-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vcw6FFl5ox8kPOWG8j3Lmk4/SGm2au+pa8I8rgRFq5pXb9FUzIFGhtRRBvDqlLUz uPfDDDpeSY+KYKNiRH0O2g== 0000017797-97-000013.txt : 19970515 0000017797-97-000013.hdr.sgml : 19970515 ACCESSION NUMBER: 0000017797-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAROLINA POWER & LIGHT CO CENTRAL INDEX KEY: 0000017797 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 560165465 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03382 FILM NUMBER: 97605239 BUSINESS ADDRESS: STREET 1: 411 FAYETTEVILLE ST CITY: RALEIGH STATE: NC ZIP: 27601 BUSINESS PHONE: 9195466111 10-Q 1 FIRST QUARTER 1997 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 1-3382 ______ CAROLINA POWER & LIGHT COMPANY __________________________________ (Exact name of registrant as specified in its charter) North Carolina 56-0165465 _____________________________________________________________________________ (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) No.) 411 Fayetteville Street, Raleigh, North Carolina 27601-1748 ___________________________________________________________ (Address of principal executive offices) (Zip Code) 919-546-6111 ____________ (Registrant's telephone number, including area code) _______________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ___ ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock (Without Par Value) shares outstanding at April 30, 1997: 151,049,522 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ______ ____________________ Reference is made to the attached Appendix containing the Consolidated Interim Financial Statements for the periods ended March 31, 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ______ _________________________________________________ Results Of Operations For the Three and Twelve Months Ended March 31, 1997, As Compared With the Corresponding Periods One Year Earlier ___________________________________________________________ Operating Revenues __________________ For the three and twelve months ended March 31, 1997, operating revenues were affected by the following factors (in millions): Three Months Twelve Months ____________ _____________ Weather $ (48) $ (75) Power Agency (17) (22) NCEMC Load Loss -- (70) Price (3) (25) Sales to Other Utilities (8) (1) Customer Growth/Changes In Usage Patterns 8 53 Other -- 6 ______ ______ Total $ (68) $ (134) The decrease in the weather component of revenue for the three and twelve months ended March 31, 1997, is the result of milder than normal temperatures in the current periods as compared to more extreme weather patterns in the prior periods. For both comparison periods, sales to North Carolina Eastern Municipal Power Agency (Power Agency) decreased due to the increased availability of generating units owned jointly by the Company and Power Agency. The loss of 200 megawatts of load from North Carolina Electric Membership Corporation (NCEMC) began in January 1996. For both periods, the majority of the decrease in the price component of revenue is attributable to a decrease in the fuel cost component of revenue. Operating Expenses __________________ The decrease in fuel expense for the three months ended March 31, 1997 includes a decrease of approximately $19 million due to a change in generation mix. Fossil generation, as a percentage of total 3 generation, decreased from 59 % to 47% and lower-cost nuclear generation increased from 39% to 51%. The change in generation mix is due primarily to the timing of refueling outages of the Company's nuclear facilities. Also contributing to the decrease is a 4.5% decrease in total generation due to lower sales. These decreases are partially offset by a $21 million increase in deferred fuel costs due to over-recovery of current fuel costs and changes in recovery of prior period fuel costs. The decrease in fuel expense for the twelve months ended March 31, 1997 includes a decrease of approximately $35 million due to a change in generation mix. Fossil generation, as a percentage of total generation, decreased from 57 % to 51% and lower-cost nuclear generation increased from 41% to 47%. The change in generation mix is due primarily to the timing of refueling outages of the Company's nuclear facilities. Also contributing to the decrease for the twelve-month period was a reduction in the cost of coal due to renegotiated coal contracts and increased spot market coal purchases. These reductions were partially offset by an over-recovery of current fuel costs, resulting in increased deferred fuel costs. Purchased power decreased for the three and twelve months ended March 31, 1997, primarily due to amendments to electric purchase power agreements between the Company and Cogentrix of North Carolina, Inc. and Cogentrix Eastern Carolina Corporation, which became effective on September 26, 1996. Operation and maintenance expense decreased for the three and twelve months ended March 31, 1997 due to cost reduction efforts and the timing of plant outages. There were more nuclear plant refueling outages in the prior periods, resulting in higher expense for those periods as compared to the current periods. In December 1996, the North Carolina Utilities Commission (NCUC) authorized the Company to accelerate amortization of certain regulatory assets over a three-year period beginning January 1, 1997. In March 1997, the South Carolina Public Service Commission (SCPSC) approved a similar plan for the Company to accelerate