UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Exact name of Registrants as specified IRS Employer Commission in their charters, address of principal Identification File Number executive offices and Registrants' telephone number Number 1-8841 FPL GROUP, INC. 59-2449419 1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775 700 Universe Boulevard Juno Beach, Florida 33408 (561) 694-4000 State or other jurisdiction of incorporation or organization: Florida Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) have been subject to such filing requirements for the past 90 days. Yes X No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each class of FPL Group, Inc. common stock, as of the latest practicable date: Common Stock, $.01 par value, outstanding at March 31, 2001: 175,857,570 shares. As of March 31, 2001, there were issued and outstanding 1,000 shares of Florida Power & Light Company's common stock, without par value, all of which were held, beneficially and of record, by FPL Group, Inc. ______________________________ This combined Form 10-Q represents separate filings by FPL Group, Inc. and Florida Power & Light Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Florida Power & Light Company makes no representations as to the information relating to FPL Group, Inc.'s other operations. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (Reform Act), FPL Group, Inc. (FPL Group) and Florida Power & Light Company (FPL) (collectively, the Company) are hereby filing cautionary statements identifying important factors that could cause the Company's actual results to differ materially from those projected in forward-looking statements (as such term is defined in the Reform Act) made by or on behalf of the Company in this combined Form 10-Q, in presentations, in response to questions or otherwise. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as will likely result, are expected to, will continue, is anticipated, estimated, projection, outlook) are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause the Company's actual results to differ materially from those contained in forward-looking statements made by or on behalf of the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Some important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements include changes in laws or regulations, changing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC), the Florida Public Service Commission (FPSC), the Public Utility Regulatory Policies Act of 1978, as amended (PURPA), the Public Utility Holding Company Act of 1935, as amended, and the U. S. Nuclear Regulatory Commission, with respect to allowed rates of return including but not limited to return on common equity and equity ratio limits, industry and rate structure, operation of nuclear power facilities, acquisition, disposal, depreciation and amortization of assets and facilities, operation and construction of plant facilities, recovery of fuel and purchased power costs, decommissioning costs, and present or prospective wholesale and retail competition (including but not limited to retail wheeling and transmission costs). The business and profitability of the Company are also influenced by economic and geographic factors including political and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions (including natural disasters such as hurricanes), population growth rates and demographic patterns, competition for retail and wholesale customers, availability, pricing and transportation of fuel and other energy commodities, market demand for energy from plants or facilities, changes in tax rates or policies or in rates of inflation or in accounting standards, unanticipated delays or changes in costs for capital projects, unanticipated changes in operating expenses and capital expenditures, capital market conditions, competition for new energy development opportunities and legal and administrative proceedings (whether civil, such as environmental, or criminal) and settlements. All such factors are difficult to predict, contain uncertainties which may materially affect actual results, and are beyond the control of the Company. PART I - FINANCIAL INFORMATION Item 1. Financial Statements FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (millions, except per share amounts) (unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 <S> <C> <C> OPERATING REVENUES .................................................................. $1,941 $1,468 OPERATING EXPENSES: Fuel, purchased power and interchange ............................................. 951 542 Other operations and maintenance................................................... 310 285 Merger-related .................................................................... 31 - Depreciation and amortization ..................................................... 240 259 Taxes other than income taxes ..................................................... 169 145 Total operating expenses ........................................................ 1,701 1,231 OPERATING INCOME .................................................................... 240 237 OTHER INCOME (DEDUCTIONS): Interest charges .................................................................. (85) (62) Preferred stock dividends - FPL ................................................... (4) (4) Other - net ....................................................................... 15 7 Total other deductions - net .................................................... (74) (59) INCOME BEFORE INCOME TAXES .......................................................... 166 178 INCOME TAXES ........................................................................ 56 57 NET INCOME .......................................................................... $ 110 $ 121 Earnings per share of common stock (basic and assuming dilution)..................... $ 0.65 $ 0.71 Dividends per share of common stock ................................................. $ 0.56 $ 0.54 Weighted-average number of common shares outstanding: Basic ............................................................................. 169 170 Assuming dilution ................................................................. 169 171 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements appearing in the combined Annual Report on Form 10-K/A for the fiscal year ended December 31, 2000 (2000 Form 10-K) for FPL Group and FPL. FPL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (millions) (unaudited) <TABLE> <CAPTION> March 31, December 31, 2001 2000 <S> <C> <C> PROPERTY, PLANT AND EQUIPMENT: Electric utility plant in service and other property, including nuclear fuel and construction work in progress ....................... $21,429 $21,022 Less accumulated depreciation and amortization ................................... (11,290) (11,088) Total property, plant and equipment - net ...................................... 