------- ---------- Other Property and Investments: Decommissioning trust fund 37,753 32,943 Other - at cost (less accumulated depreciation) 26,804 28,626 ---------- ---------- Total 64,557 61,569 ---------- ---------- Current Assets: Cash and cash equivalents: Cash 22,504 13,751 Temporary cash investments - at cost, which approximates market: Associated companies 47,980 46,336 Other 148,121 174,517 ---------- ---------- Total cash and cash equivalents 218,605 234,604 Accounts receivable: Customer (less allowance for doubtful accounts of $1.6 million in 1996 and 1995) 121,376 110,187 Associated companies 1,158 1,395 Other 21,442 15,497 Accrued unbilled revenues 80,836 73,381 Deferred fuel costs 84,692 31,154 Accumulated deferred income taxes 58,324 43,465 Fuel inventory - at average cost 43,875 32,141 Materials and supplies - at average cost 90,117 91,288 Rate deferrals 103,498 97,164 Prepayments and other 23,215 15,566 ---------- ---------- Total 847,138 745,842 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 146,522 419,904 SFAS 109 regulatory asset - net 378,843 453,628 Unamortized loss on reacquired debt 55,570 61,233 Other regulatory assets 23,072 27,836 Long-term receivables 218,246 224,727 Other 180,883 169,125 ---------- ---------- Total 1,003,136 1,356,453 ---------- ---------- TOTAL $6,568,575 $6,861,058 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares $114,055 $114,055 Paid-in capital 1,152,689 1,152,505 Retained earnings 322,054 357,704 ---------- ---------- Total common shareholder's equity 1,588,798 1,624,264 Preference stock 150,000 150,000 Preferred stock: Without sinking fund 136,444 136,444 With sinking fund 77,460 87,654 Long-term debt 2,030,294 2,175,471 ---------- ---------- Total 3,982,996 4,173,833 ---------- ---------- Other Noncurrent Liabilities: Obligations under capital leases 88,778 108,078 Other 75,904 78,245 ---------- ---------- Total 164,682 186,323 ---------- ---------- Current Liabilities: Currently maturing long-term debt 160,865 145,425 Accounts payable: Associated companies 39,146 31,349 Other 92,823 136,528 Customer deposits 24,479 21,983 Taxes accrued 50,077 37,413 Interest accrued 60,428 56,837 Nuclear refueling reserve 8,544 22,627 Obligations under capital leases 39,343 37,773 Other 34,660 86,653 ---------- ---------- Total 510,365 576,588 ---------- ---------- Deferred Credits: Accumulated deferred income taxes 1,207,996 1,177,144 Accumulated deferred investment tax credits 204,612 208,618 Deferred River Bend finance charges 39,778 58,047 Other 458,146 480,505 ---------- ---------- Total 1,910,532 1,924,314 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $6,568,575 $6,861,058 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three Months and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Department Operating Revenues: Residential $ 211.4 $ 198.6 $ 12.8 6 Commercial 128.7 120.3 8.4 7 Industrial 186.7 167.3 19.4 12 Governmental 8.7 5.9 2.8 47 ------- ------- ------ Total retail 535.5 492.1 43.4 9 Sales for resale Associated companies 8.0 11.1 (3.1) (28) Non-associated companies 21.1 21.7 (0.6) (3) Other 7.5 0.1 7.4 - ------- ------- ------ Total Electric Department $ 572.1 $ 525.0 $ 47.1 9 ======= ======= ====== Billed Electric Energy Sales (Millions of KWh): Residential 2,751 2,697 54 2 Commercial 1,887 1,831 56 3 Industrial 4,393 4,153 240 6 Governmental 127 80 47 59 ------- ------- ------ Total retail 9,158 8,761 397 5 Sales for resale Associated companies 259 534 (275) (51) Non-associated companies 535 722 (187) (26) ------- ------- ------ Total Electric Department 9,952 10,017 (65) (1) Steam Department 514 459 55 12 ------- ------- ------ Total 10,466 10,476 (10) - ======= ======= ====== Nine Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Department Operating Revenues: Residential $ 488.0 $ 447.7 $ 40.3 9 Commercial 340.5 311.9 28.6 9 Industrial 524.3 454.8 69.5 15 Governmental 23.5 18.3 5.2 28 -------- --------- ------- Total retail 1,376.3 1,232.7 143.6 12 Sales for resale Associated companies 13.6 43.9 (30.3) (69) Non-associated companies 61.3 52.3 9.0 17 Other 50.5 37.2 13.3 36 --------- --------- ------- Total Electric Department $ 1,501.7 $ 1,366.1 $ 135.6 10 ========= ========= ======= Billed Electric Energy Sales (Millions of KWh): Residential 6,396 6,012 384 6 Commercial 4,905 4,680 225 5 Industrial 12,457 11,500 957 8 Governmental 329 231 98 42 -------- --------- ------- Total retail 24,087 22,423 1,664 7 Sales for resale Associated companies 399 2,092 (1,693) (81) Non-associated companies 1,714 1,744 (30) (2) -------- --------- ------- Total Electric Department 26,200 26,259 (59) - Steam Department 1,367 1,308 59 5 -------- --------- ------- Total 27,567 27,567 - - ======== ========= ======= ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended September 30, 1996, primarily due to an increase in other operation and maintenance expenses and lower retail base revenues, which were partially offset by a decrease in income tax expense. Net income decreased for the nine months ended September 30, 1996, as the result of a decrease in retail base revenues, partially offset by decreases in income taxes and interest on long-term debt. Significant factors affecting the results of operations and causing variances between the three months and nine months ended September 30, 1996, and 1995 are discussed under "Revenues and Sales" and "Expenses" below. Revenues and Sales The changes in electric operating revenues for the three months and nine months ended September 30, 1996, are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues $(10.7) $(29.2) Fuel cost recovery 39.2 144.9 Sales volume/weather (3.7) 19.2 Other revenue (including unbilled) (1.2) (.9) Sales for resale (3.8) 1.4 ----- ------ Total $19.8 $135.4 ===== ====== Electric operating revenues increased for the three months and nine months ended September 30, 1996, primarily due to higher fuel adjustment revenues, which do not affect net income, and, for the nine months ended period, higher retail sales, partially offset by a decrease in rates. Colder weather in the first three months of 1996 contributed to the increase in retail sales for the nine months ended September 30, 1996. Base rate reductions ordered in the second quarters of 1995 and 1996 and a settlement of related issues during the fourth quarter of 1995 partially offset the effect of these increases. Expenses Operating expenses increased for the three months and nine months ended September 30, 1996, due primarily to increases in fuel and purchased power expenses, higher other operation and maintenance expenses and higher taxes other than income taxes. These increases were partially offset by the recording of rate deferrals in 1996, as discussed below. The increase in fuel and purchased power expenses for the three months ended September 30, 1996, is primarily the result of higher gas costs, while the increase in those expenses for the nine months ended September 30, 1996, is due to both higher gas costs and increased energy sales. See discussion in "Revenues and Sales" above. Taxes other than income taxes increased for the three months and nine months ended September 30, 1996, largely as a result of the expiration of Waterford 3's local property tax exemption in December 1995. This increase was offset for the first six months of 1996 by the recording of the LPSC-approved rate deferral for these taxes as discussed in Note 2. Other operation and maintenance expenses increased due to expenses related to a forced maintenance outage at Waterford 3 and an increase in litigation reserves. Lower pretax income resulted in decreased income tax expenses. Interest charges on long-term debt decreased for the three and nine months ended September 30, 1996, due to the retirement and refinancing of higher-cost long-term debt during the current year.
ENTERGY LOUISIANA, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 --------- --------- --------- --------- (In Thousands) Operating Revenues $549,295 $529,458 $1,424,909 $1,289,495 --------- --------- --------- --------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 125,447 116,015 316,789 227,616 Purchased power 113,676 92,944 314,613 261,417 Nuclear refueling outage expenses 3,977 4,517 11,910 13,550 Other operation and maintenance 82,838 71,348 219,515 217,617 Depreciation, amortization, and decommissioning 41,857 42,212 125,529 119,629 Taxes other than income taxes 19,001 13,133 56,981 43,181 Income taxes 46,584 56,003 101,277 104,366 Rate deferrals 607 - (10,768) - Amortization of rate deferrals 6,137 8,118 19,683 21,664 --------- --------- --------- --------- Total 440,124 404,290 1,155,529 1,009,040 --------- --------- --------- --------- Operating Income 109,171 125,168 269,380 280,455 --------- --------- --------- --------- Other Income (Deductions): Allowance for equity funds used during construction 186 424 712 1,527 Miscellaneous - net 614 1,137 1,342 1,718 Income taxes (114) (319) (215) (307) --------- --------- --------- --------- Total 686 1,242 1,839 2,938 --------- --------- --------- --------- Interest Charges: Interest on long-term debt 30,411 32,737 92,190 97,821 Other interest - net 1,222 1,355 5,721 5,100 Distributions on preferred securities of subsidiary 1,295 - 1,295 - Allowance for borrowed funds used during construction (373) (501) (1,204) (1,491) --------- --------- --------- --------- Total 32,555 33,591 98,002 101,430 --------- --------- --------- --------- Net Income 77,302 92,819 173,217 181,963 Preferred Stock Dividend Requirements and Other 6,289 5,367 16,457 16,177 --------- --------- --------- --------- Earnings Applicable to Common Stock $71,013 $87,452 $156,760 $165,786 ========= ========= ========= ========= See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) Operating Activities: Net income $173,217 $181,963 Noncash items included in net income: Change in rate deferrals 16,991 21,664 Depreciation, amortization, and decommissioning 125,291 119,629 Deferred income taxes and investment tax credits (24,518) (22,022) Allowance for equity funds used during construction (712) (1,527) Changes in working capital: Receivables (50,545) (51,126) Accounts payable (8,083) (741) Taxes accrued 79,301 84,144 Interest accrued (10,461) (5,232) Other working capital accounts 301 (4,885) Decommissioning trust contributions (6,593) (3,611) Provision for estimated Losses and reserves 6,526 (537) Other (16,148) (9,512) --------- --------- Net cash flow provided by operating activities 284,567 308,207 --------- --------- Investing Activities: Construction expenditures (75,574) (77,319) Allowance for equity funds used during construction 712 1,527 Nuclear fuel purchases - (45,493) Proceeds from sale/leaseback of nuclear fuel - 45,493 --------- --------- Net cash flow used in investing activities (74,862) (75,792) --------- --------- Financing Activities: Proceeds from the issuance of first mortgage bonds 113,994 - Proceeds from issuance of preferred securities of subsidiary trust 67,795 - Retirement of: First mortgage bonds (130,000) - Other long-term debt (233) (239) Redemption of preferred stock (67,824) (11,254) Changes in short-term borrowings - net (75,381) (27,154) Dividends paid: Common stock (100,300) (134,000) Preferred stock (15,584) (15,896) --------- --------- Net cash flow used in financing activities (207,533) (188,543) --------- --------- Net increase in cash and cash equivalents 2,172 43,872 Cash and cash equivalents at beginning of period 34,370 28,718 --------- --------- Cash and cash equivalents at end of period $36,542 $72,590 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized 103,434 102,574 Income taxes 81,700 63,296 Noncash investing and financing activities: Change in unrealized appreciation (depreciation) of decommissioning trust assets (2,077) 2,043 See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) ASSETS Utility Plant: Electric $4,967,444 $4,886,898 Property under capital leases 231,121 231,121 Construction work in progress 60,623 87,567 Nuclear fuel under capital lease 47,062 72,864 Nuclear fuel 1,507 1,506 ---------- ---------- Total 5,307,757 5,279,956 Less - accumulated depreciation and amortization 1,844,292 1,742,306 ---------- ---------- Utility plant - net 3,463,465 3,537,650 ---------- ---------- Other Property and Investments: Nonutility property 20,060 20,060 Decommissioning trust fund 45,220 38,560 Investment in subsidiary companies - at equity 14,230 14,230 Other - 1,113 ---------- ---------- Total 79,510 73,963 ---------- ---------- Current Assets: Cash and cash equivalents: Cash 14,888 3,952 Temporary cash investments - at cost, which approximates market: Other 21,654 30,418 ---------- ---------- Total cash and cash equivalents 36,542 34,370 Accounts receivable: Customer (less allowance for doubtful accounts of $1.4 million in 1996 and 1995) 118,512 72,328 Associated companies 8,488 8,033 Other 4,080 8,979 Accrued unbilled revenues 70,937 62,132 Deferred fuel costs 15,189 10,200 Accumulated deferred income taxes 4,089 - Materials and supplies - at average cost 79,197 79,799 Rate deferrals 8,618 25,609 Deferred nuclear refueling outage costs 9,274 21,344 Prepayments and other 10,284 9,118 ---------- ---------- Total 365,210 331,912 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: SFAS 109 regulatory asset - net 304,978 301,520 Unamortized loss on reacquired debt 38,574 39,474 Other regulatory assets 32,992 23,935 Other 26,729 23,069 ---------- ---------- Total 403,273 387,998 ---------- ---------- TOTAL $4,311,458 $4,331,523 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, no par value, authorized 250,000,000 shares; issued and outstanding 165,173,180 shares $1,088,900 $1,088,900 Capital stock expense and other (2,659) (4,836) Retained earnings 128,610 72,150 ---------- ---------- Total common shareholder's equity 1,214,851 1,156,214 Preferred stock: Without sinking fund 100,500 160,500 With sinking fund 92,500 100,009 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 70,000 - Long-term debt 1,373,114 1,385,171 ---------- ---------- Total 2,850,965 2,801,894 ---------- ---------- Other Noncurrent Liabilities: Obligations under capital leases 19,062 43,362 Other 58,982 50,835 ---------- ---------- Total 78,044 94,197 ---------- ---------- Current Liabilities: Currently maturing long-term debt 34,275 35,260 Notes payable: Associated companies 1,078 61,459 Other - 15,000 Accounts payable: Associated companies 36,805 37,494 Other 62,528 69,922 Customer deposits 58,537 56,924 Taxes accrued 97,913 18,612 Accumulated deferred income taxes - 3,366 Interest accrued 33,741 44,202 Dividends declared 3,486 5,149 Obligations under capital leases 28,000 28,000 Other 9,568 17,397 ---------- ---------- Total 365,931 392,785 ---------- ---------- Deferred Credits: Accumulated deferred income taxes 798,087 807,278 Accumulated deferred investment tax credits 141,311 145,561 Deferred interest - Waterford 3 lease obligation 20,576 23,947 Other 56,544 65,861 ---------- ---------- Total 1,016,518 1,042,647 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $4,311,458 $4,331,523 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three Months and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 215.7 $ 214.7 $ 1.0 - Commercial 112.5 105.8 6.7 6 Industrial 194.3 172.7 21.6 13 Governmental 9.2 8.2 1.0 12 ------- ------- ------ Total retail 531.7 501.4 30.3 6 Sales for resale Associated companies 0.1 0.6 (0.5) (83) Non-associated companies 15.7 19.0 (3.3) (17) Other 1.8 8.5 (6.7) (79) ------- ------- ------ Total $ 549.3 $ 529.5 $ 19.8 4 ======= ======= ====== Billed Electric Energy Sales (Millions of KWh): Residential 2,681 2,812 (131) (5) Commercial 1,449 1,456 (7) - Industrial 4,602 4,416 186 4 Governmental 121 114 7 6 ------- ------- ------ Total retail 8,853 8,798 55 1 Sales for resale Associated companies 2 20 (18) (90) Non-associated companies 258 468 (210) (45) ------- ------- ------ Total 9,113 9,286 (173) (2) ======= ======= ====== Nine Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 490.9 $ 459.5 $ 31.4 7 Commercial 289.0 267.2 21.8 8 Industrial 552.4 475.1 77.3 16 Governmental 26.0 23.7 2.3 10 --------- --------- ------- Total retail 1,358.3 1,225.5 132.8 11 