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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 1-8841
FPL GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2449419
(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 office)
(Zip Code)
(407) 694-3509
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.01
Par Value and
Preferred Share
Purchase Rights
Registered on New
York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of January 31, 1994 (based on the closing market price on the
Composite Tape on January 31, 1994) was $6,999,557,188 (determined by
subtracting from the number of shares outstanding on that date the number of
shares held by directors and officers of the registrant).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the close of the latest practicable date.
Common Stock, $.01 Par Value, outstanding at February 28, 1994:
190,065,570 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated documents
(to the extent indicated herein) Part of Form 10-K
Portions of Definitive Proxy Statement for
the 1994 Annual Meeting of Shareholders Part III
DEFINITIONS
Acronyms and defined terms used in the text include the following:
Term Meaning
AFUDC Allowance for funds used during construction
Bay Loan Bay Loan and Investment Bank
capacity clause Capacity Cost Recovery Clause
charter Restated Articles of Incorporation,as amended
Colonial Penn Colonial Penn Group, Inc.
common stock Common Stock of FPL Group, Inc.
conservation clause Energy Conservation Cost Recovery Clause
DOE United States Department of Energy
EMF Electric and magnetic fields
Energy Act Energy Policy Act of 1992
ESI ESI Energy, Inc.
EWG Exempt Wholesale Generator
FDEP Florida Department of Environmental Protection
FERC Federal Energy Regulatory Commission
FGT Florida Gas Transmission Company
FMPA Florida Municipal Power Agency
FPL Florida Power & Light Company
FPL Group FPL Group, Inc.
FPL Group Capital FPL Group Capital Inc
FPSC Florida Public Service Commission
fuel clause Fuel and Purchased Power Cost Recovery Clause
Holding Company Act Public Utility Holding Company Act of 1935,
as amended
JEA Jacksonville Electric Authority
kv Kilovolt
kva Kilovolt-ampere
kwh Kilowatt-hour
Management's Discussion Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
mortgage FPL's Mortgage and Deed of Trust dated as of
January 1, 1944, as supplemented and amended
mw Megawatt(s)
Note Note to Consolidated Financial Statements
NRC United States Nuclear Regulatory Commission
oil-backout clause Oil-Backout Cost Recovery Clause
PURPA Public Utility Regulatory Policies Act of 1978,
as amended
qualifying facilities Non-utility power production facilities meeting
the requirements of a Qualifying Facility under
the PURPA
ROE Return on Equity
SJRPP St. Johns River Power Park
Southern Companies Alabama Power Company, Georgia Power Company,
Gulf Power Company, Mississippi Power Company
and Savannah Electric & Power Company
Telesat Telesat Cablevision, Inc.
Turner Turner Foods Corporation
PART I
Item 1. Business
FPL GROUP, INC.
FPL Group, incorporated under the laws of Florida in 1984, is a public
utility holding company (as defined in the Holding Company Act) that is
engaged, through its subsidiaries, in utility and non-utility operations.
FPL Group is exempt from substantially all of the provisions of the Holding
Company Act on the basis that FPL Group's and FPL's businesses are
predominantly intrastate in character and carried on substantially in a
single state, in which both are incorporated. FPL Group, together with its
subsidiaries, employs approximately 12,400 persons.
Utility operations are conducted through FPL, which is engaged in the
generation, transmission, distribution and sale of electric energy. Non-
utility operations are conducted through FPL Group Capital and its
subsidiaries and consist mainly of investments in non-utility energy projects
and agricultural operations.
UTILITY OPERATIONS
General. FPL, a wholly-owned subsidiary of FPL Group, supplies electric
service throughout most of the east and lower west coasts of Florida. This
service territory contains 27,650 square miles with a population of
approximately 6.5 million. During 1993, FPL served approximately 3.4 million
customer accounts. Operating revenues amounted to approximately $5.2
billion, of which about 56% was derived from residential customers, 37% from
commercial customers, 4% from industrial customers and 3% from other sources.
FPL provided approximately 98% of FPL Group's operating revenues in each of
the years 1991 through 1993.
Regulation. The retail operations of FPL represent approximately 98% of
operating revenues and are regulated by the FPSC, which has jurisdiction over
retail rates, service territory, issuances of securities, planning, siting
and construction of facilities and other matters. FPL is also subject to
regulation by the FERC in various respects, including the acquisition and
disposition of certain facilities, interchange and transmission services and
wholesale purchases and sales of electric energy.
FPL is subject to the jurisdiction of the NRC with respect to its nuclear
power plants. NRC regulations govern the granting of licenses for the
construction and operation of nuclear power plants and subject such power
plants to continuing review and regulation.
Federal, state and local environmental laws and regulations cover air and
water quality, land use, power plant and transmission line siting, electric
and magnetic fields from power lines and substations, noise and aesthetics,
solid waste and other environmental matters. Compliance with these laws and
regulations increases the cost of electric service by requiring, among other
things, changes in the design and operation of existing facilities and
changes or delays in the location, design, construction and operation of new
facilities. FPL estimates that capital expenditures for improvements needed
to comply with environmental laws and regulations will be approximately $10
million to $30 million annually for the years 1994 through 1998. These
amounts are included in FPL's projected capital expenditures set forth in
Item 1. Capital Expenditures.
FPL holds franchises with varying expiration dates to provide electric
service in various municipalities and seven counties in Florida. FPL
considers its franchises to be adequate for the conduct of its business.
Retail Ratemaking. The underlying concept of utility ratemaking is to set
rates at a level that allows the utility to collect total revenues (revenue
requirements) equal to its cost of providing service, including a reasonable
return on invested capital. To accomplish this, the FPSC uses various
ratemaking mechanisms.
The basic costs of providing electric service, other than fuel and certain
other costs, are recovered through base rates, which are designed to recover
the costs of constructing, operating and maintaining the utility system.
These costs include operations and maintenance expenses, depreciation and
taxes, as well as a rate of return on FPL's investment in assets used and
useful in providing electric service (rate base). The rate of return on rate
base approximates FPL's weighted cost of capital, which includes its costs
for debt and preferred stock and an allowed ROE. Base rates are determined
in rate proceedings which occur at irregular intervals at the initiative of
FPL, the FPSC or a substantially affected party.
Fuel costs are recovered through levelized monthly charges established
pursuant to the fuel clause. These charges, which are calculated semi-
annually, are based on estimated costs of fuel and estimated customer usage
for the ensuing six-month period, plus or minus a true-up adjustment to
reflect the variance of actual costs and usage from the estimates used in
setting the fuel adjustment charges for prior periods.
Capacity payments to other utilities and generators for purchased power are
recovered primarily through the capacity clause. Costs associated with
implementing energy conservation programs are recovered through rates
established pursuant to the conservation clause. Certain other non-fuel
costs and the accelerated recovery of the costs of certain projects that
displace oil-fired generation are recovered through the oil-backout clause.
Beginning in April 1994, costs of complying with new federal, state and local
environmental regulations will be recovered through the environmental
compliance cost recovery clause. In the past such costs would have been
recoverable through base rates.
The FPSC has the power to disallow recovery of costs which it considers
excessive or imprudently incurred. Such costs may include operations and
maintenance expenses, the cost of replacing power lost when fossil and
nuclear units are unavailable and costs associated with the construction or
acquisition of new facilities. Also, the FPSC does not provide any assurance
that the allowed ROE will be achieved.
System Capability and Load. FPL's resources for serving load as of January 1,
1994 consist of 16,708 mw of firm electric power generated by FPL-owned
facilities (see Item 2. Properties) and obtained through purchased power
contracts (see table below).
On August 4, 1993, FPL reached an all-time energy peak demand of
approximately 15,266 mw. At that time, FPL had a total installed generating
capability of about 14,643 mw, 2,054 mw of firm purchased power and the
capability to reduce peak demand by 520 mw through the implementation of load
management, resulting in a reserve margin of approximately 13%.
Compound annual growth rates for the five years ending 1998 are projected to
be 2.7% for kwh sales and 2.6% for customers. To meet this growth, FPL plans
to add 1,090 mw of new plant capacity to its system by the summer of 1995 as
shown below. No new plant additions are expected for the years 1996 through
1998.
Capacity Additions 1994 1995 Total
(mw)
Scherer Unit No. 4 (Acquisition) . . . . . . . . . . . . . . . . 140 90 230
Martin Unit Nos. 3 and 4 (New Construction). . . . . . . . . . . 860 - 860
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 90 1,090
In addition to the capacity additions listed above, FPL plans by 1998 to
increase purchased power from other utilities and qualifying facilities by
325 mw (see table below).
The total amount of purchased power available under existing long-term
contracts with other utilities and qualifying facilities through 1998 is
presented in the table below. See Note 12 - Contracts.
Southern Qualifying
Period Companies JEA Facilities Total
(mw)
January 1994 . . . . . . . . . . . . . . . . . . . . . . . . 1,406 374 285 2,065
February 1994 - May 1994 . . . . . . . . . . . . . . . . . . 1,406 374 535 2,315
June 1994 - December 1994. . . . . . . . . . . . . . . . . . 1,007 374 535 1,916
January 1995 - May 1995. . . . . . . . . . . . . . . . . . . 1,007 374 543 1,924
June 1995 - December 1995. . . . . . . . . . . . . . . . . . 913 374 543 1,830
January 1996 - March 1996. . . . . . . . . . . . . . . . . . 913 374 913 2,200
April 1996 - May 1996. . . . . . . . . . . . . . . . . . . . 913 374 955 2,242
June 1996 - December 1996. . . . . . . . . . . . . . . . . . 913 374 1,010 2,297
January 1997 - December 1998 . . . . . . . . . . . . . . . . 913 374 1,031 2,318
Capital Expenditures. FPL's capital expenditures, including AFUDC, totaled
approximately $1.1 billion in 1993, $1.3 billion in 1992 and $1.2 billion in
1991. Capital expenditures for the 1994-98 period are estimated as follows
(see Management's Discussion):
1994 1995 1996 1997 1998 Total
(Millions of Dollars)
Construction:
Generation . . . . . . . $ 230 $ 190 $ 160 $ 240 $ 130 $ 950
Transmission . . . . . . 120 150 180 130 90 670
Distribution . . . . . . 280 270 280 290 290 1,410
General and other. . . . 120 110 100 90 80 500
Total construction . . 750 720 720 750 590 3,530
Scherer acquisition payments . 129 82 - - - 211
Total. . . . . . . . . $ 879 $ 802 $ 720 $ 750 $ 590 $3,741
All of these estimates are subject to continuing review and adjustment and
actual capital expenditures may vary from estimates.
Nuclear Operations. FPL owns and operates four nuclear units, two at St.
Lucie and two at Turkey Point. The operating licenses for St. Lucie Unit
Nos. 1 and 2 expire in 2016 and 2023, respectively. The operating licenses
for both Turkey Point Units expire in 2007. The nuclear units are
periodically removed from service to accommodate normal refueling and
maintenance outages, repairs and certain other modifications.
Indications of degradation have been found in the pressurized water
circulation tubes of the St. Lucie Units Nos. 1 and 2 steam generators.
Despite implementation of remedial measures, degradation of the Unit No. 1
steam generators has continued and FPL has determined that they will need to
be replaced. FPL has ordered the replacement steam generators for Unit
No. 1, which are scheduled to be installed and in service by the end of 1998,
the cost of which is included in FPL's projected capital expenditures set
forth above. The degradation in the Unit No. 2 steam generators appears to
be primarily a mechanical-wear problem and should not affect their useful
life.
Fuel. FPL's generating plants are fueled by residual and distillate oil,
natural gas, coal and nuclear fuel. The diverse fuel options, along with
purchased power, enable FPL to shift between sources of generation to achieve
the most economical fuel mix. FPL's oil requirements are obtained under
short-term contracts and in the spot market.
FPL obtains most of its natural gas requirements under a take-or-pay
transportation contract with FGT, the sole interstate pipeline operator in
Florida, and a related take-or-pay natural gas supply contract with an
affiliate of FGT. These contracts will expire in 2005. In 1992, FPL entered
into an additional take-or-pay transportation contract with FGT and a related
take-or-pay natural gas supply contract with another affiliate of FGT. The
new contracts will begin on the in-service date of FGT's pipeline expansion,
which is scheduled for late 1994, and expire in 2014 and 2009, respectively.
These contracts will provide an additional firm supply of natural gas under
competitive pricing terms to meet FPL's future gas requirements. See
Note 12 - Contracts.
FPL has, through its joint ownership interest in SJRPP Units Nos. 1 and 2 and
Scherer Unit No. 4, long-term coal supply contracts for those units. The
remaining coal requirements will be obtained under additional contracts or in
the open market.
FPL leases nuclear fuel for all four of its nuclear units. See Note 7.
Under the Nuclear Waste Policy Act of 1982, the DOE is required to construct
permanent storage facilities and will take title to and provide
transportation and storage for spent nuclear fuel for a specified fee.
Although the DOE estimates that its storage facilities will be completed by
the year 2010, there is considerable doubt within the utility industry that
this schedule will be met. Currently, FPL is storing spent fuel on site and
plans to provide adequate storage capacity for all of its spent nuclear fuel
up to and beyond the year 2010, pending its removal by the DOE.
Competition. FPL faces increasing competition in the wholesale and industrial
energy markets. Recent changes in governmental regulation are encouraging
the growth of non-regulated energy suppliers, such as EWGs, and an increased
interest in self-generation, which has provided customers with alternative
sources to meet their electric needs. Competition exists particularly with
respect to self-generation by large industrial, commercial and governmental
energy users. See Item 1.
Business - General. Regulatory law and policy limit FPL's flexibility in
pricing its services to these customers. To date, loss of customers to such
alternatives has not materially reduced FPL's sales, revenues or net income.
The FERC has exercised its enhanced power under the Energy Act over wholesale
transmission to encourage competition.
