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 June 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
</TABLE>
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Description of Shares Outstanding
Registrant Class at June 30, 1998
---------- -------------- ------------------
Florida Progress Corporation Common Stock,
without par value 97,046,179
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 Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------- ------- ------- -------
(Unaudited) (Unaudited)
REVENUES:
<S> <C> <C> <C> <C>
Electric utility $663.8 $597.2 $1,229.0 $1,151.0
Diversified 239.3 200.1 461.6 393.8
------- ------- ------- -------
903.1 797.3 1,690.6 1,544.8
EXPENSES: ------- ------- ------- -------
Electric utility:
Fuel 135.9 118.8 245.1 213.7
Purchased power 110.8 116.8 209.8 244.0
Energy conservation cost 19.0 16.6 35.6 27.6
Operations and maintenance 116.2 110.7 218.6 213.1
Extended nuclear outage - O&M
and replacement power costs - 89.9 5.1 97.8
Depreciation and amortization 90.4 74.2 171.4 148.5
Taxes other than income taxes 51.4 48.6 100.9 96.7
------- ------- ------- -------
523.7 575.6 986.5 1,041.4
------- ------- ------- -------
Diversified:
Cost of sales 192.8 169.1 386.6 340.9
Other 19.0 14.8 31.8 29.7
------- ------- ------- -------
211.8 183.9 418.4 370.6
------- ------- ------- -------
INCOME FROM OPERATIONS 167.6 37.8 285.7 132.8
------- ------- ------- -------
INTEREST EXPENSE AND OTHER:
Interest expense 47.7 35.8 95.0 70.1
Allowance for funds used during
construction (4.1) (2.3) (8.0) (4.4)
Preferred dividend requirements of
Florida Power .4 .4 .8 .8
Other expense (income), net .6 (.7) .1 (.3)
------- ------- -------- -------
44.6 33.2 87.9 66.2
------- ------- -------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 123.0 4.6 197.8 66.6
Income Taxes 45.2 (1.7) 69.5 18.3
------- -------- -------- -------
NET INCOME $77.8 $6.3 $128.3 $48.3
======= ======== ======== =======
AVERAGE SHARES OF COMMON STOCK
OUTSTANDING 97.0 97.1 97.1 97.0
======= ======== ======== =======
EARNINGS PER AVERAGE COMMON SHARE $ .80 $ .07 $ 1.32 $ .50
======= ========= ======== ========
DIVIDENDS PER COMMON SHARE $ .535 $ .525 $ 1.07 $ 1.05
======== ========= ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
June 30, December 31,
1998 1997
---------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
<S> <C> <C>
Electric utility plant in service and held $ 6,210.6 $ 6,166.8
for future use
Less - Accumulated depreciation 2,621.2 2,511.0
Accumulated decommissioning for nuclear plant 238.4 223.7
Accumulated dismantlement for fossil plants 129.5 128.5
-------- --------
3,221.5 3,303.6
Construction work in progress 345.8 279.4
Nuclear fuel, net of amortization of $365.6
in 1998 and $356.7 in 1997 57.5 66.5
-------- --------
Net electric utility property 3,624.8 3,649.5
Other property, net of depreciation of $225.7
in 1998 and $219.3 in 1997 533.2 437.7
-------- --------
4,158.0 4,087.2
-------- --------
CURRENT ASSETS:
Cash and equivalents 9.7 3.1
Accounts receivable, net 425.5 373.7
Inventories at average cost:
Fuel 78.9 77.6
Materials and supplies 92.6 91.9
Diversified materials 129.5 126.8
Underrecovery of fuel cost 39.6 34.5
Income taxes receivable -- 16.8
Deferred income taxes 40.8 5.8
Other 47.9 45.1
-------- --------
864.5 775.3
-------- --------
OTHER ASSETS:
Investments:
Loans receivable, net 31.0 24.0
Nuclear plant decommissioning fund 295.9 266.7
Joint ventures and partnerships 56.2 54.6
Deferred purchased power contract termination costs 336.7 348.2
Other 338.6 204.0
-------- --------
1,058.4 897.5
-------- --------
$ 6,080.9 $ 5,760.0
======== ========
Note: The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
(In millions)
June 30, December 31,
1998 1997
----------- -----------
CAPITAL AND LIABILITIES (Unaudited)
COMMON STOCK EQUITY:
Common stock $ 1,208.4 $ 1,209.0
Retained earnings 591.4 567.0
-------- --------
1,799.8 1,776.0
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 33.5 33.5
LONG-TERM DEBT 2,372.1 2,377.8
-------- --------
TOTAL CAPITAL 4,205.4 4,187.3
-------- --------
CURRENT LIABILITIES:
Accounts payable 254.6 253.2
Customers' deposits 100.4 97.1
Income taxes payable 63.4 --
Accrued other taxes 55.3 12.0
Accrued interest 60.4 56.8
Other 59.2 74.8
-------- --------
593.3 493.9
Notes payable 330.4 214.8
Current portion of long-term debt 56.3 15.2
-------- --------
980.0 723.9
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 489.4 471.2
Unamortized investment tax credits 81.7 85.7
Other postretirement benefit costs 111.7 107.4
Other 212.7 184.5
-------- --------
895.5 848.8
-------- --------
$ 6,080.9 $ 5,760.0
======== ========
Note: The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
(In millions)
Six Months Ended
June 30,
1998 1997
------- -------
(Unaudited)
OPERATING ACTIVITIES:
Income from continuing operations $128.3 $48.3
Adjustments for noncash items:
Depreciation and amortization 208.9 166.3
Extended nuclear outage - replacement power cost - 70.2
Deferred income taxes and
investment tax credits, net (27.1) (20.9)
Increase in accrued other postretirement
benefit costs 4.3 3.9
Net change in deferred insurance policy
acquisition costs - (3.0)
Net change in insurance policy benefit reserves - 30.8
Changes in working capital, net of effects from acquisition or sale of
businesses:
Accounts receivable (27.9) (59.4)
Inventories 18.0 (30.0)
Underrecovery of fuel cost (10.1) (46.6)
Accounts payable (15.2) 21.8
Income taxes payable 80.6 (16.9)
Accrued other taxes 43.0 38.2
Other (14.4) (13.1)
Other operating activities (4.3) 5.8
-------- -------
384.1 195.4
-------- -------
INVESTING ACTIVITIES:
Property additions (including allowance for
borrowed funds used during construction) (217.1) (188.5)
Sales (Purchases) of loans and securities, net (7.1) 11.8
Proceeds from sale of properties 6.7 4.2
Acquisition of businesses (104.3) (14.3)
Investments in joint ventures and partnerships, net (2.0) (12.6)
Other investing activities (82.5) (9.7)
-------- --------
(406.3) (209.1)
-------- --------
FINANCING ACTIVITIES:
Issuance of long-term debt 189.1 -
Repayment of long-term debt (170.1) (22.2)
Increase in commercial paper with
long-term support - 61.7
Dividends paid on common stock (103.9) (101.9)
Increase in short-term debt 115.6 90.1
Other financing activities (1.9) (.1)
-------- --------
28.8 27.6
-------- --------
NET INCREASE IN CASH AND EQUIVALENTS 6.6 13.9
Beginning cash and equivalents 3.1 5.2
-------- --------
ENDING CASH AND EQUIVALENTS $9.7 $19.1
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $86.0 $78.0
Income taxes (net of refunds) $16.4 $56.5
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Equity For the periods ended June 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 48.3 48.3
Unrealized loss on securities
net of $0.4 income tax expense (0.6) (0.6)
-------- -------- ------- ------- ------- -------
47.7 - 48.3 (0.6) - -
Common stock issued 0.7 0.7
Cash dividends on common stock (101.9) (101.9)
-------- -------- ------- ------- ------- -------
