-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, f/GEAovXAYeXakPGEijHsqoH49AU25yUmWUHXh7gkTevwS+VxhthQct+hfmrQtku cRMMdk/h3xciDjuTc6gQdA== 0000753308-94-000004.txt : 19940323 0000753308-94-000004.hdr.sgml : 19940323 ACCESSION NUMBER: 0000753308-94-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FPL GROUP INC CENTRAL INDEX KEY: 0000753308 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 592449419 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-08841 FILM NUMBER: 94517181 BUSINESS ADDRESS: STREET 1: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 4076944647 MAIL ADDRESS: STREET 1: P O BOX 14000 CITY: JUNO BEACH STATE: FL ZIP: 33408 10-K 1 FPL GROUP, INC. FORM 10-K FOR THE YEAR ENDED 12/31/93 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission File No. 1-8841 FPL GROUP, INC. (Exact name of registrant as specified in its charter) Florida 59-2449419 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 Universe Boulevard Juno Beach, Florida 33408 (Address of principal executive office) (Zip Code) (407) 694-3509 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.01 Par Value and Preferred Share Purchase Rights Registered on New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Aggregate market value of the voting stock held by non-affiliates of the registrant as of January 31, 1994 (based on the closing market price on the Composite Tape on January 31, 1994) was $6,999,557,188 (determined by subtracting from the number of shares outstanding on that date the number of shares held by directors and officers of the registrant). Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the close of the latest practicable date. Common Stock, $.01 Par Value, outstanding at February 28, 1994: 190,065,570 Shares DOCUMENTS INCORPORATED BY REFERENCE Incorporated documents (to the extent indicated herein) Part of Form 10-K Portions of Definitive Proxy Statement for the 1994 Annual Meeting of Shareholders Part III DEFINITIONS Acronyms and defined terms used in the text include the following: Term Meaning AFUDC Allowance for funds used during construction Bay Loan Bay Loan and Investment Bank capacity clause Capacity Cost Recovery Clause charter Restated Articles of Incorporation,as amended Colonial Penn Colonial Penn Group, Inc. common stock Common Stock of FPL Group, Inc. conservation clause Energy Conservation Cost Recovery Clause DOE United States Department of Energy EMF Electric and magnetic fields Energy Act Energy Policy Act of 1992 ESI ESI Energy, Inc. EWG Exempt Wholesale Generator FDEP Florida Department of Environmental Protection FERC Federal Energy Regulatory Commission FGT Florida Gas Transmission Company FMPA Florida Municipal Power Agency FPL Florida Power & Light Company FPL Group FPL Group, Inc. FPL Group Capital FPL Group Capital Inc FPSC Florida Public Service Commission fuel clause Fuel and Purchased Power Cost Recovery Clause Holding Company Act Public Utility Holding Company Act of 1935, as amended JEA Jacksonville Electric Authority kv Kilovolt kva Kilovolt-ampere kwh Kilowatt-hour Management's Discussion Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations mortgage FPL's Mortgage and Deed of Trust dated as of January 1, 1944, as supplemented and amended mw Megawatt(s) Note Note to Consolidated Financial Statements NRC United States Nuclear Regulatory Commission oil-backout clause Oil-Backout Cost Recovery Clause PURPA Public Utility Regulatory Policies Act of 1978, as amended qualifying facilities Non-utility power production facilities meeting the requirements of a Qualifying Facility under the PURPA ROE Return on Equity SJRPP St. Johns River Power Park Southern Companies Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric & Power Company Telesat Telesat Cablevision, Inc. Turner Turner Foods Corporation PART I Item 1. Business FPL GROUP, INC. FPL Group, incorporated under the laws of Florida in 1984, is a public utility holding company (as defined in the Holding Company Act) that is engaged, through its subsidiaries, in utility and non-utility operations. FPL Group is exempt from substantially all of the provisions of the Holding Company Act on the basis that FPL Group's and FPL's businesses are predominantly intrastate in character and carried on substantially in a single state, in which both are incorporated. FPL Group, together with its subsidiaries, employs approximately 12,400 persons. Utility operations are conducted through FPL, which is engaged in the generation, transmission, distribution and sale of electric energy. Non- utility operations are conducted through FPL Group Capital and its subsidiaries and consist mainly of investments in non-utility energy projects and agricultural operations. UTILITY OPERATIONS General. FPL, a wholly-owned subsidiary of FPL Group, supplies electric service throughout most of the east and lower west coasts of Florida. This service territory contains 27,650 square miles with a population of approximately 6.5 million. During 1993, FPL served approximately 3.4 million customer accounts. Operating revenues amounted to approximately $5.2 billion, of which about 56% was derived from residential customers, 37% from commercial customers, 4% from industrial customers and 3% from other sources. FPL provided approximately 98% of FPL Group's operating revenues in each of the years 1991 through 1993. Regulation. The retail operations of FPL represent approximately 98% of operating revenues and are regulated by the FPSC, which has jurisdiction over retail rates, service territory, issuances of securities, planning, siting and construction of facilities and other matters. FPL is also subject to regulation by the FERC in various respects, including the acquisition and disposition of certain facilities, interchange and transmission services and wholesale purchases and sales of electric energy. FPL is subject to the jurisdiction of the NRC with respect to its nuclear power plants. NRC regulations govern the granting of licenses for the construction and operation of nuclear power plants and subject such power plants to continuing review and regulation. Federal, state and local environmental laws and regulations cover air and water quality, land use, power plant and transmission line siting, electric and magnetic fields from power lines and substations, noise and aesthetics, solid waste and other environmental matters. Compliance with these laws and regulations increases the cost of electric service by requiring, among other things, changes in the design and operation of existing facilities and changes or delays in the location, design, construction and operation of new facilities. FPL estimates that capital expenditures for improvements needed to comply with environmental laws and regulations will be approximately $10 million to $30 million annually for the years 1994 through 1998. These amounts are included in FPL's projected capital expenditures set forth in Item 1. Capital Expenditures. FPL holds franchises with varying expiration dates to provide electric service in various municipalities and seven counties in Florida. FPL considers its franchises to be adequate for the conduct of its business. Retail Ratemaking. The underlying concept of utility ratemaking is to set rates at a level that allows the utility to collect total revenues (revenue requirements) equal to its cost of providing service, including a reasonable return on invested capital. To accomplish this, the FPSC uses various ratemaking mechanisms. The basic costs of providing electric service, other than fuel and certain other costs, are recovered through base rates, which are designed to recover the costs of constructing, operating and maintaining the utility system. These costs include operations and maintenance expenses, depreciation and taxes, as well as a rate of return on FPL's investment in assets used and useful in providing electric service (rate base). The rate of return on rate base approximates FPL's weighted cost of capital, which includes its costs for debt and preferred stock and an allowed ROE. Base rates are determined in rate proceedings which occur at irregular intervals at the initiative of FPL, the FPSC or a substantially affected party. Fuel costs are recovered through levelized monthly charges established pursuant to the fuel clause. These charges, which are calculated semi- annually, are based on estimated costs of fuel and estimated customer usage for the ensuing six-month period, plus or minus a true-up adjustment to reflect the variance of actual costs and usage from the estimates used in setting the fuel adjustment charges for prior periods. Capacity payments to other utilities and generators for purchased power are recovered primarily through the capacity clause. Costs associated with implementing energy conservation programs are recovered through rates established pursuant to the conservation clause. Certain other non-fuel costs and the accelerated recovery of the costs of certain projects that displace oil-fired generation are recovered through the oil-backout clause. Beginning in April 1994, costs of complying with new federal, state and local environmental regulations will be recovered through the environmental compliance cost recovery clause. In the past such costs would have been recoverable through base rates. The FPSC has the power to disallow recovery of costs which it considers excessive or imprudently incurred. Such costs may include operations and maintenance expenses, the cost of replacing power lost when fossil and nuclear units are unavailable and costs associated with the construction or acquisition of new facilities. Also, the FPSC does not provide any assurance that the allowed ROE will be achieved. System Capability and Load. FPL's resources for serving load as of January 1, 1994 consist of 16,708 mw of firm electric power generated by FPL-owned facilities (see Item 2. Properties) and obtained through purchased power contracts (see table below). On August 4, 1993, FPL reached an all-time energy peak demand of approximately 15,266 mw. At that time, FPL had a total installed generating capability of about 14,643 mw, 2,054 mw of firm purchased power and the capability to reduce peak demand by 520 mw through the implementation of load management, resulting in a reserve margin of approximately 13%. Compound annual growth rates for the five years ending 1998 are projected to be 2.7% for kwh sales and 2.6% for customers. To meet this growth, FPL plans to add 1,090 mw of new plant capacity to its system by the summer of 1995 as shown below. No new plant additions are expected for the years 1996 through 1998.
Capacity Additions 1994 1995 Total (mw) Scherer Unit No. 4 (Acquisition) . . . . . . . . . . . . . . . . 140 90 230 Martin Unit Nos. 3 and 4 (New Construction). . . . . . . . . . . 860 - 860 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 90 1,090
In addition to the capacity additions listed above, FPL plans by 1998 to increase purchased power from other utilities and qualifying facilities by 325 mw (see table below). The total amount of purchased power available under existing long-term contracts with other utilities and qualifying facilities through 1998 is presented in the table below. See Note 12 - Contracts.
Southern Qualifying Period Companies JEA Facilities Total (mw) January 1994 . . . . . . . . . . . . . . . . . . . . . . . . 1,406 374 285 2,065 February 1994 - May 1994 . . . . . . . . . . . . . . . . . . 1,406 374 535 2,315 June 1994 - December 1994. . . . . . . . . . . . . . . . . . 1,007 374 535 1,916 January 1995 - May 1995. . . . . . . . . . . . . . . . . . . 1,007 374 543 1,924 June 1995 - December 1995. . . . . . . . . . . . . . . . . . 913 374 543 1,830 January 1996 - March 1996. . . . . . . . . . . . . . . . . . 913 374 913 2,200 April 1996 - May 1996. . . . . . . . . . . . . . . . . . . . 913 374 955 2,242 June 1996 - December 1996. . . . . . . . . . . . . . . . . . 913 374 1,010 2,297 January 1997 - December 1998 . . . . . . . . . . . . . . . . 913 374 1,031 2,318
Capital Expenditures. FPL's capital expenditures, including AFUDC, totaled approximately $1.1 billion in 1993, $1.3 billion in 1992 and $1.2 billion in 1991. Capital expenditures for the 1994-98 period are estimated as follows (see Management's Discussion):
1994 1995 1996 1997 1998 Total (Millions of Dollars) Construction: Generation . . . . . . . $ 230 $ 190 $ 160 $ 240 $ 130 $ 950 Transmission . . . . . . 120 150 180 130 90 670 Distribution . . . . . . 280 270 280 290 290 1,410 General and other. . . . 120 110 100 90 80 500 Total construction . . 750 720 720 750 590 3,530 Scherer acquisition payments . 129 82 - - - 211 Total. . . . . . . . . $ 879 $ 802 $ 720 $ 750 $ 590 $3,741
All of these estimates are subject to continuing review and adjustment and actual capital expenditures may vary from estimates. Nuclear Operations. FPL owns and operates four nuclear units, two at St. Lucie and two at Turkey Point. The operating licenses for St. Lucie Unit Nos. 1 and 2 expire in 2016 and 2023, respectively. The operating licenses for both Turkey Point Units expire in 2007. The nuclear units are periodically removed from service to accommodate normal refueling and maintenance outages, repairs and certain other modifications. Indications of degradation have been found in the pressurized water circulation tubes of the St. Lucie Units Nos. 1 and 2 steam generators. Despite implementation of remedial measures, degradation of the Unit No. 1 steam generators has continued and FPL has determined that they will need to be replaced. FPL has ordered the replacement steam generators for Unit No. 1, which are scheduled to be installed and in service by the end of 1998, the cost of which is included in FPL's projected capital expenditures set forth above. The degradation in the Unit No. 2 steam generators appears to be primarily a mechanical-wear problem and should not affect their useful life. Fuel. FPL's generating plants are fueled by residual and distillate oil, natural gas, coal and nuclear fuel. The diverse fuel options, along with purchased power, enable FPL to shift between sources of generation to achieve the most economical fuel mix. FPL's oil requirements are obtained under short-term contracts and in the spot market. FPL obtains most of its natural gas requirements under a take-or-pay transportation contract with FGT, the sole interstate pipeline operator in Florida, and a related take-or-pay natural gas supply contract with an affiliate of FGT. These contracts will expire in 2005. In 1992, FPL entered into an additional take-or-pay transportation contract with FGT and a related take-or-pay natural gas supply contract with another affiliate of FGT. The new contracts will begin on the in-service date of FGT's pipeline expansion, which is scheduled for late 1994, and expire in 2014 and 2009, respectively. These contracts will provide an additional firm supply of natural gas under competitive pricing terms to meet FPL's future gas requirements. See Note 12 - Contracts. FPL has, through its joint ownership interest in SJRPP Units Nos. 1 and 2 and Scherer Unit No. 4, long-term coal supply contracts for those units. The remaining coal requirements will be obtained under additional contracts or in the open market. FPL leases nuclear fuel for all four of its nuclear units. See Note 7. Under the Nuclear Waste Policy Act of 1982, the DOE is required to construct permanent storage facilities and will take title to and provide transportation and storage for spent nuclear fuel for a specified fee. Although the DOE estimates that its storage facilities will be completed by the year 2010, there is considerable doubt within the utility industry that this schedule will be met. Currently, FPL is storing spent fuel on site and plans to provide adequate storage capacity for all of its spent nuclear fuel up to and beyond the year 2010, pending its removal by the DOE. Competition. FPL faces increasing competition in the wholesale and industrial energy markets. Recent changes in governmental regulation are encouraging the growth of non-regulated energy suppliers, such as EWGs, and an increased interest in self-generation, which has provided customers with alternative sources to meet their electric needs. Competition exists particularly with respect to self-generation by large industrial, commercial and governmental energy users. See Item 1. Business - General. Regulatory law and policy limit FPL's flexibility in pricing its services to these customers. To date, loss of customers to such alternatives has not materially reduced FPL's sales, revenues or net income. The FERC has exercised its enhanced power under the Energy Act over wholesale transmission to encourage competition. In 1993, FPL filed with the FERC a comprehensive revision and expansion of its service offerings in the wholesale market. FPL has proposed changes to its wholesale sales tariffs for service to municipal and cooperatively-owned electric utilities, its power sharing (interchange) agreements with other utilities and expanded its transmission offerings for new services by switching from individually negotiated contracts to three tariffs of general applicability. These revised offerings are intended to meet wholesale customer needs in the new competitive marketplace, while protecting the interests of FPL's customers and shareholders by eliminating the potential for subsidies to competitors. The FERC accepted FPL's proposal for filing and scheduled an August 1994 hearing on issues raised. FPL began collecting the proposed rates in late February 1994 subject to refund based on the outcome of the hearing. A final decision by the FERC in this case is not expected until sometime in 1995. Also in 1993, the FMPA requested the FERC, under the FERC's new authority under the