UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
For the quarterly period ended September 30, 2004
OR
For the transition period from _____________ to _____________.
| Commission File Number |
Exact name of registrants as specified in their charters, state of incorporation, address of principal executive offices, and telephone number |
I.R.S. Employer Identification Number |
| 1-8349 | Florida Progress Corporation 410 South Wilmington Street Raleigh, North Carolina 27601 Telephone (919) 546-6111 State of Incorporation: Florida |
59-2147112 |
| 1-3274 | Florida Power Corporation d/b/a Progress Energy Florida, Inc. 100 Central Avenue St. Petersburg, Florida 33701 Telephone (727) 820-5151 State of Incorporation: Florida |
59-0247770 |
NONE
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X
This combined Form 10-Q is filed separately by two registrants: Florida Progress Corporation and Florida Power Corporation d/b/a Progress Energy Florida (PEF). Information contained herein relating to either individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrant.
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date. As of November 3, 2004, each registrant had the following shares of common stock outstanding:
| Registrant | Description | Shares |
|---|---|---|
| Florida Progress Corporation | Common Stock, without par value | 98,616,658 (all of which were held by Progress Energy, Inc.) |
| PEF | Common Stock, without par value | 100 (all of which were held by Florida Progress Corporation) |
Florida Progress Corporation and Florida Power Corporation meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format.
Glossary of Terms
Safe Harbor For Forward-Looking Statements
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Florida Progress Corporation
Unaudited
Consolidated Statements of Income
Unaudited Consolidated Balance Sheets
Unaudited Consolidated
Statements of Cash Flows
Florida
Power Corporation
d/b/a
Progress Energy Florida, Inc.
Unaudited
Statements of Income
Unaudited Balance Sheets
Unaudited Statements of Cash Flows
Notes to Financial
Statements
Florida
Progress Corporation and Florida Power Corporation d/b/a Progress Energy Florida, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits
Signatures
The following abbreviations or acronyms used in the text of this combined Form 10-Q are defined below:
| TERM | DEFINITION |
|---|---|
| AFUDC the Agreement APB AST BART Bcf CAIR Calgon Caronet Code Colona the Company CR3 DOE ECRC EITF EPA EPIK FASB FASB Staff Position 106-2 FDEP Federal Circuit FERC FIN No. 46R Florida Progress or FPC FPSC Global MACT Medicare Act MGP NOx NRC NSP OCI Odyssey OPEB PEF or the utility PFA the Plan PLRs Progress Capital Progress Energy or the Parent Progress Fuels PTC PT LLC PUHCA PVI PWR RAFT Rail Services or Rail RTO SEC Section 29 Service Company SFAS No. 5 SFAS No. 71 SFAS No. 123 SFAS No. 133 SFAS No. 142 SFAS No. 143 SFAS No. 148 SMD NOPR SO2 the Trust |
Allowance for funds used during construction Stipulation and Settlement Agreement Accounting Principles Board Advanced Separation Technology Best available retrofit technology Billion cubic feet Clean Air Interstate Rule Calgon Carbon Corporation Caronet, Inc. Internal Revenue Code Colona Synfuel Limited Partnership, L.L.L.P. Florida Progress Corporation Progress Energy Florida Inc.'s nuclear generating plant, Crystal River Unit No. 3 United States Department of Energy Environmental Cost Recovery Clause Emerging Issues Task Force United States Environmental Protection Agency EPIK Communications, Inc. Financial Accounting Standards Board Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003 Florida Department of Environmental Protection United States Circuit Court of Appeals Federal Energy Regulatory Commission FASB Interpretation No. 46R, "Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51" Florida Progress Corporation Florida Public Service Commission U.S. Global LLC Maximum Available Control Technology Medicare Prescription Drug, Improvement and Modernization Act of 2003 Manufactured Gas Plant Nitrogen oxide United States Nuclear Regulatory Commission Northern States Power Other comprehensive income Odyssey Telecorp, Inc. Other postretirement benefits Progress Energy Florida, Inc., formerly referred to as Florida Power Corporation IRS Prefiling Agreement Revenue Sharing Incentive Plan Private Letter Rulings Progress Capital Holdings, Inc. Progress Energy, Inc. Progress Fuels Corporation Progress Telecommunications Corporation Progress Telecom LLC Public Utility Holding Company Act of 1935, as amended Progress Ventures, Inc. Pressurized water reactor Railcar Asset Financing Trust Rail Services business segment Regional Transmission Organization United States Securities and Exchange Commission Section 29 of the Internal Revenue Code Progress Energy Service Company, LLC Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies" Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" Statement of Financial Accounting Standards No. 133, "Accounting for Derivative and Hedging Activities" Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - An Amendment of FASB Statement No. 123" Notice of Proposed Rulemaking in Docket No. RM01-12-000, Remedying Undue Discrimination through Open Access Transmission and Standard Market Design Sulfur dioxide FPC Capital I |
This combined report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The matters discussed throughout this combined Form 10-Q that are not historical facts are forward-looking and, accordingly, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.