In 1993, FPL filed with the FERC a comprehensive revision and expansion of
its service offerings in the wholesale market. FPL has proposed changes to
its wholesale sales tariffs for service to municipal and cooperatively-owned
electric utilities, its power sharing (interchange) agreements with other
utilities and expanded its transmission offerings for new services by
switching from individually negotiated contracts to three tariffs of general
applicability. These revised offerings are intended to meet wholesale
customer needs in the new competitive marketplace, while protecting the
interests of FPL's customers and shareholders by eliminating the potential
for subsidies to competitors. The FERC accepted FPL's proposal for filing
and scheduled an August 1994 hearing on issues raised. FPL began collecting
the proposed rates in late February 1994 subject to refund based on the
outcome of the hearing. A final decision by the FERC in this case is not
expected until sometime in 1995.
Also in 1993, the FMPA requested the FERC, under the FERC's new authority
under the Energy Act, to order FPL to provide the FMPA members with network
transmission service. FPL currently provides point-to-point transmission
service to the FMPA. Network transmission service would permit the FMPA to
vary the receipt and delivery points for power without the prior agreement of
FPL. In late 1993, the FERC ordered the FMPA to provide FPL with certain
updated information and the parties to negotiate for 60 days towards a
network service agreement. Because no agreement was reached, FPL and the
FMPA, filed their respective positions and proposals for the FERC's
consideration. An initial FERC decision on this matter is expected in late
1994.
FPL is presently a defendant in two antitrust suits. In each suit, the
complaint includes an alleged inability to utilize FPL's transmission
facilities to wheel power to facilities in order to displace the existing
retail electric service from FPL. See Item 3. Legal Proceedings.
Electric and Magnetic Fields. In recent years, increasing public, scientific
and regulatory attention has been focused on possible adverse health effects
of EMF. These fields are created whenever electricity flows through a power
line or an appliance. Several epidemiological (i.e., statistical) studies
have suggested a linkage between EMF and certain types of cancer, primarily
childhood leukemia; other studies have been inconclusive or have shown no
such linkage. Neither these epidemiological studies nor clinical studies
have produced any conclusive evidence that EMF does or does not cause adverse
health effects.
The FDEP has promulgated regulations setting standards for EMF levels within
and at the edge of the rights of way for transmission lines, and FPL is in
compliance with these regulations. The FDEP reviewed its EMF standards in
1992 and confirmed the field limits previously established. Future changes
in the standards could require additional capital expenditures by FPL for
such things as increasing the right of way corridors or relocating or
reconfiguring transmission facilities. At present it is not known whether
any such expenditures will be required.
In addition, litigation seeking damages for diminution of property value or
personal injury is likely. FPL is presently a defendant in one suit alleging
personal injury and wrongful death.
Employees. FPL had approximately 12,000 employees at December 31, 1993.
Approximately 37% of the employees are represented by the International
Brotherhood of Electrical Workers whose collective bargaining agreement with
FPL expires October 31, 1994.
NON-UTILITY OPERATIONS
FPL Group Capital, a wholly owned subsidiary of FPL Group, holds the capital
stock of the non-utility subsidiaries of FPL Group and provides most of their
funding. Non-utility business activities consist primarily of investments in
non-utility energy projects and agricultural operations. FPL Group Capital
had approximately 400 employees at December 31, 1993.
FPL Group is continuing its efforts to exit substantially all of its
non-energy and non-agricultural business activities, including cable
television and real estate. In 1991, the sale of Colonial Penn, formerly FPL
Group Capital's largest subsidiary, was completed. Bay Loan, a former
subsidiary of Colonial Penn, is winding down its operations and is expected
to be dissolved with no anticipated adverse effect on FPL Group's future
operating results. Contracts for the sale of all of the directly-owned
and operated cable television systems were recently terminated. All of the
developed real estate properties are under contract for sale. FPL Group
cannot estimate the likelihood of consummating this sale; however, if
completed, this sale and the currently estimated result of disposing of the
balance of FPL Group's cable television and real estate assets are not
expected to have a significant adverse effect on FPL Group's net income. See
Management's Discussion and Notes 5 and 6 for additional information
regarding businesses to be discontinued and discontinued operations.
Non-Utility Energy. ESI provides equity capital, loans, transaction
management and project structuring for non-utility energy projects. ESI
develops and invests in non-utility energy projects and performs various
management roles associated with certain projects. To date, ESI has invested
in one project that qualifies as an EWG. Substantially all other projects in
which it invests are qualifying facilities under PURPA. Energy production
from the non-utility energy investments is generally higher during the third
quarter due to increased energy demand and resource availability. ESI
participates in 27 non-utility energy projects primary through non-
controlling ownership interests in joint ventures or leveraged lease
investments totalling 1,911 mw. Based on ESI's invested capital at
December 31, 1993, the projects are concentrated in California (48%),
Virginia (32%) and Pennsylvania (11%). The technologies and fuels used by
the projects to produce electricity include wind, geothermal, natural gas,
solar, biomass (wood), waste-to-energy and waste coal.
Agriculture. FPL Group Capital's agricultural subsidiary, Turner, owns and
operates citrus groves in Florida. Turner's primary product is juice
oranges, which are sold to processors for the premium not-from-concentrate,
as well as the international frozen-concentrate, orange juice markets. Other
products include grapefruit and specialty fruits. Turner's operations are
seasonal, with the majority of the citrus harvest taking place between
January and April.
As of December 31, 1993, Turner owned or leased approximately 29,000 acres of
citrus properties, which included 18,000 planted acres, 4,000 acres of
undeveloped land and 7,000 acres of infrastructure, wet lands and reservoirs.
Cable Television. Telesat provides franchised and/or private cable television
service in major population centers of Florida, through directly-owned and
operated cable television systems. As of December 31, 1993, Telesat directly
served approximately 41,000 subscribers. Also, Telesat has ownership
positions in four joint ventures throughout Florida, having exchanged
subscribers for ownership positions in those entities in prior years.
In 1993, Telesat sold directly-owned systems totalling approximately 14,000
subscribers, or 27% of the year's beginning subscriber count. In addition,
Telesat sold or otherwise liquidated its interest in three joint ventures.
FPL Group is actively pursuing the sale of the remainder of its
directly-owned and operated cable television systems and is liquidating its
interests in joint ventures as opportunities arise.
Other. Alandco, Inc. owns commercial, industrial and mixed-use real estate
in major population centers of Florida. FPL Group Capital is continuing its
efforts to sell or otherwise dispose of its real estate operations. During
1993, Alandco sold a portion of its rental properties. Its remaining
developed real estate properties are under contract for sale.
Qualtec Quality Services, Inc. provides consulting and training in total
quality management and licensing of its products to companies worldwide.
ESI also holds a diversified portfolio of leveraged leases. At December 31,
1993, the remaining lease terms range from 14 to 22 years.
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
J. L. Broadhead 58 Chairman of the Board, President and Chief Executive Officer
D. P. Coyle 55 General Counsel and Secretary
K. M. Davis 47 Controller and Chief Accounting Officer
P. J. Evanson 52 Vice President, Finance and Chief Financial Officer
S. E. Frank 52 President and Chief Operating Officer of FPL
J. H. Goldberg 62 President, Nuclear Division of FPL
L. J. Kelleher 46 Vice President, Human Resources
J. T. Petillo 49 Senior Vice President, External Affairs of FPL
D. L. Samil 38 Treasurer
C. O. Woody 55 Senior Vice President, Power Generation of FPL
M. W. Yackira 42 Senior Vice President, Market and Regulatory Services of FPL
The present term of office of the above executive officers extends to the
first meeting of the Board of Directors after the next annual election of
Directors, which is scheduled to be held on May 9, 1994.
Except as noted below, the individuals named in the table above have been
executive officers of FPL Group or its subsidiaries for more than five years.
Mr. Coyle was formerly a partner in the law firm of Steel Hector & Davis.
Mr. Evanson was formerly president and chief operating officer of the Lynch
Corporation, a diversified holding company.
Mr. Frank was formerly executive vice president and chief financial officer
of TRW Inc., a Cleveland-based diversified, high-technology, multinational
company.
Mr. Goldberg was formerly group vice president - nuclear of Houston Lighting
& Power Company, an electric utility.
Mr. Yackira was formerly chief planning officer of FPL, vice president of FPL
Group, vice president of GTE Florida, a telecommunications company and
assistant controller of GTE Service Corp., a telecommunications company.
Item 2. Properties
FPL Group and its subsidiaries maintain properties which are adequate for
their operations. The operating properties of FPL constitute approximately
98% of FPL Group's gross investment in property at December 31, 1993.
Generating Facilities. As of December 31, 1993, FPL had the following
generating facilities:
Net Warm
No. of Weather
Facility Location Units Fuel Capability
(mw)
STEAM TURBINES (continuous capability)
Cape Canaveral Cocoa, FL 2 Oil/Gas 734
Cutler Miami, FL 2 Gas 207
Fort Myers Fort Myers, FL 2 Oil 504
Manatee Parrish, FL 2 Oil 1,566
Martin Indiantown, FL 2 Oil/Gas 1,566
Port Everglades Port Everglades, FL 4 Oil/Gas 1,142
Riviera Riviera Beach, FL 2 Oil/Gas 544
St. Johns River Power Park Jacksonville, FL 2 Coal 250(1)
St. Lucie Hutchinson Island, FL 2 Nuclear 1,553(2)
Sanford Lake Monroe, FL 3 Oil/Gas 861
Scherer Monroe County, GA 1 Coal 416(3)
Turkey Point Florida City, FL 2 Oil/Gas 754
2 Nuclear 1,332
COMBINED CYCLE (continuous capability)
Lauderdale Dania, FL 2 Gas/Oil 782
Putnam Palatka, FL 2 Gas/Oil 478
COMBUSTION TURBINES (peak capability)
Fort Myers Fort Myers, FL 12 Oil 626
Lauderdale Dania, FL 24 Oil/Gas 876
Port Everglades Port Everglades, FL 12 Oil/Gas 438
DIESEL UNITS (peak capability)
Turkey Point Florida City, FL 5 Oil 14
Total 14,643
(1) Represents FPL's 20% ownership of SJRPP Units Nos. 1 and 2, which are jointly owned with the
JEA.
(2) Excludes Orlando Utilities Commission's and FMPA's combined share of approximately 15% of
St. Lucie Unit No. 2.
(3) Represents FPL's 49% ownership of Scherer Unit No. 4, which is jointly owned with the JEA
and Georgia Power Company. FPL has contracted to purchase an additional 27% undivided
ownership interest in Scherer Unit No. 4 in stages through 1995, including 17% (140 mw) in
June 1994.
Transmission and Distribution. FPL owns and operates 451 substations with a
total capacity of 100,054,470 kva. Electric transmission and distribution
lines owned and in service as of December 31, 1993 are as follows:
Trench
Overhead Lines and Submarine
Nominal Voltage Pole Miles Cable Miles
500 kv . . . . . . . . . . . . . . . . . . . . 985(1) -
230 kv . . . . . . . . . . . . . . . . . . . . 2,176 31
138 kv . . . . . . . . . . . . . . . . . . . . 1,340 45
115 kv . . . . . . . . . . . . . . . . . . . . 631 -
69 kv . . . . . . . . . . . . . . . . . . . . 167 15
Less than 69 kv. . . . . . . . . . . . . . . . 38,499 17,351
Total. . . . . . . . . . . . . . . . . . . . . 43,798 17,442
(1) Includes approximately 80 miles owned jointly with the JEA.
Character of Ownership. Substantially all of FPL's properties are subject to
the lien of its mortgage, which secures debt securities issued by FPL. The
principal properties of FPL are held by it in fee and are free from other
encumbrances, subject to minor exceptions, none of which is of such a nature
as to substantially impair the usefulness to FPL of such properties. Some of
the electric lines are located on land not owned in fee but are covered by
necessary consents of governmental authorities or rights obtained from owners
of private property.
Item 3. Legal Proceedings
In October 1988, Union Carbide Corporation, the corporate predecessor of
Praxair, Inc. (Praxair), filed suit against FPL and Florida Power Corporation
(Florida Power) in the United States District Court for the Middle District
of Florida. Praxair requested that Florida Power sell power to its facility
located within FPL's service territory, and that FPL transport the power to
the facility. Florida Power and FPL denied the request as being inconsistent
with Florida law and public policy. The FPSC has issued a declaratory
statement that FPL's denial of Praxair's request was proper and ordered FPL
not to wheel power under such circumstances. The suit alleges that through
a territorial agreement, FPL and Florida Power have conspired to eliminate
competition for the sale of electric power to retail customers, thereby
unreasonably restraining trade and commerce in violation of federal antitrust
laws as contained in Section 1 of the Sherman Antitrust Act (Sherman Act).
The suit seeks an award of three times Praxair's alleged damages in an
unspecified amount based on alleged higher prices paid for electricity and
product sales lost by Praxair. Cross motions for summary judgment were
denied. Both parties are appealing the denials.
In November 1988, TEC Cogeneration, Inc., its affiliate Thermo Electron
Corporation, RRD Corp. and its affiliate Rolls Royce Inc. filed suit in the
United States District Court for the Southern District of Florida against FPL
Group and its subsidiaries, FPL and ESI, on behalf of South Florida
Cogeneration Associates (SFCA), a joint venture which since 1986 has operated
a cogeneration facility for Metropolitan Dade County within FPL's service
territory in Miami, Florida. The suit alleges that the defendants have
engaged in anti-competitive conduct intended to prevent and defeat
competition from cogenerators within FPL's service territory and from SFCA's
Metropolitan Dade County facility in particular. It alleges that the
defendants' actions constitute monopolization and attempts to monopolize in
violation of Section 2 of the Sherman Act; conspiracy in restraint of trade
in violation of Section 1 of the Sherman Act; unlawful discrimination in
prices, services or facilities in violation of Section 2 of the Clayton Act;
and intentional interference with SFCA's contractual relationship with
Metropolitan Dade County in violation of Florida law. The suit seeks damages
in excess of $100 million, to be trebled under the Sherman and Clayton Acts,
as well as compensatory and punitive damages under Florida law, and
injunctive relief. A motion for summary judgment by FPL Group, FPL and ESI
has been denied.