the amortization of certain regulatory assets, including plant abandonment costs related to the Harris Plant, over a three-year period beginning January 1, 1997. Depreciation and amortization for the three and twelve months ended March 31, 1997, includes approximately $17 million related to accelerated amortization of these regulatory assets. See additional discussion of the abandonment adjustment in the Retail Rate Matters section of Other Matters. The increase in depreciation and amortization expense for the three and twelve months ended March 31, 1997 also includes amortization of deferred Hurricane Fran operation and maintenance expenses of $2.9 million and $6.8 million, respectively. The decrease in income tax expense for the three and twelve months ended March 31, 1997, is primarily due to a decrease in operating income. Other Income ____________ Allowance for equity funds used during construction decreased for the three and twelve months ended March 31, 1997 in accordance with the application of the formula prescribed by the Federal Energy Regulatory Commission. During the current periods, a greater proportion of the total allowance for funds used during construction was credited to interest charges as allowance for borrowed funds used during construction. The decrease in other income, net for the three months ended March 31, 1997, is primarily due to losses incurred in the start- up phases of certain non-regulated investments. For the twelve- month period ended March 31, 1997, other income, net, increased due to an adjustment of $22.9 million to the unamortized balance of abandonment costs related to the Harris Plant. See additional discussion of the abandonment adjustment in the Retail Rate Matters section of Other Matters. The increase for the twelve- month period was partially offset by losses incurred in the start- up phases of certain non-regulated investments. 4 Interest Charges ________________ Interest charges on long-term debt decreased for all reported periods primarily due to reduced long-term debt in the current periods as well as refinancings at lower interest costs. Other interest charges decreased for the twelve months ended March 31, 1997 primarily due to a $6 million interest accrual recorded in the prior period that related to the 1995 North Carolina Utilities Commission Fuel Order. Material Changes In Liquidity And Capital Resources From December 31, 1996, to March 31, 1997 and From March 31, 1996, to March 31, 1997 __________________________________________ Capital Requirements ____________________ The proceeds of the issuance of short-term debt and/or internally generated funds financed the redemption or retirement of long-term debt totaling $60 million and $265 million during the three and twelve months ended March 31, 1997, respectively. On May 7, 1997, the Company announced plans to redeem on July 1, 1997, all 500,000 shares of $7.72 Serial Preferred Stock and all 350,000 shares of $7.95 Serial Preferred Stock, both at a redemption price of $101 per share. The redemptions will be funded with additional commercial paper borrowings and/or internally generated funds. The Company's capital structure as of March 31 was as follows: 1997 1996 ____ ____ Common Stock Equity 50.44% 49.47% Long-term Debt 46.89% 47.83% Preferred Stock 2.67% 2.70% The Company's First Mortgage Bonds are currently rated "A2" by Moody's Investors Service, "A" by Standard & Poor=s and "A+" by Duff & Phelps. Moody's Investors Service, Standard & Poor's and Duff & Phelps have rated the Company's commercial paper "P-1," "A- 1" and "D-1," respectively. OTHER MATTERS _____________ Retail Rate Matters ___________________ A petition was filed in July 1996 by the Carolina Industrial Group for Fair Utility Rates (CIGFUR) with the NCUC, requesting that the NCUC conduct an investigation of the Company's base rates or treat its petition as a complaint against the Company. The petition alleged that the Company's return on equity (which was authorized by the NCUC in the Company's last general rate proceeding in 1988) and earnings are too high. In December 1996, the NCUC issued an order denying CIGFUR's petition and stating that it tentatively found no reasonable grounds to proceed with CIGFUR's petition as a complaint. In January 1997, CIGFUR filed its Comments and Motion for Reconsideration to which the Company responded. On February 6, 1997, the NCUC issued an order denying CIGFUR's Motion for Reconsideration. On February 25, 1997, CIGFUR filed a Notice of Appeal of the NCUC's decision with the North Carolina Court of Appeals. The Company cannot predict the outcome of this matter. 5 Additionally, in December 1996, the Company filed a proposal with the SCPSC to accelerate amortization of certain regulatory assets, including plant abandonment costs related to the Harris Plant, over a three-year period beginning January 1, 1997. This accelerated amortization will reduce income by approximately $13 million, after tax, in each of the three years. In anticipation of approval of the proposal in 1997, the unamortized balance of plant abandonment costs related to the Harris Plant was adjusted in 1996 to reflect the present value impact of the shorter recovery period. This adjustment resulted in an increase in income of approximately $14 million, after tax, in the fourth quarter of 1996. On March 20, 1997, the SCPSC approved the Company's accelerated amortization proposal. Other Business ______________ In 