<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<CAPTION>
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
<S> <C> <C>
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
</TABLE>
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 September 30, 1997: 181,905,085 shares
As of September 30, 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.
<PAGE>
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, the
Company) are hereby filing cautionary statements identifying important
factors that could cause the Company's actual results to differ materially
from those projected in forward-looking statements (as such term is
defined in the Reform Act) of the Company made by or on behalf of the
Company which are made in 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 costs, 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.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
OPERATING REVENUES ........................................ $1,858,970 $1,769,599 $4,891,309 $4,601,392
OPERATING EXPENSES:
Fuel, purchased power and interchange ................... 673,564 628,464 1,777,468 1,578,293
Other operations and maintenance......................... 290,453 264,239 857,894 848,849
Depreciation and amortization ........................... 266,236 257,761 796,591 757,341
Taxes other than income taxes ........................... 164,458 160,002 448,385 435,115
Total operating expenses .............................. 1,394,711 1,310,466 3,880,338 3,619,598
OPERATING INCOME .......................................... 464,259 459,133 1,010,971 981,794
OTHER INCOME (DEDUCTIONS):
Interest charges ........................................ (69,540) (65,525) (214,856) (202,642)
Preferred stock dividends - FPL ......................... (5,019) (5,767) (15,069) (17,966)
Other - net ............................................. 16,702 4,421 28,928 (5,443)
Total other deductions - net .......................... (57,857) (66,871) (200,997) (226,051)
INCOME BEFORE INCOME TAXES ................................ 406,402 392,262 809,974 755,743
INCOME TAXES .............................................. 144,037 142,146 282,157 261,602
NET INCOME ................................................ $ 262,365 $ 250,116 $ 527,817 $ 494,141
Earnings per share of common stock ........................ $ 1.52 $ 1.44 $ 3.05 $ 2.84
Dividends per share of common stock ....................... $ 0.48 $ 0.46 $ 1.44 $ 1.38
Average number of common shares outstanding ............... 173,041 173,850 173,101 174,217
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 12 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.
<PAGE>
FPL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant and other property - at original cost,
including nuclear fuel and construction work in progress ....................... $17,633,855 $17,033,623
Less accumulated depreciation and amortization ................................... (8,241,419) (7,649,734)
Total property, plant and equipment - net ...................................... 9,392,436 9,383,889
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 460,277 195,932
Customer receivables, net of allowances of $12,706 and $12,474, respectively ..... 624,347 461,501
Materials, supplies and fossil fuel stock - at average cost ...................... 277,676 268,186
Other ............................................................................ 208,280 247,912
Total current assets ........................................................... 1,570,580 1,173,531
OTHER ASSETS:
Special use funds of FPL ......................................................... 951,064 805,819
Other investments ................................................................ 456,069 326,855
Unamortized debt reacquisition costs of FPL ...................................... 187,391 282,756
Other ............................................................................ 322,856 246,473
Total other assets ............................................................. 1,917,380 1,661,903
TOTAL ASSETS ....................................................................... $12,880,396 $12,219,323
CAPITALIZATION:
Common shareholders' equity ...................................................... $ 4,845,165 $ 4,592,132
Preferred stock of FPL without sinking fund requirements ......................... 226,250 289,580
Preferred stock of FPL with sinking fund requirements ............................ - 42,000
Long-term debt ................................................................... 3,078,934 3,144,313
Total capitalization ........................................................... 8,150,349 8,068,025
CURRENT LIABILITIES:
Accounts payable ................................................................. 386,678 307,836
Debt and preferred stock due within one year ..................................... 345,933 154,600
Accrued interest, taxes and other ................................................ 1,140,240 812,028
Total current liabilities ...................................................... 1,872,851 1,274,464
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,430,725 1,530,538
Unamortized regulatory and investment tax credits ................................ 407,478 379,279
Other ............................................................................ 1,018,993 967,017
Total other liabilities and deferred credits ................................... 2,857,196 2,876,834
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,880,396 $12,219,323
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 12 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
<PAGE>
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................................... $ 527,817 $ 494,141
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .................................................... 796,591 757,341
Other - net ...................................................................... 172,677 63,707
Net cash provided by operating activities ...................................... 1,497,085 1,315,189
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................................... (389,422) (343,862)
Investments in energy-related projects ............................................. (211,885) (33,877)
Other - net ........................................................................ 56,002 (74,907)
Net cash used in investing activities .......................................... (545,305) (452,646)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt ......................................................... 30,181 -
Retirement of long-term debt and preferred stock ................................... (428,041) (333,292)
Increase (decrease) in short-term debt ............................................. 375 (178,500)
Repurchase of common stock ......................................................... (40,846) (65,746)
Dividends on common stock .......................................................... (249,104) (240,487)
Other - net ........................................................................ - 1,020
Net cash used in financing activities .......................................... (687,435) (817,005)
Net increase in cash and cash equivalents ............................................ 264,345 45,538
