Text

Florida Progress Corp 1990 Annual Rept
	ML20076N425
Person / Time
Site:	Crystal River
Issue date:	12/31/1990
From:	Critchfield J; FLORIDA PROGRESS CORP.
To:	;
Shared Package
ML20076N419	List: 3F0491-09, Forwards Gainesville Regional Utils & Florida Progress Corp 1990 Annual Repts & Financial Statements for City of Alachua,City of Leesburg,City of Tallahassee,Orlando & Sebring Utils Commission & Kissimmee Util Authority; ML20076N420; ML20076N425;
References
	NUDOCS 9105070154
	Download: ML20076N425 (50)
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in 1990, Florida Progress'develoNdQ he year began with management a new strategic planning process thath f taking pencil to paper and _

. creating a sketch. It was a rough outline, resulted in a corporate framework forW("4 change, During the list year, mankgers a vision of where we were to head.--

Joined together to form a shar6d visiorin {

' As a team, we worked to further .

o m future M e Ns define the future, adding color, dimen- dedicationtothelius%es$ n% news $ g sion and texture it is now a bold deslEnstrong electric utility with a tlgtytepopup }

- a crafting of priorities and people that will guide Florida Progress with a on diversifidation Jg gppg .

! For the coming year [ourlsut$idlariesh clear agenda. However, work still tare challenged to continue the)l4nn!ng s %

remains to be done -intensifying the detail, providing definition through 1 l processH giYin(fprthef definitkxdoQq 7

the 'Woik in Progress" arid adding t$ ire highlights and adding the carefully 7 rendered nuances. , J. Town mark s ; to'm achieving"co'rporatelgoAlsh,

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1Thiough d$dication and teamwork $9

n. We have appropriatelylabeled 1990 s (s ou% kid Progress "

b'ringibs'ckised as our 'Workin Progress!' And our metaphor has a singular message:;Our8 i to realizing the% ion and workis not complete . Qj{) Fbrida ProgressjCo'ratidhks T]

The business of successfully guidingi N D,'

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', , M9tM our Company demands that we sont 'l

stantly hone our craft and sedk new and ?