10,139 9,934 CURRENT ASSETS: Cash and cash equivalents ........................................................ 109 129 Customer receivables, net of allowance of $5 and $7, respectively................. 619 637 Materials, supplies and fossil fuel inventory - at average cost .................. 340 370 Deferred clause expenses ......................................................... 458 337 Other ............................................................................ 268 308 Total current assets ........................................................... 1,794 1,781 OTHER ASSETS: Special use funds of FPL ......................................................... 1,558 1,497 Other investments ................................................................ 686 651 Other ............................................................................ 1,486 1,437 Total other assets ............................................................. 3,730 3,585 TOTAL ASSETS ....................................................................... $15,663 $15,300 CAPITALIZATION: Common stock ..................................................................... $ 2 $ 2 Additional paid-in capital........................................................ 2,790 2,788 Retained earnings................................................................. 2,819 2,803 Accumulated other comprehensive income ........................................... 13 - Total common shareholders' equity............................................... 5,624 5,593 Preferred stock of FPL without sinking fund requirements ......................... 226 226 Long-term debt ................................................................... 3,977 3,976 Total capitalization ........................................................... 9,827 9,795 CURRENT LIABILITIES: Debt due within one year ......................................................... 1,385 1,223 Accounts payable ................................................................. 525 564 Accrued interest, taxes and other ................................................ 1,063 976 Total current liabilities ...................................................... 2,973 2,763 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,467 1,378 Unamortized regulatory and investment tax credits ................................ 258 269 Other ............................................................................ 1,138 1,095 Total other liabilities and deferred credits ................................... 2,863 2,742 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $15,663 $15,300 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) (unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 <S> <C> <C> NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 533 $ 480 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures of FPL ......................................................... (333) (301) Independent power investments ....................................................... (235) (81) Other - net ......................................................................... (52) (29) Net cash used in investing activities ........................................... (620) (411) CASH FLOWS FROM FINANCING ACTIVITIES: Retirement of long-term debt ........................................................ (66) - Increase (decrease) in commercial paper ............................................. 227 (218) Repurchase of common stock .......................................................... - (16) Dividends on common stock ........................................................... (94) (92) Net cash provided by (used in) financing activities ............................. 67 (326) Net decrease in cash and cash equivalents ............................................. (20) (257) Cash and cash equivalents at beginning of period ...................................... 129 361 Cash and cash equivalents at end of period ............................................ $ 109 $ 104 Supplemental disclosures of cash flow information: Cash paid for interest (net of amount capitalized)................................... $ 64 $ 53 Cash paid for income taxes .......................................................... $ - $ 17 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 18 $ 17 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (millions) (unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 <S> <C> <C> OPERATING REVENUES ......................................................................... $1,647 $1,338 OPERATING EXPENSES: Fuel, purchased power and interchange .................................................... 763 501 Other operations and maintenance ......................................................... 253 237 Merger-related ........................................................................... 26 - Depreciation and amortization ............................................................ 223 247 Income taxes ............................................................................. 62 60 Taxes other than income taxes ............................................................ 164 142 Total operating expenses ............................................................... 1,491 1,187 OPERATING INCOME ........................................................................... 156 151 OTHER INCOME (DEDUCTIONS): Interest charges ......................................................................... (53) (40) Other - net .............................................................................. (2) (1) Total other deductions - net ........................................................... (55) (41) NET INCOME ................................................................................. 101 110 PREFERRED STOCK DIVIDENDS .................................................................. 4 4 NET INCOME AVAILABLE TO FPL GROUP .......................................................... $ 97 $ 106 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (millions) (unaudited) <TABLE> <CAPTION> March 31, December 31, 2001 2000 <S> <C> <C> ELECTRIC UTILITY PLANT: Plant in service, including nuclear fuel and construction work in progress ....... $19,265 $19,033 Less accumulated depreciation and amortization ................................... (11,104) (10,919) Electric utility plant - net ................................................... 