UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified in
Commission their charters, address of principal executive IRS Employer Iden-
File Number offices and Registrants' telephone number tification Number
1-8841 FPL GROUP, INC. 59-2449419
1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4647
State or other jurisdiction of incorporation or organization: Florida
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 and (2) have been
subject to such filing requirements for the past 90 days. Yes X
No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each class of FPL Group, Inc.
common stock, as of the latest practicable date: Common Stock, $.01
Par Value, outstanding at July 31, 1996: 183,352,785 shares
As of July 31, 1996 there were issued and outstanding 1,000 shares of
Florida Power & Light Company's common stock, without par value, all
of which were held, beneficially and of record, by FPL Group, Inc.
______________________________
This combined Form 10-Q represents separate filings by FPL Group, Inc.
and Florida Power & Light Company. Information contained herein
relating to an individual registrant is filed by that registrant on its own
behalf. Florida Power & Light Company makes no representations as to
the information relating to FPL Group, Inc.'s other operations.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(In thousands, except per share amounts)
OPERATING REVENUES ....................................... $1,474,086 $1,466,724 $2,831,793 $2,644,089
OPERATING EXPENSES:
Fuel, purchased power and interchange .................. 500,169 458,403 949,829 803,275
Other operations and maintenance........................ 304,451 295,185 584,235 550,176
Depreciation and amortization .......................... 231,926 262,808 499,581 463,091
Taxes other than income taxes .......................... 138,252 138,137 275,486 266,559
Total operating expenses ............................. 1,174,798 1,154,533 2,309,131 2,083,101
OPERATING INCOME ......................................... 299,288 312,191 522,662 560,988
OTHER INCOME (DEDUCTIONS):
Interest charges ....................................... (67,871) (74,316) (137,117) (151,296)
Dividend requirements on preferred stock of FPL ........ (5,766) (9,039) (12,200) (21,192)
Other - net ............................................ (8,500) 914 (9,863) 6,307
Total other deductions - net ......................... (82,137) (82,441) (159,180) (166,181)
INCOME BEFORE INCOME TAXES ............................... 217,151 229,750 363,482 394,807
INCOME TAXES ............................................. 66,838 91,448 119,457 156,665
NET INCOME ............................................... $ 150,313 $ 138,302 $ 244,025 $ 238,142
Earnings per share of common stock ....................... $ 0.86 $ 0.79 $ 1.40 $ 1.36
Dividends per share of common stock ...................... $ 0.46 $ 0.44 $ 0.92 $ 0.88
Average number of common shares outstanding .............. 174,103 175,225 174,403 175,622
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 8 through 10 herein and
the Notes to Consolidated Financial Statements appearing in the
combined Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (1995 Form 10-K) for FPL Group, Inc. (FPL Group)
and Florida Power & Light Company (FPL).
FPL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,
1996 December 31,
(Unaudited) 1995
(Thousands of Dollars)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant and other property - at original cost,
including nuclear fuel and construction work in progress ...................... $16,898,772 $16,725,231
Less accumulated depreciation and amortization .................................. 7,309,821 6,873,250
Total property, plant and equipment - net ..................................... 9,588,951 9,851,981
CURRENT ASSETS:
Cash and cash equivalents ....................................................... 78,925 46,177
Customer receivables, net of allowances of $11,286 and $11,929, respectively .... 462,342 482,326
Materials, supplies and fossil fuel stock - at average cost ..................... 260,501 247,323
Other ........................................................................... 240,969 209,522
Total current assets .......................................................... 1,042,737 985,348
OTHER ASSETS:
Special use funds of FPL ........................................................ 714,811 646,846
Other investments ............................................................... 382,370 447,006
Unamortized debt reacquisition costs of FPL ..................................... 285,615 294,844
Other ........................................................................... 230,611 233,201
Total other assets ............................................................ 1,613,407 1,621,897
TOTAL ASSETS ...................................................................... $12,245,095 $12,459,226
CAPITALIZATION:
Common shareholders' equity ..................................................... $ 4,429,151 $ 4,392,509
Preferred stock of FPL without sinking fund requirements ........................ 289,580 289,580
Preferred stock of FPL with sinking fund requirements ........................... 42,000 50,000
Long-term debt .................................................................. 3,281,237 3,376,613
Total capitalization .......................................................... 8,041,968 8,108,702
CURRENT LIABILITIES:
Accounts payable ................................................................ 300,810 305,126
Debt and preferred stock due within one year .................................... 170,732 390,402
Accrued interest, taxes and other ............................................... 862,829 808,615
Total current liabilities ..................................................... 1,334,371 1,504,143
