10-Q/A 1 0001.txt _________________________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2000 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address of Principal Executive Identification No. Offices and Telephone Number 1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 _________________________________________________________________________ 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 Amendment No. 1 to Entergy Corporation's Form 10-Q for the quarter ended June 30, 2000 is made to include earnings per share and dividend per share information in the Entergy Corporation and Subsidiaries Consolidated Statements of Income, which were inadvertently omitted from the original filing. ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q June 30, 2000 Entergy Corporation and Subsidiaries: Consolidated Statements of Income Consolidated Statements of Cash Flows Consolidated Balance Sheets Consolidated Statements of Retained Earnings, Comprehensive Income, and Paid-In Capital Selected Operating Results Notes to Financial Statements for Entergy Corporation and Subsidiaries Signature ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)
Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands, Except Share Data) OPERATING REVENUES Domestic electric $1,664,688 $1,613,136 $3,017,570 $2,851,719 Natural gas 28,396 22,149 74,292 59,880 Steam products - 7,254 - 15,550 Competitive businesses 444,704 673,865 857,418 1,029,177 ----------------------------------------------------- TOTAL 2,137,788 2,316,404 3,949,280 3,956,326 ----------------------------------------------------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 464,436 490,871 962,190 893,844 Purchased power 502,521 676,827 872,064 1,050,626 Nuclear refueling outage expenses 16,629 17,135 35,186 36,820 Other operation and maintenance 450,223 410,707 827,634 778,338 Decommissioning 6,169 10,758 17,106 23,432 Taxes other than income taxes 83,540 83,053 163,158 166,121 Depreciation and amortization 178,749 176,707 357,025 361,549 Other regulatory credits - net (5,900) (2,372) (20,506) (18,970) Amortization of rate deferrals 7,883 88,767 15,279 97,180 ----------------------------------------------------- TOTAL 1,704,250 1,952,453 3,229,136 3,388,940 ----------------------------------------------------- OPERATING INCOME 433,538 363,951 720,144 567,386 ----------------------------------------------------- OTHER INCOME Allowance for equity funds used during construction 8,041 7,348 15,735 12,759 Gain on sale of assets 21,057 40,718 21,574 61,301 Miscellaneous - net 73,651 40,064 102,633 60,016 ----------------------------------------------------- TOTAL 102,749 88,130 139,942 134,076 ----------------------------------------------------- INTEREST AND OTHER CHARGES Interest on long-term debt 118,462 120,164 232,121 242,695 Other interest - net 23,369 36,942 43,652 45,483 Distributions on preferred securities of subsidiary 4,709 4,710 9,419 9,419 Allowance for borrowed funds used during Construction (5,889) (5,926) (11,977) (10,405) ----------------------------------------------------- TOTAL 140,651 155,890 273,215 287,192 ----------------------------------------------------- INCOME BEFORE INCOME TAXES 395,636 296,191 586,871 414,270 Income taxes 149,863 86,433 232,688 131,606 ----------------------------------------------------- CONSOLIDATED NET INCOME 245,773 209,758 354,183 282,664 Preferred dividend requirements and other 8,581 9,981 18,131 20,706 ----------------------------------------------------- EARNINGS APPLICABLE TO COMMON STOCK $237,192 $199,777 $336,052 $261,958 ===================================================== Earnings per average common share: Basic and diluted $1.04 $0.81 $1.45 $1.06 Dividends declared per common share $0.30 $0.30 $0.60 $0.60 Average number of common shares outstanding: Basic 228,097,385 246,795,710 232,352,915 246,688,052 Diluted 228,152,627 247,207,533 232,382,112 246,962,829 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited)
2000 1999 (In Thousands) OPERATING ACTIVITIES Consolidated net income $354,183 $282,664 Noncash items included in net income: Amortization of rate deferrals 15,279 97,180 Reserve for regulatory adjustments 37,113 13,344 Other regulatory credits - net (20,506) (18,970) Depreciation, amortization, and decommissioning 374,131 384,981 Deferred income taxes and investment tax credits (25,070) (180,410) Allowance for equity funds used during construction (15,735) (12,759) Gain on sale of assets - net (21,574) (61,301) Changes in working capital: Receivables (219,406) (427,677) Fuel inventory (28,416) (36,600) Accounts payable 185,462 353,302 Taxes accrued 131,612 262,406 Interest accrued 26,391 (35,306) Deferred fuel (154,214) (18,029) Other working capital accounts 59,295 (86,458) Provision for estimated losses and reserves (28,396) (24,632) Changes in other regulatory assets (32,028) (32,960) Other 99,715 132,513 ------------------------ Net cash flow provided by operating activities 737,836 591,288 ------------------------ INVESTING ACTIVITIES Construction/capital expenditures (822,584) (545,842) Allowance for equity funds used during construction 15,735 12,759 Nuclear fuel purchases (73,533) (92,196) Proceeds from sale/leaseback of nuclear fuel 43,758 75,097 Proceeds from sale of businesses 61,519 351,082 Investment in other nonregulated/nonutility properties (98,493) (14,406) Proceeds from other temporary investments 298,251 - Decommissioning trust contributions and realized change in trust assets (26,732) (35,738) Other 5,624 11,909 ------------------------ Net cash flow used in investing activities (596,455) (237,335) ------------------------ See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited) 2000 1999 (In Thousands) FINANCING ACTIVITIES Proceeds from the issuance of: Long-term debt 925,889 617,220 Common stock 9,385 11,664 Retirement of long-term debt (103,970) (608,112) Repurchase of common stock (392,591) (14,957) Redemption of preferred and preference stock (152,493) (76,758) Changes in short-term borrowings - net 315,000 (215,500) Dividends paid: Common stock (139,585) (144,059) Preferred stock (16,715) (21,671) ------------------------- Net cash flow provided by (used in) financing activities 444,920 (452,173) ------------------------- Effect of exchange rates on cash and cash equivalents (2,946) (541) ------------------------- Net increase (decrease) in cash and cash equivalents 583,355 (98,761) Cash and cash equivalents at beginning of period 1,213,719 1,184,495 ------------------------- Cash and cash equivalents at end of period $1,797,074 $1,085,734 ========================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $224,697 $319,456 Income taxes $94,478 $50,819 Noncash investing and financing activities: Change in unrealized appreciation of decommissioning trust assets $7,379 $24,544 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $156,068 $108,198 Temporary cash investments - at cost, which approximates