Balance, June 30, 1997 $1,904.2 $1,209.0 $662.9 $ (1.2) $ 33.5 $ -
======== ======== ======= ======== ======= =======
Balance, December 31, 1997 1,809.5 $1,209.0 $567.0 $ - $ 33.5 $ -
Comprehensive income
Net income 128.3 128.3
Other comprehensive income - -
------- -------- ------- -------- ------- -------
128.3 - 128.3 - - -
Common stock (redeemed) (0.6) (0.6)
Cash dividends on common stock (103.9) (103.9)
------- -------- ------- -------- ------- -------
Balance, June 30, 1998 $1,833.3 $1,208.4 $ 591.4 $ - $33.5 $ -
======= ======== ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
6
<PAGE>
FLORIDA POWER CORPORATION
FINANCIAL STATEMENTS
FLORIDA POWER CORPORATION
Statements of Income
(In millions) Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited) (Unaudited)
OPERATING REVENUES:
Residential $335.5 $306.3 $644.2 $597.0
Commercial 153.7 145.4 277.4 269.6
Industrial 55.2 55.1 103.0 107.0
Sales for resale 43.8 20.3 80.7 57.4
Other 75.6 70.1 123.7 120.0
-------- -------- --------- --------
663.8 597.2 1,229.0 1,151.0
-------- -------- --------- --------
OPERATING EXPENSES:
Operation:
Fuel 135.9 118.8 245.1 213.7
Purchased power 110.8 116.8 209.8 244.0
Energy conservation cost 19.0 16.6 35.6 27.6
Operations and maintenance 116.2 110.7 218.6 213.1
Extended nuclear outage - O&M
and replacement power costs - 89.9 5.1 97.8
Depreciation and amortization 90.4 74.2 171.4 148.5
Taxes other than income taxes 51.4 48.6 100.9 96.7
-------- -------- -------- --------
523.7 575.6 986.5 1,041.4
-------- -------- -------- --------
Income taxes:
Currently payable 61.4 3.8 93.9 36.0
Deferred, net (19.2) (5.3) (25.5) (13.3)
Investment tax credits, net (1.9) (1.9) (3.9) (3.9)
-------- -------- -------- --------
40.3 (3.4) 64.5 18.8
-------- -------- -------- --------
564.0 572.2 1,051.0 1,060.2
-------- -------- -------- --------
OPERATING INCOME 99.8 25.0 178.0 90.8
-------- -------- -------- --------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 2.2 1.4 4.4 2.7
Miscellaneous other expense, net (.6) .1 (.6) (.9)
-------- -------- -------- --------
1.6 1.5 3.8 1.8
-------- -------- -------- --------
INTEREST CHARGES
Interest on long-term debt 29.0 22.4 59.6 44.7
Other interest expense 6.2 3.7 11.5 6.7
-------- -------- -------- --------
35.2 26.1 71.1 51.4
Allowance for borrowed funds used
during construction (1.9) (.9) (3.6) (1.7)
-------- -------- -------- --------
33.3 25.2 67.5 49.7
-------- -------- -------- --------
NET INCOME 68.1 1.3 114.3 42.9
DIVIDENDS ON PREFERRED STOCK .4 .4 .8 .8
-------- -------- -------- --------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $67.7 $0.9 $113.5 $42.1
======== ======== ========= ========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
June 30, December 31,
1998 1997
----------- -----------
ASSETS (Unaudited)
PROPERTY, PLANT AND EQUIPMENT:
<S> <C> <C>
Electric utility plant in service and held $6,210.6 $6,166.8
for future use
Less - Accumulated depreciation 2,621.2 2,511.0
Accumulated decommissioning for nuclear plant 238.4 223.7
Accumulated dismantlement for fossil plants 129.5 128.5
----------- -----------
3,221.5 3,303.6
Construction work in progress 345.8 279.4
Nuclear fuel, net of amortization of $365.6
in 1998 and $356.7 in 1997 57.5 66.5
----------- -----------
3,624.8 3,649.5
Other property, net 34.7 33.2
----------- -----------
3,659.5 3,682.7
----------- -----------
CURRENT ASSETS:
Cash and equivalents 9.4 -
Accounts receivable, less reserve of $3.5
in 1998 and $3.2 in 1997 272.9 243.9
Inventories at average cost:
Fuel 51.0 44.0
Materials and supplies 92.6 91.9
Underrecovery of fuel cost 39.6 34.5
Income tax receivable - 13.5
Deferred income taxes 40.8 5.8
Other 32.6 32.2
----------- ----------
538.9 465.8
---------- ----------
OTHER ASSETS:
Nuclear plant decommissioning fund 295.9 266.7
Unamortized debt expense, being amortized
over term of debt 38.6 25.0
Deferred purchased power contract termination costs 336.7 348.2
Other 143.5 112.4
---------- ----------
814.7 752.3
---------- ----------
$5,013.1 $4,900.8
========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
8
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
(In millions)
June 30, December 31,
1998 1997
---------- ----------
CAPITALIZATION AND LIABILITIES (Unaudited)
CAPITALIZATION:
Common stock $1,004.4 $1,004.4
Retained earnings 778.6 763.1
---------- ----------
1,783.0 1,767.5
CUMULATIVE PREFERRED STOCK:
Without sinking funds 33.5 33.5
LONG-TERM DEBT 1,746.3 1,745.4
---------- ----------
TOTAL CAPITAL 3,562.8 3,546.4
---------- ----------
CURRENT LIABILITIES:
Accounts payable 153.9 161.9
Accounts payable to associated companies 21.8 26.5
Customers' deposits 100.4 97.1
Income taxes payable 65.7 -
Accrued other taxes 51.2 7.9
Accrued interest 48.2 45.7
Other 32.1 59.2
---------- ----------
473.3 398.3
Notes payable 159.4 179.8
Current portion of long-term debt 1.6 1.5
---------- ----------
634.3 579.6
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 466.8 451.3
Unamortized investment tax credits 81.2 85.1
Other postretirement benefit costs 108.6 104.7
Other 159.4 133.7
---------- ----------
816.0 774.8
---------- ----------
$5,013.1 $4,900.8
========== ==========
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Statements of Cash Flows (In millions)
Six Months Ended
June 30,
1998 1997
-------- --------
(Unaudited)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income after dividends on preferred stock $113.5 $42.1
Adjustments for noncash items:
Depreciation and amortization 189.9 152.3
Extended nuclear outage - replacement power cost - 70.2
Deferred income taxes and investment
tax credits, net (29.8) (17.2)
Increase in accrued other postretirement
benefit costs 3.9 3.7
Allowance for equity funds used during construction (4.4) (2.7)
Changes in working capital:
Accounts receivable (29.1) (43.9)
Inventories (7.7) (5.8)
Underrecovery of fuel cost (10.1) (46.6)
Accounts payable (8.0) 5.6
Accounts payable to associated companies (4.7) 2.2
Income taxes payable 79.2 2.8
Accrued other taxes 43.3 38.1
Other (21.6) (4.0)
Other operating activities 9.4 5.8
--------- ---------
323.8 202.6
--------- ---------
INVESTING ACTIVITIES:
Construction expenditures (125.1) (151.8)
Allowance for borrowed funds used during construction (3.6) (1.7)
Additions to nonutility property (4.8) (1.7)
Proceeds from sale of properties 3.1 3.2
Other investing activities (51.2) (9.7)
--------- ---------
(181.6) (161.7)
--------- ---------
FINANCING ACTIVITIES:
Issuance of long-term debt 144.1 -
Repayment of long-term debt (158.6) (20.6)
Dividends paid on common stock (98.0) (96.3)
Increase (decrease) in short-term debt (20.3) 90.1
--------- ---------
(132.8) (26.8)
--------- ---------
NET INCREASE IN CASH AND EQUIVALENTS 9.4 14.1
Beginning cash and equivalents - -
--------- ---------
ENDING CASH AND EQUIVALENTS $9.4 $14.1
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $63.2 $55.8
Income taxes (net of refunds) $15.2 $32.4
The accompanying notes are an integral part of these financial statements.