1996, the Company established a wholly owned subsidiary, CaroCapital, Inc. (CaroCapital), which purchased a minority equity interest (40%) in Knowledge Builders, Inc. (KBI), an energy- management software and control systems company. Investments in KBI amounted to $9 million in 1996. On May 6, 1997, CaroCapital entered into a merger agreement pursuant to which KBI will be merged into CaroCapital. The merger agreement provides that the remaining KBI stock will be exchanged for shares of common stock of the Company according to a market value formula. The merger agreement provides for initial payments totaling approximately $22 million, payable primarily in unregistered restricted shares of the Company's common stock. The merger agreement also provides for other incentive payments based on CaroCapital's future results of operations. If earned, these additional payments will be made primarily in unregistered restricted shares of the Company's common stock. The closing of the merger is subject to certain regulatory approvals. The Company cannot predict the outcome of this matter. Competition ___________ On January 29, 1997, representatives of both houses of the North Carolina General Assembly filed bills calling for the establishment of a commission, comprised of representatives from retail customers, electric companies and other interested parties. On April 17, 1997, the North Carolina General Assembly approved legislation establishing a 23-member study commission to evaluate the future of electric service in the state. The commission will examine a wide range of issues related to the cost and delivery of electric service, including the issue of customer choice of electric providers. The commission will make an interim report to the 1998 General Assembly and a final report in 1999. Also on April 17, 1997, a bill was introduced in the North Carolina House of Representatives calling for retail electric competition. The bill would require that residential customers be able to choose their provider by October 1, 1998, commercial customers by January 1, 1999, and industrial customers by July 1, 1999. The Company cannot predict the outcome of these matters. On February 6, 1997, representatives in the South Carolina General Assembly introduced a bill calling for a transition to full competition in the electric utility industry beginning in 1998. In addition, by letter dated May 6, 1997, the Speaker of the South Carolina House of Representatives requested that the South Carolina Public Service Commission prepare a proposal for the deregulation and restructuring of electricity in South Carolina, with a report date of January 31, 1998. The Company cannot predict the outcome of these matters. On April 8, 1997, a bill was introduced in Congress calling for all customers to be able to choose their power suppliers by January 1, 1999. The bill calls for a federal mandate of deregulation, rather than a state-by-state approach. The Company cannot predict the outcome of this matter. 6 PART II. OTHER INFORMATION ___________________________ Item 1. Legal Proceedings _________________________ Legal aspects of certain matters are set forth in Item 5 below. Item 2. Changes in Securities ) ) ) ) Item 3. Defaults upon Senior Securities ) Not applicable for the quarter ) ended March 31, 1997. ) ) Item 4. Submission of Matters to a Vote ) of Security Holders ) ) Item 5. Other Information _________________________ 1. (Reference is made to the Company's 1996 Form 10-K, Competition and Franchises, paragraph 1.b., page 6.) With regard to the bills filed with the North Carolina General Assembly (General Assembly) calling for a study of the future of the electric utility industry in North Carolina, on April 17, 1997, the General Assembly approved legislation establishing a 23-member study commission. The commission will present an interim report to the General Assembly in 1998, and a final report in 1999. Also on April 17, 1997, a bill was introduced in the North Carolina House of Representatives calling for retail electric competition by October 1, 1998 for residential customers; by January 1, 1999 for commercial customers; and by July 1, 1999 for industrial customers. By letter dated May 6, 1997, the Speaker of the South Carolina House of Representatives requested that the South Carolina Public Service Commission prepare a proposal for the deregulation and restructuring of electricity in South Carolina, with a report date of January 31, 1998. On April 8, 1997, a bill was introduced in Congress calling for all customers to be able to choose their power suppliers by January 1, 1999. The bill calls for a federal mandate of deregulation, rather than a state-by-state approach. The Company cannot predict the outcome of these matters. 2. (Reference is made to the Company's 1996 Form 10-K, Other Matters, paragraph 1, page 24.) With regard to the Independent Consultant's Safety Inspection Report (Report) required to be filed under Federal Energy Regulatory Commission (FERC) Regulation 18 CFR Part 12, on February 27, 1997, the Company received a letter from the FERC pertaining to the Company's Report filed in November 1994. The FERC submitted comments on the Report and requested that further analysis be conducted. The Company is in the process of reviewing the FERC's comments and preparing its response to the 7 letter. The Company cannot predict the outcome of this matter. 