FPL Spreadsheet Out

Dividend Plicy FPL - AHarvard Business School Case #295-059 Case Software #XLS085 Copyright © 2010 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a r transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the perm Business School. stored in a retrieval system or therwise—without the permission of Harvard . reproduced. 396 Construction work in progress 781.952 $573.957 299.251.098 $201.481.090 168.185 378.745 Investments Utility special use funds $378.878.080 374.052.014 $78.945 72.156 $170.555 Other 82.060 287. 5.724 296.242 Deferred Debits and Other Assets Unamort.450 Current Assets Cash and cash equivalents $152.591.035 243.160 $13.176 $1.367.279 299.045 62.284 $1.435 1.992 $822.164 $61.418 45.437 0 0 0 Receivables: 504.222 19.125 278.371 125.197 $1. Inc.841 $0 Deferred litigation items of FPL 110.357 $1.403 4.632 $252.078.780 $10.561 $175.774 $318.887 255.217 Partnerships and joint ventures 368.593 236.918 0 Unamortized insurance policy acqui 0 0 0 0 250.500 0 197.386.736 4. debt reacquisition costs $302.265 5.320 $150.599 382.630 438.401 476.158.080.488.904 $8. Balance Sheet for the Years 1989 to 1993 (in thousands) 1993 1992 1991 1990 1989 ASSETS Property.211 $214.688 597.534.424 Less Depreciation/amort. Plant and Equipment Electric utility plant $14.903 $2.220 Marketable securities 171.434 .087.918.838.421.174 0 Insurance/Banking Assets 0 0 0 0 1.176 $11.Exhibit 3 FPL Group.171 Materials.554 $1.104.690.859 115.859 110.866.678 $984.398 139.640 45.106.202 119. supplies and fossil fuel sto*** 329.850 $8.008 134.741 $727.214 58.937 492.300 $9.503 573.419 43.817 $12.066 4.798 $291.571 0 Leveraged leases 155.065 Deferred pension costs 0 0 51.818 118.601 $146.289.988 75.183.597 516.449 144.585 513.705 Other property 261.112 0 Other 48.184.455 $9.791 $12.567 Recoverable storm costs 44.952 61. 605 19.903 2.707 1.306.802.369 389.104 $2.828 $1.140 215.106.909 51.483 Deferred reg. $.337 406. investment tax credits 323.113 2.152 $4.562 357.781.311 Capitalization Common Stock.607 $3.438 368.241 952.078.505 Other 517.718 124.388 $1.972 $2.780.587 $4.875 Interest accrued 109.904 335.225 0 $1.517 0 Deferred clause revenues 130.121) (336.099 Deferred Credits/Other Liabilities Accum.517 451.835.435 201.282 411.516.657 74.968 87.872 Total Assets $13.509 Customers' deposits 216.653 393.014 189.353.670.008 $12.333 Additional paid-in capital 3.507.648 187.735 109.844 1.617 $1.584.791 345.004 136.398 $789.656.814 $125.610 $1.645 $1.312.281.161 $3.043 172.206 123.392 Unearned compensation (321.115.929 98.572 15.901 $1.216 319.989 $3.251 430.760 Current maturities of LT debt 279.080 501.880 90.847 $3.452.933 Accounts payable 323.000) 279 Retained earnings 829.309 CAPITALIZATION AND LIABILITIES Current Liabilities Notes Payable-Commercial paper $349.708 $1.785 $10.538.022 Income and other taxes 94.067 $1.088 $368.498 324.231 $1.566. deferred income taxes $1.647 $826.01 par value $1.512.838.804 583.100.716 $1.061 127.305 $11.718.012 $12.355) (346.994 3.833 857.788 147.208 $434.600 $0 $0 $48.546 0 0 0 0 Unamort.886.887 0 Insurance/Banking Liabilities 0 0 0 0 1.786 $419.555 $2.841.198 279.786 175 0 0 0 Other 335.958 $936.351 Capital lease obligations 271.069 171.339.215) (360.156 FPL Preferred stock .161.373 $552.748 105.343 107.589.325.680 164.177. Other 138.441 $2.613 812. credit-income taxes 216. 