Cash and cash equivalents at beginning of period ..................................... 195,932 46,177
Cash and cash equivalents at end of period ........................................... $ 460,277 $ 91,715
Supplemental disclosures of cash flow information:
Cash paid for interest ............................................................. $ 212,152 $ 202,586
Cash paid for income taxes ......................................................... $ 197,729 $ 208,200
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations ............................................. $ 48,548 $ 59,392
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 12 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
<PAGE>
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
OPERATING REVENUES ........................................ $1,819,493 $1,760,939 $4,759,380 $4,556,678
OPERATING EXPENSES:
Fuel, purchased power and interchange ................... 660,739 628,464 1,736,899 1,578,293
Other operations and maintenance ........................ 271,760 256,369 796,709 806,939
Depreciation and amortization ........................... 262,213 256,395 780,527 753,188
Income taxes ............................................ 149,470 142,948 299,162 281,058
Taxes other than income taxes ........................... 164,232 159,837 447,227 434,713
Total operating expenses .............................. 1,508,414 1,444,013 4,060,524 3,854,191
OPERATING INCOME .......................................... 311,079 316,926 698,856 702,487
OTHER INCOME (DEDUCTIONS):
Interest charges ........................................ (56,550) (62,217) (173,087) (186,150)
Other - net ............................................. 1,755 (1,682) 4,298 2,200
Total other deductions - net .......................... (54,795) (63,899) (168,789) (183,950)
NET INCOME ................................................ 256,284 253,027 530,067 518,537
PREFERRED STOCK DIVIDENDS ................................. 5,019 5,767 15,069 17,966
NET INCOME AVAILABLE TO FPL GROUP ......................... $ 251,265 $ 247,260 $ 514,998 $ 500,571
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 12 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
<PAGE>
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
<S> <C> <C>
ELECTRIC UTILITY PLANT:
At original cost, including nuclear fuel and construction work in progress ....... $16,962,778 $16,808,792
Less accumulated depreciation and amortization ................................... (8,135,107) (7,610,786)
Electric utility plant - net ................................................... 8,827,671 9,198,006
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 298,467 78,417
Customer receivables, net of allowances of $12,557 and $12,176, respectively ..... 601,877 460,120
Materials, supplies and fossil fuel stock - at average cost ...................... 223,983 247,597
Other ............................................................................ 188,555 225,153
Total current assets ........................................................... 1,312,882 1,011,287
OTHER ASSETS:
Special use funds ................................................................ 951,064 805,819
Unamortized debt reacquisition costs ............................................. 187,391 282,756
Other ............................................................................ 258,827 233,405
Total other assets ............................................................. 1,397,282 1,321,980
TOTAL ASSETS ....................................................................... $11,537,835 $11,531,273
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 4,734,927 $ 4,666,941
Preferred stock without sinking fund requirements ................................ 226,250 289,580
Preferred stock with sinking fund requirements ................................... - 42,000
Long-term debt ................................................................... 2,514,382 2,981,261
Total capitalization ........................................................... 7,475,559 7,979,782
CURRENT LIABILITIES:
Accounts payable ................................................................. 358,303 299,026
Debt and preferred stock due within one year ..................................... 306,197 4,040
Accrued interest, taxes and other ................................................ 1,047,679 824,945
Total current liabilities ...................................................... 1,712,179 1,128,011
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,033,352 1,146,680
Unamortized regulatory and investment tax credits ................................ 407,478 379,279
Other ............................................................................ 909,267 897,521
Total other liabilities and deferred credits ................................... 2,350,097 2,423,480
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,537,835 $11,531,273
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 12 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
<PAGE>
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................................... $ 530,067 $ 518,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .................................................... 780,527 753,188
Other - net ...................................................................... 57,351 99,844
Net cash provided by operating activities ...................................... 1,367,945 1,371,569
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................................... (354,678) (335,523)
Other - net ........................................................................ (64,655) (136,672)
Net cash used in investing activities .......................................... (419,333) (472,195)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt and preferred stock ................................... (268,250) (332,669)
Decrease in commercial paper ....................................................... - (178,500)
Dividends .......................................................................... (460,312) (468,975)
Capital contributions from FPL Group ............................................... - 145,000
Other - net ........................................................................ - 997
Net cash used in financing activities .......................................... (728,562) (834,147)
Net increase in cash and cash equivalents ............................................ 220,050 65,227
Cash and cash equivalents at beginning of period ..................................... 78,417 412
Cash and cash equivalents at end of period ........................................... $ 298,467 $ 65,639
Supplemental disclosures of cash flow information:
Cash paid for interest ............................................................. $ 170,649 $ 186,967
Cash paid for income taxes ......................................................... $ 361,268 $ 161,516
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations ............................................. $ 48,548 $ 59,392
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Pages 9 through 12 herein and
the Notes to Consolidated Financial Statements appearing in the 1996
Form 10-K for FPL Group and FPL.
