<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ 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
For the transition period from _______ to _______
Commission file number 1-3382
______
CAROLINA POWER & LIGHT COMPANY
__________________________________
(Exact name of registrant as specified in its charter)
North Carolina 56-0165465
_____________________________________________________________________________
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
411 Fayetteville Street, Raleigh, North Carolina 27601-1748
___________________________________________________________
(Address of principal executive offices)
(Zip Code)
919-546-6111
____________
(Registrant's telephone number, including area code)
_______________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has 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 (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
___ ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock (Without Par Value) shares outstanding at
April 30, 1997: 151,049,522
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
______ ____________________
Reference is made to the attached Appendix containing the
Consolidated Interim Financial Statements for the periods ended
March 31, 1997.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
______ _________________________________________________
Results Of Operations
For the Three and Twelve Months Ended March 31, 1997,
As Compared With the Corresponding Periods One Year Earlier
___________________________________________________________
Operating Revenues
__________________
For the three and twelve months ended March 31, 1997,
operating revenues were affected by the following factors (in
millions):
Three Months Twelve Months
____________ _____________
Weather $ (48) $ (75)
Power Agency (17) (22)
NCEMC Load Loss -- (70)
Price (3) (25)
Sales to Other Utilities (8) (1)
Customer Growth/Changes
In Usage Patterns 8 53
Other -- 6
______ ______
Total $ (68) $ (134)
The decrease in the weather component of revenue for the
three and twelve months ended March 31, 1997, is the result of
milder than normal temperatures in the current periods as compared
to more extreme weather patterns in the prior periods. For both
comparison periods, sales to North Carolina Eastern Municipal
Power Agency (Power Agency) decreased due to the increased
availability of generating units owned jointly by the Company and
Power Agency. The loss of 200 megawatts of load from North
Carolina Electric Membership Corporation (NCEMC) began in January
1996. For both periods, the majority of the decrease in the price
component of revenue is attributable to a decrease in the fuel
cost component of revenue.
Operating Expenses
__________________
The decrease in fuel expense for the three months ended
March 31, 1997 includes a decrease of approximately $19 million
due to a change in generation mix. Fossil generation, as a
percentage of total
<PAGE> 3
generation, decreased from 59 % to 47% and
lower-cost nuclear generation increased from 39% to 51%. The
change in generation mix is due primarily to the timing of
refueling outages of the Company's nuclear facilities. Also
contributing to the decrease is a 4.5% decrease in total
generation due to lower sales. These decreases are partially
offset by a $21 million increase in deferred fuel costs due to
over-recovery of current fuel costs and changes in recovery of
prior period fuel costs.
The decrease in fuel expense for the twelve months ended
March 31, 1997 includes a decrease of approximately $35 million
due to a change in generation mix. Fossil generation, as a
percentage of total generation, decreased from 57 % to 51% and
lower-cost nuclear generation increased from 41% to 47%. The
change in generation mix is due primarily to the timing of
refueling outages of the Company's nuclear facilities. Also
contributing to the decrease for the twelve-month period was a
reduction in the cost of coal due to renegotiated coal contracts
and increased spot market coal purchases. These reductions were
partially offset by an over-recovery of current fuel costs,
resulting in increased deferred fuel costs.
Purchased power decreased for the three and twelve months
ended March 31, 1997, primarily due to amendments to electric
purchase power agreements between the Company and Cogentrix of
North Carolina, Inc. and Cogentrix Eastern Carolina Corporation,
which became effective on September 26, 1996.
Operation and maintenance expense decreased for the three
and twelve months ended March 31, 1997 due to cost reduction
efforts and the timing of plant outages. There were more nuclear
plant refueling outages in the prior periods, resulting in higher
expense for those periods as compared to the current periods.
In December 1996, the North Carolina Utilities Commission
(NCUC) authorized the Company to accelerate amortization of
certain regulatory assets over a three-year period beginning
January 1, 1997. In March 1997, the South Carolina Public Service
Commission (SCPSC) approved a similar plan for the Company to
accelerate the amortization of certain regulatory assets,
including plant abandonment costs related to the Harris Plant,
over a three-year period beginning January 1, 1997. Depreciation
and amortization for the three and twelve months ended March 31,
1997, includes approximately $17 million related to accelerated
amortization of these regulatory assets. See additional
discussion of the abandonment adjustment in the Retail Rate
Matters section of Other Matters. The increase in depreciation
and amortization expense for the three and twelve months ended
March 31, 1997 also includes amortization of deferred Hurricane
Fran operation and maintenance expenses of $2.9 million and $6.8
million, respectively.
The decrease in income tax expense for the three and twelve
months ended March 31, 1997, is primarily due to a decrease in
operating income.
Other Income
____________
Allowance for equity funds used during construction
decreased for the three and twelve months ended March 31, 1997 in
accordance with the application of the formula prescribed by the
Federal Energy Regulatory Commission. During the current periods,
a greater proportion of the total allowance for funds used during
construction was credited to interest charges as allowance for
borrowed funds used during construction.