Sales for resale Associated companies 0.8 1.0 (0.2) (20) Non-associated companies 45.1 43.5 1.6 4 Other 20.7 19.5 1.2 6 --------- --------- ------- Total $ 1,424.9 $ 1,289.5 $ 135.4 11 ========= ========= ======= Billed Electric Energy Sales (Millions of KWh): Residential 6,294 6,186 108 2 Commercial 3,697 3,634 63 2 Industrial 13,215 12,742 473 4 Governmental 346 332 14 4 --------- --------- ------- Total retail 23,552 22,894 658 3 Sales for resale Associated companies 20 38 (18) (47) Non-associated companies 770 1,042 (272) (26) --------- --------- ------- Total 24,342 23,974 368 2 ========= ========= ======= ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income for the three months ended September 30, 1996, remained relatively unchanged as compared to the same period in 1995. Net income increased for the nine months ended September 30, 1996, primarily due to an increase in electric operating revenues and a decrease in other operation and maintenance expenses, partially offset by an increase in income tax expense. Significant factors affecting the results of operations and causing variances between the three months and nine months ended September 30, 1996, and 1995 are discussed under "Revenues and Sales" and "Expenses" below. Revenues and Sales The changes in electric operating revenues for the three months and nine months ended September 30, 1996, are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues $(0.7) $(2.9) Grand Gulf rate rider 4.2 17.5 Fuel cost recovery 14.4 26.0 Sales volume/weather 0.4 9.1 Other revenue (including unbilled) (3.2) (3.2) Sales for resale 1.7 17.9 ----- ----- Total $16.8 $64.4 ===== ===== Electric operating revenues increased for the three months and nine months ended September 30, 1996, due to increases in revenues from the fuel adjustment clause and the Grand Gulf 1 rate rider, which do not affect net income. Fuel adjustment clause revenues increased due to higher fuel costs, as discussed below. In connection with an annual MPSC review, in October 1995, Entergy Mississippi's Grand Gulf 1 rate rider was adjusted upward as a result of its undercollection of Grand Gulf 1 costs. Therefore, Grand Gulf 1 rate rider revenues for the three months and nine months ended September 30, 1996, were greater than revenues for the same period last year. In addition, electric operating revenues increased for the nine months ended September 30, 1996, due to increases in sales volume and sales for resale. The increase in retail sales volume is primarily attributed to more severe weather in first quarter of 1996, compared to the same period in 1995. Sales for resale, specifically sales to associated companies, increased primarily due to changes in the generation requirements and availability among the operating companies. Expenses Operating expenses increased for the three months and nine months ended September 30, 1996, due to an increase in fuel, purchased power, and rate deferral amortization. Fuel and purchased power expenses increased as a result of higher fuel costs for the three months ended September 30, 1996. Fuel and purchased power expenses increased as a result of higher fuel costs and an increase in energy sales for the nine months ended September 30, 1996. The amortization of rate deferrals increased in accordance with the Grand Gulf 1 related deferral plan. In addition, income taxes increased for the nine months ended September 30, 1996, as a result of higher pretax income. The increase in operating expenses for the nine months ended September 30, 1996, was partially offset by a decrease in other operation and maintenance expenses as a result of lower payroll, contract work, and materials and supplies expenses. Payroll expenses decreased as a result of restructuring programs recorded in 1995. Contract work and materials and supplies expenses decreased because of the turbine repairs at some of Entergy Mississippi's generating plants in 1995. Rate deferrals reducing operating expenses in 1996 represent the deferral of Entergy Mississippi's portion of the proposed System Energy rate increase. See Note 2 for a further discussion.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 --------- --------- --------- --------- (In Thousands) Operating Revenues $297,118 $280,339 $748,499 $684,054 --------- --------- --------- --------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 73,838 62,932 161,664 126,871 Purchased power 66,875 55,696 202,919 183,706 Other operation and maintenance 30,702 31,815 87,179 103,970 Depreciation and amortization 10,007 9,614 30,086 28,349 Taxes other than income taxes 11,965 13,139 32,698 34,222 Income taxes 15,327 15,928 37,539 30,022 Rate deferrals (6,971) - (19,494) - Amortization of rate deferrals 56,006 49,426 110,998 80,063 --------- --------- --------- --------- Total 257,749 238,550 643,589 587,203 --------- --------- --------- --------- Operating Income 39,369 41,789 104,910 96,851 --------- --------- --------- --------- Other Income (Deductions): Allowance for equity funds used during construction 369 235 1,012 763 Miscellaneous - net 145 413 914 1,270 Income taxes (49) (158) (350) (486) --------- --------- --------- --------- Total 465 490 1,576 1,547 --------- --------- --------- --------- Interest Charges: Interest on long-term debt 10,905 12,451 33,461 35,399 Other interest - net 1,021 806 2,895 4,064 Allowance for borrowed funds used during construction (297) (206) (818) (645) --------- --------- --------- --------- Total 11,629 13,051 35,538 38,818 --------- --------- --------- --------- Net Income 28,205 29,228 70,948 59,580 Preferred Stock Dividend Requirements and Other 1,185 2,917 3,825 6,168 --------- --------- --------- --------- Earnings Applicable to Common Stock $27,020 $26,311 $67,123 $53,412 ========= ========= ========= ========= See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) Operating Activities: Net income $70,948 $59,580 Noncash items included in net income: Change in rate deferrals 94,908 78,772 Depreciation and amortization 30,086 28,349 Deferred income taxes and investment tax credits (33,412) (24,436) Allowance for equity funds used during construction (1,012) (763) Changes in working capital: Receivables (27,423) (29,362) Fuel inventory 5 (3,327) Accounts payable 3,093 24,505 Taxes accrued 17,582 24,979 Interest accrued (5,693) (3,689) Other working capital accounts 3,856 (16,475) Other (6,304) 1,273 --------- --------- Net cash flow provided by operating activities 146,634 139,406 --------- --------- Investing Activities: Construction expenditures (63,291) (55,616) Allowance for equity funds used during construction 1,012 763 --------- --------- Net cash flow used in investing activities (62,279) (54,853) --------- --------- Financing Activities: Proceeds from the issuance of general and refunding mortgage bonds - 79,480 Retirement of: General and refunding mortgage bonds (26,000) (30,000) First mortgage bonds (25,000) (20,000) Other long-term debt (15) (965) Redemption of preferred stock (9,876) (15,000) Changes in short-term borrowings - net 15,308 (30,000) Dividends paid: Common stock (45,400) (35,400) Preferred stock (3,815) (4,782) --------- --------- Net cash flow used in financing activities (94,798) (56,667) --------- --------- Net increase (decrease) in cash and cash equivalents (10,443) 27,886 Cash and cash equivalents at beginning of period 16,945 9,598 --------- --------- Cash and cash equivalents at end of period $6,502 $37,484 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized 40,296 41,304 Income taxes 48,092 27,413 See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) ASSETS Utility Plant: Electric $1,606,090 $1,559,955 Construction work in progress 57,457 55,443 ---------- ---------- Total 1,663,547 1,615,398 Less - accumulated depreciation and amortization 627,929 613,712 ---------- ---------- Utility plant - net 1,035,618 1,001,686 ---------- ---------- Other Property and Investments: Investment in subsidiary companies - at equity 5,531 5,531 Other 5,597 5,615 ---------- ---------- Total 11,128 11,146 ---------- ---------- Current Assets: Cash and cash equivalents: Cash 6,502 2,574 Temporary cash investments - at cost, which approximates market: Associated companies - 3,248 Other - 11,123 ---------- ---------- Total cash and cash equivalents 6,502 16,945 Accounts receivable: Customer (less allowance for doubtful accounts of $1.6 million in 1996 and 1995) 62,589 46,214 Associated companies 2,354 1,134 Other 2,111 1,967 Accrued unbilled revenues 56,834 47,150 Fuel inventory - at average cost 6,676 6,681 Materials and supplies - at average cost 19,384 19,233 Rate deferrals 143,353 130,622 Prepayments and other 5,856 11,536 ---------- ---------- Total 305,659 281,482 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 139,433 247,072 SFAS 109 regulatory asset - net 12,012 6,445 Unamortized loss on reacquired debt 9,467 10,105 Other regulatory assets 27,791 17,736 Other 6,472 6,311 ---------- ---------- Total 195,175 287,669 ---------- ---------- TOTAL $1,547,580 $1,581,983 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, no par value, authorized 15,000,000 shares; issued and outstanding 8,666,357 shares $199,326 $199,326 Capital stock expense and other (143) (218) Retained earnings 253,186 231,463 ---------- ---------- Total common shareholder's equity 452,369 430,571 Preferred stock: Without sinking fund 57,881 57,881 With sinking fund 7,000 16,770 Long-term debt 399,008 494,404 ---------- ---------- Total 916,258 999,626 ---------- ---------- Other Noncurrent Liabilities 8,398 11,625 ---------- ---------- Current Liabilities: Currently maturing long-term debt 106,015 61,015 Notes payable - associated companies 15,308 - Accounts payable: Associated companies 26,249 24,391 Other 33,335 32,100 Customer deposits 25,983 24,339 Taxes accrued 46,221 28,639 Accumulated deferred income taxes 58,959 54,090 Interest accrued 16,141 21,834 Other 3,361 6,875 ---------- ---------- Total 331,572 253,283 ---------- ---------- Deferred Credits: Accumulated deferred income taxes 248,970 278,581 Accumulated deferred investment tax credits 25,799 27,978 Other 16,583 10,890 ---------- ---------- Total 291,352 317,449 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $1,547,580 $1,581,983 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three Months and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 127.4 $ 121.5 $ 5.9 5 Commercial 86.3 78.8 7.5 10 Industrial 51.2 46.2 5.0 11 Governmental 8.2 7.2 1.0 14 ------- ------- ------ Total retail 273.1 253.7 19.4 8 Sales for resale Associated companies 18.5 15.1 3.4 23 Non-associated companies 6.5 8.3 (1.8) (22) Other (1.0) 3.2 (4.2) (131) ------- ------- ------ Total $ 297.1 $ 280.3 $ 16.8 6 ======= ======= ====== Billed Electric Energy Sales (Millions of KWh): Residential 1,479 1,524 (45) (3) Commercial 1,076 1,043 33 3 Industrial 831 792 39 5 Governmental 100 94 6 6 ------- ------- ------ Total retail 3,486 3,453 33 1 Sales for resale Associated companies 502 512 (10) (2) Non-associated companies 149 278 (129) (46) ------- ------- ------ Total 4,137 4,243 (106) (2) ======= ======= ====== Nine Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 287.6 $ 263.1 $ 24.5 9 Commercial 215.3 197.7 17.6 9 Industrial 136.0 130.1 5.9 5 Governmental 22.3 20.5 1.8 9 ------- ------- ------ Total retail 661.2 611.4 49.8 8 Sales for resale Associated companies 45.2 27.6 17.6 64 Non-associated companies 18.2 17.9 0.3 2 Other 23.9 27.2 (3.3) (12) ------- ------- ------ Total $ 748.5 $ 684.1 $ 64.4 9 ======= ======= ====== Billed Electric Energy Sales (Millions of KWh): Residential 3,506 3,341 165 5 Commercial 2,684 2,561 123 5 Industrial 2,260 2,256 4 - Governmental 263 252 11 4 ------- ------- ------ Total retail 8,713 8,410 303 4 Sales for resale Associated companies 1,073 771 302 39 Non-associated companies 433 594 (161) (27) ------- ------- ------ Total 10,219 9,775 444 5 ======= ======= ====== ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended September 30, 1996, due primarily to the write-off of previously recorded rate deferrals associated with least cost planning charges, and decreased other income, partially offset by a decrease in other operation and maintenance expenses. Net income increased for the nine months ended September 30, 1996, as a result of higher gas sales and lower other operation and maintenance expenses. Significant factors affecting the results of operations and causing variances between the three months and nine months ended September 30, 1996, and 1995 are discussed under "Revenues and Sales," "Expenses," and "Other" below. Revenues and Sales The changes in electric operating revenues for the three months and nine months ended September 30, 1996, are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues $(1.5) $(4.8) Fuel cost recovery 7.8 21.7 Sales volume/weather (3.3) (3.5) Other revenue (including unbilled) (1.0) (2.8) Sales for resale (0.8) 1.3 ---- ----- Total $1.2 $11.9 ==== ===== Electric operating revenues increased for the three months and nine months ended September 30, 1996, mainly due to an increase in fuel adjustment revenues, caused by higher fuel prices, which do not affect net income. This increase was partially offset by lower industrial sales due to a significant reduction in electricity usage by a large customer. For the three and nine months ended September 30, 1996, gas operating revenues increased due to higher gas prices. In addition, increased gas sales contributed to the increase in revenues for the nine months ended September 30, 1996, as a result of more severe weather in the first quarter of 1996. Expenses Operating expenses increased for the three months ended September 30, 1996, as a result of higher fuel expenses, including purchased power and gas purchased for resale, and the reversal of rate deferrals recorded previously, partially offset by lower other operation and maintenance expenses. Fuel-related expenses increased due to significantly higher gas prices. Rate deferrals recorded in connection with the deferral of least cost planning charges in the amount of $4.4 million were written off in the third quarter, contributing to the increase in operating expenses. Other operation and maintenance expenses decreased because of decreased transmission maintenance and lower regulatory commission expenses in 1996 compared to the same period in 1995. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Operating expenses increased for the nine months ended September 30, 1996, as a result of higher fuel expenses, including purchased power and gas purchased for resale, partially offset by the recording of rate deferrals and the reduced amortization of previous deferrals in 1996. Fuel expenses increased due to significantly higher gas prices. Gas purchased for resale increased as a result of higher gas sales and a higher unit purchase price. The rate deferrals recorded represent 50% of Entergy New Orleans' portion of the proposed System Energy rate increase (see Note 2). In addition, lower other operation and maintenance expenses, principally due to lower payroll expenses as a result of restructuring, partially offset the increase. Other Other income decreased for the three and nine months ended September 30, 1996 due to the write-off of transmission substation equipment.