UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 <TABLE> <CAPTION> Exact name of Registrants as specified in Commission their charters, address of principal executive IRS Employer Iden- File Number offices and Registrants' telephone number tification Number <S> <C> <C> 1-8841 FPL GROUP, INC. 59-2449419 1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775 700 Universe Boulevard Juno Beach, Florida 33408 (561) 694-4647 </TABLE> 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 July 31, 1996: 183,352,785 shares As of July 31, 1996 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.
PART I - FINANCIAL INFORMATION Item 1. Financial Statements FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 (In thousands, except per share amounts) <S> <C> <C> <C> <C> OPERATING REVENUES ....................................... $1,474,086 $1,466,724 $2,831,793 $2,644,089 OPERATING EXPENSES: Fuel, purchased power and interchange .................. 500,169 458,403 949,829 803,275 Other operations and maintenance........................ 304,451 295,185 584,235 550,176 Depreciation and amortization .......................... 231,926 262,808 499,581 463,091 Taxes other than income taxes .......................... 138,252 138,137 275,486 266,559 Total operating expenses ............................. 1,174,798 1,154,533 2,309,131 2,083,101 OPERATING INCOME ......................................... 299,288 312,191 522,662 560,988 OTHER INCOME (DEDUCTIONS): Interest charges ....................................... (67,871) (74,316) (137,117) (151,296) Dividend requirements on preferred stock of FPL ........ (5,766) (9,039) (12,200) (21,192) Other - net ............................................ (8,500) 914 (9,863) 6,307 Total other deductions - net ......................... (82,137) (82,441) (159,180) (166,181) INCOME BEFORE INCOME TAXES ............................... 217,151 229,750 363,482 394,807 INCOME TAXES ............................................. 66,838 91,448 119,457 156,665 NET INCOME ............................................... $ 150,313 $ 138,302 $ 244,025 $ 238,142 Earnings per share of common stock ....................... $ 0.86 $ 0.79 $ 1.40 $ 1.36 Dividends per share of common stock ...................... $ 0.46 $ 0.44 $ 0.92 $ 0.88 Average number of common shares outstanding .............. 174,103 175,225 174,403 175,622 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the combined Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (1995 Form 10-K) for FPL Group, Inc. (FPL Group) and Florida Power & Light Company (FPL).
FPL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> June 30, 1996 December 31, (Unaudited) 1995 (Thousands of Dollars) <S> <C> <C> PROPERTY, PLANT AND EQUIPMENT: Electric utility plant and other property - at original cost, including nuclear fuel and construction work in progress ...................... $16,898,772 $16,725,231 Less accumulated depreciation and amortization .................................. 7,309,821 6,873,250 Total property, plant and equipment - net ..................................... 9,588,951 9,851,981 CURRENT ASSETS: Cash and cash equivalents ....................................................... 78,925 46,177 Customer receivables, net of allowances of $11,286 and $11,929, respectively .... 462,342 482,326 Materials, supplies and fossil fuel stock - at average cost ..................... 260,501 247,323 Other ........................................................................... 240,969 209,522 Total current assets .......................................................... 1,042,737 985,348 OTHER ASSETS: Special use funds of FPL ........................................................ 714,811 646,846 Other investments ............................................................... 382,370 447,006 Unamortized debt reacquisition costs of FPL ..................................... 285,615 294,844 Other ........................................................................... 230,611 233,201 Total other assets ............................................................ 1,613,407 1,621,897 TOTAL ASSETS ...................................................................... $12,245,095 $12,459,226 CAPITALIZATION: Common shareholders' equity ..................................................... $ 4,429,151 $ 4,392,509 Preferred stock of FPL without sinking fund requirements ........................ 289,580 289,580 Preferred stock of FPL with sinking fund requirements ........................... 42,000 50,000 Long-term debt .................................................................. 3,281,237 3,376,613 Total capitalization .......................................................... 8,041,968 8,108,702 CURRENT LIABILITIES: Accounts payable ................................................................ 300,810 305,126 Debt and preferred stock due within one year .................................... 170,732 390,402 Accrued interest, taxes and other ............................................... 862,829 808,615 Total current liabilities ..................................................... 1,334,371 1,504,143 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ............................................... 1,589,978 1,587,449 Unamortized regulatory and investment tax credits ............................... 397,837 426,317 Other ........................................................................... 880,941 832,615 Total other liabilities and deferred credits .................................. 2,868,756 2,846,381 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES .............................................. $12,245,095 $12,459,226 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL.
FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <TABLE> <CAPTION> Six Months Ended June 30, 1996 1995 (Thousands of Dollars) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................................................... $ 244,025 $ 238,142 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................................................... 499,581 463,091 Other - net ....................................................................... 80,478 175,097 Net cash provided by operating activities ........................................... 824,084 876,330 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1) ............................................................ (238,993) (356,285) Other - net ......................................................................... (44,662) 4,236 Net cash used in investing activities ............................................. (283,655) (352,049) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of debt .................................................................... - 110,570 Retirement of long-term debt and preferred stock .................................... (219,765) (283,862) Repurchase of common stock .......................................................... (58,869) (52,809) Decrease in commercial paper ........................................................ (107,813) (77,620) Dividends on common stock ........................................................... (160,463) (154,532) Other - net ......................................................................... 39,229 (27,049) Net cash used in financing activities ............................................. (507,681) (485,302) Net increase in cash and cash equivalents ............................................. 32,748 38,979 Cash and cash equivalents at beginning of period ...................................... 46,177 85,750 Cash and cash equivalents at end of period ............................................ $ 78,925 $ 124,729 Supplemental disclosures of cash flow information: Cash paid for interest .............................................................. $ 131,331 $ 151,107 Cash paid for income taxes .......................................................... $ 50,700 $ 54,400 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 42,192 $ 41,944 (1) Capital expenditures exclude allowance for equity funds used during construction. </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 (Thousands of Dollars) <S> <C> <C> <C> <C> OPERATING REVENUES ....................................... $1,454,997 $1,446,203 $2,795,739 $2,602,472 OPERATING EXPENSES: Fuel, purchased power and interchange .................. 500,169 458,403 949,829 803,275 Other operations and maintenance ....................... 287,677 274,817 550,194 506,706 Depreciation and amortization .......................... 230,551 260,207 496,792 457,982 Income taxes ........................................... 79,687 95,554 138,109 163,743 Taxes other than income taxes .......................... 138,156 137,668 275,252 265,596 Total operating expenses ............................. 1,236,240 1,226,649 2,410,176 2,197,302 OPERATING INCOME ......................................... 218,757 219,554 385,563 405,170 OTHER INCOME (DEDUCTIONS): Interest charges - net ................................. (61,548) (67,590) (123,934) (137,685) Other - net ............................................ 1,148 1,840 3,882 5,761 Total other deductions - net ......................... (60,400) (65,750) (120,052) (131,924) NET INCOME ............................................... 158,357 153,804 265,511 273,246 DIVIDEND REQUIREMENTS ON PREFERRED STOCK ................. 5,766 9,039 12,200 21,192 NET INCOME AVAILABLE TO FPL GROUP ........................ $ 152,591 $ 144,765 $ 253,311 $ 252,054 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> June 30, 1996 December 31, (Unaudited) 1995 (Thousands of Dollars) <S> <C> <C> ELECTRIC UTILITY PLANT: At original cost, including nuclear fuel and construction work in progress ....... $16,703,214 $16,531,492 Less accumulated depreciation and amortization ................................... 7,266,406 6,832,201 Electric utility plant - net ................................................... 9,436,808 9,699,291 CURRENT ASSETS: Cash and cash equivalents ........................................................ 12,425 412 Customer receivables, net of allowances of $11,095 and $11,737, respectively ..... 458,580 479,838 Materials, supplies and fossil fuel stock - at average cost ...................... 244,507 230,553 Other ............................................................................ 217,758 180,414 Total current assets ........................................................... 933,270 891,217 OTHER ASSETS: Special use funds ................................................................ 