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 March 31, 1997
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) 694-4000
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 March 31, 1997: 182,443,635 shares
As of March 31, 1997 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.
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 (Reform Act), FPL Group, Inc. (FPL
Group) and Florida Power & Light Company (FPL) (collectively,
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 this combined Form 10-Q, 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 statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions, and
uncertainties that 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.
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 Federal Energy Regulatory Commission (FERC), the Florida
Public Service Commission (FPSC) and the Nuclear Regulatory
Commission, 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.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1997 1996
(In thousands, except
per share amounts)
OPERATING REVENUES .................................................................... $1,445,193 $1,357,707
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................................... 543,559 449,660
Other operations and maintenance..................................................... 269,174 279,974
Depreciation and amortization ....................................................... 267,863 267,655
Taxes other than income taxes ....................................................... 139,341 137,044
Total operating expenses .......................................................... 1,219,937 1,134,333
OPERATING INCOME ...................................................................... 225,256 223,374
OTHER INCOME (DEDUCTIONS):
Interest charges .................................................................... (71,035) (69,246)
Preferred stock dividends - FPL ..................................................... (5,710) (6,434)
Other - net ......................................................................... 7,771 (1,363)
Total other deductions - net ...................................................... (68,974) (77,043)
INCOME BEFORE INCOME TAXES ............................................................ 156,282 146,331
INCOME TAXES .......................................................................... 55,213 52,619
NET INCOME ............................................................................ $ 101,069 $ 93,712
Earnings per share of common stock .................................................... $ 0.58 $ 0.54
Dividends per share of common stock ................................................... $ 0.48 $ 0.46
Average number of common shares outstanding ........................................... 173,222 174,706
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 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, 1996 (1996 Form 10-K) for FPL Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
1997 December 31,
(Unaudited) 1996
(Thousands of Dollars)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant and other property - at original cost,
including nuclear fuel and construction work in progress ....................... $17,521,698 $17,033,623
Less accumulated depreciation and amortization ................................... (7,906,516) (7,649,734)
Total property, plant and equipment - net ...................................... 9,615,182 9,383,889
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 394,725 195,932
Customer receivables, net of allowances of $9,908 and $12,474, respectively ...... 453,956 461,501
Materials, supplies and fossil fuel stock - at average cost ...................... 294,170 268,186
Other ............................................................................ 189,172 247,912
Total current assets ........................................................... 1,332,023 1,173,531
OTHER ASSETS:
Special use funds of FPL ......................................................... 849,153 805,819
Other investments ................................................................ 284,428 326,855
Unamortized debt reacquisition costs of FPL ...................................... 277,841 282,756
Other ............................................................................ 310,935 246,473
Total other assets ............................................................. 1,722,357 1,661,903
TOTAL ASSETS ....................................................................... $12,669,562 $12,219,323
CAPITALIZATION:
Common shareholders' equity ...................................................... $ 4,598,131 $ 4,592,132
Preferred stock of FPL without sinking fund requirements ......................... 226,250 289,580
Preferred stock of FPL with sinking fund requirements ............................ 38,000 42,000
Long-term debt ................................................................... 3,266,844 3,144,313
Total capitalization ........................................................... 8,129,225 8,068,025
CURRENT LIABILITIES:
Accounts payable ................................................................. 340,891 307,836
Debt and preferred stock due within one year ..................................... 387,801 154,600
Accrued interest, taxes and other ................................................ 849,976 812,028
Total current liabilities ...................................................... 1,578,668 1,274,464
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,544,405 1,530,538
Unamortized regulatory and investment tax credits ................................ 424,647 379,279
Other ............................................................................ 992,617 967,017
Total other liabilities and deferred credits ................................... 2,961,669 2,876,834
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,669,562 $12,219,323
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................................... $ 101,069 $ 93,712
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ..................................................... 267,863 267,655
Other - net ....................................................................... 142,136 125,313
Net cash provided by operating activities ....................................... 511,068 486,680
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (114,336) (115,508)
Other - net ......................................................................... 22,908 (51,786)
Net cash used in investing activities ........................................... (91,428) (167,294)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt .......................................................... 4,948 -
Retirement of long-term debt and preferred stock .................................... (125,560) (102,973)
Decrease in commercial paper ........................................................ - (138,700)
Repurchase of common stock .......................................................... (17,130) (24,374)
Dividends on common stock ........................................................... (83,105) (80,394)
Other - net ......................................................................... - 9,169
Net cash used in financing activities ........................................... (220,847) (337,272)
Net increase (decrease) in cash and cash equivalents .................................. 198,793 (17,886)
Cash and cash equivalents at beginning of period ...................................... 195,932 46,177
Cash and cash equivalents at end of period ............................................ $ 394,725 $ 28,291
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 67,590 $ 72,692
Cash paid for income taxes .......................................................... $ 27,923 $ 9,700
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 18,175 $ 30,742
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1997 1996
(Thousands of Dollars)
