UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 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 each 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Florida Progress Corporation:
Common Stock without par value and New York Stock Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
Florida Power Corporation: None
Securities registered pursuant to Section 12(g) of the Act:
Florida Progress Corporation: None
Florida Power Corporation: Cumulative Preferred Stock,
par value $100 per share
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of each registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of Florida
Progress Corporation as of December 31, 1996 was $3,075,692,949 (determined by
subtracting the number of shares held by directors and executive officers of
Florida Progress Corporation from the total number of shares outstanding, then
multiplying the difference times the closing sale price from the New York Stock
Exchange Composite Transactions).
The aggregate market value of the voting stock held by non-affiliates of Florida
Power Corporation as of February 28, 1997 was $-0-. As of February 28, 1997,
there were issued and outstanding 100 shares of Florida Power Corporation's
common stock, without par value, all of which were held, beneficially and of
record, by Florida Progress Corporation.
The number of shares of Florida Progress Corporation common stock without par
value outstanding as of December 31, 1996 was 97,007,182.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for Florida Progress Corporation
dated March 10, 1997, relating to the 1997 Annual Meeting of Shareholders, are
incorporated by reference in Part III hereof.
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This combined Form 10-K represents separate filings by Florida Progress
Corporation and Florida Power Corporation. Florida Power Corporation makes no
representations as to the information relating to Florida Progress Corporation's
diversified operations.
[THIS SPACE INTENTIONALLY BLANK]
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TABLE OF CONTENTS
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PART I.
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . 20
PART II.
Item 5. Market for the Registrants' Common Equity
and Related Stockholder Matters . . . . . . . . . . . 20
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 22
Item 8. Financial Statements and Supplementary Data . . . . . . 32
Combined Report of Independent Certified Public
Accountants . . . . . . . . . . . . . . . . . . . . 32
Consolidated Financial Statements of Florida Progress 33
Financial Statements of Florida Power . . . . . . . . 38
Combined Notes to the Financial Statements. . . . . . 43
Quarterly Financial Data (unaudited). . . . . . . . . 61
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . 62
PART III.
Item 10. Directors and Executive Officers of the Registrants . . 62
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . 64
Item 12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . 68
Item 13. Certain Relationships and Related Transactions. . . . . 69
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . 69
Signatures - Florida Progress Corporation . . . . . . . . . . . . 75
Signatures - Florida Power Corporation. . . . . . . . . . . . . . 77
Financial Statement Schedules . . . . . . . . . . . . . . . . . . 79
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GLOSSARY
When used herein, the following terms will have the meanings indicated:
TERM MEANING
1935 Act. . . . . . . . . . . . .Public Utility Holding Company Act of 1935
Btu . . . . . . . . . . . . . . .British thermal units
CAAA. . . . . . . . . . . . . . .Clean Air Act Amendments of 1990
CERCLA or Superfund . . . . . . .Comprehensive Environmental Response
Compensation and Liability Act
CR3 . . . . . . . . . . . . . . .Florida Power's nuclear generating plant,
Crystal River Unit No. 3
DOE . . . . . . . . . . . . . . .United States Department of Energy
Echelon . . . . . . . . . . . . .Echelon International Corporation
Electric Fuels. . . . . . . . . .Electric Fuels Corporation
EMF . . . . . . . . . . . . . . .electromagnetic fields, or electric and
magnetic fields
EPA . . . . . . . . . . . . . . .United States Environmental Protection Agency
FDEP. . . . . . . . . . . . . . .Florida Department of Environmental Protection
FERC. . . . . . . . . . . . . . .Federal Energy Regulatory Commission
Financial Statements. . . . . . .Florida Progress' Consolidated Financial
Statements and Florida Power's Financial
Statements, for the year ended December 31,
1996 contained under Item 8 herein
Florida Power . . . . . . . . . .Florida Power Corporation
Florida Progress. . . . . . . . .Florida Progress Corporation
FP&L. . . . . . . . . . . . . . .Florida Power & Light Company
FPSC. . . . . . . . . . . . . . .Florida Public Service Commission
FPUC. . . . . . . . . . . . . . .Florida Public Utilities Company
FRCC. . . . . . . . . . . . . . .Florida Reliability Coordinating Council
Georgia Power . . . . . . . . . .Georgia Power Company
KV. . . . . . . . . . . . . . . .kilovolts
KVA . . . . . . . . . . . . . . .kilovolt amperes
KWH . . . . . . . . . . . . . . .kilowatt hours
LTIP. . . . . . . . . . . . . . .Florida Progress Long-Term Incentive Plan
MD&A. . . . . . . . . . . . . . .Management's Discussion and Analysis of
Financial Condition and Results of Operations
Mid-Continent . . . . . . . . . .Mid-Continent Life Insurance Company
MW. . . . . . . . . . . . . . . .megawatts
NERC. . . . . . . . . . . . . . .North American Electric Reliability Council
NRC . . . . . . . . . . . . . . .United States Nuclear Regulatory Commission
NWPA. . . . . . . . . . . . . . .Nuclear Waste Policy Act
PCBs. . . . . . . . . . . . . . .polychlorinated biphenyls
Progress Capital. . . . . . . . .Progress Capital Holdings, Inc.
Progress Credit . . . . . . . . .Progress Credit Corporation
Proxy Statement . . . . . . . . .The definitive proxy statement dated March 10,
1997, relating to Florida Progress' 1997
Annual Meeting of Shareholders
PRP . . . . . . . . . . . . . . .potentially responsible party, as defined in
CERCLA
SBUs. . . . . . . . . . . . . . .Strategic Business Units
SEC . . . . . . . . . . . . . . .United States Securities and Exchange
Commission
SERP. . . . . . . . . . . . . . .Florida Progress Supplemental Employee
Retirement Plan
SOP . . . . . . . . . . . . . . . Statement of Position issued by American
Institute of Certified Public Accountants
Southern. . . . . . . . . . . . .The Southern Company
SNF . . . . . . . . . . . . . . .spent nuclear fuel
the nuclear plant . . . . . . . .Florida Power's nuclear generating plant,
Crystal River Unit No. 3
the utility . . . . . . . . . . .Florida Power Corporation<PAGE>
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PART I
ITEM 1. BUSINESS
FLORIDA PROGRESS
Florida Progress Corporation ("Florida Progress", which term includes
consolidated subsidiaries unless otherwise indicated), is a diversified electric
utility holding company. Florida Progress' revenues for the year ended December
31, 1996 were $3.2 billion and assets at year end were $5.3 billion. Its
principal executive offices are located at One Progress Plaza, St. Petersburg,
Florida 33701, telephone number (813) 824-6400. The Florida Progress home page
on the Internet's World Wide Web is located at http://www.fpc.com. Florida
Progress was incorporated in Florida on January 21, 1982.
Florida Progress defines its principal business segments as utility and
diversified operations. Florida Power Corporation ("Florida Power" or "the
utility"), Florida Progress' largest subsidiary, is the utility segment and
encompasses all regulated public utility operations. See Item 1 "Business
Utility Operations - Florida Power". Progress Capital Holdings, Inc. ("Progress
Capital") is the downstream holding company for Florida Progress' diversified
subsidiaries which consolidates the financing of nonutility operations. The
diversified operations segment includes Electric Fuels Corporation ("Electric
Fuels"), an energy and transportation company, and Mid-Continent Life Insurance
Company ("Mid-Continent"), a life insurance company. See Item 1 "Business
Diversified Operations". For information concerning the operating profit and
assets attributable to these business segments, see Note 9 to Florida Progress'
consolidated financial statements and Florida Power's financial statements for
the year ended December 31, 1996 contained herein under Item 8 (the "Financial
Statements").
In December 1996, Florida Progress spun off Echelon International Corporation
("Echelon"). Echelon, successor to Progress Credit Corporation ("Progress
Credit"), was the Florida Progress subsidiary with lending, leasing and real
estate operations. The spin-off was accomplished through a tax-free stock
dividend to Florida Progress' shareholders, thus completing a strategy begun in
1991 to exit those businesses.
Florida Progress is a public utility holding company under the Public Utility
Holding Company Act of 1935 ("1935 Act"). Florida Progress is exempt from
registration with the Securities and Exchange Commission ("SEC") under the 1935
Act and attendant regulation because its utility operations are primarily
intrastate.
UTILITY OPERATIONS - FLORIDA POWER
Florida Power was incorporated in Florida in 1899, and is an operating public
utility engaged in the generation, purchase, transmission, distribution and sale
of electricity. Florida Power has a system generating capacity of 7,341
megawatts ("MW"). In 1996, the utility accounted for 76% of Florida Progress'
consolidated revenues, 92% of its earnings from continuing operations and 80% of
its assets.
Florida Power provided electric service during 1996 to an average of 1,292,075
customers in west central Florida from its headquarters in St. Petersburg. The
service area covers approximately 20,000 square miles and includes the densely
populated areas around Orlando, as well as the cities of St. Petersburg and
Clearwater. Of Florida Power's 1996 electric revenues billed, approximately 56%
were derived from residential sales, 23% from commercial sales, 9% from
industrial sales, 5% from other retail sales and 7% from wholesale sales.
Important industries in the territory include phosphate and rock mining and
processing, electronics design and manufacturing, and citrus and other food
processing. Other important commercial activities are tourism, health care,
construction and agriculture.
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COMPETITION
Florida Power made a number of changes in 1996 to help prepare it for increased
competition. In July 1996, the utility reorganized its operations into strategic
business units ("SBUs"), making it one of the first electric companies in the
country to adopt this operational structure. The three SBUs are Energy Supply,
Energy Delivery and Energy Solutions. Each will focus on a targeted segment of
the overall utility business.
Energy Supply is responsible for strengthening Florida Power's position as an
efficient, low-cost producer of electricity. Energy Delivery oversees the
utility's transmission and distribution lines as well as system operations and
planning. Its mission is to maintain and improve service reliability in the most
cost-effective manner possible. Energy Solutions is focused on customer service,
sales and marketing and finding ways to use emerging technology to develop new
products and services.
For additional information with respect to Florida Power and competition, see
Item 7 "Management's Discussion and Analysis of Financial Condition and
Operating Results ("MD&A") - Operating Results - Florida Power Corporation -
Utility Competition".
FUEL AND PURCHASED POWER
GENERAL: Florida Power's consumption of various types of fuels depends on
several factors, the most important of which are the demand for electricity by
Florida Power's customers, the availability of various generating units, the
availability and cost of fuel, and the requirements of federal and state
regulatory agencies. Florida Power's energy mix for the last three years is
presented in the following table:
ENERGY MIX PERCENTAGES
Fuel Type 1996 1995 1994
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Coal 43% 39% 45%
Oil 16% 12% 16%
Nuclear* 6% 19% 17%
Gas 3% 4% 1%
Purchased Power 32% 26% 21%
* See "NUCLEAR" below for information regarding outages at Florida
Power's nuclear generating plant, which negatively impacted nuclear
plant availability in 1996.
Florida Power is permitted to pass the cost of recoverable fuel and purchased
power to its customers through fuel adjustment clauses. (See Note 1 to the
Financial Statements.)
The future prices for and availability of various fuels discussed in this report
cannot be predicted with complete certainty. However, Florida Power believes
that its fuel supply contracts, as described below, will be adequate to meet its
fuel supply needs.
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Florida Power's average fuel costs per million British thermal units ("Btu") for
each year of the five-year period ended December 31, 1996, were as follows:
AVERAGE FUEL COST
(per million Btu)
1996 1995 1994 1993 1992
Coal $1.91 $1.93 $1.96 $1.96 $1.97
Oil 2.80 2.70 2.39 2.49 2.53
Nuclear .50 .49 .55 .54 .57
Gas 2.78 1.98 2.46 4.27 2.54
Weighted Average 2.04 1.69 1.75 1.79 1.86
OIL AND GAS: Oil is purchased under contracts and in the spot market from
several suppliers. The cost of Florida Power's oil is determined by world market
conditions. Management believes that Florida Power has access to an adequate
supply of oil for the reasonably foreseeable future. Florida Power's natural gas
supply is purchased under firm contracts and in the spot market from numerous
suppliers and is delivered under firm, released firm and interruptible
transportation contracts. Florida Power believes that existing contracts for oil
are sufficient to cover the requirements when natural gas transmission that is
purchased on an interruptible basis is not available.
NUCLEAR: Florida Power has one nuclear generating plant, Crystal River Unit No.
3 ("CR3" or "the nuclear plant"). After completing a record performance in 1995
by achieving a capacity factor of 100%, CR3 was shut down for much of 1996.
Beginning in February 1996, the plant underwent a scheduled refueling outage
that lasted until May 1996, when the plant returned to service. In September
1996, an oil pressure problem in the main turbine forced the plant to shut down
until repairs could be made. When the repairs were completed in October, Florida
Power decided to keep the plant down to address certain backup safety system
design issues. The utility expects to be able to restart the plant by year-end
1997. For more information regarding the current outage and recent performance
at CR3, see Item 7 "MD&A - Operating Results - Florida Power Corporation -
Nuclear Operations."
Nuclear fuel is processed through four distinct stages. Stage I and Stage II
involve the mining and milling of the natural uranium ore to produce a
concentrate and the conversion of this uranium concentrate into uranium
hexafluoride. Stage III and Stage IV entail the enrichment of the uranium
hexafluoride, and the fabrication of the enriched uranium hexafluoride into
usable fuel assemblies. Florida Power has contracts in place which provide for a
supply of enriched uranium and fuel fabrication through 2004.
It will be necessary for Florida Power to enter into future fuel contracts to
cover the differences between the total unit lifetime requirements of CR3 and
the requirements covered by existing contracts. Although no assurances can be
given as to the future availability or costs of such contracts, Florida Power
expects that future contract commitments will be obtained at the appropriate
time.
Spent nuclear fuel ("SNF") is stored at CR3 pending disposal under a contract
with the United States Department of Energy ("DOE"). (See Note 4 to the
Financial Statements and Item 3 "Legal Proceedings", paragraph 9.) At the
present time, Florida Power has facilities on site for the temporary storage of
SNF generated through the year 2010.
COAL: Florida Power anticipates a requirement of approximately 5,400,000 tons of
coal in 1997. Current environmental regulations limit sulfur content, at 12,000
Btu per pound, to 1.2% for Crystal River Unit Nos. 1 and 2, and 0.7% for Unit
Nos. 4 and 5. Most of the coal is expected to be supplied from the Appalachian
coal fields of the United States. Approximately two thirds of the coal is
expected to be delivered by rail and the remainder by barge. The coal is being
supplied by Electric Fuels pursuant to contracts between Florida Power and
Electric Fuels.
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For 1997, Electric Fuels has long-term contracts with various sources for
approximately 70% of the coal requirements of Florida Power's coal units. These
long-term contracts have price adjustment provisions. Electric Fuels expects to
acquire the remainder in the spot market and under short-term contracts.
Electric Fuels does not anticipate any problem obtaining the remaining Florida
Power requirements with short-term contracts and in the spot market. (See Note
11 to the Financial Statements.)
PURCHASED POWER: Florida Power, along with other Florida utilities, buys and
sells economy power through the Florida energy brokering system. In addition,
Florida Power has long-term contracts for the purchase of approximately 480 MW
of purchased power with other utilities, including a contract with The Southern
Company ("Southern") for approximately 400 MW. Also, Florida Power has entered
into purchased power contracts with certain cogenerators for 1,160 MW of
capacity, of which 1,050 MW have been completed and are currently operating. The
capacity currently available from cogenerators represents about 12% of Florida
Power's total system capacity. (See Item 3 "Legal Proceedings", paragraphs 2
through 8, Item 7 "MD&A - Operating Results - Florida Power Corporation - Fuel
and Purchased Power" and Note 11 to the Financial Statements.)
REGULATORY MATTERS AND FRANCHISES
Florida Power is subject to the jurisdiction of the Florida Public Service
Commission ("FPSC") with respect to retail rates, customer service, planning,
construction of facilities, accounting, issuance of securities and other
matters. In addition, Florida Power is subject to regulation by the Federal
Energy Regulatory Commission ("FERC") with respect to transmission and sales of
wholesale power, accounting and certain other matters. The underlying concept of
utility ratemaking is to set rates at a level that allows the utility to collect
revenues equal to its cost of providing service plus a reasonable rate of return
on its equity.
The FPSC oversees the retail sales of the state's investor-owned utilities. The
FPSC authorizes retail "base rates" that are designed to provide a utility with
the opportunity to earn a specific rate of return on its "rate base", or average
investment in utility plant. These rates are intended to cover all reasonable
and prudent expenses of utility operations and to provide investors with a fair
rate of return. The FPSC allows utilities to recover fuel, purchased power and
conservation costs through an adjustment charge on monthly electric bills.
Beginning in 1995, the FPSC ordered Florida Power to conduct a three-year test
of revenue decoupling for its residential customers. (See Notes 1 and 5 to the
Financial Statements.)
Florida Power is interconnected with 22 municipal electric systems. Florida
Power's wholesale customers include Seminole Electric Cooperative, Inc., the
Florida Municipal Power Agency and 11 municipalities. During 1996, about 7% of
Florida Power's electric revenues were from its wholesale business.
For further information with respect to rates, see Note 5 to the Financial
Statements.
Florida Power's CR3 nuclear plant is subject to regulation by the United States
Nuclear Regulatory Commission ("NRC"). The NRC's jurisdiction encompasses broad
supervisory and regulatory powers over the construction and operation of nuclear
reactors, including matters of health and safety, antitrust considerations and
environmental impact. Florida Power has a 90.4% ownership interest in CR3. (See
Note 4 to the Financial Statements.)
By virtue of state and municipal legislation, Florida Power holds franchises
with varying expiration dates to provide electric service in nearly all
municipalities in which it distributes electric energy. Approximately 99% of
revenues from customers in incorporated areas are covered by franchises. The
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general effect of these franchises is to grant Florida Power the right to enter
upon and use streets, alleys and other public places for erecting and
maintaining poles, wires and other apparatus for the sale and distribution of
electric energy. All but one of the existing franchises cover a 30-year period
from the date granted, the maximum allowed by Florida law. The one exception is
a franchise that covers a 10-year period from the date granted. There are 112
franchises, of which 32 expire before December 31, 2001, 27 expire between
January 1, 2002 and December 31, 2011, and 53 expire between January 1, 2012 and
December 31, 2026. (For further information concerning these franchise
agreements, see Item 7 "MD&A - Operating Results - Florida Power Corporation
Utility Competition".)
ENVIRONMENTAL MATTERS
Florida Power is subject to federal, state and local regulations dealing with
air and water quality and other environmental matters.
AIR: All of Florida Power's air emission sources meet the air quality standards
currently set by the Florida Department of Environmental Protection ("FDEP")
and/or the United States Environmental Protection Agency ("EPA").
The Clean Air Act Amendments of 1990 ("CAAA"), under Title IV, Acid Rain
Control, require reduction in sulfur dioxide and nitrogen oxide emissions by the
year 2000 and set a permanent cap on those emissions. The reductions are to be
implemented in two phases. Phase I limitations became effective in 1995 and
Phase II limitations are effective by 2000. Florida Power has not been and does
not expect to be materially affected by either Phase I or Phase II. Continuous
emission monitors were installed on most of Florida Power's units by the end of
1994 as required under Title IV at a total cost of $11 million. To meet Phase II
limitations, Florida Power expects to spend about $10 million by 2000 to
implement a strategy based primarily on burning cleaner fuels and installing
burners that reduce nitrogen oxide emissions on some coal units.
Under Title III of the CAAA, the EPA is studying the emission of hazardous air
pollutants and, where appropriate, promulgating emission limitations for
specific source categories. Depending on the results of these studies and the
EPA's determination of the need for additional limitations, Florida Power could
be required to incur additional capital expenditures and operating expenses.
Under Title V of the CAAA, Florida Power is required to pay annual operating
fees based on the previous year's emissions. In 1997, these fees are expected to
total approximately $775,000 and are expected to increase to approximately $1
million by 2000.
Florida Power's construction program includes approximately $7 million of
planned environmental expenditures for air quality projects for the two-year
period ending December 31, 1998.
WATER: To help meet the future electricity needs of its customers, Florida Power
is building a new power plant complex in Polk County, Florida. Florida Power
plans to have the complex's first plant on line in 1998. This plant will use
combined cycle technology and be capable of producing up to 470 MW of power.
(See Item 2, "Properties - Utility Operations - Planned Generation".)
Approximately $26 million was spent through December 31, 1996 on environmental
projects related to site development, mainly for water resource related
facilities. For the two-year period ending December 31, 1998, Florida Power
expects that approximately $1 million will be expended on environmental projects
related to site development. In addition, Florida Power's construction program
includes approximately $4 million of additional environmental expenditures for
water resource projects at other Florida Power facilities for the two-year
period ending December 31, 1998.
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WASTE MATERIALS: Florida Power is nearing completion of its program to reduce
electrical equipment utilizing polychlorinated biphenyls ("PCB"). All regulatory
compliance dates have been met. All PCB transformers (i.e. those having greater
than 500 ppm PCB) have been removed from all of Florida Power's electric
generating plants, except for one small plant. Removal of PCB transformers from
this final plant will be delayed until Florida Power decides whether and for how
long the plant will remain in operation.
STORAGE TANK PROGRAM: The regulation of underground and above-ground storage
tanks has expanded to affect virtually every Florida Power storage tank with a
capacity of 100 gallons or greater, including vehicular fuel tanks, bulk fuel
storage tanks, mineral acid tanks, hazardous material tanks and compression
vessels. The FDEP's storage tank regulations require the replacement or
upgrading of tanks that are not protected from corrosion, and the installation
of release detection and containment capabilities for spills and leaks. These
requirements must be met by 1999. Florida Power expects the annual expenditures
through 1999 related to compliance with these regulations to be $1 million and
$3 million for operating expense and construction, respectively.
Under a FDEP program, revenues from taxes on imported oil either have been or
are expected to be used to reimburse Florida Power for the majority of past
storage tank contamination cleanup expenditures. In March 1995, the Governor of
Florida ordered a moratorium on this FDEP program. However, Florida Power
expects to receive reimbursement for cleanup activities completed prior to the
moratorium. The expenditures needed to clean up the remaining storage tank
contamination are not expected to be material.
With expansion of regulation and the resulting increased monitoring of tank
systems and oil filled electrical equipment, further expenditures for
contamination cleanup and retrofitting and upgrading equipment are likely, but
these expenditures are not expected to be material to Florida Power.
ELECTROMAGNETIC FIELDS: The potential adverse effect of electromagnetic fields,
or electric and magnetic fields ("EMF"), upon human health continues to be an
important issue in the siting, construction and operation of electric
transmission and distribution systems. EMF from a variety of sources, including
transmission and distribution lines, has been the subject of many studies and
much public discussion in recent years.
Because of its exclusive jurisdiction to regulate EMF associated with electric
transmission and distribution lines and substation facilities in Florida, the
FDEP has adopted rules which establish certain EMF limits for new transmission
lines and substations. The rules also require an annual review of the state of
the scientific research into the potential adverse effects of EMF upon human
health. The staff of the FDEP provided its progress report to the Environmental
Regulation Commission in February 1997; based on its review of the scientific
research, the staff recommended that no revision of the current EMF standards be
made at that time. The Environmental Regulation Commission adopted the staff's
recommendation and made no revision to EMF standards. Florida Power believes
that compliance with these EMF rules, which at present essentially maintain the
status quo with respect to regulated EMF exposure levels, will not have a
material adverse effect on the cost of constructing or maintaining new
transmission lines or substations. However, there always is a potential for
lawsuits brought by plaintiffs alleging damages caused by EMF.
Florida Power's management monitors and reports to Florida Power's Board of
Directors at least annually on developments in research concerning the potential
health effects of EMF, EMF mitigation technologies and procedures, and
significant actions by principal federal and Florida agencies related to EMF.
OTHER ENVIRONMENTAL MATTERS: Florida Power has received notices from the EPA
that it is or could be a potentially responsible party ("PRP") under the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA" or
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"Superfund") and the Superfund Amendment and Reauthorization Act and may be
liable, together with others, for the costs of cleaning up several contaminated
sites identified by the FDEP. In addition to these designated sites, there are
other sites where Florida Progress affiliates may be responsible for additional
environmental cleanup. For further information concerning certain environmental
matters relating to Florida Power, see paragraphs 13 and 14 under Item 3 "Legal
Proceedings" and "Contaminated Site Cleanup" in Note 11 to the Financial
Statements.
EMPLOYEES
As of December 31, 1996, Florida Power had 4,629 full-time employees. The
International Brotherhood of Electrical Workers represents approximately 2,035
of these full-time employees. The current union contract, which was to have
expired in December 1996, was extended one year to December 1997. Florida
Power's management believes that it will eventually agree on a new contract with
Florida Power's union employees.
DIVERSIFIED OPERATIONS
Florida Progress' diversified operations are owned directly or indirectly
through Progress Capital, a Florida corporation and wholly owned subsidiary of
Florida Progress. Progress Capital holds the capital stock of, and provides
funding for, Florida Progress' nonutility subsidiaries, which include the
following:
ELECTRIC FUELS - Formed in 1976, Electric Fuels is an energy and
transportation company with operations organized into three business
units. Electric Fuels' energy and related services business unit supplies
coal to Florida Power's Crystal River Energy Complex and other utility
and industrial customers. Electric Fuels' inland marine transportation
business unit, under the flag of Marine Equipment Management Corporation
("MEMCO"), transports coal and dry-bulk cargoes primarily along the
Mississippi and Ohio rivers. The rail services business unit, led by
Progress Rail Services Corporation, is one of the largest integrated
processors and suppliers of railroad materials in the country. With
operations in 14 states, Progress Rail offers a full range of railcar
parts, rail and other track material, railcar repair facilities, railcar
scrapping and metal recycling as well as railcar sales and leasing.
MID-CONTINENT - Acquired in 1986, Mid-Continent is a life insurance
company headquartered in Oklahoma City, Oklahoma. Mid-Continent has been
in business since 1909. Its principal product is a death benefit policy
which is sold through independent agents. Long-term, Mid Continent does
not fit with the strategic direction of Florida Progress. Accordingly,
Florida Progress is considering divestiture of the business. Florida
Progress expects that it will take three to five years to divest this
business. (For information regarding competition in the life insurance
industry and Mid-Continent's operating results and plans, see the
"COMPETITION" section below and Item 7 "MD&A - Operating Results -
Diversified Operations - Mid-Continent Life Insurance Company".)
As of December 31, 1996, Progress Capital and its subsidiaries had 2,624
full-time employees. (For additional information with respect to Progress
Capital and its subsidiaries, see Item 7 "MD&A - Operating Results - Diversified
Operations".)
COMPETITION
Florida Progress' nonutility subsidiaries compete in their respective
marketplaces in terms of price, service reliability, location and other factors.
Electric Fuels competes in several distinct markets: its coal operations compete
7
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in the eastern United States utility and industrial coal markets; its marine
transportation and barge operations compete in the coal, grain and bulk products
transportation markets on the Ohio and lower Mississippi rivers; its marine
equipment repair business competes in the inland river and gulf coast repair
markets; and its rail operations compete in the railcar repair, parts and
associated services markets in the eastern United States and, to a limited
extent, in the midwest and west. Factors contributing to Electric Fuels' success
in these markets include a competitive cost structure, strategic locations and,
in the case of its marine transportation operations, a modern fleet. There are,
however, numerous competitors in each of these markets, although no one
competitor is dominant in any industry. The business of Electric Fuels and its
subsidiaries, taken as a whole, is not subject to significant seasonal
fluctuation.
Mid-Continent competes with other insurance companies in all jurisdictions in
which it is licensed to do business. Many of Mid-Continent's competitors have
more diversified lines of insurance coverage, substantially greater financial
resources and direct sales forces. Over the past few years, the life insurance
industry has become more competitive, resulting in lower sales of new policies
at Mid-Continent.
In an effort to reverse declining sales, Mid-Continent introduced a new
insurance product in early 1996. The new policy replaced Mid-Continent's
principal product, which was determined to be inadequately priced. In December
1996, cost-reduction measures were taken and restructuring occurred at Mid-
Continent in an effort to improve profitability. In 1997, Mid-Continent plans to
begin an orderly process to resolve the pricing issue that is expected to
involve reducing policy dividends and increasing premiums.
For further information with respect to Florida Progress' nonutility
subsidiaries and competition, see Item 7 "MD&A - Operating Results - Diversified
Operations".
ENVIRONMENTAL MATTERS
Electric Fuels is subject to federal, state and local regulations which govern
air and water quality, waste disposal and other environmental matters. The coal
mining business is affected primarily by the Clean Water Act, the Clean Air Act
and the Surface Mining Control and Reclamation Act of 1977. The transportation
and the railcar and marine repair businesses are primarily affected by the
Resource Conservation and Recovery Act, the Emergency Planning and Community
Right-To-Know Act and the Clean Water Act.
The Environmental Affairs Department of Electric Fuels reviews existing and
emerging environmental regulations, disseminates applicable environmental
information throughout the organization and conducts site specific environmental
compliance audits. Transactional environmental assessments are performed on new
acquisitions to determine the potential environmental liabilities associated
with the facilities being considered. Compliance with environmental laws and
regulations has not had a material effect on Electric Fuels' capital
expenditures, earnings or competitive position, and Electric Fuels does not
anticipate making any material capital expenditures for environmental facilities
through the end of 1998.
For further information concerning certain environmental matters relating to
Florida Progress' diversified operations, see paragraph 15 under Item 3 "Legal
Proceedings" and Note 11 to the Financial Statements.
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EXECUTIVE OFFICERS
Roy A. Anderson, Senior Vice President, Nuclear Operations of Florida Power,
Age 48.
Mr. Anderson became Senior Vice President, Nuclear Operations, effective January
20, 1997. Prior to joining Florida Power, Mr. Anderson was employed by Carolina
Power and Light, where he held numerous executive officer positions since 1993
in the areas of nuclear operations, fossil generation, and distribution and
customer service. From 1987 to 1993, he was employed by Boston Edison Company
where he served as Plant Manager, Vice President and ultimately as Senior Vice
President, Nuclear Operations.
Kenneth E. Armstrong, Vice President and General Counsel of Florida Progress
and Florida Power, Age 49.
Mr. Armstrong has served as General Counsel of Florida Progress since July 1990
and as Vice President since April 1992. In March 1995, he was appointed Vice
President and General Counsel of Florida Power effective April 3, 1995. In
addition to these positions, Mr. Armstrong served as Assistant Secretary of
Florida Progress from April 1992 to April 1993 and as Secretary from April 1993
to April 1996. He also served as Assistant Secretary of Florida Power from 1987
until April 1993 and as Secretary from April 1993 until April 1996.
Dr. Percy M. Beard, Jr., Senior Vice President, Nuclear Operations of Florida
Power, Age 60.
Effective April 1, 1997, Dr. Beard is retiring from the above positions which he
held since November 1989.
Janice B. Case, Vice President, Energy SolutionsSM of Florida Power
Corporation, Age 44.
Mrs. Case was named Vice President, Energy SolutionsSM effective July 1, 1996.
From October 1990 until July 1996, she served as Vice President, Suncoast
Florida Region of Florida Power.
Jack B. Critchfield, Chairman of the Board and Chief Executive Officer of
Florida Progress, Age 63.
Since December 1, 1991, Dr. Critchfield's principal occupation has been as shown
above. Since 1983, he has held numerous executive positions with Florida
Progress and its subsidiaries including President, Chief Operating Officer,
Group Vice President, President of Electric Fuels and Vice President of the
Eastern and Ridge Divisions of Florida Power. He has been a director of Florida
Power since 1988 and served as a director from 1975 through 1978 and as Chairman
of its Board from 1990 until April 1996. He is a director of Barnett Banks,
Inc., Jacksonville.
Michael B. Foley, Jr., Senior Vice President, Energy Delivery of Florida Power,
Age 53.
Mr. Foley became Senior Vice President, Energy Delivery, effective July 1,
1996, after serving as Vice President in that position since February 1995.
From October 1988 until February 1995, Mr. Foley served as Director of
System Planning of Florida Power.
John A. Hancock, Senior Vice President, Energy Supply of Florida Power,
Age 56.
Mr. Hancock became Senior Vice President, Energy Supply, effective January
1993. From September 1989, to January 1993, Mr. Hancock was Senior Vice
President, Power Operations, of Florida Power.
Jeffrey R. Heinicka, Senior Vice President and Chief Financial Officer of
Florida Progress and Florida Power, Age 42.
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From December 1990 until appointment to his current positions in 1994, Mr.
Heinicka served as Vice President and Treasurer of Florida Progress. Mr.
Heinicka also served as Vice President and Treasurer of Florida Power from April
1993 to March 1994, a position he held concurrently with his Vice President and
Treasurer position at Florida Progress.
Richard D. Keller, Group Vice President, Energy and Transportation of Florida
Progress, and President and Chief Executive Officer, Electric Fuels, Age 43.
Since May 1990, Mr. Keller's principal occupation has been as shown above.
He has served as President and Chief Executive Officer of Electric Fuels since
February 1988.
Richard Korpan, President and Chief Operating Officer of Florida Progress, and
Chairman of the Board and Chief Executive Officer of Florida Power, Age 55.
For more than five years, Mr. Korpan's principal occupation has been President
and Chief Operating Officer of Florida Progress. In April 1996, Mr. Korpan also
became Chairman of the Board and Chief Executive Officer of Florida Power. He
joined Florida Progress in 1989 as Executive Vice President and Chief Financial
Officer. Mr. Korpan is a director of SunTrust Bank of Tampa Bay and Acordia
Central Florida, Inc.
Joseph H. Richardson, Group Vice President, Utility Group of Florida Progress
and President and Chief Operating Officer of Florida Power, Age 47.
Since April 1, 1996, Mr. Richardson's principal occupation has been as shown
above. From April 1995 to April 1996, he served as Senior Vice President, Energy
Distribution of Florida Power. From October 1993 to April 1995, he served as
Senior Vice President, Legal and Administrative Services, and General Counsel of
Florida Power. From August 1991 through April 1995, Mr. Richardson also held the
position of Senior Vice President of Florida Progress. He was President and
Chief Executive Officer of Talquin Corporation, a former subsidiary of Florida
Progress from May 1990 until September 1993. He is a director of Echelon.
There are no family relationships between any director or any executive officer
of Florida Progress or Florida Power. The executive officers serve at the
pleasure of their respective Boards of Directors. Each executive officer is
appointed annually.
ITEM 2. PROPERTIES
Florida Progress believes that its physical properties and those of its
subsidiaries are adequate to carry on its and their businesses as currently
conducted. Florida Progress and its subsidiaries maintain property insurance
against loss or damage by fire or other perils to the extent that such property
is usually insured. (See Note 11 to the Financial Statements.) Substantially all
of Florida Power's utility plant is pledged as collateral for Florida Power's
First Mortgage Bonds. Certain river barges and tug/barge units owned or operated
by Electric Fuels are subject to liens in favor of certain lenders.
UTILITY OPERATIONS
GENERATION: As of December 31, 1996, the total net winter generating capacity of
Florida Power's generating facilities was 7,341 MW. This capacity was generated
by 13 steam units with a capacity of 4,661 MW and 44 combustion turbine peaking
units with a capacity of 2,680 MW. Florida Power's ability to use its generating
units may be adversely impacted by various governmental regulations affecting
nuclear operations and other aspects of Florida Power's business. (See
"Regulatory Matters and Franchises" and "Environmental Matters" under Item 1
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"Business - Utility Operations - Florida Power.") Operation of these generating
units may also be substantially curtailed by unanticipated equipment failures or
interruption of fuel supplies. On February 5, 1996, Florida Power experienced a
new peak of 8,807 MW. Florida Power met this demand through system generating
capacity, purchased power and demand-side management programs. Florida Power
expects to have sufficient system capacity, access to purchased power and
demand-side management capabilities to meet anticipated future demand.
Florida Power's existing generating plants (all located in Florida) and their
capacities at December 31, 1996 are as follows:
Winter Net
Maximum
Dependable
Primary Location Steam Peaking Capacity
Plants Fuel (County) MW MW MW
- ---------------- ------- ------------- ------- ------- ----------
Crystal River: Citrus
Unit #1 Coal 373 - 373
Unit #2 Coal 469 - 469
Unit #3 Uranium 755* - 755
Unit #4 Coal 717 - 717
Unit #5 Coal 717 - 717
----- -----
3,031 3,031
Anclote: Pasco
Unit #1 Oil 517 - 517
Unit #2 Oil 517 - 517
Bartow Oil Pinellas 449 217 666
Turner Oil Volusia - 200 200
Intercession City Oil Osceola - 744 744
DeBary Oil Volusia - 786 786
Higgins Oil Pinellas - 158 158
Bayboro Oil Pinellas - 232 232
Avon Park Oil Highlands - 64 64
Port St. Joe Oil Gulf - 18 18
Rio Pinar Oil Orange - 18 18
Suwannee River Oil Suwannee 147 201 348
University of Fla. Gas Alachua - 42 42
----- ----- -----
4,661 2,680 7,341
===== ===== =====
* Represents 90.4% of total plant capacity. The remaining 9.6% of capacity
is owned by other parties. The CR3 nuclear plant was shut down in
September 1996 for repairs and remains down to address certain backup
safety system design concerns. Florida Power expects to be able to
restart CR3 by year-end 1997.