better ways of running aur busfrjesses.[ r

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L E T T E R T O S H A R E H O L D E R S Dear fellow Shareholders' Florida Progress has increased dividends paid per share for gggg his year's Annual Report themeJWork in 38 consecutive years. At its November meeting tha Board i
Progress"-represents our belief that an ongoing increased the quarterly dividend to an annual rate of $2.74 strategic management process is essentialin a per share-a quarterly dividend growth rate of 3 8 percent.
changing business environment, in 1990, The higher rate reflects the Board's confidence in our management devoted considerable time to heginning this Company's future carnings potential process f rom a corporate perspective- Consolidated eamings per share in 1990 were $3.21, As we evaluated the growth potential of our down 12.5 percent from 1989. The decision to sell our businesses, several strategic decisions were made to building products companies was the major reason for this position Florida Progress for the future Some of these dechne. Since we anticipate a net loss from divesting these decisions have affected current results, but we are confident companies, we recorded a $ 28 per share reserve The finan-they will improve our future financial performance. cial results of our building products companies are being We have selected the concept of UTILITY PLUS to rep, reported as discontinued operations.
tesent our corporate strategy, Our emphasis and pnntipal Flonda Power's contribution to earnings per share was focus is on maintaining strong utihty operations The PLUS $3 22, compared to $ 3 28 in 1989. Earnings per share in represents diversification and our behef that selectively 1990 were reduced $ 15 due to the effect of a retail credit building a portfoho of diversified companies will maomize that reduced customers' bills in 1990. A growing customer shareholder value. base and higher energy usage by Florida Power's residential Our utihty, Florida Power Corporation, has camed a and commercial cusbmers offset most of the impact of the position of strength, both operationally and hnancially. bilkng credit.
Continuing Florida Power's reputation for quahty and The year began with an unusually mild winter causing reliable service in a growin8 service territory will mean significantlylower kilowatt hour sales Along, hot summer adding new capacity and increasing construction expen- and strong customer growth made up the ditference by the ditures. Meeting this need while maintaining financial end of the year. Retai! kilowatt hout sales increased 3.1 strength is our first priority. percent in 1990, compared to an increase of 6 3 percent in We also willinvest in diversified businesses whose 1989. Lower sales to industrial customers were the principal earnings show the promise to grow at a f aster rate than the reason for this dechne as a few large phosphate companies utikty. Experience has taught us lessons that we have used reduced usage to develop a more selective and focused diversifkation Earnings per share from continuing diversified opera-program. Redefining strategies means making changes in tions were $.28 in 1990, as compared to $ 37 the year our existing diversified businesses These decisions are diffi- before. Our concern about a weakening economy led cult, but necessary in order for us to redeploy capital in us to decide in Decembst to record reserves as a prudent businesses that offer better returns Our ongoing strategic and conservative step We recorded an after tax reserve of planning eff ort will be aimed at achieving the highest $.11 per share for our real estate portfoko and lending and possible total retum to shareholders. leasing activities The lending and leasing activities include For the utikty investor, dividends are an important part aircraft and real estate transactions Both of these industries J of total return. are being affected by the weak economy A continuing ii 1 ,
,m Vt b , recession in Florida's real estate market has also hurt the e
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The Development Group experienced a per share loss of $.04 in 1990, as compared to $ 05 loss in 1989 s 3: Q j' i '/ Leasing and sales of commercial properties and resi-
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.dential apartment projects have slowed as Prospective tenants and purchasers postpone
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ing results The Energy and Transportation Group has shown Other changes affecting the membership and stic of a steady growth in earnings for the last five years The the Board of Dircctors are fully explained in the 1991 Proxy Group's lead company-Electric Fuels Corporation- Statement for the Annual Meeting of Shareholders.
continued to expand in 1990 by acquiring new coal The employees of Florida Progress and its suosidiaries properties and f acilities for repainng railcars and barges. work each day to provide quality products and services for Electric Fuels is an excellent strategic fit for Florida Progress their customers !very employee works to achieve the because it complements our core utility business its energy- financial performance needed to increase the rewards to related businesses offer increasing growth opportunities for you. our shareholders This Annual Report is dedicated to our diversification program. those employees and their ' Work in ProgresC lt will be The Finance and Life Group ncreased its earnings per thcir commitment to strategic management that share by 87 percent over 1989 and accounted for the determines our success largest portion of our diversified earnings, contnbuting $ 25 The Board of Directors, management and all the per share. Growth in equipment financing and secured employees o' Florida Progress, appreciate your support We commerciallending are the primary reasons for earnings are cornmitted to cantinuing to earn it.
growth by Progress Credit Corocration. Mid-Continent Life insurance Company also contnbuted to earnings growth through its marketing and sales effort and sound ,,
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investments. ./.
4 ( N, / fEW Several changes are taking place on the Board of Directors. Andrew H. Hines, Jr, decided to step down es ( j e
Chairman of the Board effective January 1,1991, and to retire from the Board at the end of his current term in Apol Dr. Jack B Cntchfield 1991. Effective January 1,1991,I succeeded Mr Hines as Chairman. President and Chiel (xecutive Othcer Chairman of the Board February 4,1991 Mr. Hines had been an employee of the Company for 40 years and untillast year had served as Chief Executive Officer for 17 years. His leadership in business, in the ,
community and his personal concern for people have earned him the respect of all of us.
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i C O R P O R A T E O V E R V I E W fEQ he most effective way to run a business is maximize shareholder value will t e enhanced by j g through strategic management. This approach sclectively building a portfolio of diversified companies 41 requires developing strategies and implementing 1 action plans as part of day to day management, Mccting the challenge of Srowth Flonda Progress is committed to integrating a strategic in the past, many utihties suffered from major management process throughout the organization. This construction programs, record inflation and regulatory process ensures the best use of resources to maximize disallowances Flonda Power prospered dunng this the results for customers, shareholders and employees period because of a strong service terntory and reason-
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Florida Progress' planning efforts in 1990 concen-trated on an cuerall corporate strategy. The objective was R nda Power's position of strength must be to assess the Company's ex.isting businesses and evaluatt maintained in the 1990s The challenge is to plan and their growth potential. This review estabbshed a develop additional generation capability to meet the corporate f ramework to help the subsidiaries further demand of the growing population in its serv ce terntory refine their strt.tegies and action plans in 1991. Site planning for the next major generating complex-similar in size to the Crystal River Energy Complex-has UTILITY PLUS is the corporate strategy begun In planning and financing a major construction Florida Progress is pnmarily an electric utihty program, the company must be innovative in evaluating company with Flonda Power Corporation as its core the options for additional generation. Florida Power business. Maintaining Flonda Power's operational and beheves the best approach to serving customer growth is financial strength is the principal corporate focus to rely on a mix of sources that includes new generation, This corporate strategy can best be descnbed as energy conservation programs and purchased power.
UTILITY PLUS- Flonda Progress intends to keep its utikty business Planning efforts have reaffirmed that Florida financially strong in the 1990s by maintainmg a strong Progress is committed to diversification, which is debt to equity ratio This will help minimize the impact of represented by the PLUS in the higher construction costs, which will begin in the mid.
corporate strategy. The 1990s. To strengthen its equity position. Florida Progress l opportunities to plans to of'er new common stock to the market in 1991.
l improving diversified results l
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To be a real PLUS in UTILITY PLUS, Flonda I Progresf diversified operations must achieve higher e earnings growth and earn better returns than Florida b, -
Power Decisions were made in 1990 to divest certain s R, s businesses so that the capitalinvested could be redeployed to other diversified operations Florida l h Progress plans to keep the site of its total diversification
i. program modest by maintaining an equity investment h,1 of about 20 percent, which is currently allocated fj& 2
{. to diversified operations. The Company beheves that y '
a selective, focused diversification program can be FJ the extra PLUS in the totalinvestment return to 2I utihty investors.
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The next sections discuss the utihty and diversi-fied operations of Florida Progret, 1
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j RR or Florida Power Corporation. " Work in Pro- residential and commercial customers boosted overall I j
g gress" means sereg today's customers with retail sales and off set a dechne in sales to a few large l 99.98 percent reliability, offering innovative phosphate companies i energy management programs striving for Managing the business to provide reliable service l superior customer service and providing low rates to and low customer rates l
! more than 1.1 milhon customers. In a fast growing state For several years. Florida Power customers have
! hke Florida, planning for the needs of tomorrow's enjoyed some of the lowest rates in the state and the customers is always a prionty as the company adds new Southeast. Florida Power achieved this position by facihties to maintain its high service standards.
controlling operations and maintenance expenses and j l, Serving a state that is the nation's fourth largest developing a cost effective mix of fuel sources.
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Florida ranks fourth in population among the 50 U S. Among the state's investor o,vned electric utikties.
states. With 800 new people moving into the state each Florida Power has had the lowest operating and main-4 day, Florida is projected to remain the fourth most popu- tenance costs per customer for four of the last five years.
i lous state by the turn of the century, trashng only By carefully managing the maintenance schedule for its Cahfornia. Texas and New York. power plants. the company achieves a high availability l factor during the cntical winter and summer seasons Florida Power added about 33.000 new customers in 1990, mostly located in the central part of the state. when customer demand is high. Work crews perform
, Since 1985, the company's customer growth rate aver- preventive maintenance on equipment at the power L aged 3.8 percent annually, nearly twice the national plants and peaking units during scheduled outages average. This helps prevent costly equipment failures during The steady influx of people will further strengthen critical periods.
l
' Florida Power's residential customer base, which repre- Flonda Power's fuel expenses account for about one- ,
sents about 90 percent of its total customers. Utikties third of the average customer's monthly bill. In the that rely primarily on industrial customers for growth are 1970s, rising foreign oil prices increased customer rates i
much more vulnerable to changing economic conditions, for many utihties like Florida Power. Since then. Florida Customer growth and higher usage by residential Power has developed a balanced fuel mix that helps and commercial customers increased retail kilowatt hour minimize the impact of fluctuations in the supply and m / sales by 31 percent in price of individual fuels. In 1990, this approach helped Florida Power reduce the impact on customers of the V ' ' T1990. Florida t ; power's rapid increase in foreign oil prices resulting from the crisis j , . in the Middle East. The company s energy mix was -
ie
% 54 percent coal,22 percent oil,13 percent nuclear.
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10 percent purchased power and 1 percent natural gas in 1990.
Operating power plants efficiently is another Mmportant factor in holding dcwn fuel costs. Since 1983.
florida Power has ranked in the top 10 among the A 3 r j w 'Lyf (
(Wnation's 100 latgest investor owned utihties for fossil steam unit efficiency The company's nuclear unit
.JA ;a y-4 also contributes to fuel savings for customers since 4p; nuclear fuelis one-third the cost of coal and one-hh g. '% ,
q\- y[p \= fifth the cost of oil.
j$ iw / h E"..
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'Q N /Ws Nuclear Plant in 1990, the Crystal River Nuclear Plant 13V j received its best performance report ever iom ka $
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, jjh the Nuclear Regulatory Commission, with officials citing improvements in plant s !>Hs.
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performance, emergency preparedness and plant operations. The plant was taken out of 4-s';
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service in the spnng for a planned three month refuehng approved 21 energy effiaency programs designed by outage, yet it still achieved a capacity f actor of 57 Flonda Power engineers These programs aie expected to percent for the year save the company f rom building the capaaty to produc e Flonda Power recently opened a sophitticated 115 megawatts of power training faakty in the town of Crystal River to further With innovative progtams in voltage reduction and enhance nuclear operations at the plant. The $15 million interruptible load. Florida Power can reduce peak facihty includes a state of the art simulator that is an demand dunng winter months by about 1.000 exact rephta of the control room at the Crystal River megawatts-more power than the output of a large Nuclear Plant. The simulator presents reahstic scenanos power plant. By 1995, the company estimates it can in a classroom environment. It teaches operators how to control about 1.700 megawatts-which represents more respond quickly and safely and allows the company to than 20 percent of the antiopated peak demand-use a systematic approach to training. Operators spend through its enerf,y management programs eight weeks each year in nuclear plant training Before offermg innos ative prog' rams to reduce the training f acihty opened in May, Flonda Power sent its energ y r onsumotion operators to Virginia for training. Providing a quakty b G etnor Bob Martinez presented Florida training program reflects the company's commitment t P W the p estigious 1990 Govemor'5 Award for operating the nuclear plant safely Safety remains the E nergy innovation Flonda Power was the only electnc number one pnonty for nuclear operations utihty to receive the award, which ated the company's Reducing peak demand through energy heat p pe research project, The project results in less management programs energy use and improved conditioned air comfort Since the highest electrical demand typically occurs Engineers at Flonda Power began using two new for only a few hours on cold winter days, Florida Power is technologies for reduong energy use dunng peak focusing its efforts on reduarig sharp peak usage of demand penodt Unique heat pipe devices are being electricity Dy lowering peak demand, the company can installed on commeraal air-conditioning systems to postpone building new power plants reduce hurnidity in buildings and lower energy use On cold winter mornings and hot summer Hospitals, theaters, supermarkett, fast food restaurants, afternoons-when electncal use can reach peak levels- mainframe computer rooms and document storage the company uses radio controlled devices to efficiently areas are good apphcations for this new technology.
controlload by turning off the power to major household Heat pipes are used by NASA to cool electronic apphances. These devices reduce peak demand dunng components on spacecraft.
high use periodt Also in 1990, Flonda Power began offenng resi.
Known as load management, this r untary program dential customers a specially designed heat storage of fered by Florida Power is recogni:cri as the nation's system. The system replaces conventional electric ttop leader for reducing peak demand More than 300,000 heating by storing heat in a single holding tanic similar to Florida Power customers-more customers than any a home's wateri . n
@ Nx1mm, other electric utihty in the United States- are connected to load management. Plans call for adding about 50.000 -
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9 power received a 1990 award . qg4e.
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Flonda Power expects to install about 2,300 of these pmducers, and inurasing transmission capabihty into the heatatorage systems, known as HeatworkQ in 1991, state of flonda.
In 1990, the company reactivated 220 megawatts BMancmg tehatulity with cost of setvice of gas-turbine peaking units, which had been in extended When unusual winter storms bnng tutterly cold cold shutdown for the last few years lhe company plans temperatures deep into Flonda's otrus belt-as occurred to reactivate another 34 megawatts in 1991 donng the 1989 Chnstmas hohdays-the demand for Several new peaking units, capable of produang a electnoty can outstnp the available statewide power total of 680 megawatts, are planned to be in service in supply for several hours It is not reasonable to rcquire 1992 and 1993. These oil fired combustion turbine units customers to pay the year round cost of aMtional are the most cost efficient avadable and will be designed generation to meet infrequent winter demand levels for future capacJ c expansion.
