Text

Fl Progress Corp 1995 Annual Rept
	ML20108C685
Person / Time
Site:	Crystal River
Issue date:	12/31/1995
From:	Critchfield J, Korpan R; FLORIDA PROGRESS CORP.
To:	;
Shared Package
ML20108C682	List: 3F0496-13, Forwards Annual Financial Rept for 1995 & Annual Financial Repts for Ten Participating Owners of Crystal River 3; ML20108C685; ML20108C689; ML20108C699; ML20108C712; ML20108C734; ML20108C739; ML20108C751; ML20108C752;
References
	NUDOCS 9605070098
	Download: ML20108C685 (105)
	v • d • e

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8 - (Dollar + in millions, except per sham amounts) Annual Growth Rates - (in percent) .1995 1994-1994 1995 1990-1995 L 0PERATING RESULTS - Utility revenues - $2,271.7 $2,080.5 9.2 5.9 ' Diversified revenues -783.9 691.0 13.4 21.0 ^ - Net income 238.9 212.0' 12.7 7.7 DATA PER SHARE Earnings: Utility $2.27 - $2.05 10.7 1.1 Diversified .23 .23 5.0 Consolidated 2.50 2.28 9.6 3.2 Dividends 2.02 1.99 1.5 2.6 : Book value 21.55 20.85 3.4 3.2 - Closing stock price '35% 30 17.9 6.8 Stock price range 29% - 35% 24% - 33% ; FINANCIAL POSITION AT DECEMBER 81 Assets $5,791.1 $ 5,718.7l 1.3 2.8 Total capitalization 4,085.7 4,095.7? (.2) 2.2 Capitalization structure: Short-term debt 4.5% 2.6% Long-term debt 41.2 45.4 Preferred stock 3.4 3.5 Common stock equity 50.9 48.5: STHER STATISTICS ' Return on common equity 11.8 % 11.1 % Dividend yield ' 5.7% 6.7% ' Average common shares outstanding (in millions) 95.7 93.0( 2.9 . 4.4 Employees 7.174 7,394' (3.0) (1.9) See Note 7 to the Financial Statements for busin >ss segment information. Earnings and Dividends . Average Annual Total Returns

Per Share For the periods ended December 31,1995 -

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~ L.E T T E R T OHS H A :. EH:0LDERST To Our Shareholders: CONSOLIDATED EARNINGS RISE Consolidated earnings for 1995 totaled 5238.9 million, or Nineteen ninety-five was a year of solid achievement for 52.50 per share, compared with 5212 million, or 52.28 our utility operation. Florida Power Corporation con-Per share, in 1994, a 9.6 percent increase in earnings per tinued to 6nd ways to raise the level ofits performance. share. The increase in earnings reflected improved operat-While we recognize that the company is operationally ing results 'r m both Florida Power and Electric Fuels and 6nancially strong today, we know we must prepare it Corporation. for the competition that is beginning to characterize the utility industry. FI rida Power contributed 5217.3 million, or 52.27 per share. This compares with 5190.7 million, or 52.05 per The process of preparing for change has been both share, in 1994. The increase is attributed largely to higher exhilarating and stressful. Each new challenge calls for us sales brcught on by the improving economy and customer to use our creative energy to solve problems and take gr wth in our service area. In 1995, retail kilowatt-hour advantage of the opportunities that are created. sales rose 7.8 percent over the previous year. The bene 6-The process has not been easy. Organizational changes cial results related to the earlier streamlining and restruc-have been necessary, including a reduction of the work turing of the company also contributed to our favorable force. The changes that we have made, we believe, will earnings. produce substantial success in the years ahead and ensure Electric Fuei>, our energy and transportation company, that Florida Power will be in a position to prosper no c ntinued t be a solid performer in the face of depressed matter what shape a more competitive industry might market conditions for coal in 1995. Despite the weak coal market, the company was able to contribute 524 million, The theme of this annual report is " Raising the Bar." It or 25 cents per share, to earnings. This compares with represents our commitment to set performance standards $22.6 million, or 25 cents a share,.in 1994. The excellent higher than they ever have been before. It also signi6es performance of the company's marine and rail operations our willingness to continue to raise our level of perfor-aHowed earnings to improve. mance to stay ahead of the competition. Earnings from the company's other diversified opera-h.eufout this report, you will see examples of ath- . ns remained unchanged. ti letes who have trained and conditioned themselves to per-form at peak levels. At the same time, you will be intro-RAISING THE DIVIDEND RATE duced to a number of employees who have raised their By achieving our earnings growth and making moderate own standards of excellence to reach higher and higher increases in the dividend, we have been able to continue levels cf performance. Their results can be seen in lowering the payout ratio. In 1995, the payout was 81 increased value to you, our shareholders, and in lower Percent. This represents a signi6 cant reduction from costs and improved service to our customers. 1992, when the payout peaked at 93 percent. RAISING PERFORMANCE in February 1996, the Florida Progress board of Jirectors increased the annual divi-Our performance in 1995 was excellent. Florida Progress Corporation achieved a 25.6 percent return on your dend rate on our company's common investment.1he company's common stock price 6nished stock by 4 cents per share. This will d increase the annual dividend rate to the year with a series of 52-week highs. Lower interest rates, the results of cost-cutting measures, the market's 52.06 per share. While the board is Proud of the company's track record confidence in our competitive position and our prospects for future growth contnbuted to our performance. ofincreasing the dividends paid per share for 43 consecutive years, it also recognizes that our dividend pohcy must be considered in light of a more competitive industry. H n

1 j 1 J l ~~ . ~. -. Federal Energy Regulatory Commission mission network in Florida. In 1995, the ~ .m proposed new rules designed to open the ~ ~..M h nation's transmission network to all i. .W wholesale customers and proposed other g changes to promote comparable treat- ). 9-ment for all network users. This was done g" ~- ~ ~\\ j in order to facihtate a competitive whole-j sale power market. We generally support the commission's effort, but have some j j l { ~ ~,, reservations. Our overriding concern is that the commission's final pohcy be fair c j and equitable to Florida Power and its customers. We intend to participate in the i f n4 ) debate on this issue, which will be held in E Washington in 1996. In several states, pressure is building to I allow third parties to begin using utility ~ transmission systems to wheel power to i norida Progress Chairmar, and Chief hecutive Officer Dr. Jack B. Critchfield, right, meet large retail customers in order to give b with The Honorable Peter Rudy Wallace, Speaker of the Horida House of Representatives j them a range of service and pricing l options. The rates for our industrial and Each year, the board will continue to re-examine the large commercial customers are already among the lowest dividend policy to ensure that our dividend payout and in Florida. Also, we have a relatively small number of these dividend rate are appropriate, given our business plan, customers in our service area. projected earnings growth and outlook for the electric The largest share of our busir.ess is made up of resi-utihty industry. dential and commercial customers. Many of these cus-i 1' POSITIONED FOR CHANGE tomers are served under terms of franchise agreements with municipahties and counties. 1 Legislative, regulatory and market forces are moving the { in December, the city of Clearwater renewed its fran-I insestor-owned electric utihty industry toward a new era that could result in dramat.c and sweeping change. chise for another 30 years. Revenue from this community, the second largest we serve, accounts for about 5 percent f Transmission access is an important issue for Florida of our business. The city found our favorable rates, excel-( Power because the company has the second largest trans-lent service and willingness to meet its needs strong rea-sons to renew the agreement. We beheve other cities will /, 4 feel the same way when their agreements come up for renewal. 1 INNOVATION ' Our existing power plants are efficient and cost effec-tive. We believe that we are well positioned for deregula-ferida Progress Carperwtion is w-aminittedatimringirmo,etin 1 ways to de busiess. 6 tion in this part of our company. We also are building a Arngness comparues have twised. ' : ths handQuadiheir. new generating complex in Polk County. The first phase of the project will be completed in late 1998. Its projected performance by using crentivity,, e ' - ingemaityandknad work. The - - cost will be much lower than what others in Flon.da have paid to build new generation recently. The units making ferefs ofachieversent reached up the project will use combined-cycle technclogy and ] today, kanter, arir only[orerun-burn natural gas, which provides high efficiency and low ners a[ greater things to come.. emissions. 3 jg

l Some of the capacity from the Polk County site will be Over the past few years, the life insurance industry has used to meet the requirements of a new wholesale con-become more competitive and, for the first time, Mid-tract signed in 1995. Florida Power negotiated the sale of Continent experienced a decline in new sales. It became an additional 455 megawatts to Seminole Electric clear that we needed to change the strategic direction of Cooperative, beginning in 1999. the company if we were to remain successful long-term. Florida Po ver is prepared for competitio1 today. Our in March 1995, we selected James Harlin to ead the l goal for the future is to be even better positioned to serve company. He brings 25 years ofinsurance experience to customers in a more competitive industry. The threat of the company, including 15 years as a chief actuary. In increasing competition has given our organization a new 1995, a comprehensive business plan was developed that level of common pur pose, with each business unit finding combines new products and ideas with the company's ways to work interdependently to meet the new existing strengths. challenges. In 1996, Mid-Continent will begin selling a new insur-We have made changes in the way we do business that ance product called "Basiclife." It resembles the product have enhanced and improved Floric'a Power's operational that had been the company's primary policy for the past and financial strength. This required a concerted effort 12 years, but offers more Gexibility and guarantees to by our employees to raise the bar on their performance policyholders. The new policy.;hould be appealing to in 1995. both new and existing customers. "BasicLife" will be the company's core product and other complementary life ELECTRIC FUELS CORPORATION products will be introduced on an ongoing basis. We are continuing our strategy of enlarging the opera-Nineteen ninety-six will be a year of transition for Mid-tions of Electric Fuels. The company further expanded its Continent. We believe that these changes are necessary to rail services and marine businesses in 1995. maintain and build market share and profitability in an We believe the best opportunities for growth within increasingly competitive life insurance business. l our diversified operations invAe enlarging the existing business units within Electric Fuels. We will continue to PROGRESS CREDIT CORPORATION acquire and develop new operations as long as they meet We have continued an orderly withdrawal strategy from our stringent operational and financial criteria. the lending and leasing, and real estate portions of our j During the last three years, Electric Fuels has increased business. Since announcing our exit strategy in 1991, we its earnings per share an average of 21.3 percent per year. have reduced our portfolio of assets by approximately During the same period, the company's average total 5583 million. At the end of1995, this portfolio to-return on equity was 13.3 percent. We believe Electric taled about $558 million in assets. Although our Fuels can continue to achieve double-digit earnings current exit strategy has been successful, growth. the continued weak-ness in the Electric Fuels' outstanding results have established a g% airline indus-performance benchmark for all our diversified operations. in order to r: main a part of our team, these companies try and com-mercial real must do well against their competition and demonstrate estate market an ability to enhance consolidated earnings growth and has slowed our withdrawal exceed the returns of our regulated utility. efforts. As a result, we are continuing MID-CONTINENT LIFE to examine other business options that could acceler-INSURANCE COMPANY ate the process. When we acquired Mid-Continent Life insurance MANAGEMENT CHANGES Company in 1986, it was a small, conservative insurance company selhng a popular, low-cost death benefit insur-As in the world of sports, the day comes when every com-ance policy. Since that time, Mid-Continent has more Petitor chooses to retire. In January, Allen Keesler nn unced his intention to retire as President and Chief than doubled in size by continuing to sell its market, Executive Officer of Florida Power, effective April 1. accepted product and by increasing its distribution area.

] gy e, g ,x g j f READY TO COMPETE ~ / i.- On balance,1995 was a good year for your company. j j ) l' j; From our point of view, the future appears to be quite j g-challenging as we position ourselves to take advantage of Q- / [. - f f the opportunities in the new competitive environment i / / that is developing. Our success in the future will be deter-I mined by what we do today. We believe as the bar contin-i ues to be raised, we will be ready to compete. We invite you to read the next section of this annual report. In it, you will find many examples of how our employees and companies have raised the bar to reach j new standards of performance in order to build value for l our shareholders. We think you will be impressed and ) I pleased by what you learn. l -NI 1 / Florida Progress President Richard Korpan, center, tours the Orange J County Convention Center with Florida Power Project Engineer Lyndon B. DuPont, left, and Principal Account SpecialistJay W. Dr. Jack B. Critchfield McGaffin, right. Chairman and ChiefExecutive Officer Allen has done an outstandi.igjob of serving the com-pany for 33 years. Since becoming President eight years ago, he has Richard Korpan accomplished many things. In the past few years, he led } the company through a very challenging period of restruc-President and Chief Operating Offcer I turing and cost reduction in preparation for competition. February 8,1996 His efforts have helped position the company for future success. Ailen also has served the utility industry well. A recent example can be seen in the national leadership role he has played in the area of nuclear waste disposal. He has been a great asset to the company and we wish him the very best in his retirement. Dick Korpan will become Chairman of the Florida Power board. In addition to his executive responsibilities at Florida Progress, he will also serve as Chief Executive Officer of Florida Power as part of a leadership transition period for up to one year. Florida Power Senior Vice President, Energy Distribution, Joe Richardson will suc-ceed Allen as President. Joe also will serve as Chief Operating Officer of Florida Power. x s_

R A I S I N G T H -E B A R l Fwho has fixed his attention on a crossbar se lorida Progress Corporation is like a high jumper When an idea resulted in a documented savings, an incentive payment was made to the contributing party. new, higher level. The goal is to clear the bar and reach Since work began on the project in early 1995, the very highest level possible. approximately 20 idt.s have been submitted. These l One way we know that we have been successful in ideas have resulted in a savings of 51.6 million. 1 meeting the challenge of competition is to look at our Interestingly, most of the cost-cutting ideas came from accomplishments in terms of how much value they add the project team who felt challenged to fmd a better for our shareholders. We also measure success by how way. Florida Power has paid 5142,000 in incentive pay-much we have improved the level of customer service. ments to outside vendors since the program began. Outstanding performers always strive to raise the The Polk County site is being developed on an standard of performance in everything they do. 8,000-acre tract near the city of Bartow, Florida. The innovation, strength and flexibility: these are some of property had been mined extensively for phosphate, so the characteristics of winners. Each day, they find new construction of the energy complex will help the land ways to raise the bar and chailenge themselves to go and promote habitat restoration. beyond present limits; they want to achieve more. The first phase of the project calls for construction in the following pages you will read about em-of two combustion turbines, one steam turbine and ployees who exemplify the spirit of competition. They two heat-recovery steam generators. This block of natu-have committed themselves to winning by adding value ral gas-fired generators will be capable of generating 1 for our customers and our shareholders. 470 megawatts of power. Additional power blocks could be added if needed. The site has a build-out POWERFUL PARTNERSHIPS capacity of 3,000 megawatts. The new polk County The great inventorThomas Edison had a personal phi-unit, which is scheduled to be in commercial operation losophy summed up in the phrase,"If there is a better in late 1998, will be the most efficient unit on the way, find it." Florida Power system. Florida Power is putting Edison's creed into practice LIFTING WHOLESALE POWER at its new Polk County Energy Complex. So far, finding SALES TO A NEW LEVEL a better way has resulted in cost reductions totaling millions of dollars. Florida Power's wholesale business produces about 7 Percent of the company's annual operating revenue. Most of the savings have come as the result of the Our 16 wholesale customers accounted for approxi-utility's efforts to lower capital costs from the original mately $150 million in sales in 1995, an increase projections made in 1992, when planning for the f aPProximately $20 million over the previous complex began. Substantial savings have been year. achieved through the use of new technology and favorable price reductions in the cost of plant Sales will be going even higher beginning in 1999, the first year of a three-year contract components. with our largest wholesale customer, Another part of the savings came from Semin le Electric Cooperative, Inc. an idea developed by the Project Team, FI rida Power has agreed to sell i which is led by Project Manager Dennis Semmole an additional 455 Dingle. The team created a Value eg watts of bulk power. Engineering incentive Program. The s Bulk Power Markets Director intention was to get all parties involved in the design and con. Sam Nixon led the successful nego-struction process to look actively tiations. The agreement will for better ways to do things, espe-expand Seminole's total purchase cially ways to 1,450 megawatts. The new contract that save 3 will money. increase d J

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t 4 f Florida Power's wholesale revenues by more than 40 always seem to be able to rise above adversity and per-l percent when it goes into effect. The wholesale part of form well, no matter what the conditions. l our business is expected to increase to an 8 percent Florida Power crews had ample opportunity to j share in 1999 because of the sale. demonstrate their ability to rise above adversity in f STRETCHING 1 3 1995. The year was one 7 Qww.ppmggr439er%MW$$$ of the busiest in many M:'MWk' it.7 h@ N7M ' d cal storms a THE LIMITS ~ ..M .1 years in terms of tropi-g', - A ON REUSE i OF MATERIALS _.,e{ pl... (.j -] f.7 -) canes. The Florida l Successful athletes [ 7 "~ .:.; 7 ; 1...-..s. o Power service area was l know how to get the hit by three major i most out of every E... $ h [ Allison inJune Erin in storms during the year: l ounce of energy ~- expended. Recently, a j E August and Opalin team of Florida Power .o October. ~

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employees put their pp g 5. Florida Power suffered l muscle to work by + the worst damage from j devismg new ways to 7 ..' Hurricane Erin. Three reuse old materials. + hundred twenty-five One area that seemed thousand customers l especially promising .[ i ~ were without service at j involved the reuse of y... some point following l Nineteen ninetype was a very aniveyear for hurricanes and tropical storms. the storm. Much of the The team felt that it damage was caused by j would be possible to reuse aluminum wire taken down downed t. es. Damage to Florida Power from Erin was l in highway-widening projects if the wire was in good estimated at $3.7 million. condition and ifit could be removed in usable lengths. Hurricane Opal was much more destructive, but e To test the feasibility of the idea, a group of em-most of the devastation was in the Panhandle, west of ployees in the North Florida Region developed proce-the Florida Power service area. This gave Florida Power dures to roll up the old wire as it was being removed crews an opportunity to help other Gulf Coast utilities, j from the poles. Some of the wire is placed back into including Gulf Power Company and Alabama Power j inventory for reuse. In other cases, the team deter-Company. mined that it would be more beneficial to move the old Alabama Power was so grateful for wire directly onto the new poles. our assistance that it took out 1 i e ~ j mes/ W i,,.-i ~J 'c. i1; dy When these techniques - v half-page newspaper advertise-become employed on a system- .j ments in many Florida newspa-wide basis, the company will real-pers. The ads read "..and out of ize a substantial reduction in mate-the darkness came Florida Power rial costs. Corporation." It complimented our crews for "their unselfish devo. EXCELLENCE IN ADVERSITY tion of time, skill and energy to this It's easy to perform well when conditions tremendous task." are at their best. Unfortunately, conditions are not always favorable. Great performers 1E

l l NUCLEAR UNIT TAKES A l GIGANTIC LEAP IN EFFICIENCY l In many sports, the great performers improve I-j as they gain wisdom and experience. Florida Power's Crystal River Nuclear Plant .c l is in this category. The unit, which began ser- [ ".[ l vice in 1977, achieved a capacity factor of 100 m 1 l percent in 1995. The plant staff worked hard to raise the per- 'r ' ' ' ~ ~ formance bar this year.Their decision to per-s i, I form more maintenance activities while the = ( 4 l plant was operating eliminated the need for F. j periodic maintenance outages that previously kept the plant out of service for up to 50 days 9 i. { during its normal 24-month operating cycle. ) l Improved planning and training have made on-t line maintenance a very safe and cost-efhcient ,1 ,, ' i .~j alternative. l Helicopters make fast work of transmission Ime repairs, rewiting in a major j There are many other examples of how inno. savings of time and money. vation is helping to improve plant performance. One involves verification that all materials used in Using conventional transmission bucket trucks, it takes nuclear safety-related applications meet very exacting about eight and a half months to completely inspect j quality standards. Staff Nuclear Engineer Michael Clary the transmission system and make any repairs. oversees the testing process using sophisticated equip. This year, the job was done in three and a half weeks ment hke a scanning electron microscope, an X-ray fluo. with the aid of a helicopter. Transmission Maintenance j rescent spectrometer and a four-channel oscil'oscope. Project EngineerThomas Harrison says the company Much of this equipment is now doing double duty. was looking for the fastest, most cost-effective method It is being used to perform fai!ure analysis. Clary says to get the job done. This led him to a company that both activities previously had been sent to off-site test. Specializes in aerial inspection of power lines. ing labs, or consultants were brought to the plant. A three-person inspection crew does the work. The P ot brings the small observation helicopter to within a il Bringing these activities in-house has resulted in lower j costs and reduced time in waiting for critical results. few feet of a transmission tower. A spotter, using gyro-stabilized binoculars, visually inspects the structure and TAKING TRANSMISSION MAINTENANCE describes any problems through the headset in his hel-TO NEW HEIGHTS met. The spotter's findings are entered immediately Florida Power has approximately 170 into a computer operated by the third member of the miles of 500-kilovolt transmission crew. line. Periodically, these high-volt-Harrison says time is not the only savings. This inno-age lines, and the struc-vative practice has allowed the company to reduce the tures that hold them cost of transmission tower inspection and repairs by 150 feet off the more than 60 percent. ground, must be inspected. GETTING THEJUMP ON RENEWING A FRANCHISE AGREEMENT On December 7,1995, the city of Clearwater signed a new 30-year franchise agreement with Florida Power. Clearwater, the second largest city in the company's service area, accounts for approximately 5 percent of Florida Power's total annual revenue. Renewal of the franchise, which was ser to expire in the summer of 1996, was clearly a top priority for us. C. d n, y-J

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l Florida Power Suncoast Region Vice PresidentJanice Case led the successful effort to retain the franchise by demonstrating to city officials that the residents of their community would be best served by continuing to receive electric service from Florida Power. 4 Our low commercial and industrial rates were 0 another strong factor in the city's decision. Competitive g x rates are of utmost importance in promoting the eco-l nomic development of a community. The company's [ .w proven track record of providing reliable service also 4 i" 4 l played a major role in renewal of the agreement. ( ;[~ $i r. l Competitive rates and reliable service will continue b i to be major components in the decision-makmg process of renewing franchise agreements. On both k counts, we are confident that Florida Power will con-tinue to be the undisputed provider of choice and that 1 j we will see our existing franchises renewed. ( RAISING THE BAR ON CUSTOMER SERVICE CAPABILITY On March 17,1995, FIorida Power took a quantum pg,,,,, p,,,,,,g;,,,,, g,g,,, y_ pg,,,,,,,,,,,,,,, g,,g,,,,_ g,,,,, l leap in customer service. On that day, it put its new right, discuss plans for a turbine outage at the Florida Crushed Stone l Customer Service System into operation, cogeneration plant near Brooksville, Florida. l The computer-operated system, which took nearly Dozens of utilities have expressed interest in using this three years to develop, is the most advanced ofits kind system, and several major utilities have purchased it, in the country. Conversion to the new system was a The system has allowed for some innovative organi-massive undertaking. As expected, there were startup zational changes. In late 1995, it was announced that Problems that resulted m some declines in service lev-the company's four Customer Service Centers would be els. Employees in both the customer service and infor-consolidated into two large centers linked by the com-mation technology areas rose to the challenge. Many puter and phone system. One center will be located in worked nights and weekends until the worst of the Winter Park, the other in Clearwater. Linking the cen-Problems were resolved. ters will allow us to make significant improvements in The new system allows customer service representa-service levels, as we are able to increase the volume tives to do a more thorough job of serving Florida of calls handled and the speed in which they are Power's 1.2 million customers. One ofits most j processed. innovative features is an application that allows representatives anywhere in the state to elec-THE SYSTEM MAINTENANCE tronically assign, schedule and dispatch work to CREW SCORES A BIG WIN the specific employee work group designated to Account Manager Robert Phillips and Outage serve that customer. Maintenance Coordinator Richard The system also allows for most work Bryer understand that fmding a need l to be done on a real time basis and filling it can be a sure formula which means that it is no longer for success. necessary to wait for the com-Phillips found that one of puter to process transac-his industrial customers, tions overnight. Florida Crushed Stone, The new system owner of a large lime-was developed in rock mine and partnership with cement-processing Andersen operation near j Consulting. Brooksville, Florida, j had a special need. l IE l l

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I i Every few years, the 133-megawatt power plant at DIVERSIFIED OPERATIONS } the site must be shut down for a turbine overhaul. The nonutility activities of Florida Progress continue to Phillips learned that his customer was not satisfied with play an important role in the company's future. The the work that had been done by its regular outage con-competitive bar is ser very high for these companies. tractor. He contacted Bryer, who coordinates fossil Their success is measured not only against the compe-power plant outages for Florida Power, to see if the tition in their respective markets, but also in terms of l company's System Maintenance Crew, which special-their strategic fit and their ability to enhance consoli- ) ires in tt.cbine overhauls, would be interested in bid-dated returns and to exceed the earnings growth rate l ding on the project. Bryer was, and the crew ultimately of the regulated utility. j won the contract. Electric Fuels has demonstrated success in all three l Bryer says this is a great opportunity to provide a areas. Its diversified activities include the mining and l value-added service to a key customer. It also helps the procurement of coal, rail services and marine trans-l company provide more steady employment for many of portation. l the contract laborers who make up the bulk of the A deeply depressed national coal market kept the crew. Recent plant retirements have meant less work coal business unit from making significant contribu-l and a higher likehhood that these skilled workers would tions to earnings in 1995. A Total Quality Management l be recruited to work in other parts of the country. program will be instituted throughout the mining The outage is scheduled to be conducted over four operations in 1996. Operational changes and cost weeks in March 1996. Bryer says the crew is definitely reductions resulting from the program, as well as l interested in doing additional contract work when it product quality enhancements, are expected to result does not conflict with the company's power plant out-in improved production and earnings. age schedule. The rail services and marine transportation units of i the company were outstanding performers in 1995. GAINING NEW STRENGTH Both units added substantial value to shareholders and l lN CUSTOMER RELATIONS have allowed the company to position itself for In 1995, Florida Power gained a winning edge by mov-significant growth in the years ahead. ing closer to some key customers. In this section of the report, In May, Florida Power employee Robert Godfrey you will read how these l became the Energy Manager for the Pinellas County units have raised the bar school system. The move was more than an act of and are performing at a good corporate citizenship. It reflects how important higher level. p-I I the school system is to us. With 128 schools and a l number of administrative facilities, the Pinellas school system is our largest single customer in Pir tilas County. j Prior to assuming the post as part of a one-year i pilot project, Godfrey, a 25-year veteran of the com-pany, was an energy services specialist. His full-time l assignment, before assuming his new duties, was to l work with the schools. Godfrey says he thought he [ thoroughly understood the needs of the school system but admits, since assuming the position full time, he l has gained a totally new perspective on the school ( system's needs. l Since taking over the posi- $nr 7,, ,,,e i tion, Godfrey helped form a regional cornmittee of school system energy managers. He also helped form an energy committee made up of representatives from the entire Pinellas County sc hool system. IE

RAll SERVICES BUILDS MUSCLE "We never take our customers for granted, and we Billy Ainsworth beheves there is always room for improve-never become complacent with the way things are, no ment, and his customers love it. That's because he and m trer how good they may seem. We are always looking r tter w ys t sene ur customers and lower our the approximately 1,500 employees he leads as President c sts," Ainsworth adds. of Progress Rail Services in Albertville, Alabama, are con-tinually seeking new and better ways to meet their cus. Ainsworth says the company is not hesitant to take tomers' needs. advantage of new opportunities. "When we see an oppor- "" E fits our business plan, we go for it. Ifit meets Progress Rail was formed in 1993 when Electric Fuels our objectives, we will f nd a way to make it happen." acquired the assets of Steel Processing Services, the com-An example of this can be seen.in the way Progress Rail pany Ainsworth founded 10 years earlier. The acquisition helped a number ofits major customers avoid lengthy and merger with Electric fuels. existing railcar repair and delays in the delivery of certain trackwork products. parts reconditioning business more than doubled the size Supphers were not able to keep up with demand. Sensing of the company and made it the largest integrated proces-an opportunity, Progress Rail recently constructed a large sor and suppher of railroad materials.in the country. It trackwork plant to capture a sharc of th.is market. also gave the company the financial and operational mus-cle to greatly expand the scope ofits operation. Progress Rail provides a growing number of specialized services to its customers. FM Industries, a Progress Rail Ainsworth attributes the company's success to the subsidiary, is recognized nationally as a specialist in the hard work ofits employees. their abihty to work as a team manufacture of hydraubc cushioning units for railroad and an intense focus on the customer. "If we don't take freight cars. A new rail pickup unit, specifically designed care of our customers, someone else will," says and built for Progress Rail, allows the company to offer a Ainswort h. highly specialized service that was available previously on An extremely important attribute of the business a very hmited basis. Shortline and regional railroads, and involves delivering a high-quahty product on a timely a number of Class 1 railroads without such a unit, can bas:s. A critical factor in customer satisfaction is the now rent this unit along with a trained and qualified speed of service. Progress Rail has built a solid reputation operator to remove existing rail in a highly automated and for on-time delivery, minimum delays,.omprehensive ser-efficient manner. This allows the railroad to restore its line vices and the largest in-stock invente ses in the country. to service in a more timely manner. immin

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m n . m ~ +: ~ Other examples of the company's "can do" spirit involve a series of strategic acquisitions in the western United States. In December 1995, Progress Rail pur-chased the assets of the y Glover Group, a railcar repair company based in

Sidney, Nebraska. The assets included maintenance and repair facilities in Sidney and Northport, Nebraska.