Energy Act, to order FPL to provide the FMPA members with network transmission service. FPL currently provides point-to-point transmission service to the FMPA. Network transmission service would permit the FMPA to vary the receipt and delivery points for power without the prior agreement of FPL. In late 1993, the FERC ordered the FMPA to provide FPL with certain updated information and the parties to negotiate for 60 days towards a network service agreement. Because no agreement was reached, FPL and the FMPA, filed their respective positions and proposals for the FERC's consideration. An initial FERC decision on this matter is expected in late 1994. FPL is presently a defendant in two antitrust suits. In each suit, the complaint includes an alleged inability to utilize FPL's transmission facilities to wheel power to facilities in order to displace the existing retail electric service from FPL. See Item 3. Legal Proceedings. Electric and Magnetic Fields. In recent years, increasing public, scientific and regulatory attention has been focused on possible adverse health effects of EMF. These fields are created whenever electricity flows through a power line or an appliance. Several epidemiological (i.e., statistical) studies have suggested a linkage between EMF and certain types of cancer, primarily childhood leukemia; other studies have been inconclusive or have shown no such linkage. Neither these epidemiological studies nor clinical studies have produced any conclusive evidence that EMF does or does not cause adverse health effects. The FDEP has promulgated regulations setting standards for EMF levels within and at the edge of the rights of way for transmission lines, and FPL is in compliance with these regulations. The FDEP reviewed its EMF standards in 1992 and confirmed the field limits previously established. Future changes in the standards could require additional capital expenditures by FPL for such things as increasing the right of way corridors or relocating or reconfiguring transmission facilities. At present it is not known whether any such expenditures will be required. In addition, litigation seeking damages for diminution of property value or personal injury is likely. FPL is presently a defendant in one suit alleging personal injury and wrongful death. Employees. FPL had approximately 12,000 employees at December 31, 1993. Approximately 37% of the employees are represented by the International Brotherhood of Electrical Workers whose collective bargaining agreement with FPL expires October 31, 1994. NON-UTILITY OPERATIONS FPL Group Capital, a wholly owned subsidiary of FPL Group, holds the capital stock of the non-utility subsidiaries of FPL Group and provides most of their funding. Non-utility business activities consist primarily of investments in non-utility energy projects and agricultural operations. FPL Group Capital had approximately 400 employees at December 31, 1993. FPL Group is continuing its efforts to exit substantially all of its non-energy and non-agricultural business activities, including cable television and real estate. In 1991, the sale of Colonial Penn, formerly FPL Group Capital's largest subsidiary, was completed. Bay Loan, a former subsidiary of Colonial Penn, is winding down its operations and is expected to be dissolved with no anticipated adverse effect on FPL Group's future operating results. Contracts for the sale of all of the directly-owned and operated cable television systems were recently terminated. All of the developed real estate properties are under contract for sale. FPL Group cannot estimate the likelihood of consummating this sale; however, if completed, this sale and the currently estimated result of disposing of the balance of FPL Group's cable television and real estate assets are not expected to have a significant adverse effect on FPL Group's net income. See Management's Discussion and Notes 5 and 6 for additional information regarding businesses to be discontinued and discontinued operations. Non-Utility Energy. ESI provides equity capital, loans, transaction management and project structuring for non-utility energy projects. ESI develops and invests in non-utility energy projects and performs various management roles associated with certain projects. To date, ESI has invested in one project that qualifies as an EWG. Substantially all other projects in which it invests are qualifying facilities under PURPA. Energy production from the non-utility energy investments is generally higher during the third quarter due to increased energy demand and resource availability. ESI participates in 27 non-utility energy projects primary through non- controlling ownership interests in joint ventures or leveraged lease investments totalling 1,911 mw. Based on ESI's invested capital at December 31, 1993, the projects are concentrated in California (48%), Virginia (32%) and Pennsylvania (11%). The technologies and fuels used by the projects to produce electricity include wind, geothermal, natural gas, solar, biomass (wood), waste-to-energy and waste coal. Agriculture. FPL Group Capital's agricultural subsidiary, Turner, owns and operates citrus groves in Florida. Turner's primary product is juice oranges, which are sold to processors for the premium not-from-concentrate, as well as the international frozen-concentrate, orange juice markets. Other products include grapefruit and specialty fruits. Turner's operations are seasonal, with the majority of the citrus harvest taking place between January and April. As of December 31, 1993, Turner owned or leased approximately 29,000 acres of citrus properties, which included 18,000 planted acres, 4,000 acres of undeveloped land and 7,000 acres of infrastructure, wet lands and reservoirs. Cable Television. Telesat provides franchised and/or private cable television service in major population centers of Florida, through directly-owned and operated cable television systems. As of December 31, 1993, Telesat directly served approximately 41,000 subscribers. Also, Telesat has ownership positions in four joint ventures throughout Florida, having exchanged subscribers for ownership positions in those entities in prior years. In 1993, Telesat sold directly-owned systems totalling approximately 14,000 subscribers, or 27% of the year's beginning subscriber count. In addition, Telesat sold or otherwise liquidated its interest in three joint ventures. FPL Group is actively pursuing the sale of the remainder of its directly-owned and operated cable television systems and is liquidating its interests in joint ventures as opportunities arise. Other. Alandco, Inc. owns commercial, industrial and mixed-use real estate in major population centers of Florida. FPL Group Capital is continuing its efforts to sell or otherwise dispose of its real estate operations. During 1993, Alandco sold a portion of its rental properties. Its remaining developed real estate properties are under contract for sale. Qualtec Quality Services, Inc. provides consulting and training in total quality management and licensing of its products to companies worldwide. ESI also holds a diversified portfolio of leveraged leases. At December 31, 1993, the remaining lease terms range from 14 to 22 years. EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position J. L. Broadhead 58 Chairman of the Board, President and Chief Executive Officer D. P. Coyle 55 General Counsel and Secretary K. M. Davis 47 Controller and Chief Accounting Officer P. J. Evanson 52 Vice President, Finance and Chief Financial Officer S. E. Frank 52 President and Chief Operating Officer of FPL J. H. Goldberg 62 President, Nuclear Division of FPL L. J. Kelleher 46 Vice President, Human Resources J. T. Petillo 49 Senior Vice President, External Affairs of FPL D. L. Samil 38 Treasurer C. O. Woody 55 Senior Vice President, Power Generation of FPL M. W. Yackira 42 Senior Vice President, Market and Regulatory Services of FPL
The present term of office of the above executive officers extends to the first meeting of the Board of Directors after the next annual election of Directors, which is scheduled to be held on May 9, 1994. Except as noted below, the individuals named in the table above have been executive officers of FPL Group or its subsidiaries for more than five years. Mr. Coyle was formerly a partner in the law firm of Steel Hector & Davis. Mr. Evanson was formerly president and chief operating officer of the Lynch Corporation, a diversified holding company. Mr. Frank was formerly executive vice president and chief financial officer of TRW Inc., a Cleveland-based diversified, high-technology, multinational company. Mr. Goldberg was formerly group vice president - nuclear of Houston Lighting & Power Company, an electric utility. Mr. Yackira was formerly chief planning officer of FPL, vice president of FPL Group, vice president of GTE Florida, a telecommunications company and assistant controller of GTE Service Corp., a telecommunications company. Item 2. Properties FPL Group and its subsidiaries maintain properties which are adequate for their operations. The operating properties of FPL constitute approximately 98% of FPL Group's gross investment in property at December 31, 1993. Generating Facilities. As of December 31, 1993, FPL had the following generating facilities:
Net Warm No. of Weather Facility Location Units Fuel Capability (mw) STEAM TURBINES (continuous capability) Cape Canaveral Cocoa, FL 2 Oil/Gas 734 Cutler Miami, FL 2 Gas 207 Fort Myers Fort Myers, FL 2 Oil 504 Manatee Parrish, FL 2 Oil 1,566 Martin Indiantown, FL 2 Oil/Gas 1,566 Port Everglades Port Everglades, FL 4 Oil/Gas 1,142 Riviera Riviera Beach, FL 2 Oil/Gas 544 St. Johns River Power Park Jacksonville, FL 2 Coal 250(1) St. Lucie Hutchinson Island, FL 2 Nuclear 1,553(2) Sanford Lake Monroe, FL 3 Oil/Gas 861 Scherer Monroe County, GA 1 Coal 416(3) Turkey Point Florida City, FL 2 Oil/Gas 754 2 Nuclear 1,332 COMBINED CYCLE (continuous capability) Lauderdale Dania, FL 2 Gas/Oil 782 Putnam Palatka, FL 2 Gas/Oil 478 COMBUSTION TURBINES (peak capability) Fort Myers Fort Myers, FL 12 Oil 626 Lauderdale Dania, FL 24 Oil/Gas 876 Port Everglades Port Everglades, FL 12 Oil/Gas 438 DIESEL UNITS (peak capability) Turkey Point Florida City, FL 5 Oil 14 Total 14,643 (1) Represents FPL's 20% ownership of SJRPP Units Nos. 1 and 2, which are jointly owned with the JEA. (2) Excludes Orlando Utilities Commission's and FMPA's combined share of approximately 15% of St. Lucie Unit No. 2. (3) Represents FPL's 49% ownership of Scherer Unit No. 4, which is jointly owned with the JEA and Georgia Power Company. FPL has contracted to purchase an additional 27% undivided ownership interest in Scherer Unit No. 4 in stages through 1995, including 17% (140 mw) in June 1994.
Transmission and Distribution. FPL owns and operates 451 substations with a total capacity of 100,054,470 kva. Electric transmission and distribution lines owned and in service as of December 31, 1993 are as follows:
Trench Overhead Lines and Submarine Nominal Voltage Pole Miles Cable Miles 500 kv . . . . . . . . . . . . . . . . . . . . 985(1) - 230 kv . . . . . . . . . . . . . . . . . . . . 2,176 31 138 kv . . . . . . . . . . . . . . . . . . . . 1,340 45 115 kv . . . . . . . . . . . . . . . . . . . . 631 - 69 kv . . . . . . . . . . . . . . . . . . . . 167 15 Less than 69 kv. . . . . . . . . . . . . . . . 38,499 17,351 Total. . . . . . . . . . . . . . . . . . . . . 43,798 17,442
(1) Includes approximately 80 miles owned jointly with the JEA. Character of Ownership. Substantially all of FPL's properties are subject to the lien of its mortgage, which secures debt securities issued by FPL. The principal properties of FPL are held by it in fee and are free from other encumbrances, subject to minor exceptions, none of which is of such a nature as to substantially impair the usefulness to FPL of such properties. Some of the electric lines are located on land not owned in fee but are covered by necessary consents of governmental authorities or rights obtained from owners of private property. Item 3. Legal Proceedings In October 1988, Union Carbide Corporation, the corporate predecessor of Praxair, Inc. (Praxair), filed suit against FPL and Florida Power Corporation (Florida Power) in the United States District Court for the Middle District of Florida. Praxair requested that Florida Power sell power to its facility located within FPL's service territory, and that FPL transport the power to the facility. Florida Power and FPL denied the request as being inconsistent with Florida law and public policy. The FPSC has issued a declaratory statement that FPL's denial of Praxair's request was proper and ordered FPL not to wheel power under such circumstances. The suit alleges that through a territorial agreement, FPL and Florida Power have conspired to eliminate competition for the sale of electric power to retail customers, thereby unreasonably restraining trade and commerce in violation of federal antitrust laws as contained in Section 1 of the Sherman Antitrust Act (Sherman Act). The suit seeks an award of three times Praxair's alleged damages in an unspecified amount based on alleged higher prices paid for electricity and product sales lost by Praxair. Cross motions for summary judgment were denied. Both parties are appealing the denials. In November 1988, TEC Cogeneration, Inc., its affiliate Thermo Electron Corporation, RRD Corp. and its affiliate Rolls Royce Inc. filed suit in the United States District Court for the Southern District of Florida against FPL Group and its subsidiaries, FPL and ESI, on behalf of South Florida Cogeneration Associates (SFCA), a joint venture which since 1986 has operated a cogeneration facility for Metropolitan Dade County within FPL's service territory in Miami, Florida. The suit alleges that the defendants have engaged in anti-competitive conduct intended to prevent and defeat competition from cogenerators within FPL's service territory and from SFCA's Metropolitan Dade County facility in particular. It alleges that the defendants' actions constitute monopolization and attempts to monopolize in violation of Section 2 of the Sherman Act; conspiracy in restraint of trade in violation of Section 1 of the Sherman Act; unlawful discrimination in prices, services or facilities in violation of Section 2 of the Clayton Act; and intentional interference with SFCA's contractual relationship with Metropolitan Dade County in violation of Florida law. The suit seeks damages in excess of $100 million, to be trebled under the Sherman and Clayton Acts, as well as compensatory and punitive damages under Florida law, and injunctive relief. A motion for summary judgment by FPL Group, FPL and ESI has been denied. In November 1989, Johnson Enterprises of Jacksonville, Inc. (Johnson Enterprises) filed suit in the United States District Court for the Middle District of Florida against FPL Group, FPL Group Capital and Telesat, a subsidiary of FPL Group Capital. The suit, which arises out of a cable television facilities installation agreement between Johnson Enterprises and Telesat, alleges breach of contract, fraud and violations of racketeering statutes. The suit seeks compensatory damages in excess of $24 million, treble damages under racketeering activity statutes, punitive damages and attorneys' fees, as well as the revocation of Telesat's corporate charter and cable television franchises. FPL Group believes that it and its subsidiaries have meritorious defenses to all of the litigation described above and is vigorously defending these suits. Accordingly, the liabilities, if any, arising from this litigation are not anticipated to have a material adverse effect on FPL Group's financial statements. Item 4. Submission of Matters to a Vote of Security Holders None PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Common Stock Data. FPL Group's common stock is traded on the New York Stock Exchange. The high and low sales prices for the common stock of FPL Group as reported in the consolidated transaction reporting system of the New York Stock Exchange for each quarter during the past two years are as follows:
Quarter 1993 1992 High Low High Low First. . . . . . . . . . . . . . . . . . . $ 39 5/8 $ 36 1/8 $ 37 $ 32 7/8 Second . . . . . . . . . . . . . . . . . . $ 38 5/8 $ 36 1/2 $ 36 $ 32 Third. . . . . . . . . . . . . . . . . . . $ 41 $ 37 5/8 $ 38 3/8 $ 34 7/8 Fourth . . . . . . . . . . . . . . . . . . $ 40 3/8 $ 35 1/2 $ 37 3/8 $ 34 1/2
Approximate Number of Stockholders. As of the close of business on February 28, 1994, there were 85,688 holders of record of FPL Group's common stock. Dividends. Quarterly dividends have been paid on common stock of FPL Group during the past two years in the following amounts:
Quarter 1993 1992 First. . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.61 $0.60 Second . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.62 $0.61 Third. . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.62 $0.61 Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.62 $0.61
The amount and timing of dividends payable on common stock are within the sole discretion of FPL Group's Board of Directors. The increases in the annual dividend rates shown in the table above should not be viewed as indicating a trend for the future. As a practical matter, the ability of FPL Group to pay dividends on its common stock is dependent upon dividends paid to it by its subsidiaries, primarily FPL. Given FPL's current financial condition, there are no restrictions in effect that currently limit FPL's ability to pay dividends to FPL Group. See Management's Discussion - Financial Covenants. Item 6. Selected Financial Data Certain amounts included in prior years' selected financial data were reclassified to conform to current year's presentation.