Flonda's electric utihties have developed i communica- F londa Power pgned agreements with T he Southern tion plan of emergency messages duringitatewide Company to purchase a total of 400 megawatts of coal power shortages The messages willinform customers of fired power annually through the year 2010 The con-l the seventy of an emergency and urge ene gy conserva- tracts give the company a low cost, rehabk source of tion Flonda Power beheves this approach r ? presents the powet The pnte is compatdle to what it costs Florida best and most practicalway to balance short term Power to produce electnaty at its most etficent coab rehabikty with cost of service to customers fired plants-Crystal River Units 4 and 5 f londa power is completing plans to construct a Addm3 new power to meet tomorrow,s BOO.000-volt transmisuon hne to connect with The C"C'3Y"CCd' Southern Company in south C,eorgia. Scheduled for Flonda Power 3 generation plan builds upon its completion in two phases, the hne wili be able to dehver existing capaaty with a balanced mix of new sources' an additional 600 megawa'ts in 1996 and another 250 The plan includes adding new peaking and baseload megawatts in 1997. With existing tie knes to the notth generating units, reacti, ting peakers m extended cold neanng full capacity, Florida power needs the kne to shutdown, purchasing economical power from neighbor- assure greater service rehabihty and additional power at ing util, ties and
,4 an economical cost.
A3 Other Over the last 18 months, Flonda Power has worked i
. k dim 3 3. abk 1 .
.J < u p' .f 2 with a atiren environmental advisory committee to identif, large tracts of land suitable for the company's
,y: ;
(T 0 N next power plant site. The site would be similar in size T , to the Crystal River Energy Complex, which has five w baseioad units and includes land to stockpile an g
k . adequate inventory of coalon site The com-b C mtttee has worked to locate sites that
% ( balance the region's environmental con-p q,yb
cems with Flonda Power's engineering q gl W=
[ '(M requirements. A preferred location is in Polk County on an old phosphate hkgy 4 [0 $ g mine ute. The fint unit at the new
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[y -[ in the late 1990s, will use the
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, o latest envitonmental technology
Additional units will be built as
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A 9cnc.ics upgrade 1,rI g W financial ratings 3 Maintaining a Double A
, < bond rating on senior secured g> b $g, .
p Edebt is one of Florida power s 1 finar cialgoals Two rating
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agencies based their decisions on Florida Power's solid W[f$hMg };1 financial condition, a strong service territory, adequate f;$gij b'L Jg{j.g-jg;q) reserve margins and management s commitment to gp 4 jp #J".
4 strong credit quakty The company was already rated Npgodj Doable A minus by both Duff & Phelps and Moody's lh Investors Service This marked the first time in the com-pany's history that all four agencies have rated Florida ' d f9"klTiE'l*k H ,f,] WQ$ 1d..gjfpl{.[{b.[
Power's senior debt as Double A minus, **ANM""-Shed 1?
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l Clebn Air Ac t of 1990 tsecornes lw pt- 6m encourago rmployet s to u paratt and recycle l In November, president Bush ugned into law the , while nonimaing paper consumption instead of '
, Clean Air Ati of 1990. which tightens the nation s air whsposal costs. Flonda puoer sells paper and
! polluton control standards part of the new law requaes tica'd f ar recychng Through ths program. the coal burmng electru, f Dwer plants to cut sulf ur dioude s spany has sold more than 350 tons of recyclat le
! emissions roughly in half by the year 2000 The f ast paper enough to save about 6000 trees from ta ing l phase Of the law requires all electhc utihties to hmit (ut flonda powe r ako continues to recycle or sell other l l emissions to a level equal to 2.5 lbs per milhon BlUs products such as cotJ fly ash, copper Wae aluminum j multiphed by their average fuel con:umption m (onductor. motor od and law r (attodges 198b 87. Flonda Power will not be affected by phase !mplo>ees show then spint by join!ng programs for one because its fossil plants burn oil and high.quahty. deaning up beaches. lakes and overs as well ,
low sulfur coal. as participating in water wnservation j f urther emission redochons are requeed m the law s and recychng programs (m.
i second phase This phase, to be completed by the end Moyee mvokement and ,
l of the decade, hmits each util;ty's annual sulfur dionde teamwork can rnake a chf ference in con-
[
! emissions to a level equal to their overage 1985 87 fuel ,
consumphon multiphed by an emisuon rate specified in serving the _ )3 .[ '%
i the law As new power plants are built, the addibonal world s knuted ', ; 7f% ( '
emisuons generated from the riew plants must be of fset natural f ]'g ,
by emission reductions at other costmg pom t plants or resources A ' .
allowances can be purchased from other utilities _.
1 Since Flonda Power will have to build new power
%j -
.k plants later this decade to keep pace with the growth m ,. j ,c ,
its service area, the company will be affec ted by the 4 , .c mq l
second phase While higher rates for customers seem (
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inevitable under these testnctions, the fullimpact will l not be known until options are evaluated and plans are ;
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y v developed s s n_ &3; *
] l.cachng the ef fort for a cleanct environment [ ,' W .
l Flonda progress and its companies strongly support the nation's offort to preserve the environment and con- ,gi (
) serve valuable resources. flonda Power has already j F c i
demonstrated this concern by using high quahty. Iow. ,
i Nj sulfur ccalin its power plants 6s j' io Florida Power started construction in November on' a fish hatchery and four " helper" cochng towers at q
h q
]H ,y f i Crystal River. Scheduled hatchery willinclude to open eight envuonmentally in the f all of 1991, the y%
controlled U S. 9
) spawning tanks, laboratory facihties and a pubhc displayQ Y "
area Thousands of lingethng see fish will be produced a at the hatchery and released into the surrounding j waters The cochng towers will cost approomately $80 m!Ihon and are expected to be completed in 1993 The ' u o : >n j
towers will cool the warm saltwater being discharged
, R from Crystal River Units 1,2 and 3. ;f ,,,
Flonda Power rs making other efforts to protect wild- 'N '
, hfe from its power knes and facihties Employees have
' 4' installed specially elevated platforms to provide ospreys with safe, alternative nesting sites. Other protective measures include insulating some power knes, moving c j wires and relocating nests to nearby places \
Flonda Power also pioneered a recychng program , ,C 4~
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known as " Regeneration for Generations to Come" The g ~' 'j ' t x
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D I V E R S I F I E D O P E R A 1 I O N S
] M lorida Progress' diversified operations consist of With operations now in 10 states, Electnc f uels sells coal and transportation services to other utility and Jg three major business groups: Energy and Trans-H portation, Development, and Finance and lafe. industnal companin as well. More than 5 million tons of d The strategic review in 1990 established a coal were sold in 1990 to companies other than Florida corporate framework for developing a more selective Power. Electnc Fuels also offers expanded services in wa-and iocused diversification program Each group wili use ter and rail transportation and railcar repair.
the ongoing planning process in 1991 and work within Electric Fuels owns or controls more than 70,000 this f ramework to build greater shareholder value. acres of surf ace and underground coal reserves in Kentucky, Virginia and West Virginia. In September, ENERGY AND TRANSPORTATION GROUP Mntucky May Coal Company Inc., an Electric Fuels Formed in 1976, Electric Frels Corporation is the s@sidiary. purchased United Coal Company s Belfry 5 lead company in the Energy and Transportation Group- and 6 surface mining operatiore i eastern Kentucky.
Electnc Fuels continues to succeed by expanding into The Belfry mines, which produce about one half million businesses related to coal and transportation. The tons of low sulfur coal annually, have a long term company's earnings from unregulated operations contract to supply coal to American Electric Power s Big accounted for approximately 60 percent of its tota, Sandy power plant in Kentucky. The Belfry facilities are earnings in 1990. Vertical integration into busine,ses I cated near Kentucky May,s existing operations and will compatible with coal and transportation has rest ited in a be integrated into other coal and transportation f acilities good strategic fit for Florida Progress. owned by Electric Fuels-Electric fuels sells more than 11 million tons In December, Kentucky May acquired the remaining i eoal in 1990 nterest in Diamond May Coal Company, a surf ace and Deb.*nng a reliabic, low-cost supply of high-quality underground coal mining operation in Kentucky.
coalto Flond Power is one of the goals of Electric Fuels Previously, Kcntucky May owned a 50 percent interest in About 6 million tons of low sulfur coal are deirvered eacn the operation. Diamond May produces annually about year to Florida Poser's four coal fired un:ts at Crystal 1,5 million tons of high qustity, low sulfur coal.
River Since 1985, Eicctric Fueis has reMed the cost of These acqsitions bring ElecPic Fuels' total proven delivered coal to Florida Power by 14 percent. Lcwer ? serve to about 230 million tons of clean, recoverable delivered coal costs have helped Flonda Power produce coal The new reserves of high quaity coal will help the lowest cost per kilowatt hour for coal fired plants Thrida Power meet tighter emic.,iori standards set by the among the state s utiliti n Clean & Act of 1990. Elert.ic Fuels expects increased pr fits from unregW coal sales as more utility and
% 4 . O 'Jyears.
4 industrial companies switch to low sulfur coal to comply
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' d h. with the new regulations.
A [ Electric Fuels' transportation network creates flexibility and efficiency f
A key component in Electric Fuels' success over years has been its efficient and diverse trans-rtation system The company continues to 7 -
develop a strong network of river terminal
,m acilities, ocean going vessels, river barges nd railcars it owns four river terminals-
including newly completed terminals in 1 Kentucky and West Virginia-for trans-
,.* A' floading coalinto barges Near New
' Orleans, Electric Fuels also owns part of
, pnternational Marine Terminals, a deep-J . t fwater terrninal on the Mississippi River.
? t Marine Equipment Management f Corporation, an Electric Fuels subsidiary, w
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owns or manages about 330 river barges. The company growth. At the same time, the construction industry was
transports coal, grain and other dry bulk products f rom experiencing steady growth, with new home starts reach- l i the upper Mississippi and Ohio rivers to the Gulf of ing record levels Talquin's early strategy was to combine l
l Mexico in addition to delivering coal to Florida Power's real estate development with the manufacturing and Crystal River Energy Complex, a fleet of ocean going, distribution of building products Large land parcels were l l tug-barge units carries a variety of dry bulk cargoes to expected to increase in value as the properties were i the Eastern Seaboard, the Caribbean region, Africa, and developed and sold, and the building products companies
South and Central America. In March, Electric Fuels would provide Talquin with short term, stable earnings
, purchased a facility near New Orleans that repairs tow in recent years, this strategy has met with mixed results I
boats, offshore supply vessels and barges.
! Electric Fuels owns more than 750 railcars that form Talquin changes strategy to adjust to weak
! unit trains to carry coal from central Appalachian coal economic conditions i fields. A strategic acquisition was made in August when Declining construction starts in the housing industry the company purchased a railcar repair operation near have reduced sales at Talquin's building products
, Jacksonville, Florida. Kustom Karr became a division of companies And real estate development has suffered Corbin Railway Service Company, an Electric Fuels because the economic downturn has forced many subsidiary. Corbin Railway was acquired in 1986 to businesses to shelve plans for expansion or relocation.
repair coal hopper cars and railcar wheels. Kustom Karr A few years ago, Talquin shifted its strategy to focus specializes in repairing railroad boxcars and rebuilding on investing in real estate projects that would achieve railcar parts. Corbin operates other railcar repair facilities earnings over shorter payback periods. 1 in kentucky and Tennessee.
In 1988 Talquin began forming partnerships to build 1 l An outlook of solid growth and earnings is expected luxury apartment complexes in fast growing metro areas l in 1991 and beyond. Electric Fuels expects to capitalize such as Tampa, Orlando and Fort Myers To date. Talquin '
on existing operations and looks to acquire businesses to has completed two apartment complexes and has four l complement its coal and transportation operations. While '
more under construction. In May, Talquin sold its first coal sales to Florida Power will remain relatively constant, apartment complex, Valencia Plantation in Orlando, sales to unaffiliated companies are expected to increase.
shortly after completing construction. The company DEVELOPMENT GROUP plans to sell the other complexes within three to five in the early 1980s, the Development Group-led by years to generate earnings.
Talquin Corporation-invested in in 1990, Talquin completed several projects,
'4 Florida real estate to including the 26 story Barnett Tower in downtown St.
W capitakze on the Petersburg. The office tower and retail complex opened n
?,; state's rapid in December with 70 percent of the office space
[%. , ' .
m occupied. The 385 foot tall building-the tallest in d "4% ,, Pinellas County-serves as the new headquarters of b Florida Progress, Bamett Bank of Pinellas County and '
,, KPMG Peat Marwick's Tampa Bay regional office.
Mr in 1990 Talquin became fullowner of Carillon, a
._.. j Gm 432 acre office park in St. Petersburg. Previously, Talquin 1
O . J, jN.. ; W ,
and its partner The Wilson Company, each owned a 50 Ig; k{g AT]Dp' ;g/ * *.[ '
percent interest in the park. Carillon has more than 500,000 square feet of office space completed and "3% gy'p ,
another 150,000 square feet under construction.
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Talquin sells citrus groves for strable gain
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e j Talquin purchased 3.200 acres of citrus i ,
w _ groves in south Flonda as an investment six G_ . gT lycars ago. The groves produced steady income
%MP ,
m each year and further proved to be an excellent g '} investment when they were sold in March to NGS VI A Tropical Fruits, Inc. of Indiantown, Flonda.
The company sold the groves at a time when it believed the properties held their 19
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highest value. The gain on the sale has been realaed in The company 5 totalinsurance underwntten for policy.
two annualinstallments-one collected in 1990 and the holders, known as insurance in force, has increased an other in the first quarter of 1991. Talquin also received average of 19 percent annually over the last five years in the proceeds from the 1989 90 citrus crop. After tax 1990, insurance in force surpassed $8 6 billion. Iarnings camings over the two year period will be about have also nsen on average 26 5 percent annually over
$10 million. the last five years Dunng the year, Flonda Progress evaluated the long- Mid Continent has achieved this excellent growth term growth potential and strategies of Talquin's building while maintaining a sound approach to underwnting and products companies and decided these businesses would a conservative portfolio of investment grade secunties.
not fit into the future direction of Florida Progress In The company has received the highest insurance rating October, Talquin announced plans to sell the companies of A + Supenor from A M Best, an insurance rating in its building products operations. agency, for the last 12 consecutive years Only eight The sale of these companies is expected to result in percent of alllife underwnters have been rated A 4 for losses. Talquin established a reserve of $14.2 million more than 10 consecutive years pnmarily for the disposition costs related to the sale and T he company has been successf ul because its potentiallosses associated with its window manufactur- strategy emphasizes recruiting experienced agents while ing unit. offenng a unique low premium product.
As part of its strategic planning effort, Florida Progress Crcdit builds its financial Progress will continue to reassess the role of the Instruments portfolio Development Group Talquin expects to reduce its real Progress Credit's financing activities include estate portfolio by selling large properties when the everaged leasing, senior secured commercial lending, market can deliver a f air value. The current weak real equipment financing and investments in high quality estate market may require Talquin to hold these properties until economic conditions improve. ,6 .
F! NANCE AND LIFE GROUP x h' -
The Finance and Life Group provided the largest M [r N, share of eamings for Florida Progress' diversified oper-ations in 1990. While Mid Continent ufe insurance . . , , >
Company continued its steady earnings growth, ,E/A f
~ * " "'
Progress Credit Corporation was able to utilizei Florida Progress' financial strength to profit +
ably enter into new leasing and lending transactions. _d Solid carnings growth from Mid-Continent Life %
insurance Company Headquartered in Oklahomau "
City, Mid Continent has been in m business for more than 80 0 years. Mid Continent's prin- :$
cipal product is a unique '
r ,,
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7 (l
, %W term life policy that combines @
a fixed amount of protection wit -
a low, level premium. 'i '%; M4x Since Florida Progress ecquired Mid Continent in
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' eg 1986, the insurance company hat,
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added more than 4,000 agents ; , ,$,
bringing the totalio over 6,000.1 % .
Mid-Continent has also expanded j~ 7' its regional offices from 13 to 26.! " }it Q
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securities. Progress Credit's financial instruments port, folio at the end of 1990 totaled approximately $750 million and included primatify commercial aircraft loans and leases, first mortgage real estate loans and investment. grade securities Progress Credit uses stringent underwnting standards in building its financialinstruments portfolio.
Interim aircraft loans and first mortgage real estate loans represent a major part of the new financing in 1990 and account for about 40 percent of the portfolio, Over the last several years, the company has devel-oped expertise in aircraf t leasing and interim loan financ.
Ing to build a portfoho that is nearly 60 percent invested in commercial aircraft and equipment. The aircraft port-foho is concentrated on newer, higher quahty, more versa-tile, widebody airplanes meeting higher noise standards Progress Credit has attempted to reduce its underwnting risk by financing aircraft for several airline carriers and through obtaining third party guaranties of loans and lease:,when appropriate.
