UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exact name of Registrants as specified
Commission in their charters, address of principal IRS Employer
File executive offices and Registrants' Identification
Number telephone number Number
- ----------------------------------------------------------------------
1-8841 FPL GROUP, INC. 59-2449419
1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
State or other jurisdiction of incorporation or organization: Florida
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) have been subject to such
filing requirements for the past 90 days. Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each class of FPL Group, Inc. common
stock, as of the latest practicable date: Common Stock, $.01 par value,
outstanding at March 31, 2000: 178,166,335 shares.
As of March 31, 2000, there were issued and outstanding 1,000 shares of
Florida Power & Light Company's common stock, without par value, all of
which were held, beneficially and of record, by FPL Group, Inc.
______________________________
This combined Form 10-Q represents separate filings by FPL Group, Inc. and
Florida Power & Light Company. Information contained herein relating to an
individual registrant is filed by that registrant on its own behalf. Florida
Power & Light Company makes no representations as to the information relating
to FPL Group, Inc.'s other operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the 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) made by or on behalf of the Company 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. 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 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 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 statement.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include changes in laws or regulations, changing governmental policies and
regulatory actions, including those of the Federal Energy Regulatory
Commission (FERC), the Florida Public Service Commission (FPSC), the Public
Utility Regulatory Policies Act of 1978, as amended, the Public Utility
Holding Company Act of 1935, as amended and the
U. S. Nuclear Regulatory Commission, with respect to allowed rates of
return including but not limited to return on common equity and equity
ratio limits, industry and rate structure, operation of nuclear power
facilities, acquisition, disposal, depreciation and amortization of assets
and facilities, operation and construction of plant facilities, recovery of
fuel and 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, availability, pricing and transportation of fuel
and other energy commodities, market demand for energy from plants or
facilities, changes in tax rates or policies or in rates of inflation or in
accounting standards, unanticipated delays or changes in costs for capital
projects, unanticipated changes in operating expenses and capital
expenditures, capital market conditions, competition for new energy
development opportunities and legal and administrative proceedings (whether
civil, such as environmental, or criminal) and settlements.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results, and are beyond the control of the
Company.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------------------
<S> <C> <C>
OPERATING REVENUES .................................................................. $1,468 $1,412
OPERATING EXPENSES:
Fuel, purchased power and interchange ............................................. 542 506
Other operations and maintenance................................................... 285 275
Depreciation and amortization ..................................................... 259 279
Taxes other than income taxes ..................................................... 145 144
Total operating expenses ........................................................ 1,231 1,204
OPERATING INCOME .................................................................... 237 208
OTHER INCOME (DEDUCTIONS):
Interest charges .................................................................. (62) (47)
Preferred stock dividends - FPL ................................................... (4) (4)
Gain on sale of Adelphia Communications Corporation stock ......................... - 149
Other - net ....................................................................... 7 9
Total other income (deductions) - net ........................................... (59) 107
INCOME BEFORE INCOME TAXES .......................................................... 178 315
INCOME TAXES ........................................................................ 57 106
NET INCOME .......................................................................... $ 121 $ 209
Earnings per share of common stock (basic and assuming dilution)..................... $ 0.71 $ 1.22
Dividends per share of common stock ................................................. $ 0.54 $ 0.52
Average number of common shares outstanding ......................................... 170 172
</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, 1999 (1999 Form 10-K) for
FPL Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and other property,
including nuclear fuel and construction work in progress ....................... $19,867 $19,554
Less accumulated depreciation and amortization ................................... (10,551) (10,290)
Total property, plant and equipment - net ...................................... 9,316 9,264
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 104 361
Customer receivables, net of allowance of $5 and $7, respectively................. 463 482
Materials, supplies and fossil fuel inventory - at average cost .................. 312 343
Deferred clause expenses ......................................................... 69 54
Other ............................................................................ 129 133
Total current assets ........................................................... 1,077 1,373
OTHER ASSETS:
Special use funds of FPL ......................................................... 1,441 1,352
Other investments ................................................................ 655 611
Other ............................................................................ 872 841
Total other assets ............................................................. 2,968 2,804
TOTAL ASSETS ....................................................................... $13,361 $13,441
CAPITALIZATION:
Common stock ..................................................................... $ 2 $ 2
Additional paid-in capital........................................................ 2,896 2,904
Retained earnings................................................................. 2,494 2,465
Accumulated other comprehensive loss ............................................. - (1)
Total common shareholders' equity............................................... 5,392 5,370
Preferred stock of FPL without sinking fund requirements ......................... 226 226
Long-term debt ................................................................... 3,478 3,478