8,161 8,114 CURRENT ASSETS: Cash and cash equivalents ........................................................ 12 66 Customer receivables, net of allowance of $5 and $7, respectively................. 504 489 Materials, supplies and fossil fuel inventory - at average cost .................. 303 313 Deferred clause expenses ......................................................... 458 337 Other ............................................................................ 117 211 Total current assets ........................................................... 1,394 1,416 OTHER ASSETS: Special use funds ................................................................ 1,558 1,497 Other ............................................................................ 961 993 Total other assets ............................................................. 2,519 2,490 TOTAL ASSETS ....................................................................... $12,074 $12,020 CAPITALIZATION: Common shareholder's equity ...................................................... $ 5,346 $ 5,032 Preferred stock without sinking fund requirements ................................ 226 226 Long-term debt ................................................................... 2,577 2,577 Total capitalization ........................................................... 8,149 7,835 CURRENT LIABILITIES: Debt due within one year ......................................................... 200 625 Accounts payable ................................................................. 449 458 Accrued interest, taxes and other ................................................ 929 859 Total current liabilities ...................................................... 1,578 1,942 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,162 1,084 Unamortized regulatory and investment tax credits ................................ 258 269 Other ............................................................................ 927 890 Total other liabilities and deferred credits ................................... 2,347 2,243 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,074 $12,020 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) (unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 <S> <C> <C> NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................. $ 502 $ 516 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ................................................................ (333) (301) Other - net ......................................................................... (10) (26) Net cash used in investing activities ........................................... (343) (327) CASH FLOWS FROM FINANCING ACTIVITIES: Retirement of long-term debt ........................................................ (66) - Decrease in commercial paper ........................................................ (360) (78) Dividends ........................................................................... (87) (102) Capital contributions from FPL Group ................................................ 300 - Net cash used in financing activities ............................................. (213) (180) Net increase (decrease) in cash and cash equivalents .................................. (54) 9 Cash and cash equivalents at beginning of period ...................................... 66 - Cash and cash equivalents at end of period ............................................ $ 12 $ 9 Supplemental disclosures of cash flow information: Cash paid for interest .............................................................. $ 30 $ 27 Cash received for income taxes - net ................................................ $ 39 $ 42 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 18 $ 17 Transfer of net assets to FPL FiberNet, LLC ......................................... $ - $ 100 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements herein and the Notes to Consolidated Financial Statements appearing in the 2000 Form 10-K for FPL Group and FPL. FPL GROUP, INC. AND FLORIDA POWER & LIGHT COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The accompanying condensed consolidated financial statements should be read in conjunction with the 2000 Form 10-K for FPL Group and FPL. In the opinion of FPL Group and FPL management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period may not give a true indication of results for the year. 1. Accounting for Derivative Instruments and Hedging Activities Effective January 1, 2001, FPL Group and FPL adopted Statement of Financial Accounting Standards No. (FAS) 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by FAS 137 and 138 (collectively, FAS 133). As a result, beginning in January 2001, derivative instruments are recorded on FPL Group's and FPL's balance sheets as either an asset or liability (in other current assets, other assets, other current liabilities and other liabilities) measured at fair value. FPL Group and FPL use derivative instruments (primarily swaps, options and futures) to manage the commodity price risk inherent in fuel purchases and electricity sales, as well as to optimize the value of power generation assets. At FPL, changes in fair value are deferred as a regulatory asset or liability until the contracts are settled. Upon settlement, any gains or losses will be passed through the fuel and capacity cost recovery clauses. For FPL Group's unregulated operations, predominantly FPL Energy, LLC (FPL Energy), changes in the derivatives' fair value are recognized currently in earnings (in other-net) unless hedge accounting is applied. While substantially all of FPL Energy's derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria are met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective. The hedging instrument's effectiveness is assessed utilizing regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life. Hedges are considered highly effective when a correlation coefficient of .8 or higher is achieved. Substantially all of the transactions that FPL Group has designated as hedges are cash flow hedges. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period(s) during which the transaction being hedged affects earnings. The ineffective portion of these hedges flows through earnings in the current period. Settlement gains and losses are included within the line items in the statements of income to which they relate. In January 2001, FPL Group recorded in other-net a $2 million loss as the cumulative effect on FPL Group's earnings of a change in accounting principle representing the effect of those derivative instruments for which hedge accounting was not applied. For those contracts where hedge accounting was applied, the adoption of the new rules resulted in a credit of approximately $10 million to other comprehensive income for FPL Group. Included in FPL Group's accumulated other comprehensive income at March 31, 2001 is approximately $13 million of net unrealized gains associated with hedges of forecasted fuel purchases through December 2003. See Note 2 - Other. Approximately $4 million of FPL's Group's accumulated other comprehensive income at March 31, 2001 will be reclassified into earnings within the next 12 months as the hedged fuel is consumed. In April 2001, the Financial Accounting Standards Board (FASB) reached tentative conclusions on several issues related to the power generation industry. After considering comments on the tentative conclusions, the FASB will issue final guidance that would be applied in the quarter following final resolution of the issues. The ultimate resolution of these issues could result in a requirement to mark certain of FPL Group's power and fuel agreements to their fair values each reporting period. At this time, management is unable to estimate the effects on the financial statements of the tentative conclusions or any future decisions of the FASB. 2. Capitalization FPL Group Common Stock - In April 2001, FPL Group's $570 million share repurchase program authorized in connection with the merger agreement with Entergy Corporation was terminated. As of March 31, 2001, FPL Group had repurchased a total of approximately 4.6 million shares of common stock under the 10 million share repurchase program that began in April 1997. Long-Term Debt - In February 2001, FPL redeemed approximately $65 million principal amount of solid waste disposal revenue refunding bonds, consisting of $16 million bearing interest at 7.15% and maturing 2023 and $49 million with variable rate interest maturing in 2025. Long-Term Incentive Plan - Performance shares and options granted to date under FPL Group's long-term incentive plan resulted in assumed incremental shares of common stock outstanding for purposes of computing diluted earnings per share for the three months ended March 31, 2001 and 2000. These incremental shares were not material in the periods presented and did not cause diluted earnings per share to differ from basic earnings per share. Other - Comprehensive income of FPL Group, totaling $123 million and $121 million for the three months ended March 31, 2001 and 2000, respectively, includes net income, changes in unrealized gains and losses on securities and foreign currency translation adjustments. For the three months ended March 31, 2001, comprehensive income also includes approximately $13 million of net unrealized gains on qualifying cash flow hedges. Accumulated other comprehensive income is separately displayed in the condensed consolidated balance sheets of FPL Group. 3. Commitments and Contingencies Commitments - FPL has made commitments in connection with a portion of its projected capital expenditures. Capital expenditures for the construction or acquisition of additional facilities and equipment to meet customer demand are estimated to be approximately $3.3 billion for 2001 through 2003. Included in this three-year forecast are capital expenditures for 2001 of approximately $1.1 billion, of which $289 million had been spent through March 31, 2001. As of March 31, 2001, FPL Energy has made commitments in connection with the development and expansion of independent power projects totaling approximately $500 million. Subsidiaries of FPL Group, other than FPL, have guaranteed approximately $900 million of prompt performance payments, lease obligations, purchase and sale of power and fuel agreement obligations, debt service payments and other payments subject to certain contingencies. 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 $363 million per incident at any nuclear utility reactor in the United States, payable at a rate not to exceed $43 million per incident per year. FPL participates in nuclear insurance mutual companies 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 nuclear 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 plants, FPL could be assessed up to $38 million in retrospective premiums. 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. FPL self-insures the majority of its transmission and distribution (T&D) property due to the high cost and limited coverage available from third- party insurers. As approved by the FPSC, FPL maintains a funded storm and property insurance reserve, which totaled approximately $239 million at March 31, 2001, for uninsured property storm damage or assessments under the nuclear insurance program. Recovery from customers of any losses in excess of the storm and property insurance reserve 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 Group has a $3.7 billion long-term agreement with General Electric Company for the supply of 66 gas turbines through 2004 and parts, repairs and on-site services through 2011. In addition, FPL Energy has entered into a contract to purchase 866 wind turbines through 2001. FPL Energy has also entered into various engineering, procurement and construction contracts to support its development activities through 2003. These contracts are intended to support expansion primarily at FPL Energy, and the related commitments are included in Commitments above. FPL has entered into long-term purchased power and fuel contracts. Take- or-pay purchased power contracts with the Jacksonville Electric Authority (JEA) and with subsidiaries of The Southern Company (Southern Companies) provide approximately 1,300 megawatts (mw) of power through mid-2010 and 388 mw thereafter through 2021. FPL also has various firm pay-for- performance contracts to purchase approximately 900 mw from certain cogenerators and small power producers (qualifying facilities) with expiration dates ranging from 2002 through 2026. The purchased power contracts provide for capacity and energy payments. Energy payments are based on the actual power taken under these contracts. Capacity payments for the pay-for-performance contracts are subject to the qualifying facilities meeting certain contract conditions. FPL has long-term contracts for the transportation and supply of natural gas, coal and oil with various expiration dates through 2022. FPL Energy has long-term contracts for the transportation and storage of natural gas with expiration dates ranging from 2002 through 2017, and a contract for the supply of natural gas that expires in mid-2002. The required capacity and minimum payments under these contracts for the remainder of 2001 (April-December) and for 2002-2005 are estimated to be as follows: <TABLE><CAPTION> 2001 2002 2003 2004 2005 (millions) <S> <C> <C> <C> <C> <C> FPL: Capacity payments: JEA and Southern Companies .......................................... $150 $200 $200 $200 $200 Qualifying facilities ............................................... $240 $330 $340 $350 $340 Minimum payments, at projected prices: Natural gas, including transportation ............................... $725 $870 $710 $660 $625 Coal ................................................................ $ 35 $ 45 $ 20 $ 10 $ 10 Oil ................................................................. $205 $ 10 $ - $ - $ - FPL Energy: Natural gas, including transportation and storage ................... $ 15 $ 20 $ 15 $ 15 $ 15 </TABLE> Charges under these contracts were as follows: <TABLE><CAPTION> Three Months Ended March 31, 2001 Charges 2000 Charges Energy/ Energy/ Capacity Fuel Capacity Fuel (millions) <S> <C> <C> <C> <C> FPL: JEA and Southern Companies ......................... $51(a) $ 40(b) $50(a) $31(b) Qualifying facilities .............................. $77(c) $ 33(b) $79(c) $32(b) Natural gas, including transportation .............. $ - $201(b) $ - $82(b) Coal ............................................... $ - $ 12(b) $ - $11(b) Oil ................................................ $ - $ 98(b) $ - $21(b) FPL Energy: Natural gas transportation and storage ............. $ - $ 4 $ - $ 4 _______________ (a) Recovered through base rates and the capacity cost recovery clause (capacity clause). (b) Recovered through the fuel and purchased power cost recovery clause. (c) Recovered through the capacity clause. </TABLE> Litigation - In 1999, the Attorney General of the United States, on behalf of the U.S. Environmental Protection Agency (EPA) brought an action against Georgia Power Company and other subsidiaries of The Southern Company for injunctive relief and the assessment of civil penalties for certain violations of the Clean Air Act. Among other things, the EPA alleges Georgia Power Company constructed and is continuing to operate Scherer Unit No. 4, in which FPL owns a 76% interest, without obtaining proper permitting, and without complying with performance and technology standards as required by the Clean Air Act. The suit seeks injunctive relief requiring the installation of such technology and civil penalties of up to $25,000 per day for each violation from an unspecified date after August 7, 1977 through January 30, 1997, and $27,500 per day for each violation thereafter. Georgia Power Company has filed an answer to the complaint asserting that it has complied with all requirements of the Clean Air Act, denying the plaintiff's allegations of liability, denying that the plaintiff is entitled to any of the relief that it seeks and raising various other defenses. In March 2001, the court granted the EPA's motion for leave to file an amended complaint that would extend the suit to another Southern Company subsidiary and other plants and would add an allegation that unspecified major modifications have been made at Scherer Unit No. 4 that require its compliance with the aforementioned Clean Air Act provisions (comparable allegations were made in the original complaint as to other plants but not Scherer Unit No. 4). Under the amended complaint, the EPA's demand for civil penalties with respect to Scherer Unit No. 4 would apply to the period commencing on an unspecified date after June 1, 1975. At this time, the EPA has not yet filed its amended complaint and hence Georgia Power Company has not had occasion to answer. In April 2001, the court strongly recommended to the parties that this case be administratively terminated until the Eleventh Circuit Court of Appeals rules on a pending appeal of an EPA order under the Clean Air Act involving the Tennesee Valley Authority (TVA). The EPA and Georgia Power Company have stated that they do not object to administrative termination, although the EPA asserts that the case should be reopened when its motion for consolidation of several Clean Air Act cases is decided by a Multi-District Litigation panel rather than at the conclusion of the TVA appeal. In 2000, Southern California Edison Company (SCE) filed with the FERC a Petition for Declaratory Order (petition) asking the FERC to apply a November 1999 federal circuit court of appeals' decision to all qualifying small power production facilities, including two solar facilities operated by partnerships indirectly owned in part by FPL Energy (the partnerships). The federal circuit court of appeals' decision invalidated the FERC's so- called essential fixed assets standard, which permitted uses of fossil fuels by qualifying small power production facilities beyond those expressly set forth in PURPA. The petition requests that the FERC declare that qualifying small power production facilities may not continue to use fossil fuel under the essential fixed assets standard and that they may be required to make refunds with respect to past usage. In August 2000, the partnerships filed motions to intervene and protest before the FERC, vigorously objecting to the position taken by SCE in its petition. The partnerships contend that they have always operated the solar facilities in accordance with certification orders issued to them by the FERC. Such orders were neither challenged nor appealed at the time they were granted, and it is the position of the partnerships that the orders remain fully in effect. Briefing in this proceeding is complete and the parties are currently awaiting a final determination from the FERC. FPL Group and FPL believe that they have meritorious defenses to the pending litigation discussed above and are vigorously defending the suits. Accordingly, the liabilities, if any, arising from the proceedings are not anticipated to have a material adverse effect on their financial statements. 