Progress Rail also pur-chased a 15-mile short-hne railroad that serves the Sidney facihty and industrial shippers that use the Burlington - 18

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i I i i j Northern and Union Pacific railroads. U J Earlier in the year, Progress Rail also pur-f ]) ~" chased the assets of a railcar repair facility h in Pueblo, Colorado, and railcar wheel P M N shops in Pueblo and Sidney. These acquisi-f gl g tions enhance Progress Rail's ability to F n L/j , j 4 l serve new customers in that part of the a N j country. ( j i BARGING IN ON SUCCESS i Electric Fuels' subsidiary, Marine Equipment Management Corporation E U ) (MEMCO), is steering a course toward ,..1 l continued success in nver transportation. The St. Louis-based company is the prin-cipal component of the inland marine strategic business unit. The company has a Jr l Ceet of approximately 600 hopper barges and 21 towboats that move coal, grain l and other dry bulk commodities on the I country's inland waterway system. The company's Oeet is modern and efficient. The average age ofits vessels is seven years, less than one half the industry average. Investments in modern, high-quality equipment have made the com-l pany a premier carrier. A MEMCO towboat pushes a fullload ofcoal down the Ohio River at Cincinnati. The company operates five dry docks at its main barge and boat repair facility at I ad the n.ver will allow. This helps squeeze extra revenue Harvey, Louisiana. It also has three additional dry docks fr m each load with little, if any, incremental operating and other repair equipment at strategic locations on the c st. The program is an example of how MEMCO is help-i Mississippi River in and around New Orleans. These oper-ins t increase Profitability and return to the shareholders ations repair MEMCO boats and barges and also service w thout the need for additional capital. unaffiliated marine customers. ] MEMCO's strategic plan is focused on increasing the RAISING THE BAR j size ofits barge Oeet in an orderly fashion. The company Bars represent barriers, set limits and establish bound-is committed to obtaining new equipment designed t aries. But, they also represent goals and objectives, and meet the specific needs ofits customers. By entering into 2 give us a sense of purpose and direction. They can repre-4 ] long-term contracts with high-quality companies in dif-sent challenges that we rise to meet. The Florida Progress i ferent industries, MEMCO will have a stable and growing companies and employees take the latter view. Their per-g income stream that will provide an attractive return on formance in 1995 exemplifies the positive things that can i existing assets, as well as the new barges the company happen Wn the bar is raised. plans to add in the future. The next sect;on of the annual report is called MEMCO acquired six additional inland towboats in Management,s Discussion and Analysis. It will provic e i j late 1995. This mcreased the size of the company owned you with a review ofimportant operating highlights from line-haul boat Deet by 40 percent. The addition has 1995 and discuss how management is preparing to meet enabled MEMCO to increase the number of trips, which the competitive future. It includes answers to important 'mProves its barge utilization ^ j questions posed to some of our executive officers. j The company's new barge equipment allows loading to i a deeper draft than standard river barges. In 1996, MEMCO instituted a program to work with its customers j in the loading of barges in order to get the maximum safe i n20

1 s M AN.AGEMENT'S DISCUSSION & AN ALYSIS i L (OPERATING RESULTS-Excluding results from real estate, and lending and j f - Florida Progress' 1995 consolidated earnings were $238.9 lea 5ing Puations - businesses from which Florida j A million, compared with $212 million in 1994 and $196.6 Progress is withdrawing - diversified retums on equity i million in 1993. Florida Power earned $217.3 million in were 10.9 percent in 1995,11.5 percent in 1994 and }

1995, compared with $190.7 million in 1994 and $181.5 10.1 percent in 1993.

million in 1993. Earnings from diversified operations were l: $21.6 million in 1995, compared with $21.3 million in. FLORIDA POWER CORPORATION 1994 and $14.3 million ir; 1993. Utility Competition As the electric uti:ity industry moves toward increasing competition, Florida Power is well-positioned today. The utility has competitive electric rates, a manageable con-1995 1994 W93 struction program, strong growth potential, reasoriable Fbnda Power Corporation $2.27 $2 05 $2.06 state regulation and financial strength.The challenge for Elent Fuels Corporation .25 25 17 Florida Power will be to remain pt.sactive in dealing with , Mid. cont Ute insurapce Co .07 .08 10 the changes and taking advantage of new opportunities. The most sweeping changes in 1995 were taken by fed. C >rp a e and other eral regulators on behalf ofwholesale customers.The Dwers$ed .23 .23 4 Federal Energy Regulatory Commission proposed changes incorne before accounting change 2.50 2 28 - 2 22 in its rules for transmission service. The commission's Change en accounting .01 actions are aimed at facilitating a competitive wholesale Consohdated $2.tio $2 28 $2 23 power market, .j The proposed rules wilJ give greater flexibility and more choices to wholesale power customers. Florida Power j Florida Power's results improved in 1995 and 1994, intends to compete for wholesale business when it can mainly due to increased energy sales from customer earn a reasonable return. In 1995, Florida Power entered . growth, higher average customer usage and a stronger into a three-year agreement to provide an additional 455

economy. Also contributing to the higher earnings were megawatts of power to its largest wholesale customer, savings realized from the utility's cost-control initiatives.

beginning in 1999. This contract will increase annual . Beginning in late 1993, Florida Power started stream-wholesale revenues by more than 40 percent and is proj-lining its operations to lower its costs and improve ected to expand this business segment to about 8 percent efficiencies. As a result, the utility's work force has been of total sales in 1999. reduced by about 1,100 employees, or 20 percent, since A major portion of Florida Power's business is covered year end 1993. Restructuring costs lowered annual earn-under terms of franchise agreements with municipalities ) ings by $11.5 million, or $.12 a share, in 1994 and by and counties. In December. the city of Clearwater renewed $3.4 million, or 5.04 a share, in 1993. its franchise agreement for another 30 years. Revenues in 1994, subsidiaries of Florida Power withdrew as covered by this agreement account for about 5 percent of . equity partners from a proposed natural gas pipeline Flonda Power's business. Florida Power beheves its quality project. The write-off of the investments lowered Florida service and competitive rates will be important factors to Power's 1994 net earnings by $3.9 milhon, or 5.04 per other franchisees when their agreements come up for share. renewal. No franchise agreements representing significant in 1995, Florida Power began amortizing $23.9 million revenues are due to expire for the next five years. of accumulated costs for the canceled Lake Tarpon-Flonda Power's existing generating units are efficient Kathleen transmission kne. (See Utihty Regulatory and cost effective, making the plants well-positioned for Matters.) The costs, which are being amortized over competition. Florida Power has received regulatoryap-four years, totaled $6.9 million in 1995. proval to build a new generating complex in Polk County. The financial return on the utihty's common equity was This new facility is expected to provide the utihty with 12.7 percent in 1995, compared with 11.9 percent in lower cost generation than what other energy suppliers in 1994 and 12.1 percent in 1993. Increcses in retail energy Florida have paid to build new generation recently. sales and ongoing cost-cutting initiatives allowed Florida Some third parties would like to begin using utility Power to improve its return on equity in 1995. transmission systems to wheel power to large retail cus-2E

l ~ focused on etnategies to expand the busmess. The state l of Fionda has a fast-growng population. Our annual 1 i customer growth rate is projected to be neady twice the i nationel average for electnc utilitsen. We plan to focus e y - l 4 and sellmg' services to our growing custbmer base. on the busehess opportunities m flonda m marketeg. j, j 0: What effect will your decision to retire have orrthe r' l drection of Flonda Power? j l . A: I belie company wdl contmue m the positive ) ~ droction ' hat . moving for the past several years. Iam the new leadership team wdl cootmue. the l [Q k'3 ~ ilding a stronger. organization that is capa- ? - process ble of meet g the challenges that are ahead. Joe j Richardson i an excellent choice to succeed me as - Presiderjt. H bnngs 20 years of experance m both the l Allen J. Keesler, Jr. ~ ' utility and div sified operations of the company. I feel i President and Chief Executwe Offmer, he es the ' person to lead our > company.into its sec-Fionda Power Capwaton and century. Dick Korpan will make the transdion m leadership smooth as he assumes the position of CEO l 0: What are Flonda Pow' gs pnontes for-getting ready while Joe estabhshes himself in he new position. for a more competitive mzrket? i When i retire on Apnl 1, after 33 years of service, I willleave confident that the new leadership team wdl l A: Flonda Power is operat ng from a posstiqri of ' do an outstanding job of runnmg the company. The past j strength, but must contmue.controling costs to be pre - several years have been very challengingfor us. We pared for competrtion Smco 1993, we have reduced . have gone through a penod of major restructuring and l our work force about 20 percent. Stnct control ove' cost reducton. As difficult as it was,1 believe the com- { - expenses wdl enable the company to allocate more pany e in an excellent posit;onto take advantage of the i j funds to key strategic areas iske customer service, mar-opportunities that wdl come from increased competition. koting and improving our competstive position m power-j i . generation. Lowering our operating and capital spend- - mg allows us to. avoid the need for a base rate mcrease. I j l l tomers. Several states are evaluating retail wheeling as a between 11 and 13 percent. In 1995, Florida Power's j way to provide a choice of electricity suppliers to large retail regulatory return on equity was 12.5 percent. i customers, in order to promote increased services and State regulators approved Florida Power's request to l lower energy prices. Bccause Florida utilities already pro-change the utility's load management program, beginning l vide competitive electric rates, we believe there is less in April 1995.The program is intended to defer the need l incentive for change in this state. Furthermore, Florida to build additional generation by lowering peak demand Power's industrial and commercial rates are already of electricity. Recent improvements in technology have l among the lowest in Florida. The utility also has a rela-allowed electric utilities to build generation less expen-tively small number oflarge customers in its service area. sively. Because of these changes, Florida Power redesigned As the electric utility industry becomes more competi-its load.ianagement program. The utility reduced cus-tive, Florida Power is committed to strengthening its tomer credits and introduced sales thresholds to reflect i { position by reducing costs and improving efficiencies in more accurately the value of each participant's contribu-producing and delivering power. Florida Power expects to tion to the program. Overall, these program costs will be l carn its authorized return on equity while maintaining reduced about $20 million annually. l competitive prices and offering high-quality, reliable in 1995, the state commission also approved Florida j service. Power's petition for amortization of the accumulated j costs for the canceled Lake Tarpon-Kathleen transmission Utility Regulatory Matters line. Due to numerous legal and regulatory delays, the I in Florida Power's 1992 re: ail rate case, the Florida Public total projected costs for the line had increased to more Service Commission authorized a 12-percent regulatory than $85 million, up from the initial estimate of $30 mil-l return on equity for the utility with an allowed range li n. F1 rida Power is implementing a more cost-effective alternative to enhance system reliability. E22

The commission approved a new site-specific decom-Fuel and Purchased Power I missioning study for the Crystal River Nuclear Plant that Florida Power recovers substantially all fuel and purchased increased Florida Power's retail portion of total annual power costs through fuel and capacity cost adjustment decommissioning expense to $20.5 million per year, effec-clauses established by state and federal regulators. There-tiveJanuary 1995. Florida Power increased its wholesale fore, fluctuations in these costs have little impact year to portion in a comparable manner to $1.2 million per year. year on net income, but are important from a competitive in both 1994 and 1993, decommissioning expense, as standpoint. approved by state and federal regulators, totated $11.9 fuel and purchased power costs increased by $147.7 million. (See Note 4 to the Consolidated Financial million in 1995 and $66.5 million in 1994, compared Statements on page 38.) Florida Power has the second-largest transmission net-work in Florida. Florida Power filed an open access trans- ~ mission service tariffin.1995 that complies with the new rules for nondiscriminatory wholesale transmission ser-( vice. The Federal Energy Regulatory Commission has accepted Florida Power's tariff, subject to the final rules ~ that are expected to be adopted by federal regulators in 1996. (See Note 10 on page 42.) As a result of settlement agreements approved by the commission, Florida Power recognized increases in whole-sale revenues of $9.5 million in 1995 and $8.2 million in h 1994, compared with the preceding year. (See Note 10 on 7 page 42.) y Utility Revenues and Sales i ~ Florida Power's operating revenues were $2.3 billion in 1995, compared with $2.1 billion in 1994 and $2 billion Joseph H. Richardson Senor Vice Pmsident. Energy stnbution. in 1993. Revenues rose in 1995 and 1994, primarily FI nda Power Corporation because ofincreased retail kilowatt-hour sales from cus-tomer growth, increased average usage and a stronger .I economy during both years. What is the greatest challenge to Fk>nda Power m tt e areas of customer service and marketing? The utility's retail kilowatt-hour sales increased by 7.8 percent in 1995 and by 3.1 percent in 1994. Cummer A The greatest challenge b to develop new prod-growth was 2.2 percent in 1995 and 2.4 percent in 1994. ucts and sennces to meet the needs of a more Florida Power's annual customer growth rate continues to s6phisticated and demandmg customer, while at the be about twice the national average in the electric utility saroe m managmg costs m remam competnive. We behave there are opportundies m two-way industry. - communication with customers. Advancements in At the request of the Floiida Public Service Comm.is- ' mohnology win make d possible.to provide mstanta-sion, Florida Power implemented a revenue decouphng neous sonncejo pustomers m areas. such as recon-plan for residential customers in 1995. Revenue decou-necten and disconnection, meter readmg, outage pling is a ratemaking concept that eliminates the direct detect on and load. management. The new technology link between kilowatt-hour sales and revenues. The con. wiu serve as a platform for even 'more sophisticated cept removes the disincentive for utilities to urge cus. pncmg senaces m the futum that wiu give cusemers tomers to conserve electricity. The commission ordered a and control me% une and omy, mannmm of electncity. three year test for residential revenue decoupling, begin-p g _g ning in January 1995. Under the plan, abnormal weather be enhancing Wmg services such as pow W variances will no longer impact earnings with respect to and reliability. We win seek busmess afhances, where. residential revenues. Since the utility's forecast is based on we fmd it to be strategically advantageous, and we normalized weather, Florida Power does not expect resi-wiu contmus to work hard to retam our present cus-dential revenue decoupling to have a material effect on somers: results for the three-year test period. (See Note 1 on We want.to be an. energy technology'emport for page 34.) our customers and to provide them with the highest f levels of sernoe. reliability and choce. We intend to be the clear provider of chome in Fionda. 2E

0 with each preceding year. The growth was primarily due 1994, and in 1995, increased nuclear de_ commissioning - l to increased purchased power costs a'nd higher system costs and amortization of the canceled Lake Tarpon-requirements. _ Kathleen ' transmission line. _.. Florida Power has long-term contracts to purchase Because Florida Pckwer completed several major con-1,164 megawatts of power fron', cogenerators. At the end

struction projects in recent years and is reducing cona of 1995, nearly all of the facilities were in service.

struction expenditures wherever prudent, the allowance The cost of cogeneration facilities raised Florida for funds used during construction decreased by $3.6 mil- ,j Power's system average cost for generation in 1995 and is lion in 1995 and $4.7 million in 1994c compared with the anticipated to escalate faster than the utility's cost for its Preceding years. own power plants. Florida Power projects that its retail rates will increase DIVERSIFIED OPERATIONS only about 1 percent annually over the next five years,. Electric Fuels Corporation - . despite escalating cogeneration costs. Management rec-Florida Progress continues its stratagy to expand the. ognizes that it is important for the company to minimize operations of Electric Fuels Corporation, the companv's

all' fits operating costs, including purchased power, to energy and transportation unit. Electr;c Fuels has three o

continue to offer competitive rates.- primary business units: coal, marine transportation and. The cogeneration purchased power contracts employ . rail services. Florida Progress is building Electric Fuels' separate pricing methodulogies for capacity payments.- existing operations through internal expansion and is pur-and energy payments. Three cogenerators are disputing suing new market opportunities within the business seg-the energy pricing methodologyin separate lawsuits. . (See Note 11 on page 43.) ments through acquisitions. This strategy will enable Electric Fuels to better serve the needs ofits customers and accelerate growth into new markets. Other Utility Expenses Since 1993, Electric Fuels has focused its acquisitions q Other utility operatio'n and maintenance expenses in the rail services business. In 1995, a subsidiary of i decreased by $38.9 million in 1995 and $3.1 million in Electric Fuels acquired the assets of two rail services com-l 1994, compared with the preceding years. Panies in, Nebraska and Colorado. The assets include Recoverable energy conservation program costs three railcar repair and maintenance facilities, two railcar decreased by $20.4 million in 1995, compared with 1994, wheel shops and a shortline railroad that services cus-

mers n the Burlington Northern and Union Pacific due to the previously mentioned changes in the utility's load nianagement program.These changes had no.

railr ads. These acquisitions will allow the rail services unit t expand into new markets in the western states. significant impact on earnings because Florida Power recovers substantially all of these costs through a clause in late 1994, Florida Progress acquired FM Industries, in electric rates similar to the fuel adjustment clause. Inc., a Fort Worth, Texas-based manufacturer and recon-Excluding these recoverable energy conservation pro-ditioner of cushioning units for railcars. The acquisition gram costs, other utility operation and maintenance

- - *cc unted for as a pooling ofinterests and increased

' expenses decreased by $18.5 million in 1995, compared Electnc Fuels' 1994 earnings by $2.4 million, or $.03 per share. The 1993 fmancial statements were not restated with the previous year. These expenses also decreased by $7.8 million in 1994, compared with 1993, even after rec-f r this acquisition. ognizing the one-tima costs for the voluntary early-retire, in 1993, a subsidiary of Electric Foels acquired the : ment option and restructuring plan that totaled $18.7 ssets of Steel Processing Services, Inc., an Alabama-million in 1994. The lower operation and maintenance based railcar repair and parts reconditioning company., expenses resulted from the utility's companywide, cost-(See Note 1 on page 35.) reduction efforts during the past several years. Electric Fuels' rail services operations, including these Florida Power expects that other operation and main. recent acquisitions, produced about $300 million in rev- ' enues in 1995. tenance costs, excluding conservation expenses, will decline in 1996 as part of the company's ongoing cost. Additional equipment, increased demand and higher cutting initiatives. Beyond 1996, the utility's goal is to rates for transporting barge freight improved the results limit increases in these costs to less than the national of Electric Fuels' marine transportation operations in inflation rate. 1995. The planned purchase of100 new, high-capacity Depreciation expense increased by $32.2 million in barges, each year in both 1996 and 1997, and options to 1995 and $21.3 million in 1994, compared with the pre Purchase additional barges, as well as increased operating. ceding years. Higher depreciation expense is due to plant efficiencies, should allow Electric Fuels to continue to additions, primarily new combustion turbine units in grow the earnings of this business unit. 24

t [ operations in 1996 to. increase coal production and J E earnings. Earnings for Electric Fuels in 1995 were $24 million, ) compared with 522.6 million in 1994 and $14.9 million I 1 in 1993. The increase in 1995 was largely because cf bet-c.; ter results from Electric Fuels' inland marine division. i: Q Electric Fuels' return on equity for 1995 was 13.8 j,b perc ent and has averaged 13.3 percent during the last ' f., three years. i a. j Mid-Continent Life insurance Cornpany ) ~ Mid-Contirent's earnings for 1995 were $6.5 million, ~ compared with $7.3 million in 1999 and $8.5 milhon in 1993. [ 3. Mid-Continent has developed a new comprehensive j T} fwe year business plan to improve its market position. gg, g During 1996, Mid-Continent will replace its existing policy j Senior Vice President and W'th a new product called "Basiclife. The new policy will Chsof Financial Ofhoer. Flonde Progress - be Mid-Continent's core product. Other complementary Corporation andflonda Power Corporation - products will be introduced in the future. Mid-Continent k What are your expectatens for earnmgs and - believes the new policy will be successful because it offers better features and greater flexibility to customers. dwidend growth over the next three to two years? Progress Credit Corporation A: The prospects look favorable m hght of the emproved imancial results of the past few years, Since announcing its strategy for an orderly withdrawal i Flonda Progdess has. achieved a 6.7 percent annual, fr m the leriding and leasing and real estate businesses in j compound sammgs per share growth rate for the. 1991, Progress Credit Corporation has decreased its j last three years. Florida Povier has taken the lead m assets by about $583 million, or 51 percent ofits original . this effort by working hard to lowents operstmg portfolio. l costs and capdal spendmg. This has resulted m a, The portfolio, which totaled $558 million at the end much stronger financial gosition for the utility, which will gwe n more flexibility m the futurie. Electnc Fuels of 1995, contains primarily commercial aircraft loans and i l also is playing a key mie thmugh ks strong earnings leases, first mortgage real estate loans and real estate i growth. assets. At the end of1995, Progress Credit had loan and Several years ago, we recognized that our dw,. lease loss reserves of $32 million. Management believes its dend payout was too high. in 1992, the payout was reserves are adequate to continue the company's with- $3gercent of earnmgs. Smce then, we havoidi-drawal strategy, as long as there is no significant further l lowed a strategy oi lpwerng the payopt whde workmg deterioration in the airline and real estate industries. to merease semings. N Magy has been h - ful. In 1995, the payout was 41 percent. Improved Any sale of Progress Credit's assets is expected to 4 I earneogs have allowed us to contmue to meresse the _ result in subsequent lower revenues and interest expense j dwidends paid per share, while lowering the payout. '. for the company. The impact on net income depends on We see sustained sanings.gmwth in ow fwe. the timing of these sales and the relationship between the year '@nplan. Our confidence in earnm0s returns on the assets sold, carryirig costs incurred and the . growth wit continue to'be one of severalimportant - - interest rates on the associated debt repaid. consideratidne used in setting dwidend poley. M Because most of Progress Credit's remaining real we are $ sed with ow results and hdwo E**E E. estate properties are located in growth areas, manage-tions and dwidend policy must be evaluated inlight: ment believes the market for its holdings should improve. The current commercial real estate market may require of % changes m ow %, ~- the company to hold these properties, and absorb the related carrying costs, until the properties can be sold for a fair value. Earnings from Electric Fuels' coal operations were Other lower in 1995 due to a depressed national coal market

