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 March 31, 1995
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 March 31, 1995
---------- -------------- ------------------
Florida Progress Corporation Common Stock,
without par value 95,525,472
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
ITEM 1. FINANCIAL STATEMENTS
FLORIDA PROGRESS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
Three Months Ended
March 31,
1995 1994
-------- --------
(Unaudited)
REVENUES:
Electric utility $515.9 $483.5
Diversified 187.3 155.7
--------- ---------
703.2 639.2
EXPENSES: --------- ---------
Electric utility:
Fuel used in generation 78.6 90.7
Purchased power 103.3 56.3
Deferred fuel 7.4 15.2
Other operation 87.4 108.1
--------- ---------
Operation 276.7 270.3
Maintenance 33.0 30.2
Depreciation 70.7 64.5
Taxes other than income taxes 42.9 40.2
--------- ---------
423.3 405.2
--------- ---------
Diversified:
Cost of sales 152.9 129.3
Other 16.7 13.4
--------- ---------
169.6 142.7
--------- ---------
INCOME FROM OPERATIONS 110.3 91.3
--------- ---------
INTEREST EXPENSE AND OTHER:
Interest expense 36.6 36.2
Allowance for funds used during
construction (2.2) (2.6)
Preferred dividend requirements of
Florida Power 2.5 2.5
Other expense (income), net 0.8 0.6
--------- ---------
37.7 36.7
--------- ---------
INCOME BEFORE INCOME TAXES 72.6 54.6
Income Taxes 26.0 18.1
--------- ---------
NET INCOME $46.6 $36.5
========= =========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 95.3 90.1
========= =========
EARNINGS PER AVERAGE COMMON SHARE $0.49 $0.41
========= =========
DIVIDENDS PER COMMON SHARE $0.505 $0.495
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
March 31, December 31,
1995 1994
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held
for future use $5,690.7 $5,603.4
Less - Accumulated depreciation 2,042.4 1,981.6
Accumulated decommissioning for nuclear plant 141.3 135.2
Accumulated dismantlement for fossil plants 91.9 92.4
---------- ----------
3,415.1 3,394.2
Construction work in progress 190.7 222.1
Nuclear fuel, net of amortization of $329.3
in 1995 and $322.8 in 1994 45.6 52.9
---------- ----------
Net electric utility property 3,651.4 3,669.2
Other property, net of depreciation of $169.9
in 1995 and $163.5 in 1994 425.6 420.9
---------- ----------
4,077.0 4,090.1
---------- ----------
CURRENT ASSETS:
Cash and equivalents 21.9 14.4
Accounts receivable, net 250.5 262.2
Current portion of leases and loans receivable 15.2 15.3
Inventories at average cost:
Fuel 82.1 75.2
Materials and supplies 108.9 110.4
Diversified materials 68.7 68.1
Underrecovery of fuel cost - 1.8
Deferred income taxes 32.6 28.8
Other 13.3 12.2
---------- ----------
593.2 588.4
---------- ----------
OTHER ASSETS:
Investments:
Leases and loans receivable, net 426.8 438.0
Marketable securities 149.7 148.3
Nuclear plant decommissioning fund 131.7 123.6
Joint ventures and partnerships 74.8 74.5
Deferred insurance policy acquisition costs 97.2 91.9
Other 156.5 163.9
---------- ----------
1,036.7 1,040.2
---------- ----------
$5,706.9 $5,718.7
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
March 31, December 31,
1995 1994
----------- -----------
CAPITAL AND LIABILITIES (Unaudited)
COMMON STOCK EQUITY:
Common stock $1,158.8 $1,148.1
Retained earnings 841.4 842.9
Unrealized loss on securities available for sale (4.3) (6.6)
---------- ----------
1,995.9 1,984.4
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 113.5 113.5
With sinking funds 30.0 30.0
LONG-TERM DEBT 1,842.2 1,859.6
---------- ----------
TOTAL CAPITAL 3,981.6 3,987.5
---------- ----------
CURRENT LIABILITIES:
Accounts payable 146.0 147.1
Customers' deposits 77.3 76.9
