-----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, BrCihcJ6HYrGwdWFQUyrs9DGzA+mC642puzTIRwCwzef8QECY74OSiuFK/FsKHxl r59j7TPTVVIiACFvmkaNXQ== 0000065984-97-000062.txt : 19971115 0000065984-97-000062.hdr.sgml : 19971115 ACCESSION NUMBER: 0000065984-97-000062 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: CSX 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: SEC FILE NUMBER: 001-11299 FILM NUMBER: 97717532 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: SEC FILE NUMBER: 001-10764 FILM NUMBER: 97717533 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: SEC FILE NUMBER: 000-20371 FILM NUMBER: 97717534 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: SEC FILE NUMBER: 001-08474 FILM NUMBER: 97717535 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: SEC FILE NUMBER: 000-00320 FILM NUMBER: 97717536 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: SEC FILE NUMBER: 000-05807 FILM NUMBER: 97717537 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: SEC FILE NUMBER: 001-09067 FILM NUMBER: 97717538 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) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1997 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, 1997 Entergy Corporation ($0.01 par value) 243,923,404 ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 1997 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 6 Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations 14 Statements of Consolidated Income 17 Statements of Consolidated Cash Flows 18 Consolidated Balance Sheets 20 Selected Operating Results 22 Entergy Arkansas, Inc.: Results of Operations 24 Statements of Income 26 Statements of Cash Flows 27 Balance Sheets 28 Selected Operating Results 30 Entergy Gulf States, Inc.: Results of Operations 32 Statements of Income (Loss) 34 Statements of Cash Flows 35 Balance Sheets 36 Selected Operating Results 38 Entergy Louisiana, Inc.: Results of Operations 40 Statements of Income 42 Statements of Cash Flows 43 Balance Sheets 44 Selected Operating Results 46 Entergy Mississippi, Inc.: Results of Operations 48 Statements of Income 50 Statements of Cash Flows 51 Balance Sheets 52 Selected Operating Results 54 Entergy New Orleans, Inc.: Results of Operations 56 Statements of Income 58 Statements of Cash Flows 59 Balance Sheets 60 Selected Operating Results 62 System Energy Resources, Inc.: Results of Operations 63 Statements of Income 64 Statements of Cash Flows 65 Balance Sheets 66 Notes to Financial Statements for Entergy Corporation and Subsidiaries 68 Part II: Item 1. Legal Proceedings 83 Item 5. Other Information 84 Item 6. Exhibits and Reports on Form 8-K 85 Experts 86 Signature 87 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, 1996, and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997, filed by the individual registrants with the SEC, and should be read in conjunction therewith. Forward Looking Information 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, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., System Energy Resources, Inc. 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, interest rate changes, changes in foreign currency exchange rates, and other factors. DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term Algiers 15th Ward of the City of New Orleans, Louisiana ALJ Administrative Law Judge ANO Arkansas Nuclear One Plant ANO 1 Unit No. 1 of ANO ANO 2 Unit No. 2 of ANO APSC Arkansas Public Service Commission BPS British pounds sterling 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 Pty. Council Council of the City of New Orleans, Louisiana domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively Entergy Entergy Corporation and its various direct and indirect subsidiaries 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. 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 London Investments Entergy London Investments plc, formerly Entergy Power UK, plc 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 Services Entergy Services, Inc. EPA U.S. Environmental Protection Agency EPAct Energy Policy Act of 1992 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, 1996, 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 London Electricity London Electricity plc - a regional electric company serving London, England, which was acquired by Entergy on February 7, 1997 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 NRC Nuclear Regulatory Commission 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 PUHCA Public Utility Holding Company Act of 1935, as amended PUCT Public Utility Commission of Texas PURPA Public Utility Regulatory Policies Act River Bend River Bend Nuclear Plant, owned 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 Agreement Agreement , effective January 1, 1983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources System Energy System Energy Resources, Inc. System Fuels System Fuels, Inc. UK The United Kingdom of Great Britain and Northern Ireland 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 Corporation, the domestic utility companies, and System Energy for the nine months ended September 30, 1997 and 1996 was as follows: Nine Months Nine Months Company Ended 9/30/97 Ended 9/30/96 (In Millions) Entergy Corporation $1,574.7 $1,268.7 Entergy Arkansas $ 400.5 $ 344.2 Entergy Gulf States $ 382.6 $ 263.4 Entergy Louisiana $ 271.6 $ 284.6 Entergy Mississippi $ 141.0 $ 146.6 Entergy New Orleans $ 36.8 $ 27.0 System Energy $ 201.0 $ 223.7 The positive cash flow from operations for the domestic utility companies 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 the previously deferred costs so that there is no effect on net income. These phase-in plans will continue to contribute to Entergy Corporation's cash position in the immediate future. 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. Entergy Louisiana's phase-in plan for Waterford 3 expired in June 1997. Competitive growth businesses contributed $290.8 million to Entergy Corporation's cash flow from operations. In accordance with the purchase method of accounting, London Electricity's results of operations are not included in Entergy Corporation's nine months ended September 30, 1996 Statements of Consolidated Cash Flows. Financing Sources As discussed in Note 7, the acquisition of London Electricity for $2.1 billion was accomplished in February 1997. The acquisition was financed with $1.7 billion of debt that is non-recourse to Entergy Corporation, and $392 million of equity provided by Entergy Corporation from available cash and borrowings under its $300 million line of credit. Entergy Corporation anticipates refinancing this debt during the fourth quarter of 1997 through the issuance of up to $300 million of preferred securities and new bank financing. In addition to cash flow from operations, London Electricity had several primary sources of liquidity available at September 30, 1997 including: (i) the availability under its credit facilities agreement of approximately BPS220 million, (ii) several uncommitted loan facilities totaling BPS200 million provided by banking institutions, and (iii) London Electricity's BPS150 million commercial paper program. As of September 30, 1997, a total of BPS45 million was borrowed under the commercial paper facility. In addition, London Electricity intends to use availability under existing facilities, or replacements thereof, to finance its payments of windfall profits taxes in December 1997 and 1998 which will total BPS140 million. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Entergy Mississippi issued a series of general and refunding mortgage bonds in June 1997 totaling $65 million, the proceeds of which were used to meet a scheduled July 1, 1997 debt maturity. Excluding the London Electricity investment and the Entergy Mississippi bond issuance, cash from operations, supplemented by cash on hand, was sufficient to meet substantially all investing and financing requirements of the domestic utility companies and System Energy, including capital expenditures, dividends, and debt and preferred stock maturities for the nine months ended September 30, 1997. Entergy's domestic utility companies other than Entergy Mississippi have been able to fund their capital requirements with cash from operations as discussed above in "Cash Flows". Should additional cash be needed to fund investments or to retire debt, the domestic utility companies and System Energy each have the ability, subject to regulatory approval and compliance with issuance tests, to issue debt or preferred securities to meet such requirements. In addition, to the extent market conditions and interest and dividend rates allow, the domestic utility companies and System Energy will continue to refinance and/or redeem higher cost debt and preferred stock prior to maturity. See Note 4 herein for a discussion of the recent refinancing by Entergy Louisiana. The domestic utility companies may continue to establish special purpose trusts as financing subsidiaries for the purpose of issuing trust preferred securities, such as those issued in 1996 by Entergy Louisiana Capital I and Entergy Arkansas Capital I, and those issued in January 1997 by Entergy Gulf States Capital I. Entergy Corporation, the domestic utility companies, and System Energy also have the ability to effect short-term borrowings. See Notes 4, 5, 6, 7, 9 and 10 in the Form 10- K for additional information on Entergy's capital and refinancing requirements in 1997-2001. As of September 30, 1997, Entergy Corporation had $150 million outstanding under its $300 million bank credit facility. In addition, Entergy Corporation had $91 million outstanding and Entergy Technology Holding Company (ETHC) had $17 million outstanding on a joint $250 million bank line of credit as of September 30, 1997. See Note 4 to the Form 10-K for information on the domestic utility companies' and System Energy's short-term borrowing authorizations and bank lines of credit. Financing Uses Productive investment by Entergy Corporation is integral to enhancing the long-term value of its common stock. Entergy Corporation has been expanding its investments in business opportunities overseas as well as in the United States. As of September 30, 1997, Entergy Corporation had acquired or participated in foreign electric ventures in Australia, Argentina, China, Chile, Pakistan, Peru, and the UK, and had acquired several telecommunications-based businesses in the United States. As of September 30, 1997, Entergy Corporation had a net investment of $1.2 billion in equity capital in competitive growth businesses. See Note 7 for a discussion of Entergy Corporation's acquisition of London Electricity on February 7, 1997. To make capital investments, fund its subsidiaries, and pay dividends, Entergy Corporation will utilize internally generated funds, cash on hand, funds available under its bank credit facilities, funds received from its dividend reinvestment and stock purchase plan, and bank financings as required. See Note 3 herein for information regarding proceeds from the issuance of common stock under Entergy Corporation's dividend reinvestment and stock purchase plan during the nine months ended September 30, 1997. See Note 9 in the Form 10-K for a discussion of capital requirements. Entergy Corporation receives funds through dividend payments from its subsidiaries. During the nine months ended September 30, 1997 such dividend payments from subsidiaries totaled $420.0 million. Entergy Gulf States resumed paying common stock dividends in the third quarter of 1997. During the nine months ended September 30, 1997 Entergy Corporation paid $328.2 million of ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES common stock dividends. Declarations of dividends on common stock are made at the discretion of Entergy Corporation's Board of Directors. Management will not recommend future changes in dividends to the Board unless warranted by economic circumstances and the then current business environment. See Note 8 in the Form 10-K for information on dividend restrictions. Entergy Corporation and Entergy Gulf States See Notes 1 and 2 regarding River Bend and Cajun litigation. An adverse ruling by the PUCT regarding River Bend could result in up to approximately $271 million of potential write-offs (net of tax). Such write-offs could result in substantial net losses being reported in the future by Entergy Gulf States, with resulting adverse adjustments to the common equity of Entergy Corporation and Entergy Gulf States. Adverse resolution of these matters could negatively affect Entergy Gulf States' ability to obtain financing, which could in turn affect Entergy Gulf States' liquidity and ability to pay common stock dividends to Entergy Corporation. Entergy Corporation and System Energy Under the Capital Funds Agreement, Entergy Corporation has agreed to supply System Energy with 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 thereunder 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 See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, including "Open Access Transmission", "Municipalization", "Industry Consolidation", "Functional Unbundling", and "Effects of Alternate Energy Sources on Retail Electric Sales to Industrial and Large Commercial Customers" for a discussion of the increasing competitive pressures facing Entergy and the electric utility industry. See "ANO Matters", and "Property Tax Exemptions" in the Form 10-K for a discussion of other significant issues affecting Entergy. Set forth below are recent developments to the Form 10-K disclosure for the sections presented. Competition and Industry Challenges Transition to Competition Filings See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K and Note 2 herein for a discussion of the domestic utility companies' filings with their respective state and local regulators concerning the transition to competition. Entergy Gulf States made a supplemental filing with the PUCT on April 4, 1997, outlining a comprehensive market reform proposal calling for the establishment of retail competition, service quality standards, a regional power exchange, and an independent system operator. Entergy Gulf States requested from the PUCT a reciprocal commitment to provide an opportunity for the full recovery of prudently incurred investments previously approved by regulators. The PUCT had scheduled hearings on the transition to competition to begin in October 1997 but those hearings were rescheduled and began on November 5, 1997. The MPSC conducted hearings in April 1997 on various transition to competition issues, including the recoverability of stranded costs, the potential for cost shifting, and electric supply reliability. In early July the MPSC issued an order directing the Mississippi Public Utilities Staff to submit a report outlining a plan for restructuring the electric utility industry in Mississippi. On November 3, 1997, the Mississippi Public Utilities Staff submitted to the MPSC a proposed transition plan for retail competition in the electric industry in Mississippi. The plan represents the staffs' current position on how retail competition can be implemented in Mississippi and includes an implementation schedule in which retail competition would begin on January 1, 2001. The plan assumes the passage of necessary enabling legislation in 1999. The plan also provides for a transition period, from January 1, 2001, through December 31, 2004, for the recovery of any allowed stranded costs through a non-bypassable charge. Parties will file comments and reply comments on the plan during January and February of 1998 and a hearing will be conducted by the MPSC in April 1998. In October 1996, Entergy Arkansas filed a proposal with the APSC designed to achieve an orderly transition to retail electric competition in Arkansas. Entergy Arkansas supplemented its proposal with a May 1, 1997 filing and additional testimony in response to the testimony of the other parties. The proposal included a rate decrease totaling $158 million over a two-year period beginning January 1998. On October 9, 1997, Entergy Arkansas and other parties to the proceeding submitted a settlement agreement to the APSC. The proposed settlement provides for more than $200 million in rate reductions. The proposal allows Entergy Arkansas to accelerate, beginning in 1999, the recovery of purchased power costs associated with Entergy Arkansas' allocation of Grand Gulf 1 plant investment, pending FERC approval. The $200 million reduction includes approximately $170 million associated with the termination of the Grand Gulf deferrals, a reduction which was part of an earlier settlement agreement with the APSC. The settlement also provides for a Transition Cost Account which will utilize any excess earnings above the allowed return on equity to offset stranded costs when customer choice occurs. The agreement calls for the APSC to hold a hearing in 2001 to review Entergy Arkansas' potential stranded costs and to evaluate the magnitude of stranded costs and the mechanism in place to address those stranded costs. In addition, the settlement includes, the opening of a generic docket by the APSC in 1998 to take testimony regarding transition to retail electric competition, with the findings from that docket to be turned over to the Arkansas legislature in October 1998. The APSC held a hearing on October 17, 1997 to consider the settlement agreement and is expected to issue a decision with respect to the settlement agreement by mid-December 1997. In September 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 bearing the burden of any cost shifting. See Note 2 herein for additional information regarding this filing. Hearings on these proposals have been delayed until 1998. In February 1997, the LPSC ruled that certain issues embodied in the Entergy Gulf States and Entergy Louisiana proposals would be addressed in those companies' existing rate dockets and that certain other issues would be addressed in an ongoing generic regulatory proceeding examining electric utility industry restructuring. In March 1997, the Council established new dockets regarding electric and gas utility service competition in the City of New Orleans. The dockets will address competitive issues, including the advisability of implementing competition, recoverability and measurement of stranded costs, maximization of consumer savings, minimization of cost shifting, and potential conflicts among federal, state, and local regulators, as such issues relate to electric and gas service currently being provided to New Orleans customers by Entergy New Orleans and electric service being provided in Algiers by Entergy Louisiana. Comments were filed by interested parties in April 1997. Public hearings on these issues were held in May, July and October of 1997. Entergy New Orleans made its cost of service and revenue requirement filing in conjunction with its transition to competition plan on September 17, 1997. On November 6, 1997, the Council severed the traditional ratemaking issues from the transition filings, and established a procedural schedule for the second phase of the rate proceeding, pursuant to which hearings will be conducted in July 1998. Additionally, the Council ordered Entergy New Orleans to file unbundled gas rates, in preparation for an investigation of issues relating to gas industry competition. The electric transition to competition filing is generally similar to those filed for the other domestic utility companies. It includes a rate cap coupled with a continuing right of the Council to conduct reviews of Entergy New Orleans' earnings, an offer to seek authority from FERC for accelerated recovery of Grand Gulf purchased power obligations, and implementation of a non-bypassable universal service charge for all existing customers, together with functional unbundling of electric rates. Entergy New Orleans' transition filing will be subject to further review by the Council. A procedural schedule for that filing has not been set, although public comment has been requested by the Council. Retail and Wholesale Rate Issues See Note 2 to the Form 10-K, as supplemented hereby, for a discussion of the ongoing trend of regulatory mandated rate reductions as well as incentive and performance-based regulation and filings made with state and local regulators regarding an orderly transition to a more competitive market for electricity. See Note 2 herein for a discussion of rate reductions implemented at Entergy Louisiana and Entergy New Orleans during the current period. On July 14, 1997, Entergy Services filed with the FERC its wholesale transmission open access compliance tariff incorporating the requirements of FERC Order No. 888-A. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Legislative Activity A number of bills have been introduced in the U. S. Congress calling for deregulation of the electric power industry. Included in these proposals are some that would amend or repeal PUHCA and/or PURPA. These bills generally have provisions that would give consumers the ability to choose their own electricity service provider. The Energy and Power Subcommittee of the Commerce Committee of the U.S. House of Representatives held hearings on this issue in October 1997, at which it was agreed that a consensus approach to electricity deregulation was needed. However, no agreement was reached as to a specific approach. Entergy Gulf States was an active participant in discussions aimed at developing legislation relating to electric utility industry restructuring and competition in the Texas Legislature before it adjourned on June 2, 1997. However, no such legislation was passed in Texas during the recent session. The legislature will not convene again until January 1999, by which time Entergy Gulf States believes the PUCT will have acted on the transition to competition filing of Entergy Gulf States. The Arkansas Senate has passed a resolution requesting a study of the impact of electric utility industry competition on the citizens of Arkansas, the electric utility industry, and the regulatory authority of the APSC. This study, to be performed by a joint legislative committee of the Arkansas General Assembly, is scheduled to begin by December 1, 1997, and conclude prior to the 1999 legislative session. Competitive Growth Businesses Entergy Corporation seeks opportunities to expand its domestic and foreign businesses that are not regulated by domestic state and local utility regulatory authorities. Such businesses currently include the development, ownership, and/or operation of electric distribution businesses and electric generation facilities as well as businesses which offer a broad range of energy management, security monitoring, and telecommunications services. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" for a discussion of Entergy Corporation's 1997 investments in competitive growth businesses. Some of these investments may involve a greater risk than domestic regulated utility enterprises. For the nine months ended September 30, 1997, Entergy Corporation's competitive growth businesses reduced consolidated net income by approximately $117 million principally due to the impact of a windfall profits tax in the UK which was partially offset by the reduction in the UK corporation tax rate, as discussed in more detail below in "Windfall Profits Tax". Excluding the impact of these items, the competitive growth businesses contributed $52 million to consolidated net income during the nine months ended September 30, 1997. Entergy Nuclear, Inc. (Entergy Nuclear), a wholly-owned subsidiary of Entergy Enterprises, began providing management and operations services in February 1997 to Maine Yankee Atomic Power Company (Maine Yankee) at the Maine Yankee nuclear plant for an initial period of up to one year. On August 6, 1997, the board of directors of Maine Yankee announced the permanent closure of this nuclear plant. On November 6, 1997, Entergy Nuclear and Maine Yankee entered into an agreement which calls for Entergy Nuclear to provide management services for initial decommissioning activities through September 30, 1998. This contract replaces the short-term contract in effect from February 1997 through September 30, 1997. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Through its London Electricity acquisition, Entergy expects to gain valuable experience in the deregulated UK electricity market, in anticipation of the deregulation of the electricity market in the United States. London Electricity has already experienced seven years of a partially competitive supply environment and expects to be in a fully competitive supply market beginning April 1, 1998. In conjunction with the acquisition of London Electricity, Entergy established an international retail operations group to coordinate retail electric operations in the UK, Australia, and Argentina. In February 1997, Entergy Richmond Power Corporation, a wholly- owned subsidiary of Entergy Power Development Corporation (Entergy Power), sold its 50% interest in Richmond Power Enterprise LP (owner of a gas-fired electric and steam generation facility), to a third party for $10 million, realizing an after tax gain of $2.7 million. In February 1997, Entergy Corporation announced a joint venture with Hyperion Telecommunications. It is expected that by the end of 1997, the joint venture (to be known as Entergy Hyperion Telecommunications) will offer competitive local access telephone services primarily to business customers in the metropolitan areas of Little Rock, Arkansas, Jackson, Mississippi, and Baton Rouge, Louisiana. In June 1997, Entergy Transener, S.A., another wholly-owned subsidiary of Entergy Power, sold its interest in a consortium that owned 65% of Transener S.A. for $27.5 million, realizing an after-tax gain of $5.8 million. During the second quarter of 1997, Entergy Pakistan Limited, another wholly-owned subsidiary of Entergy Power, sold 25% of its interest in Hub Power Company, Ltd. for $26.5 million, which resulted in an after-tax gain of $9.1 million. During the second quarter of 1997, Entergy Power Chile, S.A., an indirect wholly-owned subsidiary of Entergy Power, purchased a 25% interest in the San Isidro project, a 370 MW gas-fired, combined cycle generating facility under construction in Chile. Entergy Power Chile, S.A. is obligated to fund up to $20 million for the cost of completing the plant, scheduled for commercial operation in 1999. The other project owner, which is also the developer, is Empresa Nacional de Electricidad, S.A. (Endesa). On July 1, 1997, Entergy Security Company, a wholly-owned subsidiary of Entergy Technology Holding Company (Entergy's principal telecommunications subsidiary), acquired the Ranger American group of companies for an aggregate purchase price of approximately $60.8 million. Ranger American is a leading provider of electronic security services in the largest cities in Texas and in Atlanta, Georgia. This expansion increases Entergy Security's customer total to approximately 140,000 and its annual revenues to more than $53 million. See Note 3 for details regarding the Entergy Corporation common stock that was issued in connection with this acquisition. In September 1997, Entergy Power acquired Kingsnorth Power Ltd. (KPL) for $67 million. KPL owns land in Southeast England and certain rights to build a power station. The acquisition of KPL was financed by borrowings under a BPS50 million credit facility with an international bank. In early October 1997, Entergy Power announced construction of a 740 MW combined cycle gas turbine merchant power plant to be known as Damhead Creek on the KPL site. Construction is scheduled to begin in April 1998, at an estimated cost of $625 million. The target date for commercial operation is the second quarter of 2000. Financing and other project requirements are currently in the final stages of development. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS During the third quarter of 1997, Nantong Entergy Heat and Power Co., Ltd., a cooperative Joint Venture which is 92% owned by Entergy Electric Asia, Ltd., a wholly-owned subsidiary of Entergy Power International Holdings Corporation, commenced construction of a 24 MW cogeneration plant in Nantong, China. The total cost of this project is currently estimated to be approximately $33 million. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, and Note 7 herein, for a discussion of Entergy's major competitive growth businesses. Windfall Profits Tax As a result of Parliamentary elections held on May 1, 1997, the Labour Party gained control of the British government. On July 31, 1997, the British government enacted into law a one-time "windfall profits tax" on privatized industries, including regional electric utilities such as London Electricity. London Electricity's windfall profits tax liability is approximately BPS140 million (approximately $234 million), which will not be deductible for UK corporation tax purposes. Payment of the tax is required in two equal installments, the first due on December 1, 1997, and the second due on December 1, 1998. The British government also decreased the UK corporation tax rate from 33% to 31%, effective as of April 1, 1997. In accordance with SFAS 109, "Accounting for Income Taxes", this reduction in UK corporation tax rates resulted in a one-time reduction in income tax expense of approximately $65 million. The liability for the windfall profits tax (with a corresponding charge against income) and the reduction in London Electricity's deferred income tax liability (with a corresponding reduction in income tax expense) were recorded in July 1997. Catalyst Technologies, Inc. On August 8, 1997, a jury in the Civil District Court of Orleans Parish, Louisiana, returned a verdict against Entergy Enterprises, a wholly-owned non-utility subsidiary of Entergy Corporation, in the amount of $346 million. Catalyst Technologies, Inc. (CTI) alleged in its lawsuit that Entergy Enterprises had agreed to transfer computer software to CTI but breached its obligation to do so, and claimed damages in an amount equaling its purported lost profits. On September 23, 1997, the judge in the case entered a judgment in the amount of the verdict, plus accrued interest from the date of the plaintiff's original demand in the amount of approximately $118 million, which continues to accrue at a rate of approximately $88,000 per day. The judgment in favor of CTI currently is the subject of post-trial motions in which Entergy Enterprises seeks, in the alternative, a judgment notwithstanding the verdict, a new trial or a substantial reduction of the amount awarded to CTI. Entergy Enterprises contended in the trial that it was never obligated to transfer any technology to CTI because CTI never fulfilled the conditions necessary to give rise to such an obligation. Moreover, Entergy Enterprises contended that CTI's claim for lost profits was totally speculative, having been made by a start- up company that has never engaged in any substantial business and having arisen in connection with a product that has never been marketed or sold and has never generated any revenue or profit for Entergy Enterprises. Based on these facts and the advice of counsel, management continues to believe that there are a number of strong legal arguments in support of Entergy Enterprises' position, that the judgment in favor of CTI is contrary to the facts and applicable law, and that either the case will be reversed or the judgment will be reduced to an amount that would not be material to Entergy Corporation. Subject to the outcome of the post-trial motions, which were the subject of oral argument before the court on November 5, 1997, Entergy Enterprises will appeal the judgment of the trial court. Refer to "Other Regulation and Litigation" in Item 1 of the Form 10-K for information regarding the original petition filed by CTI and to Note 1 herein for additional information on related court actions brought by both Entergy and CTI. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Waterford 3 On January 6, 1997, Waterford 3 received from the NRC its Systematic Assessment of License Performance ("SALP") report for the period April 29, 1995 through November 30, 1996. During this period, observed performance declined from the previous SALP report, and three of the four functional areas received lower ratings. Waterford 3 personnel are having periodic performance meetings with NRC personnel, and significant Waterford 3 management changes have been effected in order to address these matters. Additionally, Waterford 3 has instituted a multi-year program to improve performance and is incurring additional costs in doing so. A scheduled 45-day refueling outage for the Waterford 3 nuclear plant began on April 12, 1997. Additional work and two minor incidents caused the outage to be extended from May 27 to mid-June. On May 28, 1997, a start-up transformer at Waterford 3 failed due to an internal fault. A replacement transformer was located and shipped to Waterford 3, where certain plant configuration changes were made to facilitate its installation. After installation of the replacement transformer, the plant was restarted on July 29, 1997. Cajun - River Bend On October 7, 1997, the RUS elected not to become the transferee of Cajun's 30% interest in River Bend. Accordingly, under the terms of the Settlement, Cajun's interest in River Bend will be transferred by Cajun's Trustee in Bankruptcy to Entergy Gulf States at no cost. The transfer is subject to all necessary regulatory approvals, including approval of the NRC. The terms of the transfer provide that Cajun will establish a trust fund in the amount of $125 million to satisfy its obligation for decommissioning its 30% share of the plant. The regulatory and accounting treatment of the plant to be transferred will be determined as soon as the transfer date and conditions are confirmed. See Note 1 herein. Labor Agreements During April 1997, Entergy Gulf States and a union representing 1,000 employees in Texas and Louisiana signed a two-year labor contract (expiring August 14, 1999). The contract stipulates that there will be no layoffs in the next two years and wages will be increased 3% per year in 1997 and 1998. In early July 1997, Entergy Operations and the union representing 317 employees at River Bend, and Entergy Mississippi and the union representing 400 of its employees, signed two-year labor contracts for the period from October 1998 to October 2000 which stipulate that there will be no layoffs of covered employees over the next two years and that wages will be increased 3% in each of the next two years. 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. Operating income from these operations during the three and nine months ended September 30, 1997, was $6.6 million and $15.8 million, respectively, compared to $3.3 million and $11.3 million during the comparable periods in 1996. There were approximately $825 million in deregulated operations net assets as of September 30, 1997. The increase in operating income from these deregulated operations for the three and nine months ended September 30, 1997 was principally due to decreased steam department expenses, partially offset by reduced wholesale jurisdiction revenues. 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 market prices for energy over the remaining life of the assets. Accounting Issues See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" and Note 1 in the Form 10-K for a discussion of the impact of the adoption by Entergy of SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of", effective January 1, 1996. Continued Application of SFAS 71 - As a result of the EPAct, the actions of regulatory bodies, and other factors, the electric utility industry is moving toward a combination of competition and a modified regulatory environment. The domestic utility 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 domestic utility 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. 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 is required to 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. Discontinuation of the application of SFAS 71 could have a material adverse impact on Entergy's financial statements. The SEC has expressed concern regarding the continuing applicability of SFAS 71 to the financial statements of electric utilities that either have been ordered by regulators to adopt transition to competition plans or are in the process of participating with the state legislatures and/or regulators in the development of such plans. While such plans may call for rate caps or decreases, they generally provide for recovery of investments in uneconomic or noncompetitive generating plants and other regulatory assets (together defined as stranded costs). The SEC is concerned that portions of entities subject to such plans may not meet the criteria for the continued application of SFAS 71. The Emerging Issues Task Force (EITF) of the FASB met in May and July of 1997 to address the issues of when such an entity should discontinue the application of SFAS 71, and how SFAS 101, "Regulated Enterprises - Accounting for the Discontinuation of Application of FASB Statement No. 71", should be applied to a portion of an entity subject to such a plan. As a result of these meetings, a consensus was ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS reached that SFAS 71 should be discontinued at a date no later than when the details of the transition to competition plan for all or a portion of the entity subject to such plan are known. Additionally, the EITF reached a consensus that stranded costs which are to be recovered through cash flows derived from another portion of the entity which continues to apply SFAS 71 should not be written off; rather, they should be considered regulatory assets of the segment which will continue to apply SFAS 71. The domestic utility companies' and System Energy's financial statements continue to apply SFAS 71 for their regulated operations, except for those portions of Entergy Gulf States' business described in "Deregulated Utility Operations" above. Although discussions with regulatory authorities regarding retail competition have occurred and are expected to continue, no final transition to competition plans for Entergy's domestic utility subsidiaries have yet been adopted. See Note 1 to the Form 10-K for additional discussion of Entergy's application of SFAS 71. 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 herein for a discussion of proposed changes in the accounting for decommissioning/closure costs and the potential impact of these changes on Entergy. Year 2000 Issues Like many companies, Entergy is currently evaluating its computer software and databases to determine the extent to which modifications are required to prevent problems related to the year 2000, and the resources which will be required to make such modifications. These problems could result in malfunctions in certain software and databases with respect to dates on or after January 1, 2000, unless corrected. Financial Derivatives Derivative instruments have been used by Entergy on a limited basis. Entergy uses financial derivatives primarily to mitigate business risks and not for speculative purposes. See Notes 7 and 9 to the Form 10-K and Note 4 herein for additional information concerning Entergy's derivative instruments outstanding as of December 31, 1996, and September 30, 1997, respectively. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS On February 7, 1997, Entergy Corporation made unconditional its offer to acquire London Electricity. In accordance with the purchase method of accounting, the results of operations for the three and nine months ended September 30, 1996 of Entergy Corporation and subsidiaries reported in the Statements of Consolidated Income and Cash Flows do not include London Electricity's results of operations. Consolidated net income for the three and nine months ended September 30, 1997 reflects London Electricity's results subsequent to February 1, 1997. See Note 7 for additional information regarding London Electricity. Net Income Consolidated net income decreased for the three and nine months ended September 30, 1997 primarily due to the recording of a one-time windfall profits tax at London Electricity and the reversal of the Cajun River Bend litigation accrual at Entergy Gulf States in September 1996, partially offset by a one-time reduction in income tax expense for London Electricity due to a reduction in the UK corporation tax rate from 33% to 31%. The one-time net of tax write-off of River Bend rate deferrals pursuant to SFAS 121 at Entergy Gulf States in January 1996 also partially offset the impact of these items causing the decrease for the nine months ended September 30, 1997. See Note 7 for further discussion of London Electricity. Excluding the one-time items mentioned above, net income for the three months ended September 30, 1997 would have remained relatively unchanged as compared to the same period in 1996. Net income for the nine months ended September 30, 1997 would have decreased $19.2 million primarily due to a decrease in electric revenues and an increase in other operations and maintenance expenses, partially offset by an increase in competitive growth business revenues and a decrease in income tax expenses. Excluding the one-time windfall profits tax and the one-time reduction in the corporate income tax rate for London Electricity, the competitive growth businesses contributed approximately $52.0 million to net income for the nine months ended September 30, 1997. This is primarily due to the inclusion of London Electricity results subsequent to February 1, 1997. Also contributing to the competitive growth businesses' earnings increase for the nine months ended September 30, 1997 was an increase in CitiPower's net income of approximately $23.0 million. CitiPower's earnings increased primarily due to favorable weather trends, lower interest expense, and the recording of restructuring charges in 1996. Significant factors affecting the results of operations and causing variances between the three and nine months ended September 30, 1997 and 1996 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 and nine months ended September 30, 1997 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues ($20.4) ($58.2) Rate riders (1.0) (18.4) Fuel cost recovery (4.8) 18.3 Sales volume/weather 16.3 (19.7) Other revenue (including unbilled) 37.6 8.5 Sales for resale 3.4 (32.4) ----- ------- Total $31.1 ($101.9) ===== ======= ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Electric operating revenues of the domestic utility companies and System Energy increased for the three months ended September 30, 1997 primarily due to an increase in other revenue (primarily unbilled revenue) and higher sales volume partially offset by a decrease in base revenues. Unbilled revenue and sales volume increased as a result of warmer weather in September 1997 as compared to the same period in 1996. Base revenues decreased primarily due to a base rate reduction for Louisiana retail customers that became effective in the third quarter of 1997. Electric operating revenues for the nine months ended September 30, 1997 decreased for the domestic utility companies and System Energy primarily due to lower sales volume caused by decreases in base revenues, rate rider revenues, and sales for resale to non- associated utilities. These decreases were partially offset by an increase in fuel adjustment revenues. Base revenues decreased primarily due to rate reductions for Louisiana retail customers, aggressive pricing strategies for targeted customer segments, and a change in sales mix from residential and commercial customers to industrial customers at Entergy Gulf States. The reduction of rate rider revenues is due to an MPSC decision in October 1996 to reduce Entergy Mississippi's Grand Gulf 1 rate rider based on an estimate of costs over the next year. The decrease in sales for resale to non- associated utilities is primarily due to changes in generation requirements and availability among the domestic utility companies, principally Entergy Arkansas and Entergy Gulf States. Fuel adjustment revenues, which do not affect net income, increased for the nine months ended September 30, 1997 due to a PUCT order that approved recovery of under-recovered fuel expenses by Entergy Gulf States and due to shifting generation requirements as a result of the extended Waterford 3 refueling outage. See Note 2 for further discussion of the rate and regulatory matters. Competitive growth business revenues increased for the three and nine months ended September 30, 1997 primarily due to the February 1997 acquisition of London Electricity. London Electricity generated revenues of $438 million and $1.3 billion for the three and nine months ended September 30, 1997, respectively. Also contributing to the increases in competitive growth business revenues were increases in revenue at Entergy Power Marketing, Inc. of $166.2 million and $221.2 million for the three and nine months ended September 30, 1997, respectively. These increases were offset by increased power purchased for resale as discussed below. Expenses Operating expenses for the three months ended September 30, 1997 and the nine months ended September 30, 1997 include the operating expenses of London Electricity, which were not included in the prior year's financial statements. Operating expenses for the three and nine months ended September 30, 1997, excluding London Electricity, increased primarily due to increases in power purchased for resale by Entergy Power Marketing Corporation, depreciation, amortization, and decommissioning expense, and other operation and maintenance expenses, partially offset by a reduction in fuel expenses. The increase in purchased power is primarily the result of a higher level of power trading by Entergy Power Marketing Corporation. The increase in depreciation, amortization, and decommissioning is due to plant additions and improvements. Other operation and maintenance expenses increased due to increased litigation loss reserves at Entergy Mississippi and contract work and maintenance performed by Entergy Louisiana and Entergy Mississippi. Fuel expenses decreased primarily due to lower sales volume resulting from milder weather in the first half of the year. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other Other income decreased for the three and nine months ended September 30, 1997 primarily due to the one-time windfall profits tax impact on London Electricity. Offsetting the decrease for the nine months ended September 30, 1997 was the January 1996 net of tax write- off of River Bend rate deferrals at Entergy Gulf States pursuant to SFAS 121. Excluding London Electricity, other income decreased for the three months ended September 30, 1997 due to the reversal of the accrual for Cajun-River Bend litigation in September 1996 at Entergy Gulf States. In addition, excluding London Electricity, other income increased for the nine months ended September 30, 1997 primarily due to the previously mentioned 1996 write-off . Interest on long-term debt, excluding London Electricity, decreased for the three and nine months ended September 30, 1997 due primarily to ongoing retirement and refinancing of higher cost debt. Interest on debt associated with the London Electricity acquisition more than offset this decrease. For the three months ended September 30, 1997 and 1996 the effective income tax rates were 55.71% and 39.26%, respectively. The increase is primarily due to the impact of the one-time windfall profits tax which was not deductible for UK corporation tax purposes, partially offset by a reduction in the UK corporation tax rate from 33% to 31%. For the nine months ended September 30, 1997 and 1996 the effective income tax rates were 41.93% and 45.76%, respectively. The decrease is primarily due to the January 1996 net of tax write-off of River Bend rate deferrals at Entergy Gulf States pursuant to SFAS 121. See Note 7 for a discussion of London Electricity.
