UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
<TABLE>
<CAPTION>
Exact name of Registrant as specified in I.R.S. Employer
Commission its charter, state of incorporation, address Identification
File No. of principal executive offices, telephone Number
------------ -------------------------------------------- ---------------
<S> <C> <C>
1-8349 FLORIDA PROGRESS CORPORATION 59-2147112
A Florida Corporation
One Progress Plaza
St. Petersburg, Florida 33701
Telephone (813) 824-6400
1-3274 FLORIDA POWER CORPORATION 59-0247770
A Florida Corporation
3201 34th Street South
St. Petersburg, Florida 33711
Telephone (813) 866-5151
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
</TABLE>
Description of Shares Outstanding
Registrant Class at September 30, 1998
---------- -------------- ------------------
Florida Progress Corporation Common Stock,
without par value 97,046,093
Florida Power Corporation Common Stock,
without par value 100 (all of which were
held by Florida
Progress Corporation)
This combined Form 10-Q represents separate filings by Florida Progress
Corporation and Florida Power Corporation. Florida Power makes no
representations as to the information relating to Florida Progress' diversified
operations.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FLORIDA PROGRESS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------- ------- -------- -------
(Unaudited) (Unaudited)
REVENUES:
<S> <C> <C> <C> <C>
Electric utility $795.6 $706.9 $2,024.6 $1,857.9
Diversified 235.9 215.6 697.5 609.4
------- ------- -------- --------
1,031.5 922.5 2,722.1 2,467.3
EXPENSES: ------- ------- ------- -------
Electric utility:
Fuel 188.9 129.5 434.0 343.2
Purchased power 122.3 133.7 332.1 377.7
Energy conservation cost 24.5 21.7 60.1 49.3
Operations and maintenance 108.3 105.5 326.9 318.6
Extended nuclear outage - O&M
and replacement power costs - 33.1 5.1 130.9
Depreciation and amortization 89.5 78.8 260.9 227.3
Taxes other than income taxes 57.5 53.2 158.4 149.9
------- ------- ------- -------
591.0 555.5 1,577.5 1,596.9
-------- ------- ------- -------
Diversified:
Cost of sales 201.0 187.0 587.6 527.9
Other 11.8 14.1 43.6 43.8
-------- ------- ------- -------
212.8 201.1 631.2 571.7
-------- ------- ------- -------
INCOME FROM OPERATIONS 227.7 165.9 513.4 298.7
-------- ------- ------- -------
INTEREST EXPENSE AND OTHER:
Interest expense 46.2 42.3 141.2 112.4
Allowance for funds used during
construction (4.4) (2.5) (12.4) (6.9)
Preferred dividend requirements of
Florida Power .3 .3 1.1 1.1
Other expense (income), net 1.2 (1.6) 1.3 (1.9)
-------- ------- ------- -------
43.3 38.5 131.2 104.7
-------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 184.4 127.4 382.2 194.0
Income Taxes 67.1 45.8 136.6 64.1
-------- ------- ------- -------
NET INCOME $117.3 $81.6 $245.6 $129.9
======== ======= ======= =======
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 97.0 97.1 97.0 97.1
======== ======= ======= =======
EARNINGS PER AVERAGE COMMON SHARE $1.21 $.84 $2.53 $1.34
======== ======= ======= ========
DIVIDENDS PER COMMON SHARE $.535 $.525 $1.605 $1.575
======== ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
September 30, December 31,
1998 1997
----------- ----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
<S> <C> <C>
Electric utility plant in service and held $6,286.8 $6,166.8
for future use
Less - Accumulated depreciation 2,676.7 2,511.0
Accumulated decommissioning for nuclear plant 246.6 223.7
Accumulated dismantlement for fossil plants 130.1 128.5
----------- ----------
3,233.4 3,303.6
Construction work in progress 322.9 279.4
Nuclear fuel, net of amortization of $371.3
in 1998 and $356.7 in 1997 51.8 66.5
----------- ----------
Net electric utility property 3,608.1 3,649.5
Other property, net of depreciation of $230.8
in 1998 and $219.3 in 1997 521.5 437.7
---------- ----------
4,129.6 4,087.2
---------- ----------
CURRENT ASSETS:
Cash and equivalents 21.1 3.1
Accounts receivable, net 435.0 373.7
Inventories at average cost:
Fuel 60.5 77.6
Materials and supplies 91.0 91.9
Diversified materials 142.3 126.8
Underrecovery of fuel cost 14.5 34.5
Income taxes receivable - 16.8
Deferred income taxes 47.3 5.8
Other 50.9 45.1
---------- ---------
862.6 775.3
---------- ---------
OTHER ASSETS:
Investments:
Loans receivable, net 31.0 24.0
Nuclear plant decommissioning fund 289.7 266.7
Joint ventures and partnerships 60.2 54.6
Deferred purchased power contract termination costs 325.5 348.2
Other 326.6 204.0
---------- ----------
1,033.0 897.5
---------- ----------
$6,025.2 $5,760.0
========== ==========
Note: The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
September 30, December 31,
1998 1997
----------- -----------
CAPITAL AND LIABILITIES (Unaudited)
COMMON STOCK EQUITY:
<S> <C> <C>
Common stock $1,208.4 $1,209.0
Retained earnings 656.7 567.0
---------- ---------
1,865.1 1,776.0
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 33.5 33.5
LONG-TERM DEBT 2,348.1 2,377.8
---------- ---------
TOTAL CAPITAL 4,246.7 4,187.3
--------- ---------
CURRENT LIABILITIES:
Accounts payable 208.7 253.2
Customers' deposits 101.2 97.1
Income taxes payable 21.1 -
Accrued other taxes 71.6 12.0
Accrued interest 47.4 56.8
Other 70.0 74.8
---------- ---------
520.0 493.9
Notes payable 183.2 214.8
Current portion of long-term debt 71.4 15.2
---------- ---------
774.6 723.9
---------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 601.6 471.2
Unamortized investment tax credits 79.4 85.7
Other postretirement benefit costs 114.0 107.4
Other 208.9 184.5
---------- ---------
1,003.9 848.8
---------- ----------
$6,025.2 $5,760.0
========== ==========
Note: The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
1998 1997
------- -------
(Unaudited)
OPERATING ACTIVITIES:
<S> <C> <C>
Income from continuing operations $245.6 $129.9
Adjustments for noncash items:
Depreciation and amortization 318.0 254.9
Extended nuclear outage - replacement fuel cost - 70.2
Deferred income taxes and
investment tax credits, net 76.8 (21.0)
Increase in accrued other postretirement
benefit costs 6.6 6.6
Net change in deferred insurance policy
acquisition costs - (2.8)
Net change in insurance policy benefit reserves - 43.7
Changes in working capital, net of effects from acquisition or sale of
businesses:
Accounts receivable (38.4) (91.7)
Inventories 32.0 (16.5)
Underrecovery of fuel cost 15.0 (61.3)
Accounts payable (59.6) 27.3
Income taxes payable 38.3 10.8
Accrued other taxes 59.3 58.3
Other (26.0) 6.3
Other operating activities (.7) (25.0)
-------- -------
666.9 389.7
-------- -------
INVESTING ACTIVITIES:
Property additions (including allowance for
borrowed funds used during construction) (355.9) (288.7)
Purchase of loans and securities, net (7.1) (2.4)
Proceeds from sale of properties 126.5 8.6
Acquisition of businesses (144.5) (23.2)
Acquisition of cogeneration facility and
contract termination cost - (445.0)
Investments in joint ventures and partnerships, net (7.4) (23.5)
Other investing activities (78.9) (17.3)
-------- --------
(467.3) (791.5)
-------- --------
FINANCING ACTIVITIES:
Issuance of long-term debt 189.1 447.7
Repayment of long-term debt (172.5) (34.2)
Increase(decrease) in commercial paper with
long-term support (8.4) 130.6
Dividends paid on common stock (155.9) (152.9)
Increase(decrease)in short-term debt (31.6) 19.6
Other financing activities (2.3) 1.0
-------- --------
(181.6) 411.8
-------- --------
NET INCREASE IN CASH AND EQUIVALENTS 18.0 10.0
Beginning cash and equivalents 3.1 5.2
-------- --------
ENDING CASH AND EQUIVALENTS $21.1 $15.2
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $142.4 $108.0
Income taxes (net of refunds) $21.9 $74.5
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Statements of Changes in Equity For the periods ended September 30, 1998 and
1997 (Dollars in millions)
Cumulative
Preferred Stock
Accumulated --------------
Other Without With
Common Retained Comprehensive Sinking Sinking
Total Stock Earnings Income Funds Funds
------ ------- -------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $1,957.7 $1,208.3 $716.5 $(0.6) $33.5 $-
Comprehensive income
Net income 129.9 129.9
Unrealized loss on securities
net of $1.4 income tax expense 2.3 2.3
