Exhibit 99
Duke Energy Reports Third Quarter 2003 Results
* Reported EPS of 5 cents in third quarter 2003 - excluding charges of
30 cents related to special items, EPS was 35 cents
* Excluding special items and change in accounting principles, the company
now expects 2003 ongoing EPS to be between $1.20 -- $1.25
* Company implements cost-reduction plan - expected to reduce annual
pretax expenses by more than $200 million
* Company is on track to pay down debt $1.8 billion by year end, and
$5.5 billion by the end of 2005
CHARLOTTE, N.C., Oct. 30 /PRNewswire-FirstCall/ -- Duke Energy reported
third quarter 2003 earnings of 5 cents per share, or $49 million in net
income, compared to 27 cents per share, or $230 million in net income in third
quarter 2002.
Ongoing earnings per share (EPS) for third quarter 2003, which excludes
special items, was 35 cents versus 51 cents in ongoing EPS in third quarter
2002.
Duke Energy's focus on generating positive cash flow and reducing debt
continues to show favorable results. The company has generated gross proceeds
of $1.9 billion, including $346 million of assumed debt, in 2003 from asset
sales that have been announced or closed. The company reduced $1.7 billion of
net debt and trust preferred securities during the first nine months of 2003.
By year end, the company expects to meet its target to reduce net debt and
trust preferred securities by $1.8 billion. Duke Energy's capital expenditures
for 2003 are now expected to be $2.8 billion, $200 million lower than the
previously forecasted $3 billion. Liquidity remains strong, with $1.8 billion
in cash and cash equivalents as of Sept. 30, 2003.
"We have made tough decisions necessary to strengthen our financial
position, and will continue that discipline as we move into 2004," said
Richard B. Priory, chairman and chief executive officer.
Priory added that despite the continuous steady performance from our
regulated businesses, as well as Field Services and International Energy, the
lower than expected results at Duke Energy North America (DENA) will likely
cause full-year ongoing 2003 EPS to be between $1.20 -- $1.25. This guidance
excludes any impacts from special items and changes in accounting principles.
Special items for the quarter include:
Third Quarter EPS EPS
Impact Impact
2003 2002
-- Tax benefit on 2002 goodwill impairment of
International Energy European
gas trading -- $52 million $0.06 $--
-- DENA goodwill write-off -- $254 million (0.18) --
-- Severance cost associated with work force
reduction -- $105 million in 2003;
$33 million in 2002 (0.08) (0.02)
-- Net gain/(loss) on asset sales -
($71 million) in 2003; $14 million in 2002 (0.05) 0.01
-- Settlement with the S.C. Public Service
Commission -- $46 million (0.03) --
-- Settlement with the Commodity Futures
Trading Commission -- $17 million (0.02) --
-- Write-offs of site development costs,
termination of certain turbines on order;
plus write-down of other uninstalled
turbines, demobilization costs related to
deferred plants and partial impairment of a
merchant plant -- $286 million -- (0.23)
TOTAL $(0.30) $(0.24)
EPS, as reported 0.05 0.27
EPS, ongoing 0.35 0.51
COST-REDUCTION PLAN
Duke Energy began to implement a broad-based, cost-reduction plan during
the quarter. Actions taken to date will result in reduced annual pretax
expenses of more than $200 million beginning in 2004. As part of this ongoing
initiative, the company took a pretax severance-related charge of $105
million, or 8 cents per share, in third quarter 2003. The company expects to
take additional severance-related charges in fourth quarter 2003 of about $30
million.
The company expects its global work force of 25,000 to be reduced by about
8 percent as a result of the current initiative.
"Through the corporatewide, cost-reduction plan, we are examining all
aspects of our business operations," said Fred Fowler, president and chief
operating officer of Duke Energy. "These actions are fundamental to our
efforts to position the company for future growth."
BUSINESS UNIT RESULTS
Consolidated earnings before interest and taxes (EBIT) was $352 million,
compared with $666 million in third quarter 2002. For the first nine months of
2003, consolidated EBIT was $2.3 billion, compared to $2.5 billion in the
prior year.
Below is a reconciliation of consolidated EBIT to net income:
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
($ in Millions ) 9/30/03 9/30/02 9/30/03 9/30/02
Consolidated EBIT,
as defined below $352 $666 $2,346 $2,493
Cumulative effect of change in
accounting principles, net of tax -- -- 162 --
Interest expense 391 314 1,072 786
Income tax expense (benefit) (78) 108 312 513
Minority interest expense (benefit) (10) 14 102 108
Net income $49 $230 $698 $1,086
Franchised Electric
Third quarter 2003 EBIT from Franchised Electric was $436 million,
compared to third quarter 2002 EBIT of $575 million. Cooler than normal
weather and a sluggish economy had a negative impact on results for the
quarter. During the quarter, Duke Power took an amortization charge of
$53 million related to the N.C. clean air legislation, which was $35 million
more than anticipated. EBIT was further reduced by $30 million due to a
regulatory settlement with the South Carolina Public Service Commission.
