Progress Energy Announces Third Quarter Results
Highlights:
- Reports quarterly ongoing earnings of $1.28 per share, GAAP earnings
of $1.34 per share
- Reports year-to-date ongoing earnings of $2.74 per share, GAAP
earnings of $2.88 per share
- Reduces leverage to 59.0 percent at September 30, 2003
- Announces sale of western Colorado gas reserves
- Lowers 2003 ongoing earnings guidance to $3.50 to $3.60 per share due
to weather and slow economic recovery
- Announces development in IRS audit of Colona synthetic fuels facility
RALEIGH, N.C. (October 22, 2003) - Progress Energy [NYSE: PGN] today reported
ongoing earnings of $306.2 million, or $1.28 per share, for the third quarter of
2003 compared with ongoing earnings of $333.5 million, or $1.54 per share, for
the third quarter of 2002. The primary negative earnings drivers for the quarter
were unfavorable weather, storm costs related to Hurricane Isabel, increased
pension and benefit costs, share dilution, and lower industrial segment sales.
The primary positive earnings drivers for the quarter were customer growth and
usage and increased sales of natural gas. Reported consolidated net income under
generally accepted accounting principles (GAAP) was $319.0 million, or $1.34 per
share, for the quarter compared with consolidated net income of $151.9 million,
or $0.71 per share, for the third quarter of 2002. See the table on the
following page for a reconciliation of ongoing earnings per share to GAAP
earnings per share.
Ongoing earnings for the nine months ended September 30, 2003 were $648.0
million, or $2.74 per share, compared with ongoing earnings of $667.2 million,
or $3.11 per share, for the same period in 2002. Reported GAAP consolidated net
income for the nine months ended September 30, 2003 was $679.9 million, or $2.88
per share, compared with consolidated net income of $405.1 million, or $1.89 per
share, for the same period in 2002.
"In spite of weather and the slow economy, Progress Energy has had a good 2003
on so many fronts thus far," said William Cavanaugh, chairman and CEO, Progress
Energy. "Our balance sheet has strengthened, customer satisfaction shows
continued improvement, operational metrics are strong and sales are growing in
both retail and wholesale markets. Our employees have done a superb job of
focusing on controllable expenses - capital as well as O&M. However, due to the
mild weather and slower-than-expected economic recovery, we are lowering our
2003 target earnings range to $3.50 to $3.60 per share."
In an important synthetic fuels development, Progress Energy learned late
Tuesday afternoon that the IRS's National Office will not take any adverse
action regarding the Private Letter Ruling for the company's Colona facility.
"We believe this determination is a significant step in the favorable and prompt
resolution of the tax audit of our synthetic fuels business," said Cavanaugh.
The following table provides a reconciliation of ongoing earnings to reported
GAAP earnings. A detailed discussion is provided on page 8 under the caption
"Ongoing Earnings Adjustments."
- -----------------------------------------------------------------------------------------
Progress Energy, Inc.
Reconciliation of Ongoing Earnings to Reported GAAP Earnings
September 30, 2003
- -----------------------------------------------------------------------------------------
Q3 2003 Q3 2002 YTD 2003 YTD 2002
- -----------------------------------------------------------------------------------------
Ongoing earnings $ 1.28 $ 1.54 $ 2.74 $ 3.11
Intraperiod tax allocation 0.16 0.18 0.18 (0.19)
CVO mark-to-market (0.02) 0.04 (0.02) 0.10
NCNG discontinued operations (0.08) (0.01) (0.02) 0.01
Impairments and one-time charges - (1.04) - (1.04)
Florida retroactive revenue refund - - - (0.10)
------------------------------------------------
Reported GAAP earnings $ 1.34 $ 0.71 $ 2.88 $ 1.89
========= ====== ====== ======
Average shares outstanding (000s) 239,025 216,079 236,183 214,700
- -----------------------------------------------------------------------------------------
The revised 2003 earnings guidance of $3.50 to $3.60 per share excludes any
impacts from the CVO mark-to-market adjustment and discontinued operations of
NCNG. The sale of NCNG was finalized on September 30, 2003, and there will not
be any future discontinued earnings for NCNG after this date. The CVO
mark-to-market adjustment is based on the market value of the CVOs that
management does not control and cannot predict. Therefore, Progress Energy is
not able to provide a corresponding GAAP equivalent for 2003 earnings guidance
figures.
SIGNIFICANT DEVELOPMENTS
IRS Audit of Colona Facility
The company has been informed that the National Office of the Internal
Revenue Service has rejected challenges regarding whether the synthetic fuel
produced at the company's Colona facility was the result of a significant
chemical change. Accordingly, the National Office will not take any adverse
action on the Private Letter Ruling that has been issued for the Colona
facility.
After an extensive review of the processes and analyses involved, the
National Office concluded that the company's experts, who test the synthetic
fuel for chemical change, use reasonable scientific methods to reach their
conclusions. Although this ruling applies only to the Colona facility, the
company believes that the National Office's reasoning would be equally
applicable to the other Progress Energy facilities.
2
A written decision memorializing the National Office's conclusions should
be available within the next two months. At that time, the Field Audit Staff has
the right to ask for reconsideration of the National Office's decision.
Although this is a significant event, the audits of the Colona facility and
the company's other facilities are not yet completed. Progress Energy continues
to believe that it operates its facilities in conformity with its PLRs and
Section 29 of the tax code.
Storm Cost Filing
On October 16, 2003, Progress Energy Carolinas made a filing with the North
Carolina Utilities Commission (NCUC) to seek permission to defer the expenses
incurred from Hurricane Isabel and the February 2003 winter storms. As a result
of rising storm costs and the frequency of major storm damage (more than $300
million since 1996), Progress Energy has asked the NCUC to allow the company to
create a deferred account in which the company would place expenses incurred as
a result of named tropical storms, hurricanes and significant winter storms. A
deferred account would give the company the option of seeking commission
approval to include the costs from major storms in customer rates after the
Clean Smokestacks rate freeze ends in 2007. The company estimates that it would
charge $23.5 million in 2003 from Hurricane Isabel and from February 2003 ice
storms to the deferred account, if approved.