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Nine Months Ended 1997 1996 1997 1996 (In Thousands, Except Share Data) Operating Revenues: Electric $1,998,058 $1,966,969 $4,952,725 $5,054,647 Natural gas 17,516 21,402 98,037 107,866 Steam products 11,142 15,144 35,103 45,936 Competitive growth businesses 770,871 144,817 1,935,565 392,552 ---------- ---------- ---------- ---------- Total 2,797,587 2,148,332 7,021,430 5,601,001 ---------- ---------- ---------- ---------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 509,532 527,769 1,248,052 1,309,082 Purchased power 656,214 177,824 1,593,270 525,134 Nuclear refueling outage expenses 18,675 12,196 49,083 40,144 Other operation and maintenance 466,380 394,526 1,358,929 1,127,823 Depreciation, amortization, and decommissioning 246,736 196,937 716,051 586,604 Taxes other than income taxes 92,233 90,572 275,429 269,485 Rate deferrals (8,388) (3,767) (25,872) (34,842) Amortization of rate deferrals 143,588 142,512 327,766 324,236 ---------- ---------- ---------- ---------- Total 2,124,970 1,538,569 5,542,708 4,147,666 ---------- ---------- ---------- ---------- Operating Income 672,617 609,763 1,478,722 1,453,335 ---------- ---------- ---------- ---------- Other Income (Deductions): Windfall Profit tax - London Electricity (234,080) - (234,080) - Allowance for equity funds used during construction 1,777 2,399 7,845 7,753 Write-off of River Bend rate deferrals - - - (194,498) Miscellaneous - net (914) 62,330 45,703 85,791 ---------- ---------- ---------- ---------- Total (233,217) 64,729 (180,532) (100,954) ---------- ---------- ---------- ---------- Interest Charges: Interest on long-term debt 208,909 164,795 599,709 512,342 Other interest - net 16,541 17,221 39,594 39,166 Distributions on preferred securities of subsidiaries 4,709 1,947 13,591 1,947 Allowance for borrowed funds used during construction (1,455) (2,032) (6,332) (6,499) ---------- ---------- ---------- ---------- Total 228,704 181,931 646,562 546,956 ---------- ---------- ---------- ---------- Income Before Income Taxes 210,696 492,561 651,628 805,425 Income Taxes 117,375 193,395 273,243 368,548 ---------- ---------- ---------- ---------- Net Income 93,321 299,166 378,385 436,877 Preferred and Preference Dividend Requirements of Subsidiaries and Other 12,379 19,286 41,405 55,745 ---------- ---------- ---------- ---------- Earnings Applicable to Common Stock $80,942 $279,880 $336,980 $381,132 ========== ========== ========== ========== Earnings per average common share $0.33 $1.22 $1.41 $1.67 Dividends declared per common share $0.90 $0.45 $1.80 $1.35 Average number of common shares outstanding 242,172,319 228,603,813 238,653,723 228,141,842 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Operating Activities: Net income $378,385 $436,877 Noncash items included in net income: Write-off of River Bend rate deferrals - 194,498 Change in rate deferrals/excess capacity-net 335,818 316,184 Depreciation, amortization, and decommissioning 716,051 586,604 Deferred income taxes and investment tax credits (169,887) (57,324) Allowance for equity funds used during construction (7,845) (7,753) Changes in working capital: Receivables (175,147) (160,616) Fuel inventory 68,892 (260) Accounts payable 59,540 (73,293) Taxes accrued 387,233 226,147 Windfall profit tax liability 234,080 - Interest accrued (30,923) (14,350) Other working capital accounts (103,731) (131,331) Decommissioning trust contributions (67,259) (36,675) Other (50,492) (9,970) ---------- ---------- Net cash flow provided by operating activities 1,574,715 1,268,738 ---------- ---------- Investing Activities: Construction/capital expenditures (554,638) (425,652) Allowance for equity funds used during construction 7,845 7,753 Nuclear fuel purchases (52,323) (118,958) Proceeds from sale/leaseback of nuclear fuel 91,504 107,035 Acquisition of London Electricity, net of cash acquired (1,951,701) - Acquisition of CitiPower - (1,156,112) Acquisition of security companies and assets (71,258) - Investment in nonregulated/nonutility properties 6,652 (4,151) Proceeds from sale of Hub Power stock 26,530 16,503 Proceeds from sale of investment in Transener 27,500 - Proceeds from sale of ISES - 39,398 Other (25,863) (31,285) ---------- ---------- Net cash flow used in investing activities (2,495,752) (1,565,469) ---------- ----------
ENTERGY CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Financing Activities: Proceeds from the issuance of: General and refunding mortgage bonds 64,827 39,608 First mortgage bonds 84,064 431,906 Bank notes and other long-term debt 1,717,569 1,004,243 Preferred securities of subsidiaries trust 82,323 125,963 Common stock 238,193 36,869 Retirement of: First mortgage bonds (327,692) (695,392) General and refunding mortgage bonds (7,622) (56,000) Other long-term debt (76,583) (143,373) Redemption of preferred stock (119,367) (91,879) Changes in short-term borrowings - net 103,454 75,025 Dividends paid: Preferred stock (39,540) (54,793) Common stock (328,182) (301,675) ---------- ---------- Net cash flow provided by financing activities 1,391,444 370,502 ---------- ---------- Effect of exchange rates on cash and cash equivalents 2,655 66 ---------- ---------- Net increase in cash and cash equivalents 473,062 73,837 Cash and cash equivalents at beginning of period 388,703 533,590 ---------- ---------- Cash and cash equivalents at end of period $861,765 $607,427 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $650,190 $526,252 Income taxes $116,761 $236,288 Noncash investing and financing activities: Capital lease obligations incurred - $16,358 Change in unrealized appreciation/(depreciation) of decommissioning trust assets $16,309 ($12,460) Treasury shares issued to acquire Ranger American $21,464 - See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) ASSETS Current Assets: Cash and cash equivalents: Cash $99,476 $34,807 Temporary cash investments - at cost, which approximates market 762,289 346,782 Special deposits - 7,114 ---------- ---------- Total cash and cash equivalents 861,765 388,703 Notes receivable 9,316 1,384 Accounts receivable: Customer (less allowance for doubtful accounts of $26.2 million in 1997 and $9.2 million in 1996) 618,849 324,687 Other 207,578 99,066 Accrued unbilled revenues 512,138 351,429 Deferred fuel 154,003 122,184 Fuel inventory 70,711 139,603 Materials and supplies - at average cost 360,203 339,622 Rate deferrals 327,821 444,543 Prepayments and other 171,346 151,312 ---------- ---------- Total 3,293,730 2,362,533 ---------- ---------- Other Property and Investments: Decommissioning trust funds 425,221 357,962 Non-regulated investments 557,796 513,058 Other 82,686 59,053 ---------- ---------- Total 1,065,703 930,073 ---------- ---------- Utility Plant: Electric 25,374,226 22,811,164 Plant acquisition adjustment - Entergy Gulf States 443,227 455,425 Electric plant under leases 684,367 679,991 Property under capital leases - electric 138,462 147,277 Natural gas 168,099 168,143 Steam products 81,743 81,743 Construction work in progress 391,524 401,676 Nuclear fuel under capital leases 263,937 250,651 Nuclear fuel 61,832 112,625 ---------- ---------- Total 27,607,417 25,108,695 Less - accumulated depreciation and amortization 9,477,321 8,885,572 ---------- ---------- Utility plant - net 18,130,096 16,223,123 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 180,397 399,493 SFAS 109 regulatory asset - net 1,189,341 1,196,041 Unamortized loss on reacquired debt 201,977 217,664 Other regulatory assets 470,652 435,652 Long-term receivables 215,040 216,082 CitiPower license (net of $25.0 million of amortization) 545,391 606,214 London Electricity license (net of $22.4 million 1,310,919 - of amortization) Other 506,930 379,419 ---------- ---------- Total 4,620,647 3,450,565 ---------- ---------- TOTAL $27,110,176 $22,966,294 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Currently maturing long-term debt $273,675 $345,620 Notes payable 387,229 20,686 Accounts payable 793,625 554,558 Customer deposits 185,336 155,534 Taxes accrued 654,816 180,340 Accumulated deferred income taxes 92,069 78,010 Interest accrued 193,465 203,425 Dividends declared 117,732 8,950 Obligations under capital leases 169,568 151,287 Other 112,768 184,157 ---------- ---------- Total 2,980,283 1,882,567 ---------- ---------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,575,808 3,770,760 Accumulated deferred investment tax credits 592,925 607,641 Obligations under capital leases 239,098 247,360 Other 1,653,119 1,298,306 ---------- ---------- Total 7,060,950 5,924,067 ---------- ---------- Long-term debt 9,394,235 7,590,804 Subsidiaries' preferred stock with sinking fund 196,237 216,986 Subsidiary's preference stock 150,000 150,000 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 215,000 130,000 Shareholders' Equity: Subsidiaries' preferred stock without sinking fund 334,454 430,955 Common stock, $.01 par value, authorized 500,000,000 shares; issued 243,431,490 shares in 1997 and 234,456,457 shares in 1996 2,434 2,345 Paid-in capital 4,546,564 4,320,591 Retained earnings 2,246,729 2,341,703 Cumulative foreign currency translation adjustment (5,682) 21,725 Less - treasury stock (308,202 shares in 1997 and 1,496,118 shares in 1996, at cost) 11,028 45,449 ---------- ---------- Total 7,113,471 7,071,870 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $27,110,176 $22,966,294 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 803.6 $ 800.6 $ 3.0 - Commercial 466.2 473.7 (7.5) (2) Industrial 532.6 548.6 (16.0) (3) Governmental 46.8 48.5 (1.7) (4) --------- --------- ------- Total retail 1,849.2 1,871.4 (22.2) (1) Sales for resale 110.1 106.7 3.4 3 Other 38.8 (11.1) 49.9 449 --------- --------- ------- Total $ 1,998.1 $ 1,967.0 $ 31.1 2 ========= ========= ======= Billed Electric Energy Sales (Millions of kWh): Residential 9,892 9,631 261 3 Commercial 6,563 6,378 185 3 Industrial 11,425 11,716 (291) (2) Governmental 693 703 (10) (1) --------- --------- ------- Total retail 28,573 28,428 145 1 Sales for resale 2,883 3,007 (124) (4) --------- --------- ------- Total 31,456 31,435 21 - ========= ========= ======= Nine Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 1,759.9 $ 1,824.1 ($64.2) (4) Commercial 1,197.0 1,208.3 (11.3) (1) Industrial 1,506.5 1,505.9 0.6 - Governmental 128.8 128.5 0.3 - --------- --------- ------- Total retail 4,592.2 4,666.8 (74.6) (2) Sales for resale 267.8 300.2 (32.4) (11) Other 92.7 87.6 5.1 6 --------- --------- ------- Total $ 4,952.7 $ 5,054.6 ($101.9) (2) ========= ========= ======= Billed Electric Energy Sales (Millions of kWh): Residential 21,823 22,603 (780) (3) Commercial 16,410 16,254 156 1 Industrial 33,560 33,145 415 1 Governmental 1,886 1,850 36 2 --------- --------- ------- Total retail 73,679 73,852 (173) - Sales for resale 7,136 8,817 (1,681) (19) --------- --------- ------- Total 80,815 82,669 (1,854) (2) ========= ========= ======= ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended September 30, 1997 primarily due to an increase in electric operating revenues and a decrease in other operation and maintenance expenses, partially offset by higher income taxes. Net income decreased for the nine months ended September 30, 1997 primarily as a result of a decrease in electric operating revenues, partially offset by lower income taxes. Significant factors affecting the results of operations and causing variances between the three and nine months ended September 30, 1997 and 1996 are discussed under "Revenues and Sales", "Expenses", and "Other" below. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 1997 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues ($3.3) ($3.1) Rate riders 7.3 6.8 Fuel cost recovery 2.1 5.3 Sales volume/weather 7.3 (7.4) Other revenue (including unbilled) 11.9 (4.3) Sales for resale (8.7) (33.4) ----- ------- Total $16.6 ($36.1) ===== ======= Electric operating revenues increased for the three months ended September 30, 1997 primarily due to an increase in other revenue, sales volume and rate riders, partially offset by a decrease in sales for resale. The increases in other revenue (primarily unbilled revenue) and sales volume are a result of warmer weather in September 1997 as compared to the same period in 1996 and increased usage due to customer growth. The increase in rate rider revenues was due to an increase in Grand Gulf 1 rate rider revenues as a result of increased usage related to warmer weather during September 1997. The decrease in sales for resale is due to a decrease in sales to associated companies primarily due to changes in the generation requirements and availability among the domestic utility companies. Electric operating revenues decreased for the nine months ended September 30, 1997 primarily as a result of decreased sales for resale and lower sales volume, partially offset by an increase in rate rider revenues. The decrease in sales for resale resulted from a decrease in sales to associated companies primarily due to changes in the generation requirements and availability among the domestic utility companies. Sales volume decreased because of milder weather during the first half of the year. The increase in rate rider revenues was due to an increase in Grand Gulf 1 rate rider revenues as a result of increased usage related to warmer weather during September 1997. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Operating expenses decreased slightly for the three months ended September 30, 1997 primarily due to a decrease in fuel expenses and other operation and maintenance expenses. These decreases were largely offset by an increase in purchased power expenses and an increase in the amortization of Grand Gulf 1 rate deferrals. Purchased power expenses increased due to a shift from higher priced fuel to lower priced purchased power. The increase in the amortization of Grand Gulf 1 rate deferrals is due to an increase in amortization prescribed in the Grand Gulf 1 rate phase-in plan. Other operation and maintenance expenses decreased for the three months ended September 30, 1997 primarily due to a decrease in loss reserves and rental expense. Operating expenses decreased for the nine months ended September 30, 1997 primarily due to decreases in fuel and purchased power expenses, partially offset by an increase in the amortization of Grand Gulf 1 rate deferrals. Fuel and purchased power expenses decreased primarily as a result of lower sales volume due to milder weather in the first half of the year and lower priced purchased power costs. The increase in the amortization of Grand Gulf 1 rate deferrals is due to an increase in amortization prescribed in the Grand Gulf 1 rate phase-in plan. Other Miscellaneous other income - net decreased for the three and nine months ended September 30, 1997 due to reduced Grand Gulf 1 carrying charges as a result of a decline in the deferral balance which does not impact net income. For the three months ended September 30, 1997 and 1996 the effective income tax rates were relatively unchanged. For the nine months ended September 30, 1997 and 1996 the effective income tax rates were 41.93% and 45.76%, respectively. The increase is primarily due to a decrease in regulatory operating reserves which receive flow through treatment.
ENTERGY ARKANSAS, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Nine Months Ended 1997 1996 1997 1996 (In Thousands) (In Thousands) Operating Revenues $545,849 $529,276 $1,344,199 $1,380,347 -------- -------- ---------- ---------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 72,147 84,869 201,494 216,544 Purchased power 123,871 114,106 327,725 334,362 Nuclear refueling outage expenses 7,639 7,087 19,905 22,170 Other operation and maintenance 80,280 88,629 252,081 257,765 Depreciation, amortization, and decommissioning 42,745 42,112 125,529 123,928 Taxes other than income taxes 9,114 8,546 27,643 27,989 Amortization of rate deferrals 61,365 52,608 129,370 119,078 -------- -------- ---------- ---------- Total 397,161 397,957 1,083,747 1,101,836 -------- -------- ---------- ---------- Operating Income 148,688 131,319 260,452 278,511 -------- -------- ---------- ---------- Other Income: Allowance for equity funds used during construction - 875 2,572 3,026 Miscellaneous - net 4,257 7,735 14,987 23,865 -------- -------- ---------- ---------- Total 4,257 8,610 17,559 26,891 -------- -------- ---------- ---------- Interest Charges: Interest on long-term debt 23,368 24,395 71,595 74,162 Other interest - net 1,055 1,211 2,850 3,498 Distributions on preferred securities of subsidiary 1,275 652 3,825 652 Allowance for borrowed funds used during construction - (522) (1,632) (1,821) -------- -------- ---------- ---------- Total 25,698 25,736 76,638 76,491 -------- -------- ---------- ---------- Income Before Income Taxes 127,247 114,193 201,373 228,911 Income Taxes 48,996 43,402 75,189 83,140 -------- -------- ---------- ---------- Net Income 78,251 70,791 126,184 145,771 Preferred Stock Dividend Requirements and Other 2,733 4,359 8,363 13,243 -------- -------- ---------- ---------- Earnings Applicable to Common Stock $75,518 $66,432 $117,821 $132,528 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Operating Activities: Net income $126,184 $145,771 Noncash items included in net income: Change in rate deferrals/excess capacity-net 122,556 104,544 Depreciation, amortization, and decommissioning 125,529 123,928 Deferred income taxes and investment tax credits (58,694) (50,194) Allowance for equity funds used during construction (2,572) (3,026) Changes in working capital: Receivables (13,783) (37,379) Fuel inventory 40,975 427 Accounts payable (20,826) (13,901) Taxes accrued 95,308 54,444 Interest accrued 767 (1,418) Other working capital accounts (26,638) 25,140 Decommissioning trust contributions (11,129) (11,831) Provision for estimated losses and reserves 5,878 4,069 Other 16,950 3,633 --------- --------- Net cash flow provided by operating activities 400,505 344,207 --------- --------- Investing Activities: Construction expenditures (101,796) (102,709) Allowance for equity funds used during construction 2,572 3,026 Nuclear fuel purchases (36,633) (26,064) Proceeds from sale/leaseback of nuclear fuel 36,553 25,437 --------- --------- Net cash flow used in investing activities (99,304) (100,310) --------- --------- Financing Activities: Proceeds from the issuance of: First mortgage bonds 84,064 84,256 Preferred securities of subsidiary trust - 58,168 Retirement of first mortgage bonds (117,587) (112,807) Redemption of preferred stock (4,000) (4,000) Dividends paid: Common stock (97,200) (66,600) Preferred stock (8,462) (13,342) --------- --------- Net cash flow used in financing activities (143,185) (54,325) --------- --------- Net increase in cash and cash equivalents 158,016 189,572 Cash and cash equivalents at beginning of period 43,857 11,798 --------- --------- Cash and cash equivalents at end of period $201,873 $201,370 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $63,660 $69,503 Income taxes $29,011 $77,041 Noncash investing and financing activities: Capital lease obligations incurred - $16,358 Change in unrealized appreciation (depreciation) of decommissioning trust assets $12,867 ($8,645) See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 ASSETS (In Thousands) Current Assets: Cash and cash equivalents: Cash $6,914 $5,117 Temporary cash investments - at cost, which approximates market: Associated companies 44,193 17,462 Other 150,766 21,278 ---------- ---------- Total cash and cash equivalents 201,873 43,857 Accounts receivable: Customer (less allowance for doubtful accounts of $2.3 million in 1997 and 1996) 96,564 71,144 Associated companies 27,941 45,303 Other 2,965 5,862 Accrued unbilled revenues 113,386 104,764 Fuel inventory - at average cost 16,344 57,319 Materials and supplies - at average cost 80,967 72,976 Rate deferrals 104,488 153,141 Deferred excess capacity 1,305 9,005 Deferred nuclear refueling outage costs 32,384 24,534 Prepayments and other 9,800 7,491 ---------- ---------- Total 688,017 595,396 ---------- ---------- Other Property and Investments: Investment in subsidiary companies - at equity 11,211 11,211 Decommissioning trust fund 234,396 203,274 Other - at cost (less accumulated depreciation) 3,915 5,058 ---------- ---------- Total 249,522 219,543 ---------- ---------- Utility Plant: Electric 4,687,416 4,578,728 Property under capital leases 55,736 57,869 Construction work in progress 77,270 83,524 Nuclear fuel under capital lease 82,444 79,103 Nuclear fuel - 27,500 ---------- ---------- Total 4,902,866 4,826,724 Less - accumulated depreciation and 2,101,433 1,976,204 amortization ---------- ---------- Utility plant - net 2,801,433 2,850,520 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 9,046 75,249 SFAS 109 regulatory asset - net 255,191 244,767 Unamortized loss on reacquired debt 54,714 56,664 Other regulatory assets 76,647 80,257 Other 30,631 31,421 ---------- ---------- Total 426,229 488,358 ---------- ---------- TOTAL $4,165,201 $4,153,817 ========== ========== See Notes to Financial Statements. ENTERGY ARKANSAS, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands) Current Liabilities: Currently maturing long-term debt $17,465 $32,465 Notes payable 667 667 Accounts payable: Associated companies 57,115 91,205 Other 83,353 97,589 Customer deposits 24,298 21,800 Taxes accrued 149,502 54,194 Accumulated deferred income taxes 48,462 70,506 Interest accrued 28,392 27,625 Co-owner advances 7,858 33,873 Deferred fuel cost 14,643 6,955 Obligations under capital leases 48,995 53,012 Other 25,308 17,967 ---------- ---------- Total 506,058 507,858 ---------- ---------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 766,843 785,994 Accumulated deferred investment tax credits 105,001 108,307 Obligations under capital leases 89,084 83,940 Other 139,906 113,998 ---------- ---------- Total 1,100,834 1,092,239 ---------- ---------- Long-term debt 1,243,356 1,255,388 Preferred stock with sinking fund 36,027 40,027 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 60,000 Shareholders' Equity: Preferred stock without sinking fund 116,350 116,350 Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares 470 470 Paid-in capital 590,169 590,169 Retained earnings 511,937 491,316 ---------- ---------- Total 1,218,926 1,198,305 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $4,165,201 $4,153,817 ========== ========== See Notes to Financial Statements. ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 1997 and 1996 Three Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 194.1 $ 187.0 $ 7.1 4 Commercial 105.5 102.4 3.1 3 Industrial 112.6 109.6 3.0 3 Governmental 5.2 5.0 0.2 4 ------- ------- ------ Total retail 417.4 404.0 13.4 3 Sales for resale Associated companies 53.8 68.8 (15.0) (22) Non-associated companies 67.0 60.7 6.3 10 Other 7.6 (4.3) 11.9 277 ------- ------- ------ Total $ 545.8 $ 529.2 $ 16.6 3 ======= ======= ======= Billed Electric Energy Sales (Millions of kWh): Residential 2,031 1,971 60 3 Commercial 1,391 1,353 38 3 Industrial 1,833 1,759 74 4 Governmental 67 66 1 2 ------- ------- ------ Total retail 5,322 5,149 173 3 Sales for resale Associated companies 2,102 2,855 (753) (26) Non-associated companies 2,012 1,726 286 17 ------- ------- ------ Total 9,436 9,730 (294) (3) ======= ======= ====== Nine Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 430.7 $ 437.4 ($6.7) (2) Commercial 254.0 250.4 3.6 1 Industrial 278.4 274.6 3.8 1 Governmental 14.1 13.2 0.9 7 --------- --------- ------ Total retail 977.2 975.6 1.6 - Sales for resale Associated companies 176.2 204.2 (28.0) (14) Non-associated companies 162.2 167.6 (5.4) (3) Other 28.6 32.9 (4.3) (13) --------- --------- ------ Total $ 1,344.2 $ 1,380.3 ($36.1) (3) ========= ========= ====== Billed Electric Energy Sales (Millions of kWh): Residential 4,640 4,816 (176) (4) Commercial 3,371 3,387 (16) - Industrial 4,944 4,850 94 2 Governmental 184 180 4 2 --------- --------- ------ Total retail 13,139 13,233 (94) (1) Sales for resale Associated companies 7,982 8,622 (640) (7) Non-associated companies 5,023 5,434 (411) (8) --------- --------- ------ Total 26,144 27,289 (1,145) (4) ========= ========= ====== ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended September 30, 1997 primarily as a result of a reduction in other income- miscellaneous due to the reversal of the accrual for the Cajun-River Bend litigation in September 1996. This decrease was partially offset by an increase in electric operating revenues and decreases in other operation and maintenance expenses, interest on long-term debt, and lower income taxes. Net income increased for the nine months ended September 30, 1997 primarily due to the $174 million net of tax write-off of River Bend rate deferrals required by the adoption of SFAS 121 in the first quarter of 1996. Excluding the effect of the write-off and the third quarter 1996 reversal of the Cajun-River Bend litigation accrual, net income for the nine months ended September 30, 1997 would have increased approximately 2.8% due to a decrease in other operation and maintenance expenses and reduced interest on long-term debt. Significant factors affecting the results of operations and causing variances between the three and nine months ended September 30, 1997 and 1996 are discussed under "Revenues and Sales", "Expenses", and "Other" below. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 1997 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues ($0.3) ($26.8) Fuel cost recovery (5.0) 16.9 Sales volume/weather 14.6 18.4 Other revenue (including unbilled) 7.0 (0.1) Sales for resale (4.0) (19.9) ----- ------- Total $12.3 ($11.5) ===== ======= Electric operating revenues increased for the three months ended September 30, 1997 primarily due to higher sales volume and increased other revenue (primarily unbilled revenue). Sales volume increased primarily due to an increase in sales to industrial customers, in particular, certain cogeneration customers who purchased electricity from Entergy Gulf States for less than their production cost. Unbilled revenue increased as a result of warmer weather in September 1997 as compared to the same period in 1996. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Electric operating revenues decreased for the nine months ended September 30, 1997 as a result of a decrease in base revenues and sales for resale, partially offset by increased fuel adjustment revenues, which do not affect net income, and higher sales volume. Base revenues decreased primarily due to rate reductions implemented for Louisiana retail customers in February 1997, aggressive pricing strategies for targeted customer segments, and a change in the sales mix from residential customers to industrial customers. Sales for resale decreased primarily due to decreased sales to non-associated customers. Fuel adjustment revenues increased due to a PUCT order that approved recovery of under-recovered fuel expenses. See Note 2 for further discussion. Sales volume increased primarily due to an increase in sales to certain industrial customers as noted above. Gas operating revenues increased for the nine months ended September 30, 1997 due to an increase in the fuel factor granted by the LPSC. This increase permits recovery of previously deferred gas costs. Steam operating revenues decreased for the three and nine months ended September 30, 1997 primarily due to increased customer requirements in 1996. Expenses Operating expenses increased slightly for the three and nine months ended September 30, 1997 primarily due to increased purchased power expenses, partially offset by a decrease in other operation and maintenance expenses. Purchased power increased due to increased energy requirements combined with an increase in price. The decrease in other operation and maintenance expenses is primarily due to a decrease in the reserve for Cajun's unpaid portion of River Bend related costs, which is reflected in long-term receivables. Payments into the registry of the United States District Court for the Middle District of Louisiana for Entergy Gulf States' portion of expenses for Big Cajun 2, Unit 3 are expected to be recovered during 1997 as a part of the settlement of the disputes between Cajun and Entergy. See Note 1 for further discussion. Amortization of rate deferrals increased for the nine months ended September 30, 1997 based on the LPSC-approved River Bend phase-in plan. See Note 2 for further discussion. Other Other income decreased for the three months ended September 30, 1997 due to the decrease in miscellaneous - net resulting from the reversal of the accrual for Cajun-River Bend litigation in September 1996. 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, the litigation accrual was reversed, resulting in miscellaneous income in 1996. Other income increased for the nine months ended September 30, 1997 primarily due to the write-off of River Bend rate deferrals required by the adoption of SFAS 121 in the first quarter of 1996, partially offset by the reversal of the accrual for the Cajun-River Bend litigation as discussed above. Interest charges decreased for the three and nine months ended September 30, 1997 due to the retirement of certain high cost long- term debt. For the three months ended September 30, 1997 and 1996, the effective income tax rates were relatively unchanged. For the nine months ended September 30, 1997 and 1996, the effective income tax rates were 37.36.% and 119.50%, respectively. The decrease is primarily due to the River Bend SFAS 121 write-off of $194.5 million in January 1996.