The decrease in other income, net for the three months ended
March 31, 1997, is primarily due to losses incurred in the start-
up phases of certain non-regulated investments. For the twelve-
month period ended March 31, 1997, other income, net, increased
due to an adjustment of $22.9 million to the unamortized balance
of abandonment costs related to the Harris Plant. See additional
discussion of the abandonment adjustment in the Retail Rate
Matters section of Other Matters. The increase for the twelve-
month period was partially offset by losses incurred in the start-
up phases of certain non-regulated investments.
<PAGE> 4
Interest Charges
________________
Interest charges on long-term debt decreased for all
reported periods primarily due to reduced long-term debt in the
current periods as well as refinancings at lower interest costs.
Other interest charges decreased for the twelve months ended
March 31, 1997 primarily due to a $6 million interest accrual
recorded in the prior period that related to the 1995 North
Carolina Utilities Commission Fuel Order.
Material Changes In Liquidity And Capital Resources
From December 31, 1996, to March 31, 1997
and From March 31, 1996, to March 31, 1997
__________________________________________
Capital Requirements
____________________
The proceeds of the issuance of short-term debt and/or
internally generated funds financed the redemption or retirement
of long-term debt totaling $60 million and $265 million during the
three and twelve months ended March 31, 1997, respectively.
On May 7, 1997, the Company announced plans to redeem on
July 1, 1997, all 500,000 shares of $7.72 Serial Preferred Stock
and all 350,000 shares of $7.95 Serial Preferred Stock, both at a
redemption price of $101 per share. The redemptions will be
funded with additional commercial paper borrowings and/or
internally generated funds.
The Company's capital structure as of March 31 was as follows:
1997 1996
____ ____
Common Stock Equity 50.44% 49.47%
Long-term Debt 46.89% 47.83%
Preferred Stock 2.67% 2.70%
The Company's First Mortgage Bonds are currently rated "A2"
by Moody's Investors Service, "A" by Standard & Poor=s and "A+" by
Duff & Phelps. Moody's Investors Service, Standard & Poor's and
Duff & Phelps have rated the Company's commercial paper "P-1," "A-
1" and "D-1," respectively.
OTHER MATTERS
_____________
Retail Rate Matters
___________________
A petition was filed in July 1996 by the Carolina Industrial
Group for Fair Utility Rates (CIGFUR) with the NCUC, requesting
that the NCUC conduct an investigation of the Company's base rates
or treat its petition as a complaint against the Company. The
petition alleged that the Company's return on equity (which was
authorized by the NCUC in the Company's last general rate
proceeding in 1988) and earnings are too high. In December 1996,
the NCUC issued an order denying CIGFUR's petition and stating
that it tentatively found no reasonable grounds to proceed with
CIGFUR's petition as a complaint. In January 1997, CIGFUR filed
its Comments and Motion for Reconsideration to which the Company
responded. On February 6, 1997, the NCUC issued an order denying
CIGFUR's Motion for Reconsideration. On February 25, 1997, CIGFUR
filed a Notice of Appeal of the NCUC's decision with the North
Carolina Court of Appeals. The Company cannot predict the outcome
of this matter.
<PAGE> 5
Additionally, in December 1996, the Company filed a proposal
with the SCPSC to accelerate amortization of certain regulatory
assets, including plant abandonment costs related to the Harris
Plant, over a three-year period beginning January 1, 1997. This
accelerated amortization will reduce income by approximately $13
million, after tax, in each of the three years. In anticipation of
approval of the proposal in 1997, the unamortized balance of plant
abandonment costs related to the Harris Plant was adjusted in 1996
to reflect the present value impact of the shorter recovery
period. This adjustment resulted in an increase in income of
approximately $14 million, after tax, in the fourth quarter of
1996. On March 20, 1997, the SCPSC approved the Company's
accelerated amortization proposal.
Other Business
______________
In 1996, the Company established a wholly owned subsidiary,
CaroCapital, Inc. (CaroCapital), which purchased a minority equity
interest (40%) in Knowledge Builders, Inc. (KBI), an energy-
management software and control systems company. Investments in
KBI amounted to $9 million in 1996. On May 6, 1997, CaroCapital
entered into a merger agreement pursuant to which KBI will be
merged into CaroCapital. The merger agreement provides that the
remaining KBI stock will be exchanged for shares of common stock
of the Company according to a market value formula. The merger
agreement provides for initial payments totaling approximately
$22 million, payable primarily in unregistered restricted shares
of the Company's common stock. The merger agreement also provides
for other incentive payments based on CaroCapital's future results
of operations. If earned, these additional payments will be made
primarily in unregistered restricted shares of the Company's
common stock. The closing of the merger is subject to certain
regulatory approvals. The Company cannot predict the outcome of
this matter.
Competition
___________
On January 29, 1997, representatives of both houses of the
North Carolina General Assembly filed bills calling for the
establishment of a commission, comprised of representatives from
retail customers, electric companies and other interested parties.
