News Release
Oct. 30, 2003

DUKE ENERGY REPORTS THIRD QUARTER 2003 RESULTS

  • Reported EPS of 5 cents in third quarter 2003 – excluding charges of 30 cents related to special items, EPS was 35 cents

  • Excluding special items and change in accounting principles, the company now expects 2003 ongoing EPS to be between $1.20 -- $1.25

  • Company implements cost-reduction plan – expected to reduce annual pretax expenses by more than $200 million

  • Company is on track to pay down debt $1.8 billion by year end, and $5.5 billion by the end of 2005

CHARLOTTE, N.C. – Duke Energy reported third quarter 2003 earnings of 5 cents per share, or $49 million in net income, compared to 27 cents per share, or $230 million in net income in third quarter 2002.

Ongoing earnings per share (EPS) for third quarter 2003, which excludes special items, was 35 cents versus 51 cents in ongoing EPS in third quarter 2002.

Duke Energy’s focus on generating positive cash flow and reducing debt continues to show favorable results. The company has generated gross proceeds of $1.9 billion, including $346 million of assumed debt, in 2003 from asset sales that have been announced or closed. The company reduced $1.7 billion of net debt and trust preferred securities during the first nine months of 2003. By year end, the company expects to meet its target to reduce net debt and trust preferred securities by $1.8 billion. Duke Energy’s capital expenditures for 2003 are now expected to be $2.8 billion, $200 million lower than the previously forecasted $3 billion. Liquidity remains strong, with $1.8 billion in cash and cash equivalents as of Sept. 30, 2003.

“We have made tough decisions necessary to strengthen our financial position, and will continue that discipline as we move into 2004,” said Richard B. Priory, chairman and chief executive officer.

Priory added that despite the continuous steady performance from our regulated businesses, as well as Field Services and International Energy, the lower than expected results at Duke Energy North America (DENA) will likely cause full-year ongoing 2003 EPS to be between $1.20 -- $1.25. This guidance excludes any impacts from special items and changes in accounting principles.

Special items for the quarter include:

 Third Quarter
EPS Impact 2003 EPS Impact 2002
Tax benefit on 2002 goodwill impairment of International Energy European gas trading -- $52 million
$ 0.06
$ ---
DENA goodwill write-off -- $254 million
(0.18)
---
Severance cost associated with work force reduction -- $105 million in 2003; $33 million in 2002
(0.08)
(0.02)
Net gain/(loss) on asset sales ($71 million) in 2003; $14 million in 2002
(0.05)
0.01
Settlement with the S.C. Public Service Commission -- $46 million
(0.03)
---
Settlement with the Commodity Futures Trading Commission -- $17 million
(0.02)
---
Write-offs of site development costs, termination of certain turbines on order; plus write-down of other uninstalled turbines, demobilization costs related to deferred plants and partial impairment of a merchant plant -- $286 million
---
(0.23)
TOTAL
$ (0.30)
$ (0.24)
EPS, as reported
0.05
0.27
EPS, ongoing
0.35
0.51

COST-REDUCTION PLAN

Duke Energy began to implement a broad-based, cost-reduction plan during the quarter. Actions taken to date will result in reduced annual pretax expenses of more than $200 million beginning in 2004. As part of this ongoing initiative, the company took a pretax severance-related charge of $105 million, or 8 cents per share, in third quarter 2003. The company expects to take additional severance-related charges in fourth quarter 2003 of about $30 million.

The company expects its global work force of 25,000 to be reduced by about 8 percent as a result of the current initiative.

“Through the corporatewide, cost-reduction plan, we are examining all aspects of our business operations,” said Fred Fowler, president and chief operating officer of Duke Energy. “These actions are fundamental to our efforts to position the company for future growth.”

BUSINESS UNIT RESULTS

Consolidated earnings before interest and taxes (EBIT) was $352 million, compared with $666 million in third quarter 2002. For the first nine months of 2003, consolidated EBIT was $2.3 billion, compared to $2.5 billion in the prior year.

Below is a reconciliation of consolidated EBIT to net income:

($ in Millions ) Three
Months
Ended
9/30/03
Three
Months
Ended
9/30/02
Nine
Months
Ended
9/30/03
Nine
Months
Ended
9/30/02
Consolidated EBIT, as defined below
$352
$666
$2,346
$2,493
Cumulative effect of change in accounting principles, net of tax
---
---
162
---
Interest expense
391
314
1,072
786
Income tax expense (benefit)
(78)
108
312
513
Minority interest expense (benefit)
(10)
14
102
108
Net income
$49
$230
$698
$1,086

Franchised Electric
Third quarter 2003 EBIT from Franchised Electric was $436 million, compared to third quarter 2002 EBIT of $575 million. Cooler than normal weather and a sluggish economy had a negative impact on results for the quarter. During the quarter, Duke Power took an amortization charge of $53 million related to the N.C. clean air legislation, which was $35 million more than anticipated. EBIT was further reduced by $30 million due to a regulatory settlement with the South Carolina Public Service Commission. Franchised Electric also recorded severance charges of about $46 million in third quarter 2003 compared with $21 million in third quarter 2002. As a result of the additional clean air amortization, Duke Power now expects full-year 2003 EBIT to be between $1.5 billion and $1.6 billion, excluding special items.