OPERATING REVENUES .................................................................... $1,398,768 $1,340,742
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................................... 525,186 449,660
Other operations and maintenance .................................................... 246,494 262,517
Depreciation and amortization ....................................................... 262,619 266,241
Income taxes ........................................................................ 57,828 58,423
Taxes other than income taxes ....................................................... 138,987 137,096
Total operating expenses .......................................................... 1,231,114 1,173,937
OPERATING INCOME ...................................................................... 167,654 166,805
OTHER INCOME (DEDUCTIONS):
Interest charges .................................................................... (59,206) (62,386)
Other - net ......................................................................... 1,314 2,734
Total other deductions - net ...................................................... (57,892) (59,652)
NET INCOME ............................................................................ 109,762 107,153
PREFERRED STOCK DIVIDENDS ............................................................. 5,710 6,434
NET INCOME AVAILABLE TO FPL GROUP ..................................................... $ 104,052 $ 100,719
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
1997 December 31,
(Unaudited) 1996
(Thousands of Dollars)
ELECTRIC UTILITY PLANT:
At original cost, including nuclear fuel and construction work in progress ....... $16,881,392 $16,808,792
Less accumulated depreciation and amortization ................................... (7,802,503) (7,610,786)
Electric utility plant - net ................................................... 9,078,889 9,198,006
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 196,052 78,417
Customer receivables, net of allowances of $9,610 and $12,176, respectively ...... 426,260 460,120
Materials, supplies and fossil fuel stock - at average cost ...................... 260,671 247,597
Other ............................................................................ 164,004 225,153
Total current assets ........................................................... 1,046,987 1,011,287
OTHER ASSETS:
Special use funds ................................................................ 849,153 805,819
Unamortized debt reacquisition costs ............................................. 277,841 282,756
Other ............................................................................ 241,272 233,405
Total other assets ............................................................. 1,368,266 1,321,980
TOTAL ASSETS ....................................................................... $11,494,142 $11,531,273
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 4,672,615 $ 4,666,941
Preferred stock without sinking fund requirements ................................ 226,250 289,580
Preferred stock with sinking fund requirements ................................... 38,000 42,000
Long-term debt ................................................................... 2,727,827 2,981,261
Total capitalization ........................................................... 7,664,692 7,979,782
CURRENT LIABILITIES:
Accounts payable ................................................................. 288,813 299,026
Debt and preferred stock due within one year ..................................... 198,340 4,040
Accrued interest, taxes and other ................................................ 851,360 824,945
Total current liabilities ...................................................... 1,338,513 1,128,011
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,152,679 1,146,680
Unamortized regulatory and investment tax credits ................................ 424,647 379,279
Other ............................................................................ 913,611 897,521
Total other liabilities and deferred credits ................................... 2,490,937 2,423,480
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,494,142 $11,531,273
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................................... $ 109,762 $ 107,153
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ..................................................... 262,619 266,241
Other - net ....................................................................... 107,287 125,954
Net cash provided by operating activities ....................................... 479,668 499,348
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (109,642) (114,781)
Other - net ......................................................................... (23,312) (74,077)
Net cash used in investing activities ........................................... (132,954) (188,858)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt and preferred stock .................................... (125,000) (102,770)
Decrease in commercial paper ........................................................ - (158,700)
Dividends ........................................................................... (104,079) (104,952)
Capital contributions from FPL Group ................................................ - 50,000
Other - net ......................................................................... - 7,014
Net cash used in financing activities ........................................... (229,079) (309,408)
Net increase in cash and cash equivalents ............................................. 117,635 1,082
Cash and cash equivalents at beginning of period ...................................... 78,417 412
Cash and cash equivalents at end of period ............................................ $ 196,052 $ 1,494
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 62,006 $ 67,542
Cash paid for income taxes .......................................................... $ 72,160 $ 12,766
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 18,175 $ 30,742
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 11 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
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 1996 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 March 31, 1997 and the results of operations
and cash flows for the three months ended March 31, 1997 and 1996
have been made. Certain amounts included in the prior year's
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
Regulation - In April 1997, the FPSC voted to extend through 1999
FPL's program to amortize certain specified assets, mainly costs
associated with nuclear and fossil generating assets and debt
reacquisition costs, based on the level of retail revenues achieved
compared to a forecasted amount. The decision will become final in late
May 1997 if no protests are filed. FPL will also continue to record $30
million per year of special nuclear amortization.
2. Capitalization
FPL Group Common Stock - During the three months ended March 31,
1997, FPL Group repurchased 371,500 shares of common stock under
its share repurchase program. A total of approximately 8.1 million
shares have been repurchased since the inception of the share
repurchase program in 1994. This program was terminated in the first
quarter of 1997 when FPL Group's board of directors authorized a new
program to repurchase up to an additional 10 million shares of common
stock commencing on April 1, 1997.
Preferred Stock - In March 1997, FPL redeemed all 2,533,188
outstanding shares of its $2.00 No Par Value, Series A (Involuntary
Liquidation Value $25 Per Share).
The 1997 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 1997,
30,000 shares of Series Q and the remaining 50,000 shares of Series R.
There are no preferred stock sinking fund requirements for the remainder
of 1997.
Long-Term Debt - In March 1997, FPL redeemed all $61,670,000 of the
outstanding 8.75% Quarterly Income Debt Securities (Subordinated
Deferrable Interest Debentures) due 2025.
