DUKE ENERGY REPORTS YEAR-END AND FOURTH QUARTER
2003 RESULTS
- Regulated units and Field Services show strong operational
and financial results; merchant operations produce a loss
- Non-strategic asset sales over $2 billion, exceed 2003 target
- $2.2 billion in debt reduction achieved in 2003, including
$387 million in assumed debt, exceeds 2003 target
- $3.4 billion pre-tax charges reflect actions taken in fourth
quarter to reduce exposure to merchant generation and international
business
- Annual dividend maintained at $1.10 per share
CHARLOTTE, N.C. – Reflecting previously announced special items,
Duke Energy reported a net loss in 2003 of $1.3 billion, or ($1.48)
per share, compared to net income of $1.0 billion, or $1.22 per share
in 2002.
Ongoing earnings per share (EPS) for 2003, which excludes special items,
was $1.28 versus $1.88 in ongoing EPS in 2002.
“To establish a stable platform for future growth, Duke Energy
sold non-strategic assets, cut expenses and paid down debt in 2003 –
while still funding capital expenditures at our core regulated businesses,”
said Paul Anderson, Duke Energy chairman and chief executive officer.
“We also announced our intention to exit the Australian and European
markets, as well as the merchant generation business in the southeast
United States.
“Going forward, we expect our $1.10 dividend and modest earnings
growth to provide an attractive return for long-term investors,”
he added. “Reducing debt by $2.2 billion in 2003 was an important
achievement in strengthening Duke Energy’s financial position.
This effort will continue, as we expect to reduce debt between $3.5
billion and $4 billion during 2004.”
In fourth quarter 2003, Duke Energy reported a loss of ($2.23) per share,
or a $2.0 billion loss, compared to a loss of ($0.06) per share, or a $52
million loss, in fourth quarter 2002. Excluding special items, ongoing earnings
per share for fourth quarter 2003 were $0.22 versus $0.32 in fourth quarter
2002.
Special items for the quarter include:
($ in Millions) |
Pre-Tax Amount |
Tax Effect |
2003 EPS Impact |
2002 EPS Impact |
| Fourth Quarter 2003 |
- DENA plant impairments and DETM charges
|
($2,826) |
$1,046 |
($1.97) |
-- |
- DENA redesignation of hedging contracts to mark-to-market
|
(262) |
97 |
(0.18) |
-- |
- Charges and impairments for Australia and Europe
|
(292) |
69 |
(0.25) |
-- |
- Severance and related charges
|
(48) |
18 |
(0.03) |
-- |
|
-- |
23 |
0.03 |
-- |
- DEI reserve and charges for environmental settlements in Brazil
|
(26) |
10 |
(0.02) |
-- |
- Write-off of risk management system
|
(51) |
19 |
(0.04) |
-- |
|
15 |
(6) |
.01 |
-- |
| Fourth Quarter 2002 |
- Impairment of goodwill at DEI for European gas trading
|
($194) |
-- |
-- |
($0.22) |
- Expenses at Franchised Electric associated with December 2002
ice storm
|
($89) |
35 |
-- |
(0.06) |
- Severance charges, including corporate-level severance of
$18 million
|
($70) |
30 |
-- |
(0.04) |
- Asset impairments at Field Services
|
($28) |
10 |
-- |
(0.02) |
- Information technology system write-off at DENA
|
($24) |
9 |
-- |
(0.02) |
- Previously announced settlement with North Carolina Utility
Commission and Public Service Commission of South Carolina
|
($19) |
7 |
-- |
(0.01) |
- Demobilization costs at DENA
|
($10) |
4 |
-- |
(0.01) |
| TOTAL EPS IMPACT |
|
|
($2.45) |
($0.38) |
| EPS, as reported |
|
|
($2.23) |
($0.06) |
| EPS, ongoing |
|
|
$0.22 |
$0.3 |
Special items for 2003:
| ($ in Millions) |
Pre-Tax Amount |
Tax Effect |
2003 EPS Impact |
2002 EPS Impact |
| Subtotal – 4th quarter (previously listed items) |
|
|
($2.45) |
($0.38) |
| |
| Prior 2003 special items |
|
170 |
(60) |
0.12 |
|
- Tax benefit on 2002 goodwill impairment of International Energy
European gas trading
|
-- |
52 |
0.06 |
|
- Cumulative effect of accounting changes
|
(256) |
94 |
(0.18) |