On April 17, 1997, the North Carolina General Assembly approved
legislation establishing a 23-member study commission to evaluate
the future of electric service in the state. The commission will
examine a wide range of issues related to the cost and delivery of
electric service, including the issue of customer choice of
electric providers. The commission will make an interim report to
the 1998 General Assembly and a final report in 1999. Also on
April 17, 1997, a bill was introduced in the North Carolina House
of Representatives calling for retail electric competition. The
bill would require that residential customers be able to choose
their provider by October 1, 1998, commercial customers by January
1, 1999, and industrial customers by July 1, 1999. The Company
cannot predict the outcome of these matters.
On February 6, 1997, representatives in the South Carolina
General Assembly introduced a bill calling for a transition to
full competition in the electric utility industry beginning in
1998. In addition, by letter dated May 6, 1997, the Speaker of the
South Carolina House of Representatives requested that the South
Carolina Public Service Commission prepare a proposal for the
deregulation and restructuring of electricity in South Carolina,
with a report date of January 31, 1998. The Company cannot
predict the outcome of these matters.
On April 8, 1997, a bill was introduced in Congress calling
for all customers to be able to choose their power suppliers by
January 1, 1999. The bill calls for a federal mandate of
deregulation, rather than a state-by-state approach. The Company
cannot predict the outcome of this matter.
<PAGE> 6
PART II. OTHER INFORMATION
___________________________
Item 1. Legal Proceedings
_________________________
Legal aspects of certain matters are set forth in Item 5 below.
Item 2. Changes in Securities )
)
)
)
Item 3. Defaults upon Senior Securities ) Not applicable for the quarter
) ended March 31, 1997.
)
)
Item 4. Submission of Matters to a Vote )
of Security Holders )
)
Item 5. Other Information
_________________________
1. (Reference is made to the Company's 1996 Form 10-K,
Competition and Franchises, paragraph 1.b.,
page 6.) With regard to the bills filed with the
North Carolina General Assembly (General Assembly)
calling for a study of the future of the electric
utility industry in North Carolina, on April 17,
1997, the General Assembly approved legislation
establishing a 23-member study commission. The
commission will present an interim report to the
General Assembly in 1998, and a final report in
1999. Also on April 17, 1997, a bill was
introduced in the North Carolina House of
Representatives calling for retail electric
competition by October 1, 1998 for residential
customers; by January 1, 1999 for commercial
customers; and by July 1, 1999 for industrial
customers.
By letter dated May 6, 1997, the Speaker of the
South Carolina House of Representatives requested
that the South Carolina Public Service Commission
prepare a proposal for the deregulation and
restructuring of electricity in South Carolina,
with a report date of January 31, 1998.
On April 8, 1997, a bill was introduced in
Congress calling for all customers to be able to
choose their power suppliers by January 1, 1999.
The bill calls for a federal mandate of
deregulation, rather than a state-by-state
approach.
The Company cannot predict the outcome of these matters.
2. (Reference is made to the Company's 1996 Form 10-K,
Other Matters, paragraph 1, page 24.) With
regard to the Independent Consultant's Safety
Inspection Report (Report) required to be filed
under Federal Energy Regulatory Commission (FERC)
Regulation 18 CFR Part 12, on February 27, 1997,
the Company received a letter from the FERC
pertaining to the Company's Report filed in
November 1994. The FERC submitted comments on the
Report and requested that further analysis be
conducted. The Company is in the process of
reviewing the FERC's comments and preparing its
response to the
<PAGE> 7
letter. The Company cannot predict the outcome of this matter.
3. (Reference is made to the Company's 1996 Form 10-K,
Other Matters, paragraph 7, page 26.) With
regard to the Company's wholly owned subsidiary,
CaroCapital, Inc. (CaroCapital), on May 6, 1997,
CaroCapital entered into a merger agreement
pursuant to which Knowledge Builders, Inc. (KBI),
will be merged into CaroCapital. KBI is an
energy-management software and control systems
company in which CaroCapital purchased a forty
percent (40%) equity interest in 1996. The merger
agreement provides that the remaining KBI stock
will be exchanged for shares of Common Stock of
the Company according to a market value formula.
The merger agreement provides for initial payments
totaling approximately $22 million, payable
primarily in unregistered restricted shares of the
Company's Common Stock. The merger agreement also
provides for other incentive payments that may be
earned by the KBI founders based on CaroCapital's
future results of operations. If earned, these
additional payments will be made primarily in
unregistered, restricted shares of the Company's
Common Stock (valued according to a market value
formula). The closing of the merger is subject to
certain regulatory approvals. The Company filed
applications for authority to issue additional
shares of Common Stock in connection with the
merger with the North Carolina Utilities
Commission (Docket No. E-2, Sub 711) and the South
Carolina Public Service Commission (Docket No.
97-170-E) on April 28, 1997 and April 29, 1997,
respectively. The Company cannot predict the
outcome of these matters.