Cooling degree days were 21 percent below last year’s quarter and 16 percent below normal. The effects of milder weather compared with last year had a negative impact on EBIT of about $35 million for the quarter.

Overall kilowatt-hour sales dropped 4.7 percent for the quarter versus third quarter of last year. The sluggish economy in North Carolina and South Carolina particularly affected industrial sales, which fell 8.9 percent for the quarter. Milder weather hurt residential sales, which fell 5 percent versus last year’s quarter.

However, overall customer growth continues its upward track – with an increase of another 40,000 customers compared to last year’s quarter.

Year-to-date EBIT for Franchised Electric was $1,206 million, compared with $1,347 million year to date in 2002.

Natural Gas Transmission
Duke Energy Gas Transmission (DEGT) reported third quarter 2003 EBIT of $280 million, compared to $288 million in third quarter 2002. DEGT had gains on asset sales of $31 million during third quarter 2003, compared with $18 million in third quarter 2002. DEGT also recorded $18 million in severance charges during third quarter 2003.

Increased earnings from completed expansion projects also contributed to DEGT’s quarterly results. DEGT’s major 2003 expansion projects, Patriot and HubLine, are slated to begin operations in the fourth quarter.

Year-to-date EBIT for DEGT was $1,009 million, compared with $867 million year to date in 2002.

Duke Energy North America
Duke Energy North America (DENA) reported an EBIT loss of $411 million in third quarter 2003, compared to an EBIT loss of $107 million in third quarter 2002. In third quarter 2003, mild weather, high natural gas prices and low spark spreads in many parts of the nation combined to severely impact DENA’s earnings. During the quarter, the company wrote off $254 million of goodwill, which was primarily related to the formation of DENA’s trading and marketing business. This charge reflects the reduction in scope and scale of Duke Energy Trading and Marketing’s business and the continued deterioration of market conditions affecting DENA.

DENA was also affected in the quarter by an $81 million EBIT loss on various pending asset sales and assets held for sale and a $17 million charge related to its portion of Duke Energy Trading and Marketing’s settlement with the Commodity Futures Trading Commission.

DENA also took a $5 million charge for severance costs during the third quarter, compared to $12 million in the prior year’s third quarter.

Third quarter 2002 included $207 million of charges related to impairments of turbines, site development costs, demobilization, severance costs and impairment of a merchant plant.

Year-to-date EBIT loss for DENA was $177 million, compared with positive EBIT of $143 million year to date in 2002.

International Energy
For third quarter 2003, Duke Energy International (DEI) reported EBIT of $44 million, compared to third quarter 2002 EBIT loss of $41 million which included $91 million in development cost write-offs and turbine impairments. Third quarter 2003 results include a $7 million charge for environmental reserves relating to a prior period. Excluding this charge and the write-offs and impairments from last year, results for the third quarter were essentially flat compared with the same period last year. Positive results from the Latin American and European operations offset foregone earnings associated with the sale of the company’s interest in generating facilities in Indonesia earlier in 2003 and a $3 million severance charge during third quarter 2003.

Year-to-date EBIT for DEI was $209 million, compared with $73 million year to date in 2002.

Field Services
The Field Services business segment, which represents Duke Energy's 70-percent interest in Duke Energy Field Services reported third quarter 2003 EBIT of $53 million compared to $23 million in third quarter 2002. The favorable impact of higher natural gas liquids (NGL) prices during the period was partially offset by the effects of higher natural gas prices and hedging results related to the price movements of NGLs during the period. In third quarter 2002, results were negatively impacted by higher operating and administrative costs, an increase in its provision for gas imbalances with customers and suppliers, and other charges related to its internal review and reconciliations of balance sheet accounts.

Year-to-date EBIT in 2003 for Field Services was $162 million compared to $99 million year to date in 2002.

Other Operations
Other Operations, including Crescent Resources, DukeNet Communications, Duke Capital Partners, Duke/Fluor Daniel, Duke Energy Merchants and Energy Delivery Services, reported EBIT of $21 million in third quarter 2003, compared to EBIT of $30 million in third quarter 2002.

Year-to-date EBIT in 2003 for Other Operations was $13 million compared to $175 million in year-to-date EBIT in 2002. Lower results were driven by fewer plant completions by Duke/Fluor Daniel in 2003 and wind-down costs at Duke Capital Partners, including write-downs on investments, partially offset by improved results from Crescent Resources. Year-to-date results for 2002 included $30 million in net gains related to asset sales.

INTEREST EXPENSE

Interest expense was $391 million for third quarter 2003, compared to $314 million for third quarter 2002. The increase was primarily due to lower capitalized interest of $33 million and $24 million of interest associated with the reclassification in the third quarter of certain trust preferred securities from minority interest to long-term debt. Interest expense also increased $16 million this quarter as a result of the settlement with the South Carolina Public Service Commission which required the write-off of a portion of previously capitalized debt costs.

INCOME TAX

Duke Energy had a $52 million income tax benefit in third quarter 2003 related to the goodwill impairment of its gas trading business in Europe, recorded in 2002.

