EXHIBIT 99.2
Unaudited Pro Forma Combined Condensed Balance Sheet
September 30, 2000
Progress Energy Florida Progress Pro Forma Pro Forma
(in millions) (as reported) (2) (as reclassified)(2) Adjustments Combined (1)
--------------- ------------------- ----------- -------------
Assets
Utility Plant
Utility plant, at cost $ 12,120.7 $ 7,062.9 $ - $ 19,183.6
Accumulated depreciation (5,383.2) (3,542.8) - (8,926.0)
Nuclear fuel, net of amortization 171.7 45.7 - 217.4
------------ ------------ ----------- --------------
Total Utility Plant, Net 6,909.2 3,565.8 - 10,475.0
------------ ------------ ----------- --------------
Current Assets
Cash and cash equivalents 252.3 4.0 - 256.3
Accounts receivable, net 511.1 559.6 (191.0) (3c) 879.7
Inventory 266.5 438.7 (197.0) (3c) 508.2
Prepayments and other current assets 279.0 254.9 (10.7) (3c) 523.2
------------ ------------ ----------- --------------
Total Current Assets 1,308.9 1,257.2 (398.7) 2,167.4
------------ ------------ ----------- --------------
Goodwill 285.8 243.8 3,116.8 (3) 3,646.4
Net Assets Held for Sale - - 700.8 (3c) 700.8
Deferred Debits and Other Assets 1,615.5 1,779.3 (392.8) (3c) 3,002.0
------------ ------------ ----------- --------------
Total Assets $ 10,119.4 $ 6,846.1 $ 3,026.1 $ 19,991.6
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Capitalization and Liabilities
Capitalization
Common stock $ 1,744.0 $ 1,274.2 $ 588.7 (4b) $ 3,606.9
Other stockholders' equity 1,932.9 913.6 (913.6) (4b) 1,932.9
------------ ------------ ----------- --------------
Total common stock equity 3,676.9 2,187.8 (324.9) 5,539.8
Preferred stock - redemption not required 59.3 33.5 - 92.8
Company-obligated mandatorily
redeemable preferred securities - 300.0 - 300.0
Long-term debt, net 3,489.5 2,041.9 3,454.8 (3c, 5a) 8,986.2
------------ ------------ ----------- --------------
Total Capitalization 7,225.7 4,563.2 3,129.9 14,918.8
------------ ------------ ----------- --------------
Current Liabilities
Accounts payable 299.0 306.7 (46.1) (3c, 9) 559.6
Notes payable - 332.5 - 332.5
Current portion of long-term debt 7.1 275.9 (2.9) (3c) 280.1
Other current liabilities 413.9 347.0 (9.7) (3c, 9) 751.2
------------ ------------ ----------- --------------
Total Current Liabilities 720.0 1,262.1 (58.7) 1,923.4
------------ ------------ ----------- --------------
Deferred Credits and Other Liabilities 2,173.7 1,020.8 (45.1) (3c, 7) 3,149.4
------------ ------------ ----------- --------------
Total Capitalization and Liabilities $ 10,119.4 $ 6,846.1 $ 3,026.1 $ 19,991.6
============ ============ =========== ==============
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
Unaudited Pro Forma Combined Condensed Statement of Income
For the Nine Months Ended September 30, 2000
Progress Energy Florida Progress Pro Forma Pro Forma
(in millions except per share data) (as reported) (2) (as reclassified) (2) Adjustments Combined (1)
------------------ --------------------- ----------- --------------
Operating Revenues
Electric $ 2,497.2 $ 2,237.8 $ - $ 4,735.0
Natural gas 223.1 - - 223.1
Diversified businesses 133.3 1,119.7 (899.5) (3c) 353.5
------------------ --------------------- ----------- --------------
2,853.6 3,357.5 (899.5) 5,311.6
------------------ --------------------- ----------- --------------
Operating Expenses
Fuel, operation and maintenance 1,005.5 809.6 - 1,815.1
Purchased power and other 377.4 605.0 - 982.4
Gas purchased for resale 166.5 - - 166.5
Depreciation and amortization 400.7 313.3 59.3 (3d) 773.3
Diversified businesses 207.6 1,147.2 (845.7) (3c) 509.1
------------------ --------------------- ----------- --------------
Total operating expenses 2,157.7 2,875.1 (786.4) 4,246.4
------------------ --------------------- ----------- --------------
Operating Income 695.9 482.4 (113.1) 1,065.2
-
Other Income (Expense) 203.4 9.9 (0.1) (3c) 213.2
------------------ --------------------- ----------- --------------
Income Before Interest Charges
and Income Taxes 899.3 492.3 (113.2) 1,278.4
Distributions on Company-Obligated