-------- --------- ------- ------- ------- -----
132.2 - 129.9 2.3 - -
Common stock issued / (redeemed) 0.8 0.8
Cash dividends on common stock (152.9) (152.9)
-------- --------- ------- -------- ------- ------
Balance, September 30, 1997 $1,937.8 $1,209.1 $693.5 $1.7 $33.5 $-
======== ========= ======= ======== ======= ======
Balance, December 31, 1997 $1,809.5 $1,209.0 $567.0 $- $33.5 $-
Comprehensive income
Net income 245.6 245.6
Common stock issued / (redeemed) (0.6) (0.6)
Cash dividends on common stock (155.9) (155.9)
--------- --------- ------- ------- ------- -------
Balance, September 30, 1998 $1,898.6 $1,208.4 $656.7 $- $33.5 $-
========= ======== ======= ======= ======== =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
FINANCIAL STATEMENTS
FLORIDA POWER CORPORATION
Statements of Income
(In millions) Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------- ------- -------- --------
(Unaudited) (Unaudited)
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Residential $445.0 $397.0 $1,089.2 $994.0
Commercial 174.4 156.7 451.8 426.3
Industrial 55.5 51.0 158.5 158.0
Sales for resale 74.3 47.7 155.0 105.1
Other 46.4 54.5 170.1 174.5
-------- -------- --------- ---------
795.6 706.9 2,024.6 1,857.9
-------- -------- --------- ---------
OPERATING EXPENSES:
Operation:
Fuel 188.9 129.5 434.0 343.2
Purchased power 122.3 133.7 332.1 377.7
Energy conservation cost 24.5 21.7 60.1 49.3
Operations and maintenance 108.3 105.5 326.9 318.6
Extended nuclear outage - O&M
and replacement power costs - 33.1 5.1 130.9
Depreciation and amortization 89.5 78.8 260.9 227.3
Taxes other than income taxes 57.5 53.2 158.4 149.9
-------- -------- --------- ---------
591.0 555.5 1,577.5 1,596.9
-------- -------- --------- ---------
Income taxes:
Currently payable (38.1) 41.2 55.8 77.2
Deferred, net 105.0 5.2 79.6 (8.1)
Investment tax credits, net (2.0) (2.0) (5.9) (5.9)
-------- -------- --------- --------
64.9 44.4 129.5 63.2
-------- -------- --------- ---------
655.9 599.9 1,707.0 1,660.1
-------- -------- --------- ---------
OPERATING INCOME 139.7 107.0 317.6 197.8
-------- -------- --------- ---------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 2.4 1.5 6.9 4.2
Miscellaneous other expense, net (1.8) (.8) (2.4) (1.7)
-------- -------- --------- ---------
.6 .7 4.5 2.5
-------- --------
INTEREST CHARGES
Interest on long-term debt 28.1 28.2 87.8 72.9
Other interest expense 5.0 4.2 16.4 10.9
-------- -------- --------- ---------
33.1 32.4 104.2 83.8
Allowance for borrowed funds used
during construction (1.9) (1.0) (5.5) (2.7)
-------- -------- --------- ---------
31.2 31.4 98.7 81.1
-------- -------- --------- ---------
NET INCOME 109.1 76.3 223.4 119.2
DIVIDENDS ON PREFERRED STOCK .3 .3 1.1 1.1
-------- -------- --------- ---------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $108.8 $76.0 $222.3 $118.1
======== ======== ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
September 30, December 31,
1998 1997
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
<S> <C> <C>
Electric utility plant in service and held $6,286.8 $6,166.8
for future use
Less - Accumulated depreciation 2,676.7 2,511.0
Accumulated decommissioning for nuclear plant 246.6 223.7
Accumulated dismantlement for fossil plants 130.1 128.5
---------- ----------
3,233.4 3,303.6
Construction work in progress 322.9 279.4
Nuclear fuel, net of amortization of $371.3
in 1998 and $356.7 in 1997 51.8 66.5
---------- ----------
3,608.1 3,649.5
Other property, net 33.9 33.2
---------- ----------
3,642.0 3,682.7
---------- ----------
CURRENT ASSETS:
Cash and equivalents 16.5 -
Accounts receivable, less reserve of $3.6
in 1998 and $3.2 in 1997 285.6 243.9
Inventories at average cost:
Fuel 30.0 44.0
Materials and supplies 91.0 91.9
Underrecovery of fuel cost 14.5 34.5
Income tax receivable - 13.5
Deferred income taxes 47.3 5.8
Other 37.1 32.2
---------- ----------
OTHER ASSETS:
Nuclear plant decommissioning fund 289.7 266.7
Unamortized debt expense 37.5 25.0
Deferred purchased power contract termination costs 325.5 348.2
Other 130.3 112.4
---------- ----------
783.0 752.3
---------- ----------
$4,947.0 $4,900.8
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
September 30, December 31,
1998 1997
----------- -----------
CAPITALIZATION AND LIABILITIES (Unaudited)
CAPITALIZATION:
<S> <C> <C>
Common stock $1,004.4 $1,004.4
Retained earnings 838.4 763.1
---------- ---------
1,842.8 1,767.5
CUMULATIVE PREFERRED STOCK:
Without sinking funds 33.5 33.5
LONG-TERM DEBT 1,722.6 1,745.4
---------- ---------
TOTAL CAPITAL 3,598.9 3,546.4
---------- ---------
CURRENT LIABILITIES:
Accounts payable 119.6 161.9
Accounts payable to associated companies 26.5 26.5
Customers' deposits 101.2 97.1
Income taxes payable 21.6 -
Accrued other taxes 67.6 7.9
Accrued interest 40.8 45.7
Other 39.0 59.2
---------- ---------
416.3 398.3
Notes payable - 179.8
Current portion of long-term debt 16.6 1.5
---------- ---------
432.9 579.6
---------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 577.7 451.3
Unamortized investment tax credits 79.2 85.1
Other postretirement benefit costs 110.8 104.7
Other 147.5 133.7
---------- ---------
915.2 774.8
---------- ---------
$4,947.0 $4,900.8
========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Statements of Cash Flows
(In millions)
Nine Months Ended
September 30,
1998 1997
-------- --------
(Unaudited)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income after dividends on preferred stock $222.3 $118.1
Adjustments for noncash items:
Depreciation and amortization 288.6 233.0
Extended nuclear outage - replacement fuel cost - 70.2
Deferred income taxes and investment
tax credits, net 73.0 (14.0)
Increase in accrued other postretirement
benefit costs 6.1 6.1
Allowance for equity funds used during construction (6.9) (4.2)
Changes in working capital:
Accounts receivable (41.8) (69.8)
Inventories 14.9 9.3
Underrecovery of fuel cost 15.0 (61.3)
Accounts payable (42.3) 20.0
Accounts payable to associated companies - 5.8
Income taxes payable 35.1 28.4
Accrued other taxes 59.6 58.2
Other (25.7) 24.7
Other operating activities 16.2 (20.4)
--------- ---------
614.1 404.1
--------- ---------
INVESTING ACTIVITIES:
Construction expenditures (191.6) (230.2)
Allowance for borrowed funds used during construction (5.5) (2.7)
Additions to non-utility property (5.5) (2.3)
Acquisition of cogeneration facility and
contract termination costs - (445.0)
Proceeds from sale of properties 10.8 4.7
Other investing activities (56.1) (17.3)
--------- ---------
(247.9) (692.8)
--------- ---------
FINANCING ACTIVITIES:
Issuance of long-term debt 144.1 447.7
Repayment of long-term debt (158.6) (20.6)
Decrease in commercial paper with
long term support (8.4) -
Dividends paid on common stock (147.0) (144.4)
Increase (decrease) in short-term debt (179.8) 15.0
--------- ---------
(349.7) 297.7
--------- ---------
NET INCREASE IN CASH AND EQUIVALENTS 16.5 9.0
Beginning cash and equivalents - -
--------- ---------
ENDING CASH AND EQUIVALENTS $16.5 $9.0
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $100.9 $69.9
Income taxes (net of refunds) $21.1 $47.7
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
1) As previously reported in their combined Form 8-K dated June 2, 1998,
Florida Progress Corporation ("Florida Progress") and Florida Power
Corporation ("Florida Power") amended their combined Form 10-Qs for the
quarters ended June 30,1997 and September 30,1997 (the "second quarter 1997
Form 10-Q" and "third quarter 1997 Form 10-Q" respectively) and their
combined Form 10-K for the year ended December 31, 1997, as amended by the
Form 10-K/A filed on June 2, 1998 (the "1997 Form 10-K") in response to
comments received from the Securities and Exchange Commission ("SEC"). The
SEC comments contended that Florida Power should have recognized the
operations and maintenance ("O&M") costs associated with the extended
outage of the Crystal River Nuclear Plant ("CR3") as those costs were
incurred during 1997. In June 1997, Florida Power recorded a $72.4 million
accrual for O&M costs that it expected to incur for the remaining six
months of 1997. The accrual was based on commitments and obligations
associated with outage-related work planned for the remainder of the year.