<PAGE>
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 September 30, 1997 and December 31, 1996,
the results of operations for the three and nine months ended
September 30, 1997 and 1996 and cash flows for the nine months
ended September 30, 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 base revenues achieved
compared to a fixed amount. The decision was subject to any third party
request for hearings. Such a request was filed, and hearings regarding
the extension are scheduled to take place in November 1997. The
hearings will not address amounts recorded prior to January 1, 1998.
For a discussion of amounts recorded under the special amortization
program during the three and nine months ended September 30, 1997
and 1996, see Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations.
2. Capitalization
FPL Group Common Stock - FPL Group's board of directors authorized
the repurchase of up to 10 million shares of common stock commencing
on April 1, 1997 under a new share repurchase program. During the
nine months ended September 30, 1997, FPL Group repurchased
530,800 shares of common stock under the new program, of which
184,300 were repurchased during the third quarter of 1997. A total of
8.1 million shares were repurchased under a similar share repurchase
program that began in 1994 and was terminated in March 1997, which
included 371,500 shares repurchased during the first quarter of 1997.
Preferred Stock - In March 1997, FPL redeemed all 2,533,188
outstanding shares of its $2.00 No Par Value Preferred Stock, 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. In September 1997, FPL
redeemed the remaining 380,000 shares outstanding of 6.84% Preferred
Stock, Series Q, $100 Par Value. There are no remaining preferred
stock sinking fund requirements.
Long-Term Debt - In March 1997, FPL redeemed all $61,670,300 face
amount of the outstanding 8.75% Quarterly Income Debt Securities
(Subordinated Deferrable Interest Debentures) due 2025. In April and
May 1997, FPL purchased on the open market and retired approximately
$66 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%. In September 1997, FPL
redeemed all $2 million of the 5.90% installment purchase and security
contracts due 2007. Also in September 1997, FPL redeemed
approximately $32 million principal amount of secured medium-term
notes, 8.20% series due 2002.
In October 1997, FPL redeemed approximately $126 million principal
amount of first mortgage bonds, 8 1/2% series due 2022. Also in
October 1997, FPL called for redemption, in December 1997,
approximately $99 million principal amount of secured medium-term
notes, 8% series due 2022.
3. Commitments and Contingencies
Commitments - FPL has made commitments in connection with a portion
of its projected capital expenditures. Capital expenditures for the
construction or acquisition of additional facilities and equipment to meet
customer demand are estimated to be $1.6 billion for 1997 through
1999. Included in this three-year forecast are capital expenditures for
1997 of approximately $590 million, of which $355 million had been
spent through September 30, 1997. FPL Group Capital Inc (FPL Group
Capital) and its subsidiaries, primarily ESI Energy, Inc. (ESI), have
guaranteed approximately $144 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 nuclear 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 $72 million in retrospective premiums.
FPL also participates in a program that provides $200 million of tort
liability coverage industry wide 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 $244 million at
September 30, 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 that 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
appealed the denial. In September 1997, Florida's Power Plant Siting
Board remanded selected issues for hearing before an administrative law
judge. Hearings are scheduled to take place in January 1998.