Franchised Electric also recorded severance charges of about $46 million in
third quarter 2003 compared with $21 million in third quarter 2002. As a
result of the additional clean air amortization, Duke Power now expects
full-year 2003 EBIT to be between $1.5 billion and $1.6 billion, excluding
special items.
Cooling degree days were 21 percent below last year's quarter and 16
percent below normal. The effects of milder weather compared with last year
had a negative impact on EBIT of about $35 million for the quarter.
Overall kilowatt-hour sales dropped 4.7 percent for the quarter versus
third quarter of last year. The sluggish economy in North Carolina and South
Carolina particularly affected industrial sales, which fell 8.9 percent for
the quarter. Milder weather hurt residential sales, which fell 5 percent
versus last year's quarter.
However, overall customer growth continues its upward track - with an
increase of another 40,000 customers compared to last year's quarter.
Year-to-date EBIT for Franchised Electric was $1,206 million, compared
with $1,347 million year to date in 2002.
Natural Gas Transmission
Duke Energy Gas Transmission (DEGT) reported third quarter 2003 EBIT of
$280 million, compared to $288 million in third quarter 2002. DEGT had gains
on asset sales of $31 million during third quarter 2003, compared with
$18 million in third quarter 2002. DEGT also recorded $18 million in severance
charges during third quarter 2003.
Increased earnings from completed expansion projects also contributed to
DEGT's quarterly results. DEGT's major 2003 expansion projects, Patriot and
HubLine, are slated to begin operations in the fourth quarter.
Year-to-date EBIT for DEGT was $1,009 million, compared with
$867 million year to date in 2002.
Duke Energy North America
Duke Energy North America (DENA) reported an EBIT loss of $411 million in
third quarter 2003, compared to an EBIT loss of $107 million in third quarter
2002. In third quarter 2003, mild weather, high natural gas prices and low
spark spreads in many parts of the nation combined to severely impact DENA's
earnings. During the quarter, the company wrote off $254 million of goodwill,
which was primarily related to the formation of DENA's trading and marketing
business. This charge reflects the reduction in scope and scale of Duke Energy
Trading and Marketing's business and the continued deterioration of market
conditions affecting DENA.
DENA was also affected in the quarter by an $81 million EBIT loss on
various pending asset sales and assets held for sale and a $17 million charge
related to its portion of Duke Energy Trading and Marketing's settlement with
the Commodity Futures Trading Commission.
DENA also took a $5 million charge for severance costs during the third
quarter, compared to $12 million in the prior year's third quarter.
Third quarter 2002 included $207 million of charges related to impairments
of turbines, site development costs, demobilization, severance costs and
impairment of a merchant plant.
Year-to-date EBIT loss for DENA was $177 million, compared with positive
EBIT of $143 million year to date in 2002.
International Energy
For third quarter 2003, Duke Energy International (DEI) reported EBIT of
$44 million, compared to third quarter 2002 EBIT loss of $41 million which
included $91 million in development cost write-offs and turbine impairments.
Third quarter 2003 results include a $7 million charge for environmental
reserves relating to a prior period. Excluding this charge and the write-offs
and impairments from last year, results for the third quarter were essentially
flat compared with the same period last year. Positive results from the Latin
American and European operations offset foregone earnings associated with the
sale of the company's interest in generating facilities in Indonesia earlier
in 2003 and a $3 million severance charge during third quarter 2003.
Year-to-date EBIT for DEI was $209 million, compared with $73 million year
to date in 2002.
Field Services
The Field Services business segment, which represents Duke Energy's
70-percent interest in Duke Energy Field Services reported third quarter 2003
EBIT of $53 million compared to $23 million in third quarter 2002. The
favorable impact of higher natural gas liquids (NGL) prices during the period
was partially offset by the effects of higher natural gas prices and hedging
results related to the price movements of NGLs during the period. In third
quarter 2002, results were negatively impacted by higher operating and
administrative costs, an increase in its provision for gas imbalances with
customers and suppliers, and other charges related to its internal review and
reconciliations of balance sheet accounts.
Year-to-date EBIT in 2003 for Field Services was $162 million compared to
$99 million year to date in 2002.
Other Operations
Other Operations, including Crescent Resources, DukeNet Communications,
Duke Capital Partners, Duke/Fluor Daniel, Duke Energy Merchants and Energy
Delivery Services, reported EBIT of $21 million in third quarter 2003,
compared to EBIT of $30 million in third quarter 2002.
Year-to-date EBIT in 2003 for Other Operations was $13 million compared to
$175 million in year-to-date EBIT in 2002. Lower results were driven by fewer
plant completions by Duke/Fluor Daniel in 2003 and wind-down costs at Duke
Capital Partners, including write-downs on investments, partially offset by
improved results from Crescent Resources. Year-to-date results for 2002
included $30 million in net gains related to asset sales.
INTEREST EXPENSE
Interest expense was $391 million for third quarter 2003, compared to
$314 million for third quarter 2002. The increase was primarily due to lower
capitalized interest of $33 million and $24 million of interest associated
with the reclassification in the third quarter of certain trust preferred
securities from minority interest to long-term debt. Interest expense also
increased $16 million this quarter as a result of the settlement with the
South Carolina Public Service Commission which required the write-off of a
portion of previously capitalized debt costs.