3. (Reference is made to the Company's 1996 Form 10-K, Other Matters, paragraph 7, page 26.) With regard to the Company's wholly owned subsidiary, CaroCapital, Inc. (CaroCapital), on May 6, 1997, CaroCapital entered into a merger agreement pursuant to which Knowledge Builders, Inc. (KBI), will be merged into CaroCapital. KBI is an energy-management software and control systems company in which CaroCapital purchased a forty percent (40%) equity interest in 1996. The merger agreement provides that the remaining KBI stock will be exchanged for shares of Common Stock of the Company according to a market value formula. The merger agreement provides for initial payments totaling approximately $22 million, payable primarily in unregistered restricted shares of the Company's Common Stock. The merger agreement also provides for other incentive payments that may be earned by the KBI founders based on CaroCapital's future results of operations. If earned, these additional payments will be made primarily in unregistered, restricted shares of the Company's Common Stock (valued according to a market value formula). The closing of the merger is subject to certain regulatory approvals. The Company filed applications for authority to issue additional shares of Common Stock in connection with the merger with the North Carolina Utilities Commission (Docket No. E-2, Sub 711) and the South Carolina Public Service Commission (Docket No. 97-170-E) on April 28, 1997 and April 29, 1997, respectively. The Company cannot predict the outcome of these matters. Item 6. Exhibits and Reports on Form 8-K ________________________________________ (a) Exhibits None. (b) Reports on Form 8-K filed during or with respect to the quarter: Date of Report (Earliest Event Reported) Date of Signature Items Reported ___________________________ _________________ ______________ NONE 8 SIGNATURES Pursuant to requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAROLINA POWER & LIGHT COMPANY (Registrant) By /s/ Glenn E. Harder Executive Vice President and Chief Financial Officer By /s/ Bonnie V. Hancock Vice President and Controller (and Principal Accounting Officer) Date: May 13, 1997 EX-99 2 STATEMENTS OF INCOME
Carolina Power & Light Company (ORGANIZED UNDER THE LAWS OF NORTH CAROLINA) CONSOLIDATED INTERIM FINANCIAL STATEMENTS (NOT AUDITED BY INDEPENDENT AUDITORS) MARCH 31, 1997 STATEMENTS OF INCOME Three Months Ended Twelve Months Ended March 31 March 31 (In thousands except per share amounts) 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------- Operating Revenues $ 716,084 $ 783,585 $ 2,928,214 $ 3,061,899 - ------------------------------------------------------------------------------- --------------------------------- Operating Expenses Fuel 133,268 137,566 510,752 534,107 Purchased power 81,619 105,989 388,184 422,270 Other operation and maintenance 155,963 169,400 716,703 739,599 Depreciation and amortization 118,872 92,478 413,321 366,730 Taxes other than on income 35,006 38,564 136,921 143,687 Income tax expense 61,029 77,095 253,698 274,903 Harris Plant deferred costs, net 7,565 8,065 26,216 29,588 ------------------------------------------------------------------------------- ------------------------------ Total Operating Expenses 593,322 629,157 2,445,795 2,510,884 ------------------------------------------------------------------------------- ------------------------------ Operating Income 122,762 154,428 482,419 551,015 ------------------------------------------------------------------------------- ------------------------------ Other Income Allowance for equity funds used during construction 61 1,035 (963) 3,472 Income tax credit 3,086 4,413 12,520 19,664 Harris Plant carrying costs 1,308 1,809 6,798 7,886 Interest income 1,669 1,134 4,598 7,226 Other income, net (Note 3) (1,992) 6,199 29,150 11,244 ------------------------------------------------------------------------------- ------------------------------ Total Other Income 4,132 14,590 52,103 49,492 ------------------------------------------------------------------------------- ------------------------------ Income Before Interest Charges 126,894 169,018 534,522 600,507 ------------------------------------------------------------------------------- ------------------------------ Interest Charges Long-term debt 40,710 44,676 168,655 185,480 Other interest charges 5,412 6,912 17,655 26,781 Allowance for borrowed funds used during construction (1,490) (916) (6,981) (4,670) ------------------------------------------------------------------------------- ------------------------------ Net Interest Charges 44,632 50,672 179,329 207,591 ------------------------------------------------------------------------------- ------------------------------ Net Income 82,262 118,346 355,193 392,916 Preferred Stock Dividend Requirements (2,402) (2,402) (9,609) (9,609) ------------------------------------------------------------------------------- ------------------------------ Earnings for Common Stock $ 79,860 $ 115,944 $ 345,584 $ 383,307 ============================================================================================================== Average Common Shares Outstanding 143,495 143,625 143,589 145,329 Earnings per Common Share $ 0.56 $ 0.81 $ 2.41 $ 2.64 Dividends Declared per Common Share $ 0.470 $ 0.455 $ 1.850 $ 1.790 ............................................................................... .............................. See Supplemental Data and Notes to Consolidated Interim Financial Statements.