</TABLE>
10
<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 the combined Form 10-Q of Florida
Progress and Florida Power 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 the combined Form 10-K of Florida
Progress and Florida Power for the year ended December 31, 1997 (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 six months ended June 30, 1997:
(In millions, except per share amounts) Three Months Six Months
Ended Ended
June 30, 1997 June 30, 1997
1997 as amended:
Florida Progress
Net income $6.3 $48.3
Earnings per share-basic & fully diluted .07 .50
Florida Power
Net income .9 42.1
1997 as originally reported:
Florida Progress
Net income (loss) $(38.2) $3.8
Earnings (loss) per share-basic & fully diluted (.39) .04
Florida Power
Net income (loss) (43.6) (2.4)
2) In June 1998, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities on the Balance Sheet and measure those instruments at fair
values. Florida Progress will be required to adopt this standard for
financial statements issued beginning the first quarter of the year 2000.
Florida Progress is currently evaluating the effect the standard would have
on its financial statements.
3) 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, will be recovered from
customers over a two year period, ending April 2000, through the energy
conservation cost recovery clause as directed by the FPSC decoupling order.
Revenue decoupling increased residential revenues by $4.7 million and $12.2
million for the three and six month periods ended June 30, 1997.
11
<PAGE>
4) 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 cogenerators filed individual suits in state court against Florida
Power over contract payment terms, one of which also filed suit in Federal
Court. Two of the suits have been settled, and the Federal case was
dismissed, although the plaintiff has filed a motion for reconsideration.
Currently trial dates are set for late 1998 and mid 1999 for the two
remaining suits. Management does not expect the results of these legal
actions will have a material impact on Florida Power's financial position,
operations or liquidity.
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 and are considered minimal,
based upon the asset values supporting the liabilities of these entities.
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 that 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
that appeal is still pending.
Even though the appeal is 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, will enable 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.
In December 1997, the Commissioner filed a lawsuit against Florida
Progress, certain of its directors and officers and certain former Mid-
12
<PAGE>
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.
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 believed 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. Prospectively, the investment will be 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.
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 could 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.
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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.
Negotiations are ongoing with the EPA to define the scope of the Risk
Investigation and Feasibility Study ("RI/FS") as outlined in the
Administrative Order on Consent. The PRP's, at the Sanford site, have
agreed to spend up to $1.5 million to perform the RI/FS, and Florida Power
is liable for 39.7% of those costs. Upon completion of the RI/FS, the EPA
will advise the PRP's and Florida Power to what extent the contamination
may be attributable to previous operations at the site. The RI/FS field
work will 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' current estimates indicate that its proportionate share of
liability for cleaning up all sites ranges from $2.5 million to $7.5
million. It has reserved $4.7 million against 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
intends to vigorously defend itself against this lawsuit. No projection of
an outcome or estimate of a potential liability, if any, can be determined
at this time.
AGE DISCRIMINATION SUIT - Florida Power and Florida Progress have been
named defendants in an age discrimination lawsuit involving 112 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 to provisionally certify this case as
a class action suit under the Age Discrimination in Employment Act.
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 late 1998.
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.
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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 combined 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 for the three month period ended June 30, 1998, were
$.80 per share compared to earnings of $.07 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 $.70 per share compared to
earnings of $.01 per share for the same period last year. Earnings per share for
Florida Progress for the six month period were $1.32 compared to $.50 for the
same period last year. The increase for both the three and six month periods is
primarily due to hotter than normal weather experienced during the second
quarter of 1998 as compared to the same period in the prior year. Also in 1997,
Florida Power's earnings were adversely affected by the extended outage at CR3.
(See Note 1 to the Financial Statements).
Diversified earnings per share were $.10 for the second quarter of 1998, $.04
higher than the same quarter last year, due primarily to improved earnings at
Electric Fuels Corporation ("Electric Fuels"), Florida Progress' energy and
transportation subsidiary, and to a one-time gain realized from the buy-out of a
purchase power contract associated with a cogeneration facility in which a
Florida Progress subsidiary is a minority partner. For the six months ended June
30, 1998, earnings per share from diversified operations of $.15 were $.09
higher than the same period in 1997 due to the gain on the purchased power
contract and higher earnings at Electric Fuels. The improvement in earnings at
Electric Fuels was due primarily to acquisitions in 1998 and 1997 and improved
operations at its Inland Marine Transportation Group.
Florida Power - Operating Revenues
Florida Power's operating revenues were $66.6 million (11.2%) and $78.0 million
(6.8%) higher for the three and six month periods ended June 30, 1998, compared
to the same periods in 1997. Increased customer usage, primarily due to hotter
than normal weather throughout the second quarter, was the main reason for the
increase. Temperature records were set throughout Florida Power's service
territory and the state, particularly during the month of June. In addition to
higher customer usage, strong retail customer growth also contributed to the
increase in retail sales.
Florida Power - Operating Expenses
Fuel and purchased power costs were $11.1 million (4.7%) higher for the three
month period and $2.8 million (.01%) lower for the six month period ended June
30, 1998, compared to the same periods in 1997. The increase for the quarter was
due primarily to the increase in system requirements due to the hot weather. The
decrease for the six month period was due primarily to lower fuel costs
resulting from CR3's return to service in mid-February 1998. In June 1997, in
accordance with the terms of the stipulation and settlement agreement, Florida
Power recorded $70.2 million in replacement power costs in connection with the
extended outage at CR3. Except for the $70.2 million in replacement power costs
resulting from the extended nuclear outage, Florida Power recovers substantially
all of its fuel and purchased power costs through a FPSC ordered fuel adjustment
clause, thereby eliminating any impact on net income. The disallowed replacement
power costs of $70.2 million related to the extended nuclear outage were not
recovered through the fuel adjustment clause, as a result of the 1997
settlement.
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Other operation and maintenance expenses, excluding the impact of the extended
outage, increased $5.5 million for both the three and six months ended June 30,
1998. The increase was due primarily to an unplanned 32-day outage of a
coal-fired, base load plant, as well as to the additional operating costs
associated with the Tiger Bay cogeneration facility that was purchased in July
1997.
Depreciation and amortization expense was $16.2 million and $22.9 higher for the
three and six months ended June 30, 1998, compared to the same periods last
year. Florida Power accelerated the amortization of regulatory assets in the
amount of $14 million in the second quarter of 1998, in accordance with the
terms of applicable regulatory orders. Approximately half of the amortization
was attributable to termination costs associated with the Tiger Bay purchased
power contracts. The remainder was attributable to deferred carrying charges on
plant assets which had previously been placed in extended cold shutdown.
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 $9.1 million and $19.7 million for the three and six
month periods ended June 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 $39.2 million and
$67.8 million higher for the three and six months ended June 30, 1998 compared
to the same periods last year due primarily to increased revenues at Electric
Fuels. In addition, diversified revenues for both the quarter and six months
ended June 30, 1998 reflect the absence of revenues from Mid-Continent, which
was placed into receivership in the second quarter of 1997. (See Note 4,
"Contingencies - Mid-Continent Life Insurance Company" contained herein.)
