Progress Energy 2010 Annual Report Download - page 117

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Progress Energy Annual Report 2010
OTHER LITIGATION MATTERS
We are involved in various litigation matters in the ordinary
course of business, some of which involve substantial
amounts. Where appropriate, we have made accruals
and disclosures to provide for such matters. In the
opinion of management, the final disposition of pending
litigation would not have a material adverse effect on our
consolidated results of operations or financial position.
23. CONDENSED CONSOLIDATING
STATEMENTS
Presented below are the Condensed Consolidating
Statements of Income, Balance Sheets and Cash Flows
as required by Rule 3-10 of Regulation S-X. In September
2005, we issued our guarantee of certain payments of
two wholly owned indirect subsidiaries, FPC Capital I (the
Trust) and Florida Progress Funding Corporation (Funding
Corp.). Our guarantees are in addition to the previously
issued guarantees of our wholly owned subsidiary,
Florida Progress.
The Trust, a finance subsidiary, was established in 1999
for the sole purpose of issuing $300 million of 7.10%
Cumulative Quarterly Income Preferred Securities
due 2039, Series A (Preferred Securities) and using
the proceeds thereof to purchase from Funding Corp.
$300 million of 7.10% Junior Subordinated Deferrable
Interest Notes due 2039 (Subordinated Notes). The
Trust has no other operations and its sole assets are
the Subordinated Notes and Notes Guarantee (as
discussed below). Funding Corp. is a wholly owned
subsidiary of Florida Progress and was formed for the
sole purpose of providing financing to Florida Progress
and its subsidiaries. Funding Corp. does not engage in
business activities other than such financing and has
no independent operations. Since 1999, Florida Progress
has fully and unconditionally guaranteed the obligations
of Funding Corp. under the Subordinated Notes. In
addition, Florida Progress guaranteed the payment of all
distributions related to the Preferred Securities required
to be made by the Trust, but only to the extent that the
Trust has funds available for such distributions (the
Preferred Securities Guarantee). The two guarantees
considered together constitute a full and unconditional
guarantee by Florida Progress of the Trust’s obligations
under the Preferred Securities. The Preferred Securities
and the Preferred Securities Guarantee are listed on the
New York Stock Exchange.
The Subordinated Notes may be redeemed at the option of
Funding Corp. at par value plus accrued interest through
the redemption date. The proceeds of any redemption
of the Subordinated Notes will be used by the Trust to
redeem proportional amounts of the Preferred Securities
and common securities in accordance with their terms.
Upon liquidation or dissolution of Funding Corp., holders
of the Preferred Securities would be entitled to the
liquidation preference of $25 per share plus all accrued
and unpaid dividends thereon to the date of payment.
The annual interest expense related to the Subordinated
Notes is reflected in the Consolidated Statements of
Income.
We have guaranteed the payment of all distributions
related to the Trust’s Preferred Securities. At December 31,
2010, the Trust had outstanding 12 million shares of
the Preferred Securities with a liquidation value of
$300 million. Our guarantees are joint and several, full and
unconditional, and are in addition to the joint and several,
full and unconditional guarantees previously issued to
the Trust and Funding Corp. by Florida Progress. Our
subsidiaries have provisions restricting the payment of
dividends to the Parent in certain limited circumstances,
and as disclosed in Note 11B, there were no restrictions
on PEC’s or PEF’s retained earnings.
The Trust is a variable-interest entity of which we are not
the primary beneficiary. Separate financial statements
and other disclosures concerning the Trust have not been
presented because we believe that such information is
not material to investors.
In these condensed consolidating statements, the Parent
column includes the financial results of the parent holding
company only. The Subsidiary Guarantor column includes
the consolidated financial results of Florida Progress
only, which is primarily comprised of its wholly owned
subsidiary PEF. The Non-Guarantor Subsidiaries column
includes the consolidated financial results of all non-
guarantor subsidiaries, which is primarily comprised of our
wholly owned subsidiary PEC. The Other column includes
elimination entries for all intercompany transactions and
other consolidation adjustments. All applicable corporate
expenses have been allocated appropriately among the
guarantor and non-guarantor subsidiaries. The financial
information may not necessarily be indicative of results
of operations or financial position had the subsidiary
guarantor or other non-guarantor subsidiaries operated
as independent entities.