Progress Energy Announces First Quarter Results
Quarterly Highlights:
* Reports ongoing earnings of $0.52 per share, GAAP earnings of $0.38 per
share
* Achieves core ongoing earnings of $0.53 per share, up from $0.45
per share last year
* Closed on the sale of Progress Rail in March
* Reaffirms 2005 ongoing earnings guidance of $2.90 - $3.20 per share
RALEIGH, N.C. (April 28, 2005) - Progress Energy [NYSE: PGN] today reported
ongoing earnings of $126 million, or $0.52 per share, for the first quarter of
2005 compared with ongoing earnings of $145 million, or $0.60 per share, for the
first quarter of 2004. Reported consolidated net income under generally accepted
accounting principles (GAAP) was $93 million, or $0.38 per share, for the
quarter compared with reported consolidated net income of $108 million, or $0.45
per share, for the first quarter of 2004. See the table that follows for a
reconciliation of ongoing earnings per share to GAAP earnings per share.
Core ongoing earnings, which include the results of Progress Energy Carolinas,
Progress Energy Florida and Progress Ventures, excluding synthetic fuels, were
$0.53 per share for the quarter compared to $0.45 per share for the same period
last year. The main drivers of the increase in core ongoing earnings were
increased utility growth and usage, higher wholesale sales at the utilities due
to new contracts, and the positive impacts of higher coal and natural gas prices
at Progress Ventures. Offsetting these factors were milder weather and higher
O&M expense primarily due to an increase in the workers' compensation accrual.
See the table that follows for a reconciliation of core ongoing earnings per
share to core GAAP earnings per share.
"Our core businesses had solid results during the quarter," said Bob McGehee,
chairman and CEO of Progress Energy. "In spite of milder weather, our utilities
had strong retail growth and usage, and we are on track to achieve our target
for core business earnings for the year."
Non-core earnings from the synthetic fuel operations generated an ongoing loss
of $0.01 per share for the quarter compared with ongoing earnings of $0.15 per
share for the same period last year. The main drivers of the decrease in
non-core earnings were lower synthetic fuel sales due to this quarter's
production schedule and the forfeiture of tax credits due to a tax loss on the
sale of Progress Rail. The sale of Progress Rail resulted in a capital loss for
tax purposes and the majority of this loss is expected to be carried back to the
2004 tax year, reducing the overall 2004 income tax liability. Accordingly,
approximately $17 million of tax credits will no longer be realized and cannot
be reflected as a deferred tax asset.
"The tax impact of the Rail sale was included in our 2005 non-core earnings
guidance and, assuming no significant rise in oil prices, we still expect to
produce between 8 million and 12 million tons of synthetic fuel during the
year." McGehee said. "Along with our solid first quarter core business results,
we are confident in reaffirming our 2005 ongoing earnings guidance of $2.90 to
$3.20 per share."
The following table provides a reconciliation of ongoing earnings per share to
reported GAAP earnings per share. A detailed discussion of these items is
provided later in this release under the caption "Ongoing Earnings Adjustments."
Progress Energy, Inc.
Reconciliation of Ongoing Earnings per Share to Reported GAAP Earnings per Share
Three months ended March 31
2005 2004*
----------------------------------- --------------------------------------
Core Non-core Total Core Non-core Total
Ongoing earnings per share $ 0.53 $ (0.01) $ 0.52 $ 0.45 $ 0.15 $ 0.60
Intraperiod tax allocation (0.01) - (0.01) (0.16) - (0.16)
CVO mark-to-market - - - (0.03) - (0.03)
Progress Rail discontinued operations (0.05) - (0.05) 0.04 - 0.04
Severance costs (0.08) - (0.08) - - -
----------- ------------ ---------- ----------- ------------ -------------
Reported GAAP earnings per share $ 0.39 $ (0.01) $ 0.38 $ 0.30 $ 0.15 $ 0.45
=========== ============ ========== =========== ============ =============
Shares outstanding (millions) 244 241
* The prior year ongoing earnings have been restated to reflect the operations
of Progress Rail as discontinued operations.
The 2005 ongoing earnings guidance of $2.90 to $3.20 per share excludes any
impacts from the CVO mark-to-market adjustment, discontinued operations of
Progress Rail, and the estimated severance and postretirement benefit costs
associated with the cost-management initiative discussed immediately below. The
nature of these adjustments is discussed under the heading "Ongoing Earnings
Adjustments." Progress Energy is not able to provide a corresponding GAAP
equivalent for the 2005 earnings guidance figures.