Income taxes payable 44.5 12.7
Accrued other taxes 30.0 14.8
Accrued interest 46.8 47.3
Overrecovery of fuel cost 2.9 -
Other 62.1 69.3
---------- ----------
409.6 368.1
Notes payable - 55.3
Current portion of long-term debt 46.8 52.9
---------- ----------
456.4 476.3
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 741.1 744.1
Unamortized investment tax credits 107.9 110.0
Insurance policy benefit reserves 233.3 222.5
Other postretirement benefit costs 72.1 67.8
Other 114.5 110.5
---------- ----------
1,268.9 1,254.9
---------- ----------
$5,706.9 $5,718.7
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
(In millions)
Three Months Ended
March 31,
1995 1994
----------- -----------
(Unaudited)
OPERATING ACTIVITIES:
Net income $46.6 $36.5
Adjustments for noncash items:
Depreciation and amortization 86.7 81.5
Deferred income taxes and investment
tax credits, net (13.0) (17.8)
Increase in accrued other postretirement
benefit costs 4.3 5.4
Net change in deferred insurance policy
acquisition costs (5.3) (3.6)
Net change in insurance policy
benefit reserves 10.8 9.8
Changes in working capital, net of effects
from acquisition or sale of businesses:
Accounts receivable 11.7 17.8
Inventories (7.3) (10.2)
Overrecovery of fuel cost 4.7 7.9
Accounts payable (1.2) (38.1)
Income taxes payable 32.3 1.1
Accrued other taxes 15.0 15.9
Other (8.3) 2.2
Other operating activities 8.9 22.5
--------- ---------
185.9 130.9
--------- ---------
INVESTING ACTIVITIES:
Property additions (including allowance for
borrowed funds used during construction) (72.7) (62.6)
Proceeds from sale of properties and businesses 3.6 4.4
Purchase of leases, loans and securities (11.0) (37.7)
Proceeds from sale or collection of leases,
loans and securities 23.6 31.7
Investments in joint ventures and partnerships,
net of distributions (0.8) (0.2)
Other investing activities (2.7) (2.9)
--------- ---------
(60.0) (67.3)
--------- ---------
FINANCING ACTIVITIES:
Issuance of long-term debt - 99.3
Repayment of long-term debt (10.0) (14.7)
Decrease in commercial paper with
long-term support (14.4) (71.7)
Sale of common stock 9.4 13.2
Dividends paid on common stock (48.1) (44.3)
Decrease in short-term debt (55.3) (39.0)
Other financing activities - (0.7)
--------- ---------
(118.4) (57.9)
--------- ---------
NET INCREASE IN CASH AND EQUIVALENTS 7.5 5.7
Beginning cash and equivalents 14.4 9.1
--------- ---------
ENDING CASH AND EQUIVALENTS $21.9 $14.8
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $35.4 $34.2
Income taxes (net of refunds) $7.2 $34.6
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
March 31,
1995 1994
-------- --------
(Unaudited)
OPERATING REVENUES:
Residential $283.7 $267.5
Commercial 109.4 102.5
Industrial 43.1 39.7
Sales for resale 26.0 30.9
Other 53.7 42.9
--------- ---------
515.9 483.5
--------- ---------
OPERATING EXPENSES:
Operation:
Fuel used in generation 78.6 90.7
Purchased power 103.3 56.3
Deferred fuel 7.4 15.2
Other 87.4 108.1
--------- ---------
276.7 270.3
--------- ---------
Maintenance 33.0 30.2
Depreciation 70.7 64.5
Taxes other than income taxes 42.9 40.2
Income taxes:
Currently payable 33.3 33.5
Deferred, net (7.2) (13.2)
Investment tax credits, net (2.1) (2.1)
--------- ---------
24.0 18.2
--------- ---------
447.3 423.4
--------- ---------
OPERATING INCOME 68.6 60.1
--------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 1.2 1.5
Miscellaneous other expense, net (0.5) (0.8)
--------- ---------
0.7 0.7
--------- ---------
INTEREST CHARGES
Interest on long-term debt 24.2 23.9
Other interest expense 2.8 3.7
--------- ---------
27.0 27.6
Allowance for borrowed funds used
during construction (1.0) (1.1)