market 1,637,028 1,105,521 Special deposits 3,978 - ------------------------- Total cash and cash equivalents 1,797,074 1,213,719 ------------------------- Other temporary investments - at cost, which approximates market 23,100 321,351 Notes receivable 3,643 2,161 Accounts receivable: Customer 299,948 290,331 Allowance for doubtful accounts (9,007) (9,507) Other 354,719 207,898 Accrued unbilled revenues 375,983 298,616 ------------------------- Total receivables 1,021,643 787,338 ------------------------- Deferred fuel costs 394,875 240,661 Fuel inventory - at average cost 122,835 94,419 Materials and supplies - at average cost 358,217 392,403 Rate deferrals 24,265 30,394 Deferred nuclear refueling outage costs 33,708 58,119 Prepayments and other 101,796 78,567 ------------------------- TOTAL 3,881,156 3,219,132 ------------------------- OTHER PROPERTY AND INVESTMENTS Investment in subsidiary companies - at equity 214 214 Decommissioning trust funds 1,284,301 1,246,023 Non-utility property - at cost (less accumulated depreciation) 327,191 317,165 Non-regulated investments 264,442 198,003 Other - at cost (less accumulated depreciation) 22,145 16,714 ------------------------- TOTAL 1,898,293 1,778,119 ------------------------- UTILITY PLANT Electric 23,421,808 23,163,161 Plant acquisition adjustment 398,797 406,929 Property under capital lease 771,466 768,500 Natural gas 190,000 186,041 Construction work in progress 1,960,517 1,500,617 Nuclear fuel under capital lease 262,996 286,476 Nuclear fuel 109,098 87,693 ------------------------- TOTAL UTILITY PLANT 27,114,682 26,399,417 Less - accumulated depreciation and amortization 11,248,370 10,898,661 ------------------------- UTILITY PLANT - NET 15,866,312 15,500,756 ------------------------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Rate deferrals 7,430 16,581 SFAS 109 regulatory asset - net 1,031,503 1,068,006 Unamortized loss on reacquired debt 192,493 198,631 Other regulatory assets 706,401 637,870 Long-term receivables 30,970 32,260 Other 709,718 533,732 ------------------------- TOTAL 2,678,515 2,487,080 ------------------------- TOTAL ASSETS $24,324,276 $22,985,087 ========================= See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $194,108 $194,555 Notes payable 435,716 120,715 Accounts payable 796,560 707,678 Customer deposits 164,986 161,909 Taxes accrued 580,593 445,677 Accumulated deferred income taxes 115,987 72,640 Nuclear refueling outage costs 2,329 11,216 Interest accrued 153,388 129,028 Co-owner advances 14,382 7,018 Obligations under capital leases 175,466 178,247 Other 173,865 125,749 ------------------------- TOTAL 2,807,380 2,154,432 ------------------------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 3,224,430 3,310,340 Accumulated deferred investment tax credits 506,142 519,910 Obligations under capital leases 177,874 205,464 FERC settlement - refund obligation 34,143 37,337 Other regulatory liabilities 225,843 199,139 Decommissioning 725,858 703,453 Transition to competition 176,722 157,034 Regulatory reserves 415,420 378,307 Accumulated provisions 280,378 279,425 Other 818,711 535,156 ------------------------- TOTAL 6,585,521 6,325,565 ------------------------- Long-term debt 7,378,602 6,612,583 Preferred stock with sinking fund 69,650 69,650 Preference stock - 150,000 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holdingsolely junior subordinated deferrable debentures 215,000 215,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 335,961 338,455 Common stock, $.01 par value, authorized 500,000,000 shares; issued 247,172,239 shares in 2000 and 247,082,345 shares in 1999 2,472 2,471 Paid-in capital 4,636,407 4,636,163 Retained earnings 2,982,495 2,786,467 Accumulated other comprehensive income: Cumulative foreign currency translation adjustment (69,811) (68,782) Net unrealized investment losses (6,275) (5,023) Less - treasury stock, at cost (23,709,144 shares in 2000 and 8,045,434 shares in 1999) 613,126 231,894 ------------------------- TOTAL 7,268,123 7,457,857 ------------------------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $24,324,276 $22,985,087 ========================= See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended 2000 1999 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $2,814,499 $2,514,735 Add - Earnings applicable to common stock 237,192 $237,192 199,777 $199,777 Deduct: Dividends declared on common stock 68,393 74,031 Capital stock and other expenses 803 108 ---------- ---------- Total 69,196 74,139 ---------- ---------- Retained Earnings - End of period $2,982,495 $2,640,373 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($79,447) ($46,360) Foreign currency translation adjustments (322) (322) (1,337) (1,337) Net unrealized investment gains 3,683 3,683 - - ---------- --------- Balance at end of period ($76,086) ($47,697) ========== -------- ========= -------- Comprehensive Income $240,553 $198,440 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,636,474 $4,631,040 Other paid in capital (67) 1,486 ---------- ---------- Paid-in Capital - End of period $4,636,407 $4,632,526 ========== ========== Six Months Ended 2000 1999 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $2,786,467 $2,526,888 Add - Earnings applicable to common stock 336,052 $336,052 261,958 $261,958 Deduct: Dividends declared on common stock 140,051 148,020 Capital stock and other expenses (27) 453 ---------- ---------- Total 140,024 148,473 ---------- ---------- Retained Earnings - End of period $2,982,495 $2,640,373 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($73,805) ($46,739) Foreign currency translation adjustments (1,029) (1,029) (958) (958) Net unrealized investment losses (1,252) (1,252) - - ---------- ---------- Balance at end of period ($76,086) ($47,697) ========== -------- ========== -------- Comprehensive Income $333,771 $261,000 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,636,163 $4,630,609 Other paid in capital 244 1,917 ---------- ---------- Paid-in Capital - End of period $4,636,407 $4,632,526 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)
Three Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $524.9 $497.8 $27.1 5 Commercial 387.7 358.8 28.9 8 Industrial 497.1 449.6 47.5 11 Governmental 41.3 38.4 2.9 8 ----------------------------------- Total retail 1,451.0 1,344.6 106.4 8 Sales for resale 92.9 86.8 6.1 7 Other 120.8 181.7 (60.9) (34) ----------------------------------- Total $1,664.7 $1,613.1 $51.6 3 =================================== Billed Electric Energy Sales (GWH): Residential 6,857 6,850 7 - Commercial 5,880 5,741 139 2 Industrial 11,021 10,827 194 2 Governmental 635 624 11 2 ----------------------------------- Total retail 24,393 24,042 351 1 Sales for resale 2,523 2,094 429 20 ----------------------------------- Total 26,916 26,136 780 3 =================================== Six Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $993.1 $929.8 $63.3 7 Commercial 734.5 675.0 59.5 9 Industrial 950.5 856.2 94.3 11 Governmental 80.1 74.4 5.7 8 ---------------------------------- Total retail 2,758.2 2,535.4 222.8 9 Sales for resale 176.2 163.9 12.3 8 Other 83.2 152.4 (69.2) (45) ----------------------------------- Total $3,017.6 $2,851.7 $165.9 6 =================================== Billed Electric Energy Sales (GWH): Residential 13,369 13,267 102 1 Commercial 11,160 10,910 250 2 Industrial 21,638 21,043 595 3 Governmental 1,222 1,213 9 1 ----------------------------------- Total retail 47,389 46,433 956 2 Sales for resale 4,795 4,303 492 11 ----------------------------------- Total 52,184 50,736 1,448 3 ===================================
