Progress Energy Announces Fourth Quarter and Year-end Results
Highlights:
- Reports 2003 ongoing earnings of $3.56 per share, GAAP earnings of
$3.30 per share
- Reports fourth quarter ongoing earnings of $0.82 per share,
GAAP earnings of $0.42 per share
- Sets 2004 ongoing earnings guidance of $3.50 to $3.65 per share
RALEIGH, N.C. (January 21, 2004) - Progress Energy [NYSE: PGN] today reported
ongoing earnings of $844 million, or $3.56 per share, for 2003 compared with
ongoing earnings of $827 million, or $3.81 per share, for 2002. Significant
positive earnings drivers for the year were electric utility customer growth and
usage, higher synthetic fuel sales and increased natural gas sales. Ongoing
earnings per share were negatively impacted by $0.33 of share dilution. In
addition, other unfavorable offsets were weather, higher pension and
benefit-related costs, increased depreciation, the rate reduction in Florida and
the additional refund for 2002 revenue sharing in Florida. Reported consolidated
net income under generally accepted accounting principles (GAAP) was $782
million, or $3.30 per share, for 2003 compared with reported consolidated net
income of $528 million, or $2.43 per share, for 2002. See the table on the
following page for a reconciliation of ongoing earnings per share to GAAP
earnings per share.
"In spite of unseasonably mild weather, Progress Energy delivered strong results
in 2003," said William Cavanaugh, chairman and CEO, Progress Energy. "We were
able to achieve ongoing earnings of $3.56 per share, which includes $0.05 for a
revenue sharing adjustment for 2002 in Florida, and we continued to deliver on
our primary commitments of financial discipline, balance sheet improvement and
operational excellence. During 2003, our service territory benefited from the
addition of 59,000 new customers. This growth helped offset the continued
weakness in the textile sector in the Carolinas.
"Our success in selling non-core assets has positioned us to be able to pay down
$500 million of holding company debt in March. Compared to 2002, we reduced our
capital expenditures, and our leverage is below 59 percent, down over 200 basis
points. Importantly, we raised our dividend for the 16th consecutive year.
"Significantly, we resolved some complex issues regarding our synthetic fuels
investments, and we are continuing to work diligently to complete the tax audits
of all of our synthetic fuel facilities. Other highlights for the year include
achieving a combined capacity factor of 96.8 percent for our nuclear plant fleet
and making enhancements to our power supply and delivery infrastructure to help
meet growing demand. We completed the build-out of our competitive generation
fleet and signed long-term wholesale contracts to increase our contractual
coverage for the 3,100 MW non-regulated fleet."
The following table provides a reconciliation of ongoing earnings per share to
reported GAAP earnings per share. A detailed discussion is provided on page 7
under the caption "Ongoing Earnings Adjustments."
- --------------------------------------------------------------------------------------------
Progress Energy, Inc.
Reconciliation of Ongoing Earnings per Share to Reported GAAP Earnings per Share
December 31, 2003
- --------------------------------------------------------------------------------------------
Q4 2003 Q4 2002 2003 2002
- --------------------------------------------------------------------------------------------
Ongoing earnings per share $0.82 $0.71 $3.56 $3.81
Intraperiod tax allocation (0.18) 0.18 -- --
CVO mark-to-market (0.02) 0.03 (0.04) 0.13
NCNG discontinued operations (0.01) (0.11) (0.03) (0.11)
Cumulative effect of accounting changes (0.09) -- (0.09) --
Impairments and one-time charges (0.10) (0.18) (0.10) (1.22)
Ice storm impact -- (0.08) -- (0.08)
Florida retroactive revenue refund -- -- -- (0.10)
------------------------------------------------
Reported GAAP earnings per share $0.42 $0.55 $3.30 $2.43
===== ===== ===== =====
Average shares outstanding (000s) 240,345 224,807 237,242 217,247
- --------------------------------------------------------------------------------------------
During the fourth quarter of 2003, the company recorded a total of $24 million
after-tax of impairments primarily related to its Affordable Housing portfolio
and certain assets at its Kentucky May Coal Company.
2004 EARNINGS GUIDANCE
Progress Energy expects to produce earnings of $845 million to $880 million in
2004 and is targeting an earnings range of $3.50 to $3.65 per share.
The earnings from the regulated utilities are projected to be favorable
year-over-year due to the following drivers: normal weather, elimination of the
2002 revenue sharing adjustment in Florida, growth in customers and usage, and
the investment recovery of the Hines 2 facility in Florida. These drivers will
be partially offset by increased benefit-related and insurance costs and a
decrease in regulated wholesale sales.
Earnings from the non-regulated businesses are projected to be unfavorable
year-over-year, primarily due to a full year of fixed costs in Progress
Ventures' competitive generation business. Also, dilution due to full-year
recognition of the equity issued in 2003 will negatively impact earnings per
share by approximately $0.07 per share.
"In 2004 Progress Energy will continue to focus on financial discipline. It will
be a year of transition as we generate free cash flow, focus on further reducing
our leverage to approximately 57 percent with little need for significant equity
issuances, secure new electricity sales contracts with wholesale customers, and
continue our disciplined approach to capital spending," said Cavanaugh. "We plan
to execute with the assets we have."