714,811 646,846 Unamortized debt reacquisition costs ............................................. 285,615 294,844 Other ............................................................................ 213,328 219,061 Total other assets ............................................................. 1,213,754 1,160,751 TOTAL ASSETS ....................................................................... $11,583,832 $11,751,259 CAPITALIZATION: Common shareholder's equity ...................................................... $ 4,564,262 $ 4,473,708 Preferred stock without sinking fund requirements ................................ 289,580 289,580 Preferred stock with sinking fund requirements ................................... 42,000 50,000 Long-term debt ................................................................... 2,999,097 3,094,050 Total capitalization ........................................................... 7,894,939 7,907,338 CURRENT LIABILITIES: Accounts payable ................................................................. 296,552 299,987 Debt and preferred stock due within one year ..................................... 132,100 382,500 Accrued interest, taxes and other ................................................ 798,967 778,465 Total current liabilities ...................................................... 1,227,619 1,460,952 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,263,293 1,204,315 Unamortized regulatory and investment tax credits ................................ 397,837 426,317 Other ............................................................................ 800,144 752,337 Total other liabilities and deferred credits ................................... 2,461,274 2,382,969 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,583,832 $11,751,259 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <TABLE> <CAPTION> Six Months Ended June 30, 1996 1995 (Thousands of Dollars) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income ........................................................................... $ 265,511 $ 273,246 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...................................................... 496,792 457,982 Other - net ........................................................................ 69,480 142,229 Net cash provided by operating activities ............................................ 831,783 873,457 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1) ............................................................. (236,308) (348,283) Other - net .......................................................................... (85,756) (10,066) Net cash used in investing activities .............................................. (322,064) (358,349) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of debt ..................................................................... - 110,349 Retirement of long-term debt and preferred stock ..................................... (219,354) (283,706) Decrease in commercial paper ......................................................... (138,500) (73,000) Dividends ............................................................................ (224,843) (222,347) Capital contributions from FPL Group ................................................. 50,000 - Other - net .......................................................................... 34,991 (31,771) Net cash used in financing activities .............................................. (497,706) (500,475) Net increase in cash and cash equivalents .............................................. 12,013 14,633 Cash and cash equivalents at beginning of period ....................................... 412 535 Cash and cash equivalents at end of period ............................................. $ 12,425 $ 15,168 Supplemental disclosures of cash flow information: Cash paid for interest ............................................................... $ 120,303 $ 138,185 Cash paid for income taxes ........................................................... $ 87,166 $ 94,685 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations ............................................... $ 42,192 $ 41,944 (1) Capital expenditures exclude allowance for equity funds used during construction. </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 8 through 10 herein and the Notes to Consolidated Financial Statements appearing in the 1995 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 combined 1995 Form 10-K for FPL Group and FPL. In the opinion of FPL Group and FPL, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of June 30, 1996, the results of operations for the three and six months ended June 30, 1996 and 1995 and cash flows for the six months ended June 30, 1996 and 1995 have been made. Certain amounts included in the prior year's condensed consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period may not give a true indication of results for the year. 1. Summary of Significant Accounting and Reporting Policies Depreciation and Amortization - In the second quarter of 1995, the Florida Public Service Commission (FPSC) approved, on an interim basis, accelerated amortization of FPL's nuclear units of $30 million per year plus additional amounts based on the level of sales. In