Item 6. Exhibits and Reports on Form 8-K
________________________________________
(a) Exhibits
None.
(b) Reports on Form 8-K filed during or with respect
to the quarter:
Date of Report
(Earliest Event Reported) Date of Signature Items Reported
___________________________ _________________ ______________
NONE
<PAGE> 8
SIGNATURES
Pursuant to 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.
CAROLINA POWER & LIGHT COMPANY
(Registrant)
By /s/ Glenn E. Harder
Executive Vice President and
Chief Financial Officer
By /s/ Bonnie V. Hancock
Vice President and Controller
(and Principal Accounting Officer)
Date: May 13, 1997
<TABLE>
<CAPTION>
Carolina Power & Light Company
(ORGANIZED UNDER THE LAWS OF NORTH CAROLINA)
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(NOT AUDITED BY INDEPENDENT AUDITORS)
MARCH 31, 1997
STATEMENTS OF INCOME
Three Months Ended Twelve Months Ended
March 31 March 31
<S> <C> <C> <C> <C>
(In thousands except per share amounts) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------
Operating Revenues $ 716,084 $ 783,585 $ 2,928,214 $ 3,061,899
- ------------------------------------------------------------------------------- ---------------------------------
Operating Expenses
Fuel 133,268 137,566 510,752 534,107
Purchased power 81,619 105,989 388,184 422,270
Other operation and maintenance 155,963 169,400 716,703 739,599
Depreciation and amortization 118,872 92,478 413,321 366,730
Taxes other than on income 35,006 38,564 136,921 143,687
Income tax expense 61,029 77,095 253,698 274,903
Harris Plant deferred costs, net 7,565 8,065 26,216 29,588
------------------------------------------------------------------------------- ------------------------------
Total Operating Expenses 593,322 629,157 2,445,795 2,510,884
------------------------------------------------------------------------------- ------------------------------
Operating Income 122,762 154,428 482,419 551,015
------------------------------------------------------------------------------- ------------------------------
Other Income
Allowance for equity funds used during construction 61 1,035 (963) 3,472
Income tax credit 3,086 4,413 12,520 19,664
Harris Plant carrying costs 1,308 1,809 6,798 7,886
Interest income 1,669 1,134 4,598 7,226
Other income, net (Note 3) (1,992) 6,199 29,150 11,244
------------------------------------------------------------------------------- ------------------------------
Total Other Income 4,132 14,590 52,103 49,492
------------------------------------------------------------------------------- ------------------------------
Income Before Interest Charges 126,894 169,018 534,522 600,507
------------------------------------------------------------------------------- ------------------------------
Interest Charges
Long-term debt 40,710 44,676 168,655 185,480
Other interest charges 5,412 6,912 17,655 26,781
Allowance for borrowed funds used
during construction (1,490) (916) (6,981) (4,670)
------------------------------------------------------------------------------- ------------------------------
Net Interest Charges 44,632 50,672 179,329 207,591
------------------------------------------------------------------------------- ------------------------------
Net Income 82,262 118,346 355,193 392,916
Preferred Stock Dividend Requirements (2,402) (2,402) (9,609) (9,609)
------------------------------------------------------------------------------- ------------------------------
Earnings for Common Stock $ 79,860 $ 115,944 $ 345,584 $ 383,307
==============================================================================================================
Average Common Shares Outstanding 143,495 143,625 143,589 145,329
Earnings per Common Share $ 0.56 $ 0.81 $ 2.41 $ 2.64
Dividends Declared per Common Share $ 0.470 $ 0.455 $ 1.850 $ 1.790
............................................................................... ..............................
