FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Exact name of Registrant as specified in I.R.S. Employer
Commission its charter, state of incorporation, address Identification
File No. of principal executive offices, telephone Number
------------ -------------------------------------------- ---------------
1-8349 FLORIDA PROGRESS CORPORATION 59-2147112
A Florida Corporation
One Progress Plaza
St. Petersburg, Florida 33701
Telephone (813) 824-6400
1-3274 FLORIDA POWER CORPORATION 59-0247770
A Florida Corporation
3201 34th Street South
St. Petersburg, Florida 33711
Telephone (813) 866-5151
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ___X___ No ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Description of Shares Outstanding
Registrant Class at September 30, 1994
---------- -------------- ------------------
Florida Progress Corporation Common Stock,
without par value 94,155,769
Florida Power Corporation Common Stock,
without par value 100 (all of which were
held, beneficially and
of record by Florida
Progress Corporation)
This combined Form 10-Q represents separate filings by Florida Progress
Corporation and Florida Power Corporation. Information contained herein
relating to an individual registrant is filed by that registrant on its own
behalf. Florida Power makes no representations as to the information
relating to Florida Progress' diversified operations.
<PAGE>
PART I. FINANCIAL INFORMATION
Part I. Financial Statements
FLORIDA PROGRESS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
------- ------- -------- --------
(Unaudited) (Unaudited)
REVENUES:
Electric utility $586.5 $609.0 $1,587.0 $1,477.9
Diversified 158.5 159.9 468.8 337.6
-------- -------- --------- ---------
745.0 768.9 2,055.8 1,815.5
EXPENSES: -------- -------- --------- ---------
Electric utility:
Fuel used in generation 127.6 149.6 346.2 370.6
Purchased power 80.2 68.2 216.9 149.2
Deferred fuel (0.3) - (19.7) (26.9)
Other operation 99.1 99.0 307.5 275.2
-------- -------- --------- ---------
Operation 306.6 316.8 850.9 768.1
Maintenance 27.5 29.2 90.9 95.6
Depreciation 65.5 61.0 194.9 177.8
Taxes other than income taxes 43.2 44.4 124.2 116.7
-------- -------- --------- ---------
442.8 451.4 1,260.9 1,158.2
-------- -------- --------- ---------
Diversified:
Cost of sales 131.1 131.4 388.4 267.0
Other 17.2 13.9 42.3 33.8
-------- -------- --------- ---------
148.3 145.3 430.7 300.8
-------- -------- --------- ---------
INCOME FROM OPERATIONS 153.9 172.2 364.2 356.5
-------- -------- --------- ---------
INTEREST EXPENSE AND OTHER:
Interest expense 35.8 35.9 108.2 106.8
Allowance for funds used during
construction (2.8) (4.3) (8.3) (12.9)
Preferred dividend requirements of
Florida Power 2.6 3.2 7.6 10.3
Other expense (income), net 6.0 0.2 7.6 (0.8)
-------- -------- --------- ---------
41.6 35.0 115.1 103.4
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 112.3 137.2 249.1 253.1
Income Taxes 37.2 55.2 85.3 94.5
-------- -------- --------- ---------
INCOME BEFORE CHANGE IN ACCOUNTING 75.1 82.0 163.8 158.6
Cumulative effect of income tax
accounting change - - - 0.8
-------- -------- --------- ---------
NET INCOME $75.1 $82.0 $163.8 $159.4
======== ======== ======== ========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 93.9 88.6 91.6 88.1
======== ======== ======== ========
EARNINGS PER AVERAGE COMMON SHARE:
Income before change in accounting $0.80 $0.93 $1.79 $1.80
Cumulative effect of income tax
accounting change - - - 0.01
-------- -------- --------- ---------
$0.80 $0.93 $1.79 $1.81
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $0.495 $0.485 $1.485 $1.455
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
September 30, December 31,
1994 1993
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held for $5,503.7 $5,320.3
future use
Less - Accumulated depreciation 1,950.4 1,846.2
Accumulated decommissioning for nuclear plant 129.1 118.3
Accumulated dismantlement for fossil plants 86.4 68.5
---------- ----------
3,337.8 3,287.3
Construction work in progress 242.1 285.7
Nuclear fuel, net of amortization of $316.3
in 1994 and $299.9 in 1993 59.3 68.4
---------- ----------
Net electric utility plant 3,639.2 3,641.4
Other property, net of depreciation of $155.2
in 1994 and $141.0 in 1993 404.2 391.6
---------- ----------
4,043.4 4,033.0
---------- ----------
CURRENT ASSETS:
Cash and equivalents 8.3 9.1
Accounts receivable, net 283.2 242.7
Current portion of leases and loans receivable 23.5 31.3
Inventories, primarily at average cost:
Fuel 68.5 79.5
Utility materials and supplies 115.8 112.2
Diversified materials 51.4 35.8
Underrecovery of fuel cost 31.8 7.1
Other 29.8 41.8
---------- ----------
612.3 559.5
---------- ----------
OTHER ASSETS:
Investments:
Leases and loans receivable, net 459.3 485.4
Marketable securities 156.1 129.3
Joint ventures and partnerships 79.5 88.4
Nuclear plant decommissioning fund 120.9 107.7
Deferred insurance policy acquisition costs 93.3 81.5
Other 161.0 154.0
---------- ----------
1,070.1 1,046.3
---------- ----------
$5,725.8 $5,638.8
========== ==========
The accompanying notes are an integral part of these financial statements.