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 --------- --------- --------- --------- (In Thousands) Operating Revenues: Electric $136,018 $134,855 $322,010 $310,065 Natural gas 14,919 11,865 79,644 58,207 --------- --------- --------- --------- Total 150,937 146,720 401,654 368,272 --------- --------- --------- --------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 37,080 29,649 110,100 75,088 Purchased power 44,904 40,850 124,945 114,777 Other operation and maintenance 16,404 22,409 51,893 56,324 Depreciation and amortization 4,931 4,898 14,913 14,512 Taxes other than income taxes 7,445 7,425 21,065 21,259 Income taxes 8,893 9,915 18,174 18,110 Rate deferrals 2,597 - (4,580) - Amortization of rate deferrals 9,257 10,489 19,639 23,754 --------- --------- --------- --------- Total 131,511 125,635 356,149 323,824 --------- --------- --------- --------- Operating Income 19,426 21,085 45,505 44,448 --------- --------- --------- --------- Other Income (Deductions): Allowance for equity funds used during construction 79 43 234 104 Miscellaneous - net (652) 504 410 993 Income taxes 236 (194) (173) (382) --------- --------- --------- --------- Total (337) 353 471 715 --------- --------- --------- --------- Interest Charges: Interest on long-term debt 3,632 4,023 11,644 11,896 Other interest - net 298 588 900 1,555 Allowance for borrowed funds used during construction (62) (35) (184) (83) --------- --------- --------- --------- Total 3,868 4,576 12,360 13,368 --------- --------- --------- --------- Net Income 15,221 16,862 33,616 31,795 Preferred Stock Dividend Requirements and Other 241 318 723 1,035 --------- --------- --------- --------- Earnings Applicable to Common Stock $14,980 $16,544 $32,893 $30,760 ========= ========= ========= ========= See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) Operating Activities: Net income $33,616 $31,795 Noncash items included in net income: Change in rate deferrals 27,189 23,211 Depreciation and amortization 14,913 14,512 Deferred income taxes and investment tax credits (2,269) (5,853) Allowance for equity funds used during construction (234) (104) Changes in working capital: Receivables (11,732) (20,681) Accounts payable (8,004) 14,100 Taxes accrued 2,243 11,525 Interest accrued (1,902) (279) Income tax refund - 20,172 Other working capital accounts (16,611) (4,328) Other (10,241) (13,380) --------- --------- Net cash flow provided by operating activities 26,968 70,690 --------- --------- Investing Activities: Construction expenditures (22,009) (14,637) Allowance for equity funds used during construction 234 104 --------- --------- Net cash flow used in investing activities (21,775) (14,533) --------- --------- Financing Activities: Proceeds from the issuance of general and refunding mortgage bonds 39,608 29,805 Retirement of: First mortgage bonds (23,250) - General and refunding mortgage bonds (30,000) (24,200) Redemption of preferred stock - (1,500) Dividends paid: Common stock (34,000) (14,100) Preferred stock (724) (1,046) --------- --------- Net cash flow used in financing activities (48,366) (11,041) --------- --------- Net increase (decrease) in cash and cash equivalents (43,173) 45,116 Cash and cash equivalents at beginning of period 49,746 8,031 --------- --------- Cash and cash equivalents at end of period $6,573 $53,147 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized 13,875 13,173 Income taxes (refund) - net 18,752 (6,469) See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEET September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) ASSETS Utility Plant: Electric $499,400 $483,581 Natural gas 122,701 121,083 Construction work in progress 16,971 17,525 -------- -------- Total 639,072 622,189 Less - accumulated depreciation and amortization 343,979 335,021 -------- -------- Utility plant - net 295,093 287,168 -------- -------- Other Property and Investments: Investment in subsidiary companies - at equity 3,259 3,259 -------- -------- Current Assets: Cash and cash equivalents: Cash 2,609 1,693 Temporary cash investments - at cost, which approximates market: Associated companies 1,052 10,860 Other 2,912 37,193 -------- -------- Total cash and cash equivalents 6,573 49,746 Accounts receivable: Customer (less allowance for doubtful accounts of $0.5 million and $0.8 million in 1996 and 1995) 39,694 29,168 Associated companies 59 551 Other 1,876 843 Accrued unbilled revenues 17,907 17,242 Deferred electric fuel and resale gas costs 5,942 2,647 Materials and supplies - at average cost 10,141 8,950 Rate deferrals 37,583 35,191 Prepayments and other 8,012 4,529 -------- -------- Total 127,787 148,867 -------- -------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 108,335 137,916 SFAS 109 regulatory asset-net 8,601 6,813 Unamortized loss on reacquired debt 1,712 1,932 Other regulatory assets 13,443 9,204 Other 777 1,047 -------- -------- Total 132,868 156,912 -------- -------- TOTAL $559,007 $596,206 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares $33,744 $33,744 Paid-in capital 36,294 36,306 Retained earnings subsequent to the elimination of the accumulated deficit on November 30, 1988 80,153 81,261 -------- -------- Total common shareholder's equity 150,191 151,311 Preferred stock without sinking fund 19,780 19,780 Long-term debt 168,871 155,958 -------- -------- Total 338,842 327,049 -------- -------- Other Noncurrent Liabilities 15,759 17,745 -------- -------- Current Liabilities: Currently maturing long-term debt 12,000 38,250 Accounts payable: Associated companies 19,472 13,851 Other 11,049 24,674 Customer deposits 18,724 18,214 Accumulated deferred income taxes 16,046 9,174 Taxes accrued 7,797 5,554 Interest accrued 3,209 5,111 Other 5,193 14,345 -------- -------- Total 93,490 129,173 -------- -------- Deferred Credits: Accumulated deferred income taxes 74,821 81,654 Accumulated deferred investment tax credits 8,142 8,618 Other 27,953 31,967 -------- -------- Total 110,916 122,239 -------- -------- Commitments and Contingencies (Notes 1 and 2) TOTAL $559,007 $596,206 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three Months and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 59.1 $ 58.9 $ 0.2 - Commercial 43.8 43.2 0.6 1 Industrial 6.8 6.7 0.1 1 Governmental 17.4 16.2 1.2 7 ------- ------- ----- Total retail 127.1 125.0 2.1 2 Sales for resale Associated companies 0.2 0.1 0.1 100 Non-associated companies 2.6 3.5 (0.9) (26) Other 6.1 6.2 (0.1) (2) ------- ------- ----- Total $ 136.0 $ 134.8 $ 1.2 1 ======= ======= ===== Billed Electric Energy Sales (Millions of KWh): Residential 749 798 (49) (6) Commercial 612 621 (9) (1) Industrial 131 144 (13) (9) Governmental 290 286 4 1 ------- ------- ----- Total retail 1,782 1,849 (67) (4) Sales for resale Associated companies 5 3 2 67 Non-associated companies 52 107 (55) (51) ------- ------- ----- Total 1,839 1,959 (120) (6) ======= ======= ===== Nine Months Ended Increase/ Description 1996 1995 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 120.2 $ 111.7 $ 8.5 8 Commercial 113.1 111.1 2.0 2 Industrial 18.6 17.4 1.2 7 Governmental 43.5 39.7 3.8 10 ------- ------- ------ Total retail 295.4 279.9 15.5 6 Sales for resale Associated companies 2.5 1.4 1.1 79 Non-associated companies 8.0 7.8 0.2 3 Other 16.1 21.0 (4.9) (23) ------- ------- ------ Total $ 322.0 $ 310.1 $ 11.9 4 ======= ======= ====== Billed Electric Energy Sales (Millions of KWh): Residential 1,591 1,623 (32) (2) Commercial 1,581 1,583 (2) - Industrial 363 413 (50) (12) Governmental 732 744 (12) (2) ------- ------- ----- Total retail 4,267 4,363 (96) (2) Sales for resale Associated companies 63 71 (8) (11) Non-associated companies 178 243 (65) (27) ------- ------- ----- Total 4,508 4,677 (169) (4) ======= ======= ===== SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased slightly for the three months and nine months ended September 30, 1996, as compared to the same period in 1995 primarily as a result of lower interest charges. Significant factors affecting the results of operations and causing variances between the three months and nine months ended September 30, 1996, and 1995 are discussed under "Revenues" and "Expenses" below. Revenues Operating revenues recover operating expenses, depreciation, and capital costs attributable to Grand Gulf 1. Capital costs are computed by allowing a return on System Energy's common equity funds allocable to its net investment in Grand Gulf 1 and adding to such amount System Energy's effective interest cost for its debt allocable to its investment in Grand Gulf 1. Operating revenues increased slightly for the three months and nine months ended September 30, 1996, due primarily to an increase in fuel and fuel-related expenses and increased depreciation, amortization, and decommissioning expenses offset by a decrease in nuclear refueling outage expenses as discussed under "Expenses" below. Expenses Operating expenses increased for the three months and nine months ended September 30, 1996, due to increases in fuel and fuel- related expenses, and higher depreciation, amortization, and decommissioning expenses. The increase in fuel and fuel-related expenses is due to a refueling outage in 1995 which caused these expenses to be relatively low for that period. The increase in decommissioning costs and depreciation rates is reflected in the 1995 System Energy FERC rate increase filing, subject to refund. See Note 2 for a discussion of the proposed rate increase. These increases were offset by a decrease in nuclear refueling outage expenses. The decrease in nuclear refueling outage expenses was attributed to the effect of refueling outage expenses incurred in 1995 and the absence of a refueling outage in 1996. Other operation and maintenance expenses increased for the three months and nine months ended September 30, 1996, primarily due to timing differences of maintenance expenditures between the current and prior year periods. Interest charges decreased for the three months and nine months ended September 30, 1996, due primarily to the refinancing of higher cost long-term debt.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) Three Months Ended Nine Months Ended 1996 1995 1996 1995 --------- --------- --------- --------- (In Thousands) Operating Revenues $154,467 $144,758 $471,260 $455,054 --------- --------- --------- --------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 12,148 11,194 37,159 27,090 Nuclear refueling outage expenses - 4,571 - 25,857 Other operation and maintenance 28,231 21,154 76,563 70,056 Depreciation, amortization, and decommissioning 32,212 24,530 96,225 74,463 Taxes other than income taxes 6,606 6,590 20,211 20,788 Income taxes 20,618 19,056 62,502 57,775 --------- --------- --------- --------- Total 99,815 87,095 292,660 276,029 --------- --------- --------- --------- Operating Income 54,652 57,663 178,600 179,025 --------- --------- --------- --------- Other Income (Deductions): Allowance for equity funds used during construction 184 479 831 1,511 Miscellaneous - net 2,540 783 4,006 2,525 Income taxes (222) 448 (336) 1,500 --------- --------- ----------- ----------- Total 2,502 1,710 4,501 5,536 --------- --------- ----------- ----------- Interest Charges: Interest on long-term debt 30,759 34,557 105,733 110,153 Other interest - net 1,824 1,952 6,522 6,269 Allowance for borrowed funds used during construction (178) (502) (815) (1,594) --------- --------- --------- --------- Total 32,405 36,007 111,440 114,828 --------- --------- --------- --------- Net Income $24,749 $23,366 $71,661 $69,733 ========= ========= ========= ========= See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 --------- --------- (In Thousands) Operating Activities: Net income $71,661 $69,733 Noncash items included in net income: Depreciation, amortization, and decommissioning 96,225 74,463 Deferred income taxes and investment tax credits (20,929) (11,378) Allowance for equity funds used during construction (831) (1,511) Changes in working capital: Receivables (16,001) (56,341) Accounts payable 19,152 (25,063) Taxes accrued 52,537 672 Interest accrued (6,458) (4,281) Other working capital accounts 6,977 (23,343) Decommissioning trust contributions (13,809) (4,055) FERC Settlement - refund obligation (2,959) - Provision for estimated losses and reserves 36,922 - Other 1,260 32,303 --------- --------- Net cash flow provided by operating activities 223,747 51,199 --------- --------- Investing Activities: Construction expenditures (14,316) (19,524) Allowance for equity funds used during construction 831 1,511 Nuclear fuel purchases (44,554) (52,188) Proceeds from sale/leaseback of nuclear fuel 43,971 52,188 --------- --------- Net cash flow used in investing activities (14,068) (18,013) --------- --------- Financing Activities: Proceeds from the issuance of: First mortgage bonds 233,656 - Other long-term debt 133,933 43,538 Retirement of: First mortgage bonds (325,101) - Other long-term debt (92,700) (45,320) Changes in short-term borrowings - net (2,990) - Common stock dividends paid (69,700) (69,500) --------- --------- Net cash flow used in financing activities (122,902) (71,282) --------- --------- Net increase (decrease) in cash and cash equivalents 86,777 (38,096) Cash and cash equivalents at beginning of period 240 89,703 --------- --------- Cash and cash equivalents at end of period $87,017 $51,607 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized 113,251 114,514 Income taxes 26,523 65,637 Noncash investing and financing activities: Change in unrealized appreciation/depreciation of decommissioning trust assets (973) 2,629 See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS September 30, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) ASSETS Utility Plant: Electric $2,994,821 $2,977,303 Electric plant under lease 447,539 444,305 Construction work in progress 25,946 35,946 Nuclear fuel under capital lease 87,813 71,374 ---------- ---------- Total 3,556,119 3,528,928 Less - accumulated depreciation and amortization 944,026 861,752 ---------- ---------- Utility plant - net 2,612,093 2,667,176 ---------- ---------- Other Property and Investments: Decommissioning trust fund 55,490 40,927 ---------- ---------- Current Assets: Cash and cash equivalents: Cash 4,719 240 Temporary cash investments - at cost, which approximates market: Associated companies 21,840 - Other 60,458 - ---------- ---------- Total cash and cash equivalents 87,017 240 Accounts receivable: Associated companies 91,040 72,458 Other 2,256 4,837 Materials and supplies - at average cost 66,997 67,661 Prepayments and other 7,304 16,050 ---------- ---------- Total 254,614 161,246 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: SFAS 109 regulatory asset - net 271,196 291,181 Unamortized loss on reacquired debt 59,385 52,702 Other regulatory assets 204,704 203,731 Other 15,701 14,049 ---------- ---------- Total 550,986 561,663 ---------- ---------- TOTAL $3,473,183 $3,431,012 ========== ========== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS September 31, 1996 and December 31, 1995 (Unaudited) 1996 1995 (In Thousands) CAPITALIZATION AND LIABILITIES Capitalization: Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares $789,350 $789,350 Paid-in capital - 7 Retained earnings 87,881 85,920 ---------- ---------- Total common shareholder's equity 877,231 875,277 Long-term debt 1,418,770 1,219,917 ---------- ---------- Total 2,296,001 2,095,194 ---------- ---------- Other Noncurrent Liabilities: Obligations under capital leases 59,963 44,107 Other 54,735 16,068 ---------- ---------- Total 114,698 60,175 ---------- ---------- Current Liabilities: Currently maturing long - term debt 10,000 250,000 Notes payable-associated companies - 2,990 Accounts payable: Associated companies 45,513 17,458 Other 10,160 19,063 Taxes accrued 125,185 72,648 Interest accrued 30,285 36,743 Obligations under capital lease 28,000 28,000 Other 1,778 4,211 ---------- ---------- Total 250,921 431,113 ---------- ---------- Deferred Credits: Accumulated deferred income taxes 560,870 602,182 Accumulated deferred investment tax credits 104,512 107,119 FERC Settlement - refund obligation 53,889 56,848 Other 92,292 78,381 ---------- ---------- Total 811,563 844,530 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $3,473,183 $3,431,012 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Cajun - River Bend (Entergy Corporation and Entergy Gulf States) Entergy Gulf States and Cajun, respectively, own 70% and 30% undivided interests in River Bend (operated by Entergy Gulf States), and 42% and 58% undivided interests in Big Cajun 2, Unit 3 (operated by Cajun). These relationships have spawned a number of long- standing disputes and claims between the parties. An agreement setting forth terms for the resolution of all such disputes has been reached by Entergy Gulf States, the Cajun bankruptcy trustee, and the RUS, and approved by the United States District Court for the Middle District of Louisiana (District Court) on August 26, 1996 (Cajun Settlement). On September 6, 1996, the Committee of Unsecured Creditors in the Cajun bankruptcy proceeding filed a Notice