--------- ---------
26.0 26.5
--------- ---------
NET INCOME 43.3 34.3
DIVIDENDS ON PREFERRED STOCK 2.5 2.5
--------- ---------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $40.8 $31.8
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
March 31, December 31,
1995 1994
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held
for future use $5,690.7 $5,603.4
Less - Accumulated depreciation 2,042.4 1,981.6
Accumulated decommissioning for nuclear plant 141.3 135.2
Accumulated dismantlement for fossil plants 91.9 92.4
---------- ----------
3,415.1 3,394.2
Construction work in progress 190.7 222.1
Nuclear fuel, net of amortization of $329.3
in 1995 and $322.8 in 1994 45.6 52.9
---------- ----------
3,651.4 3,669.2
Other property, net 22.5 24.2
---------- ----------
3,673.9 3,693.4
---------- ----------
CURRENT ASSETS:
Cash and equivalents 3.0 -
Accounts receivable, less reserve of $3.5
in 1995 and $2.3 in 1994 157.5 167.3
Inventories at average cost:
Fuel 56.3 52.6
Materials and supplies 108.9 110.4
Underrecovery of fuel cost - 1.8
Deferred income taxes 32.6 28.8
Other 5.3 5.8
---------- ----------
363.6 366.7
---------- ----------
OTHER ASSETS:
Nuclear plant decommissioning fund 131.7 123.6
Unamortized debt expense, being amortized
over term of debt 29.2 29.6
Other 67.0 71.2
---------- ----------
227.9 224.4
---------- ----------
$4,265.4 $4,284.5
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
March 31, December 31,
1995 1994
----------- -----------
CAPITALIZATION AND LIABILITIES (Unaudited)
CAPITALIZATION:
Common stock $955.4 $942.9
Retained earnings 721.0 724.5
---------- ----------
1,676.4 1,667.4
CUMULATIVE PREFERRED STOCK:
Without sinking funds 113.5 113.5
With sinking funds 30.0 30.0
LONG-TERM DEBT 1,351.1 1,363.8
---------- ----------
TOTAL CAPITAL 3,171.0 3,174.7
---------- ----------
CURRENT LIABILITIES:
Accounts payable 76.2 85.0
Accounts payable to associated companies 19.7 21.4
Customers' deposits 77.3 76.9
Income taxes payable 35.9 7.1
Accrued other taxes 25.3 11.3
Accrued interest 37.6 32.6
Overrecovery of fuel cost 2.9 -
Other 30.4 36.2
---------- ----------
305.3 270.5
Notes payable - 55.3
Current portion of long-term debt 35.4 35.4
---------- ----------
340.7 361.2
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 487.1 488.0
Unamortized investment tax credits 107.2 109.3
Other postretirement benefit costs 69.5 65.4
Other 89.9 85.9
---------- ----------
753.7 748.6
---------- ----------
$4,265.4 $4,284.5
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Statements of Cash Flows
(In millions)
Three Months Ended
March 31,
1995 1994
---------- ----------
(Unaudited)
OPERATING ACTIVITIES:
Net income after dividends on preferred stock $40.8 $31.8
Adjustments for noncash items:
Depreciation and amortization 79.8 75.1
Deferred income taxes and investment
tax credits, net (9.3) (15.4)
Increase in accrued other postretirement
benefit costs 4.1 5.1
Allowance for equity funds used during construction (1.2) (1.5)
Changes in working capital:
Accounts receivable 9.8 22.2
Inventories (2.2) (5.8)
Overrecovery of fuel cost 4.7 7.9
Accounts payable (8.8) (46.3)
Accounts payable to associated companies (1.7) 2.8
Income taxes payable 28.8 14.4
Accrued other taxes 14.0 15.5
Other 0.1 9.7
Other operating activities 4.5 19.0
--------- ---------
163.4 134.5
--------- ---------
INVESTING ACTIVITIES:
Construction expenditures (59.2) (56.8)
Allowance for borrowed funds used during construction (1.0) (1.1)
Additions to nonutility property (0.7) (0.8)
Proceeds from sale of properties 3.4 2.0
Other investing activities (2.8) (2.9)
--------- ---------
(60.3) (59.6)
--------- ---------
FINANCING ACTIVITIES:
Decrease in commercial paper with
long-term support (13.0) -
Dividends paid on common stock (44.3) (42.0)
Equity contributions from parent 12.5 7.5
Decrease in short-term debt (55.3) (40.4)
--------- ---------
(100.1) (74.9)
--------- ---------
NET INCREASE IN CASH AND EQUIVALENTS 3.0 -
Beginning cash and equivalents - -
--------- ---------
ENDING CASH AND EQUIVALENTS $3.0 $ -
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $20.3 $21.2
Income taxes (net of refunds) $4.3 $19.0
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 December 1994, Florida Progress Corporation ("Florida Progress")
acquired FM Industries, Inc. ("FMI"), which was accounted for on a pooling
of interests basis. The March 31, 1994 data has been restated in the
accompanying Florida Progress financial statements to reflect the
inclusion of FMI. The acquisition of FMI increased revenues by $10.6
million and net income by $.7 million, or $.01 per share, for the three
months ended March 31, 1994.
2) The Florida Public Service Commission ("FPSC") ordered Florida Power
Corporation ("Florida Power") to conduct a three-year test of residential
revenue decoupling, beginning in January 1995. For 1995, nonfuel revenues
are determined by multiplying a revenue per customer amount by the total
number of residential customers to determine a targeted revenue amount.
Differences between target revenues and actual revenues are included as a
current asset or current liability on the balance sheet and will be
billed or refunded to residential customers over a 12-month period.
Revenue decoupling did not have a material impact on Florida Power's
first-quarter earnings.
Beginning in 1995, Florida Power increased its annual provision for
nuclear decommissioning to $18.7 million from $11.9 million recorded in
1994. This increase was based on a new study of future decommissioning
costs, and is expected to be approved by the FPSC by the end of 1995.
Florida Power did not seek an increase in rates to recover the higher
costs. Based on the new study, Florida Power increased depreciation
expense by $1.6 million for the quarter ended March 31, 1995, compared to
the same period in 1994.
3) In March 1995, the Federal Energy Regulatory Commission ("FERC") accepted
Florida Power's 1995 wholesale settlement agreement, which included all
but one customer. This agreement will increase annual revenue by $8.6
million, effective January 1, 1995. The FERC also accepted the partial
requirements rates for the remaining customer, subject to refund pending
hearings which begin in July 1995. These rates will increase annual
revenue about $.9 million, effective January 2, 1995. The effect of the
new rates was to increase revenues and earnings by $1.6 million and $1
million, respectively, for the three-month period ended March 31, 1995.
4) In the first quarter of 1994, Florida Progress recognized an after-tax
charge of $7.9 million, or $.09 per share, related to an early retirement
option.
5) Effective January 1, 1995, Florida Progress adopted Financial Accounting
Standard ("FAS") No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by FAS No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosure." These standards require
Florida Progress to compute present values for impaired loans when
determining the allowance for credit losses. Upon implementation of this
standard, approximately $72 million of loans receivable were impaired, and
Florida Progress has assigned approximately $18 million of its total
allowance for loan losses to these loans. Because Florida Progress'
allowance for loan losses was adequate at January 1, 1995, there was no
earnings impact as a result of implementing this standard.