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ............................................... 1,589,978 1,587,449
Unamortized regulatory and investment tax credits ............................... 397,837 426,317
Other ........................................................................... 880,941 832,615
Total other liabilities and deferred credits .................................. 2,868,756 2,846,381
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES .............................................. $12,245,095 $12,459,226
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 8 through 10 herein and
the Notes to Consolidated Financial Statements appearing in the 1995
Form 10-K for FPL Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................................... $ 244,025 $ 238,142
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ..................................................... 499,581 463,091
Other - net ....................................................................... 80,478 175,097
Net cash provided by operating activities ........................................... 824,084 876,330
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1) ............................................................ (238,993) (356,285)
Other - net ......................................................................... (44,662) 4,236
Net cash used in investing activities ............................................. (283,655) (352,049)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt .................................................................... - 110,570
Retirement of long-term debt and preferred stock .................................... (219,765) (283,862)
Repurchase of common stock .......................................................... (58,869) (52,809)
Decrease in commercial paper ........................................................ (107,813) (77,620)
Dividends on common stock ........................................................... (160,463) (154,532)
Other - net ......................................................................... 39,229 (27,049)
Net cash used in financing activities ............................................. (507,681) (485,302)
Net increase in cash and cash equivalents ............................................. 32,748 38,979
Cash and cash equivalents at beginning of period ...................................... 46,177 85,750
Cash and cash equivalents at end of period ............................................ $ 78,925 $ 124,729
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 131,331 $ 151,107
Cash paid for income taxes .......................................................... $ 50,700 $ 54,400
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 42,192 $ 41,944
(1) Capital expenditures exclude allowance for equity funds used during construction.
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 8 through 10 herein and
the Notes to Consolidated Financial Statements appearing in the 1995
Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(Thousands of Dollars)
OPERATING REVENUES ....................................... $1,454,997 $1,446,203 $2,795,739 $2,602,472
OPERATING EXPENSES:
Fuel, purchased power and interchange .................. 500,169 458,403 949,829 803,275
Other operations and maintenance ....................... 287,677 274,817 550,194 506,706
Depreciation and amortization .......................... 230,551 260,207 496,792 457,982
Income taxes ........................................... 79,687 95,554 138,109 163,743
Taxes other than income taxes .......................... 138,156 137,668 275,252 265,596
Total operating expenses ............................. 1,236,240 1,226,649 2,410,176 2,197,302
OPERATING INCOME ......................................... 218,757 219,554 385,563 405,170
OTHER INCOME (DEDUCTIONS):
Interest charges - net ................................. (61,548) (67,590) (123,934) (137,685)
Other - net ............................................ 1,148 1,840 3,882 5,761
Total other deductions - net ......................... (60,400) (65,750) (120,052) (131,924)
NET INCOME ............................................... 158,357 153,804 265,511 273,246
DIVIDEND REQUIREMENTS ON PREFERRED STOCK ................. 5,766 9,039 12,200 21,192
NET INCOME AVAILABLE TO FPL GROUP ........................ $ 152,591 $ 144,765 $ 253,311 $ 252,054
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 8 through 10 herein and
the Notes to Consolidated Financial Statements appearing in the 1995
Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,
1996 December 31,
(Unaudited) 1995
(Thousands of Dollars)
ELECTRIC UTILITY PLANT:
At original cost, including nuclear fuel and construction work in progress ....... $16,703,214 $16,531,492
Less accumulated depreciation and amortization ................................... 7,266,406 6,832,201
Electric utility plant - net ................................................... 9,436,808 9,699,291
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 12,425 412
Customer receivables, net of allowances of $11,095 and $11,737, respectively ..... 458,580 479,838
Materials, supplies and fossil fuel stock - at average cost ...................... 244,507 230,553
Other ............................................................................ 217,758 180,414
Total current assets ........................................................... 933,270 891,217
OTHER ASSETS:
Special use funds ................................................................ 714,811 646,846
Unamortized debt reacquisition costs ............................................. 285,615 294,844
Other ............................................................................ 213,328 219,061
Total other assets ............................................................. 1,213,754 1,160,751