Florida Power and Georgia Power Company ("Georgia Power") are co-owners of a
165-MW advanced combustion turbine located at Florida Power's Intercession City
site. The unit went into commercial operation in January 1997. Florida Power
operates and maintains the unit for both owners. Georgia Power has the exclusive
right to the output of this unit during the months of June through September.
Florida Power has that right for the remainder of the year.
PLANNED GENERATION AND ENERGY SALES: Florida Power has agreed to sell between
150 and 400 MW of summer-peaking capacity annually to Georgia Power from 1996
through 1999. Since Florida Power is a winter-peaking utility and Georgia Power
is a summer-peaking utility, this transaction benefits both parties. Florida
Power's generation strategy includes continuing efforts to sign similar energy
agreements with other utilities.
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In 1992, the FPSC granted Florida Power a certificate of need to build 470 MW of
new generation using combined cycle technology. In September 1994, Florida Power
purchased approximately 8,100 acres of mined-out phosphate land for the new
power plant site. The site is located in Polk County, Florida, approximately 50
miles east of Tampa. Site development activities were completed in 1996.
Commencement of construction of the initial unit began in January 1997. The
first power block is a 470-MW combined cycle unit that is expected to come on
line in 1998. Florida Power plans to use natural gas to fuel the first phase of
the new energy complex in Polk County. (See Item 7 "MD&A - Liquidity and Capital
Resources - Florida Power Corporation".)
Florida Power has obtained capacity on the Florida Gas Transmission Company's
system for the transportation of natural gas to the planned combined cycle plant
in Polk County. The capacity will be released beginning in November 1996 with
all capacity available to Florida Power by March 1998. Florida Power has
contracted for natural gas and its transportation for a portion of the plant's
requirements.
Some of the capacity at the Polk County site will be used to meet the
requirements of a wholesale contract signed in 1995, in which Florida Power
agreed to sell an additional 455 MWs to Seminole Electric Cooperative, beginning
in 1999.
In connection with the construction of new power plants in Florida, the FPSC
requires each investor-owned electric utility to engage in a competitive bidding
process for the construction of new generation, unless the utility demonstrates
on a case-by-case basis that such a process is not in the best interests of the
utility's ratepayers. Although this rule could eventually affect Florida Power's
ability to construct its own power plants, it will not affect the construction
of the gas-fired combined cycle generating unit at Florida Power's site in Polk
County, Florida, because as noted above, the FPSC already has granted Florida
Power a certificate of need for this unit.
NUCLEAR PLANT AND NUCLEAR INSURANCE: Information regarding nuclear plant and
nuclear insurance is contained in Notes 4 and 11 to the Financial Statements.
TRANSMISSION AND DISTRIBUTION: As of December 31, 1996, Florida Power
distributed electricity through 353 substations with an installed transformer
capacity of 41,522,275 kilovolt amperes ("KVA"). Of this capacity, 28,366,750
KVA is located in transmission substations and 13,155,525 KVA in distribution
substations. Florida Power has the second largest transmission network in
Florida. Florida Power has 4,600 circuit miles of transmission lines, of which
2,610 circuit miles are operated at 500, 230, or 115 kilovolts ("KV") and the
balance at 69 KV. Florida Power has 23,914 circuit miles of distribution lines
which operate at various voltages ranging from 2.4 to 25 KV.
Florida Power, along with 12 other electric utilities in the state, formed the
Florida Reliability Coordinating Council ("FRCC") which was approved by the
North American Electric Reliability Council ("NERC") as the tenth region of
NERC. The FRCC will directly address the unique electric reliability needs of
the Florida peninsula electric system rather than participating as a subregion
of the larger Southeastern Electric Reliability Council.
In response to the FERC orders on open access transmission systems, Florida
Power and other major transmission owners in Florida established the Florida
Open Access Same-time Information System, which is a single internet location
where transmission customers may obtain transmission information and submit
requests for service or resell service rights.
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DIVERSIFIED OPERATIONS
ELECTRIC FUELS
Electric Fuels owns and/or operates approximately 4,000 railcars, 45
locomotives, 700 river barges and 30 river towboats that are used for the
transportation and shipping of coal, steel and other bulk products. Through
joint ventures, Electric Fuels has five oceangoing tug/barge units. An Electric
Fuels subsidiary, through another joint venture, owns one third of a large bulk
products terminal, located on the Mississippi River south of New Orleans, which
handles coal and other products. Electric Fuels provides drydocking and repair
services to towboats, offshore supply vessels and barges through operations it
owns near New Orleans, Louisiana.
Electric Fuels controls, either directly or through subsidiaries, coal reserves
located in eastern Kentucky and southwestern Virginia. Electric Fuels owns, in
fee, properties that contain estimated proven and probable coal reserves of
approximately 170 million tons and controls, through mineral leases, additional
estimated proven and probable coal reserves of approximately 55 million tons.
Electric Fuels also owns a 50% undivided interest in coal reserves located in
West Virginia that currently are being leased to a third party under an
agreement that expires in March 1998. The reserves controlled by Electric Fuels
include substantial quantities of high quality, low sulfur coal that is
appropriate for use at Florida Power's existing generating units. Electric
Fuels' total production of coal during 1996 was approximately 3.7 million tons.
In connection with its coal operations, an Electric Fuels subsidiary, through a
joint venture, has a 50% ownership interest in the operation of an underground
mining complex in southeastern Kentucky and southwestern Virginia. Other
Electric Fuels subsidiaries own and operate surface and underground mines, coal
processing and loadout facilities and a river terminal facility in eastern
Kentucky, a railcar-to-barge loading facility in West Virginia, and three bulk
commodity terminals: one on the Ohio River in Cincinnati, Ohio, and two on the
Kanawha River near Charleston, West Virginia. Electric Fuels and its
subsidiaries employ both company and contract miners in their mining activities.
An Electric Fuels subsidiary owns railroad car repair and parts reconditioning
and rail and trackworks facilities in 14 states, including a railcar hydraulic
cushioning unit manufacturing and reconditioning facility in Fort Worth, Texas.
Electric Fuels subsidiaries are also involved in scrap metal recycling and
railcar leasing.
Another subsidiary of Electric Fuels owns and operates a manufacturing facility
at the Florida Power Energy Complex in Crystal River, Florida. The manufacturing
process utilizes the fly ash generated by the burning of coal as the major raw
material in the production of lightweight aggregate used in construction
building blocks. Electric Fuels also operates an environmental testing
laboratory in Tampa, Florida.
MID-CONTINENT
Mid-Continent owns an office building in Oklahoma City, Oklahoma.
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ITEM 3. LEGAL PROCEEDINGS
1. In Re: Fuel And Purchased Power Cost Recovery Clause and
Generating Performance Incentive Factor, Florida Public Service
Commission, Docket No. 970001-EI.
Review Of Nuclear Outage At Florida Power Corporation's
Crystal River Unit 3, Florida Public Service Commission,
Docket No. 970261-EI.
On February 19, 1997, the FPSC approved, subject to refund, an increase
of approximately $2 per 1,000 kilowatt hours ("KWH") in the monthly retail
residential customer bills for replacement fuel costs associated with the
extended outage of CR3. This increase covers replacement fuel for the period
from September 2, 1996 through March 31, 1997. At a later time, Florida Power
plans to request FPSC approval of additional replacement fuel charges for the
period from April 1, 1997 to the date the unit eventually restarts, which is
expected to occur by year-end 1997.
In conjunction with approving the $2 adjustment, the FPSC instituted an
investigation concerning the reasons for the current outage. On February 28,
1997, the FPSC issued an order establishing procedures for this docket. On March
19, 1997, Florida Power filed a preliminary report outlining the specific
actions and circumstances that led to the shut-down of CR3 on September 2, 1996,
and the reasons why Florida Power determined that it was necessary to keep CR3
down for an extended outage. The schedule also calls for a hearing in June 1997,
with a final FPSC decision in August 1997.
Purchased Power Contracts
Florida Power has entered into purchased power contracts with certain
cogenerators which provide for capacity and energy payments. Florida Power has
interpreted the pricing provision in these contracts to allow it to pay an as-
available energy price rather than a higher firm energy price when the avoided
unit upon which the contract is based would not have been operated. Four
cogenerators filed suit against Florida Power over the level of payments made by
Florida Power under the contracts. Florida Power has entered into settlement
agreements with three of the four cogenerators, two of which are awaiting
certain approvals from the FPSC and others. The settlement agreements generally
provide for a mutually agreed upon methodology for computing the energy payments
under the contracts, and a reduction of the length of terms of the contracts.
Additional details regarding the legal proceedings with these four cogenerators
are covered in paragraphs 2-5 below:
2. Pasco Cogen, Ltd. v. Florida Power Corporation, Florida
Circuit Court, Sixth Judicial Circuit for Pasco County,
Case No. 94-5331-CA-DIV-Y.
In re: Petition for Expedited Approval of Settlement with
Pasco Cogen, Ltd., Florida Public Service Commission,
Docket No. 961407-EI.
On October 14, 1994, Florida Power was served with a complaint brought by
Pasco Cogen, Ltd. ("Pasco") seeking declaratory relief with respect to the
pricing provision in its cogeneration contract and unspecified damages for
breach of contract and violations of antitrust laws. In October 1996, Florida
Power and Pasco resolved their dispute by executing a final settlement
agreement, subject to approval by the FPSC and lenders to Pasco. On March 20,
1997, the FPSC's staff issued a primary recommendation in favor of approving the
settlement and two alternative recommendations against the settlement. The FPSC
is scheduled to make its decision regarding the petition in April 1997.
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3. NCP Lake Power, Inc. v. Florida Power Corporation, Florida
Circuit Court, Fifth Judicial Circuit for Lake County,
Case No. 94-2354-CA-01.
In re: Petition for Expedited Approval of Settlement with Lake
Cogen, Ltd., Florida Public Service Commission,
Docket No. 961477-EQ.
Lake Interest Holdings, Inc. v. Lake Cogen, Ltd., NCP Lake
Power, Inc., Lake Investments, L.P. and Florida Power
Corporation, Fifth Judicial Circuit for Lake County, Florida,
Case No. 97-549-CA-01.
In October 1996, Florida Power was served with a complaint brought by NCP
Lake Power, Inc. ("Lake") seeking unspecified damages for breach of contract
with respect to the pricing provision in its cogeneration contract. In December
1996, Florida Power and Lake resolved their dispute by executing a final
settlement agreement, subject to approval by the FPSC and lenders to Lake. The
settlement agreement was executed by NCP Lake Power, Inc., as general partner of
Lake Cogen, Ltd. On March 11, 1997, Florida Power was served with a complaint
filed by Lake Interest Holdings, Inc., a partner of Lake Cogen, Ltd., alleging
among other things that the settlement agreement was signed without authority
and is void and of no force and effect, and seeking declaratory relief,
attorneys fees and costs. On March 21, 1997, Florida Power moved to dismiss Lake
Interest Holdings' claim against Florida Power, to consolidate the two Lake
County circuit court cases, and for an order ratifying and enforcing its
settlement agreement.
4. Orlando Cogen (1), Inc. and Orlando Power Generation I Inc.,
as general partners of and on behalf of Orlando CoGen Limited,
L.P. v. Florida Power Corporation, U.S. District Court, Middle
District of Florida, Orlando Division, Case No. 94-303-CIV-ORL-22.
In re: Petition for approval of an early termination amendment
to negotiated qualifying facility contract with Orlando CoGen
Limited, FPSC Docket No. 970002-EI.
On March 10, 1994, the general partners of Orlando CoGen Limited, L.P.
("OCL") filed suit against Florida Power seeking an order directing Florida
Power to pay the capacity payment under its cogeneration contract and
unspecified damages under federal and state antitrust laws. In February 1996,
the parties executed a final settlement agreement, which was approved by the
FPSC and OCL's lenders. In October 1996, Florida Power filed a petition for
approval of an early termination amendment to reduce the term of the
cogeneration contract from 30 to 20 years, expiring 2013. In January 1997, the
FPSC issued a preliminary order denying the petition to reduce the term of the
contract, citing among other things that the projected benefits of the early
termination were overly sensitive to certain assumptions and would not be
realized until too far into the future. Florida Power has requested a hearing on
this matter.
5. 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
Progress Corporation, Florida Power Corporation and Electric
Fuels Corporation, U.S. District Court, Southern District,
Miami Division, Florida, Case No 96-594-CIV-LENARD.
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On February 13, 1996, Metropolitan Dade County ("Dade") and Montenay
Power Corp. ("Montenay") filed a complaint in the Circuit Court of the Eleventh
Circuit for Dade County, Florida, seeking a declaratory judgment that their
interpretation of the energy pricing provision in the cogeneration contract is
correct, and damages in excess of $1.3 million for breach of that contract. No
court schedule has as yet been set in this case. On May 14, 1996, Dade and
Montenay lodged a complaint against Florida Power in the U.S. District Court for
the Southern District, Miami Division, based on essentially the same facts as
presented in the state court case, but alleging violations of federal antitrust
laws and demanding unspecified treble damages. The current schedule established
by the court contemplates a trial commencing in December 1997. In March 1997,
the plaintiffs amended the federal court case to include Florida Progress and
Electric Fuels.
6. In re: Standard Offer Contract for the purchase of firm
capacity and energy from a qualifying facility between
Panda-Kathleen, L.P. and Florida Power Corporation, FPSC
Docket No. 950110-EI.
On January 23, 1995, Florida Power petitioned the FPSC for a declaratory
statement that Florida Power's standard offer contract is not available to
Panda-Kathleen, L.P. ("Panda L.P.") if it constructs a 115 MW cogeneration
facility. In May 1996, the FPSC ruled that Panda L.P.'s proposed 115 MW facility
does not comply with the 75 MW limitation contained in the FPSC's standard offer
rules, and that Florida Power is required to make capacity payments only for 20
years rather than 30 years. In June 1996, Panda L.P. appealed this order to the
Florida Supreme Court. Oral arguments were held in February 1997 and the Supreme
Court is expected to render a decision in the first half of 1997.
7. Florida Power Corporation v. Panda-Kathleen Corp., United
States District Court for the Middle District of Florida,
Tampa, Division, Case No. 95-2145-CIV-T-25-B.
In late 1995, Panda-Kathleen Corp. ("Panda Corp.") threatened Florida
Power with litigation, alleging that Florida Power tortiously interfered with
Panda Corp.'s rights by contracting with the City of Lakeland, Florida for
certain rights to transport natural gas over an interstate natural gas pipeline.
No legal action was taken by Panda Corp., but on December 27, 1995, Florida
Power filed a complaint in the U.S. District Court for the Middle District of
Florida seeking declaratory and other relief in response to Panda Corp.'s
allegations. The current schedule, which the court is expected to revise, calls
for a trial in the second quarter of 1997.
8. In re: Petition for expedited approval of an agreement to
purchase the Tiger Bay cogeneration facility and terminate the
related purchased power contracts, FPSC Docket No. 970096-EQ.
On January 22, 1997, Florida Power petitioned the FPSC for approval of an
agreement between the Tiger Bay Limited Partnership ("Tiger Bay") and Florida
Power. Tiger Bay is Florida Power's largest cogeneration power supplier,
representing 220 MW (21%) of the 1050 MW of total capacity that it receives from
16 cogenerators. The agreement provides for the purchase of the Tiger Bay
cogeneration facility and related assets by Florida Power, resulting in the
termination of five separate purchased power agreements under which Florida
Power purchases power produced by the facility. Florida Power has requested
authority to recover the purchase price over a period not to exceed five years,
through Florida Power's capacity cost recovery clause. Florida Power also
requested that it be allowed to recover the cost of fuel consumed by the Tiger
Bay facility through Florida Power's fuel and purchased power cost recovery
clause. Florida Power has asked the FPSC to expedite its consideration of this
petition in order to satisfy the conditions precedent for closing the agreement
on or before July 1, 1997. The FPSC has scheduled this matter for hearing in
April 1997, with a decision to be rendered in June 1997.
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9. Northern States Power Company, et al., v. United States
Department of Energy, Case Number 97-1064, U.S. Court of
Appeals, D.C. Circuit.
On January 31, 1997, Florida Power joined approximately 35 other
utilities with nuclear plants in an action brought against DOE under the Nuclear
Waste Policy Act ("NWPA") to suspend payments to the Nuclear Waste Fund. Under
the NWPA and contracts between utilities (including Florida Power) and DOE,
utilities are required to make payments into the Nuclear Waste Fund based on the
KWH of electricity generated by and sold from nuclear plants. In exchange, the
NWPA and those contracts require DOE to begin accepting utilities' SNF by
January 31, 1998. The U.S. Court of Appeals for the District of Columbia Circuit
recently confirmed DOE's unconditional statutory and contractual responsibility
to take SNF by January 31, 1998. See Indiana Michigan Power Co. v. DOE, 88 F.3d
1272 (D.C. Cir. 1996). In December 1996, DOE announced that it would be unable
to meet its court-affirmed obligation to commence disposing of SNF by January
31, 1998 and conceded that a national high-level waste repository will not be
available until 2010. The utilities request that, in view of DOE's
recent announcement, the court issue a declaration that the utilities are
relieved of their reciprocal obligation to pay fees into the Nuclear Waste Fund
and are authorized to place those fees into escrow accounts unless and until DOE
commences disposing of SNF.
Failure of DOE to accept SNF will not immediately affect Florida Power,
which has sufficient on-site temporary storage capacity for SNF through the year
2010. If, however, DOE does not begin accepting SNF, eventually Florida Power
will be forced to seek other temporary storage options.
10. Florida Power Corp. v. United States, United States Court of
Federal Claims, Case No. 96-702C.
In November 1996, Florida Power filed suit against the United States
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 under which the United States
provided Florida Power uranium enrichment services at fixed prices. After
Florida Power fully paid for all such services under the contracts, the United
States, 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 United States' gaseous diffusion
uranium enrichment facilities. The United States is collecting this increase
through an annual "special assessment" levied on all utilities that had
enrichment services contracts with the United States. 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. If the payments continue for the full fifteen year period, they
will increase the cost of Florida Power's contracts by a total of 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 United
States from collecting future special assessments, and (3) an award of more than
$7.5 million, plus interest, as damages for the United States' wrongful acts.
In December 1996, the court granted the parties' joint motion to stay
proceedings in this matter until 45 days after the entry of a final judgement in
Yankee Atomic Electric Co. v. United States, 33 Fed. Ct. 580 (1995), which is
now on appeal to the U.S. Court of Appeals, No. 96-5021-5025. That case is
similar to Florida Power's suit. A decision in the Yankee Atomic Electric
matter is expected in the second quarter of 1997.
17<PAGE>
<PAGE>
11. 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.
In October 1995, Florida Power and Florida Progress were served with a
multi-party lawsuit involving 17 named plaintiffs. Subsequent motions to the
case seek to add 39 additional plaintiffs. If successful, the motions would
increase the total number to 56 named plaintiffs. The plaintiffs, all former
Florida Power employees, generally allege age discrimination in violation of the
Age Discrimination in Employment Act and wrongful interference with pension
rights in violation of the Employee Retirement Income Security Act as a result
of their involuntary terminations. While no dollar amount is requested, each
plaintiff seeks back pay, reinstatement or front pay through their projected
dates of normal retirement, costs and attorneys' fees.
In November 1995, Florida Power filed its answer, a motion to dismiss
Florida Progress, and a counterclaim against the plaintiffs who signed a career
transition agreement and general release, promising, among other things, not to
sue Florida Power with respect to this matter.
On October 29, 1996, the court approved a joint stipulation whereby it
provisionally certified the case as a class action. As a result, a notice was
sent to all former employees terminated during Florida Power's recent reduction-
in-force who were over the age of forty at the time of their terminations. The
notice informed those persons of the existence of the lawsuit and of their 90
day right to "opt-in." A status conference is scheduled for April 22, 1997.
12. Gulf Power et al v. United States 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 against the United States challenging
the constitutionality of the pole attachment amendments to the
Telecommunications Act of 1996. The suit seeks a declaration that the act's
requirements 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 providing just compensation for
this use. 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 answers and asked the court to dismiss the case with
prejudice.
13. Sanford Gasification Plant Site, Sanford, Florida
The Sanford gasification site is a former manufactured gas plant site located
in the city of Sanford, Florida. It began operation in the 1880's and continued
through the early 1950's. Originally owned by Southern Utilities Company, the
plant was purchased in 1924 by the City of Sanford, then sold again in 1928 to
Sanford Gas Company. Sanford Gas Company, which merged into Florida Power in
1944, operated the plant until 1946 when it was sold to South Atlantic Gas
Company (now known as Atlanta Gas Light Company). The plant was conveyed three
more times, being purchased by the current owner, Florida Public Utilities
Company ("FPUC"), in 1965. The FDEP began investigating the site in 1990. FPUC
subsequently initiated an action styled FPUC v. Florida Power, Florida Power &
18<PAGE>
<PAGE>
Light, Atlanta Gas Company and City of Sanford, Florida, United States District
Court for the Middle District of Florida, Orlando Division, Civil Action No.
92-115-CIV-ORL-19, seeking contribution from former owners or operators of the
site, including Florida Power. The complaint alleged that Florida Power's
liability was based on prior ownership and operation of the gasification plant
between the years 1928 and 1946. This action was dismissed without prejudice in
February 1995.
In response to the FDEP, the parties to the action initiated by FPUC had
a contamination assessment conducted. The report of this assessment was
forwarded to FDEP in February 1994. The FDEP reviewed the report and issued its
site prioritization report, scoring the site with regard to the national
priorities list. Currently, the site is evaluated at 25.9 with 28.5 as the
threshold for listing the site on the national priorities list.
The EPA is performing 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 over the 28.5 threshold,
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 FDEP
in scoring the site.
Florida Power cannot at this time reasonably ascertain its share of the
costs of cleaning up this site because of variables beyond its control,
including: (i) whether the EPA will score nearby Lake Monroe above 28.5, thus
placing the site under federal regulations and possibly requiring a more costly
cleanup; (ii) whether litigation will ensue to determine the allocation of
liability, and if so, among what number of other PRPs; and (iii) the cost of
potential cleanup, monitoring or other work. Although estimates of any
additional costs are not available, the results of the EPA's additional testing
is not expected to have a material effect on Florida Power's financial position,
operations or liquidity. This matter is being reported because liability for the
cleanup of certain sites is technically joint and several and because the extent
to which other parties will ultimately share in the cleanup costs at this site
is not yet determinable. For further information regarding contaminated site
cleanup, see Note 11 to the Financial Statements.
14. Peak Oil Company, Missouri Electric Works, 62nd Street, AKO
Bayside, Bluff Electric and Sidney Mine Superfund Sites.
Florida Power has been notified by the EPA that it is or could be a PRP
with respect to each of the above Superfund sites. Based upon the information
presently available, Florida Power has no reason to believe that its total
liability for the cleanup of these sites will be material or that it will be
required to pay a significantly disproportionate share of those costs. However,
these matters are being reported because liability for cleanup of certain sites
is technically joint and several, and because the extent to which Florida Power
may ultimately have to participate in those cleanup costs is not presently
determinable.
In 1996, Florida Power settled the Sydney Mine Superfund site litigation.
In connection with the settlement, Florida Power paid approximately $56,000 in
exchange for a release from liability in connection with the site. For further
information regarding contaminated site cleanup, see Note 11 to the Financial
Statements.
15. Peak Oil Company and Zellwood Groundwater Superfund Sites.
In 1992, Florida Progress was notified by the EPA that Progress Packaging
Corporation ("Progress Packaging") is or could be a PRP in reference to the
Zellwood Groundwater site. Florida Progress sold the assets of Progress
Packaging in 1988. Based upon the information presently available, Florida
19<PAGE>
<PAGE>
Progress believes that its total liability for the cleanup of this site will not
be material. The EPA recently issued Special Notice Letters to newly identified
PRPs. To date, Florida Progress has not received such a letter. Florida Progress
has been advised orally by the EPA that if Florida Progress did not receive such
a letter then Progress Packaging will not be held liable for any damages related
to this matter. Florida Progress is currently awaiting written confirmation from
the EPA that Progress Packaging was not mailed a letter naming it as a PRP, as
none has been received to date. For further information regarding contaminated
site cleanup, see Note 11 to the Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
FLORIDA PROGRESS
Florida Progress' common stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange. The high and low price per share of Florida Progress'
common stock for each quarterly period and the dividends per common share paid
on shares of Florida Progress' common stock during the last two fiscal years
appear in Item 8 on the "Quarterly Financial Data" table for Florida Progress at
the end of the Notes to the Financial Statements, and is incorporated herein by
reference.
In February 1997, Florida Progress' Board announced an increase of about 2% in
the common stock quarterly dividend, which on an annual basis would increase the
dividend from $2.06 to $2.10 per share. In 1996, Florida Progress' dividend
payout ratio from continuing operations was 79% of earnings. Information
concerning the Florida Progress dividend payout ratio and dividend policy is set
forth in Item 7 "MD&A - Liquidity and Capital Resources".
Florida Progress' Restated Articles of Incorporation, as amended, do not limit
the dividends that may be paid on its common stock. However, the primary source
for payment of Florida Progress' dividends consists of dividends paid to it by
Florida Power. Florida Power's Amended Articles of Incorporation, as amended,
and its Indenture dated as of January 1, 1944, as supplemented, under which it
issues first mortgage bonds, contain provisions restricting dividends in certain
circumstances. At December 31, 1996, Florida Power's ability to pay dividends
was not limited by these restrictions.
Florida Progress and Progress Capital have entered into a Second Amended and
Restated Guaranty and Support Agreement dated as of August 7, 1996, pursuant to
which Florida Progress has unconditionally guaranteed the payment of Progress
Capital's debt (as defined in the agreement).
The approximate number of equity security holders of Florida Progress is as
follows:
Number of Registered Holders*
Title of Class as of December 31, 1996
- ------------------------------ ----------------------------
Common Stock without par value 54,195
* The computation of registered holders includes record holders as well as
individual positions in the Progress Plus Stock Plan.
20
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FLORIDA POWER
All of Florida Power's common stock is owned by Florida Progress, its corporate
parent, and as a result there is no established public trading market for the
stock. For the past three years, Florida Power has paid quarterly dividends to
Florida Progress totaling the amounts shown in the Statements of Shareholder's
Equity in the Financial Statements.
Florida Power's Amended Articles of Incorporation, as amended, and its Indenture
dated as of January 1, 1944, as supplemented, under which it issues first
mortgage bonds, contain provisions restricting dividends in certain
circumstances. At December 31, 1996, Florida Power's ability to pay dividends
was not limited by these restrictions.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Annual Growth Rates
(in percent)
1991-1996 1996 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FLORIDA PROGRESS CORPORATION
Summary of operations (in millions)
Utility revenues 7.0 $2,393.6 $2,271.7 $2,080.5 $1,957.6 $1,774.1 $1,718.8
Diversified revenues (continuing) 27.5 764.3 736.1 644.8 430.3 281.1 263.8
Income from continuing operations 8.0 250.7 238.9 212.0 196.0 183.8 167.9
Income (loss) from discontinued
operations and change in accounting (26.3) - - 0.6 (8.1) 4.2
Net income 6.4 224.4 238.9 212.0 196.6 175.7 172.1
------------------------------------------------------------------------------------------------------------------
Balance sheet data (in millions):
Total assets 2.7 $5,348.4 $5,550.4 $5,453.1 $5,338.0 $4,978.8 $4,683.4
Capitalization:
Short-term capital (43.0) $ 39.0 $173.7 $ 99.9 $195.2 $177.6 $60.8
Long-term debt 6.7 1,776.9 1,662.3 1,835.2 1,840.5 1,651.3 1,631.8
Preferred stock (32.2) 33.5 138.5 143.5 148.5 216.0 231.0
Common stock equity 6.2 1,924.2 2,078.1 1,984.4 1,820.5 1,737.6 1,587.7
-------------------------------------------------------------------------------------------------------------------
Total capitalization .6 $3,773.6 $4,052.6 $4,063.0 $4,004.7 $3,782.5 $3,511.3
-------------------------------------------------------------------------------------------------------------------
Common stock data:
Average shares outstanding (in millions) 4.7 96.8 95.7 93.0 88.3 85.4 80.8
Earnings per share:
Utility 2.2 $2.40 $2.27 $2.05 $2.06 $1.99 $2.03
Diversified (continuing) 7.9 .19 .23 .23 .16 .21 .11
Discontinued operations and change
in accounting (.27) - - .01 (.14) (.01)
Consolidated 1.6 2.32 2.50 2.28 2.23 2.06 2.13
Dividends per common share 3.0 2.06 2.02 1.99 1.95 1.905 1.843
Dividend payout 88.9% 81.0% 87.7% 87.6% 93.0% 87.0%
Dividend yield 6.4% 5.7% 6.7% 5.9% 5.9% 6.0%
Book value per share of common stock 1.6 $19.84 $21.55 $20.85 $20.40 $19.85 $19.14
Return on common equity 10.9% 11.8% 11.1% 11.1% 10.6% 11.4%
--------------------------------------------------------------------------------------------------------------------
Common stock price per share:
High 36 3/8 35 3/4 33 5/8 36 3/8 33 1/4 31 1/2
Low 31 5/8 29 3/8 24 3/4 31 1/4 27 7/8 24 3/8
Close 4.8 32 1/4 35 3/8 30 33 5/8 32 5/8 31 1/4
Price earnings ratio (year-end) 13.9 14.2 13.2 15.1 15.8 14.7
- ---------------------------------------------------------------------------------------------------------------------
Other year-end data:
Number of employees (1.9) 7,291 7,174 7,394 7,825 7,301 7,350
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
[CONTINUED ON NEXT PAGE]
21<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Annual Growth Rates
(in percent)
1991-1996 1996 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FLORIDA POWER CORPORATION
Electric sales (million of KWH)
Residential 4.5 15,481.4 14,938.0 13,863.4 13,372.6 12,825.8 12,623.9
Commercial 3.8 8,848.0 8,612.1 8,252.1 7,884.8 7,544.1 7,489.2
Industrial 4.1 4,223.7 3,864.4 3,579.6 3,380.8 3,254.5 3,303.0
Total retail sales 4.4 30,784.8 29,499.5 27,675.2 26,528.3 25,414.0 25,179.1
Total electric sales 4.3 33,492.5 32,402.6 30,014.6 28,647.8 27,375.5 27,350.2
- ---------------------------------------------------------------------------------------------------------------------
Residential service (average annual):
KWH sales per customer 1.9 13,560 13,282 12,597 12,420 12,214 12,257
Revenue per customer 4.9 $1,138 $1,114 $1,038 $983 $884 $899
Revenue per KWH 2.7 $0.0839 $0.0839 $0.0824 $0.0792 $0.0724 $0.0733
- ---------------------------------------------------------------------------------------------------------------------
Financial Data:
Operating revenues 7.0 $2,393.6 $2,271.7 $2,080.5 $1,957.6 $1,774.1 $1,718.8
Net income after dividends
on preferred stock 7.2 $ 232.6 $217.3 $190.7 $181.5 $170.2 $164.1
Total assets 3.2 $4,264.0 $4,284.9 $4,284.5 $4,259.5 $3,980.6 $3,643.2
Long-term debt and preferred stock
subject to mandatory redemption 1.3 $1,296.4 $1,304.1 $1,393.8 $1,433.6 $1,318.3 $1,213.1
Total capitalization including
short-term debt (in millions) 3.4 $3,180.8 $3,202.2 $3,265.4 $3,240.4 $3,029.2 $2,692.2
Capitalization ratios:
Short-term capital (10.6) 0.8% 1.0% 2.8% 5.3% 4.4% 1.4%
Long-term debt (0.3) 40.8% 39.9% 41.7% 43.1% 40.8% 41.4%
Preferred stock (35.0) 1.0% 4.3% 4.4% 4.6% 7.1% 8.6%
Common stock equity 3.4 57.4% 54.8% 51.1% 47.0% 47.7% 48.6%
Ratio of earnings to fixed charges
(SEC method) 4.3 4.80 4.41 3.90 3.83 3.84 3.87
Embedded cost of long-term debt (1.9) 7.2% 7.2% 7.1% 6.8% 7.5% 7.7%
Embedded cost of preferred stock (8.7) 4.6% 6.8% 6.8% 6.8% 7.3% 7.3%
- ---------------------------------------------------------------------------------------------------------------------
Operating Data:
Net system capacity (MW) 2.2 7,341 7,347 7,295 7,563 7,002 6,623
Net system peak load (MW) 11.9 8,807 7,722 6,955 6,729 6,982 6,056
Capital expenditures (in millions) (3.9) $217.3 $283.4 $319.5 $426.4 $472.9 $345.9
Net cash flow to capital expenditures 20.2 175% 125% 103% 63% 52% 66%
Fuel cost per million BTU 1.5 $2.04 $1.69 $1.75 $1.79 $1.86 $1.89
Average number of customers 2.6 1,292,075 1,271,784 1,243,891 1,214,653 1,182,170 1,159,237
Number of full-time employees (3.6) 4,629 4,658 4,972 5,807 5,806 5,677
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Florida Progress' 1996 consolidated earnings from continuing operations were
$250.7 million, or $252.4 million before nonrecurring items. This compares with
$238.9 million in 1995 and $212 million in 1994. Florida Power earned $232.6
million in 1996, compared with $217.3 million in 1995 and $190.7 million in
1994. Earnings from continuing diversified operations were $19.8 million in
1996, compared with $21.6 million in 1995 and $21.3 million in 1994.
22
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<PAGE>
<TABLE>
<CAPTION>
EARNINGS PER SHARE
1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C>
Florida Power Corporation $2.40 $2.27 $2.05
------------------------------------------------------------------------------
Electric Fuels Corporation .28 .25 .25
Mid-Continent Life Insurance Co. .02 .07 .08
Other (.09) (.09) (.10)
------------------------------------------------------------------------------
Diversified .21 .23 .23
Continuing operations before
nonrecurring items 2.61 2.50 2.28
Provision for loss on
coal properties (.26) - -
Gain on sale of business .24 - -
------------------------------------------------------------------------------
Total continuing operations 2.59 2.50 2.28
Discontinued operations (.27) - -
------------------------------------------------------------------------------
Consolidated $2.32 $2.50 $2.28
------------------------------------------------------------------------------
</TABLE>
Florida Power's 1996 earnings per share were up 5.7% over 1995 primarily due to
continued customer growth. Residential customer growth of about 2% in 1996
continues to have the most significant effect on Florida Power's earnings
growth.
Contributing to Florida Power's 1996 earnings growth were lower interest and
preferred dividend charges for 1996, compared with 1995. Lower debt balances
resulting from improved cash flow and the redemption of preferred stock lowered
these costs by $10 million.
The increase in 1995 earnings per share when compared with 1994 was due in part
to certain charges in 1994 that related to work-force reductions and the
write-off of a proposed natural gas pipeline project. These charges totaled
$15.4 million, or $.16 per share, in 1994.
In 1996, Florida Progress made significant strides toward accomplishing its
objective of divesting itself of businesses that are not strategically related
to its core businesses - Florida Power, the electric utility, and Electric
Fuels, its energy and transportation subsidiary.
In December 1996, Florida Progress completed the divestiture of Echelon,
formerly Progress Credit, through a tax-free stock dividend. As a part of this
transaction, Florida Progress recorded a $26.3-million charge to earnings for
the write-down of certain assets of Echelon and other costs associated with the
divestiture. Echelon is reported as discontinued operations. (See Note 10 to the
Financial Statements.)
In December 1996, Florida Progress sold its 80% interest in Advanced Separation
Technologies, Inc. for $56 million and realized an after-tax gain of $23.5
million, or $.24 per share.
Mid-Continent's earnings have declined in each of the last three years primarily
due to declining sales of its primary life insurance product and higher
death-benefit claims.
In December 1996, Electric Fuels recorded a $25.2-million after-tax charge to
earnings to establish a provision for loss on its unprofitable coal properties,
now available for sale. The provision was necessary because management did not
consider the unfavorable market conditions for low-sulfur coal to be temporary.
