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, 1997 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) 694-4000 </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 March 31, 1997: 182,443,635 shares As of March 31, 1997 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, 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) of the Company made by or on behalf of the Company which are made 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 that could cause actual results to differ materially from those expressed in the forward-looking statements. 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 of the Company 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 or statements 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 statements. Some important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements include prevailing governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC), the Florida Public Service Commission (FPSC) and the Nuclear Regulatory Commission, with respect to allowed rates of return, industry and rate structure, operation of nuclear power facilities, acquisition and disposal of assets and facilities, operation and construction of plant facilities, recovery of purchased power, 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, pricing and transportation of commodities, market demand for energy from plants or facilities, changes in tax rates or policies or in rates of inflation, unanticipated development project delays or changes in project costs, 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 (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 1997 1996 (In thousands, except per share amounts) <S> <C> <C> OPERATING REVENUES .................................................................... $1,445,193 $1,357,707 OPERATING EXPENSES: Fuel, purchased power and interchange ............................................... 543,559 449,660 Other operations and maintenance..................................................... 269,174 279,974 Depreciation and amortization ....................................................... 267,863 267,655 Taxes other than income taxes ....................................................... 139,341 137,044 Total operating expenses .......................................................... 1,219,937 1,134,333 OPERATING INCOME ...................................................................... 225,256 223,374 OTHER INCOME (DEDUCTIONS): Interest charges .................................................................... (71,035) (69,246) Preferred stock dividends - FPL ..................................................... (5,710) (6,434) Other - net ......................................................................... 7,771 (1,363) Total other deductions - net ...................................................... (68,974) (77,043) INCOME BEFORE INCOME TAXES ............................................................ 156,282 146,331 INCOME TAXES .......................................................................... 55,213 52,619 NET INCOME ............................................................................ $ 101,069 $ 93,712 Earnings per share of common stock .................................................... $ 0.58 $ 0.54 Dividends per share of common stock ................................................... $ 0.48 $ 0.46 Average number of common shares outstanding ........................................... 173,222 174,706 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 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, 1996 (1996 Form 10-K) for FPL Group and FPL.
FPL GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> March 31, 1997 December 31, (Unaudited) 1996 (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 ....................... $17,521,698 $17,033,623 Less accumulated depreciation and amortization ................................... (7,906,516) (7,649,734) Total property, plant and equipment - net ...................................... 9,615,182 9,383,889 CURRENT ASSETS: Cash and cash equivalents ........................................................ 394,725 195,932 Customer receivables, net of allowances of $9,908 and $12,474, respectively ...... 453,956 461,501 Materials, supplies and fossil fuel stock - at average cost ...................... 294,170 268,186 Other ............................................................................ 189,172 247,912 Total current assets ........................................................... 1,332,023 1,173,531 OTHER ASSETS: Special use funds of FPL ......................................................... 849,153 805,819 Other investments ................................................................ 284,428 326,855 Unamortized debt reacquisition costs of FPL ...................................... 277,841 282,756 Other ............................................................................ 310,935 246,473 Total other assets ............................................................. 1,722,357 1,661,903 TOTAL ASSETS ....................................................................... $12,669,562 $12,219,323 CAPITALIZATION: Common shareholders' equity ...................................................... $ 4,598,131 $ 4,592,132 Preferred stock of FPL without sinking fund requirements ......................... 226,250 289,580 Preferred stock of FPL with sinking fund requirements ............................ 38,000 42,000 Long-term debt ................................................................... 3,266,844 3,144,313 Total capitalization ........................................................... 8,129,225 8,068,025 CURRENT LIABILITIES: Accounts payable ................................................................. 340,891 307,836 Debt and preferred stock due within one year ..................................... 387,801 154,600 Accrued interest, taxes and other ................................................ 849,976 812,028 Total current liabilities ...................................................... 1,578,668 1,274,464 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,544,405 1,530,538 Unamortized regulatory and investment tax credits ................................ 424,647 379,279 Other ............................................................................ 992,617 967,017 Total other liabilities and deferred credits ................................... 2,961,669 2,876,834 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $12,669,562 $12,219,323 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1996 Form 10-K for FPL Group and FPL.