ENTERGY GULF STATES, INC. STATEMENTS OF INCOME (LOSS) For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Nine Months Ended 1997 1996 1997 1996 (In Thousands) (In Thousands) Operating Revenues: Electric $584,357 $572,040 $1,490,234 $1,501,707 Natural gas 4,476 4,946 32,387 26,685 Steam products 11,141 15,144 35,102 45,936 -------- -------- ---------- ---------- Total 599,974 592,130 1,557,723 1,574,328 -------- -------- ---------- ---------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 152,511 171,451 411,595 413,917 Purchased power 93,208 68,619 238,977 223,213 Nuclear refueling outage expenses 1,569 1,132 6,787 6,064 Other operation and maintenance 93,978 102,333 269,422 296,805 Depreciation, amortization, and decommissioning 53,768 51,417 160,569 154,172 Taxes other than income taxes 25,800 26,837 81,810 78,376 Amortization of rate deferrals 20,775 18,319 61,541 54,281 -------- -------- ---------- ---------- Total 441,609 440,108 1,230,701 1,226,828 -------- -------- ---------- ---------- Operating Income 158,365 152,022 327,022 347,500 -------- -------- ---------- ---------- Other Income (Deductions): Allowance for equity funds used during construction 235 705 1,686 1,937 Write-off of River Bend rate deferrals - - - (194,498) Miscellaneous - net 7,029 55,140 15,618 65,770 -------- -------- ---------- ---------- Total 7,264 55,845 17,304 (126,791) -------- -------- ---------- ---------- Interest Charges: Interest on long-term debt 40,516 44,583 124,257 137,547 Other interest - net 4,704 10,349 8,420 12,258 Distributions on preferred securities of subsidiary 1,859 - 5,041 - Allowance for borrowed funds used during construction (156) (600) (1,395) (1,656) -------- -------- ---------- ---------- Total 46,923 54,332 136,323 148,149 -------- -------- ---------- ---------- Income Before Income Taxes 118,706 153,535 208,003 72,560 Income Taxes 47,966 62,570 77,700 86,712 -------- -------- ---------- ---------- Net Income (Loss) 70,740 90,965 130,303 (14,152) Preferred and Preference Stock Dividend Requirements and Other 5,025 7,212 18,963 21,497 -------- -------- ---------- ---------- Earnings (Loss) Applicable to Common Stock $65,715 $83,753 $111,340 ($35,649) ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Operating Activities: Net income (loss) $130,303 ($14,152) Noncash items included in net income (loss): Write-off of River Bend rate deferrals - 194,498 Change in rate deferrals 60,822 54,281 Depreciation, amortization, and decommissioning 160,569 154,172 Deferred income taxes and investment tax credits 22,299 86,063 Allowance for equity funds used during construction (1,686) (1,937) Changes in working capital: Receivables (55,099) (24,352) Fuel inventory 19,761 (11,734) Accounts payable 26,758 (35,908) Taxes accrued 60,741 12,664 Interest accrued 6,211 3,591 Deferred fuel (29,208) (53,538) Other working capital accounts (4,059) (70,058) Decommissioning trust contributions (5,637) (4,442) Provision for estimated losses and reserves (16,811) (3,085) Other 7,586 (22,663) --------- --------- Net cash flow provided by operating activities 382,550 263,400 --------- --------- Investing Activities: Construction expenditures (96,998) (122,349) Allowance for equity funds used during construction 1,686 1,937 Nuclear fuel purchases (11,580) (22,193) Proceeds from sale/leaseback of nuclear fuel 11,580 23,592 --------- --------- Net cash flow used in investing activities (95,312) (119,013) --------- --------- Financing Activities: Proceeds from the issuance of: Long-term debt - 780 Preferred securities of subsidiary trust 82,323 - Retirement of: First mortgage bonds (57,240) (79,234) Other long-term debt (50,865) (50,425) Redemption of preferred and preference stock (93,367) (10,179) Dividends paid: Common stock (48,200) - Preferred and preference stock (16,960) (21,328) --------- --------- Net cash flow used in financing activities (184,309) (160,386) --------- --------- Net increase (decrease) in cash and cash equivalents 102,929 (15,999) Cash and cash equivalents at beginning of period 122,406 234,604 --------- --------- Cash and cash equivalents at end of period $225,335 $218,605 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $118,834 $128,496 Income taxes $2,631 $80 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets $2,129 ($765) See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) ASSETS Current Assets: Cash and cash equivalents: Cash $11,092 $6,573 Temporary cash investments - at cost, which approximates market: Associated companies 44,749 45,234 Other 169,494 70,599 ---------- ---------- Total cash and cash equivalents 225,335 122,406 Accounts receivable: Customer (less allowance for doubtful accounts of $2.0 million in 1997 and 1996) 110,482 87,883 Associated companies 11,623 2,777 Other 42,605 30,758 Accrued unbilled revenues 87,158 75,351 Deferred fuel costs 128,711 99,503 Accumulated deferred income taxes 22,821 56,714 Fuel inventory - at average cost 25,248 45,009 Materials and supplies - at average cost 88,445 86,157 Rate deferrals 45,844 105,456 Prepayments and other 27,130 16,321 ---------- ---------- Total 815,402 728,335 ---------- ---------- Other Property and Investments: Decommissioning trust fund 51,243 41,983 Other - at cost (less accumulated depreciation) 38,596 38,358 ---------- ---------- Total 89,839 80,341 ---------- ---------- Utility Plant: Electric 7,189,201 7,112,021 Natural Gas 45,399 45,443 Steam products 81,743 81,743 Property under capital leases 69,508 72,800 Construction work in progress 53,712 112,137 Nuclear fuel under capital lease 58,292 49,833 ---------- ---------- Total 7,497,855 7,473,977 Less - accumulated depreciation and amortization 2,970,628 2,846,083 ---------- ---------- Utility plant - net 4,527,227 4,627,894 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 100,679 120,158 SFAS 109 regulatory asset - net 380,494 372,817 Unamortized loss on reacquired debt 49,690 54,761 Other regulatory assets 87,200 45,139 Long-term receivables 215,040 216,082 Other 227,710 185,921 ---------- ---------- Total 1,060,813 994,878 ---------- ---------- TOTAL $6,493,281 $6,431,448 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Currently maturing long-term debt $150,890 $160,865 Accounts payable: Associated companies 53,514 55,630 Other 114,415 85,541 Customer deposits 31,435 25,572 Taxes accrued 96,888 36,147 Interest accrued 55,862 49,651 Nuclear refueling reserve 16,039 12,354 Obligations under capital leases 34,764 39,110 Other 17,676 18,186 ---------- ---------- Total 571,483 483,056 ---------- ---------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,207,820 1,200,935 Accumulated deferred investment tax credits 216,320 219,188 Obligations under capital leases 99,011 83,524 Deferred River Bend finance charges 15,419 33,688 Other 553,013 539,752 ---------- ---------- Total 2,091,583 2,077,087 ---------- ---------- Long-term debt 1,817,316 1,915,346 Preferred stock with sinking fund 75,210 77,459 Preference stock 150,000 150,000 Company - obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 85,000 - Shareholders' Equity: Preferred stock without sinking fund 47,444 136,444 Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares 114,055 114,055 Paid-in capital 1,152,575 1,152,689 Retained earnings 388,615 325,312 ---------- ---------- Total 1,702,689 1,728,500 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $6,493,281 $6,431,448 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 210.7 $ 211.4 ($ 0.7) - Commercial 125.3 128.7 (3.4) (3) Industrial 189.2 186.7 2.5 1 Governmental 8.6 8.7 (0.1) (1) ------- ------- ------ Total retail 533.8 535.5 (1.7) - Sales for resale Associated companies 7.6 8.0 (0.4) (5) Non-associated companies 17.5 21.1 (3.6) (17) Other 25.5 7.5 18.0 240 ------- ------- ------ Total $ 584.4 $ 572.1 $ 12.3 2 ======= ======= ====== Billed Electric Energy Sales (Millions of kWh): Residential 2,845 2,751 94 3 Commercial 1,935 1,887 48 3 Industrial 4,739 4,393 346 8 Governmental 131 127 4 3 ------- ------- ------ Total retail 9,650 9,158 492 5 Sales for resale Associated companies 181 259 (78) (30) Non-associated companies 438 535 (97) (18) ------- ------- ------ Total 10,269 9,952 317 3 ======= ======= ====== Nine Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 477.8 $ 488.0 ($ 10.2) (2) Commercial 337.6 340.5 (2.9) (1) Industrial 544.1 524.3 19.8 4 Governmental 25.1 23.5 1.6 7 --------- --------- ------- Total retail 1,384.6 1,376.3 8.3 1 Sales for resale Associated companies 13.1 13.5 (0.4) (3) Non-associated companies 41.8 61.3 (19.5) (32) Other 50.7 50.6 0.1 - --------- --------- ------- Total $ 1,490.2 $ 1,501.7 ($ 11.5) (1) ========= ========= ======= Billed Electric Energy Sales (Millions of kWh): Residential 6,282 6,396 (114) (2) Commercial 4,953 4,905 48 1 Industrial 13,459 12,457 1,002 8 Governmental 359 329 30 9 --------- --------- ------- Total retail 25,053 24,087 966 4 Sales for resale Associated companies 380 399 (19) (5) Non-associated companies 1,077 1,714 (637) (37) --------- --------- ------- Total 26,510 26,200 310 1 ========= ========= ======= ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended September 30, 1997 primarily as a result of an accrual for fire damages sustained in late September 1997 at the Little Gypsy fossil plant. Net income decreased for the nine months ended September 30, 1997 primarily due to a decrease in electric operating revenues and an increase in other operation and maintenance expenses, partially offset by lower income taxes. Significant factors affecting the results of operations and causing variances between the three and nine months ended September 30, 1997 and 1996 are discussed under "Revenues and Sales", "Expenses", and "Other" below. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 1997 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues ($11.8) ($17.7) Fuel cost recovery 15.9 15.0 Sales volume/weather (7.2) (24.7) Other revenue (including unbilled) 5.0 4.1 Sales for resale 3.3 (0.9) ----- ------- Total $ 5.2 ($24.2) ===== ======= Electric operating revenues increased for the three months ended September 30, 1997 primarily due to increases in fuel adjustment revenues, which do not affect net income, and other revenue (primarily unbilled revenue). These increases were partially offset by a decrease in base revenues and lower sales volume. Fuel adjustment revenues increased due to a change in shifting generation requirements as a result of the extended refueling outage at Waterford 3. The increase in unbilled revenue is largely the result of warmer weather in September 1997 as compared to the same period in 1996. Base revenues decreased due to a base rate reduction that became effective in the third quarter of 1997. See Note 2 for further discussion. Sales volume decreased because of the loss of a large industrial customer as well as substantially lower sales to another large industrial customer during the current period due to customer cogeneration. Electric operating revenues decreased for the nine months ended September 30, 1997 primarily as a result of a decrease in base revenues and lower sales volume, partially offset by higher fuel adjustment revenues, which do not affect net income. Base revenues decreased due to base rate reductions that became effective in the third quarter of 1996 and 1997. Sales volume decreased because of milder weather during the first half of the year and the loss of a large industrial customer as well as substantially lower sales to another large industrial customer during the current period due to customer cogeneration. Fuel adjustment revenues increased due to a change in shifting generation requirements as a result of the extended Waterford 3 refueling outage. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Operating expenses increased for the three months ended September 30, 1997 primarily due to an increase in fuel expense, partially offset by a reduction in other operation and maintenance expenses. Fuel expense increased primarily due to shifting generation requirements resulting from the extended refueling outage at the Waterford 3 nuclear plant and due to higher gas prices for the three months ended September 30, 1997. Other operation and maintenance expenses decreased due to a forced maintenance outage at Waterford 3 during the third quarter of 1996, partially offset by an accrual for fire damages sustained in late September 1997. Operating expenses increased for the nine months ended September 30, 1997 primarily due to increases in fuel and purchased power expenses and other operation and maintenance expenses, and the impact of 1996 rate deferrals. Fuel and purchased power expenses increased primarily due to shifting generation requirements resulting from the extended refueling outage at the Waterford 3 nuclear plant, partially offset by lower fuel prices. Other operation and maintenance expenses increased for the nine months ended September 30, 1997 due to non-fueling outage related contract work at Waterford 3 primarily during the second quarter of 1997, as well as maintenance performed at Waterford 3, and an accrual for fire damage sustained in late September 1997 at the Little Gypsy fossil plant. Waterford 3 property taxes recorded in 1996 were offset by the recording of the LPSC-approved rate deferrals for these taxes. See Note 2 in the Form 10-K for further information. Other For the three months ended September 30, 1997 and 1996 the effective income tax rates were 39.70% and 37.66%, respectively. For the nine months ended September 30, 1997 and 1996 the effective income tax rates were 40.29% and 36.95%, respectively. These increases are primarily due to decreased amortization of deferred income taxes on property fully depreciated for federal income tax purposes.
