UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
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 each 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, 1996
---------- -------------- ------------------
Florida Progress Corporation Common Stock,
without par value 97,005,268
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. Florida Power makes no
representations as to the information relating to Florida Progress' diversified
operations.
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
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,
1996 1995 1996 1995
------- ------- -------- --------
(Unaudited) (Unaudited)
REVENUES:
Electric utility $694.7 $671.8 $1,830.7 $1,738.2
Diversified 184.3 180.6 552.3 538.5
-------- -------- --------- ---------
879.0 852.4 2,383.0 2,276.7
EXPENSES: -------- -------- --------- ---------
Electric utility:
Fuel 147.5 140.9 323.0 336.7
Purchased power 127.6 123.7 388.2 326.8
Energy conservation cost 14.3 23.6 51.1 64.9
Operations and maintenance 105.9 96.8 304.2 292.1
Depreciation 74.7 75.8 241.5 217.3
Taxes other than income taxes 50.7 48.4 143.1 136.2
-------- -------- --------- ---------
520.7 509.2 1,451.1 1,374.0
-------- -------- --------- ---------
Diversified:
Cost of sales 153.5 151.0 462.9 455.2
Other 15.5 15.8 47.5 44.0
-------- -------- --------- ---------
169.0 166.8 510.4 499.2
-------- -------- --------- ---------
INCOME FROM OPERATIONS 189.3 176.4 421.5 403.5
-------- -------- --------- ---------
INTEREST EXPENSE AND OTHER:
Interest expense 34.6 34.3 103.4 105.5
Allowance for funds used during
construction (1.9) (1.8) (5.5) (5.6)
Preferred dividend requirements of
Florida Power 0.8 2.4 5.2 7.3
Other expense (income), net (0.4) (3.4) (5.1) (8.8)
-------- -------- --------- ---------
33.1 31.5 98.0 98.4
-------- -------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 156.2 144.9 323.5 305.1
Income Taxes 58.1 53.8 118.4 112.2
-------- -------- --------- ---------
NET INCOME FROM CONTINUING OPERATIONS 98.1 91.1 205.1 192.9
DISCONTINUED OPERATIONS, NET
OF INCOME TAXES - - (25.0) -
-------- -------- --------- ---------
NET INCOME $98.1 $91.1 $180.1 $192.9
======== ======== ========= =========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 97.0 95.9 96.8 95.6
======== ======== ========= =========
EARNINGS PER AVERAGE COMMON SHARE
CONTINUING OPERATIONS $1.01 $0.95 $2.12 $2.02
DISCONTINUED OPERATIONS - - (0.26) -
-------- -------- --------- ---------
$1.01 $0.95 $1.86 $2.02
======== ======== ========= =========
DIVIDENDS PER COMMON SHARE $0.515 $0.505 $1.545 $1.515
======== ======== ========= =========
Note: The accompanying notes are an integral part of these financial statements.
Current and prior periods reflect the recapitalization of the proposed spin-off
company, Echelon International Corporation (successor to Progress Credit
Corporation and certain of its subsidiaries), and its associated treatment as
discontinued operations.
2<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
September 30, December 31,
1996 1995
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held
for future use $5,921.2 $5,867.5
Less - Accumulated depreciation 2,296.6 2,179.7
Accumulated decommissioning for nuclear plant 185.4 165.2
Accumulated dismantlement for fossil plants 115.4 104.4
---------- ----------
3,323.8 3,418.2
Construction work in progress 148.1 131.8
Nuclear fuel, net of amortization of $356.7
in 1996 and $348.7 in 1995 60.0 59.1
---------- ----------
Net electric utility property 3,531.9 3,609.1
Other property, net of depreciation of $170.2
in 1996 and $157.3 in 1995 327.9 307.0
---------- ----------
3,859.8 3,916.1
---------- ----------
CURRENT ASSETS:
Cash and equivalents 17.8 4.3
Accounts receivable, net 327.2 307.3
Inventories at average cost:
Fuel 69.0 63.0
Materials and supplies 97.1 101.3
Diversified materials 128.3 111.0
Underrecovery of fuel cost 47.4 0.3
Deferred income taxes 34.3 32.3
Other 13.7 9.3
---------- ----------
734.8 628.8
---------- ----------
DISCONTINUED OPERATIONS:
Advances to discontinued operations 102.7 116.0
Net assets of discontinued operations 179.1 200.8
---------- ----------
281.8 316.8
---------- ----------
OTHER ASSETS:
Investments:
Loans receivable, net 31.2 31.5
Marketable securities 205.9 188.2
Nuclear plant decommissioning fund 187.7 161.1
Joint ventures and partnerships 37.9 33.9
Deferred insurance policy acquisition costs 120.1 106.4
Other 180.9 167.6
---------- ----------
763.7 688.7
---------- ----------
$5,640.1 $5,550.4
========== ==========
Note: The accompanying notes are an integral part of these financial statements.
3<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
September 30, December 31,
1996 1995
----------- -----------
CAPITAL AND LIABILITIES (Unaudited)
COMMON STOCK EQUITY:
Common stock $1,207.5 $1,187.6
Retained earnings 917.1 888.4
Unrealized gain (loss) on securities available for sale (3.6) 2.1
---------- ----------
2,121.0 2,078.1
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 33.5 113.5
With sinking funds - 25.0
LONG-TERM DEBT 1,727.4 1,662.3
---------- ----------
TOTAL CAPITAL 3,881.9 3,878.9
---------- ----------
CURRENT LIABILITIES:
Accounts payable 193.8 165.7
Customers' deposits 87.7 85.3
Income taxes payable 64.9 1.7
Accrued other taxes 68.6 15.6
Accrued interest 44.3 46.9
Other 100.1 97.0
---------- ----------
559.4 412.2
Notes payable 29.0 -
Current portion of long-term debt and preferred stock 59.8 173.7
---------- ----------
648.2 585.9
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 484.2 512.0
Unamortized investment tax credits 95.5 101.5
Insurance policy benefit reserves 309.0 265.0
Other postretirement benefit costs 96.4 84.5
Other 124.9 122.6
---------- ----------
1,110.0 1,085.6
---------- ----------
$5,640.1 $5,550.4
========== ==========
Note: The accompanying notes are an integral part of these financial statements.