CASH FLOW

For the nine months ending Sept. 30, 2003, cash flow from operations was $2.9 billion, compared to $3.3 billion for the first nine months ending Sept. 30, 2002.

LIQUIDITY AND CAPITAL RESOURCES

Duke Energy's consolidated capital structure as of Sept. 30, 2003, including short-term debt, was 58 percent debt, 38 percent common equity and 4 percent minority interests. Total debt to capitalization increased as a result of a new accounting requirement to reclassify certain trust preferred securities totaling approximately $1.2 billion from minority interest to long-term debt during the quarter.

Under various credit facilities, Duke Energy, Duke Capital and other subsidiaries had the ability to borrow up to $3.5 billion as of Sept. 30, 2003. The companies had borrowings and letters of credit outstanding under these programs of approximately $1.4 billion as of Sept. 30, 2003, resulting in unused capacity of approximately $2.1 billion. The company also had approximately $1.8 billion in cash and cash equivalents as of Sept. 30, 2003.

During third quarter, the company continued its efforts to reduce and refinance debt in order to strengthen the balance sheet and reduce future interest expense. These efforts include calling $328 million of 7.75 percent long-term debt and refinancing $500 million of First Mortgage Bonds which were redeemed in October 2003.

During the quarter, the company made a voluntary cash contribution of $181 million to its U.S. pension plan. As a result of making the contribution, the company will not be required to make a contribution to this plan in 2004.

ADDITIONAL INFORMATION

The company is unable to estimate forward-looking, generally accepted accounting principle (GAAP) EPS for 2003 because the amount of special items, if any, impacting EPS in the fourth quarter cannot be reasonably estimated at present. Additional information, including EPS reconciliation data and a schedule for Duke Energy Field Services gas volume and margin by contract type can be obtained at

Duke Energy’s third quarter 2003 earnings information Web site at: http://www.duke-energy.com/investors/financial/latest/.

FINANCIAL MEASURES AND RECONCILIATION OF CHANGES IN NET DEBT

The primary performance measure used by management to evaluate segment performance is EBIT, which at the segment level represents all profits (both operating and non-operating) before deducting interest and taxes, and is net of the minority interest expense related to those profits. Management believes EBIT is a good indicator of each segment’s operating performance as it represents the results of our ownership interests in operations without regard to financing methods or capital structures.

On a consolidated basis, EBIT is also used as one of the measures to assess performance and represents the combination of operating income and other income and expenses as presented on the consolidated statements of income. The use of EBIT as one of the performance measures on a consolidated basis follows the use of EBIT for assessing segment performance, and we believe EBIT is used by our investors as a supplemental financial measure in the evaluation of our consolidated results of operations.

EBIT should not be considered an alternative to, or more meaningful than, net income, operating income or cash flow as determined in accordance with generally accepted accounting principles (GAAP). Duke Energy’s EBIT may not be comparable to a similarly titled measure of another company.

Duke Energy refers to changes in net debt and trust preferred securities as representing the results of financing activities during the period, net of changes in cash and cash equivalents. Other changes to debt balances, including impacts of foreign currency translation, are excluded from changes to net debt and trust preferred securities. Changes to cash and cash equivalents are included, as management may elect to use a portion of cash and cash equivalents to pay down debt. Accordingly, the balance of cash and cash equivalents on hand at any point in time can fluctuate depending upon management intent and other factors, including desired levels of debt and financing opportunities. Management believes that a discussion of changes to net debt and trust preferred securities related to financing activities, combined with changes to cash and cash equivalents, provides meaningful information to investors because it presents a combined view of the net changes in these items over a period of time.

Reconciliation of net debt to balance sheet debt as of Sept. 30, 2003:

 

($ in millions)

 
Long-term debt, including current maturities
$ 21,550
 
Notes payable and CP
915
 
Trust preferred securities
1,408
 
Preferred members interest
61
 
Preferred stock with sinking fund requirements
25
 
Total adjusted debt at Dec. 31, 2002
$ 23,959
(a)
     
Year-to-date 2003 financing activity:    
Issuance of long-term debt
$2,819
 
Redemption of long-term debt, guaranteed preferred
beneficial interests and preferred member interests, and
net paydown of commercial paper and notes payable
   
     
 
(3,333)
 
Non-cash reduction of long-term debt related to asset sales
(317)
 
Net reduction in debt as of Sept. 30
$(831)
(b)
Net increase in cash and cash equivalents
894
 
Total change to debt from financing activities, net of cash, as of Sept. 30    
 
$(1,725)
 
     
Total debt as of Sept. 30, 2003
$23,964
 
Adjusted debt as of Sept. 30, 2003
23,128
(a+b)
Other increase in debt due primarily to foreign currency translation
$ 836
 

Duke Energy is a diversified multinational energy company with an integrated network of energy assets and expertise. The company manages a dynamic portfolio of natural gas and electric supply, delivery and trading businesses – meeting the energy needs of customers throughout North America and in key markets around the world. Duke Energy, headquartered in Charlotte, N.C., is a Fortune 500 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: http://www.duke-energy.com.

