FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15607
FPL GROUP CAPITAL INC
(Exact name of registrant as specified in its charter)
Florida 59-2576416
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Universe Boulevard
Juno Beach, Florida 33408
(Address of principal executive offices)
(Zip Code)
(407) 694-3509
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value, outstanding at April 30, 1994: 100
shares
FPL Group Capital Inc meets the conditions set forth under General
Instruction H(1)(a) and (b) and is therefore filing this Form with
reduced disclosure.<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FPL GROUP CAPITAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
OPERATING REVENUES ......................................................... $ 23,201 $ 28,955
OPERATING EXPENSES:
Costs of goods and services .............................................. 15,235 18,750
General and administrative ............................................... 5,689 6,495
Other operating expenses ................................................. 1,291 2,426
Total operating expenses ............................................... 22,215 27,671
OPERATING INCOME ........................................................... 986 1,284
EQUITY IN LOSSES OF PARTNERSHIPS AND JOINT VENTURES ........................ (1,916) (734)
OTHER INCOME (DEDUCTIONS):
Interest income .......................................................... 10,283 10,165
Interest expense ......................................................... (7,181) (10,163)
Other - net .............................................................. (1,969) (28)
Total other income (deductions) ........................................ 1,133 (26)
INCOME BEFORE INCOME TAXES ................................................. 203 524
INCOME TAXES ............................................................... 242 713
NET LOSS ................................................................... $ (39) $ (189)
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Page 5 herein and the Notes to
Consolidated Financial Statements appearing in FPL Group Capital Inc's (the
Company) 1993 Annual Report on Form 10-K (Form 10-K).<PAGE>
<PAGE>
FPL GROUP CAPITAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1994 December 31,
(Unaudited) 1993
(Thousands of Dollars)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................... $ 23,833 $ 29,640
Receivables from affiliated companies ............................... 32,957 34,041
Other ............................................................... 35,471 32,706
Total current assets .............................................. 92,261 96,387
INVESTMENTS:
Receivable from Employee Stock Ownership Plan Trust ................. 353,060 353,989
Investments in partnerships and joint ventures ...................... 362,190 368,881
Investments in leveraged leases ..................................... 153,264 155,449
Other ............................................................... 78,211 76,888
Total investments ................................................. 946,725 955,207
OTHER ASSETS:
Property, plant and equipment - net ................................. 184,855 205,474
Other ............................................................... 5,380 8,871
Total other assets ................................................ 190,235 214,345
TOTAL ASSETS ............................................................ $1,229,221 $1,265,939
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ................................ $ 128,197 $ 278,179
Commercial paper .................................................... 36,982 -
Advances payable to FPL Group, Inc. ................................. 95,000 -
Accounts payable .................................................... 5,386 14,004
Other ............................................................... 14,359 21,422
Total current liabilities ......................................... 279,924 313,605
OTHER LIABILITIES:
Long-term debt ...................................................... 285,803 285,918
Accumulated deferred income taxes ................................... 226,360 228,813
Other ............................................................... 104,585 105,087
Total other liabilities ........................................... 616,748 619,818
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock ........................................................ 1 1
Other shareholder's equity .......................................... 332,548 332,515
Total shareholder's equity ........................................ 332,549 332,516
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY .............................. $1,229,221 $1,265,939
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Page 5 herein and the Notes to
Consolidated Financial Statements appearing in the Company's 1993 Form
10-K.<PAGE>
<PAGE>
FPL GROUP CAPITAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................... $ (39) $ (189)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization .......................................... 2,676 3,250
Other - net ............................................................ (6,164) 1,441
Net cash (used in) provided by operating activities ...................... (3,527) 4,502
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by leveraged lease investments ........................... 3,379 986
Distributions from partnerships and joint ventures ......................... 14,118 7,280
Contributions to partnerships and joint ventures ........................... (9,214) (8,449)
Sale of investments in joint ventures ...................................... - 9,795