Mandatorily Redeemable Preferred
Securities - 16.0 - 16.0
Interest Charges, Net 154.4 138.0 123.3 (3c,5b) 415.7
------------------ --------------------- ----------- --------------
Income Before Income Taxes 744.9 338.3 (236.5) 846.7
Income Taxes 255.1 1.6 (70.7) (3c,8) 186.0
------------------ --------------------- ----------- --------------
Net Income $ 489.8 $ 336.7 $ (165.8) $ 660.7
================== ===================== =========== ==============
Average Common Shares Outstanding
Basic (4a) 153.2 98.6 199.7
Diluted (4a) 153.6 98.8 200.2
Basic Earnings Per Common Share $ 3.20 $ 3.42 $ 3.31
================== ===================== ==============
Diluted Earnings Per Common Share $ 3.19 $ 3.42 $ 3.30
================== ===================== ==============
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
Unaudited Pro Forma Combined Condensed Statement of Income
For the Year Ended December 31, 1999
Progress Energy Florida Progress Pro Forma Pro Forma
(in millions except per share data) (as reclassified) (2) (as reclassified) (2) Adjustments Combined (1)
--------------------- --------------------- ---------------- ---------------
Operating Revenues
Electric $ 3,138.8 $ 2,632.6 $ - $ 5,771.4
Natural gas 98.9 - - 98.9
Diversified businesses 119.9 1,212.5 (1,021.2)(3c) 311.2
------------ ------------ ---------- ------------
3,357.6 3,845.1 (1,021.2) 6,181.5
------------ ------------ ---------- ------------
Operating Expenses
Fuel, operation and maintenance 1,263.7 1,062.4 - 2,326.1
Purchased power and other 515.6 698.4 - 1,214.0
Gas purchased for resale 67.5 - - 67.5
Depreciation and amortization 495.7 347.5 76.8 (3d) 920.0
Diversified businesses 174.6 1,161.9 (930.5)(3c) 406.0
------------ ------------ ---------- ------------
Total operating expenses 2,517.1 3,270.2 (853.7) 4,933.6
------------ ------------ ---------- ------------
Operating Income 840.5 574.9 (167.5) 1,247.9
Other Income (Expense) (23.4) 17.2 (2.2)(3c) (8.4)
------------ ------------ ---------- ------------
Income Before Interest Charges
and Income Taxes 817.1 592.1 (169.7) 1,239.5
Distributions on Company-Obligated
Mandatorily Redeemable Preferred
Securities - 15.2 - 15.2
Interest Charges, Net 179.4 170.3 171.4 (3c, 5b) 521.1
------------ ------------ ---------- ------------
Income Before Income Taxes 637.7 406.6 (341.1) 703.2
Income Taxes 258.4 91.7 (105.1)(3c, 8) 245.0
------------ ------------ ---------- ------------
Net Income $ 379.3 $ 314.9 $ (236.0) $ 458.2
============ ============ ========== ============
Average Common Shares Outstanding
Basic (4a) 148.3 98.1 194.6
Diluted (4a) 148.6 98.3 195.0
Basic Earnings Per Common Share $ 2.56 $ 3.21 $ 2.35
============ ============ ============
Diluted Earnings Per Common Share $ 2.55 $ 3.21 $ 2.35
============ ============ ============
See accompanying Notes to Unaudited Pro Forma Condensed Financial information.
Notes to Unaudited Pro Forma Combined Condensed Financial Information
(1) The Share Exchange
On November 30, 2000, CP&L Energy, Inc., a North Carolina corporation,
acquired all of the outstanding common stock of Florida Progress
Corporation, a Florida corporation, in accordance with the Amended and
Restated Plan of Exchange, including the related Plan of Share
Exchange, dated as of August 22, 1999 as amended and restated as of
March 3, 2000, among CP&L Energy, Florida Progress and Carolina Power &
Light Company, a North Carolina corporation.
The share exchange will be accounted for under the purchase method of
accounting for business combinations. The unaudited pro forma combined
condensed financial information does not give effect to any
restructuring costs, nor any potential cost savings or other benefits
that could result from the share exchange. Progress Energy is in the
process of finalizing its plan to integrate the operations of Florida
Progress. There were no material intercompany transactions among
Progress Energy, Carolina Power & Light and Florida Progress during the
periods presented that require elimination.