Total capitalization ........................................................... 9,096 9,074
CURRENT LIABILITIES:
Debt due within one year ......................................................... 246 464
Accounts payable ................................................................. 448 407
Accrued interest, taxes and other ................................................ 1,003 999
Total current liabilities ...................................................... 1,697 1,870
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 1,166 1,079
Unamortized regulatory and investment tax credits ................................ 299 310
Other ............................................................................ 1,103 1,108
Total other liabilities and deferred credits ................................... 2,568 2,497
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $13,361 $13,441
</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 1999 Form 10-K for FPL
Group and FPL.
FPL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------- -------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 480 $ 680
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of FPL ......................................................... (301) (180)
Independent power investments ....................................................... (81) (316)
Distributions and loan repayments from partnerships and joint ventures .............. 15 57
Other - net ......................................................................... (44) 95
Net cash used in investing activities ........................................... (411) (344)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt ........................................................ - (130)
Increase (decrease) in commercial paper ............................................. (218) 276
Repurchase of common stock .......................................................... (16) (32)
Dividends on common stock ........................................................... (92) (89)
Net cash provided by (used in) financing activities ............................. (326) 25
Net increase (decrease) in cash and cash equivalents .................................. (257) 361
Cash and cash equivalents at beginning of period ...................................... 361 187
Cash and cash equivalents at end of period ............................................ $ 104 $ 548
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 53 $ 45
Cash paid for income taxes .......................................................... $ 17 $ -
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 17 $ 26
</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 1999 Form 10-K for FPL
Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions)
(unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------ ------
<S> <C> <C>
OPERATING REVENUES ......................................................................... $1,338 $1,359
OPERATING EXPENSES:
Fuel, purchased power and interchange .................................................... 501 485
Other operations and maintenance ......................................................... 237 250
Depreciation and amortization ............................................................ 247 275
Income taxes ............................................................................. 60 56
Taxes other than income taxes ............................................................ 142 143
Total operating expenses ............................................................... 1,187 1,209
OPERATING INCOME ........................................................................... 151 150
OTHER INCOME (DEDUCTIONS):
Interest charges ......................................................................... (40) (43)
Other - net .............................................................................. (1) 1
Total other deductions - net ........................................................... (41) (42)
NET INCOME ................................................................................. 110 108
PREFERRED STOCK DIVIDENDS .................................................................. 4 4
NET INCOME AVAILABLE TO FPL GROUP .......................................................... $ 106 $ 104
</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 1999 Form 10-K for FPL
Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Plant in service, including nuclear fuel and construction work in progress ....... $18,307 $18,162
Less accumulated depreciation and amortization ................................... (10,414) (10,184)
Electric utility plant - net ................................................... 7,893 7,978
CURRENT ASSETS:
Cash and cash equivalents ........................................................ 9 -
Customer receivables, net of allowance of $5 and $7, respectively................. 399 433
Materials, supplies and fossil fuel inventory - at average cost .................. 284 299
Deferred clause expenses ......................................................... 69 54
Other ............................................................................ 89 107
Total current assets ........................................................... 850 893
OTHER ASSETS:
Special use funds ................................................................ 1,441 1,352
Other ............................................................................ 412 385
Total other assets ............................................................. 1,853 1,737
TOTAL ASSETS ....................................................................... $10,596 $10,608
CAPITALIZATION:
Common shareholder's equity ...................................................... $ 4,701 $ 4,793
Preferred stock without sinking fund requirements ................................ 226 226
Long-term debt ................................................................... 2,079 2,079
Total capitalization ........................................................... 7,006 7,098
CURRENT LIABILITIES:
Debt due within one year ......................................................... 141 219
Accounts payable ................................................................. 417 379
Accrued interest, taxes and other ................................................ 900 835
Total current liabilities ...................................................... 1,458 1,433
OTHER LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes ................................................ 878 802
Unamortized regulatory and investment tax credits ................................ 299 310
Other ............................................................................ 955 965
Total other liabilities and deferred credits ................................... 2,132 2,077
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES ............................................... $10,596 $10,608
</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 1999 Form 10-K for FPL
Group and FPL.