SIGNIFICANT DEVELOPMENTS
Voluntary Enhanced Retirement Program Results
On April 28, 2005, Progress Energy announced that approximately 1,450 employees
of the 3,500 eligible employees will be retiring under the previously announced
voluntary enhanced retirement program. This number was roughly in line with
management's expectations. The retirements will occur between June 1, 2005, and
December 1, 2005. The company plans to eliminate about 450 positions, many of
which will be achieved through the departure of those who volunteered for
retirement.
2
In connection with the cost-management initiative, the company expects to incur
estimated one-time, pre-tax charges of approximately $210 million. Of this, $180
million represents a non-cash charge that will be recognized in the second
quarter of 2005 and relates primarily to postretirement benefits that will be
paid out over time to those eligible employees who elect to participate in the
voluntary enhanced retirement program.
Progress Energy Carolinas Files for Fuel Recovery in South Carolina
On April 27, 2005, Progress Energy Carolinas filed for an increase in the fuel
rate charged to its South Carolina customers. Progress Energy Carolinas is
asking the South Carolina Public Service Commission to approve a $97 million, or
21 percent, increase in the fuel components of its rates. The company requested
the change to recoup unrecovered fuel costs for the previous 15 months and to
meet expected fuel costs in the near future. If approved, the increase would
take effect July 1, 2005. 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=11622
Progress Energy Plants Recognized for Performance
On April 11, 2005, the Electric Utility Cost Group, a global industry
association that evaluates metrics across the industry, named Progress Energy
Carolinas' Roxboro plant as the best-performing large fossil plant and the
Asheville plant as the best-performing small (less than 500 megawatts) fossil
plant among more than 100 coal-fired power plants evaluated.
Brunswick Unit Completes Refueling Outage and Power Uprate
Progress Energy's Brunswick Nuclear Plant Unit 2 completed a successful
refueling and maintenance outage on April 6, 2005, when the unit was returned to
service. The successful completion of the Unit 2 outage concludes a four-year
extended power uprate project that has added approximately 230 megawatts (MW) to
the overall output of the dual-unit 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=11562
New Automated Meters to be Installed for Residential Customers
On March 30, 2005, Progress Energy announced that it will begin installing
automated meters for approximately 2.6 million residential customers in Florida
and the Carolinas. Progress Energy is among the first investor-owned utilities
to install automated meters on a broad scale. The estimated $140 million mobile
meter-reading program will be completed in early 2007 and displace approximately
160 full-time positions and 200 contractor positions in Florida and the
Carolinas. 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=11482
Progress Energy Florida Moves Forward with Storm Cost Recovery
From March 30 to April 1, the Florida Public Service Commission (FPSC) conducted
a hearing on Progress Energy Florida's $252 million storm cost-recovery filing.
If the full amount requested in the filing is approved, the company recommends
recovering the costs over a two-year period - adding roughly $3.81 in year one,
and $3.59 in year two to the average residential customer bill. On June 2, 2005,
the FPSC staff will make a recommendation to the commission and the FPSC will
decide on June 14, 2005.
3
Florida Storm Cost Securitization Legislation
Bills are proceeding through both the House and Senate of the Florida
legislature that would authorize the state's investor-owned utilities to issue
bonds that are secured by surcharges on utility customer bills. These bonds
would be issued for recovery of storm damage costs and potentially to restore
depleted storm reserves. The amount of funds established for recovery is subject
to the review and approval of the FPSC. Both the House and Senate bills have
passed all committees and have been submitted to the respective legislative
bodies for consideration. The Florida legislature is scheduled to adjourn on May
6, 2005.
Progress Rail Sale Closes
On March 28, 2005, Progress Energy announced that the company and subsidiaries
of One Equity Partners LLC closed on the sale of Progress Rail. Proceeds from
the $405 million sale were used to reduce overall corporate 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=11462
New Financing Agreements for Progress Energy Carolinas and Progress Energy
Florida
On March 22, 2005, Progress Energy Carolinas issued $300 million of 10-year
first mortgage bonds at 5.15 percent, due 2015, and $200 million of 30-year
first mortgage bonds at 5.70 percent, due 2035. Proceeds were used to retire
$300 million of first mortgage bonds due April 1, 2005, and reduce short-term
debt. On March 28, 2005, Progress Energy Carolinas entered into a new $450
million revolving credit agreement, which expires June 28, 2010. On March 28,
2005, Progress Energy Florida entered into a new $450 million revolving credit
agreement, which expires March 28, 2010. Both facilities replaced existing
credit agreements.