(2) Reclassifications
On June 19, 2000 Carolina Power & Light Company was reorganized into a
holding company structure and all of the shares of common stock of
Carolina Power & Light Company were exchanged for an equal number of
shares of common stock of CP&L Energy, Inc. On December 4, 2000, CP&L
Energy changed its name to Progress Energy, Inc.
These columns represent historical results of operations and financial
position of the respective companies, in condensed formats. Certain
reclassifications have been made to Florida Progress' historical
results to conform with Progress Energy's presentation. Immaterial
reclassifications were made to Florida Progress' income statement for
the presentation of allowance for funds used during construction. On
the balance sheet, Florida Progress' non-electric property, plant and
equipment has been reclassified to "Deferred Debits and Other Assets".
In addition, on the income statement for the twelve months ended
December 31, 1999, Carolina Power & Light's preferred dividend
requirement was reclassified to "Other Income (Expense)" to reflect the
reporting of such dividends beginning with the June 19, 2000 share
exchange with CP&L Energy.
(3) Purchase Price Allocation
The fair value of the consideration exchanged to acquire Florida
Progress common stock will be allocated to the assets and liabilities
of Florida Progress based on their estimated fair values. A preliminary
allocation of the purchase price has been presented in the unaudited
pro forma combined condensed financial information in which the fair
value of the identifiable net tangible assets of Florida Progress is
assumed to equal the net book value of such assets, except for net
assets held for sale as discussed in Note 3c. The excess of
consideration over the fair value of the identifiable net tangible
assets has been preliminarily allocated to goodwill as follows (in
millions):
Consideration exchanged for Florida Progress common stock (a) $ 5,374.7
Plus: Estimated transaction costs (b) 18.6
----------
Total estimated purchase price 5,393.3
Less: Net assets held for sale (c) 700.8
Less: Estimated fair value of Florida Progress' identifiable net
assets on September 30, 2000 (d) 1,331.9
----------
Total estimated goodwill $ 3,360.6
----------
In addition, goodwill was decreased by Florida Progress' historical goodwill of
$243.8 million, as required under the purchase accounting method.
(a) The estimated consideration and purchase price allocation used for
pro forma purposes are based on (1) 65% of the outstanding shares
of Florida Progress common stock being exchanged for $54 per share
in cash and (2) 35% of the outstanding shares of Florida Progress
common stock being exchanged for Progress Energy common stock and
cash in lieu of fractional shares, with 1.3473 shares of Progress
Energy common stock issued for each share of Florida Progress
common stock. As discussed more fully in Note 6 below, the exchange
ratio of 1.3473 corresponds to an average CP&L Energy share price
of $40.0813. In addition, the estimated consideration includes
approximately $49.3 million for the market value of contingent
value obligations, as more fully discussed in Note 7 below.
(b) Transaction costs primarily include investment banking fees and
other professional fees.
(c) Progress Energy has announced its intent to dispose of Florida
Progress' Rail Services and Inland Marine Transportation segments.
Accordingly, the assets and liabilities of those two segments have
been reclassified to Net Assets Held for Sale, with adjustments to
reflect estimated disposition proceeds and earnings net of interest
on incremental debt during the period until disposition. In
addition, the pro forma income statements have been adjusted to
remove the effects of those two segments. Finally, interest expense
has been decreased by $55.3 million and $41.4 million for the
twelve-month and nine-month periods, respectively, to reflect the
assumed reduction in long-term debt using the estimated net
proceeds of the dispositions and an interest rate of 7.5% (see Note
5b).
(d) A valuation of net assets has not been performed and, therefore,
for pro forma purposes, the fair value of the identifiable net
tangible assets of Florida Progress is assumed to equal the net
book value of such assets, except for net assets held for sale as
discussed in Note 3c. A pro forma adjustment has been made for the
twelve months ended December 31,
1999 and the nine months ended September 30, 2000 to reflect
estimated amortization expense on the goodwill resulting from the
acquisition and to eliminate Florida Progress' historical
amortization of goodwill. Goodwill is amortized over an estimated
useful life of 40 years. If a portion of goodwill were assigned to
net assets that have lives less than 40 years, or if the estimated
life of goodwill were less than 40 years, pro forma goodwill
amortization expense would increase, with a corresponding decrease
in pro forma earnings per share.
