Progress Energy Announces Fourth Quarter and Year-end Results
Highlights:
o Reports 2004 ongoing earnings of $3.06 per share, GAAP earnings of
$3.13 per share
o Reports fourth quarter ongoing earnings of $0.62 per
share, GAAP earnings of $0.80 per share
o Sets 2005 ongoing earnings guidance of $2.90 to $3.20 per share
o Main 2005 earnings drivers include favorable customer growth and usage
and increased synthetic fuel sales, offset by decreased earnings from
divested assets and higher O&M costs
RALEIGH, N.C. (March 3, 2005) - Progress Energy [NYSE: PGN] today reported
ongoing earnings of $741 million, or $3.06 per share, for 2004 compared with
ongoing earnings of $844 million, or $3.56 per share, for 2003. Reported
consolidated net income under generally accepted accounting principles (GAAP)
was $759 million, or $3.13 per share, for 2004 compared with reported
consolidated net income of $782 million, or $3.30 per share, for 2003. See the
table on the following page for a reconciliation of ongoing earnings per share
to GAAP earnings per share.
"Our core businesses had a strong year. Operational excellence, revenue growth
and cost-management initiatives ensured our core businesses all performed well -
despite enduring four hurricanes that struck our service territory," said Bob
McGehee, chairman and CEO. "The only downside to the year was our synthetic fuel
business, which was under budget due to the impacts of the hurricanes on our
taxable income.
"We ended the year in the upper range of our revised earnings guidance, and I am
especially proud of how well our company performed in 2004," said McGehee.
Ongoing earnings per share were negatively impacted by a decrease in synthetic
fuel sales as a result of hurricane costs that reduced the company's projected
2004 regular tax liability, lower wholesale sales in the Carolinas, an increase
in O&M expenses in the Carolinas primarily due to storm restoration efforts and
nuclear outages, reduced Competitive Commercial Operations earnings due
primarily to higher fixed costs, increased utility depreciation and amortization
and dilution from 2004 common stock issuance. Significant positive earnings
drivers for the year were utility customer growth and usage, the additional
return on the investment in the Hines 2 plant in Florida, favorable weather in
the Carolinas, increased Progress Rail earnings and lower retail revenue sharing
in Florida.
The following table provides a reconciliation of ongoing earnings per share to
reported GAAP earnings per share. A detailed discussion is provided later in
this release under the caption "Ongoing Earnings Adjustments."
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Progress Energy, Inc.
Reconciliation of Ongoing Earnings per Share to Reported GAAP Earnings per Share
Dec. 31, 2004
- --------------------------------------------------------------------------------------------------
Q4 2004 As Restated 2004 2003
Q4 2003*
- --------------------------------------------------------------------------------------------------
Ongoing earnings per share $0.62 $0.76 $3.06 $3.56
Intraperiod tax allocation 0.02 (0.18) -- --
CVO mark-to-market 0.01 (0.02) 0.04 (0.04)
NCNG discontinued operations 0.02 (0.01) 0.02 (0.03)
Cumulative effect of accounting changes -- (0.09) -- (0.09)
Impairments and one-time charges -- (0.10) -- (0.10)
SRS litigation settlement -- -- (0.12) --
Gain on sale of gas assets 0.13 -- 0.13 --
----- ----- ----- ------
Reported GAAP earnings per share $0.80 $0.36 $3.13 $3.30
===== ===== ===== =====
Average shares outstanding (millions) 243 240 242 237
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* Beginning in the fourth quarter of 2003, Progress Energy ceased recording
portions of Progress Fuels' segment operations, primarily synthetic fuel
facilities, one month in arrears. Progress Energy has restated previously
reported consolidated quarterly earnings to reflect the new reporting periods.
The change in Progress Energy's fourth quarter 2003 net income was a decrease of
$14 million and the change for 2003 was an increase of $2 million. The reported
fourth quarter 2003 and year-end 2003 earnings for Progress Ventures and
Progress Fuels included in this release reflect this restatement. See additional
information on this restatement in the Supplemental Data schedules of this
release.
2005 EARNINGS GUIDANCE
Progress Energy expects to generate earnings of $710 million to $780 million in
2005 and is targeting an earnings range of $2.90 to $3.20 per share. Of this,
the company expects the core businesses - the two utilities and Progress
Ventures, excluding synthetic fuels - to generate earnings of $2.50 to $2.60 per
share and the synthetic fuels business to generate earnings of $0.40 to $0.60
per share.
The earnings from the regulated utilities and Progress Ventures, excluding
synthetic fuels, are projected to be favorable year-over-year primarily due to
the following drivers: customer growth and usage, lower depreciation and
amortization at the utilities, and lower interest expense at Progress Ventures.
These drivers will be partially offset by higher O&M costs, lower natural gas
production and lower margins from nonregulated generation.
Earnings from synthetic fuels are projected to be favorable year-over-year,
primarily due to a return to more normal production levels. The company expects
lower earnings from other diversified businesses associated with the announced
sale of Progress Rail in the first quarter 2005. Also, dilution from common
stock issuance will negatively impact earnings by approximately $0.04 per share.
2
SIGNIFICANT DEVELOPMENTS
Progress Energy Announces Sale of Rail Services Subsidiary
On Feb. 18, 2005, Progress Energy signed a definitive agreement to sell its
subsidiary, Progress Rail Services Corp. (Progress Rail), to subsidiaries of One
Equity Partners LLC, a private equity unit of J.P. Morgan Chase & Co. The sale
price will be $405 million, and the transaction is expected to close within 90
days. Proceeds from the sale will be used to reduce debt. As a result of this
transaction, the company anticipates that earnings will be negatively impacted
by approximately 19 cents per share in 2005 and approximately 12 cents per share
in subsequent years. 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=11262.
Moody's Lowers Progress Energy Florida's Credit Rating; Reaffirms Outlook for
Progress Energy and Progress Energy Carolinas
On Feb. 11, 2005, Moody's Investors Service (Moody's) credit rating agency
announced that it lowered the ratings of Progress Energy Florida (senior
unsecured to A3 from A2), Progress Capital Holdings and FPC Capital Trust I and
changed their rating outlooks to stable from negative. Moody's affirmed the
ratings of Progress Energy and Progress Energy Carolinas. The rating outlooks
continue to be stable at Progress Energy Carolinas and negative at Progress
Energy. Moody's stated that it took this action primarily due to declining
credit metrics, higher O&M costs, uncertainty regarding the timing of hurricane
cost recovery, regulatory risks associated with the upcoming rate case in
Florida and ongoing capital requirements to meet Florida's growing demand.