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on Entergy's estimated construction expenditures (excluding nuclear fuel), long-term debt and preferred stock maturities, and cash sinking fund requirements. Sales Warranties and Indemnities (Entergy Corporation) See Note 9 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Entergy London and CitiPower sales transactions. Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on nuclear liability, property and replacement power insurance, related NRC regulations, the disposal of spent nuclear fuel, other high-level radioactive waste, and decommissioning costs associated with ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf 1, and Pilgrim. ANO Matters (Entergy Corporation and Entergy Arkansas) See Note 9 to the financial statements in the Form 10-K for information on cracks in a number of steam generator tubes at ANO 2 that were discovered and repaired during an outage in March 1992, and the replacement of the steam generators scheduled for September 2000. On July 21, 2000, ANO 2 went offline to conduct additional inspections on the steam generator tubes as requested by the NRC. Management expects that ANO 2 will go back online in mid-August 2000. Environmental Issues (Entergy Gulf States) Entergy Gulf States has been designated as a potentially responsible party (PRP) for the cleanup of certain hazardous waste disposal sites. Entergy Gulf States is in periodic negotiations with the U.S. Environmental Protection Agency and state authorities regarding the cleanup of certain of these sites. As of June 30, 2000, a remaining recorded liability of approximately $17.7 million existed related to the cleanup of the remaining sites at which Entergy Gulf States has been designated a PRP. See "Environmental Regulation" in Item 1 of Part I of the Form 10-K for additional discussion of Entergy Gulf States' environmental clean-up activity and related litigation. (Entergy Louisiana and Entergy New Orleans) During 1993, the Louisiana Department of Environmental Quality (LDEQ) issued new rules for solid waste regulation, including regulation of wastewater impoundments. Entergy Louisiana and Entergy New Orleans have determined that certain of their power plant wastewater impoundments were affected by these regulations and chose to upgrade or close them. Completion of this work is awaiting LDEQ approval. LDEQ has issued notices of deficiencies for certain of these sites. Additional notices of deficiencies are expected in the third quarter of 2000. Recorded liabilities in the amounts of $5.8 million and $0.5 million existed at June 30, 2000 for wastewater upgrades and closures for Entergy Louisiana and Entergy New Orleans, respectively. Management of Entergy Louisiana and Entergy New Orleans believe these reserves are adequate based on current estimates. City Franchise Ordinances (Entergy New Orleans) Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to franchise ordinances. These ordinances contain a continuing option for the City to purchase Entergy New Orleans' electric and gas utility properties. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three separate but substantially identical transactions for the sale and leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3, which were refinanced in 1997. Entergy Louisiana is obligated under certain circumstances to pay amounts sufficient to permit the Owner Participants to withdraw from these lease transactions. Additionally, Entergy Louisiana may be required to assume the outstanding bonds issued by the Owner Trustee under these leases to finance, in part, its acquisition of the undivided interests in Waterford 3. See Note 10 to the financial statements in the Form 10-K for further information. Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, and/or sex. The defendant companies are vigorously defending these suits and deny any liability to the plaintiffs. However, no assurance can be given as to the outcome of these cases. 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 June 30, 2000. See Note 9 to the financial statements in the Form 10-K for further information. Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) In addition to those proceedings discussed elsewhere herein and in the Form 10-K, Entergy and the domestic utility companies are involved in a number of other legal proceedings and claims in the ordinary course of their businesses. While management is unable to predict the outcome of these other legal proceedings and claims, it is not expected that their ultimate resolution individually or collectively will have a material adverse effect on the results of operations, cash flows, or financial condition of these entities. NOTE 2. RATE AND REGULATORY MATTERS Electric Industry Restructuring Previous developments and information related to electric industry restructuring are presented in Note 2 to the financial statements in the Form 10-K. Arkansas (Entergy Corporation and Entergy Arkansas) As discussed in Note 2 to the financial statements in the Form 10-K, in April 1999 the Arkansas legislature enacted a law providing for competition in the electric utility industry through retail open access on January 1, 2002. When retail open access is achieved, the generation operations will become a competitive business, but transmission and distribution operations will continue to be regulated. The APSC may delay implementation of retail open access, but not beyond June 30, 2003. The implementation of the Arkansas retail open access law through rulemakings and company filings is ongoing. Rulemakings associated with energy service provider licensing rules and affiliate rules have been completed. In June 2000, the APSC declared that billing would become a competitive service at the beginning of retail open access. Entergy Arkansas filed a functional, but not corporate, unbundling plan with the APSC on August 8, 2000. The plan initially establishes separate business units for distribution, generation, and a new retail energy service provider. The plan contemplates the transfer of transmission assets to the Transco discussed in the Form 10-K in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS." The functional unbundling plan is tentative because the regulatory requirements to implement the retail open access law have