of Appeal to the United States Court of Appeals for the Fifth Circuit (Fifth Circuit), objecting that the order approving the settlement was separate from the approval of a plan of reorganization and therefore, improper. The Cajun Settlement is subject to this appeal and approvals by the appropriate regulatory agencies. Management believes that it is probable that the Cajun Settlement will ultimately be approved and consummated. The Cajun Settlement resolved Cajun's civil action against Entergy Gulf States in which Cajun sought to rescind or terminate the Joint Ownership Participation and Operating Agreement (Operating Agreement) entered into on August 28, 1979, relating to River Bend. In that suit, Cajun also sought to recover its alleged $1.6 billion investment in the unit plus attorneys' fees, interest, and costs. A trial on the portion of the suit by Cajun to rescind the Operating Agreement was completed in March 1995. On October 24, 1995, the District Court issued a memorandum opinion rejecting Cajun's fraud claims and denying rescission. An appeal to the Fifth Circuit by the Cajun bankruptcy trustee was stayed pending the Court's trial of the breach of contract phase of the case. The Cajun Settlement resolves both the issues on appeal and the breach of contract claims which have not been tried. In 1992, two member cooperatives of Cajun brought an additional independent action to declare the Operating Agreement null and void, based upon Entergy Gulf States failure to get prior LPSC approval alleged to be necessary. Prior to the bankruptcy proceedings, Cajun intervened as a plaintiff in this action. The nullity claim of Cajun in this action is encompassed in the Cajun Settlement. Entergy Gulf States believes the suits are without merit and believes these cases are resolved by the Cajun Settlement. The Cajun Settlement, agreed to in principle on April 26, 1996, by Entergy Gulf States, the Cajun bankruptcy trustee, and the RUS, Cajun's largest creditor, was approved by the District Court on August 26, 1996. The terms include, but are not limited to, the following: (i) Cajun's interest in River Bend will be turned over to the RUS, which will have the option to retain the interest, sell it to a third party, or transfer it to Entergy Gulf States at no cost; (ii) Cajun will set aside a total of $125 million for its share of the decommissioning costs of River Bend; (iii) Cajun will transfer certain transmission assets to Entergy Gulf States; (iv) Cajun will settle transmission disputes and be released from claims for payment under transmission arrangements with Entergy Gulf States as discussed under "Cajun - Transmission Service" below; (v) all funds paid by Entergy Gulf States into the registry of the District Court will be returned to Entergy Gulf States; (vi) Cajun will be released from its unpaid past, present, and future liability for River Bend costs and expenses; and (vii) all litigation between Cajun and Entergy Gulf States will be dismissed. Based on the District Court's approval of the Cajun Settlement, the litigation accrual established in 1994 for possible losses associated with the Cajun-River Bend litigation was reversed in September 1996. Cajun has not paid its full share of capital costs, operating and maintenance expenses, and other costs for repairs and improvements to River Bend since 1992. Cajun's unpaid portion of River Bend operating and maintenance expenses (including nuclear fuel) and capital costs for the nine months ended September 30, 1996, was approximately $42.9 million. The cumulative cost to Entergy Gulf States resulting from Cajun's failure to pay its full share of River Bend-related costs, reduced by the proceeds from the sale by Entergy Gulf States of Cajun's share of River Bend power, and payments into the registry of the District Court for Entergy Gulf States' portion of expenses for Big Cajun 2, Unit 3, was $17.0 million as of September 30, 1996, compared with $31.1 million as of December 31, 1995. Cajun's unpaid portion of the River Bend related costs is reflected in long-term receivables with an offsetting reserve in other deferred credits. As discussed above, the Cajun Settlement will conclude all disputes regarding the non-payment by Cajun operating and maintenance expenses. Cajun continues to pay its share of decommissioning costs for River Bend. In its bankruptcy proceedings, Cajun filed a motion on January 10, 1995, to reject the Operating Agreement as a burdensome executory contract. Entergy Gulf States responded on January 10, 1995, with a memorandum opposing Cajun's motion. As discussed above, this matter will be ended as a result of the Cajun Settlement. On March 8, 1996, Southwestern Electric Power Company (SWEPCO), Entergy Gulf States, and certain member cooperatives of Cajun filed with the Bankruptcy Court a joint proposal to bring an end to the Cajun bankruptcy proceeding. The proposal was submitted in response to a bid procedure established by the Cajun bankruptcy trustee. On April 19, 1996, SWEPCO, Entergy Gulf States, and certain Cajun member cooperatives filed a separate plan of reorganization with the court based upon their earlier proposal. On April 22, 1996, the Cajun bankruptcy trustee filed a plan of reorganization with the Bankruptcy Court based on the proposal of two non-affiliated companies to take over the non-nuclear operations of Cajun. All of the plans of reorganization submitted to the Bankruptcy Court have incorporated the Cajun Settlement as an integral condition to the effectiveness of their plan. The timing and completion of the reorganization plan depends on Bankruptcy Court approval and any required regulatory approvals. See Note 8 of the Form 10-K for additional information regarding the Cajun litigation, Cajun's bankruptcy proceedings, and related filings. Cajun - Transmission Service (Entergy Corporation and Entergy Gulf States) Entergy Gulf States and Cajun are parties to FERC proceedings relating to transmission service charge disputes. As discussed above, these disputes will end upon the implementation of the Cajun Settlement. See Note 8 in the Form 10-K for additional information regarding these FERC proceedings and FERC orders issued as a result of such proceedings. Under Entergy Gulf States' interpretation of a 1992 FERC order, as modified by FERC's orders issued on August 3, 1995, and October 2, 1995, and as agreed to by the Cajun bankruptcy trustee, Cajun would owe Entergy Gulf States approximately $68.8 million as of September 30, 1996. Entergy Gulf States further estimates that if it were to prevail in its May 1992 motion for rehearing and on certain other issues decided adversely to Entergy Gulf States in the February 1995, August 1995, and October 1995 FERC orders, which Entergy Gulf States has appealed, Cajun would owe Entergy Gulf States approximately $154.1 million as of September 30, 1996. If Cajun were to prevail in its May 1992 motion for rehearing to FERC, and if Entergy Gulf States were not to prevail in its May 1992 motion for rehearing to FERC, and if Cajun were to prevail in appealing FERC's August and October 1995 orders, Entergy Gulf States estimates it would owe Cajun approximately $107.6 million as of September 30, 1996. The above amounts are exclusive of a $7.3 million payment by Cajun on December 31, 1990, which the parties agreed to apply to the disputed transmission service charges. Pending FERC's ruling on the May 1992 motions for rehearing, Entergy Gulf States has continued to bill Cajun utilizing the historical billing methodology and has recorded underpaid transmission charges, including interest, in the amount of $142.3 million as of September 30, 1996. This amount is reflected in long-term receivables with an offsetting reserve in other deferred credits. FERC has determined that the collection of the pre-petition debt of Cajun is an issue properly decided in the bankruptcy proceeding. Refer to "Cajun - River Bend" above for a discussion of the Cajun Settlement. Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 8 to the Form 10-K for information on the operating companies' and System Energy's construction expenditures (excluding nuclear fuel), and long-term debt & preferred stock maturities and cash sinking fund requirements for the period 1996-1998. Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 8 to 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 ANO, River Bend, Waterford 3, and Grand Gulf 1. The SEC has questioned certain of the financial accounting practices of the electric utility industry regarding the recognition, measurement, and classification of decommissioning costs for nuclear plants in the financial statements of electric utilities. In response to these questions, the FASB has been reviewing the accounting for decommissioning and has expanded the scope of its review to include liabilities related to the closure and removal of all long-lived assets. An exposure draft of the proposed SFAS (which proposed a 1997 effective date) was issued in February 1996. The proposed SFAS would require measurement of the liability for closure and removal of long-lived assets (including decommissioning) based on discounted future cash flows. Those future cash flows should be determined by estimating current costs and adjusting for inflation, efficiencies that may be gained from experience with similar activities, and consideration of reasonable future advances in technology. It would also require that changes in the decommissioning/closure cost liability resulting from changes in assumptions be recognized with a corresponding adjustment to the plant asset, and depreciation should be revised prospectively. The proposed SFAS states that the initial recognition of the decommissioning/closure cost liability would result in an asset that should be presented with other plant costs on the financial statements because the cost of decommissioning/closing the plant would be recognized as part of the total cost of the plant asset. In addition, there would be a regulatory asset recognized on the financial statements to the extent the initial decommissioning/closure liability has increased due to the passage of time, and such costs are probable of future recovery. After receiving comments on the exposure draft, the FASB has decided that the effective date for the proposed SFAS will be later than 1997, although a final effective date has not yet been announced. If current electric utility industry accounting practices with respect to nuclear decommissioning and other closure costs are changed, annual provisions for such costs could increase, the estimated cost for decommissioning/closure could be recorded as a liability rather than as accumulated depreciation, and trust fund income from decommissioning trusts could be reported as investment income rather than as a reduction to decommissioning expense. ANO Matters (Entergy Corporation and Entergy Arkansas) Cracks in certain steam generator tubes at ANO 2 were discovered and repaired during an outage in March 1992. Further inspections and repairs were conducted at subsequent refueling and mid-cycle outages, including the most recent refueling outage in October 1995. During the October 1995 inspection, additional cracks in the tubes were discovered. ANO 2's output has been reduced by 23 megawatts due to steam generator fouling and tube plugging. The unit may be approaching the current limit for the number of steam generator tubes that can be plugged with the unit in operation. If the established limit is reached during a future outage, Entergy Operations could be required to insert sleeves in steam generator tubes that were previously plugged. On October 25, 1996, Entergy Corporation's Board of Directors authorized Entergy Operations to negotiate a contract, with appropriate cancellation provisions, for the fabrication and replacement of the steam generator at ANO 2. Entergy estimates the cost of fabrication and replacement of the steam generator to be approximately $150 million. If the contract to purchase the steam generator is not canceled, the steam generator will be installed during a planned refueling outage in 2000. Entergy Operations periodically meets with the NRC to discuss the results of inspections of the steam generator tubes, as well as the timing of future inspections. Environmental Issues (Entergy Arkansas) In May 1995, Entergy Arkansas was named as a defendant in a suit by Reynolds Metals Company (Reynolds), seeking to recover a share of the costs associated with the clean-up of hazardous substances at a site south of Arkadelphia, Arkansas. Reynolds alleges that it has spent $11.2 million to clean-up the site, and that the site was contaminated with PCBs for which Entergy Arkansas bears some responsibility. Entergy Arkansas, voluntarily, at its expense, completed remediation at a portion of this site and at a nearby substation site. Entergy Arkansas believes that it has no liability for contamination at that portion of the site that is subject to the Reynolds suit and is contesting the lawsuit. Regardless of the outcome, Entergy Arkansas does not believe this matter would have a materially adverse effect on its financial condition or results of operations. See "Environmental Regulation" in Item 1 of Part I of the Form 10-K for additional information on the PCB contamination at the two former Reynolds plant sites in Arkansas to which Entergy Arkansas had supplied power. (Entergy Gulf States) Entergy Gulf States has been designated as a potentially responsible party for the clean-up of certain hazardous waste disposal sites. Entergy Gulf States is currently negotiating with the EPA and state authorities regarding the clean-up of certain of these sites. Through September 30, 1996, $8.2 million has been expended on the clean-up. As of September 30, 1996, a remaining recorded liability of $21.5 million existed relating to the clean-up of the sites at which Entergy Gulf States has been designated a potentially responsible party. See "Environmental Regulation" in Item 1 of Part I of the Form 10-K for additional discussion of the sites where Entergy Gulf States has been designated as a potentially responsible party by the EPA and related litigation. (Entergy Louisiana) During 1993, the Louisiana Department of Environmental Quality issued new rules for solid waste regulation, including regulation of wastewater impoundments. Entergy Louisiana has determined that certain of its power plant waste water impoundments were affected by these regulations and chose to upgrade or close them. A remaining recorded liability in the amount of $8.7 million existed at September 30, 1996, for waste water upgrades and closures to be completed by the end of 1996. Cumulative expenditures relating to the upgrades and closures of waste water impoundments were $7.0 million as of September 30, 1996. (Entergy Integrated Solutions, Inc.) In June 1996, EIS closed its Pelzer, South Carolina facility, which had been leased from a third party since June 1995. EIS subsequently learned that solid wastes were improperly buried on the leased property. EIS conducted an investigation which confirmed the presence of buried lighting ballasts on adjacent property and disclosed the possible burial of light bulb waste containing hazardous substances under the building on the leased property. It appears that the material was buried prior to the time that EIS leased the premises. A report has been provided to the EPA and to the South Carolina Department of Health and Environmental Control. Based on its investigation, EIS does not believe that it is liable for costs of remediating the leased premises. Preliminary estimates of the cost of remediation range from $600,000 to $880,000. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three transactions for the sale and leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3. Upon the occurrence of certain events, Entergy Louisiana may be obligated to pay amounts sufficient to permit the Owner Participants to withdraw from the lease transactions, and Entergy Louisiana may be required to assume the outstanding bonds issued by the Owner Trustee to finance, in part, its acquisition of the undivided interests in Waterford 3. See Note 9 to the Form 10-K for further information. Reimbursement Agreement (System Energy) Under a bank letter of credit and reimbursement agreement, System Energy has agreed to a number of covenants relating to the maintenance of certain capitalization and fixed charge coverage ratios. System Energy agreed, during the term of the agreement, to maintain its equity at not less than 33% of its adjusted capitalization (defined in the agreement to include certain amounts not included in capitalization for financial statement purposes). In addition, System Energy must maintain, with respect to each fiscal quarter during the term of the agreement, a ratio of adjusted net income to interest expense (calculated, in each case, as specified in the agreement) of at least 1.60 times earnings. System Energy was in compliance with the above covenants at September 30, 1996. See Note 8 to the Form 10-K for further information. NOTE 2. RATE AND REGULATORY MATTERS River Bend (Entergy Corporation and Entergy Gulf States) In May 1988, the PUCT granted Entergy Gulf States a permanent increase in annual revenues of $59.9 million resulting from the inclusion in rate base of approximately $1.6 billion of company-wide River Bend plant investment and approximately $182 million of related Texas retail jurisdiction deferred River Bend costs (Allowed Deferrals). In addition, the PUCT disallowed as imprudent $63.5 million of company-wide River Bend plant costs and placed in abeyance, with no finding as to prudence, approximately $1.4 billion of company-wide River Bend plant investment and approximately $157 million of Texas retail jurisdiction deferred River Bend operating and carrying costs (Abeyed Deferrals). As discussed in Note 2 to the Form 10-K, various appeals of the PUCT's order have been filed (Rate Appeal). Entergy Gulf States filed an appeal with the Texas Supreme Court and, on February 9, 1996, the Texas Supreme Court agreed to hear the appeal. Oral arguments were held on March 19, 1996. The timing of a decision by the Texas Supreme Court is not certain. As of September 30, 1996, the River Bend plant costs disallowed for retail ratemaking purposes in Texas and the River Bend plant costs held in abeyance totaled (net of taxes and depreciation) approximately $12 million and $268 million, respectively. Allowed Deferrals were approximately $78 million, net of taxes and amortization, as of September 30, 1996. Entergy Gulf States estimates it has collected approximately $199 million of revenues as of September 30, 1996, as a result of the originally ordered rate treatment by the PUCT of these deferred costs. If recovery of the Allowed Deferrals is not upheld, future revenues based thereon could be lost, and no assurance can be given as to whether or not refunds to customers of revenue received based upon such deferred costs would be required. During the first quarter of 1996, Entergy Gulf States wrote off Abeyed Deferrals of $169 million, net of tax, in accordance with SFAS 121, which became effective January 1, 1996, but it has made no write- offs or reserves for the River Bend plant-related costs. A general remand by the Texas Supreme Court in the Rate Appeal would enable Entergy Gulf States to seek recovery of the Abeyed Deferrals. Based on advice from Clark, Thomas & Winters, A Professional Corporation, legal counsel of record in the Rate Appeal, management believes that it is reasonably possible that the case will be remanded to the PUCT and that the PUCT will be allowed to rule on the prudence of the abeyed River Bend plant costs. Management and legal counsel are unable to predict the amount, if any, of abeyed and previously disallowed River Bend plant costs that ultimately might be disallowed by the PUCT. As of September 30, 1996, a net of tax write-off of up to $280 million could be required if the PUCT ultimately issues an adverse ruling on the abeyed and disallowed plant costs. The following factors support management's position that a loss contingency requiring accrual has not occurred, and its belief that all, or substantially all, of the abeyed plant costs will ultimately be recovered: 1. The $1.4 billion of abeyed River Bend plant costs have never been ruled imprudent and disallowed by the PUCT; 2. Analysis by Sandlin Associates, which supports the prudence of substantially all of the abeyed construction costs; 3. Historical inclusion by the PUCT of prudent construction costs in rate base; and 4. The analysis of Entergy Gulf States' internal legal staff, which has considerable experience in Texas rate case litigation. Additionally, based on advice from Clark, Thomas & Winters, management believes that it is reasonably possible that the Allowed Deferrals will continue to be recovered in rates, and that it is reasonably possible that the Abeyed Deferrals will be recovered in rates to the extent that the $1.4 billion of abeyed River Bend plant is recovered. Filings with the LPSC (Entergy Corporation and Entergy Gulf States) See Note 2 in the Form 10-K for a discussion of Entergy Gulf States' required earnings analysis filing with the LPSC for the test year preceding the Merger (1993). Entergy Gulf States appealed to the Louisiana Supreme Court the 1994 LPSC order for an annual rate reduction of $12.7 million. During the appeal, Entergy Gulf States' preliminary injunction from the appropriate state District Court, relating to the $8.3 million earnings effect of a 1994 change in accounting for unbilled revenues, remained in effect. On July 2, 1996, the Louisiana Supreme Court ruled on the appeal. The Court found that the LPSC ruled incorrectly on the treatment of the initial balance of unbilled revenues and the revenue annualization adjustment. As a result, Entergy Gulf States will not be required to refund the $8.3 million. The case, which included other disputed matters, was remanded to the LPSC for further proceedings. On May 31, 1995, Entergy Gulf States filed its second required post-Merger earnings analysis with the LPSC. Hearings on this review were held in December 1995. On October 4, 1996, the LPSC issued an order requiring a $33.3 million annual base rate reduction and a $9.6 million refund. One component of the rate reduction removes from base rates approximately $13.4 million annually of costs that will be recovered in the future through the fuel adjustment clause. On October 23, 1996, Entergy Gulf States obtained an injunction to stay this order, except insofar as the order requires the $13.4 million reduction, which Entergy Gulf States has agreed to implement. Entergy Gulf States plans to appeal the order to the appropriate state District Court. In addition, the LPSC order provides for the recovery of $6.8 million annually related to certain gas transportation and storage facilities costs (see "LPSC Fuel Cost Review" below). On May 31, 1996, Entergy Gulf States filed its third required post-Merger earnings analysis with the LPSC. Based on this earnings filing, on June 1, 1996, a $5.3 million annual rate reduction went into effect. Hearings on this filing are scheduled for December 1996. (Entergy Corporation and Entergy Louisiana) See Note 2 in the Form 10-K for a discussion of Entergy Louisiana's performance-based formula rate plan approved in a June 1995 LPSC rate order, Entergy Louisiana's subsequent appeal of the LPSC's order, and the final settlement of this appeal. The property tax exemption for Waterford 3 ended in December 1995 and Entergy Louisiana will be required to pay $21.5 million in property taxes to St. Charles Parish for the 1996 tax year. In a March 1996 LPSC order, Entergy Louisiana was permitted to defer the rate recovery of these taxes for the period January 1996 through June 1996. The order allowed for the recovery of the property tax and also for the recovery, from July 1996 through June 1997, of the related deferral. In addition, Entergy Louisiana's phase-in-plan for Waterford 3 will expire in November 1996. Entergy Louisiana is recovering deferred costs annually of approximately $28.4 million. On April 15, 1996, Entergy Louisiana filed its performance based formula rate plan for the 1995 test year with the LPSC. On June 19, 1996, the LPSC approved a $12 million annual reduction in base rates effective July 1, 1996. This reduction was based upon the 1995 test year results under the formula rate plan and the expiration of the Waterford 3 phase-in-plan discussed above, partially offset by the recovery of the property taxes on Waterford 3 and the related deferral discussed above. Subsequently, the LPSC staff identified cost issues which were resolved by means of a settlement conference and increased the base rate reduction from $12 million to $16.5 million. Additionally, the LPSC has indicated that it will initiate a review of Entergy Louisiana's allowed return on equity. Hearings are scheduled to begin in November 1996. Filings with the PUCT (Entergy Corporation and Entergy Gulf States) On December 6, 1995, Entergy Gulf States filed a petition with the PUCT for reconciliation of fuel and purchased power expenses for the period January 1, 1994, through June 30, 1995. Entergy Gulf States believes that there was an under-recovered fuel balance, including interest, of $22.4 million as of June 1995. Hearings began in September 1996, and a final action by the PUCT is not expected until January 1997. Management is unable to predict the final outcome of this proceeding. In accordance with the Merger agreement, Entergy Gulf States is required to file a rate proceeding with the PUCT in November 1996. However, in April 1996, certain cities served by Entergy Gulf States (Cities) instituted investigations of the reasonableness of Entergy Gulf States' rates. In May 1996, the Cities agreed to forego their investigation based on the assurance that any rate decrease ordered in the November 1996 filing will be retroactive to June 1, 1996, and accrue interest until refunded. The agreement further provides that no base rate increase will be retroactive. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) On March 15, 1996, Entergy Mississippi filed its annual earnings review with the MPSC under its formula rate plan. On April 18, 1996, the MPSC issued an order approving and adopting a joint stipulation and placing the prospective rate reduction of $5.9 million into effect on May 1, 1996. Filings with the Council (Entergy Corporation and Entergy New Orleans) Pursuant to the 1991 NOPSI Settlement, Entergy New Orleans is required to make earnings filings with the Council for the 1995 and 1996 rate years. A review of Entergy New Orleans' earnings for the test year ending September 30, 1995, required Entergy New Orleans to credit customers $6.2 million over a 12-month period which began in March 1996. On October 31, 1996, Entergy New Orleans filed with the Council a recently completed analysis of its earnings for the test year ended September 30, 1996. The analysis indicated that Entergy New Orleans' earnings for the test period exceeded Entergy New Orleans' allowed rate of return on common equity by $15.6 million. In accordance with the 1991 NOPSI Settlement, Entergy New Orleans is required to lower base rates for the following twelve months through a credit to customers. The Council is expected to conduct hearings on this matter in the fourth quarter. At this time, Entergy New Orleans is unable to predict the final amount of, or ultimate method for, implementing this rate reduction. Hearings before the Council on the reasonableness and prudence of Entergy New Orleans' deferred Least Cost Integrated Resource Planning expenses for cost recovery purposes were previously scheduled for April 1996, but have been delayed. Proposed Rate Increase (System Energy) System Energy filed an application with FERC on May 12, 1995, for a $65.5 million rate increase. The request seeks changes to System Energy's rate schedule, including increases in the revenue requirement associated with decommissioning costs, the depreciation rate, and the rate of return on common equity. On December 12, 1995, System Energy implemented a $65.5 million rate increase, subject to refund. Management has decided to record a reserve for a portion of the rate increase. Hearings on System Energy's request began in January 1996 and were completed in February 1996. On July 11, 1996, the ALJ issued an initial decision in this proceeding that agreed with certain of System Energy's proposals, while rejecting a proposed increase in return on common equity and recommending a slight decrease. The ALJ also rejected the proposed change in the decommissioning cost methodology. The decision of the ALJ is preliminary and may be modified in the final decision from FERC which is expected in the first quarter of 1997. Management is unable predict the final outcome of the rate increase request or the amount of any refunds in excess of reserves that may be required. (Entergy Mississippi) Entergy Mississippi's allocation of the proposed System Energy wholesale rate increase is $21.6 million annually. In July 1995, Entergy Mississippi filed a schedule with the MPSC that defers the retail recovery of the System Energy rate increase. The deferral plan, which was approved by the MPSC, began in December 1995, the effective date of the System Energy rate increase, and will end after the issuance of a final order by FERC. The final amount of the deferred rate increase is to be amortized over 48 months beginning in October 1998. (Entergy New Orleans) Entergy New Orleans' allocation of the proposed System Energy wholesale rate increase is $11.1 million annually. In February 1996, Entergy New Orleans filed a plan with the Council to defer 50% of the amount of the System Energy rate increase. The deferral began in February 1996 and will end after the issuance of a final order by FERC. LPSC Fuel Cost Review (Entergy Corporation and Entergy Gulf States) See Note 2 to the Form 10-K, for a discussion of the LPSC's review of Entergy Gulf States' fuel costs for the period October 1988 through September 1991 (Phase I) and Entergy Gulf States' subsequent appeal of $13.9 million of fuel costs disallowed by the LPSC. On April 15, 1996, the appropriate state District Court affirmed the LPSC decision. Entergy Gulf States has appealed this decision to the Louisiana Supreme Court. Entergy Gulf States has reached a settlement with the LPSC on one of the components of the disallowed fuel costs. See "October 1996 LPSC Settlement" below. In September 1996, the LPSC completed the second phase of their review of Entergy Gulf States' fuel costs, which review covered the period October 1991 through December 1994 (Phase II). On October 7, 1996, the LPSC issued an order requiring a $34.2 million refund. The ordered refund includes a disallowance of $14.3 million of capital costs (including interest) related to certain gas transportation and storage facilities, which were recovered through the fuel clause. However, the LPSC order provides that Entergy Gulf States may recover these costs in the future through base rates by establishing a regulatory asset. As discussed above, the LPSC order in the second post-Merger earnings analysis provides for the recovery of $6.8 million annually related to gas transportation and storage facilities costs through base rates. On October 23, 1996, Entergy Gulf States received an injunction to stay this order, except insofar as the order requires the $14.3 million refund, and plans to appeal the order to the appropriate state District Court. See "October 1996 LPSC Settlement" below. October 1996 LPSC Settlement (Entergy Corporation and Entergy Gulf States) In October 1996, Entergy Gulf States and the LPSC reached an agreement whereby Entergy Gulf States agreed to (i) refund certain capital costs related to gas transportation and storage facilities that were at issue in the Phase I and Phase II fuel cost reviews and (ii) refund similar costs recovered subsequent to the Phase II fuel cost review. This will result in a total refund to customers of approximately $32.1 million including interest. In the future, Entergy Gulf States will be permitted to recover through base rates the capital costs related to such gas transportation and storage facilities. As a