Crystal River Nuclear Plant Sets New Generation Record
On Jan. 27, 2005, Progress Energy announced that Progress Energy Florida's
Crystal River Nuclear Plant set a new record for electric generation for the
fourth straight year. During 2004, the plant generated over 7.303 billion kWh,
enough to supply the annual electric needs of over 425,000 typical Florida
homes. The previous high generation was in 2002, when the plant generated 7.300
billion kWh. In addition to establishing a new plant record for generation, the
plant also set a new record for radiation protection of workers, with the lowest
total exposure to radiation ever in the history of the plant, and one of the
three lowest ever for a U.S. commercial nuclear power plant. 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=11122.
Progress Energy Announces the Departure of Tom Kilgore, Group President of
Progress Ventures
On Jan. 25, 2005, Progress Energy announced that Tom Kilgore, group president of
Progress Ventures, will be leaving the company Feb. 28, 2005, to become
president and chief operating officer of the Tennessee Valley Authority (TVA),
the country's largest public power company. Bob McGehee announced that the
Progress Ventures organization will report to Don Davis, executive vice
president of Diversified Operations beginning March 1.
3
Progress Energy Carolinas Sets New Peak
On Jan. 24, 2005, Progress Energy Carolinas set a new record with 12,011 MWh
peak demand, eclipsing the old record of 11,977 MWh set on July 30, 2002. The
previous winter peak had been 11,629 MWh set on Jan. 24, 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=11103.
Progress Energy Florida Storm Costs Recovery
As of Dec. 31, 2004, restoration of Progress Energy Florida's system from
hurricane-related damage was estimated at $385 million (up from the original
$366 million estimate). Hearings on Progress Energy Florida's petition for
recovery of $252 million filed with the Florida Public Service Commission (FPSC)
are scheduled to begin on March 30, 2005.
Progress Energy Announces Early Retirement Program and Streamlined Organization
Structure
On Dec. 8, 2004, Progress Energy's board of directors approved an
early-retirement program to be offered to its employees in early 2005. Bob
McGehee also named a new streamlined leadership team that includes 12 fewer
senior management positions, an 18 percent reduction. These announcements are
the first major milestones in the company's cost-management initiative announced
on Oct. 12, 2004. 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=10863.
Progress Energy Increases Dividend for 17th Straight Year
On Dec. 8, 2004, Progress Energy's board of directors voted to increase the
dividend on the company's common stock. Progress Energy has increased the
dividend for 17 straight years. The increase represents a total annual dividend
of $2.36 per share, an increase of $0.06 over the 2004 dividend. 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=10862.
Progress Energy Sells Portion of Natural Gas Assets
On Nov. 23, 2004, Progress Fuels Corp., a wholly owned subsidiary of Progress
Energy, announced that it entered into an agreement to sell certain oil and gas
interests and related assets in the Fort Worth basin of Texas for a sale price
of $255 million in cash. The sale was completed on Dec. 17, 2004, and proceeds
were used to reduce debt. 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=10823.
Standard & Poor's Lowers Short-Term Debt Ratings
On Oct. 25, 2004, Standard & Poor's (S&P) credit rating agency announced that it
lowered the short-term debt ratings to A-3 from A-2 of Progress Energy, Progress
Energy Carolinas and Progress Energy Florida. S&P stated that it took this
action as a result of its outlook revision announced in Oct.
4
LINE OF BUSINESS FINANCIAL INFORMATION
Progress Energy Carolinas
Progress Energy Carolinas electric energy operations contributed GAAP net income
of $464 million for the year compared with $492 million for 2003. This year's
earnings were negatively affected by lower wholesale sales to other utilities
resulting from decreased off-system sales and margins and higher O&M costs
primarily due to storm restoration efforts and an increase in the number and
scope of nuclear plant outages. Additionally, O&M results in the prior year
included a favorable retroactive reallocation of service company costs of $10
million after tax. These factors were partially offset by increased revenues
from customer growth and usage from the addition of approximately 26,000 new
customers and favorable weather. Additionally, results in the prior year
included a one-time cumulative effect of accounting change, an impairment
primarily related to its Affordable Housing portfolio and losses on limited
partnership investment funds.
Progress Energy Carolinas incurred $18 million pre-tax of O&M storm costs in
2004, but did not seek deferral of these costs from the North Carolina Utilities
Commission. During the fourth quarter 2003, $24 million pre-tax of O&M storm
costs were deferred.
During 2004, Progress Energy Carolinas filed two depreciation studies with the
North Carolina and South Carolina commissions that allowed the utility to reduce
the rates used to calculate depreciation expense. The reduction in depreciation
expense of $82 million pre-tax is primarily attributable to extended lives at
each nuclear unit. In addition, the company recorded $174 million pre-tax of
Clean Air amortization recorded this year compared to $74 million pre-tax
recorded in 2003.
In 2003, the Financial Accounting Standards Board (FASB) issued 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 2003. This adjustment was reported as a
cumulative effect of accounting change.
Also during the fourth quarter 2003, Progress Energy recorded a total impairment
of $13 million after-tax primarily related to its Affordable Housing portfolio,
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,
weather impacts and the retroactive service company reallocation in 2003.
5
Progress Energy Florida
Progress Energy Florida electric energy operations contributed GAAP net income
of $333 million for the year compared with $295 million for 2003. This year's
earnings were positively affected by the additional return on the investment in
the Hines 2 plant that was placed into service in Dec. 2003, lower O&M costs
primarily due to a decrease in pension expense, lower retail revenue sharing,
customer growth from the addition of approximately 37,000 new customers and
higher wholesale sales to other utilities. These factors were partially offset
by higher interest costs, increased depreciation and amortization, lower
revenues as a result of hurricane-related customer outages and unfavorable
weather. In 2003, interest costs were favorably impacted by the reversal of
interest expense accrued for resolved tax matters.
In 2004, Progress Energy Florida recorded a $9 million pre-tax accrual for 2004
revenue sharing and an additional $2 million pre-tax true-up for the
finalization of 2003 revenue sharing. In 2003, Progress Energy Florida recorded
a $17 million pre-tax accrual for 2003 revenue sharing and provided an
additional refund of $18 million pre-tax related to 2002 revenue sharing.
See the attached Supplemental Data schedules for additional information on
Progress Energy Florida electric revenues, energy sales, energy supply and
weather impacts and the retroactive service company reallocation in 2003.