2
SIGNIFICANT DEVELOPMENTS
Progress Energy Nuclear Plants Achieve Record-Setting 2003 Performance
Progress Energy's fleet of nuclear-powered plants performed at
record-setting levels during 2003, producing approximately 36 percent of the
company's electricity. The nuclear program set a new company record by
generating approximately 35 million megawatt-hours of electricity during the
year. Additionally, Progress Energy's nuclear plant production had a combined
capacity factor of 96.8 percent. 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=8122.
New Franchise Agreements Signed in Florida
In January 2004, Progress Energy Florida completed three new 30-year
franchise agreements with the city of Apopka and the towns of Jennings (in
Hamilton County) and Reddick (in Marion County). These three franchises
represent approximately 14,000 customers. Since 2001, Progress Energy has signed
new franchise agreements with more than 32 cities and towns in 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=8043.
Progress Energy Receives Edison Electric Institute Emergency Response Award
On January 7, 2004, the Edison Electric Institute (EEI) recognized Progress
Energy for its excellent response following the December 2002 ice storm in the
Carolinas. That ice storm was one of the most destructive winter events to
impact North Carolina. Progress Energy, the only company to have been recognized
four times, also received the award for response to hurricanes Bonnie (1998) and
Floyd (1999), and the January 2000 winter storm. 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=8002.
Storm Cost Filing Approved
Progress Energy Carolinas made a filing with the North Carolina Utilities
Commission (NCUC) in October 2003 to seek permission to defer $24 million of
expenses incurred from Hurricane Isabel and the February 2003 winter storms. On
December 23, 2003, the NCUC approved the company's request to create a deferred
account for major storm damage expenses. Progress Energy Carolinas will amortize
its 2003 storm expenses over a five-year period, beginning in the month the
expenses were incurred. The company will be allowed to seek future storm expense
deferrals on a case-by-case basis.
3
Progress Telecom-EPIK Agreement Closed
On December 22, 2003, Progress Telecom and EPIK Communications, a
subsidiary of Odyssey Telecorp of California, announced the closing of their
agreement to combine operations. The combined company, doing business as
Progress Telecom, LLC, will be jointly owned by Progress Energy (55 percent) and
Odyssey Telecorp (45 percent). It will continue to focus on delivering wholesale
broadband solutions for customers. The company will be headquartered in the
Tampa Bay area.
Senior Management Changes Announced
On December 11, 2003, Progress Energy announced leadership changes designed
to broaden the experience of the company's senior executives. The changes were
effective January 1, 2004. As part of the changes, the company announced a new
chief financial officer. Geoff Chatas, formerly senior vice president of
finance, is now executive vice president and chief financial officer, succeeding
Peter Scott, who is now president and CEO of Progress Energy Service Company,
LLC. Several other management changes were also announced. 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=7922.
Dividend Increased
Progress Energy's board of directors voted to increase the dividend on the
company's common stock on December 10, 2003. Progress Energy has increased the
dividend 16 straight years. The quarterly dividend, raised to $0.575 per share
from $0.56 cents per share, represents an expected annual dividend of $2.30 per
share, an increase of $0.06 over dividends paid in 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=7902.
Second Hines Unit in Florida Completed
On December 9, 2003, Progress Energy Florida announced that it placed into
service the second generating unit at its Hines Generation Complex in Polk
County, Fla. The natural gas-fueled combined-cycle unit adds 516 megawatts (MW)
of electric generating power to the company's power plant fleet. Progress Energy
Florida currently has one 482-MW natural gas-fueled combined-cycle plant
operating at the Hines site. Construction on a third unit at Hines will be
completed December 2005. The company recently began the bidding process for a
proposed fourth unit at the site. 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=7862.
Crystal River Nuclear Plant Completes Reactor Head Replacement
On November 5, 2003, Progress Energy's Crystal River Nuclear Plant returned
to service following a 32-day outage. This was the second-shortest outage for
Crystal River and was the shortest reactor head replacement outage by a United
States nuclear plant. In addition to installing a new reactor head, employees at
the plant replaced one-third of the fuel in the reactor, installed a new tube
cleaning system for the plant's condensers, and performed major maintenance and
inspections of plant systems.
4
LINE OF BUSINESS FINANCIAL INFORMATION
Progress Energy Carolinas
Progress Energy Carolinas electric energy operations contributed GAAP net
income of $492 million for the year compared with $513 million for 2002. This
year's earnings were negatively affected by unfavorable weather, increased
depreciation (primarily due to Clean Air amortization), a one-time cumulative
effect of accounting change, higher O&M costs and an impairment primarily
related to its Affordable Housing portfolio. These factors were partially offset
by customer growth and usage, increased sales to other utilities, a decrease in
interest expense and a favorable retroactive reallocation of Service Company
costs.
The Financial Accounting Standards Board (FASB) issued new accounting
guidance that required certain contracts to be recorded at their fair value.
Progress Energy Carolinas had one contract that met the criteria of this new
guidance and as such recorded a negative fair value adjustment of $23 million
after-tax in the fourth quarter of 2003. This adjustment was reported as a
cumulative effect of accounting change.
During the fourth quarter of 2003, Progress Energy Carolinas electric
energy operations also recorded an impairment of $7 million after-tax primarily
related to its Affordable Housing portfolio. The total impairment was $13
million after-tax, of which $7 million was recorded in Progress Energy Carolinas
results and $6 million was recorded in Other Business results.