INCOME TAX
Duke Energy had a $52 million income tax benefit in third quarter 2003
related to the goodwill impairment of its gas trading business in Europe,
recorded in 2002.
CASH FLOW
For the nine months ending Sept. 30, 2003, cash flow from operations was
$2.9 billion, compared to $3.3 billion for the first nine months ending
Sept. 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Duke Energy's consolidated capital structure as of Sept. 30, 2003,
including short-term debt, was 58 percent debt, 38 percent common equity and
4 percent minority interests. Total debt to capitalization increased as a
result of a new accounting requirement to reclassify certain trust preferred
securities totaling approximately $1.2 billion from minority interest to
long-term debt during the quarter.
Under various credit facilities, Duke Energy, Duke Capital and other
subsidiaries had the ability to borrow up to $3.5 billion as of Sept. 30,
2003. The companies had borrowings and letters of credit outstanding under
these programs of approximately $1.4 billion as of Sept. 30, 2003, resulting
in unused capacity of approximately $2.1 billion. The company also had
approximately $1.8 billion in cash and cash equivalents as of Sept. 30, 2003.
During third quarter, the company continued its efforts to reduce and
refinance debt in order to strengthen the balance sheet and reduce future
interest expense. These efforts include calling $328 million of 7.75 percent
long-term debt and refinancing $500 million of First Mortgage Bonds which were
redeemed in October 2003.
During the quarter, the company made a voluntary cash contribution of
$181 million to its U.S. pension plan. As a result of making the contribution,
the company will not be required to make a contribution to this plan in 2004.
ADDITIONAL INFORMATION
The company is unable to estimate forward-looking, generally accepted
accounting principle (GAAP) EPS for 2003 because the amount of special items,
if any, impacting EPS in the fourth quarter cannot be reasonably estimated at
present. Additional information, including EPS reconciliation data and a
schedule for Duke Energy Field Services gas volume and margin by contract type
can be obtained at Duke Energy's third quarter 2003 earnings information Web
site at: http://www.duke-energy.com/investors/earnings/.
FINANCIAL MEASURES AND RECONCILIATION OF CHANGES IN NET DEBT
The primary performance measure used by management to evaluate segment
performance is EBIT, which at the segment level represents all profits (both
operating and non-operating) before deducting interest and taxes, and is net
of the minority interest expense related to those profits. Management believes
EBIT is a good indicator of each segment's operating performance as it
represents the results of our ownership interests in operations without regard
to financing methods or capital structures.
On a consolidated basis, EBIT is also used as one of the measures to
assess performance and represents the combination of operating income and
other income and expenses as presented on the consolidated statements of
income. The use of EBIT as one of the performance measures on a consolidated
basis follows the use of EBIT for assessing segment performance, and we
believe EBIT is used by our investors as a supplemental financial measure in
the evaluation of our consolidated results of operations.
EBIT should not be considered an alternative to, or more meaningful than,
net income, operating income or cash flow as determined in accordance with
generally accepted accounting principles (GAAP). Duke Energy's EBIT may not be
comparable to a similarly titled measure of another company.
Duke Energy refers to changes in net debt and trust preferred securities
as representing the results of financing activities during the period, net of
changes in cash and cash equivalents. Other changes to debt balances,
including impacts of foreign currency translation, are excluded from changes
to net debt and trust preferred securities. Changes to cash and cash
equivalents are included, as management may elect to use a portion of cash and
cash equivalents to pay down debt. Accordingly, the balance of cash and cash
equivalents on hand at any point in time can fluctuate depending upon
management intent and other factors, including desired levels of debt and
financing opportunities. Management believes that a discussion of changes to
net debt and trust preferred securities related to financing
activities, combined with changes to cash and cash equivalents, provides
meaningful information to investors because it presents a combined view of the
net changes in these items over a period of time.
Reconciliation of net debt to balance sheet debt as of Sept. 30, 2003:
($ in millions)
Long-term debt, including current maturities $21,550
Notes payable and CP 915
Trust preferred securities 1,408
Preferred members interest 61
Preferred stock with sinking fund requirements 25
---------
Total adjusted debt at Dec. 31, 2002 $23,959 (a)
---------
Year-to-date 2003 financing activity:
Issuance of long-term debt $2,819
Redemption of long-term debt, guaranteed preferred
beneficial interests and preferred member interests,
and net paydown of commercial paper and notes payable (3,333)
Non-cash reduction of long-term debt
related to asset sales (317)
---------
Net reduction in debt as of Sept. 30 $(831)(b)
Net increase in cash and cash equivalents 894
Total change to debt from financing activities, ---------
net of cash, as of Sept. 30 ($1,725)
=========
Total debt as of Sept. 30, 2003 $23,964
Adjusted debt as of Sept. 30, 2003 23,128 (a+b)
Other increase in debt due primarily to ---------
foreign currency translation $836
=========
Duke Energy is a diversified multinational energy company with an
integrated network of energy assets and expertise. The company manages a
dynamic portfolio of natural gas and electric supply, delivery and trading
businesses - meeting the energy needs of customers throughout North America
and in key markets around the world. Duke Energy, headquartered in Charlotte,
N.C., is a Fortune 500 company traded on the New York Stock Exchange under the
symbol DUK. More information about the company is available on the Internet
at: www.duke-energy.com.