not been finalized, and changes to the details of the plan are likely. In June 2000, Entergy Arkansas filed an application to continue the stranded cost mitigation efforts agreed upon in the 1997 settlement agreement approved by the APSC. These mitigation efforts include the funding of a transition cost account with excess earnings to offset future stranded costs and the accelerated amortization of Entergy Arkansas' share of the Grand Gulf purchased power obligation under the Unit Power Sales Agreement. The filing included an updated stranded cost estimate intended to support Entergy Arkansas' recommendation that the mitigation efforts continue. The filing presents an estimated range of stranded costs based upon the comparison of possible generation asset market values to the generation assets' book values and contractual obligations. The range of possible generation asset market values used in the estimate was determined using generation asset sales in other jurisdictions. The estimated range of stranded costs in Arkansas set forth in the filing is $254 million to $1.64 billion. Texas (Entergy Corporation and Entergy Gulf States) As discussed in Note 2 to the financial statements in the Form 10-K, in June 1999 the Texas legislature enacted a law providing for competition in the electric utility industry through retail open access. The law provides for retail open access by most electric utilities, including Entergy Gulf States, on January 1, 2002. When retail open access is achieved, the generation business and a new retail electricity provider function will become competitive businesses, but transmission and distribution operations will continue to be regulated. The new retail provider function will be the primary point of contact with the customers for most services beyond initiation of electric service and restoration of service following outages. In January 2000, as required by the Texas restructuring legislation, Entergy Gulf States filed a business separation plan with the PUCT, which was amended in June 2000. The plan provided that, by January 2002, Entergy Gulf States would ultimately be divided into a Texas distribution company, a Texas transmission company, a Texas generation company, a Texas retail electricity provider, and a Louisiana company that will encompass distribution, generation, and transmission operations. In July 2000, the PUCT issued an interim order to approve the amended business separation plan. The plan provides that the Louisiana company would retain the liability for all debt obligations of Entergy Gulf States and that the property of the Texas companies would be released from the lien of Entergy Gulf States' mortgage. Each of the Texas companies would assume a portion of Entergy Gulf States' debt obligations, which assumptions would not act to release the Louisiana company's obligations. Each of the Texas companies would also grant a lien on properties in favor of the Louisiana company to secure its obligations to the Louisiana company in respect of the assumed obligations. In addition, under the plan Entergy Gulf States will refinance or retire existing debt through 2004. Regulatory approvals from FERC, the SEC, and the LPSC will be required before the business separation plan can be implemented. Remaining business separation issues in Texas will be addressed in the unbundled costs proceeding before the PUCT. The LPSC has opened a docket to identify the changes in corporate structure of Entergy Gulf States, and their potential impact on Louisiana retail ratepayers, resulting from restructuring in Texas and Arkansas. Entergy Gulf States filed testimony in that proceeding in August 2000 and hearings are scheduled in February 2001. On March 31, 2000, pursuant to the Texas restructuring legislation, Entergy Gulf States filed cost data with the PUCT for its unbundled business functions and proposed tariffs for its unbundled distribution utility. In the filing, Entergy Gulf States is seeking approval for recovery of the following, among other things: o the unbundled distribution utility's cost of service; o a 12% return on equity for the unbundled distribution utility; and o a ten-year non-bypassable charge to recover estimated stranded costs and a non-bypassable charge to recover nuclear decommissioning costs. At a prehearing conference held in April 2000, a procedural schedule for the case was established, calling for a hearing in January 2001. Management cannot predict the outcome of this proceeding. In connection with unbundled cost filings made by all Texas investor-owned utilities, the PUCT has opened a "generic docket" to determine issues that may be resolved on an industry-wide basis before the individual utility hearings begin. These issues include updating gas prices to be used in the model established by the PUCT for estimating stranded costs and incentive mechanisms to enhance the authorized rate of return. Federal Regulatory Activity (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) In April 2000, the LPSC and the Council filed a complaint with FERC seeking revisions to the System Agreement that they allege are necessary to accommodate the introduction of retail competition in Texas and Arkansas, where Entergy Gulf States and Entergy Arkansas provide utility service, and to protect Entergy's Louisiana customers from any adverse impact that may occur due to the introduction of such retail competition in some jurisdictions but not others. The LPSC and the Council request that FERC immediately institute a proceeding to permit changes to be adopted prior to January 1, 2002, and request, among other things, that FERC cap certain of the System Agreement obligations of Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans and fix these companies' access to pool energy at the average level existing for the three years prior to the date that retail access is initiated in Texas and Arkansas. Alternatively, the LPSC and the Council request that FERC require Entergy to provide wholesale power contracts to these companies to satisfy their energy requirements at costs no higher than would have been incurred if retail competition were not implemented. The LPSC and the Council request that the relief be made available for at least eight years after implementation of retail competition or the withdrawal of Entergy Arkansas and Entergy Gulf States from the System Agreement, or until retail access is implemented in Louisiana and New Orleans. In addition, among other things, the LPSC and the Council assert in their complaint that: o unless the requested relief is granted, the restructuring legislation adopted in Texas and Arkansas, to the extent such legislation requires, or has the effect of, altering the rights of parties under the System Agreement, will result in violations of the interstate commerce clause, the due process clause, and the impairment of contracts clause in the U.S. Constitution; and o the failure of the domestic utility companies