Through 1990, Progress Credit has reked on Florida Progress' downstream holding company, Progress Cap:tal Holdings, Inc., to provide the necessary capital to fund Progress Credit's business. Since Progress Capital Holdings is the financing company for all of the diversified opera-tions, it _is necessary to maintain financial flexibility to meet the needs of its subsidiaries. In the future, Florida Progress plans to limit the amount of new capital from Progress Capital Holdings to Progress Credit. Since new capital would be needed to produce continuing earnings growth, Progress Credit is planning to study outside fund- ~
- ing alternatives in 1991.
PROGRESS TECHNOl.OGIES CORPOR ATION A patented adsorption system developed by a subsidiary of Frogress Technologies Corporation is now being used in industry and is expected to.have an even greater potentialin environmental applications. Advanced Separation Technologies Incorporated developed the ,
JP continuous contactor machine five years ago. In
,anuary 1990, the company completed dehvery of its first major ISEP installation to a chemical and fertilizer
~
- company in Colombia, South America. Subsequent sales have been made to the largest U.S. user of ion exchange i resins. -
~ To date,16 ISEP machines have been sold. The machines separate chemicals in a continuous process - _
I rather than conducting the separation in batches The machines can also be used to remove many types of
~
dissolved impurities from waste streams and to make products that benefit the environment.
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A MANAGEMENT'S DI$CUSSION AND ANALYSIS i
OPERATING RESULTS Retail kilowatt hour sales increased 3.1 *, in 1990 and The Company's earnings pa share for 1990 were A3's in 1989, mostly due to residential and commercial
$3 21. compared to $3 67 in 1989 and $3.52 in 1988 A tustomer growth, ?n 1990, the average residential usage summary of camings per share by group is as follows: iri." eased by 2.2% due in part to Flonda Power's favorable w wg9 weg electX rates. Flonda Power's retall sales growth was lower
~
in 190 due to an 8 2 *. deckne in sales to industrial Utihty 53 22 53 28 5? 31 cusamers resulting primarily from reduced usage by a few Inergy & Transportation 11$ .17 .15 phorphate producers Development ( 04) 005) (02) hnance and Life 25 .23 .14 Operating revenues for Florida Power during 1990 Corporate and Other (11) 02 (08) incteased $82.1 milkon, or 5.0% compared to 1989.The Diversified .28 77' .19 increase was due mainly to higher residential and commer.
Continuing Operations 3 50 3 65 3 50 cial customer usage and additional recoverable fuel Discontinued Operations ( 29) 02 02 revenues offset somewhat by the continuation of the Consohdated 53 21 53 67 53 52 customer bilkng credit in 1990.
l As part of a settlement agreement with the Florida Utility Pubhc Service Commission (FPSC), Florida Power agreed to Florida Power Corporation's earnings per share for pass deferred income tax savings to customers Florida 1990 were $.06 below 1989 primarily due to a customer Power estabkshed a bilkng credit to refund customers cred!t that reduced retall revenues and lowered earnings by $18.5 milkon in 1988 and $11.9 milkon in 1989. How-
$,15 per share. In 1990 Florida Power's customer growth ever, the bilkng credit had no elfect on net income for 1988 and higher usage by residential and commercial customers and 1989 since it was a pass through of deferred income partially offset the impact of the bilkng credit. tax savings.
~ ~
CORPdtATE RNANDAL ORJECTWE5 - .
Provde,a total sheechokht tet }to t Diat a competsene wth other.hgh quality checttsc utsty companiait
Develop the ( umpa#9 s busmessm 6n a matwwe that osamtaWu sts (maewealstrength
Mantam a ( ompelstsvr dividend growth (4te through diverotu atum 14NANOAt GOAL 5 - LlTRATV ,
1990 RESULf5 .
~
Maentain it rkade A fwst mortgagetumd ratmg AA - (Asf/ 4 Mat $rs
. AA- Fairh Jrevenfors yeg Aad s Ataxfy's investors Serwre
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AA Staredsti4 Poor's
.,, , e iarn a regulatory eate of return on ummwm equity Withm the . g ..
antmwhieJange of 12 6% to.114% ~ ,
11 6 %. '
Meet dvdered requetestgrats without care $dmg a payout raten that ~ l ~.
h rIprewntaine of quahty companes mihe electeu . utility industry 78 % ,
Ma6ntoin ainsed chatge coverage at at least 17 tmies 19 femes .
e tolernaby generate atlewst M% ot tonstructespwxpendstures ' - - *>1 %
Mamtam capital strudure such that : .
latal(obt does not exceed 46% . - '.. I
f. T$taldp6f - a61% I -'
k, 7
.. Comsteen equaty h at least 4S% '- -
r ' dommim egwity 44 0'ft . - -
~ Pretened storA ysnes adenoeed 10% . N} ere4webstark p% . , [
1990 a MNANDALGOAL51 ON[R$rtEDOkRADONS -
u woe *matinsame. -' . . n.
e nw.ush crosnm capaata.und ma*naia a see A grew v.
., ' M' tu m notei _
A simenwestort .* .- .- ,
'^
'* ' fwjarnati vetults that will allow Freyens Captai HoldEgs. - --
- neuttam Wieuhmaries.tevrwniedesingh Aratirewah . --
1 faggg. ~
L ,ysyir(
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. ; #8.f'aidsreeenvianysweeapsnione" . .
94- L . Mi -
S4
l Average Annual Customer Growth (in percent) beheves that nuclear plant personnel responded properly to j 6 -
._ -, the problems and worked dihgently to minimae the outage time. The cost of replacement fuel during the outages j cunently under review is approumately $40 milkon Fuel and purchased powc r costs increased in 1990 due to recovery of previously def erred fuel expense and higher l 4 c -
oil puces offset by increased nuclear generation In 1989, l higher oil pnces, increased customer demand and an a
extended outage at the nuclear unit combined to increase fuel and purchased power costs in companson to 1988 Since Flonda Power recovers substantially all f, ei costs 2
j through a fuel adjustment clause, and defers over or j j
underrecovery of fuel costs. these changes have httle impact I on net income Other utihty operations expenses increased in 1990
, _ l 9
largely due to increases ir' recoverable energy conservation
. 26 tw w 1989 in program costs in December 1990, the F PSC approved an FPSC staff Q nonJaFw $hemom he uths recommendation to increase Florida Power's annual depre-In December 1989, the FP5C continued the customer oation expense by $ 35 8 milhon. The F PSC also accepted its staff's recommendation to defer ruhng on an additional bilkng tredit that was scheduled to expire on December 31,
$27 6 milkon of depresiation expenses until the FPSC com- ;
1989. This decision was in response to the company's 1989 pletes a genenc investigation on fossif plant dismantfement regulatory rate of return. Extenuon of the bilkng credit costs currently scheduled for mid 1991. 5ee Note 1.
reduced 1990 utikty retail revenues by $12,5 rnilhon and utihty earnings by $78 milhon, or $ 15 per share. In Decem. Flonda Power plans to file,in the first quarter of 1991, ber 1990, the FPSC voted to discontinue the customer a petition with the F PSC requesting that it conduct a kmited
, bilkng credit at the end of 1990 See Note 11 to the proceeding to (onuder an increase in Flonda Power's base Conschdated Financial Statements. rates in the amount of any such additional deprecation expenses associated with dismantlement costs The FPSC is in August 1989, the FP5C dsallowed recovery of expected to rule in March on whether it will conduct a certain affiliated transportation costs, which reduced 1989 j proceeding on Florida Power's requested revenue increase results by 510 per share. This rukng resulted from conten-hmited to the issue of increased depreciation expense in the tions by Flonda Power's largest industrial customer and l event the FPSC rules against conducting a hmited proceed.
others that certain procL mment and transportation ing. Flonda Power intends to file a full revenue requirements j activities by Electnc Fuels Corporation were imprudent.
See Note 11, rate proceeding.
Taxes other than income taxes increased in 1990 due In January 1990, the F PSC issued an order adopting a mainly to higher property and revenue related taxes in July, market based pncing methodology to determine Flonda the state levied a 1/2". increase in the gioss receipts tax Power's recoverable f uel costs for purchases f rom an affil.
rate, which increased these taxes by $4.2 milhon No l lated coal suppher under a cost plus contract, effective April earnings impact resulted since the tax is paned through to 1,1989. Flonda Power requested that the FPSC reconsider ,
its deosion because the company beheves the methodology retail customers l impropedy and unfairly reduces recovery of changes in the pnce of coal in September 1990, the FPSC voted to revise Diversified Operations j one of two key elements of its methodology objected to by In the Energy and Transportation Group. Electric fuels' Florida Pvwer and deferred ruhng on the other element. A carnings per share increased to $ 19 in 1990, compared to final decision is expected in the first quarter of 1991. If the $ 18 in 1989 and $ 15 in 1988 This is due pnnapally to j FPSC affirms its initial decision on the remaining issue, the increased coal tonnage, f avorable price vananccs and company estimates that up to $8 milkon of fuel costs would growth in unregulated beinesses l
l be disallowed. Florida Power recorded a reserve of $4 Progress Energy Corporation is the other company j milhon in December 1990, pending a final FPSC decision. included in the Energy and Transportation Group This Due to the extensive outages experienced by the company was formed in 1988 to invest in cogeneration l
Crystal River Nuclear Plant from November 1988 to June projects ar.d small power fachties outside the state of 1989, the plant's performance is being reviewed by the Florida. Dunng 1990, Florida Progress decided to cease FPSC. Florida Power has filed testimony with the FPSC operating this business supporting the company's position. No provision has been Talquin Corporation, the Company's development made for potential disallowances because management subsidiary, announced in October 1990 that it planned to 25
sell the five operating companies that compnse building Since the company's real estate properties are located products This divestiture decision is part of the planning in growth areas, management believes the market for its l
effort by the Company to review its long term strategic projects should improve with the economy. A weak real direction Anticipating losses from the sale of individual estate market will necessitate Talquin holding these companies, the Company estabhshed a reserve of $ 28 per properties until economic conditions improve. Talquin's share primarily for the disposition costs and potential losses investments in two life care projects have also been associated with the sale of its window manuf acturing unit. adversely affected by the recent economic downturn. Lower l The Company has reported the net assets and operating than projected life care occupancy rates are delaying the l results of the auilding products companies as " discontinued projects from producing a positive cash flow, operations" for cliyears presented The corporate and other category includes pnmarily the in 1988, the Development Group changed its real unallc cated expenses of the holding company and the estate strategy to invest in projects, such as luxury apart- results of Better Business Form'., Inc. and Progress ment complexes, that would achieve earnings over shorter Technologies Corporation in 1989, earnings per share for payback periods The Development Group has completed the corporate and other category were increased $ 11 due ;
two projects and has four more under construction. The fid to the gain on the sale and operations of Better Business apartment complex was sold in May 1990 shortly af ter con- Forms. Inc. In 1990, unallocated debt costs for diversified l
struction was completed. Since many of Talquin's early real operations decreased corporate and other by 5.02 per estate investments will take years before commercial devel- share, compared to 1989. During 1990, Progress opment is viable, the company plans to sel! these holdings Technologies' operating results improved corporate and when the market offers adequate value. other by $ 02 per share due to lower research and M March 1990, the company entered into an install- devel0Pment costs and increased sales volume.
ment sale of its citrus groves for an after tax gain of approx- Return on Equity (In percent) imately $7.7 million. The gain recorded at closing was $4.6 g milkon, or $ 09 per share, with the balance recognized in r - - - .
January 1991, upon receipt of the remaining proceeds. ;n L.. ' '
addition, the company reahzed approximately $2.2 milhon in earnings from the citrus crop during 1990. 15 .
,, p . ~,.i.
)
^
Eamings for the Finance and Life Group were $.25 per share, an increase of 8.7% in 1990 over 1989 Both of the e Group's companies, Progress Credit Corporation and Mid- to Continent Life Insuran:e Company, contributed to the earn-ings growth. Mid-Continent's insurance premiums grew at a 21 % annual rate due to its marketing and sales effort Mid- %
5 Continent has added four regional offices to expand its -
nationwide network to 26 offices. Progress Credit contti-buted to the eamings growth through higher volumes of {
lending and equipment financing that increased the size of 0 its leases, loans and securities portfoho by approximately 1986 1987 1988 1939 1990
$220 million.
Progress Credit has a net investment of $62 million in g utmyopmte g cmmapwrska loans and leases for aircraft and spare engines with Conti- W" nental Airlines, Inc. In December 1990, Continental filed a The return on equity chart highhghts the relationship petition for reorganization under the U.S. Bankruptcy Code, between utikty and continuing diversified operations The but has continued to operate its fkghts. Progress Credit be- returns on utikty common equity were 14.2 % in 1990, lieves there will be no material adverse effect on the 15.1 % in 1989 and 16.1 % in 1988. The lower retum in Company from Continental's action because of the fair mar- 1990 is mainly due to a revenue reduction resulting from a ket value of the aircraft, third party guaranties and existing credit to customers in 1989 and 1988, retums were loss rese;ves. The airkne industry is currently experiencing affected by rate reductions given to customers under rate l financial difficulties. See Note 12 for a discussion of Pro- settlement agreements for each year.
gress Credit's exposure to that industry. The retums on equity for continuing diversified opera-The Company believes that a recession in the national tions were 7.6% in 1990. 9.8 % in 1989 and 4.7 % in 1988.
economy and Florida's real estate market has hurt its results Diversified retums have been depressed due to holding real I in 1989 and 1990. During the fourth quarter, the Company estate properties without sufficient sales activity and an oil beheved it was prudent to increase its reserves for real diilkng ng lease default in 1988. The percentage of equity
j. estate projects and lending and leasing activities in hght of invested in diversified operations remains at about 20%
l the weakening economy The after tax effect of these reflecting the Company's conservative approach to 9b reserves reduced eamings by $5.6 milhon, or 511 per share. diversification =
i
)
j interest Expense and inflation Sources of Capital (In millions of dollars)
Interest expense increased in 1990 due to additional W borrowings f or diversified operations primarily for invest- g
=
ments in leases, loans and securities at Progress Credit Even though the inflation rate has been relatively low in recent years, inflation continues to affect the Company by reducing the purchasing poser of the dollar and increasing W-500 the cost of replacing assets used in the business This has a , ,,,,,,,,,,,,
negative effect on the Company since regulators do not
- generalty consider this economic loss when utikty rates are W set. However, such losses are partly offset by the ecc nomic 200 gains that result from the repayment of long term d ebt with inflated dollars.
0 Income Taxes m w we m w The effective income tax rates were lower in 1988 and N8 W6 ss2O $6n1 582u 1989 than in 1990, mostly due to the flow throuSh of "un- f $7jsm I protected" deferred income taxes during 1988 and 1989.
The Company expects to adopt Financial Accounting Redemptions of high cost debt and preferred stock and Standard No. 96, " Accounting for income Taxes" in 1992. f avorable market conditions have allowed the Company to When adopted, the Company expects to reahze a small lower the embedded cost of capital. Florida Power's em-one time cumulative benefit to income from the reduction bedded cost of debt and preferred stock has been reduced of def erred income taxes due to lower tax rates. The elfect to 7.9% and 7.2% in 1990 from 8 7% and 8 4%, respec-on net income for subsequent years is not expected to be tively, in 1986' material, except for years in which there is a change in tax Since Florida Power has been able to interna lly gerierate rates. See Note 1.
substantially all of the funds for its construction program Other over the last five years, the Company's consolidated long-The Company is also required to adopt Financial term debt has dechned from 45.6% in 1986 to 36 2 % in Accounting Standard No.106, " Employers' Accounting fur 1990. Short term debt has increased from 3.3% in 1986 to Postretirement Benefits Other Than Pensions" starting in 18.6% in 1990 primarily to finance investments of Progress 1993 This standard mandates that an employer's obliga- Credit and for interim financing of other diversified capital tion for postretirement benefits be fully accrued by the date expenditures Preferred stock has deckned from 86% in employees attain full eligibihty to receive these benefits. The 1986 to 6.4% in 1990 as Flonda Power has reduced the Company's policy has been to accrue benefits currently total preferred stock outstanding through early redemption payable along with amortization of past service costs for of several of its high-cost series. In recent years, common
' current retirees The Company will accrue an additional stock equity has declined as a percentage of total capitaliza-amount, as yet uncalculated, under the new standard, but tion due to the increase in the Company's total debt and expects a substantial portion to be recoverable from the absence of a major common stock offering.
customers through rates. See Note 4, LIQUIDITY AND CAPITAL RESOURCES Capital Requirements (In millions of dollars)
Financing for utihty and diversified operations is a coordinated and managed at the holdinscompany. A cash r lagement program at the holding company efficiently
.zes cash balances of the diversified subsidiaries. 700 Over the last five years, cash f rom operations has been 600
.ne primary source of capital for the Company. The Company also raised equity capital through the Dividend
--Reinvestment Plan in 1986,1987 and 1990. Other sources 400 .
of capital have included proceeds from the sales of real 300 property and businesses. ,
The Company's short and long term capital require-ments primarily consist of utihty construction and preperty 2 additions, dividend payments to common shareholders, o investments in leases, loans and secunties, debt redemp- gy,
g3gg s'32$1 sNi sN2 tions, and diversified property additions. Other capital W Ut:lityPropert/ g DMdends requirements include business acquisitions and joint o Femhmtets g Rem @mmew y/
O DiwWed Ptooedy g ther O i venture investments.
Capital Structure (In percent) To improve long-term d6t financing flexibihty, Florida Power estabbshed a $200 ailhon medium term note program in 1988 Medie n term notes totakng $145 million are outstanding with rraturities from 1991 through 1997.