The financial results for the second, third and fourth quarters of 1997
have been restated to reflect the recognition of nuclear outage O&M costs
as incurred. The change affected the financial results for the interim
reporting periods but did not have any impact on the results of the fiscal
year ended 1997. The following table details the restated and originally
reported financial results for Florida Progress and Florida Power for the
three and nine months ended September 30, 1997:
<TABLE>
<CAPTION>
(In millions, except per share amounts) Three Months Nine Months
Ended Ended
September 30, 1997 September 30,1997
1997 as amended:
Florida Progress
<S> <C> <C>
Net Income $81.6 $129.9
Earnings per share-basic & fully diluted .84 1.34
Florida Power
Net Income 76.0 118.1
1997 as originally reported:
Florida Progress
Net Income $102.0 $105.8
Earnings per share-basic & fully diluted 1.05 1.09
Florida Power
Net Income 96.4 94.0
</TABLE>
2) In December 1997, Florida Power ended the three-year test period for
residential revenue decoupling which was ordered by the Florida Public
Service Commission ("FPSC") and began in January 1995. The difference
between target revenues and actual revenues is included as a current asset
on the balance sheet for the period ended December 31, 1997. The regulatory
asset of $21.8 million, at December 31, 1997, is currently being recovered
from customers over a two-year period, ending in the year 2000, through the
energy conservation cost recovery clause as directed by the FPSC decoupling
order. Revenue decoupling increased residential revenues by $1.3 million
and $13.5 million for the three and nine months ended September 30, 1997,
respectively.
<PAGE>
3) CONTINGENCIES
PURCHASED POWER COMMITMENTS - The purchased power contracts with qualifying
facilities ("QFs") employ separate pricing methodologies for capacity
payments 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
applicable contract is based would not have been operated.
Four QFs filed suit against Florida Power in state court over contract
payment terms, and one QF also filed in federal court. Two of the suits have
been settled, and the federal case was dismissed, although the plaintiff has
appealed. The trial began on November 2, 1998 in one suit and the other is
scheduled for mid-1999.
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 believes that any incremental fuel and capacity
expenses that may result from the outcome of these proceedings will be
recovered from customers through the fuel adjustment clauses.
OFF-BALANCE SHEET RISK - Several of Florida Progress' subsidiaries are
general partners in unconsolidated partnerships and joint ventures. Florida
Progress or its subsidiaries have agreed to support certain loan agreements
of the partnerships and joint ventures. Those credit risks are not material
to the financial statements of Florida Progress. Florida Progress considers
those credit risks to be minimal, based upon the asset values supporting the
liabilities of these entities.
In August 1998, MEMCO Barge Line, Inc. ("MEMCO"), a wholly owned subsidiary
of Electric Fuels Corporation ("Electric Fuels"), entered into a synthetic
lease financing, accomplished via a sale and leaseback, for an aggregate of
approximately $175 million of inland river barges and $25 million of tow
boats. Charter (lease) payments to be made by MEMCO will be sufficient to
cover the interest and principal repayments during the term of the charter.
Through September 30, 1998, $110 million of vessels had been sold by MEMCO
and leased back. Progress Capital Holdings, Inc. ("Progress Capital
Holdings") has guaranteed 100% of MEMCO's obligation.
MID-CONTINENT LIFE INSURANCE COMPANY -- A series of events in 1997
significantly jeopardized the ability of Mid-Continent Life Insurance Company
("Mid-Continent"), Florida Progress' wholly owned subsidiary, to implement a
plan to eliminate a projected reserve deficiency, resulting in the impairment
of Florida Progress' investment in Mid-Continent.
On April 14, 1997, the Insurance Commissioner of the State of Oklahoma
("Commissioner") received court approval to temporarily seize control of the
operations of Mid-Continent, and in May 1997, the Oklahoma County District
Court granted the Commissioner's application to place Mid-Continent into
receivership. The Commissioner had alleged that Mid-Continent's reserves were
understated by more than $125 million, thus causing Mid-Continent to be
statutorily impaired. The Commissioner further alleged at Mid-Continent had
violated Oklahoma law relating to deceptive trade practices in connection
with the sale of its "Extra Life" insurance policies and was not entitled to
raise premiums, a key element of Mid-Continent's plan to address the
projected reserve deficiency. While sustaining the receivership, the court
also ruled that premiums could be raised. Both sides appealed the decision to
the Oklahoma Supreme Court, and the appeals are still pending.
<PAGE>
Even though the appeals are still pending, the Oklahoma District Court
continues to hear motions and conduct other proceedings relating to the
receivership. At a hearing on June 17, 1998, the judge rejected both the
Commissioner's and Mid-Continent's rehabilitation plans. The judge invited
both parties to submit simplified plans that include premium increases. In
the annual statement filed by the Commissioner on behalf of Mid-Continent,
the estimated reserve deficiency was revised upward to $348 million. Florida
Progress believes that this new figure is untenable and not based on sound
actuarial principles.
In a ruling on July 17, 1998, the Court ordered the Commissioner to provide
actuarial data to Mid-Continent. This information, which was previously
withheld, enabled Mid-Continent to further develop rehabilitation plans. At
the same time, the Judge denied a Florida Progress motion to disqualify
Commissioner Crawford as a receiver due to conflict of interest.
On October 9, 1998 Mid-Continent submitted an outline for a rehabilitation
plan. The plan is expected to be presented in detail to the Judge in December
1998. Mid-Continent has also proposed that bids from all interested parties
be sought for purchase of the entire company and evaluated in an open
process. The Judge has agreed to this process, rejecting the Commissioner's
proposal for third-party sealed bids, restricted to Oklahoma-licensed
insurers only.
In December 1997, the Commissioner filed a lawsuit against Florida Progress,
certain of its directors and officers and certain former Mid-Continent
officers, making a number of allegations (as detailed in paragraph 10 under
Item 3 "Legal Proceedings" in the 1997 Form 10-K), and seeking access to
Florida Progress' assets to satisfy policyholder and creditor claims. On
April 17, 1998, the court granted motions to dismiss the individual
defendants, leaving Florida Progress as the sole remaining defendant in the
lawsuit. Florida Progress believes the Commissioner's lawsuit is without
merit, and intends to vigorously defend itself against these charges. The
ultimate outcome of the matter cannot presently be determined. Accordingly,
Florida Progress has made no provision for any loss for this matter.