An earnings conference call for analysts is scheduled for 10 a.m. ET today. The conference call can be accessed via the investors' section of Duke Energy’s Web site or by dialing 800/500-0311 in the United States or 719/457-2698 outside the United States. The confirmation code is 142066. Please call in five to 10 minutes prior to the scheduled start time. A replay of the conference call will be available by dialing 888/203-1112 with a confirmation code of 142066. The international replay number is 719/457-0820, confirmation code 140266. A replay and transcript also will be available by accessing the investors' section of the company’s Web site. The presentation may include certain non-GAAP financial measures as defined under SEC rules. In such event, a reconciliation of those measures to the most directly comparable GAAP measures will be available on our investor relations Web site at: http://www.duke-energy.com/investors/financial/gaap.

This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although Duke Energy believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include legislative and regulatory developments; the outcomes of litigation and regulatory proceedings or inquiries; industrial, commercial and residential growth in our service territories; the weather and other natural phenomena; general economic conditions, including any potential effects arising from terrorist attacks, the situation in Iraq and any consequential hostilities or other hostilities; the results of financing efforts, including Duke Energy’s ability to obtain financing on favorable terms; lack of improvement or further declines in the market prices of equity securities and resultant cash funding requirements for Duke Energy’s defined benefit pension plans; the level of creditworthiness of counterparties to Duke Energy’s transactions; the amount of collateral required to be posted from time to time in Duke Energy’s transactions; the timing and extent of changes in commodity prices for oil, natural gas, coal, electricity and interest rates; the extent of success in connecting natural gas supplies to gathering and processing systems and in connecting and expanding natural gas and electric markets; the performance of electric generation, pipeline and natural gas processing facilities; the timing and success of efforts to develop domestic and international power, pipeline, gathering, processing and other infrastructure projects; conditions of the capital markets and equity markets during the periods covered by the forward-looking statements; and other factors discussed in Duke Energy's filings with the Securities and Exchange Commission.



Contact: Randy Wheeless
Phone: 704/382-8379
24 Hour Phone: 704/382-8333
Email: crwheele@duke-energy.com

 

 

SEPTEMBER 2003
QUARTERLY HIGHLIGHTS
(unaudited)
       
       
Three Months Ended
Nine Months Ended
       
September 30,
September 30,
       
 
(In millions, except where noted)    
2003
2002
2003
2002

COMMON STOCK DATA                  
  Earnings Per Share (before cumulative effect of                  
     change in accounting principles)                  
     Basic    
$0.05
 
$0.27
 
$0.94
 
$1.32
     Diluted    
$0.05
 
$0.27
 
$0.94
 
$1.31
  Earnings Per Share                  
     Basic    
$0.05
 
$0.27
 
$0.76
 
$1.32
     Diluted    
$0.05
 
$0.27
 
$0.76
 
$1.31
  Dividends Per Share    
$-
 
$-
 
$0.825
 
$0.825
  Weighted-Average Shares Outstanding                  
     Basic    
905
 
834
 
901
 
817
     Diluted    
907
 
834
 
902
 
820
                     

INCOME                  
  Operating Revenues    
$5,539
 
$3,982
 
$17,112
 
$10,907
       
 
 
 
  Earnings Before Interest and Taxes (EBIT)    
352
 
666
 
2,346
 
2,493
  Interest Expense    
391
 
314
 
1,072
 
786
  Minority Interest (Benefit) Expense (a)    
(10)
 
14
 
102
 
108
  Income Tax (Benefit) Expense    
(78)
 
108
 
312
 
513
  Cumulative Effect of Change in Accounting Principles,    
-
 
-
 
(162)
 
-
     net of tax and minority interest    
 
 
 
                     
  Net Income    
49
 
230
 
698
 
1,086
  Dividends and Premiums on Redemptions of    
3
 
3
 
13
 
10
     Preferred and Preference Stock    
 
 
 
                     
  Earnings Available for Common Stockholders    
$46
 
$227
 
$685
 
$1,076
       
 
 
 

CAPITALIZATION                  
     Common Equity            
38%
 
35%
     Preferred Stock (b)            
0%
 
1%
     Trust Preferred Securities (b)            
0%
 
3%
               
 
  Total Common Equity and Preferred Securities            
38%
 
39%
  Minority Interests (b)            
4%
 
5%
  Total Debt (b)            
58%
 
56%
                     

Fixed Charges Coverage, using SEC guidelines            
2.0
 
2.3
Total Debt (b)            
$23,964
 
$22,869
Book Value Per Share            
$17.57
 
$16.90
Actual Shares Outstanding            
907
 
836

CAPITAL AND INVESTMENT EXPENDITURES  
     Franchised Electric
$282
 
$300
 
$768
 
$867
     Natural Gas Transmission (c)
172
 
235
 
603
 
2,525
     Field Services
32
 
66
 
94
 
250
     Duke Energy North America
11
 
237
 
268
 
1,758
     International Energy
18
 
133
 
61
 
350
     Other Operations (d)
78
 
105
 
226
 
410
     Other
23
 
10
 
26
 
10
     Cash acquired in acquisitions
-
 
-
 
-
 
(77)
   
 
 
 
Total Capital and Investment Expenditures
$616
 
$1,086
 
$2,046
 
$6,093
   
 
 
 
   