The weighted averag iinterest rate for these medium term 80 notes is 8 4 % Dur! ig 1990, Florida Power had $ 39.2 million of maturinglong-term debt obligations of which 60 . . $25 5 milkon were medium-term notes These repayments were initially funded by the issuance of short term debt,
. ,y .
which was subsequently replaced by the issuance of $40 1 40 ' million in medium term notes.
Florida Power's short term financing needs are funded I pnmarily throuEh its commercial paper program,which i
increased by $50 milhon in January 1991 to a total capacity l of $150 milhon. Florida Power also has registered with the o
Securities and Exchange Commission $150 milhon of first i 1960 1987 1988 1969 1990 mortgage bonds that can be issued at any time.
1 i S commonstod # hvemdSton Diversified Operations d tongaermoebt S $hontermDebt Progress Capital Holdings, Inc. (PCH) was formed in
! 1988 to consohdate the financial strength of the diversified Some equity funds were received in 1986 and 1987 operations This downstream holding company, having the I i
l through the issuance of new common shares under the benefit of a support agreement with Florida Progress, helps Dividend Reinvestment Plan. In 1988 and 1989, the to lower the cost of capital to those individual businesses.
Company purchased shares for the plan in the open During 1990, PCH established new financing facikties market. In 1990, the Company retumed to issuing new and agreements to reduce the dependence on uncom-j common shares. mitted f acihties as market conditions made this type of Florida Progress plans to issue common stocl< in 1991. financing less f avorable.
J The majority of this new equity will be provided to Florida PCH entered into a $150 milhon, two-year bank credit Power to further strengthen its financial position As Florida agreement in mid 1990 This agreement may be extended 1 Power's construction program increases in the mid 1990s, on an annual basis, subject to written consent of the par-the company plans to seek timely rate rehef. Florida Power ticipating banks. Also, in late 1990, PCH estabhshed an i plans to maintain a capital structure for debt and equity additional six month. $100 million bank credit facility. At
! during this construction period in order to retain its Double December 31,1990, each of these commitments were A minus credit rating. fully utikzed Utility PCH increased its commercial paper program from I Florida Power's construction expenditures for 1990 $75 milkon to $500 milhon in early 1991. The commercial ,
were $265.3 milhon, consisting primarily of production, Paper is currently rated A 1 by Standard & Poor's and P-1 by
'ransmission and distnbution expenditures. The five year Moody's. After year end, PCH estabhshed a new, private construction program includes planned expenditures of
$400 million medium term note program. The maturities
$362 milhon, $420 milhon, $380 milkon, $355 million and on these notes range from 9 months to 30 years, depending
$552 million for 1991 through 1995. on the financing requirement. The new notes may bear interest at either fixed or floating rates. This new program is l In October, the Clet.n Air Act of 1990 was sir.ad into expected to enable PCH to raise debt capital over the next
law by President Bush. The new legislation regt U electnc ,
' several years. It is in addition to approximately $170 milhon utikty companies to reduce sulfur dioxide emissions in two outstanding from the previous multi year povate i phases This legislation does not impact Florida Power's five-Pl acement, medium term note program that was sold out year construction forecast because the company already during the year.
meets the Phase I requirement mandated for the end of 1995. Since Florida Power plans to build new power piants in 1990, total diversified capital expenditures were in the late 1990s to keep pace with customer growth, the $509 milkon, mainly due to funding previously committed company will be affected by the Phase 11 requirement, for real estate projects. For 1990, net investments in leases, which is effective in the year 2000 While higher customer loans and securities increased $229 2 million, pnmarily from rates will likely result from the new restncticas, the full leasing and secured commerciallending activities at impact will not be known until all options are considered Progress Credit.
- and the company's plan is reviewed and approved by the in 1991, diversified capital expenditures are anticipated 28 appropriate regulatory agencies. to reach approximately $268 milhon The bulk of these i
-- expenditures are planned for facility construction and be needed to produce continuing earnings growth. Progress equipment replacements in the Energy and Transportation . Credit is planning to study outside funding afternatives
. Group. The 1991 capital expenditures are to be financed in 1991, through medium term notes. . .
Progress Credit considers a highly leveraged transaction .
The Company has off balance sheet risk related to debt (HLT) to be a transaction whose purpose is to fund the buy.
of unconsohdated partnerships should a partner in any out, acquisition or recapitalization of an existing business partnership become unable to meet its share of the and that meets the leverage criteria for HLTs as defined by partnership's obligations, the Company would be liable for federal agencies. The_ existing portfolio contains $22.1 '
all the debts of the partnership. See Note 12. million of HLTs These HLTs, funded in 1989 at a total ori-Through 1990, Progress credit relied on PCH to ginal principal amount of $ 30 million, are participations in provide the necessary capital to fund its business. In the senior secured debt used for the buyout of two existing future, Florida Progress plans to hmit the amount of new businesset All principal and interest payments that relate to capital raised for Progress Credit. Since new capital would these loans have been made and are current.
i 1
MA N A G E M E N T S R. E- P- O R T
' To Our Shareholders: auditing function that evaluates cnd formally reports on the adequacy and effectiveness of internal accounting controls, Management is responsible for the integrity and objec- pohcies and procedures.
Etivity of the financial and operating information contained in addition, the Audit Committee of the Board of in this Annual Report, including the consolidated financial Directors, consisting solely of outside directors, meets peri-statements covered by the Independent Auditors' Reporti- odically with management, the intemal auditors and the
- These statements were prepared in accordance with independent auditors to review internal accounting controls, generally accepted accounting principles and necessarily audit results, financial statements and financial reporting include amounts that are based on judgments and matters and annually recommends to the Board of Directors
' estimates by management. the selection of independent auditors.
- The Company maintains internal accounting control
' systems and related policies and procedures designed to For Management,
- provide reasonable assurance that assets are safeguarded, l -that transactions are executed as authorized and are prop-l : erly recorded and that accounting records may be relied upon for the preparation of consolidated financial state-
- I.
ments and other financial information. The design, monitor-ing and revision of internal accounting control systems
[/w involve, among other things, management's judgment with Richard Korpan respect to the relative cost and expected benefits of specific Executive Vice President control measures. The Company also maintains an internal and Chief FinancialOfficer 29
R E P -O R T S F R. O. M A U D l T O R S Reports of independent Certifico
- Public Accountants To the Shareholders of Florida Progress Corporation: To the Shareholders of Florida Progress Corporation:
We have audited the accompanying consolidated balance We have audited the accompanying consolidated balance sheet of Florida Progress Corporation (a Florida corporation) sheet of Florida Progress Corporation (a Florida corporation) and subsidiaries as of December 31,1990, and the related and subsidiaries as of December 31,1989, and the related consolidated statements of income, cash flows, and share- consolidated statements of income, cash flows, and share-holders' equity for the year ended December 31,1990. holders' equity for each of the two years ended December These financial statements are the responsibility of Florida 31,1989. These financial statements are the responsibility Progress Corporation's management. Our responsibility is to of F(orida Progress Corporation's management. Our express an opinion on these financial statements based on responsibihty is to express an opinion on these financial our audit. statements based on our audits.
We conducted our audit in accordance with generally We conducted our audits in accordance with generally accepted auditing standards. Those standards require that accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assur. we plan and perform the audit to obtain reasonable assur-ance abut whether the hnancial statements are free of ance about whether the financial statements are free of
. material misstatement. An audit includes examining, on a matenal misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures test basis, evidence supporting the amounts and disclosures in the financial statements. An aud!! also includes assessing in the financial statements. An audit also includes assessing the accounting principles used and significant estimates the accounting principles used and significant estimates made by management, as well as evaluating the overall made by management, as well as evaluating the overall financial statement presentation, We believe that our audit financial statement presentation We beheve that our audits provides a reasonable basis for our opinion. provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to in our opinion, the financial statements referred to above present fairly, in all material respects, the financial above present f airly, in all material respects, the financial
- position of Florida Progress Corporation and subsidiaries as position of Florida Progress Corporation and subsidiaries as of December 31,1990, and the results of their operations . of December 31,1989, and the results of their operations and their cash flows for the year ended December 31, and their cash flows for each of the two years ended 1990, in conformity with generally accepted accounting December 31,1989, in conformity with generatiy accepted principles. accounting pnnciples.
1 f %"'* y Q WW 4 St. Petersburg. Florida Tampa, Florida January 28,1991 January 29,1990 i
I
.30
- -.- - - = . . - . - . . ~ - - . - .
< e CONSOLIDATED FINANCIAL STATEMENTS
' FLORIDA PROC,RE 5s CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE Yi ARS E NDEo DECEMBlR 31.1990.1989 AND 1988 On (n#llions, except per share amounh) 1990 1989 1988 REVENUES:
Electric utility $1.709.1 $ 1,627.0 $ 1,468.5
_ Diversified 301.7 274.3 270.1 2,010.8 1,901.3 1,738 6 EXPENSES:
Electric utihty:
Fuel and purchased power 666.6 621 4 556.3 Other 257.4 248.4 232.2 Operations - 924.0 869.8 788.5 Maintenance 126.2 131.4 111.7 l~ Depreciation 161.1 155.3 136.8 I
Taxes other than income taxes 119.9 107.3 97.3 1,331.2 1,263.8 1,134.3 Diversified.
l- Cost of sales 185.1 172.2 177.3 Other 60.4 57.1 67.5 245.5 229 3 244.8 INCOME FROM OPERATIONS 434.1 408.2 359.5 INTEREST EXPENSE AND OTHER:
' interest expense 144.4 125.7 111.7
~ Allowance for funds used during construction (4.2) (5.2) (4.1)
Preferred dividend requirements of Florida Power 16.8 16.8 16.8 Other income, net (5.1) (7.2) (8.5)
~
L 151.9 130.1 115.9 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXE5 282.2 278.1 243.6 income taxes 102.4 92.0 65.0 INCOME FROM CONTINUING OPERATIONS 179.8 186.1 178.6 l- DISCONTINUED OPERATIONS, net of income taxes-Income (loss) from operation: ' (.8) - 1.0 1.2 -
Provision for loss on disposal (14.2) - -
Income 00ss) from discontinued operations (15.0) 1.0 1,2 NET INCOME -
5 164.8 $ 187.1 $ 179.8 AVERAGE SHARES OF COMMON STOCK OUTSTANDING S1.3 51.1 51.1 EARNINGS PER AVERAGE COMMON SHARE:
Continuing operations $3.50 $3.65 $3.50 Discontinued operations (.29) .02 .02 53.21 $ 3.67 $ 3.52
-The accomparyng noteure an integralpart of these hnanval statements 31 r
C O N S O L I D A-T E D FINANC1AL S T A T E -M E N T S FLORIDA PROGRESS CORPORATION CONSOLIDATED BAL ANCE SHEET $
. DECEMBE R 31,1990 AND 1989 On mdhons) 1990 1989 ASSETS PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service and held for future use 54,355.2 $ 4,156.8 Less; Accumulated depreciation 1,503.9 1,383.4 2,851.3 2,773.4 Construction work in progress 141.2 124,7 Nuclear fuel, net of amortization of $218.7 in 1990 and $196.2 in 1989 84.2 100.0 Net electric utility plant 3,076.7 2,998.1 Other property, net of depreciation of $80.1 in 1990 and $71.1 in 1989 343.7 268.9 3.420.4 3,267.0 CURRENT ASSETS:
Cash and equivalents 13.2 32.2-Accounts receivable, net 183.6. 184.6 Current portion of leases and loans receivable 170.3 7.5 Inventories, primanly at average cost:
Fuel 103.9 86.0 Utility materials and supplies 92.4 79.1 Diversified materials and products 9.9 26.7 Underrecovery of fuel cost 7.0 21.4 Other - 15.0 12.5 600.3 450.0 NET ASSETS OF DISCONTINUED OPERATIONS 73.8 98.6 OTHER ASSETS:
Investments:
Leases and loans receivable, net 516.9 485.7 Marketable securities 165.5 138.6-Joint ventures. partnerships and unregistered stock 112.5 47.5 Nuclear plant decommissioning fund 55.2 41.2 Deferred insurance policy acquisition costs 45.6 36.9 Other 55.7 44.9 951.4 794.8 The accompanysng notes are an integralpart of these hnancial statemerits
(
i l
l l
(In endlo, \ h 1990 1989 CAPITAL AND LIABILITIES {
COMMON STOCK EQUITY;
. Common stock without par value,250,000,000 shares authorized, 51,700,926 shares outstanding in 1990 and 51,051,200 in 1989 $ 670.5 $ 646.6 Retained earnings 753.8 725.7-1.424.3 1,372.3 CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 133.5 133.5 With sinking funds 100.0 100.0 LONG-TERM DEBT 1,326.2 1,125.8 l l y
TOTAL CAPITAL 2,984.0 2,731.6 ;
CURRENT LIABILITIES:
Accounts payable 75.4 103.0 Customers' deposits 64.9 59.2 Taxes payable 19.6 12.0 Accrued interest 39,5 36.4 Other 49.8 55.1 249.2 265.7
. Notes payable _
578.1 390.9
- Current portion of long term debt 102.9 107.7 930.2 764.3 DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 822.6 803.1 Unamortized investment tax credits . 147.9 154.9 Insurance policy benefit reserves 98.8 86.0 Nudear refueling outage reserve 5.8 19.9 Other 56.6 50.6 1,131.7 1,114.5 COMMITMENTS AND CONTINGENCIES (Note 12) 55,045.9 $ 4,610.4 33 g - .-- --e .
m.r y y 7 9
I C O N S O L I- D A T E D FINANCIAL STATEMENTS l
l FLORIDA PROGREs5 CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YE ARs ENDED DECEMBER 31,1990.1989 AND 1988 (In mdhons) 1990 1989 1988 OPERATING ACTIVITIES:
Income from continuing operations $179.8 $186.1 $178 6 Adjustments for non cash items:
Depreciation and amortization 207.4 191.6 186.7 Deferred income taxes and investment tax credits, net 52 41.6 2 .1 Changes in working capital, net of effects from acquisition or sale of businesses:
Accounts receivable 11.6 (50 5) (4.7)
Inventories (29.4) (22.1) (14.3)
Overrecovery(underrecovery)of fuel cost 14.4 (54.7) 57.8 Accounts payable (27.9) 31,5 (12.1) '
Other 13.7 28.4 4.1 Other operating activities (1.1) 19.5 23.1 Cash provided by continuing operations 373.7 371.4 456.3 income (loss) from discontinued operations (15.0) 1.0 1.2 Adjustments for non cash items, primarily loss provision in 1990 23.6 5.5 (3.7)
Cash provided by (used for) discontinued operations a.6 6.5 (2.5) 382.3 377.9 453.8 INVESTING ACTIVITIES:
Property additions (including allowance for borrowed funds used during construction) (327.4) (318.3) (239.9)
Proceeds from sales of properties 31.1 13.8 11.9 Purchase of leases, loans and securities (364.2) (187.6) (98.8)
Proceeds from sale or collection of leases, loans and securities 135.0 33.5 31.4 Acquisition of businesses (36.2) (8.4) -
Proceeds from sales of businesses .1 40.5 3.3 investments in joint ventures, partnerships and unregistered stock (78.9) (16 b) (38.3)
Distributions from joint ventures and partnerships 2.5 29.4 -
Investing activities of discontinued operations (.8) (3.9) 6.1 Otherinvesting activities (12.0) (10.9) (11,2)
(650.8) (428.4) (335.5)
FINANCING ACTIVITIES:
Issuance oflong-term debt 306.5 284.3 174.9 Repayment oflong term debt (136.1) (303.6) (153.1)
. Sale of common stock 23.9 - -
l Dividends paid on common stock (136.7) (131.7) (127.6) l Increase in short-term debt 189.4 225.8 31.2 l Financing activities of discontinued operations 2.0 (5.2) (30.6)
Other financing activities - .5 -
(2.2) 249.5 69.6 (107.4)
L NET INCREASE (DECREASE)IN CASH AND EQUIVALENTS (19.0) 19.1 10.9 8eginning cash and equivalents 32.2 13.1 2.2 ENDING CASH AND EQUIVALENTS S 13.2 $ 32.2 $ 13.1 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the penod for:
Interest (net of amount capitalized) 5141.3 $ 121.9 5109.8
, income taxes (net of refunds) S 84.1 $ 46.5 $ 30.7 The xcompanyrng notes are an integralpart of Urese hnanad statements
FLORIDA PROGRESS CORPORATION CONSOLIDATED STATEMENTS OF SH AREHOLDERS' EQUITY FOR THE YE ARs ENDED DECEMBER 31,1990.1989 AND 1988 (in mdlums, except share amcunt0 Cumulatwe Preferred Stock of Flore Powr Without With Common Retained Sinking sinking Stock Eamings Funds Funds
- Balance, December 31,1987 $646 6 $618.1 $13?.5 $100.0 j Net income - 179.8 Cash dividends on comon stock ($2.50 per share) (127.6) l Balance, December 31,1988 6466 670.3 133.5 100.0 l
Net income 187,1 l Cash dividends on common stock ($2.58 per share) ;
(131.7) _
Balance, December 31,1989 646.6 725.7 133.5 100.0 Net income 164.8 Common stock issued - 649,726 shares 23.9
- Cash dividends on common stock ($2.665 per share) (136.7)
Balance, December 31,1990 5670.5 5753.8 5133.5 5100.0 The accompanyng notes are an integralpart of these hnarcalstatements i
N O T E S T O C O N S O LID A T E D FIN A N CI A L S T A T E M E N T S (1)
SUMMARY
OF SIGNIFICANT Utility Revenues, Fuel and Purchased Power Expenses -
ACCOUNTING POLICIES Florida Power accrues the non. fuel portion of base revenues
'#5 "" ""
General- Florida Progress Corporation (the Company)is Revenues include amounts resulting from fuel and exempt from regulation as a registered holding company c nservation adjustment clauses, which are designed to under the Public Utihty Holding Company Act of 1935 Its permit full recovery of these costs. The adjustment f actors largest subsidiary, representing 70% of total assets,is are based on projected costs for a six month period. Reve-Florida Power Corporation (Florida Power), a public utility nues and expenses are adjusted for differences between engaged in the generation, transmission, distribution and remra e i el. Purchased power and conservation costs sale of electric energy within Florida.
and amounts { included in current rates. The cumula The consolidated financial statements combine the cost difference is shown in the balance sheet as overrecovery financial results of the Compary and its majority owned or underrecovery of fuel cost. Any overrecovery or under-operations. All significant intercompany balances and recovery of costs, plus an interest factor, is to be refunded or intercompany transactions have been eliminated. billed to customers during the subsequent six month period.