Progress Ventures
The Progress Ventures operations consist of Progress Fuels, which includes
natural gas production, coal mining, coal terminal services, synthetic fuels
production and fuels transportation and delivery, and Competitive Commercial
Operations, which includes nonregulated generation and energy marketing
activities. The Progress Ventures business unit had GAAP net income of $176
million for the year compared with $255 million for 2003.
Progress Fuels generated GAAP net income of $180 million for the year compared
with $235 million for 2003. The decrease was primarily due to lower synthetic
fuel sales. These results were partially offset by a $31 million after-tax gain
on the sale of certain natural gas assets in 2004, increased gas prices and
volumes and increased coal margins. Results in the prior year were negatively
impacted by an asset impairment during the fourth quarter 2003 of $11 million
after-tax at the Kentucky May Coal Company and the retroactive reallocation of
service company costs of $4 million after-tax. Within Progress Fuels, synthetic
fuels operations generated GAAP net income of $91 million for the year compared
with $205 million for 2003. The decrease in earnings resulted primarily from
lower synthetic fuel sales and an increase in operating expenses in 2004. The
impact of storm costs from Hurricanes Charley, Frances, Ivan and Jeanne
substantially reduced the company's projected 2004 tax liability. The reduction
in income tax liability led to a decrease in synthetic fuel production because
of the company's diminished ability to recognize corresponding Section 29 tax
credits. In addition, earnings in the prior year include a $13 million favorable
tax credit true-up related to 2002. Total synthetic fuel sales were 8.3 million
tons for the year compared with 12.4 million tons for 2003.
At Sept. 30, 2004, the company had anticipated an ability to use tax credits
associated with approximately 5 million tons of synthetic fuel production based
on its projected regular tax liability for 2004. This estimate was based upon a
projected casualty loss as a result of the Florida storms. Therefore, the
company recorded a charge in the third quarter of $79 million for tax credits
associated with approximately 2.7 million tons sold during the year that will
not be used.
6
Based on a reasonable expectation at year-end that Progress Energy Florida will
be granted the requested recovery of its storm costs, the casualty loss is less
than originally estimated. As of Dec. 31, 2004, the company anticipates an
ability to use tax credits associated with approximately 8 million tons of
synthetic fuel production based on the company's latest regular tax liability
projection for 2004. Therefore, the company recorded $90 million in the fourth
quarter 2004 for tax credits associated with approximately 3 million tons sold
during the year that can be used. As of Dec. 31, 2004, the company estimates
approximately $7 million of tax credits associated with approximately 0.2
million tons sold during the year could not be used.
Competitive Commercial Operations contributed a GAAP net loss of $4 million for
the year compared with GAAP net income of $20 million for 2003. The decrease was
due to losses of $9 million after-tax associated with the early redemption of a
$241 million financing facility, higher fixed charges on plants placed into
service in 2003 and interest no longer capitalized due to the completion of
plant construction in 2003. Also, results in 2003 include a contract termination
payment received on a tolling agreement. These factors were partially offset by
increased margins from serving new and existing contracts and an increase in
power sales in the spot market driven by favorable weather and the addition of
new plants. Results in the prior year were negatively impacted by the
retroactive reallocation of service company costs of $2 million after-tax.
Details on the retroactive service company reallocation recorded in the prior
year are included in the Supplemental Data schedules of this release.
Other Businesses
Other businesses include Progress Rail, Progress Telecom and other small
subsidiaries. Other businesses had a GAAP net loss of $22 million for the year
compared with a GAAP net loss of $24 million for 2003. This year's results were
negatively impacted by a $29 million after-tax charge recorded by SRS related to
a civil litigation settlement. This item was partially offset by strong sales in
the recycling operations at Progress Rail. During the fourth quarter 2003,
Progress Energy recorded a total impairment of $13 million after-tax primarily
related to its Affordable Housing portfolio, of which $6 million was recorded in
Other Business results and $7 million was recorded in Progress Energy Carolinas
results.
Progress Rail
Progress Rail had GAAP net income of $16 million for the year
compared with a GAAP net loss of $1 million for 2003. The
increase was primarily due to higher volumes and prices in
recycling operations and in part to increased production and
sales in locomotive and railcar services and engineering and
track services. In addition, results in the prior year were
negatively impacted by the retroactive reallocation of service
company costs of $3 million after-tax. Details on the retroactive
service company reallocation recorded in the prior year are
included in the Supplemental Data schedules of this release.
7
Progress Telecom
Progress Telecom recorded a GAAP net loss of $5 million for the
year compared with GAAP net income of $2 million for 2003. The
decrease resulted primarily from higher depreciation expense and
professional fees as a result of the merger with EPIK
Communications. Results in the prior year were favorably impacted
by the retroactive reallocation of service company costs of $1
million after-tax. Details on the retroactive service company
reallocation recorded in the prior year are included in the
Supplemental Data schedules of this release.
Corporate
Corporate results, which primarily include interest expense on holding company
debt, incurred an ongoing operating loss of $207 million for the year compared
with an ongoing operating loss of $219 million for 2003.
Progress Energy issued approximately 1.8 million shares of common stock in 2004
through the Investor Plus and employee benefit and options plans for proceeds of
approximately $80 million.
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 as they relate to the current quarter and
year, and information included in the Supplemental Data schedules 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 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 increased earnings
per share by $0.02 for the fourth quarter 2004, and decreased earnings per share
by $0.18 for the fourth quarter 2003, 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.
8
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 Oct. 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 increased
earnings per share by $0.01 for the fourth quarter and $0.04 for 2004. In 2003,
the CVO mark-to-market decreased earnings per share by $0.02 for the fourth
quarter and $0.04 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.
Gain on Sale of Natural Gas Assets
In Dec. 2004, the company finalized the sale of certain gas-producing properties
and related assets and recognized a gain of $56 million pre-tax ($31 million
after-tax) in earnings. Management does not believe this gain is representative
of the ongoing operations of the company.
NCNG Discontinued Operations
The sale of NCNG to Piedmont Natural Gas closed on Sept. 30, 2003, and the net
proceeds were used to pay down debt. Due to this sale, management does not
believe this activity is representative of the ongoing operations of the
company. Therefore, the operations of NCNG are reported as discontinued
operations in the accompanying financial statements. NCNG had discontinued
earnings of $6 million after-tax in 2004 from a reduction to the loss on the
sale related to deferred taxes and a discontinued loss of $8 million after-tax
in 2003.
SRS Litigation Settlement
In June 2004, SRS, a subsidiary of the company, reached a settlement agreement
in a civil suit with the San Francisco Unified School District. As a result, the
company recorded a charge of approximately $29 million after-tax in the second
quarter of 2004. Management does not believe this settlement charge is
indicative of ongoing operations of the company.
