EXHIBIT 99.(b)
Florida Progress Corporation
Investor News
Analyst Contact:
Mark A. Myers, Manager, Investor Relations (813) 866-4245
Florida Progress Restructures Diversified Operations to Focus on Growing its
Energy and Transportation Businesses
ST. PETERSBURG, Florida, December 12, 1996 -- Florida Progress Corporation
announced several strategic decisions regarding its diversified businesses.
These decisions will allow Florida Progress to better focus on growth
opportunities for Electric Fuels Corporation, its energy and transportation
company.
Previously, Florida Progress decided that three of its businesses were not a
good long-term strategic fit. The companies were Advanced Separation
Technologies Incorporated, Mid-Continent Life Insurance Company and Progress
Credit Corporation (now Echelon International Corporation). Florida Progress has
been working to exit each of these businesses in a way that maximizes
shareholder value.
ADVANCED SEPARATION TECHNOLOGIES TO BE SOLD FOR A GAIN
Last week, an agreement to sell Advanced Separation Technologies was entered
into with Calgon Carbon Corporation of Pittsburgh, Pennsylvania for $70 million
and will result in an after-tax gain of about $23 million or $.24 a share for
Florida Progress' 80% share of the company. The sale is expected to close before
year end. Florida Progress has owned this company since the mid-1980's, when the
patented ion separation process was developed. Although being in the technology
business was not a strategic fit for Florida Progress, the company showed
promise. So Florida Progress waited until Advanced Separation Technologies had
developed a track record and demonstrated its sales potential to actively market
the company for sale.
Advanced Separation Technologies is a manufacturer of chemical separation
devices headquartered in Lakeland, Florida with annual sales of approximately
$30 million and 65 employees. Its principal product is an ion separation machine
that removes dissolved impurities and performs chemical separations in a
continuous process. The machines are used in industrial and environmental
processes throughout the world and Advanced Separation Technologies is a leader
in supplying separation systems to the lysine and corn syrup industries.
ELECTRIC FUELS TO WRITE-DOWN CERTAIN COAL OPERATIONS
Electric Fuels will record a $25 million, after-tax charge to earnings in
December 1996 for the write-down of certain coal operations in eastern Kentucky
due to management's revised assessment that depressed market prices for
low-sulfur coal are not temporary. These coal operations were originally
purchased in anticipation of higher prices
-- more --
resulting from amendments to the federal Clean Air Act. The write-down is in
compliance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of,"
which was adopted by Florida Progress in 1996.
Electric Fuels began purchasing low-sulfur coal operations in the late 1980's in
an effort to capitalize on the expected increase in demand for low-sulfur coal.
The increase was anticipated because of the sulfur dioxide emission requirements
imposed on electric utilities by the Clean Air Act amendments of 1990. The Phase
I reductions went into effect on January 1, 1995. More stringent requirements
are effective in the year 2000.
Several factors that were not anticipated have kept the price of Central
Appalachian low-sulfur coal well below the market prices originally forecasted.
o The supply of western low-sulfur coal to eastern markets served by
Electric Fuels was greater than forecasted due in part to some
western railroads expanding track and more aggressively pricing
freight to certain large coal-fired plants east of the Mississippi
River. This allowed inexpensive coal from the Powder River Basin
to be marketed and sold to some large coal-fired plants east of
the Mississippi which had been forecasted to burn low-sulfur
Central Appalachian coal.
o Some midwestern states passed legislation requiring utilities to
install scrubbers for certain power plants to maintain high-sulfur
coal mining jobs in their state. This forced these plants to
continue burning high-sulfur coal instead of switching to
low-sulfur coal which had been forecasted to be the least cost
compliance option.
o Another alternative to purchasing low-sulfur coal to meet emission
requirements is to purchase emission allowance credits and burn
higher sulfur coals. Over compliance with Phase I of the Clean Air
Act has generated more than three million excess allowance credits
per year. Many of these are being generated by utilities which
installed scrubbers or are burning substantially lower sulfur coal
than required in Phase I. The excess supply of allowances has
reduced the cost of these credits thus making it a viable
alternative to purchasing low-sulfur coal.