part of the settlement, which covered post-Phase II costs of such facilities in addition to the costs addressed by the LPSC's order for the second post-Merger earnings analysis, Entergy Gulf States will be permitted to recover through base rates $1.3 million annually in addition to the $6.8 million annual recovery discussed above for a total annual recovery of $8.1 million. The settlement provides that this amount will be applied as an offset against a refund, if any, required by a final judgment in Entergy Gulf States' appeal of the second post-Merger earnings review order. NOTE 3. COMMON STOCK (Entergy Corporation) During the first nine months of 1996, Entergy Corporation issued 277,850 shares of its previously repurchased common stock, reducing the amount held as treasury stock by $8.0 million. Entergy Corporation issued these shares to meet the requirements of its various stock plans. In addition, Entergy Corporation received proceeds of $36.9 million from the issuance of 1,437,857 shares of common stock under its new dividend reinvestment and stock purchase plan during the three months ended September 30, 1996. NOTE 4. LONG-TERM DEBT (Entergy Corporation) An Entergy Corporation subsidiary signed an agreement with several banks on January 5, 1996, to obtain a revolving credit facility in the aggregate amount of $1.2 billion Australian dollars ($870 million US dollars) for the acquisition of CitiPower. The facility was partially drawn down on the same date, bears interest at an average rate of 8.31%, and is non-recourse to Entergy Corporation. The maturity date of the credit facility is June 30, 2000, unless certain events occur which would cause the maturity date to be extended to a date no later than December 31, 2000. As part of the CitiPower acquisition, Entergy Corporation provided credit support, in the form of a bank letter of credit and other agreements, of approximately $77.4 million. The subsidiary entered into several interest rate swaps to reduce the impact of interest rate changes on its debt related to the CitiPower acquisition. The interest rate swap agreements involve exchanges of floating rate interest payments for fixed rate interest payments without the exchange of the underlying notional amounts. Market risks arise from the movements in interest rates. If the counterparties to an interest rate swap agreement were to default on contractual payments, the subsidiary could be exposed to increased costs related to replacing the original agreement. However, the subsidiary does not anticipate nonperformance by any counterparty to any interest rate swap in effect at September 30, 1996. At September 30, 1996, this subsidiary was a party to a notional amount of $900 million Australian dollars of interest rate swaps with maturity dates ranging from February 1999 to December 2000. (Entergy Gulf States) On November 1, 1996, Entergy Gulf States retired $75 million of its 6.67% Series First Mortgage Bonds upon maturity. (Entergy Mississippi) On November 1, 1996, Entergy Mississippi retired $10 million of its 6.375% Series First Mortgage Bonds upon maturity. NOTE 5. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES (Entergy Arkansas) Entergy Arkansas Capital I (Trust) was established as a financing subsidiary of Entergy Arkansas for the purpose of issuing common and preferred securities. On August 14, 1996, the Trust issued $60 million in aggregate liquidation preference amount of 8.5% Cumulative Quarterly Income Preferred Securities (Preferred Securities) in a public offering and $1.9 million of common securities to Entergy Arkansas. The Trust used the proceeds from the sale of the Preferred Securities and the common securities to purchase from Entergy Arkansas 8.5% junior subordinated deferrable interest debentures in the amount of $61.9 million (Debentures). The Debentures held by the Trust are its only asset and the Trust will use interest payments received on the Debentures to make cash distributions on the Preferred Securities. The Preferred Securities of the Trust, as well as the Debentures, mature on September 30, 2045. The Preferred Securities are redeemable, however, at the option of Entergy Arkansas beginning in 2001 at 100% of their principal amount, or earlier under certain limited circumstances, including the loss of the tax deduction arising out of the interest paid on the Debentures. Entergy Arkansas has, pursuant to certain agreements taken together, fully and unconditionally guaranteed payment of distributions on the Preferred Securities. Entergy Arkansas is the owner of all of the common securities of the Trust, which constitute 3% of the Trust's total capital. Entergy Arkansas used the proceeds received from the Debentures to redeem, on October 1, 1996, $50 million of its $0.01 par value, $2.40 cumulative preferred stock and $10 million of its $25 par value, 8.84% cumulative preferred stock. (Entergy Louisiana) Entergy Louisiana Capital I (Trust) was established as a financing subsidiary of Entergy Louisiana for the purpose of issuing common and preferred securities. On July 16, 1996, the Trust issued $70 million in aggregate liquidation preference amount of 9% Cumulative Quarterly Income Preferred Securities (Preferred Securities) in a public offering and $2.2 million of common securities to Entergy Louisiana. The Trust used the proceeds from the sale of the Preferred Securities and the common securities to purchase from Entergy Louisiana 9% junior subordinated deferrable interest debentures in the amount of $72.2 million (Debentures). The Debentures held by the Trust are its only asset and the Trust will use interest payments received on the Debentures to make cash distributions on the Preferred Securities. The Preferred Securities of the Trust, as well as the Debentures, mature on September 30, 2045. The Preferred Securities are redeemable, however, at the option of Entergy Louisiana beginning in 2001 at 100% of their principal amount, or earlier under certain limited circumstances, including the loss of the tax deduction arising out of the interest paid on the Debentures. Entergy Louisiana has, pursuant to certain agreements taken together, fully and unconditionally guaranteed payment of distributions on the Preferred Securities. Entergy Louisiana is the owner of all of the common securities of the Trust, which constitute 3% of the Trust's total capital. NOTE 6. RETAINED EARNINGS (Entergy Corporation) On October 25, 1996, Entergy Corporation's Board of Directors declared a common stock dividend of 45 cents per share payable on December 1, 1996, to holders of record on November 6, 1996. NOTE 7. RESTRUCTURING COSTS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) In 1994 and 1995, Entergy implemented various restructuring programs to reduce the number of employees and consolidate offices and facilities. The programs were designed to reduce costs and improve operating efficiencies in order to enable Entergy to become a low-cost producer. The balances as of December 31, 1995, and September 30, 1996, for restructuring liabilities associated with these programs are shown below by company along with the actual termination benefits paid under the programs. Liability Liability as of Adjustments Payments as of December 31, Made in Made in September 30, Company 1995 1996 1996 1996 (In Millions) Entergy Arkansas $8.3 $0.3 $(7.4) $1.2 Entergy Gulf States 5.4 0.8 (5.2) 1.0 Entergy Louisiana 2.2 0.4 (2.5) 0.1 Entergy Mississippi 2.5 (1.6) (0.8) 0.1 Entergy New Orleans 0.6 0.1 (0.6) 0.1 Other 5.2 0.3 (4.9) 0.6 ----- ---- ------ ---- Total $24.2 $0.3 $(21.4) $3.1 ===== ==== ====== ==== The restructuring charges shown above primarily include employee severance costs related to the expected termination of approximately 2,750 employees in various groups. As of September 30, 1996, approximately 2,615 employees had either been terminated or accepted voluntary separation packages under the restructuring plan. NOTE 8. ACCOUNTING ISSUES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) New Accounting Standard - In March 1995, the FASB issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of", which became effective January 1, 1996. This statement describes circumstances which may result in assets being impaired, in addition to providing criteria for recognition and measurement of asset impairment. In the first quarter of 1996, Entergy Gulf States' regulatory assets of $169 million (net of tax) related to Texas retail deferred River Bend operating and carrying costs and $5 million (net of tax) related to Louisiana retail deferred River Bend operating costs were written off under the provisions of SFAS 121. See Note 1 to the Form 10-K for additional details regarding other assets and operations potentially impacted in the future by the requirements of SFAS 121 and the process for periodically reviewing those assets and operations for impairment. NOTE 9. ENTERGY CORPORATION-CITIPOWER ACQUISITION (Entergy Corporation) On January 5, 1996, Entergy Corporation finalized its acquisition of CitiPower, an electric distribution company serving Melbourne, Australia, and surrounding suburbs. The purchase price of CitiPower was approximately $1.2 billion US dollars, of which $294 million US dollars represented an equity investment by Entergy Corporation, and the remainder represented debt. Entergy Corporation funded the majority of the equity portion of the investment by drawing down $230 million of its $300 million bank revolving credit facility. CitiPower is one of five electric distribution businesses in the state of Victoria. CitiPower's distribution area covers approximately 10% of Victoria's population. During the nine months ended September 30, 1996, CitiPower supplied approximately 3.3 million MWh of electricity to over 238,000 customer sites. Approximately 37,000, or 15%, of these sites were commercial customers. The cost of the CitiPower license is being amortized on a straight-line basis over a 40 year period beginning January 5, 1996. As of September 30, 1996, the unamortized balance of the license was $609 million. In accordance with the purchase method of accounting, the three months and nine months results of operations for Entergy Corporation reported in its Statements of Consolidated Income and Cash Flows do not reflect CitiPower's results of operations for any period prior to January 5, 1996. The pro forma combined revenues, net income, earnings per common share before the cumulative effect of accounting change, and earnings per common share of Entergy Corporation presented below give effect to the acquisition as if it had occurred at January 1, 1995. This pro forma information is not necessarily indicative of the results of operations that would have occurred had the acquisition been consummated for the period for which it is being given effect. Three Months Ended Nine Months Ended September 30, 1995 September 30, 1995 (In Thousands of U.S. dollars, Except Per Share Data) Operating revenues $2,059,419 $5,163,736 Net income $ 261,368 $ 501,363 Earnings per average common share before cumulative effect of accounting change $ 1.15 $ 2.05 Earnings per average common share $ 1.15 $ 2.20 CitiPower's results of operations for the three months and nine months ended September 30, 1996, (beginning on January 5, 1996, at the date of acquisition) are included in Entergy Corporation's Consolidated Financial Statements and are stated separately below: Three Months Ended Nine Months Ended September 30, 1996 September 30, 1996 (In Thousands of U.S. dollars) Operating revenues $ 98,175 $ 293,614 Operating expenses $ 73,280 $ 237,099 Interest charges $ 20,110 $ 57,605 Net income (loss) $ 4,784 $ (1,091) _________________________________________ In the opinion of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited condensed financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassifying previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. However, the business of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans is subject to seasonal fluctuations, with the peak period occurring during the summer months. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year. ENTERGY CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. Legal Proceedings Merger-Related Proceedings (Entergy Corporation and Entergy Gulf States) See "Nuclear Operations" in Item 1 of Part I of the Form 10-K for information relating to the Merger related proceedings before the D.C. Circuit and the proceeding pending before the NRC Atomic Safety and Licensing Board (ASLB), which was instigated by Cajun and concerns the two Merger-related license amendments issued by the NRC for River Bend. In March 1996, the ASLB, responding to Cajun's request, dismissed the pending proceedings without prejudice. On an unopposed motion from the parties to the proceedings before the D.C. Circuit, who requested a continuance in light of the pending settlement among Entergy Gulf States, the Cajun bankruptcy trustee, and the RUS, the D.C. Circuit ordered that the cases be removed from oral argument and held in abeyance pending a further order of the court. Cajun - River Bend (Entergy Corporation and Entergy Gulf States) See Note 8 of the Form 10-K and Note 1 for a discussion of the Cajun litigation and bankruptcy proceedings. On March 8, 1996, Southwestern Electric Power Company (SWEPCO), Entergy Gulf States, and certain member cooperatives of Cajun filed with the Bankruptcy Court a joint proposal to bring an end to the Cajun bankruptcy proceeding. The proposal was submitted in response to a bid procedure established by the Cajun bankruptcy trustee. On April 19, 1996, SWEPCO, Entergy Gulf States, and certain Cajun member cooperatives filed a separate plan of reorganization with the court based upon their earlier proposal. On April 22, 1996, the Cajun bankruptcy trustee filed a plan of reorganization with the Bankruptcy Court based on the proposal of two non-affiliated companies to take over the non-nuclear operations of Cajun. All of the plans of reorganization submitted to the Bankruptcy Court have incorporated the Cajun Settlement as an integral condition to the effectiveness of their plan. The timing and completion of the reorganization plan depends on Bankruptcy Court approval and any required regulatory approvals. The Cajun Settlement, agreed to in principle on April 26, 1996, by Entergy Gulf States, the Cajun bankruptcy trustee, and the RUS, Cajun's largest creditor, was approved by the District Court on August 26, 1996. The terms include, but are not limited to, the following: (i) Cajun's interest in River Bend will be turned over to the RUS, which will have the option to retain the interest, sell it to a third party, or transfer it to Entergy Gulf States at no cost; (ii) Cajun will set aside a total of $125 million for its share of the decommissioning costs of River Bend; (iii) Cajun will transfer certain transmission assets to Entergy Gulf States; (iv) Cajun will settle transmission disputes and be released from claims for payment under transmission arrangements with Entergy Gulf States; (v) all funds paid by Entergy Gulf States into the registry of the District Court will be returned to Entergy Gulf States; (vi) Cajun will be released from its unpaid past, present, and future liability for River Bend costs and expenses; and (vii) all litigation between Cajun and Entergy Gulf States will be dismissed. Based on the District Court's approval of the Cajun Settlement, the litigation accrual established in 1994 for possible losses associated with the Cajun-River Bend litigation was reversed in September 1996. Catalyst Technologies, Inc. (Entergy Corporation) See "Other Regulation and Litigation" in Item 1 of Part I of the Form 10-K for information relating to the petition filed by Catalyst Technologies, Inc. (CTI) against Electec, Inc. (Electec), the predecessor to Entergy Enterprises. The petition alleges breach of contract, breach of the obligation of good-faith and fair dealing, and bad-faith breach of contract against Electec. It was originally believed CTI was claiming damages of approximately $36 million from Entergy Enterprises. It now appears that CTI will allege damages ranging from $231 million to $258 