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 GAAP net
income of $295 million for the year compared with $323 million for 2002. This
year's earnings were negatively affected by the rate reduction as part of the
Progress Energy Florida rate settlement that began May 1, 2002, higher pension
and benefit-related costs, the refund associated with the 2002 retail revenue
sharing adjustment, decreased wholesale sales and increased depreciation. These
factors were partially offset by customer growth and usage and a decrease in
interest expense. Prior year results included the impact of the rate case
settlement that included a one-time retroactive refund to customers of $21
million after-tax.
Progress Energy Florida recorded a $17 million pre-tax accrual for 2003
revenue sharing. In addition, the company provided an additional refund of $18
million pre-tax to its retail customers related to 2002 revenue sharing in the
second quarter of 2003.
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 consist of 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 GAAP net
income of $256 million for the year compared with $202 million for 2002.
Progress Fuels generated GAAP net income of $236 million for the year
compared with $175 million for 2002. The increase was primarily due to an
increase in synthetic fuel earnings, higher natural gas earnings from increased
natural gas prices, the addition of the North Texas Gas operations in March 2003
and the addition of Westchester Gas Company in April 2002. These results were
partially offset by an asset impairment during the fourth quarter of 2003 of $11
million after-tax at its Kentucky May Coal Company. Within Progress Fuels,
synthetic fuels operations generated GAAP net income of $200 million for the
year compared with $156 million for 2002. Total synthetic fuel sales were 12.4
million tons for the year compared with 11.2 million tons for 2002. Factors
contributing to the year-over-year increase were higher sales, improved margins
and a higher tax credit per ton. Additionally, synthetic fuels results in 2003
include 13 months of operations of some facilities. Prior to the fourth quarter
2003, results of these synthetic fuels operations had been recognized one month
in arrears. The net impact of this action increased net income by $10 million in
the fourth quarter and $2 million for the year.
Competitive Commercial Operations contributed GAAP net income of $20
million for the year compared with $27 million for 2002. 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. This was partially offset by an increase in
contract and market margins.
Other Businesses
Other businesses include Progress Rail, Progress Telecom and other small
subsidiaries. Other businesses had a GAAP net loss of $17 million for the year
(ongoing net loss of $11 million, excluding the current year impairment)
compared with a GAAP net loss of $284 million (ongoing net loss of $19 million,
excluding the prior year impairments) for 2002. This year's results were
negatively impacted by an impairment primarily of the company's Affordable
Housing portfolio. During the fourth quarter of 2003, Other Businesses recorded
an impairment of $6 million after-tax primarily related to its Affordable
Housing portfolio. The total impairment was $13 million after-tax, of which $6
million was recorded in Other Business results and $7 million was recorded in
Progress Energy Carolinas results. Prior year results were negatively impacted
by $225 million of after-tax impairments and one-time charges in the
telecommunications business and by $40 million of an after-tax impairment on
assets held for sale related to Railcar Ltd., a leasing subsidiary of Progress
Rail.
Progress Rail
Progress Rail had a GAAP net loss of $1 million for the year compared with
a GAAP net loss of $42 million (ongoing net loss of $2 million, excluding the
prior year impairment) for 2002. Progress Rail earnings were positively impacted
by improvements in the recycling business and reduced operating costs; these
improvements were offset by higher Service Company cost allocations. Prior year
results were negatively impacted by a $40 million after-tax impairment in the
fourth quarter 2002 on assets held for sale related to Railcar Ltd., a leasing
subsidiary of Progress Rail.
6
Progress Telecom
Progress Telecom, including Caronet's operations, recorded GAAP net income
of $2 million for the year compared with a GAAP net loss of $231 million
(ongoing net loss of $6 million, excluding the prior year writedown) for 2002.
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 2002, the company recorded an after-tax writedown and one-time charge of
$209 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 million in the third quarter 2002.
Corporate
Corporate results, which primarily include interest expense on holding
company debt, posted an ongoing operating loss of $227 million for the year
compared with an ongoing operating loss of $229 million for 2002.
Progress Energy issued approximately 7.6 million shares of common stock in
2003 through the Investor Plus and employee benefit plans for proceeds of
approximately $311 million.
Discontinued Operations
NCNG
The sale of NCNG to Piedmont Natural Gas closed on September 30, 2003, and
the net proceeds were 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 $8 million for the year compared with a discontinued loss
of $24 million for 2002. The loss for 2003 reflects the finalization of the sale
of NCNG.
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. Ongoing earnings as presented here may not be
comparable to similarly titled measures used by other companies. Reconciling
adjustments from GAAP earnings to ongoing earnings are as follows:
7
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 fluctuations 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 tax expense 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
decreased earnings per share by $0.18 for the fourth quarter 2003, increased
earnings per share by $0.18 for the fourth quarter 2002, but had no impact on
the company's annual earnings. 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 ongoing 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 by $0.02 for the fourth quarter and $0.04 for 2003. In 2002,
the CVO mark-to-market increased earnings per share by $0.03 for the fourth
quarter and $0.13 for the year. 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.