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
September 30, December 31,
1994 1993
----------- -----------
CAPITAL AND LIABILITIES (Unaudited)
COMMON STOCK EQUITY:
Common stock $1,137.6 $1,008.3
Retained earnings 835.7 812.2
---------- ----------
1,973.3 1,820.5
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 113.5 113.5
With sinking funds 35.0 35.0
LONG-TERM DEBT 1,867.9 1,866.6
---------- ----------
TOTAL CAPITAL 3,989.7 3,835.6
---------- ----------
CURRENT LIABILITIES:
Accounts payable 126.7 149.4
Customers' deposits 75.4 71.5
Income taxes currently payable 45.3 42.3
Accrued other taxes 59.2 11.0
Accrued interest 43.0 45.2
Other 70.5 66.4
---------- ----------
420.1 385.8
Notes payable 23.0 125.0
Current portion of long-term debt
and preferred stock 56.3 76.6
---------- ----------
499.4 587.4
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 722.9 756.3
Unamortized investment tax credits 112.4 119.6
Insurance policy benefit reserves 217.0 186.5
Other 184.4 153.4
---------- ----------
1,236.7 1,215.8
---------- ----------
$5,725.8 $5,638.8
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
1994 1993
----------- -----------
(Unaudited)
OPERATING ACTIVITIES:
Income before change in accounting $163.8 $158.6
Adjustments for noncash items:
Depreciation and amortization 237.3 220.9
Deferred income taxes and
investment tax credits, net (40.6) (15.1)
Increase in accrued other postretirement benefit
costs 17.6 13.6
Net change in deferred insurance policy
acquisition costs (11.7) (10.1)
Net change in deferred insurance policy benefits
reserves 30.5 21.2
Changes in working capital, net of effects
from acquisition or sale of businesses:
Accounts receivable (40.5) (51.3)
Inventories (1.8) 29.3
Underrecovery of fuel costs (24.7) (25.3)
Accounts payable (22.7) (8.5)
Income taxes currently payable 3.0 23.2
Accrued other taxes 48.3 46.2
Other 9.1 10.7
Other operating activities 28.5 (11.1)
---------- ----------
396.1 402.3
---------- ----------
INVESTING ACTIVITIES:
Property additions (including allowance for
borrowed funds used during construction) (245.9) (295.5)
Proceeds from sale of properties and businesses 14.3 26.3
Purchase of leases, loans and securities (69.0) (105.1)
Proceeds from sale or collection of
leases, loans, and securities 67.7 83.3
Acquisition of businesses (17.1) (79.1)
(Investments in) or distributions from joint
ventures and partnerships, net (4.7) 0.1
Other investing activities (8.2) (10.8)
---------- ----------
(262.9) (380.8)
---------- ----------
FINANCING ACTIVITIES:
Issuance of long-term debt 100.4 287.1
Repayment of long-term debt (54.6) (417.3)
Increase (decrease) in commercial paper with
long term support (68.6) 178.1
Redemption of preferred stock - (45.2)
Sale of common stock 128.4 45.4
Dividends paid on common stock (137.0) (128.3)
Increase (decrease) in short-term debt (102.0) 61.8
Other financing activities (0.6) (0.9)
---------- ----------
(134.0) (19.3)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (0.8) 2.2
Beginning cash and equivalents 9.1 8.1
---------- ----------
ENDING CASH AND EQUIVALENTS $8.3 $10.3
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $110.5 $108.7
Income taxes (net of refunds) $122.9 $ 86.4
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
FINANCIAL STATEMENTS
FLORIDA POWER CORPORATION
Statements of Income
(In millions) Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
------- ------- -------- --------
(Unaudited) (Unaudited)
OPERATING REVENUES:
Residential $336.6 $346.0 $876.9 $796.8
Commercial 133.4 136.8 358.6 341.2
Industrial 44.5 43.1 128.2 120.9
Sales for resale 38.7 37.0 96.2 87.4
Other 33.3 46.1 127.1 131.6
-------- -------- --------- ---------
586.5 609.0 1,587.0 1,477.9
OPERATING EXPENSES: -------- -------- --------- ---------
Operation:
Fuel used in generation 127.6 149.6 346.2 370.6
Purchased power 80.2 68.2 216.9 149.2
Deferred fuel (0.3) - (19.7) (26.9)
Other operations 99.1 99.0 307.5 275.2
-------- -------- --------- ---------
306.6 316.8 850.9 768.1
-------- -------- --------- ---------
Maintenance 27.5 29.2 90.9 95.6
Depreciation 65.5 61.0 194.9 177.8
Taxes other than income taxes 43.2 44.4 124.2 116.7
Income taxes:
Currently payable 49.0 62.6 102.6 98.4
Deferred, net (5.6) (9.7) (8.1) (2.9)
Investment tax credits, net (2.2) (2.1) (6.4) (6.2)
-------- -------- --------- ---------
Total income taxes 41.2 50.8 88.1 89.3
-------- -------- --------- ---------
484.0 502.2 1,349.0 1,247.5
-------- -------- --------- ---------
OPERATING INCOME 102.5 106.8 238.0 230.4
-------- -------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 1.5 2.4 4.6 7.2
Miscellaneous other expense, net (6.4) (0.1) (7.9) (1.1)
-------- -------- --------- ---------
(4.9) 2.3 (3.3) 6.1
-------- -------- --------- ---------
INTEREST CHARGES
Interest on long-term debt 24.2 23.3 72.4 68.6
Other interest expense 2.7 3.0 9.6 11.2
-------- -------- --------- ---------
26.9 26.3 82.0 79.8
-------- -------- --------- ---------
Allowance for borrowed funds used
during construction (1.3) (1.9) (3.7) (5.7)
-------- -------- --------- ---------
25.6 24.4 78.3 74.1
-------- -------- --------- ---------
NET INCOME 72.0 84.7 156.4 162.4
DIVIDENDS ON PREFERRED STOCK 2.6 3.2 7.6 10.3
-------- -------- --------- ---------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $69.4 $81.5 $148.8 $152.1
======== ======== ========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
September 30, December 31,
1994 1993
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held for $5,503.7 $5,320.3
future use
Less - Accumulated depreciation 1,950.4 1,846.2