A new lawsuit was filed on September 1, 1998 against Florida Progress,
Progress Capital Holdings, a wholly-owned subsidiary of Florida Progress,
James Harlin, and Mid-Continent's local counsel, the McAfee & Taft law firm
and two of its attorneys, Robert Gilliland and Philip Hart. The Commissioner
has on seven different occasions, two of them to the Oklahoma Supreme Court,
unsuccessfully argued that as Receiver for Mid-Continent, only he can engage
attorneys to represent Mid-Continent in the receivership proceedings. Thus,
the lawsuit claims legal malpractice against the law firm and attorneys, for
taking unauthorized action on behalf of Mid-Continent and conspiracy to
commit malpractice against the other defendants. The suit seeks damages and
injunctive relief. Florida Progress believes this case is without merit and
will vigorously defend itself. The ultimate outcome of the matter cannot
presently be determined. Accordingly, Florida Progress has not made provision
for any loss for this matter.
<PAGE>
As a result of the November election, a new Commissioner, Carroll Fisher, was
elected to replace John Crawford as Oklahoma Insurance Commissioner,
effective January 10, 1999.
As a result of the Commissioner's actions and other factors described under
the heading "Mid-Continent Life Insurance Company" in Note 11 to the
financial statements in the 1997 Form 10-K, Florida Progress concluded the
full amount of its $86.9 million investment in Mid-Continent at December 31,
1997 was impaired. Therefore, Florida Progress recorded a provision for loss
on investment of $86.9 million in 1997. In addition, tax benefits of
approximately $11 million related to the excess of the tax basis over the
book value in the investment in Mid-Continent as of December 31, 1997, were
not recorded because of uncertainties associated with the timing of a tax
deduction. Florida Progress also recorded an accrual at December 31, 1997 for
legal fees associated with defending its position in current Mid-Continent
legal proceedings.
Mid-Continent's financial statements have been deconsolidated effective
December 31, 1997 and the investment is accounted for under the cost method.
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 an FPSC
order, Florida Power is accruing $6 million annually to a storm damage
reserve and may defer any losses in excess of the reserve. The reserve
balance as of September 30, 1998 is $22.6 million.
Under 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 $83.9 million per incident, with a maximum assessment of
$10 million per year.
Florida Power is a member of the Nuclear Electric Insurance, Ltd. ("NEIL"),
an industry mutual insurer, which provides business interruption and extra
expense coverage in the event of a major accidental outage at a covered
nuclear power plant. Florida Power is subject to a retroactive premium
assessment by NEIL under this policy in the event loss experience exceeds
NEIL's available surplus. Florida Power's present maximum share of any such
retroactive assessment is $2.7 million per policy year.
Florida Power also maintains nuclear property damage insurance and
decontamination and decommissioning liability insurance totaling $2.1
billion. The first layer of $500 million is purchased in the commercial
insurance market with the remaining excess coverage purchased from NEIL.
Florida Power is self-insured for any losses that are in excess of this
coverage. Under the terms of the NEIL policy, Florida Power would be assessed
up to a maximum of $9.5 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.
<PAGE>
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 Environmental
Protection Agency ("EPA") as potentially responsible parties ("PRPs") at
certain sites, including a coal gasification plant site in Sanford, Florida
("Sanford site") that Florida Power previously owned and operated. There are
five parties, including Florida Power, that have been identified as PRPs at
the Sanford site. Liability for the cleanup costs at these sites is joint and
several.
An agreement has been reached among the PRP's to spend up to $1.5 million
dollars to perform the Risk Investigation and Feasibility Study (RI/FS).
Florida Power is liable for 39.7% of those costs. On September 25, 1998, the
EPA formally approved the PRP RI/FS Work Plan. Upon completion of the RI/FS,
EPA will advise the PRP's to what extent the contamination may be
attributable to previous operations at the site. The RI/FS field work is
expected to be completed by the end of 1998 with a final Treatability Study
report expected to be finalized by August 1999.
The discussions and resolution of liability for cleanup costs could cause
Florida Power to increase its estimate of its liability for those costs.
Although estimates of any additional costs are not currently available, the
outcome is not expected to have a material effect on Florida Progress'
financial position, results of operations or liquidity.
In addition to these designated sites, there are other sites where affiliates
may be responsible for additional environmental cleanup.
Florida Progress believes that its subsidiaries will not be required to pay a
disproportionate share of the costs for cleanup of these sites. Florida
Progress' best estimates indicate that its proportionate share of liability
for cleaning up all sites ranges from $2.5 million to $7.5 million. It has
accrued $4.5 million for these potential costs.
ADVANCED SEPARATION TECHNOLOGIES ("AST")- In 1996, Florida Progress sold its
80% interest in AST to Calgon Carbon Corporation ("Calgon") for $56 million
cash. Calgon filed a lawsuit in January 1998, and amended it in April 1998,
alleging misstatement of AST's 1996 revenues, assets and liabilities, seeking
damages and the right to rescind the sale. The lawsuit also accuses Florida
Progress of failing to disclose flaws in AST's manufacturing process and a
lack of quality control. Florida Progress believes the lawsuit is without
merit and intends to vigorously defend itself. The ultimate outcome of the
matter cannot presently be determined. Accordingly, Florida Progress has not
made provision for any loss for this matter.
AGE DISCRIMINATION SUIT - Florida Power and Florida Progress have been named
defendants in an age discrimination lawsuit. The number of plaintiffs remains
at 116, however, 4 of those plaintiffs have had their federal claims
dismissed. 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 to provisionally certify this case as a class action suit under the
Age Discrimination in Employment Act. On August 10, 1998, Florida Power filed
a motion to decertify the class, and the plaintiffs filed their response in
opposition on September 30, 1998. A hearing date for the motion has not yet
been set. Estimates of the potential liability associated with this lawsuit
cannot be made until the final decision on whether to certify the case as a
class action suit has been made. A decision is not expected until 1999.
4) In the opinion of management, the accompanying financial statements
include all adjustments deemed necessary to summarize fairly and reflect the
financial position and results of operations of Florida Progress and Florida
Power for the interim periods presented. Quarterly results are not
necessarily indicative of results for the full year. It is suggested that
these financial statements be read in conjunction with the financial
statements and notes thereto in the 1997 Form 10-K.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OPERATING RESULTS
In June 1998, Florida Progress and Florida Power amended their second and third
quarter 1997 Form 10-Qs and 1997 Form 10-K in response to comments received by
the SEC. The SEC comments contended that Florida Power should have recognized
the O&M costs associated with the extended nuclear outage as those costs were
incurred during 1997. Financial results contained herein for 1997 have been
restated to comply with those comments. (See Note 1 to the Financial
Statements).
Florida Progress' earnings per share for the three month period ended September
30, 1998, were $1.21 per share compared to earnings of $.84 cents per share for
the same period in 1997. The increase resulted primarily from Florida Power,
Florida Progress' largest operating unit, which reported earnings of $1.12 per
share compared to earnings of $.78 per share for the same period last year.
Earnings per share for Florida Progress for the nine month period ended
September 30, 1998 were $2.53 compared to $1.34 for the same period last year.
Florida Progress' and Florida Power's earnings were reduced in 1997 by $.21 and
$.82 per share, respectively, due to the extended outage at the Crystal River
nuclear plant ("CR3"). (See Note 1 to the Financial Statements.) The increase
for both the three and nine month periods ended September 30, 1998, excluding
the effects of the extended outage of CR3, is due primarily to continued hotter
than normal weather experienced during the summer months and customer growth at
Florida Power. Improved operations at Electric Fuels, Florida Progress' energy
and transportation subsidiary, also contributed to the increase.
Diversified earnings per share were $.09 for the third quarter of 1998, $.03
higher than the same quarter last year due primarily to improved operations at
Electric Fuels' Inland Marine Transportation group. Electric Fuels earned $.11
per share for the three months ended September 30, 1998 compared to $.09 for the
same period last year. For the nine months ended September 30, 1998, earnings
per share from diversified operations of $.24 were $.12 higher than the same
period in 1997 due to higher earnings at Electric Fuels and a one-time gain
realized from the buy-out, during the second quarter of 1998, of a purchase
power contract associated with a cogeneration facility in which a Florida
Progress subsidiary is a minority partner.