EX-99 3 BALANCE SHEETS
Carolina Power & Light Company BALANCE SHEETS March 31 December 31 (In thousands) 1997 1996 1996 --------------------------------------------------------------------------------------------------------- ASSETS Electric Utility Plant Electric utility plant in service $ 9,856,889 $ 9,520,522 $ 9,783,442 Accumulated depreciation (3,883,684) (3,566,838) (3,796,645) --------------------------------------------------------------------------------------------------------- Electric utility plant in service, net 5,973,205 5,953,684 5,986,797 Held for future use 14,176 13,737 12,127 Construction work in progress 177,566 173,113 196,623 Nuclear fuel, net of amortization 194,501 182,402 204,372 --------------------------------------------------------------------------------------------------------- Total Electric Utility Plant, Net 6,359,448 6,322,936 6,399,919 --------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents 24,901 5,602 10,941 Accounts receivable 312,917 338,923 384,318 Fuel 68,242 43,914 60,369 Materials and supplies 126,813 123,014 122,809 Prepayments 67,756 69,682 65,794 Other current assets 29,226 29,213 27,808 --------------------------------------------------------------------------------------------------------- Total Current Assets 629,855 610,348 672,039 --------------------------------------------------------------------------------------------------------- Deferred Debits and Other Assets Income taxes recoverable through future rates 370,444 388,009 384,336 Abandonment costs (Note 3) 59,161 53,657 65,863 Harris Plant deferred costs 77,139 101,737 83,397 Unamortized debt expense 64,581 66,639 69,956 Miscellaneous other property and investments 501,762 490,864 489,334 Other assets and deferred debits 206,245 171,782 204,357 --------------------------------------------------------------------------------------------------------- Total Deferred Debits and Other Assets 1,279,332 1,272,688 1,297,243 --------------------------------------------------------------------------------------------------------- Total Assets $ 8,268,635 $ 8,205,972 $ 8,369,201 ========================================================================================================= CAPITALIZATION AND LIABILITIES Capitalization Common stock equity $ 2,716,166 $ 2,640,027 $ 2,690,454 Preferred stock - redemption not required 143,801 143,801 143,801 Long-term debt, net 2,524,942 2,552,415 2,525,607 --------------------------------------------------------------------------------------------------------- Total Capitalization 5,384,909 5,336,243 5,359,862 --------------------------------------------------------------------------------------------------------- Current Liabilities Current portion of long-term debt 43,436 268,366 103,345 Notes payable 149,200 3,640 64,885 Accounts payable 150,097 137,997 375,216 Interest accrued 32,020 43,612 39,436 Dividends declared 73,969 71,525 73,469 Deferred fuel credit 13,953 16,086 4,339 Other current liabilities 157,903 144,304 74,668 --------------------------------------------------------------------------------------------------------- Total Current Liabilities 620,578 685,530 735,358 --------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities Accumulated deferred income taxes 1,799,860 1,728,933 1,827,693 Accumulated deferred investment tax credits 229,703 240,095 232,262 Other liabilities and deferred credits 233,585 215,171 214,026 --------------------------------------------------------------------------------------------------------- Total Deferred Credits and Other Liabilities 2,263,148 2,184,199 2,273,981 --------------------------------------------------------------------------------------------------------- Commitments and Contingencies (Note 4) Total Capitalization and Liabilities $ 8,268,635 $ 8,205,972 $ 8,369,201 ========================================================================================================= SCHEDULES OF COMMON STOCK EQUITY (In thousands) Common stock $ 1,371,548 $ 1,387,041 $ 1,366,100 Unearned ESOP common stock (170,688) (182,140) (178,514) Capital stock issuance expense (790) (790) (790) Retained earnings 1,516,096 1,435,916 1,503,658 --------------------------------------------------------------------------------------------------------- Total Common Stock Equity $ 2,716,166 $ 2,640,027 $ 2,690,454 ========================================================================================================= ......................................................................................................... See Supplemental Data and Notes to Consolidated Interim Financial Statements.
EX-99 4 STATEMENT OF CASH FLOWS
Carolina Power & Light Company STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended Twelve Months Ended March 31 March 31 1997 1996 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $ 82,262 $ 118,346 $ 355,193 $ 392,916 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 140,358 112,933 473,933 444,534 Harris Plant deferred costs 6,258 6,256 19,418 21,702 Deferred income taxes (25,819) 14,626 90,374 115,886 Investment tax credit (2,558) (2,611) (10,392) (9,402) Allowance for equity funds used during construction (61) (1,035) 963 (3,472) Deferred fuel cost (credit) 9,614 (11,409) (2,134) (34,733) Net increase in receivables, inventories and prepaid expenses (16,813) (15,575) (66,031) (50,032) Net decrease in payables and accrued expenses (23,345) (18,615) (59) (41,831) Miscellaneous 34,057 5,744 93,165 29,394 - -------------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 203,953 208,660 954,430 864,962 - -------------------------------------------------------------------------------------------------------------------------------- Investing Activities Gross property additions (92,079) (88,478) (372,909) (282,950) Nuclear fuel additions (21,616) (26,073) (82,808) (87,551) Contributions to external decommissioning trust (10,298) (10,298) (30,683) (29,809) Contributions to retiree benefit trusts (21,096) (24,700) (21,096) (24,700) Allowance for equity funds used during construction 61 1,035 (963) 3,472 Miscellaneous (1,190) (13,238) (15,998) (41,266) - -------------------------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (146,218) (161,752) (524,457) (462,804) - -------------------------------------------------------------------------------------------------------------------------------- Financing Activities Proceeds from issuance of long-term debt -- 265,557 84,443 386,539 Net increase (decrease) in short-term notes payable 86,976 3,640 74,478 (18,117) Retirement of long-term debt (61,427) (255,504) (273,733) (406,603) Purchase of Company common stock -- (1,920) (23,288) (130,181) Dividends paid on common and preferred stock (69,324) (67,568) (272,574) (268,052) - -------------------------------------------------------------------------------------------------------------------------------- Net Cash Used in Financing Activities (43,775) (55,795) (410,674) (436,414) - -------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 13,960 (8,887) 19,299 (34,256) Cash and Cash Equivalents at Beginning of the Period 10,941 14,489 5,602 39,858 - -------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of the Period $ 24,901 $ 5,602 $ 24,901 $ 5,602 ================================================================================================================================ Supplemental Disclosures of Cash Flow Information Cash paid during the period - interest $ 53,101 $ 55,202 $ 192,290 $ 203,804 income taxes $ 804 $ 655 $ 141,499 $ 176,207 ................................................................................................................................ See Supplemental Data and Notes to Interim Consolidated Financial Statements.