The required capacity and minimum payments through 2001 under these
contracts are estimated to be as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
(Millions of Dollars)
<S> <C> <C> <C> <C> <C>
Capacity payments:
JEA and Southern Companies ............................................... $210 $210 $210 $210 $210
Qualifying facilities (1) ................................................ $340 $350 $360 $370 $380
Minimum payments, at projected prices:
Natural gas, including transportation .................................... $360 $120 $120 $120 $120
Orimulsion (2) ........................................................... - - $140 $140 $140
Coal ..................................................................... $ 50 $ 50 $ 40 $ 40 $ 30
(1) Includes approximately $35 million, $35 million, $35 million, $40 million and $40 million, respectively, for capacity
payments associated with two projects that are currently in dispute. These capacity payments are subject to the outcome of
the related litigation.
(2) All of FPL's Orimulsion-related fuel supply contract obligations are subject to obtaining the required regulatory approvals.
</TABLE>
Capacity, energy and fuel charges under these contracts were as
follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1997 Charges 1996 Charges 1997 Charges 1996 Charges
Energy/ Energy/ Energy/ Energy/
Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1)
(Millions of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JEA and Southern Companies .. $51(2) $ 36 $51(2) $ 45 $153(2) $109 $143(2) $112
Qualifying facilities........ $77(3) $ 40 $70(3) $ 34 $225(3) $100 $209(3) $ 96
Natural gas ................. - $129 - $131 - $333 - $314
Coal ........................ - $ 13 - $ 14 - $ 40 - $ 37
(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.
</TABLE>
Litigation - Paul H. Wheat has filed a derivative shareholder complaint
against the present directors of FPL Group (excluding Alexander W.
Dreyfoos Jr.), two former directors and several present and former
officers of FPL Group and FPL. The complaint was filed in August 1997
and alleges defendants grossly mismanaged FPL's nuclear power plants
and are planning to engage in foreign business ventures. No claims for
damages are asserted against FPL Group. The complaint asks that the
defendants return the compensation they received during the time they
allegedly committed the acts complained of and pay FPL Group the
amounts by which FPL Group was allegedly damaged; that FPL Group's
board of directors be dismissed and a conservator appointed; and that
plaintiff's counsel be awarded attorneys' fees. Mr. Wheat's principal
legal counsel is Greenfield & Rifkin LLP, the current law firm of Richard
Greenfield. Mr. Greenfield has previously been suspended from
practicing law because he was found guilty of defrauding the courts.
Defendants have filed a motion to dismiss the complaint for failure to
state a claim upon which relief can be granted and, among other things,
because Mr. Greenfield is generally unfit to represent shareholders in
any representative action.
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 to which they are parties 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 and
included in FPL Group's condensed consolidated balance sheets.
Operating revenues of FPL Group Capital for the nine months ended
September 30, 1997 and 1996 were approximately $132 million and $45
million, respectively. For the same period, operating expenses were
approximately $119 million and $45 million. Net income for the nine
months ended September 30, 1997 and 1996 was approximately $26
million and $11 million, respectively.
At September 30, 1997, FPL Group Capital had current assets of
approximately $201 million, noncurrent assets of approximately $1.418
billion, current liabilities of approximately $254 million and noncurrent
liabilities of approximately $1.015 billion. 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 in the first quarter of 1997 increased total assets and
liabilities by approximately $450 million. The partnership is an exempt
wholesale generator that owns and operates a 663 mw electric
generating unit.
<PAGE>
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 and nine months ended September 30, 1997
benefitted from FPL's growing customer base and lower interest and
preferred stock dividends at FPL, partly offset by higher depreciation
expense. FPL's other operations and maintenance (O&M) expenses
increased slightly during the quarter, but were lower for the nine months
ended September 30, 1997. FPL Group s other operations, mainly ESI,
also contributed to the improved financial results for the quarter and
year-to-date periods. Certain fluctuations resulting from FPL's
operations, primarily interest expense, 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. The partnership is an exempt wholesale generator
that owns and operates a 663 mw electric generating unit.
FPL's revenues from base rates for the three and nine months ended
September 30, 1997 increased to $1.02 billion and $2.67 billion,
respectively, from approximately $1.01 billion and $2.64 billion for the
same periods in 1996. The increases reflect a 1.9% increase in
customer accounts, partly offset by a decrease in energy usage per retail
customer of 0.4% for the three month period and a 1.8% and 0.7%
increase in customer accounts and energy usage per retail customer,
respectively, for the nine month period. Energy usage reflects changes
in weather conditions. Revenues for the nine months ended
September 30, 1997 also reflect a weather-related shift in sales between
customer classes and the different rates charged to those classes. Cost
recovery clause revenues and franchise fees comprise substantially all of
the remaining portion of FPL's operating revenues. These revenues
represent a pass-through of costs and do not significantly affect net
income.