Cumulative Effect of Accounting Changes
In 2003, Progress Energy recorded the cumulative effect of changes in accounting
principles due to the adoption of 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 this adjustment,
management believes it is not representative of the 2003 ongoing operations of
Progress Energy.
9
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. Management does not believe these impairments and one-time charges are
representative of the ongoing operations of the company.
* * * *
This earnings announcement, along with detailed financial information and
presentation materials are available on the company's Web site at
www.progress-energy.com.
Investors, media and the public are invited to listen to the live audio webcast
of the year-end earnings results and 2005 financial forecast presentation. The
presentation will begin at 8 a.m. ET (5 a.m. PT), conclude around 10 a.m. ET (7
a.m. PT) and will be webcast to the general public. The webcast will be
available in Windows Media format and will be archived on the site for those
unable to listen in real time.
Audio from the meeting will be available by dialing (913) 981-5510 and entering
confirmation code 1042833. Should you encounter problems, please contact Shannon
Lockamy at (919) 546-7185.
A replay of the call will be available from 1 p.m. March 3, 2005, through
midnight March 17, 2005, by calling (719) 457-0820 and entering replay passcode
1042833.
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 approximately 2.9 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 or outcomes
to differ materially from those expressed in the forward-looking statements. Any
forward-looking statement is based on information current as of the date of this
report and speaks only as of the date such statement is made, and we undertake
no obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made. 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; deregulation or restructuring in the electric
industry that may result in increased competition and unrecovered (stranded)
costs; our ability to implement our cost management initiatives as planned; the
uncertainty regarding the timing, creation and structure of regional
transmission organizations; weather conditions that directly influence the
demand for electricity; our ability to recover through the regulatory process,
and the timing of such recovery of, the costs associated with the four
10
hurricanes that impacted our service territory in 2004 or other future
significant weather events; recurring seasonal fluctuations in demand for
electricity; fluctuations in the price of energy commodities and purchased
power; economic fluctuations and the corresponding impact on the company and its
subsidiaries' commercial and industrial customers; the ability of our
subsidiaries to pay upstream dividends or distributions to us; the impact on the
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 on our financial condition and
ability to meet our cash and other financial obligations in the event our credit
ratings are downgraded below investment grade; the impact that increases in
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;
investment performance of pension and benefit plans; our ability to control
costs, including pension and benefit expense, and achieve its cost management
targets for 2007; the availability and use of Internal Revenue Code Section 29
(Section 29) tax credits by synthetic fuel producers and our continued ability
to use Section 29 tax credits related to its coal and synthetic fuel businesses;
the impact to our financial condition and performance in the event it is
determined we are not entitled to previously taken Section 29 tax credits; the
impact of future accounting pronouncements regarding uncertain tax positions;
the outcome of Progress Energy Florida's rate proceeding in 2005 regarding its
future base rates; our ability to manage the risks involved with the operation
of its 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 its energy marketing operations; the outcome of any
ongoing or future litigation or similar disputes and the impact of any such
outcome or related settlements; 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 filings with
the SEC. 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. New factors emerge from time to time, and it is not
possible for management to predict all such factors or to assess the effect each
such factor will have on us.
# # #
Contacts:
Investor Relations, Bob Drennan, 919-546-7474
Corporate Communications, Garrick Francis, 919-546-6189, or
toll-free 877-641-NEWS (6397)
11
Progress Energy, Inc.
Earnings Variances
Fourth Quarter 2004 vs. 2003
Regulated Utilities
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Corporate and
Other
($ per share) Carolinas Florida Fuels CCO Businesses Consolidated
- -------------------------------------------------------------------------------------------------------------------------
2003 GAAP earnings 0.45 0.20 0.25 (0.02) (0.52) 0.36
Intra-period tax allocation 0.18 A 0.18
CVO mark-to-market 0.02 B 0.02
NCNG discontinued operations 0.01 C 0.01
Cumulative effect of accounting change 0.10 (0.01) D 0.09
Impairment of long-lived assets and investments 0.03 0.05 0.02 E 0.10
- -------------------------------------------------------------------------------------------------------------------------
2003 ongoing earnings 0.58 0.20 0.30 (0.02) (0.30) 0.76
- -------------------------------------------------------------------------------------------------------------------------
Weather - retail - - -
Other retail - growth and usage 0.03 0.03 0.06
Wholesale (0.04) F (0.04)
Retail revenue sharing - 0.01 0.01
Other margin (0.01) - (0.01)
O&M (0.16) 0.01 G (0.15)
Utility depreciation and amortization (0.08) (0.01) - - - H (0.09)
Other (0.02) 0.02 - - - I -
Interest charges 0.01 (0.01) - - 0.02 J 0.02
Net diversified business - - 0.03 (0.04) 0.07 K, L, M 0.06
Share dilution - - - - - -
- -------------------------------------------------------------------------------------------------------------------------
2004 ongoing earnings 0.31 0.25 0.33 (0.06) (0.21) 0.62
- -------------------------------------------------------------------------------------------------------------------------
Intra-period tax allocation 0.02 A 0.02
CVO mark-to-market 0.01 B 0.01
NCNG discontinued operations 0.02 C 0.02
Gain on sale of gas assets 0.13 N 0.13
- -------------------------------------------------------------------------------------------------------------------------
2004 GAAP earnings 0.31 0.25 0.46 (0.06) (0.16) 0.80
- -------------------------------------------------------------------------------------------------------------------------
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 - Sale of NCNG to Piedmont Natural Gas which was finalized on September 30,
2003.
D - Carolinas - Impact of mark to market adjustment on Broad River purchase
power contract.
E - Carolinas and Corporate and Other Businesses - Primarily due to impact of
impairment of Affordable Housing investments.
F - Carolinas - Wholesale margins decreased due to weaker power market
conditions, increased fuel prices and lower contracted capacity in the
wholesale market.
G - Carolinas - Higher O&M primarily due to increased business unit spending
as a result of nuclear outages and costs associated with severe storms.
Results for Q4 2003 included the deferral of severe storm costs. Florida -
Lower O&M due to favorable pension costs and the delay of several major
projects due to storm restoration work.
H - Carolinas - Higher amortization due to maximum Clean Air amortization
recorded in 2004, partially offset by reduced depreciation expense due
primarily to lower rates based on depreciation studies filed in 2004.
Florida - Increased depreciation expense due primarily to property
additions, including Hines 2.