Florida Power - Operating Revenues
Florida Power's operating revenues were $88.7 million (12.5%) and $166.7 million
(9.0%) higher for the three and nine month periods ended September 30, 1998,
compared to the same periods in 1997. Increased customer usage, due to hotter
than normal weather during the second and third quarters of 1998, was the
primary reason for the increase. Florida Power experienced a summer system peak
for 1998 during the month of July. In addition to higher customer usage, strong
retail customer growth and increased sales to wholesale customers also
contributed to the revenue increase.
Florida Power - Operating Expenses
Fuel and purchased power costs were $48.0 million (18.2%) and $45.2 million
(6.3%) higher for the three and nine months ended September 30, 1998 compared to
the same periods in 1997. The increase for both periods was due primarily to the
increase in system requirements due to the hot weather. In accordance with the
FPSC stipulation agreement approved by the FPSC, Florida Power recorded a charge
of approximately $5.1 million in 1998 and $70.2 million in June 1997 in
replacement fuel costs in connection with the extended outage at CR3. Florida
Power recovers substantially all of its fuel and purchased power costs through a
FPSC ordered fuel adjustment clause, except for those replacement power costs
excluded by the stipulation agreement, thereby eliminating any impact on net
income.
<PAGE>
Depreciation expense was $10.7 million and $33.6 million higher for the three
and nine months ended September 30, 1998 compared to the same periods last year.
Florida Power accelerated the amortization of the Tiger Bay regulatory asset by
$7 million in the third quarter. The accelerated amortization of Tiger Bay and
other regulatory assets totaled approximately $21 million for the nine months
ended September 30, 1998. All amortization was recorded pursuant to the
applicable regulatory orders. Excluding the accelerated amortization of the
regulatory assets, the increase in depreciation and amortization expense was due
to a higher overall plant balance, primarily resulting from the addition of the
Tiger Bay facility.
Interest expense increased $.7 million and $20.4 million for the three and nine
month periods ended September 30, 1998 compared to the same periods in 1997. The
increase for both periods was a result of higher debt balances during 1998 due
primarily to the issuance of $450 million of medium-term notes in July 1997 to
fund the Tiger Bay acquisition and increased costs associated with the nuclear
outage.
Florida Progress Diversified Operations
Florida Progress revenues from diversified operations were $20.3 million and
$88.1 million higher for the three and nine months ended September 30, 1998
compared to the same period last year due primarily to increased revenues at
Electric Fuels. In addition, diversified revenues for both the quarter and nine
months ended September 30, 1998 reflect the absence of revenues from
Mid-Continent, which was placed into receivership in the second quarter of 1997.
(See Note 3 "Contingencies - Mid-Continent Life Insurance Company" contained
herein.)
Electric Fuels earned $10.5 million, or $.11 per share, during the third
quarter, compared with $9.1 million or $.09 per share, in 1997. The improvement
in earnings was primarily attributable to improved results at the Inland Marine
Transportation group.
Earnings for the Inland Marine Transportation group were up $1.3 million over
the third quarter of 1997. The increased earnings were due to the expansion of
the MEMCO barge fleet, as well as improvements in the barge freight rates as
compared with the third quarter of 1997.
Electric Fuels' Rail Services group third quarter 1998 results increased
approximately $.4 million compared with a year ago. The improved results were
largely due to continued strong demand for railcar parts and services. Partially
offsetting the earnings improvement were lower earnings from the recycling
division. The recycling division was negatively impacted by a decline in market
prices for scrap steel. Lower market prices have resulted from an increase in
finished steel imports and a decline in scrap steel exports.
Electric Fuels' Energy and Related Services group earnings were essentially
unchanged for the third quarter of 1998, compared with the third quarter of
1997.
For the nine month period ended September 30, 1998 Electric Fuels had earnings
of $29.3 million, or $.30 per share, an increase in earnings of $7.7 million, or
$.08 per share, over the same period in the prior year. The increase was due
partially to the expanded barge fleet at the Inland Marine Transportation group,
along with the return of normal river operating conditions in 1998. First
quarter earnings in 1997 were adversely affected due to severe flooding along
the Ohio and Mississippi rivers.
Acquisitions in 1997 and 1998 by the Rail Services Group, along with increased
sales in trackwork and railcar parts and services, also contributed to the
increase. Increased offshore barge deliveries from the Energy and Related
Services group increased earnings for the nine month period, when compared to
the prior year.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Florida Power budgeted $294 million, excluding allowance for funds used during
construction, for its 1998 construction program. This is expected to be financed
by internally generated funds. During the first nine months of 1998, $191.6
million was spent on the construction program, financed primarily with funds
from operations.
Florida Power announced on October 20, 1998, that it filed plans with the FPSC
to build a second 500-megawatt generating unit at the Hines Energy Complex in
Polk County. Florida Power plans to absorb the costs of the new combined-cycle
unit in the current customer rates. Combined with the adjacent, nearly completed
Hines Unit 1, Florida Power anticipates that the two units would produce up to
1,000 megawatts of power. Because of site synergies and economies of scale due
to the existing Hines Unit 1, Florida Power is proposing that state regulators
exercise their statutory authority and waive bid requirements for the project.
If the required regulatory approvals are obtained as expected in early 1999,
Florida Power anticipates that the new unit could be built in approximately
three years and come on-line in 2001. The new plant is expected to be funded
primarily with funds from operations.
In October 1998, Florida Power announced that it would redeem in November 1998
all of its outstanding $50 million principal amount of First Mortgage Bonds, 7
3/8% Series due June 1, 2002, at a redemption price of 100.93% of the principal
amount thereof, together with accrued interest. Additionally, Florida Power
announced that it would also redeem in November 1998 all of its outstanding $50
million principal amount of First Mortgage Bonds, 7 1/4% Series due November 1,
2002, at a redemption price of 100.86% of the principal amount thereof, together
with accrued interest.
Florida Power's ratio of earnings to fixed charges was 3.73 for the twelve
months ended September 30, 1998, as compared to 3.31 for the same period in
1997. (See Exhibit 12 filed herewith).
On August 6, 1998, MEMCO, a wholly-owned subsidiary of Electric Fuels, entered
into a synthetic lease financing, accomplished via a sale and a leaseback, for
an aggregate of approximately $175 million of inland river barges and $25
million of tow boats. The lessor, MEMCO Barge Line 1998 Trust ("MEMCO Trust"),
is a special purpose Delaware business trust formed for the purpose of
facilitating the financing. MEMCO Trust is obtaining the barges and towboats
through the issuance of secured notes and trust certificates. On August 6, 1998,
MEMCO Trust issued $69.3 million of secured notes with a coupon of 6.95% and a
maturity date of June 30, 2014, and received certificate holder contributions of
$40.7 million in respect of trust certificates yielding 7.70% with a maturity of
June 30, 2014. MEMCO Trust acquired $110 million of barges and towboats from
MEMCO with the proceeds from the sale of the secured notes and trust
certificates. Charter (lease) payments to be made by MEMCO will be sufficient to
cover the interest on the notes, yield on certificates and principal repayments
during the term of the charter. MEMCO's charter payment obligations are 100%
guaranteed by Progress Capital Holdings. A second closing in respect of the
balance of $56.7 million of notes and $33.3 million of certificate holder
contributions will be held in December 1998, the proceeds from which will be
used to acquire the remaining $90 million of barges and towboats from MEMCO.
Effective November 1, 1998, Florida Progress converted its Progress Plus Stock
Plan and the Savings Plan for Employees of Florida Progress Corporation to
original issue shares from open market purchase shares. Florida Progress
believes it may raise approximately $50 million of equity per year through this
conversion. This is part of an overall capital structure management strategy to
reduce the leverage of Florida Progress.
Progress Capital has a private $300 million medium-term note program providing
for the issuance of notes with maturities ranging from nine months to 30 years.
In October 1998, Progress Capital issued $70 million of two year, 5.47%
fixed-rate medium-term notes. The proceeds will be used to pay down commercial
paper and for general corporate purposes.
Electric Fuels continues to grow. For the nine months ended September 30,1998,
Electric Fuels has made approximately $150 million in acquisitions, primarily in
the rail services industry, and may make additional acquisitions of
approximately $50 million before year end 1998.
