-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TULGsjnrgzK9qkTItH+klky39IUj38pOjKGXXwEoCzL9LQLyOLmcglfYKIzoeJNI pbo0IDx0bRgg/rb4GYThSw== /in/edgar/work/20000803/0000753308-00-000016/0000753308-00-000016.txt : 20000921 0000753308-00-000016.hdr.sgml : 20000921 ACCESSION NUMBER: 0000753308-00-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000731 ITEM INFORMATION: FILED AS OF DATE: 20000803 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: 8-K SEC ACT: SEC FILE NUMBER: 001-08841 FILM NUMBER: 685493 BUSINESS ADDRESS: STREET 1: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 5616944000 MAIL ADDRESS: STREET 1: P O BOX 14000 CITY: JUNO BEACH STATE: FL ZIP: 33408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLORIDA POWER & LIGHT CO CENTRAL INDEX KEY: 0000037634 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 590247775 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 002-27612 FILM NUMBER: 685494 BUSINESS ADDRESS: STREET 1: 700 UNIVERSE BLVD CITY: JUNO BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 5616944000 MAIL ADDRESS: STREET 1: P O BOX 14000 CITY: JUNO BEACH STATE: FL ZIP: 33408 8-K 1 0001.txt FPL GROUP AND FPL 8/2/00 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of earliest event reported: July 30, 2000
Exact name of Registrants as specified in their IRS Employer Commission charters, addresses of principal executive Identification File Number offices and Registrants' phone number Number 1-8841 FPL GROUP, INC. 59-2449419 1-3545 FLORIDA POWER & LIGHT COMPANY 59-0247775 700 Universe Boulevard Juno Beach, Florida 33408 (561) 694-4000
State or other jurisdiction of incorporation: Florida Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This Form 8-K contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the businesses of FPL Group, Inc. and Entergy Corporation are based on current expectations that are subject to risk and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks and uncertainties relating to: changes in laws or regulations, changing governmental policies and regulatory actions with respect to allowed rates of return including but not limited to return on equity and equity ratio limits, industry and rate structure, operation of nuclear power facilities, acquisition, disposal, depreciation and amortization of assets and facilities, operation and construction of plant facilities, recovery of fuel and purchased power costs, decommissioning costs, present or prospective wholesale and retail competition (included but not limited to retail wheeling and transmission costs), political and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions (including natural disasters such as hurricanes), population growth rates and demographic patterns, competition for retail and wholesale customers, availability, pricing and transportation of fuel and other energy commodities, market demand for energy from plants or facilities, changes in tax rates or policies or in rates of inflation or in accounting standards, unanticipated delays or changes in costs for capital projects, unanticipated changes in operating expenses and capital expenditures, capital market conditions, competition for new energy development opportunities and legal and administrative proceedings (whether civil, such as environmental, or criminal) and settlements and other factors. Readers are referred to FPL Group, Inc.'s, Florida Power & Light Company's and Entergy Corporation's most recent reports filed with the Securities and Exchange Commission. Item 5. Other Events FPL Group, Inc., a Florida corporation (FPL Group), Entergy Corporation, a Delaware corporation (Entergy), WCB Holding Corp., a Delaware corporation, 50% of whose outstanding capital stock is owned by FPL Group and 50% of whose outstanding capital stock is owned by Entergy (the Company), Ranger Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of the Company (Merger Sub A), and Ring Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company (Merger Sub B), entered into an Agreement and Plan of Merger dated as of July 30, 2000 (the Agreement). Each of FPL Group and Entergy is sometimes referred to herein as a "party". The description of the Agreement set forth herein does not purport to be complete and is qualified in its entirety by reference to the Agreement. Capitalized terms not defined herein shall have the meaning set forth in the Agreement. Pursuant to the terms of the Agreement, Merger Sub A will merge with and into FPL Group (the FPL Merger). FPL Group will be the surviving corporation in the FPL Merger and will become a wholly-owned subsidiary of the Company. Merger Sub B will merge with and into Entergy (the Entergy Merger, and together with the FPL Merger, the Mergers). Entergy will be the surviving corporation in the Entergy Merger and will also become a wholly- owned subsidiary of the Company. The Mergers were unanimously approved by both the FPL Group Board of Directors and the Entergy Board of Directors. FPL Group and Entergy will seek to consummate the Mergers by late 2001. Under the terms of the Agreement, at the effective