TOTAL ASSETS ....................................................................... $11,583,832 $11,751,259
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 4,564,262 $ 4,473,708
Preferred stock without sinking fund requirements ................................ 289,580 289,580
Preferred stock with sinking fund requirements ................................... 42,000 50,000
Long-term debt ................................................................... 2,999,097 3,094,050
Total capitalization ........................................................... 7,894,939 7,907,338
CURRENT LIABILITIES:
Accounts payable ................................................................. 296,552 299,987
Debt and preferred stock due within one year ..................................... 132,100 382,500
Accrued interest, taxes and other ................................................ 798,967 778,465
Total current liabilities ...................................................... 1,227,619 1,460,952
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,263,293 1,204,315
Unamortized regulatory and investment tax credits ................................ 397,837 426,317
Other ............................................................................ 800,144 752,337
Total other liabilities and deferred credits ................................... 2,461,274 2,382,969
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,583,832 $11,751,259
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 8 through 10 herein and
the Notes to Consolidated Financial Statements appearing in the 1995
Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................................... $ 265,511 $ 273,246
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ...................................................... 496,792 457,982
Other - net ........................................................................ 69,480 142,229
Net cash provided by operating activities ............................................ 831,783 873,457
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1) ............................................................. (236,308) (348,283)
Other - net .......................................................................... (85,756) (10,066)
Net cash used in investing activities .............................................. (322,064) (358,349)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt ..................................................................... - 110,349
Retirement of long-term debt and preferred stock ..................................... (219,354) (283,706)
Decrease in commercial paper ......................................................... (138,500) (73,000)
Dividends ............................................................................ (224,843) (222,347)
Capital contributions from FPL Group ................................................. 50,000 -
Other - net .......................................................................... 34,991 (31,771)
Net cash used in financing activities .............................................. (497,706) (500,475)
Net increase in cash and cash equivalents .............................................. 12,013 14,633
Cash and cash equivalents at beginning of period ....................................... 412 535
Cash and cash equivalents at end of period ............................................. $ 12,425 $ 15,168
Supplemental disclosures of cash flow information:
Cash paid for interest ............................................................... $ 120,303 $ 138,185
Cash paid for income taxes ........................................................... $ 87,166 $ 94,685
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations ............................................... $ 42,192 $ 41,944
(1) Capital expenditures exclude allowance for equity funds used during construction.
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 8 through 10 herein and
the Notes to Consolidated Financial Statements appearing in the 1995
Form 10-K for FPL Group and FPL.
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements should
be read in conjunction with the combined 1995 Form 10-K for FPL Group
and FPL. In the opinion of FPL Group and FPL, all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of June 30, 1996, the results of
operations for the three and six months ended June 30, 1996 and 1995
and cash flows for the six months ended June 30, 1996 and 1995 have
been made. Certain amounts included in the prior year's condensed
consolidated financial statements have been reclassified to conform
to the current year's presentation. The results of operations for an
interim period may not give a true indication of results for the
year.
1. Summary of Significant Accounting and Reporting Policies
Depreciation and Amortization - In the second quarter of 1995, the
Florida Public Service Commission (FPSC) approved, on an interim
basis, accelerated amortization of FPL's nuclear units of $30
million per year plus additional amounts based on the level of sales.
In March 1996, the FPSC granted final approval of the $30 million per
year of special nuclear amortization. The FPSC also approved the
additional expense amounts recorded in 1995 based on the level of
sales achieved, added certain fossil and regulatory assets to the
program and extended the program through 1997. During the second
quarter of 1996 FPL completed amortization of the additional expense
amount relating to nuclear plant assets authorized by the FPSC. In
future periods, FPL will continue to recognize $30 million of special
nuclear amortization per year and the additional expense amounts
based on the level of sales will be applied first against fossil
assets and then against regulatory assets.
