EXHIBIT 99.2
NEWS RELEASE
Progress Energy Announces Third Quarter Results
RALEIGH, N.C. (October 18, 2002) - Progress Energy [NYSE: PGN] today reported
consolidated ongoing earnings of $1.53 per share for the third quarter compared
with $1.34 per share for third quarter 2001. Reported GAAP consolidated net
income was $151.9 million, or $0.71 per share, for the quarter compared with
$366.4 million, or $1.78 per share, for the third quarter of 2001. The one-time
after-tax charge impacting 2002 was $224.8 million, or $1.04 per share,
resulting from the writedown of the company's telecommunications investments in
Progress Telecom, CaroNet and Interpath. The company's synthetic fuel
investments create intra-period tax allocations that increased reported GAAP
earnings per share by $0.18 for the quarter and CVO mark-to-market adjustments
that increased earnings per share by $0.04.
Year-to-date, ongoing earnings were $3.12 per share compared with $2.96 per
share for 2001. Reported GAAP earnings for the first nine months of 2002 were
$1.89 per share compared with $3.13 per share for 2001.
A number of factors drove the year-over-year increase in ongoing earnings of
$0.19 per share for the third quarter. First, customer growth and usage and
improved weather resulted in higher sales. Second, depreciation expense and
interest charges were lower. Third, goodwill amortization has been eliminated.
Partially offsetting these positive factors were higher O&M expenses related to
increased benefit costs and decreased pension credits. Also, the common stock
issued in August 2001 and in April 2002 as part of the Westchester Gas
acquisition resulted in dilution.
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Progress Energy, Inc.
Reconciliation of Ongoing EPS
September 30, 2002
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Q3 2002 Q3 2001 YTD 2002 YTD 2001
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Ongoing earnings $ 1.53 $ 1.34 $ 3.12 $ 2.96
Intra-period tax allocation 0.18 0.36 (0.19) 0.13
CVO mark-to-market 0.04 0.08 0.10 0.04
One-time charge /(1)/ (1.04) (1.04)
One-time retroactive revenue impact /(2)/ -- -- (0.10) --
------- --------- -------- --------
Reported earnings $ 0.71 $ 1.78 $ 1.89 $ 3.13
======= ========= ======== ========
Average shares outstanding (000s) 216,079 205,866 214,700 201,925
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/(1)/ Writedown of Progress Telecom, CaroNet, and Interpath investments.
/(2)/ Due to Florida Power's rate settlement.
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SIGNIFICANT DEVELOPMENTS
Progress Energy Announces Sale of NCNG
Progress Energy announced an agreement to sell North Carolina Natural
Gas (NCNG) to Piedmont Natural Gas for approximately $425 million in cash. The
company plans to use the net proceeds from the sale to pay down debt. The deal
is expected to close by mid-2003.
Progress Ventures Secures Long-term Contracts
Progress Ventures signed two long-term contracts to provide peaking
generation capacity to load-serving wholesale customers. One contract, beginning
June 1, 2004, and ending May 31, 2008, includes 153 MW of capacity and energy
from a Rowan County simple-cycle natural-gas-fired plant. The other contract
includes 100 MW of capacity and energy for 2003 and 150 MW for 2004. Progress
Ventures will meet the terms of this agreement through a combination of
resources, including the Rowan County plant. These agreements support the
company's strategy of securing long-term contracts for its non-regulated
generation. For 2002, 2003 and 2004, Progress Ventures has 90 percent, 68
percent and 74 percent, respectively, of its non-regulated generation capacity
under contract.
North Carolina Franchise Tax
The North Carolina legislature adopted a provision that prevents cities
and counties from levying local franchise taxes on electric utilities. Progress
Energy sought this protection in response to a flurry of local ordinances
adopted when the state withheld utility franchise tax payments to local
governments. The provision protects customers from paying two franchise taxes.
Cavanaugh Extends Term as Chairman and CEO
In September, Progress Energy announced that William Cavanaugh would
continue his term as chairman and CEO through February 1, 2005. Cavanaugh has
served as president and CEO since 1996 and chairman since 1999. The company also
announced that Robert B. McGehee has been named chief operating officer and will
assume the title of president from Cavanaugh.
Progress Energy Recognized for Transparency and Disclosure
Progress Energy was one of three companies - and the only one
representing the energy sector - to be recognized by Standard & Poor's for
providing investors with the most detailed and complete information regarding
its finances, operations and corporate governance practices according to a new
study issued in October.