Sale of Western Colorado Gas Reserves
On October 1, 2003, Progress Energy finalized the sale of its western
Colorado natural gas reserves. These reserves, held by Mesa Hydrocarbons, LLC,
have been sold to an undisclosed third party. Net proceeds of approximately $97
million will be used to reduce debt.
Sale of NCNG Finalized
On September 30, 2003, Progress Energy announced that it had completed the
sale of NCNG to Piedmont Natural Gas Co. of Charlotte, N.C. Net proceeds from
the $425 million sale have been used to reduce debt. The complete press release
regarding this announcement is available on the company's Web site at:
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=PGN&script=410&layout=
0&item_id=453969.
Quarterly Dividend Declared
On September 14, 2003, Progress Energy's board of directors declared a
dividend on the Progress Energy common stock. The quarterly dividend was
declared at $0.56 per share, payable on November 1, 2003, to shareholders of
record as of October 10, 2003. The complete press release regarding this
announcement is available on the company's Web site at:
http://www.progress-energy.com/aboutus/news/article.asp?id=7342.
3
Progress Energy Florida Annual Fuel Filing
On September 12, 2003, Progress Energy Florida asked the Florida Public
Service Commission (FPSC) to approve a cost adjustment in its annual fuel filing
that will increase retail customer bills beginning January 1, 2004. The total
amount of the fuel adjustment requested was approximately $322 million. A
decision from the FPSC is expected on November 12, 2003. The complete press
release regarding this announcement is available on the company's Web site at:
http://www.progress-energy.com/aboutus/news/article.asp?id=7162.
Wholesale Energy Agreement with Morgan Stanley Capital Group Inc. Announced
On September 11, 2003, Progress Ventures announced that it had entered into
a definitive agreement with Morgan Stanley Capital Group Inc., a direct, wholly
owned subsidiary of Morgan Stanley, to provide and schedule energy needed to
fulfill Morgan Stanley Capital's obligations to supply energy to Oglethorpe
Power Corporation through March 2005. This agreement increases the percentage of
Progress Ventures' generation portfolio under contract to approximately 85
percent in 2004. The complete press release regarding this announcement is
available on the company's Web site at: http://www.corporate-ir.net/ireye/ir_
site.zhtml?ticker=PGN&script=410&layout=0&item_id=447756.
Winter Park Bond Referendum Approved
On September 9, 2003, voters in Winter Park, Fla. approved a $50 million
bond referendum that will allow the city to purchase Progress Energy Florida's
electric system in the town of Winter Park. The bond referendum resulted from
the franchise dispute between Winter Park and Progress Energy Florida. The
Winter Park franchise includes approximately 13,000 customers of Progress Energy
Florida. The complete press release regarding this announcement is available on
the company's Web site at: http://www.progress-energy.com/aboutus/news/article.
asp?id=7082.
Power Plant in Georgia Completed
On August 27, 2003, Progress Ventures placed the 480-megawatt Effingham
plant into service. The new combined-cycle unit, fueled by natural gas, is
located near Rincon, Ga. With the start-up of the Effingham plant, Progress
Ventures has completed its nonregulated generation build-out at 3,100 megawatts.
The complete press release regarding this announcement is available on the
company's Web site at: http://www.progress-energy.com/aboutus/news/article.asp
?id=6902.
Standard & Poor's (S&P) Ratings Action
On August 27, 2003, S&P credit rating agency announced that it had lowered
its corporate credit rating on Progress Energy Inc. and its various utility
operating subsidiaries to `BBB' from `BBB+.' The outlook of the ratings was
changed from negative to stable. The company does not expect these changes to
have a material impact on its access to capital or its financial results. The
complete press release regarding this announcement is available on the company's
Web site at: http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=PGN&script=
410&layout=0&item_id=444357.
4
LINE OF BUSINESS FINANCIAL INFORMATION
Progress Energy Carolinas
Progress Energy Carolinas electric energy operations contributed net income
of $160.0 million for the quarter compared with $179.3 million for the same
period last year. Factors contributing to the quarter's decrease were
unfavorable weather and increased O&M expense primarily from storm costs
incurred for restoration efforts following Hurricane Isabel and increased
benefits expense. Increased revenues from customer growth and usage and an
increase in the tax benefit reallocation over the prior year favorably impacted
the quarter results.
On September 18, 2003, Hurricane Isabel made landfall in North Carolina,
damaging the Progress Energy Carolinas system. The company incurred a total of
$15.0 million in capital and O&M costs as part of the restoration effort.
Approximately $13.5 million of these costs were O&M.
For the nine months ended September 30, 2003, Progress Energy Carolinas
electric energy operations contributed net income of $383.3 million compared
with $396.5 million for the same period last year.
See the attached Supplemental Data schedules for additional information on
Progress Energy Carolinas electric revenues, energy sales, energy supply and
weather impacts.
Progress Energy Florida
Progress Energy Florida electric energy operations contributed net income
of $114.3 million for the quarter compared with $123.8 million for the same
period last year. Factors contributing to the quarter's decrease were increases
in O&M expense primarily from an increase in pension expense and a decrease in
the tax benefit reallocation over the prior year. These factors were partially
offset by a decrease in interest expense over the prior year and increased
revenues from customer growth. Interest expense for the quarter was favorably
impacted by a reversal of interest expense accrued for resolved tax matters.
Progress Energy Florida recorded a $9.5 million accrual in the second
quarter for estimated revenue sharing for the first half of 2003. During the
third quarter, this accrual was decreased by $4.1 million primarily due to
unfavorable weather, for a net accrual for revenue sharing at September 30,
2003, of $5.4 million.
For the nine months ended September 30, 2003, Progress Energy Florida
electric energy operations contributed net income of $246.5 million compared
with $258.3 million for the same period last year.
See the attached Supplemental Data schedules for additional information on
Progress Energy Florida electric revenues, energy sales, energy supply and
weather impacts.