FLORIDA POWER & LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------ ------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 516 $ 667
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (301) (180)
Other - net ......................................................................... (26) (51)
Net cash used in investing activities ........................................... (327) (231)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in commercial paper ........................................................ (78) -
Dividends ........................................................................... (102) (102)
Net cash used in financing activities ............................................. (180) (102)
Net increase in cash and cash equivalents ............................................. 9 334
Cash and cash equivalents at beginning of period ...................................... - 152
Cash and cash equivalents at end of period ............................................ $ 9 $ 486
Supplemental disclosures of cash flow information:
Cash paid for interest .............................................................. $ 27 $ 39
Cash paid for income taxes .......................................................... $ 18 $ 1
Supplemental schedule of noncash investing and financing activities:
Additions to capital lease obligations .............................................. $ 17 $ 26
Transfer of net assets to FPL FiberNet, LLC ......................................... $ 100 $ -
</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 1999 Form 10-K for FPL
Group and FPL.
FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The accompanying condensed consolidated financial statements should be read
in conjunction with the 1999 Form 10-K for FPL Group and FPL. In the opinion
of FPL Group and FPL management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair financial statement
presentation 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. Capitalization
FPL Group Common Stock - During the three months ended March 31, 2000, FPL
Group repurchased 369,400 shares of common stock under its share repurchase
program. A total of approximately 4.2 million shares have been repurchased
under the share repurchase program that began in April 1997.
Long-Term Debt - In April 2000, FPL sold approximately $96 million principal
amount of variable-rate pollution control revenue refunding bonds maturing in
July 2022. The proceeds will be used in July 2000 to redeem approximately
$96 million of pollution control revenue refunding bonds of which $76 million
bear interest at 7.3% and mature in 2020 and $20 million are variable rate
and mature in 2024.
Long-Term Incentive Plan - Performance shares and options granted to date
under FPL Group's long-term incentive plan resulted in assumed incremental
shares of common stock outstanding for purposes of computing both basic and
diluted earnings per share for the three months ended March 31, 2000 and
1999. These incremental shares were not material in the periods presented
and did not cause diluted earnings per share to differ from basic earnings
per share.
Other - Comprehensive income of FPL Group, totaling $121 million and $209
million for the three months ended March 31, 2000 and 1999, respectively,
includes net income, changes in unrealized gains and losses on securities and
foreign currency translation adjustments. Accumulated other comprehensive
income is separately displayed in the condensed consolidated balance sheets
of FPL Group.
2. Commitments and Contingencies
Commitments - FPL has made commitments in connection with a portion of its
projected capital expenditures. Capital expenditures for the construction or
acquisition of additional facilities and equipment to meet customer demand
are estimated to be approximately $3.1 billion for 2000 through 2002.
Included in this three-year forecast are capital expenditures for 2000 of
approximately $1.3 billion, of which $301 million had been spent through
March 31, 2000. As of March 31, 2000, FPL Energy, LLC (FPL Energy), has made
commitments in connection with the development and expansion of independent
power projects totaling approximately $97 million. FPL Group and its
subsidiaries, other than FPL, have guaranteed approximately $300 million of
purchased power agreement 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 $363
million per incident at any nuclear utility reactor in the United States,
payable at a rate not to exceed $43 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 $50
million in retrospective premiums.