4<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
1996 1995
----------- -----------
(Unaudited)
OPERATING ACTIVITIES:
Net income from continuing operations $205.1 $192.9
Adjustments for noncash items:
Depreciation and amortization 275.1 261.4
Deferred income taxes and
investment tax credits, net (37.2) (41.2)
Increase in accrued other postretirement
benefit costs 11.9 12.8
Net change in deferred insurance policy
acquisition costs (13.7) (11.7)
Net change in insurance policy
benefit reserves 44.0 31.4
Changes in working capital, net of effects
from acquisition or sale of businesses:
Accounts receivable (7.6) (74.6)
Inventories (17.9) 1.0
Overrecovery (underrecovery) of fuel cost (47.1) (6.7)
Accounts payable 21.3 16.0
Income taxes payable 60.0 35.3
Accrued other taxes 52.9 55.0
Other 2.5 21.2
Other operating activities 1.6 13.9
--------- ---------
Cash provided by continuing operations 550.9 506.7
--------- ---------
Income (loss) from discontinued operations (25.0) -
Adjustments for non-cash items, primarily
loss provision 11.1 (8.4)
--------- ---------
Cash provided by (used for) discontinued
operations (13.9) (8.4)
--------- ---------
537.0 498.3
--------- ---------
INVESTING ACTIVITIES:
Property additions (including allowance for
borrowed funds used during construction) (192.0) (211.8)
Proceeds from sale of properties and businesses 7.0 9.6
(Purchase of) proceeds from sale or collection of
loans and securities (25.1) (13.2)
Acquisition of businesses (45.1) (5.9)
Distributions from (investments in) joint
ventures and partnerships (4.6) (3.6)
Investing activities of discontinued operations 35.2 46.3
Other investing activities (24.5) (8.3)
--------- ---------
(249.1) (186.9)
--------- ---------
FINANCING ACTIVITIES:
Issuance of long-term debt 118.0 -
Repayment of long-term debt (189.8) (29.5)
Increase (decrease) in commercial paper with
long-term support (5.3) (105.0)
Redemption of preferred stock (80.9) -
Sale of common stock 18.6 28.8
Dividends paid on common stock (149.5) (144.8)
Increase (decrease) in short-term debt 29.0 (55.3)
Financing activities of discontinued operations (11.3) (9.7)
Other financing activities (3.2) (0.4)
--------- ---------
(274.4) (315.9)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 13.5 (4.5)
Beginning cash and equivalents 4.3 13.8
--------- ---------
ENDING CASH AND EQUIVALENTS $17.8 $9.3
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $101.1 $104.4
Income taxes (net of refunds) $91.2 $118.7
Note: The accompanying notes are an integral part of these financial statements.
Current and prior periods reflect the recapitalization of the proposed spin-off
company, Echelon International Corporation (successor to Progress Credit
Corporation and certain of its subsidiaries), and its associated treatment as
discontinued operations.
5
<PAGE>
<PAGE>
FLORIDA POWER CORPORATION
FINANCIAL STATEMENTS
FLORIDA POWER CORPORATION
Statements of Income
(In millions) Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------- ------- -------- --------
(Unaudited) (Unaudited)
OPERATING REVENUES:
Residential $387.6 $374.8 $1,013.2 $ 959.7
Commercial 155.4 147.2 402.2 386.7
Industrial 54.9 48.8 154.6 140.3
Sales for resale 46.5 56.0 126.6 110.8
Other 50.3 45.0 134.1 140.7
-------- -------- --------- ---------
694.7 671.8 1,830.7 1,738.2
-------- -------- --------- ---------
OPERATING EXPENSES:
Operation:
Fuel 147.5 140.9 323.0 336.7
Purchased power 127.6 123.7 388.2 326.8
Energy conservation cost 14.3 23.6 51.1 64.9
Operations and maintenance 105.9 96.8 304.2 292.1
Depreciation 74.7 75.8 241.5 217.3
Taxes other than income taxes 50.7 48.4 143.1 136.2
-------- -------- --------- ---------
520.7 509.2 1,451.1 1,374.0
-------- -------- --------- ---------
Income taxes:
Currently payable 64.9 69.0 138.9 141.1
Deferred, net (6.8) (15.6) (19.7) (29.2)
Investment tax credits, net (1.9) (2.0) (5.9) (6.2)
-------- -------- --------- ---------
56.2 51.4 113.3 105.7
-------- -------- --------- ---------
576.9 560.6 1,564.4 1,479.7
-------- -------- --------- ---------
OPERATING INCOME 117.8 111.2 266.3 258.5
-------- -------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 1.0 1.0 2.9 3.1
Miscellaneous other expense, net (1.0) - (2.0) (1.0)
-------- -------- --------- ---------
- 1.0 0.9 2.1
-------- -------- --------- ---------
INTEREST CHARGES
Interest on long-term debt 22.0 23.3 65.9 71.4
Other interest expense 2.8 2.6 8.9 8.3
-------- -------- --------- ---------
24.8 25.9 74.8 79.7
Allowance for borrowed funds used
during construction (0.9) (0.8) (2.6) (2.5)
-------- -------- --------- ---------
23.9 25.1 72.2 77.2
-------- -------- --------- ---------
NET INCOME 93.9 87.1 195.0 183.4
DIVIDENDS ON PREFERRED STOCK 0.8 2.4 5.2 7.3
-------- -------- --------- ---------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $93.1 $84.7 $189.8 $176.1
======== ======== ========= =========
Note: The accompanying notes are an integral part of these financial statements.