Accumulated decommissioning for nuclear plant 129.1 118.3
Accumulated dismantlement for fossil plants 86.4 68.5
---------- ----------
3,337.8 3,287.3
Construction work in progress 242.1 285.7
Nuclear fuel, net of amortization of $316.3
in 1994 and $299.9 in 1993 59.3 68.4
---------- ----------
3,639.2 3,641.4
Other property, net 24.0 27.7
---------- ----------
3,663.2 3,669.1
---------- ----------
CURRENT ASSETS:
Cash and equivalents 1.5 -
Accounts receivable, less reserve of $3.0
in 1994 and $2.4 in 1993 204.8 168.2
Inventories at average cost:
Fuel 52.4 58.9
Materials and supplies 115.8 112.2
Underrecovery of fuel cost 31.8 7.1
Deferred income taxes 18.5 29.2
Other 4.2 5.8
---------- ----------
429.0 381.4
---------- ----------
OTHER ASSETS:
Nuclear plant decommissioning fund 120.9 107.7
Unamortized debt expense, being amortized
over term of debt 30.2 31.6
Other 71.0 69.7
---------- ----------
222.1 209.0
---------- ----------
$4,314.3 $4,259.5
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
September 30, December 31,
1994 1993
----------- -----------
CAPITAL AND LIABILITIES (Unaudited)
COMMON STOCK EQUITY:
Common stock $927.6 $812.9
Retained earnings 728.2 709.5
---------- ----------
1,655.8 1,522.4
CUMULATIVE PREFERRED STOCK:
Without sinking funds 113.5 113.5
With sinking funds 35.0 35.0
LONG-TERM DEBT 1,379.9 1,398.6
---------- ----------
TOTAL CAPITAL 3,184.2 3,069.5
---------- ----------
CURRENT LIABILITIES:
Accounts payable 72.5 106.2
Accounts payable to associated companies 19.2 17.1
Customers' deposits 75.4 71.5
Income taxes currently payable 32.1 24.6
Accrued other taxes 54.7 8.4
Accrued interest 34.6 33.2
Other 42.4 34.2
---------- ----------
330.9 295.2
Notes payable 23.0 125.0
Current portion of long-term debt
and cumulative preferred stock 44.6 45.9
---------- ----------
398.5 466.1
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 460.4 472.7
Unamortized investment tax credits 111.4 117.8
Other 159.8 133.4
---------- ----------
731.6 723.9
---------- ----------
$4,314.3 $4,259.5
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
1994 1993
----------- -----------
(Unaudited)
OPERATING ACTIVITIES:
Net income after dividends on preferred stock $148.8 $152.1
Adjustments for noncash items:
Depreciation and amortization 219.0 203.3
Deferred income taxes and
investment tax credits, net (14.5) (9.8)
Allowance for equity funds used during construction (4.6) (7.2)
Increase in accrued other postretirement benefit
costs 16.6 12.6
Changes in working capital:
Accounts receivable (36.6) (52.4)
Inventories 2.9 15.7
Underrecovery of fuel costs (24.7) (25.3)
Accounts payable (33.7) (0.9)
Accounts payable to associated companies 2.1 (2.5)
Income taxes currently payable 7.5 40.8
Accrued other taxes 46.2 44.3
Other 15.1 10.8
Other operating activities 20.9 (10.4)
---------- ----------
365.0 371.1
---------- ----------
INVESTING ACTIVITIES:
Construction expenditures (215.8) (268.1)
Allowance for borrowed funds used during construction (3.7) (5.7)
Additions to nonutility property (2.3) (6.5)
Acquisition of electric distribution system - (53.9)
Proceeds from sale of properties 6.0 4.2
Other investing activities (9.7) (13.8)
---------- ----------
(225.5) (343.8)
---------- ----------
FINANCING ACTIVITIES:
Issuance of long-term debt - 286.3
Repayment of long-term debt (20.6) (356.6)
Increase in commercial paper with
long term support - 104.0
Redemption of preferred stock - (45.2)
Dividends paid on common stock (130.1) (121.7)
Equity contributions from parent 114.7 45.0
Increase (decrease) in short-term debt (102.0) 62.5
---------- ----------
(138.0) (25.7)
---------- ----------
NET INCREASE IN CASH AND EQUIVALENTS 1.5 1.6
Beginning cash and equivalents - -
---------- ----------
ENDING CASH AND EQUIVALENTS $1.5 $1.6
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $74.9 $57.6
Income taxes (net of refunds) $94.7 $69.9
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
1) In September 1992, the Florida Public Service Commission ("FPSC") granted
Florida Power Corporation ("Florida Power"), the largest subsidiary of
Florida Progress Corporation ("Florida Progress"), an annual revenue
increase of $85.8 million, which was phased in from November 1992 through
November 1993. As a result of this action, for the three and nine months
ended September 30, 1994, revenues increased by $5.3 million and $16.8
million, and earnings increased by $3.2 million and $10.3 million,
respectively, compared to the same periods last year.
The new rates provide Florida Power the opportunity to earn a regulatory
return on equity ("ROE") of 12% with an allowed range between 11% and 13%.
In June 1994, the FPSC ordered that Florida Power's regulatory ROE for
1994 be restricted to a maximum of 12.5% based on current market
conditions. Florida Power's regulatory ROE has ranged from 12% to 12.3%
during 1994. According to the order, the restriction will be removed
after 1994 and the allowed range for the regulatory ROE will revert to
between 11% and 13% for 1995 and the following years. Florida Power
does not expect the limit to have a material impact on its earnings or
financial position.
2) On September 9, 1994, Florida Power announced it's subsidiaries were
withdrawing as equity partners in the SunShine Pipeline project.
Florida Power recorded an after-tax charge of $3.9 million related to the
write-off of its cumulative investments in the SunShine Pipeline.
3) In late 1993, Florida Progress offered an early retirement option to
eligible employees, with an effective retirement date of February 1, 1994.