An earnings conference call for analysts is scheduled for 10 a.m. ET
today. The conference call can be accessed via the investors' section of Duke
Energy's Web site or by dialing 800/500-0311 in the United States or 719/457-
2698 outside the United States. The confirmation code is 142066. Please call
in five to 10 minutes prior to the scheduled start time. A replay of the
conference call will be available by dialing 888/203-1112 with a confirmation
code of 142066. The international replay number is 719/457-0820, confirmation
code 140266. A replay and transcript also will be available by accessing the
investors' section of the company's Web site. The presentation may include
certain non-GAAP financial measures as defined under SEC rules. In such event,
a reconciliation of those measures to the most directly comparable GAAP
measures will be available on our investor relations Web site at:
www.duke-energy.com/investors/financial/gaap.
This document includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although Duke Energy believes that its expectations are
based on reasonable assumptions, it can give no assurance that its goals will
be achieved. Important factors that could cause actual results to differ
materially from those in the forward-looking statements herein include
legislative and regulatory developments; the outcomes of litigation and
regulatory proceedings or inquiries; industrial, commercial and residential
growth in our service territories; the weather and other natural phenomena;
general economic conditions, including any potential effects arising from
terrorist attacks, the situation in Iraq and any consequential hostilities or
other hostilities; the results of financing efforts, including Duke Energy's
ability to obtain financing on favorable terms; lack of improvement or
further declines in the market prices of equity securities and resultant cash
funding requirements for Duke Energy's defined benefit pension plans; the
level of creditworthiness of counterparties to Duke Energy's transactions; the
amount of collateral required to be posted from time to time in Duke Energy's
transactions; the timing and extent of changes in commodity prices for oil,
natural gas, coal, electricity and interest rates; the extent of success in
connecting natural gas supplies to gathering and processing systems and in
connecting and expanding natural gas and electric markets; the performance of
electric generation, pipeline and natural gas processing facilities; the
timing and success of efforts to develop domestic and international power,
pipeline, gathering, processing and other infrastructure projects; conditions
of the capital markets and equity markets during the periods covered by the
forward-looking statements; and other factors discussed in Duke Energy's
filings with the Securities and Exchange Commission.
SEPTEMBER 2003
QUARTERLY HIGHLIGHTS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
(In millions, except where noted) 2003 2002 2003 2002
--------------------------------------------------------------------------
COMMON STOCK DATA
Earnings Per Share (before
cumulative effect of change in
accounting principles)
Basic $ 0.05 $ 0.27 $ 0.94 $ 1.32
Diluted $ 0.05 $ 0.27 $ 0.94 $ 1.31
Earnings Per Share
Basic $ 0.05 $ 0.27 $ 0.76 $ 1.32
Diluted $ 0.05 $ 0.27 $ 0.76 $ 1.31
Dividends Per Share $ -- $ -- $ 0.825 $ 0.825
Weighted-Average Shares Outstanding
Basic 905 834 901 817
Diluted 907 834 902 820
--------------------------------------------------------------------------
INCOME
Operating Revenues $ 5,539 $ 3,982 $17,112 $10,907
======= ======= ======= =======
Earnings Before Interest and Taxes
(EBIT) 352 666 2,346 2,493
Interest Expense 391 314 1,072 786
Minority Interest (Benefit)
Expense (a) (10) 14 102 108
Income Tax (Benefit) Expense (78) 108 312 513
Cumulative Effect of Change in
Accounting Principles, net of tax
and minority interest -- -- (162) --
------- ------- -------- -------
Net Income 49 230 698 1,086
Dividends and Premiums on
Redemptions of Preferred and
Preference Stock 3 3 13 10
------- ------- -------- -------
Earnings Available for Common
Stockholders $ 46 $ 227 $ 685 $ 1,076
======= ======= ======== =======
--------------------------------------------------------------------------
CAPITALIZATION
Common Equity 38% 35%
Preferred Stock (b) 0% 1%
Trust Preferred Securities (b) 0% 3%
-------- --------
Total Common Equity and Preferred
Securities 38% 39%
Minority Interests (b) 4% 5%
Total Debt (b) 58% 56%
--------------------------------------------------------------------------
Fixed Charges Coverage, using SEC
guidelines 2.0 2.3
Total Debt (b) $23,964 $22,869
Book Value Per Share $ 17.57 $ 16.90
Actual Shares Outstanding 907 836
--------------------------------------------------------------------------
CAPITAL AND INVESTMENT EXPENDITURES
Franchised Electric $ 282 $ 300 $ 768 $ 867
Natural Gas Transmission (c) 172 235 603 2,525
Field Services 32 66 94 250
Duke Energy North America 11 237 268 1,758
International Energy 18 133 61 350
Other Operations (d) 78 105 226 410
Other 23 10 26 10
Cash acquired in acquisitions -- -- -- (77)
------- ------- ------- --------
Total Capital and Investment
Expenditures $ 616 $ 1,086 $ 2,046 $ 6,093
======= ======= ======= =======
--------------------------------------------------------------------------
EBIT BY BUSINESS SEGMENT
Franchised Electric $ 436 $ 575 $ 1,206 $ 1,347
Natural Gas Transmission 280 288 1,009 867
Field Services 53 23 162 99
Duke Energy North America (411) (107) (177) 143
International Energy 44 (41) 209 73
Other Operations (d) 21 30 13 175
Other (89) (124) (200) (362)
------- -------- -------- --------
Total Segment and Other EBIT 334 644 2,222 2,342
EBIT Attributable to:
Minority Interest Expense
(Benefit) 5 (7) 97 49
Third Party Interest Income 6 32 17 88
Foreign Currency Remeasurement
Gain (Loss) 7 (3) 10 14
------- -------- -------- -------
Total EBIT $ 352 $ 666 $ 2,346 $ 2,493
======= ======== ======= =======
--------------------------------------------------------------------------
(a) Includes financing expenses related to securities of subsidiaries
of $33 million for the three months ended September 30, 2002, and
$55 million and $103 million for the nine months ended
September 30, 2003 and 2002, respectively.