- Investments in 20% to 50% owned joint ventures are The cost of fossil fuel for electric generation is charged accounted for using the equity method. to expense as burned. The cost of nuclear fuelis amortized Certain reclassifications have been made to prior year to fuel expense based on the quantity of heat produced for amounts to conform to the current year's presentation. the generation of electric energy in relation to the quantity f heat expected to be produced over the hfe of the nuclear Utility Plant - Utikty plant is stated at the original cost of fuel core.
construction, which includes payroll and related costs such as taxes. pensions and other fringe benefits, general and Earned Income on Finance Leases - The Company uses administrative costs and an allowance for funds used during the finance method for recognizing earned income from construction Substantially all of the utihty plant is pledged . finance leases, which are pomarily leveraged leases having as collateral for Florida Power's First Mortgage Bonds. terms of three to 25 years. Accordingly, earned income, ,5 3
1
including any residual values expected to be recognized, and Effective December 1,1990, Florida Power was autho-the related deferred investment tax credits are amortized as rized to apply new depreciation rates that will result in a revenues over the term of the transaction to provide an $35.8 million increase in annual depreciation expense. The approximate level return on the positive net investment. impact of interim depreciation rates, which increased depre-ciation expense by $14.8 million during the first nine months
' income Taxes -- Deferred income taxes have been of 1990, was reversed at the direction of the Florida Public provided on all significant book tax timing differences- Service Commission (FPSC) in the fourth quarter. The FPSC except during periods when applicable regulatory authori- is conducting a generic investigation of the need to provide ties did not permit the recovery of such taxes through rates currently for fossil plant dismantlement costs Subject to the charged to customers by Florida Power. outcome of this investigation, the FPSC staff's proposals The cumulative net amount of income tax timing differ- would require Florida Power to accrue an additional $27.6 ences for which deferred taxes have not been provided was million of annual expense related to this matter.
approximately $108 million at December 31,1990. As Florida Power charges maintenance expense with the allowed under current regulatory practices, deferred taxes cost of repairs and minor renewals of property The plant not previously provided are collected in customers' rates as accounts are charged with the cost of renewals and replace-such taxes become payable- ments of property units Accumulated depreciation is charged Deferred investment tax credits subject to regulatory with the cost,less the net salvage, of property units retired, accounting practices are being amortized to income over Allowance for Funds - The allowance for funds used the lives of the ielated properties. Additionally, oeferred dt.ng construction represents the estimated cost of capital investment tax credits associated with finance lease trans- funds Mquity and debt) applicable to utihty plant under actions are being amortized to revenues as described above- construct: . Recognition of this item as a cost of utility 4
Financial Accounting Standard No. 96, " Accounting for plant under unstruction is appropriate because it consti-Income Taxes" was issued in December 1987 and must be tutes an actual cost of construction and, under established adopted by the Company no later than 1992. The objective regulatory rate practices, Florida Power is permitted to eam of this standard is to recognize the amount of current and a return on these costs and to recover them in the rates deferred taxes payable and refundable for all events that charged for utility services while the plant is in service, have been recognized in the financial statements based on Similar treatment has been authorized by the FPSC for enacted tax laws at the date of the financial statements. the cost of funds applicable to certain existing generating The Company has determined preliminarily that the net units which were being held for future use. However, in com-effect resulting from the adoption of the standard would be pliance with the Federal Energy Regulatory Commission a reduction of the deferred income taxes on the Company's (FERC) requirements, the retum accrued on these units of balance sheet. These reductions in deferred income taxes $9.7 million through December 31,1987, was deferred.
are primarily applicable to Florida Power and represent the The FPSC and FERC allowed Florida Power to record $8.8 tax effects of those timing differences for which deferred million in other income in 1988 and $.9 million in 1990 for income taxes have been provided in prior years at higher the deferred amounts associated with the units that are statutory rates, partially offset by the tax effects of those being retumed to service and which are now included in the timing differences discussed above for which deferred rate base.
income taxes have not been provided. When Florida Power The average rate used in computing the allowance for records these reductions in deferred income taxes, a funds was 8.0% for 1990,1989 and 1988.
regulatory payable for the amount will also be recorded and insurance Policy Acquisition Costs and Benefit Reserves -
there will be no effect on net income. Florida Power expects The Company defers recoverable costs in its insurance oper-to recognize these tax effects in future consumer rates when ations that directly relate to the production of new business.
l such timing differences reverse.
These costs are amortized over the expected premium paying The Company expects to recognize a small one time period. Reserves are established out of each premium pay-cumulative benefit to income in the implementation year. ment to provide for the present value of future insurance from the reduction of deferred taxes for the diversified policy benefits using reasonable assumptions for future 7
opeiations. The effect on net income for subsequent years is investment yield, mortality, morbidity, withdrawals and the not expected to be material, except for years in which there risk of adverse deviation, is a change in tax rates.
Marketable Securities - The Compar y considers all highly Depreciation and Maintenance - The Company provides hquid debt instruments purchased with a maturity of three l
for depreciation of the cost of properties over their esti, months or less to be cash equivalents. Fixed income sect.ri-l mated useful lives primarily on a straight line basis. Florida ties are carried at amortized cost and other marketable l Power's annual provision for depreciation, including a pro. securities are stated at the lower of aggregate cost or vision for nudear plant decommissioning costs, expressed as market value.
I a percentage of the average balances of depreciable utility At December 31,1990, the market value of marketable 36 plant was 4.0% for 1990 and 1989 and 3.7% for 1988. securities exceeded cost by $6 million.
l l
(B) DISCONTINUED OPERATIONS balances related to this segment have been segregated in October 1990, the Company announced its from the ongoing operations of the Company in the
intention to sell its building products operations as part of accompanying financial statements for all years presented.
its strategic planning effort to review the long-term direction Revenues for this segment v.ere $218 8 milhon, $228.1 of the Company. The building products companies are million and $263.4 million for the years ended December involved in a variety of building related operations including 31,1990,1989 and 1988, respectively. Income tax benefits distribution and manufacturing of aluminum windows, included in operating results for these periods were $ 1 distribution of other aluminum products, air conditioning million, $3 2 million and $1,4 milhon for the years ended equipment, plumbing, irrigation and pool supplies The December 31,1990,1989 and 1988, respectively The Company plans to sell or otherwise dispose of these following amounts are included in " Net Assets of Discon-operations throughout 1991, and has retained an outside tinued Operations" as of December 31,1990 and 1989, investment banking unit to assist in this process, On m eansi mo 19g9 The Company provided for the disposition costs and Property and equipment, net s30 4 $ 400 future operating losses of the building products segment in current anets 66 1 71.7 1990, which reduced earnings by $14.2 million, net of 0"*'*"'" 17 M1 Total anets 98 2 122 8 applicable tax benefits of $1.7 milhon.The accompanying ten uawies 24 4 24 2 financial statements account for these companies as
td"*" 572 8 $ 98 6
" Discontinued Operations" Accordingly, the results and -
(3) INCOME TAXES On maons) 1990 1989 1988 Components of income tax expense.
Payable currently.
Federal g 84 3 g 41.1 g 70 3 state 13 5 67 69 97 6 478 27 2 Deferred, net (see below)-
Federal 7.0 41.8 32 8 state 30 86 82 10 0 50 4 41 o Amorteation of investment tax cred>ts net 0 0) (9 4) (4 6) 100 6 88 8 63 6 Tax benefits related to dmontinued operatons 18 32 14 s102 4 5 92.0 t 65 0 Components of deferred income tax:
Difference between financial and tax accounting for leases s 401 $ 44 0 $ 461 Excess of accelerated over stra:ght.hne tax depreciation 17/3 32 4 29 9 Underrecovery (overrecovery) of fuel cost (4 0) 12.3 (2 2.8)
Difference between financial and tax accounung for property sales (9 6) (2.3) -
Book deprecaten on construction costs and other property items deducted for tax purposes, net of additions ( 26.1) (10 9) 40 Flow through of " unprotected ' def erred mcome taxes -
(7 6) (14 7)
Altematr.e minimum tax carryforward 4.9 (3 7) 97 Other (12.6) (13 8) (11 2) s 10 0 $ 5o 4 $ 41.0 The provision for income taxes as a percent of income before taxes and preferred dividend requirements was less than the statutory federalincome tax rate for 1989 and 1988. The primary differences between the statutory rate and the effective income tax rates are detailed below:
1990 1989 1988 Federal statutory income tax rate 3=10 ': 34 0 % 34 0 %
State income tax, net of federalirKome tax benefits 39 35 38 Amortuaton of investment tax credits (18) (3 2) (4 0)
Flow through of " unprotected" deferred income taxes -
(2 6) (5 6)
Other 10 (14) (3 8)
Effectue income tax rates M 7% 30 3 % 24 4 % y
obligation for postretirement benefits be fully accrued by
-(4) RETIREMENT BENEFIT PLANS the date employees attaia f ull ebgibihty to receive such The Company and certain of its subsidiaries have a benefits The Company and certain of its subsidiaries non contributory defined benefit pension plan covering provide certain health care and hfe insurance benefits for
- substantially all employees. The benefits are based on retired emphyees Employees become ehgible for these length of service, compensation dunng the highest con.
secutive 60 of the last 120 months of employment and benefits wh en they reach normal retirement age while working fo the Company. Assuming no changes are made social secunty benehts. The companies make annual to the carrant benefits that retirees receive, the Company contributions to the plan based on an actuarial determina.
tion and in consideration of tax regulations and funding has prelmilarily estimated that its habihty would be in the range of $100 milkon to $150 milhon The Company's requirements under f ederallaw.
pohcy since January 1,1985 has been to accrue benefits Based on actuarial calculations and the funded status of currently payable along with amortization of past service the pension plan, the Company was not required to costs of current retirees. The Company has accrued $20 6 contnbute to the plan for 1990,1989 or 1988. Shown milkon at December 31,1990 using this method. The below are the components of the nei pension benefit Company expects its annual cost to increase under the new calculations for those years:
Inc 19so standard but has not calculated the effect of such and pn moons) 1988- expects that a substantial portion would be recoverable from customers through rates.
t rNt cost 1B5 Actoal return on plan assets 19 2 (64 1) (44 7)
Net amortuation and deferral 65 F) 32 0 16 1 (5) LEASES AND LOANS RECEIVABLE Net pension cost (beneht) t 4) (15) (19) At December 31,1990 ano 1989, investments in 4 14 1.7 g ggg Regulatory adiustment gg Net pension cost (benef1t) recognaed s- $ (1) $ ( 2) On moona W50 1989 The foHowing assumptions were used in the calculation Anance leases Rentais rece,vadie sx2s $254 5 of pensioncosts: Unguaranteed residual values 209 0 202 7 GN 1989 1988 ame mm (82 W Dacount rate 7.5 % 83% 85% ene emnt W mm WD (3G Expectedlong-terrn rate of retum 90% 9 0 *. 9 0 *. M77 338 0 Rate of compensation increase 68% 68% 7o%
Loans receivable The following summarizes the funded status of the commerciai 3m6 129 1 nest mortgage loans on real estate uo 18 5 pension plan at December 31,1990 and 1989. t0 0 96 Insurance pohcy loans nn muons) 1%D 1989
' D72 Accumulated benefit obhgation Nn A anu f ri ues (2 o_)
Vested $U6.4 $1641 24.7 6W 2 4932 Non vested 33 9 Lea Current pomon 116 3 75 1811 198 o Effect of pro!ected compensation increases 80 3 84 o 5516 9 $485 7 Projected beneht obhgation 261.4 282.0 Plan assets at market value M4e 383o s 92 6 $101o ing leveraged buyouts) are collaterahzed by first mortgage
$Nfto$tIaIn hens on equipment or real estate.
consistingof the folicwngcomponents.
Unrecogneed transition asset s 60 1 $ 651 Finance leases consist pnmarily of leveraged invest-Unrecogneed pnor service cost (14) (1 Si ments in aircraft, which represent 77*. of rentals receivable and residual values at December 31.1990.The majority of
ifNn7eNe"n3tYa'[
d n 33 9 37 4 these teases have terms of 15 to 22 years, with a maximum estimated expenence sW6 s tol o of 22 years. The rentals receivable represent unpaid rentals less pnncipal and interest on non recourse third party debt The following actuarial assumptions were used in cal.
participation The Company's share of rentals receivable is culating the plan's year end funded status: subordinate to the share of the debt participants who also g39 3939 have a security interest in the leased property. Net contrac-tual matunties of rentals receivable under these contract >
te f pensation increase 6 are $14.3 milhon, $15.2 million, $12.2 milhon, $14J Financial Accounting Standard No.106," Employers' milkon and $16.4 milhon for 1991 through 1995, respec-Accounting for Postretirement Benehts Other Than Pen- tively, and $190.2 milhon thereafter. Deferred taxes app-sions" was recently issued and is effective for the Company cable to leveraged leases were $271.0 milhon and $223.9 M beginningin 1993. This standard requires that an employer's milhon at December 31.1990 and 1989, respectively.
l Components of income recognized from leveraged additional commercial paper capacity which became avall-
! able in early 1991. The additional commercial paper capacity leases were as follows:
pi mahans > 190 1989 1988 was added pomarily to replace bank borrowings descobed below. The amount unused under these knes of credit as of no t s ) t e are nome wes s1 5 95 5(21) December 31,1990 was $626.1 milhon. The short term Amortization of investment tax credits ?9 44 45 debt outstanding at De(ember 31,1990 and 1989, ii E ne 5n $ 10 5 $ 10 3 consisted of commercial paper of $139 2 milhon and
$136 6 milhon, respectively, bank borrowings of $402.9 milhon and $234.2 milkon, respectively, and $ 36 milhon and $20 ~! milhon, respectively, of other borrowings (6)SHORT TERM DEBT Interest rate options under kne of credit arrangements vary At Dece nber 31,1990, the Company and its consoh- from sub pnme or money market rates to the pnme rate.
dated subsidiaries had knes of credit (Mahng $742 milkon, Banks providing knes of credit are compensated through of which $175 milkon was used to support existing com- fees, Commitment fees on knes of credit vary between 1/8 mercial paper f acihties ar d $425 milhon was for support of and 1/4 of i k (7)LONG TERM DEBT The Company's long term debt is scheduled to mature as f ollows:
Interest (In indhons) Rata 1WD 1989_
Flonda Powet Corporaton.
First mcrtgage bondt Matunng through 1995 October 1,1990 4 75 % s --
$ 13 6 May 1,1992 4 25 % 14 4 14 4 Apnl 1,1995 4 63 % 18 7 18 7 November 1,1995 4 98 % 1$ / 157 Matunng 1996 through 2000 7 86%(a) 112 2 1122 Matunng 2001 through 2003 7 66%(a) 2t'0 0 280 o Maturing October 1,2006 8 75 % 80.0 800 Premium, being amort: zed over term of bonds ?7 3i Guarantee of pollution control revenue bondi Matunng 2000 through 2012 9 34%(a) 132 0 132 6 Annual tends bonds matunn;in 2012 and 2013 6 00%(a) 106 0 1086 Notes matunng 1990-1991 8 67 %ta) 1s 0 1655 1992 1997 8 38%(a) 2% 0 90 o Progress Capital Holdings, inca Notes rnatunng 1990-1991 8 62 %(a) 6TO 44 o 1992-2001 8 79 %(a) 22fi 3 36 3 Progress Leaung Corporation (All due within 5 years) 9 49%(a) 4k2 5/ 0 Other subudianes. debt matunng through 2007 1150%(a) 52 7 u 8, 1.4 M 1 1,2 3 3 $
Less' Current portion of long term debt 1D2 9 107. ',
s13.4 1 $1.125 8 (3) We.gtited average snterest rate at Daember 31. I930 The combined aggregate maturities of long term debt year and (ne bondholders may e'ect to tender their bonds for 1991 through 1995 are $102.9 milhon, $217.0 milhon, at that time. The bonds outstanc ing at any point in time are
$205.8 million, $75.2 million and $45.6 milhon, rc;pec- supported by a $100 milhon three year bank kne of credit tively. In addition, all of Flonda Power's First Mortgage arrangement with money market based interest rate Bond issues have an annual 1 % sinking fund requirement. options and a 1/8% commitment fee.
These requirements, which total $6.7 million for 1991 and After year end, the Company estabbshed a new, 1992 and $5.5 milkon for 1993,1994 and 1995, are private $400 mdhon medium term note program with expected to be satisfied with property additions. matunties ranging from 9 months to 30 years. Interest rates The interest rate on the AnnualTender Pollution are structured under this prcgram to allow for fixed and Control Rcvenue Bonds will be adjusted March 1 of each floating rate options S
(8) PREFERRED AND PREFERENCE STOCK {
The Company has 10 million shares of authorized but unissued Preferred Stock without par value. Florida Power has 4 I million shares of authorized Cumulative Preferred Stock, $100 par value, of which 2.3 milhon shares are outstanding. In j' addition, Horida Power has i milhon shares of authorized but unissued Preference Stock, $100 par value, and 5 million shares of authonzed but unissued Cumulative Preferred Stock, without par value.
Minimum preferred stock redemption requirements during the next five years are $2.5 milkon in 1992 and $12.5 milkon i yearly in 1993 through 1995 A summary of outstanding Cumulative Preferred Stock of Florida Power follows: ,
Current Outstanding at !
Dmdend Redemption Shares December 31 )
Rate Pire Authorued Outstanding 1990 1989 (In mdhans)
Without sinkmg fundt not sutyect to mandatory redemption 4 00 % $104 25 40.000 39,980 s 40 ; 40 4 40 % $102 00 75.000 75 000 73 7.5 4 58 % $ 101.00 100.000 99.990 10.0 10 0 4 60 % $103.25 40,000 39.997 40 40 4 75 % $102 00 80.000 80.000 80 80 7 40 % $103 22(a) 300.000 300.000 30 0 300 7.76% $102 99(b) 500.000 500,000 50 0 50 0 8 80 % $101.00 200.000 200.000 20 0 20 0 :
513 3 $ $13 3.5 With 9nking funds sutyect to mandatory redemption 7.08 % $107.08(c) 500,000 500.000 s <,0 0 $500 7.84 % $107.84(d) 500.000 500 000 $0 0 50 0
$100 0 $100 0 bO2 48 4% August 15. f 992 (d I104 72 d'tri Nevernber 1% f 99f,5 f02 % A fter Novemher ti 199ti $ f on00 a*ter Mwmocr f% 2007