ENTERGY LOUISIANA, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Nine Months Ended 1997 1996 1997 1996 (In Thousands) (In Thousands) Operating Revenues $554,486 $549,295 $1,400,732 $1,424,909 -------- -------- ---------- ---------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 152,609 125,447 326,588 316,789 Purchased power 113,235 113,676 323,988 314,613 Nuclear refueling outage expenses 5,267 3,977 10,566 11,910 Other operation and maintenance 75,251 82,838 231,637 219,515 Depreciation, amortization, and decommissioning 42,877 41,857 128,343 125,529 Taxes other than income taxes 17,892 19,001 53,712 56,981 Rate deferrals - 607 - (10,768) Amortization of rate deferrals (621) 6,137 12,131 19,683 -------- -------- ---------- ---------- Total 406,510 393,540 1,086,965 1,054,252 -------- -------- ---------- ---------- Operating Income 147,976 155,755 313,767 370,657 -------- -------- ---------- ---------- Other Income (Deductions): Allowance for equity funds used during construction 601 186 1,038 712 Miscellaneous - net (789) 614 (1,706) 1,342 -------- -------- ---------- ---------- Total (188) 800 (668) 2,054 -------- -------- ---------- ---------- Interest Charges: Interest on long-term debt 27,921 30,411 88,011 92,190 Other interest - net 1,635 1,222 4,846 5,721 Distributions on preferred securities of subsidiary 1,575 1,295 4,725 1,295 Allowance for borrowed funds used during construction (555) (373) (1,311) (1,204) -------- -------- ---------- ---------- Total 30,576 32,555 96,271 98,002 -------- -------- ---------- ---------- Income Before Income Taxes 117,212 124,000 216,828 274,709 Income Taxes 46,531 46,698 87,368 101,492 -------- -------- ---------- ---------- Net Income 70,681 77,302 129,460 173,217 Preferred Stock Dividend Requirements and Other 3,251 6,289 10,097 16,457 -------- -------- ---------- ---------- Earnings Applicable to Common Stock $67,430 $71,013 $119,363 $156,760 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Operating Activities: Net income $129,460 $173,217 Noncash items included in net income: Change in rate deferrals 5,749 16,991 Depreciation, amortization, and decommissioning 128,343 125,529 Deferred income taxes and investment tax credits (8,136) (24,518) Allowance for equity funds used during construction (1,038) (712) Changes in working capital: Receivables (48,067) (50,545) Accounts payable (15,502) (8,083) Taxes accrued 100,900 79,301 Interest accrued (23,166) (10,461) Other working capital accounts 3,771 301 Decommissioning trust contributions (6,590) (6,593) Provision for estimated losses and reserves 5,046 6,526 Other 875 (16,386) --------- --------- Net cash flow provided by operating activities 271,645 284,567 --------- --------- Investing Activities: Construction expenditures (60,071) (75,574) Allowance for equity funds used during construction 1,038 712 Nuclear fuel purchases (43,332) - Proceeds from sale/leaseback of nuclear fuel 43,332 - --------- --------- Net cash flow used in investing activities (59,033) (74,862) --------- --------- Financing Activities: Proceeds from the issuance of: First mortgage bonds - 113,994 Preferred securities of subsidiary trust - 67,795 Retirement of: First mortgage bonds (34,000) (130,000) Other long-term debt (262) (233) Redemption of preferred stock (7,500) (67,824) Changes in short-term borrowings - net (31,066) (75,381) Dividends paid: Common stock (111,200) (100,300) Preferred stock (9,997) (15,584) --------- --------- Net cash flow used in financing activities (194,025) (207,533) --------- --------- Net increase in cash and cash equivalents 18,587 2,172 Cash and cash equivalents at beginning of period 23,746 34,370 --------- --------- Cash and cash equivalents at end of period $42,333 $36,542 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $101,334 $103,434 Income taxes ($1,754) $81,700 Noncash investing and financing activities: Change in unrealized appreciation (depreciation) of decommissioning trust assets $1,877 ($2,077) See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) ASSETS Current Assets: Cash and cash equivalents: Cash $10,477 $1,804 Temporary cash investments - at cost, which approximates market 31,856 21,942 ---------- ---------- Total cash and cash equivalents 42,333 23,746 Accounts receivable: Customer (less allowance for doubtful accounts of $1.4 million in 1997 and 1996) 110,004 73,823 Associated companies 14,884 11,606 Other 7,033 7,053 Accrued unbilled revenues 72,507 63,879 Deferred fuel costs 13,051 18,347 Accumulated deferred income taxes - 1,465 Materials and supplies - at average cost 84,535 78,449 Rate deferrals - 5,749 Deferred nuclear refueling outage costs 35,176 5,300 Prepaid income tax 2,403 24,651 Prepayments and other 8,007 10,234 ---------- ---------- Total 389,933 324,302 ---------- ---------- Other Property and Investments: Nonutility property 22,525 22,525 Decommissioning trust fund 60,721 50,481 Investment in subsidiary companies - at equity 14,230 14,230 ---------- ---------- Total 97,476 87,236 ---------- ---------- Utility Plant: Electric 5,080,354 4,997,456 Property under capital leases 232,582 232,582 Construction work in progress 37,214 56,180 Nuclear fuel under capital lease 66,953 38,157 Nuclear fuel 3,067 34,191 ---------- ---------- Total 5,420,170 5,358,566 Less - accumulated depreciation and amortization 2,001,376 1,881,847 ---------- ---------- Utility plant - net 3,418,794 3,476,719 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: SFAS 109 regulatory asset - net 282,043 295,836 Unamortized loss on reacquired debt 34,489 37,552 Other regulatory assets 23,661 30,320 Other 27,341 27,313 ---------- ---------- Total 367,534 391,021 ---------- ---------- TOTAL $4,273,737 $4,279,278 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Currently maturing long-term debt $35,300 $34,275 Notes payable - associated companies - 31,066 Accounts payable: Associated companies 42,800 73,389 Other 71,952 89,550 Customer deposits 61,399 59,070 Taxes accrued 108,290 7,390 Accumulated deferred income taxes 2,006 - Interest accrued 26,083 49,249 Dividends declared 3,250 3,489 Obligations under capital leases 39,828 28,000 Other 12,573 4,940 ---------- ---------- Total 403,481 380,418 ---------- ---------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 813,745 831,093 Accumulated deferred investment tax credits 135,682 139,899 Obligations under capital leases 27,124 10,156 Deferred interest - Waterford 3 lease obligation 17,550 16,809 Other 123,875 114,665 ---------- ---------- Total 1,117,976 1,112,622 ---------- ---------- Long-term debt 1,338,322 1,373,233 Preferred stock with sinking fund 85,000 92,500 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 70,000 70,000 Shareholders' Equity: Preferred stock without sinking fund 100,500 100,500 Common stock, no par value, authorized 250,000,000 shares; issued and outstanding 165,173,180 shares 1,088,900 1,088,900 Capital stock expense and other (2,321) (2,659) Retained earnings 71,879 63,764 ---------- ---------- Total 1,258,958 1,250,505 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $4,273,737 $4,279,278 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 222.6 $ 215.7 $ 6.9 3 Commercial 116.8 112.5 4.3 4 Industrial 180.2 194.3 (14.1) (7) Governmental 9.1 9.2 (0.1) (1) --------- --------- ------ Total retail 528.7 531.7 (3.0) (1) Sales for resale Associated companies 2.7 0.1 2.6 2,600 Non-associated companies 16.4 15.7 0.7 4 Other 6.7 1.8 4.9 272 --------- --------- ------ Total $ 554.5 $ 549.3 $ 5.2 1 ========= ========= ====== Billed Electric Energy Sales (Millions of kWh): Residential 2,738 2,681 57 2 Commercial 1,502 1,449 53 4 Industrial 3,918 4,602 (684) (15) Governmental 119 121 (2) (2) --------- --------- ------ Total retail 8,277 8,853 (576) (7) Sales for resale Associated companies 72 2 70 3,500 Non-associated companies 256 257 (1) - --------- --------- ------ Total 8,605 9,112 (507) (6) ========= ========= ====== Nine Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 475.4 $ 490.9 ($ 15.5) (3) Commercial 291.4 289.0 2.4 1 Industrial 538.0 552.4 (14.4) (3) Governmental 26.2 26.0 0.2 1 --------- --------- ------ Total retail 1,331.0 1,358.3 (27.3) (2) Sales for resale Associated companies 3.5 0.8 2.7 338 Non-associated companies 41.5 45.1 (3.6) (8) Other 24.7 20.7 4.0 19 --------- --------- ------ Total $ 1,400.7 $ 1,424.9 ($24.2) (2) ========= ========= ====== Billed Electric Energy Sales (Millions of kWh): Residential 6,042 6,294 (252) (4) Commercial 3,732 3,697 35 1 Industrial 12,511 13,215 (704) (5) Governmental 348 346 2 1 --------- --------- ------ Total retail 22,633 23,552 (919) (4) Sales for resale Associated companies 98 20 78 390 Non-associated companies 616 770 (154) (20) --------- --------- ------ Total 23,347 24,342 (995) (4) ========= ========= ====== ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three and nine months ended September 30, 1997 primarily due to an increase in other operation and maintenance expenses, and a decrease in electric operating revenues, partially offset by lower income taxes. Significant factors affecting the results of operations and causing variances between the three and nine months ended September 30, 1997 and 1996 are discussed under "Revenues and Sales", "Expenses", and "Other" below. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 1997 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues ($1.8) ($3.1) Rate riders (8.2) (25.2) Fuel cost recovery (11.7) (10.4) Sales volume/weather 1.6 (2.6) Other revenue (including unbilled) 8.7 (1.0) Sales for resale 9.3 2.0 ----- ------- Total $(2.1) ($40.3) ===== ======= Electric operating revenues decreased for the three months ended September 30, 1997 primarily due to decreases in fuel adjustment revenues, which do not affect net income, and rate rider revenues, partially offset by increases in sales for resale and other revenue (primarily unbilled revenue). The decrease in fuel adjustment revenues is due to an MPSC order, effective May 1, 1997, that changed fuel recovery pricing to a fixed fuel factor. In connection with an annual MPSC review, in October 1996, Entergy Mississippi's Grand Gulf 1 rate rider was decreased based on the estimate of costs over the next year. Therefore, Grand Gulf 1 rate rider revenues for the three and nine months ended September 30, 1997 were lower than revenues for the same period in 1996. Sales for resale increased due to an increase in sales to associated companies primarily due to changes in generation requirements and availability among the domestic utility companies. Unbilled revenue increased as a result of increased generation due to warmer weather in September 1997 as compared to the same period in 1996. Electric operating revenues decreased for the nine months ended September 30, 1997 primarily as a result of a decrease in Grand Gulf 1 rate rider revenues, as discussed above, and fuel adjustment revenues, which do not affect net income. Fuel adjustment revenues decreased because of an MPSC order, effective May 1, 1997, that changed fuel recovery pricing to a fixed fuel factor. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Operating expenses decreased for the three and nine months ended September 30, 1997 primarily due to decreases in fuel expenses and the amortization of rate deferrals, partially offset by an increase in purchased power expenses and an increase in other operation and maintenance expenses. The amortization of rate deferrals decreased primarily as a result of the under-recovery of Grand Gulf 1 related costs. Purchased power expenses increased due to a shift from higher priced fuel to lower priced purchased power. Other operation and maintenance expenses increased due to an increase in contract labor and loss reserves. The increase in contract labor is due to maintenance and plant outage expenses incurred in the three and nine months ended September 30, 1997. Loss reserves expense increased as a result of increased litigation reserves. Rate deferrals reducing operating expenses in 1996 and 1997 represent the deferral of Entergy Mississippi's portion of the proposed System Energy rate increase. See Note 2 for further discussion. Other For the three and nine months ended September 30, 1997 and 1996 the effective income tax rates were relatively unchanged.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Nine Months Ended 1997 1996 1997 1996 (In Thousands) (In Thousands) Operating Revenues $294,983 $297,118 $708,203 $748,499 -------- -------- -------- -------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses 72,379 73,838 138,928 161,664 Purchased power 71,441 66,875 218,015 202,919 Other operation and maintenance 32,227 30,702 95,704 87,179 Depreciation and amortization 10,739 10,007 32,120 30,086 Taxes other than income taxes 12,058 11,965 33,471 32,698 Rate deferrals (6,670) (6,971) (20,573) (19,494) Amortization of rate deferrals 49,977 56,006 94,617 110,998 -------- -------- -------- -------- Total 242,151 242,422 592,282 606,050 -------- -------- -------- -------- Operating Income 52,832 54,696 115,921 142,449 -------- -------- -------- -------- Other Income: Allowance for equity funds used during construction - 369 560 1,012 Miscellaneous - net 399 145 662 914 -------- -------- -------- -------- Total 399 514 1,222 1,926 -------- -------- -------- -------- Interest Charges: Interest on long-term debt 9,798 10,905 31,211 33,461 Other interest - net 1,154 1,021 3,477 2,895 Allowance for borrowed funds used during construction (20) (297) (482) (818) -------- -------- -------- -------- Total 10,932 11,629 34,206 35,538 -------- -------- -------- -------- Income Before Income Taxes 42,299 43,581 82,937 108,837 Income Taxes 14,964 15,376 27,851 37,889 -------- -------- -------- -------- Net Income 27,335 28,205 55,086 70,948 Preferred Stock Dividend Requirements and Other 1,129 1,185 3,258 3,825 -------- -------- -------- -------- Earnings Applicable to Common Stock $26,206 $27,020 $51,828 $67,123 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Operating Activities: Net income $55,086 $70,948 Noncash items included in net income: Change in rate deferrals 107,134 94,908 Depreciation and amortization 32,120 30,086 Deferred income taxes and investment tax credits (29,761) (33,412) Allowance for equity funds used during construction (560) (1,012) Changes in working capital: Receivables (18,818) (27,423) Fuel inventory 5,011 5 Accounts payable 5,316 3,093 Taxes accrued 38,807 17,582 Interest accrued (7,751) (5,693) Other working capital accounts (12,506) 3,856 Change in other regulatory assets (29,915) (10,055) Other (3,155) 3,751 --------- --------- Net cash flow provided by operating activities 141,008 146,634 --------- --------- Investing Activities: Construction expenditures (37,378) (63,291) Allowance for equity funds used during construction 560 1,012 --------- --------- Net cash flow used in investing activities (36,818) (62,279) --------- --------- Financing Activities: Proceeds from the issuance of general and refunding mortgage bonds 64,827 - Retirement of: General and refunding mortgage bonds (96,000) (26,000) First mortgage bonds (25,000) Other long-term debt (15) (15) Redemption of preferred stock (14,500) (9,876) Changes in short-term borrowings - net (7,132) 15,308 Dividends paid: Common stock (53,400) (45,400) Preferred stock (3,156) (3,815) --------- --------- Net cash flow used in financing activities (109,376) (94,798) --------- --------- Net decrease in cash and cash equivalents (5,186) (10,443) Cash and cash equivalents at beginning of period 9,498 16,945 --------- --------- Cash and cash equivalents at end of period $4,312 $6,502 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $41,044 $40,296 Income taxes $11,670 $48,092 See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) ASSETS Current Assets: Cash and cash equivalents: Cash $4,312 $2,384 Special deposits - 7,114 ---------- ---------- Total cash and cash equivalents 4,312 9,498 Accounts receivable: Customer (less allowance for doubtful accounts of $1.4 million in 1997 and 1996) 50,397 44,809 Associated companies 10,215 4,382 Other 563 2,014 Accrued unbilled revenues 57,691 49,383 Fuel inventory - at average cost 1,650 6,661 Materials and supplies - at average cost 19,968 17,567 Rate deferrals 139,958 142,504 Prepayments and other 18,941 7,434 ---------- ---------- Total 303,695 284,252 ---------- ---------- Other Property and Investments: Investment in subsidiary companies - at equity 5,531 5,531 Other - at cost (less accumulated depreciation) 7,813 7,923 ---------- ---------- Total 13,344 13,454 ---------- ---------- Utility Plant: Electric 1,678,658 1,633,484 Construction work in progress 36,565 47,373 ---------- ---------- Total 1,715,223 1,680,857 Less - accumulated depreciation and amortization 661,954 635,754 ---------- ---------- Utility plant - net 1,053,269 1,045,103 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals - 104,588 SFAS 109 regulatory asset - net 18,849 11,813 Unamortized loss on reacquired debt 8,617 9,254 Other regulatory assets 76,224 46,309 Other 6,325 6,693 ---------- ---------- Total 110,015 178,657 ---------- ---------- TOTAL $1,480,323 $1,521,466 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Currently maturing long-term debt $20 $96,015 Notes payable - associated companies 43,121 50,253 Accounts payable: Associated companies 35,778 32,878 Other 26,117 23,701 Customer deposits 27,307 26,258 Taxes accrued 65,289 26,482 Accumulated deferred income taxes 57,660 58,634 Interest accrued 13,158 20,909 Other 3,133 3,065 ---------- ---------- Total 271,583 338,195 ---------- ---------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 230,789 249,522 Accumulated deferred investment tax credits 24,292 25,422 Other 15,713 19,445 ---------- ---------- Total 270,794 294,389 ---------- ---------- Long-term debt 464,106 399,054 Preferred stock with sinking fund - 7,000 Shareholder's Equity: Preferred stock without sinking fund 50,381 57,881 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 (59) (143) Retained earnings 224,192 225,764 ---------- ---------- Total 473,840 482,828 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $1,480,323 $1,521,466 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 120.9 $ 127.4 ($ 6.5) (5) Commercial 80.5 86.3 (5.8) (7) Industrial 44.3 51.2 (6.9) (13) Governmental 7.3 8.2 (0.9) (11) ------- ------- ------- Total retail 253.0 273.1 (20.1) (7) Sales for resale Associated companies 27.8 18.5 9.3 50 Non-associated companies 6.5 6.5 - - Other 7.7 (1.0) 8.7 870 ------- ------- ------- Total $ 295.0 $ 297.1 ($ 2.1) (1) ======= ======= ======= Billed Electric Energy Sales (Millions of kWh): Residential 1,517 1,479 38 3 Commercial 1,125 1,076 49 5 Industrial 806 831 (25) (3) Governmental 94 100 (6) (6) ------- ------- ------- Total retail 3,542 3,486 56 2 Sales for resale Associated companies 715 502 213 42 Non-associated companies 126 149 (23) (15) ------- ------- ------- Total 4,383 4,137 246 6 ======= ======= ======= Nine Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 264.8 $ 287.6 ($ 22.8) (8) Commercial 206.9 215.3 (8.4) (4) Industrial 127.8 136.0 (8.2) (6) Governmental 20.4 22.3 (1.9) (9) ------- ------- ------- Total retail 619.9 661.2 (41.3) (6) Sales for resale Associated companies 49.5 45.2 4.3 10 Non-associated companies 15.9 18.2 (2.3) (13) Other 22.9 23.9 (1.0) (4) ------- ------- ------- Total $ 708.2 $ 748.5 ($ 40.3) (5) ======= ======= ======= Billed Electric Energy Sales (Millions of kWh): Residential 3,338 3,506 (168) (5) Commercial 2,778 2,684 94 4 Industrial 2,279 2,260 19 1 Governmental 251 263 (12) (5) ------- ------- ------- Total retail 8,646 8,713 (67) (1) Sales for resale Associated companies 1,145 1,073 72 7 Non-associated companies 309 433 (124) (29) ------- ------- ------- Total 10,100 10,219 (119) (1) ======= ======= ======= ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three and nine months ended September 30, 1997 primarily due to a decrease in electric and gas operating revenues and an increase in taxes other than income taxes, partially offset by lower income taxes. Significant factors affecting the results of operations and causing variances between the three and nine months ended September 30, 1997 and 1996 are discussed under "Revenues and Sales", "Expenses", and "Other" below. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 1997 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Change in base revenues ($3.2) ($7.5) Fuel cost recovery (5.9) (8.5) Sales volume/weather - (3.4) Other revenue (including unbilled) (0.8) (1.6) Sales for resale 0.8 3.7 ----- ------- Total $(9.1) ($17.3) ===== ======= Electric operating revenues decreased for the three and nine months ended September 30, 1997 primarily due to decreases in base revenues and fuel adjustment revenues, partially offset for the nine months ended September 30, 1997 by an increase in sales for resale. Fuel adjustment revenues, which do not impact net income, decreased because of lower gas prices. Base revenues decreased due to rate reductions implemented during the second quarter of 1997. The increase in sales for resale is the result of an increase in electric sales to associated companies primarily due to changes in the generation requirements and availability among the domestic utility companies. Weather adjusted sales volume decreased for the nine months ended September 30, 1997 due to milder weather in the first half of the year. Gas operating revenues decreased for the three and nine months ended September 30, 1997 due to a lower unit purchase price for gas purchased for resale and a reduction in sales. Milder weather in the first half of the year is partially responsible for the reduction in sales. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Operating expenses decreased for the three and nine months ended September 30, 1997 because of decreases in fuel expenses and the write-off of certain rate deferrals in 1996, partially offset by an increase in taxes other than income taxes and the amortization of rate deferrals. Also contributing to the decrease in operating expenses for the nine months ended September 30, 1997 were decreases in purchased power expenses. The decreases in fuel and purchased power expenses are the result of lower gas prices. Rate deferrals recorded in connection with the deferral of least cost planning charges were written off in the third quarter of 1996, causing a decrease in operating expenses during 1997 as compared to 1996. Taxes other than income taxes increased because of higher franchise taxes resulting from a December 1996 Council order increasing Entergy New Orleans' annual franchise fee from 2.5% to 5% of gross revenues. The increase in the amortization of rate deferrals for the three and nine months ended September 30, 1997 is primarily a result of increased over-recovery of Grand Gulf 1 related costs in 1997 compared to 1996. In addition, other operation and maintenance expenses increased for the three months ended September 30, 1997 primarily due to an increase in loss reserves. Other For the three months ended September 30, 1997 and 1996 the effective income tax rates were 40.02% and 36.26%, respectively. For the nine months ended September 30, 1997 and 1996 the effective income tax rates were 42.55% and 35.31%, respectively. These increases are primarily due to decreased amortization of deferred income taxes on property fully depreciated for federal income tax purposes.