FPL's O&M expenses increased for the three months ended
September 30, 1997, primarily due to costs associated with
improvements to FPL s distribution system that are designed to enhance
service reliability. For the nine months ended September 30, 1997, FPL s
O&M expenses decreased mainly due to lower nuclear refueling outage
costs. FPL's interest expense and preferred stock dividend requirements
also declined, resulting from reductions in outstanding debt and preferred
stock balances. The increase in FPL Group's interest expense reflects
the consolidation of the Doswell Limited Partnership beginning in 1997.
Depreciation and amortization expense in all periods presented includes
amortization recorded under the special amortization program, which is a
function of retail base revenues. Such amortization totaled $48 million
and $164 million for the three and nine months ended September 30,
1997, respectively, and $61 million and $162 million during the same
periods in 1996. Special amortization in 1997 is being applied against
regulatory assets, primarily debt reacquisition costs of FPL.
Depreciation and amortization expense for the third quarter of 1997 also
included the effect of increased depreciation rates on certain of FPL's
generating units. Improved earnings from FPL Group's other operations,
mainly new and restructured wind, geothermal and solar projects at ESI,
during the three and nine months ended September 30, 1997 are
reflected in other-net in FPL Group's condensed consolidated statements
of income.
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 base revenues achieved compared to a fixed amount. The
decision was subject to any third party request for hearings. Such a
request was filed, and hearings regarding the extension are scheduled to
take place in November 1997. The hearings will not address amounts
recorded prior to January 1, 1998.
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 and nine months ended September 30, 1997, FPL Group
repurchased 184,300 and 902,300 shares of common stock,
respectively. These actions are consistent with management's intent to
reduce debt and preferred stock balances and the number of outstanding
shares of common stock when considered appropriate. See Note 2.
The change in cash flows from investing activities primarily reflects
additional investment in existing domestic energy-related projects. For
information concerning capital commitments, see Note 3.
In September 1997, FPL filed a petition with the FPSC seeking to
increase the annual contribution to the storm and property insurance
reserve fund from $20 million to $35 million retroactive to January 1,
1997. The FPSC is scheduled to consider this matter before the end of
1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Paul H. Wheat has filed a derivative shareholder complaint against the
present directors of FPL Group (excluding Alexander W. Dreyfoos Jr.),
two former directors and several present and former officers of FPL
Group and FPL. The complaint was filed on August 29, 1997 in the
Florida Circuit Court in Palm Beach County. It alleges defendants
grossly mismanaged FPL's nuclear power plants and are planning to
engage in foreign business ventures. No claims for damages are
asserted against FPL Group. The complaint asks that the defendants
return the compensation they received during the time they allegedly
committed the acts complained of and pay FPL Group the amounts by
which FPL Group was allegedly damaged; that FPL Group's board of
directors be dismissed and a conservator appointed; and that plaintiff's
counsel be awarded attorneys' fees. Mr. Wheat's principal legal counsel
is Greenfield & Rifkin LLP, the current law firm of Richard Greenfield.
Mr. Greenfield has previously been suspended from practicing law
because he was found guilty of defrauding the courts. Defendants have
filed a motion to dismiss the complaint for failure to state a claim upon
which relief can be granted and, among other things, because Mr.
Greenfield is generally unfit to represent shareholders in any
representative action.
Item 5. Other Information
(a) Reference is made to Item 1. Business - FPL Operations - System
Capability and Load in the 1996 Form 10-K for FPL Group and FPL.
On August 14, 1997, FPL reached a record summer energy peak
demand of 16,557 mw. Adequate resources were available at the
time of peak to meet customer demand.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit FPL
Number Description Group FPL
<S> <C> <C> <C>
12 Computation of Ratios x
27 Financial Data Schedule x x
</TABLE>
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FPL GROUP, INC.