LINE OF BUSINESS FINANCIAL INFORMATION
CP&L Electric
CP&L electric energy operations contributed earnings of $179.3 million
for the quarter compared with $165.8 million for the same period last year. This
quarter's earnings were positively
affected by warmer weather, increased revenues from customer growth and
usage, lower depreciation expenses and a decrease in interest charges. These
factors were partially offset by higher O&M expenses. Please see the table that
follows for a breakdown of energy sales by customer class.
CP&L electric operations include $11.3 million in earnings related
primarily to wholesale energy marketing activities for the third quarter of 2002
compared with $11.7 million for the same period last year. These activities are
managed on behalf of the utility by the Progress Ventures business unit, and the
earnings are also included in the Progress Ventures business unit's earnings.
Florida Power
Florida Power electric energy operations had earnings of $123.8 million
($110.4 million excluding the tax benefit reallocation) for the quarter compared
with $114.1 million for the same period last year. Details on the tax benefit
reallocation are included in the "Corporate" line of business section of this
release. Other factors impacting quarter-over-quarter results were higher O&M
expenses related to decreased pension credits, increased benefit costs and
Florida Power's investments to improve service and reliability. These factors
were partially offset by warmer weather and increased revenues from customer
growth and usage. Please see the table that follows for a breakdown of energy
sales by customer class.
Florida Power electric operations include $3.3 million in earnings
related primarily to wholesale energy marketing activities for the third quarter
of 2002 compared with $6.7 million for the same period last year. These
activities are managed on behalf of the utility by the Progress Ventures
business unit, and the earnings are also included in the Progress Ventures
business unit's earnings.
Electric Utility Kilowatt Hour Sales by Class
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CP&L Sales Florida Power Sales
for the Quarter Ended September 30, 2002 for the Quarter Ended September 30, 2002
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Sales % Change from Sales % Change from
(in billions of kWh) Q3 2002 Q3 2001 (in billions of kWh) Q3 2002 Q3 2001
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Residential 4.5 11.7% Residential 5.5 2.5%
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Commercial 3.7 7.0% Commercial 3.2 1.4%
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Industrial 3.6 0.8% Industrial 1.0 5.3%
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Government 0.4 2.7% Government 0.8 1.2%
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Wholesale 4.5 20.3% Wholesale 1.0 (22.8)%
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Unbilled (0.2) -- Unbilled 0.2 --
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Total 16.5 9.8% Total 11.7 2.9%
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NCNG
NCNG reported a net loss of $5.3 million in the third quarter compared
with a net loss of $3.2 million in the same period last year. This quarter's
earnings were negatively impacted by a decrease in margins.
Progress Ventures
The Progress Ventures business unit had net income of $87.6 million in
the third quarter compared with $80.1 million for the same period last year. The
difference was primarily due to sales from the new plants that became
operational this summer. Total synthetic fuel sales were 3.0 million tons for
the quarter and 9.4 million tons year-to-date compared with 4.1 million tons in
third quarter 2001 and 10.3 million tons in the first nine months of 2001. The
company anticipates total synthetic fuel production of approximately 12 million
tons for the year.
In September 2002, all of Progress Energy's majority-owned synthetic
fuel entities were accepted into the Internal Revenue Service's (IRS) Pre-Filing
Agreement (PFA) program. The PFA program allows taxpayers to accelerate
voluntarily the IRS exam process in order to seek resolution of specific issues.
Both the company and the IRS can withdraw from the program at any time, and
issues not resolved through the program may proceed to the next level of the IRS
exam process. While the ultimate outcome is uncertain, the company believes that
participation in the PFA program will likely shorten the tax exam process. In
the company's opinion, it is complying with all the necessary requirements to be
allowed synthetic fuel tax credits and believes it is likely, although it cannot
be certain, that it will prevail if challenged by the IRS on any credits taken.
Other Diversified
Progress Rail reported revenues of $195.9 million and net income of
$0.7 million for the quarter compared with revenues of $220.0 million and a net
loss of $2.2 million in third quarter 2001. The earnings improvement was
primarily due to a decrease in O&M expenses.
Progress Telecom, including CaroNet's operations, recorded revenues of
$14.7 million and net income of $1.7 million, excluding the writedown, for the
quarter compared with revenues of $14.6 million and a net loss of $2.4 million
for the same period last year.