In March 1995, the Financial Accounting Standards Board issued FAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets To Be Disposed Of." This statement requires that long-lived
assets and certain intangible assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The statement is effective for the Company
in 1996. Florida Progress is currently assessing the impact, if any, of
this statement.
6) CONTINGENCIES
THERMO-LAG FIRE BARRIER - Florida Power's nuclear plant uses a
fire-retardant material called Thermo-Lag as a fire barrier around
electrical conduits and cables. The United States Nuclear Regulatory
Commission has indicated its intention to seek the removal or upgrade of
this material because it does not provide the full fire protection
originally claimed by the manufacturer. Although the most costly option of
removing and replacing all of the Thermo-Lag would total about $40
million, management believes there are more effective options available
that would cost less than $5 million. The resolution of this matter is
subject to NRC review and approval. Until there is a permanent
resolution, Florida Power has implemented surveillance procedures to
continuously inspect the Thermo-Lag. Florida Power does not expect to have
to replace all of the Thermo-Lag at its plant.
INSURANCE - Florida Progress and its subsidiaries utilize various risk
management techniques to protect assets from risk of loss, including the
purchase of insurance. Risk avoidance, risk transfer and self-insurance
techniques are utilized depending on Florida Progress' ability to assume
risk, the relative cost and availability of methods for transferring risk
to third parties, and the requirements of applicable regulatory bodies.
Florida Power self-insures its transmission and distribution lines against
loss due to storm damage and other natural disasters. Florida Power is
accruing $6 million annually to a storm damage reserve and may defer any
losses in excess of the reserve.
Under the provisions of the Price Anderson Act, Florida Power, as an owner
of a nuclear plant, can be assessed for a portion of any third-party
liability claims arising from an accident at any commercial nuclear power
plant in the United States. If total third-party claims relating to a
single nuclear incident exceed $200 million (the amount of currently
available commercial liability insurance), Florida Power could be assessed
up to $79.3 million per incident, with a maximum assessment of $10 million
per year.
Florida Power is a member of Nuclear Electric Insurance, Ltd. ("NEIL"), an
industry mutual insurer, which provides replacement power cost coverage in
the event of a major accidental outage at a covered nuclear power plant.
Florida Power is subject to a retroactive premium assessment under this
policy in the event of adverse loss experience. Florida Power's present
maximum share of any such retroactive assessment is $2.6 million per
policy year.
Florida Power also maintains nuclear property damage insurance and
decontamination and decommissioning liability insurance totaling $2.1
billion. The first layer of $500 million is purchased in the commercial
insurance market with the remaining excess coverage purchased from NEIL.
Florida Power is self-insured for any losses that are in excess of this
coverage. Under the terms of the NEIL policy agreements, Florida Power
could be assessed up to $8.4 million in any policy year if a loss in
excess of NEIL's available surplus is incurred. In the event of multiple
losses in any policy year, Florida Power's retroactive premium could total
up to $15.8 million.
Florida Power has never been retroactively assessed under any of these
nuclear indemnities or insurance policies.
CONTAMINATED SITE CLEANUP - Florida Progress is subject to regulation with
respect to the environmental effects of its operations. The disposal of
company-generated hazardous waste can result in costs to clean up
facilities found to be contaminated due to past disposal practices.
Federal and state statutes authorize governmental agencies to compel
responsible parties to clean up certain abandoned or uncontrolled
hazardous waste sites.