EX-99 5 SUPPLEMENTAL DATA
Carolina Power & Light Company SUPPLEMENTAL DATA Three Months Ended Twelve Months Ended March 31 March 31 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) Residential $ 248,383 $ 284,278 $ 956,256 $ 1,002,034 Commercial 149,639 151,578 625,941 628,831 Industrial 170,892 163,244 729,236 732,276 Government and municipal 19,438 20,059 74,771 79,616 Power Agency contract requirements 9,119 25,452 80,461 102,585 NCEMC 54,220 70,137 218,736 285,601 Other wholesale 25,321 21,905 90,879 83,912 Other utilities 25,579 33,697 96,959 98,303 Miscellaneous revenue 13,493 13,235 54,975 48,741 - ----------------------------------------------------------------------------------------------------------------------- Total Operating Revenues $ 716,084 $ 783,585 $ 2,928,214 $ 3,061,899 ======================================================================================================================= Energy Sales (millions of kWh) Residential 3,268 3,808 12,070 12,619 Commercial 2,287 2,322 9,580 9,506 Industrial 3,515 3,334 14,637 14,378 Government and municipal 325 336 1,253 1,323 Power Agency contract requirements 379 770 2,132 2,632 NCEMC 946 1,091 3,803 5,161 Other wholesale 568 480 2,101 1,935 Other utilities 1,160 1,572 4,487 4,231 - ----------------------------------------------------------------------------------------------------------------------- Total Energy Sales 12,448 13,713 50,063 51,785 ======================================================================================================================= Energy Supply (millions of kWh) Generated - coal 5,410 7,143 23,126 26,097 nuclear 5,873 4,679 21,478 18,780 hydro 318 312 888 838 combustion turbines 2 14 56 72 Purchased 1,214 1,896 6,611 7,819 - ----------------------------------------------------------------------------------------------------------------------- Total Energy Supply (Company Share) 12,817 14,044 52,159 53,606 ======================================================================================================================= Detail of Income Taxes (in thousands) Included in Operating Expenses Income tax expense (credit)- current $ 88,707 $ 66,104 $ 184,553 $ 174,216 Income tax expense (credit)- deferred (25,120) 13,602 79,537 110,090 Income tax expense (credit)- investment tax credit adjustments (2,558) (2,611) (10,392) (9,403) - ----------------------------------------------------------------------------------------------------------------------- Subtotal 61,029 77,095 253,698 274,903 - ----------------------------------------------------------------------------------------------------------------------- Harris Plant deferred costs - investment tax credit adjustments (60) (74) (272) (297) - ------------------------------------------------------------------------------------------------------------------------ Total Included in Operating Expenses 60,969 77,021 253,426 274,606 - ------------------------------------------------------------------------------------------------------------------------ Included in Other Income Income tax expense (credit) - current (2,387) (5,437) (23,357) (25,460) Income tax expense (credit)- deferred (699) 1,024 10,837 5,796 - ------------------------------------------------------------------------------------------------------------------------ Total Included in Other Income (3,086) (4,413) (12,520) (19,664) - ------------------------------------------------------------------------------------------------------------------------ Total Income Tax Expense $ 57,883 $ 72,608 $ 240,906 $ 254,942 ======================================================================================================================== FINANCIAL STATISTICS Ratio of earnings to fixed charges 3.95 3.84 Return on average common stock equity 12.91 % 14.58 % Book value per common share $ 18.91 $ 18.36 Capitalization ratios Common stock equity 50.44 % 49.47 % Preferred stock - redemption not required 2.67 2.70 Long-term debt, net 46.89 47.83 - ----------------------------------------------------------------------------------------------------------------------- Total 100.00 % 100.00 % ======================================================================================================================= ....................................................................................................................... See Notes to Consolidated Interim Financial Statements.