Electric Fuels earned $10.6 million, or $.11 per share, during the second
quarter, compared with $9.2 million or $.10 per share, in 1997. The increase in
earnings came from improved results from its Rail Services and Energy and
Related Services business units.
Improved second quarter results for the Rail Services group stemmed from
continued strong sales of track works and railcar parts and services. Also
contributing to the $1.1 million increase in earnings for the group were higher
volumes and operating margins resulting from acquisitions completed in both 1997
and 1998. Earnings for Electric Fuels' Energy and Related Services group were up
$.7 million in the second quarter. The improvement in earnings was due primarily
to increased deliveries by its offshore barge transportation division and lower
operating costs. The increased offshore barge deliveries resulted largely from
higher volumes of coal transported to Florida Power's Crystal River Energy
Complex. The Inland Marine group experienced slightly lower earnings for the
quarter when compared to 1997. Earnings from this group were down $.4 million
due primarily to weak export market conditions that have lowered freight rates
in 1998 when compared with 1997.
For the six month period ending June 30, 1998 Electric Fuels had earnings of
$18.8 million, or $.13 per share, an increase in earnings of $6.3 million, or
$.06 per share, over the same period in the prior year. Electric Fuels'
acquisitions in its Rail Services group in 1998 and 1997, along with increased
sales in track work and railcar parts and services contributed to the increase.
Improved operations and increased offshore barge deliveries from the Energy &
Related Services group also contributed to the increase. In the first quarter of
1997, flooding along the Ohio and Mississippi Rivers significantly affected
earnings for the Inland Marine Transportation Group. Normal operating conditions
thus far in 1998 combined with a larger fleet have also increased earnings when
compared to the same period in the prior year.
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NUCLEAR OPERATIONS
On July 29, 1998, the Nuclear Regulatory Commission ("NRC") removed CR3 from the
NRC "watch list". Earlier in July 1998, the NRC gave CR3 an overall report of
good performance and improvements in all areas assessed for the agency's
Systematic Assessment of Licensee Performance ("SALP") ratings. CR3 received an
NRC rating of "good" or a grade of "2" in each of the four SALP functional
areas: Plant Operations, Maintenance, Engineering and Plant Support. The current
report covers the period from October 6, 1997, through May 9, 1998. CR3 has been
functioning at or near full capacity since it came on-line in February of 1998.
YEAR 2000
Florida Progress does not anticipate that the costs incurred in preparing its
computer information systems and embedded technology to address the year 2000
problem will have a material adverse impact on its financial statements. The
anticipated date of completion of integration testing for year 2000 readiness is
the end of the third quarter of 1999. Florida Progress is currently working with
vendors to remedy year 2000 issues and to develop contingency plans by the end
of the third quarter of 1999. Florida Progress' current estimate of the total
costs of addressing year 2000 issues, including expenses to remedy both embedded
systems and computer information systems, is between $15 million and $25
million.
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 six months of 1998, $125.1
million was spent on the construction program, financed primarily with funds
from operations.
Florida Power's ratio of earnings to fixed charges was 3.36 for the twelve
months ended June 30, 1998. (See Exhibit 12 filed herewith).
Progress Capital Holdings, Inc.("Progress Capital"), a wholly owned subsidiary
of Florida Progress, 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 May 1998, Progress Capital issued $45 million of ten year, 6.46%
fixed-rate medium-term notes. The proceeds are expected to be used for general
corporate purposes of Florida Progress.
On August 6, 1998, MEMCO Barge Line, Inc.("MEMCO"), a wholly-owned subsidiary of
Electric Fuels, entered into a synthetic lease financing of an aggregate of
approximately $175 million of inland river barges and $25 million of tow boats.
The cost of the barges and tow boats will be 100% financed by secured notes and
trust certificates issued by MEMCO Barge Line 1998 Trust ("MEMCO Trust"). 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. 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. Charter payments are 100%
guaranteed by Progress Capital. A second closing in respect of the balance of
$56.7 million of notes and $33.3 million of certificate holder contributions is
expected to be held in December 1998.
On June 16, 1998, Progress Rail Services Corporation, a subsidiary of Electric
Fuels, purchased the assets of Blue Industrial Group, which is based in
Louisville, Kentucky. The acquisition includes substantially all of the assets
and operations of Louisville Scrap Material Company, Inc., KYRailquip, Inc.,
LSM-Roanoke, Inc. and Indigo Rail Resources, LLC. These companies are primarily
engaged in commercial metals recycling and brokerage, railcar dismantling, the
reconditioning of parts for railroad freight cars and railcar resale and
leasing. In addition to Blue Industrial Group, EFC has made other smaller
acquisitions to strategically grow the business.
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On June 22, 1998, Florida Progress received a favorable ruling from the Internal
Revenue Service ("IRS") National Office, regarding the Tiger Bay Cogeneration
("Tiger Bay") purchase in 1997. The ruling announced a conclusion of law that
Florida Power may deduct in 1997 that portion of the $445 million paid to Tiger
Bay Limited Partnership that was properly allocable to termination of the power
purchase agreement, or approximately $281 million. As a result, Florida Progress
expects to receive a $93.8 million refund from the IRS in August 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.
"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 the costs associated with preparing computers for the year
2000 problem.
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 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, 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 56 basis point increase in interest rates (10% of Florida
Progress weighted average interest rate) affecting its variable rate debt
($830.4 million at June 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 June 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. A 10%
change in the market price of coal would have an immaterial effect on the
earnings of Florida Progress.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
1. In re: Conservation Cost Recovery Clause, Florida Public Service
Commission, Docket NO. 961184-EQ In re: Petition for approval of early
termination amendment to negotiated qualifying facility contract with
Orlando Cogen, Limited, Ltd.("Orlando Cogen"), Florida Public Service
Commission, Docket
No. 961184-EQ.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 1. On March 16, 1998, the FPSC entered a final order denying the
Settlement Agreement between Florida Power and Orlando Cogen. This report
concludes this matter for reporting purposes.
2. 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 and the first quarter 1998 Form 10-Q, Part 2, Item 1, paragraph
1. On July 2, 1998, the Florida Supreme Court lifted the previously issued
stay, and on July 10, 1998, Florida Power presented for payment the letter
of credit which had been posted by Panda to secure performance.
3. 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 and the first quarter 1998 Form 10-Q, Part 2, Item 1, paragraph
2. In the District Court action, on June 25, 1998, the judge granted
Florida Power, Florida Progress and Electric Fuels' Motion for Summary
Judgment and dismissed the case. On July 10, 1998, Dade and Montenay filed
a motion for Reconsideration.
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. On June 19, 1998, the Judge issued an order on several pending
motions. The motion to dismiss Florida Progress was denied. The motion to
dismiss ERISA Claims against Florida Progress was granted. The Motion for
Summary Judgment on Defendants' Counterclaim relating to the state law
claims was granted. The Motion to Dismiss four plaintiffs based upon
statute of limitations violations was granted. As the case presently
stands, 112 plaintiffs remain.
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5. 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 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.
6. Florida Power Corporation v. United States, U.S. Court of Federal Claims,
Civil Action No. 96-702C.
Consolidated Edison Co., et al v. United States, 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. In a related case, on June 30, 1998, the U.S. Supreme
Court denied the Petition for a Writ of Ceriorari in the Yankee Atomic
case. Consequently, the original District Court opinion in the Yankee
Atomic case, that the decontamination and decommissioning fee was a lawful
tax, stands.