See Supplemental Data and Notes to Consolidated Interim Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Carolina Power & Light Company
BALANCE SHEETS March 31 December 31
(In thousands) 1997 1996 1996
---------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Electric Utility Plant
Electric utility plant in service $ 9,856,889 $ 9,520,522 $ 9,783,442
Accumulated depreciation (3,883,684) (3,566,838) (3,796,645)
---------------------------------------------------------------------------------------------------------
Electric utility plant in service, net 5,973,205 5,953,684 5,986,797
Held for future use 14,176 13,737 12,127
Construction work in progress 177,566 173,113 196,623
Nuclear fuel, net of amortization 194,501 182,402 204,372
---------------------------------------------------------------------------------------------------------
Total Electric Utility Plant, Net 6,359,448 6,322,936 6,399,919
---------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 24,901 5,602 10,941
Accounts receivable 312,917 338,923 384,318
Fuel 68,242 43,914 60,369
Materials and supplies 126,813 123,014 122,809
Prepayments 67,756 69,682 65,794
Other current assets 29,226 29,213 27,808
---------------------------------------------------------------------------------------------------------
Total Current Assets 629,855 610,348 672,039
---------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
Income taxes recoverable through future rates 370,444 388,009 384,336
Abandonment costs (Note 3) 59,161 53,657 65,863
Harris Plant deferred costs 77,139 101,737 83,397
Unamortized debt expense 64,581 66,639 69,956
Miscellaneous other property and investments 501,762 490,864 489,334
Other assets and deferred debits 206,245 171,782 204,357
---------------------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 1,279,332 1,272,688 1,297,243
---------------------------------------------------------------------------------------------------------
Total Assets $ 8,268,635 $ 8,205,972 $ 8,369,201
=========================================================================================================
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock equity $ 2,716,166 $ 2,640,027 $ 2,690,454
Preferred stock - redemption not required 143,801 143,801 143,801
Long-term debt, net 2,524,942 2,552,415 2,525,607
---------------------------------------------------------------------------------------------------------
Total Capitalization 5,384,909 5,336,243 5,359,862
---------------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt 43,436 268,366 103,345
Notes payable 149,200 3,640 64,885
Accounts payable 150,097 137,997 375,216
Interest accrued 32,020 43,612 39,436
Dividends declared 73,969 71,525 73,469
Deferred fuel credit 13,953 16,086 4,339
Other current liabilities 157,903 144,304 74,668
---------------------------------------------------------------------------------------------------------
Total Current Liabilities 620,578 685,530 735,358
---------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 1,799,860 1,728,933 1,827,693
Accumulated deferred investment tax credits 229,703 240,095 232,262
Other liabilities and deferred credits 233,585 215,171 214,026
---------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 2,263,148 2,184,199 2,273,981
---------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 4)
Total Capitalization and Liabilities $ 8,268,635 $ 8,205,972 $ 8,369,201
=========================================================================================================
SCHEDULES OF COMMON STOCK EQUITY
(In thousands)
Common stock $ 1,371,548 $ 1,387,041 $ 1,366,100
Unearned ESOP common stock (170,688) (182,140) (178,514)
Capital stock issuance expense (790) (790) (790)
Retained earnings 1,516,096 1,435,916 1,503,658
---------------------------------------------------------------------------------------------------------
Total Common Stock Equity $ 2,716,166 $ 2,640,027 $ 2,690,454
=========================================================================================================
.........................................................................................................
See Supplemental Data and Notes to Consolidated Interim Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Carolina Power & Light Company
STATEMENTS OF CASH FLOWS
(In thousands) Three Months Ended Twelve Months Ended
March 31 March 31
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 82,262 $ 118,346 $ 355,193 $ 392,916
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 140,358 112,933 473,933 444,534
Harris Plant deferred costs 6,258 6,256 19,418 21,702
Deferred income taxes (25,819) 14,626 90,374 115,886
Investment tax credit (2,558) (2,611) (10,392) (9,402)
Allowance for equity funds used during construction (61) (1,035) 963 (3,472)
Deferred fuel cost (credit) 9,614 (11,409) (2,134) (34,733)
Net increase in receivables, inventories and prepaid expenses (16,813) (15,575) (66,031) (50,032)
Net decrease in payables and accrued expenses (23,345) (18,615) (59) (41,831)
Miscellaneous 34,057 5,744 93,165 29,394
- --------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 203,953 208,660 954,430 864,962
- --------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Gross property additions (92,079) (88,478) (372,909) (282,950)
Nuclear fuel additions (21,616) (26,073) (82,808) (87,551)
Contributions to external decommissioning trust (10,298) (10,298) (30,683) (29,809)
Contributions to retiree benefit trusts (21,096) (24,700) (21,096) (24,700)
Allowance for equity funds used during construction 61 1,035 (963) 3,472
Miscellaneous (1,190) (13,238) (15,998) (41,266)
- --------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (146,218) (161,752) (524,457) (462,804)
- --------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Proceeds from issuance of long-term debt -- 265,557 84,443 386,539
Net increase (decrease) in short-term notes payable 86,976 3,640 74,478 (18,117)
Retirement of long-term debt (61,427) (255,504) (273,733) (406,603)
Purchase of Company common stock -- (1,920) (23,288) (130,181)
Dividends paid on common and preferred stock (69,324) (67,568) (272,574) (268,052)
- --------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (43,775) (55,795) (410,674) (436,414)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 13,960 (8,887) 19,299 (34,256)
Cash and Cash Equivalents at Beginning of the Period 10,941 14,489 5,602 39,858
- --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of the Period $ 24,901 $ 5,602 $ 24,901 $ 5,602
================================================================================================================================
Supplemental Disclosures of Cash Flow Information
Cash paid during the period - interest $ 53,101 $ 55,202 $ 192,290 $ 203,804
income taxes $ 804 $ 655 $ 141,499 $ 176,207
................................................................................................................................