The major provision of the Omnibus Budget Reconcilia-Operational changes and cost reductions from a quality tion Act of1993 was an increase in the maximum corpo-management program will be instituted in the mining rate income tax rate from 34 percent to 35 percent, effec-2E

l i ) tive January 1,1993. The related impact on accounting in a May 1994 public offering, Florida Progress sold } fu, long-t erm leveraged leases lowered Florida Progress'. 3.6 million shares of common stock with net proceeds of 1, 1993 net earnir.gs by $3.2 million, or $.04 per share. $92.2 million. During the last three years, the company i Even though the inflation rate has been relatively low also raised $142 million of equity capital through its during the last three years, inflation continues to affect stock purchase and dividend reinvestmen: plan, called the j Florida Progress by reducing the purchasing power of the Progress Plus Stock Plan in December 1994, Florida ^ dollar and increasing the cost of replacing assets used in Progress issued 700,000 shares to acquire FM industries. the business.This has a negative effect on Florida Power Florida Progress contributel $50 million in 1995, j because regulators generally do not consider this eco- $130 million in 1994 and $60 million in 1993 to Florida nomic loss when setting utility rates. However, such losses Power from the proceeds of the holding company's public e l are partly ofTset by the economic gains that result from stock offering:, and the Progress Plus Stock Plan.These j the repayment of tong-term debt with inflated dollars. funds were used to further strengthen Florida Power's l Florida Progress adopted several new accounting stand-finaacial position. ards during the last three years and others are expected to Florida Progress' common equity, as a percent of total i be adopted in 1996. (See Note 1 on page 34.) capital, was 50.9 percent as of December 31,199'i, and Several company subsidiaries, including Florida Power, 48.5 percent at the end ofl994. Short-term debt, as a have been notified by the U.S. Environmental Protection Percent of total capital, was 4.5 percent in 1995 and 2.6 - Agency that each is or may be a potentially responsible Percent in 1994. Long-term debt was 41.2 percent in party for the cleanup costs of several contaminated sites. 1995, compared with 45.4 percent in 1994. (See Note 11 on page 44.) Florida Progress has off-balance sheet risk related to Florida Powar Corporation debt of unconsolidated partnerships. (See Note 11 on Florida Power's construction expenditures for 1995 - Page 43.) totaled about $283 million. This was primarily for distri-bution lines and other facilities related to the utility's LIQUIDITY AND CAPITAL Srowin8 customer base. The ut.lity's five-year construction RESOURCES Program includes planned expenditures of $265 million, $332 million, $291 million, $258 million and $230 mil-Cash from operations has been the primary source of lion for 1996 through 2000. Florida Power forecasts that capital for Florida Progress. Other sources of capital have all of these construction expenditures will be financed included proceeds from the sales of properties and with. internally generated funds businesses, debt financings, issuance of common stock and the orderly liquidation of the lending and leasing The new construction program, totaling $1.4 billion portfolio. f r the 1996-2000 forecast period, is significantly lower than the prior five-year total of $1.8 billion for the 1995-Florida Progress has been issuing new equity m recent 1999 Period. The major reductions were d to lower esti-years primarily to fund Florida Power's construction pro. mates f r the planned Polk County Energ). omplex, the gram. Due to reductions in the utility's most recent con-cancellation of the take Tarpon-Kathleen transmission struction program forecast, Florida Power does not expect line and the cancellation of a power plant fuel conversion, to have any significant equity or debt requirements over Florida Power was able to cancel the transmission line the nat five years. Florida Progress' goal is to maintain and plant conversion because other, more cost-effective capital structures for its utility and diversified operations solutions were found. By prudently reducing construction that will enable its subsidiaries to preserve their current expenditures, Florida Power will be able to lower its long-credit ratings, which are listed below: term revenue requirements for depreciation, taxes,insur-ance and return on investment. These reductions will O provide a more competitive cost structure for the future. Standard, Duff & The Clean Air Act of1990 requires electric utility com- & Poor A Moody s Pheyn panies to reduce sulfur dioxide emissions. Florida Power M * * * '***" expects to meet these requirements with minimal capital AA Aa3 AA Fust mortgage bonds expenditures. ^^

I

^^ in 1995, Florida Power's net cash flow to capital expen-A 14 P1 D 14 (ymmmual papw struction commitments with cash from operations, Florida Power received equity from Florida Prm,ress and accesses Medium imm noi A A2 g g g; 7 .g Commerual papm A1 P1 paper, medium-term notes and first mortgage bonds. E2B

.,~.. _ - - - -.-..... l Florida Power has a public $200-million, medium-term note program, providing for the issuance of either 6xed or floating interest rate notes, with maturities that may range from nine months to 30 years. Florida Power's interim 6nancing needs are funded pri-marily through its commercial paper program. The utility has a 364-day revolving bank credit facility and a 6ve-year facility, $200 million each, which are used to back up ~ ~ commercial paper. (See Note 2 on page 36.) In 1995, due to additional cash generated by opera-tions, Florida Power was able to lower its total debt levels I by about $145 million, compared with year-end 1994. Florida Power expects to be able to continue reducing its ~ q! total debt in the future. Florida Power's embedded cost oflong-term debt was I 7.2 percent as of December 31,1995, compared with 7.1 percent at year-end 1994. ftichard D. Keller President and Chief Executive Officer, Electnc Fuels Corporation D.wersified Operations s Progress Capital Holdings, Inc., is a downstream holding 0: What has been Gectne Fuels' growstt strategy company of Florida Progress that finances the activities of .over the past few years Ad where do you see the the diversi6ed operations and consolidates the collective company growing in the next five years? 6nancial strength of these operations. Progress Capital has the benefit of a support agreement with Florida k: We have an aggressive growth ' strategy for our Progress, which helps to lower the cost of capital to each c mpany. We have been most active in w rail son w es uisamns nsade since M have of the comp.any's diversified businesses. Progress Capital helped us become the largest integrated rail services funds diversified operations primarily through the issu-company m the country We have approxtmately ance of commercial paper and medium term notes-1,500 employees located eri 13 states and dfor a full Progress Capital has a private $400-million, medium-range of rail services mcludmg repair, parts reconde term note program for the issuance of notes with matu. toning and manufactanng and leasmg. We are also rities that may range from nine months to 30 years. ' 'ncreasing our pmdwton d ww and recondtoned track mat.enals. We made several acquesstions in late Progress Capital also has two revolving bank credit 1995 that wal help us expand our operatons and facilities: a 364-day, $100-million facility and a five-year, serve customers in the westem United States. $300-million facility. These facilities are used to back up ' Our manne senrices business has also expanded Progress Capital's commercial paper program. (See Note with'our efforts focusmg on the Oheo and lower 2 on page 36.) . WIiseissippi nvers..Our fleet, made up of approx #- matey p barges, efficient on the nver.4among me niost modenii and in 1995, total diversified capital expenditures were Our barges are speciaRy $46.2 milh.on, pnmanly for operations at Electric Fuels. to be able can higher hf %- Net proceeds from leases, loans and securities were $45 bulk cargo when nyer conditons permit. Smce 1992, million, $28.1 millan and $21.5 million in 1995,1994 we have added approximately 300 new high-cape ty and 1993, respectively, mainly due to the orderly divesti-bergbo to the fleet. In addition, we have enerosed ture of the finance unit's assets. options to purchase 100 new berges in 1996 and 100 num w t pmnde w m In 1996, siversified cap tal expenditures are expected i with the W ofhcient and cost-effective 9 on, to be about $50 million, w. h most of these planned me nver, while consistently meshng om samengs it expenditures des;;iiated for operations of Electnc Fuels-obpectives. The marine transportation business unit will add 100 new barges in 1996 to continue to grow its business and take advantage of market opportunities. Electric Fuels' rail ser-vices and coal operations also will be upgrading and replacing facilities and equipment to reduce operating expenses and position these businesses for future market expansions. These expenditures are expected to be funded through cash generated internally and from outside financing sources. 2E

4 REPORTS ROM MANA EMENT AND AUD4 TORS MANAGEMENT'S REPORT AUDITORS' REPORT To OarShareholders: To the Shareholders ofFlorida Pmgress Corporation: I Management is responsible for the integrity and objec-We have audited the accompanying consolidated balance tivity of the financial and operating information contained sheets of Florida Progress Corporation and subsidiaries as in this 1995 Annual Report to Shareholders, including the of December 31,1995 and 1994, and the related consoli-consolidated financial statements covered by the dated statements ofincome, cash flows, and sharehold-Auditors' Report. These statements were prepared in ers' equity for each of the years in the three-year period accordance with generally accepted accounting principles ended December 31,1995. These financial statements are and necessarily include amounts that are based on judg-the responsibility of Florida Progress Corporation's man-ments and estimates by management. agement. Our responsibility is to express an opinion on these financial statements based o:< our audits. Florida Progress Corporation maintains internal con-trol systems and related policies and procedures designed We conducted our audits in accordance with generally to provide reasonable assurance that assets are safe-accepted auditing standards. Those standards require guarded, that transactions are executed as authorized and that we plan and perform the audit to obtain reasonable are properly recorded and that accounting records may be assurance about whether the financial statements are free relied upon for the preparation ofconsolidated financial of material misstatement. An audit includes examining, statements and other financial information. These policies on a test basis, evidence supporting the amounts and and procedures include a Code of Conduct program disclosures in the financial statements. An audit also intended to ensure employees adhere to the highest stand-includes assessing the accounting principles used and ards of personal and professional integrity. The design, significant estimates made by management, as well as monitoring and revision ofinternal con:rol systems evaluating the overall financial statement presentation. involve, among other things, management's judgment We believe that our audits provide a reasonable basis for with respect to the relative cost and expected benefits of our opinion, specific control measures. The company also maintains an in ur opinion, the financial statements referred to internal auditing function that evaluates and formally reports on the adequacy and effectiveness ofinternal con, above present fairly, in all material respects, the financial trols, policies and procedures. Position of Florida Progress Corporation and subsidiaries t., of December 31,1995 and 1994, and the results of in addition, the audit committee of the board of direc-their operations and their cash flows for each of the years tors, consisting solely of outside directors, meets periodi-in the three-year period ended December 31,1995, in cally with management, the internal auditors and the conformity with generally accepted accounting principles. independent auditors to review matters related to internal As discussed in Note 1 to the consolidated financial controls, audit results, financial statements and financial reporting. Annually, the audit committee recommends to statements, in 1993, Florida Progress Corporation and the board of directors the selection ofindependent audi_ subsidiaries changed their methods of accounting for 'nc me taxes. tors. Both the independent auditors and the internal auditors periodically meet alone with the audit committee and have free access to the committee at any time. 3 MY[r M For Management, St. Petersburg, Florida January 22,1996 Jeffrey R. Heinicka Senior Vice President and Chief Financial Officer M8

I L CONSOLID ATED FIN ANCI AL STATEM EN S l CONSOLIDATED STATEMENTS OF INCOME FLORIDA PROGRESS CORPORATION TOR THE YEARS ENDED DECEMBER 31,1995,1994 AND 1993 (in millions, except per share amounts) 1995 1994 1993 REVENUES: Electric utility $2,271.7 $2,080.5 $1,957.6 Diversified 783.9 691.0 491.4 3,055.6 2,771.5 2,449.0 EXPENSES-l Electric utility: l Fuel used in generation 433.7 431.9 460.8 Purchased power 440.7 294.6 209.5 l Deferred fuel (1.7) (1.5) (11.8) Other operation 358.7 388.8 378.0 Operation 1,231.4 1,113.8 1,036.5 ) Maintenance 114.1 122.9 136.8 Depreciation ' 293.7 261.5 240.2 { Taxes other than income taxes 176.2 162.8 152.6 1,815.4 1,661.0 1,566.1 ) Diversified: l Cost of sales 642.3 571.2 390.1 l Other 74.3 63.3 50.2 716.6 634.5 440.3 INCOME FROM OPERATIONS 523.6 476.0 442.6 INTEREST EXPENSE AND OTHER: l Interest expense 142.0 144.8 141.1 Allowance for funds used during construction (7.3) (10.9) (15.6) Preferred dividend requirements of Florida Power 9.7 10.1 13.4 Other expense (income), net 3.9 10.3 (2.5) 148.3 154.3 136.4 INCOME BEFORE INCOME TAXES 375.3 321.7 306.2 Income taxes 136.4 109.7 110.4 INCOME BEFORE ACCOUNTING CHANGE 238.9 212.0 195.8 CUMULATIVE EFFECT OF INCOME TAX l ACCOUNTING CHANGE .8 l NET INCOME $ 238.9 $ 212.0 $ 196.6 l [ AVERAGE SHARES OF COMMON STOC'< COTSTANDING 95.7 93.0 88.3 EARNINGS PER AVERAGE COMMON SHARE: income before accounting change $2.50 $2.28 $2.22 Change in accounting for income taxes .01 $2.50 $2.28 $2.23 The accompanying notes are an integralpart of these financialstatements. 29 ~

. ~. - .-a I l l CONSOLIDATED BALANCE SHEETS FLORIDA PROGRESS CORPORATION l DECEMBER 31,1995 AND 1994 (Dollars in mdlions) [ l 1995 1994 ASSETE PROPERTY, PLANT AND EQUIPMENT: l Electric utility plant in service and held for future use $5,867.5 $5,603.4 Less: Accumulated depreciation 2,179.7 1,981.6 f l Accumulated decommissioning for nuclear plant 165.2 135.2 i Accumulated disma.itlement for fossil plants 104.4 92.4 3,418.2 3,394.2 Construction work in progress 131.8 222.1 Nuclear fuel, net of amcrtization of $348.7 in 1995 and $322.8 in 1994 59.1 52.9 l Net electric utility plant 3,609.1 3,669.2-I l Other property, net of depreciation of $189.9 in 1995 and $163.5 in 1994 455.2 420.9. 4,064.3 4,090.1 i i 1 CURRENT ASSETS: i l Cash and equivalents 4.7 14.4 l Accounts receivable, net 309.5 262.2 Current portion ofleases and loans receivable 43.0 15.3 _ j l Inventories, primarily at average cost: Fuel 63.0 75.2 Utility materials and supplies 101.3 110.4 Diversified materials 113.2 68.1 j _ Other 44.8 42.8 679.5 588.4 l OTHER ASSETS: l investments: Leases and loans receivable, net 340.8 438.0 Marketable securities 188.2 148.3 j Nuclear plant decommissioning fund 161.1 123.6 l Joint ventures and partnerships 73.7 74.5 'l Deferred insurance policy acquisition costs 106.4 91.9 Other 177.1 163.9 1,047.3 1,040.2 $ 5,791.1 $5,718.7 The accompanying notes are an integra part ofthese financialstatements. E30

I~ (Dol!ars in millions) l 1995 1994 l . CAPITAL AND LIABILITIES i COMMON STOCK EQUITY: Common stock without par value,250,000,000 shares authorized, l 96,420,627 shares outstanding in 1995 and 95,175,360 in 1994 $1,187.6 $1,148.1 Retained earnings 888.4 842.9 Unrealized gain (loss) on securities available for sale 2.1 (6.6) l 2,078.1 1,984.4 CUMULATIVE PREFERRED STOCK OF FLORIDA POWER: Without sinking funds 113.5 113.5 With sinkin; funds 25.0 30.0 i LONG-TERM DEBT 1,685.2 1,859.6 TOTAL CAPITAL 3,901.8 3,987.5 - CURRENT LIABILITIES: Accounts payable 168.5 147.1 Customers' deposits 85.3 76.9 income taxes payable 14.4 12.7 Accrued interest 47.5 47.3 Other 119.3 84.1 I 435.0 368.1 l Notes payable 55.3 ~ l Current portion oflong-term debt 183.9 52.9 618.9 476.3 i r I' l DEFERRED CREDITS AND OTHER LIABILITIES: Deferred income taxes 694.3 744.1 - Unamortized investment tax credits 101.5 110.0 Insurance policy benefit reserves 265.0 222.5 Othe. postretirement benefit costs 84.8 67.8 { Other 124.8 110.5 1,270.4 1.254.9 COMMITMENTS AND CONTINGENCIES (Note 11) $5,791.1 $5,718.7 I 4 i 31 5

CONSOLIDATED STATEMENTS OF CASH FLOWS FLORIDA PROGRESS CORPORAil0N i t iOR THE YEARS ENDED DECEMBER 31,1995,1994 AND 1993 (in nnIhons) 1995 1994 1993 OPERATING ACTIVITIES: Income before accounting change $238.9 $212.0 $195.8 Adjustments for noncash items: Depreciation and amortization 359.1 321.7 299.9 Deferred income taxes and investment tax credits, net (80.0) (32.3) (49.1) l Increase in accrued other postretirement benefit costs 17.0 20.4 23.6 .l' Net change in deferred insurance policy acquisition costs (14.5) (10.4) (12.9) Net change in deferred insurance policy benefit reserves 42.5 36.0 25.8 ( Changes in working capital, net of effects from acquisition or sale of businesses: Accounts receivable (44.3) (17.4) (26.1) Inventories (29.8) (10.1) 12.2 Accounts payable 19.4 (4.2) 17.7 Other 43.1 (11.5) 23.4 Other operating activities 11.6 28.3 (7.4) r 563.0 532.5 502.9 t INVESTING ACTIVITIES: [ Property additions (including allowance for borrowed funds used during construction) (335.4) (368.1) (462.4) Proceeds from sales of properties and businesses 13.8 16.3 35.8 i Purchase ofleases, loans and securities (56.2) (74.1) (128.6) Proceeds from sale or collection ofleases, loans and securities 101.2 102.2 150.1 Acquisition of businesses (9.2) (17.1) (80.5) Investments in joint ventures and partnerships (5.2) (5.2) (24.1) Distributions from joint ventures and partnerships .4 3.9 26.0 Other investing activities (11.0) (10.8) (13.5) (301.6) (352.9) (497.2) FINANCING ACriVITIES: Issuance oflong-term debt 103.7 385.7 Repayment oflong-term debt (55.5) (86.7) (473.2) Increase (decrease) in commercial paper with long-term support 1.0 (61,2) 154.0 Redemption of preferred stock (5.0) (5.0) (80.5) Sale of common stock 38.4 138.0 59.1 Dividends paid on common stock -(193.4) (185.9) (172.3) Increase (decrease) in short-term debt (55.3) (75.6) 124.2 Other financing activities (1.3) (1.6) (1.7) (271.1) (174.3) (4.7) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (9.7) 5.3 1.0 Beginning cash and equivalents 14.4 9.1 8.1 ENDING CASH AND EQUIVALENTS 4.7 $ 14.4 9.1 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $135.5 $135.2 $138.1 income taxes (net of refunds) $214.7 $171.5 $155.1 The accompanying notes are an integralpart of these financial statements. -32

I CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FLORIDA PROGRESS CORPORAil0N FOR THE YEARS ENDED DECEMBER 31,1995,1994 AND 1993 (Dollars in millions, except per stiare amounts) Unrealized Cumulative Preferred Gain (Loss) Stock of Florida Power on Securities Without With Comrnon Retained Available Sinking Sinking Stock Earnings for Sale Funds' Funds Balance, December 31,1992 $ 949.2 $ 788.4 $ 133.5 $ 82.5 i Net income 196.6 l Common stock issued - 1,729,716 shares 59.1 Cash dividends on common stock ($1.95 per share) (172.3) Preferred stock reaeemed - 675,000 shares (.5) (20.0) (47.5) Balance, December 31,1993 - 1,008.3 812.2 113.5' 35.0 Net income 212.0 Common stock issued - 5,215,788 shares 138.9 ' Coramon stock issued in pooling ofinterests - 700,000 shares .9 4.1 Cash dividends on common stock ($1.99 per share) (185.4) Unrealized loss on marketable securities available for sale (6.6) Preferred stock redeemed - 50,000 shares (5.0) Balance, December 31,1994 1,148.1 842.9 (6.6) 113.5 30.0 Net income 238.9 Common stock issued - 1,245,267 shares 39.5 i Cash dividends on common stock ($2.02 per share) (193.4) Unrealized gain on marketable securities available for sale 8.7 Prefe]. i stock redeemed - 50,000 shares (5.0) Bala v., December 31,1995 $1,187.6 $ 888.4 - $ 2.1 $ 113.5 $ 25.0 The accompanying notes are an integralpart of these fnancialstatements. I l 33 5

NOTE 1

SUMMARY

OF SIGNIFICANT The allowance for funds used during construction repre-ACCOUNTING POUCIES sents the estimated cost of equity and debt for utility plant under c nstructi n. Florida Poweris permitted to earn a General - Florida Progress Corporation (the Company) is return n these costs and recover them in the rates charged an exempt holding company under the Public Utility f r utility services while the plant is in service. The average Holding Company Act of1935. Its largest subsidiary, repre-rate used m computing the allowance for funds was ~'.8% senting 74% of total assets, is Florida Power Corporation f r 1995 and 1994 and 7.9% for 1993. (Florida Power), a public utility engaged in the generation, purchase, transmission, distribution and sale of electric Utility Revenues, Fuel and Purchased Power Expenses - energy primarily within Florida. Revenues include amounts resulting from fuel, purchased The consolidated financial statements include the finan. Power and energy conservation adjustment clauses, which cial results of the Company and its majority-owned opera, are designed to permit full recovery of these costs.The tions. All significant intercompany balances and transac. adjustment factors are based on projected costs for a six-tions have been eliminated. Investments in 20% to 50% or 12-month period.The cumulative difference between owned joint ventures are accounted for using the equity actual and projected costs is included on the balance sheet method. as a current asset or current liability. Any difference is billed r refunded to customers during the subsequent period, The preparation of financial statements in conformity with generally accepted accounting principles requires man. Beginning in 1995, the FPSC ordered Florida Power to agement to make estimates and assumptions that affect c nduct a three-year test of revenue decoupling for its resi-the reported amounts of assets and liabilities and disclo. dential customers. Decoupling eliminates the direct link between kilowatt-hour sales and revenues. A nonfuel rev-sure ofcontingent assets and liabilities at the date of the financial statements and the reported amounts of revenues enue target is determined by multiplying a revenue per cus-and expenses during the reported period. Actual results tomer amount by the total number of residential cus-could differ from those estimates. tomers. Monthly residc. tial customer bills are calculated just as they were beGre decoupling. Differences between Accountmg for Regulatory Assets and Liabih.. ties - Florida target revenues and actual revenues are collected or re-Power is regulated by the Florida Public Service Commis-funded over a 12-month period through the conservation sion (FPSC) and the Federal Energy Regulatory Commission clause. The difference between target revenues and actual (FERC). The utihty follows the accounting practices set revenues is included as a current asset or current liability on forth in Financial Accounting Standard No. 71," Account-the balance sheet.The revenue per customer amount is ing for the Effects of Certain Types of Regulation" (FAS adjusted annually for a growth factor. 71). This standard allows utihties to capitalize or defer cer-Florida Power accrues the nonfuel portion of base rev-tain costs or revenues ifit is probable that these items will enues f r services rendered but unbilled. be recovered through the ratemaking process, The cost of fossil fuel for electric generation is charged At December 31,1995, Florida Power had $99 million t expense as consumed. The cost of nuclear fuel is amor-of regulatory assets and $47 million of regulatory liabilities. tized to expense based on the quantity of heat produced The company expects to fully recover these assets and f r the generation of electric energy in relation to the quan-refund the liabilities through customer rates under current tity f heat expected to be produced over the life of the regulatory practice. nuclear fuel core. If Florida Power no longer applied FAS 71 due to com-Earned income on Finance Leases - Earned income, petition, regulatory changes or other reasons, the utility would make certain adjustments. These adjustments would including any residual values expected to be realized, and the related deferred investment tax credits are amortized as j include the write-off of all or a portion ofits regulatory assets and liabilities and the evaluation of property, plant revenues over the term of the lease to provide an approxi-mate level return on the net investment. Residual values are and equipment and the write down, if necessary, of these assets to their fair value. determined principally on the basis ofindependent appraisals. Utility Plant - Utility plant is stated at the original cost of construction, which includes payroll and related costs such income Taxes - Deferred income taxes are provided on all as taxes, pensions and other fringe benefits, general and significant temporary differences between the financial and adminiurative costs, and an allowance for funds used dur. tax basis of assets and liabilities using presently enacted tax ing construction. Substantially all of the utility plant is rates in accordance with Financial Accounting Standard pledged as collateral for Florida Power's first mortgage No.109, " Accounting for income Taxes," which was imple-mented in 1993. bonds. ~ 34

l i l Deferred investment tax credits, subject to regulatory Florida Power records a provision for nuclear decommis-accounting practices, are amortized to income over the sioning costs over the expected life ofits nuclear plant. lives of the related properties. Currently, the accumulated provisions for nuclear decom-l Depreciation and Maintenance -The Company provides missi ning c sts are recorded as a reduction of Electric l for depreciation of the cost of properties over their esti-Plant in Service on the balance sheet. One altemative, if I mated useful lives primarily on a straight-line basis. Florida adopted, would require Florida Power's 90.4% share of esti-Power's annual provision for depreciation, including a pro-mated nuclea'r decommissioning costs totaling $366 mil-vision for nuclear plant decommissioning costs and fossil H n in 1995 dollars to be recorded as a liability, with a cor-plant dismantlement costs, expressed as a percentage of responding plant asset. There would be no impact on cam-the average balances of depreciable utility plant, was 5% for ings r cash flows. The FASB is expected to reach a deci-1995 and 4.8% for 1994 and 1993. sion in 1996. l l j - Florida Power charges maintenance expense with the impaired Loans - EffectiveJanuary 1,1995, the Company j l cost ofrepairs cnd minor renewals of property.The plant adopted Financial Accounting Standard No.114,"Ac-j- accounts are charged with the cost of renewals and counting by Creditors for impairment of a Loan," as l r: placements ofproperty units. Accumulated depreciation amended by Financial Accounting Standard No.118,. 1 is charged with the cost, less the net salvage, of property " Accounting by Creditors for impairment of a Loan - uni s retired. Income Recognition and Disclosure."%ese standards l t l'

Florida Power accrues a reserve for mainteaance and require the Company to compute present values for im-refueling expenses anticipated to be incurred during sched-Paired loans when determining the allowance for credit uled nuclear plant outages.