5
Progress Ventures
The Progress Ventures operations include: Progress Fuels, which includes
natural gas production, coal mining, and synthetic fuels production; and
Competitive Commercial Operations, which includes nonregulated generation and
energy marketing activities. The Progress Ventures business unit had net income
of $92.4 million for the quarter compared with $73.0 million for the same period
last year.
Progress Fuels generated net income of $79.7 million for the quarter
compared with $52.1 million for the same period last year. The increase was
primarily due to an increase in natural gas earnings resulting from increases in
the price of natural gas, the addition of North Texas Gas operations in March
2003 and an increase in synthetic fuel earnings. Within Progress Fuels,
synthetic fuels operations generated net income of $58.7 million for the third
quarter compared with $48.7 million for the same period last year. Total
synthetic fuel sales were 3.0 million tons for the third quarter in both 2003
and 2002. The company anticipates total synthetic fuel production of
approximately 12 million tons for the year.
Competitive Commercial Operations contributed net income of $12.7 million
for the quarter compared with net income of $20.9 million for the same period
last year. The decrease was due to the completion of the nonregulated
construction program in 2003 resulting in interest expense, depreciation and
other fixed charges that were either capitalized or not incurred in 2002.
For the nine months ended September 30, 2003, the Progress Ventures
business unit had net income of $183.7 million compared with net income of
$165.9 million for the same period last year. Progress Fuels generated net
income of $160.1 million for the nine months ended September 30, 2003, compared
with $140.5 million for the same period last year. Within Progress Fuels,
synthetic fuels operations generated net income of $125.9 million for the nine
months ended September 30, 2003, compared with $131.8 million for the same
period last year. Total synthetic fuel sales were 7.9 million tons for the nine
months ended September 30, 2003, compared with 9.4 million tons for the same
period last year. Competitive Commercial Operations contributed net income of
$23.6 million compared with $25.5 million for the same period last year.
Other Businesses
Other businesses include Progress Rail, Progress Telecom and other small
subsidiaries. Other businesses had a net loss of $2.9 million for the quarter
compared with a net loss of $225.1 million for the same period last year. For
the nine months ended September 30, 2003, other businesses reported a net loss
of $3.1 million compared with a net loss of $236.1 million for the same period
in the prior year. Prior year results were negatively impacted by $224.8 million
of after-tax impairments and one-time charges recorded in the third quarter of
2002.
6
Progress Rail
Progress Rail reported net income of $0.7 million for the quarter, compared
with net income of $0.7 million for the same period in the prior year. Progress
Rail earnings were positively impacted from improvements in the recycling
business and reduced operating costs; these improvements were offset by higher
service company cost allocations.
For the nine months ended September 30, 2003, Progress Rail reported a net
loss of $0.5 million compared with net income of $3.0 million for the same
period in the prior year.
Progress Telecom
Progress Telecom, including Caronet's operations, recorded a net loss of
$0.2 million for the quarter, compared with a net loss of $225.3 million (net
loss of $0.5 million, excluding the prior year writedown) for the same period in
the prior year. Progress Telecom's results were favorably impacted by lower
operating costs, a reduction in depreciation expense and the prior year
writedown. During the third quarter of 2002, the company recorded an after-tax
writedown and one-time charge of $208.5 million of Progress Telecom's and
Caronet's assets. 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 of 2002.
For the nine months ended September 30, 2003, Progress Telecom reported net
income of $1.0 million compared with a net loss of $234.5 million (net loss of
$9.7 million, excluding the prior year writedown) for the same period in the
prior year.
Corporate
Corporate results, which primarily include interest expense on holding
company debt, posted an operating loss of $57.6 million for the quarter,
compared with an operating loss of $42.3 million for the same period in the
prior year. Negatively impacting this quarter's results was a decrease in
capitalized interest over the prior year related to construction of the
nonregulated generating plants.
For the nine months ended September 30, 2003, Progress Energy has issued
approximately 7.0 million shares through the Investor Plus and employee benefit
plans for proceeds of approximately $284.0 million.
For the nine months ended September 30, 2003, corporate results had an
operating loss of $162.4 million compared with an operating loss of $163.2
million for the same period in the prior year.
Discontinued Operations
NCNG
The sale of NCNG to Piedmont Natural Gas closed on September 30, 2003. Net
proceeds from the sale of NCNG have been used to pay down debt. The operations
of NCNG are included in discontinued operations in the accompanying financial
statements. NCNG had a discontinued loss of $18.7 million for the quarter
compared with a $5.1 million loss for the same period in the prior year. The
loss for 2003 was negatively impacted by the finalization of the estimated loss
on the sale of NCNG recorded in the fourth quarter of 2002.
7
For the nine months ended September 30, 2003, NCNG had a discontinued loss
of $4.9 million compared with discontinued earnings of $2.0 million for the same
period last year.
ONGOING EARNINGS ADJUSTMENTS
Progress Energy's management uses ongoing earnings per share to evaluate
the operations of the company and to establish goals for management and
employees. Management believes this presentation is appropriate and enables
investors to compare more accurately the company's ongoing financial performance
over the periods presented. Reconciling adjustments from GAAP earnings to
ongoing earnings are as follows:
Intraperiod 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 resulting tax adjustment
increased earnings per share by $0.16 and $0.18 for the third quarter of 2003
and 2002, respectively. Since this adjustment varies by quarter but has no
impact on Progress Energy's annual earnings, management believes this adjustment
is not representative of the company's quarterly 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 after-tax cash flows above certain levels
of four synthetic fuel facilities purchased by subsidiaries of Florida Progress
Corporation in October 1999. The CVOs are debt instruments and, under GAAP, 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 decreased
earnings per share $0.02 for the current quarter and increased earnings per
share $0.04 for the third quarter of 2002. Since changes in the market value of
the CVOs do not affect the company's underlying obligation, management does not
consider the adjustment a component of ongoing earnings.
NCNG Discontinued Operations
The operations of NCNG are reported as discontinued operations due to its
sale, and therefore management does not believe this activity is representative
of the ongoing operations of the company.