@) $1022f afterletvun 1% 1944 M $1D3 92 4 fter MwmMr 1% f 992, $ 101 % 4*ter November 1% 199). $ 100!.v) efter November 1% 1994 (9) NtJCL. EAR OPERAT!ONS customers through the fuel adjustment clause at a rate of Jointly Owned Plant - Florida Power's 90% ownership 5.001 per net nuclear generated kilowatt hour and are paid share in the Crystal River nuclear unP. .w of December 31, to the DOE quarterly. Florida Powei is currently storing 1990 amounted to $562.3 million of utility plant in service, spent nuclear fuel on site and has sufficient etorage capacity
$266 million of construction work in progress, $84.2 million in place or under construction for fuel bumed through the of unamortized nuclear fuel, and $273.9 million of accumu. year 2009.
lated depreciation, which includes $69.7 milhon of Plant Refueling Outages - Florida Power accrues a reserve accumulated provisions for decommissioning costs. Each for maintenance and refuehng expenses anticipated to be participant provides for its own financing. Florida Power's incurred during scheduleo nuc' ear plant refuehng outages.
share of the operating costs is included in the appropriate A midcycle maintenance outage is scheduled for five weeks expense captions in the consolidated statements of income. beginning October 1991 and is estimated to cost $9.2 mil- .
Plant Decommissioning Costs - Florida Power's nuclear hon. The next refuehng outage, scheduled for eight weeks 1 plant depreciation rates include a provision for future beginning in October 1992, is presently estimated to cost decommissioning costs that are recoverable through rates $20.5 million.
charged to customers. Florida Power is placing its collections insurance - The Price-Anderson Act currently hmits the in a managed trust fund. The recovery from customers, plus liabikty of an owner of a nuclear power plant for a single interest camed on the trust fund, are intended to be suffi- nuclear incident to $7.8 biHion. Florida Power has purchased cient to cover Florida Power's share of the future dismantkng, the maximum available commercialinsurance of $200 mil-removal and land restoration costs. Florida Power has a lion with the balance provided by indemnity agreements license to operate the nuclear unit through December 3, prescribed by the Nuclear Regulatory Commission. In the 2016, and contemplates decommissioning beginning at event of a nuclear incident at any U.S. nuclear power plant, that time. Total future decommissioning costs are estimated Florida Power could be assessed up to $66 milhon per to be approximately $ 205.5 million in 1990 dollars. Decom- incident, with a maximum assessment of $10 milhon per missioning expense was $11.8 million for 1990, $9.8 million year. In addition to this habihty :nsurance, Florida Power for 1989 and $5.4 million for 1988 The FPSC and FERC carries extra expense insurance with Nuclear Electric approved an increase in the annual decommissioning ex- Insurance, Ltd. (NEIL) to cover the cost of replacement pense from $9.8 million to $11.8 milhon beginning in 1990. power during prolonged outages of the nuclear unit. Under Fuel Disposal Costs - Flonda Power has entered into a this pokcy, Florida Power is subject to a retroactive premium contract with the Department of Energy (DOE) for the assessment of up to $2.8 million in any year in which pohcy transportation and disposal of spent nuclear fuel. Disposal losses exceed accumulated premiums and investment
'+ 0 costs for nuc! ear fuei consumed are being cotiected from income.
(10) BUSINESS SEGMENTS The Company defines its pnncipal business segments as utiitty and diversified operations. The utikty is engaged in the generation, transmission, distribution and sale of electric energy The diversihed segment includes the energy and transporta-tion group's coal mining, procurement and transportation operations that have significant sales to the utikty Other continuing diversified operations include activities in leveraged leasing commercial finance, hfe insurance, real estate and technology.
The Company's business segment information for continuing operations for 1990,1989 and 1988 is summanzed below.
No single customer accounted for more than 10% of unaffikated revenues intra segment sales have been ehminated and the Company's equity in the eamings of partnerships and joint ventures has been included in revenues.
(in m,thomi 1940 M89 1488 Revenues Utihty $ UO91 $ 1.627 o $1.468 5 Dwenhed E nergy and tramportation grcmp Coal sales to ciectnc utJity 285 2 294 3 308 1 E xtemal customen 171 4 125 8 1064 Other diwni6cd 130 7 149 8 164 4 2.d6 4 1,196 9 2,o474 Elinunatiom (26s6) (?95 6) 0088)
Revenues from extemal t ustomers $2,010 8 $ 1.9013 $1738 6 locome from operations Utihty $ 377.9 $ 3632 $ 3342 Dwenefied
[nergy and tramportatior. poup if, 9 16.9 15 2 Other duenitied 39 3 281 10 1 434 1 408 2 359 5 Interest and othet expen e 151 9 115 9
_1301 Income from continuing operations bt fore income taxes $ 282 2 $ 2781 $ 243 6 IderittfatWe assets Utihty $3 s1s 8 $3.413 8 $3285 3 Dueruhed Energy and tramport. don group 264.3 217 6 188 5 Other c;wenihed 1,26s II 979 o 798 5
$5.045 9 $4 610 4 $4.272 3 Depreciation.
Ut:hty $ 161.1 $ 155 3 $ 1368 Dwersihed Energy and transportation poup 7.4 46 34 C$ther duerufed _
45 50 , 52 5 173 0 $ 164 9 $ 145 4 Capital additions Utihty $ 216 5 $ 26o8 $ 206 8 Dwersihed inc<gy and transportation groep 19 7 16 6 87 Other dweruf!ed 31] 409 23
$ 327 4 $ 318 3 $ ? )9 9 (11) RATES AND REGULATION December 31,1989. Extension of the bilkng credit reduced Retall Rates - In December 1988, the FPSC approved a 1990 utihty revenues by $12.5 milkon in December 1990,
$17.3 million increase in base rates effective January 1, the FPSC voted to discontinue the customer bilkng credit, 1989. This increase in base rates included an additional effective January 1,1991.
$10.7 milhon to cover increases in depreciation and nuclear Florida Power plans to file,in the first quarter of 1991, decommissioning expenses and $6 6 n:ihion related to "un- a petition with the FPSC requesting that it conduct a hmited protected" deferred income taxes. The adjustment for de- proceeding to consider an increase in Florida Power's base ferred income taxes resulted from substituting an $11.9 rate revenues for fossil plant depreciation expenses milhon additional refund in 1989 for the $18 5 milhon associated with dismantlement costs. See Depreciation and refund made in 1988 through a customer bilhng credit. Maintenance in Note 1. The FPSC is expected to rule in in December 1989, the FPSC voted to continue the March on whether it will conduct a proceeding on Florida customer bilhng credit that was scheduled to expire on Power's requested revenue increase hmited to the issue of 41
increased depreciation expense, in the event the FPSC rules purchase kvels and other hnancial commitments Additional against conducting a hmited proceeding, Florida Power commitments will be required in the future to supply Florida intends to file a full revenue requirements rate proceeding. Power's fuel needs Florida Power has entered into long term contracts with Wholesale Rates - Florida Power gave reductions to its The Southem Company for up to 400 megawatts of whoicsale customers consistent with the retail rate treat. purchased power that began on February 1,1990 and ment for both 1989 and 1990 end expects to file a rate chanEe to ehminate the customer tdirg credit for whole.
sale customers effective January 1,1991. off. Balance Sheet Risk and Concentrations of Credit Risk
- beveral of the Company's subsidiaries are general part-Fuel Cost Hearings - In December 1988, the FPSC began nas b unconsohdated partnerships and joint ventures The hearings to consider contentions of Florida Power's largest Company or subsideries have agreed to support certain industrial customer and others that certain procurement and transportation activities by Electric Fuels Corporation loan agreements of the partnuships and joint ventures The total of the debt suppoit agreements is $113.3 million at were imprudent. In August 1989, the FPSC disallowed December 31,1990, of which $14 milhoa are cash deh-approximately $ 5m milhon, plus interest, in fuel costs As a ciency agreements and $92.9 milhon are guaranties As a result,1989 insome was reduced by approximately $5 general partner, those subsidiaries are potentially hable for milkon. The company refunded the disallowed costs to all the partnerships' obhgations if the other partners failed customers as adjustments to the fuel charge during 1990.
to perform their obligations and if the partnership assets, in January 1990, the FPSC issued an order adopting a c nsisting primarily of land and buildings, were worthless, market based pricing methodology to determine Florida those subsidiaries could be liable for an additional $139.7 Pcwer's recoverable fuel costs for purchases from an affil-milhon, which represents partnership kabihties exceeding lated coal suppher under a cost plus contract, effective April am unts as mentioned above.The Company considers 1,1989. The company requested the FPSC to reconsider its these credit risks to be minimal, based upon the asset values decision because the company believes the methodology supp rting the partnership habihties, improperly and unfairly reduces recovery of changes in the Progress Credit Corporation's (PCC) investments M price of coal. In September 1990, the FPSC voted to revise one of the two key elements objected to by Florida Power leases. loans and secunties include investments in the airkne and commercial real estate industries As a lessor. PCC had and deferred rukng on the other element. A final decision is investments in hnance leases, net of non recourse debt, of expected in the first quarter of 1991. If the FPSC afhrms its
$300 million in aircraft equipment and $20 milhon in initial decision on the remaining issue, the company esti-c mmercial real estate as of December 31,1990.
mates that up to $8 milkon of fuel costs would be dis-allowed. Florida Power recorded a reserve of $4 million in As a senior lender, PCC's loans to entities associated December 1990. pendmg a hnal decision, with the airkne industry totaled $162 million at December 31,1990 PCC's loans are secured by hrst mortgage liens on Due to the extensive outages experienced by the Crystal River Nuclear Plant from November 1988 to June 1989, aircraft, aircraft engines or spare parts. fhese loans are further collateralized, where applicable, by an assignment to the plant's operating performance is being reviewed by the PCC of the borrowers' lease agreements with third party FPSC. Pre filed testimony has been submitted. No provision users of the secured equipment and selected third party has been made for potential disallowances because man- 3 guaranties.
(- agement believes that nuclear plant personnel responded properly and worked dihgently to minimize outages. The At December 31,1990, PCC, as a senior lender, had cost of replacement fuel during the outages currently under receivables totakng $137 milhon from borrowers engaged
review is approximately $40 milhon. Additional hearings on in commercitI real estate activity, These loans are secured this matter have been scheduled for April 1991. by first mortgage liens on the related commercial real estate
(
i and selected third party guarantiet PCC has, in its portfolio, aircraf t equipment leased to
- (12) COMMITMENTS AND CONTINGENCIES Continental Airlines Inc. (Continental) either directly or as a Utility Construction Program - Substantial commitments tender to an operating lessor of equipment to Continental.
have been made in connection with Florida Power's Continenta' f4d a petition for reorganin. tion under the l construction program, which are presently estimated to re-Bankruptcy Code on December 3,1990. PCC's investment suit in construction expenditures in 1991 of $362 milkan In equipment currently used by Continental totals approxi-for electric plant and nuclear fuel.
mately $62 milkon net of non recourse debt and deferred Fuel and Purchased Power Commitments - To supply a income taxes on leveraged leases. Continental has continued portion of the fuel requirements of its generating plants, to operate its fhghts despite the hhng PCC believes the val.
Florida Power hat entered into various long-term commit- ue of the collateral as well as the guaranties underpinning ments tu provide fossil and nuclear fuels and to reserve the transactions and the loss reserves accrued to date are pipehne capacity for natural gas. In most cases, such sufhcient to prevent Continental's action from having a ma-d contracts contain provisions for price escalation, minimum tenal adverse effect on the Company,
. O Retrsactive insurance Premiums - As mentioned under (EPA) that it is a "potentially responWble party" under the Note 9, " Nuclear Operations," Florida Power is subject to Comprehensive Envimnmental Response Compensation retroactive premium assessments in connection with its and Liabikty Act and the Superfund Amendment and nuclear insurance. In addition, Florida Power current;y Reauthorization Act and may be required to share in the carries approximately $1.7 bilhon in property insurance cost of cleanup of waste disposal sites identified by the EPA.
provided through severaldifferent pohcies One of these in each instance, the Company's degree of responsibikty, if policies, which is also underwritten by NEIL, provides $1.1 any. appears to be small in relation to the total for the large bil! ion of excess coverage. Under this policy, Florida Power is number of "potentially tesponsible parties" involved Based subject to a retroactive premium assessment of up to $7.1 on the current status of these matters. management million in any policy year in which losses exceed funds beheves the likelihood is remote that these actions will result available to NFIL in a material adverse effect on the Company's future Waste Disposal 5fte Cleanup - Florida Power has received several notices from the Environmental Protection Agency QUARTERLY FIN ANCIAL DATA (Unaudited)
(Dollys on mdhorn cuept per sher amounts) ,
Three Months inded March 31 June 30 september 30 December 31 1990 Revenues $448.2 5489.9 $591.8 $480.9 Income from operations 76.4 107,1 152.9 97.7 !
Net income 29.1 43.7 58.1 33.9 ;
Eamings per average common share:
Continuing operations .57 .8f 1.41 .66 Discontinued operations -
(.01) (.28) -
Net income .57. .85 1.13 .66
~
Dividends per common share .66 .66 .66 .685 Common stock price per share High 40 % 38 % 37 % 39 Low 37 35% 33% 33 %
1989 Revenues $417.8 $464.5 $551.5 $467.5 income from operations 85.3 102.4 141.2 79.3 Net income 37.5 45.3 75.2 29.1 Earnings per average common share:
Continuing operations .72 .89 1.43 .61 Discontinued operations .01 -
.04 (03)
Net income .73 .89 1.47 .58 Dividends per common share .64 .64 .64 .66 Common stock price per share
.High 35% 36% 38% 40%
Low 33 % 33% 35% 36%
The business of the Company's largest subsidiary, Florida Power, is seasonal in nature and it is management's opinion that comparisons of earnings for the quarters do not give a true indication of overall trends and changes in the Company's operations. As explained in Note 1 to the Consolidated Financial Statements, Florida Power reversed $14.8 million of interim depreciation expense in the fourth quarter of 1990 previously recorded in the first three quarters of the year. This increased fourth quarter income by $9.2 mi!! ion. 43
S E L E C T E D D A T A 1 9 8 0 -
1 9 9 0 FLORIDA POWER CORPORATION Annual Cirtwth Rates (In perc ent) 1985-1990 19t@1990 1990 1989 1988 Electric sales (milkons of KWH):
Residential 6.2 5.3 12.415 5 11,786.9 11,065.6 Commercial 7.5 7.4 7,328.7 6,989.8 6,479.4 Industrial 1.8 (01) 3.455.7 3,766.1 3,680.6 Other 58 5.4 1,678.4 1.580.5 1,466.1 Total retail sales 5.9 4.9 24.878.3 24,123.3 22,691.7 Sales for resale (2.4) (5.4) 2,265.4 2.387.2 3.439.2 Total electnc sales 50 34 27.143.7 26,510.5 26,130 9 Residential service (average annual):
KWH sales per customer 24 1.5 12.319 12.059 11,754 Revenue per customer 0.3 4.2 5896 $845 $814 Revenue per KWH (in cents) (2.1) 2.7 7.27 7.01 6.93 Financial data:
Total capitakzation (in milkons) 2.3 4.2 52.633 4 $2,473 9 $ 2.359.5 Capitahzation ratiosw:
Shor1 term debt 8.2 16.5 7.4 % 4.7 % 10,3%
long term debt (3.1 ) (2.9) 38.7 40.2 34.7 Preferred stock (4.7) (3.3) 8.9 9.4 9.9 Common stock equity 3.3 2.9 45.0 45.7 45.1 Ratio of earnings to fixed charges (SEC method) 0.4 3.3 3.89 3.79 3.79 Embedded cost of long term debt (2.1) (0 8) 7.9 % 8.1 *s 8.0 %
Embedded cost of preferred stock (5.0) (1.4) 72% 7.2 % 7.2 %
Operating data:
Net winter generating capabikty (MW) 1.9 2.5 6.571 6 309 6.086 Net system winter peak load (MW) (2.9) 1.3 5,026 6,817 6,188 Net system summer peak load (MW) 5.5 4.1 5.946 5.832 5,309 BTU per KWH of net output 0.2 (0.4) 10,005 10,076 9,985 Construction additions (in millions) 6.0 (1.6) 5269.5 $254 8 $ 201.1 Percentage of construction expendttures generated internally (12.3) 17.9 52 % 73 % 100 %
Fuel cost per million 8TU (4.3) (1.8) 52.11 $ 2.10 $1.83 Average number of customers 3.8 3.9 1,135,499 1,101,817 1.060.971 Number of regular employees 1.3 2.9 5.570 5,553 5,512 N (a) Captahutwn growth rates cakulated on total dollar amount
. i 1987 1986 1985 1984 1983 1982 1981 1980 10,318.8 9,819.2 9,175.0 8,553.6 8,009.5 7,425.0 7,752.3 7,379.8 6,0164 5,573.0 5,106.6 4,547.7 4,118.6 3,895.2 3,735.2 3,581.1 3,349.4 3,122.3 3,166.0 2,989.0 2,701.0 2.715.5 3,288,3 3,481.0 1,355.0 1,319.3 1,268.4 1,188.8 1,142.9 1,094.9 1,038.5 987.7 21,039.6 19,833.8 18,716.0 17,279.1 15,972.0 15,130.6 15.814.3 15,429.6 3,064.1 3,336.2 2,556.4 3.317.3 5,802.0 4,739.3 4,322.2 3,953.3 24,103.7 23,170.0 21,272.4 20,596.4 21,774.0 19,869.9 20,136.5 19,382.9 11,356 11,255 10,940 10,638 10,388 9.964 10,758 10,643
$827 $914 $883 $818 $783 $720 $763 $591 7.28 8.12 8.07 7.69 7.54 7.23 7.09 5.56 l
l . $2,-341.0 $ 2,275.6 $ 2.3 50.2 $ 2,3 28.0 $ 2,305.4 $ 2,200.3 $1,971.5 $ 1,751.0 6.9 % .2 % 5.0% 2,0% 2.7 % 1.6 % 1.9 % 1.6 %
39.7 46.9 45.4 51.4 51.2 53.8 52.0 52.2 10.0 10.3 11.3 11.5 11.9 12.5 11.5 12.5 43.4 42.6 38.3 35.1 34.2 32.1 34.6 33.7 4.08 4.29 3.81 3.07 2.94 2=42 3.19 2.80 8.1 % 8.7% 8.8 % 9.2 % 9.1 % 9.6% 9.2 % 8.6 %
7.2 % 8.4 % 9.3 % 9.3 % 9.3 % 9.3 % 8.4 % 8.3 %
5,966 5,961 5,989 5,927 5,993 5.899 5,255 5,117 5.087 5,977 5,813 4,858 4,913 5.347 5,088 4,419 5,196 4,644 4,548 4,163 4,610 4,086 4,355 3,995 9,954 9,865 9,928 10,074 10,082 10,383 10,357 10,443
$192.8 $195.2 $201.2 $ 284.5 $ 285.8 $385.3 $ 379.8 $316,9 96 % 100 % 100 % 99 % 66 % 39?6 45 % 10 %
$ 2.09 $2.14 $ 2.63 $ 2.36 . $2.85 $2.78 $ 3.12 $ 2.52 1,023,222- 980,427 940,976 900,799 861,548 829,810 802,787 772,265 5,395 5,323 5,215 5,070 4,923 4,829 4,533 4,195
^
45
S- E1 - L ;E C' T E D _D A -T A 1 9 8 6 -
1 99 0
- FLORIDA PROGRESS CORPORATION (Dolkrs in mdhons encept per share arnounts)
Fwe Year Annual Growth (sn percenO 1990 1989 1988 1987 1986 Summary of operations:-
Utikty revenues 2.6 $1,709.1 $1,627.0 $1,468.5 $ 1,472.2 $ 1,530.5 Diversified revenues (continuing) 24.1 301,7 274.3 2'70.1 245.5 186.0 income from continuing operations 2.4 179.8 186.1 178.6 184.1 180.7
. income Ooss) from discontinued operations (15.0) 1.0 1.2 3.7 .5 Netincome .5 164.8 187.1 179.8 187.8 181.2 Balance sheet data:
Totalassets 7.0 55,045.9 $4,610.4 $4,2 72.3 $ 4,067.2 - $ 3,855.5 Capitatation:
Short termdebt - 28.7 5 681,0 $ 498.6 $ 366.5 $ 269.0 $ 89.5 .
Long-term debt- 2.1- 1,326.2 1,125.8 1,048.8 1,093.0- 1,240.3
; Preferred stock (2.5) 233.5 233.5 233.5 233.5 233.5 Common stock equity 7.0- 1,424.3 1,372.3 1,316.9 1,264.7 1,156,4 Total capitalization - 6.6 53,665.0 $ 3,230.2 $ 2,965.7 $ 2,860.2 $ 2,719.7 Capitalization ratios