March 1996, the FPSC granted final approval of the $30 million per year of special nuclear amortization. The FPSC also approved the additional expense amounts recorded in 1995 based on the level of sales achieved, added certain fossil and regulatory assets to the program and extended the program through 1997. During the second quarter of 1996 FPL completed amortization of the additional expense amount relating to nuclear plant assets authorized by the FPSC. In future periods, FPL will continue to recognize $30 million of special nuclear amortization per year and the additional expense amounts based on the level of sales will be applied first against fossil assets and then against regulatory assets. Allowance for funds used during construction (AFUDC) - The FPSC has proposed an accounting rule change that eliminates AFUDC, except for projects that cost in excess of 1/2% of a company's electric utility plant in-service. FPL adopted the proposed rule change retroactive to January 1, 1996. 2. Capitalization FPL Group Common Stock - During the six months ended June 30, 1996, FPL Group repurchased approximately 1.3 million shares of common stock under its share repurchase program. A total of approximately 7.2 million shares have been repurchased since the inception of the share repurchase program in May 1994. Preferred Stock - In January 1996, FPL redeemed all 600,000 outstanding shares of its 7.28% Preferred Stock, Series F, $100 Par Value and all 400,000 outstanding shares of its 7.40% Preferred Stock, Series G, $100 Par Value. The 1996 sinking fund requirements for the 6.84% Preferred Stock, Series Q, $100 Par Value and the 8.625% Preferred Stock, Series R, $100 Par Value were met by redeeming and retiring, in April 1996, 30,000 shares of Series Q and 50,000 shares of Series R. There are no preferred stock sinking fund requirements for the remainder of 1996. Long-Term Debt - During the second quarter of 1996, FPL purchased on the open market and retired approximately $8 million principal amount of First Mortgage Bonds, due 2013 and 2022 bearing interest at 7 7/8% and 8 1/2%. In August 1996, FPL called for redemption in September 1996, $87 million principal amount of First Mortgage Bonds, 8 1/2% Series due 2022. 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 $1.5 billion for the years 1996 through 1998. Included in this three-year forecast are capital expenditures for 1996 of $511 million, of which $234 million had been spent through June 30, 1996. FPL Group Capital Inc (FPL Group Capital) and its subsidiaries, primarily ESI Energy, Inc., have guaranteed up to approximately $87 million of lease 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 $327 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 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 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 $69 million in retrospective premiums. In the event of a subsequent accident at such nuclear plants during the policy period, the maximum additional assessment would be $30 million under the programs in effect at June 30, 1996. FPL also participates in a program that provides $200 million of tort liability coverage for nuclear worker claims. In the event of a tort claim by an FPL or another insured's nuclear worker, FPL could be assessed up to $12 million in retrospective premiums per incident. 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 certain of its transmission and distribution (T&D) property due to the high cost and limited coverage available from third-party insurers. FPL maintains a funded storm and property insurance reserve, which totaled approximately $210 million at June 30, 1996, for T&D 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 has entered into certain 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 provide approximately 1,300 megawatts (mw) of power through mid-2010 and 374 mw through 2022. FPL also has various firm pay-for-performance contracts to purchase approximately 1,000 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. The fuel contracts provide for the transportation and supply of natural gas and coal and the supply and use of Orimulsion. Orimulsion is a new fuel which FPL expected to begin using in 1998, subject to regulatory approvals. In April 1996, Florida's Power Plant Siting Board denied FPL's request to burn Orimulsion at the Manatee power plant. FPL has appealed the denial to the First District Court of Appeal of the state of Florida. The required annual capacity and minimum payments through 2000 under these contracts are estimated to be as follows: <TABLE> <CAPTION> 1996 1997 1998 1999 2000 (Millions of Dollars) <S> <C> <C> <C> <C> <C> Capacity payments: JEA and Southern Companies ............................................... $210 $210 $210 $220 $220 Qualifying facilities .................................................... $300 $310 $320 $340 $350 Minimum payments, at projected prices: Natural gas .............................................................. $280 $210 $210 $210 $210 Orimulsion (1) ........................................................... - - $120 $140 $140 Coal ..................................................................... $ 50 $ 50 $ 40 $ 40 $ 40 (1) All of FPL's Orimulsion-related contract obligations are subject to obtaining the