On June 12, 1998, Florida Power, Consolidated Edison Co. and 15 other
utilities filed a declaratory judgment action in the Southern District of
New York against the United States Government, challenging the
constitutionality of the $2.25 billion retroactive assessment imposed by
the federal government on domestic nuclear power companies to fund the
decommissioning and decontamination of the government's uranium enrichment
facilities.
7. Gulf Power, et al v. United States of America and the Federal
Communications Commission, U.S. District Court, Northern District of
Florida, Pensacola Division, Case No. 3: 96-CV-381-LAC.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 7. On March 17, 1998, several subsidiaries of the Southern
Company and Duke Power Company filed a Notice of Appeal and on June 3,
1998, the United States filed a Notice of Cross Appeal. Florida Power has
decided not to join in the appeal of this matter. This report 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.
See prior discussion in this matter in the 1997 Form 10-K, Item 3,
paragraph 10 and the first quarter 1998 Form 10-Q, Part 2, Item 1,
paragraph 5 and Notes to the Financial Statements - "Contingencies"
contained herein. In a ruling on July 17, 1998, the Court granted
Mid-Continents' motion to proceed with a rehabilitation plan and ordered
the Commissioner to provide necessary actuarial data to Mid-Continent, so
that a detailed plan can be submitted to the Court.
9. Florida Power Corporation and Seminole Electric Cooperative v. Ronald J.
Schultz, Circuit Court for Citrus County, Case No.97-3383.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 14. On June 25, 1998, the parties filed a joint stipulation of
dismissal after having executed a settlement agreement which fully resolves
all litigated issues. The parties agreed upon a methodology to be used in
determining appropriate values to be placed on utility property for tax
assessment purposes. This report concludes this matter for reporting
purposes.
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10. ABC Rail Products Corporation v. Progress Rail Services Corporation and
Louisville Scrap Material Co., Inc., U.S. District Court, Northern District
of Illinois, Eastern Division, Civ. Action No. 98C3663.
On June 12, 1998, ABC Rail Products Corporation ("ABC") brought an action
against Progress Rail Services Corporation ("Progress Rail") and Louisville
Scrap Material Co. ("Louisville") seeking injunctive and declaratory relief
and treble damages based on alleged violations of federal and state
antitrust statutes as well as damages under other state law claims. The
complaint sought to enjoin Progress Rail's acquisition of certain assets
and business of Louisville and several affiliated corporations known as the
Blue Industrial Group. ABC alleged that Progress Rail and Louisville have
conspired to deny ABC an adequate supply of used railcar wheelsets. The
complaint also alleges Progress Rail would acquire monopoly power over the
supply of used wheelsets by virtue of the acquisition. The court denied
ABC's motion for a temporary restraining order and Progress Rail acquired
the Blue Industrial Group's assets and business. Pursuant to the court's
order, Progress Rail continues to provide ABC with used wheelsets.
ABC has filed a motion for a preliminary injunction, pending trial,
requiring Progress Rail (1) to continue providing ABC with used wheelsets
and (2) to hold the assets of Louisville separate so as to enable
divestiture to be an adequate remedy if the acquisition is found to violate
the antitrust laws. Discovery concerning this motion is ongoing. ABC has
asked for an evidentiary hearing on its motion.
On July 10, 1998, Progress Rail filed a denial of ABC's monopolization
claim and counter claims against ABC under the Clayton Act for monopoly in
the track works/new wheel set business, and under the Robinson-Patman Act
for attempting to monopolize through a freight equalization agreement with
GE Railcar that was not afforded to Progress Rail.
11. Calgon Carbon Corporation v. Potomac Capital Investment Corporation,
Potomac Electric Power Company, Progress Capital Holdings, Inc., and
Florida Progress Corporation, United States District Court for the Western
District of Pennsylvania, Civil Action No. 98-0072.
See prior discussion of this matter in the 1997 Form 10-K, Item 3,
paragraph 15. The defendants have filed a motion to dismiss all claims,
which has been responded to by the plaintiff.
Item 4. Submission of Matters to be a Vote of Security Holders.
The results of the matters submitted to the Shareholders of Florida
Progress at the Annual Meeting of Shareholders held on April 17, 1998, were
previously reported in the first quarter 1998 Form 10-Q, Item 4.
Item 5 . Other Information.
1. EXECUTIVE AND OFFICER CHANGES
As previously reported in the combined Florida Progress/Florida Power Form
8-K dated April 17, 1998, Dr. Jack Critchfield retired as Chairman of the
Board of Florida Progress effective June 30, 1998, and President and Chief
Executive Officer Richard Korpan succeeded Critchfield as Chairman
effective July 1, 1998. In conjunction with Dr. Critchfield's retirement,
the Board amended the Florida Progress Bylaws to reduce the total number of
directors from 11 to 10, effective July 1, 1998. A copy of the Florida
Progress Bylaws as amended is filed herewith as Exhibit 3.(a). In other
management changes, James Smallwood, Vice President and Treasurer of both
Florida Progress and Florida Power, was named Vice President - Mergers and
Acquisitions of Florida Progress and Pamela Saari, Assistant Treasurer of
Florida Progress and Florida Power, was named Treasurer of both Florida
Progress and Florida Power, effective June 18, 1998.
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2. STRATEGIC ALLIANCES
In May 1998, Florida Power formed a power marketing alliance with Houston
based Dynegy Inc. ("Dynegy")(formerly NGC Corporation), one of the nation's
largest power marketers. The expertise and technology of both companies
will be combined to conduct power marketing activities. Dynegy provides
additional expertise and knowledge on national trading that should allow
Florida Power to make additional sales from its generating assets.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Florida Florida
Number Exhibit Progress Power
------ ------- -------- -------
3.(a) Bylaws of Florida Progress, as amended X
to date.
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 second quarter 1998, Florida Progress and Florida Power
filed the following reports on Form 8-K:
Form 8-K dated April 17, 1998, reporting under Item 5, "Other Events"
the first quarter 1998 earnings, and Dr. Jack Critchfield's retirement
as Chairman and election of Richard Korpan to succeed Critchfield as
Chairman effective July 1, 1998.
Form 8-K dated June 2, 1998, reporting under Item 5, "Other Events"
the filing of amended second and third quarter 1997 Form 10-Q's and an
amendment to the 1997 Form 10-K to reflect a change in the recording
of nuclear outage costs.
In addition, Florida Progress and Florida Power filed the following
report on Form 8-K subsequent to the second quarter 1998:
Form 8-K dated July 16, 1998, reporting under Item 5 "Other Events"
the second quarter 1998 earnings and a litigation update.
22
<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: August 13, 1998 /s/ John Scardino, Jr.
-----------------------------
John Scardino, Jr.
Vice President and Controller
Date: August 13, 1998 /s/ Jeffrey R. Heinicka
-----------------------------
Jeffrey R. Heinicka
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Exhibit Progress Power
------ ------- -------- -------
3.(a) Bylaws of Florida Progress, as amended X
to date.
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.
Adopted January 21, 1982
Amended August 16, 1984
Amended November 19, 1987
Amended January 21, 1988
Amended November 17, 1988
Amended April 19, 1990
Amended August 16, 1990
Amended February 7, 1991, effective April 18, 1991
Amended and Restated April 18, 1991
Amended February 6, 1992
Amended November 19, 1992
Amended February 8, 1996, effective April 1, 1996
Amended May 15, 1997
Amended February 19, 1998
Amended February 19, 1998, effective April 17, 1998
Amended April 17, 1998, effective July 1, 1998
FLORIDA PROGRESS CORPORATION
BYLAWS
<PAGE>
BYLAWS
FLORIDA PROGRESS CORPORATION
ARTICLE I
Offices
Section 1. The registered office and headquarters of the Corporation
are in the City of St. Petersburg, County of Pinellas, State of Florida.