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 the majority of its transmission and distribution (T&D)
property due to the high cost and limited coverage available from third-
party insurers. As approved by the FPSC, FPL maintains a funded storm and
property insurance reserve, which totaled approximately $209 million at
March 31, 2000, for uninsured 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 Group has entered into a $3.7 billion long-term agreement
with General Electric Company for the supply of 66 gas turbines from 2000
through 2004 and parts, repairs and on-site services through 2011. The
turbines are intended to support expansion at FPL and FPL Energy, and the
related commitments for a portion of the 66 gas turbines are included in
Commitments above.
FPL has entered into 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
383 mw thereafter through 2021. FPL also has various firm pay-for-
performance contracts to purchase approximately 900 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. FPL has long-term
contracts for the transportation and supply of natural gas, coal and oil
with various expiration dates through 2021. FPL Energy has long-term
contracts for the transportation and storage of natural gas with expiration
dates ranging from 2005 through 2017, and a 24-month contract commencing in
mid-2000 for the supply of natural gas.
The required capacity and minimum payments through 2004 under these
contracts are estimated to be as follows
<TABLE><CAPTION>
2000 2001 2002 2003 2004
(millions)
<S> <C> <C> <C> <C> <C>
FPL:
Capacity payments:
JEA and Southern Companies .......................................... $210 $210 $210 $200 $200
Qualifying facilities (a) ........................................... $370 $380 $400 $410 $425
Minimum payments, at projected prices:
Natural gas, including transportation ............................... $315 $440 $495 $510 $545
Coal ................................................................ $ 50 $ 45 $ 45 $ 20 $ 10
Oil ................................................................. $175 $195 $ 10 $ - $ -
FPL Energy:
Natural gas, including transportation and storage ..................... $ 20 $ 20 $ 20 $ 15 $ 15
_______________
(a) Includes approximately $40 million, $40 million, $45 million, $45 million and $50 million, respectively, for
capacity payments associated with two contracts that are currently in dispute. These capacity payments are subject
to the outcome of the related litigation. See Litigation.
</TABLE>
Charges under these contracts were as follows:
<TABLE><CAPTION>
Three Months Ended March 31,
2000 Charges 1999 Charges
------------------------------------------
Energy/ Energy/
Capacity Fuel Capacity Fuel
------------------------------------------
(millions)
<S> <C> <C> <C> <C>
FPL:
JEA and Southern Companies ......................... $50(a) $31(b) $50(a) $23(b)
Qualifying facilities .............................. $79(c) $32(b) $75(c) $21(b)
Natural gas, including transportation .............. $ - $82(b) $ - $75(b)
Coal ............................................... $ - $11(b) $ - $12(b)
Oil ................................................ $ - $21(b) $ - $11(b)
FPL Energy:
Natural gas transportation and storage ............. $ - $ 4 $ - $ 4
_______________
(a) Recovered through base rates and the capacity cost recovery clause (capacity clause).
(b) Recovered through the fuel and purchased power cost recovery clause.
(c) Recovered through the capacity clause.
</TABLE>
Litigation - In 1997, FPL filed a complaint against the owners of two
qualifying facilities (plant owners) seeking an order declaring that FPL's
obligations under the power purchase agreements with the qualifying
facilities were rendered of no force and effect because the power plants
failed to accomplish commercial operation before January 1, 1997, as
required by the agreements. In 1997, the plant owners filed for bankruptcy
under Chapter XI of the U.S. Bankruptcy Code and entered into an agreement
with the holders of more than 70% of the bonds that partially financed the
construction of the plants. This agreement gives the holders of a majority
of the principal amount of the bonds (the majority bondholders) the right
to control, fund and manage any litigation against FPL and the right to
settle with FPL on any terms such majority bondholders approve, provided
that certain agreements are not affected and certain conditions are met.