required regulatory approvals. </TABLE> Capacity, energy and fuel charges under these contracts were as follows: <TABLE> <CAPTION> Three Months Ended June 30, Six Months Ended June 30, 1996 Charges 1995 Charges 1996 Charges 1995 Charges Energy/ Energy/ Energy/ Energy/ Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1) Capacity Fuel (1) (Millions of Dollars) <S> <C> <C> <C> <C> <C> <C> <C> <C> JEA and Southern Companies ... $45(2) $34 $60(2) $35 $ 91(2) $ 67 $121(2) $ 66 Qualifying facilities......... $70(3) $35 $39(3) $18 $139(3) $ 62 $ 76(3) $ 38 Natural gas .................. - $80 - $96 $ - $177 $ - $163 Coal ......................... - $11 - $12 $ - $ 22 $ - $ 24 (1) Recovered through the fuel and purchased power cost recovery clause (fuel clause). (2) Recovered through base rates and the capacity cost recovery clause (capacity clause). (3) Recovered through the capacity clause. </TABLE> Litigation - The Florida Municipal Power Agency (FMPA), an organization comprised of municipal electric utilities, has sued FPL for allegedly breaching a "contract" to provide transmission service to the FMPA and its members and for breaching antitrust laws by monopolizing or attempting to monopolize the provision, coordination and transmission of electric power in refusing to provide transmission service, or to permit the FMPA to invest in and use FPL's transmission system, on the FMPA's proposed terms. The FMPA seeks $140 million in damages, before trebling for the antitrust claim, and court orders requiring FPL to permit the FMPA to invest in and use FPL's transmission system on "reasonable terms and conditions" and on a basis equal to FPL. In 1995, the Court of Appeals vacated the District Court's summary judgment in favor of FPL and remanded the matter to the District Court for further proceedings. A former cable installation contractor for Telesat Cablevision, Inc. (Telesat), a wholly-owned subsidiary of FPL Group Capital, sued FPL Group, FPL Group Capital and Telesat for breach of contract, fraud, violation of racketeering statutes and several other claims. The trial court entered a judgment in favor of FPL Group and Telesat on nine of twelve counts, including all of the racketeering and fraud claims, and in favor of FPL Group Capital on all counts. It also denied all parties' claims for attorneys' fees. However, the jury in the case awarded the contractor damages totaling approximately $6 million against FPL Group and Telesat for breach of contract and tortious interference. All parties have appealed. FPL Group and FPL believe that they have meritorious defenses to all of the litigation described above and are vigorously defending these suits. Accordingly, the liabilities, if any, arising from these proceedings are not anticipated to have a material adverse effect on their financial statements. 4. Summarized Financial Information of FPL Group Capital FPL Group Capital's debentures are guaranteed by FPL Group. Operating revenues of FPL Group Capital for the six months ended June 30, 1996 and 1995 were approximately $36 million and $42 million, respectively. For the same period, operating expenses were approximately $36 million and $49 million. Net income for the six months ended June 30, 1996 was approximately $4 million and net loss for the six months ended June 30, 1995 was approximately $3 million. At June 30, 1996, FPL Group Capital had current assets of approximately $167 million, noncurrent assets of approximately $878 million, current liabilities of approximately $86 million and noncurrent liabilities of approximately $742 million. At December 31, 1995, FPL Group Capital had approximately $89 million of current assets, $934 million of noncurrent assets, $24 million of current liabilities and $787 million of noncurrent liabilities.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion should be read in conjunction with the Notes to Condensed Consolidated Financial Statements contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 1995 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 Net income for the three and six months ended June 30, 1996 benefitted from lower interest and preferred stock dividend requirements and the recognition of investment tax credits, partly offset by higher other operations and maintenance (O&M) expenses. The three-month period ended June 30, 1996 reflected lower energy sales and lower depreciation expense. During the six-month period ended June 30, 1996, FPL experienced higher energy sales, resulting from customer growth, partly offset by higher depreciation expense. FPL's revenues from base rates for the three months ended June 30, 1996 decreased to approximately $845 million from approximately $882 million for the same period in 1995 due to a 3.9% decline in retail energy sales. A 1.9% increase in customer accounts was more than offset by a 5.7% decline in energy usage per retail customer, primarily due to milder weather conditions. FPL's revenues from base rates for the six months ended June 30, 1996 increased to $1.63 billion from approximately $1.60 billion for the same period in 1995, primarily reflecting a 1.8% increase in customer accounts. The increase in usage per customer in the first quarter of 1996 resulting from unusually cold weather was offset by the mild weather experienced during the