01—Abstract
Summary
Summary of the 10-K filed March 22, 1994. Cited figures are marked; the original filing is the authoritative source.
FPL Group, Inc. (NYSE: FPL, parent of Florida Power & Light) reported 1993 net income of $428.7 milliona, or $2.30 per share, down from $466.9 million ($2.65) in 1992.
The decline was driven by a $138 millionb pretax cost reduction program (about $85 million after tax, or $0.45 per share) that included a workforce cut of roughly 1,700 positions. Excluding that charge, earnings would have been roughly flat to up from the prior year. Total operating revenues rose 2.4% to $5.32 billion, and FPL's retail electric sales grew 4.0% on 2.1% customer growth, with the utility providing about 98% of group revenues.
Total assets grew to $13.1 billionc, and the balance sheet remained solid, with common equity of $4.1 billion and long-term debt reduced to $3.75 billion from $3.96 billion. The outlook centers on a $3.7 billion FPL capital construction program for 1994-1998, including $879 million in 1994, funded mainly by internal cash flow and new FPL debt, preferred stock and commercial paper. Management expects other operations and maintenance expense to decline in 1994 and plans to add 1,090 MW of capacity through 1995, mainly the Martin Units 3 and 4 and a Scherer Unit 4 acquisition.
Non-utility businesses are being wound down: Colonial Penn was sold in 1991, and the remaining cable television and real estate assets are being sold, with management saying these sales should not significantly affect net income. Key risks include ongoing antitrust suits (Praxair and a cogeneration suit seeking over $100 milliond before trebling), a Telesat-related suit seeking more than $24 million, FERC wholesale transmission proceedings, the replacement of St. Lucie Unit 1 steam generators, and uncertainty over EMF health and regulatory issues. Management believes the litigation will not have a material adverse effect on its financial statements.
02—Key points
Key Highlights
- 1993 net income was $428.7 million ($2.30 per share), down 8% from $466.9 million ($2.65 per share) in 1992, primarily because of a $138 million pretax cost reduction charge.
- Total operating revenues rose 2.4% to $5.32 billion, supported by 4.0% growth in retail energy sales and 2.1% retail customer growth at FPL.
- FPL plans $3.7 billion of capital expenditures for 1994-1998, including $879 million in 1994, and expects 1,090 MW of new capacity by summer 1995.
- Long-term debt was reduced to $3.75 billion from $3.96 billion, and total assets grew to $13.1 billion. FPL bonds and other long-term debt issued in 1993 totaled $2.08 billion.
- The cost reduction program cut roughly 1,700 positions, with management expecting lower other operations and maintenance expense in 1994 despite sales growth.
- Non-utility operations are being exited (cable TV, real estate), and the sale of the remaining assets is not expected to significantly affect net income.
- Pending litigation includes antitrust suits seeking over $100 million (before trebling) and more than $24 million, which management believes are not material.
03—Questions
Frequently Asked Questions
Why did FPL Group's net income decline in 1993 despite revenue growth?
Net income fell to $428.7 million from $466.9 million because of a $138 million pretax ($85 million after-tax) charge for a cost reduction program that included a voluntary retirement plan and severance. Excluding this charge, earnings would have been higher than in 1992, supported by sales growth and cost controls.
How much will FPL spend on capital projects, and how will it be funded?
FPL plans about $3.7 billion of capital expenditures for 1994-1998, including $879 million in 1994. Management expects internally generated funds to finance a growing share of this, with the balance coming mainly from FPL long-term debt, preferred stock and commercial paper.
What are the main legal and regulatory risks?
The main legal risks are antitrust suits by Praxair (Union Carbide) and a cogeneration partnership, plus a cable installer suit against Telesat seeking more than $24 million. FERC proceedings on wholesale transmission and the Florida PSC's cost recovery decisions also matter. Management believes the litigation will not have a material adverse effect.
Is FPL Group's dividend secure?
The 1993 dividend was $2.47 per share, up from $2.43. Dividends depend mainly on FPL's ability to pay up to the parent, and current FPL financial condition and earnings do not restrict those payments. The filing notes that recent dividend increases should not be viewed as a trend.
What is happening with FPL Group's non-utility businesses?
FPL Group is exiting non-energy businesses, including cable television and real estate. It sold Colonial Penn in 1991 and is winding down Bay Loan. Non-utility energy investments through ESI continue, with 27 projects totaling 1,911 MW, and management does not expect the remaining disposals to materially reduce net income.
04—Continue