4. Segment Information FPL Group's reportable segments include FPL, a regulated utility, and FPL Energy, a non-rate regulated energy generating subsidiary. Corporate and Other represents other business activities, other segments that are not separately reportable and eliminating entries. FPL Group's segment information is as follows: <TABLE><CAPTION> Three Months Ended March 31, 2001 2000 FPL Corporate FPL Corporate FPL Energy & Other Total FPL Energy & Other Total (millions) <S> <C> <C> <C> <C> <C> <C> <C> <C> Operating revenues ..... $ 1,647 $ 264 $ 30 $ 1,941 $ 1,338 $ 107 $ 23 $ 1,468 Net income (a).......... $ 97 $ 18 $ (5) $ 110 $ 106 $ 15 $ - $ 121 </TABLE> <TABLE><CAPTION> March 31, 2001 December 31, 2000 FPL Corporate FPL Corporate FPL Energy & Other Total FPL Energy & Other Total <S> <C> <C> <C> <C> <C> <C> <C> <C> (millions) Total assets ........... $12,074 $2,910 $ 679 $15,663 $12,020 $2,679 $601 $15,300 </TABLE> (a) Includes merger-related expense in 2001 of $19 million after-tax, of which $16 million was recognized by FPL and $3 million by Corporate and Other. 5. Summarized Financial Information of FPL Group Capital FPL Group Capital, a 100% owned subsidiary of FPL Group, provides funding for and holds ownership interest in FPL Group's operating subsidiaries other than FPL. FPL Group Capital's debentures are fully and unconditionally guaranteed by FPL Group. Condensed consolidating financial information is as follows: Condensed Consolidating Statements of Income <TABLE><CAPTION> Three Months Ended Three Months Ended March 31, 2001 March 31, 2000 FPL FPL Group FPL FPL Group FPL Group Other Consoli- FPL Group Other Consoli- Group Capital (a) dated Group Capital (a) dated (millions) <S> <C> <C> <C> <C> <C> <C> <C> <C> Operating revenues ................... $ - $ 294 $ 1,647 $ 1,941 $ - $ 130 $ 1,338 $ 1,468 Operating expenses ................... - (271) (1,430) (1,701) - (105) (1,126) (1,231) Interest charges ..................... (7) (31) (47) (85) (8) (22) (32) (62) Other income (deductions) - net ...... 114 30 (133) 11 126 19 (142) 3 Income before income taxes ........... 107 22 37 166 118 22 38 178 Income tax expense (benefit) ......... (3) 1 58 56 (3) 2 58 57 Net income (loss) .................... $ 110 $ 21 $ (21) $ 110 $ 121 $ 20 $ (20) $ 121 (a) Represents FPL, other subsidiaries and consolidating adjustments. </TABLE> Condensed Consolidating Balance Sheets <TABLE><CAPTION> March 31, 2001 December 31, 2000 FPL FPL Group FPL FPL Group FPL Group Other Consoli- FPL Group Other Consoli- Group Capital (a) dated Group Capital (a) dated (millions) <S> <C> <C> <C> <C> <C> <C> <C> <C> PROPERTY, PLANT AND EQUIPMENT: Electric utility plant in service and other property .......................... $ - $ 2,159 $19,270 $21,429 $ - $1,984 $19,038 $21,022 Less accumulated depreciation and amortization ............................ - (186) (11,104) (11,290) - (170) (10,918) (11,088) Total property, plant and equipment - net - 1,973 8,166 10,139 - 1,814 8,120 9,934 CURRENT ASSETS: Cash and cash equivalents ................. 6 91 12 109 12 51 66 129 Receivables ............................... 18 731 85 834 56 418 409 883 Other ..................................... 1 42 808 851 - 66 703 769 Total current assets .................... 25 864 905 1,794 68 535 1,178 1,781 OTHER ASSETS: Investment in subsidiaries ................ 6,315 - (6,315) - 5,967 - (5,967) - Other ..................................... 124 1,495 2,111 3,730 141 1,365 2,079 3,585 Total other assets ...................... 6,439 1,495 (4,204) 3,730 6,108 1,365 (3,888) 3,585 TOTAL ASSETS ................................ $ 6,464 $ 4,332 $ 4,867 $15,663 $ 6,176 $3,714 $ 5,410 $15,300 CAPITALIZATION: Common shareholders' equity ............... $ 5,624 $ 969 $ (969) $ 5,624 $ 5,593 $ 935 $ (935) $ 5,593 Preferred stock of FPL without sinking fund requirements ............... - - 226 226 - - 226 226 Long-term debt ............................ - 1,400 2,577 3,977 - 1,400 2,576 3,976 Total capitalization .................... 5,624 2,369 1,834 9,827 5,593 2,335 1,867 9,795 CURRENT LIABILITIES: Accounts payable and commercial paper ..... - 1,261 649 1,910 - 705 1,017 1,722 Other ..................................... 731 191 141 1,063 467 186 388 1,041 Total current liabilities ............... 731 1,452 790 2,973 467 891 1,405 2,763 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes and unamortized tax credits ................. - 408 1,317 1,725 - 399 1,248 1,647 Other ..................................... 109 103 926 1,138 116 89 890 1,095 Total other liabilities and deferred credits ............................... 109 511 2,243 2,863 116 488 2,138 2,742 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ........ $ 6,464 $ 4,332 $ 4,867 $15,663 $ 6,176 $3,714 $ 5,410 $15,300 (a) Represents FPL, other subsidiaries and consolidating adjustments. </TABLE> Condensed Consolidating Statements of Cash Flows <TABLE><CAPTION> Three Months Ended Three Months Ended March 31, 2001 March 31, 2000 FPL FPL Group FPL FPL Group FPL Group Other Consoli- FPL Group Other Consoli- Group Capital (a) dated Group Capital (a) dated (millions) <S> <C> <C> <C> <C> <C> <C> <C> <C> NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ..................... $ 388 $(269) $ 414 $ 533 $ 127 $ (61) $ 414 $ 480 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures and independent power investments ....................... - (235) (333) (568) - (81) (301) (382) Capital contributions to FPL............... (300) - 300 - - - - - Other - net ............................... - (43) (9) (52) 3 (4) (28) (29) Net cash provided by (used in) investing activities .................. (300) (278) (42) (620) 3 (85) (329) (411) CASH FLOWS FROM FINANCING ACTIVITIES: Retirement of long-term debt .............. - - (66) (66) - - - - Increase (decrease) in commercial paper.... - 587 (360) 227 - (140) (78) (218) Repurchases of common stock ............... - - - - (16) - - (16) Dividends ................................. (94) - - (94) (92) - - (92) Net cash provided by (used in) financing activities .................. (94) 587 (426) 67 (108) (140) (78) (326) Net increase (decrease) in cash and cash equivalents .......................... (6) 40 (54) (20) 22 (286) 7 (257) Cash and cash equivalents at beginning of period.................................. 