Florida Power and former subsidiaries of Florida Progress, whose
properties were sold in prior years, are potentially responsible parties
("PRPs") at certain sites. In addition, Florida Power has been named in
one lawsuit brought against four prior owners of a coal gasification plant
site. Liability for the cleanup costs of these sites is joint and
several. The cost of cleaning up one of the PRP sites has been determined
in a settlement agreement with the United States Environmental Protection
Agency, and Florida Progress expects that payment will bring this matter
to a final conclusion. Based upon information currently available,
Florida Progress has no reason to believe that its subsidiaries will be
required to pay a significantly disproportionate share of the costs for
cleanup of the remaining PRP sites. In addition to the sites where its
subsidiaries have been named a PRP, Florida Progress affiliates are also
responsible for additional environmental cleanup at other sites. The best
estimates currently available to Florida Progress indicate that its
consolidated proportionate share of liability for cleaning up all sites
range from $1.3 million to $2 million, and it has reserved $1.8 million
against these potential costs. It is possible that additional claims
could be asserted relating to the coal gasification plant site that could
increase Florida Progress' cleanup costs. Currently, no estimates of
these additional costs, if any, are available.
PRAXAIR LAWSUIT - Florida Power and Florida Power & Light Company
("FP&L"), are co-defendants in an antitrust action. Praxair (formerly a
part of Union Carbide Corporation) is a customer of FP&L and is 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 to Florida Power's consequent refusal to provide
electricity to the customer. Management believes it has a strong defense
and intends to vigorously defend against this action.
7) 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. Results for the first
quarter are not necessarily indicative of results for the full year.
It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto in the combined Form 10-K
of Florida Progress and Florida Power for the year ended December 31, 1994
(the "1994 Form 10-K").
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
OPERATING RESULTS
Florida Progress' earnings per share for the three-month period ended March 31,
1995, were $.49 compared to $.41 for the same period in 1994. This increase
resulted primarily from Florida Power, Florida Progress' largest operating unit,
which reported earnings of $.43 per share compared to $.36 per share for the
same period last year. Florida Power's 1994 first quarter earnings were reduced
by $.09 per share because of costs recorded for an early retirement option.
(See Note 4 to the Financial Statements.) Diversified earnings per share were
higher compared to the same period last year primarily due to increased earnings
from marine and coal operations of Florida Progress' energy and transportation
unit.
Florida Power - Operating Revenues
Florida Power's operating revenues were $32.4 million, or 6.7 percent, higher
for the three-month period ended March 31, 1995, compared to the same period in
1994. Increased retail kilowatt-hour sales due to customer growth and a
stronger economy were the primary factors contributing to the increase.
Beginning in 1995, Florida Power was ordered by the FPSC to conduct a three-year
test of residential revenue decoupling. Decoupling eliminates the direct link
between kilowatt-hour sales and revenues. Under the plan, abnormal weather
variances will no longer impact earnings with respect to residential revenues.
Revenue decoupling did not have a material impact on Florida Power's revenues or
net income for the three months ended March 31, 1995. (See Note 2 to the
Financial Statements.)
Florida Power - Operating Expenses
Fuel and purchased power costs were $34.9 million, or 23.7 percent, higher for
the quarter ended March 31, 1995, compared to the same period in 1994, due
primarily to higher purchased power costs resulting from increased capacity
payments and system requirements. Florida Power recovers substantially all of
its fuel and purchased power costs through a FPSC ordered fuel adjustment
clause, thereby eliminating any impact on net income.
Other operation and maintenance expenses for the three months ended March 31,
1995, were $17.9 million, or 12.9 percent, lower than the same period last year,
due primarily to a $12.9 provision for early retirement costs recorded in the
first quarter of 1994 and a $7.7 million reduction in recoverable energy
conservation program costs in 1995. (See Note 4 to the Financial Statements.)
Similar to the recovery of fuel costs mentioned above, Florida Power recovers
substantially all of its energy conservation program costs, thereby eliminating
any impact on net income.
Depreciation expense increased $6.2 million in the quarter ended March 31, 1995,
compared to the same period last year, due primarily to Florida Power recording
a higher provision for nuclear decommissioning in 1995 (see Note 2 to the
Financial Statements), new depreciation related to the hardware and software of
a recently installed customer service computer system, and the write-off of the
Avon Park steam power plant that previously was in extended cold shut-down and
recently was permanently removed from service.