LINE OF BUSINESS FINANCIAL INFORMATION
Progress Energy Carolinas
Progress Energy Carolinas electric energy operations contributed GAAP net income
of $116 million for both the current quarter and for the same period last year.
This quarter's earnings were positively impacted by increased retail growth and
usage, decreased depreciation on plant and equipment primarily related to the
license extensions of the nuclear plants, lower compensation and benefit costs
and lower non-recoverable purchased power costs. Additionally, the prior year
results included a $6 million pre-tax increase in O&M expense as a result of ice
storms and an increase in other expenses related to a write-off of non-trade
receivables. These factors were offset by a $14 million pre-tax ($8 million
after-tax) restructuring charge related to severance costs, milder weather,
higher Clean Air amortization and increased O&M expense due to a scheduled
fossil plant outage during the quarter.
4
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 $43 million for the quarter compared with GAAP net income of $49 million for
the same period last year. This quarter's earnings were negatively impacted by a
$14 million pre-tax ($8 million after-tax) restructuring charge related to
severance costs, an increase in the workers' compensation accrual and milder
weather. These factors were partially offset by increased retail growth and
usage and higher wholesale sales due to new contracts.
See the attached Supplemental Data schedules for additional information on
Progress Energy Florida electric revenues, energy sales, energy supply and
weather impacts.
Progress Ventures, excluding synthetic fuels
The Progress Ventures operations, excluding synthetic fuels, consist of Progress
Fuels, which includes natural gas production and coal mining, and Competitive
Commercial Operations, which includes nonregulated generation and energy
marketing activities. The Progress Ventures business unit, excluding synthetic
fuels, had GAAP net income of $5 million for the quarter compared with GAAP net
income of $2 million for the same period last year. This quarter's earnings were
negatively impacted by a $2 million pre-tax ($1 million after-tax) restructuring
charge related to severance costs.
Progress Fuels, excluding synthetic fuels, generated GAAP net income of $10
million for both the current quarter and for the same period last year. This
quarter's earnings were positively impacted by higher coal and natural gas
prices. These factors were offset by increased mining costs, lower gas
production as a result of the sale of certain gas assets in 2004 and reduced
rates related to a waterborne coal transportation settlement in 2004.
Competitive Commercial Operations recorded a GAAP net loss of $5 million for the
quarter compared with a GAAP net loss of $8 million for the same period last
year. This quarter's results were positively impacted by a mark-to-market gain
in the current quarter compared with a loss last year, lower amortization as a
result of the expiration of certain tolling agreements, lower interest expense
as a result of the termination of the variable rate project financing in
December 2004 and lower compensation and benefits costs. These factors were
partially offset by lower contract margins, primarily as a result of the
expiration of certain tolling agreements.
Other Businesses
Other businesses include Progress Telecom and other small subsidiaries. Other
businesses had a GAAP net loss of $1 million for the quarter compared with a
GAAP net loss of $3 million for the same period last year.
5
Corporate
Corporate results, which primarily include interest expense on holding company
debt, posted an ongoing operating loss of $55 million for the quarter compared
with an ongoing loss of $54 million for the same period last year.
Synthetic Fuels
Synthetic fuels operations generated a GAAP net loss of $1 million for the
quarter compared with GAAP net income of $36 million for the same period last
year. Earnings were negatively impacted by lower sales, a tax loss on the sale
of Progress Rail and decreased margins. Total synthetic fuel sales were 2.0
million tons for the quarter compared with 2.9 million tons for the same period
last year. The decrease in sales is primarily attributable to an internal change
in the quarterly production schedule in 2005 compared to 2004.
The sale of Progress Rail resulted in a capital loss for tax purposes. The
majority of this capital loss is expected to be carried back to the 2004 tax
year and reduce the overall 2004 income tax liability. As a result of the
estimated amount of capital loss to be carried back to 2004, approximately $17
million in tax credits will no longer be realized and therefore cannot be
reflected as a deferred tax asset.
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
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 decreased earnings
per share by $0.01 for the quarter, and decreased earnings per share by $0.16
for the same period last year, but has 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.
6
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 had no impact
during the quarter and decreased earnings per share by $0.03 for the same period
last 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.