Section 2. The Corporation may also have an office at such other places
as the business of the Corporation may require.
ARTICLE II
Seal
The Corporate seal shall be circular in form and have inscribed thereon
the following:
Florida Progress Corporation
Corporate Seal
Florida
1982
ARTICLE III
Meetings of Shareholders
Section 1. Annual Meeting. There shall be an annual meeting of
shareholders in the month of April of each year on such date and at such time
and place as shall be designated by the Board of Directors for the election of
Directors and for the transaction of such other business as may properly be
brought before the meeting.
Section 2. Special Meetings. Special meetings of the shareholders of
the Corporation, or of the holders of any class or series of stock, required or
authorized by law, shall be held for the purpose or purposes stated in the call
of said meeting, on the call of the Chairman of the Board, or the President, or
the Board of Directors, or when the holders of not less than ten percent (10%)
of all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date, and deliver to the Corporation's
Secretary one or more written demands for the meeting describing the purpose or
purposes for which it is to be held.
Section 3. Place; Record Date. Meetings of shareholders may be held
within or without the State of Florida. The Board of Directors shall fix a
record date in order to determine the shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any other
action.
Section 4. Notice. Written notice stating the date, time and place of
each meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the meeting, either personally or by first class
mail, by or at the direction of the President, the Secretary or the officer or
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting. If the notice is mailed at least thirty (30) days before the date
of the meeting, it may be done by a class of United States mail other than first
class. If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail addressed to the shareholder as the address appears on
the stock transfer books of the Corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to
another date, time or place, it shall not be necessary to give any notice of the
adjourned meeting if the date, time or place to which the meeting is adjourned
is announced at the meeting before the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been transacted
on the original date of the meeting. If, however, after the adjournment, the
Board of Directors fixes a new record date for the adjourned meeting, a notice
of the adjourned meeting shall be given as provided in Section 4 to each
shareholder of record as of the new record date who is entitled to notice of
such meeting.
Section 6. Quorum and Voting. A majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. When a specified item of business is required to be voted on by
a class or series of stock, the holders of a majority of the shares of such
class or series shall constitute a quorum for the transaction of such item of
business by that class or series.
If a quorum exists, action on a matter, other than the election of
Directors, is approved if the votes cast by the holders of the shares
represented at the meeting and entitled to vote on the subject matter favoring
the action exceed the votes cast opposing the action, unless a greater number of
affirmative votes or voting by classes is required by law or the Articles of
Incorporation. The Directors shall be elected by a plurality of the votes cast
by the shares entitled to vote in the election at a meeting at which a quorum is
present.
If a quorum does not exist, the holders of a majority of the shares
represented in person or by proxy and who would be entitled to vote if a quorum
had been present shall have the power to adjourn the meeting from time to time,
until the requisite amount of stock shall be represented. At such adjourned
meeting at which the requisite amount of stock shall be represented any business
may be transacted which might have been transacted at the original meeting if a
quorum had been present.
Section 7. Manner of Voting. A shareholder, other person entitled to
vote on behalf of a shareholder pursuant to law, or attorney-in-fact may vote
the shareholder's shares either in person or by proxy executed in writing by the
shareholder or his duly authorized attorney-in-fact in accordance with law.
Section 8. Action by Shareholders Without a Meeting. Any action
required by law, these Bylaws or the Articles of Incorporation of the
Corporation to be taken at any annual or special meeting of shareholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such shareholders, may be taken without a meeting, without prior notice and
without a vote, if one or more written consents, setting forth the action so
taken, shall be dated and signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted, and shall be delivered to the Corporation within sixty (60)
days of the date of the earliest dated consent. If any class of shares is
entitled to vote thereon as a class, such written consent shall be required of
the holders of a majority of the shares of each class of shares entitled to vote
as a class thereon and of the total shares entitled to vote thereon.
Any written consent may be revoked prior to the date that the
Corporation receives the required number of consents to authorize the proposed
action. No revocation is effective unless in writing and until received by the
Corporation.
Within ten (10) days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing or who are not entitled to vote on the action. The notice shall fairly
summarize the material features of the authorized action and, if the action be a
merger, consolidation, sale or exchange of assets or other action for which
dissenters' rights are provided by law, the notice shall contain a clear
statement of the right of shareholders dissenting therefrom to be paid the fair
value of their shares upon compliance with further provisions of law regarding
the rights of dissenting shareholders.
A written consent shall have the same effect as a vote cast at a
meeting and may be described as such in any document.
Whenever any action is taken by written consent, the written consents
of the shareholders consenting to such action or the written reports of
inspectors appointed to tabulate such consents shall be filed with the minutes
of proceedings of shareholders.
Section 9. Advance Notice Provisions for Election of Directors. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors may be made at any annual meeting of
shareholders, or at any special meeting of shareholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any shareholder of the
Corporation (i) who is a shareholder of record on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of shareholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 9.
In addition to any other applicable requirements, for a nomination to
be made by a shareholder such shareholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
(a) in the case of an annual meeting, not less than 90 days nor more than 120
days prior to the date of the annual meeting; provided, however, that in the
event that less than 100 days' notice or prior public disclosure of the date of
the annual meeting is given or made to shareholders, notice by the shareholder
in order to be timely must be so received not later than the close of business
on the 10th day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever occurs first; and (b) in the case of a special meeting of
shareholders called for the purpose of electing directors, not later than the
close of business on the 10th day following the day on which the notice of the
date of the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever occurs first.
To be in proper written form, a shareholder's notice to the Secretary
must set forth (a) as to each person whom the shareholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the number of shares of common stock of the Corporation which are
owned beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder; and (b) as to the shareholder giving the
notice (i) the name and record address of such shareholder, (ii) the number of
shares of common stock of the Corporation which are owned beneficially or of
record by such shareholder, (iii) a description of all arrangements or
understandings between such shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such shareholder, (iv) a representation that such shareholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such shareholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to be named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 9. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 10. Advance Notice Provisions for Business to be Transacted at
Annual Meeting. No business may be transacted at an annual meeting of
shareholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any shareholder of the Corporation (i) who
is a shareholder of record on the date of the giving of the notice provided for
in this Section 10 and on the record date for the determination of shareholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 10.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than 90 days nor more than 120 days prior to the date of the annual
meeting; provided, however, that in the event that less than 100 days' notice or
prior public disclosure of the date of the annual meeting is given or made to
shareholders, notice by the shareholder in order to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever occurs first.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such shareholder, (iii) the
number of shares of common stock of the Corporation which are owned beneficially
or of record by such shareholder, (iv) a description of all arrangements or
understandings between such shareholder and any other person or persons
(including their names) in connection with the proposal of such business by such
shareholder and any material interest of such shareholder in such business and
(v) a representation that such shareholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 10, provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 10 shall be deemed to preclude discussion by
any shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE IV
Directors
Section 1. Number and Term of Office. The Board of Directors of the
Corporation shall consist of ten (10) members, divided into three (3) classes
serving staggered three-year terms in accordance with the Articles of
Incorporation. The three classes shall be designated Class I, Class II and Class
III. Class I shall consist of four directors, and Class II and Class III shall
each consist of three directors.
Section 2. Function. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall
be managed under the direction of, the Board of Directors.
Section 3. Qualification. Directors need not be residents of this
state or shareholders of the Corporation.
Section 4. Authority to Fix Compensation. The Board of Directors
shall have authority to fix the compensation of the Directors of the
Corporation.