6<PAGE>
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
September 30, December 31,
1996 1995
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held
for future use $5,921.2 $5,867.5
Less - Accumulated depreciation 2,296.6 2,179.7
Accumulated decommissioning for nuclear plant 185.4 165.2
Accumulated dismantlement for fossil plants 115.4 104.4
---------- ----------
3,323.8 3,418.2
Construction work in progress 148.1 131.8
Nuclear fuel, net of amortization of $356.7
in 1996 and $348.7 in 1995 60.0 59.1
---------- ----------
3,531.9 3,609.1
Other property, net 13.5 23.0
---------- ----------
3,545.4 3,632.1
---------- ----------
CURRENT ASSETS:
Cash and equivalents 16.9 0.8
Accounts receivable, less reserve of $5
in 1996 and $5.2 in 1995 224.9 200.7
Inventories at average cost:
Fuel 43.8 40.8
Materials and supplies 97.1 101.3
Underrecovery of fuel cost 47.4 0.3
Deferred income taxes 34.3 32.3
Other 2.7 3.9
---------- ----------
467.1 380.1
---------- ----------
OTHER ASSETS:
Nuclear plant decommissioning fund 187.7 161.1
Unamortized debt expense, being amortized
over term of debt 25.6 27.5
Other 70.8 84.1
---------- ----------
284.1 272.7
---------- ----------
$4,296.6 $4,284.9
========== ==========
Note: The accompanying notes are an integral part of these financial statements.
7<PAGE>
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
September 30, December 31,
1996 1995
----------- -----------
CAPITALIZATION AND LIABILITIES (Unaudited)
CAPITALIZATION:
Common stock $1,004.4 $992.9
Retained earnings 834.0 761.1
---------- ----------
1,838.4 1,754.0
CUMULATIVE PREFERRED STOCK:
Without sinking funds 33.5 113.5
With sinking funds 0.0 25.0
LONG-TERM DEBT 1,176.4 1,279.1
---------- ----------
TOTAL CAPITAL 3,048.3 3,171.6
---------- ----------
CURRENT LIABILITIES:
Accounts payable 102.9 89.8
Accounts payable to associated companies 23.7 24.8
Customers' deposits 87.7 85.3
Income taxes payable 61.7 8.9
Accrued other taxes 64.8 12.3
Accrued interest 36.4 32.9
Other 68.3 65.1
---------- ----------
445.5 319.1
Notes payable - -
Current portion of long-term debt and preferred stock 46.2 30.6
---------- ----------
491.7 349.7
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 470.9 483.8
Unamortized investment tax credits 94.9 100.9
Other postretirement benefit costs 92.8 81.5
Other 98.0 97.4
---------- ----------
756.6 763.6
---------- ----------
$4,296.6 $4,284.9
========== ==========
Note: The accompanying notes are an integral part of these financial statements.
8<PAGE>
<PAGE>
FLORIDA POWER CORPORATION
Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
1996 1995
---------- ----------
(Unaudited)
OPERATING ACTIVITIES:
Net income after dividends on preferred stock $189.8 $176.1
Adjustments for noncash items:
Depreciation and amortization 256.4 244.3
Deferred income taxes and investment
tax credits, net (25.6) (35.4)
Increase in accrued other postretirement
benefit costs 11.2 12.2
Allowance for equity funds used during construction (2.9) (3.1)
Changes in working capital:
Accounts receivable (24.2) (78.4)
Inventories 1.2 17.4
Overrecovery (underrecovery) of fuel cost (47.1) (6.7)
Accounts payable 13.1 5.5
Accounts payable to associated companies (1.0) (6.0)
Income taxes payable 52.8 26.9
Accrued other taxes 52.5 54.9
Other 10.2 30.9
Other operating activities 8.3 13.0
--------- ---------
494.7 451.6
--------- ---------
INVESTING ACTIVITIES:
Construction expenditures (157.5) (181.4)
Allowance for borrowed funds used during construction (2.6) (2.5)
Other investing activities (21.5) (1.5)
--------- ---------
(181.6) (185.4)
--------- ---------
FINANCING ACTIVITIES:
Repayment of long-term debt (46.8) (19.2)
Increase (decrease) in commercial paper with
long term support (65.7) (77.3)
Redemption of preferred stock (80.9) -
Dividends paid on common stock (116.1) (134.7)
Equity contributions from parent 12.5 25.0
Decrease in short-term debt - (55.3)
--------- ---------
(297.0) (261.5)
--------- ---------
NET INCREASE IN CASH AND EQUIVALENTS 16.1 4.7
Beginning cash and equivalents 0.8 -
--------- ---------
ENDING CASH AND EQUIVALENTS $16.9 $4.7
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $66.4 $73.0
Income taxes (net of refunds) $85.7 $114.1
Note: The accompanying notes are an integral part of these financial statements.
9<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
1) On July 1, 1996, Florida Progress Corporation ("Florida Progress")
announced its plan to spin-off Progress Credit Corporation ("Progress
Credit") to shareholders through a tax-free stock dividend. In September
and October 1996, Progress Credit and several of its subsidiaries merged,
and the surviving company changed its name to Echelon International
Corporation ("Echelon"). Echelon and its subsidiaries conduct the
lending, leasing and real estate businesses of Florida Progress. The
dividend distribution is expected to occur before the end of 1996.
The accompanying financial statements account for Echelon as discontinued
operations. Accordingly, the results and balances related to this segment
have been segregated from the ongoing operations of Florida Progress in
the accompanying financial statements for all periods presented. For each
of the periods presented, the accompanying financial statements reflect
the conversion of a portion of Echelon intercompany debt to equity and the
removal of the corresponding interest from the results of operations of
Echelon. In anticipation of the spin-off, Florida Progress recorded a $25
million charge to earnings in the second quarter of 1996 comprised of the
following:
<TABLE>
<CAPTION>
<S> <C>
(In millions)
Writedown of assets to be disposed of by Progress Credit
(net of income tax benefits) $ 18.0
Costs associated with disposal (net of income tax benefits) 7.0
--------
Total $ 25.0
========
</TABLE>
Echelon revenues were $48.6 million and $33.7 million for the nine
months ended September 30, 1996 and 1995, respectively. The following
amounts are included as discontinued operations on the Florida Progress
balance sheet as of September 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
<S> <C> <C>
Sept. 30, Dec. 31,
In millions 1996 1995
----------------------------------------------------------------------------------------
Leases and loans receivable, net $ 304.3 $ 351.7
Property and equipment, net 130.0 148.3
Other assets 49.6 57.6
----------------------------------------------------------------------------------------
Total assets 483.9 557.6
----------------------------------------------------------------------------------------
Less: Advances and interest due to parent 102.7 116.0
Less: Other liabilities 202.1 240.8
---------------------------------------------------------------------------------------
Net assets included as discontinued operations $ 179.1 $ 200.8
---------------------------------------------------------------------------------------
</TABLE>
2) As ordered by the Florida Public Service Commission ("FPSC"), Florida
Power Corporation ("Florida Power") is in its second year of conducting a
three-year test for residential revenue decoupling which began in January
1995. The difference between target revenues and actual revenues is
included as a current asset or current liability on the balance sheet.