In 1998, the plant owners (through the attorneys for the majority
bondholders) filed an answer denying the allegations in FPL's complaint and
asserting counterclaims for approximately $2 billion, consisting of all
capacity payments that could have been made over the 30-year term of the
power purchase agreements and three times their actual damages for alleged
violations of Florida antitrust laws by FPL, FPL Group and FPL Group
Capital Inc (FPL Group Capital), plus attorneys' fees. In 1998, the trial
court dismissed all of the plant owners' antitrust claims. In 1999, the
plant owners' motion for summary judgment was denied; they have appealed.
A contract with Cedar Bay Generating Company, L.P. (Cedar Bay), a
qualifying facility, provides FPL with the right to dispatch the Cedar Bay
facility "in any manner it deems appropriate." Despite this contractual
right, Cedar Bay initiated an action in 1997 in the circuit court
challenging, among other things, the manner in which the facility had been
dispatched by FPL. Although the court granted summary judgment to FPL with
regard to Cedar Bay's claim that FPL's dispatch decisions violated the
express terms of the contract, it permitted a jury to hear Cedar Bay's
claim that such dispatch decisions violated an implied duty of good faith
and fair dealing. The jury awarded Cedar Bay approximately $13 million on
this claim. Thereafter, the court entered a declaration that FPL was, in
the future, to dispatch the Cedar Bay facility in accordance with certain
specified parameters. FPL expects to recover the amount of this judgment
through the capacity clause.
FPL has appealed both the jury award and the court's declaration. In 1999,
after FPL filed its notice of appeal in the Cedar Bay action, a lender, on
behalf of itself and a group of other Cedar Bay lenders, filed an action
against FPL in the circuit court alleging breach of contract, breach of an
implied duty of good faith and fair dealing, fraud, tortious interference
with contract and several other claims regarding the manner in which FPL
has dispatched the Cedar Bay facility. It seeks unspecified damages and
other relief. FPL has moved to dismiss all counts of this complaint.
In 1999, the Attorney General of the United States, on behalf of the U.S.
Environmental Protection Agency (EPA) brought an action against Georgia
Power Company and other subsidiaries of The Southern Company for injunctive
relief and the assessment of civil penalties for certain violations of the
Clean Air Act. Among other things, the EPA alleges Georgia Power Company
constructed and is continuing to operate Scherer Unit No. 4, in which FPL
owns a 76% interest, without obtaining proper permitting, and without
complying with performance and technology standards as required by the
Clean Air Act. The suit seeks injunctive relief requiring the installation
of such technology and civil penalties of up to $25,000 per day for each
violation from an unspecified date after August 7, 1977 through January 30,
1997, and $27,500 per day for each violation thereafter. Georgia Power
Company has filed an answer to the complaint asserting that it has complied
with all requirements of the Clean Air Act, denying the plaintiff's
allegations of liability, denying that the plaintiff is entitled to any of
the relief that it seeks and raising various other defenses.
FPL Group and FPL believe that they have meritorious defenses to the
litigation and are vigorously defending the suits. Accordingly, the
liabilities, if any, arising from the proceedings are not anticipated to
have a material adverse effect on their financial statements.