million. Entergy Enterprises' position is that CTI is not entitled to any damages, and that even if damages were sustained, they would not exceed $600,000. The case is scheduled for a jury trial beginning on December 2, 1996, in Civil District Court for the Parish of Orleans, Louisiana. Entergy Enterprises is vigorously contesting these claims. Panda Energy Corporation Complaint (Entergy Corporation) See "Other Regulation and Litigation" in Item 1 of Part I of the Form 10-K for information relating to the litigation brought by Panda Energy Corporation (Panda) naming Entergy Corporation, Entergy Enterprises, Entergy Power, Entergy Power Asia, Ltd., and Entergy Power Development Corporation as defendants. Panda was seeking damages of $4.8 billion. Entergy believes that this litigation is unfounded, but entered into arrangements on April 30, 1996, to settle the matter for $350,000. The settlement provided that it could be revoked by Entergy if the court ruled on the case. Thereafter, the Dallas District Court entered an order of dismissal because the plaintiff was unable to show any damages and the facts did not support a cause of action against the defendants. As a result, Entergy revoked the $350,000 settlement agreement. In late May of 1996, Panda filed an appeal of the court's order for dismissal. While a briefing schedule on appeal has been set, no date has yet been designated for oral argument. System Agreement (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) See "Rate Matters and Regulation" in Item 1 of Part I of the Form 10-K for information relating to a complaint filed with FERC by the Arkansas Public Service Commission alleging that FERC's allocation of nuclear decommissioning costs in the System is no longer just and reasonable. A prehearing conference was held on July 30, 1996, and a procedural schedule was adopted which provides for hearings to begin on February 18, 1997. See "Rate Matters and Regulation" in Item 1 of Part I of the Form 10-K for information relating to a complaint filed with FERC by the LPSC alleging that the System Agreement results in unjust and unreasonable rates. On July 31, 1996, FERC dismissed the LPSC's complaint in this matter. On September 30, 1996, FERC issued an order granting the LPSC's request for a rehearing. Item 5. Other Information Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The operating companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends pursuant to Item 503 of Regulation S- K of the SEC as follows: Ratios of Earnings to Fixed Charges Twelve Months Ended December 31, September 30, 1991 1992 1993 1994 1995 1996 Entergy Arkansas 2.25 2.28 3.11(c) 2.32 2.56 2.81(e) Entergy Gulf States 1.56 1.72 1.54 .36(d) 1.86 1.34 Entergy Louisiana 2.40 2.79 3.06 2.91 3.18 3.13(e) Entergy Mississippi 2.36 2.37 3.79(c) 2.12 2.92 3.41 Entergy New Orleans 5.66(b) 2.66 4.68(c) 1.91 3.93 4.19 System Energy 1.74 2.04 1.87 1.23 2.07 2.14 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, September 30, 1991 1992 1993 1994 1995 1996 Entergy Arkansas 1.87 1.86 2.54(c) 1.97 2.12 2.32(e) Entergy Gulf States (a) 1.19 1.37 1.21 .29(d) 1.54 1.11 Entergy Louisiana 1.95 2.18 2.39 2.43 2.60 2.59(e) Entergy Mississippi 1.94 1.97 3.08(c) 1.81 2.51 2.97 Entergy New Orleans 4.97(b) 2.36 4.12(c) 1.73 3.56 3.86 (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock. (b) Earnings for the year ended December 31, 1991, include the $90 million effect of the 1991 NOPSI Settlement. (c) Earnings for the year ended December 31, 1993, include $81 million, $52 million, and $18 million for Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans, respectively, related to the change in accounting principle to provide for the accrual of estimated unbilled revenues. (d) Earnings for the year ended December 31, 1994, for Entergy Gulf States were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $144.8 million and $197.1 million, respectively. (e) Includes distributions on company-obligated mandatorily redeemable preferred securities of $0.7 million and $1.3 million for Entergy Arkansas and Entergy Louisiana, respectively. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* ** 4(a) - Twentieth Supplemental Indenture, dated as of August 1, 1996, to System Energy's Mortgage and Deed of Trust, dated as of June 15, 1977 (filed as Exhibit A- 2(a)(1) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511). ** 4(b) - Twenty-first Supplemental Indenture, dated as of August 1, 1996, to System Energy's Mortgage and Deed of Trust, dated as of June 15, 1977 (filed as Exhibit A-2(a)(2) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511). ** 4(c) - Thirtieth Assignment of Availability Agreement, Consent and Agreement, dated as of August 1, 1996, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans, and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B- 2(a) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511). ** 4(d) - Thirty-first Assignment of Availability Agreement, Consent and Agreement, dated as of August 1, 1996, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B- 2(b) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511). ** 4(e) - Thirtieth Supplementary Capital Funds Agreement and Assignment, dated as of August 1, 1996, among Entergy Corporation, System Energy and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B-3(a) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511). ** 4(f) - Thirty-first Supplementary Capital Funds Agreement and Assignment, dated as of August 1, 1996. among Entergy Corporation, System Energy and United States Trust Company of New York and Gerard F. Ganey, as Trustees (filed as Exhibit B-3(b) to Rule 24 Certificate dated August 8, 1996 in File No. 70-8511). ** 4(g) - Indenture for Unsecured Subordinated Debt Securities relating to Trust Securities between Entergy Arkansas and Bank of New York (as Trustee), dated as of August 1, 1996 (filed as Exhibit A-1(a) to Rule 24 Certificate dated August 26, 1996 in File No. 70- 8723). ** 4(h) - Amended and Restated Trust Agreement of Entergy Arkansas Capital I, dated as of August 14, 1996 (filed as Exhibit A-3(a) to Rule 24 Certificate dated August 26, 1996 in File No. 70-8723). ** 4(i) - Guarantee Agreement between Entergy Arkansas (as Guarantor) and The Bank of New York (as Trustee), dated as of August 14, 1996, with respect to Entergy Arkansas Capital I's obligations on its 8 1/2% Cumulative Quarterly Income Preferred Securities, Series A (filed as Exhibit A-4(a) to Rule 24 Certificate dated August 26, 1996 in File No. 70- 8723). 4(j) - Agreement as to Expenses and Liabilities between Entergy Arkansas and Entergy Arkansas Capital I, dated as of August 14, 1996. 23(a)- Consent of Clark, Thomas & Winters (A Professional Corporation). 23(b)- Consent of Sandlin Associates. 27(a)- Financial Data Schedule for Entergy Corporation and Subsidiaries as of September 30, 1996. 27(b)- Financial Data Schedule for Entergy Arkansas as of September 30, 1996. 27(c)- Financial Data Schedule for Entergy Gulf States as of September 30, 1996. 27(d)- Financial Data Schedule for Entergy Louisiana as of September 30, 1996. 27(e)- Financial Data Schedule for Entergy Mississippi as of September 30, 1996. 27(f)- Financial Data Schedule for Entergy New Orleans as of September 30, 1996. 27(g)- Financial Data Schedule for System Energy as of September 30, 1996. 99(a)- Entergy Arkansas Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(b)- Entergy Gulf States Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(c)- Entergy Louisiana Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(d)- Entergy Mississippi Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(e)- Entergy New Orleans Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(f)- System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined. ** 99(g)- Annual Reports on Form 10-K of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy for the fiscal year ended December 31, 1995, portions of which are incorporated herein by reference as described elsewhere in this document (filed with the SEC in File Nos. 1-11299, 1-10764, 1- 2703, 1-8474, 0-320, 0-5807, and 1-9067, respectively). ** 99(h)- Quarterly Reports on Form 10-Q of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy for the quarter ended March 31, 1996, portions of which are incorporated herein by reference as described elsewhere in this document (filed with the SEC in File Nos. 1-11299, 1-10764, 1- 2703, 1-8474, 0-320, 0-5807, and 1-9067, respectively). ** 99(i)- Quarterly Reports on Form 10-Q of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy for the quarter ended June 30, 1996, portions of which are incorporated herein by reference as described elsewhere in this document (filed with the SEC in File Nos. 1-11299, 1-10764, 1-2703, 1-8474, 0-320, 0-5807, and 1-9067, respectively). ** 99(j)- Opinion of Clark, Thomas & Winters, A Professional Corporation, dated September 30, 1992, regarding the effect of the October 1, 1991, judgment in Entergy Gulf States v. PUCT in the District Court of Travis County, Texas (99-1 in Registration No. 33-48889). ** 99(k)- Opinion of Clark, Thomas & Winters, A Professional Corporation, dated August 8, 1994, regarding recovery of costs deferred pursuant to PUCT order in Docket 6525 (filed as Exhibit 99(j) to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, in File No. 1-2703). 99(l)- Opinion of Clark, Thomas & Winters, A Professional Corporation, confirming its opinions dated September 30, 1992, and August 8, 1994. ___________________________ * Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended September 30, 1996, 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 September 30, 1996. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy Corporation and Entergy Gulf States A current report on Form 8-K, dated August 26, 1996, was filed with the SEC on August 28, 1996, reporting information under Item 5. "Other Events." Entergy Corporation and Entergy Mississippi A current report on Form 8-K, dated August 22, 1996, was filed with the SEC on August 28, 1996, reporting information under Item 5. "Other Events." Entergy Corporation, Entergy Gulf States, and Entergy Louisiana A current report on Form 8-K, dated September 5, 1996, was filed with the SEC on September 6, 1996, reporting information under Item 5. "Other Events." Entergy Corporation A current report on Form 8-K, dated October 11, 1996, was filed with the SEC on October 11, 1996, reporting information under Item 5. "Other Events." Entergy Corporation and Entergy Arkansas A current report on Form 8-K, dated October 24, 1996, was filed with the SEC on October 29, 1996, reporting information under Item 5. "Other Events." EXPERTS The statements attributed to Clark, Thomas & Winters, A Professional Corporation, as to legal conclusions with respect to Entergy Gulf States' rate regulation in Texas in Note 2 to Entergy Corporation and Subsidiaries Consolidated Financial Statements, "Rate and Regulatory Matters," have been reviewed by such firm and are included herein upon the authority of such firm as experts. The statements attributed to Sandlin Associates regarding the analysis of River Bend construction costs of Entergy Gulf States in Note 2 to Entergy Corporation and Subsidiaries Consolidated Financial Statements, "Rate and Regulatory Matters," have been reviewed by such firm and are included herein upon the authority of such firm as experts. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries. ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY GULF STATES, INC. ENTERGY LOUISIANA, INC. ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. SYSTEM ENERGY RESOURCES, INC. /s/ Louis E. Buck Louis E. Buck Vice President, Chief Accounting Officer and Assistant Secretary (For each Registrant and for each as Principal Accounting Officer) Date: November 4, 1996 EX-4 2 Exhibit 4(j) AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT dated as of August 14, 1996, between Entergy Arkansas, Inc., an Arkansas corporation ("Entergy Arkansas"), and Entergy Arkansas Capital I, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Common Securities (the "Common Securities") to and receive Debentures from Entergy Arkansas and to issue its 8-1/2% Cumulative Quarterly Income Preferred Securities, Series A (the "Preferred Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement of the Trust dated as of August 14, 1996 as the same may be amended from time to time (the "Trust Agreement"); WHEREAS, Entergy Arkansas will directly own all of the Common Securities and will issue the Debentures; NOW, THEREFORE, in consideration of the purchase by each holder of the Preferred Securities, which purchase Entergy Arkansas hereby agrees shall benefit Entergy Arkansas and which purchase Entergy Arkansas acknowledges will be made in reliance upon the execution and delivery of this Agreement, Entergy Arkansas, including in its capacity as holder of the Common Securities, and the Trust hereby agree as follows: ARTICLE I Section 1.01. Guarantee by Entergy Arkansas. Subject to the terms and conditions hereof, Entergy Arkansas hereby irrevocably and unconditionally guarantees the full payment, when and as due, of any and all Obligations (as hereinafter defined) to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries"). As used herein, "Obligations" means any indebtedness, expenses or liabilities of the Trust, other than (i) obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be and (ii) obligations arising out of the negligence, willful misconduct or bad faith of the Trustees of the Trust. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. Section 1.02. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by Entergy Arkansas and The Bank of New York, as guarantee trustee, or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. Section 1.03. Waiver of Notice. Entergy Arkansas hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and Entergy Arkansas hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 1.04. No Impairment. The obligations, covenants, agreements and duties of Entergy Arkansas under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust. There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, Entergy Arkansas with respect to the happening of any of the foregoing. Section 1.05. Enforcement. A Beneficiary may enforce this Agreement directly against Entergy Arkansas and Entergy Arkansas waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against Entergy Arkansas. ARTICLE II Section 2.01. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of Entergy Arkansas and shall inure to the benefit of the Beneficiaries. Section 2.02. Amendment. So long as there remains any Beneficiary or any Preferred Securities of any series are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the holders of the Preferred Securities. Section 2.03. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex), to wit: Entergy Arkansas Capital I c/o Steve C. McNeal, Administrative Trustee 639 Loyola Avenue New Orleans, Louisiana 70113 Facsimile No.: (504) 576-4455 Entergy Arkansas, Inc. 639 Loyola Avenue New Orleans, Louisiana 70113 Facsimile No.: (504) 576-4455 Attention: Treasurer Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES). THIS EXPENSE AGREEMENT is executed as of the day and year first above written. ENTERGY ARKANSAS, INC. By:______________________________ Name: William J. Regan, Jr. Title: Vice President and Treasurer ENTERGY ARKANSAS CAPITAL I By: ______________________________ Frank Williford IV not in his individual capacity, but solely as Administrative Trustee EX-23 3 Exhibit 23(a) [Letterhead of Clark, Thomas & Winters] CONSENT We consent to the reference to our firm under the heading "Experts" in the Quarterly Report on Form 10-Q being filed on or about the date hereof by Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. We further consent to the incorporation by reference in the registration statements of Entergy Gulf States, Inc. on Form S-3 and Form S-8 (File Numbers 2-76551, 2-98011, 33-49739, and 33-51181) of such reference and Statements of Legal Conclusions. /s/ Clark, Thomas & Winters A Professional Corporation CLARK, THOMAS & WINTERS, A Professional Corporation Austin, Texas November 4, 1996 EX-23 4 Exhibit 23(b) CONSENT We consent to the reference to our firm under the heading "Experts" in the Quarterly Report on Form 10-Q being filed on or about the date hereof by Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc. ("Entergy Gulf States"), Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. We further consent to the incorporation by reference of such reference to our firm into Entergy Gulf States' Registration Statements on Form S-3 and Form S-8 (File Numbers 2-76551, 2-98011, 33-49739 and 33-51181) of such reference and Statements. /s/ L. S. Sandlin SANDLIN ASSOCIATES Management Consultants Pasco, Washington November 4, 1996 EX-27 5