785 $10.281.250 $421.023 $7.420.449.983 3.852.397.012 $12.485 $7. without sinking fund $451.150 165.250 with sinking fund 97.309 Source: 1989 .748.050 Long-term debt 3.960.096 3.526.899 Total Capital and Liabilities $13. Inc .150 150.518.000 130.1993 Annual Reports for FPL Group.347.386 $7.840 $8. .662 3.325.668.078.443 $8.139 3.306.305 $11.950 173.250 $346.802.008 $12.250 $346.250 $346. 000 0 90.388 $4.995 92.655 86.375 Allowance for funds used during construction (66.958 $1.269 636.583 1.710 $305.690 $4.238) (57.433 $171. Income Statement for the Years 1989 to 1993 (in thousands) 1993 1992 1991 1990 1989 Operating Revenues Utility $5.086 $250.321 $121.669 $329.766 $4.893 $185.472 (14.474 1.392 $329.320 $4.008 $66.719 Interest Expense & Other (Income) Deductions Interest and preferred stock dividends $409.159.193.251.494 408.389 554.685) $294.048 $760.195 69.829.850 0 Depreciation and amortization 598.233 $1.981) (32.Exhibit 4a FPL Group.345 $5.758.179 85.469 102.932.942 113.372.284 1.249.774 $877.203.100.253 Total operating revenues $5.987.336 $4.109 497.261 2.670 98. Inc.632 $183.723 Deferred 11.962 451.291 Non-utility 91.033.637 $1.276.927.067 Income Taxes Current $238.961 $186.436 $5.158.194.608 $4.623) Other -.325.424) (21.864 90.687) 55.101 Loss on discontinuing businesses 0 0 0 99.553 $4.243.499 $261.032.237 518.100.557 $147.086.299 $5.079 $393.775.978) (47.224.256 74.908 $1.068 501.008 0 0 Non-utility operations: 70.976 Taxes other that income taxes 526.739 485.544 Operating Expenses Utility operations: Fuel/purchased power $1.044) (25.298 $1.809 .812) (46.net (48.825 Operating Income $973.871 Cost reduction program 138.456) (26.316.782) (34.074 $383.737 $931.463 $5.152 $411.294 $5.327 $5.342.579 $340.557 Operations and maintenance 1.946.760 $410.244 1. Inc. .749 $466.005) $433.180) 16.148 $298.949 $240.949 $376.843 Income (Loss) From Discontinued Operations 0 0 (135.578 ($391.337 Note: Preferred stock dividends result from intercompany transactions and are not tax-deductible. Source: 1989 .570) (689.749 $466.175 $416.494 Net Income (Loss) $428. Income From Continuing Operations $428.1993 Annual Reports for FPL Group. 02 126.11 1.43 176.50 1986 2..715 1989 3.959 2.00 1988 3.69 2. annual reports 1989 to 1993.86) 2.99 2.65 2.65 2.50 1990 (2.00 1985 3. Sources: FPL Group.11 3.207 1991 1.26 131.90 2.77 118.30 $2. Earnings and Dividends Per Common Share 1984 to 1993 Earnings Per Share before Average Shares Earnings Extraordinary Dividends Outstanding Year Per Share Items Per Share (in thousands) 1993 $2. Inc. 1994 0.932 1987 3.34 136.76 $2.48 2.696 1984 2.12 2.00 1984 1985 1986 1987 Earni ngs per Sha .00 Note: “Earnings per share before extraordinary items” excludes gains or losses from discontinued 0.90 2.544 3.Exhibit 4b FPL Group.62 2.47 186.50 operations and charges relating to cost reduction programs. June 17.10 2.280 1.553 Earnings per Share 3.39 162. Inc.18 130.42 3.94 119.12 2.50 1.10 129.65 1.64 2.413 1992 2. Value Line.66 2. Inc.004 2. 18 1989 2.47 4 1985 1986 1987 1988 1989 1990 1991 1992 1993 Earni ngs per Share Di vi dends Per Sha re .76 $2.43 1993 $2.69 2.39 1992 2.02 1987 2.12 2.65 2.90 per Share 2.77 1985 3.99 2.11 1.65 1.64 2.26 1990 2.10 1988 3.94 Earnings per Share 1986 vs Dividends 2.66 2.34 1991 2. Earnings Dividends Year per Share Per Share 1984 2. 