Florida Power - Other Operating Results
On March 29, 1995, the FERC proposed new rules that will require the electric
industry to provide open access to the nation's interstate transmission network.
Each utility under FERC jurisdiction would be required to file a
non-discriminatory open access transmission tariff, thereby making its
transmission system available to all wholesale buyers and sellers of electric
energy. Florida Power has already filed such a tariff with the FERC. If
implemented, the new tariff as filed by Florida Power would not result in a
significant change in Florida Power's revenues or earnings. In addition, under
the proposed rules, some utilities would be given the opportunity to recover
certain so called "stranded costs." However, the rules as presently drafted may
not afford Florida Power that benefit. Florida Power is continuing to analyze
the proposed FERC rules and the extent to which Florida Power may have standard
investment, if any.
As noted under the heading "Utility Operations - Competition" in Item 1 of the
1994 Form 10-K, the Energy Policy Act of 1992 will result in increased
competition for utilities serving cities, rural electric cooperatives and other
customers that resell electricity. Although this competition has resulted in
the loss of some existing wholesale sales, Florida Power intends to be a
competitive wholesale supplier, and retain its share of profitable wholesale
business.
In Florida, electric utilities have certain retail service territorial rights
granted by the FPSC. In providing electric service, utilities have negotiated
franchise agreements with local municipalities outlining the terms associated
with the use of public rights-of-way. Traditionally, municipalities have signed
30-year franchise agreements with electric utilities. Increasing competition
may affect new franchise agreements between utilities and municipalities. Also,
some municipalities may consider operating their own electric utility systems.
However, over the years, municipalities have seldom decided to purchase and
operate their own systems because the economics generally have been unfavorable
for the local residents. The last time a municipality purchased a system in
Florida was in 1947. Florida Power currently has 110 franchise agreements, only
two of which will expire before the year 2000. These two franchises represent
slightly less than 5 percent of the utility's total revenues. The City of
Clearwater, Florida is one of the two franchises and accounts for the majority
of these revenues. Florida Power has begun negotiations with the City of
Clearwater to renew its franchise which expires in 1996. Management expects to
renew these two franchises.
Florida Progress Diversified Operations
Florida Progress' diversified revenues and gross margins increased $31.6 million
and $8 million, respectively, for the three months ended March 31, 1995,
compared to the same period last year, due primarily to increased demand and
higher transportation rates from its marine operations. In addition, coal sales
revenues and margins improved for the first quarter of 1995 compared to the
prior year because sales in the prior year were negatively impacted by severe
winter weather.
As noted under the heading "Operating Results - Progress Credit Corporation" in
Item 7 of the 1994 Form 10-K, Progress Credit Corporation, Florida Progress'
real estate, lending and leasing subsidiary, was negotiating to restructure a
$32.1 million aircraft lease with Continental Airlines. In April 1995, Progress
Credit Corporation reached a tentative agreement with Continental Airlines,
which would not have a material impact on earnings.
LIQUIDITY AND CAPITAL RESOURCES
Florida Power budgeted $330 million, excluding allowance for funds used during
construction, for its 1995 construction program, of which $61.1 million was
spent during the first three months of the year. These expenditures were
financed primarily with funds from operations and equity contributions from
Florida Progress.
In March 1995, Florida Progress contributed $12.5 million to Florida Power from
the sale of common stock through Florida Progress' 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 4.06 for the twelve
months ended March 31, 1995. (See Exhibit 12 filed herewith.)
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
1) Florida Power Corporation v. ANR Southern Pipeline et al., Circuit Court,
Sixth Judicial Circuit for Pinellas County, Florida, Case
No. 95-761-CI-11.
See prior discussion in of this matter in the 1994 Form 10-K, Part I,
Item 3, paragraph 11. On April 25, 1995, Florida Power filed a notice of
voluntary dismissal with prejudice, pursuant to a settlement agreement
reached by the parties. Accordingly, this matter is now considered
terminated for reporting purposes.