Allowance for funds used during construction (AFUDC) - The FPSC has
proposed an accounting rule change that eliminates AFUDC, except for
projects that cost in excess of 1/2% of a company's electric utility
plant in-service. FPL adopted the proposed rule change retroactive
to January 1, 1996.
2. Capitalization
FPL Group Common Stock - During the six months ended June 30, 1996,
FPL Group repurchased approximately 1.3 million shares of common
stock under its share repurchase program. A total of approximately
7.2 million shares have been repurchased since the inception of the
share repurchase program in May 1994.
Preferred Stock - In January 1996, FPL redeemed all 600,000
outstanding shares of its 7.28% Preferred Stock, Series F, $100 Par
Value and all 400,000 outstanding shares of its 7.40% Preferred
Stock, Series G, $100 Par Value.
The 1996 sinking fund requirements for the 6.84% Preferred Stock,
Series Q, $100 Par Value and the 8.625% Preferred Stock, Series R,
$100 Par Value were met by redeeming and retiring, in April 1996,
30,000 shares of Series Q and 50,000 shares of Series R. There are
no preferred stock sinking fund requirements for the remainder of
1996.
Long-Term Debt - During the second quarter of 1996, FPL purchased on
the open market and retired approximately $8 million principal amount
of First Mortgage Bonds, due 2013 and 2022 bearing interest at 7 7/8%
and 8 1/2%.
In August 1996, FPL called for redemption in September 1996, $87
million principal amount of First Mortgage Bonds, 8 1/2% Series due
2022.
3. Commitments and Contingencies
Commitments - FPL has made commitments in connection with a portion
of its projected capital expenditures. Capital expenditures for the
construction or acquisition of additional facilities and equipment to
meet customer demand are estimated to be approximately $1.5 billion
for the years 1996 through 1998. Included in this three-year
forecast are capital expenditures for 1996 of $511 million, of which
$234 million had been spent through June 30, 1996. FPL Group Capital
Inc (FPL Group Capital) and its subsidiaries, primarily ESI Energy,
Inc., have guaranteed up to approximately $87 million of lease
obligations, debt service payments and other payments subject to
certain contingencies.
Insurance - Liability for accidents at nuclear power plants is
governed by the Price-Anderson Act, which limits the liability of
nuclear reactor owners to the amount of the insurance available from
private sources and under an industry retrospective payment plan. In
accordance with this Act, FPL maintains $200 million of private
liability insurance, which is the maximum obtainable, and
participates in a secondary financial protection system under which
it is subject to retrospective assessments of up to $327 million per
incident at any nuclear utility reactor in the United States, payable
at a rate not to exceed $40 million per incident per year.
FPL participates in nuclear insurance mutual companies that provide
$2.75 billion of limited insurance coverage for property damage,
decontamination and premature decommissioning risks at its nuclear
plants. The proceeds from such insurance, however, must first be
used for reactor stabilization and site decontamination before they
can be used for plant repair. FPL also participates in an insurance
program that provides limited coverage for replacement power costs if
a plant is out of service because of an accident. In the event of an
accident at one of FPL's or another participating insured's nuclear
plants, FPL could be assessed up to $69 million in retrospective
premiums. In the event of a subsequent accident at such nuclear
plants during the policy period, the maximum additional assessment
would be $30 million under the programs in effect at June 30, 1996.
FPL also participates in a program that provides $200 million of tort
liability coverage for nuclear worker claims. In the event of a tort
claim by an FPL or another insured's nuclear worker, FPL could be
assessed up to $12 million in retrospective premiums per incident.
In the event of a catastrophic loss at one of FPL's nuclear plants,
the amount of insurance available may not be adequate to cover
property damage and other expenses incurred. Uninsured losses, to
the extent not recovered through rates, would be borne by FPL and
could have a material adverse effect on FPL Group's and FPL's
financial condition.