I - Carolinas - Increase in other costs is primarily due to higher income
taxes due to a reduction in Affordable Housing tax credits. Florida -
Decrease in other costs is due to reduction in payroll taxes and favorable
property taxes for the quarter.
J - Corporate and Other Businesses - Reduction in interest expense is due to
repayment of $500M of debt at the Holding Company during the first quarter
of 2004.
K - Fuels - The increase is due primarily to the reversal of charge booked in
Q3 2004 to reduce tax credits, partially offset by less production. Charge
was reversed based on reasonable expectation that FPSC would allow recovery
of PEF's storm costs which reduced the loss from the casualty and increased
the Company's projected 2004 federal income tax liability.
L - CCO - The decrease is due primarily to the loss on the early redemption of
a financing facility.
M - Corporate and Other Businesses - Increase is due to a reduction in losses
recorded for various investments and reduction in losses for SRS
operations.
N - Gain on sale of certain North Texas Gas assets in December 2004.
S-1
Progress Energy, Inc.
Earnings Variances
2004 vs. 2003
Regulated Utilities
- -----------------------------------------------------------------------------------------------------------------
Corporate and
Other
($ per share) Carolinas Florida Fuels CCO Businesses Consolidateds
- -----------------------------------------------------------------------------------------------------------------
2003 GAAP earnings 2.07 1.24 0.99 0.08 (1.08) 3.30
CVO mark-to-market 0.04 A 0.04
NCNG discontinued operations 0.03 B 0.03
Cumulative effect of accounting change 0.10 (0.01) C 0.09
Impairment of long-lived assets and investments 0.03 0.05 0.02 D 0.10
- -----------------------------------------------------------------------------------------------------------------
2003 ongoing earnings 2.20 1.24 1.04 0.08 (1.00) 3.56
- -----------------------------------------------------------------------------------------------------------------
Weather - retail 0.09 (0.02) 0.07
Other retail - growth and usage 0.14 0.05 E 0.19
Wholesale (0.21) 0.03 F (0.18)
Retail revenue sharing - 0.06 G 0.06
Other margin 0.02 0.10 H 0.12
O&M (0.18) 0.06 I (0.12)
Service Company reallocation prior years (0.04) - 0.01 0.01 0.02 J 0.00
Utility depreciation and amortization (0.02) (0.05) - - - K (0.07)
Other (0.05) - - - - L (0.05)
Interest charges 0.01 (0.06) - (0.03) 0.03 M,N,O (0.05)
Net diversified business - - (0.43) (0.08) 0.10 P, Q, R (0.41)
Share dilution (0.04) (0.03) (0.01) - 0.02 S (0.06)
- ------------------------------------------------------------------------------------------------------------------
2004 ongoing earnings 1.92 1.38 0.61 (0.02) (0.83) 3.06
- ------------------------------------------------------------------------------------------------------------------
CVO mark-to-market 0.04 A 0.04
NCNG discontinued operations 0.02 B 0.02
SRS Litigation Settlement (0.12) T (0.12)
Gain on sale of gas assets 0.13 U 0.13
- -----------------------------------------------------------------------------------------------------------------
2004 GAAP earnings 1.92 1.38 0.74 (0.02) (0.89) 3.13
- -----------------------------------------------------------------------------------------------------------------
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 - Sale of NCNG to Piedmont Natural Gas which was finalized on September 30,
2003.
C - Carolinas - Impact of mark to market adjustment on Broad River purchase
power contract.
D - Carolinas and Corporate and Other Businesses - Primarily due to impact of
impairment of Affordable Housing investments. Fuels - Impairment of assets
at Kentucky May coal mine.
E - Florida - Growth and usage includes lost revenues from the storms of
$(0.03) per share. Exclusive of the lost revenue, growth and usage for the
year was up $0.08 per share.
F - Carolinas - Wholesale decrease primarily driven by favorable 2003 weather
that led to increased off-system sales. Additionally, 2004 margins were
decreased by weaker power market conditions, increased fuel prices and
lower contracted capacity in the wholesale market. Florida - Wholesale
increase driven by extension of several existing and signing of new
contracts.
G - Florida - Lower revenue sharing due to additional refund for 2002
recorded in 2003.
H - Carolinas - The increase is due to favorability of purchased power costs.
Florida - Primarily return on investment on Hines 2 which was placed in
service in December 2003.
I - Carolinas - Higher O&M primarily due to increased business unit spending
as a result of nuclear outages and costs associated with severe storms.
Florida - Lower O&M due primarily to favorable pension costs based on plan
asset performance, the nuclear outage costs in the prior year, the absence
of planning activities for a nuclear outage, and the delay of several major
projects due to storm restoration work.
J - Reallocation of Service Company costs (retroactive component for 2001 and
2002) in accordance with SEC PUHCA Audit in Q1 2003.
K - Carolinas - Higher amortization due to maximum Clean Air amortization
recorded in 2004, partially offset by reduced depreciation expense due
primarily to lower rates based on depreciation studies filed in 2004.
Florida - Increased depreciation expense due primarily to property
additions, including Hines 2.
L - Carolinas - Increase in other cost is due primarily to an increase in
property taxes and an increase in income taxes due to a reduction in
Affordable Housing tax credits over the prior year.
M - Florida - Interest costs in 2003 were favorably impacted by the reversal
of interest expense accrued for resolved tax matters.
N - CCO - Interest is no longer capitalized related to construction at
nonregulated generation plants due to completion of plants on which
interest was capitalized.
O - Corporate and Other Businesses - Reduction in interest expense is due to
repayment of $500M of debt at the Holding Company during the first quarter
of 2004.
P - Fuels - The decrease resulted primarily from lower synthetic fuel sales
as a result of the reduction in the company's projected 2004 tax liability
from hurricane costs. Reduction was partially offset by favorable gas
earnings due to higher volumes and prices compared to prior year.
Q - CCO - Decrease due to: 1) increased depreciation and amortization charges
and fixed costs as a result of additional plants being placed in service,
2) loss on early redemption of a financing facility and 3) receipt of a
termination payment for a tolling contract received in Q1 2003. These items
were partially offset by favorable margins on several contracts.
R - Corporate and Other Businesses - Increase primarily due to increased
profitability from the Rail business due to favorable recycling margins.
S - Due to the impact of issuances under Investor Plus and Employee Benefit
programs.
T - Impact of SRS settlement reached in civil proceedings.
U - Gain on sale of certain North Texas Gas assets in December 2004.
