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 September 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 October 31, 1996: 182,998,435 shares
As of October 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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(In thousands, except per share amounts)
OPERATING REVENUES ....................................... $1,769,599 $1,587,037 $4,601,392 $4,231,126
OPERATING EXPENSES:
Fuel, purchased power and interchange .................. 628,464 480,912 1,578,293 1,284,187
Other operations and maintenance........................ 264,239 297,201 848,849 847,376
Depreciation and amortization .......................... 257,761 212,675 757,341 675,767
Taxes other than income taxes .......................... 160,002 148,314 435,115 414,874
Total operating expenses ............................. 1,310,466 1,139,102 3,619,598 3,222,204
OPERATING INCOME ......................................... 459,133 447,935 981,794 1,008,922
OTHER INCOME (DEDUCTIONS):
Interest charges ....................................... (65,525) (70,514) (202,642) (221,811)
Dividend requirements on preferred stock of FPL ........ (5,767) (8,990) (17,966) (30,182)
Other - net ............................................ 4,421 9,179 (5,443) 15,487
Total other deductions - net ......................... (66,871) (70,325) (226,051) (236,506)
INCOME BEFORE INCOME TAXES ............................... 392,262 377,610 755,743 772,416
INCOME TAXES ............................................. 142,146 137,161 261,602 293,826
NET INCOME ............................................... $ 250,116 $ 240,449 $ 494,141 $ 478,590
Earnings per share of common stock ....................... $ 1.44 $ 1.37 $ 2.84 $ 2.73
Dividends per share of common stock ...................... $ 0.46 $ 0.44 $ 1.38 $ 1.32
Average number of common shares outstanding .............. 173,850 175,112 174,217 175,450
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
September 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 ...................... $16,901,317 $16,725,231
Less accumulated depreciation and amortization .................................. 7,444,071 6,873,250
Total property, plant and equipment - net ..................................... 9,457,246 9,851,981
CURRENT ASSETS:
Cash and cash equivalents ....................................................... 91,715 46,177
Customer receivables, net of allowances of $12,508 and $11,929, respectively .... 564,246 482,326
Materials, supplies and fossil fuel stock - at average cost ..................... 274,751 247,323
Other ........................................................................... 345,632 209,522
Total current assets .......................................................... 1,276,344 985,348
OTHER ASSETS:
Special use funds of FPL ........................................................ 745,055 646,846
Other investments ............................................................... 400,195 447,006
Unamortized debt reacquisition costs of FPL ..................................... 287,668 294,844
Other ........................................................................... 215,323 233,201
Total other assets ............................................................ 1,648,241 1,621,897
TOTAL ASSETS ...................................................................... $12,381,831 $12,459,226
CAPITALIZATION:
Common shareholders' equity ..................................................... $ 4,597,537 $ 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 .................................................................. 3,262,857 3,376,613
Total capitalization .......................................................... 8,191,974 8,108,702
CURRENT LIABILITIES:
Accounts payable ................................................................ 327,104 305,126
Debt and preferred stock due within one year .................................... 4,672 390,402
Accrued interest, taxes and other ............................................... 952,020 808,615
Total current liabilities ..................................................... 1,283,796 1,504,143
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ............................................... 1,587,499 1,587,449
Unamortized regulatory and investment tax credits ............................... 411,744 426,317
Other ........................................................................... 906,818 832,615
Total other liabilities and deferred credits .................................. 2,906,061 2,846,381
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES .............................................. $12,381,831 $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)
Nine Months Ended
September 30,
1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................................... $ 494,141 $ 478,590
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ..................................................... 757,341 675,767
Other - net ....................................................................... 63,707 144,863
Net cash provided by operating activities ....................................... 1,315,189 1,299,220
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1) ............................................................ (343,862) (499,783)
Other - net ......................................................................... (108,784) 24,378
Net cash used in investing activities ........................................... (452,646) (475,405)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt .................................................................... - 110,349
Retirement of long-term debt and preferred stock .................................... (333,292) (417,604)
Repurchase of common stock .......................................................... (65,746) (59,496)
Decrease in commercial paper ........................................................ (178,500) (183,979)
Dividends on common stock ........................................................... (240,487) (231,604)
Other - net ......................................................................... 1,020 (23,751)
Net cash used in financing activities ........................................... (817,005) (806,085)
Net increase in cash and cash equivalents ............................................. 45,538 17,730
Cash and cash equivalents at beginning of period ...................................... 46,177 85,750
Cash and cash equivalents at end of period ............................................ $ 91,715 $ 103,480
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 202,586 $ 228,760
Cash paid for income taxes .......................................................... $ 208,200 $ 242,800
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 59,392 $ 55,502
(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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(Thousands of Dollars)