23
<PAGE>
<PAGE>
The financial return on Florida Power's common equity was 12.9% in 1996,
compared with 12.7% in 1995 and 11.9% in 1994. Increases in retail energy sales
and tight control over costs are enabling Florida Power to maintain its return
on equity and continue its earnings growth. Florida Progress' diversification
strategy has centered on growing Electric Fuels. Return on equity from the
energy and transportation subsidiary, before its provision for loss on coal
properties, was 14% in 1996, 13.8% in 1995 and 14.5% in 1994.
FLORIDA POWER CORPORATION
Utility Competition
In 1996, the FERC issued new rules on transmission service to facilitate
competition in wholesale generation on a nationwide basis. The rules give
greater flexibility and more choices to wholesale power customers. (See Note 1
to the Financial Statements.)
Florida Power established a Power Marketing organization as part of its response
to the new rules issued by federal regulators. The rules are designed to
encourage increased competition in the wholesale power market.
In 1995, Florida Power was successful in obtaining a three-year agreement to
provide an additional 455 MW of power to Seminole Electric Cooperative, Inc.,
beginning in 1999. The cooperative is Florida Power's largest wholesale
customer. The contract will increase annual wholesale revenues by more than 40%
and is projected to expand this market segment to about 8% of total sales in
1999.
A major portion of Florida Power's retail business is covered under terms of
franchise agreements with municipalities and counties. In 1996, 15 franchise
customers elected early renewal of their 30-year agreements with Florida Power
while five amended their existing agreements. The utility believes quality
service and competitive rates will continue to be important factors as other
franchise agreements come up for renewal. No franchise agreements representing
significant revenues are due to expire before the year 2000.
The power generation segment of the electric power business is expected to be
the most competitive in a deregulated environment. While Florida Power's total
production costs are comparable with the other investor-owned utilities in
Florida, the utility is committed to further improving the efficiency of its
power plants. In 1998, a new 470-MW natural gas-fired combined-cycle power plant
is planned to be in service. It is expected to be one of the most cost-effective
plants in the country.
The pace of change in the electric utility industry continued to accelerate in
1996. Today, there are a record number of mergers pending in the industry. Many
U.S. electric utilities are merging or forming alliances with utilities overseas
or investing in international projects. Several states are pursuing electric
utility restructuring plans to provide retail customers with a choice for their
energy suppliers.
The momentum for retail competition has not been as strong in Florida as it has
been in other states, where some provisions for retail choice have been passed.
Competitive electric rates and the comparatively small number of large
industrial and commercial customers are the main reasons there has been less
incentive for change in Florida. There is proposed federal legislation that
could be enacted in the next couple of years that would expedite the development
of retail customer choice in all states.
Florida Power is regulated by the FPSC and the FERC. The utility is able to
capitalize or defer certain costs or revenues if it is probable these items will
be recovered through the ratemaking process. In the future, regulatory changes
due to competition or other reasons could result in the write-off of regulatory
assets and liabilities.
24<PAGE>
<PAGE>
Florida Power is committed to providing high-quality, cost-competitive service
in order to retain customers while, at the same time, developing new products
and services that will attract new customers.
Utility Revenues and Sales
Florida Power's operating revenues were $2.4 billion in 1996, compared with $2.3
billion in 1995 and $2.1 billion in 1994. Revenues rose in 1996 and in 1995,
primarily because of customer growth and continued improvement in the economy.
The utility's retail KWH sales increased 2.9% in 1996 and 7.8% in 1995.
Residential customer growth was about 2% in 1996 and in 1995. Florida Power's
annual customer growth rate continues to be twice the national average for
electric utilities.
Beginning in 1995, Florida Power was ordered by the FPSC to conduct a three-year
test of residential revenue decoupling. This ratemaking concept is designed to
eliminate the direct link between KWH sales and revenues. Under revenue
decoupling, abnormal weather does not impact earnings from residential sales,
which represents the single-largest customer group for Florida Power. A change
in customer usage due to extreme heating or cooling conditions will not have a
material effect on Florida Power's earnings, whereas customer growth and higher
usage due to nonweather-related factors can affect earnings. (See Note 1 to the
Financial Statements.)
Under Florida Power's revenue decoupling plan, the utility recorded a regulatory
liability of $3.6 million for 1996 and $18.7 million for 1995.
Fuel and Purchased Power
Fuel and purchased power costs primarily are recovered through an adjustment
recovery clause established by state and federal regulators. Fluctuations in
these costs have little impact year to year on net income, but could become
increasingly important in a more competitive environment.
Fuel and purchased power costs increased $152.2 million in 1996. This increase
was offset by the deferral of $82.3 million, which is recorded as a regulatory
asset. The increase resulted primarily from the need for replacement power due
to an extended maintenance outage at the CR3 nuclear plant.
In February 1997, the FPSC approved Florida Power's request to increase fuel
rates to recover the deferred costs of replacement power incurred through March
1997. In conjunction with this approval, the FPSC ordered its staff to begin an
immediate investigation concerning the reasons for CR3's current outage. The
additional revenues generated by the increased fuel rates associated with the
extended outage are subject to refund pending the outcome of this investigation.
Florida Power estimates that replacement fuel costs related to that outage are
approximately $10 million per month, with weather and the availability of
alternative energy sources being the principal factors that can affect actual
costs. Florida Power expects to file an additional request with the FPSC for
replacement power costs that are incurred after March 1997. Management believes
it is probable that the FPSC, after completing its investigation, will approve
the recovery of replacement power costs incurred during the entire outage. For
additional information regarding the FPSC's investigation, see paragraph 1 under
Item 3 "Legal Proceedings".
In 1995, fuel and purchased power costs increased $147.7 million over the
previous year. This was due to increased purchased power costs and higher system
requirements. For 1997, fuel and purchased power costs likely will increase over
1996 because of higher replacement fuel costs associated with the expected
unavailability of CR3 for most of 1997.
25<PAGE>
<PAGE>
Florida Power receives 1,050 MW of total capacity from cogeneration facilities.
In 1996, Florida Power spent $222 million for purchased power under these
contracts. This represented 24% of system fuel and purchased power expenses for
the year.
Costs associated with those contracts raised Florida Power's system average cost
for generation in 1995 and 1996, and this trend is expected to continue.
Florida Power is continuing to seek ways to mitigate the impact of escalating
payments from contracts it was obligated to sign under provisions of the federal
Public Utilities Regulatory Policies Act of 1978.
One strategy being pursued is to buy down those contracts that have prices that
are projected to be above future market prices. While paying a discounted price
today for these future obligations increases costs in the short term, the
long-term benefit to ratepayers can be significant.
Florida Power has several purchased power buy-down proposals before state
regulators as well as a petition to recover the costs associated with the
acquisition of the 220-MW Tiger Bay cogeneration facility and to terminate the
purchased power contracts relating to that facility for $445 million. Tiger Bay
is Florida Power's largest cogeneration power supplier, representing more than
20% of the 1,050 MW of total capacity Florida Power receives from cogeneration
facilities.
Other Utility Expenses
Utility operation and maintenance expenses increased by $19.7 million in 1996.
The increase was due primarily to additional costs associated with the extended
maintenance outage of CR3 and expenses related to improving service and
reliability.
In 1995, operation and maintenance expenses decreased by $18.5 million when
compared with the previous year primarily due to companywide cost-reduction
efforts. The utility's commitment to cost control has resulted in minimal
increases in operation and maintenance costs except for nuclear outage expenses.
The utility's goal for 1997 is to limit increases in nonnuclear operation and
maintenance costs to less than the national inflation rate.
Recoverable energy conservation program costs decreased by $21.4 million in 1996
and by $20.3 million in 1995 due to a reduction in the credits paid to customers
who participate in Florida Power's load management program. The reduction began
in April 1995. The change had no significant impact on earnings because Florida
Power recovers substantially all of these costs through a clause in electric
rates similar to the fuel adjustment clause.
Depreciation expense increased by $30.5 million in 1996 and by $32.2 million in
1995. In 1995, Florida Power began amortizing $23.9 million of accumulated costs
for the canceled Lake Tarpon-Kathleen transmission line over a four-year period.
However, the utility chose to accelerate amortization and complete the write-off
in 1996. Florida Power also wrote off two oil-fired power plants in 1996 that
were placed in extended cold shutdown in 1994, increasing depreciation in 1996
by $11.7 million. Other factors contributing to the increase in 1996 were plant
additions, primarily distribution facilities. The increase of $32.2 million in
1995 over 1994 was primarily due to increased nuclear decommissioning costs,
amortization of accumulated costs for the Lake Tarpon-Kathleen line, and plant
additions.
Nuclear Operations
After completing a record performance in 1995 by achieving a capacity factor of
100%, the CR3 nuclear plant was shut down for much of 1996. Beginning in
February, the plant underwent a scheduled refueling outage that lasted until May
when the nuclear plant returned to service.
26<PAGE>
<PAGE>
In September, an oil pressure problem in the main turbine forced the plant to
shut down until repairs could be made. When the repairs were completed in
October, Florida Power decided to keep CR3 down to address certain backup safety
system design issues.
The primary issue involves an electrical loading problem with one of the plant's
two emergency diesel generators that are part of the emergency core cooling
system. These generators would be activated in the event there is a loss of
off-site power. The utility is assessing several options to address the diesel
loading issue and expects to be able to restart the plant by year-end 1997. The
NRC established a special panel in late 1996 to provide regulatory oversight to
restarting the nuclear plant.
The NRC was critical of the nuclear plant's overall performance in 1996,
particularly in the areas of management oversight and engineering. In January
1997, the NRC placed the nuclear plant on its "Watch List" as a plant whose
operations will be monitored closely. Florida Power is disappointed with the
NRC's action, but remains committed to implementing safe, reliable and
cost-effective solutions to resolve the issues.
Florida Power hired two senior nuclear officers and added other personnel to
further strengthen the nuclear plant's engineering staff. The utility's nuclear
management and staff have developed a thorough corrective action plan that is
designed to address those areas identified by regulators as needing improvement.
Florida Power's management is confident that its action plan will return CR3 to
top performance.
The new nuclear management team is reviewing previous estimates of the operating
and maintenance expenses and capital costs associated with the outage.
Management believes that it will have sufficient information to provide final
estimates of these costs during the second quarter of 1997.
DIVERSIFIED OPERATIONS
For several years, Florida Progress has been executing an orderly withdrawal
strategy from those diversified operations no longer related to its core utility
and energy and transportation businesses. Two restructuring decisions were made
in 1996 that had a significant impact on earnings from diversified operations.
The spin-off of Echelon resulted in a $26.3-million after-tax charge to earnings
while the sale of Advanced Separation Technologies contributed an after-tax gain
of $23.5 million. Another nonrecurring item that affected 1996 diversified
earnings was the provision for loss on unprofitable coal properties owned by
Electric Fuels. This resulted in an after-tax charge of $25.2 million or $.26 a
share.
Electric Fuels Corporation
Electric Fuels, Florida Progress' energy and transportation subsidiary, has
three principal business units: energy and related services, inland marine
transportation and rail services. Florida Progress continues to build on
Electric Fuels' existing operations through internal expansion and by pursuing
new market opportunities, primarily with its inland marine transportation and
rail services units.
In July 1996, an Electric Fuels subsidiary, Progress Rail Services Corporation
("Progress Rail"), acquired Railcar, Ltd., an Atlanta-based railcar leasing
company. In August 1996, Electric Fuels acquired the assets of Mansbach Metal
Company, a metal recycling and railcar dismantling, repair, and leasing company
based in Ashland, Kentucky. Progress Rail is one of the largest integrated
suppliers of rail services in the United States with locations in 14 states.
Revenues from rail services in 1996 were $355.5 million, an increase of $33.3
million over 1995. The increase is due to recent acquisitions and increased
sales volumes as railroads continue outsourcing portions of their service and
repair needs.
27<PAGE>
<PAGE>
Expansion of Electric Fuels' inland marine transportation unit has been achieved
primarily through the purchase of river barges. At the end of 1996, the unit
operated about 700 inland river barges with a commitment to purchase
approximately 200 new high-capacity barges in 1997 and options for additional
units in 1998 and beyond if market demand warrants additional expansion.
Expansion of the fleet is expected to enable Electric Fuels to increase its
market share by focusing on long-term contracts for hauling coal, wood chips,
agricultural products and other dry cargoes.
Electric Fuels began purchasing low-sulfur coal properties in the late 1980s as
part of a strategy to take advantage of the expected increase in demand for
low-sulfur coal. The increase was expected because of more stringent sulfur
dioxide emission requirements imposed on electric utilities by the CAAA. The
supply of inexpensive low-sulfur coal from mines in the western United States
and the low cost of emission allowance credits have kept the price of central
Appalachian low-sulfur coal lower than originally projected.
Because these coal market conditions are not considered by management to be
temporary, Electric Fuels established a provision for loss on its unprofitable
coal properties.
Electric Fuels has a business plan to improve productivity and quality control
in its coal operations in 1997. The plan calls for increasing output from
Electric Fuels' remaining mines and directing production to higher-profit
markets.
Earnings from Electric Fuels in 1996, before the provision for loss on
unprofitable coal properties, were $27.1 million, compared with $24 million in
1995 and $22.6 million in 1994. The $3.1-million increase in 1996 was due
largely to better results from Electric Fuels' energy and related services
operations.
Before the provision for loss on coal properties in 1996, Electric Fuels'
earnings yielded a 22% average annual compound earnings growth rate over the
last three years and averaged a 14.1% return on equity for the same period.
Electric Fuels expects to have a continuation of double-digit earnings growth
for the foreseeable future.
Mid-Continent Life Insurance Company
When Mid-Continent was acquired in 1986, it sold a popular, low-priced
death-benefit insurance policy. Over the last few years, the insurance industry
has become more competitive, resulting in lower sales of new policies at
Mid-Continent.
A new management team at Mid-Continent determined that the old product was not
adequately priced. In 1996, Mid-Continent replaced its existing principal policy
with a new product called "Basic Life." It resembled the old product that had
been Mid-Continent's principal policy, but offered more flexibility and
guarantees to policyholders at a higher price.
Mid-Continent was hoping to rebuild market share and achieve increased
profitability with the "Basic Life" product. Sales of the new policy, however,
have not met management's expectations.
In December, Mid-Continent reduced its work force to be able to compete on a
more focused and cost-efficient basis. In 1997, Mid-Continent plans to begin an
orderly process to resolve the pricing issue that is expected to involve
reducing policy dividends and increasing premiums.
28
<PAGE>
<PAGE>
Mid-Continent does not fit with the long-term strategic direction of Florida
Progress. It is expected to take three to five years for Mid-Continent's
business plan to result in sufficient value before Florida Progress can
prudently divest this business.
Mid-Continent's earnings in 1996 were $1.9 million, compared with $6.5 million
in 1995 and $7.3 million in 1994. Florida Progress does not expect significant
future earnings contributions from Mid-Continent.
Other
Florida Progress adopted several new accounting standards during the last three
years. (See Note 1 to the Financial Statements.)
Florida Power and a former Florida Progress subsidiary have been notified by the
EPA that each is or may be a PRP for the cleanup costs of several contaminated
sites. (See Note 11 to the Financial Statements.)
Florida Progress has off-balance sheet risk related to debt of unconsolidated
partnerships. (See Note 11 to the Financial Statements.) Even though the
inflation rate has been relatively low during the last three years, inflation
continues to affect Florida Progress by reducing the purchasing power of the
dollar and increasing the cost of replacing assets used in the business. This
has a negative effect on Florida Power because regulators generally do not
consider this economic loss when setting utility rates. However, such losses are
partly offset by the economic gains that result from the repayment of long-term
debt with inflated dollars.
LIQUIDITY AND CAPITAL RESOURCES
Cash from operations has been the primary source of capital for Florida
Progress. Other sources of capital included proceeds from the sales of
properties and businesses, debt financing, issuance of common stock and the
orderly withdrawal from Florida Progress' lending and leasing and real estate
portfolio.
Florida Progress has been issuing new equity in recent years primarily to fund
Florida Power's construction program. Florida Power is forecasting lower
construction expenditures in the years ahead. The utility does not expect
construction to require any significant increase in equity or debt over the next
five years. Because of the reduced equity requirements, Florida Progress' stock
purchase plan, the Progress Plus Stock Plan (the "Stock Purchase Plan"), began
purchasing shares in the open market instead of issuing new shares beginning in
July 1996.
For the first half of 1996 and for all of 1995 and 1994, new equity was issued
through the Stock Purchase Plan. During the last three years, Florida Progress
raised $103 million of equity capital through the Stock Purchase Plan. In a May
1994 public offering, Florida Progress sold 3.6 million shares of common stock
with net proceeds of $92.2 million. In December 1994, Electric Fuels acquired FM
Industries, Inc. for 700,000 shares of Florida Progress common stock.
Florida Progress contributed $12.5 million in 1996, $50 million in 1995 and $130
million in 1994 to Florida Power from the proceeds of Florida Progress' public
stock offerings and the Stock Purchase Plan. These funds were used to further
strengthen Florida Power's financial position.
Florida Progress' capital structure as of December 31, 1996, was 51% common
equity, 48.1% debt and .9% preferred stock of Florida Power. Florida Progress'
goal is to maintain capital structures for its utility and diversified
operations at levels that will enable its subsidiaries to preserve their current
credit ratings.
29
<PAGE>
<PAGE>
CREDIT RATINGS
Standard Duff &
& Poor's Moody's Phelps
Florida Power Corporation
First mortgage bonds AA- Aa3 AA-
Medium-term notes A+ A1 A+
Commercial paper A-1+ P-1 D-1+
Progress Capital Holdings, Inc.
Medium-term notes A A2
Commercial paper A-1 P-1
Earnings per share growth over the past three years has allowed Florida Progress
to continue its long-standing tradition of increasing the dividend while, at the
same time, following the Florida Progress board of director's strategy of
lowering the dividend payout ratio. The payout from continuing operations was
79% in 1996 and 81% in 1995. This is down significantly from several years ago.
Florida Progress has increased the dividends paid per share each year for 44
consecutive years. Florida Progress' board realizes, however, that the dividend
policy should be evaluated annually, and it does so each February. The board
will continue to re-examine the dividend payout policy to ensure that Florida
Progress' dividend payout and dividend rate are appropriate, given its business
plan and projected earnings growth and the outlook for the electric utility
industry.
Florida Progress anticipates sustained earnings growth in the five-year business
plan. The level of confidence in earnings growth will continue to be one of
several considerations used in setting dividend policy.
In February 1997, Florida Progress' board increased the quarterly cash dividend
on Florida Progress common stock by approximately 2%. This board action
increased the annual dividend by four cents per share, therefore raising the
annual dividend to $2.10 per share.
Florida Power Corporation
Florida Power's construction expenditures in 1996 totaled about $217 million.
This was primarily for distribution lines and other facilities related to the
utility's growing customer base. Florida Power's five-year construction program
totals $1.4 billion for the 1997-2001 forecast period. It includes planned
expenditures of $372 million, $307 million, $252 million, $230 million and $269
million for 1997 through 2001. Florida Power expects construction expenditures
during this period will be financed with internally generated funds.
Florida Power has agreed to acquire the 220-MW Tiger Bay cogeneration facility
and to terminate the purchased power contracts related to that facility for $445
million in 1997, subject to approval by other parties. Tiger Bay is Florida
Power's largest cogeneration power supplier. Florida Power plans on financing
the Tiger Bay acquisition primarily through debt financing.
The CAAA require electric utilities to reduce sulfur dioxide emissions. Florida
Power expects to meet these requirements with minimal capital expenditures.
In 1996, Florida Power's net cash flow to capital expenditures was 175%. In
addition to funding its construction commitments with cash from operations,
Florida Power receives equity from Florida Progress and accesses the capital
markets through the issuance of commercial paper, medium-term notes and first
mortgage bonds.
30
<PAGE>
<PAGE>
Florida Power has a public $300-million, medium-term note program, providing for
the issuance of either fixed or floating interest rate notes, with maturities
that may range from nine months to 30 years.
Florida Power's interim financing needs are funded primarily through its
commercial paper program. The utility has a 364-day revolving bank credit
facility and a five-year facility, $200 million each, which are used to back up
commercial paper. (See Note 6 to the Financial Statements.)
Florida Power used additional cash generated by operations to redeem $105
million of preferred stock in 1996 and reduced total debt levels by about $145
million in 1995.
Florida Power's embedded cost of long-term debt was 7.2% as of December 31, 1996
and 1995.
Diversified Operations
Progress Capital, the downstream holding company of Florida Progress,
consolidates the collective financial strength of these operations and, with the
benefit of a recently amended guaranty and support agreement with Florida
Progress, helps to lower the cost of capital of the diversified businesses.
Progress Capital funds diversified operations primarily through the issuance of
commercial paper and medium-term notes. (See Note 6 to the Financial
Statements.)
Progress Capital has a private $300-million, medium-term note program for the
issuance of either fixed or floating interest rate notes, with maturities that
may range from nine months to 30 years. In 1996, Progress Capital issued $178
million of medium-term notes with maturities ranging from five to 10 years. The
proceeds were used mainly to repay $140 million of maturing medium-term notes.
Progress Capital also has two revolving bank credit facilities: a 364-day,
$100-million facility and a five-year, $300-million facility. These facilities
are used to back up commercial paper. (See Note 6 to the Financial Statements.)
In 1996, total diversified capital expenditures were about $41 million,
primarily for operations at Electric Fuels. In 1996, Progress Capital received
net proceeds of $53 million from the sale of Advanced Separation Technologies
and expended $54 million related to acquisitions made by Electric Fuels or its
affiliates.
In 1997, diversified capital expenditures are expected to be about $88 million,
with most of these planned expenditures designated for operations of Electric
Fuels. The inland marine transportation unit plans to add new barges in 1997 as
it continues to take advantage of market opportunities that expand its business.
Electric Fuels' rail services unit is expected to continue to grow by expanding
geographically into the midwest and western markets. These expenditures are
expected to be funded through cash generated internally and from outside
financing sources.
FORWARD-LOOKING STATEMENTS
In this report, Florida Progress has projected the population will grow to 5.1
million in Florida Power's service area by the year 2000, sustained earnings
growth of 4% to 5% for Florida Progress over the next five years, and
double-digit earnings growth at Electric Fuels. Florida Power has projected that
it's CR3 nuclear plant will return to service by year-end 1997. Florida Progress
believes that it will take three to five years to rebuild sufficient value in
Mid-Continent before that company can be divested at fair value.
31
<PAGE>
<PAGE>
Risk Factors
These statements, and any other statements contained in this report that are not
historical facts, are forward-looking statements that are based on a series of
projections and estimates regarding the economy, the electric utility industry
and Florida Progress' other businesses in general, and on key factors which
impact Florida Progress directly. The projections and estimates relate to the
pricing of services, the actions of regulatory bodies, the success of new
products and services, and the effects of competition.
Key factors that have a direct bearing on Florida Progress' ability to attain
these projections include continued annual growth in customers, successful cost
containment efforts and the efficient operation of Florida Power's existing and
future generating units. Also, in developing its forward-looking statements,
Florida Progress has made certain assumptions relating to productivity
improvements and the favorable outcome of various commercial, legal and
regulatory proceedings, and the lack of disruption to its markets.
If Florida Progress' projections and estimates regarding the economy, the
electric utility industry and key factors differ materially from what actually
occurs, or if various proceedings have unfavorable outcomes, Florida Progress'
actual results could vary significantly from the performance projected in the
forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AUDITORS' REPORT
To the Shareholders of Florida Progress Corporation
and Florida Power Corporation:
We have audited the accompanying consolidated balance sheets of Florida Progress
Corporation and subsidiaries, and of Florida Power Corporation, as of December
31, 1996 and 1995, and the related consolidated statements of income, cash
flows, and shareholders' equity for each of the years in the three-year period
ended December 31, 1996. In connection with our audits of the financial
statements, we also have audited the financial statement schedules listed in
Item 14 therein. These financial statements and financial statement schedules
are the responsibility of the respective managements of Florida Progress
Corporation and Florida Power Corporation. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Florida Progress Corporation
and subsidiaries, and Florida Power Corporation, as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
/s/KPMG Peat Marwick LLP
- ---------------------------
KPMG Peat Marwick LLP
St. Petersburg, Florida
January 27, 1997
32<PAGE>
<PAGE>
FLORIDA PROGRESS
Consolidated Financial Statements
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Income
For the years ended December 31, 1996, 1995 and 1994
(In millions, except per share amounts)
1996 1995 1994
--------- --------- ---------
REVENUES:
Electric utility $2,393.6 $2,271.7 $2,080.5
Diversified 764.3 736.1 644.8
--------- --------- ---------
3,157.9 3,007.8 2,725.3
--------- --------- ---------
EXPENSES:
Electric utility:
Fuel 409.7 431.3 425.6
Purchased power 531.6 436.5 294.6
Energy conservation costs 62.6 84.0 104.3
Operation and maintenance 413.4 393.7 412.2
Depreciation 324.2 293.7 261.5
Taxes other than income taxes 183.6 176.2 162.8
--------- --------- ---------
1,925.1 1,815.4 1,661.0
--------- --------- ---------
Diversified:
Cost of sales 642.9 624.6 552.1
Provision for loss on coal properties 40.9 - -
Other 66.6 58.9 51.1
--------- --------- ---------
750.4 683.5 603.2
--------- --------- ---------
INCOME FROM OPERATIONS 482.4 508.9 461.1
--------- --------- ---------
INTEREST EXPENSE AND OTHER:
Interest expense 135.9 139.4 141.5
Allowance for funds used during
construction (7.5) (7.3) (10.9)
Preferred dividend requirements
of Florida Power 5.8 9.7 10.1
Gain on sale of business (44.2) - -
Other expense (income), net (4.2) (9.9) (2.4)
--------- --------- ---------
85.8 131.9 138.3
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 396.6 377.0 322.8
Income taxes 145.9 138.1 110.8
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 250.7 238.9 212.0
DISCONTINUED OPERATIONS, NET OF
INCOME TAXES (26.3) - -
--------- --------- ---------
NET INCOME $ 224.4 $ 238.9 $ 212.0
========= ========= =========
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 96.8 95.7 93.0
========= ========= =========
EARNINGS PER AVERAGE COMMON SHARE:
Continuing operations $2.59 $2.50 $2.28
Discontinued operations (.27) - -
--------- --------- ---------
$2.32 $2.50 $2.28
========= ========= =========
The accompanying notes are an integral part of these financial statements.
33<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
December 31, 1996 and 1995
(Dollars in millions)
1996 1995
--------- ---------
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held
for future use $5,965.6 $5,867.5
Less: Accumulated depreciation 2,335.8 2,179.7
Accumulated decommissioning for nuclear plant 193.3 165.2
Accumulated dismantlement for fossil plants 119.6 104.4
--------- ---------
3,316.9 3,418.2
Construction work in progress 140.3 131.8
Nuclear fuel, net of amortization of $356.7
in 1996 and $348.7 in 1995 59.9 59.1
--------- ---------
Net electric utility plant 3,517.1 3,609.1
Other property, net of depreciation of $173.8
in 1996 and $157.3 in 1995 309.3 307.0
--------- ---------
3,826.4 3,916.1
--------- ---------
CURRENT ASSETS:
Cash and equivalents 5.2 4.3
Accounts receivable, net 265.0 307.3
Inventories, primarily at average cost:
Fuel 67.1 63.0
Utility materials and supplies 95.4 101.3
Diversified materials 125.5 111.0
Underrecovery of fuel costs 82.6 .3
Other 48.2 41.6
--------- ---------
689.0 628.8
--------- ---------
DISCONTINUED OPERATIONS:
Advances to discontinued operations - 116.0
Net assets of discontinued operations - 200.8
--------- ---------
- 316.8
--------- ---------
OTHER ASSETS:
Investments:
Loans receivable, net 68.1 31.5
Marketable securities 217.9 188.2
Nuclear plant decommissioning fund 207.8 161.1
Joint ventures and partnerships 41.9 33.9
Deferred insurance policy acquisition costs 120.9 106.4
Other 176.4 167.6
--------- ---------
833.0 688.7
--------- ---------
$5,348.4 $5,550.4
========= =========
The accompanying notes are an integral part of these financial statements.
34<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
December 31, 1996 and 1995
(Dollars in millions)
1996 1995
--------- ---------
CAPITAL AND LIABILITIES
COMMON STOCK EQUITY:
Common stock without par value, 250,000,000 shares
authorized, 97,007,182 shares outstanding in 1996
and 96,420,627 in 1995 $1,208.3 $1,187.6
Retained earnings 716.5 888.4
Unrealized gain (loss) on securities available
for sale (.6) 2.1
--------- ---------
1,924.2 2,078.1
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 33.5 113.5
With sinking funds - 25.0
LONG-TERM DEBT 1,776.9 1,662.3
--------- ---------
TOTAL CAPITAL 3,734.6 3,878.9
--------- ---------
CURRENT LIABILITIES:
Accounts payable 193.2 165.7
Customers' deposits 81.8 85.3
Taxes payable 41.2 17.3
Accrued interest 48.3 46.9
Other 78.5 97.0
--------- ---------
443.0 412.2
Notes payable 4.1 -
Current portion of long-term debt 34.9 173.7
--------- ---------
482.0 585.9
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 475.4 512.0
Unamortized investment tax credits 93.5 101.5
Insurance policy benefit reserves 325.3 265.0
Other postretirement benefit costs 100.0 84.5
Other 137.6 122.6
--------- ---------
1,131.8 1,085.6
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 11)
--------- ---------
$5,348.4 $5,550.4
========= =========
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
(In millions)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income from continuing operations $250.7 $238.9 $212.0
Adjustments for noncash items:
Depreciation and amortization 366.7 352.7 316.4
Gain on sale of business (44.2) - -
Provision for loss on coal properties 40.9 - -
Deferred income taxes and investment tax credits, net (56.6) (38.0) (11.7)
Allowance for equity funds used during construction (4.6) (3.8) (6.1)
Increase in accrued postemployment benefit costs 15.5 16.8 20.3
Net change in deferred insurance policy acquisition costs (14.5) (14.5) (10.4)
Net change in insurance policy benefits reserves 60.3 42.5 36.0
Changes in working capital, net of effects from acquisition or sale of
businesses:
Accounts receivable 35.4 (35.2) (18.0)
Inventories (10.9) (29.1) (10.0)
Overrecovery (underrecovery) of fuel cost (82.3) 1.5 5.3
Accounts payable 21.6 16.4 (4.0)
Taxes payable 21.0 (7.6) (13.1)
Other (13.5) 29.0 15.1
Other operating activities (14.6) 11.1 15.7
------ ------ ------
Cash provided by continuing operations 570.9 580.7 547.5
------ ------ ------
Loss from discontinued operations (26.3) - -
Adjustments for noncash items 17.4 (17.6) (15.3)
------ ------ ------
Cash used by discontinued operations (8.9) (17.6) (15.3)
------ ------ ------
562.0 563.1 532.2
------ ------ ------
INVESTING ACTIVITIES:
Property additions (including allowance for borrowed funds used during
construction) (264.0) (331.4) (366.8)
Purchase of loans and securities, net (including issuance of Echelon note) (70.4) (28.9) (31.6)
Acquisition of businesses (53.8) (9.2) (17.1)
Proceeds from sales of properties and businesses 61.1 13.1 9.3
Investing activities of discontinued operations 56.5 69.8 68.9
Other investing activities (37.0) (15.0) (15.6)
------ ------ ------
(307.6) (301.6) (352.9)
------ ------ ------
FINANCING ACTIVITIES:
Issuance of long-term debt 178.0 - 103.9
Repayment of long-term debt (190.4) (45.8) (78.9)
Increase (decrease) in commercial paper with long-term support (15.3) 1.0 (61.2)
Redemption of preferred stock (106.4) (5.0) (5.0)
Sale of common stock 18.5 38.4 138.0
Equity contributions to discontinued operations (23.7) - -
Dividends paid on common stock (199.5) (193.4) (185.9)
Increase (decrease) in short-term debt 4.1 (55.3) (75.6)
Financing activities of discontinued operations 85.2 (9.7) (8.2)
Other financing activities (4.0) (1.2) (1.6)
------ ------ ------
(253.5) (271.0) (174.5)
------ ------ ------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS .9 (9.5) 4.8
Beginning cash and equivalents 4.3 13.8 9.0
------ ------ ------
ENDING CASH AND EQUIVALENTS $ 5.2 $ 4.3 $ 13.8
====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $128.7 $135.5 $135.2
Income taxes (net of refunds) $189.3 $214.7 $171.5
The accompanying notes are an integral part of these financial statements.
</TABLE>
36
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<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Shareholders' Equity
For the years ended December 31, 1996, 1995 and 1994
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Cumulative
Unrealized Preferred Stock
Gain of Florida Power
(Loss) on ----------------
Securities Without With
Common Retained Available Sinking Sinking
Stock Earnings for Sale Funds Funds
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 1,008.3 $812.2 $ - $113.5 $ 35.0
Net income 212.0
Common stock issued - 5,215,788 shares 138.9
Common stock issued in pooling of interests -
700,000 shares .9 4.1
Cash dividends on common stock
($1.99 per share) (185.4)
Unrealized loss on marketable securities
available for sale (6.6)
Preferred stock redeemed - 50,000 shares (5.0)
--------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,148.1 842.9 (6.6) 113.5 30.0
Net income 238.9
Common stock issued - 1,245,267 shares 39.5
Cash dividends on common stock ($2.02 per share) (193.4)
Unrealized gain on marketable securities
available for sale 8.7
Preferred stock redeemed - 50,000 shares (5.0)
--------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 1,187.6 888.4 2.1 113.5 25.0
Net income 224.4
Common stock issued - 586,555 shares 20.7
Echelon International stock dividend (194.5)
Cash dividends on common stock ($2.06 per share) (199.5)
Unrealized loss on marketable securities
available for sale (2.7)
Preferred stock redeemed - 1,050,000 shares (2.3) (80.0) (25.0)
--------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $1,208.3 $716.5 $ (.6) $ 33.5 $ -
--------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
37
<PAGE>
<PAGE>
FLORIDA POWER
Financial Statements
FLORIDA POWER CORPORATION
Statements of Income
For the years ended December, 31 1996, 1995 and 1994
(In millions)
1996 1995 1994
--------- --------- ---------
OPERATING REVENUES: $2,393.6 $2,271.7 $2,080.5
--------- --------- ---------
OPERATING EXPENSES:
Operation:
Fuel used in generation 409.7 431.3 425.6
Purchased power 531.6 436.5 294.6
Energy Conservation Cost Recovery 62.6 84.0 104.3
Operations and maintenance 413.4 393.7 412.2
Depreciation 324.2 293.7 261.5
Taxes other than income taxes 183.6 176.2 162.8
Income taxes 135.8 129.5 114.7
--------- --------- ---------
2,060.9 1,944.9 1,775.7
--------- --------- ---------
OPERATING INCOME 332.7 326.8 304.8
--------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 4.6 3.8 6.1
Miscellaneous other expense, net (3.4) (2.6) (6.5)
--------- --------- ---------
1.2 1.2 (0.4)
--------- --------- ---------
INTEREST CHARGES
Interest on long-term debt 86.6 93.5 96.3
Other interest expense 11.8 11.0 12.1
--------- --------- ---------
98.4 104.5 108.4
Allowance for borrowed funds used
during construction (2.9) (3.5) (4.8)
--------- --------- ---------
95.5 101.0 103.6
--------- --------- ---------
NET INCOME 238.4 227.0 200.8
DIVIDENDS ON PREFERRED STOCK 5.8 9.7 10.1
--------- --------- ---------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $232.6 $217.3 $190.7
========= ========= =========
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
For the years ended December 31, 1996 and 1995
(Dollars in millions)
1996 1995
---------- ----------
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held $5,965.6 $5,867.5
for future use
Less - Accumulated depreciation 2,335.8 2,179.7
Accumulated decommissioning for nuclear plant 193.3 165.2
Accumulated dismantlement for fossil plants 119.6 104.4
---------- ----------
3,316.9 3,418.2
Construction work in progress 140.3 131.8
Nuclear fuel, net of amortization of $356.7
in 1996 and $348.7 in 1995 59.9 59.1
---------- ----------
3,517.1 3,609.1
Other property, net 13.3 23.0
---------- ----------
3,530.4 3,632.1
---------- ----------
CURRENT ASSETS:
Cash and equivalents - 0.8
Accounts receivable, less reserve of $4.1
in 1996 and $5.2 in 1995 174.7 200.7
Inventories at average cost:
Fuel 47.2 40.8
Materials and supplies 95.4 101.3
Underrecovery of fuel cost 82.6 0.3
Deferred income taxes 35.6 32.3
Other 6.2 3.9
---------- ----------
441.7 380.1
---------- ----------
OTHER ASSETS:
Nuclear plant decommissioning fund 207.8 161.1
Unamortized debt expense, being amortized
over term of debt 25.0 27.5
Other 59.1 84.1
---------- ----------
291.9 272.7
---------- ----------
$4,264.0 $4,284.9
========== ==========
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
For the years ended December 31, 1996 and 1995
(Dollars in millions)
1996 1995
---------- ----------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $1,004.4 $992.9
Retained earnings 821.1 761.1
---------- ----------
1,825.5 1,754.0
CUMULATIVE PREFERRED STOCK:
Without sinking funds 33.5 113.5
With sinking funds - 25.0
LONG-TERM DEBT 1,296.4 1,279.1
---------- ----------
TOTAL CAPITAL 3,155.4 3,171.6
---------- ----------
CURRENT LIABILITIES:
Accounts payable 115.5 89.8
Accounts payable to associated companies 21.2 24.8
Customers' deposits 81.7 85.3
Income taxes payable 10.4 8.9
Accrued other taxes 10.0 12.3
Accrued interest 34.8 32.9
Other 47.3 65.1
---------- ----------
320.9 319.1
Notes payable 4.1 -
Current portion of long-term debt 21.3 30.6
---------- ----------
346.3 349.7
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 472.3 483.8
Unamortized investment tax credits 92.8 100.9
Other postretirement benefit costs 96.5 81.5
Other 100.7 97.4
---------- ----------
762.3 763.6
---------- ----------
$4,264.0 $4,284.9
========== ==========
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
(In millions)
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income after dividends on preferred stock $232.6 $217.3 $190.7
Adjustments for noncash items:
Depreciation and amortization 341.1 329.7 294.8
Deferred income taxes and investment
tax credits, net (32.8) (29.3) (0.9)
Increase in accrued other postretirement
benefit costs 14.9 16.1 19.2
Allowance for equity funds used during construction (4.6) (3.8) (6.1)
Changes in working capital:
Accounts receivable 16.2 (33.4) 0.9
Inventories (0.5) 14.2 8.1
Overrecovery (underrecovery) of fuel cost (82.3) 1.5 5.3
Accounts payable 25.7 4.8 (21.2)
Accounts payable to associated companies (3.5) 3.4 4.3
Taxes payable (0.8) 2.8 (14.6)
Other (12.1) 39.5 6.9
Other operating activities 3.8 8.6 10.9
--------- --------- ---------
497.7 571.4 498.3
--------- --------- ---------
INVESTING ACTIVITIES:
Construction expenditures (217.3) (283.4) (319.5)
Allowance for borrowed funds used during construction (2.9) (3.5) (4.8)
Additions to nonutility property (2.7) (2.3) (2.9)
Proceeds from sale of properties 5.5 10.8 7.7
Other investing activities (27.6) (11.0) (12.4)
--------- --------- ---------
(245.0) (289.4) (331.9)
--------- --------- ---------
FINANCING ACTIVITIES:
Repayment of long-term debt (47.3) (35.4) (46.0)
Increase (decrease) in commercial paper with
long term support 54.8 (54.8) -
Redemption of preferred stock (106.3) (5.0) (5.0)
Dividends paid on common stock (171.3) (180.7) (175.7)
Equity contributions from parent 12.5 50.0 130.0
Increase (decrease) in short-term debt 4.1 (55.3) (69.7)
--------- --------- ---------
(253.5) (281.2) (166.4)
--------- --------- ---------
NET INCREASE IN CASH AND EQUIVALENTS (0.8) 0.8 -
Beginning cash and equivalents 0.8 - -
--------- --------- ---------
ENDING CASH AND EQUIVALENTS $ - $0.8 $ -
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $90.7 $97.9 $101.5
Income taxes (net of refunds) $166.9 $157.1 $129.8
The accompanying notes are an integral part of these financial statements.