S-2
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended Three Months Ended Percentage Change
December 31, 2004 December 31, 2003 From December 31, 2003
- -------------------------------------------------------------------------------------------------------------------------
Total Total
Progress Progress
Utility Statistics Carolinas Florida Energy Carolinas Florida Energy Carolinas Florida
- -------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions)
Retail
Residential $283 $429 $712 $269 $391 $660 5.2 % 9.7 %
Commercial 211 216 427 201 183 384 5.0 18.0
Industrial 163 62 225 154 58 212 5.8 56.9
Other retail 20 55 75 19 47 66 5.3 17.0
Provision for retail revenue
sharing --2004 - (8) (8) - (11) (11) (27.3)
- -------------------------------------------------------------------------------------------------------------------------
Total Retail $677 $754 $1,431 $643 $668 $1,311 5.3 12.9
Unbilled 19 (6) 13 26 (4) 22
Wholesale 135 68 203 149 54 203 (9.4) 25.9
Miscellaneous revenue 21 36 57 20 34 54 5.0 5.9
- -------------------------------------------------------------------------------------------------------------------------
Total Electric $852 $852 $1,704 $838 $752 $1,590 1.7 % 13.3 %
- -------------------------------------------------------------------------------------------------------------------------
Energy Sales (millions of kWh)
Retail
Residential 3,332 4,570 7,902 3,220 4,433 7,653 3.5 % 3.1 %
Commercial 3,037 2,968 6,005 2,941 2,826 5,767 3.3 5.0
Industrial 3,213 981 4,194 3,132 1,049 4,181 2.6 (6.5)
Other retail 335 803 1,138 327 771 1,098 2.4 4.2
- -------------------------------------------------------------------------------------------------------------------------
Total Retail 9,917 9,322 19,239 9,620 9,079 18,699 3.1 2.7
- -------------------------------------------------------------------------------------------------------------------------
Unbilled 371 (151) 220 505 (208) 297
Wholesale 3,074 1,292 4,366 3,648 1,151 4,799 (15.7) 12.3
- -------------------------------------------------------------------------------------------------------------------------
Total Electric 13,362 10,463 23,825 13,773 10,022 23,795 (3.0) % 4.4 %
- -------------------------------------------------------------------------------------------------------------------------
Energy Supply (millions of kWh)
Generated - steam 6,468 5,212 11,680 6,428 5,672 12,100
nuclear 6,002 1,731 7,733 6,534 1,026 7,560
hydro 239 - 239 177 - 177
combustion turbines/
combined cycle 213 1,552 1,765 70 1,570 1,640
Purchased 1,022 2,345 3,367 859 2,232 3,091
- -------------------------------------------------------------------------------------------------------------------------
Total Energy Supply 13,944 10,840 24,784 14,068 10,500 24,568
(Company Share)
- -------------------------------------------------------------------------------------------------------------------------
Impact of Weather to Normal on
Retail Sales
Heating Degree Days - Actual 1,123 198 1,179 214 (4.7) % (7.5)%
- Normal 1,204 194 1,212 194
Cooling Degree Days - Actual 77 322 47 330 63.8 % (2.4)%
- Normal 62l 321 65 321
Impact of retail weather to normal ($0.02) $0.00 ($0.02) ($0.02) $0.00 ($0.02)
on EPS
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Twelve Months Ended Twelve Months Ended Percentage Change
December 31, 2004 December 31, 2003 From December 31, 2003
- -------------------------------------------------------------------------------------------------------------------------
Total Total
Progress Progress
Utility Statistics Carolinas Florida Energy Carolinas Florida Energy Carolinas Florida
- -------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions)
Retail
Residential $1,324 $1,806 $3,130 $1,259 $1,691 $2,950 5.2 % 6.8 %
Commercial 888 853 1,741 850 740 1,590 4.5 15.3
Industrial 659 254 913 636 219 855 3.6 16.0
Other retail 82 211 293 79 181 260 3.8 16.6
Provision for retail revenue
sharing - 2004 - (9) (9) - - - -
Provision for retail revenue
sharing - 2003 - (2) (2) - - - -
Provision for retail revenue
sharing - 2002 - - - - (35) (35) (100.0)
- -------------------------------------------------------------------------------------------------------------------------
Total Retail $2,953 $3,113 $6,066 $2,824 $2,796 $5,620 4.6 11.3
Unbilled 10 7 17 (6) (2) (8)
Wholesale 575 268 843 687 227 914 (16.3) 18.1
Miscellaneous revenue 90 137 227 84 131 215 7.1 4.6
- -------------------------------------------------------------------------------------------------------------------------
Total Electric $3,628 $3,525 $7,153 $3,589 $3,152 $6,741 1.1 % 11.8 %
- -------------------------------------------------------------------------------------------------------------------------
Energy Sales (millions of kWh)
Retail
Residential 16,003 19,347 35,350 15,283 19,429 34,712 4.7 % (0.4)%
Commercial 13,019 11,734 24,753 12,557 11,553 24,110 3.7 1.6
Industrial 13,036 4,069 17,105 12,749 4,000 16,749 2.3 1.7
Other retail 1,431 3,044 4,475 1,408 2,974 4,382 1.6 2.4
- -------------------------------------------------------------------------------------------------------------------------
Total Retail 43,489 38,194 81,683 41,997 37,956 79,953 3.6 0.6
Unbilled 91 358 449 (44) 233 189
Wholesale 13,222 5,101 18,323 15,518 4,323 19,841 (14.8) 18.0
- -------------------------------------------------------------------------------------------------------------------------
Total Electric 56,802 43,653 100,455 57,471 42,512 99,983 (1.2) % 2.7 %
- -------------------------------------------------------------------------------------------------------------------------
Energy Supply (millions of kWh)
Generated - steam 28,632 22,150 50,782 28,522 22,979 51,501
nuclear 23,742 6,703 30,445 24,537 6,039 30,576
hydro 802 - 802 955 - 955
combustion turbines/
combined cycle 1,926 7,769 9,695 1,344 6,475 7,819
Purchased 4,023 9,443 13,466 4,467 9,381 13,848
- -------------------------------------------------------------------------------------------------------------------------
Total Energy Supply 59,125 46,065 105,190 59,825 44,874 104,699
(Company Share)
- -------------------------------------------------------------------------------------------------------------------------
Impact of Weather to Normal on
Retail Sales
Heating Degree Days - Actual 3,187 583 3,225 696 (1.2) % (16.2)%
- Normal 3,113 579 3,122 579
Cooling Degree Days - Actual 1,687 3,643 1,449 3,665 16.4 % (0.6)%
- Normal 1,660 3,792 1,702 3,792
Impact of retail weather to normal $0.02 ($0.02) $0.00 ($0.07) $0.01 ($0.06)
on EPS
- -------------------------------------------------------------------------------------------------------------------------
S-3
- ---------------------------------------------------------------------
Financial Statistics December 31
2004 2003
- ---------------------------------------------------------------------
Return on average common stock equity
(12 months ended) 10.0 % 11.1 %
Book value per common share $31.26 $30.94
Capitalization
Common stock equity 41.7 % 40.5 %
Preferred stock and Minority interest 0.7 0.7
Total debt 57.6 58.8
- ---------------------------------------------------------------------
Total Capitalization 100.0 % 100.0 %
- ---------------------------------------------------------------------
1st Quarter 2003 Earnings Impact of Cumulative Service Company Reallocation
Adjustment
($ in millions)
- -------------------------------------------------------------------------
2001-2002 2001-2002
Retroactive Retroactive
Reallocation Reallocation
Line of Business (pre-tax) (after-tax)
- -------------------------------------------------------------------------
Progress Energy Carolinas $16 $10
Progress Energy Florida 2 1
Progress Fuels (6) (4)
Competitive Commercial Operations (3) (2)
Holding Company (5) (3)
Progress Rail (5) (3)
Progress Telecom 1 1