I sses. At December 31,1995, approximately $59 million ofloans receivable were impair:d, and the Company has Insurance Premiums, Policy Acquisition Costs and Benefit assigned approximately $5 million of the allowance for loan Reserves - Life insurance prem:ums are recognized as rev-losses to these loans. Because the Company's allowance is l enue over the premium-paying periods of the policies. The adequate for any such impairment, there was no eamings l Company defers recoverable costs in its insurance opera-impact as a result ofimplementing these standards. l tions that directly relate to the production of new business. - These costs are amortized over the expected premium-pay. Impaired Assets - The Company will be required to adopt ing period. Reserves are established out ofeach premium Financial Accounting Standard No.121," Accounting for ) . payment to provide for the present value of future insur-the impairment of Long-Lived Assets and for Long-Lived ance policy benefits, using reasonable assumptions for AssetsTo Be Disposed Of,"in 1996.This standard requires l , future investment yield, mortality, withdrawals and the risk that long-lived assets and certain intangible assets be of adverse deviation, reviewed for impairment whenever events or changes in cir-zumstances indicate that the carrying amount of an asset Profit from Real Estate Sales - Profit from the sale of real may not be recoverable through future cash flows from the state is recognized only upon the closing of a sale, the use and disposition of the asset. The adoption of this stand-e transfer of ownership rights to the purchaser and receipt of ard is not expected to have a material impact on camings. an adequate cash down payment. Stock Compensation -The Company will be required to Accounting for Certain invntments - The Company con-adopt Financial Accounting Standard No.123," Account-siders all highly liquid debt instruments purchased with a ing for Stock-Based Compensation," in 1996. %is stand-l maturity of three months or less to be cash equivalents. The ard allows companies to account for stock issued to Company's investments in debt and equity securities are employees using a new fair value method, or the method j classified and accounted for as follows: currently in use. The Company has not determined which Type of Security Accounting Treatment method it will use, but does not expect a material impact l Debt secunties held to rnatunty Amortized cost on camings from the adoption of this standard. Trading secunties Fair market value with unreahzed gains and losses included in earnings Business Acquisitions - Tbc Company and its subsidiaries - Secunties avadable for sale Fair rnarket value with unreahzed gains acquired several businesses in 1995,1994 and 1993. All and losses, net of taxes, reported acquisitions were accounted for as purchases except the separately in shareholders' equity acquisition of FM Industries, Inc., in December 1994, See Note 5 on page 38 for securities held to maturity or which was accounted for on a pooling ofinterests basis. available for sale at 1995 and 1994 year-ends. The Com. Because the effect of restating data related to the FM pany had no investments in assets classified as trading Industries acquisition is not material,1993 results are not securities at December 31,1995 and 1994. restated. The 1994 Statement of Cash Flows does not reflect the Accounting for Disposition of Long-Lived Assets - The value of the 700,000 shares ofenmmon stock issued for l Financial Accounting Standards Board (FASB) has a cur. rent project addressing the accounting for obligations re-the acquisition of FM Industries. The market value of these shares at the date ofissuance was $21.1 million. lated to the decommissioning of nuclear power plants. l 3E

r NOTE 2 DEBT - The Company's long-term debt at December 31,1995 and 1994,is scheduled to mature as follows: 2 Interest Rate 1995 1994 Florida Power Corporation: (/n millions) First mortgage bonds: Matunng through 1999: 1995 4.74 % 34.4 1997 6.13 % 16.7 16.7 -1999-6.50 % 75.0 75.0 Maturing 2002 and 2003 6.50%(a) 280.0 200.0 Maturing 2008 6.88% 80.0 80.0 Maturing 2021 through 2023 7.98%(a) 400.0 400.0 ) Pollution control revenue bonds: Maturing 2014 through 2027 6.59%(a) 240.9 '240.9 Notes maturing: i ~ 1995-1996 8.34%(a) 30.6 31.6 [ 1997 2000 7.46%(a) 47.3 47.3 } Commercial paper, supported by revolve _r maturing November 30, 2000 5.82%(a) 145.2 200.0 Discount, net of premium, being amortized over term of bonds (6.0) (6.7) 1,309.7 1,399.2 i Progress Capital Holdings: Notes maturing: . 1995-1996 8.25%(a) 140.0 146.0 1997 2004 6.99%(a) 136.0 136.0 Commercial paper, supported by revolver maturing November 30,2000 5.83%(a) 239.6 183.8 ~ Other debt, maturing through 2006 8.79%(a) 43.8 47.5 1,869.1 - 1,912.5 Less: Current portion of long-term ' debt 183.9 52.9 j $1,685.2 $1.859.6 (a) Weighted average interest rate at December 31,1995. f The Company's consolidated subsidiaries have lines of floating interest rate notes. These notes have maturities credit totaling $800 million, which are used to support ranging from nine months to 30 years. The program has commercial paper. The lines of credit were not drawn on as approximately $170 million available for future issuance. of December 31,1995. Interest rate options under the line PCH has a private $400-million, medium-term note pro-of eredit' arrangements vary from subprime or money mar-gram providing for the issuance of notes with maturities ) ket rates to the prime rate. Banks providing lines of credit ranging from nine months to 30 years. A balance of are compensated through fees. Commitment fees on lines $126 million is available for issuance under this program of credit vary between.06 and,10 of 1% at either fixed or floating rates. The lines of credit consist of four revolvi1g bank credit The combined aggregate maturities oflong-term debt facilities, two each for Florida Power and Progress Capital for 1996 through 2000 are $183.9 million, $52.8 million, Holdir gs, Inc. (PCH). The Florida Power facilities, $200 $16.1 million, $129.8 million and $393.8 million, respec-million each, are for terms of 364 days and five years. The tively, in addition, about 14% of Florida Power's outstand-PCH facilities consist of $100 million with a 364-day term ing first mortgage bonds have an annual 1% sinking fund and $300 million with a five-year term. In 1995, both 364-requirement. These requirements, which total $1.3 million day facilities were extended to November 1996. In addition, annually for 1996 and 1997 and $1 million annually for both five-year facilities were extended to Novernber 2000. 1998 through 2000, are expected to be satisfied with prop-Based on the duration of the underlying backup credit facil-erry additions. ities, $384.8 million ofoutstanding commercial paper at Florida Progress has a support agreement with PCH that December 31,1995, and $383.8 million of outstanding requires the parent company to maintain a minimum net commercial paper at December 31,1994, are classified as worth at PCH. At December 31,1995, PCH's net worth l long-term debt. was $106.6 million higher than the amount required under l Florida Power has a public $200-million, medium-term this agreement. I note program providing for the issuance of either fixed or H6 r

+ NOTE 3 PREFERRED AND PREFERENCE STOCK AND SHAREHOLDER RIGHTS A summary of outstanding Cumulative Preferred Stock of Florida Power follows: l i Current Outstanding Davidend Redemption Shares December 31 Rate Price ~ Authorized Outstanding 1995 1994 l (In millions) i ' Without sinking funds, not subject to mandatory redemption: f 4.00 % $104.25 40,000 39,980 $ 4.0 $ 4.0 4.40 % $102.00 75.000 75,000 7.5 7.5 4.58 % $101.00 100,000 99,990 10.0 10.0 4.60 % $103.25 40,000 39,997 4.0 4.0 i 4.73% - $102.00 80,000 80,000 8.0 8.0 7.40 % $102.48 300,000 300,000 30.0 30.0 7.76 % $102.21 500.000 500.000 50.0' 50.0 I $113.5 $113.5 -i With sinking funds, subject to mandatory redemption: 7.0 % $104.72(a) 500.000 250.000 $ 25.0 $ 30.0 (a) $102.36 after November 15.1996; $100.00 after November 15,2001. i The authorized capital stock of the Company includes The authorized capital stock cf Florida Power includes 10 million shares of preferred stock, without par value, three classes of preferred stock: 4 million shares of Cumula-(-' Jincluding 2 million shares designated as Series AJunior tive Preferred Stock, $100 par value; 5 million shares of l Participating Preferred Stock. No shares of the Company's Cumulative Preferred Stock, without par value; and 1 million l preferred stock are issued and outstanding. However, under shares of Preference Stock, $100 par value. No shares of l L the Company's Shareholder Rights Agreement, each share Florida Power's Cumulative Preferred Stock, without par i of common stock has associated with it approximately two-value, or Preference Stock are issued and outstand;ng, while - thirds of one right to purchase Series AJunior Participating a total of1.4 million shares of the Cumulative Preferred Preferred Stock, subject to adjustment, which is exercisable Stock, $100 par value, are issued and outstanding in various in the event ofcertain attempted business combinations. If series as detailed in the table above. l enercised, the rights would cause substantial dilution of Preferred stock redemption requirements for 1997 to ownership, thus adversely affecting any attempt to acquire 2000 are 52.5 million per year. the Company on terms not approved by the Company's l Board of Directors.The rights have no voting or dividend rights and expire in December 2001, unless redeemed earlier by the Company. l l 1 a i 3E L

NOTE 4 NUCLEAR OPERATIONS NOTE 5 FINANCIALINSTRUMENTS Jointly Owned Plant -The following information relates to Estimated fair value amounts have been determined by the Florida Power's 90.4% proportionate share of the Crystal Company using available market information and dis-River Nuclear i'lant at December 31,1995 and 1994: counted cash-flow analysis. Judgment is required in inter-On millions) 1995 1994 Preting market data to develop the estimates of fair value. Accordingly, the estimates may be materially different than 8 I the amounts that the Company could realize in a current C t o k n progress mah exchange. Esdmating fanabes for loans asso- ' Unamortized nuclear fuel 59.1 52.9 ciated with the airline industry is difficult due to the limited Accumulated depreciation. 310.9 285.2 Accumulated decommissioning 165.2 135.2 number of transactions. Management, therefore, has esti-mated a range ofvalues for these loans. Net capital additions for Florida Power were $7.8 million The Company currently has no derivative financial in 1995 and $21.7 million in 1994, and depreciation instruments, such as futures, forwards, swaps or options expense, exclusive of nuclear decommissioning, was $28.4 contracts. millicn in 1995 and $27.3 million in 1994. Each co-owner At December 31,1995 and 1994, the Company had the provides for its own financing. Florida Power's share of the following financial instruments with estimated fair values asset balances and operating costs is included in the appro-that dirTer from the carrying amounts: priate consolidated financial statements. Amounts exclude any allocation of costs related to common facilities. 1995 1994 Carrying Fair Carrying Fair Decommissioning Costs - Florida Power's nuclear plant (In millions) Amount Value Amount Value depreciation expenses include a provision for future decom-ASSETS: missioning costs, which are recoverable through rates Loans receivable:

charged to customers. Florida Power is placing amounts Commercial finance business:

collected in an extemally managed trust fund. The recovery Real estate $106.8 $106.6 $118.4 $117.1 2 - from customers, plus income earned on the trust fund, is Airiine 46.8 14 to 44 58.4 14 to 43 intended to be sufficient to cover Florida Power's share of Life insurance business: l the future dismantlement, removal and land restoration Loans secured by real estate 6.0 7.8 7.8 8.6 costs. Florida Power has a license to operate the nuclear I Policy loans 10.2 11.1 10.4 - 8.5 unit through December 3,2016, and contemplates decom-i 139.5 148.2 missioning beginning at that time. ~ 169.8 to 189.5 '.95.0 to 177.2 In November 1995, the FPSC approved a new site-spe-Allowance for loan losses (31.1) (32.6) cific study that estimated total future decommissioning costs at approximately $2.0 billion, which corresponds to $139.5 $148.2 q $404.6 million in 1995 dollars. Florida Power increased its Totat ioans receivable $138.7 to 169.5 $162.4 to 177.2 share of the retail portion of annual decommissioning Marketable securities: expense to the FPSC approved level of $20.5 million, effec. Available for sale $296.3 $296.3 $216.9 $216.9 . tiveJanuary 1995. Florida Power also has adjusted the Held to maturity 53.0 58.6 55.0 51.8 i wholesale portion of this expense in a comparable manner, CAPITAL AND LIABILITIES: increasing it to $1.2 million annually. j Florida Pm prderred M Under the previous study, Florida Power's share of total with sinking funds $ 25.0 $ 26.1 $ 30.0 $ 29.6 annual decommissioning expense, as authorized by the Long-term debt - FPSC and the FERC, was $11.9 million for 1994 and 1993. Florida Power Corporation 1,309.7 1,352.8 1,399.2 1,298.5 Fuel Disposal Costs - Florida Power has entered into a Progress Capital Holdings 559.4 566.2 513.3 504.0 contract with the U.S. Department of Energy (DOE) for the transportation and disposal of spent nuclear fuel. Disposal costs for nuclear fuel consumed are being collected from customers through the fuel adjustment clause at a rate of $.001 per net nuclear kilowatt-hour sold and are paid to j the DOE quarterly. Florida Power currently is storing spent i nuclear fuel on site and has sufficient storage capacity in place or under construction for fuel consumed through the year 2010. I i 38

I i NOTE 6 LEASES AND LOANS RECEIVABLE At December 31,1995 and 1994, PCC's portfolio AND CONCENTRATION OF CREDIT RISK included investments in the airline and commercial real estate industries as follows: At December 31,1995 and 1994, investments in leases and g gg, loans receivable were as follows: "W (in millions) 1995 1994 Finance leases $205.3 $254.2 Finance leases: Loans receivable 46.8 58.4 l' R:ntals receivable $214.0 $238.1 Joint ventures 36.3 37.6 Unguaranteed residual values 109.7 153.5 Equipment on operating leases 6.2 7.4 Uneamed income (62.5) - (78.7) $294.6 $357.6 Deferred investment tax credits (14.7) (20.5) Commercial real estate industry: Total finance leases 246.5 292.4 Finance leases $ 15.4 ' $ 16.2 I . Loms receivable: Loans receivable 106.8 118.4 Commercial finance business 153.6 176.8 $122.2 $134.6 Lif a insurance business 16.2 18.2 New transactions are not being initiated unless they Total loans receivable 169.8 195.0 facilitate PCC's orderly withdrawal strategy. Due to condi- - Allowance for losses (32.5) (34.1) ti ns in the airline industry and the real estate market, PCC 3s3.s 453.3 has experienced delinquencies in ongoing lease and loan Less: Current portion 43.0 15.3 g3,g,, g,3g g payments as well as loan principal maturities. PCC has negotiated the restructuring ofcertain transactions. Rentals receivable from finance leases represent unpaid Although most of the outstanding real estate and aircraft rentals less principal and interest on nonrecourse third, loans mature during the next five years, PCC expects that - party debt. Progress Credit Corporation's (PCC) share of some of the borrowers may not be able to retire the loans rentals receivable is subordinate to the debt holders who at maturity. PCC will pursue its options for any nonper-hive security interests in the leased properties. forming assets, including restructuring, remedial actions Finance leases consist primarily ofleveraged investments _ and remarketing. in aircraft. The majority of the aircraft leases have remain-As of December 31,1995, PCC's portfolio includes ing terms of10 to 15 years, with a maximum of 23 years. $90.2 million in loans and leases performing under restruc. Net contractual maturities of rentals receivable under these tured agreements. All restructured assets are performing in contracts are $12.6 million, $11.1 million, $10.4 million, accordance with their new tenra and the restructurings will $13.7 million and $13.1 million for 1996 through 2000, not materially reduce PCC's future annual revenue. respectively, and $153.1 million in total thereafter. During 1995,1994 and 1993, PCC provided $5.5 million, PCC's commercial finance loans are secured by first $9.9 million and $5.9 million, respectively, for possible loan mortgage liens on the related commercial real estate or by and lease losses and had write-offs totaling $7.1 million, - security interests in aircraft, aircraft engines or spare parts. $.8 million and $4.2 million, respectively.The Company These loans are further collateralized, where applic.bk by believes PCC's existing reserve of $32 million is adequate to an assignment to PCC of the borrowers' lease agreements, cover its planned orderly withdrawal from these businesses, and, in some cases, third-party guaranties. assuming no significant further deterioration in the airline and real estate industries. Leases and loans generally are placed on nonaccrual sta-tus when management believes the collectibility ofinterest 4 or principal is unlikely. There were no assets on nonaccrual status at December 31,1995 and 1994. i 4 39 9

i NOTE 7 BUSINESS SEGMENTS NOTE 8 INCOMETAXES The Company's principal business segments are utility and diversified operations. The utility is engaged in the genera-(in millions) 1995 1994 1993 tion, purchase, transmission, distribution and sale of elec-Components of income tax expense: tric energy. Electric Fuels Corporation's (Electric Fuels) Payable currently: i operations include bulk commodities transportation, rail Federal $192.5 $127.7 $140.7 - products and services and the mining, procurement and. state 23.9 14.3 18.8 transportation of coal to Florida Power and other 216.4 142.0 159.5 unaffiliated customers. Other diversified operations Deferred, net: include activities in leveraged leasing, commercial finance, Federal (63.9) (20.6). (39.2) f life insurance, real estate and technology development. State (7.6) (2.1) (5.1) The Company's business segment information for Effect of change in tax rate on deferred assets / liabilities 4.7 1995,1994 and 1993 is summarized below. No single (71.5) (22.7) (39.6) customer accounted for 10% or more of unaffiliated Amortization of investment revenues. tax credits, net (8.5) (9.6) (9.5) (in millions) 1995 1994 1993 $136.4 $109.7 $110.4 Revenues: Utility $2,271.7 $2,080.5 $1,957.6 The primary differences between the statutory rates and Diversifed:. the effective income tax rates are detailed below: Electric Fuels: Coal sales to electric utikty 236.8 249.4 244.9 1995 1994 1993 Sales to unaffiliated customers 607.0 534.1 335.8 Federal statutory income tax rate 35.0 % 35.0 % 35.0 % Other divers 6ed 179.1 159.4 157.7 State income tax, net of federal l f 3,294.6 3,023.4 2,696.0 income tax benefits 2.7 2.4 2.8 Eliminations (239.0) (251.9) (247.0) Amortization of investment tax credits (2.5) (3.1) (3.0) Revenues from external customers $3.055.6 $2.771.5 $2.449.0 Effect of change in tax rate on deferred assets / liabilities 1.5 income from operations: Utility $ 456.3 $ 419.5 $ 391.5 Other .2 (1.2) (1.8) j ^ Diversified: Effective income tax rates 35.4 % 33.1 % 34.5 % Electric Fuels 52.1 41.6 30.3 i Other diversified 15.f - 14.9 20.8 The following summarizes the components of deferred 5236 476.0 442.6 tax liabilities and assets at December 31,1995 and 1994: Interest and other expense 148.1 154.3 136.4 (In millions) 1995 1994 Income before income taxes $ 375.3 $ 321.7 $ 306.2 Deferred tax liabilities: Identifiable assets: Dderence in tax basis d propedy, plant and Utiirty $4,284.7 $4,284.0 $4,254.2 equipment $565.5 $564.8 Diversified: Difference in accounting for leveraged leases 184.3 226.6 i Electric Fuels 573.6 489.4 397.2 Other 110.9 88.0 Other diversified 932.8 945.3 987.4 $5.791.1 $5,718.7 $5.638.8 Total deferred tax liabilities $860.7 $879.4 Deferred tax assets: Depreciation and amortization: Utility $ 329.7 $ 294.8 $ 276.5 Accrued book expenses $144.9 $114.1 Diversified: Unbilled revenues 20.8 17.7 i Electric Fuels 21.2 19.7 16.4 Other 33.0 32.4 Other diversified 8.2 72 7.0 Total deferred tax assets $198.7 $164.2 $ 359.1 $ 321.7 $ 299.9 Capital additions: At December 31,1995 and 1994, Florida Progress had Utility $ 289.2 $ 327.2 $ 440.7 net noncurrent deferred tax liabilities of $694.3 million l Diversified: and $744.1 million and net current deferred tax assets of Electric Fuels 40.5 38.1 19.5 $32.3 million and $28.9 million, respectively.The Company Other diversified 5.7 2.8 22 expects the results of future operations will generate $ 335.4 $ 368.1 $ 462.4 sufficient taxable income to allow for the utilization of deferred tax assets. E40

NOTE 9 RETIREMENT BENERT PLANS The following summarizes the funded status of the pen-sion plan at December 31,1995 and 1994: i Staff Reductions - he Company recognized pension and other postretirement benefit expenses of $5.6 million in (/n mi#i ns) 1995 1994 ~ 1993 and $15.5 million in 1994 related to an early retire-Accumulated benefit obligation: mint option. In addition, in late 1994, Florida Power elimi-Vested $315.s $267.8 l nated approximately 300 positions. As a result, the Com-Nonvested 30.6 34.7 i piny recognized severance costs of $5 million, which was 346.4 302.5 pirtially offset by a reduction of $1.8 million in related Effect of projected compensation increases 94.7 82.6 accrued pension and postretirement benef t costs. Projected benefit obligation 441.1 385.1 Pension Benefits - The Company and certain ofits sub-Plan assets at market value, primarily listed sidiaries have a noncontributory de6ned benefit pension stocks and bonds 585.0 480 0 i plan covering most employees.The benefits are based on Plan assets in excess of projected benefit obligation $143.9 $ 94.9 length of service, compensation and Social Security benefits. De participating companies make annual contri-consisung of me following components: unre gnized transiti n asset $ 36.4 $ 40.3 butions to the plan based on an actuarial determination Unre gnized rior service cost (6.9) - (7.5) (nd consideration of tax regulations and funding require. P m:nts under federal law. Based on actuarial calculations Effect of changes in assumptions and difference r and the funded status of the pension plan, the Company between actual and estimated experience 123.9 73.8 i w;s not required to contribute to the plan for 1995,1994 Accrued pensi n c sts (s.5) (11.7) or 1993. 8143 # 8 848 l Shown below are the components of the net pension Due to changes in interest rates, the Company used a expense calculations for those years: discount rate of 7.25% and a 4.5% weighted average rate of (in ml# ions) '1996 1994 1993 compensation increase to calculate the pension plan's Service cost $ 13.4 $17.2 $16.3 1995 year-end funded status. The change in the discount Interest cost 30.1 29.3 27.5 rate from 8.25% at December 31,1994, to 7.25% at Dec-Actual losses (eamings) on plan assets (124.4) 6.6 (60.7) ember 31,1995, increased the projected benefit obligation Net amortization and deferral 77.7 (54.3) 17.9 by $60 million and is expected to increase the annual pen-j- Net pension cost (benefit) (3.2) (1.2) 1.0 sion costs by $8 million, beginning in 1996. De change in 10 0 .1 the weighted average rate of compensation increase from staff reduction cost, net ' Net pension cost (benefit) recognized $ (3.2) $ 8.8 $ 1.1 5% at December 31,1994, to 4.5% at December 31,1995, ) decreased the projected benefit obligation by $17 million The following weighted average actuarial assumptions at and is expected to decrease the annual pension costs by January 1 were used in the calculation of pension expense: $4 milli n, beginning in 1996. 1995 1994 1993 Other Postretirement Benents - %e Company and some ofits subsidiaries provide certain health care and life insur-i Discount rate s.25 % 7.25 % 7.75 % ance benefits for retired employees. Employees become eli-Expected long-term rate of retum 9.00 % 9.00 % 0.00 % gible for these benefits when they reach normal retirement . Rate of compensation increase 5.00 % 5.00 % 5.50 % gg The net postretirement benefit costs for 1995,1994 and 1993 are detailed below: (in millions) 1995 1994 1993 Service cost $ 5.1 $ 5.3 $ 5.6 Interest cost 13.5 12.9 11.8 Amortization of unrecognized transition obligation 6.1 6.1 6.5 Actual earnings on plan assets (.3) Staff reduction cost 3.7 5.5 $24.4 $28.0 $29.4 4E

t r he following summarizes the plan's status, reconciled NOTE 10 RATES AND REGULATION with amounts recognized in the Company's balance sheet Retail Rates - Florida Power's currently approved retail at December 31,1995 and 1994: rates provide the opportunity to earn a regulatory return on I (in millions) 1995 1994 . equity of 12%, with an allowed range between 11% and

" W3 "" E"'"

II' " " " #9" E *** Accumulated postretrement benefit obligation: 12.5% for 1995. ? Retirees $ 96.6 $ 92.7 Fully eligible actwo plan participants 2.6 1.5 Wholesale Rates - In 1995, the FERC approved Florida 1 Other active plan participants 91.4 74.2 Power's two 1995 settlement agreements. The new rates, Plan assets at fair vaWe (3.2) (1.5) effectiveJanuary 1,1995, are designed to increase annual 187.4 166.9 revenues by approximately $9.5 million primarily to recover ) Unrecognized transition obligation (103.s) (107.8) additional purchased power capacity costs. In 1994, the FERC approved Florida Power's 1994 and 1993 settlement Unrecognized net gains 1.0 8.7 greements with its wholesale customers that provide for Accrued postretrement benefit cost $ 84.8 $ 67.8 rates designed to increase annual revenues by $9.8 million 1 and $5.7 million, respectively. The following weighted average actuarial assumptions in March 1995, the FERC proposed new rules that will were used in the calculation of the year-end status of other require the electnc mdustry to provide open access to the postretirement benefits: 2 nation's interstate transmission network. Each utility under FERCjurisdiction will be required to file a nondiscrimi-Discount rate 7.25 % 8.50 % natory open access transmission tariff, making its transmis-Rate of compensation increase 4.50 % 5.00 % sion system available to all wholesale buyers and sellers of Health care cost trend rates-electric energy. In October 1995, the FERC accepted Pro. Medicare 11.50W5.00% 12.25 4 5.75 % Florida Power's revised comparability tariff for implementa-Post. Medicare 8.25 %-4.75 % 9.0045.50% tion, subject to refund, effective November 1995. Florida Power expects that the FERC will hold heanngs to review The transition obligation is being accrued through 2012. the proposed tariff by the end of the second quarter 1996. A one-percentage point increase in the assumed health care Florida Power expects that the new tariff will not have a ) cost trend rate for each future year would have increased material effect on Florida Power's revenues or eamings. the 1995 current service and interest cost by approximately $3 million and the accumulated postretirement benefit obligation as of December 31,1995, by about $28 million. Be change in the discount rate from 8.5% at December 31,1994, to 7.25% at December 31,1995, increased the projected benefit obligation by $28 million and is expected to increase annual postretirement benefit costs by $2 mil-tion, beginning in 1996. Due to different retail and wholesale regulatory rate requirements, Florida Power began making quarterly contri-butions in 1994 to an irrevocable external trust fund for wholesale ratemaking, while continuing to accrue post-j retirement benefit costs to an unfunded reserve for retail I ratemaking. Florida Power contributed approximately $1.4 million in 1995 and $1.6 million in 1994 to the trust fund. E42