In April 1997, FPL purchased on the open market and retired
approximately $47 million in aggregate principal amount of several series
of First Mortgage Bonds, due on dates ranging from 2013 through 2026,
with interest rates ranging from 7% to 7 7/8%.
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 $1.6 billion for
1997 through 1999. Included in this three-year forecast are capital
expenditures for 1997 of approximately $590 million, of which $110
million had been spent through March 31, 1997. FPL Group Capital Inc
(FPL Group Capital) and its subsidiaries, primarily ESI Energy, Inc., have
guaranteed approximately $150 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 $71 million in retrospective premiums.
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 $230 million at March 31,
1997, 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 (Southern Companies) 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. The contract and related use of this fuel is subject
to regulatory approvals. In 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 capacity and minimum payments through 2001 under these
contracts are estimated to be as follows:
1997 1998 1999 2000 2001
(Millions of Dollars)
Capacity payments:
JEA and Southern Companies ............................................... $210 $210 $210 $210 $210
Qualifying facilities .................................................... $340 $350 $360 $370 $380
Minimum payments, at projected prices:
Natural gas, including transportation .................................... $210 $200 $210 $210 $210
Orimulsion (1) ........................................................... - - $140 $140 $140
Coal ..................................................................... $ 50 $ 50 $ 40 $ 40 $ 30
(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 March 31,
1997 Charges 1996 Charges
Energy/ Energy/
Capacity Fuel (1) Capacity Fuel (1)
(Millions of Dollars)
JEA and Southern Companies ............................................. $52(2) $35 $46(2) $33
Qualifying facilities................................................... $73(3) $29 $70(3) $27
Natural gas ............................................................ - $89 - $97
Coal ................................................................... - $11 - $12
(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 1996, the District Court ordered the FMPA to
seek a declaratory ruling from the 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 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 three months ended
March 31, 1997 and 1996 were approximately $46 million and $17
million, respectively. For the same period, operating expenses were
approximately $47 million and $18 million. Net income for the three
months ended March 31, 1997 and 1996 was approximately $1 million
and $0.4 million, respectively.
At March 31, 1997, FPL Group Capital had current assets of
approximately $227 million, noncurrent assets of approximately $1.224
billion, current liabilities of approximately $268 million and noncurrent
liabilities of approximately $958 million. At December 31, 1996, FPL
Group Capital had approximately $144 million of current assets, $857
million of noncurrent assets, $182 million of current liabilities and $595
million of noncurrent liabilities. The consolidation of the Doswell Limited
Partnership, which operates a 663 mw exempt wholesale generator,
increased total assets and liabilities at March 31, 1997 by approximately
$450 million.
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 1996 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
The principal operations of FPL Group consist of the generation,
transmission, distribution and sale of electric energy by FPL. Net
income for the three months ended March 31, 1997 increased reflecting
improved operating results at FPL. Certain fluctuations resulting from
FPL's operations were offset in FPL Group's financial statements
because, beginning with the first quarter of 1997, FPL Group's financial
statements include the accounts of the Doswell Limited Partnership.
Partnership activities did not have a significant impact on operations or
net income.
FPL's revenues from base rates for the three months ended March 31,
1997 decreased to $769 million from $786 million for the same period in
1996, despite an increase in retail kilowatt-hour sales. The decline in
base revenues resulted from a weather-related shift in sales between
customer classes and the different rates charged to those classes.
Warmer weather led to increased commercial sales in 1997 and colder
weather resulted in relatively higher residential sales in 1996. Customer
accounts increased by 1.7% during the period. Cost recovery clause
revenues and franchise fees comprise substantially all of the remaining
portion of operating revenues. Such revenues and the related fuel,
purchased power and interchange expense increased mainly as a result
of higher gas prices. These revenues represent a pass-through of costs
and do not significantly affect net income.
FPL's O&M expenses decreased for the three months ended March 31,
1997, primarily due to continued cost control efforts. Interest and
preferred stock dividend requirements also declined, resulting from
reductions in debt and preferred stock balances. Depreciation and
amortization expense at FPL decreased for the first quarter of 1997,
mainly due to the decline in retail revenues discussed above. In April
1997, the FPSC voted to extend through 1999 FPL's program to
amortize certain specified assets, mainly costs associated with nuclear
and fossil generating assets and debt reacquisition costs, based on the
level of retail revenues achieved compared to a forecasted amount. The
decision will become final in late May 1997 if no protests are filed. FPL
will also continue to record $30 million per year of special nuclear
amortization. A total of $63 million of amortization was recorded under
this program during the three months ended March 31, 1997 and $74
million during the same period in 1996. See Note 1.
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
preferred stock dividends and interest expense. Additionally, during the
three months ended March 31, 1997 FPL Group repurchased 371,500
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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit FPL
Number Description Group FPL
10(a) Employment Agreement between FPL Group and Kenneth R. Werneburg dated as of x
March 17, 1997
10(b) Supplement to the FPL Group Supplemental Executive Retirement Plan as it applies x
to Kenneth R. Werneburg effective January 2, 1997
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: May 1, 1997 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)