12 51 66 129 (16) 376 1 361 Cash and cash equivalents at end of period... $ 6 $ 91 $ 12 $ 109 $ 6 $ 90 $ 8 $ 104 (a) Represents FPL, other subsidiaries and consolidating adjustments. </TABLE> Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion should be read in conjunction with the Notes to Condensed Consolidated Financial Statements contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations (Management's Discussion) appearing in the 2000 Form 10-K for FPL Group and FPL. The results of operations for an interim period may not give a true indication of results for the year. In the following discussion, all comparisons are with the corresponding items in the prior year. RESULTS OF OPERATIONS FPL Group's earnings improved in the first quarter of 2001, excluding expenses related to the proposed merger with Entergy Corporation, which was terminated in April 2001. Earnings growth at both FPL and FPL Energy contributed to the improvement. FPL Group's earnings for the quarter ended March 31, 2001 include the effect of the adoption of FAS 133, which became effective January 1, 2001. The impact of FAS 133 negatively impacted FPL Energy's earnings for the quarter by approximately $1 million. For additional information regarding FAS 133, see Note 1. FPL Group recorded $31 million ($19 million after-tax) for merger-related expenses in the first quarter of 2001, of which $26 million ($16 million after-tax) relates to FPL and $5 million ($3 million after-tax) relates to the Corporate and Other segment. The discussion of results of operations below excludes the effect of merger-related expenses. FPL - FPL's net income for the three months ended March 31, 2001 improved mainly due to higher energy sales and lower depreciation expense, partially offset by the effect of the rate reduction agreement, higher other operations and maintenance expense (O&M) and higher interest charges. During the first quarter of 2001, usage per retail customer was up 5.7% due to cold weather conditions in January, and the number of customer accounts increased 2.4% for the same period. As a result, revenues from retail base operations, net of an increase in the revenue refund provision of approximately $40 million, increased to $758 million for the first quarter of 2001 from $730 million for the same period last year. At March 31, 2001, FPL has accrued approximately $97 million associated with refunds to retail customers for the twelve-month period ending April 14, 2001 under the rate reduction agreement. Depreciation expense declined during the quarter ended March 31, 2001 reflecting lower special depreciation allowed under the rate reduction agreement. FPL's O&M expense increased primarily due to the timing of some planned outages at its fossil plants. Interest expense increased due to higher debt balances required to fund FPL's capital expansion and under-recovered fuel costs. In January 2001, the Energy 2020 Study Commission issued a proposal for restructuring Florida's wholesale electricity market anticipating that the proposal would be considered in the 2001 legislative session. In May 2001, the Florida legislative session ended with no action taken on the commission's proposal. The commission is scheduled to develop a recommendation addressing retail competition by the end of 2001. Both wholesale and retail competition issues may then be addressed at the 2002 legislative session. On May 3, 2001, the FPSC staff recommended to the FPSC that it require FPL to submit minimum filing requirements, based on a 2002 projected calendar year, by August 15, 2001 to initiate a base rate proceeding regarding FPL's future rates. The FPSC staff has asked the FPSC to consider its recommendation on May 15, 2001. FPL's current rate agreement will remain in effect until April 15, 2002. The FPSC staff expressed concerns in its recommendation related to FPL's plans to participate in the creation of an independent transmission company along with other major utilities in Florida. FPL has been proceeding to meet the FERC's Order 2000 to establish a regional transmission organization (RTO), but may have to re- evaluate its plans in light of the FPSC staff's expressed concerns. FPL Energy - FPL Energy's net income for the three months ended March 31, 2001 benefited from a power generation portfolio with approximately 1,000 more megawatts in operation and strong performance from the wind projects. FPL Energy's portfolio growth is expected to continue to grow. FPL Energy is currently constructing or has announced construction plans for 11 plants that would add more than 5,300 mw by the end of 2003. FPL Energy has approximately 540 net mw in California, most of which are wind, solar and geothermal qualifying facilities. The output of these projects is sold predominantly under long-term contracts with California utilities. Increases in natural gas prices and an imbalance between power supply and demand, as well as other factors, have contributed to significant increases in wholesale electricity prices in California. Utilities in California had previously agreed to fixed tariffs to their retail customers, which resulted in significant under-recoveries of wholesale electricity purchase costs. On April 6, 2001, Pacific Gas & Electric Company (PG&E) filed for protection under Chapter 11 of the U.S. Bankruptcy Code. FPL Energy's projects have not received the majority of payments due from California utilities for electricity sold from November 2000 through March 2001. FPL Group's earnings exposure relating to these receivables at March 31, 2001 was approximately $17 million. All of FPL Energy's California projects have received payment for April 2001 electricity sales, and the California utilities have stated that they intend to pay qualifying facilities on a prospective basis. At March 31, 2001, FPL Energy's net investment in California projects was approximately $250 million. It is impossible to predict what the outcome of the situation in California will be or its effect, if any, on FPL Group's financial statements. LIQUIDITY AND CAPITAL RESOURCES For information concerning capital commitments, see Note 3 - Commitments. PART II - OTHER INFORMATION Item 1. Legal Proceedings Reference is made to Item 3. Legal Proceedings in the 2000 Form 10-K for FPL Group and FPL. In March 2001, the U.S. District Court for the Northern District of Georgia granted the EPA's motion for leave to file an amended complaint that would extend the suit filed in 1999 against Georgia Power Company and other subsidiaries of the Southern Company to another Southern Company subsidiary and other plants and would add an allegation that unspecified major modifications have been made at Scherer Unit No. 4 that require its compliance with the aforementioned Clean Air Act provisions (comparable allegations were made in the original complaint as to other plants but not Scherer Unit No. 4). Under the amended complaint, the EPA's demand for civil penalties with respect to Scherer Unit No. 4 would apply to the period commencing on an unspecified date after June 1, 1975. At this time, the EPA has not yet filed its amended complaint and hence Georgia Power Company has not had occasion to answer. In April 2001, the Court strongly recommended to the parties that this case be administratively terminated until the Eleventh Circuit Court of Appeals rules on a pending appeal of an EPA order under the Clean Air Act involving the TVA. The EPA and