Short term debt 18.6 % 15.4 % 12.4 % 9.4% 3.3%
Long term debt 36.2 34.9 35.4 38.2 45.6
- Preferred stock 6.4 7.2 7.8 8.2 8.6 Common stock equity 38.8 42.5 44.4 44.2 42.5 l Common stock data:
1 Average shares outstanding On milkons) 2.4 51.3 51.1 51.1 50.3 48.9 Earnings per share:
' Utikty . (1.0) 53.22 $3.28 $ 3.31' $ 3.30 $3.37 L Diversified 16.6- .28 .3 7 - .19 .37 .33 Continuing operations (.1) 3.50 3.65 3.50 3.67- 3.70 Discontinued operations
~
(.29) .02 .02 .07 . .01
~ Consolidated (1.9) 3.21 - 3.67 3.52 3.74 3.71 Dividends per common share 4.0 2.665 - 2.58 2.50 2.42 2.31
-Dividend payout 83.0 % 70.3 % 71.0 % 64.7 % . 62.3 % l Dividend yield - .
7,2 % 6.6% 7.3 % 7.6% 6.1 %
- Book value per share of common stock 5.0 $27.55 $26.88 $25.80 - $ 24.77 ' $23.26 Retum on common equity 11.8 % 13.9 % 13.9 % 15.5 % 16.4 %
l- .. Common stock price per share:
. High 540 % $40% $37% $43% $47 Low 33 % 33 % 32 29 % 30%
Close 38 % 40 35 32% 39 %
Price eamings ratio (year end)' 11.9 10.9 9.9 8.8 10.7 l- Otheryear end data:
- Number of employees 1.8 7,879 7,490 7,974 8,116 8,030 Number of common shareholders (2.7) 41,970 43,005 44,929 46,147 46,586 A
w .. ... ]
l D 1 'R E LC T O.' R S A N D O -F F I C E R S DIRECTORS' Lee H. Scott investor Dr. Jack 8. Critchfield St. Petersburg. Florida
Chairman, President and Chief Fxecutive Officer Robert T Stuart, Jr. !
' Michael P. Graney Rancher and Investor Partner ' Dallas, Texas
-Simpson Thacher & Bartlett (at orneys at law)
Jean Giles Wittner Columbus, Ohio -
President Andrew H. Hines, Jr. Wittner & Company (insurance consulting) !
Consultant - St. Petersburg, Florida
' Triangle Consulting Group St. Petersburg, Florida EXECUTIVE OFFICERS )
Frank M. Hubbard Dr. Jack B. Critchfield investor Chairman, President and Chief Executive Officer )
Orlando, Florida-
p g ]
Richard C, Johnson Executive Vice President ]
Partner Richard Kor an Johnson Simmons Company (a development company)
Clearwater, Florida Executive Vi e President and Chief Financial Officer Richard Korpan - - --
GROUP VICE PRESIDENTS Executive Vice President and Chief Financial Officer Allen J. Keesler, Jr.
Clarence V. McKee Utility Group -
Chairman of the Board WTVT Holdings, Inc. (a television station) .. Richard D. Keller
. Tampa, Florida Energy and Transportation Group
. Clarence W. McKee, Jr. Thomas S. Krzesinski investor- Finance and Life Group St. Petersburg, Florida Joseph H. Richardson Corneal B. Myers - Development Group Partner
. Peterson;Myers, Craig. Crews, OTHER OFFICERS
. Brandon & Puterbaugh, P.A. (attomeys-at law) Kenneth E. Armstrong Lake Wales, Florida GeneralCounsel Richard A. Nunis i Will am H. Bieberbach President . Senior Vice President,
.. Walt Disney Attractions Marketing and Corporate Development Orlando, Florida Jeffrey R. Heinicka
. Joan D. Ruffier Vice President andTreasurer GeneralPartner Sunshine Cafes (airport concessionaire) Dan R. Johnson
' Orlando, Florida Controller David R. Kuzma George Ruppel -
Senior Vice President, Finance President Modern Tool _& Die Company of Florida Stephen D. Purifoy Pinellas Park, Florida Secretary 47
_ _- _ _ - _ - . _ _ _ _ . _ < - .-. . -- ,_ ,.w%- - . -,,n.,,, , . - - . , ,w .,.w .y-y ,__psy, -,,5.. , .,,,_,%.,-- ..,,,y,--
I N V E S T O R I N F O R M- A T l O- N INVESTOR SERVICES COMMON STOCK LISTED -
' All dividend checks, shareholder reports, proxy material New York Stock Exchange and tax forms are handled from our St. Petersburg Pacific Stock Exchange corporate office. All correspondence concerning Ticker symbol: FPC address changes, dividend checks and related matters Newspaper listing: FlaPrg
.should be directed to:
Florida Progress Corporation ANNUAL REPORTS ON FORM 10 K AND Investor Services STATISTICAL SUPPLEMENT P. O. Box 33028 A copy of the Company's 1990 Form 10 K, without St.' Petersburg, Florida 33733 8028 exhibits, will be supplied without charge to shareholders Telephone (813) 824 6418 requesting it, A Florida Power Corporation 1990 Form Toll-Free (800) 352-1121 10-K, without exhibits, and a detailed Ten-Year Statistical Report also are available. Requests should be addressed to Investor Services at the address shown.
l TRANSFER AGENT AND REGISTRAR Inquiries conceming the transfer of common stock certificates of Florida Progress or preferred stock AUDITORS certificates of Florida Power should be directed to: KPMG Peat Marwick Manufacturers Hanover Trust Company Stock Transfer Administration P. O. Box 24935, Church Street Station ANALYSTS' CONTACTS
.New York, New York 10249 Richard R. Champion (813) 824 6428
. Telephone (212) 613 7147 Director, investor Relations DIVIDEND REINVESTMENT PLAN Mark A. Myers (813) 824 6422 Manager, investor Communications
. The Company offers a Dividend Reinvestment and .
Stock Purchase Plan (Plan) for shareholders of record.
At the end of 1990, approximately 40% of the CORPORATE OFFICES
Company's common shareholders participated in the Barnett Tower
. Plan. Under the Plan, the Company has the option to One Progress Plaza purchase shares for Plan participants with reinvested St. Petersburg, Florida 33701 dividends, optional cash payrnents and employee Telephone (813) 824 6400 payroll deductions by either issuing new shares or L purchasing shares at a nominal commission in the open
!- . market through an independent agent. The Company -
pays all of the costs of administering the Plan for share-holders. Plan enrollments, withdrawals and other correspondence should be directed to investor Services at the address shown, COMMON STOCK DIVIDENDS Record dates are normally on or about the fifth day of March, June, September and December. Quarterly dividends are customarily mailed to reach shareholders -
on or about the 20th day of March, June, September
'48 and December.
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