</TABLE>
41
<PAGE>
<PAGE>
FLORIDA POWER CORPORATION
Statements of Shareholder's Equity
For the years ended December 31, 1996, 1995 and 1994
(Dollars in millions, except share amounts)
Cumulative
Preferred Stock
--------------------
Without With
Common Retained Sinking Sinking
Stock Earnings Funds Funds
----------------------------------------
Balance, December 31, 1993 $812.9 $709.5 $113.5 $35.0
Net income after dividends on
preferred stock 190.7
Capital contribution by parent company 130.0
Cash dividends on common stock (175.7)
Preferred stock redeemed -
50,000 shares (5.0)
----------------------------------------
Balance, December 31, 1994 942.9 724.5 113.5 30.0
Net income after dividends on
preferred stock 217.3
Capital contribution by parent company 50.0
Cash dividends on common stock (180.7)
Preferred stock redeemed -
50,000 shares (5.0)
----------------------------------------
Balance, December 31, 1995 992.9 761.1 113.5 25.0
Net income after dividends on
preferred stock 232.6
Capital contribution by parent company 12.5
Cash dividends on common stock (171.3)
Preferred stock redemption costs (1.3)
Premium on preferred stock redemption (1.0)
Preferred stock redeemed -
1,050,000 shares (80.0) (25.0)
----------------------------------------
Balance, December 31, 1996 $1,004.4 $821.1 $33.5 ($0.0)
========================================
The accompanying notes are an integral part of these financial statements.
42<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - Florida Progress is an exempt holding company under the 1935 Act. Its
largest subsidiary, representing 80% of total assets, is Florida Power, a public
utility engaged in the generation, purchase, transmission, distribution and sale
of electric energy primarily within Florida.
The consolidated financial statements include the financial results of Florida
Progress and its majority-owned operations. All significant intercompany
balances and transactions have been eliminated. Investments in 20%- to 50%-owned
joint ventures are accounted for using the equity method.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
This could affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Certain reclassifications have been made to prior year amounts to conform to the
current year's presentation.
REGULATION - Florida Power is regulated by the FPSC and the FERC. The utility
follows the accounting practices set forth in Financial Accounting Standard
(FAS) No. 71, "Accounting for the Effects of Certain Types of Regulation" FAS 71
as amended. This standard allows utilities to capitalize or defer certain costs
or revenues based on management's ongoing assessment that it is probable these
items will be recovered through the ratemaking process.
At December 31, 1996, Florida Power had $173.8 million of regulatory assets,
including $82.6 million of underrecovery of fuel costs, and $51.8 million of
regulatory liabilities. The utility expects to fully recover these assets and
refund the liabilities through customer rates under current regulatory practice.
If Florida Power no longer applied FAS No. 71 due to competition, regulatory
changes or other reasons, the utility would make certain adjustments. These
adjustments would include the write-off of all or a portion of its regulatory
assets and liabilities, the evaluation of utility plant, contracts and
commitments and the recognition, if necessary, of any losses to reflect market
conditions.
In April 1996, FERC issued new rules governing open transmission access,
stranded cost issues and electronically offering information on transmission
capacity. The new rules are designed to provide open access to the nation's
interstate transmission network. In July 1996, FERC accepted Florida Power's
nondiscriminatory open access transmission tariff that was filed to comply with
the new rules. The new FERC rules did not have a material effect on the
utility's revenues or earnings.
UTILITY PLANT - Utility plant is stated at the original cost of construction,
which includes payroll and related costs such as taxes, pensions and other
fringe benefits, general and administrative costs, and an allowance for funds
used during construction. Substantially all of the utility plant is pledged as
collateral for Florida Power's first mortgage bonds.
The allowance for funds used during construction represents the estimated cost
of equity and debt for utility plant under construction. Florida Power is
permitted to earn a return on these costs and recover them in the rates charged
for utility services while the plant is in service. The average rate used in
computing the allowance for funds was 7.8%.
43
<PAGE>
<PAGE>
UTILITY REVENUES, FUEL AND PURCHASED POWER EXPENSES - Revenues include amounts
resulting from fuel, purchased power and energy conservation adjustment clauses,
which are designed to permit full recovery of these costs. The adjustment
factors are based on projected costs for a six- or 12-month period. The
cumulative difference between actual and billed costs is included on the balance
sheet as a current regulatory asset or liability. Any difference is billed or
refunded to customers during the subsequent period.
As ordered by the FPSC, Florida Power is conducting a three-year test for
residential revenue decoupling, which began in January 1995. Decoupling
eliminates the direct link between kilowatt-hour sales and revenues. A nonfuel
revenue target is determined by multiplying a revenue per customer amount by the
total number of residential customers. The difference between target revenues
and actual revenues is included as a current asset or liability on the balance
sheet. The revenue per customer amount is adjusted annually for a growth factor.
Florida Power accrues the nonfuel portion of base revenues for services rendered
but unbilled.
The cost of nuclear fuel is amortized to expense based on the quantity of heat
produced for the generation of electric energy in relation to the quantity of
heat expected to be produced over the life of the nuclear fuel core.
INCOME TAXES - Deferred income taxes are provided on all significant temporary
differences between the financial and tax basis of assets and liabilities using
presently enacted tax rates in accordance with FAS No. 109, "Accounting for
Income Taxes."
Deferred investment tax credits, subject to regulatory accounting practices, are
amortized to income over the lives of the related properties.
DEPRECIATION AND MAINTENANCE - Florida Progress provides for depreciation of the
cost of properties over their estimated useful lives primarily on a
straight-line basis. Florida Power's annual provision for depreciation,
including a provision for nuclear plant decommissioning costs and fossil plant
dismantlement costs, expressed as a percentage of the average balances of
depreciable utility plant, was 4.9% for 1996, 5% for 1995 and 4.8% for 1994.
Florida Power charges maintenance expense with the cost of repairs and minor
renewals of property. The plant accounts are charged with the cost of renewals
and replacements of property units. Accumulated depreciation is charged with the
cost, less the net salvage, of property units retired.
Florida Power accrues a reserve for maintenance and refueling expenses
anticipated to be incurred during scheduled nuclear plant outages.
INSURANCE PREMIUMS, POLICY ACQUISITION COSTS AND BENEFIT RESERVES - Life
insurance premiums are recognized as revenues over the premium-paying periods of
the policies.
Florida Progress defers recoverable costs in its insurance operations that
directly relate to the production of new business. These costs are amortized
over the expected premium-paying period. Benefit reserves are established out of
each premium payment to provide for the present value of future insurance policy
benefits. Florida Progress reviews the adequacy and recoverability of the
deferred acquisition costs and the benefit reserves based on a gross premium
reserve analysis of the in-force business.
Significant assumptions used in this analysis include estimates of future
premium increases, mortality rates, withdrawal rates, expense rates, and
investment yield. The assumptions are based on Florida Progress' actual
experience adjusted for the effect of future actions affecting the in-force
44
<PAGE>
<PAGE>
business. Although these assumptions are Florida Progress' best estimate of the
future experience, actual results may vary in either direction and could
significantly impact income in the period of change. Management believes
deferred policy acquisition costs are recoverable at December 31, 1996.
ACCOUNTING FOR CERTAIN INVESTMENTS - Florida Progress considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents. Florida Progress' investments in debt and equity securities
are classified and accounted for as follows:
Type of Security Accounting Treatment
Debt securities held to maturity Amortized cost
------------------------------------------------------------------------------
Trading securities Fair market value with unrealized
gains and losses included in earnings
------------------------------------------------------------------------------
Securities available for sale Fair market value with unrealized gains
and losses, net of taxes, reported
separately in shareholders' equity
------------------------------------------------------------------------------
See Note 2 for securities held to maturity or available for sale. Florida
Progress had no investments in assets classified as trading securities at
December 31, 1996 and 1995. A decline in the market value of any security
available-for-sale or held-to-maturity that falls below cost results in a
reduction in carrying amount to fair value if the decline is not considered
temporary. The impairment is charged to earnings and a new cost basis for the
security is established. Premiums and discounts are amortized or accreted over
the life of the related held-to-maturity security as an adjustment to yield
using the effective interest method. Dividend and interest income are recognized
when earned.
ACCOUNTING FOR LONG-LIVED ASSETS - Florida Progress adopted the provisions of
FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," on January 1, 1996. This statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to undiscounted future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell. Adoption of this statement
in January 1996 did not have a material impact on Florida Progress' financial
position, results of operations, or liquidity.
The Financial Accounting Standards Board has a current project addressing the
accounting for obligations related to the decommissioning of nuclear power
plants. Florida Power records a provision for nuclear decommissioning costs over
the expected life of its nuclear plant. Currently, the accumulated provisions
for nuclear decommissioning costs are recorded as a reduction of Electric Plant
in Service on the balance sheet. One alternative, if adopted, would require
Florida Power's 90.4% share of estimated nuclear decommissioning costs totaling
$385 million in 1996 dollars to be recorded as a liability, with a corresponding
plant asset. There would be no impact on earnings or cash flows.
STOCK-BASED COMPENSATION - Under its Long-Term Incentive Plan ("LTIP"), Florida
Progress grants selected executives performance shares, which upon achievement
of performance criteria for a three-year performance cycle, result in the award
of shares of common stock of Florida Progress, two-thirds of which would be
restricted for periods of time. Florida Progress accounts for its LTIP in
45<PAGE>
<PAGE>
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees." On January 1, 1996, Florida
Progress adopted FAS No. 123, "Accounting for Stock-Based Compensation," and
Florida Progress elected to continue to apply the accounting provisions of APB
No. 25. There was no material difference in earnings as a result of this
election.
BUSINESS ACQUISITIONS - Florida Progress and its subsidiaries acquired several
businesses in 1996, 1995 and 1994. All acquisitions were accounted for as
purchases except the acquisition of FM Industries, Inc., in December 1994, which
was accounted for on a pooling of interests basis.
The 1994 Statement of Cash Flows does not reflect the value of the 700,000
shares of common stock issued for the acquisition of FM Industries. The market
value of these shares at the date of issuance was $21.1 million.
COMMITMENTS AND CONTINGENCIES - In October 1996, the American Institute of
Certified Public Accountants issued Statement of Position ("SOP") 96-1,
"Environmental Remediation Liabilities." SOP 96-1 was adopted by Florida
Progress on January 1, 1997 and requires, among other things, environmental
remediation liabilities to be accrued when the criteria of FAS No. 5,
"Accounting for Contingencies," have been met. The SOP also provides guidance
with respect to the measurement of the remediation liabilities. Such accounting
is consistent with Florida Progress' current method of accounting for
environmental remediation costs and, therefore, adoption of this new statement
did not have a material impact on Florida Progress' financial position, results
of operations or liquidity.
NOTE 2 FINANCIAL INSTRUMENTS
Estimated fair value amounts have been determined by Florida Progress using
available market information and discounted cash-flow analysis. Judgment is
required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates may be different than the amounts that Florida
Progress could realize in a current market exchange.
Florida Progress currently has no derivative financial instruments, such as
futures, forwards, swaps or options contracts. At December 31, 1996 and 1995,
Florida Progress had the following financial instruments with estimated fair
values and carrying amounts:
1996 1995
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
ASSETS:
Loans receivable:
Echelon International $ 32.9 $ 32.9 $ - $ -
Life insurance business:
Loans secured by real estate 4.1 4.4 6.0 7.8
Policy loans 11.0 10.1 9.7 11.1
-------- -------- -------- --------
$ 48.0 $ 47.4 $ 15.7 $ 18.9
======== ======== ======== ========
Marketable securities:
Available for sale $ 352.4 $ 352.4 $ 296.3 $ 296.3
Held to maturity 73.3 76.8 53.0 58.6
CAPITAL AND LIABILITIES:
Florida Power preferred stock
with sinking funds $ - $ - $ 25.0 $ 26.1
Long-term debt:
Florida Power Corporation 1,317.7 1,335.3 1,309.7 1,352.8
Progress Capital Holdings 494.1 497.1 526.2 532.8
46
<PAGE>
<PAGE>
NOTE 3 INCOME TAXES
FLORIDA PROGRESS
(In millions) 1996 1995 1994
----------------------------------------------------------------------------
Components of income tax expense:
Payable currently:
Federal $179.7 $157.3 $109.7
State 23.0 18.8 12.8
----------------------------------------------------------------------------
202.7 176.1 122.5
----------------------------------------------------------------------------
Deferred, net:
Federal (41.9) (27.5) (1.9)
State (6.9) (2.0) (.2)
----------------------------------------------------------------------------
(48.8) (29.5) (2.1)
----------------------------------------------------------------------------
Amortization of investment
tax credits, net (8.0) (8.5) (9.6)
----------------------------------------------------------------------------
$145.9 $138.1 $110.8
============================================================================
FLORIDA POWER
(In millions) 1996 1995 1994
----------------------------------------------------------------------------
Components of income tax expense:
Payable currently:
Federal $143.6 $136.8 $ 95.3
State 24.9 22.1 17.1
----------------------------------------------------------------------------
168.5 158.9 112.4
----------------------------------------------------------------------------
Deferred, net:
Federal (20.9) (18.9) 7.0
State (4.0) (1.9) .6
----------------------------------------------------------------------------
(24.9) (20.8) 7.6
----------------------------------------------------------------------------
Amortization of investment
tax credits, net (7.9) (8.5) (8.5)
----------------------------------------------------------------------------
Total income tax expense 135.7 129.6 111.5
Less: Amounts charged or (credited)
to non-operating income (.1) .1 (3.2)
----------------------------------------------------------------------------
Amounts charged to operating income $135.8 $129.5 $114.7
============================================================================
47
<PAGE>
<PAGE>
The primary differences between the statutory rates and the effective income tax
rates are detailed below:
FLORIDA PROGRESS
1996 1995 1994
----------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income tax, net of federal
income tax benefits 2.6 2.8 2.5
Amortization of investment tax credits (2.0) (2.2) (2.9)
Other .6 .1 (1.3)
----------------------------------------------------------------------------
Effective income tax rates 36.2% 35.7% 33.3%
============================================================================
FLORIDA POWER
1996 1995 1994
----------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income tax, net of federal
income tax benefits 3.6 3.7 3.7
Amortization of investment tax credits (2.2) (2.4) (2.7)
Other - - (.3)
----------------------------------------------------------------------------
Effective income tax rates 36.4% 36.3% 35.7%
============================================================================
The following summarizes the components of deferred tax liabilities and assets
at December 31, 1996 and 1995:
FLORIDA PROGRESS
(In millions) 1996 1995
---------------------------------------------------------------------------
Difference in tax basis of property,
plant and equipment $544.1 $550.8
Deferred acquisition costs 35.9 37.2
Investment in partnerships 20.1 20.9
Other 35.6 41.6
---------------------------------------------------------------------------
Total deferred tax liabilities $635.7 $650.5
===========================================================================
Deferred tax assets:
Loss reserves not currently deductible $ 69.5 $ 41.2
Accrued book expenses 90.6 79.2
Unbilled revenues 17.6 20.8
Other 18.2 29.6
---------------------------------------------------------------------------
Total deferred tax assets $195.9 $170.8
===========================================================================
At December 31, 1996 and 1995, Florida Progress had net noncurrent deferred tax
liabilities of $475.4 million and $512 million and net current deferred tax
assets of $35.6 million and $32.3 million, respectively. Florida Progress
expects the results of future operations will generate sufficient taxable income
to allow for the utilization of deferred tax assets.
48
<PAGE>
<PAGE>
FLORIDA POWER
(In millions) 1996 1995
--------------------------------------------------------------------------
Deferred tax liabilities:
Difference in tax basis of property,
plant and equipment $516.0 $526.0
Deferred book expenses 12.7 19.9
Under recovery of fuel 2.8 2.8
Carrying value of securities over cost 7.7 4.5
--------------------------------------------------------------------------
Total deferred tax liabilities $539.2 $553.2
==========================================================================
Deferred tax assets:
Accrued book expenses $ 76.5 $ 64.4
Unbilled revenues 17.6 20.8
Regulatory liability for deferred income taxes 4.4 13.4
Other 4.0 3.1
--------------------------------------------------------------------------
Total deferred tax assets $102.5 $101.7
==========================================================================
At December 31, 1996 and 1995, Florida Power had net noncurrent deferred tax
liabilities of $472.3 million and $483.8 million and net current deferred tax
assets of $35.6 million and $32.3 million, respectively. Florida Power expects
the results of future operations will generate sufficient taxable income to
allow the utilization of deferred tax assets.
NOTE 4 NUCLEAR OPERATIONS
JOINTLY OWNED PLANT - The following information relates to Florida Power's 90.4%
proportionate share of the Crystal River nuclear plant at December 31, 1996 and
1995:
(In millions) 1996 1995
------------------------------------------------------------
Utility plant in service $643.6 $656.6
Construction work in progress 14.8 18.3
Unamortized nuclear fuel 59.9 59.1
Accumulated depreciation 309.5 310.9
Accumulated decommissioning 193.3 165.2
============================================================
Net capital additions/(retirements) for Florida Power were $(16.5) million in
1996 and $7.8 million in 1995, and depreciation expense, exclusive of nuclear
decommissioning, was $28.3 million in 1996 and $28.4 million in 1995. Each
co-owner provides for its own financing. Florida Power's share of the asset
balances and operating costs is included in the appropriate consolidated
financial statements. Amounts exclude any allocation of costs related to common
facilities.
DECOMMISSIONING COSTS - Florida Power's nuclear plant depreciation expenses
include a provision for future decommissioning costs, which are recoverable
through rates charged to customers. Florida Power is placing amounts collected
in an externally managed trust fund. The recovery from customers, plus income
earned on the trust fund, is intended to be sufficient to cover Florida Power's
share of the future dismantlement, removal and land restoration costs. Florida
Power has a license to operate the nuclear unit through December 3, 2016, and
contemplates decommissioning beginning at that time.
In November 1995, the FPSC approved a new site-specific study that estimated
total future decommissioning costs at approximately $2.0 billion, which
corresponds to $425.4 million in 1996 dollars. Florida Power increased its share
of the retail portion of annual decommissioning expense to the FPSC-approved
49
<PAGE>
<PAGE>
level of $20.5 million, effective January 1995. Funding of the approved increase
occurred during the first quarter of 1996, upon receipt in January 1996 of the
FPSC's final order, effective retroactively to January 1995. Florida Power also
has adjusted the wholesale portion of this expense in a comparable manner,
increasing it to $1.2 million annually.
Under the previous study, Florida Power's share of total annual decommissioning
expense, as authorized by the FPSC and the FERC, was $11.9 million for 1994.
FUEL DISPOSAL COSTS - Florida Power has entered into a contract with the DOE for
the transportation and disposal of SNF. Disposal costs for nuclear fuel consumed
are being collected from customers through the fuel adjustment clause at a rate
of $.001 per net nuclear KWH sold and are paid to the DOE quarterly. Florida
Power currently is storing SNF on site and has sufficient storage capacity in
place or under construction for fuel consumed through the year 2010.
NOTE 5 RATES
Florida Power's retail rates are set by the FPSC. Florida Power's last general
rate case was approved in 1992 and allowed a 12% regulatory return on equity
with an allowed range between 11% and 13%. The utility's retail regulatory
return was 12.3% for 1996.
Under Florida Power's revenue decoupling plan (See Note 1), Florida Power has
recorded a regulatory liability of $3.6 million for the 1996 time period and
$18.7 million for the 1995 time period.
The extended maintenance outage at the Crystal River nuclear plant requires
Florida Power to incur higher replacement power costs. The cost of this
replacement power exceeds the amount currently being recovered in Florida
Power's rates. As a result, Florida Power has an underrecovery of fuel and
purchased power costs of approximately $82.6 million at December 31, 1996. In
January 1997, Florida Power petitioned the FPSC for an increase in its rates to
recover, over a 12-month period beginning April 1997, the current balance of
deferred fuel together with an estimate of under-recoveries through March 1997.
The FPSC is scheduled to have hearings in February 1997. Management believes
that the FPSC will approve the increase in rates.
[THIS SPACE INTENTIONALLY BLANK]
50<PAGE>
<PAGE>
NOTE 6 DEBT
Florida Progress' long-term debt at December 31, 1996 and 1995, is scheduled to
mature as follows:
<TABLE>
<CAPTION>
Interest
Rate 1996 1995
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Florida Power Corporation:
(In millions)
First mortgage bonds:
Maturing in 1997 and 1999 6.50% $ 75.0 $ 91.7
Maturing 2002 and 2003 6.50%(a) 280.0 280.0
Maturing 2008 6.88% 80.0 80.0
Maturing 2021 through 2023 7.98%(a) 400.0 400.0
Pollution control revenue bonds:
Maturing 2014 through 2027 6.59%(a) 240.9 240.9
Notes maturing:
1996-1997 8.44%(a) 21.3 51.9
1998-2008 6.67% 26.0 26.0
Commercial paper, supported by revolver maturing November 30, 2001 5.53%(a) 200.0 145.2
Discount, net of premium, being amortized over term of bonds (5.5) (6.0)
--------------------------------------------------------------------------------------------------------------
1,317.7 1,309.7
Progress Capital Holdings:
Notes maturing:
1996-1997 9.35% 10.0 150.0
1998-2006 7.01%(a) 304.0 126.0
Commercial paper, supported by revolver maturing November 30, 2001 5.71%(a) 169.4 239.6
Other debt, maturing through 2006 6.81%(a) 10.7 10.7
--------------------------------------------------------------------------------------------------------------
1,811.8 1,836.0
Less: Current portion of long-term debt 34.9 173.7
--------------------------------------------------------------------------------------------------------------
$1,776.9 $1,662.3
==============================================================================================================
(a) Weighted average interest rate at December 31, 1996.
</TABLE>
Florida Progress' consolidated subsidiaries have lines of credit totaling $800
million, which are used to support commercial paper. The lines of credit were
not drawn on as of December 31, 1996. Interest rate options under the line of
credit arrangements vary from subprime or money market rates to the prime rate.
Banks providing lines of credit are compensated through fees. Commitment fees on
lines of credit vary between .06 and .10 of 1%.
The lines of credit consist of four revolving bank credit facilities, two each
for Florida Power and Progress Capital. The Florida Power facilities, $200
million each, are for terms of 364 days and five years. The Progress Capital
facilities consist of $100 million with a 364-day term and $300 million with a
five-year term. In 1996, both 364-day facilities were extended to November 1997.
In addition, both five-year facilities were extended to November 2001. Based on
the duration of the underlying backup credit facilities, $369.4 million of
outstanding commercial paper at December 31, 1996, and $384.8 million of
outstanding commercial paper at December 31, 1995, are classified as long-term
debt. Florida Power had another $4.1 million of outstanding commercial paper at
December 31, 1996, which was classified as short-term debt.
Florida Power has a public $300-million, medium-term note program providing for
the issuance of either fixed or floating interest rate notes. These notes have
maturities ranging from nine months to 30 years. All $300 million is available
for issuance.
51<PAGE>
<PAGE>
Florida Power has registered $370 million of first mortgage bonds which are
unissued and available for issuance.
Progress Capital has a private $300-million, medium-term note program providing
for the issuance of either fixed or floating interest rate notes, with
maturities ranging from nine months to 30 years. A balance of $122 million is
available for issuance under this program at either fixed or floating rates.
The combined aggregate maturities of long-term debt for 1997 through 2001 are
$34.9 million, $15 million, $128.6 million, $2.7 million and $472.4 million,
respectively. In addition, about 12% of Florida Power's outstanding first
mortgage bonds have an annual 1% sinking fund requirement. These requirements,
which total $1 million annually for 1997 through 2000, are expected to be
satisfied with property additions.
Florida Progress and Progress Capital entered into an amended guaranty and
support agreement in 1996, pursuant to which Florida Progress has
unconditionally guaranteed the payment of Progress Capital's debt as defined in
the agreement.
NOTE 7 PREFERRED AND PREFERENCE STOCK AND SHAREHOLDER RIGHTS
A summary of outstanding Cumulative Preferred Stock of Florida Power follows:
<TABLE>
<CAPTION>
Current Outstanding
Dividend Redemption Shares December 31
Rate Price Authorized Outstanding 1996 1995
--------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C> <C>
Without sinking funds, not subject to mandatory redemption:
4.00% $104.25 40,000 39,980 $ 4.0 $ 4.0
4.40% $102.00 75,000 75,000 7.5 7.5
4.58% $101.00 100,000 99,990 10.0 10.0
4.60% $103.25 40,000 39,997 4.0 4.0
4.75% $102.00 80,000 80,000 8.0 8.0
7.40% $102.48 300,000 - - 30.0
7.76% $102.21 500,000 - - 50.0
--------------------------------------------------------------------------------------------------------
334,967 $ 33.5 $ 113.5
--------------------------------------------------------------------------------------------------------
With sinking funds, subject to mandatory redemption:
7.08% $102.36 500,000 - $ - $ 25.0
========================================================================================================
</TABLE>
The authorized capital stock of Florida Progress includes 10 million shares of
preferred stock, without par value, including 2 million shares designated as
Series A Junior Participating Preferred Stock. No shares of Florida Progress'
preferred stock are issued and outstanding. However, under Florida Progress'
Shareholder Rights Agreement, each share of common stock has associated with it
approximately two-thirds of one right to purchase one one-hundredth of a share
of Series A Junior Participating Preferred Stock, subject to adjustment, which
is exercisable in the event of certain attempted business combinations. If
exercised, the rights would cause substantial dilution of ownership, thus
adversely affecting any attempt to acquire Florida Progress on terms not
approved by Florida Progress' Board of Directors. The rights have no voting or
dividend rights and expire in December 2001, unless redeemed earlier by Florida
Progress.
52<PAGE>
<PAGE>
The authorized capital stock of Florida Power includes three classes of
preferred stock: 4 million shares of Cumulative Preferred Stock, $100 par value;
5 million shares of Cumulative Preferred Stock, without par value; and 1 million
shares of Preference Stock, $100 par value. No shares of Florida Power's
Cumulative Preferred Stock, without par value, or Preference Stock are issued
and outstanding, while a total of 334,967 shares of the Cumulative Preferred
Stock, $100 par value, are issued and outstanding in various series as detailed
in the table above.
During 1996, Florida Power redeemed 1,050,000 shares of its Cumulative Preferred
Stock. Florida Power also redeemed 50,000 shares in 1995 and 850,000 shares in
1994.
NOTE 8 RETIREMENT BENEFIT PLANS
STAFF REDUCTIONS - Florida Progress recognized pension and other postretirement
benefit expenses of $15.5 million in 1994 related to an early retirement option.
In addition, in late 1994, Florida Power eliminated approximately 300 positions.
As a result, Florida Progress recognized severance costs of $5 million, which
was partially offset by a reduction of $1.8 million in related accrued pension
and postretirement benefit costs.
PENSION BENEFITS - Florida Progress and certain of its subsidiaries have a
noncontributory defined benefit pension plan covering most employees. The
benefits are based on length of service, compensation and Social Security
benefits. The participating companies make annual contributions to the plan
based on an actuarial determination and consideration of tax regulations and
funding requirements under federal law. Based on actuarial calculations and the
funded status of the pension plan, Florida Progress was not required to
contribute to the plan for 1996, 1995 or 1994.
Shown below are the components of the net pension expense calculations for those
years:
(In millions) 1996 1995 1994
--------------------------------------------------------------------------
Service cost $ 16.2 $ 13.4 $ 17.2
Interest cost 31.3 30.1 29.3
Actual losses (earnings) on plan assets (88.0) (124.4) 6.6
Net amortization and deferral 29.5 77.7 (54.3)
--------------------------------------------------------------------------
Net pension cost (benefit) (11.0) (3.2) (1.2)
Staff reduction cost, net - - 10.0
--------------------------------------------------------------------------
Net pension cost (benefit) recognized $(11.0) $ (3.2) $ 8.8
==========================================================================
Florida Power's share of the plan's net pension costs (benefits) for 1996, 1995
and 1994 was $(10.3) million, $(3) million and $9 million, respectively.
The following weighted average actuarial assumptions at January 1 were used in
the calculation of pension expense:
1996 1995 1994
Discount rate 7.25% 8.25% 7.25%
Expected long-term rate of return 9.00% 9.00% 9.00%
Rate of compensation increase 4.50% 5.00% 5.00%
53
<PAGE>
<PAGE>
The following summarizes the funded status of the pension plan at December 31,
1996 and 1995:
(In millions) 1996 1995
-------------------------------------------------------------------
Accumulated benefit obligation:
Vested $326.1 $315.8
Nonvested 31.5 30.6
-------------------------------------------------------------------
357.6 346.4
Effect of projected compensation increases 94.4 94.7
-------------------------------------------------------------------
Projected benefit obligation 452.0 441.1
Plan assets at market value, primarily listed
stocks and bonds 655.0 585.0
-------------------------------------------------------------------
Plan assets in excess of projected benefit
obligation $203.0 $143.9
===================================================================
Consisting of the following components:
Unrecognized transition asset $ 30.4 $ 35.4
Unrecognized prior service cost (6.3) (6.9)
Unrecognized net actuarial gains 176.4 123.9
(Accrued)/prepaid pension costs 2.5 (8.5)
-------------------------------------------------------------------
$203.0 $143.9
===================================================================
Due to changes in interest rates, Florida Progress used a discount rate of 7.5%
to calculate the pension plan's 1996 year-end funded status. The change in the
discount rate from 7.25% at December 31, 1995, to 7.5% at December 31, 1996,
decreased the projected benefit obligation by $16.5 million and is expected to
decrease the annual pension costs by $2.1 million, beginning in 1997.
OTHER POSTRETIREMENT BENEFITS - Florida Progress and some of its subsidiaries
provide certain health care and life insurance benefits for retired employees.
Employees become eligible for these benefits when they reach normal retirement
age while working for Florida Progress.
The net postretirement benefit costs for 1996, 1995 and 1994 are detailed below:
(In millions) 1996 1995 1994
-------------------------------------------------------------------
Service cost $ 5.3 $ 5.1 $ 5.3
Interest cost 12.4 13.5 12.9
Amortization of unrecognized
transition obligation 6.1 6.1 6.1
Actual earnings on plan assets (.3) (.3) -
Staff reduction cost - - 3.7
-------------------------------------------------------------------
$23.5 $24.4 $28.0
===================================================================
54
<PAGE>
<PAGE>
The following summarizes the plan's status, reconciled with amounts recognized
in Florida Progress' balance sheet at December 31, 1996 and 1995:
(In millions) 1996 1995
-------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $100.4 $ 96.6
Fully eligible active plan participants 3.1 2.6
Other active plan participants 81.2 91.4
Plan assets at fair value (4.7) (3.2)
-------------------------------------------------------------------
180.0 187.4
Unrecognized transition obligation (97.2) (103.6)
Unrecognized net gains 17.2 1.0
-------------------------------------------------------------------
Accrued postretirement benefit cost $100.0 $ 84.8
===================================================================
Florida Power's share of the plan's net postretirement benefit cost for 1996,
1995 and 1994 was $22.7 million, $23.5 million and $27.1 million, respectively.
The following weighted average actuarial assumptions were used in the
calculation of the year-end status of other postretirement benefits:
1996 1995
------------------------------------------------------------------
Discount rate 7.50% 7.25%
Rate of compensation increase 4.50% 4.50%
Health care cost trend rates:
Pre-Medicare 9.50%-5.25% 11.50%-5.00%
Post-Medicare 7.50%-5.00% 8.25%-4.75%
==================================================================
The transition obligation is being accrued through 2012. A one-percentage point
increase in the assumed health care cost trend rate for each future year would
have increased the 1996 current service and interest cost by approximately $3
million and the accumulated postretirement benefit obligation as of December 31,
1996, by about $26.2 million. The change in the discount rate from 7.25% at
December 31, 1995, to 7.5% at December 31, 1996, decreased the projected benefit
obligation by $6 million and is expected to decrease annual postretirement
benefit costs by $.5 million, beginning in 1997.
Due to different retail and wholesale regulatory rate requirements, Florida
Power began making quarterly contributions in 1995 to an irrevocable external
trust fund for wholesale ratemaking, while continuing to accrue postretirement
benefit costs to an unfunded reserve for retail ratemaking. Florida Power
contributed approximately $1.3 million in 1996 and $1.4 million in 1995 to the
trust fund.
NOTE 9 BUSINESS SEGMENTS
Florida Progress' principal business segments are utility and diversified
operations. The utility is engaged in the generation, purchase, transmission,
distribution and sale of electric energy. Electric Fuels' operations include
bulk commodities transportation, rail products and services and the mining,
procurement and transportation of coal to Florida Power and other unaffiliated
customers. Other diversified operations include ownership of a life insurance
subsidiary.
55
<PAGE>
<PAGE>
Florida Progress' business segment information for 1996, 1995 and 1994 is
summarized below. No single customer accounted for 10% or more of unaffiliated
revenues.