|
|
(254) |
90 |
(0.18) |
|
- Severance associated with work force reductions
|
(105) |
37 |
(0.08) |
|
- Settlement with the South Carolina Public Service Commission
|
(46) |
18 |
(0.03) |
|
- Settlement with the Commodities Futures Trading Commission
|
(17) |
-- |
(0.02) |
|
| |
| Special items yearly total for 2003 |
|
|
($2.76) |
|
| EPS, as reported |
|
|
($1.48) |
|
| EPS, ongoing |
|
|
$1.28 |
|
| |
| Other 2002 special items |
| Termination of certain turbines on order, plus write-down of other
uninstalled turbines |
(163) |
59 |
|
(0.13) |
| Write-off of site development costs, primarily in California and Brazil |
(80) |
30 |
|
(0.06) |
| Demobilization costs related to deferral of three merchant power projects |
(12) |
4 |
|
(0.01) |
| Severance costs associated with reduction in workforce |
(33) |
10 |
|
(0.04) |
| Partial impairment of a merchant plant as a result of current market
outlook |
(31) |
9 |
|
(0.04) |
| Special items yearly total for 2002 |
|
|
|
($0.66) |
| EPS, as reported |
|
|
|
$1.22 |
| EPS, ongoing |
|
|
|
$1.88
|
BUSINESS UNIT RESULTS
At the end of 2003, Duke Energy moved the results for certain business
segments from EBIT to a separate line on the income statement called
“Loss from Discontinued Operations.” The amounts reported
as discontinued operations are reported net of tax. The business units
affected by this reclassification are International Energy, Field Services
and Other Operations. All reported periods have been restated.
Franchised Electric
Fourth quarter 2003 EBIT from Franchised Electric was $197 million, compared
to fourth quarter 2002 EBIT of $248 million. Milder weather and lower bulk
power sales led to a 6.7 percent decrease in overall electric sales. During
the quarter, Franchised Electric expensed $28 million in clean air amortization.
Also during the quarter, it recorded $32 million of severance and related
costs. In fourth quarter 2002, Franchised Electric incurred $89 million in
ice storm-related costs.
Year-end 2003 EBIT for Franchised Electric was $1.4 billion, compared to $1.6
billion in 2002.
During 2003, Franchised Electric successfully secured 20-year license
extensions for the McGuire and Catawba nuclear stations. It also completed
reactor vessel head replacements at two Oconee Nuclear Station units,
completed a steam generator replacement at one of the Oconee Nuclear
Station units, and posted record generation output for its fossil-fired
power plants. Overall electric customers grew by more than 43,000 in
2003.
Natural Gas Transmission
Duke Energy Gas Transmission (DEGT) reported fourth quarter 2003 EBIT of $308
million, compared to $294 million in fourth quarter 2002. Gains of $16 million
from asset sales and increased earnings from new projects, partially offset
by foregone earnings on assets sold, drove this increase. During the quarter,
DEGT had $11 million in severance and related charges.
Year-end 2003 EBIT for DEGT was $1.3 billion – an increase from
$1.2 billion in 2002.
For the year, more than 99 percent of customers in the northeast United
States whose transportation contracts permitted notice of termination,
decided to renew. DEGT also placed in service several projects totaling
850 million cubic feet per day (mmcf/d) of pipeline capacity.
Duke Energy North America
Duke Energy North America (DENA) reported an EBIT loss of $3.16 billion in
fourth quarter 2003, compared to EBIT of $26 million in fourth quarter 2002.
Special items for the quarter totaled $3.1 billion, and included the decision
to: a) sell DENA’s merchant plants in the southeast United States, b)
reduce DENA’s interest in deferred plants, c) wind down its trading
and marketing joint venture with ExxonMobil and d) redesignate certain hedging
contracts to mark-to-market. Also included in the special items is $5 million
in severance and related costs.