Florida Progress and Florida Power believe their available sources of liquidity
will be sufficient to fund their long-term and short-term capital requirements.
<PAGE>
YEAR 2000
Florida Progress is in the process of addressing Year 2000 ("Y2K") issues and
mitigating its risks. Y2K issues exist because, historically, many computer
systems have used two digits to represent a year. With the change of the
century, a two digit year may present calculation or sequencing errors in
computer software and embedded technology.
Florida Progress has taken a comprehensive approach in developing its Y2K plans,
which emphasizes the testing of every system, to the extent possible, dedicating
resources and developing contingency plans. Florida Progress expects that
preparations for Y2K issues, including contingency plans, will be completed by
the end of the third quarter of 1999 for Florida Power and during the fourth
quarter of 1999 for Electric Fuels. The following is a more detailed description
of the methodology, priorities and planning to address Y2K concerns, as required
by Securities and Exchange Commission Rules.
Florida Progress' methodology for identification and remediation of Y2K issues
is a five step process which includes: (1) awareness (i.e., the communication of
Y2K issues and their importance); (2) inventory (i.e., the itemized tabulation
of all Y2K suspect software, infrastructure and embedded systems); (3)
assessment and prioritization (i.e., performing an evaluation of all technology
components, obtaining compliance certifications from suppliers, product vendors,
and other third parties, to the extent possible, with which Florida Progress
conducts business, reviewing interfaces, and categorizing identified issues as
mission critical or not); (4) remediation and verification (i.e., correcting or
upgrading systems and components and where possible, end-to-end testing); and
(5) contingency planning.
All areas of Florida Progress are involved in identifying and addressing
software, infrastructure and embedded technology issues. The Information
Technology ("IT") focus is on application and operating software, data storage
capabilities and technology infrastructure (workstations, servers, voice and
data networks, and communications equipment). Embedded systems are internal
components used to control, monitor, or assist the operation of equipment,
machinery, or plants. They are integral parts of systems, and in many cases
their presence is not obvious. There are several categories of embedded systems,
including microprocessors found in such devices as temperature sensors, circuit
breakers, flow controllers, switchgear, telephone exchanges, and computer
systems used in manufacturing or process control, where the computer is
connected to plant or machinery in order to control it.
Florida Power began planning for Y2K in 1996, by inventorying and assessing
traditional IT supported applications and infrastructure. In 1997, the scope was
expanded to encompass embedded microprocessors within its power generation,
delivery, and customer service areas. The scope has been further expanded in
1998 to include verifying the readiness of the transmission grid, vendors,
suppliers and customers.
Florida Progress has identified mission critical processes that have been given
the highest level of priority and is currently focusing its efforts on verifying
the Y2K readiness of those systems. These are the systems or processes that
provide for the generation and delivery of energy. Systems that provide for the
monitoring and control of the electric grid, generating plant output and safety
have been given the highest priority. Additional systems that have been given a
critical status are the plant process control activities, security and
telecommunications. The customer service system has also been given a priority
status.
Florida Power has completed the inventory and assessment of all IT and the
mission critical embedded technology, with the remainder of the embedded
technology to be completed by the end of the first quarter 1999. The generation,
distribution, and customer service embedded systems are currently in the
assessment and remediation phases. Electric Fuels' IT, as well as coal, marine
and rail embedded systems, are currently in the inventory and assessment phases.
Remediation, verification, and contingency planning for all Florida Power
systems is anticipated to be completed by the end of the third quarter 1999, and
for Electric Fuels by the end of the fourth quarter of 1999.
<PAGE>
The Florida Progress Y2K effort is overseen by the Vice President, Information
Technology of Florida Power, who provides status reports to the Board of
Directors and outside regulatory agencies and other entities such as the FPSC,
the Nuclear Regulatory Commission ("NRC"), and the North American Electric
Reliability Council ("NERC").
Florida Progress is in the process of developing corporate-wide contingency
plans and incorporating assumptions consistent with similar businesses within
its region. Due to the speculative nature of contingency planning, however,
Florida Progress cannot insure the extent to which such plans will in fact
mitigate the risk of material impacts on Florida Progress' operations due to Y2K
issues.
Florida Progress is in the process of identifying and assessing third party
vulnerabilities. Highest vulnerabilities from third party vendors for Florida
Power exist in the fuel supply and telecommunications industries. Florida Power
has begun a program of working with these vendors to try to determine potential
risks and Y2K readiness. Also, Florida Power is working with industry groups
such as the Florida Reliability Coordinating Council, Nuclear Energy Institute /
Nuclear Utility Software Management Group, and Electric Power Research Institute
to ensure the safety and reliability of power generation and the integrity of
the transmission grid. In addition, Florida Power has initiated and participated
in utility sharing strategy sessions to identify issues with third parties.
Florida Power has also begun to request status information from significant
vendors to determine potential third party Y2K risk.
Florida Progress' current estimate of the total costs of addressing Y2K issues,
including expenses to remedy both embedded systems and computer information
systems, is between $15 million and $25 million. No Florida Progress systems
were replaced on an accelerated basis due to the Y2K issue. To date, no material
IT projects have been postponed. Through the third quarter of 1998, Florida
Progress has spent a total of approximately $3 million to remedy the Y2K issue.
These costs have been expensed as incurred. Florida Progress expects to incur
approximately an additional $2 million, to address Y2K issues, through the end
of 1998. Comparatively, the estimate of $25 million is equal to approximately
75% of the typical yearly Florida Progress IT budget excluding Y2K costs. Costs
associated with the Y2K project are currently, and are expected to continue to
be, funded from general corporate funds. As Florida Progress continues to
address its systems and as the remediation and contingency planning phases of
its compliance efforts progress, the estimated costs of Y2K compliance may
increase.
In the electric utility industry, there are many computers and software programs
that may have Y2K issues, as well as a multitude of individual computer chips
within equipment that may have Y2K implications. Computers and computer chips
are used in power plants that generate electricity, in systems that handle
billing and customer information, and in many other common devices such as
telephones, security systems, and building elevators. While the potential
effects could be widespread, the exact nature of those effects is unknown,
Florida Progress does not expect the potential effect to be severe or
widespread. Florida Progress is making every effort to remediate issues and
provide contingency plans for the possibility of any disruption that could
occur. Nevertheless, achieving Y2K readiness is subject to various risks and
uncertainties, many of which are described above. It is difficult to provide a
detailed, meaningful description of the most reasonably likely worst case Y2K
scenarios. Florida Progress is not able to predict all of the factors that could
cause actual results to differ materially from its current expectations as to
its Y2K readiness. If Florida Progress or third parties with whom it has
significant business relationships, fail to achieve Y2K readiness with respect
to critical systems, there could be a material adverse impact on Florida
Progress' financial position, results of operations, and cash flows. However,
based on the milestones that have been achieved to date and the planned
completion of the Y2K project, Florida Progress is confident that it is taking
the necessary steps to minimize the impact of Y2K.
<PAGE>
"SAFE HARBOR" STATEMENT UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward looking statements, including projections
regarding the proportionate liability for cleaning up certain environmental
sites; the effect of certain legal proceedings on the operations of
Mid-Continent and Florida Progress; the costs associated with, and the time
table for implementation of, Florida Progress' plan to prepare its information
technology systems and embedded technology for the Y2K issue; and Electric
Fuels' acquisitions.
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 business
and Florida Progress' other businesses in general, and on factors which impact
Florida Progress directly. The projections and estimates relate to the pricing
of services, the actions of regulatory bodies, and the effects of competition.
Key factors that have a direct impact on the ability to attain these projections
include continued annual growth in customers, successful cost containment
efforts, the ability of Florida Progress and third party vendors, suppliers and
customers to mitigate risks associated with the Y2K issue, and the efficient
operation of Florida Power's existing and future generating units. In addition,
in developing its forward-looking statements, Florida Progress has made certain
assumptions relating to information technology and productivity improvements and
the favorable outcome of various commercial, legal and regulatory proceedings
and the lack of disruption to its markets.