See Supplemental Data and Notes to Interim Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Carolina Power & Light Company
SUPPLEMENTAL DATA Three Months Ended Twelve Months Ended
March 31 March 31
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (in thousands)
Residential $ 248,383 $ 284,278 $ 956,256 $ 1,002,034
Commercial 149,639 151,578 625,941 628,831
Industrial 170,892 163,244 729,236 732,276
Government and municipal 19,438 20,059 74,771 79,616
Power Agency contract requirements 9,119 25,452 80,461 102,585
NCEMC 54,220 70,137 218,736 285,601
Other wholesale 25,321 21,905 90,879 83,912
Other utilities 25,579 33,697 96,959 98,303
Miscellaneous revenue 13,493 13,235 54,975 48,741
- -----------------------------------------------------------------------------------------------------------------------
Total Operating Revenues $ 716,084 $ 783,585 $ 2,928,214 $ 3,061,899
=======================================================================================================================
Energy Sales (millions of kWh)
Residential 3,268 3,808 12,070 12,619
Commercial 2,287 2,322 9,580 9,506
Industrial 3,515 3,334 14,637 14,378
Government and municipal 325 336 1,253 1,323
Power Agency contract requirements 379 770 2,132 2,632
NCEMC 946 1,091 3,803 5,161
Other wholesale 568 480 2,101 1,935
Other utilities 1,160 1,572 4,487 4,231
- -----------------------------------------------------------------------------------------------------------------------
Total Energy Sales 12,448 13,713 50,063 51,785
=======================================================================================================================
Energy Supply (millions of kWh)
Generated - coal 5,410 7,143 23,126 26,097
nuclear 5,873 4,679 21,478 18,780
hydro 318 312 888 838
combustion turbines 2 14 56 72
Purchased 1,214 1,896 6,611 7,819
- -----------------------------------------------------------------------------------------------------------------------
Total Energy Supply
(Company Share) 12,817 14,044 52,159 53,606
=======================================================================================================================
Detail of Income Taxes (in thousands)
Included in Operating Expenses
Income tax expense (credit)- current $ 88,707 $ 66,104 $ 184,553 $ 174,216
Income tax expense (credit)- deferred (25,120) 13,602 79,537 110,090
Income tax expense (credit)- investment
tax credit adjustments (2,558) (2,611) (10,392) (9,403)
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 61,029 77,095 253,698 274,903
- -----------------------------------------------------------------------------------------------------------------------
Harris Plant deferred costs -
investment tax credit adjustments (60) (74) (272) (297)
- ------------------------------------------------------------------------------------------------------------------------
Total Included in Operating Expenses 60,969 77,021 253,426 274,606
- ------------------------------------------------------------------------------------------------------------------------
Included in Other Income
Income tax expense (credit) - current (2,387) (5,437) (23,357) (25,460)
Income tax expense (credit)- deferred (699) 1,024 10,837 5,796
- ------------------------------------------------------------------------------------------------------------------------
Total Included in Other Income (3,086) (4,413) (12,520) (19,664)
- ------------------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 57,883 $ 72,608 $ 240,906 $ 254,942
========================================================================================================================
FINANCIAL STATISTICS
Ratio of earnings to fixed charges 3.95 3.84
Return on average common stock equity 12.91 % 14.58 %
Book value per common share $ 18.91 $ 18.36
Capitalization ratios
Common stock equity 50.44 % 49.47 %
Preferred stock - redemption not required 2.67 2.70
Long-term debt, net 46.89 47.83
- -----------------------------------------------------------------------------------------------------------------------
Total 100.00 % 100.00 %
=======================================================================================================================
.......................................................................................................................
See Notes to Consolidated Interim Financial Statements.
</TABLE>
Carolina Power & Light Company
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
_____________________
These consolidated interim financial statements are prepared
in conformity with the accounting principles reflected
in the financial statements included in the Company's 1996
Annual Report to Shareholders and the 1996 Annual Report on
Form 10-K. Due to temperature variations between seasons of
the year and the timing of outages of electric generating units,
especially nuclear-fueled units, the amounts reported in the Statements
of Income for periods of less than twelve months are not
necessarily indicative of amounts expected for the year.
The amounts are unaudited but, in the opinion of
management, reflect all adjustments necessary to fairly present
the Company's financial position and results of operations for the
interim periods. Certain amounts for 1996 have been reclassified
to conform to the 1997 presentation, with no effect on previously
reported net income or common stock equity.
In preparing financial statements that conform with
generally accepted accounting principles, management must
make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial
statements and amounts of revenues and expenses reflected
during the reporting period. Actual results could differ
from those estimates.
2. NUCLEAR DECOMMISSIONING
_______________________
In the Company's retail jurisdictions, provisions for
nuclear decommissioning costs are approved by the North
Carolina Utilities Commission (NCUC) and the South Carolina
Public Service Commission (SCPSC) and are based on site-
specific estimates that include the costs for removal of
all radioactive and other structures at the site. In
the wholesale jurisdiction, the provisions for nuclear
decommissioning costs are based on amounts agreed upon in
applicable rate agreements. Based on the site specific
estimates discussed below, and using an assumed aftertax
earnings rate of 8.5% and an assumed cost escalation rate of
4%, current levels of rate recovery for nuclear
decommissioning costs are adequate to provide for
decommissioning of the Company's nuclear facilities.