In addition, forward-looking statements are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” including, but not limited to, statements under the sub-heading “Liquidity and Capital Resources” concerning operating cash flows.
Any forward-looking statement speaks only as of the date on which such statement is made, and neither Florida Progress (the Company) nor Florida Power Corporation doing business as Progress Energy Florida, Inc. (PEF) undertakes any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made.
Examples of factors that you should consider with respect to any forward-looking statements made throughout this document include, but are not limited to, the following: the impact of fluid and complex government laws and regulations, including those relating to the environment; deregulation or restructuring in the electric industry that may result in increased competition and stranded costs; the uncertainty regarding the timing, creation and structure of regional transmission organizations; weather conditions that directly influence the demand for electricity; our ability to recover through the regulatory process, and the timing of, the costs associated with the four hurricanes that impacted our service territory in 2004 or other significant weather events; recurring seasonal fluctuations in demand for electricity; fluctuations in the price of energy commodities and purchased power; successful maintenance and operation of PEF’s energy commodities and purchased power; economic fluctuations and the corresponding impact on PEF’s commercial and industrial customers; the inherent risks associated with the operation of nuclear facilities, including environmental, health, regulatory and financial risks; the impact of any terrorist acts generally and on our generating facilities and other properties; the ability to successfully access capital markets on favorable terms; the impact that increases in leverage may have on the Company and PEF; the ability of the Company and PEF to maintain their current credit ratings; the impact of derivative contracts used in the normal course of business; investment performance of pension and benefit plans and the ability to control costs; the availability and use of Internal Revenue Code Section 29 (Section 29) tax credits by synthetic fuel producers and the Company’s continued ability to use Section 29 tax credits related to its coal and synthetic fuel businesses; the impact to our financial condition and performance in the event it is determined the Company is not entitled to previously taken Section 29 tax credits; the outcome of any ongoing or future litigation or similar disputes and the impact of any such outcome or related settlements; and unanticipated changes in operating expenses and capital expenditures. Many of these risks similarly impact the Company’s subsidiaries.
These and other risks are detailed from time to time in Florida Progress’ and PEF’s SEC reports. All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond the control of the Company and PEF. Many, but not all of the factors that may impact actual results of the Company and PEF are discussed in the Risk Factors section of PEF’s annual report on Form 10-K for the year ended December 31, 2003 which was filed with the SEC on March 12, 2004. You should carefully read these SEC reports. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the effect of each such factor on Florida Progress and PEF.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
| Three Months Ended September 30 |
Nine Months Ended September 30 |
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | 2004 | 2003 | 2004 | 2003 | |||||||||||
| Operating Revenues | |||||||||||||||
| Utility | $ 1,029 | $ 904 | $ 2,673 | $ 2,399 | |||||||||||
| Diversified business | 646 | 487 | 1,817 | 1,414 | |||||||||||
| Total Operating Revenues | 1,675 | 1,391 | 4,490 | 3,813 | |||||||||||
| Operating Expenses | |||||||||||||||
| Utility | |||||||||||||||
| Fuel used in electric generation | 335 | 255 | 880 | 657 | |||||||||||
| Purchased power | 173 | 156 | 433 | 427 | |||||||||||
| Operation and maintenance | 138 | 163 | 450 | 458 | |||||||||||
| Depreciation and amortization | 68 | 82 | 209 | 241 | |||||||||||
| Taxes other than on income | 70 | 63 | 196 | 180 | |||||||||||
| Diversified business | |||||||||||||||
| Cost of sales | 566 | 426 | 1,599 | 1,252 | |||||||||||
| Depreciation and amortization | 31 | 25 | 83 | 68 | |||||||||||
| Other | 34 | 30 | 99 | 92 | |||||||||||
| Total Operating Expenses | 1,415 | 1,200 | 3,949 | 3,375 | |||||||||||
| Operating Income | 260 | 191 | 541 | 438 | |||||||||||
| Other Income (Expense) | |||||||||||||||
| Interest income | 1 | 1 | 3 | 3 | |||||||||||
| Other, net | 8 | 5 | 1 | (2) | |||||||||||
| Total Other Income | 9 | 6 | 4 | 1 | |||||||||||
| Interest Charges | |||||||||||||||
| Interest charges | 42 | 29 | 134 | 124 | |||||||||||
| Allowance for borrowed funds used during construction | (1) | (2) | (3) | (6) | |||||||||||
| Total Interest Charges, Net | 41 | 27 | 131 | 118 | |||||||||||
| Income before Income Taxes | 228 | 170 | 414 | 321 | |||||||||||
| Income Tax Expense (Benefit) | 80 | (4) | 76 | (59) | |||||||||||
| Net Income | $ 148 | $ 174 | $ 338 | $ 380 | |||||||||||
See Notes to Interim Financial Statements.