8
Impairments and One-Time Charges
During the third quarter of 2002, the company recorded an after-tax
writedown and one-time charge of Progress Telecom's and Caronet's assets.
Progress Energy also wrote off the remaining amount of its investment in
Interpath. Management does not believe these impairments and one-time charges
are representative of the ongoing operations of the company.
Progress Energy Florida One-Time Retroactive Refund
The one-time retroactive rate refund under the Progress Energy Florida rate
settlement in March 2002 was related to funds collected during the period
between March 13, 2001, when the prior rate agreement in Florida expired, and
March 27, 2002, the date the parties entered into the settlement agreement. Due
to the nonrecurring nature of the refund, management believes it is not
representative of the 2002 operations of Progress Energy Florida.
* * * *
This earnings announcement, as well as a package of detailed financial
information, is available on the company's Web site at www.progress-energy.com.
Progress Energy's conference call with the investment community will be held on
October 22, 2003, at 10 a.m. ET (7 a.m. PT) and will be hosted by Peter Scott,
executive vice president and chief financial officer. Investors, media and the
public may listen to the conference call by dialing 800-399-1340 or 706-634-5919
(international/local), confirmation code 3109238. Should you encounter problems,
please contact Tammy Blankenship at 919-546-2233. A playback of the call will be
available from 1 p.m. ET October 22 through midnight November 5, 2003. To listen
to the recorded call, dial 800-642-1687 or 706-645-9291 (international/local)
and enter confirmation code 3109238.
A webcast of the live conference call will be available at
www.progress-energy.com. The webcast will be available in Windows Media format.
The webcast will be archived on the site for those unable to listen in real
time.
Members of the media are invited to listen to the conference call and then
participate in a media-only question and answer session with Peter Scott
starting at 11 a.m. ET. To participate in this session, please dial
800-399-1340, confirmation code 3366663.
Progress Energy (NYSE: PGN), headquartered in Raleigh, N.C., is a Fortune 250
diversified energy company with more than 23,000 megawatts of generation
capacity and $8 billion in annual revenues. The company's holdings include two
electric utilities serving more than 2.8 million customers in North Carolina,
South Carolina and Florida. Progress Energy also includes nonregulated
operations covering generation, energy marketing, natural gas production, fuel
extraction, rail services and broadband capacity. For more information about
Progress Energy, visit the company's Web site at www.progress-energy.com.
9
This document 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 document include, but are not limited to, the following: the impact
of fluid and complex government laws and regulations, including those relating
to the environment; the impact of recent events in the energy markets that have
increased the level of public and regulatory scrutiny in the energy 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; recurring seasonal fluctuations in demand for
electricity; fluctuations in the price of energy commodities and purchased
power; economic fluctuations and the corresponding impact on our commercial and
industrial customers; the ability of our subsidiaries to pay upstream dividends
or distributions to us; the impact on our facilities and our businesses from a
terrorist attack; the inherent risks associated with the operation of nuclear
facilities, including environmental, health, regulatory and financial risks; the
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; the outcome of the IRS's audit and inquiry into the
availability and use of Section 29 tax credits by synthetic fuel producers and
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
Progress Telecommunications Corp. and Caronet, Inc.; our ability to successfully
integrate newly acquired assets, properties or businesses into our operations as
quickly or as profitably as expected; our ability to manage the risks involved
with the operation of our nonregulated plants, including 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 Company's ability to obtain an extension of the Securities and
Exchange Commission's order requiring us to divest of Progress Rail Services
Corp. by November 30, 2003; and unanticipated changes in operating expenses and
capital expenditures. Many of these risks similarly impact our subsidiaries.
These and other risk factors are detailed from time to time in our SEC reports.
All such factors are difficult to predict, contain uncertainties that may
materially affect actual results, and may be beyond our ability to control or
estimate precisely.
# # #
Contacts:
Investor Relations, Bob Drennan, 919-546-7474
Corporate Communications, Keith Poston, 919-546-6189, or
toll-free 877-641-NEWS (6397)
10
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) 2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------------------
Operating Revenues
Utility $ 1,914,004 $ 1,908,817 $ 5,150,678 $ 5,007,321
Diversified business 526,762 403,562 1,418,800 1,103,707
- --------------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 2,440,766 2,312,379 6,569,478 6,111,028
Operating Expenses
Utility
Fuel used in electric generation 488,607 448,960 1,293,561 1,185,769
Purchased power 254,627 269,108 667,194 675,066
Other operation and maintenance 368,769 325,495 1,067,848 1,000,827
Depreciation and amortization 220,136 205,922 663,819 628,295
Taxes other than on income 107,222 104,989 304,499 294,217
Diversified Business
Cost of sales 433,817 365,481 1,219,934 1,072,818
Depreciation and amortization 45,333 28,563 111,751 86,625
Impairment - 304,986 - 304,986
Other 42,739 58,655 128,082 114,937
- --------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,961,250 2,112,159 5,456,688 5,363,540
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 479,516 200,220 1,112,790 747,488
- --------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest income 2,166 3,293 8,464 11,673
Impairment on investments - (25,011) - (25,011)
Other, net (3,067) 10,806 (14,950) 14,249
- --------------------------------------------------------------------------------------------------------------------------------
Total Other Income (Expense) (901) (10,912) (6,486) 911
- --------------------------------------------------------------------------------------------------------------------------------
Income before Interest Charges and Income Taxes 478,615 189,308 1,106,304 748,399
- --------------------------------------------------------------------------------------------------------------------------------
Interest Charges
Net interest charges 146,006 142,242 461,774 482,571
Allowance for borrowed funds used during construction (1,932) (624) (7,041) (7,530)
- --------------------------------------------------------------------------------------------------------------------------------
Total Interest Charges, Net 144,074 141,618 454,733 475,041
- --------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 334,541 47,690 651,571 273,358
Income Taxes (3,112) (109,383) (33,258) (129,710)
- --------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 337,653 157,073 684,829 403,068
- --------------------------------------------------------------------------------------------------------------------------------
Discontinued Operations, Net of Tax (18,691) (5,139) (4,888) 2,013
- --------------------------------------------------------------------------------------------------------------------------------
Net Income $ 318,962 $ 151,934 $ 679,941 $ 405,081
- --------------------------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 239,025 216,079 236,183 214,700
Basic Earnings per Common Share
Income from Continuing Operations $1.42 $0.72 $2.90 $1.88
Discontinued Operations, Net of Tax ($0.08) ($0.01) ($0.02) $0.01
Net Income $1.34 $0.71 $2.88 $1.89
- --------------------------------------------------------------------------------------------------------------------------------
Diluted Earnings per Common Share
Income from Continuing Operations $1.42 $0.71 $2.89 $1.87
Discontinued Operations, Net of Tax ($0.08) ($0.01) ($0.02) $0.01
Net Income $1.34 $0.70 $2.87 $1.88
- --------------------------------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $0.560 $0.545 $1.680 $1.635
- --------------------------------------------------------------------------------------------------------------------------------
This financial information should be read in conjunction with the
Company's 2002 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.