Cumulative Effect of Accounting Changes
Progress Energy recorded the cumulative effect of changes in accounting
principles due to the adoption of new FASB accounting guidance. The impact to
Progress Energy was due primarily to the new FASB guidance related to the
accounting for certain contracts. This guidance discusses whether the pricing in
a contract that contains broad market indices qualifies for certain exceptions
that would not require the contract to be recorded at its fair value. Progress
Energy Carolinas has a purchase power contract with Broad River LLC that did not
meet the criteria for an exception, and a fair value adjustment was recorded in
the fourth quarter of 2003. Due to the nonrecurring nature of the adjustment,
management believes it is not representative of the 2003 operations of Progress
Energy Carolinas.
8
Impairments and One-Time Charges
During the fourth quarter of 2003, the company recorded after-tax
impairments of its Affordable Housing portfolio and certain assets at the
Kentucky May Coal Company. During the fourth quarter of 2002, the company
committed to a divestiture plan for Railcar, Ltd., which is primarily engaged in
rail car leasing, and recorded an estimated loss on assets held for sale. During
the third quarter of 2002, the company recorded an after-tax impairment 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.
Ice Storm Impact
During the fourth quarter of 2002, the company experienced a severe ice
storm in the Carolinas that caused extensive damage to the distribution system.
Due to the extensive costs associated with the storm damage, management believes
the restoration costs are not representative of the 2002 ongoing operations of
Progress Energy Carolinas.
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
January 21, 2004, at 10 a.m. ET (7 a.m. PT) and will be hosted by Peter Scott,
president and chief executive officer of the Service Company, and Geoff Chatas,
executive vice president and chief financial officer. Investors, media and the
public may listen to the conference call by dialing 719-457-2679, confirmation
code 319933. 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 January 21
through midnight February 4, 2004. To listen to the recorded call, dial
719-457-0820 and enter confirmation code 319933.
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 and
Geoff Chatas starting at 11 a.m. ET. To participate in this session, please dial
719-457-2703, confirmation code 161573.
9
Progress Energy (NYSE: PGN), headquartered in Raleigh, N.C., is a Fortune 250
diversified energy company with more than 24,000 megawatts of generation
capacity and $9 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.
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 Telecom; 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; 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, Garrick Francis, 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 Year Ended
December 31 December 31
(In millions except per share amounts) 2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Revenues
Utility $ 1,590 $ 1,594 $ 6,741 $ 6,601
Diversified business 574 371 1,993 1,475
- ---------------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 2,164 1,965 8,734 8,076
Operating Expenses
Utility
Fuel used in electric generation 401 400 1,695 1,586
Purchased power 195 187 862 862
Other operation and maintenance 351 389 1,419 1,390
Depreciation and amortization 219 192 883 820
Taxes other than on income 101 92 405 386
Diversified Business
Cost of sales 523 327 1,743 1,401
Depreciation and amortization 45 31 157 118
Impairment of long-lived assets 17 59 17 364
Other 69 31 197 145
- ---------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,921 1,708 7,378 7,072
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Income 243 257 1,356 1,004
- ---------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest income 3 3 11 15
Impairment on investments (21) - (21) (25)
Other, net (3) 19 (19) 33
- ---------------------------------------------------------------------------------------------------------------------------------
Total Other Income (Expense) (21) 22 (29) 23
- ---------------------------------------------------------------------------------------------------------------------------------
Income before Interest Charges and Income Taxes 222 279 1,327 1,027
- ---------------------------------------------------------------------------------------------------------------------------------
Interest Charges
Net interest charges 170 158 632 641
Allowance for borrowed funds used during construction - - (7) (8)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Interest Charges, Net 170 158 625 633
- ---------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes 52 121 702 394
Income Tax Benefit (75) (28) (109) (158)
- ---------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 127 149 811 552
- ---------------------------------------------------------------------------------------------------------------------------------
Discontinued Operations, Net of Tax (3) (26) (8) (24)
Income before Cumulative Effect of Accounting Changes 124 123 803 528
Cumulative Effect of Accounting Changes, Net of Tax (22) - (21) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income $ 102 $ 123 $ 782 $ 528
- ---------------------------------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 240 225 237 217
Basic Earnings per Common Share
Income from Continuing Operations $ 0.52 $ 0.66 $ 3.42 $ 2.54
Discontinued Operations, Net of Tax $ (0.01) $ (0.11) $ (0.03) $ (0.11)
Cumulative effect $ (0.09) $ - $ (0.09) $ -
Net Income $ 0.42 $ 0.55 $ 3.30 $ 2.43
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted Earnings per Common Share
Income from Continuing Operations $ 0.52 $ 0.66 $ 3.40 $ 2.53
Discontinued Operations, Net of Tax $ (0.01) $ (0.11) $ (0.03) $ (0.11)