\\ NOTE 11 COMMITMENTS AND Florida Power incurred purchased power capacity costs CONTINGENCIES totaling $260.1 million in 1995, $138.6 million in 1994 Fuel, Coal and Purchased Power Commitments - Florida and $74.3 million in 1993. The following table shows mini-PowIr has entered into various long-term contracts to pro. mum expected future capacity payments for purchased vide the fossil and nuclear fuel requirements ofits gener-Power commitments. Because the purchased power com-ating plants and to reserve pipeline capacity for natural gas. mitments have relatively long durations, the total present i in most cases, such contracts contain provisions for price value of these payments using a 10% discount rate also is escalation, minimum purchase levels and other financial Presented. These amounts assume that all units are commitments. Estimated annual payments, based on cur. brought into service as contracted and meet contract per-rent market prices, for Florida Power's firm commitments formance requirements: for fuel purchases and transportation costs, excluding de* Purchased Power Capacity Payments livered coal and purchased power, are $4 million, $11 mil-(in inmions) utilities cogenerators Totai j lion, $18 million, $18 million and $17 million for 1996 1996 $ 64 $ 221 $ 285 through 2000, respectively, and $182 million in total there-w 67 238 sos afttr. Additional commitments will be required in the future 1998 65 250 315 to supply Florida Power's fuel needs. 1999 66 262 328 Electric Fuels has entered into several contracts with out-2000 3' 276 -313 side parties for the purchase of coal. Electric Fuels also has 2001-2025 359 9,745 10,104 entered into several operating leases, and rental or royalty 7g gg3g ggg agreements, relating to transportation eauipment and coal _ procurement and processing. %e annual' obligations under T tal net presenhalue $ 3.372 these contracts and leases, including transportation costs, are $231.2 million, $176.3 million, $104.5 million, $83.2 The FPSC allows these capacity payments to be recov-1 million and $67.7 million for 1996 through 2000, respec. ered through a capacity cost recovery clause, which is simi- ) . tively, and $126.6 million in total thereafter. The total cost far to, and works in conjunction with, energy payments incurred for these commitments was $235.2 million in recovered through the fuel adjustment clause. 1995, $199.2 million in 1994 and $213.2 million in 1993. The cogeneration purchased power contracts employ i Florida Power has long-term contracts for about 480 Separate pricing methodologies for capacity payments and megawatts of purchased power with other utilities, includ. energy payments. Two cogenerators filed suit against ] ing a contract with The Southern Company for approxi. Florida Power in state court and a third in federal court j mately 400 megawatts of purchased power annually challengig the energy pricing methodology. i through 2010.This represents 4.6% of Florida Power's total Another cogenerator entered into a standard offer i current system capacity. Florida Power has an option to cogeneration contract with Florida Power and subsequently lower these Southern purchases to approximately 200 indicated its intention to build a 115-megawatt facility, The j megawatts annually, beginning in 2000, with a three-year FPSC's rules limit standard offer cogeneration projects to notice.The purchased power from Southern is supplied by 75 megawatts, and Florida Pc,wer filed a petition seeking an generating units with a capacity of approximately 3,500 FPSC ruling that Florida Power's standard offer contract is m:gawatts and is guaranteed by Southern's entire system, not available if the cogenerator constructs a larger facility. totaling more than 30,000 megawatts. Florida Power also has filed a lawsuit in federal court in i As of December 31,1995, Florida Power had entered connection with this dispute. into purchased power contracts with certain cogenerators Management does not expect the results of these legal for 1,164 megawans of capacity with expiration dates rang-actions will have a material impact on earnings. ing from 2002 to 2025.The purchased power contracts Utility Construction Program - Substantial commitments provide for capacity and energy payments. Energy payments have been made in connection with Florida Power's con-are based on the actual power taken under these contracts. struction program. In 1996, total construction expenditures Capacity payments are subject to the qualifying facilities of $265 million are projected, primarily for electric plant meeting certain contract obligations. In most cases, these and nuclear fuel. contracts account for 100% of the generating capacity of Off-Balance Sheet Risk - Several of the Company's sub-each of the facilities. Of the 1,164 megawatts under con-S' diaries are Seneral artners in unconsolidated partner-P tract,1,049 megawatts are currently available. All commit. ships and joint ventures. The Company or subsidianes have ments have been approved by the FPSC. Florida Power does not plan to increase the level of purchased power currently agreed to support certa n loan agreements of the partner-ships and joint ventures. The debt support agreements under contract. totaled $33.4 million and $31.9 million at December 31, 4E

1995 and 1994, respectively, of which $26.1 million and million is purchased in the commercial insurance market $24.9 million were guaranties, and $7.3 million and $7 mil-with the remaining excess coverage purchased from NEIL. lion were stand-by letters of credit, respectively. If the other Florida Power is self-insured for any losses that are in excess partners fail to perform their obligations and if the partner-of this coverage. Under the terms of the NEIL policy agree-ship assets, consisting primarily ofland and buildings, were ments, Florida Power could be assessed up to $8.1 million worthless, those subsidiaries could be liable for an addi-in any policy year if a loss in excess of NEIL's available sur-tional $37.4 million as of December 31,1995, which repre-plus is mcurred. In the event of multiple losses in any policy sents partnership liabilities in excess of amounts mentioned year, Florida Power's retroactive premium could total up to earlier. The Company considers these credit risks to be mini- $15.9 million. mal, based upon the asset values supporting the partner-Florida Power has never been assessed under these ship liabilities. nuclearindemnities or insurance policies. Insurance - Florida Progress and its subsidiaries utilize vari-Contaminated Site Cleanup - %e Company is subject to nus risk management techniques to protect assets from risk regulation with respect to the environmental effects ofits ofloss, including the purchase ofinsurance. Risk avoidance, operations. The Company's disposal of hazardous waste risk transfer and self-insurance techniques are utilized through third-party vendors can result in costs to clean up depending on the Company's ability to assume risk, the rel-facilities found to be contaminated. Federal and state ative cost and availability of methods for transferring risk to statutes authorize governmental agencies to compel respon-third parties, and the requirements of applicable regulatory sible parties to pay for clean up ofcertain abandoned or bodies. uncontrolled hazardous waste sites. Florida Power self-insures its transmission and distribu-Florida Power and former subsidiaries of the Company,. tion lines against loss due to storm damage and other nat-whose properties were sold in prior years, have been iden-ural disasters. Florida Power is accruing $6 million annually tified by the U.S. Environmental Protection Agency as to a storm damage reserve and may defer any losses in pocentially responsible parties at certain sites. In addition excess of the reserve. to these designated sites, there are other sites where Under the provisions of the Price Anderson Act, which Company affiliates may be responsible for additional envi-limits liability for accidents at nuclear power plants, Florida ronmental cleanup, including a coal gasification plant site Power, as an owner of a nuclear plant, can be assessed for that Florida Power previously owned and operated. %ere a portion of any third-party liability claims arising from an are five parties which have been identified as potentially accident at any commercial nuclear power plant in the responsible for this gas site, including Florida Power. Lia-United States. If total third-party claims relating to a single bility for the cleanup costs of these sites is joint and several. nuclear incident exceed $200 million (the amount of cur-The Company believes that its subsidiaries will not be rently available commercial liability insurance), Florida required to pay a disproportionate share of the costs for Power could be assessed up to $79.3 million per incident, cleanup of these sites. The Company's best estimates indi- ) with a maximum assessment of $10 million per year. cate that its proportionate share ofliability for cleaning up Florida Power is a member of NEIL, an industry mutual all sites ranges from $2.5 million to $4.5 million. It has insurer, which provides business interruption and extra reserved $2.8 million against these potential costs. Furthe-expense coverage in the event of a major accidental outage study of the coal gasification plant site could lead to .j at a covered nuclear power plant. Florida Power is subject increasing Florida Power's liability for cleanup costs. It is too to a retroactive premium assessment under this policy in early to predict the outcome of the study. Estimates of these the event of adverse loss experience. Florida Power's present additional costs are not available, but are not expected to maximum share of any such retroactive assessment is $2.6 have a material effect on the Company's financial position, million per policy year. operations or liquidity. Florida Power also maintains nuclear property damage i insurance and decontamination and decommissioning lia-bility insurance totaling $2.1 billion.The first layer of $500 i s ~ 44

QUARTERLY FINANCIAL DATA (Unaudited) Three Months Ended (In millions, except per share amounts) March 31 June 30 September 30 December 31 1995 . Revenues $703.2 $742.9 $862.6 $746.9 l Income from operations 110.3 123.6 180.9 108.8 Net income 46.6 55.2 91.1 46.0 Earnings per average common share .49 .58 .95 .48 Dividends per common share .505 .505 .505 .505 Common stock price per share: High 32X 32X 32X 35% Low - 29% 29X 29% 32X 1994 5 Revenues $639.2 $693.2 $756.2 $682.9 income from operations 91.3 121.8 155.2 107.7 . Nit income 36.5 53.7 75.8 46.0 Earnings per average common share .41 .58 .80 .49 e Dividends per common share 495 .495 .495 .505 Common stock price per share: High 33%. 30X 29% 30% I Low ' ?.9% 24% 25X 27% The business of Florida Power is seasonal in nature and comparisons of earnings for the quarters do not give a true . indication of overall trends and changes in the Company's operations. I l 45 5

1 SELECTED DATA 1985 1'9 9 5 Annual Growth Rates (in percent) 1990-1995 1985 1995 1995 1994 1993 1 FLORIDA PROGRESS CORPORATION Summary of operations (in millions): Utility revenues 5.9 4.2 $2,271.5 $2,080.5 $1,957.6 Diversi6cd revenues (continuing) 21.0 17.3 783.9 691.0 491.4 Income from continuing operations 5.8 4.0 238.9 212.0 195.8 Income (loss) from discontinued operations and change in accounting .8 i Net income 7.7 4.0 238.9 212.0 196.6 Balance sheet data (in millions): Total assets 2.8 4.7 $ 5,791.1 $5,718.7 $5,638.8 Capitalization: Short-term capital (23.0) (1.1) $ 183.9 $ 108.2 $ 201.6 1.ong-term debt 4.9 3.3 1,685.2 1,859.6 1,866.6 Preferred stock (9.9) (6.3) 138.5 143.5 148.5 Common stock equity 7.8 7.4 2,078.1 1,984.4 1,820.5 Total capitalization 2.2 4.2 $4,085.7 $4,095.7 $4,037.2 Common stock data: Average shares outstanding (in millions) 4.4 3.4 95.7 93.0 88.3 Earnings per share: Utility 1.1 .1 $2.27 $2.05 $2.06 Diversi6ed (continuing) 5.0 8.7 .23 .23 .17 Discontinued operations Consolidated 3.2 .6 2.50 2.28 2.23 Dividends per common share 2.6 3.3 2.02 1.99 1.95 Dividend payout 81.0% 87.7% 87.6% Dividend yield 5.7% 6.7% 5.9% Book value per share ofcommon stock 3.2 4.1 $21.55 $20 85 $20.40 Return on common equity 11.8% 11.1% 11.1% Common stock price per share: High 35% 33% 36% Low 29% 24% 31% Close 6.8 5.6 35% 30 33% Price carnings ratio (year-end) 14.2 13.2 15.1 l Other year-end data: Number of employees (1.9) (.1) 7,174 7,394 7,825 j Number of registered shareholders (.7) (1.7) 40,523 44,148 44,371 j FLORIDA POWER CORPORATION Electric sales billed (millions of KWH): Residential 3.8 5.0 14,938.0 13,863.4 13,372.6 Commercial 3.3 3.5 8,612.1 8,252.1 7,884.8 Industrial 2.3 2.0 3,864.4 3,579.6 3,380.8 Total retail sales 3.5 4.7 29,499.5 27,675.2 26,528.3 Total electric sales 3.6 4.3 32,402.6 30,014.6 28.647.8 l Residential service (average annual): KWH sales per customer 1.5 2.0 13,282 12,597 12,420 Revenue per customer 4.5 2.4 $1,114 $1,038 $983 Ratio of earnings to 6xed charges (SEC method) 4.41 3.90 3.83 Embedded cost oflong-term debt (1.8) (2.0) 7.2% 7.1% 6.8% Embedded cost of preferred stock (1.1) (3.1) 6.8% 6.8% 6.8% Operating data: Net system capability (MW) 2.3 2.1 7,347 7,295 7,563 Net system peak (MW) 9.0 2.9 7,722 6,955 6,729 Construction expenditures (in millions) 1.3 3.9 $283.4 $319.5 $426.4 Net cash flow to capital expenditures 12.3 (1.0) 125% 103% 63% Average number of customers 2.3 3.1 1,271,784 1,243,891 1,214,653 1 Number of full-time employees (3.5) (1.1) 4,658 4,972 5,807 E46

I l 1992 1991 1990 1989 1988 1987 1986 1985 $1,774.1 $1,718.8 $1,709.1 51,627.0 $1,468.5 $1,472.2 $1,530.5 $1,504.9 i 321.2 355.9 301.7 274.3 270.1 245.5 186.0 159.0 175.7 174.5 179.8 186.1 178.6 184.1 180.7 160.9 (2.4) (15.0) 1.0 1.2 3.7 .5 175.7 172.1 164.8 187.1 179.8 187.8 181.2 160.9 $5,333.0 $ 5,024.9 $5,045.9 $4,610.4 $4,272.3 $4,067.2 $3,855.5 $3,666.6 $ 201.9 68.2 $ 681.0 $ 498.6 $ 366.5 $ 269.0 89.5 $ 205.0 1,656.4 1,659.1 1,326.2 1,125.8 1,048.8 1,093.0 1,240.3 1,220.9 l 216.0 231.0 233.5 233.5 233.5 233.5 233.5 265.1 1,737.6 1,587.7 1,424.3 1,372.3 1,316.9 1,264.7 1,156.4 1,014.2 $3,811.9 $ 3,546.0 $3,665.0 $3,230.2 $2,965.7 $2,860.2 $2,719.7 $2,705.2 85.4 80.8 77.0 76.6 76.6 75.4 73.3 68.4 $1.99 $2.03 $2.15 $2.19 $ 2.21 $2.20 $2.25 $2.25 .07 .13 .18 .24 .13 .24 .21 .10 (.03) (.19) .01 .01 .05 .01 2.06 2.13 2.14 2.44 2.35 2.49 2.47 2.35 1.905 1.843 1.777 1.72 1.667 1.613 1.54 1.46 93.0% 87.0% 82.9% 70.4% 71.0% 64.7% 61.4 % 62.2% 5.9% 6.0% 7.2% 6.6% 7.3% 7.6% 6.1% 7.4% $19.85 $19.14 $18.37 $17.92 $17.20 $16.51 $15.51 $14.42 10.6% 11.4% 11.8% 13.9% 13.9% 15.5% 16.4% 16.8% 33% 31% 27 26% 25% 29% 31% 20% 27% 24% 22% 22% 21% 19% 20% 15% 32X 31% 25X 26X 23% 21% 26X 20% 15.8 14.7 11.9 10.9 9.9 8.7 10.7 8.7 7,301 7,350 7,879 7,490 7,974 8,116 8,030 7,208 44,870 42,176 41,970 43,005 44,929 46,147 46,586 48,052 12,825.8 12,623.9 12,415.5 11,786.9 11,065.6 10,318.8 9,819.2 9,175.0 7,544.1 7,489.2 7,328.7 6,989.8 6,479 4 6,016.4 5,573.0 5,106.6 1 3,254.5 3,303.0 3,455.7 3,766.1 3,680.6 3,349.4 3,122.3 3,166.0 25,414.0 25,179.1 24,878.3 24,123.3 22,691.7 21,039.6 19,833.8 18,716.0 i z7,375.5 27,350.2 27,143.7 26.510.5 26,130.9 24,103.7 23,170.0 21,272.4 l 12,214 12,257 12,319 12,059 11,754 11,356 11,255 10,940 $884 $899 $896 $845 $814 $827 $914 $883 3.84 3.87 3.89 3.79 3.79 4.08 4.29 3.81 7.5% 7.7% 7.9% 8.1% 8.0% 8.1% 8.7% 8.8% 7.3% 7.3% 7.2% 7.2% 7.2% 7.2% 8.4% 9.3% 7,002 6,623 6,571 6,309 6,086 5,966 5,961 5,989 6,982 6,056 5,026 6,817 6,188 5,087 5,977 5,813 $472.9 $345.9 $265.3 $249.6 $197.0 $188.5 $189.4 $194.1 52% 66% 70% 94% 103% 117% 116% 138% 1,182,170 1,159,237 1,135,499 1,101,817 1,060,971 1,023,222 980,427 940,976 5,806 5,677 5,570 5,553 5,512 5,395 5,323 5,215 4E

5 BOAR *O OF DIRECTORS Dr. Jack B. Critchfield,62, is Chairman tor since 1992, he is a member of the Charies B. Reed,54, is Chancellor of the of the Board and Chief Executive OEcer Finance & Budget Committee. State University System of Florida in of Florida Progress. He served as a Florida Tallahassee, Florida. He previously served Power Corporation director from 1975 to Richard Korpan,54,is Pres. dent and as Chief of 5taff and Deputy Chief to i 1978 beforejoining the utility in 1983. Chief Operating OEcer of Florida. Florida Governor Bob Graham. A com-6 He is a director of Barnett Banks, Inc., in Progress.,He joined the company in 1989 pany director since 1992, he is a member as Executive Vice President and Chief Jacksonville, Florida. A company director of the Finance & Budget and Nominating since 1988, he is chairman of the Fina,ncial OMcer. He previously served as Comm;ttees. President and Chief Executive OEcer of Executive Committee. Pacific Diversified Capital Company, a Joan D. Rumer,56, is a General Partner Willard D. Frederick,Jr.,61,is a citrus subsidiary of 5an Diego Gas & Electric in Sunshine Cafes, an Orlando-based grower and investor. He served as mayor Company. He is a director of 5unTrust food and beverage concession business, of the city of Orlando from 1980 to 1992 Bank, Tampa Bay and Acordia of Central which has operations at two Florida air-and was a board member of the Orlando Florida, Inc. A company director since ports. A certified public accountant, she Utilities Commission. He retired as a 1989, he is a member of the Executive is a former chairman of the Board of Partner from the law firm of Holland & and Finance & Budget Committees. Regents of the State University System of Knight in April 1995. He is a director of Florida. She is a director of the Clarence V. McKee, 53, is Chairman and Jacksonville Branch of the Federal Reserve Atlantic Gulf Communities Corporation, Blue Cross Blue Shield of Florida and Chief Executive 0$cer of McKee Com-Bank of Atlanta. A company director Sprint / United Telephone. He is also mumcations, Inc., a television and radio since 1990, she is chairman of the incoming Chairman of the Board of investment firm in Tampa, Florida. He is a Compliance Committee and a member of Trustees of Rollins College. A company director of American Hentage Life the Audit and Finance & Budget i director sinceJanuary 1995, he is a mem-Insurance Company and Barnett Banks, Committees. ber of the Compensation and Compli-inc., both mJacksonvdle. A company ance Committees. director since 1989, he is chairman of the Robert T. Stuart, Jr., 63,,s,a retired i Compensation Committee and a member Chairmari and Chief Executive Omcer of Michael P. Graney,52, is a Partner in the of the Audit Committee. Mid-Continent Ufe insurance Company law firm o."Simpson Thacher & Bartlett in in Oklahoma City, which Florida Progress Columbus, Ohio. Specializing in utilities VincentJ. Na.imoli,58, is Cha.irman, acquired in 1986. A company director President and Chief Executive OEcer of law, litigation and antitrust, he is a mem-since 1986, he is a member of the ber of the American, District of Anchor industries intemational, Inc., and Executive Committee. Columbia, Ohio and Columbus Bar Harvard industries, Inc., Tampa-based Associations and the Federal Energy Bar Perating and holdmg companies. He,s Jean Giles Wittner,61, is Pres, dent of i i Association. A company director since also Managing General Partner of the Wittner & Company, a St. Petersburg firm 1991, he is chairman of the Nominating Tampa 13ay Devil Rays, Ltd. base wall mvolved m real estate management, Committee and a member of the ownership group, St., Petersburg 'l rida. insurance brokerage and, dent and Chiefc 7 AC mPany director since 1992, he is a previously served as Presi Executive and Compliance Committees. member of the Compensation, Finance & Executive Omcer of a savings association Allen J. Keester,Jr., 57, is President and Budget and Nominating Committees. until it was sold in 1986. She is a director Chief Executive Officer of Florida Power. of Raymond James Bank, F.5.B. in St. Richard A. Nun.es,63, is Chairman of Petersburg. A Florida Power director since Since 'oining Florida Power in 1963, he has held several positions in engineering Walt Disney Attractions in Orlando, 1977 and a company director since 1982, Florida. He is a director of The Walt and operations. In 1982, he was pro-she is chairman of the Audit Committee moted to President and Chief Executive Disney Company and SunTrust Bank, and a member of the Compensation and Omcer of Talquin Corporation and Central Florida, N.A. m Orlando. A com-Compliance Committees. served in that position until returning to pany director since 1989, he is chairman Florida Power in 1988. He is a director of of the Finance & Budget Committee and a member of the Executive and SouthTrust Corporation. A Florida Power director since 1988 and a company direc-Compensation Committees. OFFICERS i Dr. Jack B. Critchfield Darryl A. LeClair Allen j. Keesler,Jr. Chairman and Chief Executive O$cer Vice President, Mergers, Acquisitions and President and Chief becutive 05cer, j Richard Korpan Divestitures, and President, Progress Florida Power Corporation i President and Chief Operating OMcer Credit Corporation Richard D. Keller j jeffrey R. Heinicka LanyJ. Newsome President and Chief Executive 05cer, j Senior Vice President and Vice President, Tax Administration Electric Fuels Corporation Chief Financial Officer John Scardino,Jr. James L Harlin Vice President and Controller President and Chief Executive OEcer, Kenneth E. Armstrong Vice President, General Counsel and James V. Smallwood Mid-Continent Life Insurance Company Secretary Vice President and Treasurer Dudley E. Bryant President and Chief Executive Omcer, A.Nanced Separation Technologies Incorpo.?ted 1 ' 48

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i l f i 1 1 i d t' FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT l CITY OF ALACHUA ALACHUA, FLORIDA i SEPTEMBER 30,1995 )

i FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT CITY OF ALACHUA ALACHUA, FLORIDA SEPTEMBER 30,1995 CONTENTS i Page Independent Auditors' Report 1-2 General Purpose Financial Statements Combined Balance Sheet - All Fund Types and Account Groups 3-4 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types 5 l Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General and Debt Service Fund 6 Combined Statement of Revenues, Expenses and Changes in Retained Earnings - All Proprietary Fund Types 7 Combined Statement of Cash Flows - All Proprietary Fund Types 8-9 Notes to Financial Statements 10-38 Accompanying Informatior > Combining and Individual Fund Statements General Fund Balance Sheets 39 Statement of Revenues - Budget and Actual 40-41 Statement of Expenditures - Budget and Actual 42-43 Proprietary Funds Combining Balance Sheet 44-45 Combining Statement of Revenues, Expenses and Changes in Retained Earnings 46

Purvis Gray & Company l INDEPENDENT AUDITORS' REPORT Honorable Mayor and City Commission City of Alachua Alachua, Florida We have audited the accompanying general purpose financial statements of the City of Alachua, Florida as of September 30,1995 and for the year then ended, as listed in the table of contents. These general purpose fimancial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. l Except as discussed in the Mlowing paragraph, we conducted our audit in accordance with generally acc:pted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and the provisions of Office of Management and Budget (OMB) Circular A-128, Audits of State and Local Governments. Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the l accounting principles used and significant estimates made by management, as well as evaluating the l overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We did not obtain sufficier_t evidential matter to determine if property, plant and equipment recorded in the proprietary fund types is fairly presented at cost or estimated historical cost, due to insufficient detail within the City's property records. In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to determine the propriety of amounts recorded as property, plant and l equipment in the proprietary fund types, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Alachua, Florida as of September 30,1995, and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conformity wi;h generally accepted accounting principles. Certified Public Accountants P.O. Box 23999

222 N.E.1st Street a Gainesville, Florida 32602 * (352) 378-2461 Laurel Ridge Professional Center
2347 5.E.17th Street
Ocala, Florida 34471 * (352) 732 3872 1415 Piedmont Drive, East, Suite 2
Tallahassee, Florida 32312 * (904) 385-0554 l

MEMBERS OF AMERICAN AND FLORIDA INSTITUTES OF CERYlFIED PutuC ACCOUNT ANT 5 MEMBER OF AMERICAN INSTITUT! OF CERTIFIED PUkIC ACCOUNTANT 5 PRIVATE COMPANIES AND s E C. PRACTICE SECTION5

l Honorable Mayor and City Commission City of Alachua l Alachua, Florida - i P INDEPENDENT AUDITORS' REPORT J (Concluded) l Our audit was made for the purpose of formmg an opimon on the general purpose financial statements taken as a whole. The combining and individual fund financial statements listed in the table of contents i l are presented for purposes of additional analysis and are not a required part of the general purpose l financial statements of the City of Alachua, Florida. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, except for the effect of such adjustments, if any, related to the matter discussed in the third paragraph, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated December 8,1995 on our consideration of the City of Alachua, Florida's internal control structure and a report dated December 8,1995 on its compliance with laws and regulations. December 8,1995 e.i_,i,.. elo,,. 7 % 1 i i i I l l l l l l l