282.494) Other 89.340) Charges for discontinuing businesses 0 0 0 99.266.661) ($1.351) ($1.976 Increase (decrease) in deferred income taxes 10.578) 5.976 $987.269 636.726) ($975.521) 194.667) Other 34.086) (107.772 (10.960) (37.237 518.005) $410.052. Inc.193.379) ($1.343.414) 47.462 17.931) ($1.180 (16.466 78.427 (55.977) 120.949 (102.912 31.156 (31.129 Net cash provided by operating activities $1.247.813 59.Exhibit 5 FPL Group.068 501.130.389 554.325 Provision for refunds 0 0 0 10.416 Depreciation and amortization 598.488 Receipts from partnerships and leveraged leases 82.481 49.894) (90.692) Deferrals under cost recovery clauses 138.870) .184 (57.962 (42.850 0 Increase (decrease) in accrued interest and taxes (10.038.795 $962.006) 58.002) Loss from discontinued operations 0 0 135.013) 1.650 (Increase) decrease in recoverable storm costs 12.225 211. Cash Flow Statement for the Years 1989 to 1993 (in thousands) 1993 1992 1991 1990 1989 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $428.949 $240.365 (10.383.521 $1.968 CASH FLOWS FROM INVESTING ACTIVITIES Capital and nuclear fuel expenditures ($1.578 ($391.740) ($836.930) ($1.483) (117.198) Net cash used in investing activities ($1.662 $1.592 11.390.749 $466.130) 0 0 0 Refund of revenues from tax savings rule 0 0 0 (22.834) ($1.380 0 0 Net cash provided (used) by discontinued operations 0 0 (49.058 (90.252.948 15.257 38.570 689.572 (96.827) (92.493) Sale of Colonial Penn 0 0 128. 246 276.889 25.105 Source: 1989 .124 Dividends on Common Stock (461.000 0 0 0 Issuance of preferred stock 190.614) (360. .626 318. Paper 349.156 $170.000 0 0 0 Proceeeds from FPL Group Capital borrowings 0 0 0 260.164 $22.946) 107.919) (297. activities ($62.756 (13.014 $78.861) Sale of nuclear fuel 0 0 235.032) Net increase (decease) in cash and cash equivalents $73.176 Other 22.542 Issuance of FPL Group Capital long-term debt 125.073 213.814) (76.478 Net cash provided (used) in fin.890) Issuance of Common Stock 276.648.953) $192.1993 Annual Reports for FPL Group.905 $421. Inc.341 796.399 Increase (decrease) in notes payable--Comml.170) (699.059 ($54.633 265.000 125.082.990 ($42.491 73.164 $22.892) (193.000) $0 Issuance of FPL bonds and other long-term debt 2.600 0 (48.284) $303.892) 8.934) Cash and cash equivalents at beginning of year $78.211 $214.972 75 47.000 0 Retirement of long-term debt and preferred stock (2.858 ($92.039 Cash and cash equivalents at end of year $152.993 874.000) (323.468) (7.CASH FLOW FROM FINANCING ACTIVITIES Unearned ESOP compensation $0 $0 $0 ($360.716) (392.156 $170.634 $14.372) (141.055) ($43.639) (430.295) (3.105 $77.287 422.211 $214. 1 192. May 1994.350 3.455 74. Salomon Brothers US Equity Research.618 3.526 3.4 191.627 16.712 3. Lufkin & Jenrette Securities Corp.420 78.2 186.6% Total Capacity (owned by FPL in MW) 16. analyst report. March 16. 