In 1994, Florida Progress recorded an after tax charge of $9.5 million
that was related to the special termination benefit portion of the costs
associated with the option.
In October 1994, Florida Power announced further cost reductions that will
result in eliminating approximately 300 positions by the end of 1994. In
September 1994, Florida Power recognized after tax charges of $3 million
related to separation costs and $1.4 million related to curtailment costs
associated with post-employment benefits. Florida Power expects to record
an after-tax curtailment gain of approximately $2.5 million in the fourth
quarter of 1994 related to pension costs. This gain is recognizable upon
the affected employees' termination.
4) CONTINGENCIES
INSURANCE COVERAGE - The Price-Anderson Act currently limits the liability
of an owner of a nuclear power plant for a single nuclear incident to $8.8
billion. Florida Power has purchased the maximum available commercial
nuclear liability insurance of $200 million with the balance provided by
indemnity agreements prescribed by the Nuclear Regulatory Commission
("NRC"). In the event of a nuclear incident at any United States nuclear
power plant, Florida Power could be assessed up to $79.3 million per
incident, with a maximum assessment of $10 million per year. Florida
Power has never been assessed for a nuclear incident under these indemnity
agreements. In addition to this liability insurance, Florida Power
carries extra expense insurance with Nuclear Electric Insurance, Ltd.
("NEIL") to cover the cost of replacement power during any prolonged
outage of the nuclear unit. Under this policy, Florida Power is subject
to a retroactive premium assessment of up to $2.6 million in any year in
which policy losses exceed accumulated premiums and investment income. In
addition, Florida Power currently carries approximately $2.1 billion in
nuclear property insurance provided through several different policies.
One of these policies, which also is underwritten by NEIL, provides $1.4
billion of excess coverage. Under this policy, Florida Power is subject to
a retroactive premium assessment of up to $6.4 million for the first loss
in any policy year in which losses exceed funds available to NEIL. In the
event of multiple losses in any policy year, Florida Power's aggregate
retroactive premium could total up to $13.8 million.
Effective November 1993, the FPSC authorized Florida Power to self-insure
its transmission and distribution lines against loss due to storm damage
and other natural disasters. On June 21, 1994, the FPSC authorized Florida
Power to increase the annual accrual for the storm damage reserve from $3
million to $6 million effective January 1, 1994, and defer any losses in
excess of the reserve.
CONTAMINATED SITE CLEANUP - Florida Power and other subsidiaries of
Florida Progress have received notices from the United States
Environmental Protection Agency ("EPA") that it is or could be a
"potentially responsible party" under the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") and the Superfund
Amendment and Reauthorization Act and may be liable, together with others,
for the costs of cleaning up several contaminated sites identified by the
EPA. In addition, Florida Power has been named as a defendant in one suit
brought against four prior owners of a coal gasification plant site,
seeking contributions pursuant to CERCLA and Florida law toward the cost
of cleaning up that site and nearby property that may have become
contaminated. The best estimates currently available to Florida Progress
indicate that its proportionate share of liability for cleaning up the
sites range from $.7 million to $1.5 million, and it has a current reserve
of $1.4 million against these potential costs. Liability for such
cleanup costs is joint and several. However, Florida Progress presently
has no reason to believe that it will ultimately have to pay a
significantly disproportionate share of the cleanup costs of any of the
sites. Although it does not currently contemplate a need to do so,
Florida Power believes that it would have a sound basis for seeking
recovery through the ratemaking process in the event it ultimately has to
pay a significantly disproportionate share of the costs of cleaning up any
contaminated site. It is recognized, however, that no such recovery would
be assured.
PRAXAIR LAWSUIT - Florida Power and the Florida Power & Light Company
("FP&L") are co-defendants in an antitrust action brought by Praxair,
Inc., a customer of FP&L, seeking injunctive relief and damages. The suit
challenges a long-standing territorial agreement between the two
unaffiliated, neighboring utilities, notwithstanding the defendants'
contention that the agreement was clearly authorized by state law and
approved by the FPSC. Florida Power believes that the state action
exemption from the antitrust laws is applicable to the agreement and
Florida Power's consequent refusal to provide electricity to Praxair, Inc.
Management believes it has a strong defense and intends to vigorously
defend against this action.
NON-UTILITY GENERATORS - Florida Power has long-term contracts to purchase
approximately 1100 megawatts ("MW") of firm power and as-available energy
from non-utility generators ("NUGs"). In response to a dispute over the
price paid for purchases under the contracts, two NUGs have filed suit
against Florida Power in state court and a third NUG amended its complaint
in a pending lawsuit regarding a backup fuel dispute with Florida Power.
Florida Power has filed petitions with the FPSC seeking to resolve these
issues.
In October 1994, Florida Power placed into effect a generation curtailment
plan, which was implemented pursuant to Florida Power's NUG contracts.
During periods of low demand when curtailment becomes necessary and is
implemented, Florida Power avoids having to cycle off certain of its own
baseload units. Although Florida Power filed a petition with the FPSC
seeking approval of this plan, approval was not required prior to
implementation.
The FPSC has not ruled on these petitions. The liability associated with
these NUG issues is currently not material, but could become material over
a period of time. See "Operating Results-Florida Power-Non-Utility
Generators" under Part I, Item 2 herein.
5) In the opinion of management, the accompanying financial statements
include all adjustments deemed necessary to summarize fairly and reflect
the financial position and results of operations of Florida Progress and
Florida Power for the interim periods presented. However, it is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto in the Florida Progress Form 10-K for the
year ended December 31, 1993 (the "1993 Progress Form 10-K") and the
Florida Power Form 10-K for the year ended December 31, 1993 (the "1993
Power Form 10-K").
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OPERATING RESULTS
Florida Progress' earnings per share for the three and nine months ended
September 30, 1994, were $.80 and $1.79 per share, respectively, which
represents a reduction of $.13 and $.02 compared to the same periods last year.