Sale of property, plant and equipment ...................................... 19,928 174
Increase in loans receivable ............................................... (2,589) (20,819)
Other - net ................................................................ (1,284) (3,478)
Net cash provided by (used in) investing activities ...................... 24,338 (14,511)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt ................................................. (158,600) (1,259)
Increase in commercial paper ............................................... 36,982 -
Increase in advances from FPL Group, Inc. .................................. 95,000 7,000
Net cash (used in) provided by financing activities ...................... (26,618) 5,741
Net decrease in cash and cash equivalents .................................... (5,807) (4,268)
Cash and cash equivalents at beginning of period ............................. 29,640 11,731
Cash and cash equivalents at end of period ................................... $ 23,833 $ 7,463
Supplemental disclosures of cash flow information:
Cash paid for interest (net of amount capitalized) ......................... $ 12,018 $ 12,595
Cash paid to (received from) FPL Group, Inc. for income taxes .............. $ 2,160 $ (457)
</TABLE>
This report should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements on Page 5 herein and the Notes to
Consolidated Financial Statements appearing in the Company's 1993 Form
10-K.<PAGE>
<PAGE>
FPL GROUP CAPITAL INC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements should be
read in conjunction with the Company's 1993 Form 10-K and, in the opinion
of the Company, all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position as of
March 31, 1994, the results of operations for the three months ended
March 31, 1994 and 1993 and the cash flows for the three months ended
March 31, 1994 and 1993 have been made. Certain amounts included in the
prior year's condensed consolidated financial statements have been
reclassified to conform to the current year's presentation. The results of
operations for an interim period may not give a true indication of results
for the year.
1. Debt
In January 1994, the Company redeemed $150 million of its 8 7/8%
Debentures using proceeds from an advance from FPL Group, Inc. (FPL
Group) and internally generated funds.
2. Commitments and Contingencies
Litigation - A suit brought by the partners in a cogeneration project located
in Dade County, Florida alleges that ESI Energy, Inc. (ESI) has engaged in
anti-competitive conduct intended to eliminate competition from cogenerators
generally, and from their facility in particular, in violation of federal
antitrust laws and have wrongfully interfered with the cogeneration project's
contractual relationship with Metropolitan Dade County. The suit seeks
damages in excess of $100 million, before trebling under antitrust law, plus
other unspecified compensatory and punitive damages. ESI's motion for
summary judgment has been denied. ESI is appealing the denial.
A former cable installation contractor for Telesat Cablevision, Inc. (Telesat)
has sued the Company, FPL Group and Telesat for breach of contract, fraud
and violation of racketeering statutes. The suit seeks compensatory
damages in excess of $24 million, treble damages under racketeering activity
statutes, punitive damages and attorneys' fees, as well as the revocation of
Telesat's corporate charter and cable television franchises.
The Company believes that it and its affiliates have meritorious defenses to
all of the litigation described above and is vigorously defending these suits.
Accordingly, the liabilities, if any, arising from this litigation are not
anticipated to have a material adverse effect on the Company's financial
position.
Other - The Company and ESI have committed to invest approximately $9
million in, and lend approximately $2 million to, partnerships and joint
ventures entered into through ESI, all of which are expected to be funded
in 1994. Additionally, the Company and its subsidiaries, primarily ESI,
have guaranteed up to approximately $89 million of lease obligations, debt
service payments and other payments subject to certain contingencies.
3. Summarized Financial Information
ESI's investment in Doswell II Limited Partnership is expected to result in
disclosure of separate limited partnership financial statements in the
Company's 1994 Annual Report on Form 10-K. ESI accounts for this
investment under the equity method and includes in operating results its
proportionate share of partnership net income. Summarized interim financial
information of the partnership is provided below:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Gross revenues ..................................................................... $46,525 $44,622
Net operating income ............................................................... $20,513 $23,491
Net income ......................................................................... $ 5,155 $ 7,499
/TABLE
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements contained herein and Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in the Company's 1993 Form 10-K. The results of operations for
an interim period may not give a true indication of results for the year.
In the following discussion, all comparisons are with the corresponding
items in the prior year.
RESULTS OF OPERATIONS
The continuing operations of the Company consist primarily of the
non-utility energy operations of ESI and the agricultural operations
of Turner Foods Corporation. The Company continues to pursue the
disposition of its remaining real estate and cable television operations.