The company initiated a valuation study to assess the recoverability of
Progress Telecom's and CaroNet's long-lived assets. Based on this assessment,
the company recorded an after-tax writedown and one-time charge of $208.5
million of Progress Telecom's and CaroNet's assets in the third quarter. This
writedown constitutes a significant reduction in the book value of these assets,
and the ongoing operations are expected to have a negligible impact on Progress
Energy's net income. Progress Telecom has successfully implemented sizeable cost
reduction measures that are benefiting operational results. Further, Progress
Telecom has achieved self-funding status in 2002, which it expects to sustain
into the future.
Progress Energy also wrote off the remaining amount of its investment
in Interpath and recorded an after-tax writedown of $16.3 million in the third
quarter.
Corporate
Corporate results, which primarily include interest expense on holding
company debt, posted an operating loss of $52.8 million for the quarter,
compared with an operating loss of $54.9 million for the same period last year.
Corporate results were positively impacted by the elimination of goodwill
amortization, which was $23.1 million in third quarter 2001. Negatively
impacting this quarter's
results was a $10.8 million tax benefit reallocation from the holding company to
the profitable subsidiary companies. Recent guidance in an SEC order states that
Progress Energy, Inc.'s tax benefit not related to acquisition interest expense
is to be allocated to the profitable subsidiary companies. This allocation has
no impact on consolidated tax expense; however, it does decrease the tax expense
on the profitable subsidiary results.
NON-OPERATING ADJUSTMENTS ASSOCIATED WITH SYNTHETIC FUELS
Intra-period Tax Allocation
Generally accepted accounting principles require companies to apply an
effective tax rate to interim periods that is consistent with a company's
estimated annual tax rate. The tax credits generated from synthetic fuel
operations reduce Progress Energy's overall effective tax rate. The company's
synthetic fuel sales are not subject to seasonal fluctuation to the same extent
as the electric utility earnings. The company projects the effective tax rate
for the year and then, based upon projected operating income for each quarter,
raises or lowers the credits recorded in that quarter to reflect the projected
tax rate. On the other hand, operating losses incurred to produce the tax
credits are included in the current quarter. The estimated annual tax rate was
affected by the telecommunications writedown in this quarter. The resulting tax
adjustment increased earnings per share by $0.18 for the quarter and decreased
earnings per share by $0.19 for the year. These adjustments will reverse over
the balance of the year, resulting in no impact to the company's annual
earnings.
Contingent Value Obligation (CVO) Mark-to-Market
In connection with the acquisition of Florida Progress Corporation,
Progress Energy issued 98.6 million CVOs. Each CVO represents the right to
receive contingent payments based on production above certain levels of the four
synthetic fuel facilities purchased by subsidiaries of Florida Progress
Corporation in October 1999. The payments, if any, will be based on the net
after-tax cash flows the facilities generate. The CVOs are debt instruments and
are valued at market value. Unrealized gains and losses from changes in market
value are recognized in earnings each quarter. The CVO mark-to-market increased
earnings per share by $0.04 for the quarter and $0.10 for the year. Since the
company does not have any control over the market price of the CVOs, it does not
consider the mark-to-market adjustment a component of ongoing earnings.