UT This schedule contains summary financial information extracted from Entergy Corporation financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 017 ENTERGY CORPORATION AND SUBSIDIARIES 0000065984 ENTERGY CORPORATION 1,000 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 16,226,927 777,577 2,645,222 3,494,364 0 23,144,090 2,315 4,240,038 2,406,339 6,609,735 221,986 490,955 7,642,768 120,692 0 0 355,305 0 275,323 151,204 7,087,165 23,144,090 5,589,790 352,890 4,147,666 4,500,556 1,089,234 (105,401) 983,833 602,701 381,132 0 381,132 0 0 1,213,845 0 0
EX-27 6
UT This schedule contains summary financial information extracted from Entergy Arkansas' financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 001 ENTERGY ARKANSAS, INC. 0000007323 ENTERGY ARKANSAS, INC. 1,000 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 2,831,588 195,810 764,646 510,002 0 4,302,046 470 590,794 558,314 1,149,578 45,027 176,350 1,256,206 667 0 0 32,150 0 94,431 52,747 1,494,890 4,302,046 1,380,347 73,648 1,101,836 1,175,484 204,863 17,399 222,262 76,491 145,771 13,243 132,528 0 0 344,207 0 0
EX-27 7
UT This schedule contains summary financial information extracted from Entergy Gulf States' financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 003 ENTERGY GULF STATES, INC. 0000044570 ENTERGY GULF STATES, INC. 1,000 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 4,653,744 64,557 847,138 1,003,136 0 6,568,575 114,055 1,152,689 322,054 1,588,798 77,460 136,444 2,030,294 0 0 0 160,865 0 88,778 39,343 2,446,593 6,568,575 1,574,328 85,435 1,226,828 1,312,263 262,065 (128,068) 133,997 148,149 (14,152) 21,497 (35,649) 0 0 263,400 0 0
EX-27 8
UT This schedule contains summary financial information extracted from Entergy Louisiana's financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 009 ENTERGY LOUISIANA, INC. 0000060527 ENTERGY LOUISIANA, INC. 1,000 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 3,463,465 79,510 365,210 403,273 0 4,311,458 1,088,900 (2,659) 128,610 1,214,851 92,500 100,500 1,373,114 1,078 0 0 34,275 0 19,062 28,000 1,448,078 4,311,458 1,424,909 101,277 1,054,252 1,155,529 269,380 1,839 271,219 98,002 173,217 16,457 156,760 0 0 284,567 0 0
EX-27 9
UT This schedule contains summary financial information extracted from Entergy Mississippi's financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 010 ENTERGY MISSISSIPPI, INC. 0000066901 ENTERGY MISSISSIPPI, INC. 1,000 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 1,035,618 11,128 305,659 195,175 0 1,547,580 199,326 (143) 253,186 452,369 7,000 57,881 399,008 15,308 0 0 106,015 0 0 0 509,999 1,547,580 748,499 37,539 606,050 643,589 104,910 1,576 106,486 35,538 70,948 3,825 67,123 0 0 146,634 0 0
EX-27 10
UT This schedule contains summary financial information extracted from Entergy New Orleans' financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 011 ENTERGY NEW ORLEANS, INC. 0000071508 ENTERGY NEW ORLEANS, INC. 1,000 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 295,093 3,259 127,787 132,868 0 559,007 33,744 36,294 80,153 150,191 0 19,780 168,871 0 0 0 12,000 0 0 0 208,165 559,007 401,654 18,174 337,975 356,149 45,505 471 45,976 12,360 33,616 723 32,893 0 0 26,968 0 0
EX-27 11
UT This schedule contains summary financial information extracted from System Energy's financial statements for the quarter ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 012 SYSTEM ENERGY RESOURES, INC. 0000202584 SYSTEM ENERGY RESOURCES, INC. 1,000 9-MOS DEC-31-1995 SEP-30-1996 PER-BOOK 2,612,093 55,490 254,614 550,986 0 3,473,183 789,350 0 87,881 877,231 0 0 1,418,770 0 0 0 0 0 59,963 28,000 1,089,219 3,473,183 471,260 62,502 230,158 292,660 178,600 4,501 183,101 111,440 71,661 0 71,661 0 0 223,747 0 0
EX-99 12
Exhibit 99(a) Entergy Arkansas, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1991 1992 1993 1994 1995 1996 Fixed charges, as defined: Interest on long-term debt $133,854 $120,317 $107,771 $101,439 $102,339 $96,254 Interest on notes payable -- 117 349 1,311 678 685 Amortization of expense and premium on debt-net(cr) 1,112 1,359 2,702 4,563 4,514 4,651 Other interest 1,303 2,308 8,769 3,501 7,806 6,652 Dividends on preferred securities of subsidiary trust -- -- -- -- -- 652 Interest applicable to rentals 21,969 17,657 16,860 19,140 18,158 19,081 ---------------------------------------------------------- Total fixed charges, as defined 158,238 141,758 136,451 129,954 133,495 127,975 Preferred dividends, as defined (a) 31,458 32,195 30,334 23,234 27,636 27,444 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $189,696 $173,953 $166,785 $153,188 $161,131 $155,419 ========================================================== Earnings as defined: Net Income $143,451 $130,529 $205,297 $142,263 $136,666 $149,916 Add: Provision for income taxes: Federal & State 44,418 57,089 58,162 83,300 105,964 128,355 Deferred - net 11,048 3,490 34,748 (17,939) (28,225) (41,098) Investment tax credit adjustment - net (1,600) (9,989) (10,573) (36,141) (5,658) (4,976) Fixed charges as above 158,238 141,758 136,451 129,954 133,495 127,975 ---------------------------------------------------------- Total earnings, as defined $355,555 $322,877 $424,085 $301,437 $342,242 $360,172 ========================================================== Ratio of earnings to fixed charges, as defined 2.25 2.28 3.11 2.32 2.56 2.81 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.87 1.86 2.54 1.97 2.12 2.32 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 13
Exhibit 99(b) Entergy Gulf States, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1991 1992 1993 1994 1995 1996 Fixed charges, as defined: Interest on long-term debt $201,335 $197,218 $172,494 $167,082 $181,994 $175,679 Interest on notes payable 27,953 21,155 19,440 20,203 810 922 Other interest 29,169 26,564 10,561 7,957 8,074 6,115 Amortization of expense and premium on debt-net(cr) 1,999 3,479 8,104 8,892 9,346 9,156 Interest applicable to rentals 24,049 23,759 23,455 21,539 16,648 14,601 ---------------------------------------------------------- Total fixed charges, as defined 284,505 272,175 234,054 225,673 216,872 206,473 Preferred dividends, as defined (a) 90,146 69,617 65,299 52,210 44,651 42,625 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $374,651 $341,792 $299,353 $277,883 $261,523 $249,098 ========================================================== Earnings as defined: Income (loss) from continuing operations before extraordinary items and the cumulative effect of accounting changes $112,391 $139,413 $69,462 ($82,755) $122,919 ($718) Add: Income Taxes 48,250 55,860 58,016 (62,086) 63,244 71,595 Fixed charges as above 284,505 272,175 234,054 225,673 216,872 206,473 ---------------------------------------------------------- Total earnings, as defined (b) $445,146 $467,448 $361,532 $80,832 $403,035 $277,350 ========================================================== Ratio of earnings to fixed charges, as defined 1.56 1.72 1.54 0.36 1.86 1.34 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.19 1.37 1.21 0.29 1.54 1.11 ========================================================== - ---------------------- (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. (b) Earnings for the year ended December 31, 1994, for GSU were not adequate to cover fixed charges combined fixed charges and preferred dividends by $144.8 million and $197.1 million, respectively.
EX-99 14
Exhibit 99(c) Entergy Louisiana, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1991 1992 1993 1994 1995 1996 Fixed charges, as defined: Interest on long-term debt $158,816 $128,672 $124,633 $124,820 $124,507 $119,230 Interest on notes payable -- 150 898 1,948 1,932 2,324 Other interest charges 5,924 5,591 5,706 4,546 5,278 5,507 Dividends on preferred securities of subsidiary trust 1,295 Amortization of expense and premium on debt - net(cr) 3,282 7,100 5,720 5,130 5,184 4,830 Interest applicable to rentals 11,381 9,363 8,519 8,332 9,332 10,701 ----------------------------------------------------------- Total fixed charges, as defined 179,403 150,876 145,476 144,776 146,233 143,887 Preferred dividends, as defined (a) 41,212 42,026 40,779 29,171 32,847 30,310 ----------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $220,615 $192,902 $186,255 $173,947 $179,080 $174,197 =========================================================== Earnings as defined: Net Income $166,572 $182,989 $188,808 $213,839 $201,537 $192,790 Add: Provision for income taxes: Federal and State 8,684 36,465 70,552 79,260 114,665 113,981 Deferred Federal and State - net 67,792 51,889 43,017 21,580 8,148 5,776 Investment tax credit adjustment - net 8,244 (1,317) (2,756) (37,552) (5,699) (5,822) Fixed charges as above 179,403 150,876 145,476 144,776 146,233 143,887 ----------------------------------------------------------- Total earnings, as defined $430,695 $420,902 $445,097 $421,903 $464,884 $450,612 =========================================================== Ratio of earnings to fixed charges, as defined 2.40 2.79 3.06 2.91 3.18 3.13 =========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.95 2.18 2.39 2.43 2.60 2.59 =========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 15
Exhibit 99(d) Entergy Mississippi, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1991 1992 1993 1994 1995 1996 Fixed charges, as defined: Interest on long-term debt $63,628 $60,709 $52,099 $46,081 $46,241 $44,573 Interest on notes payable 953 36 7 1,348 474 1,266 Other interest charges 1,444 1,636 1,795 3,581 4,164 2,203 Amortization of expense and premium on debt-net(cr) 1,617 1,685 1,458 1,754 756 487 Interest applicable to rentals 574 521 1,264 1,716 2,173 2,167 ---------------------------------------------------------- Total fixed charges, as defined 68,216 64,587 56,623 54,480 53,808 50,696 Preferred dividends, as defined (a) 14,962 12,823 12,990 9,447 9,004 7,587 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $83,178 $77,410 $69,613 $63,927 $62,812 $58,283 ========================================================== Earnings as defined: Net Income $63,088 $65,036 $101,743 $48,779 $68,667 $80,035 Add: Provision for income taxes: Federal and State (1,001) 4,463 54,418 46,884 71,651 88,009 Deferred Federal and State - net 32,491 20,430 539 (26,763) (35,224) (42,259) Investment tax credit adjustment - net (1,634) (1,746) 1,036 (7,645) (1,550) (3,491) Fixed charges as above 68,216 64,587 56,623 54,480 53,808 50,696 ----------------------------------------------------------- Total earnings, as defined $161,160 $152,770 $214,359 $115,735 $157,352 $172,990 =========================================================== Ratio of earnings to fixed charges, as defined 2.36 2.37 3.79 2.12 2.92 3.41 =========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.94 1.97 3.08 1.81 2.51 2.97 =========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
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Exhibit 99(e) Entergy New Orleans, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1991 1992 1993 1994 1995 1996 Fixed charges, as defined: Interest on long-term debt $23,865 $22,934 $19,478 $16,382 $15,330 $15,164 Interest on notes payable -- -- -- 153 130 143 Other interest charges 793 1,714 1,016 1,027 1,723 1,056 Amortization of expense and premium on debt-net(cr) 565 576 598 710 619 532 Interest applicable to rentals 517 444 544 1,245 916 825 ----------------------------------------------------------- Total fixed charges, as defined 25,740 25,668 21,636 19,517 18,718 17,720 Preferred dividends, as defined (a) 3,582 3,214 2,952 2,071 1,964 1,507 ----------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $29,322 $28,882 $24,588 $21,588 $20,682 $19,227 =========================================================== Earnings as defined: Net Income $74,699 $26,424 $47,709 $13,211 $34,386 $36,208 Add: Provision for income taxes: Federal and State 8,885 16,575 27,479 22,606 22,465 18,735 Deferred Federal and State - net 36,947 (340) 5,203 (15,674) (1,364) 2,264 Investment tax credit adjustment - net (591) (170) (744) (2,332) (634) (677) Fixed charges as above 25,740 25,668 21,636 19,517 18,718 17,720 ------------------------------------------------------------ Total earnings, as defined $145,680 $68,157 $101,283 $37,328 $73,571 $74,250 ============================================================ Ratio of earnings to fixed charges, as defined 5.66 2.66 4.68 1.91 3.93 4.19 ============================================================ Ratio of earnings to combined fixed charges and preferred dividends, as defined 4.97 2.36 4.12 1.73 3.56 3.86 ============================================================ - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. (b) Earnings for the twelve months ended December 31, 1991 include the $90 million effect of the 1991 NOPSI Settlement.
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Exhibit 99(f) System Energy Resources, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges September 30, 1991 1992 1993 1994 1995 1996 Fixed charges, as defined: Interest on long-term debt $218,538 $196,618 $184,818 $162,517 $136,916 $132,443 Interest on notes payable -- -- -- 88 473 564 Amortization of expense and premium on debt-net 7,495 6,417 4,520 6,731 6,104 6,156 Interest applicable to rentals 10,007 6,265 6,790 7,546 6,475 7,475 Other interest charges 3,617 1,506 1,600 7,168 8,019 8,179 ---------------------------------------------------------- Total fixed charges, as defined $239,657 $210,806 $197,728 $184,050 $157,987 $154,817 ========================================================== Earnings as defined: Net Income $104,622 $130,141 $93,927 $5,407 $93,039 $94,968 Add: Provision for income taxes: Federal and State (26,848) 35,082 48,314 67,477 120,830 136,945 Deferred Federal and State - net 37,168 23,648 60,690 (27,374) (41,871) (51,422) Investment tax credit adjustment - net 63,256 30,123 (30,452) (3,265) (3,466) (3,466) Fixed charges as above 239,657 210,806 197,728 184,050 157,987 154,817 ---------------------------------------------------------- Total earnings, as defined $417,855 $429,800 $370,207 $226,295 $326,519 $331,842 ========================================================== Ratio of earnings to fixed charges, as defined 1.74 2.04 1.87 1.23 2.07 2.14 ==========================================================
EX-99 18 Exhibit 99(l) [LETTERHEAD OF CLARK, THOMAS & WINTERS] November 4, 1996 Entergy Gulf States, Inc. 639 Loyola Avenue New Orleans, LA 70112 Attn: Chris Barrilleaux Re: SEC Form 10-Q of Entergy Gulf States, Inc. (the "Company") for the quarter ending September 30, 1996 Dear Mr. Barrilleaux: Our firm has rendered to the Company two opinion letters dated September 30, 1992 and August 8, 1994, concerning certain issues presented in the appeal of PUCT Docket No. 7195 now pending in the Supreme Court of Texas. In connection with the above-referenced Form 10-Q, we confirm to you as of the date hereof that we continue to hold the opinions set forth in the letter dated August 8, 1994 and in the September 30, 1992 letter which addressed the recovery of $1.45 billion of abeyed construction costs. CLARK, THOMAS & WINTERS A Professional Corporation /s/ Clark, Thomas & Winters, A Professional Corporation _______________________________ The opinion letters dated September 30, 1992 indicate that the amount of River Bend plant costs held in abeyance was $1.45 billion. The more correct amount, as indicated by the Company in its securities filings to which those opinions related, is $1.4 billion. -----END PRIVACY-ENHANCED MESSAGE-----