to honor a right of first refusal with respect to any sale of generating capacity and associated energy under the System Agreement, and any attempt to eliminate such right of first refusal from the System Agreement, would violate the Federal Power Act and constitute a breach of the System Agreement. In June 2000, Entergy's domestic utility companies filed proposed amendments to the System Agreement with FERC to facilitate the implementation of retail competition in Arkansas and Texas and to provide for continued equalization of costs among the domestic utilities in Louisiana and Mississippi. The amendments provide the following: o cessation of participation in all aspects of the System Agreement, other than those related to transmission equalization, for any jurisdictional division of a domestic utility operating in a jurisdiction that initiates retail access; o certain sections of the System Agreement will no longer apply to the sales of generating capacity, whether through the sale of the asset or the output thereof, by a domestic utility operating in a jurisdiction that has established a date by which it will implement retail access; and o modification of the service schedule developed to track changes in energy costs resulting from the Entergy-Gulf States Utilities merger to include one final true-up of fuel costs upon cessation of one company's participation in the System Agreement, which thereafter will no longer be applicable for any purpose. Entergy believes that the proceedings relating to the proposed amendments serve as a response to the complaint by the LPSC and the Council and anticipates that the proceedings would be consolidated. In response to Entergy's proposal, the LPSC and the Council have requested that FERC dismiss the proposed amendments and proceed with the complaint proceedings. Several other parties have also intervened in the proceeding. In the event that the proceedings relating to the proposed amendments proceed, the LPSC and the Council have asserted that the charges to the domestic utility companies under the Unit Power Sales Agreement need to be reconsidered. Entergy has requested an expedited hearing on the proposed amendments and that FERC issue a final decision by October 1, 2001. A procedural schedule has not been established. Neither the timing, nor the ultimate outcome of these proceedings at FERC can be predicted at this time. Retail Rate Proceedings Previous developments and information related to retail rate proceedings are presented in Note 2 to the financial statements in the Form 10-K. Filings with the APSC (Entergy Corporation and Entergy Arkansas) In March 2000, Entergy Arkansas filed its annually redetermined energy cost recovery (ECR) rate with the APSC in accordance with the energy cost recovery rider formula. The filing reflected that an increase was warranted to collect an under-recovery of energy costs for 1999. The increased ECR rate is effective April 2000 through March 2001. As discussed in Note 2 to the financial statements in the Form 10-K, Entergy Arkansas is operating under the terms of a settlement agreement approved by the APSC in December 1997 that allows the collection of excess earnings in a transition cost account. An adjustment was made to the transition cost account in May 2000 resulting in a negative net income impact of $4.4 million ($2.7 million after tax). Interest of $2.6 million ($1.6 million net of tax) was also recorded in the transition cost account for the first six months of 2000. The results of operations reflect these charges in operating expenses. Filings with the PUCT and Texas Cities PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States) As determined in the settlement agreement discussed in Note 2 to the financial statements in the Form 10-K, Entergy Gulf States adopted a methodology for calculating its fixed fuel factor based on the market price of natural gas. This calculation and any necessary adjustments occur semi-annually and will continue until December 2001. The amounts collected under Entergy Gulf States' fixed fuel factor through December 2001 are subject to fuel reconciliation proceedings before the PUCT, including a fuel reconciliation case filed by Entergy Gulf States in July 1999. In February 2000, Entergy Gulf States reached a settlement with all but one of the parties to that proceeding. Entergy Gulf States reconciled approximately $731 million (after excluding approximately $14 million related to Cajun issues to be handled in a subsequent proceeding) of fuel and purchased power costs. The settlement reduces Entergy Gulf States' requested surcharge in the reconciliation filing from $14.7 million to $2.2 million. This settlement was approved by the PUCT in April 2000, confirming an interim order that allowed Entergy Gulf States to begin the recovery of the $2.2 million surcharge between April 2000 and January 2001. In addition, Entergy Gulf States agreed to file a fuel reconciliation case by January 12, 2001 covering the period from March 1, 1999 through August 31, 2000. The decrease in the requested surcharge was recorded in March 2000 and is reflected in Entergy Gulf States' operating income. In September 1999, the PUCT approved the final adjustment of the rate refunds ordered as a result of Entergy Gulf States' November 1996 rate case. These refunds were completed in the October 1999 billing month. Pursuant to the September 1999 order, a true-up proceeding was initiated, which required Entergy Gulf States to refund an additional $25 million. This refund was concluded in December 1999. The PUCT approved the final refund and concluded the proceeding in June 2000. In September 1999, Entergy Gulf States filed an application with the PUCT requesting an interim fuel surcharge to collect under- recovered fuel and purchased power expenses incurred from March 1999 through July 1999. In December 1999, the PUCT approved the collection of $33.9 million over a five-month period beginning January 2000. An administrative appeal of the interim fuel surcharge was filed by certain cities in Travis County District Court. The fuel and purchased power expenses contained in this surcharge will be subject to future fuel reconciliation proceedings. Filings with the LPSC Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States) In June 2000, the LPSC approved a settlement between Entergy Gulf States and the LPSC staff to refund $83 million, including interest, resolving refund issues in Entergy Gulf States' second, third, fourth, and fifth post-Merger earnings reviews by the LPSC. The refund, for which adequate reserves have been made, will occur over a three-month period beginning July 2000. In May 2000, Entergy Gulf States filed its seventh required post- Merger earnings analysis with the LPSC. This filing will be subject to review by the LPSC, which may result in a change in rates. Entergy Gulf States also is proposing that the allowed return on common equity be increased to 11.60%. A procedural schedule has not yet been established by the LPSC. Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana) In April 1999, Entergy Louisiana submitted its fourth annual performance-based rate plan filing for the 1998 test year. A rate reduction of $15 million was implemented effective August 1, 1999. In May 2000, the LPSC ordered an additional $6.4 million refund effective April 2000. Entergy Louisiana has provided reserves for these refunds. In addition, the LPSC extended Entergy Louisiana's formula rate plan for an additional year with the last filing to be made on April 15, 2001. In May 2000, Entergy Louisiana submitted its fifth annual performance-based rate plan filing for the 1999 test year. The filing indicated that a $24.8 million base rate reduction might be appropriate for implementation effective August 2000. Entergy Louisiana is proposing to increase prospectively the allowed return on common equity from 10.5% to 11.6%, which would reduce the amount of any rate reduction implemented. This filing will be subject to review by the LPSC. A procedural schedule has not yet been established by the LPSC. Fuel Adjustment Clause Litigation (Entergy Corporation and Entergy Louisiana) In May 1998, a group of ratepayers filed a complaint against Entergy Corporation, Entergy Power, and Entergy Louisiana in state court in Orleans Parish purportedly on behalf of all Entergy Louisiana ratepayers. The plaintiffs seek treble damages for alleged injuries arising from alleged violations by the defendants of Louisiana's antitrust laws in connection with the costs included in fuel filings with the LPSC and passed through to ratepayers. Among other things, the plaintiffs allege that Entergy Louisiana improperly introduced certain costs into the calculation of the fuel charges, including high-cost electricity imprudently purchased from its affiliates and high-cost gas imprudently purchased from independent third party suppliers. In addition, plaintiffs seek to recover interest and attorney's fees. Exceptions were filed by Entergy, asserting that this dispute should be litigated before the LPSC and FERC. At the appropriate time, if necessary, Entergy will raise its defenses to the antitrust claims. At present, the suit in state court is stayed by stipulation of the parties. Plaintiffs also requested that the LPSC initiate a review of Entergy Louisiana's monthly fuel adjustment charge filings and force restitution to ratepayers of all costs that the plaintiffs allege were improperly included in those fuel adjustment filings. Marathon Oil Company and Louisiana Energy Users Group have also intervened in the LPSC proceeding. Discovery at the LPSC has been conducted and is expected to continue. Direct testimony was filed with the LPSC by plaintiffs and the intervenors in July 1999. In their testimony for the period 1989 through 1998, plaintiffs purport to quantify many of their claims in an amount totaling $544 million, plus interest. The plaintiffs will likely assert additional damages for the period 1974 through 1988. The Entergy companies filed responsive and rebuttal testimony in September 1999. Rebuttal testimony by the plaintiffs and intervenors was filed in November 1999. Entergy Louisiana and the staff of the LPSC have reached an agreement in principle for the settlement of the matter before the LPSC. The terms of the proposed settlement have not as yet been agreed to by other parties to the LPSC proceeding, and must be approved by the LPSC after any parties contesting the settlement are afforded the opportunity for a hearing. Entergy Louisiana would agree under the proposed settlement terms to refund to customers approximately $72 million to resolve all claims arising out of or relating to Entergy Louisiana's fuel adjustment clause filings from January 1, 1975 through December 31, 1999, except with respect to purchased power and associated costs included in the fuel adjustment clause filings for the period May 1 through September 30, 1999. Reserves were previously provided by Entergy Louisiana for the refund. If the proposed settlement is approved, Entergy Louisiana would also consent to future fuel cost recovery under a long-term gas contract based on a formula that would likely result in an under- recovery of actual costs under that contract for the remainder of its term, which runs through 2013. The future under-recovery cannot be precisely estimated at this time because it will depend upon factors that are not certain, such as the price of gas and the amount of gas purchased under the long-term contract. In recent years, Entergy Louisiana has made purchases under that contract totaling from $91 million to $121 million annually. Had the proposed settlement terms been applicable to such purchases, the under-recoveries would have ranged from $4 million to $9 million per year. Hearings in this proceeding are scheduled for September 2000, which will include consideration of the proposed settlement. In its intervention, Marathon Oil Company and Louisiana Energy Users Group requested that the LPSC review the prudence of a contract entered into by Entergy Louisiana to purchase energy generated by a hydroelectric facility known as the Vidalia project through the year 2031. Note 9 to the financial statements in the Form 10-K contains further discussions of the obligations related to the Vidalia project. By orders entered by the LPSC in 1985 and 1990, the LPSC approved Entergy Louisiana's entry into the Vidalia contract and Entergy Louisiana's right to recover, through the fuel adjustment clause, the costs of power purchased thereunder. Additionally, the wholesale electric rates under the Vidalia power purchase contract were filed at FERC. In December 1999, the LPSC instituted a review of the following issues relating to the Vidalia project: (i) the LPSC's jurisdiction over the Vidalia project; (ii) Entergy Louisiana's management of the Vidalia contract, including opportunities to restructure or otherwise reform the contract; (iii) the appropriateness of Entergy Louisiana's recovery of 100% of the Vidalia contract costs from ratepayers; (iv) the appropriateness of the fuel adjustment clause as the method for recovering all or part of the Vidalia contract costs; (v) the appropriate regulatory treatment of the Vidalia contract in the event the LPSC approves implementation of retail competition; and (vi) Entergy Louisiana's communication of pertinent information to the LPSC regarding the Vidalia project and contract. Based on its review, the LPSC will determine whether it should disallow any of the costs of the Vidalia project included in the fuel adjustment clause. In March 2000, Entergy Louisiana filed testimony in this sub- docket asserting that the prudence of the Vidalia contract already has been approved by final orders of the LPSC and that recovery of all amounts paid by Entergy Louisiana related to the Vidalia project pursuant to the FERC-filed rate is appropriate. Direct