This decrease resulted from lower earnings in both periods from Florida Power,
Florida Progress' largest operating unit, which realized both quarterly and
year-to-date earnings per share declines of $.18 and $.11, respectively. This
was partially offset by improved results of Florida Progress' diversified
operations, which increased earnings per share over 1993 by $.05 and $.10 per
share, respectively, for the three and nine-month periods.
Florida Power - Operating Revenues
Florida Power's operating revenues were $22.5 million lower and $109.1 million
higher, respectively, for the three and nine-month periods ended September 30,
1994, compared to the same periods in 1993. The decrease in revenues for the
three-month period was due primarily to lower energy sales resulting from
frequent afternoon thunderstorms which resulted in lower than normal
temperatures during the third quarter. Increased energy sales and the
continued impact of a phased-in retail rate increase contributed to the
increase in revenues for the nine-month period. (See Note 1 to the Financial
Statements with respect to the retail rate increase.)
Florida Power - Operating Expenses
Fuel and purchased power costs were $10 million lower and $43.3 million higher
for the three and nine months ended September 30, 1994, respectively, compared
to the same periods in 1993. Lower fuel costs for the quarter, due primarily
to reduced system requirements, were partially offset by increased capacity
payments to NUGs. These higher capacity payments and increased costs from
higher system requirements contributed to the increase in fuel and purchased
power expense for the nine-month period. Florida Power recovers substantially
all of its fuel and purchased power costs through a FPSC ordered fuel
adjustment clause, thereby eliminating any material impact on net income.
Other operation and maintenance expenses were $1.6 million lower and $27.6
million higher for the three and nine months ended September 30, 1994,
respectively, compared to the same periods last year. For the three-month
period ended September 30, 1994, costs associated with the recently announced
work force reductions were more than offset by lower operating costs. The
costs for the work force reductions and the early retirement program offered in
late 1993, and higher recoverable energy conservation program costs,
contributed to the increase for the nine-month period. Similar to the recovery
of fuel costs mentioned above, Florida Power recovers substantially all of its
energy conservation program costs, thereby eliminating any material impact on
net income. (See Note 3 to the Financial Statements with respect to the early
retirement program and work force reductions.)
Florida Power - Other Operating Results
In October 1994, Florida Power presented a proposed settlement agreement for
its 1995 wholesale rate case to its wholesale customers requesting an annual
revenue increase of approximately $14.2 million. The increase is necessary,
primarily to recover the cost of increased purchased power expenses associated
with additional purchases from NUGs. Prefiling settlement discussions are
expected to begin in early November 1994. Florida Power plans to file this
rate increase with the Federal Energy Regulatory Commission ("FERC") on
December 15, 1994, and expects the new rates to be effective in January 1995.
On October 4, 1994, the FPSC approved Florida Power's depreciation study. The
depreciation rate changes will become effective January 1, 1995, and are not
expected to have a significant impact on 1995 annual depreciation expense.
During Florida Power's most recent retail rate case, Florida Power agreed to
file a demand-side management ("DSM") incentive proposal and a revenue
decoupling proposal. Florida Power filed both proposals in April 1993. See
prior discussion in Item 1 under the headings "Business-Utility
Operations-Florida Power-Rate Matters" and "Business-Rate Matters" in the
1993 Progress and Power Form 10-K, respectively. On October 3, 1994, the FPSC
voted against adopting DSM incentives and in favor of revenue decoupling.
Florida Power believes the DSM incentives on selected DSM programs would have
encouraged the development and use of such DSM programs since both rate payers
and shareholders would have benefited. However, the FPSC vote against adopting
DSM incentives is not expected to have a material effect on earnings.
The FPSC accepted Florida Power's revenue decoupling proposal and directed the
FPSC staff to recommend specific implementation proposals for a final FPSC vote
in November 1994. There are still certain technical implementation aspects of
the FPSC staff's proposal to be resolved. Revenue decoupling is a
non-traditional approach to rate making that eliminates the direct link between
energy sales and base revenues. The Florida Power proposal calls for
establishing a three-year test period for revenue decoupling of residential
revenues only, which is about 60% of Florida Power's base revenues. The test
will employ a revenue per customer methodology ("RPC"). The RPC would reduce
month-to-month earnings volatility caused by weather, making earnings more
predictable. Florida Power does not expect revenue decoupling to have a
material effect on annual earnings. The three-year test period is expected to
begin in January 1995.
As previously reported in Item 1 under the headings "Business-Utility
Operations-Transmission And Distribution" and "Business-Transmission And
Distribution" in the 1993 Progress and Power Form 10-K, respectively, Florida
Power has been pursuing a plan to construct a 500 kilovolt ("KV") transmission
line that would run through northwest Hillsborough County and connect the Lake
Tarpon substation in Pinellas County to the Kathleen substation in Polk County
(the "LTK Line"). On October 25, 1994, Florida Power announced that it was
seeking a reassessment from the FPSC of the need for the project. Florida
Power believes there are now more cost-effective solutions to help alleviate
the system reliability concerns that initially justified this project. If the
LTK Line is cancelled, Florida Power will seek authorization from the FPSC to
account for the associated costs as a regulatory asset and to amortize the
costs over a five-year period. If approved by the FPSC, the unrecovered costs
of this regulatory asset would be included as part of rate base, the periodic
amortization would be included in the cost of service, and both would be used
in the determination of Florida Power's regulated ROE. To date, Florida Power
has incurred, or has committed to incur, costs of approximately $22 million,
including $5 million of allowance for funds used during construction ("AFUDC"),
on the LTK Line. Actual recovery will depend on FPSC actions, but Florida
Power believes that all costs were prudently incurred and should be eligible
for inclusion in cost of service.
On September 9, 1994, Florida Power announced that it's subsidiaries were
withdrawing as equity partners in the SunShine Pipeline project. See Note 2
to the Financial Statements herein.