Georgia Power Company have stated that they do not object to administrative termination, although the EPA asserts that the case should be reopened when its motion for consolidation of several Clean Air Act cases is decided by a Multi-District Litigation panel rather than at the conclusion of the TVA appeal. In August 2000, the SEGS VIII and SEGS IX facilities filed motions to intervene and protest, vigorously objecting to the position taken by SCE in its petition filed with the FERC. Briefing in this proceeding has been complete since September 2000, and the parties are currently awaiting a final determination from the FERC. Item 5. Other Information Reference is made to Item 1. Business - FPL Operations - Retail Ratemaking in the 2000 Form 10-K for FPL Group and FPL. For information regarding the FPSC staff's recommendation to require FPL to submit minimum filing requirements to initiate a base rate proceeding regarding FPL's future rates, see Item 2. Management's Discussion - Results of Operations - FPL. Reference is made to Item 1. Business - FPL Operations - Competition in the 2000 Form 10-K for FPL Group and FPL. For information regarding the Energy 2020 Study Commission, see Item 2. Management's Discussion - Results of Operations - FPL. On March 28, 2001, the FERC granted provisional RTO status to GridFlorida, LLC. The RTO status is subject to FPL, Florida Power Corporation and Tampa Electric Company filing the required modifications with the FERC within 60 days. For information regarding the FPSC staff's recommendation, see Item 2. Management's Discussion - Results of Operations - FPL. Reference is made to Item 1. Business - FPL Energy Operations in the 2000 Form 10-K for FPL Group and FPL. For information regarding FPL Energy's California projects, see Item 2. Management's Discussion - Results of Operations - FPL Energy. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits <TABLE><CAPTION> Exhibit FPL Number Description Group FPL <S> <C> <C> <C> 12(a) Computation of Ratio of Earnings to Fixed Charges x 12(b) Computation of Ratios x </TABLE> (b) Reports on Form 8-K A Current Report on Form 8-K was filed with the Securities and Exchange Commission on January 22, 2001 by FPL Group and FPL reporting one event under Item 5. Other Events. A Current Report on Form 8-K was filed with the Securities and Exchange Commission on March 19, 2001 by FPL Group and FPL reporting one event under Item 5. Other Events. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. FPL GROUP, INC. FLORIDA POWER & LIGHT COMPANY (Registrants) Date: May 3, 2001 K. MICHAEL DAVIS K. Michael Davis Controller and Chief Accounting Officer of FPL Group, Inc. Vice President, Accounting, Controller and Chief Accounting Officer of Florida Power & Light Company (Principal Financial and Accounting Officer of the Registrants) EXHIBIT 12(a) FPL GROUP, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES <TABLE> <CAPTION> Three Months Ended March 31, 2001 (millions) <S> <C> Earnings, as defined: Net income .............................................................................. $110 Income taxes ............................................................................ 56 Fixed charges, included in the determination of net income, as below .................... 89 Distributed income of independent power investments...................................... 2 Less: Equity in earnings of independent power investments ............................... 1 Total earnings, as defined ............................................................ $256 Fixed charges, as defined: Interest charges ........................................................................ $ 85 Rental interest factor .................................................................. 2 Fixed charges included in nuclear fuel cost ............................................. 2 Fixed charges, included in the determination of net income .............................. 89 Capitalized interest .................................................................... 6 Total fixed charges, as defined ....................................................... $ 95 Ratio of earnings to fixed charges ........................................................ 2.69 </TABLE> EXHIBIT 12(b) FLORIDA POWER & LIGHT COMPANY COMPUTATION OF RATIOS <TABLE> <CAPTION> Three Months Ended March 31, 2001 (millions) RATIO OF EARNINGS TO FIXED CHARGES <S> <C> Earnings, as defined: Net income .............................................................................. $101 Income taxes ............................................................................ 59 Fixed charges, as below ................................................................. 56 Total earnings, as defined ............................................................ $216 Fixed charges, as defined: Interest charges ........................................................................ $ 53 Rental interest factor .................................................................. 1 Fixed charges included in nuclear fuel cost ............................................. 2 Total fixed charges, as defined ....................................................... $ 56 Ratio of earnings to fixed charges ........................................................ 3.86 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Earnings, as defined: Net income .............................................................................. $101 Income taxes ............................................................................ 59 Fixed charges, as below ................................................................. 56 Total earnings, as defined ............................................................ $216 Fixed charges, as defined: Interest charges ........................................................................ $ 53 Rental interest factor .................................................................. 1 Fixed charges included in nuclear fuel cost ............................................. 2 Total fixed charges, as defined ....................................................... 56 Non-tax deductible preferred stock dividends .............................................. 4 Ratio of income before income taxes to net income ......................................... 1.58 Preferred stock dividends before income taxes ............................................. 6 Combined fixed charges and preferred stock dividends ...................................... $ 62 Ratio of earnings to combined fixed charges and preferred stock dividends ................. 3.48 </TABLE>