(In millions) 1996 1995 1994
Revenues:
Utility $2,393.6 $2,271.7 $2,080.5
Diversified:
Electric Fuels, combined:
Coal sales to electric utility 272.1 236.8 249.4
Sales to external customers 609.0 607.0 534.1
Other 155.3 129.1 110.7
------------------------------------------------------------------------------
3,430.0 3,244.6 2,974.7
Eliminations (272.1) (236.8) (249.4)
------------------------------------------------------------------------------
Revenues from external customers $3,157.9 $3,007.8 $2,725.3
==============================================================================
Income from operations:
Utility $ 468.5 $ 456.3 $ 419.5
Diversified:
Electric Fuels recurring, combined 61.4 52.1 41.6
Electric Fuels loss provision (40.9) - -
Other (6.6) .5 -
------------------------------------------------------------------------------
482.4 508.9 461.1
Interest and other expense 85.8 131.9 138.3
------------------------------------------------------------------------------
Income from continuing operations
before income taxes $ 396.6 $ 377.0 $ 322.8
==============================================================================
Identifiable assets:
Utility $4,263.7 $4,284.7 $4,284.0
Diversified:
Electric Fuels, combined 619.8 573.6 489.4
Other 464.9 692.1 679.7
------------------------------------------------------------------------------
$5,348.4 $5,550.4 $5,453.1
==============================================================================
Depreciation and amortization:
Utility $ 341.1 $ 329.7 $ 294.8
Diversified:
Electric Fuels, combined 23.5 21.2 19.7
Other 2.1 1.8 1.9
------------------------------------------------------------------------------
$ 366.7 $ 352.7 $ 316.4
==============================================================================
Capital additions:
Utility $ 222.9 $ 289.2 $ 327.2
Diversified:
Electric Fuels, combined 40.6 40.5 38.1
Other .5 1.7 1.5
------------------------------------------------------------------------------
$ 264.0 $ 331.4 $ 366.8
==============================================================================
In December 1996, Electric Fuels revised its assessment that low-sulfur
coal market prices were depressed temporarily. Electric Fuels decided to close
and dispose of its unprofitable coal operations and recorded a provision for
loss of $40.9 million, as shown above.
56<PAGE>
<PAGE>
NOTE 10 DISCONTINUED OPERATIONS
On November 21, 1996, Florida Progress' Board of Directors declared a spin-off
distribution to common shareholders of record on December 5, 1996, of the common
shares of Echelon International Corporation, which comprised Florida Progress'
lending, leasing and real estate operations. Common shares were distributed on
the basis of one share of Echelon common stock for every 15 shares of Florida
Progress' common stock.
In connection with the spin-off, Florida Progress has presented Echelon as a
discontinued operation in the accompanying Consolidated Statements of Income. As
of the date of the spin-off, the net assets of Echelon were $194.5 million. This
amount has been charged against Florida Progress' retained earnings in the
accompanying December 31, 1996 Consolidated Balance Sheet to reflect the
distribution of Echelon common shares on December 18, 1996. A summary of net
assets distributed is as follows:
(In millions)
------------------------------------------------------------------
Cash and equivalents $ 53.8
Assets held for sale 26.8
Leases and loans receivable, net 272.0
Property and equipment, net 126.0
Other assets 39.9
------------------------------------------------------------------
Total assets 518.5
Total liabilities (324.0)
------------------------------------------------------------------
Net assets distributed $ 194.5
==================================================================
Summarized income statement information relating to Echelon's results of
operations (as reported in discontinued operations) is as follows:
Year ended December 31,
(In millions) 1996 1995 1994
------------------------------------------------------------------------------
Sales and revenues $63.2 $50.0 $48.8
==============================================================================
Loss from operations (net of income tax) - - -
Provision for loss on
disposition of assets (net
of income tax benefits of $11.3) (18.0) - -
Spin-off transaction costs (net
of income tax benefits of $1.8) (8.3) - -
------------------------------------------------------------------------------
Total discontinued operations ($26.3) $ - $ -
==============================================================================
Fiscal year 1996 includes results of operations through December 18, 1996.
Results of operations include allocated interest expense of $8.7 million, $11.7
million and $12.4 million for 1996, 1995 and 1994, respectively.
NOTE 11 COMMITMENTS AND CONTINGENCIES
FUEL, COAL AND PURCHASED POWER COMMITMENTS - Florida Power has entered into
various long-term contracts to provide the fossil and nuclear fuel requirements
of its generating plants and to reserve pipeline capacity for natural gas. In
most cases, such contracts contain provisions for price escalation, minimum
purchase levels and other financial commitments. Estimated annual payments,
based on current market prices, for Florida Power's firm commitments for fuel
57
<PAGE>
<PAGE>
purchases and transportation costs, excluding delivered coal and purchased
power, are $8 million, $28 million, $36 million, $33 million and $29 million for
1997 through 2001, respectively, and $324 million in total thereafter.
Additional commitments will be required in the future to supply Florida Power's
fuel needs.
Electric Fuels has entered into several contracts with outside parties for the
purchase of coal. Electric Fuels also has entered into several operating leases,
and rental or royalty agreements, relating to transportation equipment and coal
procurement and processing. The annual obligations under these contracts and
leases, including transportation costs, are $278.6 million, $131.6 million,
$108.5 million, $77.3 million and $75.4 million for 1997 through 2001,
respectively, and $85.6 million in total thereafter. The total cost incurred for
these commitments was $221.4 million in 1996, $235.2 million in 1995 and $199.2
million in 1994.
Florida Power has long-term contracts for about 480 MW of purchased power with
other utilities, including a contract with Southern for approximately 400 MW of
purchased power annually through 2010. This represents 4.5% of Florida Power's
total current installed system capacity. Florida Power has an option to lower
these Southern purchases to approximately 200 MW annually, beginning in 2000,
with a three-year notice. The purchased power from Southern is supplied by
generating units with a capacity of approximately 3,500 MW and is guaranteed by
Southern's entire system, totaling more than 30,000 MW.
As of December 31, 1996, Florida Power had entered into purchased power
contracts with certain cogenerators for about 1,160 MW of capacity with
expiration dates ranging from 2002 to 2025. The purchased power contracts
provide for capacity and energy payments. Energy payments are based on the
actual power taken under these contracts. Capacity payments are subject to the
qualifying facilities meeting certain contract performance obligations. In most
cases, these contracts account for 100% of the generating capacity of each of
the facilities. Of the 1,160 MW under contract, 1,050 MW currently are available
to Florida Power. All commitments have been approved by the FPSC. Florida Power
does not plan to increase the level of purchased power currently under contract.
The FPSC allows the capacity payments to be recovered through a capacity cost
recovery clause, which is similar to, and works in conjunction with, energy
payments recovered through the fuel adjustment clause.
Florida Power incurred purchased power capacity costs totaling $284 million in
1996, $260.1 million in 1995 and $138.6 million in 1994. The following table
shows minimum expected future capacity payments for purchased power commitments.
Because the purchased power commitments have relatively long durations, the
total present value of these payments using a 10% discount rate also is
presented. These amounts assume that all units are brought into service as
contracted and meet contract performance requirements:
Purchased Power Capacity Payments
(In millions) Utilities Cogenerators Total
----------------------------------------------------------------
1997 $ 64 $ 233 $ 297
1998 63 245 308
1999 64 256 320
2000 36 270 306
2001 36 281 317
2002-2025 324 9,293 9,617
----------------------------------------------------------------
Total $587 $10,578 $11,165
================================================================
Total net present value $ 3,350
================================================================
58<PAGE>
<PAGE>
As part of Florida Power's strategy to mitigate its exposure to these expensive
cogeneration contracts, Florida Power has agreed, subject to FPSC approval, to
acquire a 220-MW cogeneration facility for $445 million.
The cogeneration purchased power contracts employ separate pricing methodologies
for capacity payments and energy payments. Four cogenerators filed suit against
Florida Power over the contract payment terms. Florida Power entered into
settlement agreements with three of the four cogenerators. One of those
agreements already has been finalized and litigation terminated. The other two
agreements are awaiting certain approvals from the FPSC and others before being
finalized. Management does not expect that the results of these legal actions
will have a material impact on Florida Power's financial position, operations or
liquidity.
Florida Power was threatened in late 1995 with litigation from another
cogeneration developer, which claimed interference involving an effort to obtain
a gas transportation contract with a third party. However, no legal action has
been taken by the developer.
UTILITY CONSTRUCTION PROGRAM - Substantial commitments have been made in
connection with Florida Power's construction program. In 1997, total
construction expenditures of $372 million are projected, primarily for electric
plant and nuclear fuel.
OFF-BALANCE SHEET RISK - Several of Florida Progress' subsidiaries are general
partners in unconsolidated partnerships and joint ventures. Florida Progress or
subsidiaries have agreed to support certain loan agreements of the partnerships
and joint ventures. These credit risks are not material to the financial
statements and Florida Progress considers these credit risks to be minimal,
based upon the asset values supporting the partnership liabilities.
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. Pursuant to a regulatory order,
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 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.
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
59
<PAGE>
<PAGE>
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 these hazardous waste sites.
Florida Power and former subsidiaries of Florida Progress, whose properties were
sold in prior years, have been identified by the EPA as PRPs at certain sites.
In addition to these designated sites, there are other sites where 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 that 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 $3.7 million to $5.4 million. It has reserved
$3.7 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 Progress' financial position,
results of operations or liquidity.
AGE DISCRIMINATION SUIT - Florida Power and Florida Progress have been served
with an age discrimination lawsuit involving 56 former Florida Power employees.
While no dollar amount was requested, each plaintiff seeks back pay,
reinstatement or front pay through their projected dates of normal retirement,
costs and attorneys' fees. In October 1996, the court approved an agreement
between parties to provisionally certify this case as a class action suit under
the Age Discrimination in Employment Act. A notice was sent to eligible former
employees informing them of their right to become a party to this provisional
class action within 90 days. Estimates of the potential liability associated
with this lawsuit cannot be determined until the size of the potential class has
been determined.
60<PAGE>
<PAGE>
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
(Unaudited)
Three Months Ended
(In millions, except per share amounts) March 31 June 30 September 30 December 31
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
OPERATING RESULTS
Revenues from continuing operations $ 730.4 $ 773.6 $ 879.0 $ 774.9
Income from continuing operations 48.3 58.7 98.1 45.6
Loss from discontinued operations - (25.0) - (1.3)
Net income 48.3 33.7 98.1 44.3
DATA PER SHARE
Earnings:
Continuing operations .50 .61 1.01 .47
Discontinued operations - (.26) - (.01)
Consolidated .50 .35 1.01 .46
Dividends per common share .515 .515 .515 .515
Common stock price per share:
High 36 3/8 34 3/4 35 1/8 34 1/2
Low 33 32 1/2 33 1/2 31 5/8
--------------------------------------------------------------------------------------------------------------
1995
OPERATING RESULTS
Revenues from continuing operations $ 693.0 $ 731.3 $ 852.4 $ 731.1
Income from continuing operations 46.6 55.2 91.1 46.0
Income (loss) from discontinued operations - - - -
Net income 46.6 55.2 91.1 46.0
DATA PER SHARE
Earnings:
Continuing operations .49 .58 .95 .48
Discontinued operations - - - -
Consolidated .49 .58 .95 .48
Dividends per common share .505 .505 .505 .505
Common stock price per share:
High 32 5/8 32 3/8 32 1/2 35 3/4
Low 29 3/8 29 1/2 29 3/4 32 3/8
--------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
(Unaudited)
-------------------------------------------------------------------------------------------------------------
Three Months Ended
(In millions) March 31 June 30 September 30 December 31
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Operating revenues $547.3 $588.7 $694.7 $562.9
Net income $45.2 $56.0 $93.9 $43.3
Earnings on common stock $42.9 $53.9 $93.1 $42.7
1995
Operating revenues $515.9 $550.5 $671.8 $533.5
Net income $43.3 $53.0 $87.1 $43.6
Earnings on common stock $40.8 $50.6 $84.7 $41.2
</TABLE>
The business of Florida Power is seasonal in nature and comparisons of
earnings for the quarters do not give a true indication of overall trends and
changes in operations. The divestiture of Echelon is reflected in the loss from
discontinued operations.
61<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
FLORIDA PROGRESS
Information concerning the Directors of Florida Progress is included under the
headings "Information as to Nominees" and "Information as to Continuing
Directors" in Florida Progress' Proxy Statement and is incorporated herein by
reference. Information concerning the executive officers of Florida Progress is
set forth in Part I, Item 1 hereof under the heading "Executive Officers". With
respect to compliance by Florida Progress' directors and officers, and persons
who own more than 10% of Florida Progress' common stock, with the reporting
requirements of Section 16(a) of the Securities Act of 1934, there were no
reporting delinquencies.
FLORIDA POWER
DIRECTORS
R. Mark Bostick, Age 42, Director since 1992.
Member - Executive Committee, Compliance Committee.
Since January 1989, Mr. Bostick's principal occupation has been President of
COMCAR Industries, Inc., a privately held, diversified transportation company.
Mr. Bostick is a director of NationsBank, N.A. South.
Jack B. Critchfield, Age 63, Director 1975-1978 and since 1988.
Member - Executive Committee.
Information concerning Dr. Critchfield is set forth in Part I, Item 1 hereof
under the heading "Executive Officers."
Allen J. Keesler, Jr., Age 58, Director since 1988.
In April of 1996, Mr. Keesler retired as Group Vice President, Utility Group of
Florida Progress, and President and Chief Executive Officer of Florida Power,
positions he held since 1988. He is currently President and Chief Executive
Officer of E. R. Jahna Industries, Inc., a management consulting company. He
serves as director of SouthTrust Corporation and Cameron-Ashley Building
Products, Inc.
Richard Korpan, Age 55, Director since 1989. Chairman - Executive Committee
effective April 1, 1996.
Information concerning Mr. Korpan is set forth in Part I, Item 1 hereof under
the heading "Executive Officers".
Frank C. Logan, Age 61, Director since 1994.
Member - Executive Committee, Chairman - Compliance Committee.
Mr. Logan has practiced law since 1962, primarily in the areas of estate
planning, probate, corporate and business law. Since September 1994, Mr. Logan
has been a partner in the law firm of Harris, Barrett, Mann & Dew, Clearwater,
Florida. Previously, he was with the Clearwater firm of McMullen, Everett,
Logan, Marquardt & Cline which became MacFarlane, Ausley, Ferguson & McMullen
after a 1993 merger with a Tampa firm.
62
<PAGE>
<PAGE>
Clarence V. McKee, Esquire, Age 54, Director since 1988.
Mr. McKee's principal occupation is Chairman and Chief Executive Officer of
McKee Communications, Inc., Tampa, Florida, a firm involved in the acquisition
and management of television and radio stations. He served as Counsel to Pepper
& Corazinni, a Washington, D.C. communications law firm, from 1980 until 1987
when he became a co-owner of WTVT Holdings, Inc., where he held the position of
Chairman and Chief Executive Officer until 1992. He is a director of Barnett
Banks, Inc., American Heritage Life Insurance Company, and Checkers Drive In
Restaurants, Inc.
Joseph H. Richardson, Age 47, Director since 1996.
Member - Executive Committee.
Information concerning Mr. Richardson is set forth in Part I, Item 1 hereof
under the heading "Executive Officers."
Joan D. Ruffier, Age 57, Director since 1991.
Ms. Ruffier's principal occupation for more than five years has been as general
partner of Sunshine Cafes, Ltd., Orlando, Florida, a food and beverage
concession business at major Florida airports. Previously, she practiced public
accounting with the firm of Colley, Trumbower & Howell. She also serves on the
boards of directors of Cyprus Equity Fund and INVEST, Inc.
Jean Giles Wittner, Age 62, Director since 1977.
Mrs. Wittner's principal occupation is President of Wittner & Co., Wittner
Securities, Inc., and Wittner & Associates, Inc., St. Petersburg, Florida, firms
involved in real estate management, insurance brokerage and consulting,
positions she has held for more than five years. She previously served as
President and Chief Executive Officer of a savings association until it was sold
in 1986. She serves on the board of Raymond James Bank, F.S.B.
All of the directors except Mr. Bostick, Mr. Logan, Mr. Keesler and Mr.
Richardson are directors of Florida Progress. Each director holds office until
the next Annual Meeting of Shareholders and until the election and qualification
of a successor.
EXECUTIVE OFFICERS
Information concerning the executive officers of Florida Power is set forth in
Part I, Item 1 hereof under the heading "Executive Officers" and is incorporated
herein by reference.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of the copies of Section 16(a) forms furnished to
Florida Power during 1996, or written representations that no forms were
required, Florida Power believes that all persons who at any time during 1996
were officers, directors or greater than 10% beneficial owners of Florida
Power's preferred stock, filed their applicable Section 16(a) reports on a
timely basis during 1996 and prior fiscal years, except that Florida Power's
Vice Presidents, Janice B. Case and Michael B. Foley, Jr., failed to timely file
a Form 3 within 10 days of becoming an executive officer. Both of these forms
were filed 27 days after they became executive officers.
63<PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
FLORIDA PROGRESS
The information under the headings "Compensation of Directors", "Compensation
Committee Interlocks and Insider Participation", "Executive Compensation",
"Pension Plan Table" and "Employment Contracts" in Florida Progress' Proxy
Statement is incorporated herein by reference.
FLORIDA POWER
COMPENSATION OF DIRECTORS
For 1996, compensation for all directors of Florida Power (excluding employees
of Florida Progress or subsidiaries) was $1,500 for attendance at each meeting
of the Florida Power Board of Directors. Messrs. Bostick and Logan, and
effective April 1, 1996, Mr. Keesler received $20,000 per year as a retainer fee
and a meeting fee of $750 for attendance at each committee meeting.
The foregoing retainer fees were paid in accordance with the terms of the Stock
Plan for Non-Employee Directors of Florida Progress and Subsidiaries as approved
by the shareholders of Florida Progress at the 1996 Annual Meeting of
Shareholders. As approved, 75% of the directors' retainer fees was paid in
Florida Progress common stock. Only the cash portion of directors' compensation
is allowed to be deferred.
[THIS SPACE INTENTIONALLY BLANK]
64<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
The following table contains information with respect to compensation awarded,
earned or paid during the years 1994-1996 to (i) each person who served as the
Chief Executive Officer, and (ii) the other four most highly compensated
executive officers of Florida Power (collectively the "Named Executive
Officers") in 1996, whose total remuneration paid in 1996 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation(1) ------------
Name and Principal ------------------------- LTIP All Other
Position Year Salary Bonus Payouts(2) Compensation(3)
-------------------------- ----- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
ALLEN J. KEESLER, JR. (4) 1996 $155,386 $ 81,500 $207,802(5) $245,304(6)
Former President and 1995 397,848 240,000 260,419 16,785
Chief Executive Officer 1994 383,011 172,500 178,904 15,837
RICHARD KORPAN 1996 $535,610 $333,500 $339,107(5) $ 18,900
Chairman and Chief 1995 440,003 257,000 284,109 19,800
Executive Officer 1994 432,311 232,500 206,455 18,060
JOSEPH H. RICHARDSON 1996 $288,884 $214,000 $128,858(5) $ 16,585(7)
President and Chief 1995 215,009 113,000 110,473 8,835
Operating Officer 1994 212,122 88,500 81,326 4,226
JEFFREY R. HEINICKA 1996 $258,456 $169,000 $113,139(5) $ 8,595
Senior Vice President and 1995 211,200 100,000 N/A 8,325
Chief Financial Officer 1994 174,723 76,000 N/A 7,943
KENNETH E. ARMSTRONG 1996 $212,785 $144,500 $101,748(5) $ 8,010
Vice President and 1995 197,995 77,000 N/A 8,910
General Counsel 1994 196,459 70,000 N/A 8,436
JOHN A. HANCOCK 1996 $217,385 $115,000 $130,787(5) $ 8,400
Senior Vice President, 1995 199,992 105,000 109,974 8,550
Energy Supply 1994 197,088 72,500 74,786 8,700
(1) All other annual compensation paid to the Named Executive Officers
during 1996, other than salary and annual incentive compensation,
does not exceed the minimum amounts required to be reported
pursuant to SEC rules.
(2) Unless otherwise noted, the number of shares of restricted Common
Stock held by Named Executive Officers as of December 31, 1996 as a
result of awards earned under the 1992-1994 and 1993-1995
performance cycles and the value of such shares as of that date, is
as follows: Allen J. Keesler, Jr. 5,876 shares, $189,501; Richard
Korpan 6,527 shares, $210,496; Joseph H. Richardson 2,548 shares,
$82,173; Jeffrey R. Heinicka -0-; Kenneth E. Armstrong -0-; and
John A. Hancock 2,473 shares, $79,754.
(3) Represents contributions to the Savings Plan of Florida Progress
and/or the Executive Optional Deferred Compensation Plan on behalf
of the Chief Executive Officer and the Named Executive Officers.
(4) Allen J. Keesler, Jr. retired as President and Chief Executive
Officer of Florida Power on April 1, 1996.
65<PAGE>
<PAGE>
(5) Represents the dollar value as of the date of award, of shares of
Common Stock of Florida Progress earned under the 1994-1996
performance cycle ("Cycle IV") of the LTIP, two-thirds of which are
restricted except that none of the shares awarded Allen J. Keesler,
Jr. are restricted. The total number of shares earned are as
follows: Allen J. Keesler, Jr. 6,898 shares; Richard Korpan 10,895
shares; Joseph H. Richardson 4,140 shares; Jeffrey R. Heinicka
3,635 shares; Kenneth E. Armstrong 3,269 shares; and John A.
Hancock 4,202 shares. The vesting schedule for the restricted stock
is 50% on January 1, 1998 and 50% on January 1, 1999. Dividends are
payable on the restricted Common Stock to the extent and on the
same date as dividends are paid on all other shares of Florida
Progress Common Stock. In the event of a change in control of
Florida Progress, all restrictions on all shares of restricted
stock lapse.
The payouts listed for Richard Korpan, Joseph H. Richardson,
Jeffrey R. Heinicka and Kenneth E. Armstrong are the result of (i)
the Florida Progress Compensation Committee's determination that
the results exceeded the Cycle IV goals, after taking into account
the exclusion of a provision for loss on coal properties for
Electric Fuels' return-on- equity, (ii) the application of a
mathematical formula converting the goal level achieved into the
number of performance shares earned and (iii) adding dividend
equivalents on shares earned for the period of the performance
cycle.
(6) Represents $4,712 in Company Contributions to the Savings Plan of
Florida Progress and/or the Executive Optional Deferred
Compensation Plan and $240,592 in Nondiscrimination Plan and
Supplemental Executive Retirement Plan payments.
(7) Represents $8,835 in Company Contributions to the Savings Plan of
Florida Progress and/or the Executive Optional Deferred
Compensation Plan and $7,750 of director fees for services as a
director of Echelon, a former subsidiary of Florida Progress.
</TABLE>
The following table contains information with respect to Performance Shares
granted in 1996 to each of the Named Executive Officers of Florida Power for the
1996-1998 performance cycle of the LTIP:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN(1)
AWARDS IN 1996
Number of Performance Estimated Payout in Shares at End of Period(3)
Performance Period ---------------------------------------------
Name Shares(2) Covered Threshold Target Maximum
---------------------- ---------- --------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Allen J. Keesler, Jr. 0 1996-1998 0 0 0
Richard Korpan 7,719 1996-1998 3,860 7,719 11,579
Joseph H. Richardson 4,211 1996-1998 2,106 4,211 6,317
Jeffrey R. Heinicka 2,975 1996-1998 1,488 2,975 4,463
Kenneth E. Armstrong 2,414 1996-1998 1,207 2,414 3,621
John A. Hancock 2,470 1996-1998 1,235 2,470 3,705
(1) The LTIP is a Common Stock based incentive plan to reward participants for
long-term growth and performance of Florida Progress. It was approved by
the Florida Progress shareholders in 1990.
66<PAGE>
(2) Performance shares granted under the LTIP which, upon achievement of
performance criteria established by the Compensation Committee of the Board
of Directors of Florida Progress, would result in the payout of shares of
Florida Progress Common Stock, two-thirds of which would be restricted for
periods of time. Payouts of shares of Florida Progress Common Stock are
made for achieving financial goals equal to or exceeding the thresholds
established by the Compensation Committee. In the event of a change in
control of Florida Progress, 150% of all performance shares granted
under the LTIP and then outstanding would automatically be considered
earned and would be paid in shares of unrestricted Florida Progress
Common Stock together with shares of unrestricted Florida Progress
Common Stock payable for dividend equivalents accrued to the change in
control on performance shares awarded for performance cycles starting
after December 31, 1992. Also, all restrictions on shares of restricted
Florida Progress Common Stock previously awarded and then held would
lapse.
(3) Grants of performance shares are earned upon achievement of Florida
Progress and/or subsidiary financial goals for the three-year
performance cycle.
</TABLE>
Pension Plan Table
The table below illustrates the estimated annual benefits (computed as a
straight life annuity beginning at retirement at age 65) payable under the
Florida Progress Corporation Retirement Plan and Nondiscrimination Plan for
specified final average compensation and years of service levels. As explained
below, the table also provides information about the estimated lifetime annual
benefits payable under the Florida Progress Corporation Supplemental Executive
Retirement Plan ("SERP").
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefits Payable Under
the Retirement Plan and Nondiscrimination Plan
--------------------------------------------------
Average Annual
Compensation Service Years
---------------------------------------------------------------------------------------------------------
5 10 15 20 25 30 35 or more
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 18,000 $ 36,000 $ 54,000 $ 72,000 $ 90,000 $108,000 $126,000
300,000 27,000 54,000 81,000 108,000 135,000 162,000 189,000
400,000 36,000 72,000 108,000 144,000 180,000 216,000 252,000
500,000 45,000 90,000 135,000 180,000 225,000 270,000 315,000
600,000 54,000 108,000 162,000 216,000 270,000 324,000 378,000
700,000 63,000 126,000 189,000 252,000 315,000 378,000 441,000
800,000 72,000 144,000 216,000 288,000 360,000 432,000 504,000
900,000 81,000 162,000 243,000 324,000 405,000 486,000 567,000
1,000,000 90,000 180,000 270,000 360,000 450,000 540,000 630,000
1,100,000 99,000 198,000 297,000 396,000 495,000 594,000 693,000
</TABLE>
Under the Retirement Plan and the Nondiscrimination Plan, the compensation taken
into account in calculating benefits is salary only. The years of credited
service that would be used in calculating benefits under the Retirement Plan and
the Nondiscrimination Plan for the Named Executive Officers in the summary
compensation table are as follows: Mr. Keesler, 33 years of service; Mr. Korpan,
8 years of service; Mr. Richardson, 21 years of service; Mr. Heinicka, 19 years
of service; Mr. Armstrong, 10 years of service and Mr. Hancock, 30 years of
service. The benefits under the Retirement Plan and the Nondiscrimination Plan
are subject to offset by an amount equal to 1 1/7% of a participant's primary
Social Security benefit for each year of service (with a maximum offset of 40%).
67<PAGE>
<PAGE>
The Named Executive Officers are also entitled to benefits under the SERP. These
benefits are offset by the benefits payable under the Retirement Plan and the
Nondiscrimination Plan, as well as 100% of the executive's primary Social
Security benefit. The estimated annual SERP benefit for the Named Executive
Officers (prior to any offsets) may be determined using the table set forth
above for the Retirement Plan and the Nondiscrimination Plan. For these
purposes, the current compensation for each executive that would be used in
calculating benefits under the SERP is substantially the same as that reported
as salary and bonus in the summary compensation table, and the number of years
of deemed credited service that would be used in calculating benefits under the
SERP for each such executive is as follows: Mr. Korpan 35 years of service; Mr.
Richardson 21 years of service; Mr. Heinicka, 19 years of service; Mr.
Armstrong, 15 years of service; and Mr. Hancock, 30 years of service.
Accrued benefits may also be paid under each of the Retirement Plan,
Nondiscrimination Plan and the SERP if a participant terminates employment
before age 65 and meets the requirements for early retirement, disability, death
or other termination of employment benefits after becoming vested under the
rules of the particular plan.
The SERP also provides for a lump sum benefit payable in the event of a change
in control. In most instances, this benefit is equal to the sum of (i) two times
the executive's current annual salary and bonus, (ii) the value of the
executive's prospective award under the SERP if he were to continue to work
until age 65 (including amounts that later would have been payable to any
surviving spouse) and (iii) the amount of any federal excise taxes (and income
taxes on any reimbursement under this provision) imposed on the executive under
Section 4999 of the Internal Revenue Code with respect to all compensation plans
and arrangements of Florida Progress.
Mr. Keesler retired effective April 1, 1996, pursuant to the "special early
retirement" provisions of the SERP which are separate and in lieu of those
mentioned above. Under this arrangement, Mr. Keesler receives until age 62, an
annual retirement benefit of $368,753. After age 62, the annual benefit will be
reduced by $11,856, the amount of his annual Social Security benefit. After his
death, his spouse will receive an annual survivor benefit of $254,931.
Approximately 62% of the benefits are payable pursuant to the SERP, with the
balance payable under the Retirement and Nondiscrimination Plans. Florida
Progress also pays 95% of his medical insurance premiums and 71% of his
spouse's.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
FLORIDA PROGRESS
The information included under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" in Florida Progress'
Proxy Statement is incorporated herein by reference.
FLORIDA POWER
All of Florida Power's common stock is held beneficially and of record by
Florida Progress. None of Florida Power's directors or executive officers owns
any shares of Florida Power's common or preferred stock. Information concerning
shares of Florida Progress common stock that are held by persons known to
Florida Progress to be the beneficial owners of more than 5% of Florida
Progress' common stock is set forth in the table under the heading "Security
Ownership of Certain Beneficial Owners" in the Florida Progress Proxy Statement
and is incorporated herein by reference.
68
<PAGE>
<PAGE>
The table below sets forth as of December 31, 1996, the number of shares of
common stock of Florida Progress owned by Florida Power's directors, Chief
Executive Officer and Named Executive Officers individually and the directors
and executive officers of Florida Power as a group.
Florida Power Number of Shares Percent of
Officer or Director Name Beneficially Owned (1) Class (2)
- ------------------------ ---------------------- ----------
R. M. Bostick 654
Jack B. Critchfield 38,377
Allen J. Keesler, Jr. 41,779
Richard Korpan 17,339
Frank C. Logan 1,754
Clarence V. McKee 2,436
Joan D. Ruffier 3,750
Jean Giles Wittner 9,444
Kenneth E. Armstrong 2,335
Joseph H. Richardson 10,062
Jeffrey R. Heinicka 2,339
John A. Hancock 19,184
All 15 directors, Named
Executive Officers and executive
officers as a group, including
those named above 162,517 .17
(1) As used in this table, "beneficial ownership" means the direct or indirect,
sole or shared power to vote, or to direct the voting of, a security and/or
investment power with respect to a security.
(2) Unless otherwise noted, less than 1% per individual.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FLORIDA PROGRESS
The information included under the heading "Certain Relationships and Related
Transactions" in Florida Progress' Proxy Statement is incorporated herein by
reference.
FLORIDA POWER
With respect to Florida Power, there are no relationships or related
transactions required to be reported under this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FOR FLORIDA PROGRESS AND FLORIDA POWER
(a) 1. Financial Statements, notes to Financial Statements and report
thereon of KPMG Peat Marwick LLP are found in Item 8 "Financial
Statements and Supplementary Data", herein.
2. The following Financial Statement Schedules and
reports are included herein:
Florida Progress
II-Valuation and Qualifying Accounts
for the years ended December 31,
1996, 1995 and 1994
69<PAGE>
<PAGE>
Florida Power
II-Valuation and Qualifying Accounts
for the years ended December 31,
1996, 1995 and 1994
All other schedules are not submitted because they are not
applicable or not required or because the required information is
included in the financial statements or notes thereto.
3. Exhibits filed herewith:
Florida Florida
Number Exhibit Progress Power
------ ------- -------- -------
4.(a) Amendment to Shareholder Rights
Agreement dated February 20, 1997,
between Florida Progress and The First
National Bank of Boston. X
4.(b) Form of Certificate representing shares of
Florida Progress Common Stock. X
10.(a) Management Incentive Compensation Plan X X
of Florida Progress Corporation, as amended
to date.*
10.(b) Florida Progress Supplemental Executive X X
Retirement Plan.*
10.(c) Executive Optional Deferred Compensation
Plan.* X X
12 Statement of Computation of Ratios. X
21 Subsidiaries of Florida Progress. X
23.(a) Consent of Independent Certified Public X
Accountants to the incorporation by reference
of their report on the financial statements
into the following registration statements of
Florida Progress: Form S-3 (No. 33-51573)
(relating to the registration of 4.5 million
shares of common stock and filed with the SEC
on December 17, 1993); Form S-8 (Nos. 33-53939
and 333-19037)(relating to the Savings Plan for
Employees of Florida Progress and filed with the
SEC on June 1, 1994 and December 31, 1996,
respectively); Form S-3 (Nos. 33-45044 and
333-07853) (relating to the Progress Plus Plan
and filed with the SEC on January 13, 1992 and
July 10, 1996, respectively); Form S-8 (No.
33-47623) (relating to Florida Progress'
Long-Term Incentive Plan and filed with the SEC
on May 1, 1992); Form S-8 (No. 33-39153) (also
relating to the Long-Term Incentive Plan and
filed with the SEC on February 26, 1991); Form
S-3 (No. 2-93111)(relating to the acquisition
of Better Business Forms and filed with the SEC
on September 5, 1984; Form S-3 (No. 33-56873)
(relating to the resale of shares by the former
shareholders of F.M. Industries, Inc. ("FMI")
and filed with the SEC on December 15, 1994); and
Form S-3 (No. 333-00547) (also relating to the
resale of shares held by the FMI shareholders
and filed with the SEC on January 30, 1996).
70<PAGE>
<PAGE>
23.(b) Consent of Independent Certified Public X
Accountants to the incorporation by reference
of their report on the financial statements
into Florida Power's registration statements
on Form S-3 (No. 33-62210 and 33-55273)(relating
to Florida Power's first mortgage bond shelf)
and Form S-3 (Nos. 33-50908 and 333-02549)
(relating to Florida Power's medium-term note
shelf).
27.(a) Florida Progress Financial Data Schedule X
27.(b) Florida Power Financial Data Schedule X
4. Exhibits incorporated herein by reference:
Florida Florida
Number Exhibit Progress Power
------ ------- -------- -------
3.(a) Bylaws of Florida Progress, as amended to X
date. (Filed as Exhibit 3(a) to the Florida
Progress Form 10-K for the year ended
December 31, 1995, as filed with the SEC on
March 20, 1996.)
3.(b) Bylaws of Florida Power, as amended to date. X
(Filed as Exhibit 3.(b) to the Florida Power
Form 10-K for the year ended December 31, 1995,
as filed with the SEC on March 20, 1996.)
3.(c) Restated Articles of Incorporation, as amended, X
of Florida Progress. (Filed as Exhibit 3(a) to
Florida Progress' Form 10-K for the year ended
December 31, 1991, as filed with the SEC on
March 30, 1992.)
3.(d) Amended Articles of Incorporation, as amended, X X
of Florida Power. (Filed as Exhibit 3(a) to the
Florida Power Form 10-K for the year ended
December 31, 1991, as filed with the SEC
(File No. 1-3274) on March 30, 1992).
4.(c) Rights Agreement, dated as of November 21, X
1991, between Florida Progress and
Manufacturers Hanover Trust Company,
including as Exhibit A the form of Rights
Certificate. (Filed as Exhibit 4(a) to
Florida Progress' Form 8-K dated November
21, 1991, as filed with the SEC on November
27, 1991).
4.(d) Indenture, dated as of January 1, 1944 (the X X
"Indenture"), between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees. (Filed as Exhibit B-18 to Florida
Power's Registration Statement on Form A-2
(No. 2-5293) filed with the SEC on January
24, 1944).
71<PAGE>
<PAGE>
4.(e) Seventh Supplemental Indenture, dated as of X X
July 1, 1956, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(b) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(f) Eighth Supplemental Indenture, dated as of X X
July 1, 1958, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(c) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(g) Sixteenth Supplemental Indenture, dated as of X X
February 1, 1970, between Florida Power and
Morgan Guaranty Trust Company of New York and
The Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(d) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(h) Twenty-Ninth Supplemental Indenture, dated as X X
of September 1, 1982, between Florida Power
and Morgan Guaranty Trust Company of New York
and Florida National Bank, as Trustees, with
reference to the modification and amendment
of the Indenture. (Filed as Exhibit 4(c) to
Florida Power's Registration Statement on
Form S-3 (No. 2-79832) filed with the SEC on
September 17, 1982).