S-1
Progress Energy, Inc.
BALANCE SHEETS
Unaudited Consolidated Interim Financial Information September 30 December 31
(In thousands) 2003 2002
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Utility Plant
Utility plant in service $ 21,198,711 $ 20,152,787
Accumulated depreciation (10,162,434) (10,480,880)
- ----------------------------------------------------------------------------------------------------------------
Utility plant in service, net 11,036,277 9,671,907
Held for future use 13,177 15,109
Construction work in progress 862,125 752,336
Nuclear fuel, net of amortization 219,574 216,882
- ----------------------------------------------------------------------------------------------------------------
Total Utility Plant, Net 12,131,153 10,656,234
- ----------------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 100,146 61,358
Accounts receivable 813,110 737,369
Unbilled accounts receivable 190,867 225,011
Inventory 816,425 875,485
Deferred fuel cost 327,213 183,518
Assets of discontinued operations - 490,429
Prepayments and other current assets 328,969 260,804
- ----------------------------------------------------------------------------------------------------------------
Total Current Assets 2,576,730 2,833,974
- ----------------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
Regulatory assets 649,956 393,215
Nuclear decommissioning trust funds 883,837 796,844
Diversified business property, net 2,147,456 1,884,271
Miscellaneous other property and investments 446,026 463,776
Goodwill, net 3,719,327 3,719,327
Prepaid pension assets 52,575 60,169
Other assets and deferred debits 663,297 517,182
- ----------------------------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 8,562,474 7,834,784
- ----------------------------------------------------------------------------------------------------------------
Total Assets $ 23,270,357 $ 21,324,992
- ----------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock (without par value, authorized 500,000,000, issued and outstanding $ 5,223,644 $ 4,929,104
244,929,214 and 237,992,513 shares, respectively)
Unearned ESOP common stock (88,734) (101,560)
Accumulated other comprehensive loss (221,603) (237,762)
Retained earnings 2,366,769 2,087,227
- ----------------------------------------------------------------------------------------------------------------
Total Common Stock Equity 7,280,076 6,677,009
Preferred stock of subsidiary - not subject to mandatory redemption 92,831 92,831
Long-term debt, net 9,760,671 9,747,293
- ----------------------------------------------------------------------------------------------------------------
Total Capitalization 17,133,578 16,517,133
- ----------------------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt 868,008 275,397
Accounts payable 566,201 677,197
Income taxes accrued 156,928 -
Interest accrued 135,550 220,400
Dividends declared 136,398 132,232
Short-term obligations - 694,850
Customer deposits 167,755 158,214
Liabilities of discontinued operations - 124,767
Other current liabilities 444,390 429,222
- ----------------------------------------------------------------------------------------------------------------
Total Current Liabilities 2,475,230 2,712,279
- ----------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 753,423 932,813
Accumulated deferred investment tax credits 194,037 206,221
Regulatory liabilities 548,321 119,766
Asset retirement obligations 1,242,165 -
Other liabilities and deferred credits 923,603 836,780
- ----------------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 3,661,549 2,095,580
- ----------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 23,270,357 $ 21,324,992
- ----------------------------------------------------------------------------------------------------------------
S-2
Progress Energy, Inc.
STATEMENTS OF CASH FLOWS
Unaudited Consolidated Interim Information Nine Months Ended
September 30
(In thousands) 2003 2002
- --------------------------------------------------------------------------------------------------------
Operating Activities
- --------------------------------------------------------------------------------------------------------
Net income $ 679,941 $ 405,081
Adjustments to reconcile net income to net cash provided by
operating activities:
Income from discontinued operations 4,888 (2,013)
Impairment of long-lived assets and investments - 329,997
Depreciation and amortization 852,015 835,659
Deferred income taxes (208,260) (313,654)
Investment tax credits (29,471) (14,790)
Deferred fuel credit (143,695) (37,290)
Net increase in accounts receivable (91,003) (99,777)
Net (increase) decrease in inventories 62,951 (25,930)
Net (increase) decrease in prepaids and other current assets 43,440 (28,377)
Net increase in accounts payable 57,041 59,184
Net increase in income taxes accrued 157,737 162,213
Net decrease in other current liabilities (69,289) (52,906)
Other 118,780 74,330
- --------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,435,075 1,291,727
- --------------------------------------------------------------------------------------------------------
Investing Activities
Gross property additions (759,374) (771,309)
Diversified business property additions and acquisitions (475,992) (455,102)
Nuclear fuel additions (96,031) (56,029)
Acquisitions, net of cash - (365,232)
Acquisition of intangibles (198,234) (3,079)
Proceeds from sale of subsidiaries and assets 477,502 11,931
Other investing activities (37,364) (94,861)
- --------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,089,493) (1,733,681)
- --------------------------------------------------------------------------------------------------------
Financing Activities
Issuance of common stock, net 283,846 31,916
Purchase of restricted shares (6,560) (5,393)
Issuance of long-term debt, net 1,243,046 1,770,622
Net increase in short-term indebtedness (695,899) 117,953
Net decrease in cash provided by checks drawn in excess of bank balances (53,476) (37,471)
Retirement of long-term debt (699,157) (1,045,380)
Dividends paid on common stock (403,383) (358,978)
Other 25,017 (25,733)
- --------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities (306,566) 447,536
- --------------------------------------------------------------------------------------------------------
Cash Used in Discontinued Operations (228) (640)
- --------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 38,788 4,942
Cash and Cash Equivalents at Beginning of the Period 61,358 53,708
- --------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of the Period $ 100,146 $ 58,650
- --------------------------------------------------------------------------------------------------------
S-3
Progress Energy, Inc.