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Nine Months Ended 1997 1996 1997 1996 (In Thousands) (In Thousands) Operating Revenues: Electric $126,901 $136,018 $309,050 $326,402 Natural gas 13,039 14,919 65,649 79,644 -------- -------- -------- -------- Total 139,940 150,937 374,699 406,046 -------- -------- -------- -------- Operating Expenses: Operation and maintenance: Fuel, fuel-related expenses, and gas purchased for resale 28,146 37,080 96,586 110,100 Purchased power 46,958 44,904 119,922 124,945 Other operation and maintenance 19,443 16,404 52,125 51,893 Depreciation and amortization 5,477 4,931 16,068 14,913 Taxes other than income taxes 11,448 7,445 28,940 21,065 Rate deferrals (1,718) 2,597 (5,299) (188) Amortization of rate deferrals 12,090 9,257 30,106 19,639 -------- -------- -------- -------- Total 121,844 122,618 338,448 342,367 -------- -------- -------- -------- Operating Income 18,096 28,319 36,251 63,679 -------- -------- -------- -------- Other Income (Deductions): Allowance for equity funds used during construction 99 79 259 234 Miscellaneous - net (27) (652) (7) 410 -------- -------- -------- -------- Total 72 (573) 252 644 -------- -------- -------- -------- Interest Charges: Interest on long-term debt 3,429 3,632 10,488 11,644 Other interest - net 485 298 1,064 900 Allowance for borrowed funds used during construction (68) (62) (194) (184) -------- -------- -------- -------- Total 3,846 3,868 11,358 12,360 -------- -------- -------- -------- Income Before Income Taxes 14,322 23,878 25,145 51,963 Income Taxes 5,732 8,657 10,699 18,347 -------- -------- -------- -------- Net Income 8,590 15,221 14,446 33,616 Preferred Stock Dividend Requirements and Other 242 241 724 723 -------- -------- -------- -------- Earnings Applicable to Common Stock $8,348 $14,980 $13,722 $32,893 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Operating Activities: Net income $14,446 $33,616 Noncash items included in net income: Change in rate deferrals 28,987 27,189 Depreciation and amortization 16,068 14,913 Deferred income taxes and investment tax credits (1,690) (2,269) Allowance for equity funds used during construction (259) (234) Changes in working capital: Receivables (801) (11,732) Accounts payable (1,323) (8,004) Taxes accrued 12,233 2,243 Interest accrued (2,426) (1,902) Other working capital accounts (16,874) (16,611) Other (11,570) (10,241) --------- --------- Net cash flow provided by operating activities 36,791 26,968 --------- --------- Investing Activities: Construction expenditures (7,652) (22,009) Allowance for equity funds used during construction 259 234 --------- --------- Net cash flow used in investing activities (7,393) (21,775) --------- --------- Financing Activities: Proceeds from the issuance of general and refunding mortgage bonds - 39,608 Retirement of: First mortgage bonds (12,000) (23,250) General and refunding mortgage bonds - (30,000) Dividends paid: Common stock (26,000) (34,000) Preferred stock (965) (724) --------- --------- Net cash flow used in financing activities (38,965) (48,366) --------- --------- Net decrease in cash and cash equivalents (9,567) (43,173) Cash and cash equivalents at beginning of period 17,510 49,746 --------- --------- Cash and cash equivalents at end of period $7,943 $6,573 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $3,731 $13,875 Income taxes - net $4,309 $18,752 See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) ASSETS Current Assets: Cash and cash equivalents: Cash $2,384 $1,015 Temporary cash investments - at cost, which approximates market: Associated companies 1,260 7,435 Other 4,299 9,060 ---------- ---------- Total cash and cash equivalents 7,943 17,510 Accounts receivable: Customer (less allowance for doubtful accounts of $0.7 million in 1997 and 1996) 28,868 27,430 Associated companies 818 714 Other 2,724 1,764 Accrued unbilled revenues 15,363 17,064 Deferred electric fuel and resale gas costs 11,886 7,290 Materials and supplies - at average cost 11,458 9,904 Rate deferrals 37,531 37,692 Prepayments and other 7,513 7,157 ---------- ---------- Total 124,104 126,525 ---------- ---------- Other Property and Investments: Investment in subsidiary companies - at equity 3,259 3,259 ---------- ---------- Utility Plant: Electric 524,335 503,061 Natural gas 122,700 122,700 Construction work in progress 5,686 18,247 ---------- ---------- Total 652,721 644,008 Less - accumulated depreciation and amortization 361,017 347,790 ---------- ---------- Utility plant - net 291,704 296,218 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: Rate deferrals 70,672 99,498 SFAS 109 regulatory asset - net 3,470 6,051 Unamortized loss on reacquired debt 1,483 1,647 Other regulatory assets 12,184 15,908 Other 922 890 ---------- ---------- Total 88,731 123,994 ---------- ---------- TOTAL $507,798 $549,996 ========== ========== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Currently maturing long-term debt $- $12,000 Accounts payable: Associated companies 18,060 18,757 Other 13,503 14,130 Customer deposits 19,423 18,974 Taxes accrued 13,437 1,204 Accumulated deferred income taxes 10,774 5,584 Interest accrued 2,899 5,325 Provision for rate refund 7,349 19,465 Other 2,821 1,521 ---------- ---------- Total 88,266 96,960 ---------- ---------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 62,066 72,895 Accumulated deferred investment tax credits 7,544 7,984 Accumulated provision for property insurance 15,487 15,666 Other 14,885 24,713 ---------- ---------- Total 99,982 121,258 ---------- ---------- Long-term debt 168,937 168,888 Shareholders' Equity: Preferred stock without sinking fund 19,780 19,780 Common Shareholder's Equity: 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 36,294 Retained earnings subsequent to the elimination of the accumulated deficit on November 30, 1988 60,795 73,072 ---------- ---------- Total 150,613 162,890 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $507,798 $549,996 ========== ========== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 55.3 $ 59.1 ($ 3.8) (6) Commercial 38.3 43.8 (5.5) (13) Industrial 6.3 6.8 (0.5) (7) Governmental 16.6 17.4 (0.8) (5) ------- ------- ------- Total retail 116.5 127.1 (10.6) (8) Sales for resale Associated companies 0.8 0.2 0.6 300 Non-associated companies 2.8 2.6 0.2 8 Other 6.8 6.1 0.7 11 ------- ------- ------- Total $ 126.9 $ 136.0 ($ 9.1) (7) ======= ======= ======= Billed Electric Energy Sales (Millions of kWh): Residential 761 749 12 2 Commercial 610 612 (2) - Industrial 128 131 (3) (2) Governmental 285 290 (5) (2) ------- ------- ------- Total retail 1,784 1,782 2 - Sales for resale Associated companies 22 5 17 340 Non-associated companies 51 52 (1) (2) ------- ------- ------- Total 1,857 1,839 18 1 ======= ======= ======= Nine Months Ended Increase/ Description 1997 1996 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 111.2 $ 124.6 ($ 13.4) (11) Commercial 107.2 113.1 (5.9) (5) Industrial 18.2 18.6 (0.4) (2) Governmental 43.1 43.5 (0.4) (1) ------- ------- ------- Total retail 279.7 299.8 (20.1) (7) Sales for resale Associated companies 7.8 2.5 5.3 212 Non-associated companies 6.4 8.0 (1.6) (20) Other 15.2 16.1 (0.9) (6) ------- ------- ------- Total $ 309.1 $ 326.4 ($ 17.3) (5) ======= ======= ======= Billed Electric Energy Sales (Millions of kWh): Residential 1,521 1,591 (70) (4) Commercial 1,576 1,581 (5) - Industrial 367 363 4 1 Governmental 745 732 13 2 ------- ------- ------- Total retail 4,209 4,267 (58) (1) Sales for resale Associated companies 247 63 184 292 Non-associated companies 112 178 (66) (37) ------- ------- ------- Total 4,568 4,508 60 1 ======= ======= ======= SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income for the three months ended September 30, 1997 remained relatively unchanged as compared to the same period in 1996. Net income increased slightly for the nine months ended September 30, 1997 primarily as a result of lower interest charges. Significant factors affecting the results of operations and causing variances between the three and nine months ended September 30, 1997 and 1996 are discussed under "Revenues", "Expenses", and "Other" 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. See Note 2 herein for a discussion of System Energy's proposed rate increase. Expenses Operating expenses increased for the three and nine months ended September 30, 1997 due to higher nuclear refueling outage expenses and higher depreciation, amortization, and decommissioning expenses. These increases were partially offset for the nine months ended September 30, 1997 by lower interest charges. Nuclear refueling outage expenses increased due to costs that were deferred from the November 1996 outage, which are now being amortized over an 18-month period beginning December 1996. Prior to this outage, such costs were expensed as incurred and no such expenses were incurred during the nine months ended September 30, 1996. The increase in depreciation, amortization, and decommissioning expense is due to the reversal of the regulatory asset set up to defer the depreciation associated with the sale and leaseback in 1989 of a portion of Grand Gulf 1. The depreciation was deferred to match the collection of lease principal and revenues with the depreciation of the asset. Other Interest charges decreased for the nine months ended September 30, 1997 due to the refinancing of higher cost long-term debt in 1996. For the three and nine months ended September 30, 1997 and 1996 the effective income tax rates were relatively unchanged.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Months Ended Nine Months Ended 1997 1996 1997 1996 (In Thousands) (In Thousands) Operating Revenues $160,573 $154,467 $477,255 $471,260 -------- -------- -------- -------- Operating Expenses: Operation and maintenance: Fuel and fuel-related expenses 12,270 12,148 36,728 37,159 Nuclear refueling outage expenses 4,202 - 11,826 - Other operation and maintenance 28,431 28,231 77,228 76,563 Depreciation, amortization, and decommissioning 36,238 32,212 110,951 96,225 Taxes other than income taxes 6,619 6,606 19,825 20,211 -------- -------- -------- -------- Total 87,760 79,197 256,558 230,158 -------- -------- -------- -------- Operating Income 72,813 75,270 220,697 241,102 -------- -------- -------- -------- Other Income: Allowance for equity funds used during construction 1,169 184 1,730 831 Miscellaneous - net 2,323 2,540 5,564 4,006 -------- -------- -------- -------- Total 3,492 2,724 7,294 4,837 -------- -------- -------- -------- Interest Charges: Interest on long-term debt 30,079 30,759 91,940 105,733 Other interest - net 1,720 1,824 5,331 6,522 Allowance for borrowed funds used during construction (761) (178) (1,318) (815) -------- -------- -------- -------- Total 31,038 32,405 95,953 111,440 -------- -------- -------- -------- Income Before Income Taxes 45,267 45,589 132,038 134,499 Income Taxes 20,818 20,840 59,151 62,838 -------- -------- -------- -------- Net Income $24,449 $24,749 $72,887 $71,661 ======== ======== ======== ======== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 (In Thousands) Operating Activities: Net income $72,887 $71,661 Noncash items included in net income: Depreciation, amortization, and decommissioning 110,951 96,225 Deferred income taxes and investment tax credits (30,168) (20,929) Allowance for equity funds used during construction (1,730) (831) Changes in working capital: Receivables (8,110) (16,001) Accounts payable 5,380 19,152 Taxes accrued 6,146 52,537 Interest accrued 169 (6,458) Other working capital accounts 14,423 6,977 Decommissioning trust contributions (14,208) (13,809) FERC Settlement - refund obligation (3,351) (2,959) Provision for estimated losses and reserves 30,303 36,922 Other 18,304 1,260 --------- --------- Net cash flow provided by operating activities 200,996 223,747 --------- --------- Investing Activities: Construction expenditures (25,403) (14,316) Allowance for equity funds used during construction 1,730 831 Nuclear fuel purchases (39) (44,554) Proceeds from sale/leaseback of nuclear fuel 39 43,971 --------- --------- Net cash flow used in investing activities (23,673) (14,068) --------- --------- Financing Activities: Proceeds from the issuance of: First mortgage bonds - 233,656 Other long-term debt - 133,933 Retirement of: First mortgage bonds (10,000) (325,101) Other long-term debt (7,319) (92,700) Changes in short-term borrowings - net - (2,990) Common stock dividends paid (84,000) (69,700) --------- --------- Net cash flow used in financing activities (101,319) (122,902) --------- --------- Net increase in cash and cash equivalents 76,004 86,777 Cash and cash equivalents at beginning of period 92,315 240 --------- --------- Cash and cash equivalents at end of period $168,319 $87,017 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $89,681 $113,251 Income taxes $77,016 $26,523 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($564) ($973) See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) ASSETS Current Assets: Cash and cash equivalents: Cash $209 $26 Temporary cash investments - at cost, which approximates market: Associated companies 38,107 41,600 Other 130,003 50,689 ---------- ---------- Total cash and cash equivalents 168,319 92,315 Accounts receivable: Associated companies 78,171 71,337 Other 3,798 2,522 Materials and supplies - at average cost 64,185 66,302 Deferred nuclear refueling outage costs 12,357 24,005 Prepayments and other 3,313 4,929 ---------- ---------- Total 330,143 261,410 ---------- ---------- Other Property and Investments: Decommissioning trust fund 78,861 62,223 ---------- ---------- Utility Plant: Electric 3,015,458 2,994,445 Electric plant under leases 451,785 447,409 Construction work in progress 28,646 41,362 Nuclear fuel under capital lease 56,247 83,558 ---------- ---------- Total 3,552,136 3,566,774 Less - accumulated depreciation and amortization 1,060,889 974,472 ---------- ---------- Utility plant - net 2,491,247 2,592,302 ---------- ---------- Deferred Debits and Other Assets: Regulatory assets: SFAS 109 regulatory asset - net 249,294 264,758 Unamortized loss on reacquired debt 52,986 57,785 Other regulatory assets 194,735 207,214 Other 14,598 15,601 ---------- ---------- Total 511,613 545,358 ---------- ---------- TOTAL $3,411,864 $3,461,293 ========== ========== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS September 30, 1997 and December 31, 1996 (Unaudited) 1997 1996 (In Thousands) LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities: Currently maturing long-term debt $70,000 $10,000 Accounts payable: Associated companies 26,714 18,245 Other 15,747 18,836 Taxes accrued 73,969 67,823 Interest accrued 34,364 34,195 Obligations under capital leases 42,445 28,000 Other 1,348 2,306 ---------- ---------- Total 264,587 179,405 ---------- ---------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 578,198 624,020 Accumulated deferred investment tax credits 101,040 103,647 Obligations under capital leases 13,802 55,558 FERC Settlement - refund obligation 49,488 52,839 Other 212,576 165,517 ---------- ---------- Total 955,104 1,001,581 ---------- ---------- Long-term debt 1,341,848 1,418,869 Common Shareholder's Equity: Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares 789,350 789,350 Retained earnings 60,975 72,088 ---------- ---------- Total 850,325 861,438 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL $3,411,864 $3,461,293 ========== ========== 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 was reached by Entergy Gulf States, the Cajun bankruptcy trustee, and the RUS, and was 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. On August 5, 1997, the Fifth Circuit ruled that the District Court's order approving the settlement was proper. Management believes that the Cajun Settlement will be consummated prior to the end of 1997. See Note 9 of the Form 10-K for additional information regarding the Cajun litigation, Cajun's bankruptcy proceedings, and related filings. The Cajun Settlement includes, but is not limited to, the following elements: (i) the RUS was given the option to become the transferee of Cajun's interest in River Bend, sell it to a third party, or cause it to be transferred 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 and Entergy Gulf States will settle transmission disputes and release each other from claims for payment under transmission arrangements, 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 remaining litigation between Cajun and Entergy Gulf States will be dismissed. Based on the District Court's approval of the Cajun Settlement, a 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, 1997 was approximately $50.7 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 $3.9 million as of September 30, 1997. Cajun's unpaid portion of the River Bend related costs is reflected in long-term receivables which are substantially reserved for in other deferred credits. As discussed above, the Cajun Settlement will conclude all disputes regarding the non-payment by Cajun of River Bend operating and maintenance expenses. Cajun continues to pay its share of decommissioning costs for River Bend. On October 7, 1997, the RUS elected not to become the transferee of Cajun's 30% interest in River Bend. Accordingly, under the terms of the Settlement, the Cajun River Bend interest will be transferred by Cajun's Trustee in Bankruptcy to Entergy Gulf States at no cost. The transfer is subject to necessary regulatory approvals, including approval of the NRC. The settlement with the RUS also provides that Cajun will fund its decommissioning obligation of $125 million. The regulatory and accounting treatment of the plant to be transferred will be determined as soon as the transfer date and conditions are confirmed. 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 a result of the proposed Cajun Settlement, FERC has dismissed or placed in abeyance various proceedings pending before it, to which Cajun or the Cajun bankruptcy trustee is a party, that would be resolved by the Cajun Settlement. 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 $74.6 million as of September 30, 1997. 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 $167.3 million as of September 30, 1997. 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 $120.8 million as of September 30, 1997. 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 $149.5 million as of September 30, 1997. 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. See Note 9 in the Form 10-K for additional information regarding these FERC proceedings and FERC orders issued as a result of such proceedings. Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States) On January 13, 1997, Entergy Gulf States filed a declaratory judgment action in the U.S. Bankruptcy Court in which the Cajun bankruptcy is pending, seeking a ruling that Entergy Gulf States would not be liable for damages to certain coal suppliers for Big Cajun 2, Unit 3, if the Cajun bankruptcy trustee were to reject their coal contracts as a part of a plan of reorganization in the bankruptcy proceeding. In its pleading, Entergy Gulf States took the position that it was not a party to, and had no liability under, those coal contracts. On February 12, 1997, the coal suppliers and the Cajun bankruptcy trustee filed a response in the declaratory judgment action and made certain counterclaims and crossclaims. The coal suppliers contended that Entergy Gulf States' declaratory judgment action should be dismissed and, in the alternative, argued that Cajun is Entergy Gulf States' agent in the procurement of coal for Big Cajun 2, Unit 3, and that Entergy Gulf States is a party to and has liability under the coal supply contracts. On September 4, 1997, the U.S. Bankruptcy Court ruled that Entergy Gulf States is not liable for the Cajun coal contracts. The coal suppliers have subsequently appealed this decision to the District Court. 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 Form 10-K for information on the domestic utility companies' and System Energy's construction expenditures (excluding nuclear fuel), for the years 1997, 1998, and 1999 and long- term debt and preferred stock maturities and cash sinking fund requirements for the period 1997-1999. 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 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 FASB issued an exposure draft of a proposed SFAS (which proposed a 1997 effective date) in February 1996 regarding the recognition, measurement and classification of decommissioning costs for nuclear power plants. 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. 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 May 1997. Turbine modifications were installed in May 1997 to restore most of the output lost 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, it could become necessary for Entergy Operations 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 for the fabrication and replacement of the steam generators at ANO 2. Entergy estimates the cost of fabrication and replacement of the steam generators to be approximately $150 million. Entergy Operations has entered into a contract, with certain cancellation provisions, for the design and fabrication of replacement steam generators. A letter of intent has been issued for the installation of the replacement steam generators. It is anticipated that the steam generators 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) in the U.S. District Court for the Eastern District of Arkansas, 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 nearby substation site and 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. Entergy Arkansas filed a Motion for Summary Judgment on June 30, 1997 requesting that the case be dismissed. On July 29, 1997, the Court granted Entergy Arkansas' Motion for Summary Judgment and dismissed Reynolds' lawsuit. 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 (PRP) 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. As of September 30, 1997, a remaining recorded liability of $19.8 million existed relating to the clean-up of the 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 the sites where Entergy Gulf States has been designated as a PRP 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 $6.7 million existed at September 30, 1997, for waste water upgrades and closures to be completed by the end of 1997. Cumulative expenditures relating to the upgrades and closures of waste water impoundments were $7.1 million as of September 30, 1997. 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. In July 1997, Entergy Louisiana caused the lessors to issue $307,632,000 aggregate principal amount of Waterford 3 Secured Lease Obligation Bonds, 8.09% Series due 2017, to refinance the outstanding bonds originally issued to finance the purchase of the undivided interests by the lessors. The lease payments will be reduced to reflect the lower interest costs. 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 10 to the Form 10-K and Note 4 herein 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, 1997. See Note 9 to the Form 10-K for further information. Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) See Note 9 to the Form 10-K for further information relating to lawsuits filed by former employees asserting they were wrongfully terminated and/or discriminated against on the basis of age, race, and/or sex. (Entergy Corporation, Entergy Louisiana, and Entergy New Orleans) Entergy Corporation, Entergy Louisiana and Entergy New Orleans are defendants in numerous lawsuits filed in Louisiana state court on behalf of approximately 147 plaintiffs who claim that they were illegally terminated from their jobs due to discrimination on the basis of age. The plaintiffs have requested that the court certify the matter as a class action. On August 13, 1997, the court certified the case as a class action. The court decision to certify a class action has been appealed to the Louisiana Fifth Circuit Court of Appeal. No assurance can be given as to the timing or outcome of these proceedings. (Entergy Corporation and Entergy Arkansas) Entergy Corporation and Entergy Arkansas are defendants in a number of lawsuits filed in federal court on behalf of a total of approximately 62 plaintiffs who claim they were illegally terminated from their jobs due to discrimination on the basis of age or race. The first of these lawsuits, originally involving 29 plaintiffs, was tried before a jury beginning in April 1997. Settlements were reached with two of the plaintiffs prior to the trial. On May 1, 1997, the jury rendered findings as to 22 of the plaintiffs indicating that Entergy had no liability to them for discrimination. The jury did find that Entergy had intentionally discriminated against the remaining 5 plaintiffs on the basis of age. As a result, these plaintiffs will be awarded damages equal to twice their back pay plus lost future wages and attorneys' fees. A trial date for another suit involving 18 plaintiffs, originally scheduled for May 1997, has been continued with no new date set. Another of the suits is set for trial in November 1997. No trial dates have been set for the remaining cases. (Entergy Corporation and Entergy Gulf States) Entergy Corporation and Entergy Gulf States were defendants in a lawsuit involving approximately 176 plaintiffs filed in state court in Texas by former employees who claim that they lost their jobs as a result of the Merger. The plaintiffs in these cases asserted various claims, including discrimination on the basis of age, race, and/or sex. The court made a preliminary ruling that each plaintiff's claim should be tried separately. However, all of these claims were settled before reaching trial in June 1997. Catalyst Technologies, Inc. (Entergy Corporation) On August 8, 1997, a jury in the Civil District Court of Orleans Parish, Louisiana, returned a verdict against Entergy Enterprises, a wholly-owned non-utility subsidiary of Entergy Corporation, in the amount of $346 million. Catalyst Technologies, Inc. (CTI) alleged in its lawsuit that Entergy Enterprises had agreed to transfer computer software to CTI but breached its obligation to do so, and claimed damages in an amount equaling its purported lost profits. On September 23, 1997, the judge in the case entered a judgment in the amount of the verdict, plus accrued interest from the date of the plaintiff's original demand in the amount of approximately $118 million, which continues to accrue at a rate of approximately $88,000 per day. The judgment in favor of CTI currently is the subject of post-trial motions in which Entergy Enterprises seeks, in the alternative, a judgment notwithstanding the verdict, a new trial or a substantial reduction of the amount awarded to CTI. Entergy Enterprises contended in the trial that it was never obligated to transfer any technology to CTI because CTI never fulfilled the conditions necessary to give rise to such an obligation. Moreover, Entergy Enterprises contended that CTI's claim for lost profits was totally speculative, having been made by a start- up company that has never engaged in any substantial business and having arisen in connection with a product that has never been marketed or sold and has never generated any revenue or profit for Entergy Enterprises. Based on these facts and the advice of counsel, management continues to believe that there are a number of strong legal arguments in support of Entergy Enterprises' position, that the judgment in favor of CTI is contrary to the facts and applicable law, and that either the case will be reversed or the judgment will be reduced to an amount that would not be material to Entergy Corporation. Subject to the outcome of the post-trial motions, which were the subject of oral argument before the court on November 5, 1997, Entergy Enterprises will appeal the judgment of the trial court. Refer to "Other Regulation and Litigation" in Item 1 of the Form 10-K for information regarding the original petition filed by CTI. On September 11, 1997, Entergy initiated a declaratory judgment action against CTI in the Delaware Chancery Court seeking a determination that Entergy would not be liable to CTI for the judgment entered against Entergy Enterprises by the Orleans Parish Civil District Court. On October 14, 1997, CTI filed a motion to dismiss the complaint. This action is pending. On September 30, 1997, CTI filed a new