4.(i) Thirty-Eighth Supplemental Indenture dated as X X
of July 25, 1994, between Florida Power and
First Chicago Trust Company of New York, as
successor Trustee, Morgan Guaranty Trust
Company of New York, as resigning Trustee,
and First Union National Bank of Florida, as
resigning Co-Trustee, with reference to
confirmation of First Chicago Trust Company
of New York as successor Trustee under the
Indenture. (Filed as exhibit 4.(f) to Florida
Power's Registration Statement on Form S-3
(No. 33-55273) as filed with the SEC on August
29, 1994.)
10.(d) Second Amended and Restated Guaranty and X
Support Agreement dated as of August 7, 1996.
(Filed as Exhibit 4 to Florida Progress' Form
10-Q for the quarter ended June 30, 1996).
10.(e) Florida Progress Corporation Long-Term X X
Incentive Plan, approved by Florida Progress'
Shareholders on April 19, 1990. (Filed as
Exhibit 10(d) to Florida Progress' Form 10-Q
for the quarter ended March 31, 1990, as
filed with the SEC on May 14, 1990). *
72<PAGE>
<PAGE>
10.(f) Stock Plan for Non-Employee Directors of X X
Florida Progress Corporation and Subsidiaries.
(Filed as Exhibit 4.(k) to the Florida Progress
Registration Statement on Form S-8 (No. 333-
02619) as filed with the SEC on April 18, 1996.)*
X = Exhibit is filed for that respective company.
* = Exhibit constitutes an executive compensation plan or arrangement.
In reliance upon Item 601(b)(4)(iii) of Regulation S-K, certain instruments
defining the rights of holders of long-term debt of Florida Progress and its
consolidated subsidiaries are not being filed herewith, because the total amount
authorized thereunder does not exceed 10% of the total assets of Florida
Progress and its subsidiaries on a consolidated basis. Florida Progress hereby
agrees to furnish a copy of any such instruments to the SEC upon request.
(b) Reports on Form 8-K:
During the fourth quarter of the year ended December 31, 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 CR3 maintenance outage.
Form 8-K dated November 21, 1996, reporting under
Item 5 "Other Events" a press release announcing the
approval of the spin-off of Echelon to shareholders.
Florida Progress also issued an investor news release
dated November 22, 1996 updating Florida Power's
CR3 outage.
Form 8-K dated December 5, 1996, reporting under Item
5 "Other Events" an investor news release to provide
an update regarding Florida Power's CR3, and another
investor news release dated December 12, 1996
announcing several strategic decisions regarding
Florida Progress' diversified businesses.
Form 8-K dated December 18, 1996, reporting under
Item 5 "Other Events" a news release announcing the
spin-off of Echelon.
In addition, Florida Progress and Florida Power filed the
following reports on Form 8-K subsequent to the fourth quarter
of 1996:
Form 8-K dated January 7, 1997, reporting under Item
5 "Other Events" a press release dated January 7,
1997 announcing the replacements in top nuclear
positions at Florida Power, and an investor news
release dated January 14, 1997 relating to CR3.
Florida Power also issued another news release dated
January 14, 1997 regarding its request to recover
higher fuel costs.
73<PAGE>
<PAGE>
Form 8-K dated January 23, 1997, reporting under Item
5 "Other Events" a news release and related Investor
News report reporting the signing of an agreement to
acquire the Tiger Bay Cogeneration facility. Florida
Progress also issued a news release reporting 1996
earnings.
Form 8-K dated January 29, 1997, reporting under Item
5 "Other Events" a news release reporting Florida
Power's CR3 being added to NRC watch list. Florida
Progress also issued an investor news release dated
January 29, 1997 relating to CR3.
Form 8-K dated February 20, 1997, reporting under
Item 5 "Other Events" the approval by the board of a
dividend increase and the approval by the FPSC of an
increase in Florida Power's fuel costs.
[THIS SPACE INTENTIONALLY BLANK]
74<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 27, 1997 By: /s/ Jack B. Critchfield
----------------------------
Jack B. Critchfield,
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Jack B. Critchfield Chairman of the Board, March 27, 1997
----------------------------- Chief Executive Officer
Jack B. Critchfield and Director
Principal Executive Officer
/s/ Jeffrey R. Heinicka Senior Vice President and March 27, 1997
----------------------------- Chief Financial Officer
Jeffrey R. Heinicka
Principal Financial Officer
/s/ John Scardino, Jr. Vice President and March 27, 1997
----------------------------- Controller
John Scardino, Jr.
Principal Accounting Officer
/s/ Willard D. Frederick, Jr. Director March 27, 1997
-----------------------------
Willard D. Frederick, Jr.
/s/ Michael P. Graney Director March 27, 1997
-----------------------------
Michael P. Graney
/s/ Richard Korpan Director March 27, 1997
-----------------------------
Richard Korpan
(Continued)
75
<PAGE>
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Clarence V. McKee Director March 27, 1997
-----------------------------
Clarence V. McKee
/s/ Vincent J. Naimoli Director March 27, 1997
-----------------------------
Vincent J. Naimoli
/s/ Richard A. Nunis Director March 27, 1997
-----------------------------
Richard A. Nunis
/s/ Charles B. Reed Director March 27, 1997
-----------------------------
Charles B. Reed
/s/ Joan D. Ruffier Director March 27, 1997
-----------------------------
Joan D. Ruffier
/s/ Robert T. Stuart, Jr. Director March 27, 1997
-----------------------------
Robert T. Stuart, Jr.
/s/ Jean Giles Wittner Director March 27, 1997
-----------------------------
Jean Giles Wittner
76
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 POWER CORPORATION
March 27, 1997 By: /s/ Joseph H. Richardson
---------------------------------
Joseph H. Richardson, President
and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Richard Korpan Chairman of the Board, March 27, 1997
------------------------- Chief Executive Officer
Richard Korpan and Director
/s/ Jeffrey R. Heinicka Senior Vice President March 27, 1997
------------------------- and
Jeffrey R. Heinicka Chief Financial Officer
Principal Financial Officer
/s/ John Scardino, Jr. Vice President March 27, 1997
------------------------- and Controller
John Scardino, Jr.
Principal Accounting Officer
/s/ R. Mark Bostick Director March 27, 1997
-------------------------
R. Mark Bostick
/s/ Jack B. Critchfield Director March 27, 1997
--------------------------
Jack B. Critchfield
/s/ Allen J. Keesler, Jr. Director March 27, 1997
-------------------------
Allen J. Keesler, Jr.
(Continued)
77
<PAGE>
<PAGE>
/s/ Frank C. Logan Director March 27, 1997
-------------------------
Frank C. Logan
/s/ Clarence V. McKee Director March 27, 1997
-------------------------
Clarence V. McKee
/s/ Joseph H. Richardson Director March 27, 1997
--------------------------
Joseph H. Richardson
/s/ Joan D. Ruffier Director March 27, 1997
-------------------------
Joan D. Ruffier
/s/ Jean Giles Wittner Director March 27, 1997
-------------------------
Jean Giles Wittner
78
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Schedule II
FLORIDA PROGRESS CORPORATION
Valuation and Qualifying Accounts
For the Years Ended December 31, 1996, 1995, and 1994
(In millions)
Balance at Additions Balance at
Beginning Charged to Other End of
Description of Period Expense Deductions Add (Ded) Period
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996
Nuclear Refueling Outage Reserve $14.7 $17.4 $23.4 $ - $8.7
======= ======= ======= ======= =======
Insurance policy benefit reserves $265.0 $60.3 $ - $ - $325.3
======= ======= ======= ======= =======
Reserve for mine closure/reclamation $0.0 $40.9 $ - $ - $40.9
======= ======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1995
Nuclear Refueling Outage Reserve $6.4 $12.7 $4.4 $ - $14.7
======= ======= ======= ======= =======
Insurance policy benefit reserves $222.5 $42.5 $ - $ - $265.0
======= ======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1994
Nuclear Refueling Outage Reserve $11.5 $12.6 $17.7 $ - $6.4
======= ======= ======= ======= =======
Insurance policy benefit reserves $186.5 $36.0 $ - $ - $222.5
======= ======= ======= ======= =======
</TABLE>
79
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Schedule II
FLORIDA POWER CORPORATION
Valuation and Qualifying Accounts
For the Years Ended December 31, 1996, 1995, and 1994
(In millions)
Balance at Additions Balance at
Beginning Charged to Deductions End of
Description of Period Expense (See Note) Period
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996
1996 Nuclear Refueling Outage Reserve (#10) $14.7 $9.2 $23.4 $0.5
1998 Nuclear Refueling Outage Reserve (#11) $0.0 $8.2 $0.0 $8.2
------- ------- ------- -------
$14.7 $17.4 $23.4 $8.7
======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1995
1996 Nuclear Refueling Outage Reserve (#10) $6.4 $12.7 $4.4 14.7
------- ------- ------- -------
$6.4 $12.7 $4.4 $14.7
======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1994
1993 Nuclear Midcycle Outage Reserve (#9) ($0.7) $0.7 $0.0 $0.0
1994 Nuclear Refueling Outage Reserve (#9) 12.2 5.5 17.7 0.0
1996 Nuclear Refueling Outage Reserve (#10) 0.0 6.4 0.0 6.4
------- ------- ------- -------
$11.5 $12.6 $17.7 $6.4
======= ======= ======= =======
Note: Deductions are payments of actual expenditures related to the outage.
</TABLE>
80
<PAGE>
EXHIBIT 4.(a)
AMENDMENT TO SHAREHOLDER RIGHTS AGREEMENT
THIS AMENDMENT TO SHAREHOLDER RIGHTS AGREEMENT (this "Amendment") is
made and entered into this 20th day of February, 1997, effective for all
purposes as of the 6th day of December, 1996 by and between FLORIDA PROGRESS
CORPORATION, a Florida corporation (the "Company") and THE FIRST NATIONAL BANK
OF BOSTON (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, Florida Progress Corporation (the "Company"), a Florida
corporation, and Manufacturers Hanover Trust Company ("Manufacturers"), a New
York Corporation, previously entered into that certain Shareholder Rights
Agreement dated November 21, 1991 (the "Rights Agreement"), with Manufacturers
serving as the original Rights Agent under and as defined in the Rights
Agreement; and
WHEREAS, under and in accordance with the Rights Agreement, ChaseMellon
Shareholder Services, L.L.C. ("ChaseMellon") succeeded Manufacturers Hanover
Trust Company as Rights Agent; and
WHEREAS, under and in accordance with the Rights Agreement, and
pursuant to a Rights Agency Agreement effective December 6, 1996, The First
National Bank of Boston succeeded ChaseMellon as, and now is, the sole Rights
Agent; and
WHEREAS, in furtherance of the substitution of The First National Bank
of Boston as Rights Agent, the parties desire to amend the terms and provisions
of the Rights Agreement in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth in this Agreement, the parties hereby agree as follows:
1. REFERENCE TO RIGHTS AGREEMENT.
Reference is hereby made to the Rights Agreement. The Company and the
Rights Agent do hereby agree that the Rights Agreement and its terms and
provisions shall be and are hereby amended by this Amendment. Except as amended
hereby, all terms and provisions of the Rights Agreement as in effect
immediately prior to the effectiveness hereof are hereby ratified and affirmed.
Any reference in this Amendment to the Rights Agreement shall be deemed a
reference to the Rights Agreement as amended hereby, unless the context herein
indicates otherwise. Capitalized terms used herein shall have the meanings given
such terms in the Rights Agreement, except as the manner in which such terms are
used herein indicates otherwise.
<PAGE>
<PAGE>
Amendment to Shareholder Rights Agreement
Page 2
2. SUBSTITUTION OF RIGHTS AGENT.
The appointment and substitution of The First National Bank of Boston
as the sole Rights Agent under the Rights Agreement is confirmed and ratified.
Any reference in the Rights Agreement to the "Rights Agent" shall be deemed to
be a reference to The First National Bank of Boston unless and until The First
National Bank of Boston shall cease to be the Rights Agent in accordance with
the terms of the Rights Agreement.
3. AMENDMENT OF SECTION 2.
The second sentence of Section 2 of the Rights Agreement is hereby
deleted and in its place and stead is substituted the following:
* * *
The Company may from time to time appoint such co-Rights Agent or Agents as it
may deem necessary or desirable, in its sole discretion, upon ten (10) days'
prior written notice to the Rights Agent. No co-Rights Agent shall have any duty
to supervise, nor shall any co-Rights Agent have any liability for or with
respect to any act or omission of, any other co-Rights Agent.
* * *
4. AMENDMENT OF SECTION 3.
Section 3(e) of the Rights Agreement is hereby deleted and in its place
and stead is substituted the following:
* * *
(e) Rights shall be issued in respect of all shares of Common Stock
which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such shares
of Common Stock shall also be deemed to be certificates for Rights, and shall
bear a legend substantially to the following effect (provided, however, no
legend shall be deemed not to comply with this provision by reason of any error
in reference to the Rights Agent or to the date of this Agreement or any
amendment or supplement hereto, or any other matter of similar importance; and,
provided further, however, that any legend on any such certificate which
substantially complied with this provision as in effect when such legend was
placed on such certificate shall be deemed to comply with this Agreement as from
time to time in effect):
<PAGE>
<PAGE>
Amendment to Shareholder Rights Agreement
Page 3
This certificate also evidences and entitles the holder of this
certificate to certain Rights as set forth in the Shareholder Rights
Agreement, as amended (the "Rights Agreement"), between Florida
Progress Corporation (the "Corporation") and the rights agent named
therein (the "Rights Agent"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal office of the Corporation. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. The Corporation will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of
mailing, without charge, promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Persons or by any subsequent holder, may become
null and void.
The Rights shall not be exercisable, and shall be void so long as held,
by a holder in any jurisdiction where the requisite qualification to
the issuance to such holder, or the exercise by such holder, of the
Rights in such jurisdiction shall not have been obtained or be
obtainable.
With respect to certificates containing such a legend, until the earlier of: (i)
the Distribution Date or (ii) the Expiration Date, the Rights associated with
the Common Stock represented by such certificates shall be evidenced by such
certificates alone and registered holders of Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.
* * *
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
such date, and effective such date, as first above written.
FLORIDA PROGRESS CORPORATION THE FIRST NATIONAL BANK
OF BOSTON
By: /s/ Jeffrey R. Heinicka By: /s/Colleen Shea
------------------------------ -----------------------
Jeffrey R. Heinicka Authorized Officer
Senior Vice President and
Chief Financial Officer
EXHIBIT 4.(b)
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS
NUMBER OF THE SHARES
K STATE OF FLORIDA
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
IN THE CITIES OF BOSTON OR NEW YORK CERTAIN DEFINITIONS
CUSIP
FLORIDA PROGRESS CORPORATION
THIS IS TO CERTIFY THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK WITHOUT PAR VALUE
OF
Florida Progress Corporation transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions
of the Amended Articles of Incorporation, as amended, of the Corporation, to
all of which the holder by acceptance hereof assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation, and the facsimile signatures
of its duly authorized officers.
Dated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
(MASSACHUSETTS) TRANSFER AGENT
AND REGISTRAR /s/Jeffrey R. Heinicka /s/Jack B. Critchfield
BY Vice President and Chairman and Chief
Treasurer Executive Officer
AUTHORIZED OFFICER
</TABLE>
<PAGE>
<PAGE>
REVERSE SIDE
FLORIDA PROGRESS CORPORATION
___________
THE PROVISIONS OF THE CORPORATION'S AMENDED ARTICLES OF INCORPORATION, AS
AMENDED, SHOWING THE CLASSES OF SERIES OF STOCK AUTHORIZED TO BE ISSUED BY THE
CORPORATION AND THE DISTINGUISHING CHARACTERISTICS THEREOF ARE HEREBY
INCORPORATED BY REFERENCE TO THE SAME EXTENT AS IF HEREIN SET FORTH AT LENGTH;
A COPY OF SAID PROVISIONS, CERTIFIED BY AN OFFICER OF THE CORPORATION, WILL BE
FURNISHED BY THE CORPORATION OR BY ITS TRANSFER AGENT, WITHOUT COST, TO AND
UPON THE REQUEST OF THE HOLDER OF THIS CERTIFICATE. REQUESTS MAY BE ADDRESSED
TO THE SECRETARY OF FLORIDA PROGRESS CORPORATION, ST. PETERSBURG, FLORIDA, OR
THE CORPORATION'S TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT--....Custodian....
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act............
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________, Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_______________________
_____________________________
SIGNATURE(S) GUARANTEED:____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
ON SIDE OF REVERSE
The signature to assignment must correspond with the name
Notice: as written upon the face of the certificate in every particular,
without alteration or enlargement or any change whatever.
This certificate also evidences and entitles the holder of this certificate to
certain Rights as set forth in the Shareholder Rights Agreement, as amended (the
"Rights Agreement") between Florida Progress Corporation (the "Corporation") and
the rights agent named therein (the "Rights Agent"), the terms of which are
hereby incorporated herein by reference and a copy of which is on file at the
principal office of the Corporation. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. The Corporation will mail
to the holder of this certificate a copy of the Rights Agreement, as in effect
on the date of mailing, without charge, promptly after receipt of a written
request therefor. Under certain circumstances set forth in the Agreement,
Rights issued to, or held by, any person who is, was or becomes an Acquired
Person or any Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void.
The Rights shall not be exercisable, and shall be void so long as held, by a
holder in any jurisdiction where the requisite qualification to the issuance to
such holder, or the exercise by such holder, of the Rights in such jurisdiction
shall not have been obtained or be obtainable.
EXHIBIT 10.(a)
FLORIDA PROGRESS CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
Amended and Restated
November 21, 1996
<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
Article 1. General Provisions
1.1 Purpose The purpose of the Management Incentive Compensation Plan is to
benefit the shareholders and customers of the Company by offering
annual award opportunities to management for their achievement of
financial and value added individual goals.
1.2 Term of the Plan The Plan, as amended and restated, shall be effective
as of January 1, 1996 (the "Effective Date"). The Plan shall remain in
effect until such time as the Company's Board of Directors elects to
terminate the Plan.
Article 2. Definitions
The following definitions shall be established within the Plan text, and unless
the Plan text indicates otherwise, shall have the meanings set forth below:
2.1 "Base Salary Rate" shall mean the Participant's annual base salary
in effect as of December 31 of each Plan Year.
2.2 "Board" shall mean the Board of Directors of Florida Progress
Corporation.
2.3 "Chairman" shall mean the Chairman and Chief Executive Officer of the
Board of Directors of Florida Progress Corporation.
2.4 "Company" shall mean the Florida Progress Corporation and its
subsidiaries.
2.5 "Compensation Committee" or "Committee" shall mean the Compensation
Committee of the Board.
2.6 "Disability" shall have the meaning ascribed to such term in the
Participant's Company sponsored tax-qualified retirement plan, or if
no such plan exists, the following definition will apply.
Shall mean any physical or mental disability arising out of natural or
accidental causes, or both, which originate subsequent to the date of
this Plan which prevents the Participant from engaging in and
performing all of the duties assigned to him and such Disability shall
have been in existence for a period of at least six months.
2.7 "Effective Date" means the date the Plan becomes effective, as set
forth in Section 1.2 herein.
Page 1 November 21, 1996
<PAGE>
<PAGE>
2.8 "Employee" shall mean a person who is a full-time, active employee of
Florida Progress Corporation or a Subsidiary.
2.9 "Financial Goal(s)" shall mean the annual financial goal(s)
established for the Company or Subsidiary.
2.10 "Individual Goals" shall mean the established annual performance goals
and objectives for each Participant which will be used to determine
the Participant's Performance Award pursuant to the Plan.
2.11 "Participant" shall mean an Employee who is actively participating in
the Plan during any Plan Year.
2.12 "Performance Award" shall mean the amount of the cash award payable to
a Participant based on achievement of certain preestablished
performance goals during the applicable Plan Year.
2.13 "Plan" shall mean the Management Incentive Compensation Plan for
the Company as described and set forth herein.
2.14 "Plan Year" shall mean a calendar year beginning on January 1 and
ending on December 31.
2.15 "Pool" shall mean the total Performance Awards which are created and
funded based on the achievement of Financial Goal(s) with respect to
either the Company or a particular Subsidiary.
2.16 "Prorated Award" shall mean the amount of a Performance Award paid to
a Participant for participating in the Plan less than the full Plan
Year or change of Target Incentive, as provided in Article 9 hereof.
2.17 "Retirement" shall have the meaning ascribed to such term in the
Participant's Company sponsored tax-qualified retirement plan, or if
no such plan exists, under that company's retirement policy.
2.18 "Subsidiary" shall mean any operating company or other corporate
entity which is affiliated with the Company and designated by the
Board to be included in the Plan.
2.19 "Supervisor" shall mean the immediate supervisor of Participant to
whom the latter reports on a day-to-day basis for operational and
administrative direction.
2.20 "Target Incentive" shall mean the percentage of Base Salary Rate at
risk by a Participant for 100% or full achievement of the applicable
Financial Goal(s).
Page 2 November 21, 1996
<PAGE>
<PAGE>
Article 3. Administration
3.1 Compensation Committee. The Compensation Committee shall have the final
authority with respect to all matters pursuant to the Plan. Based upon
recommendations submitted by the Chairman, and subject to the terms of
the Plan, the Compensation Committee shall have the authority to:
(a) Review, and either accept, reject, or modify any or all of
the annual Financial Goals;
(b) Review, and either approve, reject, or modify the recommended
Performance Awards designated for the Chairman and
Participants who are one, two and three levels removed from
the Chairman;
(c) Subject to Article 14 hereof, revise, amend, or otherwise
change in any manner, the terms, provisions, or other features
of the Plan as the Compensation Committee sees fit from time
to time;
(d) Review, and either approve, reject or modify the total
amount of each Pool, and achievement of Financial Goals; and
3.2 Chairman and Chief Executive Officer. As permitted by applicable law,
and subject to the terms of the Plan, the Chairman or designee of his
choice, is vested with authority to manage the day-to-day activities of
the Plan. The Chairman shall make recommendations to the Compensation
Committee as to the establishment of Financial and Individual Goals for
the Plan Year, and other administrative matters which may evolve
pursuant to the Plan from time to time. Specific authorities of the
Chairman shall be to:
(a) Determine the eligible Employees who are designated
Participants;
(b) Prepare, review and recommend to the Compensation
Committee the Performance Awards for Participants who are
one, two and three management levels removed from him;
(c) Review and recommend to the Compensation Committee the total
expenditures for all Performance Awards according to each
Subsidiary, and achievement of Financial Goals; and
(d) Designate, at his discretion, an executive to administer
the Plan within the Company or any of its Subsidiaries.
(e) Select Participants who shall be eligible to defer a
Performance Award with respect to any Plan Year, pursuant to
the criteria set forth in Section 10.1 hereof.
Page 3 November 21, 1996
<PAGE>
<PAGE>
Article 4. Eligibility and Participation
4.1 Eligibility. Eligibility for participation in the Plan will be limited
to those Employees who as members of management have responsibility for
decision-making and actions which significantly influence the Company's
annual performance. The nomination of Participants will be left to the
discretion of the President of each Subsidiary with the approval of the
Chairman.
4.2 No Right of Employment. Nothing in the Plan shall imply any right of an
Employee to continue in the employ of the Company, or shall interfere
with the right of the Company to terminate such Employee's employment
at any time.
Article 5. Performance Measurement Period
The Plan measures and rewards performance achieved by the Company over the
course of the Plan Year.
Article 6. Performance Criteria
6.1 Financial Goals. The Plan's performance criteria for funding
Performance Awards shall be established each Plan Year consistent
with the Company's annual Financial Goal(s) and objectives.
6.2 Weighting of Financial Goals. Each Financial Goal established with
respect to Florida Progress Corporation and each Subsidiary shall be
weighted to reflect its relative importance in determining the size of
the Pool. The weighting of the Financial Goals by organizational entity
shall be as set forth below:
Organizational Entity Weighting of Financial Goals
Florida Progress Corporation 85% Florida Power
15% Diversified Consolidated
Subsidiary Companies 100% Subsidiary Company
Article 7. Determination of Individual Performance Awards
7.1 Size of Individual Performance Awards. The size of individual
Performance Awards shall be based upon the achievement of financial
goals the assessment of the Participant's achievement of Individual
Goals during the Plan Year. All Performance Awards are distributed from
available funds in the applicable Pool(s).
7.2 Target Award Opportunities. Each Participant will be assigned a
Target Incentive as determined by management to be commensurate
with the responsibility and impact of their position on the
Strategic, Annual Profit Plan, and Operations Goals of the Company.
Page 4 November 21, 1996
<PAGE>
<PAGE>
The range of Participant Target Incentives, as determined by the
Committee, shall be from 10% up to 60% of the Participant's Base Salary
Rate.
7.3 Performance Award Pool. A Pool shall be established separately with
respect to the Company and each Subsidiary, and funds are not
transferrable between Pools. The amount of each Pool shall be
determined based on the level of achievement of the applicable
Financial Goal. As set forth below, at 100% achievement, the amount of
the Pool shall equal the TOTAL of the Participant Target Incentives; at
the Threshold achievement level, the amount of the Pool shall be 50% of
the TOTAL; and at the Maximum achievement level, the amount of the Pool
shall be equal to 150% of the TOTAL. Results between achievement levels
shall produce interpolated funding levels.
Financial Goal Achievement
---------------------------------------------------------------
Threshold Target Maximum
---------------------------------------------------------------
% of Target Incentive 50% 100% 150%
7.4 Development of Individual Goals. During the first quarter of each Plan
Year, all Participants will develop Individual Goals which set forth
annual goals and objectives of the Participant. The Individual Goals
are to be developed as the result of discussions between the
Participant and Supervisor. These Individual Goals may be either
quantitative or qualitative and should be consistent with the Company
or Subsidiary, Strategic, Annual Profit Plan or Operations Goals for
the Plan Year.
7.5 Measurement Against the Individual Performance Plan. Following the
last quarter of the Plan Year, management will assess the performance
and recommend a Performance Award based upon the achievement of each
Participant.
7.6 Funds Not Allocated As Performance Awards. Any funds which are not
allocated to Participants shall be returned to the Company's operating
profits for the applicable Plan Year.
Article 8. Timing and Payment of Awards
8.1 Timing of Award Payments. Subject to deferrals made pursuant to
Articles 10 and 11 hereof, Participants in the Plan will receive their
Performance Awards, if any, as soon as practical after the completion
of the Plan Year.
Page 5 November 21, 1996
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<PAGE>
8.2 Awards Payable in Cash. All Performance Awards payable under the Plan
shall be paid in cash. All Performance Awards shall be subject to the
Company's obligation to withhold the required amount of any Social
Security, federal, state, or local taxes attributed to any amounts
payable pursuant to the Plan.
Article 9. Limited Participation and Change in Target Incentive during Plan
Year
9.1 Partial Plan Year Eligibility. Subject to Section 9.2 hereof, a
Participant must be an Employee of the Company or a Subsidiary as of
the last day of the Plan Year in order to be eligible to receive any
Performance Award pursuant to the Plan. In the event that an Employee
is a Participant in the Plan for less than a full Plan Year, the
following provisions shall apply:
(a) An Employee who becomes eligible for participation in the Plan
due to initial employment, transfer, or promotion during the
Plan Year will be eligible to receive a Prorated Award based
upon the Participant's Target Incentive at the time of
induction. In no event, however, will Prorated Awards be made
for any employment period of time less than three months
participation during the Plan Year by the Participant.
(b) The size of the Prorated Award payable pursuant to Section
9.1(a) hereof shall be determined by multiplying the
Performance Award which would have been earned by the
Participant for a full Plan Year's participation by the
fraction that reflects the number of months of active service
during the Plan Year, as follows:
Prorated = Annual x Number of Months of Active
Award Performance Service During Plan Year
Award --------------------------
12
9.2 Termination of Employment Due to Retirement, Disability or Death. A
Plan Participant who is not an Employee on the last day of the Plan
Year as a direct result of Retirement, Disability, or death (in which
case the rights would pass to the Participant's beneficiary), will be
eligible to receive a Prorated Award. The Prorated Award will be
determined by multiplying the Performance Award which would have been
earned by the Participant for a full year's participation by the
fraction that reflects the number of months of active service during
the Plan Year, as set forth below:
Prorated = Annual x Number of Months of Active
Award Performance Service During Plan Year
Award --------------------------
12
Page 6 November 21, 1996
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
9.3 Proration of Target Incentives. In the event a Participant's Target Incentive changes during
the Plan Year, the Performance Award shall be determined as follows:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31 x Former x # of + 12/31 x New Target x # of
Base Target Months Base Incentive Months
Salary Incentive ------- Salary ------
Rate 12 Rate 12
</TABLE>
Article 10. Deferral Opportunity
10.1 Eligibility. The Chairman may permit any eligible Participant to defer
all or a portion of his or her Performance Award which may become
payable under the terms of the Plan for any Plan Year. It is the intent
of the Company to extend eligibility to defer receipt of Performance
Awards only to those individuals who are deemed to comprise a select
group of management or highly compensated employees such that the Plan
will qualify for treatment as a "top hat" plan under the Employee
Retirement Income Security Act of 1974, as amended from time to time or
any successor act thereto.
In the event a Participant no longer meets the eligibility requirements
for making deferrals of a Performance Award under the Plan, as
determined by the Chairman, such Participant shall become ineligible to
make further deferrals, retaining all the rights described in Articles
10 and 11 hereof, except the right to make any further deferrals, until
such time that the Participant again becomes eligible to make
deferrals.
10.2 Participation. The Chairman shall, determine the Participants who are
eligible to make deferrals for any Plan Year pursuant to this Article
10 based on the criteria set forth in this Section 10.1. Participants
who are deemed eligible to defer a Performance Award for any Plan Year
shall be so notified in writing.
10.3 Mandatory Deferral of Awards. The Company shall defer paying any
Performance Award, including a Performance Award previously deferred by
a Participant, to the extent it would otherwise be disallowable as a
deduction under Section 162(m) of the Internal Revenue Code, as may be
amended from time to time, until such time as the payment will be
allowed as a deduction. Such deferral shall be subject to all of the
terms and provisions set forth in Articles 10 and 11 hereof, except to
the extent that any such terms or provisions are inconsistent with this
Section 10.3, as determined by the Chairman. In determining the extent
that such payment would be disallowable, all other remuneration to a
Participant shall first be taken into account for purposes of the limit
imposed by Section 162(m).
10.4 No Right to Defer. No Participant shall have the right to be selected
to defer a Performance Award under this Article 10 nor, having been so
selected for any given Plan Year, to be selected for any other Plan
Year.
Page 7 November 21, 1996
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<PAGE>
10.5 Amount Which May Be Deferred. An eligible Participant may elect to
defer up to one hundred percent (100%) of his or her Performance Award
payable for any Plan Year. An election to defer a Performance Award for
any Plan Year shall be expressed by each Participant in increments of
ten percent (10%) of the Performance Award which may become payable
under the Plan.
10.6 Deferral Election. Eligible Participants shall make their elections to
defer the Performance Awards which may become payable under the Plan
for a given Plan Year prior to the beginning of that Plan Year, or such
earlier date as may be specified by the Chairman. All deferral
elections shall be irrevocable, and shall be made on a "Performance
Award Deferral Election Form," as described herein.
Eligible Participants shall make the following irrevocable elections on
each "Performance Award Deferral Election Form":
(a) The percentage amount of the Performance Award to be deferred
for the Plan Year;
(b) The length of the deferral period, pursuant to the terms of
Section 10.7 herein; and
(c) The form of payment to be made to the Participant upon
Retirement, pursuant to the terms of Section 10.8 herein.
10.7 Length of Deferral. The deferral period elected by each Participant for
any Plan Year shall be either (a) until the Participant's Retirement;
or (b) for a period at least equal to one (1) year following the end of
the Plan Year in which the Performance Award is earned and no greater
than ten (10) years following such date; provided, however, that each
Participant may have only one (1) deferral period under this Section
10.7(b) outstanding at any one time. Notwithstanding the foregoing, no
deferral period selected pursuant to Section 10.7(b) may extend beyond
a Participant's Retirement.
Notwithstanding the deferral periods elected by a Participant, payment
of deferred amounts and accumulated interest thereon shall be made to
the Participant in a single lump sum in the event the Participant's
employment with the Company terminates for any reason other than
Retirement at a time prior to full payment of deferred amounts and
interest thereon. Such payment following employment termination shall
be made in cash as soon as practicable following the termination of the
Participant's employment.
10.8 Payment of Deferred Amounts. Amounts, together with interest earned
thereon, which are deferred to a date which occurs prior to a
Participant's Retirement shall be paid, in cash, in one lump sum as
soon as practicable following such date. With respect to amounts
deferred until Retirement, Participants shall be entitled to elect to
receive payment of such deferred amounts, together with earnings
thereon, in cash,
Page 8 November 21, 1996
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<PAGE>
commencing upon the effective date of their Retirement, in a single
lump-sum or in installments.
(a) Lump-Sum Payment. Such payment shall be made in cash as soon
as practicable following the Participant's Retirement.
(b) Installment Payments. Participants may elect payment of
deferred amounts in installments, with a minimum of two (2)
installments and a maximum of ten (10) installments. The
initial payment shall be made, in cash, as soon as practicable
following the effective date of the Participant's Retirement.
The remaining installment payments shall be made, in cash,
during the first quarter of each Plan Year thereafter, until
the Participant's entire deferred compensation account has been
paid.
The amount of each installment payment shall be equal to the
balance remaining in the Participant's deferred compensation
account immediately prior to each such payment, multiplied by a
fraction, the numerator of which is one (1), and the denominator
of which is the number of installment payments remaining.
10.9 Financial Hardship. The Committee shall have the authority to alter the
timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the satisfaction of the Committee, "severe
financial hardship." In such event, the Committee may, in its sole
discretion:
(a) Authorize the cessation of deferrals by such Participant under
the Plan; or
(b) Provide that all, or a portion, of the amount previously deferred
by the Participant shall immediately be paid in a lump-sum cash
payment; or
(c) Provide that all, or a portion, of the installments payable over
a period of time shall immediately be paid in a lump-sum cash
payment; or
(d) Provide for such other installment payment schedule as deemed
appropriate by the Committee under the circumstances.
For purposes of this Section 10.9, "severe financial hardship" shall
mean any financial hardship resulting from extraordinary and
unforeseeable circumstances arising as a result of one or more recent
events beyond the control of the Participant. In any event, payment may
not be made to the extent such emergency is or may be relieved: (i)
through reimbursement or compensation by insurance or otherwise; (ii)
by liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial
hardship; and (iii) by cessation of deferrals under the Plan.
Withdrawals of amounts because of a severe financial hardship may only
be permitted to the extent reasonably necessary to satisfy the
hardship. Examples of what are not
Page 9 November 21, 1996
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<PAGE>
considered to be severe financial hardships include the need to send a
Participant's child to college or the desire to purchase a home. The
Participant's account will be credited with interest in accordance with
the Plan up to the date of distribution.
The severity of the financial hardship shall be judged by the
Committee. The Committee's decision with respect to the severity of
financial hardship and the manner in which, if at all, the
Participant's future deferral opportunities shall be ceased, and/or the
manner in which, if at all the payment of deferred amounts to the
Participant shall be altered or modified, shall be final, conclusive,
and not subject to appeal.
Article 11. Participant's Accounts
11.1 Participants' Accounts. The Company shall establish and maintain an
individual bookkeeping account for deferrals made by each Participant
under Article 10 herein. Each account shall be credited as of the date
the amount deferred otherwise would have become due and payable to the
Participant.
11.2 Interest on Deferred Amounts. Amounts deferred under Article 10 shall
accrue interest as established by the Corporation based on the
investment return of the Stable Value Fund of the Savings Plan for
Employees of Florida Progress Corporation. Each Participant's deferred
compensation account shall be credited on the last day of each calendar
quarter, with interest computed on the beginning quarterly balance in
the account. Interest on deferred amounts shall be paid out to
Participants at the same time and in the same manner as the underlying
deferred amounts.
11.3 Charges Against Accounts. There shall be charged against each
Participant's deferred compensation account any payments made to the
Participant or to his or her beneficiary.
Article 12. Designation of Beneficiary.
Each Participant shall designate a beneficiary or beneficiaries who, upon the
Participant's death, will receive the amounts that otherwise would have been
paid to the Participant under the Plan. All designations shall be signed by the
Participant, and shall be in such form as prescribed by the Committee. Each
designation shall be effective as of the date delivered to the Vice
President-Human Resources of the Company by the Participant.