Progress Rail Discontinued Operations
The sale of Progress Rail Services Corp. (Progress Rail) to One Equity Partners,
LLC closed on March 24, 2005, and the net proceeds were used to pay down debt.
Due to its sale, the operations of Progress Rail are reported as discontinued
operations in the accompanying financial statements and therefore management
does not believe this activity is representative of the ongoing operations of
the company. Progress Rail had a discontinued loss of $12 million for the
quarter, which includes an estimated loss on the sale of $17 million, compared
with discontinued earnings of $9 million in the prior year.
Cost-Management Restructuring Charge
On February 28, 2005, as part of a previously announced cost-management
initiative, Progress Energy approved a workforce restructuring, which will
result in a reduction of approximately 450 positions and is expected to be
completed in September 2005. In connection with the cost-management initiative,
the company expects to incur estimated one-time, pre-tax charges of
approximately $210 million. Approximately $31 million of this amount relates to
estimated future payments for severance benefits and was recorded in the first
quarter of 2005. The amounts will be paid out over time and are subject to
revision in future quarters based on the impact of the voluntary enhanced
retirement program. The company has estimated that an additional $180 million
non-cash charge will be recognized in the second quarter of 2005 and relates
primarily to postretirement benefits that will be paid out over time to those
eligible employees who elected to participate in the voluntary enhanced
retirement program. The cost-management initiative charges could change
significantly, primarily due to the demographics of the specific employees who
elected enhanced retirement and its impact on the postretirement benefit
actuarial studies. Due to the nonrecurring nature of the adjustment, management
believes it is not representative of the company's ongoing operations.
* * * *
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.
7
Progress Energy's conference call with the investment community will be held
April 28, 2005, at 10 a.m. ET (7 a.m. PT) and will be hosted by Bob McGehee,
chairman and chief executive officer, and Geoff Chatas, executive vice president
and chief financial officer. Investors, media and the public may listen to the
conference call by dialing 913-981-5525, confirmation code 2743134. 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 April 28 through midnight May 11,
2005. To listen to the recorded call, dial 719-457-0820 and enter confirmation
code 2743134.
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 Geoff Chatas
starting at 11 a.m. ET. To participate in this session, please dial
719-457-2600, confirmation code 7953894.
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 2.9 million customers in North Carolina,
South Carolina and Florida. Progress Energy also includes nonregulated
operations covering generation, energy marketing, natural gas production, fuel
extraction 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 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 the 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 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 our commercial and
industrial customers; the ability of our subsidiaries to pay upstream dividends
or distributions to us; the impact on our facilities and the 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; our ability
to maintain our current credit ratings and the impact on our financial condition
and ability to meet 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; the impact of derivative contracts used in the normal
course of business by us; investment performance of pension and benefit plans;
8
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 our 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 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 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 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. 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)
9
PROGRESS ENERGY, INC.
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
March 31, 2005
UNAUDITED CONSOLIDATED STATEMENTS of INCOME
- -------------------------------------------------------------------------------------
Three Months Ended
March 31
- -------------------------------------------------------------------------------------
(in millions except per share data) 2005 2004
- -------------------------------------------------------------------------------------
Operating revenues
Electric $ 1,783 $ 1,685
Diversified business 415 321
- -------------------------------------------------------------------------------------
Total operating revenues 2,198 2,006
- -------------------------------------------------------------------------------------
Operating expenses
Utility
Fuel used in electric generation 550 493
Purchased power 198 183
Operation and maintenance 406 363
Depreciation and amortization 208 202
Taxes other than on income 117 105
Diversified business
Cost of sales 395 311
Depreciation and amortization 39 41
Other 32 30
- -------------------------------------------------------------------------------------
Total operating expenses 1,945 1,728
- -------------------------------------------------------------------------------------
Operating income 253 278
- -------------------------------------------------------------------------------------
Other income (expense)
Interest income 4 2
Other, net 2 (22)
- -------------------------------------------------------------------------------------
Total other income (expense) 6 (20)
- -------------------------------------------------------------------------------------