SUPPLEMENTAL DATA
Unaudited
Three Months Ended Three Months Ended Percentage Change From
September 30, 2003 September 30, 2002 September 30, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Total Progress Total Progress
Utility Statistics Carolinas Florida Energy Carolinas Florida Energy Carolinas Florida
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Retail
Residential $ 385,464 $ 501,834 $ 887,298 $ 384,582 $ 469,828 $ 854,410 0.2 % 6.8 %
Commercial 249,954 214,266 464,220 244,590 199,510 444,100 2.2 7.4
Industrial 178,946 56,889 235,835 182,986 52,584 235,570 (2.2) 8.2
Other retail 23,906 49,320 73,226 23,458 45,062 68,520 1.9 9.4
Provision for retail
revenue sharing - 4,119 4,119 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Retail $ 838,270 $ 826,428 $ 1,664,698 $ 835,616 $ 766,984 $ 1,602,600 0.3 7.8
Unbilled (24,393) (3,897) (28,290) (5,854) 8,396 2,542 - -
Wholesale 174,273 51,789 226,062 193,904 57,893 251,797 (10.1) (10.5)
Miscellaneous revenue 21,739 29,795 51,534 21,514 30,364 51,878 1.0 (1.9)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Electric $ 1,009,889 $ 904,115 $ 1,914,004 $ 1,045,180 $ 863,637 $ 1,908,817 (3.4)% 4.7 %
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Sales (millions of kWh)
Retail
Residential 4,424 5,739 10,163 4,485 5,503 9,988 (1.4)% 4.3 %
Commercial 3,687 3,334 7,021 3,675 3,206 6,881 0.3 4.0
Industrial 3,414 1,028 4,442 3,569 983 4,552 (4.3) 4.6
Other retail 420 805 1,225 425 760 1,185 (1.2) 5.9
- ------------------------------------------------------------------------------------------------------------------------------------
Total Retail 11,945 10,906 22,851 12,154 10,452 22,606 (1.7) 4.3
Unbilled (465) (112) (577) (218) 215 (3) - -
Wholesale 3,950 1,006 4,956 4,531 1,019 5,550 (12.8) (1.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Electric 15,430 11,800 27,230 16,467 11,686 28,153 (6.3)% 1.0 %
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Supply (millions of kWh)
Generated - steam 7,676 6,539 14,215 8,215 6,314 14,529
nuclear 6,294 1,626 7,920 6,022 1,698 7,720
hydro 221 - 221 51 - 51
combustion turbines/
combined cycle 816 1,911 2,727 1,143 1,978 3,121
Purchased 1,318 2,529 3,847 1,700 2,442 4,142
- ------------------------------------------------------------------------------------------------------------------------------------
Total Energy Supply 16,325 12,605 28,930 17,131 12,432 29,563
(Company Share)
- ------------------------------------------------------------------------------------------------------------------------------------
Impact of Weather to
Normal on Retail Sales
Heating Degree Days - Actual 18 0 1 0 - % - %
- Normal 17 0 19 0
Cooling Degree Days - Actual 986 2,077 1,170 2,191 (15.7) % (5.2)%
- Normal 1,082 2,299 1,071 2,299
Impact of retail weather to normal on EPS ($0.04) ($0.03) ($0.07) $0.03 ($0.02) $0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Nine Months Ended Percentage Change From
September 30, 2003 September 30, 2002 September 30, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Total Progress Total Progress
Utility Statistics Carolinas Florida Energy Carolinas Florida Energy Carolinas Florida
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands)
Retail
Residential $ 990,119 $1,300,312 $ 2,290,431 $ 952,288 $1,244,654 $ 2,196,942 4.0 % 4.5 %
Commercial 649,666 556,733 1,206,399 630,732 549,709 1,180,441 3.0 1.3
Industrial 481,502 160,405 641,907 488,926 157,719 646,645 (1.5) 1.7
Other retail 60,341 133,125 193,466 58,929 128,497 187,426 2.4 3.6
Provision for retail
revenue refund - (18,597) (18,597) - (35,000) (35,000) - -
Provision for retail
revenue sharing - (5,358) (5,358) - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total Retail $ 2,181,628 $2,126,620 $ 4,308,248 $ 2,130,875 $2,045,579 $ 4,176,454 2.4 4.0
Unbilled (31,875) 2,685 (29,190) 8,533 20,236 28,769 - -
Wholesale 537,871 172,866 710,737 493,195 166,121 659,316 9.1 4.1
Miscellaneous revenue 63,975 96,908 160,883 58,717 84,065 142,782 9.0 15.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total Electric $ 2,751,599 $2,399,079 $ 5,150,678 $ 2,691,320 $2,316,001 $ 5,007,321 2.2 % 3.6 %
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Sales (millions of kWh)
Retail
Residential 12,063 14,996 27,059 11,732 14,078 25,810 2.8 % 6.5 %
Commercial 9,616 8,727 18,343 9,493 8,519 18,012 1.3 2.4
Industrial 9,616 2,951 12,567 9,917 2,859 12,776 (3.0) 3.2
Other retail 1,081 2,204 3,285 1,088 2,095 3,183 (0.6) 5.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total Retail 32,376 28,878 61,254 32,230 27,551 59,781 0.5 4.8
Unbilled (549) 441 (108) 26 689 715 - -
Wholesale 11,870 3,172 15,042 11,356 2,976 14,332 4.5 6.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total Electric 43,697 32,491 76,188 43,612 31,216 74,828 0.2 % 4.1 %
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Supply (millions of kWh)
Generated - steam 22,094 17,307 39,401 21,456 16,172 37,628
nuclear 18,003 5,011 23,014 17,599 5,041 22,640
hydro 778 - 778 297 - 297
combustion turbines/
combined cycle 1,273 4,907 6,180 1,817 5,051 6,868
Purchased 3,608 7,149 10,757 4,127 6,864 10,991
- ------------------------------------------------------------------------------------------------------------------------------------
Total Energy Supply 45,756 34,374 80,130 45,296 33,128 78,424
(Company Share)
- ------------------------------------------------------------------------------------------------------------------------------------
Impact of Weather to
Normal on Retail Sales
Heating Degree Days - Actual 2,046 482 1,754 370 16.6 % 30.3 %
- Normal 1,910 385 1,912 385
Cooling Degree Days - Actual 1,402 3,335 1,835 3,368 (23.6) % (1.0)%
- Normal 1,637 3,471 1,596 3,471
Impact of retail weather to normal on EPS ($0.05) $0.00 ($0.05) $0.05 ($0.01) $0.04
- ------------------------------------------------------------------------------------------------------------------------------------
S-4
Progress Energy, Inc.