3. Segment Information
FPL Group's reportable segments include FPL, a regulated utility, and FPL
Energy, an unregulated energy generating subsidiary. Corporate and other
represents other business activities, other segments that are not separately
reportable and eliminating entries. FPL Group's segment information is as
follows:
<TABLE><CAPTION>
Three Months Ended March 31,
2000 1999
------------------------------------------ ----------------------------------------
FPL Corporate FPL Corporate
FPL Energy & Other Total FPL Energy & Other Total
------------------------------------------ ----------------------------------------
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues ..... $ 1,338 $ 107 $ 23 $ 1,468 $ 1,359 $ 41 $ 12 $ 1,412
Net income ............. $ 106 $ 15 $ - $ 121 $ 104 $ 9 $ 96(a) $ 209
</TABLE>
<TABLE><CAPTION>
March 31, 2000 December 31, 1999
--------------------------------------- ---------------------------------------
FPL Corporate FPL Corporate
FPL(b) Energy & Other(b) Total FPL Energy & Other Total
--------------------------------------- ----------------------------------------
(millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets ........... $10,596 $2,288 $ 477 $13,361 $10,608 $2,212 $621 $13,441
</TABLE>
(a) Includes $96 million after-tax gain on the sale of an investment in
Adelphia Communications Corporation (Adelphia) common stock. See
Management's Discussion and Analysis of Financial Condition and Results
of Operations - Results of Operations - Corporate and Other.
(b) Includes effect of $100 million net asset transfer in January 2000 from
FPL to FPL FiberNet, LLC.
4. Summarized Financial Information of FPL Group Capital
FPL Group Capital provides funding for and holds ownership interest in FPL
Group's operating subsidiaries other than FPL. FPL Group Capital's
debentures are guaranteed by FPL Group and included in FPL Group's
condensed consolidated balance sheets. Summarized financial information of
FPL Group Capital is as follows:
<TABLE><CAPTION>
Three Months Ended
March 31, March 31, December 31,
2000 1999 2000 1999
---- ---- --------- ------------
(millions) (millions)
<S> <C> <C> <C> <C> <C>
Operating revenues .... $130 $ 54 Current assets ......... $ 477 $ 640
Operating expenses .... $105 $ 51 Noncurrent assets ...... $2,801 $2,627
Net income ............ $ 20 $112(a) Current liabilities .... $ 286 $ 414
Noncurrent liabilities.. $1,860 $1,840
</TABLE>
(a) Includes $96 million after-tax gain on the sale of an investment in
Adelphia common stock. See Management's Discussion and Analysis of
Financial Condition and Results of Operations - Results of Operations -
Corporate and Other.
Management has not presented separate financial statements and other
disclosures concerning FPL Group Capital because management has determined
that such information is not material to holders of the FPL Group Capital
debentures.
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 1999 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
FPL Group's earnings for the first quarter of 2000 improved over the same
period last year, excluding the first quarter 1999 nonrecurring gain on the
sale of Adelphia stock. The improvement was primarily a result of growth
at FPL Energy.
FPL - FPL's net income for the three months ended March 31, 2000 was up
slightly despite the rate reduction that went into effect in April 1999.
Higher sales, as well as lower depreciation and other operations and
maintenance expenses contributed to the improvement. FPL's revenues from
retail base operations for the three months ended March 31, 2000 were $730
million, down from $760 million for the same period in 1999. The effect of
the rate agreement described below was partially offset by higher customer
usage and growth in customer accounts. Usage per retail customer was up 4%
due to weather conditions and some demand elasticity associated with lower
rates. The number of customer accounts increased 2.3% for the same period.
FPL's other operations and maintenance expense decreased for the three
months ended March 31, 2000, primarily reflecting successful cost control
efforts as well as the timing of expenditures.
The rate agreement provides for a $350 million reduction in annual revenues
from retail base operations allocated to all customers on a cents-per-
kilowatt-hour basis. Additionally, the agreement sets forth a revenue
sharing mechanism for each of the twelve-month periods covered by the
agreement, whereby revenues from retail base operations in excess of a
stated threshold will be shared on the basis of two-thirds refunded to
retail customers and one-third retained by FPL. Revenues from retail base
operations in excess of a second threshold will be refunded 100% to retail
customers. The thresholds for the twelve months ended April 14, 2000, were
$3.4 billion and $3.556 billion, respectively. As of March 31, 2000, FPL
had accrued approximately $19 million associated with the refund to retail
customers for the twelve months ended April 14, 2000. The annual revenue
reduction was offset by lower special depreciation. The agreement allows
for special depreciation of up to $100 million, in each year of the three-
year agreement period to be applied to nuclear and/or fossil generating
assets. During the first year of the agreement, FPL recognized as
depreciation essentially all of the $100 million; $29 million in the first
quarter of 2000 and $70 million in 1999. For the three months ended March
31, 1999, FPL recorded approximately $61 million under the previous
program.