(b) Upon the implementation of SFAS No. 150 (effective July 1, 2003),
approximately $1.2 billion related to trust preferred securities,
preferred stock with sinking fund requirements and minority interests
have been reclassified to debt.
(c) 2002 nine months ended amount includes $1.7 billion (net of cash
acquired) paid to Westcoast Energy shareholders related to the
acquisition.
(d) Beginning in 2003, Other Energy Services and Duke Ventures were
combined into Other Operations.
SEPTEMBER 2003
QUARTERLY HIGHLIGHTS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
(In millions, except where noted) 2003 2002 2003 2002
--------------------------------------------------------------------------
FRANCHISED ELECTRIC
Operating Revenues $ 1,357 $ 1,460 $ 3,718 $ 3,735
Operating Expenses 928 898 2,550 2,434
Gain on Sales of Other Assets,
net 1 -- 2 --
Other Income, net of Expenses 6 13 36 46
------- ------- ------- -------
EBIT $ 436 $ 575 $ 1,206 $ 1,347
======= ======= ======= =======
Sales, GWh 22,163 23,251 63,621 63,190
--------------------------------------------------------------------------
NATURAL GAS TRANSMISSION
Operating Revenues $ 641 $ 628 $ 2,301 $ 1,699
Operating Expenses 393 375 1,381 954
Gain on Sales of Other Assets,
net 3 -- 4 --
Other Income, net of Expenses (a) 38 44 117 143
Minority Interest Expense 9 9 32 21
------- ------- ------- -------
EBIT $ 280 $ 288 $ 1,009 $ 867
======= ======= ======= =======
Proportional Throughput, TBtu 679 802 2,502 2,177
--------------------------------------------------------------------------
FIELD SERVICES
Operating Revenues $ 1,841 $ 1,318 $ 6,218 $ 3,828
Operating Expenses 1,772 1,303 6,040 3,735
Gain on Sales of Other Assets,
net 1 -- 27 --
Other Income, net of Expenses (b) 14 16 53 35
Minority Interest Expense 31 8 96 29
------- ------- ------- -------
EBIT $ 53 $ 23 $ 162 $ 99
======= ======= ======= =======
Natural Gas Gathered and
Processed/Transported, TBtu/day 7.7 8.4 7.9 8.4
Natural Gas Liquids Production,
MBbl/d 366.2 395.1 367.6 392.0
Average Natural Gas Price per
MMBtu $ 4.97 $ 3.18 $ 5.66 $ 2.97
Average Natural Gas Liquids Price
per Gallon $ 0.49 $ 0.39 $ 0.52 $ 0.36
--------------------------------------------------------------------------
DUKE ENERGY NORTH AMERICA
Operating Revenues $ 1,141 $ 486 $ 3,499 $ 1,153
Operating Expenses 1,517 634 3,844 1,054
Loss on Sales of Other Assets,
net (c) (84) -- (84) --
Other Income, net of Expenses (d) 11 13 207 29
Minority Interest Benefit (38) (28) (45) (15)
-------- -------- -------- --------
EBIT $ (411) $ (107) $ (177) $ 143
======== ======== ======== ========
Actual Plant Production, GWh (e) 9,130 9,662 18,750 19,188
Proportional MW Capacity in
Operation 15,836 14,211
--------------------------------------------------------------------------
INTERNATIONAL ENERGY
Operating Revenues $ 295 $ 203 $ 1,043 $ 711
Operating Expenses 256 265 853 679
Loss on Sales of Other Assets, net (1) -- (1) --
Other Income, net of Expenses 9 26 33 57
Minority Interest Expense 3 5 13 16
------- ------- ------- -------
EBIT $ 44 $ (41) $ 209 $ 73
======= ======== ======= =======
Sales, GWh 4,301 5,637 14,378 15,583
Proportional MW Capacity in
Operation 4,585 4,825
Proportional Maximum Pipeline
Capacity in Operation, MMcf/d 363 363
--------------------------------------------------------------------------
OTHER OPERATIONS
Operating Revenues $ 454 $ 241 $ 1,445 $ 588
Operating Expenses 426 243 1,440 552
(Loss) Gain on Sales of Other
Assets, net (23) (5) (43) 41
Other Income, net of Expenses 16 36 52 96
Minority Interest (Benefit) Expense -- (1) 1 (2)
------- -------- ------- -------
EBIT $ 21 $ 30 $ 13 $ 175
======= ======== ======== =======
--------------------------------------------------------------------------
(a) For the nine months ended September 30, 2003, other income includes
approximately $61 million gain on sale of the Alliance/Aux Sable and
Foothills equity investments.