SUPPLEMENTAL DATA (Continued)
Unaudited
- ------------------------------------------------------------------------------------------------------------------------------------
Detail of Income Taxes (in thousands) Three Months Ended Nine Months Ended
September 30 September 30
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax expense (credit) - current $ 107,954 $ 164,712 $ 204,372 $ 198,735
deferred (89,718) (269,436) (208,159) (313,670)
investment tax credit (21,348) (4,659) (29,471) (14,775)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ (3,112) $ (109,383) $ (33,258) $ (129,710)
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Statistics September 30
2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges (12 months ended) 1.6 1.1
Return on average common stock equity (12 months ended) 11.7 % 8.8 %
Book value per common share $30.34 $28.78
Capitalization
Common stock equity 40.5 % 35.6 %
Preferred stock of subsidiary- redemption not required 0.5 0.5
Total debt 59.0 63.9
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capitalization 100.0 % 100.0 %
- ------------------------------------------------------------------------------------------------------------------------------------
ONGOING EARNINGS BY BUSINESS LINE
The following table provides an update to Progress Energy's 2003 projected
ongoing earnings through the third quarter of 2003. The 2003 forecast was
originally presented at Progress Energy's analyst meeting in February and was
updated in April as part of Progress Energy's first quarter 2003 earnings
release. The April update reflected the impact of the company's change in
allocation methodology for assigning service company costs to Progress Energy
subsidiaries. These reallocation entries have no impact on consolidated
earnings. In its third quarter 2003 earnings release, Progress Energy lowered
its ongoing earnings guidance to $3.50 to $3.60 per share, or approximately
$830-$855 million of ongoing earnings.
- ---------------------------------------------------------------------------------------------------------------------------------
Service YTD 9/30/03 YTD
($ in millions) February 2003 Company April 2003 Per Earnings Tax Benefit 9/30/03
Forecast* Reallocation Forecast* Release Reallocation Ongoing*
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities
Retail $ 710 $ 22 $ 732 $ 554 ($27) $ 527
Regulated Wholesale Marketing 65 65 75 75
Progress Ventures
Synfuels 185 185 126 126
Progress Fuels 50 (8) 42 34 (1) 33
Competitive Commercial Operations 10 (5) 5 24 24
Other Diversified 5 (4) 1 (3) 1 (2)
Corporate Costs (150) (6) (156) (162) 27 (135)
- ---------------------------------------------------------------------------------------------------------------------------------
Ongoing Earnings** $ 875 $ 0 $ 875 $ 648 $0 $ 648
Intra-period tax allocation 41 41
CVO mark-to-market (4) (4)
NCNG Discontinued Operations (5) (5)
--------- ------------
Reported GAAP Earnings $ 680 $ 680
- ---------------------------------------------------------------------------------------------------------------------------------
*Excludes tax benefit reallocation from holding company.
**Totals may not foot due to rounding
S-5
Progress Energy, Inc.
Earnings Variances
Third Quarter 2003 vs 2002
Regulated Utilities
Corporate
Progress and Other
($ per share) Carolinas Florida Ventures Businesses Consolidated
----------------------------------------------------------------------------
2002 GAAP earnings 0.83 0.57 0.34 (1.03) 0.71
Intra-period tax allocation (0.18) A (0.18)
CVOs (0.04) B (0.04)
NCNG discontinued operations 0.01 C 0.01
PTC impairment 1.04 1.04
----------------------------------------------------------------------------
2002 ongoing earnings 0.83 0.57 0.34 (0.20) 1.54
----------------------------------------------------------------------------
Weather - retail (0.07) (0.01) (0.08)
Other retail - growth and usage 0.01 0.01 0.02
Wholesale (0.02) (0.01) (0.03)
2003 retail revenue sharing 0.01 D 0.01
Other margin 0.01 0.01
O&M (0.03) (0.05) E (0.08)
Hurricane costs (0.03) F (0.03)
Depreciation (0.01) (0.01) G (0.02)
Other income and expense 0.01 0.01 (0.05) (0.03)
Interest charges 0.01 0.05 (0.03) (0.03) H 0.00
Net diversified business 0.11 I 0.11
Tax benefit reallocation 0.04 (0.04) J 0.00
Share dilution (0.07) (0.05) (0.04) 0.02 K (0.14)
----------------------------------------------------------------------------
2003 ongoing earnings 0.67 0.48 0.39 (0.26) 1.28
----------------------------------------------------------------------------
Intra-period tax allocation 0.16 A 0.16
CVOs (0.02) B (0.02)
NCNG discontinued operations (0.08) C (0.08)
----------------------------------------------------------------------------
2003 GAAP earnings 0.67 0.48 0.39 (0.20) 1.34
----------------------------------------------------------------------------
Other Businesses includes Progress Telecom, Progress Rail, other small
subsidiaries, Holding Company interest expense, CVO mark-to-market, intra-period
tax allocations, purchase accounting transactions and corporate eliminations.