- -------------------------------------------------------------------------
Total $0 $0
- -------------------------------------------------------------------------
The SEC completed its initial audit of Progress Energy Service Company's cost
allocation process in March 2003. The SEC routinely audits new holding company
systems within the first two years of their formation. As a result of this
audit, the SEC directed the company to change its allocation methodology for
assigning service company costs to Progress Energy's subsidiaries. Upon
completion of the audit, Progress Energy changed its allocation methodology and
recorded reallocation adjustments to reflect this new method. These reallocation
adjustments were recorded in the first quarter of 2003 and include a cumulative
adjustment for years 2001 and 2002. These retroactive reallocation entries had
no impact on consolidated earnings.
S-4
2003 Quarterly Restatement of Subsidiary Reporting Period Change
Beginning in the fourth quarter of 2003, the Company ceased recording portions
of the Progress Fuels' segment operations, primarily synthetic fuel facilities,
one month in arrears. As a result, earnings for the year ended December 31, 2003
included 13 months of these operations, resulting in a net income increase of $2
million for the year. The Company restated previously reported consolidated
quarterly earnings to reflect the new reporting periods, resulting in four
months of earnings in the restated first quarter 2003 net income. The resulting
impact for each quarter is outlined in the tables below.
2003
-----------------------------------------------
Q1 Q2 Q3 Q4 Total
- -----------------------------------------------------------------------------------------------
Published Quarterly Ongoing earnings $184 $157 $306 $197 $844
Adjustment for Subsidiary Reporting Period Change 11 4 (1) (14) -
- -----------------------------------------------------------------------------------------------
Restated Quarterly Ongoing earnings $195 $161 $305 $183 $844
2003
-----------------------------------------------
Q1 Q2 Q3 Q4 Total
- -----------------------------------------------------------------------------------------------
Reported Quarterly GAAP net income $208 $153 $319 $102 $782
Adjustment for Subsidiary Reporting Period Change 11 4 (1) (14) -
- -----------------------------------------------------------------------------------------------
Restated Reported Quarterly GAAP Net Income $219 $157 $318 $88 $782
Reconciliation of Restated Quarterly Ongoing earnings to Restated Quarterly
Reported GAAP net income:
2003
-----------------------------------------------
Q1 Q2 Q3 Q4 Total
- -----------------------------------------------------------------------------------------------
Ongoing Earnings $195 $161 $305 $183 $844
CVO mark-to-market* 2 (2) (5) (4) (9)
NCNG discontinued operations* 11 3 (18) (4) (8)
Cumulative effect of accounting changes* 1 - - (22) (21)
Impairments and one-time charges* - - - (24) (24)
Intraperiod tax allocation* 10 (5) 36 (41) -
- -----------------------------------------------------------------------------------------------
Reported GAAP net income $219 $157 $318 $88 $782
* See explanation for ongoing earnings adjustments under the caption "Ongoing
Earnings Adjustments" in the text of the press release.
S-5
PROGRESS ENERGY, INC.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS -
December 31, 2004
UNAUDITED CONSOLIDATED STATEMENTS of INCOME
Three Months Ended Year Ended
December 31 December 31
- ----------------------------------------------------------------------------------------------------------
(in millions except per share data) 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------
Operating Revenues
Electric $ 1,704 $ 1,590 $ 7,153 $ 6,741
Diversified business 654 457 2,619 2,000
- ----------------------------------------------------------------------------------------------------------
Total Operating Revenues 2,358 2,047 9,772 8,741
- ----------------------------------------------------------------------------------------------------------
Operating Expenses
Utility
Fuel used in electric generation 494 401 2,011 1,695
Purchased power 197 195 868 862
Operation and maintenance 415 353 1,475 1,421
Depreciation and amortization 256 219 878 883
Taxes other than on income 97 101 425 405
Diversified business
Cost of sales 574 403 2,288 1,748
Depreciation and amortization 47 43 190 157
Impairment of long-lived assets - 17 - 17
(Gain)/loss on the sale of assets (56) 1 (57) 1
Other 43 66 218 195
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses 2,067 1,799 8,296 7,384
- ----------------------------------------------------------------------------------------------------------
Operating Income 291 248 1,476 1,357
- ----------------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest income 5 3 14 11
Impairment of investments - (21) - (21)
Other, net 5 3 8 (16)
- ----------------------------------------------------------------------------------------------------------
Total Other Income (Expense) 10 (15) 22 (26)
- ----------------------------------------------------------------------------------------------------------
Interest Charges
Net interest charges 167 173 653 635
Allowance for borrowed funds used during construction (1) - (6) (7)
- ----------------------------------------------------------------------------------------------------------
Total Interest Charges, Net 166 173 647 628
- ----------------------------------------------------------------------------------------------------------
Income from Continuing Operations before Income Tax, Minority 135 60 851 703
Interest and Cumulative Effect of Changes in Accounting
Principles
Income Tax (Benefit) Expense (43) (56) 115 (111)
- ----------------------------------------------------------------------------------------------------------
Income from Continuing Operations before Minority Interest 178 116 736 814
and cumulative Effect of Changes in Accounting Principles
Minority Interest, Net of Tax (11) 3 (17) 3
- ----------------------------------------------------------------------------------------------------------
Income from Continuing Operations Before Cumulative Effect of 189 113 753 811
Changes in Accounting Principles
Discontinued Operations, Net of Tax 5 (3) 6 (8)
Cumulative Effect of Changes in Accounting Principles, - (22) - (21)
Net of Tax
- ----------------------------------------------------------------------------------------------------------
Net Income $ 194 $ 88 $ 759 $ 782
- ----------------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 243 240 242 237
- ----------------------------------------------------------------------------------------------------------
Basic Earnings per Common Share
Income from Continuing Operations before Cumulative $ 0.78 $ 0.47 $ 3.11 $ 3.42
Effect of Change in Accounting Principle
Discontinued Operations, Net of Tax 0.02 (0.01) 0.02 (0.03)
Cumulative Effect of Changes in Accounting Principles, - (0.09) - (0.09)
Net of Tax
Net Income $ 0.80 $ 0.37 $ 3.13 $ 3.30
- ----------------------------------------------------------------------------------------------------------
Diluted Earnings per Common Share
Income from Continuing Operations before Cumulative $ 0.78 $ 0.47 $ 3.10 $ 3.40
Effect of Change in Accounting Principle
Discontinued Operations, Net of Tax 0.02 (0.01) 0.02 (0.03)
Cumulative Effect of Changes in Accounting Principles, - (0.09) - (0.09)
Net of Tax
Net Income $ 0.80 $ 0.37 $ 3.12 $ 3.28
- ----------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $ 0.590 $ 0.580 $ 2.32 $ 2.26
- ----------------------------------------------------------------------------------------------------------
This financial information should be read in conjunction with the Company's
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 by any securities.