(b) For the nine months ended September 30, 2003, other income includes
approximately $11 million gain on sale of TEPPCO Class B shares.
(c) For 2003, amount includes approximately $18 million loss on the
anticipated sale of 25% interest in Vermillion and $66 million loss on
the anticipated sale of turbines.
(d) For the the nine months ended September 30, 2003, other income
includes approximately $178 million gain on sale of the American Ref-
Fuel Company equity investment.
(e) Represents 100% of GWh.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Operating Revenues
Sales of natural gas and petroleum
products $ 2,888 $ 1,184 $ 9,953 $ 3,586
Generation, transmission and
distribution of electricity 1,953 2,238 5,187 5,407
Transportation and storage of
natural gas 447 429 1,279 1,202
Other 251 131 693 712
-------- -------- -------- --------
Total operating revenues 5,539 3,982 17,112 10,907
-------- -------- -------- --------
Operating Expenses
Natural gas and petroleum products
purchased 2,614 944 8,788 2,827
Fuel used in electric generation 567 553 1,265 1,180
Net interchange and purchased power 138 291 381 521
Operation and maintenance 1,003 1,090 2,684 2,750
Depreciation and amortization 487 425 1,390 1,166
Property and other taxes 127 139 402 398
Impairment of goodwill 254 -- 254 --
-------- -------- -------- --------
Total operating expenses 5,190 3,442 15,164 8,842
-------- -------- -------- --------
(Loss) Gain on Sales of Other Assets,
net (104) (4) (96) 42
-------- -------- -------- --------
Operating Income 245 536 1,852 2,107
-------- -------- -------- --------
Other Income and Expenses
Equity in earnings of unconsolidated
affiliates 35 57 85 166
Gain on sale of equity investments 33 18 266 32
Other income and expenses, net 39 55 143 188
-------- -------- -------- --------
Total other income and expenses 107 130 494 386
Interest Expense 391 314 1,072 786
Minority Interest (Benefit) Expense (10) 14 102 108
-------- -------- -------- --------
(Loss) Earnings Before Income Taxes (29) 338 1,172 1,599
Income Tax (Benefit) Expense (78) 108 312 513
-------- -------- -------- --------
Income Before Cumulative Effect of
Change in Accounting Principles 49 230 860 1,086
Cumulative Effect of Change in
Accounting Principles, net of tax
and minority interest -- -- (162) --
-------- -------- -------- --------
Net Income 49 230 698 1,086
Dividends and Premiums on Redemptions
of Preferred and Preference Stock 3 3 13 10
-------- -------- -------- --------
Earnings Available For Common
Stockholders $ 46 $ 227 $ 685 $ 1,076
======== ======== ======== ========
Common Stock Data
Weighted-average shares outstanding 905 834 901 817
Earnings per share (before
cumulative effect of change in
accounting principles)
Basic $ 0.05 $ 0.27 $ 0.94 $ 1.32
Diluted $ 0.05 $ 0.27 $ 0.94 $ 1.31
Earnings per share
Basic $ 0.05 $ 0.27 $ 0.76 $ 1.32
Diluted $ 0.05 $ 0.27 $ 0.76 $ 1.31
Dividends per share $ -- $ -- $0.825 $ 0.825
Duke Energy's reported results for the three and nine-month periods
ended September 30, 2003 do not include any effects for the application
of Statement of Financial Accounting Standards (SFAS) No. 150,
"Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity" to minority interests in consolidated
limited life entities, as the Financial Accounting Standards Board
was scheduled to re-evaluate the applicability of SFAS No. 150 to these
financial instruments at its October 29, 2003 meeting. The resolution of
this aspect of SFAS No. 150 is not expected to have an impact on Duke
Energy's consolidated EBIT, and all other provisions of SFAS No. 150 have
been adopted by Duke Energy effective July 1, 2003. Duke Energy is still
assessing the impact of this aspect of SFAS No. 150 to its consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Nine Months Ended
September 30,
-------------------------
2003 2002
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 698 $ 1,086
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization
(including amortization of
nuclear fuel) 1,493 1,269
Cumulative effect of change in
accounting principles 162 --
Impairment charges 254 274
Net realized and unrealized
mark-to-market and hedging
transactions 12 288
Gains on sale of equity
investments and other assets (170) (74)
Changes in working capital and
other 430 422
------- --------
Net cash provided by operating
activities 2,879 3,265
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital and investment
expenditures, net (2,046) (4,386)
Acquisition of Westcoast Energy
Inc., net of cash acquired -- (1,707)
Proceeds from the sale of equity
investments and other assets
and collections on notes receivable 1,540 309
Contribution to company-
sponsored pension plan (181) --
Other (124) (5)
------- --------
Net cash used in investing
activities (811) (5,789)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Issuance of long-term debt 2,819 3,447
Issuance of common stock
related to employee benefit plans 214 265
Payments for the redemption of
long-term debt, guaranteed preferred
beneficial interests and preferred member
interests, and net pay down of commercial
paper and notes payable (3,333) (605)
Dividends paid (786) (697)
Other (88) 297
------- --------
Net cash (used in) provided by
financing activities (1,174) 2,707
------- --------
Net increase in cash and cash equivalents 894 183
Cash and cash equivalents at beginning of
period 857 290
-------- ---------
Cash and cash equivalents at end of period $ 1,751 $ 473
======= ========
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
September 30, December 31,