lawsuit against Entergy Corporation, Entergy Services, Entergy Enterprises and certain individuals who are, or at one time were, directors of those corporations. In summary, the suit claims that CTI suffered damages as a result of actions on the part of Entergy that allegedly caused the individual defendants to breach their fiduciary duties owed to Entergy Enterprises and, indirectly, to CTI as Entergy Enterprises' judgment creditor. In particular, the CTI claim asserts that the defendants have wrongfully caused Entergy Enterprises' assets to be depleted. Entergy Corporation, Entergy Services, Entergy Enterprises, and the individual defendants deny any such wrongdoing and will vigorously contest this new lawsuit, which Entergy believes is without merit. Australian Franchise Taxes (Entergy Corporation) On August 27, 1997, the Federal Court of Australia upheld a decision by the Australian Commissioner of taxation that franchise taxes paid by a resident electricity distribution business were not deductible for Australian income tax purposes. This decision is currently on appeal by this electricity distribution business. Management is currently analyzing the impact of this decision on CitiPower, which also incurs such franchise taxes. Management estimates the exposure to CitiPower, should this decision be upheld or alternative planning strategies be unavailable, is approximately $26 million for the periods prior to September 30, 1997. NOTE 2. RATE AND REGULATORY MATTERS River Bend (Entergy Corporation and Entergy Gulf States) In 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). At the same time, 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). The PUCT's order has been the subject of several appellate proceedings, culminating in an appeal to the Texas Supreme Court (Supreme Court). On January 31, 1997, the Supreme Court issued an opinion reversing the PUCT's order and remanding the case to the PUCT for further proceedings. The Supreme Court found that the PUCT had prejudiced Entergy Gulf States' rights by attempting to defer a ruling on the abeyed plant costs and incorrectly determined the amount of federal income tax expense that should have been allowed in rates. The Supreme Court ruled that the PUCT could choose either to conduct hearings and take further evidence or to decide the case on the original evidence. On February 18, 1997, the Texas Office of Public Utility Counsel filed a motion for rehearing of the Supreme Court's decision, arguing that the Supreme Court's remand should have instructed the PUCT as to how the case should be dealt with on remand. On July 31, 1997, the Supreme Court overruled the motion for rehearing and issued its mandate that the case be returned to the PUCT for further deliberations. The case has been docketed at the PUCT and Entergy Gulf States has filed a motion asking that the case be consolidated with its rate proceeding filed in November 1996 now pending at the PUCT. On November 4, 1997, the PUCT denied the motion to consolidate the remanded issues with the rate proceeding, but has put both the abeyed plant costs and the federal income tax expense issues on an expedited schedule. As of September 30, 1997, 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 $259 million, respectively. As a result of the application of SFAS 121, Entergy Gulf States wrote off Abeyed Deferrals of $169 million, net of tax, effective January 1, 1996. In light of the continuing proceedings before the PUCT and the Texas Supreme Court's January 31, 1997 decision, Entergy Gulf States has made no write-offs or reserves for the River Bend plant-related costs. At this time, management and legal counsel are unable to predict the amount of the abeyed and previously disallowed River Bend plant costs, if any, that may ultimately be allowed in Entergy Gulf States' Texas retail rates. In prior proceedings involving other utilities, the PUCT has held that the original cost of nuclear power plants will be recoverable in electric rates to the extent those costs were prudently incurred. In another proceeding Entergy Gulf States has previously filed with the PUCT, a cost reconciliation study prepared by Sandlin Associates, management consultants with expertise in the cost analysis of nuclear power plants, which supports the reasonableness of the River Bend costs held in abeyance by the PUCT. This reconciliation study determined that approximately 82% of the River Bend cost increase above the amount included by the PUCT in rate base was a result of changes in federal nuclear safety requirements, and provided other support for the remainder of the abeyed amounts. In particular, there have been four other rate proceedings in Texas involving nuclear power plants. Disallowed investment in the plants ranged from 0% to 15%. Each case was unique, and the disallowances in each were made for different reasons. Appeals of two of these PUCT decisions are currently pending. Based upon the PUCT's prior decisions, management believes that River Bend construction costs were prudently incurred and that it is reasonably possible that it will recover through rates, or otherwise through means such as a deregulated asset plan, all or substantially all of the abeyed River Bend plant costs. In the event of an adverse ruling in this case, a net of tax write-off, as of September 30, 1997, of up to $271 million could be required. System Agreement (Energy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) On March 3, 1995, a FERC ALJ issued an opinion holding that the practice of including the out-of-service units in the reserve equalization calculations during the period 1987 through 1993 was not permitted by Service Schedule MSS-1 and, therefore, constituted a violation of the System Agreement. However, the ALJ found that the violation was in good faith and had benefited the customers of Entergy as a whole. Accordingly, the ALJ recommended that no retroactive refunds should be ordered. The ALJ also held that the System Agreement should be amended to allow out-of-service units to be included in reserve equalization as proposed in an offer of settlement filed by Entergy on February 16, 1994. On August 5, 1997, the FERC issued an Opinion and Order affirming the initial decision of the ALJ. On September 3, 1997, the LPSC and the MPSC filed a request for rehearing of FERC's August 5, 1997 decision. This request remains pending. On March 14, 1995, the LPSC filed a complaint with FERC alleging that the System Agreement results in unjust and unreasonable rates and requested that FERC order a hearing on this matter. In May 1995, the LPSC amended its original complaint, asserting that the System Agreement should be revised to exclude curtailable load from the cost allocation determination due to conflicts with federal policies under PURPA and with Entergy's system planning philosophy. On August 5, 1996, FERC dismissed the LPSC's complaint and amended complaint. On September 30, 1996, FERC granted the LPSC's request for rehearing, solely for the purpose of affording FERC additional time for consideration of the matters raised on rehearing. On September 12, 1997, the FERC denied the LPSC's request for rehearing on the FERC's order dismissing the LPSC's complaint and amended complaint. Retail Rate Proceedings Filings with the APSC (Entergy Corporation and Entergy Arkansas) In October 1996, Entergy Arkansas filed a proposal with the APSC designed to achieve an orderly transition to retail electric competition in Arkansas. Entergy Arkansas supplemented its proposal with a May 1, 1997 filing and additional testimony in response to the other parties' testimonies. The proposal included a rate decrease totaling $158 million over a two-year period beginning January 1998. On October 9, 1997, Entergy Arkansas and other parties to the proceeding submitted a settlement agreement to the APSC. The proposed settlement provides for more than $200 million in rate reductions. The proposal allows Entergy Arkansas to accelerate, beginning in 1999, the recovery of purchased power costs associated with Entergy Arkansas' allocation of Grand Gulf 1 plant investment, pending FERC approval. The $200 million reduction includes approximately $170 million associated with the termination of the Grand Gulf deferrals, a reduction which was part of an earlier settlement agreement with the APSC. The settlement also provides for a Transition Cost Account which will utilize any excess earnings above the allowed return on equity to offset stranded costs when customer choice occurs. The agreement calls for the APSC to hold a hearing in 2001 to review Entergy Arkansas' potential stranded costs and to evaluate the magnitude of stranded costs and the mechanism in place to address those stranded costs. In addition, the settlement includes the opening of a generic docket by the APSC in 1998 to take testimony regarding transition to retail electric competition, with the findings from that docket to be turned over to the Arkansas legislature in October 1998. The APSC held a hearing on October 17, 1997 to consider the settlement agreement and is expected to issue a decision with respect to the settlement agreement by mid-December 1997. Filings with the PUCT (Entergy Corporation and Entergy Gulf States) In December 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 were concluded in October 1996, and in April 1997 the PUCT issued an order which approved recovery of approximately $18.8 million of the under- recovered fuel balance, including interest. In June 1997, the PUCT issued a subsequent order based on a rehearing, which reduced the approved recovery to $18.5 million. Entergy Gulf States has appealed portions of the PUCT's order to the Texas District Court. No assurance can be given as to the timing or outcome of these appeals. In accordance with the Merger agreement, Entergy Gulf States filed a rate proceeding with the PUCT in November 1996. 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 pending investigation based on the assurance that any rate decrease ordered in the November 1996 filing will be retroactive to June 1, 1996, and will accrue interest until refunded. The agreement further provides that no base rate increase will be retroactive. Subsequent to the November 1996 filing, the Cities passed ordinances reducing Entergy Gulf States' rates by $43.6 million. Entergy Gulf States has appealed these ordinances to the PUCT, and these appeals have been consolidated in the pending rate proceeding. Included in the November 1996 filing was a proposal to achieve an orderly transition to retail electric competition in Texas, similar to the filing described below that Entergy Gulf States made with the LPSC. This filing with the PUCT is being litigated in four phases as follows: (i) fuel factor/fuel reconciliation phase, of which Entergy Gulf States believes there was an under-recovered fuel balance of $41.4 million, including interest, for the period July 1, 1995 through June 30, 1996; (ii) revenue requirement phase; (iii) cost allocation/rate design phase; and (iv) competitive issues phase. Hearings on the first two phases have been completed though additional hearings may occur regarding the second phase. A supplemental filing with respect to the fourth phase was made with the PUCT on April 4, 1997, outlining a comprehensive market reform proposal calling for the establishment of retail competition, service quality standards, a regional power exchange, and an independent system operator. Entergy Gulf States requested from the PUCT a reciprocal commitment to provide an opportunity for the full recovery of prudently incurred investments previously approved by regulators. The PUCT had scheduled hearings on the transition to competition to begin November 5, 1997, although the Commission has not issued an order with respect to the two completed phases. Filings with the LPSC (Entergy Corporation and Entergy Gulf States) 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 appealed the LPSC's order and obtained an injunction to stay the order, except insofar as it requires the $13.4 million reduction, which Entergy Gulf States implemented in November 1996. In addition, pursuant to an October 1996 settlement with the LPSC, Entergy Gulf States will be allowed to recover $8.1 million annually related to certain gas transportation and storage facilities costs. This amount will be applied as an offset against any refund that may be required by a final judgment in Entergy Gulf States' appeal of the second post-Merger earnings review order. 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, Entergy Gulf States implemented a $5.3 million annual rate reduction. Hearings on this filing concluded in March 1997. An additional rate reduction may be required upon the issuance by the LPSC of a final rate order which is expected by the end of 1997. On May 30, 1997, Entergy Gulf States filed its fourth post- Merger earnings analysis with the LPSC. This filing showed a revenue deficiency such that no rate reduction is warranted. Entergy Gulf States' filing will be subject to further review by the LPSC. LPSC Fuel Cost Review In September 1996, the LPSC completed the second phase of its review of Entergy Gulf States' fuel costs, which 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, and which have been refunded pursuant to the October 1996 LPSC Settlement. Entergy Gulf States will be permitted to recover these costs in the future through base rates. On October 23, 1996, Entergy Gulf States appealed and received an injunction to stay this order, except insofar as the order requires the $14.3 million refund. On September 19, 1997, the District Court reversed the LPSC's order with respect to several disallowances associated with the operation of River Bend, and affirmed the LPSC's order with respect to the remainder of the ordered disallowances. The economic effect of the reversal of certain disallowances pursuant to the District Court's order is not yet determined. It is expected that appeals will be filed with the Louisiana Supreme Court. See "LPSC Fuel Cost Review" and "October 1996 LPSC Settlement" in Note 2 of the financial statements in the Form 10-K for more information. (Entergy Corporation and Entergy Louisiana) On May 30, 1997, Entergy Louisiana made its annual formula rate plan filing with the LPSC for the 1996 test year. This filing showed the necessity to reduce rates by approximately $27.8 million. Additionally, in order to reflect certain Waterford 3 related items (property tax and termination of the phase-in plan) that are addressed outside the formula rate plan, the filing showed the necessity to additionally reduce rates approximately $26.7 million. These two reductions produced a total reduction of approximately $54.6 million which was implemented beginning in the first filing cycle of July 1997. The May 30 filing is the final filing in the two year period of the formula rate plan. There has been no determination by the LPSC as to whether the formula rate plan should be extended, modified, or terminated. (Entergy Corporation, Entergy Gulf States, and Entergy Louisiana) In September 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 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 but 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. Although these proposals allow for the complete recovery of the remaining plant investment associated with River Bend and Waterford 3 as of December 31, 1995, over a seven-year period, the NRC operating licenses for these plants permit continued operation until the years 2025 and 2024, respectively. Hearings on these proposals have been delayed until 1998. In February 1997, the LPSC identified certain issues embodied in the Entergy Gulf States and Entergy Louisiana proposals that will be addressed in those companies' existing rate dockets, and other issues that will be addressed in an ongoing generic regulatory proceeding examining electric utility industry restructuring. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) On March 15, 1997, Entergy Mississippi filed its annual earnings review with the MPSC under its formula rate plan for the 1996 test year. In April 1997, the MPSC issued an order approving a prospective rate reduction of $11.2 million. This rate reduction went into effect May 1, 1997. Entergy Mississippi has initiated discussions with the MPSC regarding an orderly transition to a more competitive market for electricity. In August 1996, Entergy Mississippi filed a proposal with the MPSC for a rate rider to assure recovery of all Grand Gulf costs incurred to serve customers. The rider would maintain current rates for electric service provided by Entergy Mississippi and would apply to customers within Entergy Mississippi's service area who obtain electricity in the future from a source other than Entergy Mississippi. Entergy Mississippi 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 this proposal and established a generic docket to consider competition for retail electric service. Hearings on this docket concluded in April 1997. In early July the MPSC issued an order directing the Mississippi Public Utilities Staff to submit a report outlining a plan for restructuring the electric utility industry in Mississippi. On November 3, 1997, the Mississippi Public Utilities Staff submitted to the MPSC a proposed transition plan for retail competition in the electric industry in Mississippi. The plan represents the staffs' current position on how retail competition can be implemented in Mississippi and includes an implementation schedule in which retail competition would begin on January 1, 2001. The plan assumes the passage of necessary enabling legislation in 1999. The plan also provides for a transition period, from January 1, 2001, through December 31, 2004, for the recovery of any allowed stranded costs through a non-bypassable charge. Parties will file comments and reply comments on the plan during January and February of 1998 and a hearing will be conducted by the MPSC in April 1998. Filings with the Council (Entergy Corporation, Entergy New Orleans and Entergy Louisiana) In March 1997, the Council established new dockets regarding electric and gas utility service competition in the City of New Orleans. The dockets will address competitive issues, including competition, stranded costs, consumer savings, cost shifting, and potential conflicts among federal, state, and local regulators, as such issues relate to electric and gas service. Comments were filed by interested parties in April 1997. Public hearings on these issues were held in May, July and October of 1997. The Council issued a resolution in February 1997 indicating that it will conduct an investigation of Entergy New Orleans' allowed rate of return, base rates, and adjustment clauses. The Council conducted hearings in April 1997 on the issue of rate of return, and directed Entergy New Orleans to make a cost of service and revenue requirement filing on May 1, 1997. That filing was later deferred until September 1997. In July 1997, Entergy New Orleans and the Council agreed to implement an $18 million annual reduction in base rates effective May 1, 1997, even though an allowed rate of return had not yet been determined by the Council. Entergy New Orleans made its cost of service and revenue requirement filing in conjunction with its transition to competition plan on September 17, 1997. On November 6, 1997, the Council severed the traditional ratemaking issues from the transition filings and established a procedure schedule for the second phase of the rate proceeding, pursuant to which hearings will be conducted in July 1998. Additionally, the Council ordered Entergy New Orleans to file unbundled gas rates, in preparation for an investigation of issues relating to gas industry competition. The electric transition to competition filing is generally similar to those filed for the other domestic utility companies. It includes a rate cap coupled with a continuing right of the Council to conduct reviews of Entergy New Orleans' earnings, an offer to seek authority from FERC for accelerated recovery of Grand Gulf purchased power obligations, and implementation of a non-bypassable universal service charge for all existing customers, together with functional unbundling of electric rates. Entergy New Orleans' transition filing will be subject to further review by the Council. A procedural schedule on that filing has not been set, although public comment has been requested by the Council. 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. The request also includes a proposed change in the accounting recognition of nuclear refueling outage costs from that of expensing those costs as incurred to the deferral and amortization method described in Note 1 in the Form 10-K with respect to Entergy Arkansas. 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, including the change in accounting for nuclear refueling outage costs, 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 at any time. Management is unable to 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. NOTE 3. COMMON STOCK (Entergy Corporation) During the nine months ended September 30, 1997, Entergy Corporation issued 1,187,916 shares of its previously repurchased common stock, reducing the amount held as treasury stock by approximately $34 million. Included in the foregoing were 813,161 shares of common stock issued at a value of $21.5 million in connection with the acquisition of the security monitoring company, Ranger American, during the three months ended September 30, 1997. Entergy Corporation issued the remaining shares to meet the requirements of its various stock plans. In addition, Entergy Corporation received proceeds of $230.2 million from the issuance of 8,975,033 shares of common stock under its dividend reinvestment and stock purchase plan during the nine months ended September 30, 1997. NOTE 4. LONG-TERM DEBT (Entergy Corporation) See Note 7 of the Form 10-K for a discussion of the Entergy London Investments (formally Entergy Power UK plc) credit facility. Approximately BPS1.03 billion ($1.66 billion) of variable rate borrowings were outstanding under this facility as of September 30, 1997. The weighted average interest rate on the borrowings outstanding as of September 30, 1997 was 8.77%. Entergy London Investments entered into several interest rate swaps to reduce the impact of interest rate changes on its debt related to the London Electricity acquisition. The interest rate swap agreements involve the exchange of floating rate interest payments for fixed rate interest payments over the life of the agreements. Entergy London Investments recognizes interest expense currently based on the fixed rate of interest resulting from use of these swap agreements. If the counterparties to an interest rate swap agreement were to default on contractual payments, Entergy London Investments could be exposed to increased costs related to replacing the original agreement. However, Entergy London Investments does not anticipate nonperformance by any counterparty to any interest rate swap in effect at September 30, 1997. At September 30, 1997, Entergy London Investments was a party to a notional amount of BPS600 million of interest rate swaps with maturity dates ranging from March 1999 to September 2001. An Entergy Corporation subsidiary signed an agreement with several banks on January 5, 1996, to obtain a revolving credit facility for the acquisition of CitiPower. The subsidiary entered into several interest rate swaps to reduce the impact of interest rate changes on its debt related to the CitiPower acquisition. See Note 7 of the Form 10-K for a discussion of the credit facility and the interest rate swap agreements. The interest rate swap agreements involve the exchange of floating rate interest payments for fixed rate interest payments over the life of the agreements. Interest expense is recognized currently based on the fixed rate of interest resulting from use of these swap agreements. On September 2, 1997, CitiPower entered into an additional interest rate swap agreement with a notional amount of 32 million Australian dollars and maturity dates ranging from February 1999 to December 2009. Entergy enters into interest rate swaps as part of its overall risk management strategy and does not hold or issue material amounts of derivative financial instruments for trading purposes. Entergy accounts for its interest rate swaps in accordance with the concepts established in SFAS 80, "Accounting for Futures Contracts", and various EITF pronouncements. If the interest rate swaps were to be sold or terminated, any resulting gain or loss would be deferred and amortized over the remaining life of the debt instrument being hedged by the interest rate swaps. If the debt instrument being hedged by the interest rate swaps were to be extinguished, any resulting gain or loss attributable to the swaps would be recognized in the period in which the debt was extinguished. (Entergy Corporation and Entergy Louisiana) Entergy Louisiana is the lessee of three separate undivided interests in Waterford 3 under three separate, but substantially identical, long-term net leases. The lessors under such leases acquired the undivided interests (aggregating approximately 9.3%) in Waterford 3 from Entergy Louisiana in three separate sale-leaseback transactions that occurred in 1989. Approximately 87.7% of the aggregate consideration paid by the lessors for their respective undivided interests was provided to the lessors from the issuance of Waterford 3 Secured Lease Obligation Bonds (Initial Series Bonds) in 1989. In July 1997, Entergy Louisiana caused the lessors to issue $307,632,000 aggregate principal amount of Waterford 3 Secured Lease Obligation Bonds, 8.09% Series due 2017, to refinance the outstanding bonds originally issued to finance the purchase of the undivided interests by the lessors. The lease payments will be reduced to reflect the lower interest costs. 