In November 1989, Johnson Enterprises of Jacksonville, Inc. (Johnson
Enterprises) filed suit in the United States District Court for the Middle
District of Florida against FPL Group, FPL Group Capital and Telesat, a
subsidiary of FPL Group Capital. The suit, which arises out of a cable
television facilities installation agreement between Johnson Enterprises and
Telesat, alleges breach of contract, fraud and violations 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.
FPL Group believes that it and its subsidiaries 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 FPL Group's
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Common Stock Data. FPL Group's common stock is traded on the New York Stock
Exchange.
The high and low sales prices for the common stock of FPL Group as reported
in the consolidated transaction reporting system of the New York Stock
Exchange for each quarter during the past two years are as follows:
Quarter 1993 1992
High Low High Low
First. . . . . . . . . . . . . . . . . . . $ 39 5/8 $ 36 1/8 $ 37 $ 32 7/8
Second . . . . . . . . . . . . . . . . . . $ 38 5/8 $ 36 1/2 $ 36 $ 32
Third. . . . . . . . . . . . . . . . . . . $ 41 $ 37 5/8 $ 38 3/8 $ 34 7/8
Fourth . . . . . . . . . . . . . . . . . . $ 40 3/8 $ 35 1/2 $ 37 3/8 $ 34 1/2
Approximate Number of Stockholders. As of the close of business on February
28, 1994, there were 85,688 holders of record of FPL Group's common stock.
Dividends. Quarterly dividends have been paid on common stock of FPL Group
during the past two years in the following amounts:
Quarter 1993 1992
First. . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.61 $0.60
Second . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.62 $0.61
Third. . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.62 $0.61
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.62 $0.61
The amount and timing of dividends payable on common stock are within the
sole discretion of FPL Group's Board of Directors. The increases in the
annual dividend rates shown in the table above should not be viewed as
indicating a trend for the future. As a practical matter, the ability of FPL
Group to pay dividends on its common stock is dependent upon dividends paid
to it by its subsidiaries, primarily FPL. Given FPL's current financial
condition, there are no restrictions in effect that currently limit FPL's
ability to pay dividends to FPL Group. See Management's Discussion -
Financial Covenants.
Item 6. Selected Financial Data
Certain amounts included in prior years' selected financial data were
reclassified to conform to current year's presentation.
Years Ended December 31,
1993 1992 1991 1990 1989
(Thousands of Dollars, except per share amounts)
SELECTED FINANCIAL DATA:
Total operating revenues $ 5,316,294 $ 5,193,327 $ 5,249,436 $ 5,086,345 $ 5,032,544
Income from continuing operations $ 428,749(1) $ 466,949 $ 376,148(1) $ 298,175(2) $ 393,922
Net income (loss) $ 428,749(1) $ 466,949 $ 240,578(1)(3) $ (391,005)(2)(3) $ 410,416
Earnings (loss) per share of
common stock:
Continuing operations $ 2.30(1) $ 2.65 $ 2.31(1) $ 2.18(2) $ 2.99
Net income (loss) $ 2.30(1) $ 2.65 $ 1.48(1)(3) $ (2.86)(2)(3) $ 3.12
Dividends paid per share of
common stock $ 2.47 $ 2.43 $ 2.39 $ 2.34 $ 2.26
Total assets $13,078,012 $12,306,305 $11,281,785 $10,802,008 $10,526,529
Long-term debt, excluding
current maturities $ 3,748,983 $ 3,960,096 $ 3,668,139 $ 3,852,662 $ 3,449,443
Obligations under capital leases,
excluding current maturities $ 271,498 $ 324,198 $ 279,657 $ 74,887 $ 84,609
Preferred Stock of FPL
with sinking fund requirements,
excluding current maturities $ 97,000 $ 130,150 $ 150,150 $ 165,950 $ 164,250
SELECTED OPERATING STATISTICS OF FPL:
Energy sales (millions of kwh) 72,455 69,290 68,712 66,763 66,018
Energy sales:
Residential 50.2% 49.3% 50.4% 50.2% 48.9%
Commercial 39.3 39.0 39.6 39.7 38.9
Industrial 5.4 5.9 5.9 6.1 6.4
Interchange power sales 2.6 2.4 1.6 1.6 2.1
Other (4) 2.5 3.4 2.5 2.4 3.7
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Approximate 60-minute net
peak served (mw):
Summer season 15,266 14,661 14,123 13,754 13,425
Winter season(5) 12,964 13,112 11,868 13,988 12,876
Average number of customer accounts:
Residential 2,973,677 2,911,812 2,863,203 2,801,210 2,715,993
Commercial 358,377 350,271 343,837 337,134 327,279
Industrial 14,853 14,791 15,350 16,659 17,643
Other 3,261 4,376 4,079 3,820 3,531
Total 3,350,168 3,281,250 3,226,469 3,158,823 3,064,446
Average price per kwh sold (cents) (6) 7.10 7.25 7.39 7.37 7.39
(1) Reduced by after-tax effect of cost reduction program or restructuring
charge. See Note 4.
(2) Reduced by charges related to the write-down of businesses to be
discontinued. See Note 5.
(3) Reduced by charges related to the disposition of Colonial Penn.
See Note 6.
(4) Includes unbilled sales.
(5) The winter season generally represents November and December of the prior
year and January through March of the current year.
(6) Includes unbilled and deferred cost recovery clause revenues.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
For the three periods presented, net income benefitted from increased energy
sales, primarily from customer growth, and the effects of cost control
measures. Charges associated with a cost reduction program in 1993 and a
corporate restructuring in 1991 reduced net income in those years. In
addition, 1992 net income was adversely affected by Hurricane Andrew. In the
following discussion, all comparisons are with the corresponding items in the
prior year.
Operating Income - Approximately 98% of FPL Group's operating revenue is
derived from the electric utility operations of FPL. FPL's retail operations
are regulated by the FPSC. Energy sales to retail customers, which represent
over 96% of total energy sales, increased 4.0%, 0.1% and 3.3% in 1993, 1992
and 1991, respectively. Retail customer growth for those years was 2.1%,
1.7% and 2.1%, respectively. Revenues from base rates, which represented
61%, 57% and 56% of total operating revenues for 1993, 1992 and 1991,
respectively, increased for the three years presented due to higher energy
sales. Revenues derived from cost recovery clauses (including fuel) and
franchise fees comprise substantially all of the remaining portion of
operating revenues. These revenues represent a pass-through of costs and do
not significantly affect net income.
With increasing competition in the utility industry, FPL is continuing its
efforts to reduce its operating and capital costs and avoid filing for rate
increases, the traditional response to increased rate base and cost
pressures. In connection with these efforts, a major cost reduction program
was implemented during 1993, resulting in a $138 million pretax charge. The
charge consisted primarily of severance pay and employee retirement benefits
related to a workforce reduction of approximately 1,700 positions.
Approximately 45% of the charge relates to retirement benefits.
Substantially all of the balance represents severance costs, of which about
$60 million remains to be paid in 1994. In addition, substantial reductions
were reflected in FPL's 1994-98 capital expenditure forecast, including a
$210 million reduction from the previous capital expenditure forecast for
1994. The majority of the reductions in the 1994-97 period reflect a
decrease in transmission and distribution expenditures through more efficient
use of existing plant and more cost effective designs for new facilities. In
1991, FPL implemented a corporate restructuring that eliminated approximately
1,400 FPL positions and about 900 contractor positions. See Note 4.
Other operations and maintenance expenses reflect cost savings from the 1991
restructuring, partially offset by the effects of an increasing customer
base, changes in prices and operating activities, as well as the
implementation of two new accounting standards relating to postretirement and
postemployment benefits. See Note 3. As a result of FPL's recent cost
reduction measures, other operations and maintenance expense is expected to
decline in 1994, despite projected sales growth, additional generating units
in service and two additional nuclear refueling outages. Higher utility
plant balances, reflecting facilities added to meet customer growth, resulted
in increased depreciation expense in each of the last three years. FPL filed
new depreciation studies with the FPSC in December 1993. Changes in
depreciation rates, when adopted, will be retroactive to January 1994 and,
together with increases in utility plant, will increase depreciation expense
in 1994. In addition, FPL is scheduled to file updated nuclear
decommissioning studies with the FPSC in December 1994. Changes, if any, in
the accrual for nuclear decommissioning costs will be effective January 1995.
See Note 1.
Non-Operating Income and Deductions - Allowance for funds used during
construction (AFUDC) increased in 1993 and 1992 due to higher construction
activity in the generation area. In future periods AFUDC is expected to
decrease because the repowered Lauderdale units were placed in service in the
second quarter of 1993, the Martin units are scheduled to be in service by
June 1994 and no new generating capacity is under construction.
Despite the obligation to fund growth in electric plant, interest and
preferred dividends were relatively flat over the three-year period due to
refunding approximately $3.3 billion of debt and preferred stock with lower
rate instruments.
The income contribution from other-net increased in 1993 mainly due to
improved equity in earnings of partnerships and joint ventures associated
with ESI Energy, Inc. (ESI) and its non-utility energy projects. This
increase was largely offset by premiums paid to redeem high cost debt of FPL
Group Capital Inc (FPL Group Capital). Premiums paid on the redemption of
FPL debt are amortized over the remaining life of the respective debt
securities, consistent with the ratemaking treatment. See Note 1.
Effective January 1, 1993, the corporate federal income tax rate increased
from 34% to 35%. The rate change increased income tax expense by
approximately $11 million, including $4 million resulting from the adjustment
of the deferred income tax balances of the non-utility subsidiaries.
Pending Accounting Changes - In November 1993, the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 93-6, "Employers' Accounting for Employee
Stock Ownership Plans." If adopted, SOP 93-6 would significantly change the
manner in which FPL Group recognizes compensation expense associated with the
matching contributions to its thrift plans. Based on preliminary estimates,
adoption of the statement would reduce net income by approximately $20
million but would increase earnings per share by $0.04 in 1994, since shares
held by the trust for the thrift plans that have not been allocated to
employees would not be considered outstanding for purposes of computing
earnings per share. FPL Group is not required to adopt the accounting
guidance in this pronouncement and is evaluating whether to adopt it.
Liquidity and Capital Resources
Capital Requirements and Resources - FPL Group's primary capital requirements
consist of expenditures under FPL's construction program. FPL's capital
expenditures for the period 1994-98, including AFUDC, are expected to be $3.7
billion, including $879 million in 1994. Internally generated funds are
expected to fund an increasing percentage of capital expenditures. The
balance will be provided primarily through the issuance of FPL long-term
debt, preferred stock and commercial paper.
FPL Group Capital and ESI have committed to invest approximately $3.2 million
in, and lend approximately $4.2 million to, partnerships and joint ventures
entered into through ESI, all of which are expected to be funded in 1994.
Additionally, FPL Group Capital and its subsidiaries, primarily ESI, have
guaranteed up to approximately $89.2 million of lease obligations, debt
service payments and other payments subject to certain contingencies.
Debt maturities and minimum sinking fund requirements will require cash
outflows of approximately $809 million through 1998, including $280 million
in 1994. See Note 10. Bank lines of credit currently available to FPL Group
and its subsidiaries aggregate $950 million.
Financial Covenants - FPL Group's charter does not limit the dividends that
may be paid on its common stock; however, FPL's charter and mortgage contain
provisions which, under certain conditions, restrict the payment of dividends
and other distributions to FPL Group. Given FPL's current financial
condition and level of earnings, these restrictions do not currently limit
FPL's ability to pay dividends to FPL Group. FPL's charter limits the amount
of unsecured debt and FPL's mortgage limits the amount of secured debt FPL
can issue. At December 31, 1993, the charter and mortgage provisions would
allow issuance of approximately $1.3 billion of additional unsecured debt and
$5.5 billion of additional first mortgage bonds, respectively. The amount of
additional first mortgage bonds that are permitted to be issued will increase
as the amount of unfunded property additions increases. FPL's charter also
prohibits the issuance of preferred stock unless the preferred stock coverage
ratio, as prescribed, is at least 1.5; for the 12 months ended December 31,
1993 it was 2.24.
FPL Group Capital, under a financial covenant in connection with a bank loan,
is required to maintain a minimum level of consolidated net worth. At
December 31, 1993, the required level was $100 million and actual
consolidated net worth of FPL Group Capital was $333 million.
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
FPL GROUP, INC.:
We have audited the consolidated financial statements of FPL Group, Inc. and
its subsidiaries, listed in the accompanying index as Item 14(a)1 of this
Annual Report (Form 10-K) to the Securities and Exchange Commission for the
year ended December 31, 1993. Our audits also comprehended the financial
statement schedules of FPL Group, Inc. and its subsidiaries, listed in the
accompanying index as Item 14(a)2. These financial statements and financial
statement schedules are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of FPL Group, Inc. and its
subsidiaries at December 31, 1993 and 1992 and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information shown
therein.
As discussed in Notes 2 and 3 to the consolidated financial statements, FPL
Group, Inc. and its subsidiaries changed their method of accounting for
income taxes and postretirement benefits other than pensions effective
January 1, 1993.