* * * *
This press release contains forward-looking statements within the meaning of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The forward-looking statements involve estimates, projections, goals, forecasts,
assumptions, risk and uncertainties that could cause actual results to differ
materially from those expressed in the forward-looking statements. Examples of
factors that you should consider with respect to any forward looking statements
made in this press release include, but are not limited to, the following: the
impact of fluid and complex government laws and regulations, including those
relating to the environment; the impact of recent events in the energy
markets that have increased the level of public and regulatory scrutiny in our
industry and in the capital markets; deregulation or restructuring in the
electric industry that may result in increased competition and unrecovered
(stranded) costs; the uncertainty regarding the timing, creation and structure
of regional transmission organizations; weather conditions that directly
influence the demand for electricity and natural gas; fluctuations in the price
of energy commodities; economic fluctuations and the corresponding impact on our
commercial and industrial customers; seasonal fluctuations in demand for
electricity and natural gas; the ability of our subsidiaries to pay upstream
dividends or distributions to us; the impact on our facilities and our business
from a terrorist attack; the inherent risks associated with the operation of
nuclear facilities, including environmental, health, regulatory and financial
risks; our ability to successfully access capital markets on favorable terms;
the impact that increases in our leverage may have on us; our ability to
maintain our current credit ratings; the impact of derivative contracts used in
the normal course of our business; our continued ability to use Section 29 tax
credits related to our coal and synthetic fuels businesses; the continued
depressed state of the telecommunications industry and our ability to realize
future returns from our Progress Telecom and Caronet, Inc.; our ability to
successfully integrate newly acquired businesses, including Westchester Gas
Company, into our operations as quickly or as profitably as expected; our
ability to successfully complete the sale of North Carolina Natural Gas and
apply the proceeds therefrom to reduce outstanding indebtedness; our ability to
manage the risks involved with the construction and operation of our wholesale
plants, including construction delays, dependence on third parties and related
counter-party risks, and a lack of operating history; our ability to manage the
risks associated with our energy marketing and trading operations; the extent to
which we are able to reduce our capital expenditures through the utilization of
the natural gas expansion fund established by the North Carolina Utilities
Commission; and unanticipated changes in operating expenses and capital
expenditures. Most of these risks similarly impact our subsidiaries.
These and other risk factors are detailed from time to time in the our SEC
reports. We urge you to read closely these SEC reports, including, particularly,
our Current Report on Form 8-K filed with the SEC on August 9, 2002. All such
factors are difficult to predict, contain uncertainties that may materially
affect actual results, and may be beyond the ability of the company to control
or estimate precisely.
PROGRESS ENERGY, INC.
UNAUDITED CONSOLIDATED INTERIM FINANCIAL INFORMATION
STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30 September 30
(In thousands except per share amounts) 2002 2001 2002 2001
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Operating Revenues
Electric $1,908,817 $1,879,934 $5,007,321 $5,077,928
Natural gas 60,568 51,671 211,171 258,820
Diversified businesses 383,141 398,942 1,060,613 1,217,532
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Total Operating Revenues 2,352,526 2,330,547 6,279,105 6,554,280
Operating Expenses
Fuel used in electric generation 459,293 446,309 1,205,731 1,194,453
Purchased power 269,108 268,794 675,066 698,218
Gas purchased for resale 47,505 36,282 150,277 203,060
Other operation and maintenance 324,880 290,651 1,011,096 890,148
Depreciation and amortization 211,088 268,475 642,979 849,395
Taxes other than on income 106,144 105,125 297,775 298,716
Diversified businesses 737,243 461,393 1,536,229 1,372,840
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Total Operating Expenses 2,155,261 1,877,029 5,519,153 5,506,830
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Operating Income 197,265 453,518 759,952 1,047,450
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Other Income (Expense)
Interest income 3,002 5,549 11,317 24,997
Other, net (13,394) 16,671 (8,505) 7,214
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Total Other Income (Expense) (10,392) 22,220 2,812 32,211
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Income before Interest Charges and Income Taxes 186,873 475,738 762,764 1,079,661
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Interest Charges
Net interest charges 149,431 170,044 498,475 530,259
Allowance for borrowed funds used during construction (3,721) (4,206) (11,064) (9,559)
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Total Interest Charges, Net 145,710 165,838 487,411 520,700
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Income before Income Taxes 41,163 309,900 275,353 558,961
Income Taxes (110,771) (56,543) (129,728) (73,187)
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Net Income $ 151,934 $ 366,443 $ 405,081 $ 632,148
=============================================================================================================================
Average Common Shares Outstanding 216,079 205,866 214,700 201,925
Basic Earnings per Common Share $ 0.71 $ 1.78 $ 1.89 $ 3.13
Diluted Earnings per Common Share $ 0.70 $ 1.77 $ 1.88 $ 3.12
Dividends Declared per Common Share $ 0.545 $ 0.530 $ 1.635 $ 1.590
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This financial information should be read in conjunction with the Company's 2001
Annual Report to shareholders. These statements have been prepared for the
purpose of providing information concerning the Company and not in connection
with any sale, offer for sale, or solicitation of an offer to buy any
securities.
Progress Energy, Inc.