| (in millions) | September 30 | December 31 | |||
|---|---|---|---|---|---|
| Assets | 2004 | 2003 | |||
| Utility Plant | |||||
| Utility plant in service | $ 8,311 | $ 8,150 | |||
| Accumulated depreciation | (2,921 | ) | (2,871 | ) | |
| Utility plant in service, net | 5,390 | 5,279 | |||
| Held for future use | 8 | 8 | |||
| Construction work in progress | 382 | 328 | |||
| Nuclear fuel, net of amortization | 51 | 69 | |||
| Total Utility Plant, Net | 5,831 | 5,684 | |||
| Current Assets | |||||
| Cash and cash equivalents | 32 | 27 | |||
| Accounts receivable | 508 | 487 | |||
| Unbilled accounts receivable | 71 | 59 | |||
| Receivables from affiliated companies | 15 | 43 | |||
| Inventory | 485 | 412 | |||
| Deferred fuel cost | 212 | 204 | |||
| Assets held for sale | — | 75 | |||
| Prepayments and other current assets | 285 | 137 | |||
| Total Current Assets | 1,608 | 1,444 | |||
| Deferred Debits and Other Assets | |||||
| Regulatory assets | 388 | 126 | |||
| Nuclear decommissioning trust funds | 439 | 433 | |||
| Diversified business property, net | 927 | 841 | |||
| Miscellaneous other property and investments | 95 | 90 | |||
| Prepaid pension cost | 234 | 223 | |||
| Deferred tax asset | 89 | 189 | |||
| Other assets | 134 | 132 | |||
| Total Deferred Debits and Other Assets | 2,306 | 2,034 | |||
| Total Assets | $ 9,745 | $ 9,162 | |||
| CAPITALIZATION AND LIABILITIES | |||||
| Common Stock Equity | |||||
| Common stock without par value | $ 1,701 | $ 1,699 | |||
| Retained earnings | 1,064 | 842 | |||
| Accumulated other comprehensive loss | (32 | ) | (17 | ) | |
| Total Common Stock Equity | 2,733 | 2,524 | |||
| Preferred Stock of Subsidiaries - Not Subject to Mandatory Redemption | 34 | 34 | |||
| Long-Term Debt, Affiliate | 809 | 809 | |||
| Long-Term Debt, Net | 1,999 | 2,045 | |||
| Total Capitalization | 5,575 | 5,412 | |||
| Current Liabilities | |||||
| Current portion of long-term debt | 48 | 68 | |||
| Accounts payable and accrued liabilities | 648 | 415 | |||
| Payables to affiliated companies | 97 | 68 | |||
| Notes payable to affiliated companies | 337 | 636 | |||
| Taxes accrued | — | 16 | |||
| Short-term obligations | 323 | — | |||
| Customer deposits | 131 | 127 | |||
| Other current liabilities | 370 | 279 | |||
| Total Current Liabilities | 1,954 | 1,609 | |||
| Deferred Credits and Other Liabilities | |||||
| Accumulated deferred income taxes and investment tax credits | 113 | 85 | |||
| Regulatory liabilities | 1,340 | 1,322 | |||
| Asset retirement obligations | 350 | 339 | |||
| Other liabilities | 413 | 395 | |||
| Total Deferred Credits and Other Liabilities | 2,216 | 2,141 | |||
| Commitments and Contingencies (Note 15) | |||||
| Total Capitalization and Liabilities | $ 9,745 | $ 9,162 | |||
See Notes to Interim Financial Statements.