FLORIDA POWER & LIGHT COMPANY
(Registrants)
Date: November 4, 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)
EXHIBIT 12
FLORIDA POWER & LIGHT COMPANY
COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
(Thousands of Dollars)
RATIO OF EARNINGS TO FIXED CHARGES
<S> <C>
Earnings, as defined:
Net income .............................................................................. $ 530,067
Income taxes ............................................................................ 294,344
Fixed charges, as below ................................................................. 183,790
Total earnings, as defined ............................................................ $1,008,201
Fixed charges, as defined:
Interest expense ........................................................................ $ 173,087
Rental interest factor .................................................................. 3,006
Fixed charges included in nuclear fuel cost ............................................. 7,697
Total fixed charges, as defined ....................................................... $ 183,790
Ratio of earnings to fixed charges ........................................................ 5.49
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Earnings, as defined:
Net income .............................................................................. $ 530,067
Income taxes ............................................................................ 294,344
Fixed charges, as below ................................................................. 183,790
Total earnings, as defined ............................................................ $1,008,201
Fixed charges, as defined:
Interest expense ........................................................................ $ 173,087
Rental interest factor .................................................................. 3,006
Fixed charges included in nuclear fuel cost ............................................. 7,697
Total fixed charges, as defined ....................................................... 183,790
Non-tax deductible preferred stock dividends .............................................. 15,069
Ratio of income before income taxes to net income ......................................... 1.56
Preferred stock dividends before income taxes ............................................. 23,508
Combined fixed charges and preferred stock dividends ...................................... $ 207,298
Ratio of earnings to combined fixed charges and preferred stock dividends ................. 4.86
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from FPL Group's and FPL's condensed consolidated balance sheet as
of September 30, 1997 and condensed consolidated statements of income and cash flows for the nine months ended September 30, 1997
and is qualified in its entirety by reference to such financial statements.
<CIK> 0000753308
<NAME> FPL Group, Inc.
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $8,827,671
<OTHER-PROPERTY-AND-INVEST> $1,971,898
<TOTAL-CURRENT-ASSETS> $1,570,580
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $510,247
<TOTAL-ASSETS> $12,880,396
<COMMON> $0
<CAPITAL-SURPLUS-PAID-IN> $0
<RETAINED-EARNINGS> $0
<TOTAL-COMMON-STOCKHOLDERS-EQ> $4,845,165
$0
$226,250
<LONG-TERM-DEBT-NET> $3,078,934
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $0
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $4,730,047
<TOT-CAPITALIZATION-AND-LIAB> $12,880,396
<GROSS-OPERATING-REVENUE> $4,891,309
<INCOME-TAX-EXPENSE> $282,157
<OTHER-OPERATING-EXPENSES> $3,880,338
<TOTAL-OPERATING-EXPENSES> $3,880,338
<OPERATING-INCOME-LOSS> $1,010,971
<OTHER-INCOME-NET> $28,928
<INCOME-BEFORE-INTEREST-EXPEN> $742,673
<TOTAL-INTEREST-EXPENSE> $214,856
<NET-INCOME> $527,817
$15,069
<EARNINGS-AVAILABLE-FOR-COMM> $527,817
<COMMON-STOCK-DIVIDENDS> $249,104
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $1,497,085
<EPS-PRIMARY> $3.05
<EPS-DILUTED> $3.05
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from FPL's condensed consolidated balance sheet as of September 30,
1997 and condensed consolidated statements of income and cash flows for the nine months ended September 30, 1997 and is qualified
in its entirety by reference to such financial statements.
<CIK> 0000037634
<NAME> Florida Power & Light Company
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $8,827,671
<OTHER-PROPERTY-AND-INVEST> $951,064
<TOTAL-CURRENT-ASSETS> $1,312,882
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $446,218
<TOTAL-ASSETS> $11,537,835
<COMMON> $0
<CAPITAL-SURPLUS-PAID-IN> $0
<RETAINED-EARNINGS> $0
<TOTAL-COMMON-STOCKHOLDERS-EQ> $4,734,927
$0
$226,250
<LONG-TERM-DEBT-NET> $2,514,382
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $0
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $4,062,276
<TOT-CAPITALIZATION-AND-LIAB> $11,537,835
<GROSS-OPERATING-REVENUE> $4,759,380
<INCOME-TAX-EXPENSE> $299,162
<OTHER-OPERATING-EXPENSES> $3,761,362
<TOTAL-OPERATING-EXPENSES> $4,060,524
<OPERATING-INCOME-LOSS> $698,856
<OTHER-INCOME-NET> $4,298
<INCOME-BEFORE-INTEREST-EXPEN> $703,154
<TOTAL-INTEREST-EXPENSE> $173,087
<NET-INCOME> $530,067
$15,069
<EARNINGS-AVAILABLE-FOR-COMM> $514,998
<COMMON-STOCK-DIVIDENDS> $0
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $1,367,945
<EPS-PRIMARY> $0
<EPS-DILUTED> $0
</TABLE>