EX-99 6 NOTES TO FINANCIAL STATEMENTS Carolina Power & Light Company NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION _____________________ These consolidated interim financial statements are prepared in conformity with the accounting principles reflected in the financial statements included in the Company's 1996 Annual Report to Shareholders and the 1996 Annual Report on Form 10-K. Due to temperature variations between seasons of the year and the timing of outages of electric generating units, especially nuclear-fueled units, the amounts reported in the Statements of Income for periods of less than twelve months are not necessarily indicative of amounts expected for the year. The amounts are unaudited but, in the opinion of management, reflect all adjustments necessary to fairly present the Company's financial position and results of operations for the interim periods. Certain amounts for 1996 have been reclassified to conform to the 1997 presentation, with no effect on previously reported net income or common stock equity. In preparing financial statements that conform with generally accepted accounting principles, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and amounts of revenues and expenses reflected during the reporting period. Actual results could differ from those estimates. 2. NUCLEAR DECOMMISSIONING _______________________ In the Company's retail jurisdictions, provisions for nuclear decommissioning costs are approved by the North Carolina Utilities Commission (NCUC) and the South Carolina Public Service Commission (SCPSC) and are based on site- specific estimates that include the costs for removal of all radioactive and other structures at the site. In the wholesale jurisdiction, the provisions for nuclear decommissioning costs are based on amounts agreed upon in applicable rate agreements. Based on the site specific estimates discussed below, and using an assumed aftertax earnings rate of 8.5% and an assumed cost escalation rate of 4%, current levels of rate recovery for nuclear decommissioning costs are adequate to provide for decommissioning of the Company's nuclear facilities. The Company's most recent site-specific estimates of decommissioning costs were developed in 1993, using 1993 cost factors, and are based on prompt dismantlement decommissioning, which reflects the cost of removal of all radioactive and other structures currently at the site, with such removal occurring shortly after operating license expiration. These estimates, in 1993 dollars, are $257.7 million for Robinson Unit No. 2, $235.4 million for Brunswick Unit No. 1, $221.4 million for Brunswick Unit No. 2 and $284.3 million for the Harris Plant. The estimates are subject to change based on a variety of factors including, but not limited to, cost escalation, changes in technology applicable to nuclear decommissioning, and changes in federal, state or local regulations. The cost estimates exclude the portion attributable to North Carolina Eastern Municipal Power Agency, which holds an undivided ownership interest in the Brunswick and Harris nuclear generating facilities. Operating licenses for the Company's nuclear units expire in the year 2010 for Robinson Unit No. 2, 2016 for Brunswick Unit No. 1, 2014 for Brunswick Unit No. 2 and 2026 for the Harris Plant. The Financial Accounting Standards Board (the Board) has reached several tentative conclusions with respect to its project regarding accounting practices related to closure and removal of long-lived assets. The primary conclusions as they relate to nuclear decommissioning are: 1) the cost of decommissioning should be accounted for as a liability and accrued as the obligation is incurred; 2) recognition of a liability for decommissioning results in recognition of an increase to the cost of the plant; 3) the decommissioning liability should be measured based on discounted cash flows using a risk-free rate; and 4) decommissioning trust funds should not be offset against the decommissioning liability. It is uncertain what impacts the final statement may ultimately have on the Company's accounting for nuclear decommissioning and other closure and removal costs. The Board has announced that the effective date would be no earlier than 1998. 3. RETAIL RATE MATTERS ___________________ A petition was filed in July 1996 by the Carolina Industrial Group for Fair Utility Rates (CIGFUR) with the NCUC requesting that the NCUC conduct an investigation of the Company's base rates or treat its petition as a complaint against the Company. The petition alleged that the Company's return on equity (which was authorized by the NCUC in the Company's last general rate proceeding in 1988) and earnings are too high. In December 1996, the NCUC issued an order denying CIGFUR's petition and stating that it tentatively found no reasonable grounds to proceed with CIGFUR's petition as a complaint. In January 1997, CIGFUR filed its Comments and Motion for Reconsideration to which the Company responded. On February 6, 1997, the NCUC issued an order denying CIGFUR's Motion for Reconsideration. On February 25, 1997, CIGFUR filed a Notice of Appeal of the NCUC's decision with the North Carolina Court of Appeals. The Company cannot predict the outcome of this matter. Additionally, in December 1996, the Company filed a proposal with the SCPSC to accelerate amortization of certain regulatory assets, including plant abandonment costs related to the Harris Plant, over a three-year period beginning January 1, 1997. This accelerated amortization will reduce income by approximately $13 million, after tax, in each of the three years. In anticipation of approval of the proposal in 1997, the unamortized balance of plant abandonment costs related to the Harris Plant was adjusted in 1996 to reflect the present value impact of the shorter recovery period. This adjustment resulted in an increase in income of approximately $14 million, after tax, in the fourth quarter of 1996. On March 20, 1997, the SCPSC approved the Company's accelerated amortization proposal. 