Years Ended December 31, 1993 1992 1991 1990 1989 (Thousands of Dollars, except per share amounts) SELECTED FINANCIAL DATA: Total operating revenues $ 5,316,294 $ 5,193,327 $ 5,249,436 $ 5,086,345 $ 5,032,544 Income from continuing operations $ 428,749(1) $ 466,949 $ 376,148(1) $ 298,175(2) $ 393,922 Net income (loss) $ 428,749(1) $ 466,949 $ 240,578(1)(3) $ (391,005)(2)(3) $ 410,416 Earnings (loss) per share of common stock: Continuing operations $ 2.30(1) $ 2.65 $ 2.31(1) $ 2.18(2) $ 2.99 Net income (loss) $ 2.30(1) $ 2.65 $ 1.48(1)(3) $ (2.86)(2)(3) $ 3.12 Dividends paid per share of common stock $ 2.47 $ 2.43 $ 2.39 $ 2.34 $ 2.26 Total assets $13,078,012 $12,306,305 $11,281,785 $10,802,008 $10,526,529 Long-term debt, excluding current maturities $ 3,748,983 $ 3,960,096 $ 3,668,139 $ 3,852,662 $ 3,449,443 Obligations under capital leases, excluding current maturities $ 271,498 $ 324,198 $ 279,657 $ 74,887 $ 84,609 Preferred Stock of FPL with sinking fund requirements, excluding current maturities $ 97,000 $ 130,150 $ 150,150 $ 165,950 $ 164,250 SELECTED OPERATING STATISTICS OF FPL: Energy sales (millions of kwh) 72,455 69,290 68,712 66,763 66,018 Energy sales: Residential 50.2% 49.3% 50.4% 50.2% 48.9% Commercial 39.3 39.0 39.6 39.7 38.9 Industrial 5.4 5.9 5.9 6.1 6.4 Interchange power sales 2.6 2.4 1.6 1.6 2.1 Other (4) 2.5 3.4 2.5 2.4 3.7 Total 100.0% 100.0% 100.0% 100.0% 100.0% Approximate 60-minute net peak served (mw): Summer season 15,266 14,661 14,123 13,754 13,425 Winter season(5) 12,964 13,112 11,868 13,988 12,876 Average number of customer accounts: Residential 2,973,677 2,911,812 2,863,203 2,801,210 2,715,993 Commercial 358,377 350,271 343,837 337,134 327,279 Industrial 14,853 14,791 15,350 16,659 17,643 Other 3,261 4,376 4,079 3,820 3,531 Total 3,350,168 3,281,250 3,226,469 3,158,823 3,064,446 Average price per kwh sold (cents) (6) 7.10 7.25 7.39 7.37 7.39
(1) Reduced by after-tax effect of cost reduction program or restructuring charge. See Note 4. (2) Reduced by charges related to the write-down of businesses to be discontinued. See Note 5. (3) Reduced by charges related to the disposition of Colonial Penn. See Note 6. (4) Includes unbilled sales. (5) The winter season generally represents November and December of the prior year and January through March of the current year. (6) Includes unbilled and deferred cost recovery clause revenues. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations For the three periods presented, net income benefitted from increased energy sales, primarily from customer growth, and the effects of cost control measures. Charges associated with a cost reduction program in 1993 and a corporate restructuring in 1991 reduced net income in those years. In addition, 1992 net income was adversely affected by Hurricane Andrew. In the following discussion, all comparisons are with the corresponding items in the prior year. Operating Income - Approximately 98% of FPL Group's operating revenue is derived from the electric utility operations of FPL. FPL's retail operations are regulated by the FPSC. Energy sales to retail customers, which represent over 96% of total energy sales, increased 4.0%, 0.1% and 3.3% in 1993, 1992 and 1991, respectively. Retail customer growth for those years was 2.1%, 1.7% and 2.1%, respectively. Revenues from base rates, which represented 61%, 57% and 56% of total operating revenues for 1993, 1992 and 1991, respectively, increased for the three years presented due to higher energy sales. Revenues derived from cost recovery clauses (including fuel) and franchise fees comprise substantially all of the remaining portion of operating revenues. These revenues represent a pass-through of costs and do not significantly affect net income. With increasing competition in the utility industry, FPL is continuing its efforts to reduce its operating and capital costs and avoid filing for rate increases, the traditional response to increased rate base and cost pressures. In connection with these efforts, a major cost reduction program was implemented during 1993, resulting in a $138 million pretax charge. The charge consisted primarily of severance pay and employee retirement benefits related to a workforce reduction of approximately 1,700 positions. Approximately 45% of the charge relates to retirement benefits. Substantially all of the balance represents severance costs, of which about $60 million remains to be paid in 1994. In addition, substantial reductions were reflected in FPL's 1994-98 capital expenditure forecast, including a $210 million reduction from the previous capital expenditure forecast for 1994. The majority of the reductions in the 1994-97 period reflect a decrease in transmission and distribution expenditures through more efficient use of existing plant and more cost effective designs for new facilities. In 1991, FPL implemented a corporate restructuring that eliminated approximately 1,400 FPL positions and about 900 contractor positions. See Note 4. Other operations and maintenance expenses reflect cost savings from the 1991 restructuring, partially offset by the effects of an increasing customer base, changes in prices and operating activities, as well as the implementation of two new accounting standards relating to postretirement and postemployment benefits. See Note 3. As a result of FPL's recent cost reduction measures, other operations and maintenance expense is expected to decline in 1994, despite projected sales growth, additional generating units in service and two additional nuclear refueling outages. Higher utility plant balances, reflecting facilities added to meet customer growth, resulted in increased depreciation expense in each of the last three years. FPL filed new depreciation studies with the FPSC in December 1993. Changes in depreciation rates, when adopted, will be retroactive to January 1994 and, together with increases in utility plant, will increase depreciation expense in 1994. In addition, FPL is scheduled to file updated nuclear decommissioning studies with the FPSC in December 1994. Changes, if any, in the accrual for nuclear decommissioning costs will be effective January 1995. See Note 1. Non-Operating Income and Deductions - Allowance for funds used during construction (AFUDC) increased in 1993 and 1992 due to higher construction activity in the generation area. In future periods AFUDC is expected to decrease because the repowered Lauderdale units were placed in service in the second quarter of 1993, the Martin units are scheduled to be in service by June 1994 and no new generating capacity is under construction. Despite the obligation to fund growth in electric plant, interest and preferred dividends were relatively flat over the three-year period due to refunding approximately $3.3 billion of debt and preferred stock with lower rate instruments. The income contribution from other-net increased in 1993 mainly due to improved equity in earnings of partnerships and joint ventures associated with ESI Energy, Inc. (ESI) and its non-utility energy projects. This increase was largely offset by premiums paid to redeem high cost debt of FPL Group Capital Inc (FPL Group Capital). Premiums paid on the redemption of FPL debt are amortized over the remaining life of the respective debt securities, consistent with the ratemaking treatment. See Note 1. Effective January 1, 1993, the corporate federal income tax rate increased from 34% to 35%. The rate change increased income tax expense by approximately $11 million, including $4 million resulting from the adjustment of the deferred income tax balances of the non-utility subsidiaries. Pending Accounting Changes - In November 1993, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 93-6, "Employers' Accounting for Employee Stock Ownership Plans." If adopted, SOP 93-6 would significantly change the manner in which FPL Group recognizes compensation expense associated with the matching contributions to its thrift plans. Based on preliminary estimates, adoption of the statement would reduce net income by approximately $20 million but would increase earnings per share by $0.04 in 1994, since shares held by the trust for the thrift plans that have not been allocated to employees would not be considered outstanding for purposes of computing earnings per share. FPL Group is not required to adopt the accounting guidance in this pronouncement and is evaluating whether to adopt it. Liquidity and Capital Resources Capital Requirements and Resources - FPL Group's primary capital requirements consist of expenditures under FPL's construction program. FPL's capital expenditures for the period 1994-98, including AFUDC, are expected to be $3.7 billion, including $879 million in 1994. Internally generated funds are expected to fund an increasing percentage of capital expenditures. The balance will be provided primarily through the issuance of FPL long-term debt, preferred stock and commercial paper. FPL Group Capital and ESI have committed to invest approximately $3.2 million in, and lend approximately $4.2 million to, partnerships and joint ventures entered into through ESI, all of which are expected to be funded in 1994. Additionally, FPL Group Capital and its subsidiaries, primarily ESI, have guaranteed up to approximately $89.2 million of lease obligations, debt service payments and other payments subject to certain contingencies. Debt maturities and minimum sinking fund requirements will require cash outflows of approximately $809 million through 1998, including $280 million in 1994. See Note 10. Bank lines of credit currently available to FPL Group and its subsidiaries aggregate $950 million. Financial Covenants - FPL Group's charter does not limit the dividends that may be paid on its common stock; however, FPL's charter and mortgage contain provisions which, under certain conditions, restrict the payment of dividends and other distributions to FPL Group. Given FPL's current financial condition and level of earnings, these restrictions do not currently limit FPL's ability to pay dividends to FPL Group. FPL's charter limits the amount of unsecured debt and FPL's mortgage limits the amount of secured debt FPL can issue. At December 31, 1993, the charter and mortgage provisions would allow issuance of approximately $1.3 billion of additional unsecured debt and $5.5 billion of additional first mortgage bonds, respectively. The amount of additional first mortgage bonds that are permitted to be issued will increase as the amount of unfunded property additions increases. FPL's charter also prohibits the issuance of preferred stock unless the preferred stock coverage ratio, as prescribed, is at least 1.5; for the 12 months ended December 31, 1993 it was 2.24. FPL Group Capital, under a financial covenant in connection with a bank loan, is required to maintain a minimum level of consolidated net worth. At December 31, 1993, the required level was $100 million and actual consolidated net worth of FPL Group Capital was $333 million. Item 8. Financial Statements and Supplementary Data INDEPENDENT AUDITORS' REPORT FPL GROUP, INC.: We have audited the consolidated financial statements of FPL Group, Inc. and its subsidiaries, listed in the accompanying index as Item 14(a)1 of this Annual Report (Form 10-K) to the Securities and Exchange Commission for the year ended December 31, 1993. Our audits also comprehended the financial statement schedules of FPL Group, Inc. and its subsidiaries, listed in the accompanying index as Item 14(a)2. These financial statements and financial statement schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of FPL Group, Inc. and its subsidiaries at December 31, 1993 and 1992 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information shown therein. As discussed in Notes 2 and 3 to the consolidated financial statements, FPL Group, Inc. and its subsidiaries changed their method of accounting for income taxes and postretirement benefits other than pensions effective January 1, 1993. DELOITTE & TOUCHE Certified Public Accountants Miami, Florida February 11, 1994 FPL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)
Years Ended December 31, 1993 1992 1991 OPERATING REVENUES: Utility $ 5,224,299 $ 5,100,463 $ 5,158,766 Non-utility 91,995 92,864 90,670 Total operating revenues 5,316,294 5,193,327 5,249,436 OPERATING EXPENSES: Utility operations: Fuel, purchased power and interchange 1,758,298 1,829,908 1,932,637 Other operations and maintenance of utility plant 1,251,284 1,203,474 1,276,244 Cost reduction program and restructuring charges 138,000 - 90,008 Non-utility operations 70,256 74,195 69,469 Depreciation and amortization 598,389 554,237 518,068 Taxes other than income taxes 526,109 497,739 485,962 Total operating expenses 4,342,336 4,159,553 4,372,388 OPERATING INCOME 973,958 1,033,774 877,048 INTEREST EXPENSE AND OTHER (INCOME) DEDUCTIONS: Interest and preferred stock dividend requirements 409,760 410,152 411,079 Allowance for funds used during construction (66,238) (57,782) (34,044) Other - net (48,812) (46,978) (47,456) Interest expense and other - net 294,710 305,392 329,579 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 679,248 728,382 547,469 INCOME TAXES: Current 238,557 147,961 186,008 Deferred 11,942 113,472 (14,687) Total income taxes 250,499 261,433 171,321 INCOME FROM CONTINUING OPERATIONS 428,749 466,949 376,148 Loss on sale of discontinued operations, net of income tax benefits of $28,900 - - (135,570) NET INCOME $ 428,749 $ 466,949 $ 240,578 EARNINGS PER SHARE OF COMMON STOCK: Continuing operations $ 2.30 $ 2.65 $ 2.31 Discontinued operations - - $ (0.83) Net income $ 2.30 $ 2.65 $ 1.48 Dividends per share of common stock $ 2.47 $ 2.43 $ 2.39 Average number of common shares outstanding 186,777 176,458 163,101
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. FPL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Thousands of dollars)
December 31, 1993 1992 PROPERTY, PLANT AND EQUIPMENT: Electric utility plant - at original cost, including nuclear fuel under capital lease $ 14,838,160 $ 13,534,791 Construction work in progress 781,435 1,158,688 Other property 261,125 278,887 Less accumulated depreciation and amortization 5,591,265 5,106,066 Total property, plant and equipment - net 10,289,455 9,866,300 INVESTMENTS: Utility special use funds 378,774 318,798 Investments in partnerships and joint ventures 368,724 296,593 Investments in leveraged leases 155,449 144,398 Other 82,045 62,952 Total investments 984,992 822,741 CURRENT ASSETS: Cash and cash equivalents 152,014 78,156 Marketable securities - at market value (cost of $169,607 and $75,441, respectively) 171,988 75,437 Receivables: Customers, net of allowance for uncollectible amounts of $13,946 and $14,990, respectively 444,815 413,574 Other 59,782 103,011 Materials, supplies and fossil fuel stock - at average cost 329,599 382,080 Recoverable storm costs 44,945 72,500 Other 48,214 58,418 Total current assets 1,251,357 1,183,176 DEFERRED DEBITS AND OTHER ASSETS: Unamortized debt reacquisition costs of FPL 302,561 175,320 Deferred litigation items of FPL 110,859 110,859 Other 138,788 147,909 Total deferred debits and other assets 552,208 434,088 TOTAL ASSETS $ 13,078,012 $ 12,306,305
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. FPL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES (Thousands of dollars)
December 31, 1993 1992 CAPITALIZATION: Common shareholders' equity: Common Stock, $.01 par value, authorized - 300,000,000 shares; outstanding - 190,065,570 shares at December 31, 1993 and 182,788,320 shares at December 31, 1992 $ 1,901 $ 1,828 Additional paid-in capital 3,589,994 3,312,903 Unearned compensation (321,121) (336,355) Retained earnings 829,833 857,613 Total common shareholders' equity 4,100,607 3,835,989 Preferred stock of FPL: Without sinking fund requirements 451,250 421,250 With sinking fund requirements 97,000 130,150 Long-term debt 3,748,983 3,960,096 Total capitalization 8,397,840 8,347,485 CURRENT LIABILITIES: Commercial paper 349,600 - Current maturities of long-term debt and preferred stock 279,680 164,004 Accounts payable 323,282 411,369 Customers' deposits 216,140 215,435 Interest accrued 109,206 123,735 Income and other taxes 94,880 90,929 Deferred clause revenues 130,786 175 Other 335,043 172,069 Total current liabilities 1,838,617 1,177,716 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 1,512,067 1,718,388 Deferred regulatory credit - income taxes 216,546 - Unamortized investment tax credits 323,791 345,438 Capital lease obligations 271,498 324,198 Other 517,653 393,080 Total deferred credits and other liabilities 2,841,555 2,781,104 COMMITMENTS AND CONTINGENCIES TOTAL CAPITALIZATION AND LIABILITIES $13,078,012 $12,306,305
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. FPL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars)
Years Ended December 31, 1993 1992 1991 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 428,749 $ 466,949 $ 240,578 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 598,389 554,237 518,068 Increase (decrease) in deferred income taxes and related regulatory credit 10,225 211,156 (31,414) (Increase) decrease in recoverable storm costs 12,184 (57,130) - Deferrals under cost recovery clauses(1) 138,949 (102,977) 120,772 Increase (decrease) in accrued interest and taxes (10,578) 5,948 15,481 Loss from discontinued operations - - 135,570 Other 89,058 (90,521) 194,466 Net cash provided by operating activities 1,266,976 987,662 1,193,521 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2) (1,247,661) (1,390,930) (1,343,931) Sale of Colonial Penn - - 128,380 Net cash used by discontinued operations - - (49,827) Receipts from partnerships and leveraged leases 82,462 17,592 11,572 Other 34,365 (10,013) 1,427 Net cash used in investing activities (1,130,834) (1,383,351) (1,252,379) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of FPL bonds and other long-term debt 2,082,993 874,633 265,246 Issuance of FPL Group Capital long-term debt 125,889 25,000 - Issuance of preferred stock 190,000 125,000 - Retirement of long-term debt and preferred stock (2,648,170) (699,614) (360,372) Issuance of common stock 276,287 422,626 318,341 Dividends on common stock (461,639) (430,716) (392,000) Sale of nuclear fuel - - 235,972 Increase (decrease) in commercial paper 349,600 - (48,814) Other 22,756 (13,295) (3,468) Net cash provided (used) by financing activities (62,284) 303,634 14,905 Net increase (decrease) in cash and cash equivalents 73,858 (92,055) (43,953) Cash and cash equivalents at beginning of year 78,156 170,211 214,164 Cash and cash equivalents at end of year $ 152,014 $ 78,156 $ 170,211 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest (net of amount capitalized) $ 350,845 $ 316,826 $ 341,668 Cash paid for income taxes $ 150,227 $ 115,045 $ 139,400 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Additions to capital lease obligations $ 57,579 $ 152,833 $ 274,966