time of the Mergers (the Effective Time), each outstanding share of FPL Group common stock (other than shares held by FPL Group, Entergy or the Company) will be converted into the right to receive one share of Company common stock and each outstanding share of Entergy common stock (other than shares held by FPL Group, Entergy or the Company) will be converted into the right to receive 0.585 of a share of Company common stock. In addition, at the Effective Time, each share of Company common stock issued and outstanding immediately prior to the Effective Time will be cancelled. The Mergers are subject to customary closing conditions, including, without limitation, the receipt of the required approvals of the shareholders of FPL Group and Entergy, there being no injunction, restraining order or law in effect which prevents the consummation of the Mergers, the Form S-4 being effective and not the subject of any stop order or proceeding seeking a stop order, the shares of Company common stock issuable in the Mergers having been approved for listing on the NYSE and all necessary governmental approvals having been received and all necessary governmental filings having been made, including the consent or approval of certain state utility regulators, the approvals of the Federal Energy Regulatory Commission, the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 and the Nuclear Regulatory Commission, and the filing of the requisite notification with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Agreement contains certain covenants of the parties applicable during the period pending the consummation of the Mergers. Generally, each party and its subsidiaries are obligated to carry on its business in the ordinary course consistent with past practice. The Agreement contains certain restrictions on each party including limitations on or procedures for: amendments to the corporate charter documents of FPL Group or Entergy or any of their respective subsidiaries, declaration and payment of dividends, issuance of securities, acquisitions, capital expenditures, dispositions, incurrence or guarantee of indebtedness, trading or marketing of energy, modification of employee benefits, modifications of existing agreements or course of dealings with governmental authorities, changes in accounting policies and maintenance of insurance. FPL Group and Entergy each generally will be permitted to take actions pursuant to restructuring legislation in their respective states of operation and reorganize their transmission businesses. The Agreement prohibits, with certain exceptions, either party and its subsidiaries from initiating, soliciting or knowingly encouraging, or knowingly taking any other action designed to facilitate, any inquiries or the making of any Entergy Takeover Proposal or FPL Takeover Proposal, as the case may be (hereinafter referred to as a Takeover Proposal), or participate in any negotiations or substantive discussions regarding any Takeover Proposal. If, at any time prior to receipt of such party's shareholder approval, the party's Board of Directors determines in good faith, after consultation with its legal and financial advisors, that a Takeover Proposal that was not solicited in violation of the Agreement is, or is reasonably likely to lead to, an Entergy Superior Proposal or FPL Superior Proposal, as the case may be (hereinafter referred to as a Superior Proposal), then, after providing prior written notice of its decision to take such action to the other party and otherwise complying with the applicable provisions of the Agreement, the party may: (i) furnish information with respect to itself and its subsidiaries to the person making such proposal pursuant to a customary confidentiality agreement containing terms no less favorable than those set forth in the confidentiality agreement between FPL Group and Entergy and (ii) participate in discussions or negotiations regarding such proposal. The Agreement requires that each party, its subsidiaries and their representatives immediately terminate any existing activities, discussions or negotiations with any parties with respect to any Takeover Proposal. Neither the Board of Directors of a party nor any committee thereof shall: (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to the other party, the approval or recommendation of the Mergers, by such Board of Directors, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause such party to enter into any agreement (an Acquisition Agreement) related to any Takeover Proposal. In response to a Takeover Proposal that is not obtained in violation of the Agreement, at any time prior to receipt of such party's shareholder approval, the Board of Directors of such party may, if it determines in good faith after consulting with outside counsel that the failure to take such action would be reasonably likely to result in a breach of the Board of Directors' fiduciary obligations to its shareholders under applicable law, (i) withdraw or modify, or propose publicly to withdraw or modify, the approval or recommendation by such