2003 2002
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 1,751 $ 857
Receivables 3,219 4,796
Inventory 1,279 1,134
Unrealized gains on mark-to-market
and hedging transactions 2,295 2,144
Other 844 952
------------ ------------
Total current assets 9,388 9,883
------------ ------------
Investments and Other Assets
Investments in unconsolidated affiliates 1,490 2,015
Nuclear decommissioning trust funds 838 708
Goodwill, net of accumulated amortization 3,870 3,747
Notes receivable 358 589
Unrealized gains on mark-to-market
and hedging transactions 2,880 2,480
Assets held for sale 257 --
Other 1,103 1,645
------------ ------------
Total investments and other assets 10,796 11,184
------------ ------------
Property, Plant and Equipment
Cost 51,145 48,677
Less accumulated depreciation and
amortization 13,451 12,458
------------ ------------
Net property, plant and equipment 37,694 36,219
------------ ------------
Regulatory Assets and Deferred Debits
Deferred debt expense 266 263
Regulatory asset related to income taxes 1,015 936
Other 1,006 460
------------ ------------
Total regulatory assets and
deferred debits 2,287 1,659
------------ ------------
Total Assets $ 60,165 $ 58,945
============ ============
Duke Energy's reported results for the three and nine-month periods
ended September 30, 2003 do not include any effects for the application
of Statement of Financial Accounting Standards (SFAS) No. 150,
"Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity" to minority interests in consolidated
limited life entities, as the Financial Accounting Standards Board
was scheduled to re-evaluate the applicability of SFAS No. 150 to
these financial instruments at its October 29, 2003 meeting. The
resolution of this aspect of SFAS No. 150 is not expected to have an
impact on Duke Energy's consolidated EBIT, and all other provisions of
SFAS No. 150 have been adopted by Duke Energy effective July 1, 2003.
Duke Energy is still assessing the impact of this aspect of SFAS No. 150
to its consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
September 30, December 31,
2003 2002
------------- ------------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 2,448 $ 3,620
Notes payable and commercial paper 494 915
Taxes accrued 560 156
Interest accrued 306 310
Current maturities of long-term debt and
preferred stock 756 1,331
Unrealized losses on mark-to-market
and hedging transactions 1,843 1,918
Other 1,472 1,770
------------- ------------
Total current liabilities 7,879 10,020
------------- ------------
Long-term Debt 22,714 20,221
------------- ------------
Deferred Credits and Other Liabilities
Deferred income taxes 5,058 4,834
Investment tax credit 168 176
Unrealized losses on mark-to-market
and hedging transactions 2,235 1,548
Other 4,329 3,733
------------- ------------
Total deferred credits and other
liabilities 11,790 10,291
------------- ------------
Commitments and Contingencies
Guaranteed Preferred Beneficial
Interests in Subordinated Notes of Duke Energy
Corporation or Subsidiaries -- 1,408
------------- ------------
Minority Interests 1,716 1,904
------------- ------------
Preferred and Preference Stock
Preferred and preference stock with
sinking fund requirements -- 23
Preferred and preference stock
without sinking fund requirements 134 134
------------- ------------
Total preferred and preference stock 134 157
------------- ------------
Common Stockholders' Equity
Common stock, no par, 2 billion shares authorized;
907 million and 895 million shares outstanding as of
September 30, 2003 and December 31, 2002,
respectively 9,448 9,236
Retained earnings 6,336 6,417
Accumulated other comprehensive
income (loss) 148 (709)
------------- ------------
Total common stockholders' equity 15,932 14,944
------------- ------------
Total Liabilities and Common
Stockholders' Equity $ 60,165 $ 58,945
============= ============
Supplemental Disclosures
Quarter Ended September 30, 2003
Duke Energy Corporation
-------------------------------------------------------------------------
3Q03
-------
Mark-to-market Portfolio (in billions) $ 0.2
Daily Value at Risk (DvaR) (in millions)
95% Confidence Level, One-Day Holding Period,
Two-Tailed Average for the Period $ 11
Duke Energy North America
-------------------------------------------------------------------------
(in millions unless stated otherwise) Q-T-D September 30, 2003
Proprietary Structured Owned
Merchant Energy Gross Margin Trading Contracts Assets Total
------------------------------ ----------- ---------- ------- -------
Mark-to-market gross margin
(loss) $ (2) $ (65) $ 7 $ (60)
Accrual gross margin (loss) n/a (11) 175 164
----------- ---------- ------- -------
Total Gross Margin $ (2) $ (76) $ 182 104
----------- ---------- -------
Reconciliation to Segment EBIT:
Plant depreciation (64)
Plant operating and
maintenance expenses (94)
General and administrative
and other expenses (60)
Minority interest 38
Goodwill impairment (254)
Gain (loss) on sale of
other assets (81)
-------
DENA Segment EBIT $ (411)
=======
Owned Assets - Merchant Plant
Production and Hedging Information 2003 * 2004 2005
-------------------------------------- ------- ------ ------
Estimated available production
(millions of MWh) 24 101 107
Combined cycle 19 78 84
Peaker units 5 23 23
Estimated production (millions of
MWh) 5 30 36
Combined cycle 5 29 34
Peaker units -- 1 2
Hedges
Estimated production hedged 142% 98% 74%
Average price hedged ($/MWh) $ 56 $ 42 $ 42
* Information for 2003 is for the remainder of the year only (October -
December).