Interest charges
Net interest charges 166 161
Allowance for borrowed funds used during construction (3) (1)
- -------------------------------------------------------------------------------------
Total interest charges, net 163 160
- -------------------------------------------------------------------------------------
Income from continuing operations before income tax and 96 98
minority
interest
Income tax benefit 1 2
- -------------------------------------------------------------------------------------
Income from continuing operations before minority interest 97 100
Minority interest in subsidiaries' loss (income), net of tax 8 (1)
- -------------------------------------------------------------------------------------
Income from continuing operations 105 99
Discontinued operations, net of tax (12) 9
- -------------------------------------------------------------------------------------
Net income $ 93 $ 108
- -------------------------------------------------------------------------------------
Average common shares outstanding 244 241
- -------------------------------------------------------------------------------------
Basic earnings per common share
Income from continuing operations $ 0.43 $ 0.41
Discontinued operations, net of tax (0.05) 0.04
Net income $ 0.38 $ 0.45
- -------------------------------------------------------------------------------------
Diluted earnings per common share
Income from continuing operations $ 0.43 $ 0.41
Discontinued operations, net of tax (0.05) 0.04
Net income $ 0.38 $ 0.45
- -------------------------------------------------------------------------------------
Dividends declared per common share $ 0.590 $ 0.575
- -------------------------------------------------------------------------------------
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) March 31 December 31
ASSETS 2005 2004
- ------------------------------------------------------------------------------------------------------------
Utility plant
Utility plant in service $ 22,117 $ 22,103
Accumulated depreciation (9,231) (8,783)
- ------------------------------------------------------------------------------------------------------------
Utility plant in service, net 12,886 13,320
Held for future use 13 13
Construction work in progress 972 799
Nuclear fuel, net of amortization 251 231
- ------------------------------------------------------------------------------------------------------------
Total utility plant, net 14,122 14,363
- ------------------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents 280 56
Short-term investments 229 82
Receivables 931 911
Inventory 772 805
Deferred fuel cost 235 229
Deferred income taxes 65 111
Assets of discontinued operations - 574
Prepayments and other current assets 291 174
- ------------------------------------------------------------------------------------------------------------
Total current assets 2,803 2,942
- ------------------------------------------------------------------------------------------------------------
Deferred debits and other assets
Regulatory assets 1,021 1,064
Nuclear decommissioning trust funds 1,078 1,044
Diversified business property, net 1,861 1,838
Miscellaneous other property and investments 480 444
Goodwill 3,719 3,719
Intangibles, net 330 337
Other assets and deferred debits 282 265
- ------------------------------------------------------------------------------------------------------------
Total deferred debits and other assets 8,771 8,711
- ------------------------------------------------------------------------------------------------------------
Total assets $ 25,696 $ 26,016
- ------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------
Common stock equity
Common stock without par value, 500 million shares authorized,
249 and 247 million shares issued and outstanding, respectively $ 5,428 $ 5,360
Unearned restricted shares (1 and 1 million shares, respectively) (16) (13)
Unearned ESOP shares (3 and 3 million shares, respectively) (65) (76)
Accumulated other comprehensive loss (159) (164)
Retained earnings 2,475 2,526
- ------------------------------------------------------------------------------------------------------------
Total common stock equity 7,663 7,633
- ------------------------------------------------------------------------------------------------------------
Preferred stock of subsidiaries-not subject to mandatory redemption 93 93
Minority interest 38 36
Long-term debt, affiliate 270 270
Long-term debt, net 8,728 9,251
- ------------------------------------------------------------------------------------------------------------
Total capitalization 16,792 17,283
- ------------------------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt 1,148 349
Accounts payable 582 630
Interest accrued 165 219
Dividends declared 146 145
Short-term obligations 691 684
Customer deposits 186 180
Liabilities of discontinued operations - 149
Other current liabilities 620 703
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 3,538 3,059
- ------------------------------------------------------------------------------------------------------------
Deferred credits and other liabilities
Accumulated deferred income taxes 603 625
Accumulated deferred investment tax credits 173 176
Regulatory liabilities 2,402 2,654
Asset retirement obligations 1,211 1,282
Other liabilities and deferred credits 977 937
- ------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 5,366 5,674
- ------------------------------------------------------------------------------------------------------------
Commitments and contingencies
- ------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $ 25,696 $ 26,016
- ------------------------------------------------------------------------------------------------------------
PROGRESS ENERGY, INC.