Florida Power - Non-Utility Generators
Florida Power has long-term contracts to purchase approximately 1100 MW of firm
power and as-available energy from NUGs. See "Non-Utility Generators" in Note
4 to the Financial Statements herein and prior discussion in Note 11 in the
1993 Progress Form 10-K and Note 10 in the 1993 Power Form 10-K.
In 1994, Florida Power developed a model simulating the operation of a
coal-fired avoided unit ("avoided unit"). This is the type of unit which
Florida Power's purchased power contracts use as the avoided unit for pricing
purposes. The model shows that during certain periods the avoided unit would
not operate because other Florida Power generation and purchase options would
provide lower cost power. During such periods, Florida Power's contracts
provide that Florida Power pay an as-available price rather than a firm energy
price, which is in many instances significantly lower than the firm energy
price. Florida Power began making payments on the basis of this model in
August 1994. On an annual basis, paying an as-available energy price during
periods when the avoided unit would not operate is expected to result in
lowered payments to NUGs of approximately $15 million. Following the
implementation of this pricing mechanism, two NUGs filed suit against Florida
Power and a third amended its complaint in a pending lawsuit regarding a backup
fuel dispute to include a count regarding the pricing model. Florida Power
believes that the FPSC has jurisdiction over both the avoided unit model
dispute and the backup fuel dispute. Accordingly, Florida Power filed
petitions with the FPSC seeking to resolve these issues. The FPSC has not yet
ruled on these petitions.
Under certain circumstances, the rules of the FPSC and Florida Power's
contracts with its NUGs provide that Florida Power shall be relieved of its
obligation to purchase electricity. Such circumstances arise when purchases
from a NUG would impair Florida Power's ability to give adequate service to its
customers, result in costs greater than those which Florida Power would incur
if it did not make such purchases, or otherwise place an undue burden on
Florida Power. By October 1994, Florida Power had obtained approximately 350
MW of voluntary daily curtailment arrangements from its NUGs in anticipation
that Florida Power might need to invoke this provision under conditions when
available energy on Florida Power's system exceeds the demands of its
customers. These voluntary curtailments were not sufficient to alleviate all
instances when electricity generated and purchased exceeds demand. Effective
October 14, 1994, Florida Power placed into effect a generation curtailment
plan, which was implemented pursuant to Florida Power's NUG contracts and the
FPSC rules. During periods of low demand when curtailment becomes necessary
and is implemented, Florida Power avoids having to cycle off certain of its own
baseload units. These baseload units are not designed to be cycled; therefore,
Florida Power avoids operating in an inefficient and potentially unreliable
manner that would otherwise increase Florida Power's operating and maintenance
costs. NUGs are paid a capacity payment but not an energy payment when
curtailed. On an annual basis, Florida Power expects that its energy payments
will be approximately $1 million to $2 million less with the curtailment plan.
Although Florida Power filed a petition with the FPSC seeking approval of this
plan, approval was not required prior to implementation. The FPSC has not
ruled on this petition.
Florida Progress - Diversified Operations
Florida Progress' diversified revenues were about even for the quarter and
$131.2 million higher for the nine months ended September 30, 1994 compared to
the same periods in 1993. The increase for the nine-month period was caused
primarily by a June 1993 acquisition by Electric Fuels, Florida Progress' coal
mining and transportation subsidiary. Gross margins remained fairly constant
for the quarter and increased $9.8 million for the nine-month period compared
to the same periods in 1993. Improved marine operations, the acquisition noted
above, and increased coal sales were the primary factors contributing to the
positive results.
Florida Progress - Consolidated
During the third quarter ended September 30, 1993, a one percent increase in
the federal corporate income tax rate became effective and was applied
retroactive to January 1, 1993. The increase in the tax rate reduced
Florida Progress' consolidated earnings related to the first six months of 1993
by $4.5 million. In third quarter 1993, this change in tax rate reduced
diversified earnings by $3.4 million, primarily due to a one-time deferred tax
adjustment, and reduced Florida Power earnings by $1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
Florida Power budgeted $344 million, excluding AFUDC, for its 1994 construction
program, of which $224 million was spent during the first nine months of the
year. These expenditures were financed primarily with funds from operations
and equity contributions from Florida Progress.
In 1992, the FPSC granted Florida Power a certificate of need to build two
gas-fired combined cycle generating units, each with a winter rating of 235 MW.
In September 1994, Florida Power completed the purchase of approximately 8,100
acres of mined-out phosphate land for the new power plant site. The site is
located in Polk County, Florida, approximately 50 miles east of Tampa. The
first unit is planned to come on line in 1998, with the second unit to follow
in 1999, at a combined cost of approximately $356 million. In connection with
this project, substantial amounts of environmental expenditures are included in
this combined cost forecast. Florida Power expects to spend about $11
million in the next two years to cover environmental costs of site development,
permitting and compliance. At September 30, 1994, actual expenditures for this
site totaled $34 million, of which $7 million was environmental related.
In August 1994, Progress Rail Services Corporation, a subsidiary of Electric
Fuels Corporation, signed a letter of intent to acquire all of the outstanding
capital stock of FM Industries, Inc. ("FMI"), a manufacturer and reconditioner
of railcar hydraulic cushioning units. FMI is based in Fort Worth, Texas, and
has 325 employees. Completion of the proposed transaction is subject to
negotiation of a definitive agreement and receipt of necessary governmental
approvals.
In September 1994, Florida Progress contributed $7.5 million to Florida Power
from the sale of common stock through its dividend reinvestment and stock
purchase plan. These funds were used to repay commercial paper and for general
corporate purposes.
Florida Power's ratio of earnings to fixed charges was 3.73 at September 30,
1994. (See Exhibit 12 filed herewith.)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
1. Kim S. McDowell and Talesa C. Lloyd v. Florida Power Corporation, United
States District Court for the Middle District of Florida, Tampa Division,
Case No. 91-1858-CIV-T-23B.