testimony was filed by intervenor Marathon Oil Company in May 2000 and by the LPSC staff and intervenor Louisiana Energy Users Group in July 2000. In its testimony the LPSC staff alleges that Entergy Louisiana was imprudent for not declaring to the LPSC that the Vidalia project had become uneconomic and not threatening to block the Vidalia project's owners' July 30, 1990 request that the LPSC clarify the LPSC's 1985 order (approving the Entergy Louisiana/Vidalia project power purchase agreement), unless the Vidalia project's owners' shared with Entergy Louisiana's ratepayers some portion of what the LPSC staff quantifies as approximately $90 million of tax consequences available to the project. The LPSC staff's testimony does not quantify how much of the potential tax savings Entergy Louisiana should have demanded in exchange for not attempting to block the Vidalia project's owners' request for clarification; however, that testimony does suggest various alternatives by which some portion of the $90 million, perhaps $45 million plus interest since 1990, could be returned to the ratepayers. The direct testimony of the intervenor Louisiana Energy Users Group alleges that Entergy Louisiana was imprudent for not attempting to block the Vidalia project's owners' July 30, 1990 request that the LPSC clarify the LPSC's 1985 order approving the Entergy Louisiana/Vidalia project power purchase agreement; however, that intervenor does not quantify the amount of damage alleged to have been caused by this alleged imprudence. The direct testimony of the intervenor Marathon Oil Company alleges with respect to Entergy Louisiana that imprudent Vidalia project costs should be disallowed and that Entergy Louisiana's customers should not be charged 100% of the Vidalia costs. It is anticipated that hearings in this sub- docket concerning the Vidalia contract will be completed by the end of 2000. (Entergy Corporation and Entergy New Orleans) In April 1999, a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seek treble damages for alleged injuries arising from the defendants' alleged violations of Louisiana's antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans' fuel adjustment filings with the Council. In particular, plaintiffs allege that Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorney's fees. Exceptions to the plaintiffs' allegations were filed by Entergy, asserting, among other things, that jurisdiction over these issues rests with the Council and FERC. If necessary, at the appropriate time, Entergy will also raise its defenses to the antitrust claims. At present, the suit in state court is stayed by stipulation of the parties. Plaintiffs also filed this complaint with the Council in order to initiate a review by the Council of their allegations and to force restitution to ratepayers of all costs they allege were improperly and imprudently included in the fuel adjustment filings. Discovery has begun in the proceedings before the Council. In April 2000, testimony was filed on behalf of the plaintiffs in this proceeding. The testimony asserts, among other things, that Entergy New Orleans and other defendants have engaged in fuel procurement and power purchasing practices that could have resulted in New Orleans customers being overcharged by more than $45 million over a period of years. However, it is not clear precisely what periods and damages are being alleged. Entergy intends to defend this matter vigorously, both in court and before the Council. The ultimate outcome of the lawsuit and the Council proceeding cannot be predicted at this time. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) In March 2000, Entergy Mississippi submitted its annual performance-based formula rate plan filing for the 1999 test year. The filing indicated that no change in rate levels was warranted and the current rate levels remain in effect. Purchased Power for Summer 2000 (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) The domestic utility companies filed applications with the APSC, the LPSC, the MPSC, and the Council to approve the sale of power by Entergy Gulf States from its unregulated, undivided 30% interest in River Bend formerly owned by Cajun to the other domestic utility companies during the summer of 2000. In addition, Entergy Gulf States and Entergy Louisiana filed an application with the LPSC for authorization to purchase capacity and electric power from third parties for the summer of 2000. The commissions and Council have approved the applications, with a reservation of their right to review the prudence of the purchases and the appropriate catagorization of the costs as either capacity or energy charges for purposes of recovery. Proposed Rate Increase (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in Note 2 to the financial statements in the Form 10-K, System Energy applied to FERC in May 1995 for a $65.5 million rate increase. The request sought 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. In December 1995, System Energy implemented the $65.5 million rate increase, subject to refund, for which a portion has been reserved. After a hearing, FERC issued an order in August 2000 in the proceeding. FERC affirmed the ALJ's adoption of a 10.8% return on equity, but modified the return to reflect changes in capital market conditions since the ALJ's decision. FERC adjusted the rate of return to 10.58% for the period December 1995 to the date of FERC's decision, and prospectively adjusted the rate of return to 10.94% from the date of FERC's decision. FERC's decision also changed other aspects of System Energy's proposed rate schedule, including the depreciation rate and decommissioning costs and their methodology. System Energy has provided reserves for a potential refund to the rate level of the initial ALJ decision, including interest. Management is analyzing the effect of FERC's decision, but a refund to the FERC decision rate level is not expected to have a material adverse effect on Entergy's, System Energy's, or the domestic utility companies results of operations. Management's analysis may result in a request for rehearing or an appeal of FERC's order. NOTE 3. COMMON STOCK (Entergy Corporation) During the six months ended June 30, 2000, Entergy Corporation repurchased 16,126,000 shares of common stock in the open market for an aggregate purchase price of approximately $389 million. These shares were purchased pursuant to Entergy's stock repurchase plan and also to fulfill the requirements of various stock-based compensation and benefit plans. Under the terms of the Merger Agreement, Entergy will use its commercially reasonable efforts to purchase in open market transactions an additional $430 million of shares of its common stock. During the six months ended June 30, 2000, Entergy Corporation issued 462,290 shares of its previously repurchased common stock to satisfy stock options exercised and employee stock purchases. In addition, Entergy Corporation received proceeds of approximately $2.0 million from the issuance of 89,894 shares of common stock under its dividend reinvestment and stock purchase plan. NOTE 4. LONG-TERM DEBT (Entergy Mississippi) On February 15, 2000, Entergy Mississippi issued $120 million of 7.75% Series First Mortgage Bonds due February 15, 2003. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for working capital needs and capital expenditures. (Entergy Arkansas) On March 9, 2000, Entergy Arkansas issued $100 million of 7.72% Series First Mortgage Bonds due March 1, 2003. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for working capital needs and capital expenditures. (Entergy Louisiana) On March 1, 2000, Entergy Louisiana redeemed, at maturity, $100 million of 6.00% Series First Mortgage Bonds using funds received from an open-account advance from Entergy Corporation. On May 23, 2000, Entergy Louisiana issued $150 million of 8.50% Series First Mortgage Bonds due June 1, 2003. The proceeds are being used for general corporate purposes, including the repayment of the open account advance from Entergy Corporation and of short-term indebtedness that was incurred for capital needs and capital expenditures. (Entergy Gulf States) On June 1, 2000, Entergy Gulf States issued $300 million of First Mortgage Bonds due June 2, 2003 bearing interest at an initial rate of 8.04%. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for capital needs and capital expenditures, and the mandatory redemption of $150 million of preference stock. (Entergy New Orleans) On July 25, 2000, Entergy New Orleans issued $30 million of 8.125% Series First Mortgage Bonds due July 15, 2005. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for capital needs and capital expenditures. (Entergy Corporation) In May 2000, Entergy's global power development business entered into 10-year interest rate swap agreements with an average fixed rate of 6.568% for approximately 75% of the debt outstanding under the Damhead Creek bridge and term loan portion of the Senior Credit Facility. The global power development business is exposed to market risks from movements in interest rates for the hedged portion of the debt only in the unlikely event that the counterparties to the interest rate swap agreements were to default on contractual payments. At June 30, 2000, Entergy's global power development business had outstanding interest rate swap agreements totalling a notional amount of $362.8 million. Under the Senior Credit Facility and the Subordinated Credit Facility, the ability of the global power development business to make distributions of dividends, loans, or advances to Entergy Corporation is restricted by, among other things, the requirement to pay permitted project costs, make debt repayments, and maintain cash reserves. See Note 7 to the financial statements in the Form 10-K for further discussion on the financing of the Damhead Creek project. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On July 28, 2000, Entergy Corporation's Board of Directors declared a common stock dividend of $0.30 per share, payable on September 1, 2000, to holders of record on August 14, 2000. NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation) See Note 14 to the financial statements in the Form 10-K for information regarding Entergy's adoption of SFAS 131 and its operating segments. Entergy's segment financial information for the three months ended June 30, 2000 and 1999 is as follows (in thousands):
Domestic Power Utility and Marketing System and All Energy Trading* Other* Eliminations Consolidated 2000 Operating Revenues $1,697,577 $372,803 $ 79,988 $ (12,580) $2,137,788 Income Taxes 120,306 2,061 27,496 - 149,863 Net Income 186,946 3,823 55,004 - 245,773 1999 Operating Revenues $1,646,027 $ 668,797 $ 9,868 $ (8,288) $ 2,316,404 Income Taxes 107,903 1,187 (22,657) - 86,433 Net Income 174,868 (142) 35,032 - 209,758
Entergy's segment financial information for the six months ended June 30, 2000 and 1999 is as follows (in thousands):
Domestic Power Utility and Marketing System and Energy Trading* All Other* Eliminations Consolidated 2000 Operating Revenues $3,098,921 $718,960 $ 155,839 $ (24,440) $ 3,949,280 Income Taxes 191,497 7,797 33,394 - 232,688 Net Income 274,284 15,120 64,779 - 354,183 Total Assets 20,228,032 849,718 3,780,569 (534,043) 24,324,276 1999 Operating Revenues $2,932,729 $1,013,595 $ 21,731 $ (11,729) $ 3,956,326 Income Taxes 167,497 (7,036) (28,855) - 131,606 Net Income 257,444 (14,155) 39,375 - 282,664 Total Assets 19,515,460 952,960 2,838,509 (223,197) 23,083,732
Businesses marked with * are referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation, which is also included in the "All Other" column. The "All Other" category includes the parent, Entergy Corporation, segments below the quantitative threshold for separate disclosure, and other business activities. Other segments principally include global power development and non-utility nuclear power operations and management. Other business activities principally include the gains on the sales of businesses. The elimination of power marketing and trading mark-to-market profits on intercompany power transactions is also included in "All Other." Eliminations are primarily intersegment activity. NOTE 7. SUBSEQUENT EVENT (Entergy Corporation) On July 30, 2000, Entergy Corporation and FPL Group entered into a Merger Agreement, providing for a business combination that results in the creation of a new company. The Merger will be accounted for under the purchase method of accounting as an acquisition of Entergy by FPL Group. Each outstanding share of FPL Group common stock will be converted into the right to receive one share of the new company's common stock, and each outstanding share of Entergy Corporation common stock will be converted into the right to receive 0.585 of a share of the new company's common stock. It is expected that FPL Group's shareholders will own approximately 57% of the common equity of the new company and Entergy's shareholders will own approximately 43%. The new company will be given a new name that will be agreed upon between the Boards of Directors of FPL and Entergy prior to the consummation of the Merger. The new company will maintain its principal corporate offices and headquarters in Juno Beach, Florida, and will maintain its utility headquarters in New Orleans, Louisiana. The Merger is conditioned, among other things, upon approvals of the shareholders of FPL Group and Entergy and approvals of various local, state, and federal regulatory agencies and commissions. Entergy and FPL Group will seek to consummate the Merger by late 2001. __________________________________ In the opinion of the management of Entergy Corporation, the accompanying unaudited condensed financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENTERGY CORPORATION /s/ Nathan E. Langston Nathan E. Langston Vice President and Chief Accounting Officer Date: August 11, 2000