Cumulative effect $ (0.09) $ - $ (0.09) $ -
Net Income $ 0.42 $ 0.55 $ 3.28 $ 2.42
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $ 0.58 $ 0.56 $ 2.26 $ 2.20
- ---------------------------------------------------------------------------------------------------------------------------------
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 December 31 December 31
(In millions) 2003 2002
- --------------------------------------------------------------------------------------------------------
ASSETS
Utility Plant
Utility plant in service $ 21,675 $ 20,157
Accumulated depreciation (10,286) (10,481)
- --------------------------------------------------------------------------------------------------------
Utility plant in service, net 11,389 9,676
Held for future use 13 15
Construction work in progress 634 752
Nuclear fuel, net of amortization 228 217
- --------------------------------------------------------------------------------------------------------
Total Utility Plant, Net 12,264 10,660
- --------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 273 61
Accounts receivable 867 737
Unbilled accounts receivable 219 225
Inventory 810 875
Deferred fuel cost 317 184
Assets of discontinued operations - 490
Prepayments and other current assets 368 262
- --------------------------------------------------------------------------------------------------------
Total Current Assets 2,854 2,834
- --------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
Regulatory assets 699 393
Nuclear decommissioning trust funds 938 797
Diversified business property, net 2,160 1,884
Miscellaneous other property and investments 464 519
Goodwill, net 3,726 3,719
Prepaid pension assets 443 60
Intangibles, net 328 155
Other assets and deferred debits 267 305
- --------------------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 9,025 7,832
- --------------------------------------------------------------------------------------------------------
Total Assets $ 24,143 $ 21,326
- --------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock (without par value, authorized 500 issued and outstanding $ 5,269 $ 4,951
246 and 238 shares, respectively)
Unearned restricted shares (16) (21)
Unearned ESOP common stock (89) (102)
Accumulated other comprehensive loss (36) (238)
Retained earnings 2,330 2,087
- --------------------------------------------------------------------------------------------------------
Total Common Stock Equity 7,458 6,677
Preferred stock of subsidiary - not subject to mandatory redemption 93 93
Long-term debt, net 9,934 9,747
- --------------------------------------------------------------------------------------------------------
Total Capitalization 17,485 16,517
- --------------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt 868 275
Accounts payable 732 677
Interest accrued 209 220
Dividends declared 140 132
Short-term obligations 4 695
Customer deposits 167 158
Liabilities of discontinued operations - 125
Other current liabilities 567 429
- --------------------------------------------------------------------------------------------------------
Total Current Liabilities 2,687 2,711
- --------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 856 933
Accumulated deferred investment tax credits 190 206
Regulatory liabilities 768 120
Asset retirement obligations 1,271 -
Other liabilities and deferred credits 886 839
- --------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 3,971 2,098
- --------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 24,143 $ 21,326
- --------------------------------------------------------------------------------------------------------
S-2
Progress Energy, Inc.
STATEMENTS OF CASH FLOWS
Unaudited Interim Consolidated Information Years Ended
December 31
(In millions) 2003 2002
- ------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 782 $ 528
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss from discontinued operations 8 24
Impairment of long-lived assets and investments 38 389
Cumulative effect of accounting changes 21 -
Depreciation and amortization 1,146 1,099
Deferred income taxes (280) (402)
Investment tax credits (16) (18)
Deferred fuel credit (133) (37)
Cash provided from (used for) operating assets and liabilites:
Accounts receivable (168) (35)
Inventories 78 (49)
Prepayments and other current assets 25 (39)
Accounts payable 41 100
Other current liabilities 171 56
Other 75 28
- ------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,788 1,644
- ------------------------------------------------------------------------------------------------------
Investing Activities
Utility property additions (1,018) (1,174)
Diversified business property additions (607) (570)
Nuclear fuel additions (117) (81)
Acquisitions, net of cash - (365)
Acquisitions of intangibles (200) (10)
Proceeds from sale of subsidiaries and investments 579 43
Other (17) (61)
- ------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,380) (2,218)
- ------------------------------------------------------------------------------------------------------
Financing Activities
Issuance of common stock, net 304 687
Issuance of long-term debt, net 1,539 1,783
Net decrease in short-term indebtedness (696) (247)
Retirement of long-term debt (810) (1,157)
Dividends paid on common stock (541) (480)
Other 8 (5)
- ------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (196) 581
- ------------------------------------------------------------------------------------------------------
Net Increased in Cash and Cash Equivalents 212 7
Cash and Cash Equivalents at Beginning of the Period 61 54
- ------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of the Period $ 273 $ 61
- ------------------------------------------------------------------------------------------------------
S-3
Progress Energy, Inc.