EBIT BY BUSINESS SEGMENT    
     Franchised Electric    
$436
 
$575
 
$1,206
 
$1,347
     Natural Gas Transmission    
280
 
288
 
1,009
 
867
     Field Services    
53
 
23
 
162
 
99
     Duke Energy North America    
(411)
 
(107)
 
(177)
 
143
     International Energy    
44
 
(41)
 
209
 
73
     Other Operations (d)    
21
 
30
 
13
 
175
     Other    
(89)
 
(124)
 
(200)
 
(362)
       
 
 
 
Total Segment and Other EBIT    
334
 
644
 
2,222
 
2,342
     EBIT Attributable to:                  
        Minority Interest Expense (Benefit)    
5
 
(7)
 
97
 
49
        Third Party Interest Income    
6
 
32
 
17
 
88
        Foreign Currency Remeasurement Gain (Loss)    
7
 
(3)
 
10
 
14
       
 
 
 
Total EBIT    
$352
 
$666
 
$2,346
 
$2,493
       




   
(a) Includes financing expenses related to securities of subsidiaries of $33 million for the three months ended September 30, 2002, and $55 million and $103 million for the nine months ended September 30, 2003 and 2002, respectively.
(b) Upon the implementation of SFAS No. 150 (effective July 1, 2003), approximately $1.2 billion related to trust preferred securities, preferred stock with sinking fund requirements and minority interests have been reclassified to debt.
(c) 2002 nine months ended amount includes $1.7 billion (net of cash acquired) paid to Westcoast Energy shareholders related to the acquisition.
(d) Beginning in 2003, Other Energy Services and Duke Ventures were combined into Other Operations.


 


SEPTEMBER 2003
QUARTERLY HIGHLIGHTS
(unaudited)
                     
       
Three Months Ended
Nine Months Ended
       
September 30,
September 30,
       
 
(In millions, except where noted)    
2003
2002
2003
2002

FRANCHISED ELECTRIC    
  Operating Revenues    
$1,357
$1,460
$3,718
$3,735
  Operating Expenses    
928
898
2,550
2,434
  Gain on Sales of Other Assets, net    
1
-
2
-
  Other Income, net of Expenses    
6
13
36
46
       



  EBIT    
$436
$575
$1,206
$1,347
       



  Sales, GWh    
22,163
23,251
63,621
63,190
       

NATURAL GAS TRANSMISSION    
  Operating Revenues    
$641
$628
$2,301
$1,699
  Operating Expenses    
393
375
1,381
954
  Gain on Sales of Other Assets, net    
3
-
4
-
  Other Income, net of Expenses (a)    
38
44
117
143
  Minority Interest Expense    
9
9
32
21
       



  EBIT    
$280
$288
$1,009
$867
       



  Proportional Throughput, TBtu    
679
802
2,502
2,177
       

FIELD SERVICES    
  Operating Revenues    
$1,841
$1,318
$6,218
$3,828
  Operating Expenses    
1,772
1,303
6,040
3,735
  Gain on Sales of Other Assets, net    
1
-
27
-
  Other Income, net of Expenses (b)    
14
16
53
35
  Minority Interest Expense    
31
8
96
29
       



  EBIT    
$53
$23
$162
$99
       



  Natural Gas Gathered and            
  Processed/Transported, TBtu/day    
7.7
8.4
7.9
8.4
  Natural Gas Liquids Production, MBbl/d    
366.2
395.1
367.6
392.0
  Average Natural Gas Price per MMBtu    
$4.97
$3.18
$5.66
$2.97
  Average Natural Gas Liquids Price per Gallon    
$0.49
$0.39
$0.52
$0.36
       

DUKE ENERGY NORTH AMERICA    
  Operating Revenues    
$1,141
$486
$3,499
$1,153
  Operating Expenses    
1,517
634
3,844
1,054
  Loss on Sales of Other Assets, net (c)    
(84)
-
(84)
-
  Other Income, net of Expenses (d)    
11
13
207
29
  Minority Interest Benefit    
(38)
(28)
(45)
(15)
       



  EBIT    
$(411)
$(107)
$(177)
$143
       



  Actual Plant Production, GWh (e)    
9,130
9,662
18,750
19,188
  Proportional MW Capacity in Operation    
15,836
14,211
       

INTERNATIONAL ENERGY    
  Operating Revenues    
$295
$203
$1,043
$711
  Operating Expenses    
256
265
853
679
  Loss on Sales of Other Assets, net    
(1)
-
(1)
-
  Other Income, net of Expenses    
9
26
33
57
  Minority Interest Expense    
3
5
13
16
       



  EBIT    
$44
$(41)
$209
$73
       



  Sales, GWh    
4,301
5,637
14,378
15,583
  Proportional MW Capacity in Operation    
4,585
4,825
  Proportional Maximum Pipeline Capacity in Operation, MMcf/d    
363
363
       

OTHER OPERATIONS    
  Operating Revenues    
$454
$241
$1,445
$588
  Operating Expenses    
426
243
1,440
552
  (Loss) Gain on Sales of Other Assets, net    
(23)
(5)
(43)
41
  Other Income, net of Expenses    
16
36
52
96
  Minority Interest (Benefit) Expense    
-
(1)
1
(2)
       



  EBIT    
$21
$30
$13
$175
       




(a) For the nine months ended September 30, 2003, other income includes approximately $61 million gain on sale of the Alliance/Aux Sable and Foothills equity investments.
(b) For the nine months ended September 30, 2003, other income includes approximately $11 million gain on sale of TEPPCO Class B shares.
(c) For 2003, amount includes approximately $18 million loss on the anticipated sale of 25% interest in Vermillion and $66 million loss on the anticipated sale of turbines.
(d) For the the nine months ended September 30, 2003, other income includes approximately $178 million gain on sale of the American Ref-Fuel Company equity investment.
(e) Represents 100% of GWh.