1994 Florida Power & Light Company 1994-98 Forecast and 1993 Financial and Statistical Report .1 192. Shares Outstanding (millions) 176.563 18.559 17.603 82.779 2.411 76.809 2.7% Customer Accounts (thousands) 3.1 192.337 $901 $831 $743 $769 $624 Maturing Debt 152 11 2 81 101 4 185 Preferred Dividends 44 43 40 40 40 40 40 Common Dividends 431 461 ? ? ? ? ? Avg.484 80.290 72.6% Net Income $467 $429 $527 $557 $576 $596 $615 Depreciation and Amortization 554 598 665 711 741 778 795 Capital Expenditures $1.281 3. analyst report.1 Capitalization Ratios Long Term Debt 48% 46% 46% 46% 45% 44% 44% Preferred Stock 6% 6% 6% 6% 6% 6% 6% Equity 46% 47% 48% 48% 50% 50% 50% Sources: Donaldson.5 192.697 17.Exhibit 6 FPL Group—Financial Projections as of March 1994 1993-98 1992 1993 1994 1995 1996 1997 1998 Annualized Actual Actual Estimate Estimate Estimate Estimate Estimate Growth Florida Power & Light Company Electric Sales (millions of KWH) 69.437 3.030 18.051 18.270 $1.051 1. 0811 $0.00 $1.11 $0.0182 $0. Gulf Power Co.0% 1.041 $25.206.0479 $0.47 $1.0813 Commercial $0.0% 24.0% 16.0% Costs Operation/Maintenance Costs/KWH $0.9% 12.0103 $0.911 $3.7% 50.0242 Transmission Cost/KWH (1987) $0.0% 43.0% 3.1% 13.0% Commercial 36.0 28.0366 $0.0 13.0% 15.0% Utility Companies and other 4. The Southern Co.66 $1.89 Rates (average realization per KWH) Residential $0.0010 $0.0% 14.8 16.0009 $0.0792 $0.0562 $0.80 $5.70 Dividend per common share $2.0% 46.0675 $0.0% 7.3% 11.78 $0.3% 49.0% 33.0391 $0.0051 $0.880.0704 $0.639 $4.80 $2.0403 $0.0072 $0.0% 15.0% 12.9% 12.058.0451 $0.5 Customer Mix (percent of sales) Residential 56.75 $2.193 $5. Florida Power Corp.0% 27.6% 12.0% 32.0 119.0319 $0.0% 20.09 $5.23 $2.0% 13.0431 $0.0154 $0.0075 $0.5% 47.0% Industrial 4. Tampa Electric Co.0368 Incremental Generation Cost/KWH (d) $0.57 $1.0% 33.84 $1.0540 $0.0% Capital Structure Long Term Debt/Total Capitalization 46.0694 $0.0% 26.0732 $0.446.0828 $0.95 Dividend Yield 6% 5% 5% 6% 6% 5% 4% Payout Ratio (all dividends) 91% 74% 68% 87% 74% 75% 73% Capacity Utilization Annual Load Factor (a) 57% 59% 60% 51% 57% 59% n/a Capacity Margin (b) 8. TECO Energy.0293 $0.14 $0.0% 21.30 Cash Flow per share $5.9% 47.4% 48.0673 Industrial $0.0187 $0.0186 $0.Exhibit 7 Investor-Owned Utilities in the Southeast United States in 1993 FPL Group Carolina Power Duke Power Florida Progress SCANA Corp.0059 $0.0% 10.0% 26.2% 45.078 $8.0344 $0.0317 $0.0019 $0.0% 14.0% 8.02 $3.3% Earnings per share $2.72 $1.647.0007 $0.0% 28.11 $1. SC Electric and Alabama Power Co.0006 $2.0049 Busbar Cost/KWH (c) $0.0008 $0.0% 30.0% 44.26 $3.9% 48.6% 13.1% 49.0010 $0.0115 $0. Electric Subsidiaries Florida Power Carolina Power Duke Power Co.0070 $0.0732 $0.5% 13.0% 15.11 $1.505.8% Percent of Power Purchased (1993est) 30.0% 20.454.0713 $0.128 Profitability Return on Common Stock 12. Inc.194 $12.85 $5.0% 7.0176 $0. (FL) Markets and Customers Major markets East/South FL East NC Central NC North Central FL Southwest SC Northwest FL. and AL Total KWH produced (millions) 72.0581 $0.8% 48.2% 10.0% 29.1% 50.0% 26.0600 $0.7 45. and Light Company and Light Company Gas Company Georgia Power Co.1% Common Stock/Total Capitalization 47.0465 .3% Total Assets (millions) $13.0549 $0.74 $1.0% 11.16 $2.59 $6.0 76. Central FL Northeast SC Northwest SC GA.0% 47.95 $2.6% 13.2% 39.0% 28. Sources: Value Line. (c) Busbar Cost is the unit output cost of electric power coming out of a generating plant. .Peak Load in Summer)/Total Capacity. (d) Incremental Generation Cost is the marginal cost to produce an additional kilowatt-hour. Bradford & Co. (b) Capacity Margin = (Total Capacity . 