SUPPLEMENTAL DATA
Unaudited
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended Percentage Change
December 31, 2003 December 31, 2002 From December 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Total Total
Progress Progress
Utility Statistics Carolinas Florida Energy Carolinas Florida Energy Carolinas Florida
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions)
Retail
Residential $269 $391 $660 $289 $400 $689 (6.9)% 2.3)%
Commercial 201 183 384 201 181 382 - 1.1
Industrial 154 58 212 156 52 208 (1.3) 11.5
Other retail 19 47 66 19 45 64 - 4.4
Provision for retail revenue sharing - (11) (11) - (4) (4) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total Retail $643 $668 $1,311 $665 $674 $1,339 (3.3) (0.9)
Unbilled 26 (4) 22 6 (23) (17) - -
Wholesale 149 54 203 158 64 222 (5.7) (15.6)
Miscellaneous revenue 20 34 54 19 31 50 5.3 9.7
- -----------------------------------------------------------------------------------------------------------------------------------
Total Electric $838 $752 $1,590 $848 $746 $1,594 (1.2)% 0.8 %
- -----------------------------------------------------------------------------------------------------------------------------------
Energy Sales (millions of kWh)
Retail
Residential 3,220 4,433 7,653 3,507 4,676 8,183 (8.2)% (5.2)%
Commercial 2,941 2,826 5,767 2,975 2,901 5,876 (1.1) (2.6)
Industrial 3,132 1,049 4,181 3,172 976 4,148 (1.3) 7.5
Other retail 327 771 1,098 349 755 1,104 (6.3) 2.1
- -----------------------------------------------------------------------------------------------------------------------------------
Total Retail 9,620 9,079 18,699 10,003 9,308 19,311 (3.8) (2.5)
Unbilled 505 (208) 297 244 (685) (441) - -
Wholesale 3,648 1,151 4,799 3,668 1,205 4,873 (0.5) (4.5)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Electric 13,773 10,022 23,795 13,915 9,828 23,743 (1.0)% 2.0 %
- -----------------------------------------------------------------------------------------------------------------------------------
Energy Supply (millions of kWh)
Generated - steam 6,428 5,672 12,100 7,090 5,020 12,110
nuclear 6,534 1,026 7,560 5,827 1,660 7,487
hydro 177 - 177 194 - 194
combustion turbines/combined cycle 70 1,570 1,640 117 1,536 1,653
Purchased 859 2,232 3,091 1,086 2,229 3,315
- -----------------------------------------------------------------------------------------------------------------------------------
Total Energy Supply (Company Share) 14,068 10,500 24,568 14,314 10,445 24,759
- -----------------------------------------------------------------------------------------------------------------------------------
Impact of Weather to Normal on Retail Sales
Heating Degree Days - Actual 1,179 214 1,313 279 (10.2) % (23.3)%
- Normal 1,212 194 1,206 194
Cooling Degree Days - Actual 47 330 105 505 (55.2) % (34.7)%
- Normal 65 321 57 321
Impact of retail weather to normal on EPS ($0.02) $0.00 ($0.02) $0.04 $0.03 $0.07
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Twelve Months Ended Twelve Months Ended Percentage Change
December 31, 2003 December 31, 2002 From December 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Total Total
Progress Progress
Utility Statistics Carolinas Florida Energy Carolinas Florida Energy Carolinas Florida
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions)
Retail
Residential $1,259 $1,691 $2,950 $1,241 $1,645 $2,886 1.5 % 2.8 %
Commercial 850 740 1,590 832 731 1,563 2.2 1.2
Industrial 636 219 855 645 210 855 (1.4) 4.3
Other retail 79 181 260 78 173 251 1.3 4.6
Provision for retail revenue refund - - - - (35) (35) - -
Provision for retail revenue sharing - (35) (35) - (5) (5) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total Retail $2,824 $2,796 $5,620 $2,796 $2,719 $5,515 1.0 2.8
Unbilled (6) (2) (8) 15 (2) 13 - -
Wholesale 687 227 914 651 230 881 5.5 (1.3)
Miscellaneous revenue 84 131 215 77 115 192 9.1 13.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total Electric $3,589 $3,152 $6,741 $3,539 $3,062 $6,601 1.4 % 2.9 %
- -----------------------------------------------------------------------------------------------------------------------------------
Energy Sales (millions of kWh)
Retail
Residential 15,283 19,429 34,712 15,239 18,754 33,993 0.3 % 3.6 %
Commercial 12,557 11,553 24,110 12,467 11,420 23,887 0.7 1.2
Industrial 12,749 4,001 16,750 13,089 3,835 16,924 (2.6) 4.3
Other retail 1,407 2,974 4,381 1,437 2,850 4,287 (2.1) 4.4
- -----------------------------------------------------------------------------------------------------------------------------------
Total Retail 41,996 37,957 79,953 42,232 36,859 79,091 (0.6) 3.0
Unbilled (43) 233 190 271 5 276 - -
Wholesale 15,518 4,323 19,841 15,024 4,180 19,204 3.3 3.4
- -----------------------------------------------------------------------------------------------------------------------------------
Total Electric 57,471 42,513 99,984 57,527 41,044 98,571 (0.1) % 3.6 %
- -----------------------------------------------------------------------------------------------------------------------------------
Energy Supply (millions of kWh)
Generated - steam 28,522 22,979 51,501 28,547 21,187 49,734
nuclear 24,537 6,039 30,576 23,425 6,701 30,126
hydro 955 - 955 491 - 491
combustion turbines/combined cycle 1,344 6,475 7,819 1,934 6,588 8,522
Purchased 4,467 9,381 13,848 5,213 9,092 14,305
- -----------------------------------------------------------------------------------------------------------------------------------
Total Energy Supply (Company Share) 59,825 44,874 104,699 59,610 43,568 103,178
- -----------------------------------------------------------------------------------------------------------------------------------
Impact of Weather to Normal on Retail Sales
Heating Degree Days - Actual 3,225 696 3,074 647 4.9 % 7.6 %
- Normal 3,122 579 3,118 579
Cooling Degree Days - Actual 1,449 3,665 1,939 3,873 (25.3) % (5.4)%
- Normal 1,702 3,792 1,653 3,792
Impact of retail weather to normal on EPS ($0.07) $0.01 ($0.06) $0.09 $0.02 $0.11
- -----------------------------------------------------------------------------------------------------------------------------------
S-4
Progress Energy, Inc.