FPL self-insures certain of its transmission and distribution (T&D)
property due to the high cost and limited coverage available from
third-party insurers. FPL maintains a funded storm and property
insurance reserve, which totaled approximately $210 million at
June 30, 1996, for T&D property storm damage or assessments under the
nuclear insurance program. Recovery from customers of any losses in
excess of the storm and property insurance reserve will require the
approval of the FPSC. FPL's available lines of credit include $300
million to provide additional liquidity in the event of a T&D
property loss.
Contracts - FPL has entered into certain long-term purchased power
and fuel contracts. Take-or-pay purchased power contracts with the
Jacksonville Electric Authority (JEA) and with subsidiaries of the
Southern Company provide approximately 1,300 megawatts (mw) of power
through mid-2010 and 374 mw through 2022. FPL also has various firm
pay-for-performance contracts to purchase approximately 1,000 mw from
certain cogenerators and small power producers (qualifying
facilities) with expiration dates ranging from 2002 through 2026.
The purchased power contracts provide for capacity and energy
payments. Energy payments are based on the actual power taken under
these contracts. Capacity payments for the pay-for-performance
contracts are subject to the qualifying facilities meeting certain
contract conditions. The fuel contracts provide for the
transportation and supply of natural gas and coal and the supply and
use of Orimulsion. Orimulsion is a new fuel which FPL expected to
begin using in 1998, subject to regulatory approvals. In April 1996,
Florida's Power Plant Siting Board denied FPL's request to burn
Orimulsion at the Manatee power plant. FPL has appealed the denial
to the First District Court of Appeal of the state of Florida.
The required annual capacity and minimum payments through 2000 under
these contracts are estimated to be as follows:
1996 1997 1998 1999 2000
(Millions of Dollars)
Capacity payments:
JEA and Southern Companies ............................................... $210 $210 $210 $220 $220
Qualifying facilities .................................................... $300 $310 $320 $340 $350
Minimum payments, at projected prices:
Natural gas .............................................................. $280 $210 $210 $210 $210
Orimulsion (1) ........................................................... - - $120 $140 $140
Coal ..................................................................... $ 50 $ 50 $ 40 $ 40 $ 40
(1) All of FPL's Orimulsion-related contract obligations are subject to obtaining the required regulatory approvals.
Capacity, energy and fuel charges under these contracts were as
follows:
Three Months Ended June 30, Six Months Ended June 30,
1996 Charges 1995 Charges 1996 Charges 1995 Charges
Energy/ Energy/ Energy/ Energy/
Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1)
(Millions of Dollars)
JEA and Southern Companies ... $45(2) $34 $60(2) $35 $ 91(2) $ 67 $121(2) $ 66
Qualifying facilities......... $70(3) $35 $39(3) $18 $139(3) $ 62 $ 76(3) $ 38
Natural gas .................. - $80 - $96 $ - $177 $ - $163
Coal ......................... - $11 - $12 $ - $ 22 $ - $ 24
(1) Recovered through the fuel and purchased power cost recovery clause (fuel clause).
(2) Recovered through base rates and the capacity cost recovery clause (capacity clause).
(3) Recovered through the capacity clause.
Litigation - The Florida Municipal Power Agency (FMPA), an organization
comprised of municipal electric utilities, has sued FPL for allegedly
breaching a "contract" to provide transmission service to the FMPA and
its members and for breaching antitrust laws by monopolizing or
attempting to monopolize the provision, coordination and transmission of
electric power in refusing to provide transmission service, or to permit
the FMPA to invest in and use FPL's transmission system, on the
FMPA's proposed terms. The FMPA seeks $140 million in damages,
before trebling for the antitrust claim, and court orders requiring FPL to
permit the FMPA to invest in and use FPL's transmission system on
"reasonable terms and conditions" and on a basis equal to FPL. In
1995, the Court of Appeals vacated the District Court's summary
judgment in favor of FPL and remanded the matter to the District Court
for further proceedings.
A former cable installation contractor for Telesat Cablevision, Inc.
(Telesat), a wholly-owned subsidiary of FPL Group Capital, sued FPL
Group, FPL Group Capital and Telesat for breach of contract, fraud,
violation of racketeering statutes and several other claims. The trial
court entered a judgment in favor of FPL Group and Telesat on nine of
twelve counts, including all of the racketeering and fraud claims, and in
favor of FPL Group Capital on all counts. It also denied all parties'
claims for attorneys' fees. However, the jury in the case awarded the
contractor damages totaling approximately $6 million against FPL Group
and Telesat for breach of contract and tortious interference. All parties
have appealed.