Board of Directors or any committee thereof of the Mergers, (ii) approve or recommend, or propose to approve or recommend, any Superior Proposal, or (iii) terminate the Agreement. However, such actions can only be taken if, in the case of each of clauses (ii) and (iii), such Board of Directors determines in good faith that such Takeover Proposal constitutes a Superior Proposal and, in the case of clause (iii), (A) such party has notified the other in writing of its determination that such Takeover Proposal constitutes a Superior Proposal and (B) at least seven business days following receipt by such party of such notice, the Board of Directors of such party determines that such Superior Proposal remains a Superior Proposal. At the Effective Time, the Board of Directors of the Company will consist of eight directors designated by FPL Group and seven directors designated by Entergy. The first vacancy on the Board that occurs with respect to a FPL Designee following the 12-month anniversary of the Effective Time and prior to the third annual shareholders' meeting of the Company that occurs following the end of the calendar year in which the Effective Time occurs will not be filled and, instead, the number of directors will be reduced by one. Any increase or decrease in the size of the Board of Directors or change to the above-mentioned mechanism would require the affirmative vote of at least two-thirds of the entire Board of Directors. Following the Effective Time, (i) a subcommittee consisting of the remaining members of the Board appointed by FPL Group will recommend replacements for a Board vacancy of a member designated by FPL Group, and (ii) a subcommittee consisting of the remaining members of the Board appointed by Entergy will recommend replacements for a Board vacancy of a member designated by Entergy. The Board is required to honor the subcommittee's recommendations to fill vacancies during such period. Any changes to this procedure will require the affirmative vote of at least two-thirds of the entire Board of Directors. The provisions described in this paragraph will no longer be applicable following the earlier of (a) the time at which the size of the Board is reduced by one and (b) the third annual shareholders' meeting of the Company that occurs following the end of the calendar year in which the Effective Time occurs. From the Effective Time until the first anniversary of the Effective Time, pursuant to the terms of the employment agreements entered into between the Company and each of James L. Broadhead and J. Wayne Leonard, (i) Mr. Broadhead will be Chairman of the Board of the Company (serving in an executive capacity) and (ii) Mr. Leonard will be CEO and President of the Company. Following the first anniversary of the Effective Time and prior to the third annual shareholders' meeting of the Company following the calendar year in which the Effective Time occurs, (i) Mr. Broadhead will be Chairman of the Board of the Company (serving in a non-executive capacity) and (ii) Mr. Leonard will be CEO and President of the Company. At the Effective Time, each of Robert v.d. Luft and an FPL Group designee will be appointed to the position of Vice Chairman of the Board of the Company. At the Effective Time, the name of the Company will be a new name agreed upon between the Boards of Directors of FPL Group and Entergy prior to the Effective Time. The Company will maintain its principal corporate offices and headquarters in Juno Beach, Florida, and will maintain its utility headquarters in New Orleans, Louisiana. The Agreement may be terminated under certain circumstances, including: (i) if the Mergers have not occurred by April 30, 2002; provided that the termination date will be extended until October 31, 2002 if the only closing condition not satisfied at April 30, 2002 is that relating to obtaining all required regulatory and governmental approvals; (ii) if the requisite shareholder approvals have not been obtained; (iii) if any temporary restraining order or preliminary or permanent injunction or other order by any court preventing, or applicable law prohibiting, consummation of the Mergers is in effect and is final and nonappealable; provided that the party seeking to terminate the Agreement must have used its reasonable best efforts to prevent the entry of and to remove such restraint; (iv) if the other party has breached any representations, warranties or covenants, and such breaches, individually or in the aggregate, (A) give rise to the failure of the closing condition that the representations and warranties be true or that the covenants be complied with at the Effective Time, and (B) are incapable of being cured by such breaching party or are not cured by such breaching party within 30 days following receipt of written notice from the other party of such breach or failure to perform; (v) if the applicable Board determines in good faith that a Takeover Proposal constitutes a Superior Proposal; provided that, in order for the termination of the Agreement to be deemed effective, the terminating party must