GENERAL PURPOSE FINANCIAL STATEMENTS These basic statements provide a summary overview of the financial position of all funds and account groups as well as the operating results of all funds and cash flows of the proprietary fund types. They also serve as an introduction to and summary of the more detailed statements included in' the accompanying information section. ] 1 l d 1 1

COMBINED DALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS SEITEMBER 30,1995 CITY OF ALACHUA, FLORIDA Governmental Account Groups Fund Types Proprietary Fhisciary General General Totals Special Debt Fund Types Fund Type Flued Img-Tesui (Memorandum Only) General Revenue Service Enterprise Agency Aswts Debt 1995 1994 Aswts Cash and Cash Equivalents 3 275.719 $ 38,134 5 57,960 $ 139,881 5 511,694 5 220,537 Investments 105,500 92,922 123,292 $ 117,747 439,461-303,130 Receivables (Net of Allowances For Uncollectibles Parenthetically Indicated): Taxes and Special Assessments 19,782 22,940 42,722 3.640 Accounts ($45,120) 7:4,968 714,968 558,416 Accrued freerest armi Penalties 264 264 264 Other Receivables 18,588 8,903 27,491 60,242 Due From Other Funds 35,350 35.350 333,341 Due From Other Governments 92,378 11,667 104.045 48,758 Inventory of Utility Supplies 1 %,674 196,674 206,132 Prepaid Expemes 70,497 37,556 108.053 118,903 Unbilled Revenue 210,237 210,237 - 161,799 Restricted Assets: Cash and Cash Equivalents 434,721 434,721 611,812 Investments 1,954,404 1,954,404 2,455,598 Accrued Interest 7.057 7,057 6,234 Property, Plant and Equipment - Cost Less Accumulated Depreciation For Proprietary Fund Types; Cost For General Fixed Assets Account Group 11,632,892 5 3,023,120 14,656,012 14,065,526 Unamortized Bond Issue Costs 455,499 455,499 476,443 Amount Available For Retirement of General Long-Term Debt 150,882 150,882 145,571 Amount to be Provided For Retirement of General 1,516.260 1,516,260 1,486,916 Long-Term Debt Total Aswee 582,728 5 49,801 5 150,882 5 15,974.374 5 117,747 $ 3,023,120 $ 1,667,142 21,565,794 $ 21,295,262 See accompanying notes. 3

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COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES - FOR THS YEAR ENDED SEITEMBER 30,1995 CITY OF ALACHUA, FLORIDA Governaiental Fund Types Totah Special Debt (Mesmorandues Only) General _ Revenue Service 1995 1994 Revenees Taxes and Special Assessments 3 1,277,246 $ 11,667 $ 0 1,288,913 $ 1,179,842 Licenses and Permits 82,662 0 0 82,662 55,610 Intergovernrnental 495,666 0 0 495,666 409,441 Charges For Services 133,062 0 0 133,062 113,637 Fines and Forfeitures 94,541 0 0 94,541 97,067 Interest and Miscellaneous 61,893 768 5,987 68,648 42,247 Total Revenues 2,145,070 12,435 5,987 2,163,492 1,897,844 Expenditures Current: General Government 386,549 0 0 386,549 378,224 Public Safety 1,341,133 0 0 1,341,133 1,142,399 Physical Environment 45,325 0 0 45,325 59,032 Transportation 303,701 0 0 303,701 265,566 Parks and Recreation 184,012 0 0 184,012 136,770 Debt Service 0 0 121,495 121,495 108,175 (Total Expenditures) (2,260,720) 0 (121,495) (2,382,215) (2,090,166) (Deficiency) Excess of Revenues (Under) Over Expenditores (115,650) 12,435 (115,508) (218,723) (192,322). Other Financing Sources (Uses) Tramfers in 178,113 0 119,286 297,399 2 %,803 Transfers Out (119,286) 0 0 (119,286) (118,690) Proceeds From New Debt 0 0 393,000 393,000 19,000 Proceeds From Capital Lease 70,516 0 0 70,516 0 Payments on Current Refunding 0 0 (382,520) (382,520) 0 Bond Issue Costs 0 0 (8,947) (8,947) 0 Total Other Financing Sources (Uses) 129,343 0 120,819 250,162 197.113 Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 13,693 12.435 5,311 31,439 4,791 Fund Balances, Beginning of Year 186,109 37,366 145,571 369,046 364.255 Fund Balances, End of Year 199,802 $ 49,801 $ 150,882 400,485 $ 369,046 See accompanying notes. 5

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CIIANGES IN FUND CALANCES - EUDGET AND ACTUAL GENERAL AND DEBT SERVICE FUND FOR THE YEAR ENDED SEI'I' EMBER 30,1995 CITY OF ALACHUA, FLORIDA General Fund Debt Service Fund Totals Favorable Favorable (Memorandum Only) Budget Actual (Unfavorable) Budget Actual (Unfavorable) 1995 1994 Revenues Taxes 5 1,197,070 $ 1,277,246 5 80,176 5 0 5 0 5 0 5 1,277,246 5 1,171,445 Licenses and Permits 67,000 82,662 15,662 0 0 0 82.662 55,610 Intergovernmertal 654,051 495,666 (158,385) 0 0 0 495,666 409,441 Charges For Services 63,400 133,062 69,662 0 0 0 133,062 113,637 Fines and Porfeitures 100,000 94,541 (5,459) 0 0 0 94,541 97,067 traerest and Miscellaneous ' 71.310 61,893 (9,417) 0 5,987 5,987 67,880 42,247 Total Revenues 2,152,831 2,145,070 (7,761) 0 5,987 5,987 _ 2,'51,057 1,889,447 Expenditures Current: General Government 365,680 386.549 (20,869) 0 0 0 386,549 378,224 Public Safety 1,283,080 1,341,133 (58,053) 0 0 0 1.341,133 1,142,399 Physical Environment 71,347 45,325 26.022 0 0 0 45,325 59,032 Transportation 286,751 303,701 (16,950) 0 0 0 303,701. 265,566 Parks and Recreation 179,596 184,012 (4,416) 0 0 0 184,012 136,770 Debt Service 0 0 0 118,180 121,495 (3,315) 121,495 108,175 (Total Expenditures) (2,186,454) (2,260,720) ("4,266) (118.180) (121,495) (3,315) (2,382,215) (2,090.166) (Deficiency) Excess of Revenues (Under) Over Expenditures (33,623) (115,650) (82.027) (118,180) (115,508) 2,672 (231,158) (200,719) Other Financing Sources (Uses) Transfers 1n 178,113 178,113 0 118,180 119,286 1,106 297.399 2 %,803 Transfers Out (118,180) (119,286) (1,106) 0 0 0 (119,286) (118,690) Proceeds From Refunding Debt 0 0 0 0 393,000 393,000 393,000 0 Proceeds From Capital Leases 0 70,516 70,516 0 0 0 70,516 19,000 Payments on Current Refunding 0 0 0 0 (382,520) (382,520) (382,520) O Bond Issue Costs 0 0 0 0 (8.947) (8,947) (8.947) 0 Total Other Financing Sources (Uses) 59,933 129,343 69,410 118,180 120,819 (2,639) 250,162 197,113 Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses 5 26,310 13,693 5 (12,617) 5 0 5,311 5 33 19,004 ' (3,606) Fund Balances, Beginning of Year 186,109 145,571 331,680 335,286 Fund Balances, End of Year 5 199.802 5 150,882 5 350,684 5 331,680 See accompanying notes. 6

COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES FOR THE YEAR ENDED SEPTEMBER 30,1995 l CITY OF ALACHUA, FLORIDA j Total Proprietary (Memorandum Fund Type Only) Enterprise 1994 Operating Revenues $ 5,644,363 $ 5,312,109 Operating Expenses Power Production Expense 2,849,207 2,743,333 Treatment 229,952 228,615 Distribution and Collection 295,267 330,250 Warehousing 59,128 55,979 Customer Accounts 163.186 158,121 General arx! Administrative 242,996 300,625 Depreciation 463,018 444,501 Taxes 112,575 104,439 (Total Operating Expenses) (4,415,329) (4,365,863) Operating income 1,229,034 946,246 i Nonoperating Revenue (Expenses) Special Assessments 134,977 0 Connection Charges 80,356 0 Interest income 143,6 % 104,021 j laterest on Long-Term Debt (949,750) (%5,457) Amortization of Bond Issue Costs (20,945) (20,884) Miscellaneous Income 363 370 Total Nonoperating Revenue (Expenses) (611,303) (881,950) Income Before Operating Transfers 617,731 64,296 P (Operating Transfers Out) (178,113) (178,113) Net income (less) 439,618 (113,817) Retained Earnings (Deficit). Be;; inning of Year (2,355,959) (2,242,142) Retained Earnings (Deficit), End of Year $ (1,916,341) $ (2,355,959) See accompanying notes. 7

i i 1 l I COMBINED STATEMENT OF CASH FLOWS. ALL PROPRIETARY FUND TYPES FOR THE YEAR ENDED SEPTEMBER 30,1995 l CITY OF ALACHUA, FLORIDA l . Total l Proprietary (Memorandum Fund Type Only) Enterprise 1994 Cash Flows From Operating Activities l Operating Income 1,229,034 $ 946,246 Adjustments to Reconcile Operating Income to Net Cash Provided By Operations: 'l Depreciation of Plant 463,018. 444,501 Amortization of Decommissioning Costs 3,586 3,586 Provision For Losses on Accounts Receivable 18,100 16,000 Ch4nge in Current Assets - (Increase) Decrease: l Accounts Receivable and Unbilled Revenue 118,509 (78,022) i Inventory (Net of Material Salvaged From Retirements of $5,286) .14,744 (17,285) Prepaid Power Costs 26,914' (34,654) Other Prepaid Expenses (3,433) 3,771 Change in Current Liabilities - Increase (Decrease): Accounts Payable and Other Accrued Expenses. (279,298) (21,797) Customer Deposits 6,505 3,604 l Net Cash Provided By Operating Activities 1,597,679 1,265,950 Cash Flows From Noncapital Financing Activities Connection Charges 80,356 0 Miscellaneous Income 363 370 Operating Transfers In From Other Funds 10,200 0 Operating Transfers Out to Other Funds (188,313) (178,113) l Net Cash (Used in) Noncapital Financing Activities (97.394) (177,743) l Cash Flows From Capital and Related Financing Activities l Extension and Replacement of Plant - Net of l Contributions Received in Aid of Construction (947,671) (481,414) Plant Removal Costs (2,949) (1,270) Principal Payments on Bonds (220,000) (189,000) Interest Paid (945,672) (913,537) Bond Issue Costs 0 (20,738) J Operating Transfers Out to Other Funds (109,793) (154,089) i i Operating Transfers in From Other Funds 109,793 154,089 Net Cash (Used In) Capital and Related Financing Activities (2,116,292) (1,605.959) j See accompanying notes. 8 i

COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES FOR THE YEAR ENDED SEPTEMBER 30,1995 ' CITY OF ALACHUA, FLORIDA (Concluded) Total Proprietary (Memorandum Fund Type Only) Enterprise 1994 Cash Flows From Investing Activities investments Purchased $ (1,379,100) $ (1,271,239) Investments Matured 1,757,001-1,577,001 Interest lacome 151,314 '116,475 Net Cash Provided By Investing Activities 529,215 422,237 Net (Decrease) in Cash, Cash Overdraft and Cash Equivalents (86,792) (95,515) Cash, Cash Overdraft and Cash Equivalents, October 1,1994 423,722 519,237 Cash, Cash Overdraft and Cash Equivalents, J September 30,1995 336,930 $ 423.722 Reconciliation of Cash, Cash Overdraft and Cash Equivalents (Above) to Combined Balance Sheet Captions on Combined Balance Sheet Cash and Cash Equivalents 139,881 $ 43,330 Restricted Assets - Cash and Cash Equivalents 434,721 611,812 (Cash Overdraft) (237,672) (231,420) Total 336,930 $ 423,722 See accompanying notes. 9

[ NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA l Note 1 - Summary of Significant Accounting Policies The City of Alachua, Florida (the City) is a political subdivision of the State of Florida l located in Alachua County. The legislative branch of the City is composed of a five-member 1 elected commission. The City Commission is governed by the City Charter and b'y state and local laws and regulaticas. The City Commission is responsible for the establishment and i adoption of policy. The execution of such policy is the responsibility of the Commission-l appointed City Manager. The City's major operations include various utility services - electric, water and wastewater as well as police protection, road and street maintenance, parks, recreation and other general government services. The City contracts with Alachua County for the provision of fire service at a fixed cost to the City which is renegotiated annually. The City leases the fire station and equipment to the County at no cost. Sanitation services are provided by a private l company, but billed by the City to its customers. The City retains an administrative fee on sanitation services. The accounting policies of the City conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant accounting policies. Reporting Entity As outlined in Governmental Accounting Standards Board (GASB) Statement No.14, The Reporting Entity, effective for financial statements for periods beginning after December 15, 1992, the financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations whose exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Each potential component unit is individually evaluated using specific criteria l outlined in GASB No.14, to determine whether the entity a) is part of the primary government; b) a component unit which should be included in the reporting entity (blended or discretely presented); or c) an organization which should be excluded from the reporting entity entirely. The principal criteria for classifying a potential component unit include a) the legal separateness of the organization, and b) the financial accountability of the primary government for the potential component unit resulting from either the primary government's ability to impose its will on the potential component unit or the potential component unit's fiscal dependency on the primary government. Based upon the application of these criteria, the following is a brief review of each potential component unit addressed in defining the City's reporting entity. m Community Redevelopment Agency l The Community Redevelopment Agency (the Agency) was created by the City of Alachua l Commission in 1982. In evaluating this potential component unit, it was determined that i the Agency is not a separate legal entity as it generally cannot transact business in its own name and, therefore, should be included as part of the primary government for reporting purposes. The Agency is presented in the general purpose financial statements of the City i as a special revenue fund. 10 l l

i NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 1 - Summary of Significant Accounting Policies (Continued) Reporting Entity (Concluded) j u Public Finance Authority For Affoidable Housing (the Authority) This potential component unit was created by the City Commisdon in 1992. The i Authority is a separate legal entity capable of suing and beicg sued an t able to purchase l property in its own name. By charter, the Authority's Board is comiosed of the City Commission and the Commission has oversight over all financial activitier. Accordingly, the Authority is a component unit of the City. There have been no financhl transactians in the Authority during 1995, or since its creation; therefore, no amounts related M the Authority are reported in the accompanying general purpose financial statements. I Fund Accounting The City's accounting records are organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity, with a self-balancing set of accounts recording all financial resources with all related liabilities, reserves and residual entities, or balances or changes therein, which are segregated for the purpose of carrying on specific activities or attaining j certain objectives. Amounts received from or payable to other funds are shown in the accounts of an individual fund and separaaly presented in the accompanying general purpose financial statements until liquidated by payment or an interfund transfer. l The following fund types and account groups are used in accounting for the financial operations of the City. m Governmental Fund Types General Fund - to account for all financial resources not properly accounted for in another fund. Special Revenue Fund - to account for the proceeds of specific revenue resources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes. The City uses this fund to account for the activities of the Agency. Debt Service Fund - to account for the accumulation of resources and payment of general obligation bond principal and interest from these resources. The City uses the debt service fund to account for the accumulation of resources and the payment of principal and interest on the Gulf Breeze and FLGFA loans. m Proprietary Fund Types Enterprise Funds - to account for operations that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. The City's electric, water and wastewater utility services are accounted for in these funds. In addition, a new fund for Turkey Creek water and wastewater utility services was established in 1993. 11

' NOTES TO FINANCIAL' STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 1 Summary of Significant Accounting Policies (Condissed) -

l Fund Accounting (Concluded) a Fiduciary Fund Types Agency Fund - to account for assets held by the City' as an agent for other individuals, private organizations, other governments, and/or other funds. - The City employees' deferred compensation plan is accounted for in this fund.-

I e Account Groups The Account Groups are used to establish accounting control and accountability for ' . the government's general fixed assets and general long-term debt. These account. l groups are not considered funds since they do not reflect available financial resources ) and related liabilities. Measurement Focus The accounting and reporting treatment applied a the fixed assets and long-term liabilities ] associated with a fund are determined by its measurement focus. Governmental fund types are accounted for on a " spending" or " financial flow" measurement focus. This means that . only current assets and current liabilities are generally included on the balance sheet. The reported fund balance (net current assets) is considered a measure of "available spendable resources."' Governmental fund type operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, such statements are said to present a summary of sources and uses of. "available spendable resources" during a period. Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the general fixed assets account group, rather than in governmental funds, and long- - term liabilities expected to be financed from governmental fund types are accounted for in the general long-term debt account group. The proprietary fund types are accounted for on a cost of services or " capital maintenance" measurement focus. This means that all assets and all liabilities (whether current or noncurrent) associated with its activity are included on the balance sheet. ' The reported fund equity (net total assets) is segregated into contributions and retained earnings components. The proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. The fiduciary fund type for the City, an agency fund, is custodial in nature and does not involve measurement of results of operations, j j 12

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Basis of Accounting The governmental fund types are maintained on the modified accrual basis of accounting. Under this method of accounting, revenues are generally recognized when they become measurable and available as net current assets. Revenues which are susceptible to accrual, i.e., being recorded when earned, include property and utility taxes, refuse collection fees md lot clearing and certain other fees. Expenditures are generally recorded on an accrual basis, i.e., when incurred, except as follows: a Principal and interest on long-term debt are recognized when due; e accumulated vacation and sicit pay is not recorded in the general fund since the current amount is immaterial. The proprietary fund types are maintained on the accrual basis of accounting. This method of accounting relates costs and expenditures to the period in which benefits of the outlays are received. It is intended to provide an accurate matching of these benefits with associated revenues. Under the accrual basis of accounting, revenues are recognized when earned and measurable, and expenses are recognized when incurred. Proprietary fund types follow all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: e Financial Accounting Standards Board (FASB) Statements and Interpretations; e Accounting Principles Board (APB) Opinions; and a Accounting Research Bulletins. Pursuant to GASB Statement No. 20, the City has elected not to apply all FASB Statements and Imterpretations issued after November 30,1989 to its proprietary fund type activities. Budgeting The City's procedures in preparing and adopting the annual budget are as follows: a The City Manager is responsible for preparing a proposed operating budget for the upcoming year prior to September 30 that includes estimated revenues, proposed expenditures, and other financing sources and uses, e Public hearings are held to obtain taxpayer comments and suggestions. The budget is enacted through passage of a resolution, which sets spending limits by department. e The City Manager is authorized to transfer budgeted amounts within any department in any fund, but may not revise total departmental expenditures without the approval of the City Commission. The budgetary information for all governmental fund types in the j combined statement of revenues, expenditures and changes in fund balances is reported as amended. i i 13

I NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 1 - Summary of Significant Accounting Policies (Condnued) Budgeting (Concluded) e Budgets are adopted on a basis consistent with generally accepted accounting rrinciples. Appropriations lapse at the end of the year. Encumbrances are not recorded. e The budgets for governmental funds which include the general fund and debt service fund that were either adopted or amended during the year by the City Commission were prepared on the same basis of accounting utilized by those specific fund types. Comparisons of budgetary data to actual are not sequired to be reported for proprietary fund types. There was no budget adopted for the special revenue fund. Receivables Customer accounts receivable are recorded at their net realizable value reduced by an allowance for uncollectible accounts. Property taxes receivable are recorded, if material, offset by deferred revenue for the amount which is not measurable and available at i I September 30, 1995. Inventory Inventory in the general fund is charged to expenditures when purchased. Inventory in the proprietary fund types consists of supplies held for repairs or capital improvements, plus nuclear fuel. Property, Plant and Equipment and Depreciation Property, plant and equipment in the proprietary fund types are recorded at historical cost or at fair market value on the date donated. Ordinary maintenance and repairs are charged to expenses as incurred. Provision has been made for the depreciation of such property, plant and equipment using the straight-line method with a half-year convention. The straight-line rate is computed using j the period of years considered as the normal service life of the property. Such rates are as ' follows: Nuclear Plant and Equipment 2.7% to 3.6% Electric Distribution Plan 2% to 4% Water Plant 3% to 10% Wastewater Plant 2.5% Other Equipment 10% to 20% Construction work in progress is not depreciated until completed and placed into service. Utility plant acquired through grants is depreciated along with other utility plant purchased or constructed. 14

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Property, Plant and Equipment and Depreciation (Concluded) All other property and equipment owned by the City is reflected at cost in the general fixed assets account group and shown as an expenditure in the fund purchasing the property or equipment. Certain improvements such as streets, sidewalks and other infrastructure assets are capitalized along with other general fixed assets. No provision for depreciation is made for any general fixed assets. Bond Discount and Issue Costs Amortization The bond issue costs on the Utility Revenue Bonds of 1993 and 1986 are being amortized over the lives 'of the bonds using the straight-line method. The bond discounts on the Utility l Revenue Bonds are being amortized over the life of the bonds using the effective interest ~' method. Capitalized Interest During Construction The City accounts for capitalized interest during construction in accordance with Statement of Financial Accounting Standards No. 34, Capitalization ofInterest Costs, and Statement No. 62, Capitalization of Interest Cost in Situctions InvoMng Certain Tax-Exempt Borrowings and Certain Gifts and Grants. No interest expense was capitalized during 1995 on construction-in-progress in any fund or account group. Long-Term Liabilities Because of their spending measurement focus, expenditure recognition for governmental fund types is limited to exclude amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type liabilities. They are instead reported as liabilities in the general long-term debt account group. Compensated Absences The City accrues accumulated unpaid vacation and sick pay when incurred, if material, in i the proprietary funds and the general long-term debt account group. Amounts representing the current liability for unused annual and sick leave in governmental fund types are immaterial. Therefore, the entire liability for governmental fund types is recorded in the general long-term debt account group. Personnel policies allow permanent, full-time employees to accumulate a maximum of twenty-five days vacation leave and sixty days sick leave. One week of vacation time is granted if sixty days sick leave is accumulated. Employees are paid the balance of their accumulated vacation leave, in full, upon termination. Also upon termination, employees are paid the balance of their accumulated sick leave, up to a maximum of eighty hours. 15 l 1

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 1 - Summary of Significant Accounting Policies (Condnued) Revenue Recognition Utility revenues are recognized when customers are billed unless there has been a significant change in meter reading rates. In that event, unbilled or deferred revenues are recorded for consistency. Restricted grant revenues which are received, but not expended, are recorded as deferred revenues in the liability section of the balance sheet. Property Taxes Under Florida law, the assessment of all properties and the collection of all county, municipal and school board property taxes are consolidated in the offices of the County Property Appraiser and County Tax Collector. The laws of the state regulating tax assessments are also designed to assure a consistent property valuation method statewide. Florida Statutes permit municipalities to levy property taxes at a rate of up to 10.00 mills. The City's millage rate for the 1995 fiscal year was 5.5 mills. The tax levy of the City is established by the City Commission prior to October 1 of each year and the Alachua County Property Appraiser incorporates the City millages into the total tax levy, which includes the County r.nd the County School Board tax requirements. All property is reassessed according to its fair market value January 1 of each year. Each assessment rollis submitted to the Executive Director of the Florida Department of Revenue for review to determine if the rolls meet all of the appropriate requirements of Florida Statutes. All taxes are levied on November 1 of each year or as soon thereafter as the assessment roll is certified and delivered to the County Tax Collector. All unpaid taxes become delinquent on April 1 following the year in which they are assessed. Discounts are allowed for early payment at the rate of 4% in the month of November, 3% in the month of December, 2% in the month of January, and 1% in the month of February. The taxes paid in March are without discount. i On or prior to June 1 following the tax year, certificates are sold for all delinquent taxes on real property. After sale, tax certificates bear interest of 18% per year or at any lower rate bid by the buyer. Application for a tax deed on any unredeemed tax certificates may be made by the certificate holder after a period of two years. Unsold certificates are held by the County. Delinquent taxes on personal property bear interest at 18% per year until the tax is satisfied j either by seizure and sale of the property or by the five-year statute of limitations. i 16 i l l)

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 1 - Summary of Significant Accounting Policies (Concluded) Total Columns on the Combined Statements Total columns on the combined statements are captioned " Totals (Memorandum Only)" to. indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or cash flows in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. The totals for 1994 are presented for the purpose of additional analysis and are not a required part of the general purpose financial statements. Note 2 - Deposits and investments ' All monies collected by the City are required to be deposited in accordance with the laws of the State of Florida. Florida Statutes authorize the City t'o invest in the following: e Direct obligations of, or obligations gusranteed by, the U.S. Government; e Interest-bearing time deposits or savings accounts in qualified institutions; e Obligations of the Federal Farm Credit Banks; e. Obligations of the Federal National Mortgage Association; and a The Local Government Surplus Funds Trust Fund. Deposits. At year end, the carrying amount of the City's deposits was $95,608 and the bank balance was $435,983. All deposits of the City are maintained in qualified public depositories. In addition, the City had $465,207 deposited with a fiscal agent as of September 30,1995 for the payment of revenue bonds and other interest on October 1. The Florida Security for Public Deposits Act; Chapter 280 of the Florida Statutes, provides that qualified public depositories must maintain eligible collateral having a market value equal-to 50% of the average daily balance for each month of all public deposits in excess of any applicable deposit insurance held by the depository during the twelve months immediately preceding the date of any computation of the balance. As such, the depository is not required to hold collateral in the City's name nor specify which collateral is held for the City's benefit. In the event of default, the Public Deposit Security Trust Fund, as created under the laws cf the State of Florida, would be required to pay the City for any deposits not covered by depository insurance or collateral pledged by the depository as previously described. 17 e ~