1993 edition) Goldman Sachs Selected Electric Utility Industry Statistics (November 1994) Notes: (a) Annual Load Factor is the average level of capacity used by the utility.. before transmission and distribution.C. Annual Reports. North American Utility Almanac (J. 70 $547.90 $700.647.0293 $0.41 $468.04 $985.Operation/Maintenance Costs/KWH $0.0 13.370.7 45.58 $3.0176 $0.0009 $0.39 $313.833.78 $1.83 Incremental Generation Cost/KWH (d) $1.0019 $0.67 $494.651.0059 $0.354.0154 $0.62 $521.0010 $0.446.0 28.87 $325.0242 Transmission Cost/KWH (1987) $0.0115 $0.5 Operation/Maintenance Costs/KWH $543.0344 $0.802.0049 Busbar Cost/KWH (c) $0.0010 $0.0006 Total KWH produced (millions) 72.0007 $0.53 $86.0317 $0.8 16.0 119.411.058.09 $703.0319 $0.454.505.0403 $0.0366 $0.0187 $0.0182 $0.41 .48 $494.0072 $0.338.32 $65.89 Busbar Cost/KWH (c) $2.0051 $0.880.62 $200.206.97 $1.0070 $0.0103 $0.85 $2.0368 Incremental Generation Cost/KWH (d) $0.0008 $0.0 76.84 $1.0075 $0.0186 $0. Transmission Cost/KWH (1987) $137.06 $28.82 $95.95 $76.36 $8.07 .65 $11.66 $40. Exhibit 9 Dividends by Industry and for Electric Utilities—First Quarter 1994 Dividend Dividend S&P Industry Groups Payout Ratio Yield Health Care (drugs) 69.8% Restaurants 15.0% 7.6% Tobacco 65.0% 0.4% 8.4% Aerospace/Defense 31.7% Automobiles 20.7% 2.9% Sample of Electric Utility Companies Texas Utilities 106.6% Ohio Edison 81.5% Consolidated Edison 75.9% 0.2% 9.3% Central & SW 87.7% Houston Industries 90.7% Chemicals (specialty) 39.4% 4.5% 0.6% American Electric 81.1% Household Products 66.0% 2.9% 0.5% Carolina P&L 72.9% Toys 16.3% 7.8% Computer Software/Services 10. 88.7% 5.5% 1.1% Northern State Power 81.5% Hardward and Tools 53.5% 6.0% 9.9% Telecommunications (long distance) 39.4% 6.3% 8.1% PacificCorp 74.2% 7.7% Textiles 34.5% Pacific G&E 71.4% Electronics (semiconductors) 6.3% Retail (specialty) 29.2% 1.7% 9.1% 9.6% 8.2% 8.6% 3.8% Cosmetics 39.2% 7.6% 1.5% .9% Public Service of CO 87.4% Airlines deficit 0.6% Potomac Electric 92.3% 2.8% Foods 45.6% Oklahoma G&E 93.9% NY State E&G 88.1% 0.6% Hotel-Motel 25.1% Steel deficit 0.5% 7.1% Southern Company 71.6% 2.9% Shoes 25.0% 2.9% 10.9% Entertainment 23.9% 6.4% 1.5% 6.4% SCE Corp.2% Regional Banks 32.3% 8.4% 0.0% Dominion Resources 79.7% 0.0% Delmarva P&L 90.9% 2.3% Beverages (soft drinks) 38.7% 2.2% Publishing (newspapers) 58.7% 1.7% Commonwealth Edison 84. Barrons 5/16/1994.7% 6.3% Centerior Energy 61.5% General Public Utilities 65. . 16. September 1994 Monthly Supplement.8% Sources: S&P Analysts' Handbook.5% 7.8% 5.7% Philadelphia Electric 60.8% 5.5% 6. p.Entergy 66.6% Duke Power 64. 4% Mutual Funds/Money Managers 13. Note: An ESOP (Employee Stock Ownership Plan) is a program administered by a third party trustee to encourage employees to purchase stock in the company—often used as a retirement savings vehicle.1% 17 Total 100.9% 85.9% 328 Pension Funds/Universities 18.787 Number of shares outstanding at 12/31/93 (millions) 190. .1% Insiders (Officers and Directors) 0.2% ESOP (Fidelity Management is trustee) 11.3% Insurance Companies 1.0% Financial Institutions 4.0% 85.442 Institutions (total) 36. CDA/Spectrum.1 Sources: FPL Group 1993 Annual Report and Proxy Statement (5/4/94). and casewriter estimates.Exhibit 10 FPL Group Ownership Information—First Quarter 1994 Number of Type of Shareholder Percent of Total Shares Shareholders Individuals and Other 51.