FPL GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 1997 1996 (Thousands of Dollars) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................................................... $ 101,069 $ 93,712 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................................................... 267,863 267,655 Other - net ....................................................................... 142,136 125,313 Net cash provided by operating activities ....................................... 511,068 486,680 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ................................................................ (114,336) (115,508) Other - net ......................................................................... 22,908 (51,786) Net cash used in investing activities ........................................... (91,428) (167,294) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt .......................................................... 4,948 - Retirement of long-term debt and preferred stock .................................... (125,560) (102,973) Decrease in commercial paper ........................................................ - (138,700) Repurchase of common stock .......................................................... (17,130) (24,374) Dividends on common stock ........................................................... (83,105) (80,394) Other - net ......................................................................... - 9,169 Net cash used in financing activities ........................................... (220,847) (337,272) Net increase (decrease) in cash and cash equivalents .................................. 198,793 (17,886) Cash and cash equivalents at beginning of period ...................................... 195,932 46,177 Cash and cash equivalents at end of period ............................................ $ 394,725 $ 28,291 Supplemental disclosures of cash flow information: Cash paid for interest .............................................................. $ 67,590 $ 72,692 Cash paid for income taxes .......................................................... $ 27,923 $ 9,700 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 18,175 $ 30,742 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1996 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 1997 1996 (Thousands of Dollars) <S> <C> <C> OPERATING REVENUES .................................................................... $1,398,768 $1,340,742 OPERATING EXPENSES: Fuel, purchased power and interchange ............................................... 525,186 449,660 Other operations and maintenance .................................................... 246,494 262,517 Depreciation and amortization ....................................................... 262,619 266,241 Income taxes ........................................................................ 57,828 58,423 Taxes other than income taxes ....................................................... 138,987 137,096 Total operating expenses .......................................................... 1,231,114 1,173,937 OPERATING INCOME ...................................................................... 167,654 166,805 OTHER INCOME (DEDUCTIONS): Interest charges .................................................................... (59,206) (62,386) Other - net ......................................................................... 1,314 2,734 Total other deductions - net ...................................................... (57,892) (59,652) NET INCOME ............................................................................ 109,762 107,153 PREFERRED STOCK DIVIDENDS ............................................................. 5,710 6,434 NET INCOME AVAILABLE TO FPL GROUP ..................................................... $ 104,052 $ 100,719 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1996 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> March 31, 1997 December 31, (Unaudited) 1996 (Thousands of Dollars) <S> <C> <C> ELECTRIC UTILITY PLANT: At original cost, including nuclear fuel and construction work in progress ....... $16,881,392 $16,808,792 Less accumulated depreciation and amortization ................................... (7,802,503) (7,610,786) Electric utility plant - net ................................................... 9,078,889 9,198,006 CURRENT ASSETS: Cash and cash equivalents ........................................................ 196,052 78,417 Customer receivables, net of allowances of $9,610 and $12,176, respectively ...... 426,260 460,120 Materials, supplies and fossil fuel stock - at average cost ...................... 260,671 247,597 Other ............................................................................ 164,004 225,153 Total current assets ........................................................... 1,046,987 1,011,287 OTHER ASSETS: Special use funds ................................................................ 849,153 805,819 Unamortized debt reacquisition costs ............................................. 277,841 282,756 Other ............................................................................ 241,272 233,405 Total other assets ............................................................. 1,368,266 1,321,980 TOTAL ASSETS ....................................................................... $11,494,142 $11,531,273 CAPITALIZATION: Common shareholder's equity ...................................................... $ 4,672,615 $ 4,666,941 Preferred stock without sinking fund requirements ................................ 226,250 289,580 Preferred stock with sinking fund requirements ................................... 38,000 42,000 Long-term debt ................................................................... 2,727,827 2,981,261 Total capitalization ........................................................... 7,664,692 7,979,782 CURRENT LIABILITIES: Accounts payable ................................................................. 288,813 299,026 Debt and preferred stock due within one year ..................................... 198,340 4,040 Accrued interest, taxes and other ................................................ 851,360 824,945 Total current liabilities ...................................................... 1,338,513 1,128,011 OTHER LIABILITIES AND DEFERRED CREDITS: Accumulated deferred income taxes ................................................ 1,152,679 1,146,680 Unamortized regulatory and investment tax credits ................................ 424,647 379,279 Other ............................................................................ 913,611 897,521 Total other liabilities and deferred credits ................................... 2,490,937 2,423,480 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES ............................................... $11,494,142 $11,531,273 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1996 Form 10-K for FPL Group and FPL.