BALANCE SHEETS September 30 December 31
(In thousands) 2002 2001
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ASSETS
Utility Plant
Electric utility plant in service $ 19,764,622 $ 19,176,021
Gas utility plant in service 540,693 491,903
Accumulated depreciation (10,522,018) (10,096,412)
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Utility plant in service, net 9,783,297 9,571,512
Held for future use 15,027 15,380
Construction work in progress 806,922 1,065,154
Nuclear fuel, net of amortization 215,493 262,869
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Total Utility Plant, Net 10,820,739 10,914,915
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Current Assets
Cash and cash equivalents 58,940 54,419
Accounts receivable 794,659 723,807
Unbilled accounts receivable 231,393 199,593
Taxes receivable - 32,325
Inventory 918,297 893,971
Deferred fuel cost 183,942 146,652
Prepayments 62,740 49,056
Other current assets 190,358 224,409
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Total Current Assets 2,440,329 2,324,232
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Deferred Debits and Other Assets
Regulatory assets 403,168 448,631
Nuclear decommissioning trust funds 790,858 822,821
Diversified business property, net 1,768,477 1,073,046
Miscellaneous other property and investments 515,613 464,589
Goodwill, net 3,785,073 3,690,210
Prepaid pension assets 503,357 489,600
Restricted cash 73,821 -
Other assets and deferred debits 479,321 513,099
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Total Deferred Debits and Other Assets 8,319,688 7,501,996
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Total Assets $ 21,580,756 $ 20,741,143
===================================================================================================================
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock (without par value, authorized 500,000,000, issued and outstanding $ 4,278,913 $ 4,107,493
221,933,138 and 218,725,352 shares, respectively)
Unearned ESOP common stock (101,560) (114,385)
Accumulated other comprehensive loss (39,102) (32,180)
Retained earnings 2,094,639 2,042,605
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Total Common Stock Equity 6,232,890 6,003,533
Preferred stock of subsidiary - redemption not required 92,831 92,831
Long-term debt, net 9,735,025 8,618,960
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Total Capitalization 16,060,746 14,715,324
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Current Liabilities
Current portion of long-term debt 375,202 688,052
Accounts payable 657,572 725,977
Taxes accrued 123,645 -
Interest accrued 153,903 212,387
Dividends declared 120,001 117,857
Short-term obligations 1,060,267 942,314
Customer deposits 159,920 154,343
Other current liabilities 391,470 419,398
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Total Current Liabilities 3,041,980 3,260,328
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Deferred Credits and Other Liabilities
Accumulated deferred income taxes 1,157,446 1,434,506
Accumulated deferred investment tax credits 211,446 226,382
Regulatory liabilities 292,544 287,239
Other liabilities and deferred credits 816,594 817,364
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Total Deferred Credits and Other Liabilities 2,478,030 2,765,491
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Total Capitalization and Liabilities $ 21,580,756 $ 20,741,143
===================================================================================================================
Progress Energy, Inc.
SUPPLEMENTAL DATA Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
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Operating Revenues (in thousands)
Electric
Retail $ 1,602,600 $ 1,591,713 $ 4,176,454 $ 4,214,165
Wholesale 251,797 254,054 659,316 729,608
Unbilled 2,542 (7,493) 28,769 (54,272)
Miscellaneous revenue 51,878 41,660 142,782 188,427
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Total Electric 1,908,817 1,879,934 5,007,321 5,077,928
Natural gas 60,568 51,671 211,171 258,820
Diversified businesses 383,141 398,942 1,060,613 1,217,532
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Total Operating Revenues $ 2,352,526 $ 2,330,547 $ 6,279,105 $ 6,554,280
=====================================================================================================================
Energy Sales
Electric (millions of kWh)
Retail
Residential 9,988 9,385 25,810 25,310
Commercial 6,881 6,597 18,012 17,553
Industrial 4,552 4,473 12,776 13,068
Other retail 1,185 1,164 3,183 3,135
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Total Retail 22,606 21,619 59,781 59,066
Unbilled (3) (350) 716 (893)
Wholesale 5,550 5,087 14,331 13,946
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Total Electric 28,153 26,356 74,828 72,119
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Natural Gas (thousands of dt) 19,965 13,080 52,463 39,022
=====================================================================================================================
Energy Supply (millions of kWh)
Generated - steam 14,529 13,451 37,628 37,242
nuclear 7,720 7,553 22,640 21,503
hydro 51 83 297 200
combustion turbines 3,121 2,461 6,868 5,270
Purchased 4,142 3,945 10,991 11,330
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Total Energy Supply (Company Share) 29,563 27,493 78,424 75,545
=====================================================================================================================
Detail of Income Taxes (in thousands)
Income tax expense (credit) - current $ 163,024 $ (4,197) $ 197,212 $ 24,279
deferred (269,087) (47,082) (312,020) (78,987)
investment tax (4,708) (5,264) (14,920) (18,479)
- ---------------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ (110,771) $ (56,543) $ (129,728) $ (3,187)
=====================================================================================================================
FINANCIAL STATISTICS
Ratio of earnings to fixed charges 1.10 1.74
Return on average common stock equity 5.10% 11.98%
Book value per common share $ 28.78 $ 29.14
Capitalization ratios
Common stock equity 35.62% 38.04%
Preferred stock of subsidiary- redemption not required 0.53 0.57
Total debt 63.85 61.39
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Total 100.00% 100.00%
=====================================================================================================================
Progress Energy, Inc.