Item 4. Submission of Matters to a Vote of Security-Holders.
The Annual Meeting of Shareholders of Florida Progress was held on April 20,
1995. There were 95,240,004 shares of common stock entitled to vote. The
following matters were voted upon at the meeting:
1) Election of Directors.
Votes Votes
Class II - Term Expiring in 1998 For Withheld
----- --------
Willard D. Frederick, Jr. 84,645,513 2,260,068
Allen J. Keesler, Jr. 84,407,472 2,498,110
Vincent J. Naimoli 84,387,509 2,518,073
Charles B. Reed 84,497,907 2,407,674
2) Three shareholder proposals.
Proposal 2A requested that the Florida Progress Board of Directors adopt a
policy to not sell or otherwise transfer operational responsibility for the
Crystal River nuclear power plant to any third party, and immediately cease
operation of the nuclear power plant, unless and until the dangers
associated with the use of Thermo-Lag insulation are resolved. Proposal 2B
asked that the Florida Progress Board of Directors adopt a policy that
requires annual salary increases for executive officers that are greater
than 5% of their prior year's salary to be approved by a vote of the
shareholders. Proposal 2C requested that the Florida Progress Board of
Directors discontinue, for long-term or otherwise, the Management Incentive
Compensation Plan, otherwise known as the "MICP Plan."
Voting results: Proposal 2A Proposal 2B Proposal 2C
----------- ----------- -----------
For the proposal 2,895,830 14,522,355 11,208,004
Against the proposal 68,587,517 57,839,008 60,367,623
Abstentions 2,668,040 1,790,024 2,575,761
Broker Non-votes 12,754,194 12,754,194 12,754,194
Item 5. Other Information.
In March 1995, James V. Smallwood was appointed Treasurer of both Florida
Progress and Florida Power. Joseph H. Richardson was appointed Senior Vice
President, Energy Distribution of Florida Power effective April 3, 1995. Mr.
Richardson no longer serves as a Senior Vice President of Florida Progress.
<PAGE>
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 first quarter 1995, Florida Progress and Florida Power
filed the following reports on Form 8-K:
Form 8-K dated January 23, 1995, reporting
under Item 5 "Other Events" a press release
and related Investor Information Report reporting
Florida Progress' and Florida Power's 1994 earnings.
Form 8-K dated February 9, 1995, reporting under
Item 5 "Other Events" a press release and
related Investor Information report reporting
that Florida Power has filed suit to terminate
two agreements to transport natural gas through
the proposed SunShine Pipeline.
In addition, Florida Progress and Florida Power filed the following
report on Form 8-K subsequent to the first quarter 1995:
Form 8-K dated April 20, 1995, reporting under Item 5
"Other Events" a press release and related Investor
Information report reporting Florida Progress' and
Florida Power' first quarter 1995 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: May 11, 1995 /s/ John Scardino, Jr.
-----------------------------
John Scardino, Jr.
Vice President and Controller
Date: May 11, 1995 /s/ James V. Smallwood
-----------------------------
James V. Smallwood
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 of Computation of Ratios
(Dollars In Millions)
Ratio of Earnings to Fixed Charges:
12-Months
Ended
March 31, 1995 1994 1993
-------------- ------ ------
Net Income $209.8 $200.8 $194.9
Add:
Operating Income Taxes 120.5 114.7 104.5
Other Income Taxes (0.9) (0.8) (0.1)
------ ------ ------
Income Before Taxes 329.4 314.7 299.3
Total Interest Charges 107.7 108.4 105.8
------ ------ ------
Total Earnings (A) $437.1 $423.1 $405.1
------ ------ ------
Fixed Charges (B) $107.7 $108.4 $105.8
------ ------ ------
Ratio of Earnings to
Fixed Charges (A/B) 4.06 3.90 3.83
===== ===== =====
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