10
<PAGE>
<PAGE>
Revenue decoupling reduced operating revenues by $17.5 million and $18.7
million for the nine months ended September 30, 1996 and 1995,
respectively.
3) CONTINGENCIES
PURCHASED POWER - Florida Power's cogeneration purchased power contracts
employ separate pricing methodologies for capacity payments and energy
payments. Two cogenerators have filed suit against Florida Power in state
court. In October 1996, Florida Power executed a final settlement
agreement with one of these two cogenerators subject to the approval of
the FPSC and the cogenerator's lenders. A third cogenerator has filed
suit in both state and federal court.
Another cogenerator entered into a standard offer cogeneration contract
with Florida Power and subsequently indicated its intention to build a 115
megawatt ("MW") facility. On May 20, 1996, the FPSC issued an order ruling
against the cogenerator on two of the three material issues related to the
contract. First, the FPSC held that the cogenerator's proposed 115 MW
facility does not comply with the 75 MW limitation contained in the FPSC's
standard offer rules. Second, the FPSC held that under its rules, Florida
Power is required to make capacity payments for 20 years rather than for
30 years as argued by the cogenerator. On a third issue, the FPSC ruled
against Florida Power by extending by 18 months the "milestone" dates
contained in the standard offer contract, including the construction
commencement date and the commercial in-service date. The cogenerator
appealed this order to the Florida Supreme Court. It is expected that the
Florida Supreme Court will render a decision in the first half of 1997.
Management does not expect that the results of these actions will have a
material impact on Florida Power's financial position, operations or
liquidity.
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, which limits liability for
accidents at nuclear power plants, 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 the Nuclear Electric Insurance, Ltd.
("NEIL"), an industry mutual insurer, which provides business interruption
and extra expense 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 $2.5 million per policy year.
11<PAGE>
<PAGE>
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 a maximum of $10.3 million in any policy year if
losses in excess of NEIL's available surplus are incurred.
Florida Power has never been assessed under these nuclear indemnities or
insurance policies.
CONTAMINATED SITE CLEANUP - Florida Progress is subject to regulation with
respect to the environmental effects of its operations. Florida Progress'
disposal of hazardous waste through third-party vendors can result in
costs to clean up facilities found to be contaminated. Federal and state
statutes authorize governmental agencies to compel responsible parties to
pay for cleanup of certain abandoned or uncontrolled hazardous waste
sites.
Florida Power and former subsidiaries of Florida Progress, whose
operations were sold in prior years, have been identified by the United
States Environmental Protection Agency ("EPA") as potentially responsible
parties at certain sites. In addition to these designated sites, there are
other sites where Florida Progress affiliates may be responsible for
additional environmental cleanup, including a coal gasification plant site
that Florida Power previously owned and operated. There are five parties
which have been identified as potentially responsible for this gas site,
including Florida Power. Liability for the cleanup costs of these sites
is joint and several.
Florida Progress believes that its subsidiaries will not be required to
pay a disproportionate share of the costs for cleanup of these sites.
Florida Progress' best estimates indicate that its proportionate share of
liability for cleaning up all sites ranges from $2.5 million to $4.5
million. Florida Progress has reserved $2.8 million against these
potential costs. The EPA is expected to further study the coal
gasification plant site, which could cause Florida Power to increase its
reserve for its portion of liability for cleanup costs. Although estimates
of any additional costs are not available, the results of the tests are
not expected to have a material effect on Florida Power's financial
position, operations or liquidity.
4) 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 these interim
periods are not necessarily indicative of results for the full year. These
financial statements should 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, 1995 (the "1995 Form
10-K"), the combined Form 10-Q of Florida Progress and Florida Power for
the quarter ended March 31, 1996 (the "first quarter 1996 Form 10-Q") and
the combined Form 10-Q of Florida Progress and Florida Power for the
quarter ended June 30, 1996 (the "second quarter 1996 Form 10-Q").
12<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
OPERATING RESULTS
Florida Progress' earnings per share from continuing operations for the three
and nine months ended September 30, 1996, were $1.01 and $2.12, respectively.
This represents an increase of $.06 and $.10 compared to the same periods in
1995. The increase for both periods primarily resulted from higher earnings at
Florida Power, Florida Progress' largest operating unit, which produced an
increase in earnings per share of $.08 and $.12 for the three and nine-month
period, respectively. The increase at Florida Power was due primarily to
customer growth and higher industrial kilowatt hour ("KWH") sales. Diversified
earnings per share for the three and nine-month periods ended September 30, 1996
were $.05 and $.16, compared to $.07 and $.18, respectively, for the same
periods in 1995. This change is largely due to unfavorable results at
Mid-Continent Life Insurance Company ("Mid-Continent"), which were partially
offset by improved results in the marine and rail services operations at
Electric Fuels Corporation ("Electric Fuels") .
Florida Power - Operating Revenues
Florida Power's operating revenues were $22.9 million (3.4%) and $92.5 million
(5.3%) higher for the three and nine-month periods ended September 30, 1996,
compared to the same periods in 1995. Recoverable fuel revenues increased $24.0
million and $58.7 million for the three and nine-month periods as a result of
the corresponding increase in fuel and purchased power expenses discussed below.
For the nine month period ended September 30, 1996, KWH sales increased 5.6%,
compared to the same period in 1995. This increase was due primarily to
customer growth and higher industrial customer usage largely from phosphate
mining.