second quarter of 1996. Revenues from cost recovery clauses 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. O&M expenses increased for the three and six months ended June 30, 1996, primarily due to costs associated with a planned nuclear refueling outage in each of the first and second quarters of 1996. There were no nuclear refueling outages in the first six months of 1995 and none are planned for the remainder of 1996. Two nuclear refueling outages occurred in the second half of 1995. In 1995, FPL proposed to the FPSC a special amortization of its nuclear units in a fixed amount of $30 million per year plus an additional amount based on the level of sales. In the second quarter of 1995, upon receiving interim approval from the FPSC, FPL added $79 million to depreciation expense, representing the year-to-date portion of the special amortization of its nuclear units. This year-to-date expense recorded in 1995 coupled with the decline in energy sales in the second quarter of 1996 resulted in a decrease in depreciation expense for the three months ended June 30, 1996. For the six months ended June 30, 1996, depreciation expense increased mainly as a result of the special amortization of generating units, which amounted to approximately $101 million, and an increase in the provision for nuclear decommissioning and fossil dismantlement. In future periods, FPL will continue to recognize $30 million of special nuclear amortization per year and the additional expense amounts based on the level of sales will be applied first against fossil assets and then against regulatory assets. See Note 1 - Depreciation and Amortization. The increased depreciation of nuclear and fossil assets also resulted in increased amortization of related investment tax credits, lowering income tax expense in 1996. The FPSC has proposed an accounting rule change that eliminates AFUDC, except for projects that cost in excess of 1/2% of a company's electric utility plant in-service. FPL adopted the proposed rule change retroactive to January 1, 1996 and the effect is included in other - net. LIQUIDITY AND CAPITAL RESOURCES Using available cash flows from operations, FPL has redeemed certain series of its preferred stock and first mortgage bonds reducing dividend requirements on preferred stock and interest expense. Additionally, FPL Group has repurchased approximately 1.3 million shares of common stock. These actions are consistent with management's intent to reduce debt and preferred stock balances and the number of outstanding shares of common stock. See Note 2. For information concerning capital commitments, see Note 3.
PART II - OTHER INFORMATION Item 1. Legal Proceedings (a) Reference is made to Item 3. Legal Proceedings in the 1995 Form 10-K for FPL Group and FPL and Item 1.(a) Legal Proceedings in the FPL Group and FPL Form 10-Q for the quarterly period ended March 31, 1996. In May 1996, the U.S. Supreme Court denied Praxair's request to review the Court of Appeals' decision previously entered in favor of FPL and Florida Power Corporation. (b) Reference is made to Item 3. Legal Proceedings in the 1995 Form 10-K for FPL Group and FPL. In July 1996, the FPSC approved the settlement of a suit brought by the partners of a cogeneration project located in Dade County, Florida as part of a buy-out of an uneconomic power purchase agreement that FPL was required to enter into because of the Public Utility Regulatory Policies Act of 1978, as amended. All amounts payable by FPL under the settlement agreement will be recovered through the capacity clause and the fuel clause. Item 2. Changes in Securities (a) In June 1996, FPL Group's Board of Directors declared a dividend of one preferred share purchase right for each outstanding share of common stock of FPL Group. Each right entitles the holder to purchase from FPL Group one one-hundredth of a share of Series A Junior Participating Preferred Stock (Preferred Stock) of FPL Group at a price of $120. The rights do not become exercisable until a person or group acquires, or expresses an intention to acquire, 10% or more of the outstanding common stock of FPL Group. Prior to such an acquisition, FPL Group's Board of Directors may redeem the rights at a price of $.01 per right. After such an acquisition, the Board may exchange each right for one share of common stock or one one-hundredth of a share of Preferred Stock or shares having the same rights, privileges and preferences as the Preferred Stock. A summary description of the rights and the Rights Agreement between FPL Group and The First National Bank of Boston, as Rights Agent, were filed on Form 8-K dated June 17, 1996. Item 4. Submission of Matters to a Vote of Security Holders FPL Group: (a) The Annual Meeting of FPL Group's shareholders was held on May 13, 1996. Of the 184,512,535 shares of common stock outstanding on the record date of March 4, 1996, a total of 148,350,261 shares were represented in person or by proxy. (b) The following directors were elected effective May 13, 1996: <TABLE> <CAPTION> Votes Cast Against or For Withheld <S> <C> <C> H. Jesse Arnelle ......................................................... 144,621,142 3,729,119 Robert M. Beall, II ...................................................... 144,794,572 3,555,689 David Blumberg ........................................................... 