If Florida Progress' and Florida Power's projections and estimates regarding the
economy, the electric utility business and other factors differ materially from
what actually occurs, or if various proceedings have unfavorable outcomes, then
actual results could vary significantly from the performance projected in the
forward-looking statements.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Florida Progress is exposed to changes in interest rates primarily as a result
of its borrowing activities.
A hypothetical 55 basis point increase in interest rates (10% of Florida
Progress weighted average interest rate) affecting its variable rate debt
($674.8 million at September 30, 1998) would have an immaterial effect on
Florida Progress' pre-tax earnings over the next fiscal year. A hypothetical 10%
decrease in interest rates would also have an immaterial effect on the estimated
fair value of Florida Progress' long-term debt at September 30, 1998.
Commodity Price Risk
Currently, at Florida Power, commodity price risk due to changes in market
conditions for fuel and purchased power are recovered through the fuel
adjustment clause, with no effect on earnings.
Electric Fuels is exposed to commodity price risk through coal sales, the scrap
steel market and fuel for its marine transportation business. A 10% change in
the market price of those commodities would have an immaterial effect on the
earnings of Florida Progress.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
1. Metropolitan Dade County ("Dade") and Montenay Power Corp.
("Montenay") 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.
In re: Petition for Declaratory Statement That Energy Payments Are
Limited to Analysis of Avoided Unit's Contractually Specified
Characteristics, Florida Public Service Commission, Docket No.
980283-EQ.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 2, the first quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 2 and the second quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 3. On September 14, 1998 the federal court affirmed the
order granting Florida Power's Motion for Summary Judgment. In
response, the plaintiffs have filed an appeal. On October 6, 1998, the
FPSC denied the Florida Power Motion for Declaratory Statement.
2. NCP Lake Power, Inc. ("Lake") v. Florida Power Corporation, Florida
Circuit Court, Fifth Judicial Circuit for Lake County, Case No.
9402354-CA-01.
In re: Petition for Expedited Approval of Settlement Agreement With
Lake Cogen, Ltd., Public Service Commission, Docket No. 961477-EQ.
In re: Petition for Declaratory Statement Regarding the Negotiated
Contract for Purchase of Firm Capacity and Energy between Florida
Power Corporation and Lake Cogen, Ltd., Florida Public Service
Commission, Docket No. 980509-EQ.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 3, and the first quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 3. On April 9, 1998, Florida Power filed a petition with the
FPSC for a Declaratory Statement. Florida Power is seeking a
determination that energy payments due pursuant to the negotiated
contract are limited to amounts derived from an analysis of avoided
costs, based exclusively upon the contractually specified
characteristics. On October 6, 1998 the FPSC denied the petition.
In the Circuit Court action, a pre-trial conference was held on
October 1, 1998 and Court mandated mediation was conducted on October
6, with the parties reaching impasse. The bench trial began on
November 2, 1998, and is ongoing.
<PAGE>
3. In re: Standard Offer Contract for the purchase of firm capacity and
energy from a qualifying facility between Panda-Kathleen, L.P.
("Panda") and Florida Power Corporation, FPSC Docket No. 950110-EI.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 4, the first quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 1 and the second quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 2. On August 19, 1998, the Florida Supreme Court denied
Panda's petition for Writ of Certiorari, based on a lack of
jurisdiction. This concludes this matter for reporting purposes.
4. 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-C.V.-OC-10.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 5 and the second quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 4. On August 10, 1998, Florida Power filed a Motion to
Decertify the class. The plaintiffs filed their response in opposition
to the Florida Power motion on September 30, 1998. On October 12,
1998, Florida Power filed a motion for summary judgment on its
counterclaim and on the state law claims of 69 plaintiffs. A hearing
date for the motion has not yet been set. The number of plaintiffs
remains at 116, but 4 of those plaintiffs have had their federal
claims dismissed.
5. Florida Power Corporation v. United States ("Government"), U.S. Court
of Federal Claims, Civil Action No. 96-702C.
Consolidated Edison Co., et al v. United States ("Government"), United
States District Court, Southern District of New York, Case No.98-CIV-
4115.
See prior discussion of the Court of Claims case in the 1997 Form
10-K,Item 3, paragraph 6 and the second quarter 1998 Form 10-Q, Part
2, Item 1, paragraph 6. On September 4, 1998, Florida Power and the
Government filed a joint status report concerning the "most
appropriate course for this litigation" as required by the Judge.
Florida Power is seeking a further stay of the Court of Federal Claims
action, which the government opposes, pending resolution of the
Consolidated Edison Co. case. On October 19, 1998 Florida Power filed
an Amended Complaint and Motion to Stay.
In August 1998, the utilities in the Consolidated Edison Co. case
filed an Amended Complaint adding several additional utilities as
plaintiffs. On August 26, 1998, the government filed a motion for
stay, pending resolution of the federal claims litigation.
6. Sanford Gasification Plant Site, Sanford, Florida.
See prior discussion of the Court of Claims case in the 1997 Form
10-K, Item 3, paragraph 8, the first quarter 1998 Form 10-Q, Part 2,
Item 1, paragraph 4 and Notes to the Financial Statements
"Contingencies" contained herein. On September 25, 1998, the EPA
formally approved the PRP RI/FS Work Plan. Upon completion of the
RI/FS, EPA will advise the PRP's to what extent the contamination may
be attributable to previous operations at the site. The RI/FS field
work is expected to be completed by the end of 1998 with a final
Treatability Study report expected to be finalized by August 1999.
<PAGE>
7. Northern States Power Company et al. v. United States Department of
Energy ("DOE"), U.S. Court of Appeals for the D.C. Circuit, Case No.
97-1065.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 9 and the second quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 5. On May 5, 1998, the Court denied Florida Power's and 40
other utilities' Motion to Enforce the previously issued mandate. The
utilities were seeking, among other things, an order to bar the use by
the DOE of Nuclear Waste Fund fees. Several State Commissions filed a
petition for a Writ of Certiorari with the U.S. Supreme Court seeking
a review of the Circuit Court's denial of the motion to enforce the
Northern States Power Company mandate. Florida Power has chosen not to
join in this action. This concludes this matter for reporting
purposes.
8. State of Oklahoma, ex rel. John P. Crawford, Insurance Commissioner v.
Mid-Continent Life Insurance Company, District Court of Oklahoma
County, State of Oklahoma, Case No. CJ-97-2518-62.
State of Oklahoma, ex rel, John P. Crawford, Insurance Commissioner as
Receiver for Mid-Continent Life Insurance Company v. Florida Progress
Corporation, a Florida corporation, District Court of Oklahoma County,
State of Oklahoma. Case No. CJ-97-2518-62.
Mid-Continent Life Insurance Company v. Robert H. Guilliland, Jr.,
Phillip D. Hart, Mcafee & Taft, a Professional Corporation, James L.
Harlin, Progress Capital Holdings, Inc. and Florida Progress
Corporation, a Florida corporation, District Court of Oklahoma County,
State of Oklahoma. Case No. CJ-98-6595-65.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 10, the first quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 5 and the second quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 8. and Notes to the Financial Statements - "Contingencies"
contained herein. Mid-Continent has notified the court that it has
prepared a revised rehabilitation plan. The plan will be presented in
detail in November 1998. Mid-Continent has also proposed that bids
from all interested parties be sought for purchase of the entire
company and evaluated in an open process. The Judge has agreed to this
process, rejecting the Commissioner's proposal for third-party, sealed
bids from only Oklahoma-licensed insurers.
A new lawsuit was filed on September 1, 1998, against Florida
Progress, Progress Capital, James Harlin and Mid-Continent's local
counsel, the McAfee & Taft law firm and two of its attorneys, Bob
Gilliland and Phil Hart. The Commissioner has on seven different
occasions, two of them to the Oklahoma Supreme Court, unsuccessfully
argued that as Receiver for Mid-Continent, only he can engage
attorneys to represent Mid-Continent in the receivership proceedings.
Thus, the lawsuit claims legal malpractice against the law firm and
attorneys for taking unauthorized actions on behalf of Mid-Continent
and conspiracy to commit malpractice against the other defendants. The
suit seeks damages and injunctive relief. Florida Progress believes
this case is without merit and will vigorously defend itself.