SUPPLEMENTAL DATA (Continued)
Unaudited
Financial Statistics December 31
2003 2002
- ---------------------------------------------------------------------------------------
Return on average common stock equity (12 months ended) 11.1 % 8.4 %
Book value per common share $31.00 $28.73
Capitalization
Common stock equity 40.6 % 38.2 %
Preferred stock of subsidiary- redemption not required 0.5 0.5
Total debt 58.9 61.3
- ---------------------------------------------------------------------------------------
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 fourth 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-$855 million of ongoing earnings.
- ----------------------------------------------------------------------------------------------------------------------------------
Impairments
February Service 2003 Per and Ongoing
2003 Company April 2003 Earnings Earnings Tax Benefit 2003
($ in millions) Forecast* Reallocation Forecast* Release Adjustments Reallocation Ongoing*
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities
Retail $710 $22 $732 $691 $30 ($36) $685
Regulated Wholesale Marketing 65 65 96 $96
Progress Ventures
Synfuels 185 185 200 $200
Progress Fuels 50 (8) 42 36 10 (1) $45
Competitive Commercial Operations 10 (5) 5 20 $20
Other Diversified 5 (4) 1 (17) 6 ($11)
Corporate Costs (150) (6) (156) (227) 37 ($190)
- ----------------------------------------------------------------------------------------------------------------------------------
Ongoing Earnings** $875 $0 $875 $844
- ----------------------------------------------------------------------------------------------------------------------------------
CVO mark-to-market (9)
NCNG Discontinued Operations (8)
Cumulative effect of accounting change (21)
Impairments and one-time charges (24)
- ----------------------------------------------------------------------------------------------------------------------------------
Reported GAAP Earnings $782
- ----------------------------------------------------------------------------------------------------------------------------------
*Excludes tax benefit reallocation from holding company.
**Totals may not foot due to rounding
S-5
Progress Energy, Inc.
Earnings Variances
Total Year 2003 vs 2002
Regulated Utilities
Corporate
Progress and Other
($ per share) Carolinas Florida Ventures Business Consolidated
- -----------------------------------------------------------------------------------------------------------------------
2002 GAAP earnings 2.36 1.49 0.93 (2.35) 2.43
CVOs (0.13) A (0.13)
Florida Retroactive Rate Refund 0.10 B 0.10
Impairment of long lived assets and investments 1.22 C 1.22
NCNG Discontinued Operations 0.11 D 0.11
Ice Storm 0.08 E 0.08
- -----------------------------------------------------------------------------------------------------------------------
2002 ongoing earnings 2.44 1.59 0.93 (1.15) 3.81
- -----------------------------------------------------------------------------------------------------------------------
Weather - retail (0.17) (0.02) (0.19)
Other retail - growth and usage 0.12 0.14 0.26
Wholesale 0.05 (0.05) F 0.00
Rate reduction impact (0.13) G (0.13)
2002 retail revenue sharing resolution (0.05) H (0.05)
2003 retail revenue sharing (0.04) I (0.04)
Other margin 0.07 0.06 J 0.13
O&M - other (0.06) (0.12) K (0.18)
Service Company allocations - prior years 0.04 (0.02) (0.02) L 0.00
Depreciation (0.11) (0.04) M (0.15)
Other 0.01 (0.01) 0.00
Interest charges 0.05 0.04 (0.04) (0.02) N 0.03
Net diversified business 0.36 0.04 O 0.40
Tax benefit reallocation (0.04) (0.03) 0.07 P 0.00
Share dilution (0.20) (0.11) (0.10) 0.08 Q (0.33)
- -----------------------------------------------------------------------------------------------------------------------
2003 ongoing earnings 2.20 1.24 1.13 (1.01) 3.56
- -----------------------------------------------------------------------------------------------------------------------
CVOs (0.04) A (0.04)
NCNG discontinued operations (0.03) D (0.03)
Cumulative Effect of Accounting Changes (0.10) 0.01 R (0.09)
Impairment of long-lived assets and investments (0.03) (0.05) (0.02) S (0.10)
- -----------------------------------------------------------------------------------------------------------------------
2003 GAAP earnings 2.07 1.24 1.08 (1.09) 3.30
- -----------------------------------------------------------------------------------------------------------------------
Corporate and 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 - Impact of change in market value of outstanding CVOs.
B - Impact of $35M ($21M after tax) retroactive rate refund related to
Florida's rate case settlement in 2002.
C - Corporate and Other Businesses - PTC impairment and one-time charges of
$225M after tax and loss on assets held for sale at Railcar, Ltd of $40M
after tax. D- Sale of NCNG to Piedmont Natural Gas which was finalized on
September 30, 2003.
E - O&M impact of December 2002 ice storm.
F - Carolinas - Primarily favorable weather in Northeastern United States
during the first quarter. Florida - expiration of wholesale contracts.
G - Florida - Impact of 9.25% rate reduction effective May 2002.
H - Florida - Resolution of 2002 revenue sharing calculation dispute in June
2003 ($18M pre-tax).
I - Florida - 2003 YTD revenue sharing.
J - Carolinas - Primarily favorable non-recoverable purchased power. Florida -
Primarily wheeling and miscellaneous service charges.
K - Carolinas - Primarily increased benefit-related expenses. Florida -
Primarily increased pension costs of $26M pre-tax and increased
benefit-related expenses.
L - Retroactive reallocation of Service Company costs in accordance with a 2002
SEC PUHCA audit.
M - Carolinas - Higher depreciation due to more assets placed in service and
impact of Clean Air Amortization in 2003 vs. nuclear accelerated
depreciation in 2002. Florida - Higher depreciation due to more assets
placed in service.