Florida Power - Operating Expenses
Fuel and purchased power costs were $10.5 million (4.0%) and $47.7 million
(7.2%) higher for the three and nine months ended September 30, 1996, compared
to the same periods in 1995. This increase was due primarily to higher fuel oil
prices and the extended nuclear refueling outage and subsequent maintenance
outage at the Crystal River 3 nuclear power plant ("CR3"). (See "Nuclear
Operations" below.) Florida Power has deferred an underrecovery of fuel and
purchased power expense of approximately $48.3 million for the nine-month period
ended September 30, 1996, versus an overrecovery of approximately $0.6 million
for the comparable period in 1995. To recover the deferred expense and
increased costs of fuel and purchased power, Florida Power received approval
from the FPSC to increase its rates by $1.06 per 1,000 KWH, effective July 1,
1996 through March 31, 1997. Florida Power also received approval to apply
approximately $18 million of the 1996 revenue decoupling credit to the
underrecovered fuel balance to help mitigate the increased fuel and purchased
power costs.
Energy conservation program costs were $9.3 million (39.4%) and $13.8 million
(21.3%) lower for the three and nine months ended September 30, 1996, compared
to the same periods in 1995. Florida Power recovers substantially all of its
fuel, purchased power, and energy conservation program costs. These costs are
recovered through FPSC ordered fuel adjustment, purchased power capacity and
energy conservation cost-recovery clauses, thereby eliminating any significant
impact on net income.
Florida Power's operation and maintenance expenses increased $9.1 million
(9.4%) and $12.1 million (4.1%) for the three and nine-month periods ended
September 30, 1996, compared to the same periods in 1995. Florida Power's cost
control initiatives were offset by increased costs associated with improvements
to Florida Power's new customer service system and additional repairs at CR3.
13<PAGE>
<PAGE>
Depreciation expense was $1.1 million (1.5%) lower and $24.2 million (11.1%)
higher for the three and nine months ended September 30, 1996, compared to the
same periods in 1995. The increase for the nine-month period was due primarily
to an $11.6 million write-off of the Turner and Higgins power plants that had
previously been placed in extended cold shutdown and the amortization of the
Lake Tarpon Kathleen transmission line project that was canceled in September
1995. The accelerated amortization was approved by the FPSC.
Florida Power - Other Operating Results
Nuclear Operations
Florida Power has extended the current maintenance outage of CR3 to review and
analyze issues regarding plant design and equipment operating margins. While CR3
was off line for unrelated maintenance, Florida Power found several design basis
issues that require further study. The key issues involve the potential
capacity of an emergency diesel generator and piping concerns in the emergency
feedwater system.
CR3 was taken off line on September 2, 1996 to make repairs to a lubricating-oil
pipe leading to the main turbine generator. The extended outage is unrelated to
these "lube-oil" pipe repairs, which have been completed. The outage is also
unrelated to a recent investigation involving a coin found in an oil strainer.
An internal investigation concluded that the coin was accidentally introduced
into the oil strainer and that no evidence existed of a pattern of equipment
tampering at CR3. A special inspection team from the Nuclear Regulatory
Commission ("NRC") has concurred with Florida Power's conclusions.
Florida Power has assembled evaluation teams, which include external nuclear
experts, to conduct the review and develop interim and longer-term solutions to
assure that plant systems meet performance requirements. The duration of the
outage will be determined after the review is completed. Florida Power expects
that CR3 will restart in early 1997. However, due to the complexity of the
issues, extent of the evaluation and anticipated regulatory consultations,
Florida Power can not assure exactly when CR3 will be restarted.
Florida Power does not anticipate any significant difficulty in meeting customer
load requirements during the outage under normal weather conditions. Florida
Power expects to have sufficient reserve margin to handle forecasted peak
demand. In addition to its own generating units, Florida Power also expects to
buy from other suppliers and use its energy management system to reduce peak
demand, if necessary.
Because of the current maintenance outage and an extended refueling outage this
past spring, CR3's 1996 operating results will drop below the plant's average
capacity factor of 89% for the past three years. However, Florida Power does
not expect the extended outage to have a material effect on earnings in 1996 or
1997. (For further information regarding this matter, see the 1995 Form 10-K,
Part I, Item 7, under "Operating Results - Florida Power - Nuclear Operations",
the first quarter 1996 Form 10-Q, Item 2, under the heading "Operating Results -
Florida Power - Other Operating Results" and the second quarter 1996 Form 10-Q,
Item 2, under the heading "Operating Results - Florida Power - Other Operating
Results".)
Cogeneration Capacity Payment Restructuring
On February 21, 1996, the FPSC approved Florida Power's request to defer
disposition of a $17.7 million liability from the over-recovery of revenues
under residential revenue decoupling during 1995, pending a presentation of
Florida Power's proposal to exchange future cogenerator capacity payments for
up-front payments.
14<PAGE>
<PAGE>
On October 1, 1996, Florida Power presented such a proposal by petitioning the
FPSC for the approval of an amendment to its purchased power contract with
Orlando CoGen Limited, L.P. ("OCL"). OCL is a limited partnership selling
electricity to Florida Power. The proposed amendment would restructure this
purchased power contract by eliminating the last 10 years of the 30-year term
that ends in 2023. In return, Florida Power would make termination payments to
OCL totaling $49.4 million over a five-year period beginning in January 1997.
This restructuring would save Florida Power and its customers $462 million over
the life of the contract, which equates to a net present value of $33 million,
after the effect of the proposed termination payments.
Florida Power's petition requests that the early termination payments be
recovered through the capacity cost-recovery clause. In addition, the petition
suggests that the $17.7 million decoupling from 1995 be amortized over the one-
to-three year period that best minimizes fluctuations to customers' overall
bills. The FPSC is scheduled to issue a decision on this petition in early
1997. (For additional information see Note 2 and the text under the heading
"Purchased Power" in Note 3 to the Financial Statements. Also see prior
discussion of this matter in the 1995 Form 10-K, Part I, Item 7, under
"Operating Results - Florida Power - Utility Revenues and Sales" and the second
quarter 1996 Form 10-Q, Part I, Item 2, under "Operating Results - Florida Power
- - Other Operating Results".)
Bargaining Unit Contract
Florida Power and representatives of its employees' bargaining unit are
negotiating a new collective bargaining agreement. The current contract expires
on December 8, 1996, but both parties have agreed to continue the contract
beyond that date if necessary. (See prior discussion of this matter in the 1995
Form 10-K, Part I, Item 1, under "Utility Operations - Florida Power -
Employees".)