OPERATING REVENUES ....................................... $1,760,939 $1,579,549 $4,556,678 $4,182,021
OPERATING EXPENSES:
Fuel, purchased power and interchange .................. 628,464 480,912 1,578,293 1,284,187
Other operations and maintenance ....................... 256,369 288,808 806,939 795,514
Depreciation and amortization .......................... 256,395 211,000 753,188 668,982
Income taxes ........................................... 142,948 143,956 281,058 307,699
Taxes other than income taxes .......................... 159,837 148,091 434,713 413,687
Total operating expenses ............................. 1,444,013 1,272,767 3,854,191 3,470,069
OPERATING INCOME ......................................... 316,926 306,782 702,487 711,952
OTHER INCOME (DEDUCTIONS):
Interest charges - net ................................. (62,217) (63,979) (186,150) (201,664)
Other - net ............................................ (1,682) 2,944 2,200 8,705
Total other deductions - net ......................... (63,899) (61,035) (183,950) (192,959)
NET INCOME ............................................... 253,027 245,747 518,537 518,993
DIVIDEND REQUIREMENTS ON PREFERRED STOCK ................. 5,767 8,990 17,966 30,182
NET INCOME AVAILABLE TO FPL GROUP ........................ $ 247,260 $ 236,757 $ 500,571 $ 488,811
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
September 30,
1996 December 31,
(Unaudited) 1995
(Thousands of Dollars)
ELECTRIC UTILITY PLANT:
At original cost, including nuclear fuel and construction work in progress ....... $16,700,189 $16,531,492
Less accumulated depreciation and amortization ................................... 7,399,429 6,832,201
Electric utility plant - net ................................................... 9,300,760 9,699,291
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 65,639 412
Customer receivables, net of allowances of $12,317 and $11,737, respectively ..... 561,738 479,838
Materials, supplies and fossil fuel stock - at average cost ...................... 254,597 230,553
Other ............................................................................ 321,071 180,414
Total current assets ........................................................... 1,203,045 891,217
OTHER ASSETS:
Special use funds ................................................................ 745,055 646,846
Unamortized debt reacquisition costs ............................................. 287,668 294,844
Other ............................................................................ 204,828 219,061
Total other assets ............................................................. 1,237,551 1,160,751
TOTAL ASSETS ....................................................................... $11,741,356 $11,751,259
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 4,668,156 $ 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 ................................................................... 2,980,701 3,094,050
Total capitalization ........................................................... 7,980,437 7,907,338
CURRENT LIABILITIES:
Accounts payable ................................................................. 324,874 299,987
Debt and preferred stock due within one year ..................................... 4,000 382,500
Accrued interest, taxes and other ................................................ 936,521 778,465
Total current liabilities ...................................................... 1,265,395 1,460,952
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,258,331 1,204,315
Unamortized regulatory and investment tax credits ................................ 411,744 426,317
Other ............................................................................ 825,449 752,337
Total other liabilities and deferred credits ................................... 2,495,524 2,382,969
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,741,356 $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)
Nine Months Ended
September 30,
1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................................... $ 518,537 $ 518,993
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ..................................................... 753,188 668,982
Other - net ....................................................................... 99,844 92,735
Net cash provided by operating activities ....................................... 1,371,569 1,280,710
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1) ............................................................ (335,523) (490,837)
Other - net ......................................................................... (136,672) (13,626)
Net cash used in investing activities ........................................... (472,195) (504,463)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt .................................................................... - 110,349
Retirement of long-term debt and preferred stock .................................... (332,669) (417,438)
Decrease in commercial paper ........................................................ (178,500) (174,000)
Dividends ........................................................................... (468,975) (463,443)
Capital contributions from FPL Group ................................................ 145,000 200,000
Other - net ......................................................................... 997 (29,504)
Net cash used in financing activities ........................................... (834,147) (774,036)
Net increase in cash and cash equivalents ............................................. 65,227 2,211
Cash and cash equivalents at beginning of period ...................................... 412 535
Cash and cash equivalents at end of period ............................................ $ 65,639 $ 2,746
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 186,967 $ 210,811
Cash paid for income taxes .......................................................... $ 161,516 $ 321,135
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 59,392 $ 55,502
(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 September 30, 1996, the results
of operations for the three and nine months ended September 30, 1996
and 1995 and cash flows for the nine months ended September 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, added certain fossil and regulatory assets to the program and
extended the program through 1997. The aggregate amount relating to
nuclear and fossil plant assets was fully amortized by the end of the
third quarter of 1996. FPL will continue to recognize $30 million of
special nuclear amortization per year and the additional expense
amounts based on the level of sales are now applied against
regulatory assets.
Allowance for Funds Used During Construction (AFUDC) - In October
1996, the FPSC approved 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 rule change
retroactive to January 1, 1996.