144,369,777 3,980,484 James L. Broadhead ....................................................... 141,985,353 6,364,908 J. Hyatt Brown ........................................................... 144,156,163 4,194,098 Lynne V. Cheney .......................................................... 144,652,228 3,698,033 Armando M. Codina ........................................................ 144,691,675 3,658,586 Marshall M. Criser ....................................................... 144,695,421 3,654,840 B. F. Dolan .............................................................. 144,828,407 3,521,854 Willard D. Dover ......................................................... 143,504,453 4,845,807 Paul J. Evanson .......................................................... 144,368,332 3,981,929 Drew Lewis ............................................................... 144,248,372 4,101,889 Frederic V. Malek ........................................................ 144,168,866 4,181,395 Paul R. Tregurtha ........................................................ 144,316,064 4,034,197 </TABLE> (c)(i) The vote to ratify the appointment of Deloitte & Touche LLP as independent auditors for 1996 was 145,156,013 for, 2,135,979 against and 1,058,268 abstaining. (ii) The vote on a shareholder proposal requesting that FPL Group adopt cumulative voting for the election of directors was 38,352,615 for, 85,160,115 against, 3,481,183 abstaining and 21,356,348 broker non-votes. (iii) The vote on a shareholder proposal requesting an amendment to the Long Term Incentive Plan was 17,877,935 for, 105,735,084 against, 3,380,846 abstaining and 21,356,396 broker non-votes. FPL: (a) The following FPL directors were elected effective May 13, 1996 by the written consent of the sole common shareholder of FPL in lieu of an annual meeting of shareholders: James L. Broadhead Dennis P. Coyle Paul J. Evanson Lawrence J. Kelleher Thomas F. Plunkett C. O. Woody Michael W. Yackira Item 5. Other Information (a) Reference is made to Item 1. Business - FPL Operations - System Capability and Load in the 1995 Form 10-K for FPL Group and FPL. On July 24, 1996, FPL reached an all-time energy peak demand of 16,064 mw. Adequate resources were available at the time of peak to meet customer demand. (b) Reference is made to Item 1. Business - FPL Operations - Nuclear in the 1995 Form 10-K for FPL Group and FPL. Indications of abnormal degradation had previously been found in the pressurized water circulation tubes of the St. Lucie Unit No. 1 steam generators and FPL had determined that they needed to be replaced. Replacement steam generators have been ordered and are scheduled to be delivered in June 1997. During a scheduled refueling outage at St. Lucie Unit No. 1, that began in late April 1996, FPL performed additional maintenance on the steam generator tubes. The additional maintenance was necessary to meet a more conservative standard for determining the need to plug steam generator tubes. During the outage, FPL plugged approximately 12% of the steam generator tubes in St. Lucie Unit No. 1. To date, approximately 23% of the steam generator tubes have been plugged. St. Lucie No. 1 returned to service in July 1996. FPL's current plan is to replace the steam generators in October 1997. The steam generators were previously scheduled to be replaced in March 1998. Analysis supporting continued operation of St. Lucie Unit No. 1 until at least October 1997 is scheduled to be completed and submitted to the Nuclear Regulatory Commission in September 1996. (c) Reference is made to Item 1. Business - FPL Operations - Fuel in the 1995 Form 10-K for FPL Group and FPL and Item 5.(b) Other Information in the FPL Group and FPL Form 10-Q for the quarterly period ended March 31, 1996. In May 1996, FPL appealed to the First District Court of Appeal of the state of Florida the Florida's Power Plant Siting Board's denial of FPL's request to burn Orimulsion at the Manatee plant. (d) Reference is made to Item 1. Business - FPL Operations - Electric and Magnetic Fields in the 1995 Form 10-K for FPL Group and FPL and Item 5.(c) Other Information in the FPL Group and FPL Form 10-Q for the quarterly period ended March 31, 1996. In June 1996, the plaintiffs that alleged personal injury and wrongful death resulting from electric and magnetic fields appealed the court's summary judgment in favor of FPL. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits <TABLE> <CAPTION> Exhibit FPL Number Description Group FPL <S> <C> <C> <C> 3 Amendment to FPL Group's Restated Articles of Incorporation dated June 27, 1996 x 12 Computation of Ratios x 27 Financial Data Schedule x x </TABLE> (b) Reports on Form 8-K (1) A Current Report on Form 8-K dated June 17, 1996 was filed by FPL Group on June 18, 1996 filing one event under Item 5 - Other Events and one exhibit under Item 7 - Financial Statements and Exhibits.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FPL GROUP, INC. FLORIDA POWER & LIGHT COMPANY (Registrants) Date: August 8, 1996 MICHAEL W. YACKIRA Michael W. Yackira Vice President, Finance and Chief Financial Officer of FPL Group, Inc., Senior Vice President, Finance and Chief Financial Officer of Florida Power & Light Company (Principal Financial Officer of the Registrants)