 


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share amounts)
             
             
     
Three Months Ended
September 30,
Nine Months Ended
September 30,
     
     

     
2003
2002
2003
2002
     




Operating Revenues          

Sales of natural gas and petroleum products

 
$2,888 
$1,184 
$9,953 
$3,586 

Generation, transmission and distribution of electricity

 
1,953 
2,238 
5,187 
5,407 

Transportation and storage of natural gas

 
447 
429 
1,279 
1,202 

Other

 
251 
131 
693 
712 
     




          Total operating revenues

5,539 
3,982 
17,112 
10,907 
     




Operating Expenses          

Natural gas and petroleum products purchased

 
2,614 
944 
8,788 
2,827 

Fuel used in electric generation

 
567 
553 
1,265 
1,180 

Net interchange and purchased power

 
138 
291 
381 
521 

Operation and maintenance

 
1,003 
1,090 
2,684 
2,750 

Depreciation and amortization

 
487 
425 
1,390 
1,166 

Property and other taxes

 
127 
139 
402 
398 

Impairment of goodwill

 
254 
254 
     




          Total operating expenses

5,190 
3,442 
15,164 
8,842 
     




(Loss) Gain on Sales of Other Assets, net  
(104)
(4)
(96)
42 
     




Operating Income  
245 
536 
1,852 
2,107 
     




             
Other Income and Expenses          

Equity in earnings of unconsolidated affiliates

 
35 
57 
85 
166 

Gain on sale of equity investments

 
33 
18 
266 
32 

Other income and expenses, net

 
39 
55 
143 
188 
     




          Total other income and expenses

107 
130 
494 
386 
             
Interest Expense  
391 
314 
1,072 
786 
Minority Interest (Benefit) Expense  
(10)
14 
102 
108 
     




             
             
(Loss) Earnings Before Income Taxes  
(29)
338 
1,172 
1,599 
Income Tax (Benefit) Expense  
(78)
108 
312 
513 
     




             
Income Before Cumulative Effect of Change in Accounting Principles
49 
230 
860 
1,086 
Cumulative Effect of Change in Accounting Principles, net of tax and minority interest
(162)
     




             
Net Income  
49 
230 
698 
1,086 
Dividends and Premiums on Redemptions of Preferred and Preference Stock
13 
10 
     




             
Earnings Available For Common Stockholders  
$46 
$227 
$685 
$1,076 
     




             
Common Stock Data          

Weighted-average shares outstanding

 
905 
834 
901 
817 

Earnings per share (before cumulative effect of change in accounting principles)

         

       Basic

$0.05 
$0.27 
$0.94 
$1.32 

       Diluted

$0.05 
$0.27 
$0.94 
$1.31 

Earnings per share

         

       Basic

$0.05 
$0.27 
$0.76 
$1.32 

       Diluted

$0.05 
$0.27 
$0.76 
$1.31 

Dividends per share

 
$- 
$- 
$0.825 
$0.825 
             
             
Duke Energy's reported results for the three and nine-month periods ended September 30, 2003 do not include any effects for the application of Statement of Financial Accounting Standards (SFAS) No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" to minority interests in consolidated limited life entities, as the Financial Accounting Standards Board was scheduled to re-evaluate the applicability of SFAS No. 150 to these financial instruments at its October 29, 2003 meeting. The resolution of this aspect of SFAS No. 150 is not expected to have an impact on Duke Energy's consolidated EBIT, and all other provisions of SFAS No. 150 have been adopted by Duke Energy effective July 1, 2003. Duke Energy is still assessing the impact of this aspect of SFAS No. 150 to its consolidated financial statements.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
           
           
Nine Months Ended
           
September 30,
           
           
2003
2002
     
 
CASH FLOWS FROM OPERATING ACTIVITIES          
  Net income    
$698
 
$1,086
  Adjustments to reconcile net income to net cash provided by          
     operating activities:          
     Depreciation and amortization (including amortization of nuclear fuel)    
1,493
 
1,269
     Cumulative effect of change in accounting principles    
162
 
-
     Impairment charges    
254
 
274
     Net realized and unrealized mark-to-market and hedging transactions    
12
 
288
     Gains on sale of equity investments and other assets    
(170)
 
(74)
     Changes in working capital and other    
430
 
422
       
 
        Net cash provided by operating activities    
2,879
 
3,265
           
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES          
  Capital and investment expenditures, net    
(2,046)
 
(4,386)
  Acquisition of Westcoast Energy Inc., net of cash acquired    
-
 
(1,707)
  Proceeds from the sale of equity investments and other assets          
  and collections on notes receivable    
1,540
 