have complied with the applicable provisions of the Agreement and paid the required Termination Fee (described below); (vi) if the other party, or any of the other party's directors or officers, participate in discussions or negotiations relating to a Takeover Proposal; (vii) if the other party's Board of Directors (a) withdraws or modifies, or proposes publicly to withdraw or modify, the approval or recommendation by such Board of Directors of the Agreement or the Mergers, (b) fails to reaffirm such approval or recommendation within 10 business days of receipt of the terminating party's written request at any time when a Takeover Proposal relating to the other party shall have been made and not rejected by the Board of Directors of such other party or (c) approves or recommends, or proposes to approve or recommend, a Takeover Proposal; or (viii) if any condition to the obligation of such party to consummate the Mergers becomes incapable of satisfaction prior to closing; provided that the failure of such condition is not the result of a material breach of the Agreement by the party seeking to terminate the Agreement. A party will become obligated to pay the other party a termination fee of $215 million (the Termination Fee) if (i) following a party's shareholders meeting, a Takeover Proposal is made for such party, thereafter the Agreement is terminated by either FPL Group or Entergy due to the Effective Time not occurring prior to the termination date, and within 12 months after the termination of the Agreement, such party enters into an Acquisition Agreement or consummates a Takeover Proposal with the party who submitted the Takeover Proposal referred to above, (ii) prior to or during the such party's shareholders meeting, a Takeover Proposal for such party is made, thereafter the Agreement is terminated by either FPL Group or Entergy because approval of the shareholders of the party receiving the Takeover Proposal was not obtained, and within 24 months thereafter such party enters into an Acquisition Agreement or consummates a Takeover Proposal with any third party, (iii) the Agreement is terminated by a party pursuant to the provision permitting termination for a Superior Proposal, or (iv) the Agreement is terminated by a party because the Board of Directors of the other party (A) withdraws or modifies, or proposes publicly to withdraw or modify, its approval or recommendation of the Agreement or the Mergers, or (B) approves or recommends, or proposes to approve or recommend, a Takeover Proposal. If the Termination Fee becomes payable to a party in accordance with the above-described provisions, the party paying the Termination Fee will be obligated to reimburse the other party for its fees and expenses in connection with the Mergers, up to a maximum of $25 million. Reference is made to FPL Group's Form 8-K filed July 31, 2000, which attached as Exhibits 2.1, 10.1, 10.2 and 99.1 respectively, copies of the Agreement, the employment agreement between Mr. Broadhead and the Company, the employment agreement between Mr. Leonard and the Company and a joint press release of FPL Group and Entergy announcing the execution of the Agreement. Item 7. Financial Statements and Exhibits The following selected unaudited pro forma combined condensed consolidated financial statements (pro forma financial statements) have been prepared to reflect the merger of FPL Group and Entergy in a transaction accounted for as an acquisition of Entergy under the purchase method of accounting. The pro forma adjustments are reflected in the unaudited combined condensed consolidated pro forma balance sheets (pro forma balance sheets) as if the Mergers occurred on June 30, 2000. The unaudited combined condensed consolidated pro forma statements of income (pro forma income statements) for the six months ended June 30, 2000 and the year ended December 31, 1999 assume that the Mergers were completed January 1, 1999. These pro forma financial statements are for illustrative purposes only. They are not necessarily indicative of the financial position or operating results that would have occurred had these transactions been completed on the dates assumed above; nor is the information necessarily indicative of future financial position or operating results. Results of operations and financial position in the first year after the consummation could differ significantly from the pro forma financial statements, which are based on past operations. The following pro forma financial statements should be read in conjunction with the consolidated historical financial statements and related notes of FPL Group and Entergy, which are included in their respective Annual Reports on Form 10-K for the year ended December 31, 1999 and subsequent Quarterly Reports on Form 10-Q. Entergy has provided all the information included in this Form 8-K regarding Entergy and its subsidiaries. FPL Group has provided all the information included in this Form 8-K regarding FPL Group and its subsidiaries. Neither Entergy nor FPL Group assumes any responsibility for the accuracy or completeness of the information provided by the other party. Unaudited Pro Forma Combined Condensed Consolidated Statements of Income Six Months Ended June 30, 2000 (millions, except per share amounts)