Segment Earnings Variance Analysis
Third Quarter September 2002 vs 2001
Florida
CP&L Power Progress Other
($ per share) (Electric) (Electric) Ventures Businesses Corporate Consolidated
---------- ---------- -------- ---------- --------- ------------
Reported 2001 Earnings 0.80 0.55 0.30 (0.03) 0.16 1.78
CVO Mark-to-Market - 2001 (0.08) (A) (0.08)
Intra-period tax levelization - 2001 (0.36) (B) (0.36)
---------- ---------- -------- ---------- --------- ------------
Ongoing 2001 Earnings 0.80 0.55 0.30 (0.03) (0.28) 1.34
Weather 0.06 0.03 0.09
Florida Rate Reduction (0.09) (C) (0.09)
Other Margin 0.02 0.03 (D) 0.05
Depreciation 0.04 0.06 (E) 0.10
Goodwill Amortization 0.11 (E) 0.11
O&M (0.04) (0.06) (F) (0.10)
Interest Charges 0.04 0.01 0.03 (G) 0.08
Diversified Businesses 0.03 0.03
Other Income/Expense (0.04) 0.01 (0.01) 0.04 0.00
Share Dilution (0.04) (0.03) (0.02) 0.01 (H) (0.08)
Tax Reallocation (0.01) 0.06 (0.05) (I) 0.00
---------- ---------- -------- ---------- --------- ------------
Ongoing 2002 Earnings 0.83 0.57 0.34 (0.04) (0.17) 1.53
PTC Impairment (1.04) (J) (1.04)
CVO Mark-to-Market - 2002 0.04 (A) 0.04
Intra-period tax levelization - 2002 0.18 (B) 0.18
---------- ---------- -------- ---------- --------- ------------
Reported 2002 Earnings 0.83 0.57 0.34 (1.08) 0.05 0.71
---------- ---------- -------- ---------- --------- ------------
Segment View:
---------- ---------- -------- ---------- --------- ------------
Third Quarter 2002 0.77 0.56 0.41 (1.08) 0.05 (K) 0.71
---------- ---------- -------- ---------- --------- ------------
---------- ---------- -------- ---------- --------- ------------
Third Quarter 2001 0.74 0.52 0.39 (0.03) 0.16 1.78
---------- ---------- -------- ---------- --------- ------------
Other includes NCNG, SRS, Progress Telecom, and Progress Rail. Progress Rail's
EPS contribution is immaterial and, therefore, is not separately disclosed.
Corporate includes eliminations, holding company interest expense, goodwill (in
2001), CVO mark-to-market, intra-period tax allocations, and purchase
accounting transactions.
(A) Impact of change in market value of outstanding CVO's.
(B) Intra-period income tax leveling impact, related to cyclical nature of
energy demand/earnings.
(C) Florida rate reduction: 9.2% reduction effective 5-1-02.
(D) CP&L - favorable retail growth/volume/pricing $0.05, unfavorable
fuel/purchased power $0.02. FPC: favorable retail growth $0.03.
(E) CP&L - Lower nuclear accelerated depreciation, FPC - rate case impact,
Corporate - goodwill
(F) CP&L: Increased salary and benefit costs, pre-staging costs for planned
nuclear refueling outage. FPC: Lower pension credits, increased system and
reliability enhancements and employee benefits.
(G) Lower interest rates.
(H) Primarily impact of issuance in August 2001 (12.7M shares) and purchase of
Westchester Gas in April 2002 (2.5M shares).
(I) Moving impact of tax favorability from Holding Company to business segments.