FLORIDA POWER & LIGHT COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, 1997 1996 (Thousands of Dollars) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income .......................................................................... $ 109,762 $ 107,153 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................................................... 262,619 266,241 Other - net ....................................................................... 107,287 125,954 Net cash provided by operating activities ....................................... 479,668 499,348 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ................................................................ (109,642) (114,781) Other - net ......................................................................... (23,312) (74,077) Net cash used in investing activities ........................................... (132,954) (188,858) CASH FLOWS FROM FINANCING ACTIVITIES: Retirement of long-term debt and preferred stock .................................... (125,000) (102,770) Decrease in commercial paper ........................................................ - (158,700) Dividends ........................................................................... (104,079) (104,952) Capital contributions from FPL Group ................................................ - 50,000 Other - net ......................................................................... - 7,014 Net cash used in financing activities ........................................... (229,079) (309,408) Net increase in cash and cash equivalents ............................................. 117,635 1,082 Cash and cash equivalents at beginning of period ...................................... 78,417 412 Cash and cash equivalents at end of period ............................................ $ 196,052 $ 1,494 Supplemental disclosures of cash flow information: Cash paid for interest .............................................................. $ 62,006 $ 67,542 Cash paid for income taxes .......................................................... $ 72,160 $ 12,766 Supplemental schedule of noncash investing and financing activities: Additions to capital lease obligations .............................................. $ 18,175 $ 30,742 </TABLE> This report should be read in conjunction with the Notes to Condensed Consolidated Financial Statements on Pages 9 through 11 herein and the Notes to Consolidated Financial Statements appearing in the 1996 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 1996 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 March 31, 1997 and the results of operations and cash flows for the three months ended March 31, 1997 and 1996 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. Summary of Significant Accounting and Reporting Policies Regulation - In April 1997, the FPSC voted to extend through 1999 FPL's program to amortize certain specified assets, mainly costs associated with nuclear and fossil generating assets and debt reacquisition costs, based on the level of retail revenues achieved compared to a forecasted amount. The decision will become final in late May 1997 if no protests are filed. FPL will also continue to record $30 million per year of special nuclear amortization. 2. Capitalization FPL Group Common Stock - During the three months ended March 31, 1997, FPL Group repurchased 371,500 shares of common stock under its share repurchase program. A total of approximately 8.1 million shares have been repurchased since the inception of the share repurchase program in 1994. This program was terminated in the first quarter of 1997 when FPL Group's board of directors authorized a new program to repurchase up to an additional 10 million shares of common stock commencing on April 1, 1997. Preferred Stock - In March 1997, FPL redeemed all 2,533,188 outstanding shares of its $2.00 No Par Value, Series A (Involuntary Liquidation Value $25 Per Share). The 1997 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 1997, 30,000 shares of Series Q and the remaining 50,000 shares of Series R. There are no preferred stock sinking fund requirements for the remainder of 1997. Long-Term Debt - In March 1997, FPL redeemed all $61,670,000 of the outstanding 8.75% Quarterly Income Debt Securities (Subordinated Deferrable Interest Debentures) due 2025. In April 1997, FPL purchased on the open market and retired approximately $47 million in aggregate principal amount of several series of First Mortgage Bonds, due on dates ranging from 2013 through 2026, with interest rates ranging from 7% to 7 7/8%. 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 $1.6 billion for 1997 through 1999. Included in this three-year forecast are capital expenditures for 1997 of approximately $590 million, of which $110 million had been spent through March 31, 1997. FPL Group Capital Inc (FPL Group Capital) and its subsidiaries, primarily ESI Energy, Inc., have guaranteed approximately $150 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 $71 million in retrospective premiums. 