DELOITTE & TOUCHE
Certified Public Accountants
Miami, Florida
February 11, 1994
FPL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Years Ended December 31,
1993 1992 1991
OPERATING REVENUES:
Utility $ 5,224,299 $ 5,100,463 $ 5,158,766
Non-utility 91,995 92,864 90,670
Total operating revenues 5,316,294 5,193,327 5,249,436
OPERATING EXPENSES:
Utility operations:
Fuel, purchased power and interchange 1,758,298 1,829,908 1,932,637
Other operations and maintenance of utility plant 1,251,284 1,203,474 1,276,244
Cost reduction program and restructuring charges 138,000 - 90,008
Non-utility operations 70,256 74,195 69,469
Depreciation and amortization 598,389 554,237 518,068
Taxes other than income taxes 526,109 497,739 485,962
Total operating expenses 4,342,336 4,159,553 4,372,388
OPERATING INCOME 973,958 1,033,774 877,048
INTEREST EXPENSE AND OTHER (INCOME) DEDUCTIONS:
Interest and preferred stock dividend requirements 409,760 410,152 411,079
Allowance for funds used during construction (66,238) (57,782) (34,044)
Other - net (48,812) (46,978) (47,456)
Interest expense and other - net 294,710 305,392 329,579
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 679,248 728,382 547,469
INCOME TAXES:
Current 238,557 147,961 186,008
Deferred 11,942 113,472 (14,687)
Total income taxes 250,499 261,433 171,321
INCOME FROM CONTINUING OPERATIONS 428,749 466,949 376,148
Loss on sale of discontinued operations, net
of income tax benefits of $28,900 - - (135,570)
NET INCOME $ 428,749 $ 466,949 $ 240,578
EARNINGS PER SHARE OF COMMON STOCK:
Continuing operations $ 2.30 $ 2.65 $ 2.31
Discontinued operations - - $ (0.83)
Net income $ 2.30 $ 2.65 $ 1.48
Dividends per share of common stock $ 2.47 $ 2.43 $ 2.39
Average number of common shares outstanding 186,777 176,458 163,101
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands of dollars)
December 31,
1993 1992
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant - at original cost, including
nuclear fuel under capital lease $ 14,838,160 $ 13,534,791
Construction work in progress 781,435 1,158,688
Other property 261,125 278,887
Less accumulated depreciation and amortization 5,591,265 5,106,066
Total property, plant and equipment - net 10,289,455 9,866,300
INVESTMENTS:
Utility special use funds 378,774 318,798
Investments in partnerships and joint ventures 368,724 296,593
Investments in leveraged leases 155,449 144,398
Other 82,045 62,952
Total investments 984,992 822,741
CURRENT ASSETS:
Cash and cash equivalents 152,014 78,156
Marketable securities - at market value (cost of
$169,607 and $75,441, respectively) 171,988 75,437
Receivables:
Customers, net of allowance for uncollectible
amounts of $13,946 and $14,990, respectively 444,815 413,574
Other 59,782 103,011
Materials, supplies and fossil fuel stock - at average cost 329,599 382,080
Recoverable storm costs 44,945 72,500
Other 48,214 58,418
Total current assets 1,251,357 1,183,176
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt reacquisition costs of FPL 302,561 175,320
Deferred litigation items of FPL 110,859 110,859
Other 138,788 147,909
Total deferred debits and other assets 552,208 434,088
TOTAL ASSETS $ 13,078,012 $ 12,306,305
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Thousands of dollars)
December 31,
1993 1992
CAPITALIZATION:
Common shareholders' equity:
Common Stock, $.01 par value, authorized - 300,000,000 shares;
outstanding - 190,065,570 shares at December 31, 1993 and
182,788,320 shares at December 31, 1992 $ 1,901 $ 1,828
Additional paid-in capital 3,589,994 3,312,903
Unearned compensation (321,121) (336,355)
Retained earnings 829,833 857,613
Total common shareholders' equity 4,100,607 3,835,989
Preferred stock of FPL:
Without sinking fund requirements 451,250 421,250
With sinking fund requirements 97,000 130,150
Long-term debt 3,748,983 3,960,096
Total capitalization 8,397,840 8,347,485
CURRENT LIABILITIES:
Commercial paper 349,600 -
Current maturities of long-term debt and preferred stock 279,680 164,004
Accounts payable 323,282 411,369
Customers' deposits 216,140 215,435
Interest accrued 109,206 123,735
Income and other taxes 94,880 90,929
Deferred clause revenues 130,786 175
Other 335,043 172,069
Total current liabilities 1,838,617 1,177,716
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,512,067 1,718,388
Deferred regulatory credit - income taxes 216,546 -
Unamortized investment tax credits 323,791 345,438
Capital lease obligations 271,498 324,198
Other 517,653 393,080
Total deferred credits and other liabilities 2,841,555 2,781,104
COMMITMENTS AND CONTINGENCIES
TOTAL CAPITALIZATION AND LIABILITIES $13,078,012 $12,306,305
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Years Ended December 31,
1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 428,749 $ 466,949 $ 240,578
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 598,389 554,237 518,068
Increase (decrease) in deferred income
taxes and related regulatory credit 10,225 211,156 (31,414)
(Increase) decrease in recoverable storm costs 12,184 (57,130) -
Deferrals under cost recovery clauses(1) 138,949 (102,977) 120,772
Increase (decrease) in accrued interest and taxes (10,578) 5,948 15,481
Loss from discontinued operations - - 135,570
Other 89,058 (90,521) 194,466
Net cash provided by operating activities 1,266,976 987,662 1,193,521
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2) (1,247,661) (1,390,930) (1,343,931)
Sale of Colonial Penn - - 128,380
Net cash used by discontinued operations - - (49,827)
Receipts from partnerships and leveraged leases 82,462 17,592 11,572
Other 34,365 (10,013) 1,427
Net cash used in investing activities (1,130,834) (1,383,351) (1,252,379)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of FPL bonds and other long-term debt 2,082,993 874,633 265,246
Issuance of FPL Group Capital long-term debt 125,889 25,000 -
Issuance of preferred stock 190,000 125,000 -
Retirement of long-term debt and preferred stock (2,648,170) (699,614) (360,372)
Issuance of common stock 276,287 422,626 318,341
Dividends on common stock (461,639) (430,716) (392,000)
Sale of nuclear fuel - - 235,972
Increase (decrease) in commercial paper 349,600 - (48,814)
Other 22,756 (13,295) (3,468)
Net cash provided (used) by financing activities (62,284) 303,634 14,905
Net increase (decrease) in cash and cash equivalents 73,858 (92,055) (43,953)
Cash and cash equivalents at beginning of year 78,156 170,211 214,164
Cash and cash equivalents at end of year $ 152,014 $ 78,156 $ 170,211
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest (net of amount capitalized) $ 350,845 $ 316,826 $ 341,668
Cash paid for income taxes $ 150,227 $ 115,045 $ 139,400
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Additions to capital lease obligations $ 57,579 $ 152,833 $ 274,966
(1) Represents the effect on cash flows from operating activities of the net
amounts deferred or recovered under the fuel and purchased power,
oil-backout, energy conservation, capacity and environmental cost
recovery clauses.
(2) Excludes allowance for other funds used during construction.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
FPL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1993, 1992 and 1991
1. Summary of Significant Accounting and Reporting Policies
Basis of Presentation - The consolidated financial statements include the
accounts of FPL Group, Inc. (FPL Group) and its subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. Certain amounts included in prior years' consolidated
financial statements have been reclassified to conform to the current year's
presentation.
Regulation - The principal operating company of FPL Group is Florida Power
& Light Company (FPL), a utility subject to regulation by the Florida Public
Service Commission (FPSC) and the Federal Energy Regulatory Commission
(FERC). As a result of such regulation, FPL follows the accounting practices
set forth in Statement of Financial Accounting Standard (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation."
Revenues and Rates - FPL's retail and wholesale utility rate schedules are
approved by the FPSC and the FERC, respectively. FPL records the estimated
amount of base revenues for energy delivered to customers but not billed.
Such unbilled revenues are included in receivables - customers and amounted
to approximately $112 million and $120 million at December 31, 1993 and 1992,
respectively.
Revenues include amounts resulting from cost recovery clauses, which are
designed to permit full recovery of certain costs and provide a return on
certain assets utilized by these programs, and franchise fees. Such revenues
represent a pass-through of costs and include substantially all fuel,
purchased power and interchange expenses, conservation-related expenses,
revenue taxes and franchise fees. Revenues from cost recovery clauses are
recorded when billed; FPL achieves matching of costs and related revenues by
deferring the net under or over recovery.
Electric Utility Plant, Depreciation and Amortization - The cost of additions
to units of utility property is added to electric utility plant. The cost of
units of property retired, less net salvage, is charged to accumulated
depreciation. Maintenance and repairs of property as well as replacements
and renewals of items determined to be less than units of property are
charged to operating expenses - other operations and maintenance of utility
plant.
Depreciation of utility property is provided primarily on a straight-line
average remaining life basis. Depreciation studies are performed at least
every four years for substantially all utility property. The weighted annual
composite depreciation rate was approximately 3.9%, 3.5% and 3.8% for the
years 1993, 1992 and 1991, respectively. These rates exclude decommissioning
expense and certain accelerated depreciation under cost recovery clauses.
All depreciation methods and rates are approved by the FPSC.
Nuclear fuel costs, including a charge for spent nuclear fuel disposal, is
accrued in fuel expense on a unit of production method.
Substantially all electric utility plant is subject to the lien of the
Mortgage and Deed of Trust, as supplemented, securing FPL's first mortgage
bonds.
Allowance for Funds Used During Construction (AFUDC) - FPL recognizes AFUDC
as a noncash item which represents the allowed cost of capital used to
finance a portion of FPL's construction work in progress. AFUDC is
capitalized as an additional cost of utility plant and is recorded as an
addition to income. The capitalization rate used in computing AFUDC was
8.67% from January 1993 through June 1993, 8.26% from July 1993 through
December 1993, 8.61% in 1992 and 8.46% in 1991. FPL allocates total AFUDC
between borrowed funds and other funds. The portion of AFUDC attributable to
short and long-term borrowed funds amounted to $31 million, $27 million and
$17 million for the years ended December 31, 1993, 1992 and 1991,
respectively.
Nuclear Decommissioning - FPL accrues nuclear decommissioning costs over the
expected service life of each plant. Nuclear decommissioning studies are
performed at least every five years for FPL's four nuclear units. A
provision for nuclear decommissioning of $38 million for each of the years
1993, 1992 and 1991 is included in depreciation expense. The accumulated
provision for nuclear decommissioning totaled $445 million and $390 million
at December 31, 1993 and 1992, respectively, and is included in accumulated
depreciation.
Amounts equal to decommissioning expense are deposited in either qualified
funds on a pretax basis or in a non-qualified fund on a net of tax basis.
Fund earnings, net of taxes, are reinvested in the funds. Both fund earnings
and the charge resulting from reinvestment of the earnings are included in
other income - net. The related income tax effects are included in deferred
taxes. The decommissioning reserve funds, the predominant component of the
utility special use funds, may be used only for the payment of the cost of
decommissioning FPL's nuclear units. Securities held in the funds consist
primarily of tax-exempt obligations and are carried at cost. See Note 11.
The most recent decommissioning studies assume prompt dismantlement for the
Turkey Point nuclear units commencing in the year 2005 and for St. Lucie Unit
No. 2 commencing in 2021. St. Lucie Unit No. 1 will be mothballed in 2016
until St. Lucie Unit No. 2 is ready for dismantlement. FPL's portion of the
cost of decommissioning these units, including dismantlement and reclamation,
expressed in 1993 dollars, is currently estimated to aggregate $935 million.
Storm and Property Insurance Reserve Fund - The storm and property insurance
reserve fund provides coverage toward storm damage costs and possible
retrospective premium assessments stemming from a nuclear incident under the
various insurance programs covering FPL's nuclear generating plants. The
storm and property insurance reserve represents amounts accumulated to date
net of expenditures for storm damages. The related income tax effects are
included in accumulated deferred income taxes. Securities held in the fund
consist primarily of tax-exempt obligations and are carried at cost. In
1992, $21 million of the storm fund was used for storm damage costs
associated with Hurricane Andrew. See Note 11.
Investments in Partnerships and Joint Ventures - The majority of investments
in partnerships and joint ventures are accounted for under the equity method.
The cost method is used when FPL Group has virtually no ability to influence
the operating or financial decisions of the investee.
Securities Transactions - Marketable securities are held by a consolidated
limited partnership and are accounted for at market value. Partnership
assets are managed by an independent investment advisor. Earnings on the
investments are included in other - net in the consolidated statements of
income.
Included in other current liabilities at December 31, 1993 are approximately
$94 million of securities sold, but not yet purchased. These obligations are
carried at their market value and create off-balance sheet market risk to the
extent that the market value of the underlying securities (U.S. Treasury
Notes) subsequently increases.
Cash Equivalents - Cash equivalents consist of short-term, highly liquid
investments with original maturities of three months or less. The carrying
amount of these investments approximates their market value.
Retirement of Long-Term Debt - The excess of FPL's reacquisition cost over the
book value of long-term debt is deferred and amortized to expense ratably
over the remaining life of the original issue, which is consistent with its
treatment in the ratemaking process. FPL Group Capital Inc (FPL Group
Capital) expenses this cost in the period incurred.
Rate Matters - Deferred litigation items of FPL at December 31, 1993 and 1992,
represent costs approved by the FPSC for recovery over five years commencing
with the effective date of new base rates to be established in the next
general rate proceeding.
Income Taxes - Deferred income taxes are provided on all significant temporary
differences between the financial statement and tax bases of assets and
liabilities. Investment tax credits are used to reduce current federal
income taxes and, in the case of FPL, are deferred and amortized to income
over the approximate lives of the related property.
2. Income Taxes
In 1993, FPL Group adopted SFAS No. 109, "Accounting for Income Taxes," which
requires the use of the liability method in accounting for income taxes.
Under the liability method, the tax effect of temporary differences between
the financial statement and tax bases of assets and liabilities are reported
as deferred taxes measured at current tax rates. At FPL, the principal
effect of adopting SFAS No. 109 was the reclassification of the revenue
equivalent of deferred taxes in excess of the amount required to be reported
as a liability under SFAS No. 109 from accumulated deferred income taxes to
a newly-established deferred regulatory credit - income taxes. This amount
will be amortized over the estimated lives of the assets or liabilities which
resulted in the initial recognition of the deferred tax amount. Adoption of
this standard had no effect on results of operations. The net result of
amortizing the deferred regulatory credit and the related deferred taxes
established under SFAS No. 109 is to yield comparable amounts to those
included in the tax provision under accounting rules applicable to prior
periods.