309
  Contribution to company-sponsored pension plan    
(181)
 
-
  Other    
(124)
 
(5)
       
 
        Net cash used in investing activities    
(811)
 
(5,789)
           
 
                 
CASH FLOWS FROM FINANCING ACTIVITIES          
    Proceeds from:          
       Issuance of long-term debt    
2,819
 
3,447
       Issuance of common stock related to employee benefit plans    
214
 
265
    Payments for the redemption of long-term debt, guaranteed          
       preferred beneficial interests and preferred member interests,          
       and net pay down of commercial paper and notes payable    
(3,333)
 
(605)
    Dividends paid    
(786)
 
(697)
    Other    
(88)
 
297
         
 
          Net cash (used in) provided by financing activities    
(1,174)
 
2,707
           
 
                 
    Net increase in cash and cash equivalents      
894
 
183
    Cash and cash equivalents at beginning of period      
857
 
290
           
 
    Cash and cash equivalents at end of period      
$1,751
 
$473
           
 


CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions)
       
   
September 30,
December 31,
   
2003
2002
   

ASSETS    
       
Current Assets    

   Cash and cash equivalents

$1,751 
$857 

   Receivables

3,219 
4,796 

   Inventory

1,279 
1,134 

   Unrealized gains on mark-to-market and hedging transactions

2,295 
2,144 

   Other

844 
952 
   

      Total current assets

9,388 
9,883 
   

       
Investments and Other Assets    

   Investments in unconsolidated affiliates

1,490
2,015 

   Nuclear decommissioning trust funds

838 
708 

   Goodwill, net of accumulated amortization

3,870 
3,747 

   Notes receivable

358 
589 

   Unrealized gains on mark-to-market and hedging transactions

2,880 
2,480 

   Assets held for sale

257 
   Other
1,103 
1,645 
   

        Total investments and other assets
10,796 
11,184 
   

       
Property, Plant and Equipment    

   Cost

51,145 
48,677 

   Less accumulated depreciation and amortization

13,451 
12,458 
   

        Net property, plant and equipment
37,694 
36,219 
   

       
Regulatory Assets and Deferred Debits    

   Deferred debt expense

266 
263 

   Regulatory asset related to income taxes

1,015 
936 

   Other

1,006 
460 
   

        Total regulatory assets and deferred debits
2,287 
1,659 
   

       

Total Assets

$60,165 
$58,945 
   

       
       
Duke Energy's reported results for the three and nine-month periods ended September 30, 2003 do not include any effects for the application of Statement of Financial Accounting Standards (SFAS) No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" to minority interests in consolidated limited life entities, as the Financial Accounting Standards Board was scheduled to re-evaluate the applicability of SFAS No. 150 to these financial instruments at its October 29, 2003 meeting. The resolution of this aspect of SFAS No. 150 is not expected to have an impact on Duke Energy's consolidated EBIT, and all other provisions of SFAS No. 150 have been adopted by Duke Energy effective July 1, 2003. Duke Energy is still assessing the impact of this aspect of SFAS No. 150 to its consolidated financial statements.

 



CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
         
         
     
September 30,
December 31,
     
2003
2002
 

LIABILITIES AND COMMON STOCKHOLDERS' EQUITY    
         
Current Liabilities        

   Accounts payable

 
$2,448 
$3,620 

   Notes payable and commercial paper

 
494 
915 

   Taxes accrued

 
560 
156 

   Interest accrued

 
306 
310 

   Current maturities of long-term debt and preferred stock

 
756 
1,331 

   Unrealized losses on mark-to-market and hedging transactions

 
1,843 
1,918 

   Other

 
1,472 
1,770 
 

      Total current liabilities

7,879 
10,020 
 

     
Long-term Debt    
22,714 
20,221 
 

     
Deferred Credits and Other Liabilities  

   Deferred income taxes

 
5,058 
4,834 

   Investment tax credit

 
168 
176 

   Unrealized losses on mark-to-market and hedging transactions

2,235 
1,548 

   Other

 
4,329 
3,733 
 

      Total deferred credits and other liabilities

11,790 
10,291 
 

     
Commitments and Contingencies  
     
Guaranteed Preferred Beneficial Interests in Subordinated  

   Notes of Duke Energy Corporation or Subsidiaries

 
1,408 
 

     
Minority Interests    
1,716 
1,904 
 

     
Preferred and Preference Stock  

   Preferred and preference stock with sinking fund requirements

 
23 

   Preferred and preference stock without sinking fund requirements

 
134 
134 
 

          Total preferred and preference stock

134 
157 
 

     
Common Stockholders' Equity  

   Common stock, no par, 2 billion shares authorized; 907 million and

      895 million shares outstanding as of September 30, 2003 and

   
      December 31, 2002, respectively  
9,448 
9,236 

   Retained earnings

 
6,336 
6,417 

   Accumulated other comprehensive income (loss)

 
148 
(709)
 

          Total common stockholders' equity

15,932 
14,944 
 

     

Total Liabilities and Common Stockholders' Equity

 
$60,165 
$58,945 
 

       

 

 

 

Supplemental Disclosures
Quarter Ended September 30, 2003

 
                 
                   
                   
Duke Energy Corporation                

     
3Q03
           
     
           