Participants may change their designations of beneficiary on such form as
prescribed by the Vice President - Human Resources of Florida Power Corporation.
The payment of amounts deferred under the Plan shall be in accordance with the
last unrevoked written designation of beneficiary that has been signed by the
Participant and delivered by the Participant to the Vice President - Human
Resources of Florida Power Corporation prior to the Participant's death.
In the event that all the beneficiaries named by a Participant pursuant to this
Article 12 predecease the Participant, the amounts that would have been paid to
the Participant or the Participant's beneficiaries shall be paid to the
Participant's estate. In the event a Participant
Page 10 November 21, 1996
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<PAGE>
does not designate a beneficiary, or for any reason such designation is
ineffective, in whole or in part, the amounts that otherwise would have been
paid to the Participant or the Participant's beneficiaries under the Plan shall
be paid to the Participant's estate.
Article 13. Forfeiture
13.1 Forfeiture of Participation. Participants in the Plan are expected to
provide vision and leadership in the strategic management of the
Company, exhibit the corporate philosophies and maintain trusteeship of
corporate culture. Significant activity which, by its nature, impedes
the achievement of Company goals or damages the reputation of the
Company, shall result in the immediate forfeiture of participation, as
determined by the Committee in its sole discretion.
13.2 Forfeiture of Payment. As a condition of receiving benefits under this
Plan, a Participant shall not, directly or indirectly, after the
termination of his or her employment with the Company:
(a) use or disclose any financial or business information of the
Company obtained by the Participant during the course of his or
her employment, other than information that has been previously
made available to the public through normal, authorized business
channels, in a manner that would be prejudicial to the interests
of the Company. Notwithstanding the preceding requirements of
this subsection (a), a Participant may disclose information if
required by legal process or if the disclosure is protected by
the Florida Whistle-blower's Act of 1986, or any similar
applicable federal or state statute; or
(b) render any services of an advisory nature or become employed
by or participate or engage in any business in competition with
the Company, without the prior written consent of his or her
employer. A Participant shall be considered as engaging
in a business if he or she is a shareholder or other owner, or
partner, director, officer, or employee of, or consultant to,
the business; provided, that a Participant shall not be
prohibited from owning securities of a competitor if (1) the
securities owned constitute less than 2% of the competitor's
total outstanding securities of the same class and (2) the
Participant does not have the power to control, direct or
substantially influence the competitor's management or policies.
Article 14. Amendment and Termination
The Committee, in its sole discretion, without notice, at any time and from time
to time, may modify or amend, in whole or in part, any or all of the provisions
of the Plan, or suspend or terminate the Plan entirely; provided, however, that
no such modification, amendment, suspension or termination may, without the
consent of a Participant (or beneficiary, as applicable), materially and
adversely affect the right of a Participant (or beneficiary, as applicable) to a
payment or distribution hereunder with respect to an outstanding Performance
Award or previously deferred amounts.
Page 11 November 21, 1996
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Article 15. Miscellaneous
15.1 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan and the Plan shall be
construed and enforced as if the illegal or invalid provision had not
been included.
15.2 Costs of the Plan. All costs of administering the Plan shall be borne
by the Company out of the Company's general assets. Although not
prohibited from doing so, the Company is not required, in any way, to
segregate assets in any manner or to specifically fund any benefits
provided under this Plan.
15.3 Contractual Obligation. The Plan shall create a contractual
obligation on the part of the Company to make payments from the
Participants accounts when due. Payment of account balances shall
be made out of the general funds of the Company.
15.4 Unsecured Interest. No Participant or party claiming an interest in
deferred amounts under a Participant shall have any interest whatsoever
in any specific asset of the Company. To the extent that any party
acquires a right to receive payments under the Plan, such right shall
be equivalent to that of an unsecured general creditor of the Company.
The Company may establish one or more trusts, with such trustee as the
Committee may approve, for the purpose of providing for the payment of
deferred amounts. Such trust or trusts may be irrevocable, but the
assets thereof shall be subject to the claims of the Company's general
creditors. To the extent any deferred amounts or contributions under
the Plan are actually paid from any such trust, the Company shall have
no further obligation with respect thereto, but to the extent not so
paid, such deferred amounts shall remain the obligation of, and shall
be paid by, the Company.
15.5 Nontransferability: In no event shall the Company or any Employer make
any payment under this plan to any assignee or creditor of a
Participant or of a beneficiary. Prior to the time of a payment
hereunder, a participant or a beneficiary shall have no right by way of
anticipation or otherwise to assign (including without limitation in
connection with a divorce) or otherwise dispose of any interest under
this Plan nor shall rights be assigned or transferred by operation of
law.
Article 16. Choice of Law
The validity, interpretation, and administration of the Plan and the rights of
any and all persons having or claiming to have an interest therein, shall be
determined exclusively in accordance with the laws of the State of Florida.
micpdoc.96 Page 12 November 21, 1996
EXHIBIT 10.(b)
FLORIDA PROGRESS CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended and Restated, effective February 20, 1997
<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
ARTICLE 1. ESTABLISHMENT AND PURPOSE . . . . . . . . . . . . . . . . . 1
1.1 Restatement. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Gender and Number. . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Eligibility for Participation. . . . . . . . . . . . . . . . . 8
3.2 Date of Participation. . . . . . . . . . . . . . . . . . . . . 8
3.3 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Limitation on Participation. . . . . . . . . . . . . . . . . . 8
ARTICLE 4. REGULAR BENEFITS. . . . . . . . . . . . . . . . . . . . . . 9
4.1 Normal Retirement Benefit. . . . . . . . . . . . . . . . . . . 9
4.2 Early Retirement Benefit . . . . . . . . . . . . . . . . . . . 9
4.3 Disability Retirement Benefit. . . . . . . . . . . . . . . . . 10
4.4 Vested Termination Benefit . . . . . . . . . . . . . . . . . . 12
4.5 Change in Control. . . . . . . . . . . . . . . . . . . . . . . 13
4.6 Surviving Spouse Benefit . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5. SPECIAL EARLY RETIREMENT BENEFITS . . . . . . . . . . . . . 17
5.1 Special Early Retirement Benefit . . . . . . . . . . . . . . . 17
5.2 Surviving Spouse Benefit . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6. SPECIAL BENEFIT PROVISIONS. . . . . . . . . . . . . . . . . 19
6.1 General Principles . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Optional Lump Sum Payment. . . . . . . . . . . . . . . . . . . 19
ARTICLE 7. FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 No Trust Created . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Unsecured Interest . . . . . . . . . . . . . . . . . . . . . . 21
7.4 "Rabbi" Trust. . . . . . . . . . . . . . . . . . . . . . . . . 21
7.5 Divested Subsidiary Employee Participants. . . . . . . . . . 21
ARTICLE 8. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Administration . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Liability of Committee and Board; Indemnification. . . . . . . 22
8.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . 22
<PAGE>
<PAGE>
ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Nontransferability . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Amendment or Termination . . . . . . . . . . . . . . . . . . . 23
9.3 Impact of 1994 Amendments. . . . . . . . . . . . . . . . . . . 23
9.4 Forfeiture of Benefits . . . . . . . . . . . . . . . . . . . . 24
9.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Amended and Restated, effective February 20, 1997)
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 Restatement. Florida Progress Corporation hereby amends and restates,
effective as of February 20, 1997, an unfunded plan of deferred compensation for
certain officers and other management personnel of the Company and its
subsidiaries and their beneficiaries as described herein, which plan shall be
known as the "Florida Progress Corporation Supplemental Executive Retirement
Plan" (the "Plan").
1.2 Purpose. The purpose of this Plan is to provide additional retirement
benefits to a select group of officers and other management personnel with the
goal of helping to attract and retain superior officers and other management
personnel.
<PAGE>
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ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used hereinafter, the following terms shall
have the meaning set forth below.
(a) "Accrued Benefit" means, at any particular date, a Participant's
Target Amount, but calculated on the basis of the number of years
and months of Deemed Credited Service of the Participant and the
Final Average Earnings of the Participant as of such date rather
than as of his or her Normal Retirement Date.
(b) "Actuarial Equivalent" means, with respect to determining the
amount of a lump sum payment, a benefit of equivalent value to
the benefit that would otherwise have been provided to the
Participant, determined on the basis of the actuarial assumptions
in effect under the Retirement Plan as of the date such value is
computed (except that the current monthly PBGC rate shall be
used).
(c) "Board" means the Board of Directors of the Company.
(d) "Calculated under this Plan" means a calculation made as
otherwise indicated but without regard to any cost of living
adjustments occurring after retirement or other termination of
employment, and calculated as a straight life annuity without
regard to the actual form of payment under the Retirement Plan or
the Nondiscrimination Plan.
(e) A "Change in Control" means:
(1) a change in control of the Company of a nature that is
required, pursuant to the Securities Exchange Act of 1934
(the "1934 Act"), to be reported in response to (i) Item
1(a) of a Current Report on Form 8-K or (ii) Item 6(e) of
Schedule 14A, in each case as such requirements are in
effect on October 1, 1994;
(2) the adoption by the Company of a plan of dissolution or
liquidation;
(3) the closing of a sale of all or substantially all of the
assets of the Company;
(4) the closing of a merger, reorganization or similar
transaction (a "Transaction") involving the Company in
which the Company is not the surviving corporation or, if
the Company is the surviving corporation, immediately
following the closing of the Transaction, persons who were
shareholders of the Company immediately prior to the
Transaction own less than 75% of the combined voting power
of the surviving corporation's voting securities;
2
<PAGE>
<PAGE>
(5) the acquisition of "Beneficial Ownership" (as defined in
Rule 13d-3 under the 1934 Act) of the Company's securities
comprising 25% or more of the combined voting power of the
Company's outstanding securities by any "person" (as that
term is used in Sections 13(d) and 14(d)(2) of the 1934 Act
and the rules and regulations promulgated thereunder, but
not including any trustee or fiduciary acting in that
capacity for an employee benefit plan sponsored by the
Company) and such person's "affiliates" and "associates"
(as those terms are defined under the 1934 Act);
(6) the failure of the "Incumbent Directors" (as defined below)
to constitute at least a majority of all directors of the
Company (for these purposes, "Incumbent Directors" means
individuals who were the directors of the Company on
January 1, 1992, and, after his or her election, any
individual becoming a director subsequent to January 1,
1992, whose election, or nomination for election by the
Company's shareholders, is approved by a vote of at least
two-thirds of the directors then comprising the Incumbent
Directors, except that no individual shall be considered an
Incumbent Director whose initial assumption of office as a
director is in connection with an actual or threatened
"election contest" relating to the "election of directors"
of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(7) the occurrence of a "Triggering Event," as such term is
defined in Section 1(n) of that certain Shareholder Rights
Agreement by and between the Company and Manufacturers
Hanover Trust Company dated November 21, 1991, as it may be
amended from time to time.
Notwithstanding any provision above to the contrary, no Change in
Control shall be deemed to have occurred with respect to any
particular Participant by virtue of a transaction, or series of
transactions, that results in the Participant, or a group of
persons that includes the Participant, acquiring the Beneficial
Ownership of more than 25% of the combined voting power of the
Company's outstanding securities.
(f) "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time, or any successor statute. Reference to
a specific section of the Code shall include a reference to any
successor provision.
(g) "Committee" means the Compensation Committee of the Board.
(h) "Company" means Florida Progress Corporation, or any successor
entity.
(i) "Control Date" means the date on which a Change in Control
occurs.
3<PAGE>
<PAGE>
(j) "Credited Service" shall have the same meaning in this Plan as
is found in the Retirement Plan; provided, that if a
Participant incurs a Disability, such Disability terminates,
the Participant returns to work with an Employer and the
Committee determines that such person shall continue as an
active Participant in this Plan upon such return to work, such
Participant's Credited Service shall be increased by the time
he or she had a Disability (but only to the extent such time
is not otherwise included in his or her Credited Service); and
provided further, that if a Participant is employed by an
Employer that is not a participating employer in the
Retirement Plan, "Credited Service" for such Participant means
the number of years and months equal to the number of years
and months of Credited Service the Participant would have had
if his or her Employer had been a participating employer in
the Retirement Plan during the entire time of the Employer's
affiliation with the Company.
(k) "Current Earnings" means, at any particular time, the sum of the
Participant's then current monthly Earnings plus 1/12th of the
Participant's last MICP Award or MICP target incentive amount
(as defined in MICP), whichever is greater.
(l) "Deemed Credited Service" means, with respect to a Participant,
the sum of the following (but not in excess of 35 years):
(1) such Participant's Credited Service; plus
(2) with respect to a person who becomes eligible to
participate under Article 4 or Article 5, the additional
years and months of credited service, if any, awarded to
the Participant by the Committee at such time.
In awarding Deemed Credited Service under the standards set
forth in this subsection (l), the Committee may establish
conditions on when the additional years shall be considered to
be earned and thus become effective (e.g., only upon the
Participant reaching a specified age or completing a specified
number of years of actual service, only on a graduated basis
pursuant to a schedule approved by the Committee, etc.); and in
any such event, for all purposes of this Plan, a Participant
shall be considered at any time only to have those years of
additional service previously awarded that then have been earned
under the conditions established by the Committee.
(m) "Disability" means the total and permanent disability of a
Participant by reason of sickness or injury to perform all of
the duties assigned to the Participant by his or her Employer,
with the existence of a Disability to be determined by the
Committee in its sole discretion.
(n) "Early Retirement Date" means the first day of the calendar
month next following the day on which the Participant has
attained age 55 and has five years of Credited Service.
4
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(o) "Earnings" means a Participant's regular basic compensation (base
salary) from his or her Employer, prior to any reduction in
compensation pursuant to a plan established under the authority
of Section 125 or Section 401(k) of the Code and prior to any
reduction for amounts deferred under a deferred compensation plan
or arrangement. Any amounts deferred under a deferred
compensation plan or arrangement and thus included in Earnings
when earned shall not be included in Earnings when actually
received.
(p) "Employer" means the Company or any subsidiary thereof.
(q) "Final Average Earnings" means, on any particular date, the sum
of (1) the amount determined by dividing the sum of a
Participant's Earnings in the highest 36 consecutive months out
of the last 60 months prior to the Participant's termination of
employment or other applicable date by 36, plus (2) the amount
determined by dividing the sum of the Participant's three
highest MICP Awards paid during the last 60 months prior to the
Participant's termination of employment or other applicable
date by 36; provided, however, that in no event shall the Final
Average Earnings of a Participant decrease after such
Participant's Normal Retirement Date. Appropriate adjustments
will be made in determining Final Average Earnings for any
Participant who was not in active service for the 60 months
preceding his or her most recent termination of employment or
other applicable date, including any Participant who has less
than 36 months of service. Final Average Earnings shall then
be calculated based on Earnings and MICP Awards for all the
months during which the Participant was in active service;
Final Average Earnings shall equal the average determined by
dividing the sum of Earnings attributed to the 36 consecutive
such months that will produce the highest such average by 36,
and for a Participant with fewer than 36 months of service,
such average shall be taken over those months in which he or
she was in service.
(r) "Incentive Plan" means the Florida Progress Corporation
Management Incentive Compensation Plan and, if applicable, the
former Florida Power Corporation Management Incentive Plan, in
each case as it may be amended from time to time.
(s) "MICP Award" means an award paid to a Participant under the
Incentive Plan. For all purposes of this Plan, a MICP Award
shall be deemed to be paid at the time and in the amount as
initially provided, without regard to any deferral of payment
in whole or in part, whether the deferral is a voluntary
deferral by the Participant or is mandatory under the terms of
the applicable plan. Any portion of an award that is deferred
and thus included as part of a MICP Award as initially provided
shall not be taken into account when actually received.
(t) "Nondiscrimination Plan" means the Florida Progress Corporation
Retirement Benefit Nondiscrimination Plan for Excess Benefits,
as it may be amended from time to time.
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(u) "Normal Retirement Date" means the first day of the calendar
month next following the day on which the Participant attains age
65.
(v) "Participant" means any officer or other management employee of
an Employer who meets the eligibility requirements of the Plan,
as set forth in Article 3, to be and become a Participant, and
who continues to meet such requirements.
(w) "Plan" means the Florida Progress Corporation Supplemental
Executive Retirement Plan, as it is set forth herein and as it
may be amended from time to time.
(x) "Prospective Target Amount" means, at any particular date, a
Participant's Target Amount calculated using the Participant's
Final Average Earnings as of that date and the years and months
of Deemed Credited Service that the Participant would have at his
or her Normal Retirement Date if he or she continued to work
until such Normal Retirement Date.
(y) "Reorganization" means any change in personnel that is initiated
voluntarily by an Employer to accommodate or facilitate
enhancement of the operations or organization of the Employer.
(z) "Retirement Plan" means the Employees' Retirement Plan of Florida
Progress Corporation, as it may be amended from time to time.
(aa) "Social Security" means estimated Social Security benefits; if
the Participant's termination of employment occurs before the
Participant attains age 55, the Participant's future earnings are
assumed to continue until his or her Normal Retirement Date at
the same rate as they were immediately prior to the termination,
and if the Participant's termination of employment occurs at or
after the time the Participant attains age 55, the Participant's
future earnings are assumed to be zero.
(bb) "Special Early Retirement" means, for purposes of Article 5, the
retirement of a Participant from service with his or her Employer
in connection with a Reorganization and pursuant to an
opportunity provided by the Committee, at any time after the
Participant has at least 15 years of Credited Service, but before
the Participant has attained age 65.
(cc) "Spouse" means a person to whom a Participant was married both at
the time of the termination of his or her employment and at the
time of his or her death.
(dd) "Target Amount" means the monthly normal retirement income
payable to a Participant under Section 4.01(a) of the Retirement
Plan and Article IV of the Nondiscrimination Plan, but Calculated
under this Plan, and further calculated on the basis of the
number of years and months of Deemed Credited
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Service (without regard to the actual number of years and months
of Credited Service) of the Participant and the Final Average
Earnings (as defined in this Plan and not as defined in the
Retirement Plan) of the Participant as of his or her Normal
Retirement Date.
2.2 Gender and Number. Except when otherwise indicated by the context, any
masculine terminology when used in the Plan shall also include the feminine
gender, and the definition of any term herein in the singular shall also include
the plural.
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ARTICLE 3. PARTICIPATION
3.1 Eligibility for Participation. The Committee shall have the exclusive
right to designate which officers or other management employees of an Employer
shall be eligible to participate in this Plan. Participation shall be limited to
a select group of management or highly compensated employees and is subject to
change by the Committee from time to time.
3.2 Date of Participation. Each retired or active officer or other
management employee who was a Participant in this Plan on October 1, 1994 shall
remain as a Participant. Thereafter, each officer or other management employee
who becomes eligible to participate in this Plan under Section 3.1 shall become
a Participant on such date as may be designated by the Committee.
3.3 Duration. An officer or other management employee who becomes a
Participant shall continue to be a Participant until the earlier of (a) the date
he or she is no longer employed by an Employer or (b) the effective date of a
determination by the Committee that he or she shall not accrue additional
benefits under this Plan; provided, in either case, that if a Participant is
then vested in benefits under the Plan, he or she shall continue as a
Participant (even though not accruing additional benefits) for the purpose of
receiving his or her then accrued vested benefits pursuant to the provisions of
this Plan. In addition, a person eligible to receive a benefit under Section 4.5
shall cease to be a Participant as of the applicable Control Date (subject to
the right to receive benefits under such Section 4.5).
3.4 Limitation on Participation. A Participant shall be entitled to receive
benefits either under Article 4 or under Article 5, but not both. To implement
this provision, the Committee shall provide, with respect to each Participant,
whether such person shall be eligible to receive the regular benefits under
Article 4 or the Special Early Retirement benefits under Article 5. Accordingly,
the term "Participant" as used in Article 4 shall only refer to a Participant
who has been designated to receive benefits under such Article 4, and the term
"Participant" as used in Article 5 shall only refer to a Participant who has
been designated to receive benefits under such Article 5. Notwithstanding the
foregoing, a Participant under Article 4 may become eligible for the Special
Early Retirement Benefits under Article 5 provided that such person first waives
to the satisfaction of the Committee any and all rights to benefits under
Article 4.
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ARTICLE 4. REGULAR BENEFITS
4.1 Normal Retirement Benefit.
(a) Eligibility. A Participant whose employment with his or her
Employer terminates at or after (1) attaining age 65 and (2)
completing five years of participation in this Plan shall be
eligible for a normal retirement benefit under this Section 4.1.
(b) Amount. A Participant who is eligible for a benefit under
subsection (a) above shall be entitled to receive a monthly
normal retirement benefit for his or her life equal to the amount
by which (1) below exceeds (2) below:
(1) This amount equals the Participant's Accrued Benefit as of
the date of his or her retirement, with no increase for
payment beginning after the Participant's Normal Retirement
Date.
(2) This amount equals the sum of (i) the monthly normal
retirement income payable to the Participant under the
Retirement Plan and the Nondiscrimination Plan (adjusted as
provided for in Section 6.1(c)), without regard to any
post-retirement increases in such benefit, plus (ii) the
monthly amount payable to the Participant as his or her
full primary Social Security benefit, without regard to any
subsequent increases in such benefit.
(c) Commencement and Form of Payment. Monthly normal retirement
benefit payments shall commence at the same time as the
Participant's normal retirement benefits under the Retirement
Plan and shall continue to be paid for the life of the
Participant.
4.2 Early Retirement Benefit.
(a) Eligibility. A Participant whose employment with his or her
Employer terminates (for reasons other than normal retirement,
death or Disability) at or after (1) attaining his or her Early
Retirement Date and (2) completing five years of participation
in this Plan shall be eligible for an early retirement benefit
under this Section 4.2; provided, however, that a Participant
shall not be entitled to an early retirement benefit unless (1)
if the Participant has fewer than 15 years of Credited Service,
the Participant first obtains the express, written consent of
the Committee or (2) if the Participant has 15 or more years of
Credited Service, the Participant provides the Committee with
at least six months prior written notice of such proposed
retirement.
(b) Amount. A Participant who is eligible for a benefit under
subsection (a) above shall be entitled to receive a monthly early
retirement benefit for his or her life equal to the amount by
which (1) below exceeds (2) below:
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(1) This amount equals the Participant's Accrued Benefit as of
the date of his or her early retirement, reduced for early
payment as provided in Section 4.2(c).
(2) This amount equals the sum of (i) the monthly early
retirement income payable to the Participant under the
Retirement Plan and the Nondiscrimination Plan (adjusted as
provided for in Section 6.1(c)), without regard to any
post-retirement increases in such benefit, plus (ii) the
monthly amount payable to the Participant as his or her
full primary Social Security benefit, assuming such
payments begin at age 62 or, if later, the date of the
Participant's early retirement (without regard to any
subsequent increases in such benefit); provided, however,
that the Social Security offset under this subsection
(b)(2)(ii) shall not be applied until the Participant
attains age 62.
(c) Reduction for Early Payment. The amount of the Participant's
Accrued Benefit determined under Section 4.2(b)(1) shall be
reduced to the extent payment of the Participant's early
retirement benefit begins before the Participant's Normal
Retirement Date. Such reduced amount shall be computed by
multiplying the Participant's Accrued Benefit as so determined by
the factor set forth below based on the Participant's age at the
time payment begins:
Age When Payment Begins Factor
64 1.00
63 1.00
62 1.00
61 .95
60 .90
59 .85
58 .80
57 .75
56 .70
55 .65
(d) Commencement and Form of Payment. Monthly early retirement
benefit payments shall commence on the first day of the calendar
month following the date of the Participant's early retirement
under this Plan.
4.3 Disability Retirement Benefit.
(a) Eligibility. A Participant whose employment with his or her
Employer terminates due to a Disability prior to his or her
Normal Retirement Date shall be eligible for a disability
retirement benefit under this Section 4.3; provided, however,
that a Participant shall not be entitled to receive and/or to
continue receiving any Disability benefits under this Plan
unless the Committee has
10<PAGE>
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determined in its sole discretion that a Disability exists and
continues. To this end, the Committee may require the
Participant to submit to a medical examination or a series of
medical examinations at any time and from time to time to
determine his or her eligibility and/or continued eligibility
for a disability benefit. The failure of the Participant to
submit to any such examination shall be sufficient grounds for
the denial of a disability benefit and/or the continuation
thereof.
(b) Amount. A Participant who is eligible for a benefit under
subsection (a) above shall be entitled to receive a monthly
disability retirement benefit for his or her life (or if his or
her Disability terminates prior to the Participant's Normal
Retirement Date, until his or her Disability terminates) equal to
the amount by which (1) below exceeds (2) below:
(1) This amount equals the Participant's Accrued Benefit as of
the date of the termination of his or her employment by
reason of Disability, with no reduction for early payment.
(2) This amount equals the sum of (i) the monthly income
payable to the Participant under the Retirement Plan and
the Nondiscrimination Plan (adjusted as provided for in
Section 6.1(c)), without regard to any post-termination
increases in such benefit, plus (ii) the monthly amount
that would be payable to the Participant under any
long-term disability plan sponsored by his or her Employer
if the Participant had elected the maximum benefit option
thereunder available to the Participant, without regard to
the actual election, if any, made by the Participant, plus
(iii) the monthly amount payable to the Participant as his
or her Social Security disability benefit if he or she is
then eligible for such a benefit, or if he or she is not
then eligible for a Social Security disability benefit, his
or her full primary Social Security benefit, assuming such
payments begin at age 62 or, if later, the date of the
Participant's termination of employment by reason of
Disability (without regard to any subsequent increases in
such benefit); provided, however, that if the Participant
is not eligible for a Social Security disability benefit,
any Social Security offset under this subsection
(b)(2)(iii) shall not be applied until the Participant
attains age 62. For purposes of (ii) above, the maximum
benefit option available to a Participant is the maximum
benefit option that may be elected by a Participant (as of
October 1, 1994, the 70% option) in the absence of an
adverse determination by the insurance carrier; or, in the
case of such an adverse determination, is the maximum
benefit allowed by the insurance carrier.
(c) Commencement and Form of Payment. Monthly disability retirement
benefit payments shall commence on the first day of the calendar
month following the date of the termination of the Participant's
employment by reason of Disability and shall continue to be paid
for the life of the Participant
11<PAGE>
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or, if his or her Disability terminates prior to his or her
Normal Retirement Date, until the Participant's Disability
terminates.
(d) Termination of Disability. If the Participant's Disability
terminates before his or her Normal Retirement Date and either
the Participant does not return to work for an Employer, or the
Participant returns to work for an Employer but the Committee
does not determine that such person shall continue as an active
Participant in the Plan upon such return to work, the
Participant shall be entitled to receive an early retirement
benefit under Section 4.2 (if he or she was eligible for such a
benefit on the date his or her employment terminated by reason
of Disability) or a vested termination benefit under Section
4.4; and in any such case, the benefit shall be calculated as
of the date the Participant's employment terminated by reason
of Disability. Any early retirement benefit referred to in the
first sentence of this subsection (d) shall begin on the first
day of the calendar month immediately following the termination
of the Disability, and any vested termination benefit referred
to in the first sentence of this subsection (d) shall begin on
the first day of the calendar month next following the day the
Participant attains age 62 or, if the termination of the
Disability occurs thereafter, on the first day of the calendar
month next following the date of such termination.
4.4 Vested Termination Benefit.
(a) Eligibility. A Participant whose employment with his or her
Employer terminates at or after the time he or she has a vested
Accrued Benefit under this Article 4, but who is not otherwise
entitled to a benefit under this Article 4, shall be eligible
for a vested termination benefit under this Section 4.4.
Except as provided in Section 9.3 with respect to Participants
in the Plan on October 1, 1994, a Participant shall not have a
vested Accrued Benefit under this Article 4 unless and until he
or she satisfies the provisions of Section 4.4(d).
(b) Amount. A Participant who is eligible for a benefit under
subsection (a) above shall be entitled to receive a monthly
vested termination benefit for his or her life equal to the
amount by which (1) below exceeds (2) below:
(1) This amount equals the Participant's Accrued Benefit as of
the date of the termination of his or her employment, with
no reduction for early payment.
(2) This amount equals the sum of (i) the monthly income
payable to the Participant under the Retirement Plan and
the Nondiscrimination Plan (adjusted as provided for in
Section 6.1(c)), without regard to any post-termination
increases in such benefit, plus (ii) the monthly amount
payable to the Participant as his or her full primary
Social Security benefit, assuming such payments begin at
age 62 or, if later, the date
12<PAGE>
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of the Participant's termination of employment (without
regard to any subsequent increases in such benefit).
(c) Commencement and Form of Payment. Monthly vested termination
benefit payments shall commence on the first day of the calendar
month next following the day the Participant attains age 62 or,
if the termination of employment occurs thereafter, on the first
day of the calendar month next following the date of such
termination of employment, and shall continue to be paid for the
life of the Participant.
(d) Vesting. A Participant shall become 100% vested in his or her
Accrued Benefit when he or she has satisfied both of the
following conditions:
(1) the Participant has been a Participant for at least five
years; and
(2) one of the following has occurred:
(i) the Participant has attained age 55 and has at
least five years of Credited Service; or
(ii) the sum of the Participant's age and Credited
Service (in each case counting full months
thereof) equals or exceeds 65.
A Participant shall also become 100% vested in his or her Accrued
Benefit, even if the foregoing tests have not been satisfied, at
the time of the Participant's termination of employment by reason
of Disability or death; the occurrence of a Change in Control; or
the termination of this Plan.
4.5 Change in Control.
(a) Eligibility. Upon the occurrence of a Change in Control, any
Participant employed by an Employer on the day immediately
prior to a Control Date shall be entitled to receive a benefit
calculated and paid as provided in this Section 4.5.
Notwithstanding any other provision of this Plan to the
contrary, upon the occurrence of a Change in Control, the
benefit provided by this Section 4.5 shall be the exclusive
benefit provided under this Plan to the Participants who are
eligible to receive such benefit (and to their spouses) and
accordingly each such person shall not be entitled to any other
benefits under this Plan without regard to the age of the
Participant, the vested status of the Participant or any other
factor; and upon receipt of his or her benefit under this
Section 4.5, a person shall cease being a Participant in this
Plan.
(b) Amount and Form of Payment. A Participant who is eligible for a
benefit under subsection (a) above shall receive his or her
benefit in a lump sum, paid on or as soon as practicable after
the Control Date, but no more than five days after such date,
equal to the sum of the following:
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(1) This amount equals the product of the Participant's Current
Earnings on the day immediately prior to the Control Date
and the number of months by which the Control Date precedes
the Participant's Normal Retirement Date (up to a maximum
of 24 months).
(2) This amount equals the "adjusted present value" (as defined
below) of a monthly benefit for the Participant's life in
an amount equal to the amount by which (i) below exceeds
(ii) below, plus (but only if the Participant is married as
of the Control Date) the "adjusted present value" (as
defined below) of a 50% surviving spouse's benefit for the
life of the surviving spouse:
(i) This amount equals the Participant's Prospective
Target Amount determined as of the Control Date, with
no reduction for early payment.
(ii) This amount equals the monthly deferred retirement
income that would be payable to the Participant under
the Retirement Plan and the Nondiscrimination Plan
beginning as of the Participant's Normal Retirement
Date (adjusted as provided for in Section 6.1(c)) if
the Participant's employment terminated as of the
Control Date. For these purposes, no pre-retirement
survivorship charges or early retirement reductions
shall be applied.
For purposes of this Section 4.5(b)(2), the "adjusted
present value" shall be calculated by determining the
Actuarial Equivalent of the stated benefit as if it were to
be paid in a lump sum on the Participant's Normal
Retirement Date and as if the equivalent monthly benefit
for the Participant's and (if applicable) the surviving
spouse's lives were to begin at the Participant's Normal
Retirement Date; no reduction shall be made for payment of
the lump sum prior to the Participant's Normal Retirement
Date.
(c) Additional Payment. A Participant who is eligible for a
benefit under subsection (a) above also shall be entitled to
receive the amount described below to the extent applicable:
In the event any payment under this Section 4.5 or under
another plan or agreement (collectively, the "Payments") are
subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), the Participant's Employer shall pay the
Participant an amount (the "Gross Up") such that the net amount
retained by the Participant after deduction of any Excise Tax
on the Payments and the federal income tax on any payments
under this Section 4.5(c) shall be equal to the Payments. For
purposes of determining the Gross Up, the Participant shall be
deemed to pay the federal income tax at the highest marginal
rate of taxation (currently 39.5%) in the calendar year in
which the payment under Section 4.5 is to be made. The
determination of whether such Excise Tax is payable and the
14<PAGE>
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amount thereof shall be made upon the opinion of tax counsel
selected by the Employer and reasonably acceptable to the
Participant. The Gross Up, if any, that is due as a result of
such determination shall be paid to the Participant in cash in
a lump sum within thirty (30) days of such computation. If
such opinion is not finally accepted by the Internal Revenue
Service upon audit or otherwise, then appropriate adjustments
shall be computed (without interest but with Gross Up, if
applicable) by such tax counsel based upon the final amount of
the Excise Tax so determined; any additional amount due the
Participant as a result of such adjustment shall be paid to the
Participant by his or her Employer in cash in a lump sum within
thirty (30) days of such computation, or any amount due the
Participant's Employer as a result of such adjustment shall be
paid to the Employer by the Participant in cash in a lump sum
within thirty (30) days of such computation.
4.6 Surviving Spouse Benefit.
(a) Eligibility. If at the time of the death of a Participant, (1)
(i) the employment of a Participant with his or her Employer
had previously terminated and the Participant was receiving or
was entitled to receive benefits under this Article 4 or (ii)
the Participant was still employed by his or her Employer and
had unpaid Accrued Benefits under this Article 4 (whether or
not vested at the time of death) and (2) the Participant is
survived by a Spouse, such Spouse shall be eligible for a
surviving spouse benefit under this Section 4.6. In no other
circumstances shall the Spouse of a Participant or any other
beneficiary of a Participant under the Retirement Plan or
otherwise be entitled to any benefit under this Article 4 in
the event of the death of a Participant hereunder, even if
survivor benefits are otherwise payable under the Retirement
Plan. Also, without limitation on the foregoing, and
notwithstanding anything to the contrary contained in this
Section 4.6, no benefit shall be payable to a Spouse of a
deceased Participant or former Participant who received during
his or her lifetime or who was entitled to receive at the time
of death a benefit under Section 4.5, or who received during
his or her lifetime or who was entitled to receive at the time
of death a benefit under any provision of this Article 4 in the
optional lump sum form in accordance with Section 6.2.
(b) Amount. A Spouse who is eligible for a benefit under subsection
(a) above shall be entitled to receive a monthly surviving
spouse benefit for his or her life in an amount equal to the
amount by which (1) below exceeds (2) below:
(1) In the case of a Participant whose employment with his or
her Employer terminated prior to death, this amount equals
fifty percent (50%) of the monthly amount the Participant
was eligible to receive (even if only on a deferred basis)
or was receiving at the time of death under Section
4.1(b)(1), 4.2(b)(1), 4.3(b)(1) or 4.4(b)(1), as the case
may be, prior to the application of any applicable
set-off, with no reduction for early payment. In the
case of a Participant who was still
15<PAGE>
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in the employment of his or her Employer at the time of
death, this amount equals fifty percent (50%) of the
Participant's Accrued Benefit as of the date of death,
with no reduction for early payment.
(2) This amount equals the aggregate monthly income, if any,
payable to the Spouse and to any other beneficiary of the
Participant under the Retirement Plan and the
Nondiscrimination Plan as a result of the death of the
Participant (adjusted as provided for in Section 6.1(c)).
(c) Commencement and Form of Payment. Monthly surviving spouse
benefit payments shall be payable to the Spouse for the life of
the Spouse and shall commence as soon as practicable following
the Participant's death.
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ARTICLE 5. SPECIAL EARLY RETIREMENT BENEFITS
5.1 Special Early Retirement Benefit.
(a) Eligibility. A Participant whose employment with his or her
Employer terminates by reason of Special Early Retirement shall
be entitled to a retirement benefit under this Section 5.1.
(b) Amount. A Participant who is eligible for a benefit under
subsection (a) above shall be entitled to receive a monthly
retirement benefit for his or her life equal to the amount by
which (1) below exceeds (2) below:
(1) This amount equals the amount determined by the Committee,
but not in excess of the Participant's Prospective Target
Amount determined as of the date of the termination of the
Participant's employment by reason of Special Early
Retirement, with no reduction for early payment.