| Nine Months Ended September 30 | |||||
|---|---|---|---|---|---|
| (in millions) | 2004 | 2003 | |||
| Operating Activities | |||||
| Net income | $ 338 | $ 380 | |||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||
| Depreciation and amortization | 322 | 314 | |||
| Deferred income taxes and investment tax credits, net | 182 | (100 | ) | ||
| Deferred fuel credit | (8 | ) | (155 | ) | |
| Cash provided (used) by changes in operating assets and liabilities: | |||||
| Accounts receivable | (46 | ) | (71 | ) | |
| Affiliate accounts receivable | 28 | 14 | |||
| Inventories | (46 | ) | 44 | ||
| Prepayments and other current assets | (48 | ) | (12 | ) | |
| Accounts payable | (14 | ) | 24 | ||
| Affiliate accounts payable | 39 | (18 | ) | ||
| Income taxes, net | (150 | ) | 54 | ||
| Other current liabilities | 49 | 34 | |||
| Other | (67 | ) | 25 | ||
| Net Cash Provided by Operating Activities | 579 | 533 | |||
| Investing Activities | |||||
| Utility property additions | (341 | ) | (412 | ) | |
| Diversified business property additions | (156 | ) | (306 | ) | |
| Nuclear fuel additions | — | (50 | ) | ||
| Proceeds from sale of assets | 85 | — | |||
| Other | (20 | ) | (11 | ) | |
| Net Cash Used in Investing Activities | (432 | ) | (779 | ) | |
| Financing Activities | |||||
| Proceeds from issuance of long-term debt | 1 | 639 | |||
| Net increase (decrease) in short-term obligations | 323 | (258 | ) | ||
| Retirement of long-term debt | (66 | ) | (430 | ) | |
| Net change in intercompany notes | (299 | ) | 324 | ||
| Equity contributions from parent | 3 | 155 | |||
| Dividends paid to parent | (117 | ) | (203 | ) | |
| Other | 13 | 1 | |||
| Net Cash (Used in) Provided by Financing Activities | (142 | ) | 228 | ||
| Net Increase (Decrease) in Cash and Cash Equivalents | 5 | (18 | ) | ||
| Cash and Cash Equivalents at Beginning of Period | 27 | 34 | |||
| Cash and Cash Equivalents at End of Period | $ 32 | $ 16 | |||
| Supplemental Disclosures of Cash Flow Information | |||||
| Cash paid during the year - interest (net of amount capitalized) | $ 137 | $ 138 | |||
| income taxes (net of refunds) | $ 34 | $ 10 | |||
See Notes to Interim Financial Statements.
UNAUDITED STATEMENTS of INCOME
| Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in millions) | 2004 | 2003 | 2004 | 2003 | |||||
| Operating Revenues | $ 1,029 | $ 904 | $ 2,673 | $ 2,399 | |||||
| Operating Expenses | |||||||||
| Fuel used in electric generation | 335 | 255 | 880 | 657 | |||||
| Purchased power | 173 | 156 | 433 | 427 | |||||
| Operation and maintenance | 138 | 163 | 450 | 458 | |||||
| Depreciation and amortization | 68 | 82 | 209 | 241 | |||||
| Taxes other than on income | 70 | 63 | 196 | 180 | |||||
| Total Operating Expenses | 784 | 719 | 2,168 | 1,963 | |||||
| Operating Income | 245 | 185 | 505 | 436 | |||||
| Other Income | |||||||||
| Other, net | 1 | — | — | 1 | |||||
| Total Other Income | 1 | — | — | 1 | |||||
| Interest Charges | |||||||||
| Interest charges | 27 | 10 | 87 | 68 | |||||
| Allowance for borrowed funds used during construction | (1 | ) | (2 | ) | (3 | ) | (6 | ) | |
| Total Interest Charges, Net | 26 | 8 | 84 | 62 | |||||
| Income before Income Taxes | 220 | 177 | 421 | 375 | |||||
| Income Tax Expense | 80 | 62 | 147 | 127 | |||||
| Net Income | $ 140 | $ 115 | $ 274 | $ 248 | |||||
| Preferred Stock Dividend Requirement | — | — | 1 | 1 | |||||
| Earnings for Common Stock | $ 140 | $ 115 | $ 273 | $ 247 | |||||