Florida Progress Diversified Operations
Florida Progress' diversified revenues increased $3.7 million and $13.8 million,
respectively, for the three and nine-month periods ended September 30, 1996
compared to the same periods in 1995. The increase is due primarily to
increased sales in the marine and rail divisions of Electric Fuels.
A.M. Best Company, an insurance rating agency, lowered Mid-Continent's A+
(Superior) rating to A (Excellent) in September 1996. This rating action
reflects Mid-Continent's recent decline in new business and limited operating
profile which has been focused on the sale of one primary life insurance
product. In 1996, Mid-Continent began replacing its primary policy with a new
product. Thus far, sales levels for the new product have been less than
expected. Mid-Continent's earnings were down $.9 million and $3.2 million for
the three and nine-month periods ended September 30, 1996, respectively,
compared with the same periods in 1995. Florida Progress and Mid-Continent will
further evaluate market opportunities for Mid-Continent in the fourth quarter of
1996 as its five-year business plan is reviewed by the Florida Progress board of
directors. (For additional information regarding this matter, see the 1995 Form
10-K, Part I, Item 7, under "Operating Results - Diversified Operations -
Mid-Continent" and the second quarter 1996 Form 10-Q, Part I, Item 2 Operating
Results - Florida Progress Diversified Operations - Other Operating Results".)
Discontinued Operations
On July 1, 1996, the Florida Progress Board of Director's announced its plan to
spin-off Echelon to Florida Progress' shareholders through a tax-free stock
dividend. The spin-off is anticipated to occur before the end of 1996. Florida
Progress has presented the results of operations of Echelon as discontinued
operations, therefore, the results and balances related to Echelon have
been segregated from ongoing operations in the financial statements for all
periods presented. (See Note 1 to the Financial Statements.)
15<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Florida Power budgeted $265.3 million for its 1996 construction program,
excluding allowance for funds used during construction, of which $163.0 million
was spent during the first nine months of 1996. These expenditures were
financed primarily with funds from operations.
On September 19, 1996, Florida Power announced that on November 19, 1996, it
will redeem:
(a) 50,000 shares of its 7.08% series cumulative preferred stock at the
redemption price of $100 per share, plus accrued and unpaid dividends, to meet
mandatory and optional sinking fund requirements, and
(b) the remaining 200,000 shares of this 7.08% series at the redemption
price of $102.36 per share, plus accrued and unpaid dividends.
Florida Power expects to fund this redemption with funds from operations.
Florida Power's ratio of earnings to fixed charges was 4.77 for the twelve
months ended September 30, 1996. (See Exhibit 12 filed herewith.)
Progress Capital Holdings, Inc. ("Progress Capital") has a private $300 million
medium-term note program providing for the issuance of notes with maturities
ranging from nine months to 30 years. In August, September and October 1996,
Progress Capital issued a combined total of $178 million of fixed-rate,
medium-term notes. The new notes are comprised of:
(a) $60 million with a stated interest rate of 6.88%, due in 2001, and
(b) $58 million with a stated interest rate of 7.45%, due in 2003, and
(c) $60 million with a stated interest rate of 7.17%, due in 2006.
The net proceeds were used (i) to repay $140 million of medium-term notes that
matured in July and September 1996 with a weighted average interest rate of 8.3%
and (ii) for other general corporate purposes. Up to $122 million of remaining
notes may be issued under the medium-term note program.
Effective November 4, 1996, Florida Progress appointed The First Bank of Boston
as successor (i) transfer agent, registrar and paying agent for the Florida
Progress Common Stock and (ii) rights agent for the Florida Progress
Shareholders Rights Agreement. The First Bank of Boston replaced Chase Mellon
Shareholder Services which previously handled these responsibilities.
"SAFE HARBOR" STATEMENT UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Form 10-Q contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including (without limitation)
statements as to expectations, beliefs, plans, objectives and future financial
performance, and assumptions underlying or concerning the foregoing, relating to
the following identified matters: (a) the expectation that the spin-off of
Echelon will occur before the end of 1996 (Part I, Item 2. MD&A - Discontinued
Operations, including portions of the Notes to the Financial Statements referred
to therein), (b) estimated amounts of capital and operating expenditures and
fees relating to compliance with environmental/safety requirements and
remediation of contaminated sites (Note 3 to the Financial Statements), (c)
expectations as to the timing, outcome or effect of legal or regulatory
proceedings (Part II, Item 1. Legal Proceedings and Part I, Item 2. MD&A -
Operating Results - Discontinued Operations, including portions of the Notes to
Financial Statements referred to therein), (d) expectations as to savings that
16<PAGE>
<PAGE>
would be realized from the OCL contract amendment (Part I, Item 2. MD&A -
Operating Results - Florida Power - Other Operating Results), and (e)
expectations that CR3 will restart in early 1997, that Florida Power does not
anticipate any significant difficulty in meeting customer load requirements
during the outage under normal weather conditions, and that the outage will not
have a material effect on earnings in 1996 and 1997 (Part I, Item 2. MD&A -
Operating Results Florida Power - Other Operating Results). These statements,
and any other statements contained in this Form 10-Q that are not historical
facts, are forward-looking and, accordingly, involve risks and uncertainties
which could cause actual results or outcome to differ materially from those
expressed in the forward-looking statements.
In addition to those matters discussed elsewhere in this Form 10-Q, the
following are some of the important factors that could cause actual results or
outcomes to differ materially from those discussed in the forward-looking
statements (the categories of forward-looking statements described in the
preceding paragraph that could be affected by these factors are identified in
parentheses by their letter heading): (1) governmental actions and initiatives,
including those affecting industry and rate structure, and competition in the
utility industry (e.g., retail wheeling and transmission access), and
environmental/safety requirements (a, b, c, d, e), (2) pricing and other actions
by competitors (c, d, e), (3) unanticipated delays or actions by courts,
administrative agencies or regulatory authorities (a, b, c, d, e), (4)
significant changes from expectations in actual capital expenditures and
operating expenses and unanticipated project delays (a, b, c, e), (5) changes
in economic conditions (including population growth rates), demographic patterns
and weather conditions in Florida Power's service territory or the United States
generally (a, d, e), (6) changes in Florida Power's environmental compliance
strategies or fuel strategies (b, c, d), (7) changes in the availability of fuel
and purchased power (b, c, d, e), and (8) significant changes in tax rates or
policies or in rates of inflation (a, b, d, e).