UNAUDITED CONSOLIDATED STATEMENTS of CASH FLOWS
- --------------------------------------------------------------------------------------------------------
(in millions)
Three Months Ended March 31, 2005 2004
- --------------------------------------------------------------------------------------------------------
Operating activities
Net income $ 93 $ 108
Adjustments to reconcile net income to net cash provided by operating
activities:
Discontinued operations, net of tax 12 (9)
Depreciation and amortization 276 271
Deferred income taxes 13 (7)
Investment tax credit (3) (4)
Deferred fuel cost 19 63
Other adjustments to net income 42 16
Cash provided (used) by changes in operating assets and liabilities:
Receivables 4 50
Inventories (23) 6
Prepayments and other current assets (10) (20)
Accounts payable 38 (35)
Other current liabilities (156) (131)
Regulatory assets and liabilities (55) (7)
Other 29 66
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 279 367
- --------------------------------------------------------------------------------------------------------
Investing activities
Gross utility property additions (263) (242)
Diversified business property additions (49) (45)
Nuclear fuel additions (64) (39)
Proceeds from sales of subsidiaries and other investments 406 2
Purchases of short-term investments (1,840) (601)
Proceeds from sales of short-term investments 1,693 828
Other (49) (9)
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (166) (106)
- --------------------------------------------------------------------------------------------------------
Financing activities
Issuance of common stock, net 60 29
Issuance of long-term debt, net 495 -
Net increase in short-term indebtedness 7 503
Retirement of long-term debt (216) (675)
Dividends paid on common stock (145) (141)
Other (48) (62)
- --------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 153 (346)
- --------------------------------------------------------------------------------------------------------
Cash (used) provided by discontinued operations (42) 88
Net increase in cash and cash equivalents 224 3
Cash and cash equivalents at beginning of period 56 34
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 280 $ 37
========================================================================================================
Progress Energy, Inc.
SUPPLEMENTAL DATA Page S-1
Unaudited
Progress Energy, Inc.
Earnings Variances
First Quarter 2005 vs. 2004
Regulated Utilities
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Fuels,
excluding Corporate and
Synthetic Other Core Synthetic
($ per share) Carolinas Florida Fuels CCO Businesses Business fuels Consolidated
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2004 GAAP earnings 0.48 0.20 0.04 (0.03) (0.39) 0.30 0.15 0.45
Intra-period tax allocation 0.16 0.16 A 0.16
CVO mark-to-market 0.03 0.03 B 0.03
Rail discontinued operations (0.04) (0.04) C (0.04)
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2004 ongoing earnings 0.48 0.20 0.04 (0.03) (0.24) 0.45 0.15 0.60
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Weather - retail (0.05) (0.01) (0.06) (0.06)
Other retail - growth and usage 0.05 0.02 0.07 0.07
Wholesale - 0.02 0.02 E 0.02
Retail revenue sharing - - - -
Other margin 0.01 - 0.01 F 0.01
O&M - (0.03) (0.03) G (0.03)
Utility depreciation and
amortization (0.01) - (0.01) H (0.01)
Other 0.05 0.02 0.07 I 0.07
Interest charges (0.01) (0.01) (0.01) 0.01 0.01 (0.01) J (0.01)
Net diversified business - - 0.02 - 0.01 0.03 K (0.16) L (0.13)
Share dilution (0.01) - - - - (0.01) (0.01)
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2005 ongoing earnings 0.51 0.21 0.05 (0.02) (0.22) 0.53 (0.01) 0.52
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Intra-period tax allocation (0.01) (0.01) A (0.01)
CVO mark-to-market - - -
Rail discontinued operations (0.05) (0.05) C (0.05)
Severance costs (0.04) (0.03) (0.01) - - (0.08) D (0.08)
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2005 GAAP earnings 0.47 0.18 0.04 (0.02) (0.28) 0.39 (0.01) 0.38
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Corporate and Other Businesses includes Progress Telecom, other small
subsidiaries, Holding Company interest expense, CVO mark-to-market, intra-period
tax allocations, Progress Rail discontinued operations, 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 Progress Rail to One Equity Partnership LLC which was finalized
on March 24, 2005.
D - Severance costs recorded in the first quarter 2005 associated with the
previously announced cost-management initiative.
E - Florida - Wholesale increased due to new contracts signed subsequent to
March 31, 2004.
F - Carolinas - Other margin increased due to lower non-recoverable purchase
power costs from 1) higher fuel costs in the current year which increased
the recoverable portion of the fixed price cogeneration contract costs and
2) reduced generation at cogeneration facilities in the current year.
G - Florida - O&M increased primarily due to an increase in the workers'
compensation accrual.
H - Carolinas - Depreciation & amortization increased due to higher Clean Air
amortization, offset by decreased depreciation on plant & equipment
primarily related to the license extensions of the nuclear plants.