FPL Energy - The improvement in FPL Energy's net income for the three
months ended March 31, 2000 is primarily due to new projects and improved
performance in the mid-atlantic and central regions. The new projects
include the Maine assets, several wind projects and a gas project.
Earnings from these additions were partially offset by higher interest and
administrative expenses.
Corporate and Other - First quarter 1999 net income for the corporate and
other segment reflects a $149 million ($96 million after-tax) gain on the
sale of an investment in Adelphia stock.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2000, FPL Group repurchased 369,400
shares of common stock.
For information concerning capital commitments, see Note 2 - Commitments.
PART II - OTHER INFORMATION
Item 5. Other Information
Reference is made to Item 1. Business - FPL Operations - Competition in the
1999 Form 10-K for FPL Group and FPL.
In April 2000, the Florida Supreme Court upheld arguments by FPL and other
Florida utilities and ruled that under current Florida law the FPSC is not
authorized to grant a determination of need for a proposed power plant, the
output of which is not fully committed to use by Florida retail customers.
Also in April 2000, a settlement agreement between FPL and its wholesale
customers was filed with the FERC covering issues that have been pending
resolution since a rate case was filed by FPL in 1993. The settlement
provides for lower rates to wholesale customers through the adoption of new
fixed rates, rather than formula rates, effective January 1, 2000 and a $65
million refund for wholesale services from 1994-99, and is subject to FERC
approval. As of March 31, 2000, FPL had accrued for the impact of this
settlement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE><CAPTION>
Exhibit FPL
Number Description Group FPL
<S> <C> <C> <C>
12(a) Computation of Ratio of Earnings to Fixed Charges x
12(b) 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
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FPL GROUP, INC.
FLORIDA POWER & LIGHT COMPANY
(Registrants)
Date: April 28, 2000 K. MICHAEL DAVIS
----------------
K. Michael Davis
Controller and Chief Accounting Officer of FPL Group, Inc.
Vice President, Accounting, Controller and
Chief Accounting Officer of Florida Power & Light Company
(Principal Accounting Officer of the Registrants)
EXHIBIT 12(a)
FPL GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
2000
-----------
(millions)
<S> <C>
Earnings, as defined:
Net income .............................................................................. $121
Income taxes ............................................................................ 57
Fixed charges, included in the determination of net income, as below .................... 65
Distributed income of independent power investments...................................... 13
Less: Equity in earnings of independent power investments ............................... 2
Total earnings, as defined ............................................................ $254
Fixed charges, as defined:
Interest charges ........................................................................ $ 62
Rental interest factor .................................................................. 1
Fixed charges included in nuclear fuel cost ............................................. 2
Fixed charges, included in the determination of net income .............................. 65
Capitalized interest .................................................................... 5
Total fixed charges, as defined ....................................................... $ 70
Ratio of earnings to fixed charges ........................................................ 3.63
</TABLE>
EXHIBIT 12(b)
FLORIDA POWER & LIGHT COMPANY
COMPUTATION OF RATIO
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000
------------------
(millions)
RATIO OF EARNINGS TO FIXED CHARGES
<S> <C>
Earnings, as defined:
Net income .............................................................................. $110
Income taxes ............................................................................ 58
Fixed charges, as below ................................................................. 43
Total earnings, as defined ............................................................ $211
Fixed charges, as defined:
Interest charges ........................................................................ $ 40
Rental interest factor .................................................................. 1
Fixed charges included in nuclear fuel cost ............................................. 2
Total fixed charges, as defined ....................................................... $ 43
Ratio of earnings to fixed charges ........................................................ 4.91
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Earnings, as defined:
Net income .............................................................................. $110
Income taxes ............................................................................ 58
Fixed charges, as below ................................................................. 43
Total earnings, as defined ............................................................ $211
Fixed charges, as defined:
Interest charges ........................................................................ $ 40
Rental interest factor .................................................................. 1
Fixed charges included in nuclear fuel cost ............................................. 2
Total fixed charges, as defined ....................................................... 43
Non-tax deductible preferred stock dividends .............................................. 4
Ratio of income before income taxes to net income ......................................... 1.53
Preferred stock dividends before income taxes ............................................. 6
Combined fixed charges and preferred stock dividends ...................................... $ 49
Ratio of earnings to combined fixed charges and preferred stock dividends ................. 4.31
</TABLE>
<TABLE> <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 March 31, 2000
and condensed consolidated statements of income and cash flows for the three
months ended
March 31, 2000 and is qualified in its entirety by reference to such
financial statements.