The Company's most recent site-specific estimates of
decommissioning costs were developed in 1993, using 1993
cost factors, and are based on prompt dismantlement
decommissioning, which reflects the cost of removal of all
radioactive and other structures currently at the site,
with such removal occurring shortly after operating license
expiration. These estimates, in 1993 dollars, are $257.7
million for Robinson Unit No. 2, $235.4 million for
Brunswick Unit No. 1, $221.4 million for Brunswick Unit No. 2
and $284.3 million for the Harris Plant. The estimates are
subject to change based on a variety of factors including,
but not limited to, cost escalation, changes in
technology applicable to nuclear decommissioning, and changes
in federal, state or local regulations. The cost
estimates exclude the portion attributable to North
Carolina Eastern Municipal Power Agency, which holds an
undivided ownership interest in the Brunswick and Harris
nuclear generating facilities. Operating licenses for the
Company's nuclear units expire in the year 2010 for Robinson
Unit No. 2, 2016 for Brunswick Unit No. 1, 2014 for Brunswick
Unit No. 2 and 2026 for the Harris Plant.
The Financial Accounting Standards Board (the Board) has
reached several tentative conclusions with respect to its
project regarding accounting practices related to closure and removal
of long-lived assets. The primary conclusions as they relate
to nuclear decommissioning are: 1) the cost of
decommissioning should be accounted for as a liability
and accrued as the obligation is incurred; 2)
recognition of a liability for decommissioning results in
recognition of an increase to the cost of the plant; 3) the
decommissioning liability should be measured based on
discounted cash flows using a risk-free rate; and 4)
decommissioning trust funds should not be offset against
the decommissioning liability. It is uncertain what impacts
the final statement may ultimately have on the Company's
accounting for nuclear decommissioning and other closure and
removal costs. The Board has announced that the effective
date would be no earlier than 1998.
3. RETAIL RATE MATTERS
___________________
A petition was filed in July 1996 by the Carolina
Industrial Group for Fair Utility Rates (CIGFUR) with the
NCUC requesting that the NCUC conduct an investigation of
the Company's base rates or treat its petition as a
complaint against the Company. The petition alleged that the
Company's return on equity (which was authorized by the
NCUC in the Company's last general rate proceeding in 1988)
and earnings are too high. In December 1996, the NCUC
issued an order denying CIGFUR's petition and stating that
it tentatively found no reasonable grounds to proceed with
CIGFUR's petition as a complaint. In January 1997, CIGFUR
filed its Comments and Motion for Reconsideration to which
the Company responded. On February 6, 1997, the NCUC issued
an order denying CIGFUR's Motion for Reconsideration. On
February 25, 1997, CIGFUR filed a Notice of Appeal of the
NCUC's decision with the North Carolina Court of Appeals.
The Company cannot predict the outcome of this matter.
Additionally, in December 1996, the Company filed a proposal
with the SCPSC to accelerate amortization of certain
regulatory assets, including plant abandonment costs related
to the Harris Plant, over a three-year period beginning
January 1, 1997. This accelerated amortization will reduce
income by approximately $13 million, after tax, in each of
the three years. In anticipation of approval of the proposal
in 1997, the unamortized balance of plant abandonment costs
related to the Harris Plant was adjusted in 1996 to reflect
the present value impact of the shorter recovery period.
This adjustment resulted in an increase in income of
approximately $14 million, after tax, in the fourth quarter
of 1996. On March 20, 1997, the SCPSC approved the
Company's accelerated amortization proposal.
4. COMMITMENTS AND CONTINGENCIES
_____________________________
Contingencies existing as of the date of these statements
are described below. No significant changes have occurred
since December 31, 1996, with respect to the commitments
discussed in Note 11 of the financial statements included
in the Company's 1996 Annual Report to Shareholders.
A. Applicability of SFAS-71
As a regulated entity, the Company is subject to the
provisions of Statement of Financial Accounting Standards
No.71, "Accounting for the Effects of Certain Types of
Regulation," (SFAS-71). Accordingly, the Company records
certain assets and liabilities resulting from the effects of
the ratemaking process, which would not be recorded under
generally accepted accounting principles for non-
regulated entities. The continued applicability of
SFAS-71 will require further evaluation as competitive
forces, deregulation and restructuring take effect in the
electric utility industry. In the event the Company
discontinued the application of SFAS-71, amounts recorded
under SFAS-71 as regulatory assets and liabilities would be
eliminated. At March 31, 1997, the Company's regulatory assets
totaled $663.0 million. Additionally, the factors discussed
above could result in an impairment of electric utility
plant assets as determined pursuant to Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for LongLived Assets to Be Disposed
Of."
B. Claims and Uncertainties
1) The Company is subject to federal, state and local
regulations addressing air and water quality, hazardous and
solid waste management and other environmental matters.