See prior discussion of this matter in the 1993 Progress and Power Form
10-K, Part I, Item 3, paragraph 5 and the Progress and Power Form 10-Q for
the quarter ended June 30, 1994, Part II, Item 1, paragraph 3. On June 8,
1994, the Court set this matter for trial during the week of December 5,
1994. The time frame within which the plaintiffs could have amended their
complaint to add class action allegations has expired. Consequently, the
case is proceeding with only the two named plaintiffs. Florida Power
believes that its exposure in this matter will not be material even if
Florida Power is unsuccessful in defending against these individual
claimants. Accordingly, this matter is now considered terminated for
reporting purposes.
2. Orlando Cogen (1), Inc. and Orlando Power Generation I Inc., as general
partners of and on behalf of Orlando CoGen Limited, L.P. v. Florida Power
Corporation, U.S. District Court, Middle District of Florida, Orlando
Division, Case No. 94-303-CIV-ORL-22.
Petition for Resolution of a Cogeneration Contract Dispute with Orlando
CoGen Limited, L.P. by Florida Power Corporation, Florida Public Service
Commission, Docket No. 940357-EQ.
In 1993, Florida Power notified Orlando CoGen Limited, L.P. ("OCL"), a
limited partnership selling electricity to Florida Power, that OCL was in
default of its purchased power contract with Florida Power by failing to
install and maintain backup fuel at its cogeneration facility. On March
10, 1994, the general partners of OCL - Orlando CoGen (1), Inc., a
subsidiary of Air Products and Chemicals, Inc. ("Air Products"), and
Orlando Power Generation I Inc., a subsidiary of UtilCo Group ("UtilCo") -
filed suit against Florida Power as general partners of and on behalf of
OCL. As amended, the suit now seeks unspecified damages under Federal and
state antitrust laws and an order directing Florida Power to pay the
capacity payment under the contract. The suit also includes a breach of
contract count based on Florida Power's reliance on the pricing mechanism
specified in the contract, which allows Florida Power to pay an
as-available energy price rather than a higher firm energy price when the
avoided unit upon which the contract price is based would not have been
operated.
Florida Power filed an answer to the complaint and antitrust claims, and a
counterclaim against the partnership, Air Products, and UtilCo,
alleging that OCL never intended to maintain an uninterrupted fuel supply,
and therefore fraudulently induced Florida Power to execute a purchased
power contract.
On April 7, 1994, Florida Power filed a complaint with the FPSC requesting
the FPSC to enter an order interpreting the contract between OCL and
Florida Power to require OCL to provide a backup fuel supply for its
cogeneration facility. OCL has filed a motion to dismiss the FPSC case on
the grounds that the FPSC lacks jurisdiction to interpret this
cogeneration contract. A FPSC ruling on its jurisdiction is expected by
the end of 1994. For additional discussion of this matter, see "Non-
Utility Generators" in Note 4 to the Financial Statements and "Operating
Results - Florida Power - Non-Utility Generators" under Part I, Item 2
herein.
3. Pasco Cogen, Ltd. v. Florida Power Corporation, Florida Circuit Court,
Sixth Judicial Circuit for Pasco County, Case No. 94-5331-CA-DIV-Y.
On October 14, 1994, Florida Power received service of a complaint brought
by Pasco Cogen, Ltd. ("Pasco"), a Florida limited partnership. Under a
purchase power contract, Pasco sells electricity to Florida Power from
Pasco's natural gas-fired cogeneration facility located in Pasco County,
Florida. The dispute involves Florida Power's reliance on the pricing
mechanism specified in Pasco's contract, which allows Florida Power to pay
an as-available energy price rather than a higher firm energy price when
the avoided unit upon which the contract price is based would not have
been operated. Pasco seeks a declaratory judgment that it is entitled to
higher payments for energy delivered to Florida Power and a mandatory
injunction requiring Florida Power to pay higher energy payments, based on
Pasco's allegation that the avoided unit would have operated more often
than Florida Power's model indicates. Pasco also seeks unspecified
damages for Florida Power's alleged breach of the Pasco contract and
violations of Florida antitrust law. Florida Power filed its answer to
this lawsuit on November 2, 1994. For additional discussion of this
matter, see "Non-Utility Generators" in Note 4 to the Financial Statements
and "Operating Results - Florida Power - Non-Utility Generators" under
Part I, Item 2 herein.
4. NCP Lake Power, Inc. v. Florida Power Corporation, Florida Circuit Court,
Fifth Judicial Circuit for Lake County, Case No. 94-2354 CA-01.
On October 21, 1994, Florida Power received service of a complaint brought
by NCP Lake Power, Inc. ("Lake"), a general partner of Lake Cogen Ltd, a
Florida limited partnership. Under a purchase power contract, Lake sells
electricity to Florida Power from Lake's natural gas-fired cogeneration
facility located in Lake County, Florida. The dispute involves Florida
Power's reliance on the pricing mechanism specified in Lake's contract
price which allows Florida Power to pay an as-available price rather than
a higher firm energy price when the avoided unit upon which the contract
price is based would not have been operated.
Lake seeks unspecified damages for Florida Power's alleged breach of the
Lake contract, and a declaratory judgment that it is entitled to higher
payments for energy delivered to Florida Power. Florida Power filed its
answer to this lawsuit on November 10, 1994. For additional discussion of
this matter, see "Non-Utility Generators" in Note 4 to the Financial
Statements and "Operating Results - Florida Power - Non-Utility
Generators" under Part I, Item 2 herein.
5. In re: Petition of Florida Power Corporation for a Declaratory Statement
regarding the application of Rule 25-17-22.020, F.A.C., to certain
negotiated contracts for the purchase of firm capacity and energy, Florida
Public Service Commission, Docket No. 940771-EQ.