Section 5. Duties of Directors. A Director shall discharge his duties
as a Director, including his duties as a member of any committee of the Board
upon which he may serve, in good faith, in a manner he reasonably believes to be
in the best interests of the Corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In discharging his duties, a Director shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by:
(a) one or more officers or employees of the Corporation
whom the Director reasonably believes to be reliable and competent in the
matters presented;
(b) legal counsel, public accountants or other persons as to matters
which the Director reasonably believes to be within the persons' professional or
expert competence; or
(c) a committee of the Board of Directors upon which he does not
serve, duly designated in accordance with a provision of the Articles of
Incorporation or the Bylaws, as to matters within its designated authority,
which committee the Director reasonably believes to merit confidence.
In discharging his duties, a Director may consider such factors as the
Director deems relevant, including the long-term prospects and interests of the
Corporation and its shareholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the Corporation
or its subsidiaries, the communities and society in which the Corporation or its
subsidiaries operate, and the economy of the state and the nation.
A Director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question which would cause such reliance
described above to be unwarranted.
A Director is not liable for any action taken as a Director, or any
failure to take any action, if he performed the duties of his office in
compliance with this Section 5.
Section 6. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any Director may be removed, only for cause, if the
number of votes cast to remove him exceeds the number of votes cast not to
remove him. If a Director is elected by a voting group or class of shares under
the Articles of Incorporation, only the shareholders of that voting group or
class may participate in the vote to remove him.
Section 7. Vacancies. Until the next election of Directors upon the
expiration of their terms, any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled only by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board of Directors. A
Director elected to fill a vacancy shall hold office only until the next
election of Directors by the shareholders and until his successor shall have
been elected and shall qualify.
ARTICLE V
Chairman of the Board
The Corporation may have a Chairman of the Board who shall be a
Director and who shall preside at all meetings of the shareholders and of the
Board of Directors. He shall advise and counsel with the President. In addition
to the responsibility for maintaining effective external relationships on behalf
of the Corporation with industry groups, governmental agencies, scientific,
educational and other similar groups, he shall exercise such other
responsibilities and duties as shall be assigned to him by the Board of
Directors. The Board of Directors shall have the power at any time to leave the
office of Chairman of the Board vacant and, in such eventuality, the President
shall assume and exercise all of the powers and responsibilities of this office.
ARTICLE VI
Meetings of the Board
Section 1. Time, Place, and Call of Meetings. Meetings of the Board of
Directors may be held within or without the State of Florida at the time fixed
by these Bylaws or upon call of the Chairman of the Board or the President or
the Secretary or any two Directors.
Section 2. Annual Meeting. The annual meeting of the Board of
Directors shall be held promptly following the annual meeting of shareholders.
Section 3. Notice of Meetings. Written notice of the date, time and
place of special meetings of the Board of Directors shall be given to each
Director by either personal delivery, mail, telegram or cablegram at least two
(2) days before the meeting.
Notice need not be given of regular meetings held each quarter on dates
promulgated before the end of the preceding year. Notice of a meeting of the
Board of Directors need not be given to any Director who signs a waiver of
notice, either before or after the meeting. Attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting and waiver of any
and all objection to the place of the meeting, the time of the meeting, or the
manner in which it has been called or convened, except when a Director states,
at the beginning of the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened.
Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
A majority of the Directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the Directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
Directors.
Members of the Board of Directors or any committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment by means of which all Directors participating
in the meeting may simultaneously hear each other during the meeting.
Participation by such means shall constitute presence in person at a meeting.
The vote on any matter before the Board or any committee of the Board, when
members are present by means of a conference telephone or similar communication
equipment, shall be by roll call.
Section 4. Action Without a Meeting. Any action required to be taken at
a meeting of the Board of Directors or a committee thereof may be taken without
a meeting if one or more written consents, setting forth the action so to be
taken, signed by all of the Directors, or all of the members of the committee,
as the case may be, is filed in the minutes of the proceeding. Action taken
under this section is effective when the last Director signs the consent, unless
the consent specifies a different effective date. A consent under this section
has the effect of a meeting vote and may be described as such in any document.
Section 5. Quorum and Voting. A majority of the number of Directors
fixed by these Bylaws shall constitute a quorum for the transaction of business.
The act of the majority of the Directors present at a meeting at which a quorum
is present when a vote is taken shall be the act of the Board of Directors.
Section 6. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof when
corporate action is taken shall be deemed to have assented to the action taken
unless he objects at the beginning of the meeting (or promptly upon his arrival)
to holding it or transacting specified business at the meeting, or he votes
against or abstains from the action taken.
Section 7. Director Conflicts of Interest. No contract or other
transaction between the Corporation and one or more of its Directors or any
other corporation, firm, association or entity in which one or more of the
Directors are directors or officers or are financially interested shall be
either void or voidable because of such relationship or interest or because such
Director or Directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if:
(a)The fact of such relationship or interest is disclosed or known to
the Board of Directors or committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested Directors; or
(b)The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(c)The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the Board, a committee, or the
shareholders.
Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
Shares owned by or voted under the control of a Director who has a
relationship or interest in the subject transaction may not be counted in the
shareholders' vote to determine whether to authorize, approve, or ratify a
conflict of interest transaction under subparagraph (b) above.
ARTICLE VII
Committees
Section 1. Committees. The Board of Directors, by resolution adopted by
a majority of the full Board, may designate from among its members an Executive
Committee, Audit Committee, Finance and Budget Committee, Compensation
Committee, Nominating Committee and one or more other committees and may
designate one or more Directors as alternate members of any such committee who
may act in the place and stead of any absent member or members at any meeting of
such committee.
The members of committees, who shall be at least two in number, shall
act only as a committee and the individual members shall have no power as such.
Unless the Board of Directors elects a committee chairman, each committee shall
elect its own chairman and secretary, and have full power and authority to make
rules for the conduct of its business. The Board shall have the power at any
time to change the membership of committees, fill vacancies, and to abolish
committees.
Neither the designation of any such committee, the delegation thereto
of authority, nor action by such committee pursuant to such authority shall
alone constitute compliance by any member of the Board of Directors not a member
of the committee in question with his responsibility to act in good faith, in a
manner he reasonably believes to be in the best interests of the Corporation,
and with such care as an ordinarily prudent person in a like position would use
under similar circumstances.
Section 2. Executive Committee. The Executive Committee shall have and
may exercise all of the powers of the Board of Directors during the intervals
between the meetings of the Board in the management of the business and affairs
of the Corporation. A majority of the Executive Committee shall constitute a
quorum for the transaction of business, and the act of a majority of those
present at a meeting, at which a quorum is present, shall be the act of the
Executive Committee. The Executive Committee shall keep a record of its acts and
proceedings and make a report thereof from time to time to the Board of
Directors.
The Executive Committee shall not have the authority to:
(a)approve or recommend to shareholders actions or
proposals required by the Florida Business Corporation Act to be approved by
shareholders;
(b)fill vacancies on the Board of Directors or any committee
thereof;
(c)adopt, amend or repeal the Bylaws;
(d)authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of Directors; or
(e)authorize or approve the issuance or sale or contract for
the sale of shares, or determine the designation and relative rights,
preferences, and limitations of a voting group except that the Board of
Directors may authorize a committee (or a senior executive officer of the
Corporation) to do so within limits specifically prescribed by the Board of
Directors.
Section 3. Audit Committee: The Audit Committee shall be composed of at
least three outside Directors. The Committee will nominate the public accounting
firm to conduct the annual audit of the Corporation and submit the nomination to
the Board of Directors for approval. The Audit Committee shall keep a record of
its acts and proceedings and make a report thereof from time to time to the
Board of Directors.