Accrual for Nuclear Maintenance Costs - In October 1996, the FPSC
approved a change in the accounting for costs associated with nuclear
refueling outages. Under the new method of accounting, FPL will
accrue estimated nuclear refueling and maintenance costs relating to
each unit's next planned outage while the unit is in operation. Any
cost overruns will be expensed when known. This approach will result
in FPL recognizing costs equivalent to slightly less than three
outages per year based upon the current refueling outage schedule for
FPL's four nuclear units. The cumulative effect of adopting this
accounting method was $35 million and will be expensed over a period
not to exceed five years.
2. Capitalization
FPL Group Common Stock - During the nine months ended September 30,
1996, FPL Group repurchased approximately 1.5 million shares of
common stock under its share repurchase program. A total of
approximately 7.4 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 - In September 1996, FPL redeemed $87 million
principal amount of First Mortgage Bonds, 8 1/2% Series due 2022.
During the nine months ended September 30, 1996, FPL purchased on the
open market and retired approximately $29 million in aggregate
principal amount of several series of First Mortgage Bonds, due on
dates ranging from 2013 through 2023, at interest rates ranging from
7 3/4% to 8 1/2%.
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
primarily 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 $335 million had been spent through September 30,
1996. FPL Group Capital Inc (FPL Group Capital) and its
subsidiaries, primarily ESI Energy, Inc., have guaranteed up to
approximately $86 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 September 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 $217 million at
September 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) ........................................................... - - - $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 September 30, Nine Months Ended September 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 ... $51(2) $ 45 $45(2) $44 $143(2) $112 $165(2) $110
Qualifying facilities......... $70(3) $ 34 $40(3) $25 $209(3) $ 96 $116(3) $ 63
Natural gas .................. - $131 - $97 $ - $314 $ - $259
Coal ......................... - $ 14 - $13 $ - $ 37 $ - $ 38
(1) Recovered through the fuel and purchased power cost recovery 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. In September 1996, the District Court ordered
the FMPA to seek a declaratory ruling from the Federal Energy
Regulatory Commission (FERC) regarding certain issues in the case. All
other action in the case has been stayed pending the FERC's ruling.
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 nine months ended
September 30, 1996 and 1995 were approximately $45 million and $49
million, respectively. For the same period, operating expenses were
approximately $49 million and $59 million. Net income for the nine
months ended September 30, 1996 and 1995 was approximately $11
million and $1 million, respectively.
At September 30, 1996, FPL Group Capital had current assets of
approximately $92 million, noncurrent assets of approximately $892
million, current liabilities of approximately $15 million and noncurrent
liabilities of approximately $745 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 nine months ended September 30, 1996
increased due to higher energy sales, resulting from customer growth
and weather conditions, and lower interest and preferred stock dividend
requirements, partly offset by higher depreciation expense. The three-
month period ended September 30, 1996 also benefitted from lower
operations and maintenance expenses (O&M).
FPL's revenues from base rates for the three and nine months ended
September 30, 1996 increased to approximately $1.03 billion and $2.71
billion, respectively, from approximately $1.00 billion and $2.65 billion for
the same periods in 1995. The increases reflect a 1.8% increase in
customer accounts and increases in energy usage per retail customer of
1.2% and 0.1%, respectively, primarily due to weather conditions.
Revenues from cost recovery clauses and franchise fees comprise
substantially all of the remaining portion of operating revenues. Such
revenues and costs increased mainly as a result of higher gas prices.
These revenues represent a pass-through of costs and do not
significantly affect net income.
O&M decreased for the three months ended September 30, 1996,
primarily due to continued efforts to control costs and costs associated
with ongoing organizational reviews recorded in 1995. Included in O&M
for the third quarter, and the primary reason for the increase in O&M for
the nine months ended September 30, 1996, was a change in the
accounting for costs associated with nuclear refueling outages. Under
this FPSC-approved method, FPL will accrue estimated nuclear refueling
and maintenance costs relating to each unit's next planned outage while
the unit is in operation. Any cost overruns will be expensed when
known. This approach will result in FPL recognizing costs equivalent to
slightly less than three outages per year based upon the current
refueling outage schedule for FPL's four nuclear units. Two refueling
outages occurred in the fourth quarter of 1995, two refueling outages
occurred in the first half of 1996 and no additional refueling outages are
scheduled for the remainder of 1996. The cumulative effect of adopting
this accounting method was $35 million and will be expensed over a
period not to exceed five years. See Note 1 - Accrual for Nuclear
Maintenance Costs.
In 1995, FPL began recording $30 million of special nuclear amortization
per year plus an additional amount based on the level of sales. The
additional expense amounts were to be applied against certain fossil and
nuclear generating assets, as well as regulatory assets. For the three
and nine months ended September 30, 1996, depreciation and
amortization expense increased mainly as a result of the special
amortization of generating assets and regulatory assets, which amounted
to approximately $61 million and $162 million, respectively. 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 against regulatory assets. See
Note 1 - Depreciation and Amortization. The increased depreciation of
nuclear and fossil assets also resulted in increased amortization of
related deferred investment tax credits, lowering income tax expense in
1996.