The components of income taxes are as follows:
Years Ended December 31,
1993 1992 1991
(Thousands of Dollars)
Federal:
Current. . . . . . . . . . . . . . . . . . . $205,233 $124,417 $155,265
Deferred:
Loss on reacquired debt . . . . . . . . . . 41,606 10,117 691
Cost reduction program/restructuring. . . . (28,995) 191 (7,909)
Depreciation and related items. . . . . . . 36,213 105,048 141,866
Cost recovery clauses . . . . . . . . . . . (45,873) 33,334 (39,045)
Nuclear decommissioning reserve . . . . . . (2,016) (1,959) (12,459)
Alternative minimum tax credits . . . . . . 44,647 (31,302) (32,168)
Other . . . . . . . . . . . . . . . . . . . (17,375) 4,464 (30,744)
Deferred investment tax credits. . . . . . . (503) (2,817) (634)
Amortization of investment tax credits . . . (21,491) (20,715) (37,373)
Total federal . . . . . . . . . . . . . . 211,446 220,778 137,490
State:
Current. . . . . . . . . . . . . . . . . . . 33,324 23,544 30,743
Deferred:
Loss on reacquired debt . . . . . . . . . . 6,992 1,358 209
Cost reduction program/restructuring. . . . (4,810) 33 (1,354)
Depreciation and related items. . . . . . . 5,968 10,600 18,641
Cost recovery clauses . . . . . . . . . . . (7,645) 5,706 (6,684)
Alternative minimum tax credits . . . . . . 12,385 - -
Other . . . . . . . . . . . . . . . . . . . (7,161) (586) (7,724)
Total state . . . . . . . . . . . . . . . 39,053 40,655 33,831
Total income taxes . . . . . . . . . . . . . . . . . $250,499 $261,433 $171,321
A reconciliation between income tax expense and the expected income tax
expense at the applicable statutory rates is as follows:
Years Ended December 31,
1993 1992 1991
(Thousands of Dollars)
Computed at statutory federal income tax rate. . . . $237,737 $247,650 $186,139
Increases (reductions) resulting from:
State income taxes - net of federal
income tax benefit. . . . . . . . . . . . . 24,530 26,832 22,328
Amortization of investment tax credits . . . (21,491) (20,714) (45,624)
Preferred dividend requirements of FPL . . . 14,932 14,926 14,027
Other - net. . . . . . . . . . . . . . . . . (5,209) (7,261) (5,549)
Total income taxes . . . . . . . . . . . . . . . . . $250,499 $261,433 $171,321
The income tax effects of discontinued operations in 1991 differ from the
effects computed at statutory rates primarily due to FPL Group's assessment
of loss disallowance rules and limitations on the ability to utilize capital
loss benefits. FPL Group plans to challenge the loss disallowance rules.
Based on the uncertainties associated with the ultimate outcome of this
challenge and recognition of offsetting capital gains, a valuation allowance
was recorded to fully offset the effect of establishing a deferred tax asset
of approximately $170 million under SFAS No. 109 for the tax benefits of the
capital loss carryforward.
The income tax effects of temporary differences giving rise to FPL Group's
consolidated deferred income tax assets and liabilities after adoption of
SFAS No. 109 are as follows:
December 31, 1993 January 1, 1993
(Thousands of Dollars)
Deferred tax liabilities:
Property related. . . . . . . . . . . . . . . . . $1,677,926 $1,644,200
Leveraged leases. . . . . . . . . . . . . . . . . 167,467 159,300
Partnerships and joint ventures . . . . . . . . . 166,376 153,800
Unamortized debt reacquisition costs. . . . . . . 116,556 65,900
Other . . . . . . . . . . . . . . . . . . . . . . 75,666 57,400
Total deferred tax liabilities. . . . . . . . . 2,203,991 2,080,600
Deferred tax assets and valuation allowance:
Asset writedowns and capital loss carryforward. . 236,865 216,100
Unamortized investment tax credits. . . . . . . . 124,913 130,000
Deferred regulatory credit - income taxes . . . . 83,524 110,100
Storm and decommissioning reserves. . . . . . . . 133,754 119,100
Alternative minimum tax credits . . . . . . . . . 106,422 88,300
Other . . . . . . . . . . . . . . . . . . . . . . 193,534 177,400
Valuation allowance . . . . . . . . . . . . . . . (187,088) (182,900)
Net deferred tax assets . . . . . . . . . . . . 691,924 658,100
Accumulated deferred income taxes. . . . . . . . . . . . $1,512,067 $1,422,500
3. Employee Retirement Benefits
Pension Benefits - Substantially all employees of FPL Group and its
subsidiaries are covered by a noncontributory defined benefit pension plan.
Plan benefits are generally based on employees' years of service and
compensation during the last years
of employment. Participants are vested after five years of service. Plan
assets consist primarily of bonds, common stocks and short-term investments.
For 1993, 1992 and 1991 the components of pension cost, a portion of which
has been capitalized, are as follows:
Years Ended December 31,
1993 1992 1991
(Thousands of Dollars)
Benefits earned during the year. . . . . . . . . . . . . . . . . . . $ 36,105 $ 39,624 $ 37,153
Interest cost on projected benefit obligation. . . . . . . . . . . . 78,797 62,518 60,753
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . (236,565) (76,755) (253,447)
Net amortization and deferral. . . . . . . . . . . . . . . . . . . . 106,894 (30,592) 150,149
Negative pension cost. . . . . . . . . . . . . . . . . . . . . . . . (14,769) (5,205) (5,392)
Effect of cost reduction program (see Note 4). . . . . . . . . . . . 34,463 - -
FPL regulatory adjustment. . . . . . . . . . . . . . . . . . . . . . - 5,221 5,722
Pension cost recognized in the Consolidated Statements of Income . . $ 19,694 $ 16 $ 330
Prior to 1993, an adjustment was made to reflect in the results of operations
FPL's pension cost calculated under the actuarial cost method used for
utility ratemaking purposes. In 1993, FPL adopted consistent pension
measurements for ratemaking and financial reporting. The accumulated
regulatory adjustment is being amortized to income over five years. At
December 31, 1993 and 1992, the cumulative amount of this regulatory
adjustment included in other liabilities was approximately $16 million and
$20 million, respectively.
During 1992, the method used for valuing plan assets in the calculation of
pension cost was changed from fair value to a calculated market-related
value. The new method was adopted to reduce the volatility in annual pension
expense that results from short-term fluctuations in the securities markets.
The cumulative effect of the change was to reduce prepaid pension costs and
the related accumulated regulatory adjustment by approximately $37 million,
with no effect on earnings.
During 1993, the effect of a prior plan amendment that changed the manner in
which benefits accrue was recognized and included as part of prior service
cost to be amortized over the remaining service life of the employees.
FPL Group funds the pension cost calculated under the entry age normal level
percentage of pay actuarial cost method, provided that this amount satisfies
the Employee Retirement Income Security Act minimum funding standards and is
not greater than the maximum tax deductible amount for the year. No
contributions to the plan were required for 1993, 1992 or 1991.
A reconciliation of the funded status of the plan to the amounts recognized
in the Consolidated Balance Sheets is presented below:
December 31,
1993 1992
(Thousands of Dollars)
Fair market value of plan assets . . . . . . . . . . . . . . . . . $ 1,662,051 $1,549,294
Actuarial present value of benefits for services rendered to date:
Accumulated benefits based on salaries to date, including
vested benefits of $689.2 million and $870.6 million for
1993 and 1992, respectively. . . . . . . . . . . . . . . . . 740,959 883,487
Additional benefits based on estimated future salary levels . . 325,582 235,908
Projected benefit obligation . . . . . . . . . . . . . . . . . . . 1,066,541 1,119,395
Plan assets in excess of projected benefit obligation. . . . . . . 595,510 429,899
Prior service costs not recognized in net periodic pension cost. . 212,908 79,584
Unrecognized net asset at January 1, 1986, being amortized
primarily over 19 years - net of accumulated amortization . . . (256,914) (280,270)
Unrecognized net gain. . . . . . . . . . . . . . . . . . . . . . . (548,741) (206,755)(1)
Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . $ 2,763 $ 22,458
(1) Includes $37 million effect of changing to calculated market-related
method of valuing plan assets.
As of December 31, 1993 and 1992, the weighted-average discount rate used in
determining the actuarial present value of the projected benefit obligation
was 7.0% and 6.0%, respectively. The assumed rate of increase in future
compensation levels at those respective dates was 5.5% and 6.0%. The
expected long-term rate of return on plan assets used in determining pension
cost was 7.75% for 1993 and 7.0% for 1992 and 1991.
Other Postretirement Benefits - FPL Group and its subsidiaries have defined
benefit postretirement plans for health care and life insurance benefits that
cover substantially all employees. Eligibility for health care benefits is
based upon age plus years of service at retirement. The plans are
contributory, and contain cost-sharing features such as deductibles and
coinsurance. FPL Group has capped company contributions for postretirement
health care at a defined level which, depending on actual claims experience,
may be reached by the year 2000. Generally, life insurance benefits for
retirees are capped at $50,000. FPL Group's policy is to fund postretirement
benefits in amounts determined at the discretion of management. Benefit
payments in 1993 and 1992 totaled $13 million and $12 million, respectively,
and were paid out of existing plan assets.
In 1993, FPL Group adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." For the year ended December
31, 1993, the components of net periodic postretirement benefit cost, a
portion of which has been capitalized, are as follows:
Year Ended
December 31,1993
(Thousands of Dollars)
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,233
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,633
Return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,130)
Amortization of transition obligation. . . . . . . . . . . . . . . . . . . . . . . 4,064
Net periodic postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . 15,800
Effect of cost reduction program (see Note 4). . . . . . . . . . . . . . . . . . . 29,008
Postretirement benefit cost recognized in the Consolidated Statement of Income . . $ 44,808
A reconciliation of the funded status of the plan to the amounts recognized
in the Consolidated Balance Sheets is presented below:
December 31, 1993
(Thousands of Dollars)
Plan assets at fair value, primarily listed stocks and bonds . . . . . . . . $109,372
Accumulated postretirement benefit obligation:
Retirees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,788
Fully eligible active plan participants . . . . . . . . . . . . . . . 68,823
Other active plan participants. . . . . . . . . . . . . . . . . . . . 177,419
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,030
Accumulated postretirement benefit obligation in excess of plan assets . . . (143,658)
Unrecognized net transition obligation (amortized over 20 years) . . . . . . 66,217
Unrecognized net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,633
Accrued postretirement benefit cost. . . . . . . . . . . . . . . . . . . . . $ 44,808
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) for 1993 is 10.5% for
retirees under age 65 and 6.5% for retirees over age 65. These rates are
assumed to decrease gradually to 6.0% by the year 2000, which is when it is
anticipated that benefit costs will reach the defined level at which company
contributions will be capped. The cap on FPL Group's contributions mitigates
the potential significant increase in costs resulting from an increase in the
health care cost trend rate. Increasing the assumed health care cost trend
rate by one percentage point would increase the plan's accumulated
postretirement benefit obligation as of December 31, 1993 by $8 million, and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost of the plan for 1993 by approximately $1 million.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% at December 31, 1993. The
expected long-term rate of return on plan assets was 7.75% at December 31,
1993.
Postemployment Benefits - In 1993, FPL Group adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," which requires a change from
recognizing expenses when paid to recording the benefits as the liability is
incurred. Implementation of this pronouncement did not have a material effect
on FPL Group's results of operations.
4. Cost Reduction Program and Restructuring Charge
In 1993, FPL implemented a major cost reduction program, which resulted in a
$138 million charge and reduced net income by approximately $85 million. The
program consisted primarily of a Voluntary Retirement Plan (VRP) and a
Special Severance Plan (SSP). The VRP was offered to all employees who were
at least 54 years of age and had at least 10 years of service. The plan,
among other things, added five years to age and service for the determination
of plan benefits to be received by eligible employees. Approximately 700
employees, or 75% of those eligible, elected to retire under this program.
The impact on pension cost resulting from the two programs as determined
under the provisions of SFAS No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits," was approximately $34 million. The impact on postretirement
benefits as determined under SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" was approximately $29 million.
These amounts are included as part of the total charge of $138 million. See
Note 3.
In 1991, FPL recorded a $90 million restructuring charge in connection with
a company-wide restructuring which reduced net income by $56 million. The
charge included severance pay for departing employees, as well as relocation
and facility
modification expenditures.
5. Businesses to be Discontinued
In 1990, FPL Group decided to sell or otherwise dispose of the real estate,
cable television, environmental remediation and utility-related services
businesses. In 1991, the environmental remediation and utility-related
services businesses were sold with no significant impact on net income.
During 1993, FPL Group sold or otherwise liquidated certain cable television
and real estate assets, including cable television operating systems,
interests in three cable television joint ventures and real estate rental
properties. FPL Group's remaining developed real estate properties are under
contract for sale. This pending sale, if closed, and the currently estimated
result of disposing of the balance of FPL Group's cable television and real
estate assets are not expected to have a significant adverse effect on net
income.
6. Discontinued Operations
In 1991, Colonial Penn Group, Inc. (Colonial Penn) was sold, resulting in a
$135 million after-tax loss. The sale did not include Bay Loan and
Investment Bank (Bay Loan), a former Colonial Penn subsidiary, which is
winding down its operations and will be dissolved. The principal business of
Bay Loan was investing in loans secured by real estate using funds provided
from the issuance of insured certificates of deposit. Bay Loan ceased
investing in new loans in 1990 and is in the process of effecting an orderly
liquidation. The date when such liquidation will be completed cannot be
predicted with certainty because it is dependent on the timing of loan
prepayments and asset sales. FPL Group has no legal obligation and has no
intention to contribute additional equity to Bay Loan. The investment in Bay
Loan was written off in 1990; the orderly liquidation of its operations is
not expected to have an adverse effect on FPL Group's future operating
results.
Colonial Penn and Bay Loan have been accounted for as discontinued
operations. Operating revenues of Bay Loan were $16.3 million and $21.4
million for 1993 and 1992, respectively. Combined operating revenues of
Colonial Penn (through date of closing) and Bay Loan were $714.1 million for
1991. Bay Loan reported operating income of $5.1 million in 1993 and
operating losses of $5.9 million and $8.5 million in 1992 and 1991,
respectively. The losses incurred subsequent to the measurement date (date
on which Bay Loan was initially classified as discontinued operations) had no
effect on FPL Group's results of operations as such losses had been provided
for in the loss on disposal of discontinued operations in 1991.