ARTICLE VIII
Officers
Section 1. Executive Officers. The officers of the Corporation may
consist of a Chairman of the Board of Directors, and shall consist of a
President, a Secretary, a Treasurer, and such other officers as may be
determined and appointed by the Board of Directors. Officers shall be appointed
by the Board of Directors at least annually, at the first meeting of Directors
immediately following the annual meeting of shareholders of the Corporation, and
shall serve until their successors are appointed and shall qualify. Any two or
more offices may be held by the same person.
Section 2. Duties. The officers of the Corporation shall have the
following duties:
(a)President. The President shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect, subject, however,
to the right of the Board to delegate to others, so far as it lawfully may, any
specific powers; and shall, in the absence of the Chairman of the Board, preside
at all meetings of the shareholders and of the Board of Directors. The President
may appoint such agents as he may deem necessary, who shall hold office during
his pleasure, and who shall have such authority and shall perform such duties as
from time to time he may prescribe.
(b)Secretary. The Secretary shall have custody of, and maintain,
all of the corporate records except the financial records, shall record the
minutes of all meetings of the shareholders and of the Board of Directors, send
all notices of meetings, authenticate records of the Corporation and perform
such other duties as may be prescribed by the Board of Directors or the
President.
(c)Treasurer. The Treasurer shall have custody of all corporate
funds and shall perform such other duties as may be prescribed by the Board of
Directors or the President.
Section 3. Removal of Officers. Any officer or agent appointed by the
Board of Directors may be removed by the Board with or without cause, whenever
in its judgment the best interests of the Corporation will be served thereby.
Any vacancy, however occurring, in any office may be filled by the Board
of Directors.
An officer's removal does not affect the officer's contract rights, if
any, with the Corporation. An officer's resignation does not affect the
Corporation's contract rights, if any, with the officer. The appointment of an
officer does not of itself create contract rights.
ARTICLE IX
Capital Stock
Section 1. Certificates of Stock. The Board of Directors shall provide
for the issue and transfer of the capital stock of the Corporation and prescribe
the form of the certificates for such stock.
Section 2. Form. Certificates representing shares in the Corporation
shall be signed (either manually or in facsimile) by the President or Vice
President and the Treasurer or an Assistant Treasurer and may be sealed with the
seal of the Corporation or a facsimile thereof. In case any officer who signed
such certificate, or whose facsimile signature has been placed upon such
certificate, shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issuance.
If and to the extent the Corporation is authorized to issue different
classes of shares or different series within a class, each certificate
representing shares shall state or fairly summarize upon the front or back of
the certificate, or shall state conspicuously on its front or back that the
Corporation will furnish to any shareholder upon request and without charge a
full statement of:
(a)The designations, preferences, limitations, and relative rights
applicable to each class.
(b)The variations in the relative rights, preferences and limitations
determined for each series, and the authority of the Board of Directors to
determine the variations for future series.
Every certificate representing shares which are restricted as to the sale,
disposition or other transfer of such shares shall state that such shares are
restricted as to transfer and shall set forth or fairly summarize upon the
certificate such restrictions, or shall state that the Corporation will furnish
to any shareholder upon request and without charge a full statement of such
restrictions.
Each certificate representing shares shall state upon the face thereof: the
name of the Corporation; that the Corporation is organized under the laws of the
State of Florida; the name of the person or persons to whom issued; the number
and class of shares; and the designation of the series, if any, which such
certificate represents.
Section 3. Transfer of Stock. The stock of the Corporation
shall be transferable or assignable on the books of the Corporation by the
holders in person or by attorney on the surrender of the certificates
therefor.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall be the calendar year.
ARTICLE XI
Indemnification of Directors, Officers and Employees
The Corporation shall indemnify any Director, officer, or employee or
any former Director, officer, or employee to the full extent permitted by law.
ARTICLE XII
Dividends
The Board of Directors of the Corporation may, from time to time,
declare, and the Corporation may pay, dividends on its shares in cash, property
or its own shares, except as prohibited by law, or when contrary to any
restrictions contained in corporate indentures, bonds, or other financing
agreements.
ARTICLE XIII
Amendment
Except as provided in Article VIII of the Articles of Incorporation,
these Bylaws may be altered, amended or repealed and new Bylaws may be adopted
by an affirmative vote of at least two-thirds of the number of Directors
constituting the Board of Directors or by an affirmative vote of the holders of
at least two-thirds of the outstanding Voting Stock (as defined in Article VIII
of the Articles of Incorporation) of the Corporation.
ARTICLE XIV
Gender
All references herein to the masculine pronoun shall be deemed to
include the feminine pronoun.
Exhibit 12
FLORIDA POWER CORPORATION
Statement of Computation of Ratios
(Dollars In millions)
Ratio of Earnings to Fixed Charges:
Twelve Months Ended Year Ended
June 30, December 31,
1998 1997 1997 1996
------ ------ ------ ------
NET INCOME $207.3 $180.1 $135.9 $238.4
Add:
Operating Income Taxes 115.7 97.4 69.9 135.8
Other Income Taxes .2 - - (.1)
------ ----- ------ ------
Income Before Taxes 323.2 277.5 205.8 374.1
Total Interest Charges 137.0 99.9 117.3 98.4
------ ------ ------ ------
Total Earnings (A) $460.2 $377.4 $323.1 $472.5
Fixed Charges (B) $137.0 $ 99.9 $117.3 $98.4
------ ------ ------ ------
Ratio of Earnings to
Fixed Charges (A/B) 3.36 3.78 2.75 4.80
====== ====== ====== ======
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> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,625
<OTHER-PROPERTY-AND-INVEST> 916
<TOTAL-CURRENT-ASSETS> 865
<TOTAL-DEFERRED-CHARGES> 337
<OTHER-ASSETS> 338
<TOTAL-ASSETS> 6,081
<COMMON> 1,208
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 592
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,800
0
34
<LONG-TERM-DEBT-NET> 2,372
<SHORT-TERM-NOTES> 180
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 150
<LONG-TERM-DEBT-CURRENT-PORT> 56
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,489
<TOT-CAPITALIZATION-AND-LIAB> 6,081
<GROSS-OPERATING-REVENUE> 1,691
<INCOME-TAX-EXPENSE> 70
<OTHER-OPERATING-EXPENSES> 1,405
<TOTAL-OPERATING-EXPENSES> 1,475
<OPERATING-INCOME-LOSS> 216
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 216
<TOTAL-INTEREST-EXPENSE> 87
<NET-INCOME> 129
1
<EARNINGS-AVAILABLE-FOR-COMM> 128
<COMMON-STOCK-DIVIDENDS> 104
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 384
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</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> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,625
<OTHER-PROPERTY-AND-INVEST> 331
<TOTAL-CURRENT-ASSETS> 539
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 518
<TOTAL-ASSETS> 5,013
<COMMON> 1,004
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 779
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,783
0
34
<LONG-TERM-DEBT-NET> 1,746
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 159
<LONG-TERM-DEBT-CURRENT-PORT> 2
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,289
<TOT-CAPITALIZATION-AND-LIAB> 5,013
<GROSS-OPERATING-REVENUE> 1,229
<INCOME-TAX-EXPENSE> 65
<OTHER-OPERATING-EXPENSES> 986
<TOTAL-OPERATING-EXPENSES> 1,051
<OPERATING-INCOME-LOSS> 178
<OTHER-INCOME-NET> 4
<INCOME-BEFORE-INTEREST-EXPEN> 182
<TOTAL-INTEREST-EXPENSE> 67
<NET-INCOME> 115
1
<EARNINGS-AVAILABLE-FOR-COMM> 114
<COMMON-STOCK-DIVIDENDS> 98
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 324
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