In October 1996, the FPSC approved 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 rule change
retroactive to January 1, 1996. The effect of eliminating AFUDC in 1996
and the contribution of AFUDC in prior periods 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, thereby reducing
dividend requirements on preferred stock and interest expense, and has
increased the funding for special use funds. Additionally, FPL Group
has repurchased approximately 1.5 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. Other cash flows from operations at FPL
Group decreased mainly as a result of non-recurring alternative minimum
tax benefits realized in 1995.
For information concerning capital commitments, see Note 3.
PART II - OTHER INFORMATION
Item 5. Other Information
(a) Reference is made to Item 1. Business - FPL Operations - Retail
Ratemaking in the 1995 Form 10-K for FPL Group and FPL.
For information regarding the FPSC's approval of a change in the
accounting for costs associated with planned nuclear refueling
outages, see Note 1 - Accrual for Nuclear Maintenance Costs.
(b) Reference is made to Item 1. Business - FPL Operations - System
Capability and Load in the 1995 Form 10-K for FPL Group and FPL.
In September 1996, FPL received approval from the Nuclear
Regulatory Commission (NRC) to increase the output of each of the
Turkey Point nuclear units by 31 mw. The uprating of Turkey Point
Units Nos. 3 and 4 was completed in October and November 1996,
respectively.
(c) Reference is made to Item 1. Business - FPL Operations - Nuclear
in the 1995 Form 10-K for FPL Group and FPL.
Since mid-1995, the St. Lucie nuclear plant has experienced a
series of mechanical and operational problems that have resulted in
increased attention and fines from the NRC. A number of
self-identified and NRC-identified corrective actions have been
implemented, and several changes have been made to St. Lucie's
management team. However, the NRC continues to review St.
Lucie's overall operations and to identify additional performance
issues.
In September 1996, FPL submitted an analysis of the pressurized
water circulation tubes of the St. Lucie Unit No. 1 steam generators
to the NRC. The analysis supported continued operation of St.
Lucie Unit No. 1 until at least September 1997, at which time FPL
plans to replace the steam generators. The NRC is currently
reviewing the analysis.
(d) Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 (the Reform Act), FPL
Group and FPL (collectively, the Company) are hereby filing
cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected
in forward-looking statements (as such term is defined in the Reform
Act) of the Company made by or on behalf of the Company which
are made in presentations, in response to questions or otherwise.
Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events
or performance (often, but not always, through the use of words or
phrases such as will likely result, are expected to, will continue, is
anticipated, estimated, projection, outlook) are not historical facts
and may be forward-looking and, accordingly, such statements
involve estimates, assumptions, and uncertainties which could cause
actual results to differ materially from those expressed in the
forward-looking statements. Accordingly, any such statements are
qualified in their entirety by reference to, and are accompanied by,
the following important factors that could cause the Company's
actual results to differ materially from those contained in
forward-looking statements of the Company made by or on behalf of
the Company.
The Company cautions that the following important factors could
cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements of the Company made
by or on behalf of the Company. Any forward-looking statement
speaks only as of the date on which such statement is made, and
the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or
circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge
from time to time and it is not possible for management to predict all
of such factors, nor can it assess the impact of each such factor on
the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
Some important factors that could cause actual results or outcomes
to differ materially from those discussed in the forward-looking
statements include prevailing governmental policies and regulatory
actions, including those of the FERC, the FPSC and the NRC, with
respect to allowed rates of return, industry and rate structure,
operation of nuclear power facilities, acquisition and disposal of
assets and facilities, operation and construction of plant facilities,
recovery of purchased power, decommissioning costs, and present
or prospective wholesale and retail competition (including but not
limited to retail wheeling and transmission costs).
The business and profitability of the Company are also influenced by
economic and geographic factors including political and economic
risks, changes in and compliance with environmental and safety
laws and policies, weather conditions (including natural disasters
such as hurricanes), population growth rates and demographic
patterns, competition for retail and wholesale customers, pricing and
transportation of commodities, market demand for energy from
plants or facilities, changes in tax rates or policies or in rates of
inflation, unanticipated development project delays or changes in
project costs, unanticipated changes in operating expenses and
capital expenditures, capital market conditions, competition for new
energy development opportunities, and legal and administrative
proceedings (whether civil, such as environmental, or criminal) and
settlements.
All such factors are difficult to predict, contain uncertainties which
may materially affect actual results, and are beyond the control of
the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit FPL
Number Description Group FPL
10 Employment Agreement between FPL Group and Thomas F. Plunkett dated as of x
September 16, 1996
12 Computation of Ratios x
27 Financial Data Schedule x x
(b) Reports on Form 8-K - None
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: November 4, 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)