4. COMMITMENTS AND CONTINGENCIES _____________________________ Contingencies existing as of the date of these statements are described below. No significant changes have occurred since December 31, 1996, with respect to the commitments discussed in Note 11 of the financial statements included in the Company's 1996 Annual Report to Shareholders. A. Applicability of SFAS-71 As a regulated entity, the Company is subject to the provisions of Statement of Financial Accounting Standards No.71, "Accounting for the Effects of Certain Types of Regulation," (SFAS-71). Accordingly, the Company records certain assets and liabilities resulting from the effects of the ratemaking process, which would not be recorded under generally accepted accounting principles for non- regulated entities. The continued applicability of SFAS-71 will require further evaluation as competitive forces, deregulation and restructuring take effect in the electric utility industry. In the event the Company discontinued the application of SFAS-71, amounts recorded under SFAS-71 as regulatory assets and liabilities would be eliminated. At March 31, 1997, the Company's regulatory assets totaled $663.0 million. Additionally, the factors discussed above could result in an impairment of electric utility plant assets as determined pursuant to Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for LongLived Assets to Be Disposed Of." B. Claims and Uncertainties 1) The Company is subject to federal, state and local regulations addressing air and water quality, hazardous and solid waste management and other environmental matters. Various organic materials associated with the production of manufactured gas, generally referred to as coal tar, are regulated under various federal and state laws. There are several manufactured gas plant (MGP) sites to which the Company and certain entities that were later merged into the Company had some connection. In this regard, the Company, along with other entities alleged to be former owners and operators of MGP sites in North Carolina, is participating in a cooperative effort with the North Carolina Department of Environment, Health and Natural Resources, Division of Waste Management (DWM) to establish a uniform framework for addressing these MGP sites. The investigation and remediation of specific MGP sites will be addressed pursuant to one or more Administrative Orders on Consent between the DWM and individual potentially responsible party or parties. The Company continues to investigate the identities of parties connected to individual MGP sites, the relative relationships of the Company and other parties to those sites and the degree to which the Company will undertake shared voluntary efforts with others at individual sites. The Company has been notified by regulators of its involvement or potential involvement in several sites, other than MGP sites, that require remedial action. Although the Company cannot predict the outcome of these matters, it does not expect costs associated with these sites to be material to the results of operations of the Company. The Company carries a liability for the estimated costs associated with certain remedial activities at several MGP and other sites. This liability is not material to the financial position of the Company. Due to uncertainty regarding the extent of remedial action that will be required and questions of liability, the cost of remedial activities at certain MGP sites is not currently determinable. The Company cannot predict the outcome of these matters. 2) As required under the Nuclear Waste Policy Act of 1982, the Company entered into a contract with the U. S. Department of Energy (DOE) under which the DOE agreed to dispose of the Company's spent nuclear fuel. The Company cannot predict whether the DOE will be able to perform its contractual obligations and provide interim storage or permanent disposal repositories for spent nuclear fuel and/or high-level radioactive waste materials on a timely basis. With certain modifications, the Company's spent fuel storage facilities are sufficient to provide storage space for spent fuel generated on the Company's system through the expiration of the current operating licenses for all of the Company's nuclear generating units. Subsequent to the expiration of these licenses, dry storage may be necessary. 3) In the opinion of management, liabilities, if any, arising under other pending claims would not have a material effect on the financial position, results of operations or cash flows of the Company. 5. SUBSEQUENT EVENTS _________________ Events occurring subsequent to the date of these financial statements are described below. A. Purchase of Knowledge Builders, Inc. (KBI) On May 6, 1997, CaroCapital, Inc. (CaroCapital), a wholly owned subsidiary of the Company, entered into a merger agreement pursuant to which KBI will be merged into CaroCapital. KBI is an energy-management software and control systems company in which CaroCapital purchased a 40% equity interest in 1996. The merger agreement provides that the remaining KBI stock will be exchanged for shares of common stock of the Company according to a market value formula. The merger agreement provides for initial payments totaling approximately $22 million, payable primarily in unregistered restricted shares of the Company's common stock. The merger agreement also provides for other incentive payments based on CaroCapital's future results of operations. If earned, these additional payments will be made primarily in unregistered restricted shares of the Company's common stock. The closing of the merger is subject to certain regulatory approvals. The Company cannot predict the outcome of this matter. B. Preferred Stock Redemption On May 7, 1997, the Company announced plans to redeem on July 1, 1997, all 500,000 shares of $7.72 Serial Preferred Stock and all 350,000 shares of $7.95 Serial Preferred Stock, both at a redemption price of $101 per share. The redemptions will be funded with additional commercial paper borrowings and/or internally generated funds. EX-27 7 FINANCIAL DATA SCHEDULE
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF MARCH 31, 1997) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000017797 CAROLINA POWER & LIGHT COMPANY 1,000 3-MOS DEC-31-1997 MAR-31-1997 PER-BOOK $6,359,448 $501,762 $629,855 $571,325 $206,245 $8,268,635 $1,200,860 ($790) $1,516,096 $2,716,166 $0 $143,801 $2,524,942 $0 $0 $0 $43,436 $0 $0 $0 $2,840,290 $8,268,635 $716,084 $61,029 $532,293 $593,322 $122,762 $4,132 $126,894 $44,632 $82,262 $2,402 $79,860 $67,422 $40,710 $203,953 $0.56 $0.56
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