~_ ~- NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 2 - Deposits and Investments (Concluded) Investments j Investments are carried at cost or amortized cost. The carrying amount and market value of l investments owned by the City of Alachua at September 30,1995 was as follows: Carrying Market Type of Investment Amount Value Certificates of Deposit,2.90% to 6.00% interest, Varying Maturities Through September 1996 $ 1,503,153 $ 1,503,153 State Board of Administration of Florida Local Government Pooled Investment Account, Variable Interest Rate (5.68% at September 30,1995) 147,928 147,928 Florida Municipal Power Agency (FMPA) CR-3 Pooled Investment Account 115,731 115,731 United States Treasury Bonds, $575,000 Par Value, 7.625% Interest, Maturing February 15,2007 564,312 610,578 City of Arcadia - Debt Service Reserve 92,922 92,922 ICMA Deferred Compensation Account 117,747 117,747 Totals $ 2,541,793 $ 2,588.059 All the above investments are insured or registered, or held by the City or its agent in the City's name. The State Board of Administration's deposits in Tallahassee are maintained in an investment pool which invests primarily in commercial paper, repurchase agreements, bankers acceptance notes and U.S. Government obligations. The FMPA account represents a 2.1714% interest in an investment pool which invests primarily in mid-and long-term U.S. Government obligations. The securities in the pool are registered in the name of SunTrust, N.A. as trustee for the FMPA (CR-3) participants. The City of Arcadia debt service resen'e account is an investment pool held by the Trustee for the City of Arcadia bond issue, which is invested in FNMA mortgage notes. The ICMA deferred compensation account is an investment pool managed by the International City Managers Association. The State Board of Administration account is classified with " cash and cash equivalents" on the balance sheet because the investment has an original maturity of ninety days or less. Note 3 - Inventory Inventory in the proprietary fund types at September 30,1995 consists of the following: Electric Utility Supplies $ 122,945 Water / Sewer Supplies 20,189 Nuclear Fuel 30,377 l l Nuclear Plant Materials Inventory 23,163 Total $ 1%,674 l l 18 l l l

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 3 Inventory (Concluded) The utility supplies and plant inventory are valued at cost as determined by the average unit cost method. The City's portion of nuclear fuel inventory at the CR-3 nuclear generating facility is recorded at amortized cost. Note 4 - Detail of Property, Plant and Equipment General Fixed Assets Accounting Group A summary of changes in general fixed assets for the year follows: Balance (Removals and Balance 10/1/94 Additions A(lustments) 9/30/95 City Park - Structures and improvements 19,885 $ 0$ 0$ 19,885 City Hall - Building 157,625 0 0 157,625 City Hall - Equipment, - Furnishings and Vehicles 68,505 0 0 65,505 Fire Station 72,169 0 0 72,169 Police Station 69,094 0 0 69,094 l Rolling Green - Land and 4 Buildings 647,699 0 0 647,699 j Rolling Green - Improvements 14,653 0 0 14,653 Parking Lots - Land 43,189 0 0 43,189 Street Paving and Sidewalks 994,189 0 0 994,189 Fire Tmcks and Other Equipment 178,865 0 0 178,865 Mosquito Spraying Equipment 8,725 0 0 8,725 Land - Other 171,791 50,925 0 222,716 i Police Department - Cars and Equipment 285,355 59,741 (9,913) 335,103 Streets and Roads Equipment 82,973 0 0 82,973 Miscellaneous 11,709 0 0 11,709 Parks and Recreation - Equipment 30,107 0 0 30,107 Physical Environment - Equipment 58,419 13,870 (6,455) 65,834 Total Property, Plant and Equipment - At Cost $ 2,914,952 $ 124,536 $ (16.368) $ 3,023,120 19

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 4 - Detail of Property, Plant and Equipment (Concluded) Proprietary Fund Types A summary of property, plant and equipment in the proprietary fund types at September 30, 1995 follows: Nuclear Generating Plant and Equipment 589,945 Electric Distribution Plant and Equipment 5,644,096 Water Plant and Equipment 3,233,433 Wastewater Plant and Equipment 4,677,471 i Turkey Creek Water and Wastewater Plant and Equipment 2,117,982 16,262,927 (Accumulated Depreciation) (4,630.035) Total Utility Plant - Cost Less Accumulated Depreciation $ 11,632,892 Nuclear generating plant and equipment represents the cost of the City's.0779% undivided interest in the Florida Power Corporation CR-3. Note 5 - Long-Term Debt i General Long-Term Debt: - The following tabulation summarizes the changes in the City's gener mg-term debt account group during the year ended September 30,1995: Balance New (Principal Balance 10/1/94 Debt Pald) 9/30/95 City of Arcadia, Florida, Dedicated Pool Local Govern-ment Revenue Bonds, Series 1993 $1,165,000 $ 0$ (35,000) $1,130,000 Florida Local Government Finance Authority, Government Unit Loan Program 389,689 0 (389,689) 0 Sales Tax Revenue Note, Series 1995 0 393,000 (4,291) 388,709 Note Payable - First National 0 70,516 0 70,516 Note Payable - Other 17,690 0 (3,329) 14,361 Compensated Absences 60,108 3,448 0 63,556 Totals $1,632,487 $ 466,964 $ (432,309) 51,667,142 20

NOTES 'IO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Contheued) Note 5 - lang-Term Debt (Contheued) General Long-Term Debt: (Conanned) a City of Arcadia, Florida - Dedicated Pool Local Government Revenue Bonds, Series 1993 On July 1,1993, the City of Alachua, Florida executed a loan agreement with the City of Arcadia, Florida (the Sponsor), and NationsBank of Florida, N.A. (the Trustee), to l borrow $1,200,000 from the Sponsor's $45,455,000 Local Government Revenue Bonds, Series 1993, Dedicated Pool. The Sponsor issued the bonds on August 10,1993 and deposited the proceeds with the Trustee to fund the pool, available to governmental entities for financing and refinancing certain qualified projects. The City of Alachua used the proceeds to refinance the balance due on a loan from the City of Gulf Breeze, originally issued to finance street and drainage improvements. The City of Arcadia loan is evidenced by a Governmental Unit Note, which is payable solely from the City's local option gas tax revenues and guaranteed entitlement revenues (the ~ Pledged Revenues). The loan agreement required the establishment of the following accounts: Revenue To collect the pledged revenues. Sinking To accumulate sufficient monies to pay interest on the next semiannual interest date (December I and June 1), to pay principal coming due annually and to make required " reserve payments," if any. Reserve To initially accumulate the maximum annual debt service requirement of $92,922. In accordance with the loan agreement, money on deposit in the revenue account must-be disbursed in the following order:

To satisfy current debt service requirements of the note;
to provide for the reserve payments, if any, when due (in the event the reserve account is insufficient);
to the payment of any additional parity bonds;
to the payment of any junior lien obligations; and

= for any other lawful purpose. 21

1 j NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA 3 (Continued) Note 5 - Long-Term Debt (Continued) General Long-Term Debt: (Continued) City of Arcadia, Florida - Dedicated Pool Local Government Revenue Bonds, Series e 1993 (Concluded) The note carries a true interest cost rate of 5.375% and matures on December 1,2014. The following tabulation summarizes remaining interest and principal payment requirements of the note: Fiscal Year Ending September 30 Principal Interest Total 1996 5 35,000 $ 54,846 $ 89,846 1997 35,000 53,576 88,576 1998 40,000 52,122 92,122 1999 40,000 50,503 90,503 2000 35,000 48,930 83,930 Thereafter 945,000 442,654 1,387.654 i Totals $1,130,000 $ 702,631 $ 1,832,631 Florida Local Government Finance Authority - Government Unit Loan Program e On September 26,1990, the City adopted Resolution R-90-17 authorizing the borrowing of $425,000 from the Florida Local Government Finance Authority (FLGFA), Governmental Unit Loan Program, to provide funds for the repayment of a $300,000 General Obligation Note to First National Bank of Alachua, Florida, and to finance certain other qualified projects, primarily street improvements. FLGFA, a public body corporate and politic of the State of Florida (the Sponsor) had issued $427,500,000 Government Unit Loan Program Revenue Bonds, Series 1986 A through E on December 1,1986, and deposited the proceeds with SunTrust (the Trustee) for the purpose of financing or refinancing qualified projects for any public agency of a state or local government. Tb: loan is evidenced by a Governmental Unit Note which is payable solely from the City's half-cent sales tax revenues (the Pledged Revenues). The note was original 4y payable over 305 months beginning November 1,1990 at a variable interest rate (5.28% at May 31,1995). However, on May 31,1995, the note became subject to a mandatory tender and subsequent redemption, as a result of the termination and nonreplacement of the issue's remarketing agent. The City paid the outstanding principal balance of $382,520 plus unamortized issue costs of $3,582 pursuant to the provisions of the mandatory tender. 22

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 5 - Long-Term Debt (Continued) General Long-Term Debt: (Concluded) e Sales Tax Revenue Note, Series 1995 On May 24,1995, the City adopted Resolution R-95-9, authorizing the issuance of a $400,000 Sales Tax Revenue Note, Series 1995. The note was issued at the par amount of $393,000, and used to refinance the City's outstanding FLGFA loan, plus pay note issuance and loan redemption costs. The note is secured by a lien upon the pledge of the City's local government half-cent sales tax. Principal and interest are payable on the first of each month in level monthly installments for fifteen years. Interest accrues at a fixed rate of 5.20% (based on a 360 day year) for the first five years of the note, and is reset on June 1,2000 and June 1, 2005 to the five-year U.S. Treasury index on those dates. The City may prepay the note in whole or in part, at any time, without penalty. Following is a tabulation of the remaining principal and interest requirements of the note (interest requirements assume a 5.20% rate throughout the entire term): Fiscal Year Ending September 30 Principal Interest Total 1996 17,860 $ 20,119 $ 37,979 1997 18,881 19,098 37,979 1998 19,901 18,078 37,979 1999 20,975 17,004 37,979 2000 22,108 15,871 37,979 Thereafter - 288,984 81,229 370,213 Totals $ 388,709 $ 171,399 $ 560,108 m Note Payable - First National Bank of Alachua This unsecured note is payable over forty-eight months beginning October 18,1995 at $1,638 per month including 5.35% interest. The proceeds were used to purchase four

vehicles, a Note Payable - Other This unsecured note is payable over sixty months beginning May 6,1994 at $385 per month including 8% interest.

23

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 5 - Long-Term Debt (Condnued) General Lcng-Term Debt - Summary The following tabulation indicates the principal retirement of general long-term debt by fiscal year (excluding compensated absences): 1995 City of Sales Tax Fiscal Year Ending Arcadia Revenue Notes Total September 30 Loan Note Payable Principal 1996 35,000 $ 17,860 $ 19,823 $ 72,683 1997 35,000 18,881 21,033 74,914 1998 40,000 19,901 22,310 82,211 1999 40,000 20,975 21,711 82,686 2000 35,000 22.108 0 57,108 Thereafter 945,000 288,984 0 1,233,984 Totals $ 1,130,000 $ 388,709 $ 84,877 $ 1,603,586 Proprietary Fund Types: Utility Acquisition Bonds, Series 1993 e On October 18, 1993, the City adopted Resolution R-93-24 authorizing the issuance of $1,300,000 Utility Acquisition Bonds, Series 1993 (the 1994 bonds) to provide the necessary funds for the acquisition of the private water and wastewater systems in the Turkey Creek recreational residential community in the City. The bonds are secured by the gross revenues of the combined electric, water and wastewater utility systems of the City, but is subordinate to the secured interests of the bondholders in the other outstanding revenue bonds of the City. The bonds were issued without premium or discount and are payable at 7 % interest, with interest payable semiannually beginning April 1,1994 and principal payable annually beginning October 1,1994. The following tabulation summarizes principal and interest payments on the 1994 bonds: 24

1 NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 5 - Long-Term Debt (Condnued) Propritary Fund Types: (Condnued) m Utility Acquisition Bonds, Series 1993 (Continued) Fiscal Year Ending September 30 Principal Interest Total 1996 20,000 $ 88,900 $ 108,900 1997 25,000 87,325 112,325 1998 25,000 85,575 110,575 1999 25,000 83,825 108,825 2000 30,000 81,900 111,900 2001 30,000 79,800 109,800 2002 35,000 77,525 112,525 2003 35,000 75,075 110,075 2004 40,000 72,450 112,450 2005 40,000 69,650 109,650 2006 45,000 66,675 111,675 2007 45,000 63,525 108,525 2008 50,000 60,200 110,200 2009 55,000 56,525 111,525 2010 55,000 52,675 107,675 2011 60,000 48,650 108,650 2012 65,000 44,275 109,275 2013 70,000-39,550 109,550 2014 75,000 34,475 109,475 2015 80,000 29,050 109,050 2016 85,000 23,275 -108,275 2017 90,000 17,150. 107,150 2018 95,000 10,675 105,675 2019 105,000 3,675 108,675 Totals 1,280,000 $ 1,352,400 $ 2,632,400 e Utility Refunding Revenue Bonds, Series 1993 On March 31, 1993, the City adopted Resolution R-93-3, authorizing the issuance of $9,500,000 Utility Refunding Revenue Bonds, Series 1993. The bonds were issued at a par amount of $9,000,000 to provide a portion of the funds required: a) to advance refund the City's outstanding Utility Revenue Bonds, Series 1990 and a portion of the City's outstanding Utility Refunding Revenue Bonds, Series 1986; b) to construct and install certain facilities constituting water and wastewater capital improvements; and c) to pay a portion of the costs ofissuance. Gross revenues of the system, plus utilities service taxes are pledged as collateral for the revenue bonds on a parity and rank equally as to lien on, and source and security for payment with the City's outstanding Series 1979 bonds and the remaining Series 1986 bonds. 25

i NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) l l Note 5 - Long-Term Debt (Condnued) I Proprietary Fund Types: (Condnued) i Utility Refunding Revenue Bonds, Series 1993 (Concluded) e The $9,000,000 issue consists of $1,355,000 of serial bonds maturing from 1994 to 2009, with stated interest rates of 3% to 5.5%, $1,635,000-5,625% Term Bonds due April 1,2012, sold at a price of 98.5% of par and $6,010,000-5.75% Term Bonds, due April 1,2020 at 99% of par. The Term Bonds are subject to mandatory redemption prior to their stated maturity dates as shown below. Interest is payable semiannually on each April 1 and October 1, with principal due annually on October 1. The following tabulation summarizes principal and interest payments on the 1993 bonds. Fiscal Year Ending September 30 Principal Interest Total 1996 20,000 $ 508,435 $ 528,435 1997 15,000 507,635 522,635 1998 20,000 506,990 526,990 1999 20,000 506,090 526,090 2000 20,000 505,150 525,150 2001 25,000 504,190 529,190 2002 25,000 502,965 527,965 2003 20,000 501,715 521,715 l 2004 25,000 500,695 525,695' 2005 25,000 499.395 524,395 2006 25,000 498,070 523,070 2007 390,000 486,726 876,726 2008 205,000 479,666, 684,666 2009 490,000 464,494 954,494 2010 515,000 437,544 952,544 2011 545,000 408,575 953,575 2012 575,000 377,919 952,919 2013 610,000 345,575 955,575 2014 640,000 310,500 950,500 2015 680,000 273,700 953,700 2016 720,000 234,600 954,600 2017 760,000 193,200 953,200 2018 805,000 149,500 954,500 2019 850,000 103,213 953,213 2020 945,000 54,337 999,337 Totals 8,970,000 $ 9,860,879 $ 18,830,879 i 26 l l 1

NOTES 'IO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 5 - Img-Term Debt (Condosed) Proprietary Fund Types: (Condnued) ' s Utility Refunding Revenue Bonds, Series 1993 (Concluded) Allocated Between Proprietary Funds (Unamortized Carrying Par Discount) Value Electric Fund 5 6,168,525 5 (58,137) 5 6,110,388 Wastewater Fund 1,683,131

(15,863) 1,667,268 Turkey Creek Fund 1,118.344 (10.541) 1,107,803 Totals 8,970,000 $

(84,541) $ 8,885.459 The 1993 bonds are considered additional parity bonds, issued under the authority of Original Resolution R-86-10 (which authorized the issuance of the Utility Refunding Revenue Bonds of 1986). The covenants and pledges contained in the original resolution regarding the establishment and maintenance of various funds and accounts for the 1986 bonds are applicable to the 1993 bonds. The reserve account established in the original . resolution is applicable pro-rata to the 1993 bonds, and the payments made into said j reserve account are increasd proportionately to provide a reserve for both the 1993 bonds and the remaining 1986 bonds equal to the maximum annual combined bond service requirement. In addition to the refunding proceeds, $1,003,318 was deposited into a construction fund established by the bond resolution to be used for water and wastewater capital improvements. e Utility Refunding Revenue Bonds of 1986 On May 19,1986, the City adopted a resolution to issue the Utilities Refunding Revenue Bonds, Series 1986. These bonds were issued pursuant to a multi-purpose plan including the advance refunding of cenain of the City's utility refunding and revenue bonds. The refunding portion of the proceeds was deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded bonds. As a result, the 1983 bonds and all other refunded bonds are considered to be defeased, and the trust account assets and liabilities of the defeased bonds are not included in the financial statements of the City. The 1986 bonds were issued on a parity and rank equally as to lien on and source and security for payment from gross revenues and excise taxes as the Utilities Revenue Bond of 1979. Gross revenues of the electric, water and wastewater utility systems, plus utilities service taxes are pledged as collateral for the refunding bonds which have a coupon rate ranging from 6.15% to 7.80%. 27

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 5 - Long-Term Debt (Condnued) Proprietary Fund Types: (Condnued) e Utility Refunding Revenue Bonds of 1986 (Condaued) The $7,750,000 issue consisted of $1,795,000 of serial bonds maturing from 1991 to 2000, and $5,955,000 of term bonds, $2,495,000 due in 2007 and $3,460,000 due in 2016, but which are subject to mandatory redemption in earlier years as tabulated below at no premium. All of the outstanding term bonds due in 2016, with the exception of $255,000, subject to mandatory redemption in 2008, were advance refunded through the issuance of the $9,000,000 Utility Refunding Revenue Bonds, Series 1993. The following tabulation summarizes remaining interest and principal payment requirements of the 1986 issue: Fiscal Yeur Ending September 30 Principal Interest Total 19 % 5 180,000 5 .292,379 5 472,379 1997 195,000 279,259 474,259 1998 205,000 264,731 469,731 1999 225,000 249,151 474,151 2000 245,000 231,995 476,995 2001 255,000 213,252 468,252 2002 275,000 - 193,490 468,490 2003 300,000 172,177 472,177 2004' 320,000 148,928 468,928 2005 350,000 124.128 474,128 2006 375,000 95,002 470,002 2007 620,000 67,940 687,940 2008 255,000 19,890 274,890 Totals $ 3,800,000 $ 2,352,322 $ 6.152,322 i l Allocated Between Proprietary Funds 1 (Unamortized Carrying Par Discount) Value Electric Fund $ 2,065,300 $ (24,310) $ 2,040,990 Wastewater Fund 1,734,700 (20,418) 1,714,282 Totals $ 3,800,000 $ (44,728) $ 3,755,272 28 )

~ - _ NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) Note 5 - lang-Term Debt (Condnued) Proprietary Fund Types: (Condnued) e Utility Refunding Revenue Bonds of 1986 (Concluded) The bond resolution required the establishment of the following accounts: Revenue To collect electric, water and wastewater revenues. Operation and Maintenance To pay for cost of operation and maintenance of the - utility system. Bond and Interest Sinking To accumulate sufficient monies to pay interest on the next semiannual interest date (October 1 and April 1) and to pay principal coming due on serial bonds. Bond Amortization To accumulate monies for payment of amonization installments coming due on term bonds.- Reserve To accumulate monies to (1) pay cost of repairs and replacement to utility system; (2) pay for improvements to the system; (3) pay bond principal and interest when other accounts are insufficient. In accordance with the bond resolution, operating revenues from the utility system must be disbursed in the following order:

To satisfy current debt service requirements of serial and term bonds;
to fund a reserve account equal to the maximum annual bond service requirement;
to meet operating and maintenance expenses before depreciation;
for any other lawful purpose.

s Utilities Revenue Bond of 1979 On August 6,1979, the City adopted a resolution to issue the Utilities Revenue Bond of 1979. The bond was issued on December 17,1979, to partially finance the cost of the construction of additions to the utility system. Net utility revenues and utilities service taxes are pledged as collateral for the revenue bond which has a coupon rate of 5%. The lien on revenues by the 1979 bond is equal to the Utilities Refunding Revenue Bonds of 1986 and 1993. Amounts deposited in the revenue fund created by the bond resolution must be disbursed in the following order: 29

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 5 - Long-Term Debt (Continued) Proprietary Fund Types: (Condnued)- Utilities Revenue Bond of 1979 (Concluded) a

To meet operating expenses;
to satisfy debt service requirements;
to fund a reserve account to be used for repairs, improvements and to satisfy debt service.

The issue consists of $830,800 of Serial Bonds - $150,800 of which has been paid and the remainder which matures as indicated in the following schedule: Fiscal Year Ending September 30 Principal Interest Total 1996 15,000 $ 34,000 $ 49,000 1997 16,000 33,250 49,250 1998 17,000 32,450 49,450 1999 18,000 31,600 49,600 2000 18,000 30,700 48,700 2001 19,000 29,800 48,800 2002 21,000 28,850 49,850 l 2003 21,000 27,800 48,800 2004 23,000 26,750 49,750 2005 24,000 25,600 49,600 2006 25,000 24,400 49,400 2007 26,000 23,150 49,150 2008 27,000 21,850 48,850 2009 29,000 20,590 49,500 2010 30,000 19,050 49,050 2011 32,000 17,550 49,550 l 2012 33,000 15,950 48,950 l 2013 35,000 14,300 49,300 2014 37,000 12,550 49,550 2015 38,000 10,700 48,700 2016 40,000 8,800 48,800 2017 43,000 6,800 49,800 2018 45,000 4,650 49,650 2019 48,000 2,400 50,400 Totals 680,000 $ 503,450 $ 1,183,450 30

l l l l NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Continued) l Note 5 - Long-Term Debt (Concluded) Proprietary Fund Types: (Conc 5f d) a Utility Reveeine Bond of 1979 (Concluded) Summary of Principal Maturities Required For Next Five Years on Long-Term Debt Principal Required During Fiscal Year Ending September 30 1995 1996 1997 1998 1999 General long-Term Debt $ 72,683 $ 74,914 $ 82,211 5 82,686 $ 57,108 Utility Acquisition Bonds, Series 1993 20,000 25,000 25,000 25,000 30,000 Utility Refunding Revenue Bonds, Series 1993 20,000 15,000 20,000 20,000 20,000 Utility Refunding Revenue Bonds, Series 1986 180,00C 195,000 205,000 225,000 245,000 Utility Revenue Bond, Series 1979 15,000 16,000 17,000 18,000 18,000 Totals S 307,683 $ 325,914 $ 349,211 $ 370,686 5 370,108 a Interest Interest paid (governmental fund types) or accrued (enterprise funds) amounted to $74,653 in the debt service fund, $1,295 in the general fund and $908,211 in the proprietary fund types (including amortization of bond discounts) for the fiscal year ended September 30,1995, All interest in the proprietary fund types was charged to interest expense. L Note 6 - Restricted Assets The required balances and the actual carrying values of the restricted asset accounts in the enterprise funds at September 30,1995 are as follows: Elect.w Water Wastewater Turkey Creek Totals Regdred Actual Required Actual Regtdred Actual Regdred Actual Required Actual Revenue Bond Accounts: Construction Account $ 0$ 0$ 0$ 0$ 0$ 0$ 103,528 $ 103,528 $ 103,528 $ 103,528 $mting bd 264,217 254,217 24,875 0 236,189 239,536 64,800 64,800 590,081 558,553 Reserve Account 217,995 217,995 43,320 40,000 731,841 731,841 57,165 57,165 1,050,321 1,047,001 Bond Amortization Account 0 0 0 0 564,312 564,312 0 0 564,312 564,312 Interest Receivable 0 0 0 0 0 1,057 0 0 0 7,057 Customer Deposits 125,910 0 0 0 0 0 0 0 125,910 0 Cm 3 Decommissioning Account 115,731 115,731 0 0 0 0 0 0 115,731 115,731 Impact Fee Nd 41,921 0 0 0 0 0 0 0 41,921 0 i Total Required 765,774 68,195 1,532,342 225,493 $ 2,591.804 ) Total Actual $ 587,943 $ 40,000 $ 1.542,746 $ 225.493 $ 2.396,182 31