<PAGE>
9. ABC Rail Products Corporation ("ABC")v. Progress Rail Services
Corporation ("Progress Rail")and Louisville Scrap Material Co., Inc.,
U.S. District Court, Northern District of Illinois, Eastern
Division, Civ. Action No. 98C3663.
See prior discussion of this matter in the second quarter 1998 Form
10-Q, Part 2, Item 1, paragraph 10. On August 17, 1998, the court
denied ABC's Motion for a preliminary injunction pending trial. On
August 14, 1998, ABC filed a motion to dismiss Progress Rail's
counterclaims. On September 10,1998, the court, on its own motion,
dismissed Progress Rail's counterclaims without prejudice because the
claims are not "causally or factually, temporally, or otherwise
related to the Progress-Louisville merger". Discovery is continuing,
and the case is on the May, 1999 trial calendar.
10. In Re: Joint Petition for Determination of Need for an Electrical
Power Plant in Volusia County by the Utilities Commission, City of
New Smyrna Beach, and Duke Energy New Smyrna Beach Power Company
Ltd.,L.L.P. Public Service Commission, Docket No. 981042-EM.
On August 28, 1998, Duke Energy New Smyrna Beach Power Company and
the Utilities Commission of New Smyrna Beach filed a petition with
the FPSC seeking a determination of need to build a 514 megawatt
combined cycle electric power plant with an in-service date of
November 1, 2001. On September 8, 1998 Florida Power filed a Motion
to Intervene and a Motion to Dismiss in that action. On October 5,
1998, Florida Power's Motion to Intervene was granted. Florida Power
believes that granting the petition would profoundly restructure
Florida's statutorily mandated approach to planning and siting
generating capacity by contradicting a long standing Public Service
Commission interpretation of the Florida Power Plant Siting Act that
has been affirmed by the Florida Supreme Court. It would also raise a
host of significant related policy issues that are beyond the scope
of this proceeding. A hearing is scheduled for December 2, 1998.
11. In Re: Petition of Florida Power Corporation for Waiver of Rule 25-
22.082 F.A.C. Selection of Generating Capacity, Florida Public
Service Commission, Docket No. 98-1360-EI.
On October 20, 1998, Florida Power filed a Petition with the FPSC
seeking a waiver of the Commission rules which require an electric
utility to solicit and evaluate bids for new generating capacity as a
prerequisite to constructing a power plant with capacity in excess of
75 Megawatts. This petition was filed to facilitate the start of
building a second unit at the Hines Energy Complex in Polk County.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-New Plant".
<PAGE>
Item 5 . Other Information.
1. Executive and Officer Changes
Stanley I. Garnett, Executive Vice President of Florida Progress, retired from
Florida Progress in August 1998. Mr. Garnett joined Florida Progress in 1997.
Florida Progress has not named a successor.
2. Strategic Alliances
On October 1, 1998, Florida Progress, Cinergy Corporation, and New Century
Energies formed Centrus, LLP. Centrus was established to develop products and
services for residential and small business customers, including the billing and
service conveniences of a "one-stop" utility and telecommunications provider.
The first offering, long distance services, is being made available in a
selected Florida Power market in October 1998. Centrus is the second joint
venture formed by Florida Progress, New Century Energies and Cinergy
Corporation.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Florida Florida
Number Exhibit Progress Power
------ ------- -------- -------
12 Statement Regarding Computation of Ratio X
of Earnings to Fixed Charges for Florida
Power.
27.(a) Florida Progress Financial Data Schedule. X
27.(b) Florida Power Financial Data Schedule. X
X = Exhibit is filed for that respective company.
(b) Reports on Form 8-K:
During the third quarter 1998, Florida Progress and Florida Power
filed the following reports on Form 8-K:
Form 8-K dated July 16, 1998, reporting under Item 5 "Other Events"
the second quarter 1998 earnings.
In addition, Florida Progress and Florida Power filed the following
report on Form 8-K subsequent to the third quarter 1998:
Form 8-K dated October 16, 1998, reporting under Item 5 "Other
Events" the third quarter 1998 earnings and a litigation update.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. The signature of
each of the undersigned on behalf of each listed company shall be
deemed to relate only to matters having reference to such company.
FLORIDA PROGRESS CORPORATION
FLORIDA POWER CORPORATION
Date: November 12, 1998 /s/ John Scardino, Jr.
-----------------------------
John Scardino, Jr.
Vice President and Controller
Date: November 12, 1998 /s/ Jeffrey R. Heinicka
-----------------------------
Jeffrey R. Heinicka
Senior Vice President and
Chief Financial Officer
Exhibit 12
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Statement of Computation of Ratios
(Dollars In Millions)
Ratio of Earnings to Fixed Charges:
Twelve Months Ended Year Ended
September 30, December 31,
1998 1997 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET INCOME $240.2 $162.5 $135.9 $238.4
Add:
Operating Income Taxes 136.2 85.7 69.9 135.8
Other Income Taxes .2 (0.2) - (.1)
------ ------ ------ ------
Income Before Taxes 376.6 248.0 205.8 374.1
Total Interest Charges 137.8 107.4 117.3 98.4
------ ------ ------ ------
Total Earnings (A) $514.4 $355.4 $323.1 $472.5
Fixed Charges (B) $137.8 $107.4 $117.3 $98.4
------ ------ ------ ------
Ratio of Earnings to
Fixed Charges (A/B) 3.73 3.31 2.75 4.80
====== ====== ====== ======
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EX-27.(a)
FLORIDA PROGRESS CORPORATION
SCHEDULE UT
<ARTICLE> UT
<MULTIPLIER> 1,000,000
<CIK> 0000357261
<NAME> FLORIDA PROGRESS CORPORATION
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,608
<OTHER-PROPERTY-AND-INVEST> 902
<TOTAL-CURRENT-ASSETS> 863
<TOTAL-DEFERRED-CHARGES> 326
<OTHER-ASSETS> 326
<TOTAL-ASSETS> 6,025
<COMMON> 1,208
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 657
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,865
0
34
<LONG-TERM-DEBT-NET> 2,348
<SHORT-TERM-NOTES> 67
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 116
<LONG-TERM-DEBT-CURRENT-PORT> 71
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,524
<TOT-CAPITALIZATION-AND-LIAB> 6,025
<GROSS-OPERATING-REVENUE> 2,722
<INCOME-TAX-EXPENSE> 137
<OTHER-OPERATING-EXPENSES> 2,209
<TOTAL-OPERATING-EXPENSES> 2,346
<OPERATING-INCOME-LOSS> 376
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 376
<TOTAL-INTEREST-EXPENSE> 129
<NET-INCOME> 247
1
<EARNINGS-AVAILABLE-FOR-COMM> 246
<COMMON-STOCK-DIVIDENDS> 156
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 667
<EPS-PRIMARY> 2.53
<EPS-DILUTED> 2.53
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EX-27.(b)
FLORIDA POWER CORPORATION
SCHEDULE UT
<ARTICLE> UT
<MULTIPLIER> 1,000,000
<CIK> 0000037637
<NAME> FLORIDA POWER CORPORATION
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,608
<OTHER-PROPERTY-AND-INVEST> 324
<TOTAL-CURRENT-ASSETS> 522
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 493
<TOTAL-ASSETS> 4,947
<COMMON> 1,004
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 838
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,842
0
34
<LONG-TERM-DEBT-NET> 1,723
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 17
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,331
<TOT-CAPITALIZATION-AND-LIAB> 4,947
<GROSS-OPERATING-REVENUE> 2,025
<INCOME-TAX-EXPENSE> 130
<OTHER-OPERATING-EXPENSES> 1,577
<TOTAL-OPERATING-EXPENSES> 1,707
<OPERATING-INCOME-LOSS> 318
<OTHER-INCOME-NET> 4
<INCOME-BEFORE-INTEREST-EXPEN> 322
<TOTAL-INTEREST-EXPENSE> 99
<NET-INCOME> 223
1
<EARNINGS-AVAILABLE-FOR-COMM> 222
<COMMON-STOCK-DIVIDENDS> 147
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 614
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