PROGRESS ENERGY, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in millions)
December 31 2004 2003
- ----------------------------------------------------------------------------------------------------------
ASSETS
Utility Plant
Utility plant in service $ 22,103 $ 21,680
Accumulated depreciation (8,438) (8,174)
- ----------------------------------------------------------------------------------------------------------
Utility plant in service, net 13,665 13,506
Held for future use 13 13
Construction work in progress 799 559
Nuclear fuel, net of amortization 231 228
- ----------------------------------------------------------------------------------------------------------
Total Utility Plant, Net 14,708 14,306
- ----------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 100 98
Short-term investments 44 175
Receivables 1,084 1,084
Inventory 982 907
Deferred fuel cost 229 270
Deferred income taxes 121 87
Prepayments and other current assets 175 268
- ----------------------------------------------------------------------------------------------------------
Total Current Assets 2,735 2,889
- ----------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
Regulatory assets 1,064 598
Nuclear decommissioning trust funds 1,044 938
Diversified business property, net 2,010 2,095
Miscellaneous other property and investments 446 464
Goodwill 3,719 3,726
Prepaid pension costs 42 462
Intangibles, net 337 357
Other assets and deferred debits 233 258
- ----------------------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 8,895 8,898
- ----------------------------------------------------------------------------------------------------------
Total Assets $ 26,338 $ 26,093
- ----------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Common Stock Equity
Common stock without par value, 500 million shares authorized,
247 and 246 million shares issued and outstanding, respectively $ 5,360 $ 5,270
Unearned restricted shares (1 and 1 million shares, respectively) (13) (17)
Unearned ESOP shares (3 and 5 million shares, respectively) (76) (89)
Accumulated other comprehensive loss (164) (50)
Retained earnings 2,526 2,330
- ----------------------------------------------------------------------------------------------------------
Total Common Stock Equity 7,633 7,444
- ----------------------------------------------------------------------------------------------------------
Preferred Stock of Subsidiaries-Not Subject to Mandatory Redemption 93 93
Minority Interest 36 30
Long-Term Debt, Affiliate 270 270
Long-Term Debt, Net 9,251 9,664
- ----------------------------------------------------------------------------------------------------------
Total Capitalization 17,283 17,501
- ----------------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt 349 868
Accounts payable 742 635
Interest accrued 219 228
Dividends declared 145 140
Short-term obligations 684 4
Customer deposits 180 167
Other current liabilities 742 608
- ----------------------------------------------------------------------------------------------------------
Total Current Liabilities 3,061 2,650
- ----------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 599 701
Accumulated deferred investment tax credits 176 190
Regulatory liabilities 2,999 2,879
Asset retirement obligations 1,282 1,271
Accrued pension and other benefits 562 508
Other liabilities and deferred credits 376 393
- ----------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 5,994 5,942
- ----------------------------------------------------------------------------------------------------------
Commitments and Contingencies
- ----------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 26,338 $ 26,093
- ----------------------------------------------------------------------------------------------------------
PROGRESS ENERGY, INC.
UNAUDITED CONSOLIDATED STATEMENTS of CASH FLOWS
(in millions)
Year Ended December 31 2004 2003
- --------------------------------------------------------------------------------------------------------
Operating Activities
Net income $ 759 $ 782
Adjustments to reconcile net income to net cash provided by operating
activities:
(Income) loss from discontinued operations (6) 8
Net (gain) loss on sale of operating assets (57) 1
Impairment of long-lived assets and investments - 38
Cumulative effect of change in accounting principle - 21
Depreciation and amortization 1,181 1,146
Deferred income taxes (74) (276)
Investment tax credit (14) (16)
Deferred fuel credit (19) (133)
Cash provided (used) by changes in operating assets and liabilities:
Receivables (35) (158)
Inventory (108) 8
Prepayments and other current assets (18) 39
Accounts payable 33 37
Other current liabilities 82 121
Regulatory assets and liabilities (284) (21)
Other 167 127
- --------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,607 1,724
- --------------------------------------------------------------------------------------------------------
Investing Activities
Gross utility property additions (998) (972)
Diversified business property additions (236) (584)
Nuclear fuel additions (101) (117)
Proceeds from sales of subsidiaries and investments 366 579
Purchases of short-term investments (966) (712)
Proceeds from sales of short-term investments 1,097 537
Acquisition of intangibles (1) (200)
Other (46) (26)
- --------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (885) (1,495)
- --------------------------------------------------------------------------------------------------------
Financing Activities
Issuance of common stock, net 72 304
Issuance of long-term debt, net 421 1,539
Net increase (decrease) in short-term indebtedness 680 (696)
Retirement of long-term debt (1,353) (810)
Dividends paid on common stock (558) (541)
Other 18 12
- --------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (720) (192)
- --------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents 2 37
Cash and Cash Equivalents at Beginning of Period 98 61
- --------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 100 $ 98
========================================================================================================