(2) This amount equals the sum of (i) the monthly income
payable to the Participant under the Retirement Plan and
the Nondiscrimination Plan (adjusted as provided for in
Section 6.1(c)), without regard to any post-retirement
increases in such benefit, plus (ii) the monthly amount
payable to the Participant as his or her full primary
Social Security benefit, assuming such payments begin at
age 62 or, if later, the date of the Participant's early
retirement (without regard to any subsequent increases in
such benefit); provided, however, that the Social Security
offset under this subsection (b)(2)(ii) shall not be
applied until the Participant attains age 62.
(c) Commencement and Form of Payment. Monthly Special Early
Retirement benefit payments under this Section 5.1 shall
commence on the first day of the calendar month next following
the day of the Participant's termination of employment with his
or her Employer by reason of Special Early Retirement and shall
continue to be paid for the life of the Participant, or shall
be paid in such other form as may be determined in the sole
discretion of the Committee. Any such alternative benefit
shall be in an amount that is the Actuarial Equivalent of such
monthly benefit for life.
5.2 Surviving Spouse Benefit.
(a) Eligibility. If a Participant dies while eligible for a
benefit under Section 5.1 (i.e., his or her employment has
terminated by reason of Special Early Retirement) and is
survived by a Spouse, such Spouse shall be eligible for a
surviving spouse benefit under this Section 5.2. In no other
circumstances shall the Spouse of a Participant or any other
beneficiary of a Participant under the Retirement Plan or
otherwise be entitled to any benefit under this Article 5 in
the event of the death of a Participant hereunder, even if
survivor
17<PAGE>
<PAGE>
benefits are otherwise payable under the Retirement
Plan. Also, without limitation on the foregoing, and
notwithstanding anything to the contrary contained in this
Section 5.2, no benefit shall be payable to a Spouse of a
deceased Participant who received during his or her lifetime or
who was entitled to receive at the time of his or her death a
benefit under Section 5.1 in the optional lump sum form in
accordance with Section 6.2.
(b) Amount. A Spouse who is eligible for a benefit under subsection
(a) above shall be entitled to receive a monthly surviving
spouse benefit for his or her life equal to the amount by which
(1) below exceeds (2) below:
(1) This amount equals fifty percent (50%) of the monthly
amount the Participant was eligible to receive or was
receiving at the time of death under Section 5.1(b)(1),
prior to the application of any applicable set-off, with
no reduction for early payment.
(2) This amount equals the aggregate monthly income, if any,
payable to the Spouse and to any other beneficiary of the
Participant under the Retirement Plan and the
Nondiscrimination Plan as a result of the death of the
Participant (adjusted as provided for in Section 6.1(c)).
(c) Commencement and Form of Payment. Monthly surviving spouse
benefit payments shall be payable to the Spouse for the life of
the Spouse and shall commence as soon as practicable following
the Participant's death.
18<PAGE>
<PAGE>
ARTICLE 6. SPECIAL BENEFIT PROVISIONS
6.1 General Principles.
(a) General Rule for Offset. The amount of any offset under
Section 4.1(b)(2), 4.2(b)(2), 4.3(b)(2), 4.4(b)(2), 4.6(b)(2),
5.1(b)(2), or 5.2(b)(2), as the case may be, shall be
determined by using the amount payable to a Participant or
other named person during the month in question under the
Retirement Plan, the Nondiscrimination Plan and (if applicable)
any long-term disability plan, taking into account in general
applicable adjustments, if any, including without limitation
those for deferred payment or early payment, and pre-retirement
survivorship charges, but any such determination shall be
subject to the provisions of Section 6.1(c); provided, that no
adjustments shall be made for any cost-of-living or similar
changes in a Participant's benefits after the date that
benefits begin to be paid to the Participant. Furthermore, as
provided under Sections 4.2(b)(2), 4.3(b)(2) and 5.1(b)(2), a
Social Security offset may not be applicable prior to the time
the Participant attains age 62; and a benefit may not be
payable under the Retirement Plan, the Nondiscrimination Plan,
and/or any long-term disability plan for all months a benefit
is to be payable under this Plan. Thus, the amount of the
offset may vary from month to month.
(b) Qualified Domestic Relations Order. If a Participant's spouse
or former spouse has received or is entitled to receive a
benefit under the Retirement Plan or the Nondiscrimination Plan
as a result of a Qualified Domestic Relations Order, the amount
of the offset applicable to the Participant shall include the
amount that is so paid or is payable to the spouse.
(c) Special Adjustment. In determining the amount payable during
the month in question under the Retirement Plan and the
Nondiscrimination Plan, the benefit, in the case of a
Participant who is not married for purposes of the Retirement
Plan, shall be calculated as a straight life annuity and the
benefit, in the case of a Participant who is married for
purposes of the Retirement Plan, shall be calculated as a 50%
joint and survivor annuity, without regard in each case to the
actual form of payment under the Retirement Plan or the
Nondiscrimination Plan.
6.2 Optional Lump Sum Payment.
(a) Right To Receive. The benefit of a Participant under Section
4.1 (Normal Retirement), Section 4.2 (Early Retirement) and
Section 4.4 (Vested Termination) shall be paid in a lump sum if
payment in such form is elected by the Participant; provided,
however, that to be effective, such election must be made in
accordance with such rules and procedures as may be
established by the Committee from time to time and must be
approved by the Committee. Any lump sum benefit shall be in an
amount that is the Actuarial Equivalent of such monthly benefit
for life.
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(b) Limitation. Notwithstanding the foregoing provisions of this
Section 6.2, a Participant's election of a lump sum payment
shall be effective only if an irrevocable election is made by
the Participant and submitted to the Committee no later than
the last day of the calendar year that is at least two calendar
years prior to the calendar year of retirement or other
termination of employment or unless the benefit is reduced by
five percent (5%).
(c) Payment. A validly elected lump sum shall be paid to a
Participant as soon as practicable following the date monthly
benefits would have begun to be paid to the Participant;
provided, however, that in the event, if payment were made at
such time, the Company would not be able to deduct for federal
income tax purposes the entire amount to be paid to the
Participant under this Plan because of the limits under Section
162(m) of the Code, full payment shall be delayed, with payment
to be made as soon as possible in one or more installments to
the extent and at such time or times as a deduction may be
obtained without limit under Section 162(m).
20<PAGE>
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ARTICLE 7. FINANCING
7.1 Financing. The benefits under this Plan shall be paid out of the
general assets of the Company or other Employer.
7.2 No Trust Created. Nothing contained in this Plan, and no action taken
pursuant to the provisions of this Plan, shall create or be construed to create
a trust of any kind or a fiduciary relationship between any Employer and any
Participant, his or her spouse or any other person.
7.3 Unsecured Interest. No Participant hereunder shall have any interest
whatsoever in any specific asset of the Company or any other Employer. To the
extent that any person acquires a right to receive payments under this Plan,
such right shall be no greater than the right of any unsecured general creditor
of the Company or other Employer.
7.4 "Rabbi" Trust. Notwithstanding the foregoing provisions of this Article
7, the Company and the other Employers reserve the right to create and
contribute funds to a "Rabbi" trust for the purpose of paying some or all of the
benefits provided under this Plan, but the existence of any such trust shall not
in any way alter the relationship among the Company, any other Employer and a
Participant as described in this Article 7.
7.5 Divested Subsidiary Employee Participants. The liability for benefits
under this Plan for any Participant, who is an employee of an Employer that is
divested ("Divested Subsidiary Employee Participant") is and shall remain solely
the obligation of that divested Employer. Any Divested Subsidiary Employee
Participant will have no future claim to benefits under this Plan, or against
assets of any related trust, if assets sufficient to fund that Divested
Subsidiary Employee Participant's benefits are transferred to a plan or trust to
be sponsored by the divested Employer, or if the Divested Subsidiary Employee
Participant is compensated for any benefits accrued under this Plan.
21<PAGE>
<PAGE>
ARTICLE 8. ADMINISTRATION
8.1 Administration. The Committee shall have complete control over the
administration of the Plan, with all powers necessary to enable it to carry out
its duties in that respect. In connection with its administration of the Plan,
the Committee shall be empowered to exercise discretion, including with respect
to the interpretation of the terms of the Plan and in the determination of
eligibility for benefits and the amounts thereof; such discretionary
determinations and interpretations shall be binding upon all Participants and
others hereunder. Without limitation on the foregoing, the Committee shall be
authorized to construe and interpret all of the provisions of the Plan, to adopt
rules and practices concerning the administration of the same, and to make any
determination necessary hereunder, all of which shall be binding and conclusive
on all parties.
8.2 Liability of Committee and Board; Indemnification. To the extent
permitted by law, no member of the Committee or of the Board shall be liable to
any person for any action taken or omitted in connection with the interpretation
and administration of this Plan unless attributable to his or her own gross
negligence, fraud or bad faith. The Company shall indemnify the members of the
Committee and of the Board against any and all claims, losses, damages and
expenses, including counsel fees, incurred by them, and any liability, including
any amounts paid in settlement with their approval, arising from their action or
failure to act, except when the same is determined to be attributable to their
gross negligence, fraud or bad faith. The provisions of this Section 8.2 are not
intended to be exclusive, and nothing contained in this Section 8.2 shall in any
way limit indemnification provided members of the Committee and/or members of
the Board under the by-laws of the Company, by contract, by statute or
otherwise.
8.3 Expenses. The cost of payment from this Plan and the expenses of
administering the Plan shall be borne by the Company and the other Employers.
8.4 Tax Withholding. An Employer may withhold, or require the withholding
of, from any payment which it is required to make, any federal, state or local
taxes required by law to be withheld with respect to such payment and such sum
as the Employer may reasonably estimate as necessary to cover any taxes for
which the Employer may be liable and which may be assessed with regard to such
payment. Upon discharge or settlement of such tax liability, the Employer shall
distribute the balance of such sum, if any, to the Participant from whose
payment it was withheld, or if such Participant is then deceased, to the
beneficiary of such Participant. Prior to making any payment hereunder, the
Employer may require such documents from any taxing authority, or may require
such indemnities or surety bond, as the Employer shall reasonably deem necessary
for its protection.
22<PAGE>
<PAGE>
ARTICLE 9. MISCELLANEOUS
9.1 Nontransferability. In no event shall the Company or any Employer make
any payment under this Plan to any assignee or creditor of a Participant or of a
beneficiary. Prior to the time of a payment hereunder, a Participant or a
beneficiary shall have no rights by way of anticipation or otherwise to assign
(including without limitation in connection with a divorce) or otherwise dispose
of any interest under this Plan nor shall rights be assigned or transferred by
operation of law.
9.2 Amendment or Termination.
(a) Amendments; Termination. The Plan may be amended or terminated at
any time by the Committee, and, except as provided to the
contrary in subsection (b) below, no Participant or beneficiary
of a deceased Participant shall have a right to receive benefits
under the Plan at any time. Notice of any such amendment or
termination shall be given in writing to each Participant and
beneficiary of a deceased Participant having an interest in the
Plan.
(b) Effect on Benefits. No amendment or termination of the Plan may
adversely affect the benefits then payable or that may be payable
in the future with respect to any Participant (without giving
effect to such Plan amendment or termination) to the extent
described below:
(1) for a Participant whose employment with his or her Employer
has terminated prior to such Plan amendment or termination,
the benefits then payable or to be payable to the
Participant and his or her spouse shall not be altered;
(2) for a Participant under Article 4 whose employment with
his or her Employer has not terminated prior to such Plan
amendment or termination, the amount of the benefits
accrued as of the date of the Plan amendment or
termination shall not be decreased;
(3) for a Participant under Article 5 whose employment with
his or her Employer has not terminated prior to such Plan
amendment or termination, the benefits that would be
payable to the Participant and his or her spouse (without
giving effect to such Plan amendment or termination) upon
the termination of his or her employment by reason of
Special Early Retirement shall not be altered; and
(4) once there has been a Change in Control, any benefits
payable or that could be payable under Section 4.5 as a
result of such Change in Control shall not be altered.
9.3 Impact of 1994 Amendments. Notwithstanding the provisions of Section
9.2, the following provisions shall govern the impact of the amendment and
restatement of this Plan as of October 1, 1994 on persons who were Participants
on October 1, 1994:
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(a) a Participant in this Plan on October 1, 1994 who was then
receiving benefits shall not be affected by the amendment and
restatement and shall be governed in all respects by the
provisions of the Plan as in effect immediately prior to such
Participant's termination of employment; and
(b) a Participant in this Plan on October 1, 1994 who was not then
receiving benefits shall be entitled to receive as a benefit
under Section 4.1, 4.2, 4.3, 4.4, 4.5 or 5.1, as the case may
be, and assuming the Participant is otherwise eligible for such
benefit at some time (either then or in the future), an amount
equal to the greater of the benefit calculated under the
provisions of the Plan as in effect immediately prior to such
amendment and restatement or the benefit calculated under the
provisions of the Plan as so amended and restated. The benefits
payable to a Participant's surviving spouse under Section 4.6
or 5.2, as the case may be (taking into account, in calculating
the benefit payable to a Participant's surviving spouse, the
benefit available to the Participant under the preceding
sentence) and all other provisions relating to the payment of
benefits under the Plan (including, without limitation, the
ability to receive a lump sum payment) shall be governed by the
provisions of the Plan as so amended and restated.
Notwithstanding any provisions of Sections 4.1(a) or 4.2(a) to the contrary, the
requirement that a Participant have at least five years of participation in this
Plan in order to receive a benefit under such provisions shall be deemed to be
satisfied (without regard to the actual number of years of such participation)
with respect to each Participant in this Plan on October 1, 1994. Moreover, each
Participant in this Plan on October 1, 1994 shall be deemed to be 100% vested in
his or her Accrued Benefit (as it may be from time to time), without regard to
his or her number of years of participation in the Plan, number of years of
Credited Service, age or any other requirement of Section 4.4(d).
9.4 Forfeiture of Benefits. As a condition of receiving benefits under this
Plan, a Participant shall not, directly or indirectly, after the termination of
his or her employment with an Employer:
(a) use or disclose any financial or business information of the
Company and/or its subsidiaries obtained by the Participant
during the course of his or her employment, other than
information that has been previously made available to the
public through normal, authorized business channels, in a
manner that would be prejudicial to the interests of the
Company and its subsidiaries. Notwithstanding the preceding
requirements of this subsection (a), a Participant may disclose
information if required by legal process or if the disclosure
is protected by the Florida Whistle-blower's Act of 1986, or
any similar applicable federal or state statute; or
(b) render any services of an advisory nature or become employed by
or participate or engage in any business in competition with
the Company or any of its subsidiaries, without the prior
written consent of his or her Employer. A Participant shall be
considered as engaging in a business if he or she is a
shareholder or other owner, or partner, director, officer, or
employee of, or
24<PAGE>
<PAGE>
consultant to, the business; provided, that a Participant shall
not be prohibited from owning securities of a competitor if (1)
the securities owned constitute less that 2% of the
competitor's total outstanding securities of the same class and
(2) the Participant does not have the power to control, direct
or substantially influence the competitor's management or
policies.
Any breach of any of the foregoing conditions will result in complete forfeiture
of any further benefits under the Plan for both the Participant and any
surviving spouse of the Participant. The immediately preceding sentence shall
not require the forfeiture or the return of any benefit received or due prior to
the breach of any of the specific conditions.
9.5 Applicable Law. This instrument shall be construed in accordance with
and governed by the laws of the State of Florida, to the extent not superseded
by the laws of the United States.
25
EXHIBIT 10.(c)
FLORIDA PROGRESS CORPORATION
EXECUTIVE OPTIONAL DEFERRED COMPENSATION PLAN
Effective September 1, 1994
As Amended, effective January 1, 1995
As Amended and Restated, effective January 1, 1997
<PAGE>
<PAGE>
FLORIDA PROGRESS CORPORATION
EXECUTIVE OPTIONAL DEFERRED COMPENSATION PLAN
I. Purpose
1. The Plan is intended to be an unfunded plan under the Employee
Retirement Income Security Act of 1974, as amended, that is
maintained for the purpose of providing deferred compensation for a
select group of management or highly compensated employees under
Sections 201(2), 301(a)(2), 401(a)(1), and 402(b)(6) of the Employee
Retirement Income Security Act of 1974, as amended.
The purpose of this plan is to provide a select management group with
the ability to save a percentage of their total base salary rate on a
pre-tax basis, with associated company match, in a way which mirrors
the Savings Plan for Employees of Florida Progress Corporation to
effectively eliminate all Internal Revenue Service Code Section and
regulatory limitations imposed on qualified defined contribution
plans.
2. The effective date of the Plan is September 1, 1994. The Plan has
been amended and restated as of January 1, 1997, except that certain
provisions are effective as of an earlier or later date as indicated
in the Plan. The Plan shall remain in effect until such time as the
Compensation Committee of the Company's Board of Directors elects to
terminate the Plan.
II. Definitions
The following definitions shall be established within the Plan text, and
unless the Plan text indicates otherwise, shall have the meanings set
forth below:
1. "Base Salary Rate" shall mean the Participant's annual base salary on
the first day of the month prior to the beginning of each Plan Year
(i.e. August 1, 1994 for initial Plan Year 1994; December 1, 1994 for
Plan Year 1995; etc.). Increases or decreases in Base Salary Rate
which occur during the Plan Year will not change the Pre-tax Deferral
Election amount determined prior to the beginning of each Plan Year.
2. "Beneficiary" shall mean any person or persons designated by the
Participant to receive amounts payable in accordance with this Plan
in the event of the Participant's death. If no such designation is
in effect at the time of death of the Participant, or if no person
so designated shall survive the Participant, the beneficiary shall
be the estate of the Participant.
Page 1
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3. "Company" shall mean Florida Progress Corporation and its
subsidiaries, who participate in the Savings Plan.
4. "Company Matching Deferred Contributions" shall mean the amount of
Company Matching Deferred Contributions, as defined herein in
Paragraph 2 of the Contributions section, due a Participant based
upon the Participant's elected Employee Deferred Contributions.
5. "Company Matching Deferred Contributions Account" shall mean the
accounts that will be established by the Company as a book reserve to
which shall be credited the sum of the Participant's Company Matching
Deferred Contributions for that Plan Year plus any earnings credited
thereafter in accordance with Section X of this Plan. This account
will also be credited with Regular Company Contributions and/or
Special Company Contributions that cannot be allocated to the Savings
Plan because they exceed the limitations prescribed by Section 415(c)
of the Internal Revenue Code of 1986.
6. "Compensation Committee" shall mean the Compensation Committee of the
Florida Progress Corporation Board of Directors which is responsible
for the administration of this Plan in accordance with the provisions
of the Plan as set forth in this document.
7. "Death" shall mean death from any cause.
8. "Disability" shall mean the total and permanent disability of a
Participant by reason of sickness or injury to perform all of the
duties assigned to the Participant by his or her Company, with the
existence of a Disability to be determined by the Committee in its
sole discretion.
9. "Eligible Participant" shall mean an Employee selected by Senior
Management who is eligible to receive a Performance Award pursuant to
the Management Incentive Compensation Plan, and whose annual base
salary exceeds the compensation limits outlined in Code Section
401(a)(17) of the Internal Revenue Code of 1986.
10. "Employee" shall mean a person who is a full-time, active employee of
the Company.
11. "Employee Deferred Contributions" shall mean the amount of the
Pre-tax Deferral Election from 1% to 16% of a Participant's Base
Salary Rate, as defined herein in Section V.
Page 2<PAGE>
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12. "Employee Deferred Contributions Account" shall mean the accounts
that will be established by the Company as a book reserve to which
shall be credited the sum of the Participant's Employee Deferred
Contributions for that Plan Year plus any earnings credited
thereafter in accordance with Section X of this Plan.
13. "Management Incentive Compensation Plan" shall mean the Company's
annual management incentive bonus program.
14. "Participant" shall mean an Eligible Participant who has an account
balance in the Plan.
15. "Plan" shall mean the Executive Optional Deferred Compensation Plan
of Florida Progress Corporation effective September 1, 1994, as
amended and restated effective January 1, 1997, and as may be
amended hereafter.
16. "Plan Administrator" shall mean the Plan Administrator for the
Savings Plan.
17. "Plan Year" shall mean the calendar year beginning January 1 and
ending December 31, except in the initial year when it will mean the
period of time from September 1, 1994 to December 31, 1994.
18. "Pre-tax Deferral Election Form" shall mean the form made available
annually by the Compensation Committee to an Eligible Participant
which, when properly executed by the Participant, effects his
participation in the Plan for the next following Plan Year.
19. "Retirement" shall mean the date upon which the Participant retires
from the Company as defined in the Participant's Company sponsored
tax-qualified retirement plan.
20. "Savings Plan" shall mean the Savings Plan for Employees of Florida
Progress Corporation, as amended.
21. "Short Plan Year" shall mean the period of the calendar year
remaining for which an Eligible Participant, as described in Section
III, may participate in the Plan. Such Eligible Participant must
duly complete, execute, and file with the Compensation Committee a
Pre-Tax Deferral Election Form no later than 30 days following the
date such an individual first became an Eligible Participant. Such
Pre-Tax Deferral Election Form shall be first effective with respect
to base salary earned by the Participant during the first
practicable payroll period following the Compensation Committee's
receipt of the Pre-Tax Deferral Election Form.
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22. "Termination" shall mean the termination of a Participant's
employment as a regular employee of the companies within the Florida
Progress Corporation controlled group for reasons other than Death,
Disability or Retirement.
23. "Valuation Date" shall mean the last day of each calendar month.
III. Eligibility and Participation
1. Participants. Participant as defined by the Plan.
2. New Hires. Effective January 1, 1995, the provisions of the Plan are
amended to allow newly-hired Eligible Participants to make an
irrevocable pre-tax deferral election for the Short Plan Year in
their initial year of hire. Thereafter, the Plan Year for the
newly-hired employee will be the calendar year beginning January 1.
3. Transfers. Effective January 1, 1995, Eligible Participants who are
transferring from non-participating companies within the Florida
Progress Corporation controlled group into a Company which
participates and whose annual base salary at the time of transfer
exceeds the compensation limits outlined in Code Section 401(a) (17),
can make an irrevocable pre-tax deferral election for the Short Plan
Year remaining in the year of transfer. Thereafter, the Plan Year
for the transferred Employee will be the calendar year beginning
January 1.
4. Salary Increases. Effective January 1, 1995, Eligible Participants,
whose Base Salary Rate is increased during a year in excess of the
compensation limits outlined in Code Section 401(a) (17), can make an
irrevocable pre-tax deferral election for the Short Plan Year
remaining in the year of the salary increase. Thereafter, the Plan
Year for the employee with such a salary increase will be the
calendar year beginning January 1.
5. No Right of Employment. Nothing in the Plan shall imply any right of
an Employee to continue in the employ of the Company, or shall
interfere with the right of the Company to terminate such Employee's
employment at any time.
IV. Elections
1. Pre-Tax Deferral Election. Any Eligible Participant or Participant
in the Plan may voluntarily make an irrevocable election to defer an
amount from 1% to 16% of their Base Salary Rate as Employee Deferred
Contributions in a manner that is consistent with and in agreement
with the terms and provisions of the Plan. Such election must be
irrevocable and in writing, on a Pre-tax Deferral Election Form
provided by the Compensation Committee, and completed and delivered
prior to the beginning of each Plan Year or Short Plan Year.
Page 4<PAGE>
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V. Contributions
1. Employee Deferred Contributions.
(a) Eligible Participants or Participants who choose to
participate in the Plan will make an irrevocable Pre-Tax
Deferral Election to defer an amount from 1% to 16% of their
Base Salary Rate. Employee Deferred Contributions made to the
Plan will be the difference between the total Pre-tax Deferral
Election amount and the lesser of (a) the annual 401(k)
maximum limit or (b) the maximum 401(k) deferral election
amount permitted by 401(k)/401(m) non-discrimination testing
for the previous year as determined by the Plan Administrator
for highly-compensated employees within the Savings Plan.
(b) The Employee Deferred Contributions Account will be
established by the Company as a book reserve to which shall be
credited the sum of the Participant's Employee Deferred
Contributions for that year (on a monthly basis) plus any
earnings credited thereafter in accordance with Section X of
the Plan.
(c) The Employee Deferred Contributions made to this Plan will be
capped to prevent a Participant's Base Salary Rate from
dropping below the compensation limits outlined in Code
Section 401(a)(17).
2. Company Matching Deferred Contributions.
(a) The Company shall make Company Matching Deferred Contributions
on behalf of each Participant who chooses to participate in
the Plan in the amounts and at the times Regular Company
Contributions and Special Company Contributions, as defined in
the Savings Plan, are allocated within the Savings Plan. Prior
to the reduction provided for in Paragraph (b) below, the
Company Matching Deferred Contributions will equal sixty-five
percent of Employee Deferred Contributions, up to six percent
of a Participant's Base Salary Rate, allocated monthly, and an
additional annual match of five percent or ten percent based
on the attainment of pre-determined Savings Plan Goals, as
defined within the Savings Plan, allocated in December of each
year goals are attained. However, no Special Company
Contributions shall be made for a Plan Year unless the
Participant is an Employee on the last day of the final pay
period of the Plan Year or the Participant's Retirement or
Death occurred during the Plan Year.
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Effective January 1, 1997, the Company Matching Deferred
Contributions made to the Plan will mirror the changes being
made to the Regular Company Contributions in the Savings Plan
so that the Company Matching Deferred Contributions in the
Plan will be increased to seventy-five percent (75%) of
Employee Deferred Contributions, up to six percent (6%) of a
Participant's Base Salary Rate. The increase from 65% to 75%
for Regular Company Contributions is in lieu of the
opportunity to receive an additional annual match of five
percent (5%) for each predetermined Savings Plan Goal
achieved.
(b) The Company Matching Deferred Contributions will be the
difference between the Company Matching Deferred
Contributions on the total Pre-tax Deferral Election amount,
up to 6% of the Base Salary Rate, and the sum of Regular
Company Contributions and Special Company Contributions in the
Savings Plan on the lesser of (a) the annual 401(k) maximum
limit or (b) the maximum 401(k) deferral election amounts
permitted by 401(k)/401(m) non-discrimination testing for the
previous year as determined by the Plan Administrator for
highly-compensated employees within the Savings Plan plus any
Regular Company Contributions and Special Company
Contributions associated with Regular Contributions made to
the Savings Plan on an after-tax basis.
(c) The Company Matching Deferred Contributions Account will be
established by the Company as a book reserve to which shall be
credited the sum of the Participant's Company Matching
Deferred Contributions for that year (on a monthly basis) plus
any earnings credited thereafter in accordance with Section X
of the Plan. This account will also be credited with Regular
Company Contributions and/or Special Company Contributions
that cannot be allocated to the Savings Plan because they
exceed the limitations prescribed by Section 415(c) of the
Internal Revenue Code of 1986.
VI. Vested Portion of Accounts
1. At any point in time, a Participant shall be vested in the following
portions of his Accounts:
(a) 100% of the Participant's Employee Deferred Contributions
Account, plus
(b) A percentage of his Company Matching Deferred Contributions
Account determined in accordance with the vesting schedule
applicable to the Savings Plan, as shown below:
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Completed Year of Continuous
Service on Valuation Date Vested Percentage
------------------------------ -----------------
Under 2 0%
2 25
3 50
4 75
5 or more 100
(c) A Participant who is not 100% vested in his Company Matching
Deferred Contributions Account pursuant to paragraph (b) above
shall nevertheless be 100% vested in this account upon the
later of his attainment of age 65 or completion of 5 years of
Continuous Service, as defined in the Savings Plan, while in
the employ of the Company or upon his Death while in the
employ of the Company or upon his Retirement.
(d) In the event a Participant incurs a Termination before the
Participant has obtained a vested interest in the total amount
of his or her Company Matching Deferred Contributions Account,
then the portion of the Participant's Company Matching
Deferred Contributions Account in which such Participant does
not have a vested interest at the time of such Termination
shall be permanently forfeited and debited from the
Participant's Company Matching Deferred Contributions Account
by the Company as of the last day of the payroll period during
which such Participant incurred such Termination. If an
individual returns to Company employment, any amounts
previously forfeited and debited from a Participant's Company
Matching Deferred Contributions Account upon a prior
Termination shall, in no event and in no manner, be credited
to the individual under this Plan.
VII. Timing and Payment of Account Balances
1. Form of Payment - Distribution of a Participant's Employee Deferred
Contributions Account and the vested portion of the Company Matching
Deferred Contributions Account shall be made in a cash lump sum to the
Participant or to his Beneficiary if the Participant is not living.
2. Commencement of Payment - A Participant or his Beneficiary, if the
Participant is not living, shall receive a distribution of a
Participant's Employee Deferred Contributions Account and the vested
portion of the Company Matching Deferred Contributions Account as
soon as administratively practicable following the Participant's
Retirement, Termination, Disability or Death.
Page 7<PAGE>
<PAGE>
VIII. Valuation and Reporting of Accounts
1. Valuation. The Employee Deferred Contributions Account and the
Company Matching Deferred Contributions Account will be valued at the
end of each month on the Valuation Date. Any applicable earnings will
be allocated to these accounts monthly on the Valuation Date.
2. Statement of Account. At least once a year, but no more frequently
than quarterly, each Participant shall be furnished with a statement
setting forth the value and the vested portion of the Participant's
accounts.
IX. Termination of Participation in the Plan
Any Participant having previously elected to participate in the Plan shall
automatically cease to participate in the Plan if he or she fails (in a
subsequent year) to properly execute a Pre-Tax Deferral Election Form as
provided for within the Plan, in which event the accumulated credits in
his Employee Deferred Contributions Account and Company Matching Deferred
Contributions Account, as applicable, prior to his termination of
participation, will continue to be subject to the applicable provisions of
the Plan.
X. Crediting of Earnings
There shall be credited to the Employee Deferred Contributions Account and
Company Matching Deferred Contributions Account an additional amount of
earnings (i.e. in addition to the principal amounts credited to such
accounts), as established by the Company based on the investment return of
the Stable Value Fund in the Savings Plan.
XI. Administration, Amendment and Termination
1. The Compensation Committee shall have the final authority with
respect to all matters pursuant to the Plan and shall have the
authority to specify rules and administrative practices to be
applied uniformly to all Participants in this Plan. The
Compensation Committee may, at any time, revise, amend, terminate,
or otherwise change in any manner the terms, provisions, features,
or administrative practices as they see fit from time to time.
However, no modification, amendment or termination of the Plan shall
adversely affect the right of any Participant to receive the
benefits granted under the Plan by the Compensation Committee in
respect to such Participant as of the date of modification,
amendment, or termination.
2. Tax Withholding. The Company shall have the right to deduct from all
payments any taxes required by law to be withheld with respect to any
Page 8<PAGE>
<PAGE>
payments made under this Plan.
XII. Financing
1. Financing. The benefits under this Plan shall be paid out of the
general assets of the Company.
2. No Trust Created. Nothing contained in this Plan, and no action
taken pursuant to the provisions of this Plan, shall create or be
construed to create a trust of any kind or a fiduciary relationship
between the Company and any Participant, his or her spouse or any
other person.
3. Unsecured Interest. No Participant hereunder shall have any interest
whatsoever in any specific asset of the Company. To the extent that
any person acquires a right to receive payments under this Plan, such
right shall be no greater than the right of any unsecured general
creditor of the Company.
4. "Rabbi" Trust. Notwithstanding the foregoing provisions of this
Financing section, the Company reserves the right to create and
contribute funds to a "Rabbi" trust for the purpose of paying some
or all of the benefits provided under this Plan, but the existence
of any such trust shall not in any way alter the relationship among
the Company and a Participant as described in this Financing
section.
The creation of said trust shall not cause the Plan to be other than
"unfunded" for purposes of the Sections of ERISA cited in Section
I.1.
XIII. Miscellaneous.
1. Nontransferability. Except to the extent required by the law, in no
event shall the Company make any payment under this Plan to any
assignee or creditor of a Par-ticipant or of a Beneficiary. Prior to
the time of a payment hereunder, a Participant or a beneficiary shall
have no rights by way of anticipation or otherwise to assign
(including without limitation in connection with a divorce) or
otherwise dispose of any interest under this Plan nor shall rights be
assigned or transferred by operation of law.
2. Laws Applicable and Construction. The Plan is intended to constitute
an unfunded deferred compensation arrangement for a select group of
management or highly compensated employees, and all rights hereunder
shall be governed by and construed in accordance with the laws of the
State of Florida to the extent not governed by the Sections of ERISA
referenced in Section I.1.
Page 9<PAGE>
<PAGE>
3. Grammar. Masculine pronouns used herein shall refer to men or women
or both, and nouns when stated in the singular shall include the
plural and when stated in the plural shall include the singular
wherever appropriate.
4. Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan and the remaining parts of
the Plan and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included.
5. Payment Due an Incompetent. If the Compensation Committee
determines that any person to whom a payment is due hereunder is
unable to care for his affairs because of physical or mental
disability, it shall have the authority to cause the payments
becoming due to such person to be made to the spouse, brother,
sister or other such person deemed by the Compensation Committee to
have incurred expense for such person otherwise entitled to payment
(unless prior claim shall have been made by a duly qualified
guardian or other legal representative) without responsibility of
the Compensation Committee to see to the application of such
payments. Payments made pursuant to such power shall operate
as a complete discharge of the obligations of the Compensation
Committee and the Company.
6. Inalienability of Benefits. No benefits payable under the Plan shall
be subject to alienation, sale, transfer, assignment, pledge,
attachment, garnishment, lien, levy, or like encumbrance. No benefit
under the Plan shall in any manner be liable for or subject to the
debts or liabilities of any person entitled to benefits under the
Plan.
7. Discretionary Decisions. All decisions, determinations, or
interpretations the Compensation Committee, the Company, or any
member, officer or employee thereof are authorized to make under the
Plan (including the delegation of any authority hereunder to another
party) shall be made in that party's sole discretion and shall be
final, binding, and conclusive on all interested persons.
Page 10
Exhibit 12
FLORIDA POWER CORPORATION
Statement of Computation of Ratios
(Dollars In Millions)
Ratio of Earnings to Fixed Charges:
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Net Income $238.4 $227.0 $200.8 $194.9 $186.9
Add:
Operating Income Taxes 135.8 129.5 114.7 104.5 97.7
Other Income Taxes (0.1) .1 (0.8) (0.1) (0.2)
------- ------- ------- ------- -------
Income Before Taxes 374.1 356.6 314.7 299.3 284.4
Total Interest Charges 98.4 104.5 108.4 105.8 100.2
------- ------- ------- ------- -------
Total Earnings (A) $472.5 $461.1 $423.1 $405.1 $384.6
------- ------- ------- ------- -------
Fixed Charges (B) $ 98.4 $104.5 $108.4 $105.8 $100.2
------- ------- ------- ------- -------
Ratio of Earnings to
Fixed Charges (A/B) 4.80 4.41 3.90 3.83 3.84
======= ======= ======= ======= =======
EXHIBIT 21
Subsidiaries of Florida Progress Corporation
December 31, 1996
Name of Subsidiary * State of Incorporation
------------------- ----------------------
Utility segment:
Florida Power Corporation Florida
Diversified segment:
Progress Capital Holdings, Inc. Florida
Electric Fuels Corporation Florida
Marine Equipment Management Corporation Delaware
Progress Rail Services Corporation Alabama
Mid-Continent Life Insurance Company Oklahoma
----------
* Each subsidiary does business under its own name.
Exhibit 23.(a)
The Shareholders
Florida Progress Corporation:
We consent to incorporation by reference in the registration statements No.
33-51573 on Form S-3, No. 33-53939 on Form S-8, No. 33-45044 on Form S-3, No.
33-47623 on Form S-8, No. 33-39153 on Form S-8, No. 2-93111 on Form S-3, No. 33-
56873 on Form S-3, No. 333-00547 on Form S-3, No. 333-19037 on Form S-8 and No.
333-07853 on Form S-3 of Florida Progress Corporation of our report dated
January 27, 1997, relating to the consolidated balance sheets of Florida
Progress Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1996, and all
related schedules, which report appears in the December 31, 1996 annual report
on Form 10-K of Florida Progress Corporation.
/s/KPMG PEAT MARWICK LLP
- ------------------------
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
March 27, 1997
Exhibit 23.(b)
The Shareholders
Florida Power Corporation:
We consent to incorporation by reference in the registration statements No.
33-62210 on Form S-3, No. 33-55273 on Form S-3, No. 33-50908 on Form S-3, and
No. 333-02549 on Form S-3 of Florida Power Corporation of our report dated
January 27, 1997, relating to the balance sheets of Florida Power Corporation as
of December 31, 1996 and 1995, and the related statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996, and all related schedules which report appears
in the December 31, 1996 annual report on Form 10-K of Florida Power
Corporation.
/s/KPMG PEAT MARWICK LLP
- -------------------------
KPMG PEAT MARWICK LLP
St. Petersburg, Florida
March 27, 1997
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