N - Carolinas - Primarily lower average interest rate. Florida - Primarily the
reversal of interest expense accrued for resolved tax matter. Progress
Ventures and Corporate and Other - Interest capitalized in 2002 related to
construction at nonregulated generation plants.
O - Progress Ventures - CCO margin is favorable $0.02 due primarily to higher
margins partially offset by higher depreciation expense. Synfuels is
favorable $0.23 due to higher sales, improved margins and a higher tax
credit per ton. Synfuels was also favorable $0.01 due to 2003 including
thirteen months of operations for some facilities. Fuels is favorable $0.12
due to favorable gas operations (Westchester and North Texas Gas).
Corporate and Other Businesses - Favorable depreciation at Telecom.
P - Allocation of tax favorability from Holding Company to profitable
subsidiaries.
Q - Progress Ventures - Primarily due to the impact of the purchase of
Westchester Gas in April 2002 (2.5M shares), issuance in November 2002
(14.7M shares) and issuances under Investor Plus and Employee Benefit
programs in 2002 and 2003.
R - Carolinas - Impact of mark to market adjustment on Broad River purchase
power contract.
S - Carolinas and Corporate and Other Businesses - Primarily due to impact of
impairment of Affordable Housing investments. Progress Ventures -
Impairment of assets at Kentucky May coal mine.
S-6
Progress Energy, Inc.
Earnings Variances
Fourth Quarter 2003 vs 2002
Regulated Utilities
Corporate
Progress and Other
($ per share) Carolinas Florida Ventures Business Consolidated
- -----------------------------------------------------------------------------------------------------------------------
2002 GAAP earnings 0.52 0.29 0.14 (0.40) 0.55
Intra-period tax allocation (0.18) A (0.18)
CVOs (0.03) B (0.03)
Impairment of long-lived assets and investments 0.18 C 0.18
NCNG discontinued operations 0.11 D 0.11
Ice Storm 0.08 E 0.08
- -----------------------------------------------------------------------------------------------------------------------
2002 ongoing earnings 0.60 0.29 0.14 (0.32) 0.71
- -----------------------------------------------------------------------------------------------------------------------
Weather - retail (0.06) (0.04) (0.10)
Other retail - growth and usage 0.05 0.06 0.11
Wholesale (0.01) (0.01) (0.02)
2003 retail revenue sharing (0.02) F (0.02)
Other margin 0.01 0.04 G 0.05
O&M 0.01 (0.07) H (0.06)
O&M Storm Cost Deferral 0.06 I 0.06
Depreciation (0.07) J (0.07)
Other 0.03 (0.01) (0.01) 0.01 0.02
Interest charges (0.01) (0.01) (0.02) K (0.04)
Net diversified business 0.24 (0.01) L 0.23
Tax benefit reallocation (0.02) 0.02 M 0.00
Share dilution (0.04) (0.01) (0.02) 0.02 N (0.05)
- -----------------------------------------------------------------------------------------------------------------------
2003 ongoing earnings 0.58 0.20 0.34 (0.30) 0.82
- -----------------------------------------------------------------------------------------------------------------------
Intra-period tax allocation (0.18) A (0.18)
CVOs (0.02) B (0.02)
NCNG discontinued operations (0.01) D (0.01)
Cumulative Effect of Accounting Changes (0.10) 0.01 O (0.09)
Impairments (0.03) (0.05) (0.02) P (0.10)
- -----------------------------------------------------------------------------------------------------------------------
2003 GAAP earnings 0.45 0.20 0.29 (0.52) 0.42
- -----------------------------------------------------------------------------------------------------------------------
Corporate and 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 - Loss on assets held for sale at Railcar Ltd.
D - Sale of NCNG to Piedmont Natural Gas which was finalized on September 30,
2003.
E - O&M impact of December 2002 ice storm.
F - Florida - 2003 revenue sharing accrual.
G - Florida - Primarily wheeling and other service charges.
H- Florida - Primarily increased pension costs of $7M pre-tax and increased
benefit-related costs.
I - Carolinas - Deferral of costs related to February ice storms and
Hurricane Isabel as permitted by the NCUC.
J - Carolinas - Higher depreciation due to more assets placed in service and
the impact of Clean Air amortization in 2003 vs. nuclear accelerated
depreciation in 2002.
K - Progress Ventures and Corporate and Other Businesses - Interest capitalized
in 2002 related to construction at nonregulated generation plants.
L - Progress Ventures - CCO margin is unfavorable $0.01 due primarily to higher
margins offset by higher depreciation expense. Synfuels is favorable $0.23
due to higher sales, improved margins and higher tax credit per ton.
Synfuels was also favorable $0.04 due to 2003 including four months of
operations for some facilities. Fuels is favorable $0.01 due to favorable
gas operations (Westchester and North Texas Gas).
M - Allocation of tax favorability from Holding Company to profitable
subsidiaries.
N - Primarily due to the impact of the issuance in November 2002 (14.7M shares)
and issuances under Investor Plus and Employee Benefit programs.
O - Carolinas - Impact of mark to market adjustment on Broad River purchase
power contract.
P - Carolinas and Corporate and Other Businesses - Primarily due to impact of
impairment of Affordable Housing investments.
S-7