(4) Stock Consideration
(a) In the share exchange, 65% of the outstanding shares of Florida
Progress common stock was exchanged for cash consideration of
$54.00 per share and 35% of the outstanding shares of Florida
Progress common stock was exchanged for a number of shares of
Progress Energy common stock based on the exchange ratio determined
in the manner described in Note 6 below. Based on the average
closing price of CP&L Energy common stock on the New York Stock
Exchange for the twenty trading day period ended on November 22,
2000, which was $40.0813, Progress Energy would have issued
approximately 46.503 million shares in the transaction for 35% of
Florida Progress common stock outstanding on September 30, 2000
(which was approximately the same as the shares outstanding on the
share exchange date of November 30, 2000). The unaudited pro forma
net earnings per share reflect the weighted-average number of
shares of Progress Energy common stock that would have been
outstanding if the share exchange had occurred at the beginning of
the periods presented, with conversion of each Florida Progress
share not exchanged for cash into 1.3473 shares of Progress Energy
common stock, as provided in the exchange agreement and discussed
in Note 6 below.
(b) Pro forma adjustments have been made as of September 30, 2000 to:
(1) reflect the issuance of approximately 46.503 million shares of
Progress Energy common stock to be exchanged together with cash of
approximately $3.461 billion and contingent value obligations with
a market value of approximately $49.3 million for all of the
outstanding shares of Florida Progress common stock (based on the
number of shares of Florida Progress common stock outstanding on
September 30, 2000) and (2) eliminate the shareholders' equity
accounts of Florida Progress.
(5) Cash Consideration
(a) A pro forma adjustment has been made to reflect the approximate
$3.461 billion cash consideration that Progress Energy used to fund
the purchase price for 65% of the Florida Progress common stock,
assuming such cash consideration was funded through the issuance of
long-term
debt. Progress Energy used short-term financing facilities to
consummate the cash portion of the share exchange, but expects to
issue long-term debt in the near future to replace those short-
term facilities. The remaining exchange consideration was
comprised of Progress Energy common stock and contingent value
obligations.
(b) A pro forma adjustment has been made to reflect increased
interest expense resulting from the issuance of approximately
$3.461 billion of long-term debt to fund part of the Florida
Progress purchase price, as if such issuance had occurred on
January 1, 1999 and assuming a weighted- average annual interest
rate of 7.5%. That average interest rate reflects the best
estimate available for the long-term debt facilities expected to
be issued in conjunction with the acquisition. If the average
interest rate changed by 1/8%, pro forma net income would change
by approximately $2.6 million on an annual basis.
(6) Exchange Ratio
As provided in the exchange agreement, Florida Progress shareholders
were permitted to elect either Progress Energy common stock or cash,
with the total cash consideration fixed at 65% percent and the total
stock consideration fixed at 35%. Shareholder elections were prorated
to the extent necessary to maintain this mix of consideration. Based
upon the average closing price per share of CP&L Energy common stock on
the New York Stock Exchange for the twenty trading day period ended on
November 22, 2000 (which is calculated based on the actual share
exchange date of November 30, 2000) of $40.0813, the exchange ratio was
1.3473 shares of Progress Energy common stock for each share of Florida
Progress common stock not exchanged for cash, and Progress Energy would
have issued approximately 46.503 million shares in this transaction
based on the number of shares of Florida Progress common stock
outstanding as of September 30, 2000.
(7) Contingent Value Obligation Consideration
In the share exchange, one contingent value obligation (CVO) was issued
for each whole or fractional share of Florida Progress common stock.
The CVOs represent the right to receive contingent payments based on
the after-tax cash flow to Progress Energy generated by certain
synthetic fuel plants. For accounting purposes, the pro forma liability
is based on the average of the quoted market price of the CVOs around
the share exchange date of November 30, 2000, which was $0.50 per CVO.
(8) Income Taxes
A pro forma adjustment has been made for the twelve months ended
December 31, 1999 and the nine months ended September 30, 2000 to
reflect the tax effect of certain pro forma adjustments using Progress
Energy's statutory tax rate of approximately 40%. Goodwill created by
the share exchange is nondeductible for tax purposes.
(9) Current Liabilities
A pro forma adjustment has been made for accounts payable associated
with the transaction, such as investment banker fees, legal fees and
other professional fees. A pro forma adjustment also has been made to
other current liabilities for amounts due, under the long-term
incentive plans maintained by Florida Progress and its subsidiaries and
under the Florida Progress phantom stock plan for non-employee
directors, upon a change in control of Florida Progress.