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 10 to the Form 10-K for further information. (Entergy Gulf States) On November 1, 1997, Entergy Gulf States retired $75 million of its 6.99% Series First Mortgage Bonds upon maturity. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On September 26, 1997, Entergy Corporation's Board of Directors declared a common stock dividend of 45 cents per share, payable on December 1, 1997, to holders of record on November 12, 1997. NOTE 6. ACCOUNTING ISSUES (Entergy Corporation) New Accounting Standard - In March 1997, the FASB issued SFAS 128, "Earnings per Share", effective for financial statements for periods ending after December 15, 1997. This statement will simplify the computation of earnings per share for many companies by eliminating calculation provisions which were required by the prior earnings per share standard, Accounting Principles Board Opinion 15. The adoption of SFAS 128 is not expected to have a material effect on the calculation of earnings per share for Entergy Corporation. In May and July 1997, the EITF of the FASB met regarding EITF Issues No. 97-4, "Deregulation of the Pricing of Electricity - Issues Related to the Application of SFAS 71, "Accounting for the Effects of Certain Types of Regulation"", and how SFAS 101, "Regulated Enterprises - Accounting for the Discontinuation of Application of FASB Statement No. 71", should be applied to a portion of an entity subject to such a plan. As a result of these meetings, a consensus was reached that SFAS 71 should be discontinued at a date no later than when the details of the transition to competition plan for all or a portion of the entity subject to such plan are known. Additionally, the EITF reached a consensus that stranded costs which are to be recovered through cash flows derived from another portion of the entity which continues to apply SFAS 71 should not be written off; rather, they should be considered regulatory assets of the segment which will continue to apply SFAS 71. NOTE 7. ACQUISITION OF LONDON ELECTRICITY (Entergy Corporation) On December 18, 1996, Entergy Corporation made a formal cash offer to acquire London Electricity for $2.1 billion. London Electricity is a regional electric company serving approximately two million customers in the metropolitan area of London, England. The offer was approved by authorities in the UK, and, as of February 7, 1997, the offer was made unconditional. Entergy Corporation, through Entergy London Investments, now controls 100% of the common shares of London Electricity. Entergy Corporation has included the results of operations of London Electricity in its results of operations beginning February 1, 1997, based on management's determination that effective control was achieved on that date. The acquisition was financed with $1.7 billion of debt that is non-recourse to Entergy Corporation and $392 million of equity provided by Entergy Corporation from available cash and borrowings under its $300 million line of credit. The cost of the London Electricity license is being amortized on a straight-line basis over a 40-year period beginning February 1, 1997. As of September 30, 1997, the unamortized balance of the license was approximately $1.3 billion, which is based on a preliminary purchase price allocation. In accordance with the purchase method of accounting, the three and nine months ended September 30, 1997 results of operations for Entergy Corporation reported in its Statements of Consolidated Income and Cash Flows do not reflect London Electricity's results of operations for any period prior to February 1, 1997. The pro forma combined revenues, net income, and earnings per common share of Entergy Corporation presented below give effect to the acquisition as if it had occurred on January 1, 1997 and 1996, respectively. 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. The three months ended September 30, 1996 pro forma information is not available for comparative purposes. For the Nine Months Ending: September 30, 1997(b) September 30, 1996(a) (In Millions of U.S. Dollars, Except Share Data) Operating revenues $ 7,243 $ 7,118 Net income $ 381 $ 450 Earnings per average common share $ 1.42 $ 1.73 (a) - Net Income in 1996 includes the $174 million net of tax write-off of River Bend rate deferrals pursuant to SFAS 121. (b) - On July 31, 1997, the British government enacted into law a one-time "windfall profits tax" on privatized industries, including regional electric utilities such as London Electricity. London Electricity's liability is approximately BPS140 million (approximately $234 million), which will not be deductible for UK corporation tax purposes. Payment of the tax is required in two equal installments, the first due on December 1, 1997, and the second due one year later. The government also decreased the corporation tax rate in the UK from 33% to 31%, effective as of April 1, 1997. In accordance with SFAS 109, "Accounting for Income Taxes", this reduction in UK corporation tax rates resulted in a one-time reduction in income tax expense of approximately $65 million during the quarter ended September 30, 1997. __________________________________ 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 Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) See "Employment Litigation" in Item 1 of Part I of the Form 10-K for information relating to lawsuits filed by former employees asserting they were wrongfully terminated and/or discriminated against due to age, race, and/or sex. See "Employment Litigation" in Note 1 herein for developments that have occurred since the filing of the Form 10-K. Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States) See "Cajun - Coal Contracts" in Note 1 herein for developments that have occurred since the filing of the Form 10-K. Catalyst Technologies, Inc. (Entergy Corporation) See "Catalyst Technologies, Inc." in Item 1 of Part I of the Form 10-K for information relating to the lawsuit filed by Catalyst Technologies, Inc. See "Catalyst Technologies, Inc." in Note 1 herein for developments that have occurred since the filing of the Form 10-K. Service Area Dispute (Entergy Corporation and Entergy Mississippi) On October 11, 1994, twelve Mississippi cities filed a complaint in state court against Entergy Mississippi and eight electric power associations seeking a judgment from the court declaring unconstitutional certain Mississippi statutes that establish the procedure that must be followed before a municipality can acquire the facilities and certificate rights of a utility serving in the municipality. Specifically, the suit requests that the court declare unconstitutional certain 1987 amendments to the Mississippi Public Utilities Act that require that the MPSC cancel a utility's certificate to serve in the municipality before a municipality may acquire a utility's facilities located in the municipality. The suit also requests that the court find that Mississippi municipalities can serve any consumer in the boundaries of the municipality and within one mile thereof. On January 6, 1995, Entergy Mississippi and the other defendants filed motions to dismiss. In October 1995, the state court dismissed the complaint. The plaintiffs appealed the dismissal to the Mississippi Supreme Court. On September 11, 1997, the Mississippi Supreme Court affirmed the decision of the lower court finding in favor of Entergy Mississippi and dismissing the municipalities' complaint. A petition for rehearing filed by the municipalities on September 24, 1997 is pending before the Mississippi Supreme Court. See "Service Area Dispute" in Item 1 of Part I of the Form 10-K for more information. Federal Income Tax Audit (Entergy Corporation, Entergy Louisiana, and System Energy) In August 1994, Entergy Corporation received an IRS report covering the federal income tax audit of Entergy Corporation and subsidiaries for the years 1988 - 1990. The report asserted an $80 million tax deficiency for the 1990 consolidated federal income tax returns related primarily to the utilization of accelerated investment tax credits associated with Waterford 3 and Grand Gulf 1. Changes to the initial report, made in the IRS appeal process, reduced the assessment to $58 million. In March 1997, Entergy Corporation received notification that the IRS National Office had resolved the audit in Entergy's favor and that no additional tax payments would be due. Taxes Paid Under Protest (Entergy Corporation and Entergy Louisiana) Since the mid-1980's, Entergy Louisiana and the tax authorities of St. Charles Parish, Louisiana (Parish), the parish in which Waterford 3 is located, have disputed use taxes on nuclear fuel paid under protest by Entergy Louisiana. Entergy Louisiana has been successful in lawsuits in the Parish with regard to recovering these taxes, plus interest, and also with regard to Parish lease tax issues pertaining to fuel financing arrangements. In June 1995, Entergy Louisiana received a favorable decision from the Louisiana Fifth Circuit Court of Appeal that confirmed that no such use and lease taxes are due. In May 1997, the Parish and Entergy Louisiana settled all pending use and lease tax litigation. This settlement includes returns to Entergy Louisiana of additional payments under protest on nuclear fuel and the dismissal of nuclear fuel related suits against Entergy Louisiana and/or the fuel lessors. The suits by Entergy Louisiana with regard to state use tax paid under protest on nuclear fuel are still pending. Union Pacific In October 1997, Entergy Arkansas and Entergy Services filed a civil suit against Union Pacific Railroad Company (Union Pacific) in the United States District Court for the Middle District of Louisiana. This suit, which seeks damages in excess of $1 million and the termination of coal shipping contracts with Union Pacific, maintains that Union Pacific has failed to meet its contractual obligations to ship coal to Entergy Arkansas' two large coal-fired plants and that such failure has resulted in a very low level of coal inventory at those plants. The low inventory level has impaired Entergy Arkansas' ability to generate electricity from these plants. Item 5. Other Information Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The domestic utility companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends pursuant to Item 503 of Regulation S-K of the SEC as follows: Ratios of Earnings to Fixed Charges Twelve Months Ended December 31, September 30, 1992 1993 1994 1995 1996 1997 Entergy Arkansas 2.28 3.11(b) 2.32 2.56 2.93 2.72 Entergy Gulf States 1.72 1.54 .36(c) 1.86 1.47 2.19 Entergy Louisiana 2.79 3.06 2.91 3.18 3.16 2.80 Entergy Mississippi 2.37 3.79(b) 2.12 2.92 3.40 2.94 Entergy New Orleans 2.66 4.68(b) 1.91 3.93 3.51 1.99 System Energy 2.04 1.87 1.23 2.07 2.21 2.32 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, September 30, 1992 1993 1994 1995 1996 1997 Entergy Arkansas 1.86 2.54(b) 1.97 2.12 2.44 2.39 Entergy Gulf States (a) 1.37 1.21 .29(c) 1.54 1.19 1.82 Entergy Louisiana 2.18 2.39 2.43 2.60 2.64 2.46 Entergy Mississippi 1.97 3.08(b) 1.81 2.51 2.94 2.59 Entergy New Orleans 2.36 4.12(b) 1.73 3.56 3.22 1.80 (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock. (b) 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. (c) 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. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* 23(a) - Consent of Sandlin Associates. 27(a) - Financial Data Schedule for Entergy Corporation and Subsidiaries as of September 30, 1997. 27(b) - Financial Data Schedule for Entergy Arkansas as of September 30, 1997. 27(c) - Financial Data Schedule for Entergy Gulf States as of September 30, 1997. 27(d) - Financial Data Schedule for Entergy Louisiana as of September 30, 1997. 27(e) - Financial Data Schedule for Entergy Mississippi as of September 30, 1997. 27(f) - Financial Data Schedule for Entergy New Orleans as of September 30, 1997. 27(g) - Financial Data Schedule for System Energy as of September 30, 1997. 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, 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(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, 1997, 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, 1997, 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). ___________________________ Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of Entergy Corporation and its subsidiaries on a consolidated basis. * Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended September 30, 1997, 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, 1997. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy Corporation, Entergy Arkansas, and Entergy Gulf States A current report on Form 8-K, dated October 9, 1997, was filed with the SEC on October 10, 1997, reporting information under Item 5. "Other Events". Entergy Corporation A current report on Form 8-K, dated September 23, 1997, was filed with the SEC on October 1, 1997, reporting information under Item 5. "Other Events". Entergy Corporation A current report on Form 8-K, dated August 8, 1997, was filed with the SEC on August 11, 1997, reporting information under Item 5. "Other Events". 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 13, 1997 EX-23 2 Exhibit 23(a) 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 (File Numbers 33- 49739 and 33-51181), Form S-8 (File Numbers 2-76551 and 2- 98011) and on Form S-2 (File Number 333-17911) of such reference and Statements. /s/ L. S. Sandlin SANDLIN ASSOCIATES Management Consultants Pasco, Washington November 13, 1997 EX-27 3
UT This schedule contains summary financial information extracted from Entergy Corporation and Subsidiaries financial statements for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000065984 ENTERGY CORPORATION 023 ENTERGY CORPORATION AND SUBSIDIARIES 1,000 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 18,130,096 1,065,703 3,293,730 4,620,647 0 27,110,176 2,434 4,546,564 2,246,729 6,779,017 346,237 334,454 9,394,235 387,229 0 0 273,675 0 239,098 169,568 9,186,663 27,110,176 7,021,430 273,243 5,542,708 5,542,708 1,478,722 (180,532) 1,298,190 646,562 378,385 41,405 336,980 0 0 1,574,715 0 0
EX-27 4
UT This schedule contains summary financial information extracted from Entergy Arkansas' financial statements for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000007323 ENTERGY ARKANSAS 001 ENTERGY ARKANSAS 1,000 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 2,801,433 249,522 688,017 426,229 0 4,165,201 470 590,169 511,937 1,102,576 36,027 116,350 1,243,356 667 0 0 17,465 0 89,084 48,995 1,510,681 4,165,201 1,344,199 126,184 1,083,747 1,083,747 260,452 17,559 278,011 76,638 126,184 8,363 117,821 0 0 400,505 0 0
EX-27 5
UT This schedule contains summary financial information extracted from Entergy Gulf States' financial statements for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000044570 ENTERGY GULF STATES 006 ENTERGY GULF STATES 1,000 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 4,527,227 89,839 815,402 1,060,813 0 6,439,281 114,055 1,152,575 388,615 1,655,245 225,210 47,444 1,817,316 0 0 0 150,890 0 99,011 34,764 2,463,401 6,493,281 1,557,723 77,700 1,230,701 1,230,701 327,022 17,304 344,326 136,323 130,303 18,963 111,340 0 0 382,550 0 0
EX-27 6
UT This schedule contains summary financial information extracted from Entergy Louisiana's financial statements for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000060527 ENTERGY LOUISIANA 012 ENTERGY LOUISIANA 1,000 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 3,418,794 97,476 389,933 367,534 0 4,273,737 1,088,900 (2,321) 71,879 1,158,458 85,000 100,500 1,338,322 0 0 0 35,300 0 27,124 39,828 1,489,205 4,273,737 1,400,732 87,368 1,086,965 1,086,965 313,767 (668) 313,099 96,271 129,460 10,097 119,363 0 0 271,645 0 0
EX-27 7
UT This schedule contains summary financial information extracted from Entergy Mississippi's financial statements for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000066901 ENTERGY MISSISSIPPI 016 ENTERGY MISSISSIPPI 1,000 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 1,053,269 13,344 303,695 110,015 0 1,480,323 199,326 (59) 224,192 423,459 0 50,381 464,106 43,121 0 0 20 0 0 0 499,236 1,480,323 708,203 27,851 592,282 592,282 115,921 1,222 117,143 34,206 55,086 3,258 51,828 0 0 141,008 0 0
EX-27 8
UT This schedule contains summary financial information extracted from Entergy New Orleans' financial statements for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000071508 ENTERGY NEW ORLEANS 017 ENTERGY NEW ORLEANS 1,000 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 291,704 3,259 124,104 88,731 0 507,798 33,744 36,294 60,795 130,833 0 19,780 168,937 0 0 0 0 0 0 0 188,248 507,798 374,699 10,699 338,448 338,448 36,251 252 36,503 11,358 14,446 724 13,722 0 0 36,791 0 0
EX-27 9
UT This schedule contains summary financial information extracted from System Energy's financial statements for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000202584 SYSTEM ENERGY RESOURCES 018 SYSTEM ENERGY RESOURCES 1,000 9-MOS DEC-31-1996 SEP-30-1997 PER-BOOK 2,491,247 78,861 330,143 511,613 0 3,411,864 789,350 0 60,975 850,325 0 0 1,341,848 0 0 0 70,000 0 13,802 42,445 1,093,444 3,411,864 477,255 59,151 256,558 256,558 220,697 7,294 227,991 95,953 72,887 0 72,887 0 0 200,996 0 0
EX-99 10 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
September30, 1992 1993 1994 1995 1996 1997 Fixed charges, as defined: Total Interest Charges 124,101 119,591 110,814 115,337 106,716 106,674 Interest applicable to rentals 17,657 16,860 19,140 18,158 19,121 18,390 ------------------------------------------------------------------- Total fixed charges, as defined 141,758 136,451 129,954 133,495 125,837 125,064 Preferred dividends, as defined (a) 32,195 30,334 23,234 27,636 24,731 17,281 ------------------------------------------------------------------- Combined fixed charges and preferred $173,953 $166,785 $153,188 $161,131 $150,568 $142,345 dividends, as defined =================================================================== Earnings as defined: Net Income $130,529 $205,297 $142,263 $136,666 $157,798 138,211 Add: Provision for income taxes: Total 50,590 82,337 29,220 72,081 84,445 76,494 Fixed charges as above 141,758 136,451 129,954 133,495 125,837 125,064 ------------------------------------------------------------------- Total earnings, as defined $322,877 $424,085 $301,437 $342,242 $368,080 $339,769 =================================================================== Ratio of earnings to fixed charges, as defined 2.28 3.11 2.32 2.56 2.93 2.72 =================================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.86 2.54 1.97 2.12 2.44 2.39 =================================================================== - ------------------------ (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 11 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, 1992 1993 1994 1995 1996 1997 Fixed charges, as defined: Total Interest charges 248,416 210,599 204,134 200,224 192,465 180,378 Interest applicable to rentals 23,759 23,455 21,539 16,648 14,887 15,187 ------------------------------------------------------------------ Total fixed charges, as defined 272,175 234,054 225,673 216,872 207,352 195,565 Preferred dividends, as defined (a) 69,617 65,299 52,210 44,651 48,690 40,186 ------------------------------------------------------------------ Combined fixed charges and preferred $341,792 $299,353 $277,883 $261,523 $256,042 $235,751 dividends, as defined ================================================================== Earnings as defined: Income (loss) from continuing operations before extraordinary items and the cumulative effect of accounting changes $139,413 $69,462 ($82,755) $122,919 ($3,887) 140,568 Add: Income Taxes 55,860 58,016 (62,086) 63,244 102,091 93,079 Fixed charges as above 272,175 234,054 225,673 216,872 207,352 195,565 ------------------------------------------------------------------ Total earnings, as defined (b) $467,448 $361,532 $80,832 $403,035 $305,556 $429,212 ================================================================== Ratio of earnings to fixed charges, as defined 1.72 1.54 0.36 1.86 1.47 2.19 ================================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.37 1.21 0.29 1.54 1.19 1.82 ================================================================== - -------------------------------------------- (a) "Preferred dividends," as defined by SE 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 12 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
December 31, September 30, 1992 1993 1994 1995 1996 1997 Fixed charges, as defined: Total Interest 141,513 136,957 136,444 136,901 132,412 130,788 Interest applicable to rentals 9,363 8,519 8,332 9,332 10,601 9,019 -------------------------------------------------------------- Total fixed charges, as defined 150,876 145,476 144,776 146,233 143,013 139,807 Preferred dividends, as defined (a) 42,026 40,779 29,171 32,847 28,234 19,045 -------------------------------------------------------------- Combined fixed charges and preferred $192,902 $186,255 $173,947 $179,080 $171,247 $158,852 dividends, as defined ============================================================== Earnings as defined: Net Income $182,989 $188,808 $213,839 $201,537 $190,762 $147,005 Add: Provision for income taxes: Total Taxes 87,037 110,813 63,288 117,114 118,559 104,435 Fixed charges as above 150,876 145,476 144,776 146,233 143,013 139,807 -------------------------------------------------------------- Total earnings, as defined $420,902 $445,097 $421,903 $464,884 $452,334 $391,247 ============================================================== Ratio of earnings to fixed charges, as defined 2.79 3.06 2.91 3.18 3.16 2.80 ============================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.18 2.39 2.43 2.60 2.64 2.46 ============================================================== - ------------------------ (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(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, 1992 1993 1994 1995 1996 1997 Fixed charges, as defined: Total Interest 64,066 55,359 52,764 51,635 48,007 46,339 Interest applicable to rentals 521 1,264 1,716 2,173 2,165 2,299 -------------------------------------------------------- Total fixed charges, as defined 64,587 56,623 54,480 53,808 50,172 48,638 Preferred dividends, as defined (a) 12,823 12,990 9,447 9,004 7,720 6,493 -------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $77,410 $69,613 $63,927 $62,812 $57,892 $55,131 ======================================================== Earnings as defined: Net Income $65,036 $101,743 $48,779 $68,667 $79,210 63,348 Add: Provision for income taxes: Total income taxes 23,147 55,993 12,476 34,877 41,107 31,069 Fixed charges as above 64,587 56,623 54,480 53,808 50,172 48,638 --------------------------------------------------------- Total earnings, as defined $152,770 $214,359 $115,735 $157,352 $170,489 $143,055 ========================================================= Ratio of earnings to fixed charges, 2.37 3.79 2.12 2.92 3.40 2.94 as defined ========================================================= Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.97 3.08 1.81 2.51 2.94 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 14 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
December 31, September 30, 1992 1993 1994 1995 1996 1997 Fixed charges, as defined: Total Interest 24,648 20,494 17,562 17,183 16,304 15,312 Interest applicable to rentals 444 544 1,245 916 831 991 -------------------------------------------------------------- Total fixed charges, as defined 25,092 21,038 18,807 18,099 17,135 16,303 Preferred dividends, as defined (a) 3,214 2,952 2,071 1,964 1,549 1,691 -------------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $28,306 $23,990 $20,878 $20,063 $18,684 $17,994 ============================================================== Earnings as defined: Net Income $26,424 $47,709 $13,211 $34,386 $26,776 $7,606 Add: Provision for income taxes: Total 16,065 31,938 4,600 20,467 16,216 8,568 Fixed charges as above 25,092 21,038 18,807 18,099 17,135 16,303 -------------------------------------------------------------- Total earnings, as defined $67,581 $100,685 $36,618 $72,952 $60,127 $32,477 ============================================================== Ratio of earnings to fixed charges, as defined 2.69 4.79 1.95 4.03 3.51 1.99 ============================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.39 4.20 1.75 3.64 3.22 1.80 ============================================================== - ------------------------------------ (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.
EX-99 15
Exhibit 99(f) System Energy Resources, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges December 31, September 30, 1992 1993 1994 1995 1996 1997 Fixed charges, as defined: Total Interest 204,541 190,938 176,504 151,512 143,720 128,736 Interest applicable to rentals 6,265 6,790 7,546 6,475 6,223 5,958 -------------------------------------------------------------------- Total fixed charges, as defined $210,806 $197,728 $184,050 $157,987 $149,943 $134,694 ==================================================================== Earnings as defined: Net Income $130,141 $93,927 $5,407 $93,039 $98,668 $99,894 Add: Provision for income taxes: Total 88,853 78,552 36,838 75,493 82,121 78,434 Fixed charges as above 210,806 197,728 184,050 157,987 149,943 134,694 -------------------------------------------------------------------- Total earnings, as defined $429,800 $370,207 $226,295 $326,519 $330,732 $313,022 ==================================================================== Ratio of earnings to fixed charges, as defined 2.04 1.87 1.23 2.07 2.21 2.32 ====================================================================
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