Electric Fuels is committed to its energy-related businesses. Electric Fuels has
made some operational changes and brought in new leadership for its coal
operations with substantial coal industry experience. Electric Fuels has a
business plan to improve productivity and quality control. The plan calls for
increasing output from remaining company-operated mines and directing production
to higher profit markets.
Electric Fuels' strategy for growth has focused in recent years on its rail
services and marine transportation business units and has resulted in 21 percent
annual compound growth for the last three years. Electric Fuels plans to
continue growing these business units while seeking to improve results in its
energy-related businesses and expects to continue to achieve double-digit
earnings growth during its five-year forecast period.
-- more --
RESTRUCTURED MID-CONTINENT LIFE INSURANCE
Mid-Continent Life Insurance Company was acquired in 1986. It was a small
insurance company that sold a popular, low-priced death benefit insurance
policy. Mid-Continent more than doubled in size by continuing to sell its
product and by increasing its distribution area. Over the last few years, the
life insurance industry has become more competitive, and for the first time,
Mid-Continent experienced a decline in new sales. A new president was selected
in 1995 and he developed a comprehensive business plan to combine new products
and ideas with the company's existing strengths.
The new management team at Mid-Continent determined that the old product was not
adequately priced to achieve targeted long-term profitability goals. In 1997,
Mid-Continent plans to begin an orderly process to resolve the pricing issue.
This may involve reducing policy dividends and increasing premiums.
A new insurance product called "Basic Life" was introduced in 1996 and it has
replaced the old product that was being marketed. It resembled the old product
that had been the company's principal policy, but offered more flexibility and
guarantees to policyholders at a higher price. Mid-Continent was hoping to
rebuild market share and achieve planned profitability with the "Basic Life"
product. Sales of the new policy have not met management's expectations.
Mid-Continent recently announced a reduction in its workforce and a new business
plan to be able to compete on a more focused and cost efficient basis. A
revamped and lower-cost marketing operation intends to offer a broader array of
products and marketing tools on behalf of Mid-Continent and other companies.
Although Florida Progress continues to believe that Mid-Continent is not a good
long-term fit, it appears that it will take three to five years for
Mid-Continent's business plan to result in values that allow Florida Progress to
rationally exit this business. Since Mid-Continent does not pay dividends to
Florida Progress and its earnings are not significant, this strategy is not
expected to affect Florida Progress' consolidated earnings growth rate or
dividend policy.
FOCUSED ON GROWING CORE BUSINESSES
Restructuring its diversified businesses has been a high priority for Florida
Progress in 1996. Earlier this year Florida Progress announced the spin-off of
Echelon International, its lending, leasing and real estate company, through a
tax-free dividend scheduled for December 18, 1996. The sale of Advanced
Separation Technologies and restructuring of Mid-Continent are other examples of
Florida Progress' commitment to exiting businesses that are not related to its
core businesses -- Florida Power and Electric Fuels. With the solid growth
potential of Florida Power and the continued growth of Electric Fuels,
management believes that Florida Progress should be able to maintain an annual
consolidated earnings per share growth rate of four to five percent.
-- more --
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: this report contains forward looking statements, including statements
regarding expected after-tax gains on the sale of Advanced Separation
Technologies, the future of coal prices and earnings growth at Electric Fuels,
plans relating to the insurance business, and Florida Progress' earnings per
share growth rate and dividend policy. These statements involve risks and
uncertainties that could cause actual results or outcomes to differ materially
from those expressed. Pertinent risk factors include the impact of pricing and
other actions by competitors, changes in tax rates or policies or other
governmental actions, significant changes from expectations in actual capital
expenditures and operating expenses, changes in the marine, rail services or
coal industries, changes in overall economic conditions, and other risks
described in the Company's Securities and Exchange Commission filings.
Florida Progress (NYSE:FPC) is a Fortune 500 diversified utility holding company
with assets of $5.8 billion. Its principal subsidiary is Florida Power, the
state's second-largest electric utility with about 1.3 million customers.
Diversified operations include coal mining, marine operations, rail services and
life insurance.
###