I f ~! L 1 i l NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA j \\ (Continued) ? l Note 6 - Restricted Assets (Concluded) The deficiencies in the various restricted asset accounts are the result of the City utilizing these funds for operating expenditures in violation of bond covenants, contractual agreements and City ordmances. it is the City's policy to record all debt service cash accounts related to the 1990 issue in the electric fund, the 1986 issue in the wastewater fund, and the 1979 issue in the water fund. Cash accounts relating to the 1993 issue have been allocated to the electric fund (if related l. to'the refunding of the 1990 issue), the wastewater fund (if related to the refunding of the l. 1986 issue) and to the Turkey Creek fund (if new money). l The CR-3 Decommissioning Account is required by state law to accumulate funds for the City's share of the decommissioning cor.ts of the CR-3 nuclear power plant. The City's contribution to this account was $3,586 plus interest during 1995. The required cash balance in the decommissioning account is offset by a deferred credit on the balance sheet. The impact fee fund represents prepaid impact fees and is also offset by a deferred credit. j Note 7 - Interfund Receivables cad Payables l I Interfund transactions are normally recorded through a consolidated cash account instead of l interfund receivables and payables. Following is a summary of interfund receivables and l payable at September 30,1995: l Due From Due To Amount Enterprise - Turkey Creek - Water / Wastewater l (Operating Account) Enterprise - Electric 35,350 l l l Following is a summary of interfund transfers during 1995: l Transfers Out Transfers in j Governmental Enterprise Debt General Service Electric Wastewater Total l Governmental l General 0 $ 119,286 $ 0$ 0 $ 119,286 Enterprise Electric: Noncapital Financing 178,113 0 0 10,200 158,313 Turkey Creek Water / Wastewater Capital Financing 0 0 109,793 0 109,793 Totals $ 178,113 $ 119,286 $ 109.793 $ 10,200 $ 417,392 + 4 32 i

s i t i NOTES 'ID FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 8 - Fund Balances - Reserves and Designations Fund balances are reserved and designated within the governmental fund types as follows: f l Debt I General Service Reserved Prepaid Expenses 70,497 $ 0 Fire Station Improvements 57,931 0 . Debt Service-0 150,882 Total Reserved Fund Balances $ 128,428 ' $ 150,882 Designated Police Operations 5,160 $ 0 . Reserves earmark a portion of fund equity as 1) not available for appropriation or i expenditure; or 2) legally restricted to a specific future use. Designations of fund equity i represent management's tentative spending plan. ] Note 9 - Changes in Fund Equity - Enterprise Funds I i Following is a summary of the changes in fund equity - enterprise funds for the year ended September 30,1995-Fund Equity - October 1,1994 $ (490,474) Net income - All Enterprise Funds -439,618 Fund Equity - September 30,1995 $ - (50,856) Note 10 - Excess of Expenditures Over Budget and Deficit Equity Balances For excesses of actual expenditures over budgeted appropriations for governmental fund types, please see page 6 of the financial statements. The following individual fund shows deficit equity balances at September 30,1995 in the amounts shown: Fund Type Deficit Enterprise i Electric Unreserved Retained Earnings $ 2,532,383 Wastewater Unreserved Retained Earnings 808,328 Turkey Creek Water / Wastewater Unreserved Retained Earnings 161,552 ) i 33 4

l i NOTES 'ID FINANCIAL STATEMENTS ~ CITY OF ALACHUA, FLORIDA (Condnued) - Note 11 - 4.r.t Information - Proprietary Fund Types Turkey Creek l Water / j Electric Water Wastewater Wastewater l Fund Fund Fund Fund Operating Revenues' 5 4,717,784 5 264,557 5 452,127 5 209,895 Depreciation 194, % 7 99,665 124,613 43,773 Operating lacome (Loss) 1,112,024 (23,139) 61,329 78,820 Nonoperating Revenues (Expenses) (372,582) (4,882) (143,939) (89,900) l Operating Transfers in (Out) (78,520) O. 10,200-(109,793) t Net income (Loss) 660,922 (28,021) (72,410) (120,873) J! Property, Plant and Equipment - .l Additions 198,996 3,529 0 798,970 l Contributions - Current Year 3,869 0 0 0 Net Working Capital 1,000,545 79,617 (211,200) (35,350) Total Assets 6,545,881 2,184,930 4,905,466 2,338,097. Bonds Payable. Long-Tenn Portion - 8,039,793 665,000 3,295,627 2,365,310 Total Equiry (2,532,383)' 1,478,092 1,164,987 .(161.552) L Total Retained Earnings (Deficit) (2,532,383) 1,021,610 - (244,016) (161,552) Note 12 - Electric Power Agreements City of Gainesville The City entered into a wholesale electric service contract with the City of Gainesville, i Florida, on Jrnuary 21,1987, for the purchase of the majority of the City's electric power l requirements beginning January 6,1988. The City constructed a 138 x 69 - 12.47Y/7.2kV substation to receive the power, which was placed into operation on that date. The substation ~ is located in such a manner that the City has reasonable access to the transmission lines of l both the City of Gainesville and Florida Power Corporation. A portion of the substation is owned by the City of Gainesville. Th: initial term of the contract was five years, with options for additional annual extensions. The contract was renegotiated on October 2,1992 l l and extended for an additional fifteen years, beginning December 31,1992. Provisions in the contract allow for price adjustments for increases and decreases in.th'e City of. l Gainesville*s fuel and operating costs. Total payments to the City of Gainesville for 1995 were $2,502,737. l Crystal River Unit #3 Participation Agreement The City is a participant in an agreement with Florida Power Corporation which was entered - into on July 31, 1975. Under terms of the agreement, the City acquired an 0.0779% ownership interest and generation entitlement share in the nuclear steam electric generating unit. Participants are entitled to energy output of the unit based upon their respective l generation entitlement share. I E I 34 r 9" r m--mT

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 12 - Electric Power Agreements (Concluded) Florida Power Corporation has been appointed by the participants to act as their agent and has sole authority to manage, control, maintain and operate the unit. Operating costs of the unit, in general, are shared in proportion to each generation entitlement share on a monthly basis. Common and external facilities of the generating unit are solely owned by Florida Power Corporation and participants share in the operating and maintenance expenses of such facilities. Nuclear fuel payments and capital acquisition costs are required of participants in advance. Total payments for 1995 were $118,117. The City's share of plant decommissioning costs to be paid during the years 2015 through 2022 is being accumulated in an account administered by the FMPA. FMPA has determined the appropriate account balance to be $115,731 at September 30,1995. The cash account is offset by a deferred credit on the balance sheet of $115,731 at September 30,1995. St. Lucie No. 2 Power Purchase Agreement The City has negotiated a long-term agreement with Florida Power and Light Corporation through the FMPA to purchase.3044 megawatts of generating capacity and a corresponding amount of energy monthly from the St. Lucie No. 2 nuclear generating plant. The plant i became operational in 1984. Total payments for 1995 were $159,339. The City has signed certain documents with FMPA relating to the St. Lucie Project that provide that if the agency defaults on certain bond payments, the City would be required to satisfy payment on their share (.431%) of the bonds. The par amount of the outstanding bonds at September 30,1995 was approximately $300 million. Note 13 - Defined Benefit Pension Plan All full-time employees of the City of Alachua participate in the Florida State Retirement System (the System), a multiple-employer defined benefit public retirement system. The payroll for employees covered by the System for the year ended September 30,1995 was $436,390 for special risk employees, $83,183 for senior management and $794,932 for all other employees. The City's total payroll for all employees was $1,418,735. All full-time employees of the City are eligible to participate in the System. Special risk employees who retire at or after age 55, with ten years of creditable service; and all other employees who retire at or after age 62, with ten years of creditable service, are entitled to a retirement benefit, payable monthly for life, equal to the product of: (1) average monthly compensation in the highest five years of creditable service; (2) creditable service during the 35

F NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 13 - Defined Benefit Pension Plan (Concluded) appropriate period; and (3) the appropriate benefit percentage. Benefits fully vest on l reaching ten years of service. Vested employees may retire after ten years of creditable service and receive reduced retirement benefits. The System also provides death and disability benefits.. Benefits are established by Florida Statute. l The City is required by Florida Statute to contribute 27.49% of special risk; 24.54% of senior management; and 17.57% of all other employee earnings during calendar year 1995 (27.59%; 23.63%; and 17.66%, respectively, for calendar year 1994). The contribution requirement for the year ended September 30,1995 was $280.123; $120,051 for special risk employees; $20,224 for senior management; and $139,848 for all other employees. The " pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure, - which is the actuarial present value of credited projected benefits, is intended to help users assess the System's funding status on a going concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among PERS and employees. The System does not make special measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at June 30,1993 (the latest actuarial valuation) for the System as a whole was $39.7 billion. The System's net assets available for benefits on that date (at cost) were $29.1 billion (market was $34.7 billion), leaving an unfunded pension benefit obligation of $10.6 billion ($5.0 billion at market). The City's 1995 contribution represented less than 1% of total contributions required of all participating entities. Ten-year historical trend informnion showing the System's progress in accumulating . sufficient assets to pay benefits when due is not presently available. However, historical trend information commencing with 1986 is present in the System's June 30,1994 annual financial report. Note 14 - Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeat' emergencies. i I 1 ? i I 36 I i _ _ ~..,

1 NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Condnued) Note 14 - Deferred Compensation Plan (Concluded) All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of the benefits under the plan), subject only to the claims of the City's general creditors. Participants' rights under the plan are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. The City has no liability for losses under the plan, but does have the duty of due care that would be required of any ordinary prudent investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. Note 15 - Risk Management The City is exposed to various risk cf loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the City carries insurance. Insurance against losses are provided for the following types of risk with the following carriers: Florida League of Chies, Inc. m Workers' Compcnsation and Employer's Liability a General Liability and Automobile Liability e Real and Personal Property Damage a Automobile Physical Damage Hilb, Rogal and Hamilton Company of Gainesville, Florida, Inc. m Public Employees' Blanket Bond a Boiler and Machinery Policy - Electric Substation a Public Official Liability e Law Enforcement Officers' Professional Liability and Other Mandated Coverage a Accidental Death and Dismemberment e Auxiliary Reserve Policy Hunt Insurance Group, Inc. s Law Enforcement Officers' Professional Liability The City's coverage for Workers' Compensation is under a retrospectively rated policy. Premiums are accrued based on the ultimate cost to date of the City's experience for this type of risk. 37

NOTES TO FINANCIAL STATEMENTS CITY OF ALACHUA, FLORIDA (Concluded) Note 15 - Risk Management (Concluded) The City's coverage for Law Enforcement Officers' Professional Liability administered by Hunt Insurance Group, Inc. is through the Florida Police Chiefs' Self-Insurance Fund. The nature of the City's participation in this public entity risk pool, including the rights and responsibilities of the City and the pool have not been determined. 1 i 38

~ l i ACCOMPANYING INFORMATION

. COMBINING AND INDIVIDUAL FUND STATEMENTS These statements provide a more detailed view of the " general purpose financial statements" presented in the previous section. ' Combining statements are presented when there is more than one fund of a given fund type. An individ.ual fund statement is presented for the general fund to provide detail budgetary comparisons.

BALANCE SIIEETS GENERAL FUND SEPTEMBER 30,1995 AND 1994 CITY OF ALACHUA, FLORIDA 9 1995 1994 Assets Cash in Bank, Including Certificates of Deposit: Police Department Trust Fund S 5,160 $ 10,706 Alachua Meadows Account 105,500 105,500 Other 270,559 76,486 Receivables: Utility Taxes 19,782 12,700 Accrued Interest 264 264 Other 18,588 7,731 Due From Other Governments 92,378 48,758 Prepaid Expenses 70,497 57,866 Total Assets 582,728 320,011 Liabilities and Fund Balance Liabilities Accounts Payable 374,035 113,350 Accrued Expenses 0 10,573 Occupational Licenses Collected in Advance 1,,891 9,979 Total Liabilities 382,926 133,902 Fund Balance Reserved For Prepaid Expenses 70,497 57,866 Reserved For Police Education 0 631 Reserved For Special Assessment Expenditures 0 118,369 Reserved For Fire Station Improvements 57,931 56,795 Designated For Police Department Operations 5,160 10,706 Undesignated 66,214 (58,258) Total Fund Balance 199,802 186,109 Total Liabilities and Fund Balance $ 582.728 $ 320.011 39 l

STATEMENT OF REVENUES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,1995, WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED SEPTEMBER 30,1994 CITY OF ALACHUA, FLORIDA 1995 1994 Variance Favorable Budget Actual - (Unfavorable) Actual Revenues Taxes Property Taxes - Current 667,070 $ 683,975 $ 16,905 $ 613,229 Property Taxes - Delinquent 10,000 2,667 (7,333) 5,977 Franchise Fees 27,000 33,057 6,057 30,169 Utility Taxes 385,000 451,240 66,240 421,891 Local Option Gas Taxes 108,000 106,307 (1,693) 100,179 Total Taxes 1,197,070 1,277,246 80,176 1,171,445 Licenses and Permits. Occupational Licenses 18,000 19,901 1,901 17,012 Building Permits 49,000 62,761 13,761 38,598 Total Licenses and Permits 67,000 82,662 15,662 55,610 Intergovernmental Federal Grants: U.S. Department of Justice - COPS - Phase I 198,270 79,798 (118,472) 0 U.S. Department of Justice - COPS - FAST 48,447 7,919 (40,528) 0 Alachua County School Board (D.A.R.E.) 0 0 0 15,000 Alachua County (CCPO) 0 397 397 44,086 Total Federal Grants 246,717 88,114 (158,603) 59,086 State Grants: DCA Sports Grant 27,600 27,600 0 0 Solid Waste 9,447 9,458 11 9,792 Total State Grants 37,047 37,058 11 9,792 State-Shared Revenue: Cigarette Tax 15,121 14,585 (536) 14,327 State Revenue Sharing 114,640 122,993 8,353 111,3 % Mobile Home Licenses 3,400 2,989 (411) 4,306 Alcoholic Beverage Tax 6,000 4,187 (1,813) 4,785 Half-Cent Sales Tax 228,126 224,806 (3,320) 202,335 Rebate on Municipal Vehicles ' 3,000 934 (2,066) 3,414 Total State-Shared Revenue 370,287 370,494 207 340,563 Total Intergovernmenhl 654,051 495,666 (158,385) 409,441 40

STATEMENT OF REVENUES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,1995, WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED SEPTEMBER 30,1994 CITY OF ALACHUA, FLORIDA (Concluded) 1995 1994 Variance Favorable Budget Actual (Unfavorable) Actual Revenues (Concluded) Charges For Services Police Services 10,800 $ 71,051 $ 60,251 $ 70,332 Zoning Fees 8,000 10,325 2,325 832 Sanitation Revenue 16,000 22,473 6,473 14,245 Penalty Revenue 3,600 4,173 573 3,475 Mosquito Spraying 25,000 25.040 40 24,753 Total Charges For Services 63,400 133,062 69,662 113,637 Fines and Forfeitures Court Fines 100,000 94,541 (5,459) 97,067 Miscellaneous laterest 10,000 10,231 231 10,614 Miscellaneous Revenue 16,310 6,934 (9,376) '5,555 Sports Center Revenue 25,000 16,313 (8,687) 23,237 Administrative Fee 0 174 174 22 Contributions and Donations 20,000 28,241 8,241 0 Total Miscellaneous 71,310 61,893 (9,417) 39,428 Total Revenues $ 2,152,831 $ 2,145,070 $ (7,761) $ 1,886,628 41 i

~ _ _ _ _ _ STATEMENT OF EXPENDITURES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,1995, WITH i COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED SEPTEMBER 30,1994 CITY OF ALACHUA, FLORIDA 1995 1994 Variance Favorable Budget Actual (Unfavorable) Actual i Expenditures Current: General Government legislative: Personal Services 46,054 $ 52,769 $ (6,715) $ 44,344 Operations 19,965 19,854 111 18,681 Capital Outlay 0 0 0 498 Total legislative 66,019 72,623 (6,604) 63,523 Executive: Personal Services 50,575 41,506 9,069 49,119 Operations 14,576 15,864 (1,288) 11,949 Total Executive 65,151 57,370 7,781 61,068 Finance and Administration: Personal Services 63,227 77,064 (13,837) 66,190 Operations 37,565 42,874 (5,309) 35,899 Capital Outlay 0 0 0 170 ) Total Finance and Administration 100,792 119.938 (19,146) 102,259 legal and Code Enforcement: Personal Services 8,948 8,068 8E0 12,129 Operations 43,085 46,731 (3,646) 40,179 Total legal and Code Enforcement 52,033 54,799 (2,766) 52,308 l Comprehensive Planning: Personal Services 24,060 33,041 (8,981) 18,064 Operations 35,384 27,162 8,222 31,941 l Total Comprehensive Planning 59,444 60,203 (759) 50,005 Other General Government: Operations 16,300 16,993 (693) 23,134 Capital Outlay 0 0 0 24,000 Debt Service 5,941 4,623 1.318 1,927 Total Other General Government 22,241 21,616 625 49,061 Total General Government 365,680 386,549 (20,869) 378.224 j Public Safety Law Enforcement: Personal Services 958,022 903,940 54,082 849,524 Operations 138,221 187,314 (49,093) 133,470 Capital Outlay 4,000 59,741 (55,741) 2,318 Total Law Enforcement 1,100,243 1,150,995 (50,752) 985,312 42

STATEMENT OF EXPENDITURES - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30,1995, WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED SEPTEMBER 30,1994 CITY OF ALACHUA, FLORIDA (Concluded) 1995 1994 Variance Favorable Budget Actual (Unfavorable) Actual Expenditures (Concluded) Current: (Concluded) Public Safety (Concluded) Fire Control: Operations 141,083 $ 145,604 $ (4,521) $ 134,019 Protective Inspections: Operations 34,416 37,998 (3,582) 14,691 Other Public Safety: Personal Services 5,068 3,408 1,660 5,061 . Operations 2,270 3.128 (858) 3,316 Total Other Public Safety 7.338 6,536 802 8,377 Total Public Safety 1,283,080 1,341,133 (58,053) 1.142,399 Physical Environment Personal Services 44,320 23,316 21,004 33,315 Operations 27,027 22,009 5,018 19,313 Capital Outlay 0 0 0 6,404 Total Physical Environment 71,347 45,325 26.022 59,032 Transportation Personal Services 154,731 154,688 43 137,877 Operations 132,020 135,838 (3,818) 126,489 Capital Outlay 0 13,175 (13,175) 1,200 Total Transportation 286,751 303,701 (16,950) 265,566 Parks and Recreation Personal Services 64,919 68,515 (3,5%) 65,052 Operations 64,677 64,572 105 64,454 Capital Outlay 50,000 50,925 (925) 7,264 Total Parks and Recreation 179,596 184,012 (4,416) 136,770 Total Expenditures $ 2,186,454 $ 2,260,720 $ (74,266) $ 1,981,991 l 43

COMBINING DALANCE SHEET PROPRIETARY FUNDS SEPTEMBER 30,1995, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30,1994 CITY OF ALACHUA, FLORIDA Turkey Creek Water / Totals Electric Water Wastewater Wastewater 1995 1994 Assets Current Assets Cash ami Cash Equivalents 70,615 $ 69,266 139,881 $ 43,330 Investments 70,000 33,292 123,292 0 Receivables (Net of Allowance For Uncollectibles as Parenthetically Imlicated): Accounts ($45,120) 714,968 714,968 558,416 Special Assessments 22,940 .22,940 22,940 Other Receivables 8,903 8,903 52,511 Due From Other Funds 35,350 35,350 333,341 Inventory, At Cost 176,485 20,189 1%,674 206,132 Prepaid Power Costs 11,931 11,931 38,845 Other Prepa'1 Expenses 25,625 25,625 22,192 ~ Unbilled Revenue 210,237 210,237 161,799 l Total Current Assets 1,367,054 89,455 33,292 $ 0 1,489,801 ~ 1,439,506 Restricted Assets Cash and Cash Equivalents 254,217 239,536 (59,032) 434,721 611,812 Investments 333,726 40,000 1,2 %,153 284,525 1,954,404 2,455,598 Accrued Interest 7,057 7,057 6,234 Total Restricted Assets 587,943 40,000 1,542,746 225,493 2,3 %,182 3,073,644 Property, Plant and Equipment j Utility Plant in Service 6,234,041 - 3,233,433 4,677,471 2,117,982 16,262,927 15,265,300 (Accumulated Depreciation) (1,911,433) (1,177,958) (1,457,382) (83,262) (4,630,035) (4,164,682) Construction in Progress 0 49,956 Total Propedy, Plant and E,__* ___.4 Cost im Depreciation 4,322,608 2,055,475 3,220,089 2,034,720 11,632,892 11,150,574 Other Assets Unamortized Bond Issue Costs 268,276 -0 109,339 77,884 455,499 476,443 Total Assets $ 6,545,881 $ 2,184,930 $ 4,905,466 $ 2,338,097 $ 15,974,374 $ 16,140,167 44 m

COMBINING CALANCE SHEET PROPRIETARY FUNDS SEPTEM ER 30,1995, WITH COMPARATIVE TOTALS FOR TIIE YEAR ENDED SEI"rEMBER 30,1994 i CITY OF ALACHUA, FLORIDA l (Concluded) T - sey C m t l l Water / Totsk Electric Water Wastewater Wastewater 1995 1994 i tinhale== and Pamd Equity l Current IJaWilaies, PayaMe Freat Carstat Assets Cash Overdraft 237,672 237.672 - $ 231,420 I Accounts Payable 258,193 258,193 215,547 l Other Accrued Expenses 27,456 27,456 22,591 j Deferred Credits and Developer Deposits $6,002 $ 845 56,847 83,995 Due to Other Ibnds 35,350 35,350 333,341 J caued Canpennted Absences 24,858 8,993 6,820 40,671 42,341 Tctal Current lashikties, PayaMe Frean Current Assets 366.509 9,838 244,492 35,350 656,189 929,235 Cemet llabilMeg, PayaMe 1%en Restricted Amiets Accrued Interest 254,275 17,000 114,437 76,495 462,207 469,605 Ikmds Payable - Current Portion 111,584 15,000 85,923 22,494 235,001 220,000 Customer berosits 125,910 125,910 119,405 l Total Current IJahdutnes, PayaWe Preum Restrictal Assets 491,769 32,000 200,360 98,989 823,118 809,010 Long-Tern liainhenes Deferred Credit - CR-3 Decommissioning Costs i15,331 115,331 103,301 Deferred C,e;;,.6,.s - Special Assessments 22,940 22,940 157,917 Deferred Contribution - Impact rte 41,922 41,922 41,922 Utilities Revenue Band of 1979,less Current Porti<m 665,0nD 665,000 680,000 Utility RcAmding Revenue Bonds of 1986, less Current Porten 1,943,160 1,632,112 3,575,272 3,748,504 i Utility Revenue Bonds of 1993, Less Current Potten 6,096,633 1,663,515 1,105,310 8,865,458 8,880,752 Utility Revenue Bonds of 1994, less Current Ibrtion 1,260,000 1,260,000 1,280,000 Total Leag-Tertu liainkties 8,219,986 665,000 3,295,627 2,365,310 14.545,923 14,892.3 % Total IJahihenes 9,078,264 706,838 3,740,479 2,499,649 16,025,210 16,630,641 Fund F#y Contributions: Customers 36,774 924,325 961,099 % I,099 Capital Projed Fund 37,758 37,758 37,758 EDA and IlUD 135,050 304,278 439,328 439,328 i Farmers llome Administratinn 246,900 180,400 427,300 427,300 Total Contributions 0 456,482 1,409.003 0 1,865,485 1,865,485 Retained Erina'q:s: Reserved For Debt Service and Contmgencies 40,000 564,312 604,312 606,6 % Unreservd (2,532,383) 981,610 (808,328) (161,552) (2.520,653) (2 962,655) Total rem Earnings (Deficit) (2,532,383) 1,021,610 (244,016) (161,552) (1,916,341) (2,355,959) Total f%md Equity (2,532,383) 1,478,092 1,164,987 (161,552) (50,85Q (490,474) Totalllahikties and Emed Equity 6,545,881 $ 2,184,930 $ 4,905,466 $ 2,338,097 $ 15,974,374 $ 16,140,167 45 .. ~.

COMDINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30,1995, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30,1994 CITY OF ALACHUA, FLORIDA Turkey Creek Waterl Totals Electric Water Wastewater Wastewater 1995 1994 Operating Revenues Utility Billings $ 4.668,172 $ 264,557 $ 452,127 $ 209,895 5 5,594,751 3 5,209.212 Hookup Charges and Other 49,612 0 0 0 49,612 102,897 Total Operating Revenues 4.717,784 264,557 - 452.127 209.895 5.644,363 5,312,109 Operating Expenses Electnc Power Expenses: Nuclear Power Generation and Transmission 292,158 0 0 0 292,158 92.119 Purchased Power and Other 2,557,049 0 0 0 2,557,049 2,651,214 Treatment 0 41,779 126,466 61,707 229,952 228,615-Distribution and Collection 200,698 34,400 37.181 22,988 295,267 330,250 Warehousing 37,342 13,219 8,453 114 59.128 55,979 Customer Accousas 92,758 40,561 29,843 24 163,186 158,121 General and Administrative 118,213 58,072 64,242 2,469 242,996 300,625 Depreciation 194, % 7 99,665 124,613 43,773 463,018 444,501 Taxes 112,575 0 0 0 112.575 104,439 (Total Operating Expenses) (3,605.760) (287,696) (390,798) (131.075) (4,415.329) (4,365,863) Operating Income (Loss) 1,112,024 (23,139) 61,329 78,820 1,229,034 946,246 Nonoperating Revenues (Expenses) Special Assessments 134,977 0 0 0 114,977 0 Connection Charges 0 28,104 6,827 45,425 80,356 0 Interest Income 24,039 1,389 96,652 21,616 143,6 % 104,021 Interest and Fiscal Charges (520,392) (34,375) (241,370) (153,613) (949,750) (965,457) Amortization of Bond Issue Costs (11,569) 0 (6,048) (3,328) (20,945) (20,884) Miscellaneous Income 363 0 0 0 363 370 Total Nonoperating Revenues (Expenses) (372,582) (4,882) (143,939) (89,900) (611.303) (881,950) Income (Loss) Before Operating Transfers 739,442 (28.021) (82,610) (11,080) 617,731 64,2 % Operating Transfers In (Out) Transfers In 109,793 0 10,200 0 119,993 154,089 Transfers Ott (188,313) 0 0 (109.793) (298.106) (332,202) Total Operating Transfers In (Out) G8,520) 0 10,200 (109.793) (178,113) (178,113) Net income (Loss) 660,922 (28,021) (72,410) (120,873) 439 3i8 (113,817) Retained Earnings (Deficit), Beginning of Year (3,193,305) 1,049,631 (171,606) (40,679) (2,355,959) (2,242,142) Retained Earnings (Deficit), End of Year $ (2,532.383) $ 1,021,610 $ (244,016) $ (161,552) $ (1,916.341) $ (2,355,959) 46 -}}

ML20108C685

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