Operating revenues and operating expenses for the quarter declined in part
from dispositions completed subsequent to the first quarter of 1993. During
the first quarter 1994, the Company's real estate operations included sales of
two operating properties and one non-operating property with no significant
effect on net income. However, future operating revenues and related expenses
will diminish accordingly. The sale of the remaining operating property is
under negotiation.
The Company's net loss for the quarter ended March 31, 1994 improved slightly
as a result of lower interest expense due to lower outstanding debt and
refinancing of higher cost debt at lower interest rates. This was partially
offset by increased losses from the Company's investments primarily due to
extreme weather conditions affecting two plants in the Northeast, temporarily
increasing the cost of production of one and reducing the waste fuel supply of
the other. Energy production from the non-utility energy projects is generally
lower during the first quarter, increasing during the summer months.
Operating revenues declined primarily due to lower agricultural revenues.
Prices received for fruit in the first quarter of 1994 under market-price
contracts were below those received under floor-price contracts existing
during the first quarter of the prior year. The agricultural operations
continue to benefit from increased cost efficiencies.
Contracts for the sale of all of the remaining directly-owned and operated
cable television systems were recently terminated. Certain costs associated
with this unconsummated sale, net of a non-refundable deposit, are included
in other - net. The effective tax rate for the three months reflects
limitations on certain deductions for state income tax purposes.
FINANCIAL CONDITION
The Company, under a financial covenant in connection with its bank loan,
must maintain a minimum level of consolidated net worth which is reduced as
loan prepayments are made. At March 31, 1994, the required level of
consolidated net worth under this provision was $100 million and actual
consolidated net worth was $333 million.
For a discussion of the Company's financing activities, see Note 1. For
information concerning the Company's commitments, see Note 2.<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
*4(a) Indenture dated as of March 1, 1987 between the Company
and Irving Trust Company (now The Bank of New York), as
Trustee, including form of Debenture (filed as Exhibit 4.2
to Amendment No. 3, File No. 33-6215)
*4(b) First Supplemental Indenture dated as of March 1, 1987
(filed as Exhibit 4.3 to Amendment No. 3, File No. 33-6215)
*4(c) Second Supplemental Indenture dated as of June 1, 1987
(filed as Exhibit 4(e), File No. 33-69786)
*4(d) Third Supplemental Indenture dated as of September 1, 1987
(filed as Exhibit 4(f), File No. 33-69786)
*4(e) Fourth Supplemental Indenture dated as of February 1, 1988
(filed as Exhibit 4(g), File No. 33-69786)
*4(f) Fifth Supplemental Indenture dated as of July 1, 1992
(filed as Exhibit 4(h), File No. 33-69786)
*4(g) Sixth Supplemental Indenture dated as of May 1, 1993
(filed as Exhibit 4(i), File No. 33-69786)
*10 Support Agreement dated as of December 18, 1985 between
the Company and FPL Group (filed as Exhibit 10 to Form 10-K
for the year ended December 31, 1993)
12 Computation of Ratio of Earnings to Fixed Charges
* Incorporated herein by reference
(b) Reports on Form 8-K
(1) A Current Report on Form 8-K dated March 22, 1994
was filed March 22, 1994 reporting one event under Item 5.
Other Events and filing one exhibit under Item 7.
Financial Statements and Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FPL GROUP CAPITAL INC
(Registrant)
Date: May 10, 1994 PAUL J. EVANSON
Paul J. Evanson
Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 12
FPL GROUP CAPITAL INC AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1994
(Thousands of Dollars)
<S> <C>
Earnings, as defined:
Net loss ............................................................................ $ (39)
Income taxes ........................................................................ 242
Fixed charges, included in determination of income, as below ........................ 7,260
Total earnings, as defined ........................................................ $7,463
Fixed charges, as defined:
Interest expense .................................................................... $7,181
Rental interest factor .............................................................. 79
Fixed charges, included in determination of income .................................. 7,260
Capitalized interest ................................................................ 106
Total fixed charges, as defined ................................................... $7,366
Ratio of earnings to fixed charges .................................................... 1.01
</TABLE>