(1) Represents the effect on cash flows from operating activities of the net amounts deferred or recovered under the fuel and purchased power, oil-backout, energy conservation, capacity and environmental cost recovery clauses. (2) Excludes allowance for other funds used during construction. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. FPL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 1993, 1992 and 1991 1. Summary of Significant Accounting and Reporting Policies Basis of Presentation - The consolidated financial statements include the accounts of FPL Group, Inc. (FPL Group) and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts included in prior years' consolidated financial statements have been reclassified to conform to the current year's presentation. Regulation - The principal operating company of FPL Group is Florida Power & Light Company (FPL), a utility subject to regulation by the Florida Public Service Commission (FPSC) and the Federal Energy Regulatory Commission (FERC). As a result of such regulation, FPL follows the accounting practices set forth in Statement of Financial Accounting Standard (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." Revenues and Rates - FPL's retail and wholesale utility rate schedules are approved by the FPSC and the FERC, respectively. FPL records the estimated amount of base revenues for energy delivered to customers but not billed. Such unbilled revenues are included in receivables - customers and amounted to approximately $112 million and $120 million at December 31, 1993 and 1992, respectively. Revenues include amounts resulting from cost recovery clauses, which are designed to permit full recovery of certain costs and provide a return on certain assets utilized by these programs, and franchise fees. Such revenues represent a pass-through of costs and include substantially all fuel, purchased power and interchange expenses, conservation-related expenses, revenue taxes and franchise fees. Revenues from cost recovery clauses are recorded when billed; FPL achieves matching of costs and related revenues by deferring the net under or over recovery. Electric Utility Plant, Depreciation and Amortization - The cost of additions to units of utility property is added to electric utility plant. The cost of units of property retired, less net salvage, is charged to accumulated depreciation. Maintenance and repairs of property as well as replacements and renewals of items determined to be less than units of property are charged to operating expenses - other operations and maintenance of utility plant. Depreciation of utility property is provided primarily on a straight-line average remaining life basis. Depreciation studies are performed at least every four years for substantially all utility property. The weighted annual composite depreciation rate was approximately 3.9%, 3.5% and 3.8% for the years 1993, 1992 and 1991, respectively. These rates exclude decommissioning expense and certain accelerated depreciation under cost recovery clauses. All depreciation methods and rates are approved by the FPSC. Nuclear fuel costs, including a charge for spent nuclear fuel disposal, is accrued in fuel expense on a unit of production method. Substantially all electric utility plant is subject to the lien of the Mortgage and Deed of Trust, as supplemented, securing FPL's first mortgage bonds. Allowance for Funds Used During Construction (AFUDC) - FPL recognizes AFUDC as a noncash item which represents the allowed cost of capital used to finance a portion of FPL's construction work in progress. AFUDC is capitalized as an additional cost of utility plant and is recorded as an addition to income. The capitalization rate used in computing AFUDC was 8.67% from January 1993 through June 1993, 8.26% from July 1993 through December 1993, 8.61% in 1992 and 8.46% in 1991. FPL allocates total AFUDC between borrowed funds and other funds. The portion of AFUDC attributable to short and long-term borrowed funds amounted to $31 million, $27 million and $17 million for the years ended December 31, 1993, 1992 and 1991, respectively. Nuclear Decommissioning - FPL accrues nuclear decommissioning costs over the expected service life of each plant. Nuclear decommissioning studies are performed at least every five years for FPL's four nuclear units. A provision for nuclear decommissioning of $38 million for each of the years 1993, 1992 and 1991 is included in depreciation expense. The accumulated provision for nuclear decommissioning totaled $445 million and $390 million at December 31, 1993 and 1992, respectively, and is included in accumulated depreciation. Amounts equal to decommissioning expense are deposited in either qualified funds on a pretax basis or in a non-qualified fund on a net of tax basis. Fund earnings, net of taxes, are reinvested in the funds. Both fund earnings and the charge resulting from reinvestment of the earnings are included in other income - net. The related income tax effects are included in deferred taxes. The decommissioning reserve funds, the predominant component of the utility special use funds, may be used only for the payment of the cost of decommissioning FPL's nuclear units. Securities held in the funds consist primarily of tax-exempt obligations and are carried at cost. See Note 11. The most recent decommissioning studies assume prompt dismantlement for the Turkey Point nuclear units commencing in the year 2005 and for St. Lucie Unit No. 2 commencing in 2021. St. Lucie Unit No. 1 will be mothballed in 2016 until St. Lucie Unit No. 2 is ready for dismantlement. FPL's portion of the cost of decommissioning these units, including dismantlement and reclamation, expressed in 1993 dollars, is currently estimated to aggregate $935 million. Storm and Property Insurance Reserve Fund - The storm and property insurance reserve fund provides coverage toward storm damage costs and possible retrospective premium assessments stemming from a nuclear incident under the various insurance programs covering FPL's nuclear generating plants. The storm and property insurance reserve represents amounts accumulated to date net of expenditures for storm damages. The related income tax effects are included in accumulated deferred income taxes. Securities held in the fund consist primarily of tax-exempt obligations and are carried at cost. In 1992, $21 million of the storm fund was used for storm damage costs associated with Hurricane Andrew. See Note 11. Investments in Partnerships and Joint Ventures - The majority of investments in partnerships and joint ventures are accounted for under the equity method. The cost method is used when FPL Group has virtually no ability to influence the operating or financial decisions of the investee. Securities Transactions - Marketable securities are held by a consolidated limited partnership and are accounted for at market value. Partnership assets are managed by an independent investment advisor. Earnings on the investments are included in other - net in the consolidated statements of income. Included in other current liabilities at December 31, 1993 are approximately $94 million of securities sold, but not yet purchased. These obligations are carried at their market value and create off-balance sheet market risk to the extent that the market value of the underlying securities (U.S. Treasury Notes) subsequently increases. Cash Equivalents - Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. The carrying amount of these investments approximates their market value. Retirement of Long-Term Debt - The excess of FPL's reacquisition cost over the book value of long-term debt is deferred and amortized to expense ratably over the remaining life of the original issue, which is consistent with its treatment in the ratemaking process. FPL Group Capital Inc (FPL Group Capital) expenses this cost in the period incurred. Rate Matters - Deferred litigation items of FPL at December 31, 1993 and 1992, represent costs approved by the FPSC for recovery over five years commencing with the effective date of new base rates to be established in the next general rate proceeding. Income Taxes - Deferred income taxes are provided on all significant temporary differences between the financial statement and tax bases of assets and liabilities. Investment tax credits are used to reduce current federal income taxes and, in the case of FPL, are deferred and amortized to income over the approximate lives of the related property. 2. Income Taxes In 1993, FPL Group adopted SFAS No. 109, "Accounting for Income Taxes," which requires the use of the liability method in accounting for income taxes. Under the liability method, the tax effect of temporary differences between the financial statement and tax bases of assets and liabilities are reported as deferred taxes measured at current tax rates. At FPL, the principal effect of adopting SFAS No. 109 was the reclassification of the revenue equivalent of deferred taxes in excess of the amount required to be reported as a liability under SFAS No. 109 from accumulated deferred income taxes to a newly-established deferred regulatory credit - income taxes. This amount will be amortized over the estimated lives of the assets or liabilities which resulted in the initial recognition of the deferred tax amount. Adoption of this standard had no effect on results of operations. The net result of amortizing the deferred regulatory credit and the related deferred taxes established under SFAS No. 109 is to yield comparable amounts to those included in the tax provision under accounting rules applicable to prior periods. The components of income taxes are as follows:
Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) Federal: Current. . . . . . . . . . . . . . . . . . . $205,233 $124,417 $155,265 Deferred: Loss on reacquired debt . . . . . . . . . . 41,606 10,117 691 Cost reduction program/restructuring. . . . (28,995) 191 (7,909) Depreciation and related items. . . . . . . 36,213 105,048 141,866 Cost recovery clauses . . . . . . . . . . . (45,873) 33,334 (39,045) Nuclear decommissioning reserve . . . . . . (2,016) (1,959) (12,459) Alternative minimum tax credits . . . . . . 44,647 (31,302) (32,168) Other . . . . . . . . . . . . . . . . . . . (17,375) 4,464 (30,744) Deferred investment tax credits. . . . . . . (503) (2,817) (634) Amortization of investment tax credits . . . (21,491) (20,715) (37,373) Total federal . . . . . . . . . . . . . . 211,446 220,778 137,490 State: Current. . . . . . . . . . . . . . . . . . . 33,324 23,544 30,743 Deferred: Loss on reacquired debt . . . . . . . . . . 6,992 1,358 209 Cost reduction program/restructuring. . . . (4,810) 33 (1,354) Depreciation and related items. . . . . . . 5,968 10,600 18,641 Cost recovery clauses . . . . . . . . . . . (7,645) 5,706 (6,684) Alternative minimum tax credits . . . . . . 12,385 - - Other . . . . . . . . . . . . . . . . . . . (7,161) (586) (7,724) Total state . . . . . . . . . . . . . . . 39,053 40,655 33,831 Total income taxes . . . . . . . . . . . . . . . . . $250,499 $261,433 $171,321
A reconciliation between income tax expense and the expected income tax expense at the applicable statutory rates is as follows:
Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) Computed at statutory federal income tax rate. . . . $237,737 $247,650 $186,139 Increases (reductions) resulting from: State income taxes - net of federal income tax benefit. . . . . . . . . . . . . 24,530 26,832 22,328 Amortization of investment tax credits . . . (21,491) (20,714) (45,624) Preferred dividend requirements of FPL . . . 14,932 14,926 14,027 Other - net. . . . . . . . . . . . . . . . . (5,209) (7,261) (5,549) Total income taxes . . . . . . . . . . . . . . . . . $250,499 $261,433 $171,321
The income tax effects of discontinued operations in 1991 differ from the effects computed at statutory rates primarily due to FPL Group's assessment of loss disallowance rules and limitations on the ability to utilize capital loss benefits. FPL Group plans to challenge the loss disallowance rules. Based on the uncertainties associated with the ultimate outcome of this challenge and recognition of offsetting capital gains, a valuation allowance was recorded to fully offset the effect of establishing a deferred tax asset of approximately $170 million under SFAS No. 109 for the tax benefits of the capital loss carryforward. The income tax effects of temporary differences giving rise to FPL Group's consolidated deferred income tax assets and liabilities after adoption of SFAS No. 109 are as follows:
December 31, 1993 January 1, 1993 (Thousands of Dollars) Deferred tax liabilities: Property related. . . . . . . . . . . . . . . . . $1,677,926 $1,644,200 Leveraged leases. . . . . . . . . . . . . . . . . 167,467 159,300 Partnerships and joint ventures . . . . . . . . . 166,376 153,800 Unamortized debt reacquisition costs. . . . . . . 116,556 65,900 Other . . . . . . . . . . . . . . . . . . . . . . 75,666 57,400 Total deferred tax liabilities. . . . . . . . . 2,203,991 2,080,600 Deferred tax assets and valuation allowance: Asset writedowns and capital loss carryforward. . 236,865 216,100 Unamortized investment tax credits. . . . . . . . 124,913 130,000 Deferred regulatory credit - income taxes . . . . 83,524 110,100 Storm and decommissioning reserves. . . . . . . . 133,754 119,100 Alternative minimum tax credits . . . . . . . . . 106,422 88,300 Other . . . . . . . . . . . . . . . . . . . . . . 193,534 177,400 Valuation allowance . . . . . . . . . . . . . . . (187,088) (182,900) Net deferred tax assets . . . . . . . . . . . . 691,924 658,100 Accumulated deferred income taxes. . . . . . . . . . . . $1,512,067 $1,422,500
3. Employee Retirement Benefits Pension Benefits - Substantially all employees of FPL Group and its subsidiaries are covered by a noncontributory defined benefit pension plan. Plan benefits are generally based on employees' years of service and compensation during the last years of employment. Participants are vested after five years of service. Plan assets consist primarily of bonds, common stocks and short-term investments. For 1993, 1992 and 1991 the components of pension cost, a portion of which has been capitalized, are as follows:
Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) Benefits earned during the year. . . . . . . . . . . . . . . . . . . $ 36,105 $ 39,624 $ 37,153 Interest cost on projected benefit obligation. . . . . . . . . . . . 78,797 62,518 60,753 Actual return on plan assets . . . . . . . . . . . . . . . . . . . . (236,565) (76,755) (253,447) Net amortization and deferral. . . . . . . . . . . . . . . . . . . . 106,894 (30,592) 150,149 Negative pension cost. . . . . . . . . . . . . . . . . . . . . . . . (14,769) (5,205) (5,392) Effect of cost reduction program (see Note 4). . . . . . . . . . . . 34,463 - - FPL regulatory adjustment. . . . . . . . . . . . . . . . . . . . . . - 5,221 5,722 Pension cost recognized in the Consolidated Statements of Income . . $ 19,694 $ 16 $ 330
Prior to 1993, an adjustment was made to reflect in the results of operations FPL's pension cost calculated under the actuarial cost method used for utility ratemaking purposes. In 1993, FPL adopted consistent pension measurements for ratemaking and financial reporting. The accumulated regulatory adjustment is being amortized to income over five years. At December 31, 1993 and 1992, the cumulative amount of this regulatory adjustment included in other liabilities was approximately $16 million and $20 million, respectively. During 1992, the method used for valuing plan assets in the calculation of pension cost was changed from fair value to a calculated market-related value. The new method was adopted to reduce the volatility in annual pension expense that results from short-term fluctuations in the securities markets. The cumulative effect of the change was to reduce prepaid pension costs and the related accumulated regulatory adjustment by approximately $37 million, with no effect on earnings. During 1993, the effect of a prior plan amendment that changed the manner in which benefits accrue was recognized and included as part of prior service cost to be amortized over the remaining service life of the employees. FPL Group funds the pension cost calculated under the entry age normal level percentage of pay actuarial cost method, provided that this amount satisfies the Employee Retirement Income Security Act minimum funding standards and is not greater than the maximum tax deductible amount for the year. No contributions to the plan were required for 1993, 1992 or 1991. A reconciliation of the funded status of the plan to the amounts recognized in the Consolidated Balance Sheets is presented below:
December 31, 1993 1992 (Thousands of Dollars) Fair market value of plan assets . . . . . . . . . . . . . . . . . $ 1,662,051 $1,549,294 Actuarial present value of benefits for services rendered to date: Accumulated benefits based on salaries to date, including vested benefits of $689.2 million and $870.6 million for 1993 and 1992, respectively. . . . . . . . . . . . . . . . . 740,959 883,487 Additional benefits based on estimated future salary levels . . 325,582 235,908 Projected benefit obligation . . . . . . . . . . . . . . . . . . . 1,066,541 1,119,395 Plan assets in excess of projected benefit obligation. . . . . . . 595,510 429,899 Prior service costs not recognized in net periodic pension cost. . 212,908 79,584 Unrecognized net asset at January 1, 1986, being amortized primarily over 19 years - net of accumulated amortization . . . (256,914) (280,270) Unrecognized net gain. . . . . . . . . . . . . . . . . . . . . . . (548,741) (206,755)(1) Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . $ 2,763 $ 22,458
(1) Includes $37 million effect of changing to calculated market-related method of valuing plan assets. As of December 31, 1993 and 1992, the weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation was 7.0% and 6.0%, respectively. The assumed rate of increase in future compensation levels at those respective dates was 5.5% and 6.0%. The expected long-term rate of return on plan assets used in determining pension cost was 7.75% for 1993 and 7.0% for 1992 and 1991. Other Postretirement Benefits - FPL Group and its subsidiaries have defined benefit postretirement plans for health care and life insurance benefits that cover substantially all employees. Eligibility for health care benefits is based upon age plus years of service at retirement. The plans are contributory, and contain cost-sharing features such as deductibles and coinsurance. FPL Group has capped company contributions for postretirement health care at a defined level which, depending on actual claims experience, may be reached by the year 2000. Generally, life insurance benefits for retirees are capped at $50,000. FPL Group's policy is to fund postretirement benefits in amounts determined at the discretion of management. Benefit payments in 1993 and 1992 totaled $13 million and $12 million, respectively, and were paid out of existing plan assets. In 1993, FPL Group adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." For the year ended December 31, 1993, the components of net periodic postretirement benefit cost, a portion of which has been capitalized, are as follows:
Year Ended December 31,1993 (Thousands of Dollars) Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,233 Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,633 Return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,130) Amortization of transition obligation. . . . . . . . . . . . . . . . . . . . . . . 4,064 Net periodic postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . 15,800 Effect of cost reduction program (see Note 4). . . . . . . . . . . . . . . . . . . 29,008 Postretirement benefit cost recognized in the Consolidated Statement of Income . . $ 44,808
A reconciliation of the funded status of the plan to the amounts recognized in the Consolidated Balance Sheets is presented below:
December 31, 1993 (Thousands of Dollars) Plan assets at fair value, primarily listed stocks and bonds . . . . . . . . $109,372 Accumulated postretirement benefit obligation: Retirees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,788 Fully eligible active plan participants . . . . . . . . . . . . . . . 68,823 Other active plan participants. . . . . . . . . . . . . . . . . . . . 177,419 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,030 Accumulated postretirement benefit obligation in excess of plan assets . . . (143,658) Unrecognized net transition obligation (amortized over 20 years) . . . . . . 66,217 Unrecognized net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,633 Accrued postretirement benefit cost. . . . . . . . . . . . . . . . . . . . . $ 44,808
The weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) for 1993 is 10.5% for retirees under age 65 and 6.5% for retirees over age 65. These rates are assumed to decrease gradually to 6.0% by the year 2000, which is when it is anticipated that benefit costs will reach the defined level at which company contributions will be capped. The cap on FPL Group's contributions mitigates the potential significant increase in costs resulting from an increase in the health care cost trend rate. Increasing the assumed health care cost trend rate by one percentage point would increase the plan's accumulated postretirement benefit obligation as of December 31, 1993 by $8 million, and the aggregate of the service and interest cost components of net periodic postretirement benefit cost of the plan for 1993 by approximately $1 million. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.0% at December 31, 1993. The expected long-term rate of return on plan assets was 7.75% at December 31, 1993. Postemployment Benefits - In 1993, FPL Group adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which requires a change from recognizing expenses when paid to recording the benefits as the liability is incurred. Implementation of this pronouncement did not have a material effect on FPL Group's results of operations. 4. Cost Reduction Program and Restructuring Charge In 1993, FPL implemented a major cost reduction program, which resulted in a $138 million charge and reduced net income by approximately $85 million. The program consisted primarily of a Voluntary Retirement Plan (VRP) and a Special Severance Plan (SSP). The VRP was offered to all employees who were at least 54 years of age and had at least 10 years of service. The plan, among other things, added five years to age and service for the determination of plan benefits to be received by eligible employees. Approximately 700 employees, or 75% of those eligible, elected to retire under this program. The impact on pension cost resulting from the two programs as determined under the provisions of SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," was approximately $34 million. The impact on postretirement benefits as determined under SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" was approximately $29 million. These amounts are included as part of the total charge of $138 million. See Note 3. In 1991, FPL recorded a $90 million restructuring charge in connection with a company-wide restructuring which reduced net income by $56 million. The charge included severance pay for departing employees, as well as relocation and facility modification expenditures. 5. Businesses to be Discontinued In 1990, FPL Group decided to sell or otherwise dispose of the real estate, cable television, environmental remediation and utility-related services businesses. In 1991, the environmental remediation and utility-related services businesses were sold with no significant impact on net income. During 1993, FPL Group sold or otherwise liquidated certain cable television and real estate assets, including cable television operating systems, interests in three cable television joint ventures and real estate rental properties. FPL Group's remaining developed real estate properties are under contract for sale. This pending sale, if closed, and the currently estimated result of disposing of the balance of FPL Group's cable television and real estate assets are not expected to have a significant adverse effect on net income. 6. Discontinued Operations In 1991, Colonial Penn Group, Inc. (Colonial Penn) was sold, resulting in a $135 million after-tax loss. The sale did not include Bay Loan and Investment Bank (Bay Loan), a former Colonial Penn subsidiary, which is winding down its operations and will be dissolved. The principal business of Bay Loan was investing in loans secured by real estate using funds provided from the issuance of insured certificates of deposit. Bay Loan ceased investing in new loans in 1990 and is in the process of effecting an orderly liquidation. The date when such liquidation will be completed cannot be predicted with certainty because it is dependent on the timing of loan prepayments and asset sales. FPL Group has no legal obligation and has no intention to contribute additional equity to Bay Loan. The investment in Bay Loan was written off in 1990; the orderly liquidation of its operations is not expected to have an adverse effect on FPL Group's future operating results. Colonial Penn and Bay Loan have been accounted for as discontinued operations. Operating revenues of Bay Loan were $16.3 million and $21.4 million for 1993 and 1992, respectively. Combined operating revenues of Colonial Penn (through date of closing) and Bay Loan were $714.1 million for 1991. Bay Loan reported operating income of $5.1 million in 1993 and operating losses of $5.9 million and $8.5 million in 1992 and 1991, respectively. The losses incurred subsequent to the measurement date (date on which Bay Loan was initially classified as discontinued operations) had no effect on FPL Group's results of operations as such losses had been provided for in the loss on disposal of discontinued operations in 1991. The remaining assets of Bay Loan consist primarily of loans secured by real estate and real estate owned as a result of foreclosures. Most of Bay Loan's loan customers and the real estate securing their loans are located in the northeast United States. The remaining liabilities of Bay Loan consist primarily of FDIC-insured certificates of deposit, which will be settled with funds generated from loan repayments and the sale of Bay Loan assets. Total assets and liabilities of Bay Loan at December 31, 1993 were $149.3 million and $129.7 million, respectively. Total assets and liabilities of Bay Loan at December 31, 1992 were $194.9 million and $180.4 million, respectively. The carrying amounts of assets and liabilities at December 31, 1993 and 1992, approximate the estimated fair values of the financial instruments of Bay Loan. 7. Leases In 1991, FPL expanded its nuclear fuel lease program to include all four of its nuclear units. In connection with this expansion, FPL sold to a non-affiliated lessor and leased back approximately $220 million of nuclear fuel held in reactors of these units, as well as nuclear fuel in various stages of enrichment. The fuel was sold at book value. Nuclear fuel payments, which are based on energy production and are charged to fuel expense, were $122 million, $120 million and $81 million for the years ended December 31, 1993, 1992 and 1991, respectively. Included in these payments was an interest component of $11 million, $13 million and $9 million in 1993, 1992 and 1991, respectively. Under certain circumstances of lease termination, FPL is required to purchase all nuclear fuel in whatever form at a purchase price designed to allow the lessor to recover its net investment cost in the fuel, which totaled $226 million at December 31, 1993. For ratemaking purposes, the leases encompassed within this lease arrangement are classified as operating leases. For financial reporting purposes, the capital lease obligation is recorded at the amount due in the event of lease termination. In 1992, FPL entered into a noncancelable capital lease arrangement for an office building whose net book value at December 31, 1993 and 1992 was approximately $46 million and $48 million, respectively. The present value of future minimum lease payments at December 31, 1993 totaled $49 million. Future minimum annual lease payments under this lease arrangement, which expires in 2016, are estimated to be $4 million. Excluding these leases, the amount of assets and capitalized lease obligations for other capital leases is not material. FPL Group, through its subsidiaries, leases automotive, computer, office and other equipment through rental agreements with various terms and expiration dates. Rental expense totaled $33 million, $55 million and $51 million for 1993, 1992 and 1991, respectively. Minimum annual rental commitments for noncancelable operating leases are $22 million for 1994, $19 million for 1995, $13 million for 1996, $7 million for 1997, $6 million for 1998 and $15 million thereafter. 8. Jointly-Owned Electric Utility Plant FPL owns approximately 85% of the St. Lucie Nuclear Unit No. 2, 20% of the St. Johns River Power Park (SJRPP) units and coal terminal and a 49% undivided interest in Scherer Unit No. 4. FPL expects to purchase an additional 27% undivided ownership interest in Scherer Unit No. 4 in two stages through 1995. At December 31, 1993, FPL's investment in St. Lucie Unit No. 2 was $768 million, net of accumulated depreciation of $397 million; the investment in the SJRPP units and coal terminal was $221 million, net of accumulated depreciation of $110 million; the investment in Scherer Unit No. 4 was $296 million, net of accumulated depreciation of $54 million. FPL is responsible for its share of the operating costs, as well as providing its own financing. At December 31, 1993, there was no significant balance of construction work in progress on these facilities. 9. Common Shareholders' Equity The changes in common shareholders' equity accounts are as follows:
Common Stock Aggregate Additional Unearned Retained Shares Par Value Paid-in Capital Compensation Earnings (In thousands) Balances, December 31, 1990 161,065 $1,610 $2,566,844 $(360,000) $ 952,707 Net income - - - - 240,578 Issuances of common stock 9,691 98 318,905 - - Dividends on common stock - - - - (392,000) Earned compensation and tax benefits on ESOP dividends - - - 13,785 10,956 Other - - 364 - - Balances, December 31, 1991 170,756 1,708 2,886,113 (346,215) 812,241 Net income - - - - 466,949 Issuances of common stock 12,032 120 429,482 (5,683) - Dividends on common stock - - - - (430,716) Earned compensation and tax benefits on ESOP dividends - - - 15,543 9,139 Other - - (2,692) - - Balances, December 31, 1992 182,788 1,828 3,312,903 (336,355) 857,613 Net income - - - - 428,749 Issuances of common stock 7,277 73 278,123 - - Dividends on common stock - - - - (461,639) Earned compensation and tax benefits on ESOP dividends - - - 15,234 5,110 Other - - (1,032) - - Balances, December 31, 1993 190,065 $1,901 $3,589,994 $(321,121) $829,833
Common Stock Dividend Restrictions - FPL Group's Charter does not limit the dividends that may be paid on its common stock. As a practical matter, the ability of FPL Group to pay dividends on its common stock is dependent upon dividends paid to it by its subsidiaries, primarily FPL. FPL's charter and mortgage contain provisions that, under certain conditions, restrict the payment of dividends and other distributions to FPL Group. Given FPL's current financial condition and level of earnings, these restrictions do not currently limit FPL's ability to pay dividends to FPL Group. Employee Stock Ownership Plan - The employee thrift plans of FPL Group and FPL include a leveraged Employee Stock Ownership Plan feature. Shares of common stock held by the Trust for the Thrift Plans (Trust) are used to provide all or a portion of the employers' matching contributions. In 1990, the Trust borrowed the funds from FPL Group Capital, at an interest rate of 9.69% to purchase the shares and is repaying the loan with dividends received on the shares along with cash contributions from the employers. Reducing stockholders' equity at December 31, 1993 is approximately $317 million of unearned compensation related to unallocated shares of common stock held by the Trust. The unallocated shares are considered outstanding for purposes of computing earnings per share. Dividends paid aggregated approximately $30 million in all years. In November 1993, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued SOP 93-6, "Employers' Accounting for Employee Stock Ownership Plans." If adopted, SOP 93-6 would significantly change the manner in which FPL Group recognizes compensation expense associated with the matching contributions to its thrift plans. Based on preliminary estimates, adoption of the standard would reduce net income by approximately $20 million but would increase earnings per share by $0.04 in 1994, since shares held by the Trust which have not yet been allocated to employees would not be considered outstanding for purposes of computing earnings per share. FPL Group is not required to adopt the accounting guidance in this pronouncement and is evaluating whether or not to adopt it. Long-Term Incentive Plan - FPL Group has a long-term incentive plan under which an aggregate of 4 million shares may be awarded to officers and key employees of FPL Group and its subsidiaries. At December 31, 1993, 3,304,739 shares were available for future awards. Total compensation charged against earnings under the incentive plan, and the effect on earnings per share, were not material in any year. The changes in share awards under the incentive plan are as follows:
Non-qualified Performance Restricted Option Shares Stock Shares Balances, December 31, 1990 178,418 13,900 365,651 Granted 196,729 110,344 - Exercised at $29 3/8 - $37 1/4 - - (153,625) Paid (45,158) - - Forfeited (57,008) - (52,229) Balances, December 31, 1991 272,981 124,244 159,797 Granted 106,516 60,950 - Exercised at $30 7/8 - $35 3/4 - - (71,814) Paid/released (65,061) (6,898) - Forfeited (22,991) (1,000) (2,577) Balances, December 31, 1992 291,445 177,296 85,406 Granted 89,827 - - Exercised at $36 1/4 - $40 7/8 - - (35,045) Paid/released (87,169) (6,903) - Forfeited (14,044) (4,070) (285) Balances, December 31, 1993 280,059(1) 166,323(2) 50,076(3)
(1) Payment of performance shares is based on the market price of FPL Group's common stock when the related performance goal is achieved. (2) Shares of restricted stock were issued at market value at the date of the grant. (3) All outstanding options are exercisable at $30 7/8. Stock appreciation rights in an equivalent amount have been granted in conjunction with the options referred to above. No awards of incentive stock options have been granted as of December 31, 1993. Other - FPL Group has reserved 17 million shares of common stock for issuance under the Dividend Reinvestment and Common Share Purchase Plan and Employee Benefit Plans. At December 31, 1993, 9 million of the shares reserved for these plans had been issued. Each share of common stock has been granted a Preferred Share Purchase Right, which is exercisable in the event of certain attempted business combinations. The Rights will cause substantial dilution to a person or group attempting to acquire FPL Group on terms not approved by the FPL Group Board of Directors. 10. Preferred Stock and Long-Term Debt Preferred Stock (1)(2)
December 31, 1993 Shares Redemption December 31, Outstanding Price 1993 1992 (Thousands of Dollars) Preferred stock of FPL without sinking fund requirements: Cumulative, No Par Value, authorized 10,000,000 shares at December 31, 1993 and December 31, 1992 $2.00 No Par Value, Series A (Involuntary Liquidation Value $25 Per Share) 5,000,000 $ 27.00 $125,000 $125,000 Cumulative, $100 Par Value, authorized 15,822,500 shares at December 31, 1993 and 17,842,000 shares at December 31, 1992 4 1/2% Series 100,000 101.00 10,000 10,000 4 1/2% Series A 50,000 101.00 5,000 5,000 4 1/2% Series B 50,000 101.00 5,000 5,000 4 1/2% Series C 62,500 103.00 6,250 6,250 4.32% Series D 50,000 103.50 5,000 5,000 4.35% Series E 50,000 102.00 5,000 5,000 7.28% Series F 600,000 102.93 60,000 60,000 7.40% Series G 400,000 102.53 40,000 40,000 8.70% Series K - - - 75,000 8.84% Series L - - - 50,000 8.50% Series P - - - 35,000 6.98% Series S 750,000 -(3) 75,000 - 7.05% Series T 500,000 -(3) 50,000 - 6.75% Series U 650,000 -(3) 65,000 - Total preferred stock of FPL without sinking fund requirements 8,262,500 $451,250 $421,250 Preferred stock of FPL with sinking fund requirements(4): 10.08% Series J - - - $ 3,746 8.70% Series M - - - 30,200 11.32% Series O - - - 6,500 6.84% Series Q (5) 485,000 $104.10 $48,500 48,500 8.625% Series R (6) 500,000 108.63 50,000 50,000 Total preferred stock with sinking fund requirements 985,000 98,500 138,946 Less current maturities 15,000 1,500 8,796 Preferred stock with sinking fund requirements, excluding current maturities 970,000 $ 97,000 $130,150
(1) FPL Group's charter authorizes the issuance of 100 million shares of serial preferred stock, $.01 par value. None of these shares are outstanding. (2) FPL's charter authorizes the issuance of 5 million shares of subordinated preferred stock, no par value. No shares of subordinated preferred stock are outstanding. In 1993, FPL issued 1,900,000 shares of $100 par value preferred stock. In 1992, FPL issued 5,000,000 shares of $2.00 No Par Value, Series A, preferred stock. There were no issuances of preferred stock in 1991. (3) Not redeemable prior to 2003. (4) Minimum annual sinking fund requirements on preferred stock are approximately $2 million for each of the years 1994 and 1995 and $4 million for each of the years 1996, 1997 and 1998. In the event that FPL should be in arrears on its sinking fund obligations, FPL may not pay dividends on common stock. (5) Entitled to a sinking fund to retire a minimum of 15,000 shares and a maximum of 30,000 shares annually from 1994 through 2026 at $100 per share plus accrued dividends. FPL redeemed and retired 15,000 shares in 1992, satisfying the 1993 minimum annual sinking fund requirement. (6) Entitled to a sinking fund to retire a minimum of 25,000 shares and a maximum of 50,000 shares annually from 1996 through 2015 at $100 per share plus accrued dividends. Long-Term Debt (1)(2)
December 31, 1993 1992 (Thousands of Dollars) Florida Power & Light Company First Mortgage Bonds: Maturing through 2000 - 4 5/8% to 9 5/8% $ 460,697 $ 500,000 Maturing 2001 through 2015 - 6 5/8% to 9 1/8% 700,000 725,000 Maturing 2016 through 2026 - 7% to 10 1/4% 1,126,223 1,425,000 Medium-Term Notes: Maturing through 2000 - 4.85% to 9.5% 280,300 30,000 Maturing 2001 through 2015 - 5.79% to 9.4% 155,725 90,000 Maturing 2016 through 2022 - 8% to 9.45% 148,700 193,700 Pollution Control and Industrial Development Series: Maturing 2008 through 2027 - 6.10% to 11 3/8% 412,565(3) 456,705 Pollution Control, Solid Waste Disposal and Industrial Development Revenue Bonds: Maturing 2021 through 2027 - variable, 2.6% to 3.9% year-end interest rate 200,315 77,625 Installment Purchase and Security Contracts: Maturing 2004 through 2007 - 5.40% to 6.15% 22,990 89,030 Promissory Notes - 5% due 1993 - 1,750 Unamortized discount - net (44,450) (32,656) Total long-term debt of FPL 3,463,065 3,556,154 Less current maturities - 151,750 Long-term debt of FPL, excluding current maturities 3,463,065 3,404,404 FPL Group Capital Inc Debentures: Maturing 1997 - 6 1/2% 150,000 150,000 Maturing 2013 - 7 5/8% 125,000 - Maturing 2017 - 8 7/8% and 10 1/8% 150,000 250,000 Bank loans - 3.7% to 4.2% in 1993 and 4.0% to 4.2% in 1992 due December 1994 125,000 125,000 Other long-term debt - 7.0% to 9.9% due various dates to 2013 16,399 35,288 Unamortized discount (2,302) (1,138) Total long-term debt of FPL Group Capital 564,097 559,150 Less current maturities 278,179 3,458 Long-term debt of FPL Group Capital, excluding current maturities 285,918 555,692 Total long-term debt $3,748,983 $3,960,096
(1) Minimum annual maturities and sinking fund requirements of long-term debt are approximately $278 million for 1994, $82 million for 1995, $101 million for 1996, $151 million for 1997 and $181 million for 1998. (2) Available lines of credit aggregated approximately $950 million at December 31, 1993, all of which were based on firm commitments. (3) Excludes approximately $46 million principal amount of bonds removed from the balance sheet in December 1993 as a result of an in-substance defeasance. Such bonds were redeemed in January 1994 with funds previously placed in an irrevocable trust. 11. Fair Value of Financial Instruments The following estimates of the fair value of financial instruments have been made using available market information and other valuation methodologies. However, the use of different market assumptions or methods of valuation could result in different estimated fair values.