<CIK> 0000753308
<NAME> FPL Group, Inc.
<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $7,893
<OTHER-PROPERTY-AND-INVEST> $3,519
<TOTAL-CURRENT-ASSETS> $1,077
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $872
<TOTAL-ASSETS> $13,361
<COMMON> $2
<CAPITAL-SURPLUS-PAID-IN> $2,896
<RETAINED-EARNINGS> $2,494
<TOTAL-COMMON-STOCKHOLDERS-EQ> $5,392
$0
$226
<LONG-TERM-DEBT-NET> $3,478
<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> $4,265
<TOT-CAPITALIZATION-AND-LIAB> $13,361
<GROSS-OPERATING-REVENUE> $1,468
<INCOME-TAX-EXPENSE> $57
<OTHER-OPERATING-EXPENSES> $1,231
<TOTAL-OPERATING-EXPENSES> $1,231
<OPERATING-INCOME-LOSS> $237
<OTHER-INCOME-NET> $7
<INCOME-BEFORE-INTEREST-EXPEN> $183
<TOTAL-INTEREST-EXPENSE> $62
<NET-INCOME> $121
$4
<EARNINGS-AVAILABLE-FOR-COMM> $121
<COMMON-STOCK-DIVIDENDS> $92
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $480
<EPS-BASIC> $0.71
<EPS-DILUTED> $0.71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from FPL's
condensed consolidated balance sheet as of
March 31, 2000 and condensed consolidated statements of income and cash flows
for the three months ended March 31, 2000 and is qualified in its entirety by
reference to such financial statements.
<CIK> 0000037634
<NAME> Florida Power & Light Company
<MULTIPLIER> 1,000,000
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $7,893
<OTHER-PROPERTY-AND-INVEST> $1,441
<TOTAL-CURRENT-ASSETS> $850
<TOTAL-DEFERRED-CHARGES> $0
<OTHER-ASSETS> $412
<TOTAL-ASSETS> $10,596
<COMMON> $0
<CAPITAL-SURPLUS-PAID-IN> $0
<RETAINED-EARNINGS> $0
<TOTAL-COMMON-STOCKHOLDERS-EQ> $4,701
$0
$226
<LONG-TERM-DEBT-NET> $2,079
<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> $3,590
<TOT-CAPITALIZATION-AND-LIAB> $10,596
<GROSS-OPERATING-REVENUE> $1,338
<INCOME-TAX-EXPENSE> $60
<OTHER-OPERATING-EXPENSES> $1,127
<TOTAL-OPERATING-EXPENSES> $1,187
<OPERATING-INCOME-LOSS> $151
<OTHER-INCOME-NET> $(1)
<INCOME-BEFORE-INTEREST-EXPEN> $150
<TOTAL-INTEREST-EXPENSE> $40
<NET-INCOME> $110
$4
<EARNINGS-AVAILABLE-FOR-COMM> $106
<COMMON-STOCK-DIVIDENDS> $0
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $516
<EPS-BASIC> $0
<EPS-DILUTED> $0
</TABLE>