(J) PTC impairment and one time charges.
(K) Trading and marketing activities in CP&L ($0.06) and Florida Power ($0.01)
that are managed by Progress Ventures
Progress Energy, Inc.
Segment Earnings Variance Analysis
Year-to-Date September 2002 vs 2001
Florida
CP&L Power Progress Other
($ per share) (Electric) (Electric) Ventures Businesses Corporate Consolidated
---------- ---------- -------- ---------- --------- ------------
Reported 2001 Earnings 1.82 1.34 0.79 (0.08) (0.74) 3.13
CVO Mark-to-Market - 2001 (0.04) (A) (0.04)
Intra-period tax levelization - 2001 (0.13) (B) (0.13)
---------- ---------- -------- ---------- --------- ------------
Ongoing 2001 Earnings 1.82 1.34 0.79 (0.08) (0.91) 2.96
Weather 0.06 0.06 0.12
Florida Rate Reduction (0.15) (C) (0.15)
Other Margin 0.08 0.07 (D) 0.15
Depreciation 0.05 0.18 (E) 0.23
Goodwill Amortization 0.33 (E) 0.33
O&M (0.15) (0.20) (0.01) (F) (0.36)
Interest Charges 0.08 0.01 0.02 0.01 (G) 0.12
Diversified Businesses 0.01 (0.01) (0.00)
Other Income/Expense (0.10) (0.02) 0.03 (H) (0.09)
Share Dilution (0.11) (0.07) (0.05) 0.04 (I) (0.19)
Tax Reallocation 0.12 0.06 0.01 (0.19) (J) 0.00
---------- ---------- -------- ---------- --------- ------------
Ongoing 2002 Earnings 1.85 1.30 0.77 (0.09) (0.71) 3.12
Florida Retroactive Rate Refund (0.10) (K) (0.10)
CVO Mark-to-Market - 2002 0.10 (A) 0.10
PTC Impairment (1.04) (L) (1.04)
Intra-period tax levelization - 2002 (0.19) (B) (0.19)
---------- ---------- -------- ---------- --------- ------------
Reported 2002 Earnings 1.85 1.20 0.77 (1.13) (0.80) 1.89
---------- ---------- -------- ---------- --------- ------------
Segment View:
---------- ---------- -------- ---------- --------- ------------
First Nine Months 2002 1.65 1.16 1.01 (1.13) (0.80) (M) 1.89
---------- ---------- -------- ---------- --------- ------------
---------- ---------- -------- ---------- --------- ------------
First Nine Months 2001 1.62 1.25 1.08 (0.08) (0.74) 3.13
---------- ---------- -------- ---------- --------- ------------
Other includes NCNG, SRS, Progress Telecom, and Progress Rail. Progress Rail's
EPS contribution is immaterial and, therefore, is not separately disclosed.
Corporate includes eliminations, holding company interest expense, goodwill (in
2001), CVO mark-to-market, intra-period tax allocations, and purchase
accounting transactions.
(A) Impact of change in market value of outstanding CVO's.
(B) Intra-period income tax leveling impact, related to cyclical nature of
energy demand/earnings.
(C) Florida rate reduction: 9.2% reduction effective 5-1-02.
(D) CP&L - favorable retail growth/usage/pricing $0.12, unfavorable wholesale
($0.03) and industrial ($0.04), fuel/other $0.03. FPC: favorable retail
growth $0.07, unfavorable wholesale ($0.03), fuel/purchased power/other
$0.03.
(E) CP&L - Lower nuclear accelerated depreciation, FPC - rate case impact,
Corporate - goodwill
(F) CP&L: Increased salary and benefit costs, boiler replacement costs,
pre-staging costs for planned nuclear refueling outage. FPC: Lower pension
credits, system reliability and enhancements, increased employee benefits.
(G) Lower interest rates.
(H) CP&L - Lower AFUDC credits in 2002, lower interest income, and other
nonoperating charges.
(I) Primarily impact of issuance in August 2001 (12.7M shares) and purchase of
Westchester Gas in April 2002 (2.5M shares).
(J) Moving impact of tax favorability from Holding Company to business segments.
(K) Impact of $35M retroactive rate refund related to rate case settlement.
(L) PTC impairment and one time charges.
(M) Trading and marketing activities in CP&L ($0.20) and Florida Power ($0.04)
that are managed by Progress Ventures.