FPL Group and FPL believe that they have meritorious defenses to all of
the litigation described above and are vigorously defending these suits.
Accordingly, the liabilities, if any, arising from these proceedings are not
anticipated to have a material adverse effect on their financial
statements.
4. Summarized Financial Information of FPL Group Capital
FPL Group Capital's debentures are guaranteed by FPL Group.
Operating revenues of FPL Group Capital for the six months ended
June 30, 1996 and 1995 were approximately $36 million and $42 million,
respectively. For the same period, operating expenses were
approximately $36 million and $49 million. Net income for the six
months ended June 30, 1996 was approximately $4 million and net loss
for the six months ended June 30, 1995 was approximately $3 million.
At June 30, 1996, FPL Group Capital had current assets of
approximately $167 million, noncurrent assets of approximately $878
million, current liabilities of approximately $86 million and noncurrent
liabilities of approximately $742 million. At December 31, 1995, FPL
Group Capital had approximately $89 million of current assets, $934
million of noncurrent assets, $24 million of current liabilities and $787
million of noncurrent liabilities.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion should be read in conjunction with the Notes to
Condensed Consolidated Financial Statements contained herein and
Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing in the 1995 Form 10-K for FPL Group
and FPL. The results of operations for an interim period may not give a
true indication of results for the year. In the following discussion, all
comparisons are with the corresponding items in the prior year.
RESULTS OF OPERATIONS
Net income for the three and six months ended June 30, 1996 benefitted
from lower interest and preferred stock dividend requirements and the
recognition of investment tax credits, partly offset by higher other
operations and maintenance (O&M) expenses. The three-month period
ended June 30, 1996 reflected lower energy sales and lower
depreciation expense. During the six-month period ended June 30,
1996, FPL experienced higher energy sales, resulting from customer
growth, partly offset by higher depreciation expense.
FPL's revenues from base rates for the three months ended June 30,
1996 decreased to approximately $845 million from approximately $882
million for the same period in 1995 due to a 3.9% decline in retail energy
sales. A 1.9% increase in customer accounts was more than offset by a
5.7% decline in energy usage per retail customer, primarily due to milder
weather conditions. FPL's revenues from base rates for the six months
ended June 30, 1996 increased to $1.63 billion from approximately $1.60
billion for the same period in 1995, primarily reflecting a 1.8% increase in
customer accounts. The increase in usage per customer in the first
quarter of 1996 resulting from unusually cold weather was offset by the
mild weather experienced during the second quarter of 1996. Revenues
from cost recovery clauses and franchise fees comprise substantially all
of the remaining portion of operating revenues. These revenues
represent a pass-through of costs and do not significantly affect net
income.
O&M expenses increased for the three and six months ended June 30,
1996, primarily due to costs associated with a planned nuclear refueling
outage in each of the first and second quarters of 1996. There were no
nuclear refueling outages in the first six months of 1995 and none are
planned for the remainder of 1996. Two nuclear refueling outages
occurred in the second half of 1995.
In 1995, FPL proposed to the FPSC a special amortization of its nuclear
units in a fixed amount of $30 million per year plus an additional amount
based on the level of sales. In the second quarter of 1995, upon
receiving interim approval from the FPSC, FPL added $79 million to
depreciation expense, representing the year-to-date portion of the
special amortization of its nuclear units. This year-to-date expense
recorded in 1995 coupled with the decline in energy sales in the second
quarter of 1996 resulted in a decrease in depreciation expense for the
three months ended June 30, 1996. For the six months ended June 30,
1996, depreciation expense increased mainly as a result of the special
amortization of generating units, which amounted to approximately $101
million, and an increase in the provision for nuclear decommissioning
and fossil dismantlement. In future periods, FPL will continue to
recognize $30 million of special nuclear amortization per year and the
additional expense amounts based on the level of sales will be applied
first against fossil assets and then against regulatory assets. See
Note 1 - Depreciation and Amortization. The increased depreciation of
nuclear and fossil assets also resulted in increased amortization of
related investment tax credits, lowering income tax expense in 1996.