Mark-to-market Portfolio (in billions)  
$0.2
           
                   
Daily Value at Risk (DvaR) (in millions)                
                   
     95% Confidence Level, One-Day Holding Period, Two-Tailed                
        Average for the Period  
$11
           
                   
                   
                   
Duke Energy North America                

(in millions unless stated otherwise)  
Q-T-D September 30, 2003
                   
     
Proprietary
Structured
Owned
Merchant Energy Gross Margin  
Trading
Contracts
Assets
Total

 
 
 
 
     Mark-to-market gross margin (loss)  
$(2)
 
$(65)
 
$7
 
$(60)
     Accrual gross margin (loss)  
n/a
 
(11)
 
175
 
164
     
 
 
 
  Total Gross Margin  
$(2)
 
$(76)
 
$182
 
104
     
 
 
   
                   
  Reconciliation to Segment EBIT:                
        Plant depreciation              
(64)
        Plant operating and maintenance expenses              
(94)
        General and administrative and other expenses              
(60)
        Minority interest              
38
        Goodwill impairment              
(254)
        Gain (loss) on sale of other assets              
(81)
                 
  DENA Segment EBIT              
$(411)
                 
                   
                   
Owned Assets - Merchant Plant Production
               
and Hedging Information
 
2003 *
 
2004
 
2005
   
 
 
 
 
   
  Estimated available production (millions of MWh)  
24
 
101
 
107
   
        Combined cycle  
19
 
78
 
84
   
        Peaker units  
5
 
23
 
23
   
                   
  Estimated production (millions of MWh)  
5
 
30
 
36
   
        Combined cycle  
5
 
29
 
34
   
        Peaker units  
-
 
1
 
2
   
                   
  Hedges                
        Estimated production hedged  
142%
 
98%
 
74%
   
        Average price hedged ($/MWh)  
$56
 
$42
 
$42
   
                   
  * Information for 2003 is for the remainder of the year only (October - December).                

 

 

Supplemental Disclosures
Quarter Ended September 30, 2003

 
Duke Energy North America (continued)                          

(in millions)                          
                             
Maturity/Source of Fair Value of
Over 5
Total Fair
Energy Contract Net Assets
2003
2004
2005
2006
2007
Years
Value


 
 
 
 
 
 
Proprietary Trading                          
  Actively quoted prices and other external sources
$15
 
$135
 
$10
 
$-
 
$-
 
$6
 
$166
  Modeled
(4)
 
(1)
 
14
 
17
 
1
 
(4)
 
23
   
 
 
 
 
 
 
   
$11
 
$134
 
$24
 
$17
 
$1
 
$2
 
$189
   
 
 
 
 
 
   
Structured Contracts                          
  Actively quoted prices and other external sources
$32
 
$55
 
$(10)
 
$(13)
 
$(1)
 
$(2)
 
$61
  Modeled
(9)
 
(43)
 
(11)
 
24
 
12
 
12
 
(15)
   
 
 
 
 
 
 
   
$23
 
$12
 
$(21)
 
$11
 
$11
 
$10
 
$46
   
 
 
 
 
 
   
Owned Assets                          
  Actively quoted prices and other external sources
$182
 
$330
 
$155
 
$45
 
$-
 
$-
 
$712
  Modeled
-
 
-
 
41
 
88
 
85
 
147
 
361
   
 
 
 
 
 
 
   
$182
 
$330
 
$196
 
$133
 
$85
 
$147
 
$1,073
   
 
 
 
 
 
   
                           

   
Total Fair Value of Energy Contract Net Assets *
$1,308
                           
                             
 
* Total Fair Value of Energy Contract Net Assets represents the combination of amounts presented as assets and (liabilities) related to unrealized gains or losses on mark-to-market and hedging transactions for Duke Energy North America.
 
Terms of Reference

 
Estimated Available Production
Represents the amount of electric power capable of being generated from owned merchant assets, after adjusting for scheduled maintenance and outage factors. For simple cycle facilities, only peak demand periods were included in this calculation.
                             
Estimated Production
Represents the amount of power expected to be sold in a future period. This figure is based on economic projections modeled by Duke Energy personnel.
 
Estimated Production Hedged
Represents the portion of estimated production which has been sold.
 
Owned Assets
Represents activity around energy assets owned or leased, including hedges of power sales and fuel purchase requirements and tolls, transmission, transportations and storage contracts that hedge owned assets. Normal purchases and sales associated with such assets are included in the Merchant Energy Gross Margin table, yet excluded from the Maturity/Sources of Fair Value of Energy Contract Net Assets table. Economic hedges of Owned Assets that do not meet hedge accounting standards will still be classified as Owned Assets in the Merchant Energy Gross Margin table.
 
Proprietary Trading
Standardized contracts entered into to take a market view, capture market price changes or put capital at risk.
 
Structured Contracts

Non-standard contracts not associated with owned or leased assets and involving significant tailoring of terms to meet customer needs, and associated hedges. This category includes tolls, transmission contracts, transportation contracts and storage contracts, except those that hedge Owned Assets. Economic hedges of Structured Contracts that do not meet hedge accounting standards will still be classified as Structured Contracts in the Merchant Energy Gross Margin table.