The remaining assets of Bay Loan consist primarily of loans secured by real
estate and real estate owned as a result of foreclosures. Most of Bay Loan's
loan customers and the real estate securing their loans are located in the
northeast United States. The remaining liabilities of Bay Loan consist
primarily of FDIC-insured certificates of deposit, which will be settled with
funds generated from loan repayments and the sale of Bay Loan assets. Total
assets and liabilities of Bay Loan at December 31, 1993 were $149.3 million
and $129.7 million, respectively. Total assets and liabilities of Bay Loan
at December 31, 1992 were $194.9 million and $180.4 million, respectively.
The carrying amounts of assets and liabilities at December 31, 1993 and 1992,
approximate the estimated fair values of the financial instruments of Bay
Loan.
7. Leases
In 1991, FPL expanded its nuclear fuel lease program to include all four of
its nuclear units. In connection with this expansion, FPL sold to a
non-affiliated lessor and leased back approximately $220 million of nuclear
fuel held in reactors of these units, as well as nuclear fuel in various
stages of enrichment. The fuel was sold at book value. Nuclear fuel
payments, which are based on energy production and are charged to fuel
expense, were $122 million, $120 million and $81 million for the years ended
December 31, 1993, 1992 and 1991, respectively. Included in these payments
was an interest component of $11 million, $13 million and $9 million in 1993,
1992 and 1991, respectively. Under certain circumstances of lease
termination, FPL is required to purchase all nuclear fuel in whatever form at
a purchase price designed to allow the lessor to recover its net investment
cost in the fuel, which totaled $226 million at December 31, 1993. For
ratemaking purposes, the leases encompassed within this lease arrangement are
classified as operating leases. For financial reporting purposes, the
capital lease obligation is recorded at the amount due in the event of lease
termination.
In 1992, FPL entered into a noncancelable capital lease arrangement for an
office building whose net book value at December 31, 1993 and 1992 was
approximately $46 million and $48 million, respectively. The present value
of future minimum lease payments at December 31, 1993 totaled $49 million.
Future minimum annual lease payments under this lease arrangement, which
expires in 2016, are estimated to be $4 million.
Excluding these leases, the amount of assets and capitalized lease
obligations for other capital leases is not material.
FPL Group, through its subsidiaries, leases automotive, computer, office and
other equipment through rental agreements with various terms and expiration
dates. Rental expense totaled $33 million, $55 million and $51 million for
1993, 1992 and 1991, respectively. Minimum annual rental commitments for
noncancelable operating leases are $22 million for 1994, $19 million for
1995, $13 million for 1996, $7 million for 1997, $6 million for 1998 and $15
million thereafter.
8. Jointly-Owned Electric Utility Plant
FPL owns approximately 85% of the St. Lucie Nuclear Unit No. 2, 20% of the
St. Johns River Power Park (SJRPP) units and coal terminal and a 49%
undivided interest in Scherer Unit No. 4. FPL expects to purchase an
additional 27% undivided ownership interest in Scherer Unit No. 4 in two
stages through 1995. At December 31, 1993, FPL's investment in St. Lucie
Unit No. 2 was $768 million, net of accumulated depreciation of $397 million;
the investment in the SJRPP units and coal terminal was $221 million, net of
accumulated depreciation of $110 million; the investment in Scherer Unit
No. 4 was $296 million, net of accumulated depreciation of $54 million.
FPL is responsible for its share of the operating costs, as well as providing
its own financing. At December 31, 1993, there was no significant balance of
construction work in progress on these facilities.
9. Common Shareholders' Equity
The changes in common shareholders' equity accounts are as follows:
Common Stock
Aggregate Additional Unearned Retained
Shares Par Value Paid-in Capital Compensation Earnings
(In thousands)
Balances, December 31, 1990 161,065 $1,610 $2,566,844 $(360,000) $ 952,707
Net income - - - - 240,578
Issuances of common stock 9,691 98 318,905 - -
Dividends on common stock - - - - (392,000)
Earned compensation and tax benefits
on ESOP dividends - - - 13,785 10,956
Other - - 364 - -
Balances, December 31, 1991 170,756 1,708 2,886,113 (346,215) 812,241
Net income - - - - 466,949
Issuances of common stock 12,032 120 429,482 (5,683) -
Dividends on common stock - - - - (430,716)
Earned compensation and tax benefits
on ESOP dividends - - - 15,543 9,139
Other - - (2,692) - -
Balances, December 31, 1992 182,788 1,828 3,312,903 (336,355) 857,613
Net income - - - - 428,749
Issuances of common stock 7,277 73 278,123 - -
Dividends on common stock - - - - (461,639)
Earned compensation and tax benefits
on ESOP dividends - - - 15,234 5,110
Other - - (1,032) - -
Balances, December 31, 1993 190,065 $1,901 $3,589,994 $(321,121) $829,833
Common Stock Dividend Restrictions - FPL Group's Charter does not limit the
dividends that may be paid on its common stock. As a practical matter, the
ability of FPL Group to pay dividends on its common stock is dependent upon
dividends paid to it by its subsidiaries, primarily FPL. FPL's charter and
mortgage contain provisions that, under certain conditions, restrict the
payment of dividends and other distributions to FPL Group. Given FPL's
current financial condition and level of earnings, these restrictions do not
currently limit FPL's ability to pay dividends to FPL Group.
Employee Stock Ownership Plan - The employee thrift plans of FPL Group and FPL
include a leveraged Employee Stock Ownership Plan feature. Shares of common
stock held by the Trust for the Thrift Plans (Trust) are used to provide all
or a portion of the employers' matching contributions. In 1990, the Trust
borrowed the funds from FPL Group Capital, at an interest rate of 9.69% to
purchase the shares and is repaying the loan with dividends received on the
shares along with cash contributions from the employers. Reducing
stockholders' equity at December 31, 1993 is approximately $317 million of
unearned compensation related to unallocated shares of common stock held by
the Trust. The unallocated shares are considered outstanding for purposes of
computing earnings per share. Dividends paid aggregated approximately $30
million in all years.
In November 1993, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued SOP 93-6,
"Employers' Accounting for Employee Stock Ownership Plans." If adopted,
SOP 93-6 would significantly change the manner in which FPL Group recognizes
compensation expense associated with the matching contributions to its thrift
plans. Based on preliminary estimates, adoption of the standard would reduce
net income by approximately $20 million but would increase earnings per share
by $0.04 in 1994, since shares held by the Trust which have not yet been
allocated to employees would not be considered outstanding for purposes of
computing earnings per share. FPL Group is not required to adopt the
accounting guidance in this pronouncement and is evaluating whether or not to
adopt it.
Long-Term Incentive Plan - FPL Group has a long-term incentive plan under
which an aggregate of 4 million shares may be awarded to officers and key
employees of FPL Group and its subsidiaries. At December 31, 1993, 3,304,739
shares were available for future awards. Total compensation charged against
earnings under the incentive plan, and the effect on earnings per share, were
not material in any year. The changes in share awards under the incentive
plan are as follows:
Non-qualified
Performance Restricted Option
Shares Stock Shares
Balances, December 31, 1990 178,418 13,900 365,651
Granted 196,729 110,344 -
Exercised at $29 3/8 - $37 1/4 - - (153,625)
Paid (45,158) - -
Forfeited (57,008) - (52,229)
Balances, December 31, 1991 272,981 124,244 159,797
Granted 106,516 60,950 -
Exercised at $30 7/8 - $35 3/4 - - (71,814)
Paid/released (65,061) (6,898) -
Forfeited (22,991) (1,000) (2,577)
Balances, December 31, 1992 291,445 177,296 85,406
Granted 89,827 - -
Exercised at $36 1/4 - $40 7/8 - - (35,045)
Paid/released (87,169) (6,903) -
Forfeited (14,044) (4,070) (285)
Balances, December 31, 1993 280,059(1) 166,323(2) 50,076(3)
(1) Payment of performance shares is based on the market price of FPL Group's
common stock when the related performance goal is achieved.
(2) Shares of restricted stock were issued at market value at the date of the
grant.
(3) All outstanding options are exercisable at $30 7/8.
Stock appreciation rights in an equivalent amount have been granted in
conjunction with the options referred to above. No awards of incentive stock
options have been granted as of December 31, 1993.
Other - FPL Group has reserved 17 million shares of common stock for issuance
under the Dividend Reinvestment and Common Share Purchase Plan and Employee
Benefit Plans. At December 31, 1993, 9 million of the shares reserved for
these plans had been issued. Each share of common stock has been granted a
Preferred Share Purchase Right, which is exercisable in the event of certain
attempted business combinations. The Rights will cause substantial dilution
to a person or group attempting to acquire FPL Group on terms not approved by
the FPL Group Board of Directors.
10. Preferred Stock and Long-Term Debt
Preferred Stock (1)(2)
December 31, 1993
Shares Redemption December 31,
Outstanding Price 1993 1992
(Thousands of Dollars)
Preferred stock of FPL without sinking fund requirements:
Cumulative, No Par Value, authorized 10,000,000
shares at December 31, 1993 and December 31, 1992
$2.00 No Par Value, Series A (Involuntary Liquidation
Value $25 Per Share) 5,000,000 $ 27.00 $125,000 $125,000
Cumulative, $100 Par Value, authorized 15,822,500
shares at December 31, 1993 and 17,842,000 shares
at December 31, 1992
4 1/2% Series 100,000 101.00 10,000 10,000
4 1/2% Series A 50,000 101.00 5,000 5,000
4 1/2% Series B 50,000 101.00 5,000 5,000
4 1/2% Series C 62,500 103.00 6,250 6,250
4.32% Series D 50,000 103.50 5,000 5,000
4.35% Series E 50,000 102.00 5,000 5,000
7.28% Series F 600,000 102.93 60,000 60,000
7.40% Series G 400,000 102.53 40,000 40,000
8.70% Series K - - - 75,000
8.84% Series L - - - 50,000
8.50% Series P - - - 35,000
6.98% Series S 750,000 -(3) 75,000 -
7.05% Series T 500,000 -(3) 50,000 -
6.75% Series U 650,000 -(3) 65,000 -
Total preferred stock of FPL without sinking fund requirements 8,262,500 $451,250 $421,250
Preferred stock of FPL with sinking fund requirements(4):
10.08% Series J - - - $ 3,746
8.70% Series M - - - 30,200
11.32% Series O - - - 6,500
6.84% Series Q (5) 485,000 $104.10 $48,500 48,500
8.625% Series R (6) 500,000 108.63 50,000 50,000
Total preferred stock with sinking fund requirements 985,000 98,500 138,946
Less current maturities 15,000 1,500 8,796
Preferred stock with sinking fund requirements,
excluding current maturities 970,000 $ 97,000 $130,150
(1) FPL Group's charter authorizes the issuance of 100 million shares of serial
preferred stock, $.01 par value. None of these shares are outstanding.
(2) FPL's charter authorizes the issuance of 5 million shares of subordinated
preferred stock, no par value. No shares of subordinated preferred stock
are outstanding. In 1993, FPL issued 1,900,000 shares of $100 par value
preferred stock. In 1992, FPL issued 5,000,000 shares of $2.00 No Par
Value, Series A, preferred stock. There were no issuances of preferred
stock in 1991.
(3) Not redeemable prior to 2003.
(4) Minimum annual sinking fund requirements on preferred stock are
approximately $2 million for each of the years 1994 and 1995 and $4 million
for each of the years 1996, 1997 and 1998. In the event that FPL should
be in arrears on its sinking fund obligations, FPL may not pay dividends
on common stock.
(5) Entitled to a sinking fund to retire a minimum of 15,000 shares and a
maximum of 30,000 shares annually from 1994 through 2026 at $100 per
share plus accrued dividends. FPL redeemed and retired 15,000 shares in
1992, satisfying the 1993 minimum annual sinking fund requirement.
(6) Entitled to a sinking fund to retire a minimum of 25,000 shares and a
maximum of 50,000 shares annually from 1996 through 2015 at $100 per
share plus accrued dividends.
Long-Term Debt (1)(2)
December 31,
1993 1992
(Thousands of Dollars)
Florida Power & Light Company
First Mortgage Bonds:
Maturing through 2000 - 4 5/8% to 9 5/8% $ 460,697 $ 500,000
Maturing 2001 through 2015 - 6 5/8% to 9 1/8% 700,000 725,000
Maturing 2016 through 2026 - 7% to 10 1/4% 1,126,223 1,425,000
Medium-Term Notes:
Maturing through 2000 - 4.85% to 9.5% 280,300 30,000
Maturing 2001 through 2015 - 5.79% to 9.4% 155,725 90,000
Maturing 2016 through 2022 - 8% to 9.45% 148,700 193,700
Pollution Control and Industrial Development Series:
Maturing 2008 through 2027 - 6.10% to 11 3/8% 412,565(3) 456,705
Pollution Control, Solid Waste Disposal and Industrial
Development Revenue Bonds:
Maturing 2021 through 2027 - variable, 2.6%
to 3.9% year-end interest rate 200,315 77,625
Installment Purchase and Security Contracts:
Maturing 2004 through 2007 - 5.40% to 6.15% 22,990 89,030
Promissory Notes - 5% due 1993 - 1,750
Unamortized discount - net (44,450) (32,656)
Total long-term debt of FPL 3,463,065 3,556,154
Less current maturities - 151,750
Long-term debt of FPL, excluding current maturities 3,463,065 3,404,404
FPL Group Capital Inc
Debentures:
Maturing 1997 - 6 1/2% 150,000 150,000
Maturing 2013 - 7 5/8% 125,000 -
Maturing 2017 - 8 7/8% and 10 1/8% 150,000 250,000
Bank loans - 3.7% to 4.2% in 1993 and 4.0% to 4.2%
in 1992 due December 1994 125,000 125,000
Other long-term debt - 7.0% to 9.9% due various dates to 2013 16,399 35,288
Unamortized discount (2,302) (1,138)
Total long-term debt of FPL Group Capital 564,097 559,150
Less current maturities 278,179 3,458
Long-term debt of FPL Group Capital,
excluding current maturities 285,918 555,692
Total long-term debt $3,748,983 $3,960,096
(1) Minimum annual maturities and sinking fund requirements of long-term debt
are approximately $278 million for 1994, $82 million for 1995, $101
million for 1996, $151 million for 1997 and $181 million for 1998.