The FPSC has proposed an accounting rule change that eliminates
AFUDC, except for projects that cost in excess of 1/2% of a company's
electric utility plant in-service. FPL adopted the proposed rule change
retroactive to January 1, 1996 and the effect is included in other - net.
LIQUIDITY AND CAPITAL RESOURCES
Using available cash flows from operations, FPL has redeemed certain
series of its preferred stock and first mortgage bonds reducing dividend
requirements on preferred stock and interest expense. Additionally, FPL
Group has repurchased approximately 1.3 million shares of common
stock. These actions are consistent with management's intent to reduce
debt and preferred stock balances and the number of outstanding shares
of common stock. See Note 2.
For information concerning capital commitments, see Note 3.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
(a) Reference is made to Item 3. Legal Proceedings in the
1995 Form 10-K for FPL Group and FPL and Item 1.(a)
Legal Proceedings in the FPL Group and FPL Form
10-Q for the quarterly period ended March 31, 1996.
In May 1996, the U.S. Supreme Court denied Praxair's
request to review the Court of Appeals' decision
previously entered in favor of FPL and Florida Power
Corporation.
(b) Reference is made to Item 3. Legal Proceedings in the
1995 Form 10-K for FPL Group and FPL.
In July 1996, the FPSC approved the settlement of a
suit brought by the partners of a cogeneration project
located in Dade County, Florida as part of a buy-out of
an uneconomic power purchase agreement that FPL
was required to enter into because of the Public Utility
Regulatory Policies Act of 1978, as amended. All
amounts payable by FPL under the settlement
agreement will be recovered through the capacity clause
and the fuel clause.
Item 2. Changes in Securities
(a) In June 1996, FPL Group's Board of Directors declared
a dividend of one preferred share purchase right for
each outstanding share of common stock of FPL Group.
Each right entitles the holder to purchase from FPL
Group one one-hundredth of a share of Series A Junior
Participating Preferred Stock (Preferred Stock) of FPL
Group at a price of $120. The rights do not become
exercisable until a person or group acquires, or
expresses an intention to acquire, 10% or more of the
outstanding common stock of FPL Group. Prior to such
an acquisition, FPL Group's Board of Directors may
redeem the rights at a price of $.01 per right. After such
an acquisition, the Board may exchange each right for
one share of common stock or one one-hundredth of a
share of Preferred Stock or shares having the same
rights, privileges and preferences as the Preferred
Stock. A summary description of the rights and the
Rights Agreement between FPL Group and The First
National Bank of Boston, as Rights Agent, were filed on
Form 8-K dated June 17, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
FPL Group:
(a) The Annual Meeting of FPL Group's shareholders was
held on May 13, 1996. Of the 184,512,535 shares of
common stock outstanding on the record date of
March 4, 1996, a total of 148,350,261 shares were
represented in person or by proxy.
(b) The following directors were elected effective May 13,
1996:
Votes Cast
Against or
For Withheld
H. Jesse Arnelle ......................................................... 144,621,142 3,729,119
Robert M. Beall, II ...................................................... 144,794,572 3,555,689
David Blumberg ........................................................... 144,369,777 3,980,484
James L. Broadhead ....................................................... 141,985,353 6,364,908
J. Hyatt Brown ........................................................... 144,156,163 4,194,098
Lynne V. Cheney .......................................................... 144,652,228 3,698,033
Armando M. Codina ........................................................ 144,691,675 3,658,586
Marshall M. Criser ....................................................... 144,695,421 3,654,840
B. F. Dolan .............................................................. 144,828,407 3,521,854
Willard D. Dover ......................................................... 143,504,453 4,845,807
Paul J. Evanson .......................................................... 144,368,332 3,981,929
Drew Lewis ............................................................... 144,248,372 4,101,889
Frederic V. Malek ........................................................ 144,168,866 4,181,395
Paul R. Tregurtha ........................................................ 144,316,064 4,034,197
(c)(i) The vote to ratify the appointment of Deloitte &
Touche LLP as independent auditors for 1996 was
145,156,013 for, 2,135,979 against and 1,058,268
abstaining.