Various organic materials associated with the production
of manufactured gas, generally referred to as coal tar, are
regulated under various federal and state laws. There
are several manufactured gas plant (MGP) sites to which the Company
and certain entities that were later merged into the Company had some
connection. In this regard, the Company, along with other entities
alleged to be former owners and operators of MGP sites in North Carolina,
is participating in a cooperative effort with the North Carolina
Department of Environment, Health and Natural Resources, Division of
Waste Management (DWM) to establish a uniform framework for addressing
these MGP sites. The investigation and remediation of specific MGP
sites will be addressed pursuant to one or more Administrative Orders
on Consent between the DWM and individual potentially responsible party
or parties. The Company continues to investigate the identities of
parties connected to individual MGP sites, the relative relationships of
the Company and other parties to those sites and the degree to which the
Company will undertake shared voluntary efforts with others at
individual sites.
The Company has been notified by regulators of its involvement or
potential involvement in several sites, other than MGP sites,
that require remedial action. Although the Company cannot predict
the outcome of these matters, it does not expect costs associated
with these sites to be material to the results of operations of
the Company.
The Company carries a liability for the estimated costs
associated with certain remedial activities at several MGP and
other sites. This liability is not material to the financial
position of the Company. Due to uncertainty regarding the
extent of remedial action that will be required and questions of
liability, the cost of remedial activities at certain MGP sites
is not currently determinable. The Company cannot predict the
outcome of these matters.
2) As required under the Nuclear Waste Policy Act of 1982, the
Company entered into a contract with the U. S. Department of
Energy (DOE) under which the DOE agreed to dispose of the
Company's spent nuclear fuel. The Company cannot predict whether
the DOE will be able to perform its contractual obligations and
provide interim storage or permanent disposal repositories for spent
nuclear fuel and/or high-level radioactive waste materials on a timely
basis.
With certain modifications, the Company's spent fuel storage
facilities are sufficient to provide storage space for spent fuel
generated on the Company's system through the expiration of the
current operating licenses for all of the Company's nuclear
generating units. Subsequent to the expiration of these licenses,
dry storage may be necessary.
3) In the opinion of management, liabilities, if any, arising
under other pending claims would not have a material effect on
the financial position, results of operations or cash flows of
the Company.
5. SUBSEQUENT EVENTS
_________________
Events occurring subsequent to the date of these financial
statements are described below.
A. Purchase of Knowledge Builders, Inc. (KBI)
On May 6, 1997, CaroCapital, Inc. (CaroCapital), a wholly owned
subsidiary of the Company, entered into a merger agreement
pursuant to which KBI will be merged into CaroCapital. KBI is an
energy-management software and control systems company in which
CaroCapital purchased a 40% equity interest in 1996. The merger
agreement provides that the remaining KBI stock will be
exchanged for shares of common stock of the Company according to a
market value formula. The merger agreement provides for
initial payments totaling approximately $22 million, payable
primarily in unregistered restricted shares of the Company's
common stock. The merger agreement also provides for other
incentive payments based on CaroCapital's future results of
operations. If earned, these additional payments will be made
primarily in unregistered restricted shares of the Company's
common stock. The closing of the merger is subject to certain
regulatory approvals. The Company cannot predict the outcome of
this matter.
B. Preferred Stock Redemption
On May 7, 1997, the Company announced plans to redeem on July 1,
1997, all 500,000 shares of $7.72 Serial Preferred Stock and all
350,000 shares of $7.95 Serial Preferred Stock, both at a
redemption price of $101 per share. The redemptions will be
funded with additional commercial paper borrowings and/or
internally generated funds.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM (CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF MARCH 31,
1997) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000017797
<NAME> CAROLINA POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $6,359,448
<OTHER-PROPERTY-AND-INVEST> $501,762
<TOTAL-CURRENT-ASSETS> $629,855
<TOTAL-DEFERRED-CHARGES> $571,325
<OTHER-ASSETS> $206,245
<TOTAL-ASSETS> $8,268,635
<COMMON> $1,200,860
<CAPITAL-SURPLUS-PAID-IN> ($790)
<RETAINED-EARNINGS> $1,516,096
<TOTAL-COMMON-STOCKHOLDERS-EQ> $2,716,166
$0
$143,801
<LONG-TERM-DEBT-NET> $2,524,942
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $43,436
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $2,840,290
<TOT-CAPITALIZATION-AND-LIAB> $8,268,635
<GROSS-OPERATING-REVENUE> $716,084
<INCOME-TAX-EXPENSE> $61,029
<OTHER-OPERATING-EXPENSES> $532,293
<TOTAL-OPERATING-EXPENSES> $593,322
<OPERATING-INCOME-LOSS> $122,762
<OTHER-INCOME-NET> $4,132
<INCOME-BEFORE-INTEREST-EXPEN> $126,894
<TOTAL-INTEREST-EXPENSE> $44,632
<NET-INCOME> $82,262
$2,402
<EARNINGS-AVAILABLE-FOR-COMM> $79,860
<COMMON-STOCK-DIVIDENDS> $67,422
<TOTAL-INTEREST-ON-BONDS> $40,710
<CASH-FLOW-OPERATIONS> $203,953
<EPS-PRIMARY> $0.56
<EPS-DILUTED> $0.56
</TABLE>