On July 21, 1994, Florida Power filed the above-referenced petition
seeking a FPSC declaration that Florida Power's reliance on the pricing
mechanism specified in 11 of its purchase power contracts is consistent
with FPSC regulations. The mechanism in question allows Florida Power to
pay an as-available energy price rather than a higher firm energy price
when the avoided unit upon which the contract prices are based would not
have been operated. Various NUGs have intervened for the purpose of
moving to dismiss this petition, arguing that this is a contract dispute
over which the FPSC lacks jurisdiction. No FPSC action has occurred to
date. For additional discussion of this matter, see "Non-Utility
Generators" in Note 4 to the Financial Statements and "Operating Results -
Florida Power - Non-Utility Generators" under Part I, Item 2 herein.
6. In re: Petition of Florida Power Corporation for determination that its
plan for curtailing purchases from Qualifying Facilities in minimum load
conditions is consistent with Rule 25-17.086, F.A.C., Florida Public
Service Commission, Docket No. 941101-EQ.
As a result of various factors, Florida Power has begun to experience a
condition where the total energy on its system may exceed the demand of
its customers during minimum load periods on certain days, usually during
the mild-weather period from mid-October through May. On October 14,
1994, Florida Power placed into effect a generation curtailment plan, and
filed the above-referenced petition with the FPSC to seek a determination
that the curtailment plan is consistent with FPSC rules. The FPSC has not
yet set a schedule for this proceeding. For additional discussion of this
matter, see "Non-Utility Generators" in Note 4 to the Financial Statements
and "Operating Results - Florida Power - Non-Utility Generators" under
Part I, Item 2 herein.
7. Praxair, Inc. v. Florida Power & Light Company ("FP&L") and Florida Power
Corporation, U.S. District Court for the Middle District of Florida, Tampa
Division, Civil Action No. 88-1672-CIV-T-13C.
See prior discussion of this matter in the 1993 Progress and Power Form
10-K, Part I, Item 3, paragraph 4. Initial briefs have been filed in the
U.S. Court of Appeals for the 11th Circuit by all the parties in this
case, as well as the FPSC and the Attorney General of Florida as amicus
curiae in support of the positions of Florida Power and FP&L. The case
has not yet been set for oral argument. For additional discussion of this
matter, see "Praxair Lawsuit" in Note 4 to the Financial Statements
herein.
Item 5. Other
1) Union Contract
Florida Power's contract with the International Brotherhood of Electrical
Workers ("IBEW") was to have expired on December 31, 1994. On October 3,
1994, Florida Power and the IBEW decided not to give notice to terminate
the present contract. The contract will automatically renew for 12
months, or until a new agreement is reached if earlier. Florida Power
and the IBEW are currently negotiating a new contract.
2) Progress Credit Corporation
Progress Credit Corporation ("PCC"), Florida Progress' finance subsidiary,
is continuing its planned orderly withdrawal from the commercial leasing
and lending industry. Leases and loans generally are placed on
non-accrual status when management believes the receipt of interest or
principal is unlikely. Florida Progress previously reported in its Form
10-Q for the quarter ended March 31, 1994, that PCC had one loan for $25
million on non-accrual status. In October 1994, the deferred loan
interest payments were made and, therefore, PCC has removed the loan from
non-accrual status.
3) New FPSC Commissioner
In August 1994, the Governor of Florida appointed Joe Garcia, a Miami,
Florida lawyer, to the FPSC. Mr. Garcia replaced Luis J. Lauredo who
resigned from the FPSC in April 1994.
4) Limited Partnership Investment
Florida Progress announced on November 1, 1994, that it had agreed to
invest $5 million as limited partner in Tampa Bay Sports Investors, Ltd.,
a Florida limited partnership to be formed to acquire a Major League
Baseball franchise for the Tampa Bay area. A corporation controlled by
Vincent J. Naimoli, a director of Florida Progress, would be the managing
general partner of the partnership and Mr. Naimoli himself would be a
limited partner.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Description
12 Statement Regarding Computation of Ratio
of Earnings to Fixed Charges for Florida
Power.
27.(a) Florida Progress Financial Data Schedule
27.(b) Florida Power Financial Data Schedule
(b) Reports on Form 8-K:
During the third quarter 1994, Florida Progress and Florida Power
filed the following report on Form 8-K:
Form 8-K dated July 21, 1994, reporting under Item 5
"Other Events" Florida Progress' and Florida Power's second
quarter 1994 earnings.
In addition, Florida Progress and Florida Power filed the following
report on Form 8-K subsequent to the third quarter 1994:
Form 8-K dated October 20, 1994, reporting under Item 5
"Other Events" Florida Progress' and Florida Power's third
quarter 1994 earnings.
<PAGE>
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.
FLORIDA PROGRESS CORPORATION
FLORIDA POWER CORPORATION
Date: November 14, 1994 /s/ John Scardino, Jr.
-------------------------
John Scardino, Jr.
Vice President and Controller
Date: November 14, 1994 /s/ David R. Kuzma
-------------------------
David R. Kuzma
Vice President and Treasurer
<PAGE>
Exhibit Index
Exhibit Number Description
- -------------- -------------------------------------------
12 Statement Regarding Computation of Ratio
of Earnings to Fixed Charges for Florida
Power.
27.(a) Florida Progress Financial Data Schedule
27.(b) Florida Power Financial Data Schedule
Exhibit 12
FLORIDA POWER CORPORATION
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(Dollar Amounts in Thousands)
Twelve Months
Ended
September 30, 1994
(Unaudited)
-------------
Earnings:
Net Income. . . . . . . . . . . . . . . . . $ 188,839
Net Taxes . . . . . . . . . . . . . . . . . 105,688
Fixed Charges . . . . . . . . . . . . . . . 108,043
--------
$ 402,570
========
Ratio of Earnings to Fixed Charges . . . . . . . . . 3.73
========
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