(2) Available lines of credit aggregated approximately $950 million at
December 31, 1993, all of which were based on firm commitments.
(3) Excludes approximately $46 million principal amount of bonds removed from
the balance sheet in December 1993 as a result of an in-substance
defeasance. Such bonds were redeemed in January 1994 with funds
previously placed in an irrevocable trust.
11. Fair Value of Financial Instruments
The following estimates of the fair value of financial instruments have been
made using available market information and other valuation methodologies.
However, the use of different market assumptions or methods of valuation
could result in different estimated fair values.
December 31,
1993 1992
Carrying Estimated Carrying Estimated
Amount Fair Value(1) Amount Fair Value(1)
(Thousands of Dollars)
Utility special use funds $ 378,774 $ 403,841 $ 318,798 $ 331,877
Marketable securities $ 171,988 $ 171,988 $ 75,437 $ 75,437
Other investment securities $ 82,045 $ 82,045 $ 62,952 $ 62,952
Preferred stock with
sinking fund requirements (2) $ 98,500 $ 104,463 $ 138,946 $ 144,148
Long-term debt (2) $ 4,027,162 $ 4,200,802 $4,115,304 $4,285,080
(1) Based on quoted market prices for these or similar issues.
(2) Includes current maturities.
12. Commitments and Contingencies
Capital Commitments - FPL has made certain commitments in connection with its
projected capital expenditures. These expenditures, for the construction or
acquisition of additional facilities and equipment to meet customer demand,
are estimated to be $3.7 billion, including AFUDC, for the years 1994 through
1998.
FPL Group Capital and ESI Energy, Inc. (ESI), have committed to invest $3
million in, and lend approximately $4 million to, partnerships and joint
ventures entered into through ESI, all of which are expected to be funded in
1994. Additionally, FPL Group Capital 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.
FPL Group, through a consolidated limited partnership, has entered into
forward commitments at December 31, 1993 to purchase $100 million of
mortgage-backed securities on various dates through February 1994 at
specified prices. The market value of these securities totaled $100 million
at December 31, 1993. Additionally, the partnership had entered into forward
commitments to sell short $87 million of U.S. Treasury Notes on various dates
in January 1994 at specified prices. At December 31, 1993, the market value
of those securities totaled $89 million.
Insurance - Liability for accidents at nuclear power plants is governed by the
Price-Anderson Act, which limits the liability of nuclear reactor owners to
the amount of the insurance available from private sources and under an
industry retrospective payment plan. In accordance with this Act, FPL
maintains $200 million of private liability insurance, which is the maximum
obtainable, and participates in a secondary financial protection system under
which it is subject to retrospective assessments of up to $317 million per
incident at any nuclear utility reactor in the United States, payable at a
rate not to exceed $40 million per incident per year.
FPL participates in insurance pools and other arrangements that provide $2.75
billion of limited insurance coverage for property damage, decontamination
and premature decommissioning risks at its nuclear plants. The proceeds from
such insurance, however, must first be used for reactor stabilization and
site decontamination before they can be used for plant repair. FPL also
participates in an insurance program that provides limited coverage for
replacement power costs if a plant is out of service because of an accident.
In the event of an accident at one of FPL's or another participating
insured's nuclear plant, FPL could be assessed up to $58 million in
retrospective premiums, and in the event of a subsequent accident at such
nuclear plants during the policy period, the maximum assessment is $72
million under the programs in effect at December 31, 1993. This contingent
liability would be partially offset by a portion of FPL's storm and property
insurance reserve (storm fund), which totaled $82 million at that date.
In the event of a catastrophic loss at one of FPL's nuclear plants, the
amount of insurance available may not be adequate to cover property damage
and other expenses incurred. Uninsured losses, to the extent not recovered
through rates, would be borne by FPL and could have a material adverse effect
on FPL Group's and FPL's financial condition.
In 1993, FPL replaced its transmission and distribution (T&D) property
insurance coverage with a self-insurance program due to the high cost and
limited coverage available from third-party insurers. Costs incurred under
the self-insurance program will be charged against FPL's storm fund.
Recovery of any losses in excess of the storm fund from ratepayers will
require the approval of the FPSC. FPL's available lines of credit include
$300 million to provide additional liquidity in the event of a T&D property
loss.
Contracts - FPL has take-or-pay contracts with the Jacksonville Electric
Authority (JEA) for 374 megawatts (mw) through 2023 and with the subsidiaries
of the Southern Company to purchase 1,406 mw of power through May 1994, and
declining amounts thereafter through mid-2010. FPL also has various firm
pay-for-performance contracts to purchase 1,031 mw from certain cogenerators
and small power producers (qualifying facilities) with expiration dates
ranging from 2002 through 2026. These contracts provide for capacity and
energy payments. Capacity payments for the pay-for-performance contracts are
subject to the qualifying facilities meeting certain contract obligations.
Energy payments are based on the actual power taken under these contracts.
The required capacity payments through 1998 under these contracts are
estimated to be as follows:
1994 1995 1996 1997 1998
(In Millions)
JEA. . . . . . . . . . . . . . . . . . $ 80 $ 80 $ 80 $ 80 $ 80
Southern Company . . . . . . . . . . . 200 150 140 140 140
Qualifying Facilities. . . . . . . . . 140 160 310 340 350
FPL's capacity and energy charges under these contracts for 1993, 1992 and
1991 were as follows:
1993 Charges 1992 Charges 1991 Charges
Capacity Energy(3) Capacity Energy(3) Capacity Energy(3)
(In Millions)
JEA. . . . . . . . . . . . . . $ 85(1) $ 51 $ 85(1) $ 48 $ 82(4) $ 53
Southern Company . . . . . . . 268(2) 183 377(2) 283 389(2) 311
Qualifying Facilities. . . . . 60(2) 40 44(2) 40 5(2) 36
(1) Recovered through base rates and the capacity cost recovery clause
(capacity clause).
(2) Recovered through the capacity clause.
(3) Recovered through the fuel and purchased power cost recovery clause.
(4) Recoverable through base rates.
FPL has take-or-pay contracts for the supply and transportation of natural
gas under which it is required to make payments estimated to be $280 million
for 1994, $380 million for 1995 and $390 million for each of the years 1996,
1997 and 1998. Total payments made under these contracts were $270 million,
$269 million and $221 million for 1993, 1992 and 1991, respectively.
Litigation - Union Carbide Corporation sued FPL and Florida Power Corporation
alleging that, through a territorial agreement approved by the FPSC, they
conspired to eliminate competition in violation of federal antitrust laws.
Praxair, Inc., an entity that was formerly a unit of Union Carbide, has been
substituted as the plaintiff. The suit seeks treble damages of an
unspecified amount based on alleged higher prices paid for electricity and
product sales lost. Cross motions for summary judgement were denied. Both
parties are appealing the denials.
A suit brought by the partners in a cogeneration project located in Dade
County, Florida, alleges that FPL Group, FPL and ESI have 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. A motion for summary
judgment by FPL Group, FPL and ESI has been denied.
A former cable installation contractor for Telesat Cablevision, Inc. (an
indirect subsidiary of FPL Group) has sued FPL Group, FPL Group Capital 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.
FPL Group believes that it and its subsidiaries 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 FPL Group's
financial statements.
13. Quarterly Data (Unaudited)
Condensed consolidated quarterly financial information for 1993 and 1992 is
as follows:
March 31 (1) June 30 (1) September 30 (1) ecember 31 (1)
(In thousands, except per share amounts)
1993
Operating revenues $ 1,132,376 $ 1,349,866 $ 1,602,685 $ 1,231,367
Operating income $ 205,925 $ 235,606 $ 294,853(2) $ 237,574
Net income $ 91,950 $ 110,546 $ 140,522(2) $ 85,731
Earnings per share of common stock $ 0.50 $ 0.60 $ 0.75(2) $ 0.45
Dividends per share of common stock $ 0.61 $ 0.62 $ 0.62 $ 0.62
High-low trading prices $39 5/8 - 36 1/8 $38 5/8 - 36 1/2 $ 41 - 37 5/8 $40 3/8 - 35 1/2
1992
Operating revenues $ 1,093,369 $ 1,261,982 $ 1,569,153 $ 1,268,823
Operating income $ 193,470 $ 237,263 $ 381,816 $ 221,225
Net income $ 74,405 $ 103,491 $ 187,773 $ 101,280
Earnings per share of common stock $ 0.43 $ 0.60 $ 1.05 $ 0.56
Dividends per share of common stock $ 0.60 $ 0.61 $ 0.61 $ 0.61
High-low trading prices $ 37 - 32 7/8 $ 36 - 32 $38 3/8 - 34 7/8 $37 3/8 - 34 1/2
(1) In the opinion of FPL Group, all adjustments, which consist of normal
recurring accruals necessary to present a fair statement of such amounts for
such periods, have been made. Results of operations for an interim period
may not give a true indication of results for the calendar year.
(2) Charge resulting from cost reduction program reduced operating income by
$138 million, net income by $85 million and earnings per share by $0.45.
See Note 4.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item will be included in FPL Group's
Definitive Proxy Statement which will be filed with the SEC in connection
with the 1994 Annual Meeting of Shareholders (FPL Group's Proxy Statement)
and is incorporated herein by reference, or is included in Part I under
Executive Officers of the Registrant.
Item 11. Executive Compensation
The information required by this Item will be included in FPL Group's Proxy
Statement and is incorporated herein by reference, provided that the
Compensation Committee Report and Performance Graphs which are contained in
FPL Group's Proxy Statement shall not be deemed to be incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item will be included in FPL Group's Proxy
Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item will be included in FPL Group's Proxy
Statement and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements Page(s)
Independent Auditors' Report 15
Consolidated Statements of Income for the Years
Ended December 31, 1993, 1992 and 1991 16
Consolidated Balance Sheets at December 31, 1993 and 1992 17-18
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1993, 1992 and 1991 19
Notes to Consolidated Financial Statements for the
Years Ended December 31, 1993, 1992 and 1991 20-35
2. Financial Statement Schedules(1)
Schedule V Property, Plant and Equipment 39-40
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment 41-42
Schedule IX Short-Term Borrowings 43
Schedule X Supplementary Income Statement Information 44
(1) All other schedules are omitted as not applicable or
not required.
3. Exhibits including those Incorporated by Reference
Exhibit
Number Description
*3(i) Restated Articles of Incorporation of FPL
Group dated December 31, 1984, as amended
through December 17, 1990 (filed as Exhibit
4(a) to Post-Effective Amendment No. 5 to
Form S-8, File No. 33-18669)
3(ii) Bylaws of FPL Group dated November 15, 1993
*4(a) Rights Agreement, dated as of June 16, 1986,
between FPL Group, Inc. and the First
National Bank of Boston (filed as Exhibit
4(e) to Post-Effective Amendment No. 5 to
Form S-8, File No. 33-18669)
*4(b) Mortgage and Deed of Trust dated as of
January 1, 1944, and Ninety-four Supplements
thereto between FPL and Bankers Trust Company
and The Florida National Bank of Jacksonville
(now First Union National Bank of Florida),
Trustees (as of September 2, 1992, the sole
trustee is Bankers Trust Company) (filed as
Exhibit B-3, File No. 2-4845; Exhibit 7(a),
File No. 2-7126; Exhibit 7(a), File No.
2-7523; Exhibit 7(a), File No. 2-7990;
Exhibit 7(a), File No. 2-9217; Exhibit
4(a)-5, File No. 2-10093; Exhibit 4(c), File
No. 2-11491; Exhibit 4(b)-1, File No.
2-12900; Exhibit 4(b)-1, File No. 2-13255;
Exhibit 4(b)-1, File No. 2-13705; Exhibit
4(b)-1, File No. 2-13925; Exhibit 4(b)-1,
File No. 2-15088; Exhibit 4(b)-1, File No.
2-15677; Exhibit 4(b)-1, File No. 2-20501;
Exhibit 4(b)-1, File No. 2-22104; Exhibit
2(c), File No. 2-23142; Exhibit 2(c), File
No. 2-24195; Exhibit 4(b)-1, File No.
2-25677; Exhibit 2(c), File No. 2-27612;
Exhibit 2(c), File No. 2-29001; Exhibit 2(c),
File No. 2-30542; Exhibit 2(c), File No.
2-33038; Exhibit 2(c), File No. 2-37679;
Exhibit 2(c), File No. 2-39006; Exhibit 2(c),
File No. 2-41312; Exhibit 2(c), File
No. 2-44234; Exhibit 2(c), File No. 2-46502;
Exhibit 2(c), File No. 2-48679; Exhibit 2(c),
File No. 2-49726; Exhibit 2(c), File No.
2-50712; Exhibit 2(c), File No. 2-52826;
Exhibit 2(c), File No. 2-53272; Exhibit 2(c),
File No. 2-54242; Exhibit 2(c), File No.
2-56228; Exhibits 2(c) and 2(d), File No.
2-60413; Exhibits 2(c) and 2(d), File No.
2-65701; Exhibit 2(c), File No. 2-66524;
Exhibit 2(c), File No. 2-67239; Exhibit 4(c),
File No. 2-69716; Exhibit 4(c), File No.
2-70767; Exhibit 4(b), File No. 2-71542;
Exhibit 4(b), File No. 2-73799; Exhibits
4(c), 4(d) and 4(e), File No. 2-75762;
Exhibit 4(c), File No. 2-77629; Exhibit 4(c),
File No. 2-79557; Exhibit 99(a) to
Post-Effective Amendment No. 5 to Form S-8,
File No. 33-18669; Exhibit 99(a) to
Post-Effective Amendment No. 1 to Form S-3,
File No. 33-46076); and Exhibit 4(b) to
Form 10-K dated March 21, 1994, File
No. 1-3545).