December 31, 1993 1992 Carrying Estimated Carrying Estimated Amount Fair Value(1) Amount Fair Value(1) (Thousands of Dollars) Utility special use funds $ 378,774 $ 403,841 $ 318,798 $ 331,877 Marketable securities $ 171,988 $ 171,988 $ 75,437 $ 75,437 Other investment securities $ 82,045 $ 82,045 $ 62,952 $ 62,952 Preferred stock with sinking fund requirements (2) $ 98,500 $ 104,463 $ 138,946 $ 144,148 Long-term debt (2) $ 4,027,162 $ 4,200,802 $4,115,304 $4,285,080
(1) Based on quoted market prices for these or similar issues. (2) Includes current maturities. 12. Commitments and Contingencies Capital Commitments - FPL has made certain commitments in connection with its projected capital expenditures. These expenditures, for the construction or acquisition of additional facilities and equipment to meet customer demand, are estimated to be $3.7 billion, including AFUDC, for the years 1994 through 1998. FPL Group Capital and ESI Energy, Inc. (ESI), have committed to invest $3 million in, and lend approximately $4 million to, partnerships and joint ventures entered into through ESI, all of which are expected to be funded in 1994. Additionally, FPL Group Capital and its subsidiaries, primarily ESI, have guaranteed up to approximately $89 million of lease obligations, debt service payments and other payments subject to certain contingencies. FPL Group, through a consolidated limited partnership, has entered into forward commitments at December 31, 1993 to purchase $100 million of mortgage-backed securities on various dates through February 1994 at specified prices. The market value of these securities totaled $100 million at December 31, 1993. Additionally, the partnership had entered into forward commitments to sell short $87 million of U.S. Treasury Notes on various dates in January 1994 at specified prices. At December 31, 1993, the market value of those securities totaled $89 million. Insurance - Liability for accidents at nuclear power plants is governed by the Price-Anderson Act, which limits the liability of nuclear reactor owners to the amount of the insurance available from private sources and under an industry retrospective payment plan. In accordance with this Act, FPL maintains $200 million of private liability insurance, which is the maximum obtainable, and participates in a secondary financial protection system under which it is subject to retrospective assessments of up to $317 million per incident at any nuclear utility reactor in the United States, payable at a rate not to exceed $40 million per incident per year. FPL participates in insurance pools and other arrangements that provide $2.75 billion of limited insurance coverage for property damage, decontamination and premature decommissioning risks at its nuclear plants. The proceeds from such insurance, however, must first be used for reactor stabilization and site decontamination before they can be used for plant repair. FPL also participates in an insurance program that provides limited coverage for replacement power costs if a plant is out of service because of an accident. In the event of an accident at one of FPL's or another participating insured's nuclear plant, FPL could be assessed up to $58 million in retrospective premiums, and in the event of a subsequent accident at such nuclear plants during the policy period, the maximum assessment is $72 million under the programs in effect at December 31, 1993. This contingent liability would be partially offset by a portion of FPL's storm and property insurance reserve (storm fund), which totaled $82 million at that date. In the event of a catastrophic loss at one of FPL's nuclear plants, the amount of insurance available may not be adequate to cover property damage and other expenses incurred. Uninsured losses, to the extent not recovered through rates, would be borne by FPL and could have a material adverse effect on FPL Group's and FPL's financial condition. In 1993, FPL replaced its transmission and distribution (T&D) property insurance coverage with a self-insurance program due to the high cost and limited coverage available from third-party insurers. Costs incurred under the self-insurance program will be charged against FPL's storm fund. Recovery of any losses in excess of the storm fund from ratepayers will require the approval of the FPSC. FPL's available lines of credit include $300 million to provide additional liquidity in the event of a T&D property loss. Contracts - FPL has take-or-pay contracts with the Jacksonville Electric Authority (JEA) for 374 megawatts (mw) through 2023 and with the subsidiaries of the Southern Company to purchase 1,406 mw of power through May 1994, and declining amounts thereafter through mid-2010. FPL also has various firm pay-for-performance contracts to purchase 1,031 mw from certain cogenerators and small power producers (qualifying facilities) with expiration dates ranging from 2002 through 2026. These contracts provide for capacity and energy payments. Capacity payments for the pay-for-performance contracts are subject to the qualifying facilities meeting certain contract obligations. Energy payments are based on the actual power taken under these contracts. The required capacity payments through 1998 under these contracts are estimated to be as follows:
1994 1995 1996 1997 1998 (In Millions) JEA. . . . . . . . . . . . . . . . . . $ 80 $ 80 $ 80 $ 80 $ 80 Southern Company . . . . . . . . . . . 200 150 140 140 140 Qualifying Facilities. . . . . . . . . 140 160 310 340 350
FPL's capacity and energy charges under these contracts for 1993, 1992 and 1991 were as follows:
1993 Charges 1992 Charges 1991 Charges Capacity Energy(3) Capacity Energy(3) Capacity Energy(3) (In Millions) JEA. . . . . . . . . . . . . . $ 85(1) $ 51 $ 85(1) $ 48 $ 82(4) $ 53 Southern Company . . . . . . . 268(2) 183 377(2) 283 389(2) 311 Qualifying Facilities. . . . . 60(2) 40 44(2) 40 5(2) 36
(1) Recovered through base rates and the capacity cost recovery clause (capacity clause). (2) Recovered through the capacity clause. (3) Recovered through the fuel and purchased power cost recovery clause. (4) Recoverable through base rates. FPL has take-or-pay contracts for the supply and transportation of natural gas under which it is required to make payments estimated to be $280 million for 1994, $380 million for 1995 and $390 million for each of the years 1996, 1997 and 1998. Total payments made under these contracts were $270 million, $269 million and $221 million for 1993, 1992 and 1991, respectively. Litigation - Union Carbide Corporation sued FPL and Florida Power Corporation alleging that, through a territorial agreement approved by the FPSC, they conspired to eliminate competition in violation of federal antitrust laws. Praxair, Inc., an entity that was formerly a unit of Union Carbide, has been substituted as the plaintiff. The suit seeks treble damages of an unspecified amount based on alleged higher prices paid for electricity and product sales lost. Cross motions for summary judgement were denied. Both parties are appealing the denials. A suit brought by the partners in a cogeneration project located in Dade County, Florida, alleges that FPL Group, FPL and ESI have engaged in anti-competitive conduct intended to eliminate competition from cogenerators generally, and from their facility in particular, in violation of federal antitrust laws and have wrongfully interfered with the cogeneration project's contractual relationship with Metropolitan Dade County. The suit seeks damages in excess of $100 million, before trebling under antitrust law, plus other unspecified compensatory and punitive damages. A motion for summary judgment by FPL Group, FPL and ESI has been denied. A former cable installation contractor for Telesat Cablevision, Inc. (an indirect subsidiary of FPL Group) has sued FPL Group, FPL Group Capital and Telesat for breach of contract, fraud and violation of racketeering statutes. The suit seeks compensatory damages in excess of $24 million, treble damages under racketeering activity statutes, punitive damages and attorneys' fees, as well as the revocation of Telesat's corporate charter and cable television franchises. FPL Group believes that it and its subsidiaries have meritorious defenses to all of the litigation described above and is vigorously defending these suits. Accordingly, the liabilities, if any, arising from this litigation are not anticipated to have a material adverse effect on FPL Group's financial statements. 13. Quarterly Data (Unaudited) Condensed consolidated quarterly financial information for 1993 and 1992 is as follows:
March 31 (1) June 30 (1) September 30 (1) ecember 31 (1) (In thousands, except per share amounts) 1993 Operating revenues $ 1,132,376 $ 1,349,866 $ 1,602,685 $ 1,231,367 Operating income $ 205,925 $ 235,606 $ 294,853(2) $ 237,574 Net income $ 91,950 $ 110,546 $ 140,522(2) $ 85,731 Earnings per share of common stock $ 0.50 $ 0.60 $ 0.75(2) $ 0.45 Dividends per share of common stock $ 0.61 $ 0.62 $ 0.62 $ 0.62 High-low trading prices $39 5/8 - 36 1/8 $38 5/8 - 36 1/2 $ 41 - 37 5/8 $40 3/8 - 35 1/2 1992 Operating revenues $ 1,093,369 $ 1,261,982 $ 1,569,153 $ 1,268,823 Operating income $ 193,470 $ 237,263 $ 381,816 $ 221,225 Net income $ 74,405 $ 103,491 $ 187,773 $ 101,280 Earnings per share of common stock $ 0.43 $ 0.60 $ 1.05 $ 0.56 Dividends per share of common stock $ 0.60 $ 0.61 $ 0.61 $ 0.61 High-low trading prices $ 37 - 32 7/8 $ 36 - 32 $38 3/8 - 34 7/8 $37 3/8 - 34 1/2
(1) In the opinion of FPL Group, all adjustments, which consist of normal recurring accruals necessary to present a fair statement of such amounts for such periods, have been made. Results of operations for an interim period may not give a true indication of results for the calendar year. (2) Charge resulting from cost reduction program reduced operating income by $138 million, net income by $85 million and earnings per share by $0.45. See Note 4. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant The information required by this Item will be included in FPL Group's Definitive Proxy Statement which will be filed with the SEC in connection with the 1994 Annual Meeting of Shareholders (FPL Group's Proxy Statement) and is incorporated herein by reference, or is included in Part I under Executive Officers of the Registrant. Item 11. Executive Compensation The information required by this Item will be included in FPL Group's Proxy Statement and is incorporated herein by reference, provided that the Compensation Committee Report and Performance Graphs which are contained in FPL Group's Proxy Statement shall not be deemed to be incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this Item will be included in FPL Group's Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information required by this Item will be included in FPL Group's Proxy Statement and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements Page(s) Independent Auditors' Report 15 Consolidated Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 16 Consolidated Balance Sheets at December 31, 1993 and 1992 17-18 Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 19 Notes to Consolidated Financial Statements for the Years Ended December 31, 1993, 1992 and 1991 20-35 2. Financial Statement Schedules(1) Schedule V Property, Plant and Equipment 39-40 Schedule VI Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment 41-42 Schedule IX Short-Term Borrowings 43 Schedule X Supplementary Income Statement Information 44 (1) All other schedules are omitted as not applicable or not required. 3. Exhibits including those Incorporated by Reference Exhibit Number Description *3(i) Restated Articles of Incorporation of FPL Group dated December 31, 1984, as amended through December 17, 1990 (filed as Exhibit 4(a) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) 3(ii) Bylaws of FPL Group dated November 15, 1993 *4(a) Rights Agreement, dated as of June 16, 1986, between FPL Group, Inc. and the First National Bank of Boston (filed as Exhibit 4(e) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *4(b) Mortgage and Deed of Trust dated as of January 1, 1944, and Ninety-four Supplements thereto between FPL and Bankers Trust Company and The Florida National Bank of Jacksonville (now First Union National Bank of Florida), Trustees (as of September 2, 1992, the sole trustee is Bankers Trust Company) (filed as Exhibit B-3, File No. 2-4845; Exhibit 7(a), File No. 2-7126; Exhibit 7(a), File No. 2-7523; Exhibit 7(a), File No. 2-7990; Exhibit 7(a), File No. 2-9217; Exhibit 4(a)-5, File No. 2-10093; Exhibit 4(c), File No. 2-11491; Exhibit 4(b)-1, File No. 2-12900; Exhibit 4(b)-1, File No. 2-13255; Exhibit 4(b)-1, File No. 2-13705; Exhibit 4(b)-1, File No. 2-13925; Exhibit 4(b)-1, File No. 2-15088; Exhibit 4(b)-1, File No. 2-15677; Exhibit 4(b)-1, File No. 2-20501; Exhibit 4(b)-1, File No. 2-22104; Exhibit 2(c), File No. 2-23142; Exhibit 2(c), File No. 2-24195; Exhibit 4(b)-1, File No. 2-25677; Exhibit 2(c), File No. 2-27612; Exhibit 2(c), File No. 2-29001; Exhibit 2(c), File No. 2-30542; Exhibit 2(c), File No. 2-33038; Exhibit 2(c), File No. 2-37679; Exhibit 2(c), File No. 2-39006; Exhibit 2(c), File No. 2-41312; Exhibit 2(c), File No. 2-44234; Exhibit 2(c), File No. 2-46502; Exhibit 2(c), File No. 2-48679; Exhibit 2(c), File No. 2-49726; Exhibit 2(c), File No. 2-50712; Exhibit 2(c), File No. 2-52826; Exhibit 2(c), File No. 2-53272; Exhibit 2(c), File No. 2-54242; Exhibit 2(c), File No. 2-56228; Exhibits 2(c) and 2(d), File No. 2-60413; Exhibits 2(c) and 2(d), File No. 2-65701; Exhibit 2(c), File No. 2-66524; Exhibit 2(c), File No. 2-67239; Exhibit 4(c), File No. 2-69716; Exhibit 4(c), File No. 2-70767; Exhibit 4(b), File No. 2-71542; Exhibit 4(b), File No. 2-73799; Exhibits 4(c), 4(d) and 4(e), File No. 2-75762; Exhibit 4(c), File No. 2-77629; Exhibit 4(c), File No. 2-79557; Exhibit 99(a) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669; Exhibit 99(a) to Post-Effective Amendment No. 1 to Form S-3, File No. 33-46076); and Exhibit 4(b) to Form 10-K dated March 21, 1994, File No. 1-3545). *10(a) Supplemental Executive Retirement Plan, as amended and restated (filed as Exhibit 99(b) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(b) Benefit Restoration Plan of FPL Group and affiliates, as amended and restated (filed as Exhibit 99(c) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(c) FPL Group Amended and Restated Supplemental Executive Retirement Plan for J. L. Broadhead (filed as Exhibit 99(d) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(d) Employment Agreement between FPL Group and D. P. Coyle dated June 12, 1989 (filed as Exhibit 99(e) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(e) Employment Agreement between FPL and Stephen E. Frank dated July 31, 1990 (filed as Exhibit 99(f) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(f) Employment Agreement between FPL and Jerome H. Goldberg dated August 9, 1989 (filed as Exhibit 99(g) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(g) FPL Group Long-Term Incentive Plan of 1985, as amended (filed as Exhibit 99(h) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(h) Director and Executive Compensation Deferral Plan of FPL, as amended (filed as Exhibit 99(i) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) *10(i) Employment Agreement between FPL Group and James L. Broadhead dated February 13, 1989 (filed as Exhibit 99(j) to Post-Effective Amendment No. 5 to Form S-8, File No. 33-18669) 10(j) Employment Agreement between FPL Group and James L. Broadhead dated as of December 13, 1993 21 Subsidiaries of the Registrant 23 Independent Auditors' Consent * Incorporated herein by reference (b) Reports on Form 8-K (1) A Current Report on Form 8-K dated October 22, 1993 was filed October 22, 1993 reporting one event under Item 5. Other Events. SCHEDULE V FPL GROUP, INC. AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F Balance at Other Balance at Beginning Additions Retire- Changes - End of Classification of Year at Cost(1) ments(2) Add (Deduct) Year (Thousands of Dollars) Year Ended December 31, 1993 Electric utility plant, at original cost: Electric plant: Production plant: Steam $ 2,400,151 $ 391,623 $(50,295) $ (22,598) $2,718,881 Nuclear 3,365,244 40,407 (19,016) (192) 3,386,443 Other 338,611 483,230 (5,603) 23,081 839,319 Total production plant 6,104,006 915,260 (74,914) 291 6,944,643 Transmission plant 1,674,423 146,108 (15,052) (288) 1,805,191 Distribution plant 4,504,269 295,925 (48,856) 1,770 4,753,108 General plant 858,532 87,024 (34,462) 636 911,730 Intangible plant 46,265 87,143 - (56) 133,352 Total electric plant in service 13,187,495 1,531,460 (173,284) 2,353 14,548,024 Held for future use 69,493 (3,115) - (2,366) 64,012 Nuclear fuel 277,803 57,589 - (109,268) 226,124 Total electric utility plant 13,534,791 1,585,934 173,284) (109,281) 14,838,160 Construction work in progress 1,158,688 (377,253) - - 781,435 Other property 278,887 18,377 (11,617) (24,522) 261,125 Total $14,972,366 $1,227,058 $(184,901) $(133,803) $15,880,720 Year Ended December 31, 1992 Electric utility plant, at original cost: Electric Plant: Production plant: Steam $ 2,344,399 $ 83,322 $ (27,136) $ (434) $ 2,400,151 Nuclear 3,355,766 52,916 (43,438) - 3,365,244 Other 305,601 45,741 (12,743) 12 338,611 Total production plant 6,005,766 181,979 (83,317) (422) 6,104,006 Transmission plant 1,605,823 75,226 (5,899) (727) 1,674,423 Distribution plant 4,227,135 324,065 (48,640) 1,709 4,504,269 General plant 695,311 186,984 (26,043) 2,280 858,532 Intangible plant 31,657 14,134 - 474 46,265 Total electric plant in service 12,565,692 782,388 (163,899) 3,314 13,187,495 Held for future use 73,385 1,156 - (5,048) 69,493 Nuclear fuel 279,740 105,716 - (107,653) 277,803 Total electric utility plant 12,918,817 889,260 (163,899) (109,387) 13,534,791 Construction work in progress 597,401 561,287 - - 1,158,688 Other property 255,035 48,390 (19,947) (4,591) 278,887 Total $13,771,253 $1,498,937 $(183,846) $(113,978) $14,972,366
SCHEDULE V FPL GROUP, INC. AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT (Concluded)
Column A Column B Column C Column D Column E Column F Balance at Other Balance at Beginning Additions Retire- Changes - End of Classification of Year at Cost(1) ments(2) Add (Deduct) Year (Thousands of Dollars) Year Ended December 31, 1991 Electric utility plant, at original cost: Electric plant: Production plant: Steam $ 2,142,443 $ 239,997 $ (32,927) $ (5,114) $ 2,344,399 Nuclear 3,075,336 302,241 (21,500) (311) 3,355,766 Other 300,356 7,422 (2,176) (1) 305,601 Total production plant 5,518,135 549,660 (56,603) (5,426) 6,005,766 Transmission plant 1,546,047 63,291 (4,137) 622 1,605,823 Distribution plant 3,898,288 351,414 (25,508) 2,941 4,227,135 General plant 655,587 72,695 (32,695) (276) 695,311 Intangible plant 18,190 13,467 - - 31,657 Total electric plant in service 11,636,247 1,050,527 (118,943) (2,139) 12,565,692 Held for future use 59,801 12,611 - 973 73,385 Nuclear fuel 488,128 53,497 (108,607) (153,278) 279,740 Total electric utility plant 12,184,176 1,116,635 (227,550) (154,444) 12,918,817 Construction work in progress 476,279 121,122 - - 597,401 Other property 243,185 20,295 (3,945) (4,500) 255,035 Total $12,903,640 $1,258,052 $(231,495) $(158,944) $13,771,253 (1) Substantially all additions are originally charged to construction work in progress and transferred to electric utility plant accounts upon completion. Additions at cost give effect to such transfers. (2) The installed cost of individual units of plant retired is not always available. Plant accounts are credited for such retirements on the basis of estimates when the original cost is not available. Nuclear fuel materials sold are reflected as retirements.