(ii) The vote on a shareholder proposal requesting that
FPL Group adopt cumulative voting for the election of
directors was 38,352,615 for, 85,160,115 against,
3,481,183 abstaining and 21,356,348 broker non-votes.
(iii) The vote on a shareholder proposal requesting an
amendment to the Long Term Incentive Plan was
17,877,935 for, 105,735,084 against, 3,380,846
abstaining and 21,356,396 broker non-votes.
FPL:
(a) The following FPL directors were elected effective
May 13, 1996 by the written consent of the sole
common shareholder of FPL in lieu of an annual
meeting of shareholders:
James L. Broadhead
Dennis P. Coyle
Paul J. Evanson
Lawrence J. Kelleher
Thomas F. Plunkett
C. O. Woody
Michael W. Yackira
Item 5. Other Information
(a) Reference is made to Item 1. Business - FPL
Operations - System Capability and Load in the 1995
Form 10-K for FPL Group and FPL.
On July 24, 1996, FPL reached an all-time energy peak
demand of 16,064 mw. Adequate resources were
available at the time of peak to meet customer
demand.
(b) Reference is made to Item 1. Business - FPL
Operations - Nuclear in the 1995 Form 10-K for FPL
Group and FPL.
Indications of abnormal degradation had previously
been found in the pressurized water circulation tubes
of the St. Lucie Unit No. 1 steam generators and FPL
had determined that they needed to be replaced.
Replacement steam generators have been ordered and
are scheduled to be delivered in June 1997.
During a scheduled refueling outage at St. Lucie Unit
No. 1, that began in late April 1996, FPL performed
additional maintenance on the steam generator tubes.
The additional maintenance was necessary to meet a
more conservative standard for determining the need
to plug steam generator tubes. During the outage,
FPL plugged approximately 12% of the steam generator
tubes in St. Lucie Unit No. 1. To date,
approximately 23% of the steam generator tubes have
been plugged.
St. Lucie No. 1 returned to service in July 1996.
FPL's current plan is to replace the steam generators
in October 1997. The steam generators were
previously scheduled to be replaced in March 1998.
Analysis supporting continued operation of St. Lucie
Unit No. 1 until at least October 1997 is scheduled
to be completed and submitted to the Nuclear
Regulatory Commission in September 1996.
(c) Reference is made to Item 1. Business - FPL
Operations - Fuel in the 1995 Form 10-K for FPL Group
and FPL and Item 5.(b) Other Information in the FPL
Group and FPL Form 10-Q for the quarterly period
ended March 31, 1996.
In May 1996, FPL appealed to the First District Court
of Appeal of the state of Florida the Florida's
Power Plant Siting Board's denial of FPL's request to
burn Orimulsion at the Manatee plant.
(d) Reference is made to Item 1. Business - FPL
Operations - Electric and Magnetic Fields in the
1995 Form 10-K for FPL Group and FPL and Item 5.(c)
Other Information in the FPL Group and FPL Form 10-Q
for the quarterly period ended March 31, 1996.
In June 1996, the plaintiffs that alleged personal
injury and wrongful death resulting from electric and
magnetic fields appealed the court's summary judgment
in favor of FPL.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit FPL
Number Description Group FPL
3 Amendment to FPL Group's Restated Articles of Incorporation dated June 27, 1996 x
12 Computation of Ratios x
27 Financial Data Schedule x x
(b) Reports on Form 8-K
(1) A Current Report on Form 8-K dated June 17, 1996
was filed by FPL Group on June 18, 1996 filing one
event under Item 5 - Other Events and one exhibit
under Item 7 - Financial Statements and Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FPL GROUP, INC.
FLORIDA POWER & LIGHT COMPANY
(Registrants)
Date: August 8, 1996 MICHAEL W. YACKIRA
Michael W. Yackira
Vice President, Finance and Chief Financial Officer of FPL Group, Inc.,
Senior Vice President, Finance and Chief Financial Officer of Florida
Power & Light Company
(Principal Financial Officer of the Registrants)