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 $230 million at March 31, 1997, 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 (Southern Companies) 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. The contract and related use of this fuel is subject to regulatory approvals. In 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 capacity and minimum payments through 2001 under these contracts are estimated to be as follows: <TABLE> <CAPTION> 1997 1998 1999 2000 2001 (Millions of Dollars) <S> <C> <C> <C> <C> <C> Capacity payments: JEA and Southern Companies ............................................... $210 $210 $210 $210 $210 Qualifying facilities .................................................... $340 $350 $360 $370 $380 Minimum payments, at projected prices: Natural gas, including transportation .................................... $210 $200 $210 $210 $210 Orimulsion (1) ........................................................... - - $140 $140 $140 Coal ..................................................................... $ 50 $ 50 $ 40 $ 40 $ 30 (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 March 31, 1997 Charges 1996 Charges Energy/ Energy/ Capacity Fuel (1) Capacity Fuel (1) (Millions of Dollars) <S> <C> <C> <C> <C> JEA and Southern Companies ............................................. $52(2) $35 $46(2) $33 Qualifying facilities................................................... $73(3) $29 $70(3) $27 Natural gas ............................................................ - $89 - $97 Coal ................................................................... - $11 - $12 (1) Recovered through the fuel and purchased power cost recovery 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. In 1996, the District Court ordered the FMPA to seek a declaratory ruling from the FERC regarding certain issues in the case. All other action in the case has been stayed pending the FERC's ruling. 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 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 three months ended March 31, 1997 and 1996 were approximately $46 million and $17 million, respectively. For the same period, operating expenses were approximately $47 million and $18 million. Net income for the three months ended March 31, 1997 and 1996 was approximately $1 million and $0.4 million, respectively. At March 31, 1997, FPL Group Capital had current assets of approximately $227 million, noncurrent assets of approximately $1.224 billion, current liabilities of approximately $268 million and noncurrent liabilities of approximately $958 million. At December 31, 1996, FPL Group Capital had approximately $144 million of current assets, $857 million of noncurrent assets, $182 million of current liabilities and $595 million of noncurrent liabilities. The consolidation of the Doswell Limited Partnership, which operates a 663 mw exempt wholesale generator, increased total assets and liabilities at March 31, 1997 by approximately $450 million.
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 1996 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 The principal operations of FPL Group consist of the generation, transmission, distribution and sale of electric energy by FPL. Net income for the three months ended March 31, 1997 increased reflecting improved operating results at FPL. Certain fluctuations resulting from FPL's operations were offset in FPL Group's financial statements because, beginning with the first quarter of 1997, FPL Group's financial statements include the accounts of the Doswell Limited Partnership. Partnership activities did not have a significant impact on operations or net income. FPL's revenues from base rates for the three months ended March 31, 1997 decreased to $769 million from $786 million for the same period in 1996, despite an increase in retail kilowatt-hour sales. The decline in base revenues resulted from a weather-related shift in sales between customer classes and the different rates charged to those classes. Warmer weather led to increased commercial sales in 1997 and colder weather resulted in relatively higher residential sales in 1996. Customer accounts increased by 1.7% during the period. Cost recovery clause revenues and franchise fees comprise substantially all of the remaining portion of operating revenues. Such revenues and the related fuel, purchased power and interchange expense increased mainly as a result of higher gas prices. These revenues represent a pass-through of costs and do not significantly affect net income. FPL's O&M expenses decreased for the three months ended March 31, 1997, primarily due to continued cost control efforts. Interest and preferred stock dividend requirements also declined, resulting from reductions in debt and preferred stock balances. Depreciation and amortization expense at FPL decreased for the first quarter of 1997, mainly due to the decline in retail revenues discussed above. In April 1997, the FPSC voted to extend through 1999 FPL's program to amortize certain specified assets, mainly costs associated with nuclear and fossil generating assets and debt reacquisition costs, based on the level of retail revenues achieved compared to a forecasted amount. The decision will become final in late May 1997 if no protests are filed. FPL will also continue to record $30 million per year of special nuclear amortization. A total of $63 million of amortization was recorded under this program during the three months ended March 31, 1997 and $74 million during the same period in 1996. See Note 1. LIQUIDITY AND CAPITAL RESOURCES Using available cash flows from operations, FPL has redeemed certain series of its preferred stock and first mortgage bonds, thereby reducing preferred stock dividends and interest expense. Additionally, during the three months ended March 31, 1997 FPL Group repurchased 371,500 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 6. Exhibits and Reports on Form 8-K (a) Exhibits <TABLE> <CAPTION> Exhibit FPL Number Description Group FPL <S> <C> <C> <C> 10(a) Employment Agreement between FPL Group and Kenneth R. Werneburg dated as of x March 17, 1997 10(b) Supplement to the FPL Group Supplemental Executive Retirement Plan as it applies x to Kenneth R. Werneburg effective January 2, 1997 12 Computation of Ratios x 27 Financial Data Schedule x x </TABLE> (b) Reports on Form 8-K - None 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: May 1, 1997 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)