I - Carolinas - Other costs decreased due to lower income taxes of $5 million
(pre-tax) and reduced investment losses and increased short-term investment
gains of $6 million (pre-tax). Additionally, 2004 included $7 million in
costs (pre-tax) associated with the write-off of non-trade receivables.
Florida - Other costs decreased due to AFUDC equity associated with
construction of Hines 3 and Hines 4 and reduced income taxes.
J - Carolinas - Increased interest charges on commercial paper in 2005.
Florida - Higher interest rates on commercial paper and higher balances.
Fuels - Lower capitalized interest expense associated with gas operations.
CCO - Decreased interest expense due to termination of the variable rate
project financing in December 2004.
K - Fuels - Increased due to increased coal and gas prices, partially offset
by the sale of the North Texas Gas operations, the waterborne coal
transportation rate settlement in 2004 and increased mining costs.
Corporate and Other Businesses - Increased due to interest income and
decreased income taxes.
L - Synthetic Fuels - Decreased due to lower sales, forfeited tax credits
from the sale of Progress Rail and decreased margins.
Progress Energy, Inc.
SUPPLEMENTAL DATA Page S-2
Unaudited
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Three Months Ended Three Months Ended Percentage Change
March 31, 2005 March 31, 2004 From March 31, 2004
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Total Total
Progress Progress
Utility Statistics Carolinas Florida Energy Carolinas Florida Energy Carolinas Florida
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Operating Revenues (in millions)
Retail
Residential $ 374 $ 431 $ 805 $ 371 $ 402 $ 773 0.8 % 7.2 %
Commercial 215 201 416 208 181 389 3.4 11.0
Industrial 149 63 212 147 63 210 1.4 -
Other retail 19 53 72 19 46 65 - 15.2
Provision for retail revenue sharing - (2) (2) (4) (4) - -
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Total Retail $ 757 $ 746 $ 1,503 $ 745 $ 688 $ 1,433 1.6 8.4
Unbilled (19) (5) (24) (23) (6) (29) - -
Wholesale 174 73 247 156 67 223 11.5 9.0
Miscellaneous revenue 23 34 57 23 35 58 - (2.9)
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Total Electric $ 935 $ 848 $ 1,783 $ 901 $ 784 $ 1,685 3.8 % 8.2 %
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Energy Sales (millions of kWh)
Retail
Residential 4,672 4,347 9,019 4,741 4,291 9,032 (1.5)% 1.3 %
Commercial 3,080 2,571 5,651 3,058 2,491 5,549 0.7 3.2
Industrial 2,931 940 3,871 2,993 1,023 4,016 (2.1) (8.1)
Other retail 327 709 1,036 345 672 1,017 (5.2) 5.5
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Total Retail 11,010 8,567 19,577 11,137 8,477 19,614 (1.1) 1.1
Unbilled (303) (103) (406) (385) (135) (520) - -
Wholesale 3,938 1,338 5,276 3,791 1,323 5,114 3.9 1.1
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Total Electric 14,645 9,802 24,447 14,543 9,665 24,208 0.7 % 1.4 %
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Energy Supply (millions of kWh)
Generated - steam 7,424 4,769 12,193 7,950 5,032 12,982
nuclear 5,992 1,707 7,699 5,933 1,658 7,591
hydro 226 - 226 208 - 208
combustion turbines/
combined cycle 532 1,731 2,263 323 1,395 1,718
Purchased 1,059 2,206 3,265 762 2,171 2,933
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Total Energy Supply 15,233 10,413 25,646 15,176 10,256 25,432
(Company Share)
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Impact of Weather to Normal on Retail Sales
Heating Degree Days - Actual 1,692 304 1,845 364 (8.3) % (16.5)%
- Normal 1,666 372 1,656 372
Cooling Degree Days - Actual 5 40 10 0 (50) % - %
- Normal 11 28 13 28
Impact of retail weather to normal on EPS $0.00 ($0.01) ($0.01) $0.05 ($0.01) $0.04
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Financial Statistics March 31
2005 2004
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Return on average common stock equity (12 mos. ended) 9.7 % 9.3 %
Book value per common share $31.27 $30.81
Capitalization
Common stock equity 41.1 % 40.9 %
Preferred stock of subsidiary and minority interest 0.7 0.7
Total debt 58.2 58.4
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Total Capitalization 100.0 % 100.0 %
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