*10(a) Supplemental Executive Retirement Plan, as
amended and restated (filed as Exhibit 99(b)
to Post-Effective Amendment No. 5 to Form
S-8, File No. 33-18669)
*10(b) Benefit Restoration Plan of FPL Group and
affiliates, as amended and restated (filed as
Exhibit 99(c) to Post-Effective Amendment
No. 5 to Form S-8, File No. 33-18669)
*10(c) FPL Group Amended and Restated Supplemental
Executive Retirement Plan for J. L. Broadhead
(filed as Exhibit 99(d) to Post-Effective
Amendment No. 5 to Form S-8, File
No. 33-18669)
*10(d) Employment Agreement between FPL Group and D.
P. Coyle dated June 12, 1989 (filed as
Exhibit 99(e) to Post-Effective Amendment
No. 5 to Form S-8, File No. 33-18669)
*10(e) Employment Agreement between FPL and Stephen
E. Frank dated July 31, 1990 (filed as
Exhibit 99(f) to Post-Effective Amendment
No. 5 to Form S-8, File No. 33-18669)
*10(f) Employment Agreement between FPL and Jerome
H. Goldberg dated August 9, 1989 (filed as
Exhibit 99(g) to Post-Effective Amendment
No. 5 to Form S-8, File No. 33-18669)
*10(g) FPL Group Long-Term Incentive Plan of 1985,
as amended (filed as Exhibit 99(h) to
Post-Effective Amendment No. 5 to Form S-8,
File No. 33-18669)
*10(h) Director and Executive Compensation Deferral
Plan of FPL, as amended (filed as Exhibit
99(i) to Post-Effective Amendment No. 5 to
Form S-8, File No. 33-18669)
*10(i) Employment Agreement between FPL Group and
James L. Broadhead dated February 13, 1989
(filed as Exhibit 99(j) to Post-Effective
Amendment No. 5 to Form S-8, File
No. 33-18669)
10(j) Employment Agreement between FPL Group and
James L. Broadhead dated as of December 13,
1993
21 Subsidiaries of the Registrant
23 Independent Auditors' Consent
* Incorporated herein by reference
(b) Reports on Form 8-K
(1) A Current Report on Form 8-K dated October 22, 1993 was filed
October 22, 1993 reporting one event under Item 5. Other
Events.
SCHEDULE V
FPL GROUP, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F
Balance at Other Balance at
Beginning Additions Retire- Changes - End of
Classification of Year at Cost(1) ments(2) Add (Deduct) Year
(Thousands of Dollars)
Year Ended December 31, 1993
Electric utility plant, at original cost:
Electric plant:
Production plant:
Steam $ 2,400,151 $ 391,623 $(50,295) $ (22,598) $2,718,881
Nuclear 3,365,244 40,407 (19,016) (192) 3,386,443
Other 338,611 483,230 (5,603) 23,081 839,319
Total production plant 6,104,006 915,260 (74,914) 291 6,944,643
Transmission plant 1,674,423 146,108 (15,052) (288) 1,805,191
Distribution plant 4,504,269 295,925 (48,856) 1,770 4,753,108
General plant 858,532 87,024 (34,462) 636 911,730
Intangible plant 46,265 87,143 - (56) 133,352
Total electric plant in service 13,187,495 1,531,460 (173,284) 2,353 14,548,024
Held for future use 69,493 (3,115) - (2,366) 64,012
Nuclear fuel 277,803 57,589 - (109,268) 226,124
Total electric utility plant 13,534,791 1,585,934 173,284) (109,281) 14,838,160
Construction work in progress 1,158,688 (377,253) - - 781,435
Other property 278,887 18,377 (11,617) (24,522) 261,125
Total $14,972,366 $1,227,058 $(184,901) $(133,803) $15,880,720
Year Ended December 31, 1992
Electric utility plant, at original cost:
Electric Plant:
Production plant:
Steam $ 2,344,399 $ 83,322 $ (27,136) $ (434) $ 2,400,151
Nuclear 3,355,766 52,916 (43,438) - 3,365,244
Other 305,601 45,741 (12,743) 12 338,611
Total production plant 6,005,766 181,979 (83,317) (422) 6,104,006
Transmission plant 1,605,823 75,226 (5,899) (727) 1,674,423
Distribution plant 4,227,135 324,065 (48,640) 1,709 4,504,269
General plant 695,311 186,984 (26,043) 2,280 858,532
Intangible plant 31,657 14,134 - 474 46,265
Total electric plant in service 12,565,692 782,388 (163,899) 3,314 13,187,495
Held for future use 73,385 1,156 - (5,048) 69,493
Nuclear fuel 279,740 105,716 - (107,653) 277,803
Total electric utility plant 12,918,817 889,260 (163,899) (109,387) 13,534,791
Construction work in progress 597,401 561,287 - - 1,158,688
Other property 255,035 48,390 (19,947) (4,591) 278,887
Total $13,771,253 $1,498,937 $(183,846) $(113,978) $14,972,366
SCHEDULE V
FPL GROUP, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT (Concluded)
Column A Column B Column C Column D Column E Column F
Balance at Other Balance at
Beginning Additions Retire- Changes - End of
Classification of Year at Cost(1) ments(2) Add (Deduct) Year
(Thousands of Dollars)
Year Ended December 31, 1991
Electric utility plant, at original cost:
Electric plant:
Production plant:
Steam $ 2,142,443 $ 239,997 $ (32,927) $ (5,114) $ 2,344,399
Nuclear 3,075,336 302,241 (21,500) (311) 3,355,766
Other 300,356 7,422 (2,176) (1) 305,601
Total production plant 5,518,135 549,660 (56,603) (5,426) 6,005,766
Transmission plant 1,546,047 63,291 (4,137) 622 1,605,823
Distribution plant 3,898,288 351,414 (25,508) 2,941 4,227,135
General plant 655,587 72,695 (32,695) (276) 695,311
Intangible plant 18,190 13,467 - - 31,657
Total electric plant in service 11,636,247 1,050,527 (118,943) (2,139) 12,565,692
Held for future use 59,801 12,611 - 973 73,385
Nuclear fuel 488,128 53,497 (108,607) (153,278) 279,740
Total electric utility plant 12,184,176 1,116,635 (227,550) (154,444) 12,918,817
Construction work in progress 476,279 121,122 - - 597,401
Other property 243,185 20,295 (3,945) (4,500) 255,035
Total $12,903,640 $1,258,052 $(231,495) $(158,944) $13,771,253
(1) Substantially all additions are originally charged to construction work in progress
and transferred to electric utility plant accounts upon completion. Additions at
cost give effect to such transfers.
(2) The installed cost of individual units of plant retired is not always available.
Plant accounts are credited for such retirements on the basis of estimates when the
original cost is not available. Nuclear fuel materials sold are reflected as
retirements.
SCHEDULE VI
FPL GROUP, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F
Additions Charged to
Costs and Expenses
Balance at Clearing Other Changes Balance
Beginning Deprecia- & Other Retire- Add at End
Description of Year tion Accounts(1) ments (Deduct) of Year
(Thousands of Dollars)
Year ended December 31, 1993
Accumulated depreciation of electric utility plant(2)(3):
Production plant:
Steam $1,022,517 $116,950 $ 197 $ (50,295) $ 20,394 $1,109,763
Nuclear 1,350,309 187,057 - (19,016) 4,597 1,522,947
Other 207,163 21,039 397 (5,603) 3,506 226,502
Total production plant 2,579,989 325,046 594 (74,914) 28,497 2,859,212
Transmission plant 771,076 33,366 - (15,052) 2,608 791,998
Distribution plant 1,449,155 173,752 - (48,857) 1,087 1,575,137
General plant 239,479 56,339 13,490 (34,462) 3,821 278,667
Intangible plant 18,542 15,113 537 - 1,958 36,150
Total electric utility plant 5,058,241 603,616 14,621 (173,285) 37,971 5,541,164
Accumulated depreciation of other
property 47,825 11,432 - (5,574) (3,582) 50,101
Total $5,106,066 $615,048 $14,621 $(178,859) $ 34,389 $5,591,265
Year ended December 31, 1992
Accumulated depreciation of electric utility plant(2)(3):
Production plant:
Steam $ 962,585 $107,625 $ 31 $(41,211) $ (6,513) $1,022,517
Nuclear 1,205,123 190,124 - (44,933) (5) 1,350,309
Other 204,853 9,287 - (13,327) 6,350 207,163
Total production plant 2,372,561 307,036 31 (99,471) (168) 2,579,989
Transmission plant 744,931 31,283 - (4,880) (258) 771,076
Distribution plant 1,335,068 161,466 - (47,248) (131) 1,449,155
General plant 188,899 49,864 12,790 (12,513) 439 239,479
Intangible plant 9,866 7,620 938 - 118 18,542
Total electric utility plant 4,651,325 557,269 13,759 (164,112) - 5,058,241
Accumulated depreciation of other
property 39,078 11,136 - (3,920) 1,531 47,825
Total $4,690,403 $568,405 $13,759 $(168,032) $ 1,531 $5,106,066
SCHEDULE VI
FPL GROUP, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT (Concluded)
Column A Column B Column C Column D Column E Column F
Additions Charged to
Costs and Expenses
Balance at Clearing Other Changes Balance
Beginning Deprecia- & Other Retire- Add at End
Description of Year tion Accounts(1) ments (Deduct) of Year
(Thousands of Dollars)
Year ended December 31, 1991
Accumulated depreciation of electric utility plant(2)(3):
Production plant:
Steam $ 883,237 $103,629 $ - $ (44,417) $20,136 $ 962,585
Nuclear 1,050,026 178,789 - (23,602) (90) 1,205,123
Other 208,739 8,586 - (2,951) (9,521) 204,853
Total production plant 2,142,002 291,004 - (70,970) 10,525 2,372,561
Transmission plant 718,325 29,484 - (2,821) (57) 744,931
Distribution plant 1,223,635 144,119 - (33,108) 422 1,335,068
General plant 157,507 50,189 11,959 (30,776) 20 188,899
Intangible plant 4,328 5,537 - - 1 9,866
Total electric plant 4,245,797 520,333 11,959 (137,675) 10,911 4,651,325
Accumulated amortization of nuclear
fuel assemblies 205,787 - (168,554) (37,233) - -
Total electric utility plant 4,451,584 520,333 (156,595) (174,908) 10,911 4,651,325
Accumulated depreciation of other
property 30,152 9,936 - (899) (111) 39,078
Total $4,481,736 $530,269 $(156,595) $(175,807) $10,800 $4,690,403
(1) Depreciation of transportation equipment is charged to various accounts
based on the use of such equipment. Amortization of nuclear fuel
assemblies is charged to fuel, purchased power and interchange expense.
(2) This reserve is maintained for all depreciable property. The amount in
the retirements column is net of removal costs and salvage.
(3) Includes fossil decommissioning reserves of $102 million, $92 million
and $83 million at December 31, 1993, 1992 and 1991, respectively.
SCHEDULE IX
FPL GROUP, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate at End Interest During the During the During the
Short-Term Borrowings of Year Rate Year (1) Year (2) Year (3)
(Thousands of Dollars)
Year ended December 31, 1993
Commercial paper $ 349,600 3.4% $ 374,600 $164,331 3.2%
Year ended December 31, 1992
Commercial paper - - $ 19,100 $ 7,096 3.7%
Year ended December 31, 1991
Lines of credit - - $ 36,500 $ 16,898 5.9%
Commercial paper - - $ 51,301 $ 19,042 7.0%
(1) Represents the maximum amount outstanding at any month end.
(2) Computed by dividing the sum of the daily ending balances by the number
of days in the year.
(3) Computation is based upon the principal amounts weighted by the number
of days outstanding.
SCHEDULE X
FPL GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION (1)
Column A Column B
Years Ended December 31,
1993 1992 1991
(Thousands of Dollars)
Maintenance expense $ 346,736 $ 358,375 $ 405,017
Taxes other than income taxes:
Federal and state payroll $ 55,815 $ 54,272 $ 53,836
Real and personal property 150,952 140,394 126,574
State gross receipts 127,086 113,725 106,545
Franchise charges 202,258 194,421 204,880
Miscellaneous 29,209 46,765 32,277
Total $ 565,320 $ 549,577 $ 524,112
Charged to:
Operating expenses $ 526,109 $ 497,739 $ 485,962
Utility plant and other accounts 39,211 51,838 38,150
Total $ 565,320 $ 549,577 $ 524,112
(1) Other information required by Article 5, Schedule X - Supplementary Income
Statement Information is shown in the Consolidated Financial Statements or
notes thereto, or is not presented as such amounts are less than 1% of
total revenues.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 21, 1994 FPL Group, Inc.
By JAMES L. BROADHEAD
James L. Broadhead
(Chairman of the Board,
President and Chief
Executive Officer, Principal
Executive Officer and Director)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
PAUL J. EVANSON Principal Financial Officer
Paul J. Evanson
(Vice President, Finance
and Chief Financial Officer)
K. MICHAEL DAVIS Principal Accounting Officer
K. Michael Davis
(Controller and Chief
Accounting Officer)
March 21, 1994
H. JESSE ARNELLE
H. Jesse Arnelle
ROBERT M. BEALL, II Directors
Robert M. Beall, II
DAVID BLUMBERG
David Blumberg
Signature Title Date
J. HYATT BROWN
J. Hyatt Brown
MARSHALL M. CRISER
Marshall M. Criser
JEAN MCARTHUR DAVIS
Jean McArthur Davis
BEVERLY F. DOLAN
Beverly F. Dolan
Directors March 21, 1994
WILLARD D. DOVER
Willard D. Dover
ALFONSO FANJUL
Alfonso Fanjul
STEPHEN E. FRANK
Stephen E. Frank
DREW LEWIS
Drew Lewis
FREDERIC V. MALEK
Frederic V. Malek
PAUL R. TREGURTHA
Paul R. Tregurtha