A - Intra-period income tax allocation impact, related to cyclical nature of
energy demand/earnings and timing of synthetic fuel tax credits.
B - Impact of change in market value of outstanding CVOs.
C - Sale of NCNG to Piedmont Natural Gas which was finalized on September 30,
2003.
D - Florida - 2003 YTD revenue sharing accrual adjustment.
E - Carolinas - Primarily increased benefits expense. Florida - primarily
increased pension expense.
F - Carolinas - Hurricane Isabel O&M costs of $13.5 million pre-tax.
G - Higher depreciation due to more assets placed in service.
H - Carolinas - Lower debt and average interest rate. Florida - reversal of
interest expense accrued for resolved tax matters. Progress Ventures and
Other - interest capitalized in 2002 related to nonregulated generation
plants.
I - Progress Ventures - Favorable gas operations (Westchester and North Texas
Gas) and synthetic fuels.
J - Allocation of tax favorability from Holding Company to profitable
subsidiaries.
K - Primarily due to the impact of the issuance in November 2002 (14.7M shares)
and issuances under Investor Plus and Employee Benefit programs.
S-6
Progress Energy, Inc.
Earnings Variances
Year-to-Date September 2003 vs 2002
Regulated Utilities
Corporate
Progress and Other
($ per share) Carolinas Florida Ventures Businesses Consolidated
----------------------------------------------------------------------------
2002 GAAP earnings 1.85 1.20 0.77 (1.93) 1.89
Intra-period tax allocation 0.19 A 0.19
CVOs (0.10) B (0.10)
NCNG discontinued operations (0.01) C (0.01)
Retroactive rate refund 0.10 D 0.10
PTC impairment 1.04 1.04
----------------------------------------------------------------------------
2002 ongoing earnings 1.85 1.30 0.77 (0.81) 3.11
----------------------------------------------------------------------------
Weather - retail (0.11) 0.02 (0.09)
Other retail - growth and usage 0.07 0.08 0.15
Wholesale 0.07 (0.04) E 0.03
Rate reduction impact (0.13) F (0.13)
2002 retail revenue sharing resolution (0.05) G (0.05)
2003 retail revenue sharing (0.02) H (0.02)
Other margin 0.05 0.03 I 0.08
O&M - other (0.08) (0.07) J (0.15)
O&M - storm costs (0.06) K (0.06)
Service Company allocations - prior years 0.04 (0.02) (0.02) L 0.00
Depreciation (0.03) (0.03) M (0.06)
Other income and expense (0.03) 0.01 0.01 0.01 N 0.00
Interest charges 0.05 0.06 (0.03) (0.03) O 0.05
Net diversified business 0.12 0.04 P 0.16
Tax benefit reallocation (0.04) (0.02) 0.01 0.05 Q 0.00
Share dilution (0.16) (0.10) (0.08) 0.06 R (0.28)
----------------------------------------------------------------------------
2003 ongoing earnings 1.62 1.04 0.78 (0.70) 2.74
----------------------------------------------------------------------------
Intra-period tax allocation 0.18 A 0.18
CVOs (0.02) B (0.02)
NCNG discontinued operations (0.02) C (0.02)
----------------------------------------------------------------------------
2003 GAAP earnings 1.62 1.04 0.78 (0.56) 2.88
----------------------------------------------------------------------------
Other Businesses includes Progress Telecom, Progress Rail, other small
subsidiaries, Holding Company interest expense, CVO mark-to-market, intra-period
tax allocations, purchase accounting transactions and corporate eliminations.
A - Intra-period income tax allocation impact, related to cyclical nature of
energy demand/earnings and timing of synthetic fuel tax credits.
B - Impact of change in market value of outstanding CVOs.
C - Sale of NCNG to Piedmont Natural Gas which was finalized on September 30,
2003.
D - Impact of $35M ($21M after tax) retroactive rate refund related to
Florida's rate case settlement in 2002.
E - Carolinas - Favorable weather in Northeastern United States during the
first quarter. Florida - expiration of wholesale contracts in prior year.
F - Florida - Impact of 9.25% rate reduction effective May 2002.
G - Florida - Resolution of 2002 revenue sharing calculation dispute ($18.4M
pre-tax).
H - Florida - 2003 YTD revenue sharing accrual.
I - Carolinas - Primarily favorable non-recoverable fuel. Florida - Primarily
increased transmission and wheeling fees.
J - Carolinas - Primarily costs associated with an additional planned nuclear
outage in 2003 and increased benefits. Florida - primarily increased
pension expense.
K - Carolinas - Ice storm O&M costs of $10.4M in February 2003 and Hurricane
Isabel O&M costs of $13.5M in September 2003 (pre-tax).
L - Retroactive reallocation of Service Company costs in accordance with an SEC
PUHCA audit.
M - Higher depreciation due to more assets placed in service.
N - Carolinas - Recognition of limited partnership investment losses recorded
upon finalization of the partnership tax returns ($9.4M pre-tax).
O - Carolinas - Lower debt and average interest rate. Florida - reversal of
interest expense accrued for resolved tax matters. Progress Ventures and
Other - interest capitalized in 2002 related to nonregulated generation
plants.
P - Progress Ventures - Favorable gas operations (Westchester and North Texas
Gas), partially offset by lower synthetic fuel production (internal change
in production schedule) and higher fixed costs. Other Businesses -
Favorable depreciation at Telecom.
Q - Allocation of tax favorability from Holding Company to profitable
subsidiaries.
R - Primarily due to the impact of the purchase of Westchester Gas in April
2002 (2.5M shares), issuance in November 2002 (14.7M shares) and issuances
under Investor Plus and Employee Benefit programs.
S-7