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. Metropolitan Dade County and Montenay Power Corp. v. Florida Power
Corporation, Circuit Court of the Eleventh Circuit for Dade County,
Florida, Case No. 96-09598-CA-30.
Metropolitan Dade County and Montenay Power Corp. v. Florida Power
Corporation, U.S. District Court, Southern District, Miami Division,
Florida, Case No. 96-594-CIV-LENARD.
See prior discussion of this matter in the 1995 Form 10-K, Part I, Item 3,
paragraph 6 and in the second quarter 1996 Form 10-Q, Part II, Item 1,
paragraph 5. On June 28, 1996, Florida Power answered the amended federal
complaint and moved to dismiss the federal claim with respect to the
plaintiffs due to lack of antitrust standing. In addition, Florida Power
brought a declaratory judgment counterclaim seeking a declaration that
Florida Power has made appropriate payments under the contract and has not
violated antitrust laws. On August 19, 1996, the plaintiffs moved to
dismiss Florida Power's counterclaim. The federal court has scheduled a
jury trial in December 1997.
On August 22, 1996, the Florida court denied Florida Power's motion to
stay the Florida court proceeding until the conclusion of the federal
court case. Florida Power appealed this decision to the Florida Third
District Court of Appeals. On September 5, 1996, the Florida court of
17<PAGE>
<PAGE>
appeals issued an order directing the plaintiff to file an answer and show
cause why Florida Power's petition should not be granted. (See Note 3 to
the Financial Statements for further information regarding purchased power
expenses and commitments.)
2. Wanda L. Adams, et al. v. Florida Power Corporation and Florida Progress
Corporation, U.S District Court, Middle District of Florida, Ocala,
Division; Case No. 95-123-CIV-OC-10.
See prior discussion of this matter in the 1995 Form 10-K, Part I, Item 3,
paragraph 9 and in the second quarter 1996 Form 10-Q, Part II, Item 1,
paragraph 7. In September 1996, counsel for the plaintiffs filed a motion
to amend this complaint to add four former employees as plaintiffs. This
and an earlier motion, if successful, would raise the number of named
plaintiffs from the initial 17 to a total of 56.
On October 29, 1996, the court approved a joint stipulation whereby it
will provisionally certify a class pursuant to the Age Discrimination in
Employment Act. A notice will be sent to all former employees who were 40
years of age or older at the time of their involuntary discharge during
Florida Power's redeployment and career transition reductions in force.
The notice will inform them of their right to become a party to this
provisional class action within 90 days if they believe they were
discriminated against on the basis of age. Florida Power reserved the
right to file a motion to decertify the class at the end of the 90-day
period. The court deferred ruling on all other pending motions and
postponed the trial.
3. Sanford Coal Gasification Plant Site, Sanford, Florida
See prior discussion of this matter in the 1995 Form 10-K, Part I, Item 3,
paragraph 10 and in the first quarter 1996 Form 10-Q, Part II, Item 1,
paragraph 3. The EPA is expected to perform a supplemental study of
nearby Lake Monroe to determine if contamination exists in the water or
sediment. If associated contamination is confirmed, the site could score
well over the 28.5 threshold referred to in the 1995 Form 10-K, thereby
causing the EPA to add this site to the EPA's National Priorities List of
sites that require cleanup. The EPA is expected to coordinate with the
Florida Department of Environmental Protection in scoring the site. (For
additional information on environmental matters, see Note 3 to the
Financial Statements.)
4. Pasco Cogen, Ltd. v. Florida Power Corporation, Florida Circuit Court,
Sixth Judicial Circuit for Pasco County, Case No. 94-5331-CA-DIV-Y.
See prior discussion of this matter in the 1995 Form 10-K, Item 3,
paragraph 4 and the second quarter 1996 Form 10-Q, Part II, Item 1,
paragraph 4. Under a purchase power contract, Pasco sells electricity to
Florida Power from Pasco's natural gas-fired cogeneration facility located
in Pasco County, Florida.
On October 25, 1996, Florida Power and Pasco Cogen executed a final
settlement agreement subject to approval by the FPSC and lenders to Pasco
Cogen. In general, the terms of the settlement agreement provide for a
mutually agreed upon (i) methodology for computing the energy payments
under the contract, (ii) off-peak curtailment, (iii) reduction in the term
of the contract by four years and seven months, (iv) special monthly
payments as consideration for the restructuring of the term of the
contract, and (v) adjustments to energy payments already made under the
contract. The parties will file a joint motion to stay the litigation and
18<PAGE>
<PAGE>
defer discovery until the FPSC rules on the settlement agreement.
Assuming the FPSC approval is obtained, the parties will file a motion to
dismiss the litigation with prejudice and will execute mutual releases.
(See Note 3 to the Financial Statements for further information regarding
purchased power expenses and commitments.)
5. Florida Power Corp. v. United States, United States Court of Federal
Claims, Case No. 96-702C.
On November 1, 1996, Florida Power filed suit against the United States
Government alleging breach of contract and illegal taking of property
without just compensation. Florida Power seeks more than $7.5 million in
damages, plus interest, and has requested declaratory and injunctive
relief.
The suit arises out of several contracts it executed with the Government
under which the Government provided uranium enrichment services at fixed
prices. After Florida Power fully paid for all such services under the
contracts, the Government, through congressional legislation enacted in
1992, imposed a retroactive price increase on the completed enrichment
services contracts in order to fund the decontamination and
decommissioning of the Government's gaseous diffusion uranium enrichment
facilities. The Government is collecting this increase through an annual
"special assessment" levied on all utilities that had enrichment services
contracts with the Government. Collection of the special assessments
began in 1992 and is scheduled to continue for a fifteen-year period.