Entergy FPL Group, Inc. Corporation Pro Forma Pro Forma (as reported) (as reported) Adjustments Combined Operating Revenues ..................... $ 3,138 $ 3,949 $ 7,087 Operating Expenses: Fuel, purchased power and interchange 1,146 1,834 2,980 Other operations and maintenance ..... 593 843 1,436 Depreciation and amortization ........ 525 389 $ (8) A 909 (4) B 7 B Taxes other than income taxes ........ 291 163 454 Total operating expenses ........... 2,555 3,229 (5) 5,779 Operating Income ....................... 583 720 5 1,308 Other Income (Deductions) Interest charges ..................... (126) (264) (390) Preferred stock dividends ............ (7) (27) (34) Other - net 34 140 174 Total other income (deductions) - net (99) (151) (250) Income Before Income Taxes ............. 484 569 5 1,058 Income Taxes ........................... 159 233 2 C 394 Net Income ............................. $ 325 $ 336 $ 3 $ 664 Earnings per share (basic and assuming dilution) .......... $ 1.91 $ 1.45 $ 2.17 Average number of shares outstanding.... 170 232 306 D
Unaudited Pro Forma Combined Consensed Consolidated Statements of Income Year Ended December 31, 1999 (millions, except per share amounts)
Entergy FPL Group, Inc. Corporation Pro Forma Pro Forma (as reported) (as reported) Adjustments Combined Operating Revenues ..................... $ 6,438 $ 8,773 $ 15,211 Operating Expenses: Fuel, purchased power and interchange 2,365 4,526 6,891 Other operations and maintenance ..... 1,322 1,789 3,111 Depreciation and amortization ........ 1,040 867 $ (16) A 1,897 (8) B 14 B Impairment loss on Maine assets ...... 176 - 176 Taxes other than income taxes ........ 615 339 954 Total operating expenses ........... 5,518 7,521 (10) 13,029 Operating Income ....................... 920 1,252 10 2,182 Other Income (Deductions) Interest charges ..................... (222) (536) (758) Preferred stock dividends ............ (15) (62) (77) Divestiture of cable investments ..... 257 - 257 Other - net .......................... 80 255 335 Total other income (deductions) - net 100 (343) (243) Income Before Income Taxes ............. 1,020 909 10 1,939 Income Taxes ........................... 323 357 3 C 683 Net Income ............................. $ 697 $ 552 $ 7 $ 1,256 Earnings per share (basic and assuming dilution)........... $ 4.07 $ 2.25 $ 3.99 Average number of shares outstanding.... 171 245 315 D
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheets June 30, 2000 (millions)
Entergy FPL Group, Inc. Corporation Pro Forma Pro Forma (as reported) (as reported) Adjustments Combined Property, Plant and Equipment: Electric utility plant in service and other property, including nuclear fuel and construction work in progress ........................................ $ 20,220 $ 27,442 $ (399) A $ 47,113 (150) B Less accumulated depreciation and amortization ..... (10,764) (11,248) (22,012) Total property, plant and equipment - net ........ 9,456 16,194 (549) 25,101 Current Assets: Cash and cash equivalents .......................... 234 1,797 2,031 Customer receivables, net of allowances ............ 578 1,022 1,600 Materials, supplies and fossil fuel inventory ...... 320 481 801 Deferred clause expenses ........................... 259 395 654 Other - net ........................................ 219 186 405 Total current assets ............................. 1,610 3,881 5,491 Other Assets: Special use funds .................................. 1,449 1,284 2,733 Other investments .................................. 782 264 1,046 Other .............................................. 899 2,701 416 B 4,016 Total other assets ............................... 3,130 4,249 416 7,795 Total Assets ......................................... $ 14,196 $ 24,324 $ (133) $ 38,387 Capitalization: Common shareholders' equity ........................ $ 5,499 $ 6,934 $(6,903) E $ 12,134 6,650 E (46) F Preferred stock without sinking fund requirements .. 226 336 562 Preferred stock with sinking fund requirements ..... - 69 69 Long-term debt ..................................... 3,479 7,593 11,072 Total capitalization ............................. 9,204 14,932 (299) 23,837 Current Liabilities: Debt due within one year ........................... 823 630 1,453 Accounts payable ................................... 547 797 1,344 Deferred clause revenues ........................... 74 - 74 Accrued interest, taxes and other .................. 984 1,380 253 F 2,617 Total current liabilities ........................ 2,428 2,807 253 5,488 Other Liabilities and Deferred Credits: Accumulated deferred income taxes .................. 1,176 3,224 (58) C 4,313 (29) C Unamortized regulatory and investment tax credits .. 289 506 795 Other .............................................. 1,099 2,855 3,954 Total other liabilities and deferred credits ..... 2,564 6,585 (87) 9,062 Commitments and Contingencies Total Capitalization and Liabilities ................. $ 14,196 $ 24,324 $ (133) $ 38,387
Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements The pro forma financial statements have been prepared using preliminary assessments of the fair values of the assets and liabilities acquired and, accordingly, may change significantly as the valuations are completed. The pro forma adjustments may also change to reflect changes in circumstances during the period of time required to obtain the necessary approvals for the Mergers. The pro forma financial statements do not reflect the anticipated recurring cost savings resulting from the Mergers or the effect of FPL Group and Entergy's announced share repurchase programs. Certain amounts in Entergy's financial statements have been reclassified to conform to FPL Group's presentation. A. A plant acquisition adjustment (goodwill) resulting from a prior acquisition by Entergy and the related amortization expense have been eliminated. B. Based on preliminary estimates of the fair values of certain unregulated generating assets, net reductions in book value of approximately $150 million are reflected in the pro forma balance sheets to record those assets at their fair values. Depreciation expense has been reduced in the pro forma income statement on a straight-line basis over the average remaining useful life of 20 years. The assets and liabilities of Entergy's regulated operations will not be revalued because they are subject to cost-based regulation. Complete valuations of Entergy's operating assets and related contracts and the pension and postretirement accounts have not been performed. As a result, the purchase price in excess of the amounts assigned to identifiable assets and liabilities of $416 million has been recorded as goodwill for purposes of these pro forma financial statements. The estimated lives associated with the assets to which this excess might ultimately be allocated are expected to range from 20 to 40 years. Therefore, for pro forma purposes, an amortization period of 30 years has been used. Actual goodwill, if any, recorded upon consummation of the Mergers will consider the fair value of Entergy's assets and liabilities at that future date and may differ significantly from the amount recorded in these pro forma financial statements. C. Deferred income taxes have been recorded on the pro forma balance sheets to reflect the tax effect of differences between the book and tax bases of assets and liabilities acquired. An adjustment has been made to the pro forma income statements to reflect the tax effect of the pro forma adjustments using FPL Group's statutory tax rate of 38.575%. Goodwill created by the acquisition is nondeductible for tax purposes. D. The number of shares used in the calculation of the pro forma per share data is based on the weighted average number of shares outstanding during the period, adjusted to give effect to the exchange ratios described in Note E below. E. Under the terms of the Agreement, each holder of FPL Group common stock will receive one share of the new holding company for each share of FPL Group common stock, and each holder of Entergy common stock will receive 0.585 of a share of the new holding company for each share of Entergy common stock, in a tax-free, stock-for-stock exchange. A value of $51 per share has been assumed in determining the purchase price, based on the closing prices of FPL Group's common stock two trading days prior and two trading days following the announcement of the Mergers. Below is a reconciliation of the pro forma adjustment to Entergy's common shareholders' equity (millions):
Entergy's common shareholders' equity, June 30, 2000 (as reported) $6,934 Non-recurring merger costs to be expensed by Entergy, net of tax (see Note F) (31) Net pro forma adjustment $6,903
F. Adjustments totaling $253 million have been made and are reflected in accrued interest, taxes and other on the pro forma balance sheets to accrue for transaction costs associated with the acquisition and amounts due under certain of Entergy's employment contracts and employee benefit plans resulting from a change in control. Of this amount, $178 million represents direct costs of the transaction and is reflected in the purchase price allocation. The remaining $75 million represents merger- related costs which are required to be expensed. Because these costs are non-recurring, they have not been reflected in the pro forma income statements, but are reflected in common shareholders' equity on the pro forma balance sheets ($46 million after taxes). FPL Group's and Entergy's portions of these merger costs to be expensed are $15 million and $31 million after taxes, respectively. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. FPL Group, Inc. Florida Power & Light Company (Registrants) Date: August 2, 2000 K. MICHAEL DAVIS K. Michael Davis Controller and Chief Accounting Officer of FPL Group, Inc. Vice President, Accounting, Controller and Chief Accounting Officer of Florida Power & Light Company -----END PRIVACY-ENHANCED MESSAGE-----