Supplemental Disclosures
Quarter Ended September 30, 2003
Duke Energy North America (continued)
--------------------------------------------------------------------------
(in millions)
Maturity/Source of Fair
Value of Energy Contract Over Total
Net Assets 2003 2004 2005 2006 2007 5 Years Fair Value
----------------------- ----- ----- ----- ----- ----- -------- -----------
Proprietary Trading
Actively quoted prices
and other external
sources $ 15 $ 135 $ 10 $ -- $ -- $ 6 $ 166
Modeled (4) (1) 14 17 1 (4) 23
----- ------ ---- ----- ----- ----- ------
$ 11 $ 134 $ 24 $ 17 $ 1 $ 2 $ 189
===== ====== ==== ===== ===== =====
Structured Contracts
Actively quoted prices
and other external
sources $ 32 $ 55 $(10) $(13) $ (1) $(2) $ 61
Modeled (9) (43) (11) 24 12 12 (15)
----- ------ ---- ----- ----- ----- ------
$ 23 $ 12 $(21) $ 11 $ 11 $10 $ 46
===== ====== ==== ===== ===== =====
Owned Assets
Actively quoted prices
and other external
sources $182 $ 330 $155 $ 45 $ -- $-- $ 712
Modeled -- -- 41 88 85 147 361
----- ----- ---- ----- ----- ----- ------
$182 $ 330 $196 $133 $ 85 $147 $1,073
===== ===== ==== ===== ===== =====
------
Total Fair Value of Energy Contract Net Assets * $1,308
======
* Total Fair Value of Energy Contract Net Assets represents the
combination of amounts presented as assets and (liabilities) related
to unrealized gains or losses on mark-to-market and hedging transactions
for Duke Energy North America.
Terms of Reference
--------------------------------------------------------------------------
Estimated Available Production
------------------------------
Represents the amount of electric power capable of being generated from
owned merchant assets, after adjusting for scheduled maintenance and
outage factors. For simple cycle facilities, only peak demand periods
were included in this calculation.
Estimated Production
--------------------
Represents the amount of power expected to be sold in a future period.
This figure is based on economic projections modeled by Duke Energy
personnel.
Estimated Production Hedged
---------------------------
Represents the portion of estimated production which has been sold.
Owned Assets
------------
Represents activity around energy assets owned or leased, including hedges
of power sales and fuel purchase requirements and tolls, transmission,
transportations and storage contracts that hedge owned assets. Normal
purchases and sales associated with such assets are included in the
Merchant Energy Gross Margin table, yet excluded from the Maturity/Sources
of Fair Value of Energy Contract Net Assets table. Economic hedges of
Owned Assets that do not meet hedge accounting standards will still be
classified as Owned Assets in the Merchant Energy Gross Margin table.
Proprietary Trading
-------------------
Standardized contracts entered into to take a market view, capture market
price changes or put capital at risk.
Structured Contracts
--------------------
Non-standard contracts not associated with owned or leased assets and
involving significant tailoring of terms to meet customer needs, and
associated hedges. This category includes tolls, transmission contracts,
transportation contracts and storage contracts, except those that hedge
Owned Assets. Economic hedges of Structured Contracts that do not meet
hedge accounting standards will still be classified as Structured
Contracts in the Merchant Energy Gross Margin table.
SOURCE Duke Energy
-0- 10/30/2003
/CONTACT: MEDIA - Randy Wheeless, +1-704-382-8379, or 24-Hour,
+1-704-382-8333, or ANALYST - Greg Ebel, +1-704-382-8118, both of Duke Energy/
/Company News On-Call: http://www.prnewswire.com/comp/257451.html/
/Web site: http://www.duke-energy.com /
(DUK)
CO: Duke Energy
ST: North Carolina
IN: OIL UTI
SU: ERN