To date, Florida Power has paid more than $7.5 million in special
assessments and if continued throughout its anticipated fifteen-year life,
the special assessments would increase the cost of Florida Power's
contracts by more than $23 million. In its complaint, Florida Power is
seeking (1) an order declaring that all special assessments are unlawful,
(2) an injunction prohibiting the Government from collecting future
special assessments, and (3) an award of more than $7.5 million, plus
interest, as damages for the Government's wrongful acts.
6. Indiana Michigan Power Company, et al. v. United States Department of
Energy, Case Number 95-1279, U.S. Court of Appeals, D.C. Circuit.
See prior discussion of this matter in the 1995 Form 10-K, Item 3,
paragraph 8 and the second quarter 1996 Form 10-Q, Part II, Item 1,
paragraph 6. On July 23, 1996, the court ruled in favor of the utilities,
holding that the Nuclear Waste Policy Act creates an unconditional
obligation on the Department of Energy ("DOE") to begin to dispose of
spent nuclear fuel no later than January 31, 1998. The DOE has chosen not
to seek further appeal of this case. This matter is now concluded for
future reporting purposes.
7. Gulf Power et al v. U.S. of America and the Federal Communications
Commission, U.S. District Court, Northern District of Florida, Pensacola
Division, Case No. 3:96-CV-381-LAC.
On July 30, 1996, Florida Power, together with six other electric
utilities, filed the above-referenced suit challenging the
constitutionality of the pole attachment amendments to the
Telecommunications Act of 1996. The suit seeks a declaration that the
pole attachments are unconstitutional because they impose a mandatory
obligation on utilities to provide access to poles they own or control to
cable television and telecommunications service providers without
19
<PAGE>
<PAGE>
providing just compensation for this use. The claim is based on the Fifth
Amendment to the United States Constitution which provides that private
property shall not be taken for public use without just compensation. The
suit also seeks a permanent injunction against the Federal Communications
Commission preventing it from enforcing the mandatory access provision.
On October 11, 1996, the United States and the Federal Communications
Commission filed their answer and asked the court to dismiss the case with
prejudice. Also on October 11th, the Association for Local
Telecommunications Services filed a motion to intervene in the case and
accompanied the motion with its answer. That intervention was granted on
November 7th. In addition, American Communications Services, Inc. is
seeking intervention in the case. On October 23rd, the U.S. District
Court Judge issued an order setting pre-trial procedures for the case.
Item 5. Other
As anticipated in the second quarter 1996 Form 10-Q, Item 2, under the
heading "Operating Results - Florida Power - Other Operating Results", in
September 1996, Florida Power paid to the NRC the fine proposed by the NRC
staff in July 1996.
On April 16, 1996, Florida Power and Ridge Generating Station, L.P.
("Ridge") entered into a settlement agreement resolving a cogeneration
pricing dispute. The dispute involved energy payments to be made under a
1991 agreement for the sale of approximately 40 MWs from Ridge's
cogeneration facility to Florida Power. On September 24, 1996, the FPSC
issued an order approving the agreement. (See prior discussion of this
matter in the first quarter 1996 Form 10-Q, Part I, Item 2, under
"Operating Results - Florida Power - Other Operating Results".)
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Florida Florida
Number Exhibit Progress Power
------ ------- -------- -------
12 Statement Regarding Computation of Ratio X
of Earnings to Fixed Charges for Florida
Power.
27.(a) Florida Progress Financial Data Schedule. X
27.(b) Florida Power Financial Data Schedule. X
X = Exhibit is filed for that respective company.
(b) Reports on Form 8-K:
During the third quarter 1996, Florida Progress filed the
following report on Form 8-K:
Form 8-K dated July 1, 1996, reporting under Item
5 "Other Events" a news release dated July 1, 1996,
announcing that Florida Progress' Board of Directors
approved a plan to spin-off Echelon.
20<PAGE>
<PAGE>
Also during the third quarter 1996, Florida Progress and
Florida Power filed the following report on Form 8-K.
Form 8-K dated July 18, 1996, reporting under Item 5
"Other Events" a press release and related Investor
Information Report reporting Florida Progress' and
Florida Power's second quarter 1996 earnings.
Subsequent to the third quarter 1996, Florida Progress and Florida
Power filed the following reports on Form 8-K:
Form 8-K dated October 17, 1996, reporting under Item
5 "Other Events" a press release and related Investor
Information Report reporting Florida Progress' and
Florida Power's third quarter 1996 earnings.
Form 8-K dated October 22, 1996, reporting under Item
5, "Other Events" a news release regarding Florida
Power's Crystal River 3 Nuclear Power Plant outage.
21
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
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 8, 1996 /s/ John Scardino, Jr.
-----------------------------
John Scardino, Jr.
Vice President and Controller
Date: November 8, 1996 /s/ James V. Smallwood
-----------------------------
James V. Smallwood
Vice President and Treasurer
22
<PAGE>
Exhibit Index
Florida Florida
Number Exhibit Progress Power
------ ------- -------- -------
12 Statement Regarding Computation of Ratio X
of Earnings to Fixed Charges for Florida
Power.
27.(a) Florida Progress Financial Data Schedule. X
27.(b) Florida Power Financial Data Schedule. X
X = Exhibit is filed for that respective company.
Exhibit 12
FLORIDA POWER CORPORATION
Statement of Computation of Ratios
(Dollars In Millions)
Ratio of Earnings to Fixed Charges:
12-Months Year Ended
Ended September 30, December 31,
1996 1995 1995 1994
------ ------ ------ ------
Net Income $238.6 $227.8 $227.0 $200.8
Add:
Operating Income Taxes 137.1 129.8 129.5 114.7
Other Income Taxes (0.2) (0.6) 0.1 (0.8)
------ ------ ------ ------
Income Before Taxes 375.5 357.0 356.6 314.7
Total Interest Charges 99.6 106.1 104.5 108.4
------ ------ ------ ------
Total Earnings (A) $475.1 $463.1 $461.1 $423.1
------ ------ ------ ------
Fixed Charges (B) $ 99.6 $106.1 $104.5 $108.4
------ ------ ------ ------
Ratio of Earnings to
Fixed Charges (A/B) 4.77 4.36 4.41 3.90
===== ===== ===== =====
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<NAME> FLORIDA POWER CORPORATION
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0
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