SCHEDULE VI FPL GROUP, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F Additions Charged to Costs and Expenses Balance at Clearing Other Changes Balance Beginning Deprecia- & Other Retire- Add at End Description of Year tion Accounts(1) ments (Deduct) of Year (Thousands of Dollars) Year ended December 31, 1993 Accumulated depreciation of electric utility plant(2)(3): Production plant: Steam $1,022,517 $116,950 $ 197 $ (50,295) $ 20,394 $1,109,763 Nuclear 1,350,309 187,057 - (19,016) 4,597 1,522,947 Other 207,163 21,039 397 (5,603) 3,506 226,502 Total production plant 2,579,989 325,046 594 (74,914) 28,497 2,859,212 Transmission plant 771,076 33,366 - (15,052) 2,608 791,998 Distribution plant 1,449,155 173,752 - (48,857) 1,087 1,575,137 General plant 239,479 56,339 13,490 (34,462) 3,821 278,667 Intangible plant 18,542 15,113 537 - 1,958 36,150 Total electric utility plant 5,058,241 603,616 14,621 (173,285) 37,971 5,541,164 Accumulated depreciation of other property 47,825 11,432 - (5,574) (3,582) 50,101 Total $5,106,066 $615,048 $14,621 $(178,859) $ 34,389 $5,591,265 Year ended December 31, 1992 Accumulated depreciation of electric utility plant(2)(3): Production plant: Steam $ 962,585 $107,625 $ 31 $(41,211) $ (6,513) $1,022,517 Nuclear 1,205,123 190,124 - (44,933) (5) 1,350,309 Other 204,853 9,287 - (13,327) 6,350 207,163 Total production plant 2,372,561 307,036 31 (99,471) (168) 2,579,989 Transmission plant 744,931 31,283 - (4,880) (258) 771,076 Distribution plant 1,335,068 161,466 - (47,248) (131) 1,449,155 General plant 188,899 49,864 12,790 (12,513) 439 239,479 Intangible plant 9,866 7,620 938 - 118 18,542 Total electric utility plant 4,651,325 557,269 13,759 (164,112) - 5,058,241 Accumulated depreciation of other property 39,078 11,136 - (3,920) 1,531 47,825 Total $4,690,403 $568,405 $13,759 $(168,032) $ 1,531 $5,106,066
SCHEDULE VI FPL GROUP, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (Concluded)
Column A Column B Column C Column D Column E Column F Additions Charged to Costs and Expenses Balance at Clearing Other Changes Balance Beginning Deprecia- & Other Retire- Add at End Description of Year tion Accounts(1) ments (Deduct) of Year (Thousands of Dollars) Year ended December 31, 1991 Accumulated depreciation of electric utility plant(2)(3): Production plant: Steam $ 883,237 $103,629 $ - $ (44,417) $20,136 $ 962,585 Nuclear 1,050,026 178,789 - (23,602) (90) 1,205,123 Other 208,739 8,586 - (2,951) (9,521) 204,853 Total production plant 2,142,002 291,004 - (70,970) 10,525 2,372,561 Transmission plant 718,325 29,484 - (2,821) (57) 744,931 Distribution plant 1,223,635 144,119 - (33,108) 422 1,335,068 General plant 157,507 50,189 11,959 (30,776) 20 188,899 Intangible plant 4,328 5,537 - - 1 9,866 Total electric plant 4,245,797 520,333 11,959 (137,675) 10,911 4,651,325 Accumulated amortization of nuclear fuel assemblies 205,787 - (168,554) (37,233) - - Total electric utility plant 4,451,584 520,333 (156,595) (174,908) 10,911 4,651,325 Accumulated depreciation of other property 30,152 9,936 - (899) (111) 39,078 Total $4,481,736 $530,269 $(156,595) $(175,807) $10,800 $4,690,403
(1) Depreciation of transportation equipment is charged to various accounts based on the use of such equipment. Amortization of nuclear fuel assemblies is charged to fuel, purchased power and interchange expense. (2) This reserve is maintained for all depreciable property. The amount in the retirements column is net of removal costs and salvage. (3) Includes fossil decommissioning reserves of $102 million, $92 million and $83 million at December 31, 1993, 1992 and 1991, respectively. SCHEDULE IX FPL GROUP, INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS
Column A Column B Column C Column D Column E Column F Maximum Average Weighted Weighted Amount Amount Average Balance Average Outstanding Outstanding Interest Rate Category of Aggregate at End Interest During the During the During the Short-Term Borrowings of Year Rate Year (1) Year (2) Year (3) (Thousands of Dollars) Year ended December 31, 1993 Commercial paper $ 349,600 3.4% $ 374,600 $164,331 3.2% Year ended December 31, 1992 Commercial paper - - $ 19,100 $ 7,096 3.7% Year ended December 31, 1991 Lines of credit - - $ 36,500 $ 16,898 5.9% Commercial paper - - $ 51,301 $ 19,042 7.0%
(1) Represents the maximum amount outstanding at any month end. (2) Computed by dividing the sum of the daily ending balances by the number of days in the year. (3) Computation is based upon the principal amounts weighted by the number of days outstanding. SCHEDULE X FPL GROUP, INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION (1)
Column A Column B Years Ended December 31, 1993 1992 1991 (Thousands of Dollars) Maintenance expense $ 346,736 $ 358,375 $ 405,017 Taxes other than income taxes: Federal and state payroll $ 55,815 $ 54,272 $ 53,836 Real and personal property 150,952 140,394 126,574 State gross receipts 127,086 113,725 106,545 Franchise charges 202,258 194,421 204,880 Miscellaneous 29,209 46,765 32,277 Total $ 565,320 $ 549,577 $ 524,112 Charged to: Operating expenses $ 526,109 $ 497,739 $ 485,962 Utility plant and other accounts 39,211 51,838 38,150 Total $ 565,320 $ 549,577 $ 524,112
(1) Other information required by Article 5, Schedule X - Supplementary Income Statement Information is shown in the Consolidated Financial Statements or notes thereto, or is not presented as such amounts are less than 1% of total revenues. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: March 21, 1994 FPL Group, Inc. By JAMES L. BROADHEAD James L. Broadhead (Chairman of the Board, President and Chief Executive Officer, Principal Executive Officer and Director) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date PAUL J. EVANSON Principal Financial Officer Paul J. Evanson (Vice President, Finance and Chief Financial Officer) K. MICHAEL DAVIS Principal Accounting Officer K. Michael Davis (Controller and Chief Accounting Officer) March 21, 1994 H. JESSE ARNELLE H. Jesse Arnelle ROBERT M. BEALL, II Directors Robert M. Beall, II DAVID BLUMBERG David Blumberg Signature Title Date J. HYATT BROWN J. Hyatt Brown MARSHALL M. CRISER Marshall M. Criser JEAN MCARTHUR DAVIS Jean McArthur Davis BEVERLY F. DOLAN Beverly F. Dolan Directors March 21, 1994 WILLARD D. DOVER Willard D. Dover ALFONSO FANJUL Alfonso Fanjul STEPHEN E. FRANK Stephen E. Frank DREW LEWIS Drew Lewis FREDERIC V. MALEK Frederic V. Malek PAUL R. TREGURTHA Paul R. Tregurtha EX-3.(II) 2 BY-LAWS EXHIBIT 3(ii) FPL GROUP, INC. BYLAWS ARTICLE I. MEETINGS OF SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders of the Corporation shall be held at the time and place designated by the board of directors of the Corporation. Section 2. Special Meetings. Special meetings of the shareholders may be called by the chairman of the board of directors or the president or the secretary of the Corporation and shall be called upon the written request of a majority of the entire board of directors or the holder or holders of not less than a majority of all the outstanding shares of stock of the Corporation entitled to vote on the matter or matters to be presented at the meeting. Such request shall state the purpose or purposes of the proposed meeting. No business shall be conducted at any special meeting other than the business for which the special meeting is called as set forth in the notice of the special meeting. Special meetings shall be held at the time and place designated by the chief executive officer of the Corporation. Section 3. Place and Presiding Officer. Meetings of the shareholders may be held within or without the State of Florida. Meetings of the shareholders may be presided over by the chairman of the board, the president or any vice president. The secretary of the Corporation, or any person chosen by the person presiding over the shareholders' meeting, shall act as secretary for the meeting. Section 4. Notice. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the meeting, either personally or by United States mail, by or at the direction of the chairman of the board, the president, the secretary, or the officer or persons calling the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his or her address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment the board of directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in Section 4 of this Article I to each shareholder of record on the new record date entitled to vote at such meeting. Section 6. Closing of Transfer Books and Fixing Record Date. For the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the board of directors may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, sixty days (or such longer period as may from time to time be permitted by law). If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of, or to vote at, a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the board of directors may fix in advance a date as the record date for any determination of shareholders, such date in any case to be not more than sixty days (or such longer period as may from time to time be permitted by law) and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 6, such determination shall apply to any adjournment thereof, unless the board of directors fixes a new record date for the adjourned meeting. Section 7. Shareholder Quorum and Voting. A majority of the total number of shares outstanding and entitled to vote, present in person or represented by proxy thereat, shall constitute a quorum at a meeting of shareholders for the transaction of business, except as otherwise provided by law or by the Corporation's Restated Articles of Incorporation (the "Charter"). If a specified item of business is required to be voted on by a class or series of shares, a majority of the total number of shares outstanding and entitled to vote of such class or series, present in person or represented by proxy thereat, shall constitute a quorum at a meeting of shareholders for the transaction of such item of business by such class or series. If, however, a quorum does not exist at a meeting, the holders of a majority of the shares present at such meeting and entitled to vote may adjourn the meeting from time to time, without notice other than by announcement at the meeting, until the requisite number of shares entitled to vote shall be present. At any such adjourned meeting at which a quorum exists, any business may be transacted which might have been transacted at the meeting as originally noticed. After a quorum has been established at a meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. If a quorum exists, action on a matter (including the election of directors) shall be approved by the shareholders of the Corporation if the matter receives the affirmative vote of a majority of the total number of shares represented at the meeting and entitled to vote on such matter, unless the matter is one upon which, by express provision of law a greater vote is required or from time to time permitted by action of the board of directors, or by the Charter or these bylaws a greater or different vote is required, in either which case such express provision shall govern and control the requisite vote requirement. Section 8. Inspectors of Election. Prior to each meeting of shareholders, the board of directors shall appoint not less than two nor more than seven inspectors of election who shall have such duties and perform such functions in connection with the meeting as shall be determined by the board of directors. ARTICLE II. DIRECTORS Section 1. Function. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the board of directors. Section 2. Number. The number of directors of the Corporation shall not be less than three nor more than sixteen. The authorized number of directors, within the limits above specified, shall be determined by the affirmative vote of a majority of the entire board of directors given at a regular or special meeting thereof. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director. At each annual meeting the shareholders shall elect directors to hold office until the next succeeding annual meeting. Each director so elected shall hold office for the term of which he or she is elected and until his or her successor shall have been elected and qualified or until his or her earlier resignation, retirement, removal from office or death. No person who shall have attained the age of 72 years by the date of election shall be eligible for election as a director of the Corporation, and no director who shall have attained the age of 70 years by the date of election shall be eligible for election as chairman of the board of directors; provided, however, that these limitations shall not be applied in a manner which would cause the involuntary retirement of an employee of the Corporation. Section 3. Vacancies. Any vacancy occurring in the board of directors, including any vacancy created by reason of an increase in the number of directors, shall be filled only by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the next annual meeting of shareholders. Section 4. Removal. A director may be removed by the majority vote of the entire board of directors. A director may also be removed by shareholders, but only for cause and only by the affirmative vote of the holders of at least 75% of the voting power of the then outstanding shares of Voting Stock (as defined in the Charter), voting together as a single class. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal or has been adjudged by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his or her duty to the Corporation in a matter of substantial importance to the Corporation, and such adjudication is no longer subject to direct appeal. Notwithstanding the foregoing, and except as otherwise provided by law, in the event that holders of any class or series of Preferred Stock are entitled, voting separately as a class, to elect one or more directors, the provisions of this Section 4 shall apply, in respect to the removal of a director so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares of Voting Stock voting together as a single class. Section 5. Quorum and Voting. A majority of the number of directors fixed by, or in the manner provided in, these bylaws shall constitute a quorum for the transaction of business; provided, however, that whenever, for any reason, a vacancy occurs in the board of directors, the quorum shall consist of a majority of the remaining directors until the vacancy has been filled. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. Section 6. Executive and Other Committees. The board of directors, by resolution adopted by a majority of the entire board of directors, may designate from among its members an executive committee and one or more other committees. Each committee of the board of directors shall have such powers and functions as may be delegated to it by resolution adopted by the entire board of directors, except as prohibited by law. The board of directors, by resolution adopted in accordance with this Section 6, shall designate a chairman for each committee it establishes who shall preside at all meetings of the committee and who shall have such additional duties as shall from time to time be designated by the board of directors. The board of directors, by resolution adopted in accordance with this Section 6, may designate one or more directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee. Section 7. Meetings. Regular meetings of the board of directors shall be held without notice at the location of and immediately after the adjournment of the annual meeting of shareholders in each year, and at such other time and place, as may be determined by the board of directors. Notice of the time and place of special meetings of the board of directors shall be given to each director either by personal delivery, telegram, cablegram, or by telephone at least two days prior to the meeting. Notice may also be given through the postal service if mailed at least five days prior to the meeting. Notice of a meeting of the board of directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and a waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. Except as otherwise provided in the Charter, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the board of directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of adjournment, to the other directors. Meetings of the board of directors may be called by the chairman of the board, the president, or by any two directors. Members of the board of directors may participate in a meeting of such board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Meetings of the board of directors shall be presided over by the chairman of the board, or if such position is vacant or such person is absent, by the president. If neither the chairman of the board nor the president is present, the directors shall elect a chairman for the meeting from one of their members present. Section 8. Action Without a Meeting. Any action required to be taken at a meeting of the directors or any action which may be taken at a meeting of the directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so to be taken, signed by all of the directors or all the members of the committee, as the case may be, is filed in the minutes of the proceedings of the board or of the committee. Such consent shall have the same effect as a unanimous vote. ARTICLE III. OFFICERS Section 1. Types. The officers of the Corporation shall consist of a chairman of the board, a president, a secretary, a treasurer and such vice presidents and other officers as may be appointed by the board of directors or by a duly appointed officer authorized by these bylaws or by resolution of the board of directors to appoint officers. The chief executive officer of the Corporation shall be either the chairman of the board or the president as determined by the board of directors. The chief executive officer of the Corporation shall have the authority to appoint one or more assistant treasurers, assistant controllers and assistant secretaries. Section 2. Appointment and Term. The officers of the Corporation shall be appointed by the board of directors or by a duly appointed officer authorized to appoint officers. Each officer shall hold office until the first board of directors meeting immediately following the annual shareholders' meeting next occurring after his or her appointment to office and until his or her successor shall have been appointed or until his or her earlier resignation, retirement, removal from office or death. Section 3. Duties. All officers of the Corporation shall have such authority and shall perform such duties as generally pertain to their respective offices and shall have such additional authority and perform such additional duties as may from time to time be determined by resolution of the board of directors. Section 4. Removal of Officers. Any officer may be removed by the board of directors at any time with or without cause. Any officer appointed by the chief executive officer may be removed by the chief executive officer at any time with or without cause. Removal of any officer shall be without prejudice to the contract rights, if any, of the person so removed; provided, however, the appointment of any officer shall not of itself create contract rights. ARTICLE IV. STOCK CERTIFICATES Certificates representing shares in the Corporation shall be signed by the president or a vice president and the secretary or an assistant secretary. In addition, such certificates may be signed by a transfer agent or a registrar (other than the Corporation itself) and may be sealed with the seal of the Corporation or a facsimile thereof. Any or all of the signatures on such certificates may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of its issuance. Each certificate representing shares shall state upon the face thereof: the name of the Corporation; that the Corporation is organized under the laws of Florida; the name of the person or persons to whom issued; the number and class of shares and the designation of the series, if any, which such certificate represents; and the par value of each share represented by such certificate or a statement that the shares are without par value. ARTICLE V. DIVIDENDS The board of directors of the Corporation may, from time to time, declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and by the Charter. ARTICLE VI. INDEMNIFICATION Section 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or was or is called as a witness or was or is otherwise involved in any Proceeding in connection with his or her status as an Indemnified Person, shall be indemnified and held harmless by the Corporation to the fullest extent permitted under the Florida General Corporation Act (the "Act"), as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the Act permitted the Corporation to provide prior to such amendment). Such indemnification shall cover all expenses incurred by an Indemnified Person (including, but not limited to, attorneys' fees and other expenses of litigation) and all liabilities and losses (including, but not limited to, judgments, fines, ERISA or other excise taxes or penalties and amounts paid or to be paid in settlement) incurred by such person in connection therewith. Notwithstanding the foregoing, except with respect to indemnification specified in Section 3 of this Article VI, the Corporation shall indemnify an Indemnified Person in connection with a Proceeding (or part thereof) initiated by such person only if authorization for such Proceeding (or part thereof) was not denied by the board of directors of the Corporation prior to 60 days after receipt of notice thereof from such person. For purposes of this Article VI: (i) a "Proceeding" is an action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom; (ii) an "Indemnified Person" is a person who is or was (A) a director or officer of the Corporation, (B) a director, officer or other employee of the Corporation serving as a trustee or fiduciary of an employee benefit plan of the Corporation, (C) an agent or non-officer employee of the Corporation as to whom the Corporation has agreed to grant such indemnity, or (D) serving at the request of the Corporation in any capacity with any entity or enterprise other than the Corporation and as to whom the Corporation has agreed to grant such indemnity. Section 2. Expenses. Expenses, including attorneys' fees, incurred by a person indemnified pursuant to Section 1 of this Article VI in defending or otherwise being involved in a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding, including any appeal therefrom, (i) in the case of a director or officer of the Corporation or director, officer or other employee of the Corporation serving as a trustee or fiduciary of any employee benefit plan of the Corporation, upon receipt of an undertaking ("Undertaking") by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation; or (ii) in the case of any other person, upon such terms and as the board of directors, the chairman of the board or the president of the Corporation deems appropriate. Notwithstanding the foregoing, in connection with a Proceeding (or part thereof) initiated by such person, except a Proceeding authorized by Section 3 of this Article VI, the Corporation shall pay said expenses in advance of final disposition only if authorization for such Proceeding (or part thereof) was not denied by the board of directors of the Corporation prior to 60 days after receipt of a request for such advancement accompanied by an Undertaking. A person to whom expenses are advanced pursuant to this Section 2 shall not be obligated to repay pursuant to an Undertaking until the final determination of any pending Proceeding in a court of competent jurisdiction concerning the right of such person to be indemnified or the obligation of such person to repay pursuant to such Undertaking. Section 3. Protection of Rights. If a claim under Section 1 of this Article VI is not promptly paid in full by the Corporation after a written claim has been received by the Corporation or if expenses pursuant to Section 2 of this Article VI have not been promptly advanced after a written request for such advancement accompanied by an Undertaking has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim or the advancement of expenses. If successful, in whole or in part, in such suit, such claimant shall also be entitled to be paid the reasonable expense thereof. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required Undertaking has been tendered to the Corporation) that indemnification of the claimant is prohibited by law, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its shareholders) to have made a determination, if required, prior to the commencement of such action that indemnification of the claimant is proper in the circumstances, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its shareholders) that indemnification of the claimant is prohibited, shall be a defense to the action or create a presumption that indemnification of the claimant is prohibited. Section 4. Miscellaneous. (i) Power to Request Service and to Grant Indemnification. The chairman of the board or the president or the board of directors may request any director, officer, agent or employee of the Corporation to serve as its representative in the position of a director or officer (or in a substantially similar capacity) of an entity or enterprise other than the Corporation, and may grant to such person indemnification by the Corporation as described in Section 1 of this Article VI. (ii) Non-Exclusivity of Rights. The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter, bylaw, agreement, vote of shareholders or disinterested directors or otherwise. The board of directors shall have the authority, by resolution, to provide for such indemnification of employees or agents of the Corporation or others and for such other indemnification of directors, officers, employees or agents as it shall deem appropriate. (iii) Insurance Contracts and Funding. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of or person serving in any other capacity with, the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including serving as a trustee or fiduciary of any employee benefit plan) against any expenses, liabilities or losses, whether or not the Corporation would have the power to indemnify such person against such expenses, liabilities or losses under the Act. The Corporation may enter into contracts with any director, officer, agent or employee of the Corporation in furtherance of the provisions of this Article VI, and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect the advancing of expenses and indemnification as provided in this Article VI. (iv) Contractual Nature. The provisions of this Article VI shall continue as to a person who has ceased to be a director, officer, agent or employee and shall inure to the benefit of the heirs, executors and administrators of such person. This Article VI shall be deemed to be a contract between the Corporation and each person who, at any time that this Article VI is in effect, serves or served in any capacity which entitles him or her to indemnification hereunder and any repeal or other modification of this Article VI or any repeal or modification of the Act, or any other applicable law shall not limit any rights of indemnification for Proceedings then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including without limitation, the right to indemnification for Proceedings commenced after such repeal or modification to enforce this Article VI with regard to Proceedings arising out of acts, omissions or events arising prior to such repeal or modification. (v) Savings Clause. If this Article VI or any portion hereof shall be invalidated or held to be unenforceable on any ground by any court of competent jurisdiction, the decision of which shall not have been reversed on appeal, the Corporation shall nevertheless indemnify each Indemnified Person as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any Proceeding, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and as permitted by applicable law. ARTICLE VII. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS Unless otherwise directed by the board of directors, the chief executive officer or his or her designee shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of shareholders of or with respect to any action of shareholders of any other corporation in which the Corporation may hold securities and to otherwise exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE VIII. AMENDMENT The power to adopt, alter, amend or repeal bylaws shall be vested in the board of directors. Bylaws adopted by the board of directors may be repealed or changed, and new bylaws may be adopted by shareholders only if such repeal, change or adoption is approved by the affirmative vote of the holders of at least 75% of the then outstanding Voting Stock (as defined in the Charter), voting together as a single class. ARTICLE IX. CONTINUING EFFECT OF BYLAW PROVISIONS Any provisions contained in these bylaws which, at the time of its adoption, was authorized or permitted by applicable law shall continue to remain in full force and effect until such time as such provision is specifically amended in accordance with these bylaws, notwithstanding any subsequent modification of such law (except to the extent such bylaw provision expressly provides for its modification by or as a result of any such subsequently enacted law). 11-15-93 EX-10 3 EMPLOYMENT AGREEMENT BETWEEN FPL GROUP AND JAMES L. BROADHEAD DATED AS OF DECEMBER 13, 1993 EXHIBIT 10(j) EMPLOYMENT AGREEMENT Employment Agreement, dated as of December 13, 1993, between FPL Group, Inc., a Florida corporation (the "Company"), and James L. Broadhead, residing at , Florida (the "Employee"). The Company and the Employee agree as follows: 1. Position. The Company currently employs the Employee, and the Employee currently serves the Company, as Chairman of the Board, President, and Chief Executive Officer. The Employee also serves as Chairman of the Board and Chief Executive Officer of Florida Power & Light Company. The parties intend that the Employee shall continue to so serve in the aforesaid capacities throughout the term of this employment agreement (the "Agreement"). 2. Term. The term of this Agreement shall commence on January 1, 1994, and shall continue through December 31, 1997 (the "Term"); provided, however, that commencing on January 1, 1997, and each January 1 thereafter, the Term shall automatically be extended for one additional year, unless at least 30 days prior to such January 1 date, the Company or the Employee shall have given written notice that it or he does not wish to extend the Term. Notwithstanding the foregoing, the Employment Agreement dated February 13, 1989, as now in effect or as hereafter amended (the "Supplemental Employment Agreement") between the Company and the Employee shall continue in full force and effect in accordance with its terms and, in the event of a "Change of Control" (as defined therein) of the Company, this Agreement shall terminate as of the Effective Date under the Supplemental Employment Agreement, and thereafter the Employee's employment relationship with the Company shall be governed by the provisions of the Supplemental Employment Agreement. 3. Duties. Throughout the Term of this Agreement the Employee shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company and its Affiliates, except for reasonable vacations and except for illness or incapacity, but nothing in this Agreement shall preclude the Employee from devoting reasonable periods required for serving as a director or a member of an advisory committee of any organization involving no conflict of interest with the Company, from engaging in charitable and community activities, and from managing his personal investments, provided that such activities do not materially interfere with the performance of his duties and responsibilities under this Agreement. As used in this Agreement, the term "Affiliates" means any entity controlled by the Company, whether by means of ownership or otherwise. 4. Compensation. (a) Base Salary. The Company shall pay to the Employee a Base Salary at the minimum rate of $765,900 per year, payable in equal installments not less frequently than monthly. Such salary shall be reviewed at least annually (beginning in 1994), with any increases taking into account, among other factors, corporate and individual performance and increases in cost of living indexes. (b) Annual Incentive Compensation. In addition to Base Salary, the Employee shall be entitled to participate in the Company's Annual Incentive Plan, as in effect on the date of this Agreement or as may be modified from time to time but providing substantially similar opportunities and benefits, on a basis that provides the Employee with opportunities and benefits at least equal, both as to amount and percentage of total compensation, to those afforded the Employee under the Annual Incentive Plan as in effect on the date of this Agreement. (c) Long Term Incentive Compensation. In addition to Base Salary and Annual Incentive Compensation, the Employee shall be entitled to participate in the Company's Performance Share Plan, as in effect on the date of this Agreement or as may be modified from time to time but providing substantially similar opportunities and benefits, under the Long Term Incentive Plan on a basis that provides the Employee with opportunities and benefits at least equal, both as to amount and percentage of compensation, to those afforded the Employee under the Performance Share Plan as in effect on the date of this Agreement. (d) Benefit Plans. The Employee shall be entitled to participate on a basis commensurate with his duties and responsibilities as Chairman of the Board, President, and Chief Executive Officer in all applicable retirement and employee benefit plans of the Company, including, without limitation, the FPL Group Employee Pension Plan; the Benefit Restoration Plan of FPL Group, Inc. and Affiliates; the FPL Group, Inc. Supplemental Executive Retirement Plan; FPL Group Employee Thrift Plan; Medical Plan for Employees of FPL Group and Affiliates; the Life Insurance Plan for Employees of FPL Group and Affiliates; the Long Term Disability Plan for Employees of FPL Group and Affiliates; the FPL Flex Plan for Employees of FPL Group and Affiliates; and the Dental Plan for Employees of FPL Group and Affiliates, the Company's Executive Benefits Program, and such other benefit plans as may be adopted from time to time during his employment with the Company. (e) Supplemental Retirement Plan. The Employee has been provided with an Amended and Restated Supplemental Executive Retirement Plan adopted by the Compensation Committee on September 16, 1991 (the "Supplemental Retirement Plan") and related Restricted Stock Award Agreements. The Supplemental Retirement Plan and related Restricted Stock Award Agreements shall be continued in full force and effect and are amended by the provisions of Paragraph 6(b). (f) Fringe Benefits. The Employee shall be entitled to fringe benefits in accordance with the practices and policies of the Company in effect for the Employee on the date of this Agreement. (g) Business Expenses. The Company shall, in accordance with policies then in effect with respect to payment of expenses, pay or reimburse the Employee for all reasonable out-of-pocket travel and other expenses (other than ordinary commuting expenses) incurred by the Employee in performing services hereunder. All such expenses shall be accounted for in such reasonable detail as the Company may require. 5. Termination. (a) Death. In the event of the death of the Employee during the Term of this Agreement, his Base Salary shall be paid to his designated beneficiary, or in the absence of such designation to the estate or other legal representative of the Employee, through the month in which death occurs. Other death benefits will be determined and paid in accordance with the terms of the Supplemental Retirement Plan and all other applicable benefit programs and plans of the Company. (b) Disability. The Company may terminate the Employee's employment hereunder in the event of the Employee's Total and Permanent Disability as defined in the Long Term Disability Plan for Employees of FPL Group and Affiliates, as amended from time to time or any successor plan thereof. In such event the Employee shall be entitled to compensation in accordance with such Plan, the Supplemental Retirement Plan, and all other applicable benefit programs and plans of the Company. (c) Cause. The Company may terminate the Employee's employment hereunder for Cause, which for purposes of this Agreement shall mean (i) an act of dishonesty constituting a felony and intended to result in substantial personal enrichment at the expense of the Company or its Affiliates or (ii) the willful refusal (except for incapacity due to accident or illness) to perform substantially his duties as set forth in Paragraph 3, provided that such refusal shall have resulted in demonstrable material injury to the Company or its Affiliates. No act or failure to act on the Employee's part shall be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that his action or omission was in the best interest of the Company and its Affiliates. If the Employee's employment is terminated for Cause, this Agreement shall terminate without further obligation to the Employee other than the obligation to pay to him the Base Salary through the date of termination, the amount of any other compensation previously awarded to him and still unpaid, and whatever benefits he may be entitled to under the Company's benefit programs and plans. (d) Without Cause. The Company may terminate the Employee's employment at any time for whatever reasons it deems appropriate; provided, however, that in the event such termination is not due to Disability or for Cause, the Employee shall be entitled to receive the Termination Benefits set forth in Paragraph 6. (e) Constructive. The Employee may terminate his employment hereunder for Good Reason, which for purposes of this Agreement shall mean: (i) the failure to reelect the Employee as Chairman of the Board, President, and Chief Executive Officer of the Company or Chairman of the Board and Chief Executive Officer of Florida Power & Light Company; (ii) a material diminution in the nature or scope of the authorities, powers, duties, or responsibilities attached to the Employee's position as described in Paragraphs 1 and 3; (iii) any failure by the Company to comply with any of the provisions of Paragraph 4 other than an isolated, insubstantial, and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; or (iv) a relocation of the Employee's place of work that requires him to commute more than 25 miles from his current residence in North Palm Beach, Florida. If the Employee terminates his employment hereunder for Good Reason, he shall be entitled to receive the Termination Benefits set forth in Paragraph 6. (f) Voluntary. In the event that the Employee terminates his employment at his own volition prior to the expiration of the Term (except as provided in Paragraph 5(e)), the Employee shall be limited to the same rights and benefits as provided in connection with a termination for Cause under Paragraph 5(c). 6. Termination Benefits. The Employee shall be entitled to the following benefits ("Termination Benefits") if, during the Term of the Agreement, the Company terminates the Employee's employment other than for Disability or Cause or the Employee terminates his employment for Good Reason: (a) A lump sum cash payment equal to the aggregate of the following amounts: (i) The Employee's Base Salary through the month in which termination of employment occurs. (ii) All Annual Incentive Compensation and Long Term Incentive Compensation, if any, awarded but not yet paid with respect to fiscal years ending prior to the fiscal year in which termination of employment occurs. (iii) Two times the Employee's Base Salary, as in effect immediately prior to his termination of employment. (iv) Two times the average of the Annual Incentive Awards paid or payable to the Employee by the Company and its Affiliates in respect of the two fiscal years immediately preceding the fiscal year in which termination of employment occurs. (v) All amounts accrued to the date of termination of employment but not paid under each Performance Share Grant in progress under the Long Term Incentive Plan. With respect to the fiscal year in which termination of employment occurs, the payout for that year under each Performance Share Grant shall be prorated based on the assumption that 100% of the targeted award for that year is achieved. (vi) An amount reflecting the economic equivalent of the employee benefit plans referred to in Paragraph 4(d) for the remaining Term of this Agreement. Such lump sum payment shall be made within 30 days after termination of the Employee's employment. (b) The Employee's benefits under the Supplemental Retirement Plan shall become fully vested and non-forfeitable and the restrictions under the related Restricted Stock Award Agreements shall lapse. (c) The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Paragraph 6 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Paragraph 6 be reduced by any compensation earned by the Employee after the termination of this Agreement. 7. Non-Compete. The Employee agrees that during the period ending two years after a termination of employment under Paragraph 5(d) or 5(e) and during the period ending one year after a termination of employment under Paragraph 5(f) (the "Non-Compete Period"), he shall not compete with the Company or any of its Affiliates. For purposes of this Agreement, the term "compete" shall mean engaging in a business as a more than 10 percent stockholder, an officer, a director, an employee, a partner, an agent, a consultant, or any other individual or representative capacity if it involves: (i) engaging in the electric generation, transmission, or distribution business in competition with the Company in any state of the United States in which the Company or any of its Affiliates (which shall mean for purposes of this Paragraph 7 any Affiliate in which the Company owns, directly or indirectly, an equity interest of 20% or more) operates at any time during the Non-Compete Period; or (ii) rendering services or advice pertaining to the electric generation, transmission, or distribution business to or on behalf of any person, firm or corporation which is in competition with the Company or any of its Affiliates at any time during the Non-Compete Period in any state of the United States. In the event the restrictions against engaging in a competitive activity contained in this Paragraph 7 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographic area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over the maximum period of time for which it may be enforceable, and over the maximum geographic area as to which it may be enforceable and to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. Clauses (i) and (ii), above, are intended by the Company as separate and divisible provisions, and if for any reason any one is held to be invalid or unenforceable, neither the validity nor the enforceability of the other shall thereby be affected. 8. Confidential Information. The Employee shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its Affiliates and their respective businesses, which is obtained by the Employee during his employment by the Company or any of its Affiliates and which is not public knowledge (other than by acts by the Employee in violation of this Agreement). After termination of the Employee's employment with the Company, the Employee shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. 9. Injunctive Relief. The Employee acknowledges that a breach of the restrictions against engaging in a competitive activity contained in Paragraph 7 and the disclosure of confidential information contained in Paragraph 8 will cause irreparable damage to the Company, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Employee and the Company agree that if the Employee breaches the restrictions on engaging in a competitive activity or on the disclosure of confidential information contained in Paragraphs 7 and 8, then the Company shall be entitled to injunctive relief, without posting bond or other security. 10. Successors and Assigns. (a) Company. Subject to the provisions of Paragraph 2, this Agreement shall be binding upon and inure to the benefit of the Company or any corporation or other entity with which the Company may merge or consolidate or to which the Company may transfer all or substantially all of its assets and business, in which case the term "Company," as used herein, shall mean such corporation or other entity. (b) Employee. This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of an be enforceable by the Employee's legal representative. 11. Governing Law. This Agreement shall be governed by the laws of the State of Florida. 12. Entire Agreement. This Agreement, the Supplemental Employment Agreement, the Supplemental Retirement Plan, the Restricted Stock Award Agreements, and the plans and documents referred to herein contain all of the understandings and representations between the parties hereto pertaining to the matters referred to herein, and supersede all undertakings and agreements, whether oral or in writing, previously entered into by them with respect thereto. This Agreement may only be modified by an instrument in writing signed by the parties hereto. 13. Waiver of Breach. The waiver by any party of a breach of any condition or provision of this Agreement to be performed by the other party shall not operate or be construed to be a waiver of a similar or dissimilar provision or condition at the same or any prior or subsequent time. 14. Notices. Any notice to be given hereunder shall be in writing and delivered personally, by telefacsimile, or by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or to such other address as such party may subsequently give notice of hereunder in writing: If to the Company: FPL Group, Inc. 700 Universe Boulevard P. O. Box 14000 Juno Beach, Florida 33408 Attention: Corporate Secretary If to the Employee: 15. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association then in effect in the State of Florida, and judgment upon such award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The board of arbitrators shall consist of one arbitrator to be appointed by the Company, one by the Employee, and one by the two arbitrators so chosen. The arbitration shall be held in West Palm Beach, Florida, or such other place as may be agreed upon at the time by the parties to the arbitration. The cost of arbitration shall be borne among the parties to the arbitration as determined by the arbitrators. It is the intention of the parties that to the extent the Employee's position is upheld, his expenses (including cost of witnesses, evidence, and attorneys), as determined by the arbitrators, shall be reimbursed to him by the Company. 16. Withholding. Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Employee or his estate or beneficiaries shall be subject to the withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provisions for payment of taxes and withholdings as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold have been satisfied. 17. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 18. Titles. Titles to the paragraphs in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any paragraph. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. FPL GROUP, INC. By /s/ LAWRENCE J. KELLEHER Lawrence J. Kelleher, Vice President, Human Resources /s/ JAMES L. BROADHEAD James L. Broadhead EX-21 4 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT State or Jurisdiction Subsidiary of Incorporation 1. Florida Power & Light Company (100%-Owned) Florida 2. FPL Group Capital Inc (100%-Owned) Florida 3. Bay Loan and Investment Bank(1) Rhode Island 4. Palms Insurance Company, Limited(1) Cayman Islands 5. Palmetto Insurance Company Limited(2) Cayman Islands
(1) 100%-owned subsidiary of FPL Group Capital Inc (2) 100%-owned subsidiary of Palms Insurance Company, Limited EX-23 5 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 4 to Registration Statement No. 33-18669 on Form S-8; Post-Effective Amendment No. 2 to Registration Statement No. 33-31487 on Form S-8; Post- Effective Amendment No. 2 to Registration Statement No. 33-33215 on Form S-8; Registration Statement No. 33-11631 on Form S-8; Post-Effective Amendment No. 1 to Registration Statement No. 33-39306 on Form S-3; Registration Statement No. 33-57470 on Form S-3; and Post-Effective Amendment No. 5 to Registration Statement No. 33-18669 on Form S-8 of FPL Group, Inc., of our report dated February 11, 1994 appearing in this Annual Report on Form 10-K of FPL Group, Inc. for the year ended December 31, 1993. DELOITTE & TOUCHE Miami, Florida March 21, 1994 -----END PRIVACY-ENHANCED MESSAGE-----