Excluding special items, DENA had a fourth quarter EBIT loss of $74
million compared to ongoing EBIT of $63 million in fourth quarter 2002.
Lower spark spreads and increased depreciation led to lower results.
Year-end 2003 EBIT for DENA was a loss of $3.3 billion, compared with
positive EBIT of $169 million in 2002.
International Energy
As a result of the decision to exit Europe and sell its Australian assets,
the Duke Energy International (DEI) reporting segment will now include only
operations in Latin America and its investment in National Methanol.
For fourth quarter 2003, DEI reported EBIT from continuing operations
of $36 million, compared to $23 million in fourth quarter 2002. Fourth
quarter results for 2003 include improved operational performance due
to higher margins, successful re-contracting in Brazil and lower expenses
throughout Latin America. DEI had a special item of $26 million for
a reserve and charges for estimated environmental settlements in Brazil.
Year-end EBIT for DEI was $210 million versus $102 million in 2002.
Field Services
The Field Services business segment, which represents Duke Energy's 70-percent
interest in Duke Energy Field Services, reported fourth quarter 2003 EBIT
of $52 million compared to $49 million in fourth quarter 2002. The favorable
impact of higher natural gas liquids (NGL) prices during the period was offset
by the effects of hedging results related to the price movements of NGLs,
higher natural gas prices and increased general and administrative costs.
The higher general and administrative costs included $4 million in severance
and related charges.
Year-end EBIT for Field Services was $192 million compared to $148
million 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 $96 million in fourth quarter 2003, compared to
$91 million in fourth quarter 2002.
Year-end EBIT in 2003 for Other Operations was $153 million compared
to $239 million in year-end EBIT in 2002.
Discontinued Operations
Discontinued Operations showed a fourth quarter 2003 after-tax loss of $215
million – due largely to a $223 million after-tax charge to complete
the exit from the European market and the divestiture of DEI’s Australian
assets. That compares with a fourth quarter 2002 after-tax loss of $266
million. The after-tax loss for Discontinued Operations in 2003 was $156
million versus an after-tax loss of $261 million in 2002.
INTEREST EXPENSE
Interest expense was $354 million for fourth quarter 2003, compared
to $344 million for fourth quarter 2002. This increase was primarily
due to lower capitalized interest of $15 million and $23 million of
interest associated with the reclassification of certain trust preferred
securities from minority interest to long-term debt, partially offset
by lower borrowing costs in the quarter.
INCOME TAX
An income tax benefit of $707 million for 2003 results primarily from
the large write-offs in fourth quarter 2003.
CASH FLOW
For the 12 months ending Dec. 31, 2003, cash flow from operations was
$3.9 billion, compared to $4.5 billion for the 12 months ending Dec.
31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Duke Energy's consolidated capital structure as of Dec. 31, 2003, including
short-term debt, was 58 percent debt, 37 percent common equity and 5
percent minority interests.
Under various credit facilities, Duke Energy, Duke Capital and other
subsidiaries had the ability to borrow up to $3.4 billion as of Dec.
31, 2003. The companies had borrowings and letters of credit outstanding
under these programs of approximately $1.1 billion as of Dec. 31, 2003,
resulting in unused capacity of approximately $2.3 billion. The company
also had approximately $1.2 billion in cash and cash equivalents as
of Dec. 31, 2003.
ADDITIONAL INFORMATION
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 fourth quarter 2003 earnings information
Web site at: http://www.duke-energy.com/investors/financial/latest/default.asp.
NON-GAAP FINANCIAL MEASURES
The primary performance measure used by management to evaluate segment
performance is EBIT from continuing operations, which at the segment
level represents all profits from continuing operations (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 from continuing operations is a good indicator of each segment’s
operating performance as it represents the results of our ownership
interests in continuing operations without regard to financing methods
or capital structures.
On a consolidated basis, EBIT from continuing operations 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 from continuing operations
as one of the performance measures on a consolidated basis follows the
use of EBIT from continuing operations for assessing segment performance,
and we believe EBIT from continuing operations is used by our investors
as a supplemental financial measure in the evaluation of our consolidated
results of operations.
EBIT from continuing operations should not be considered an alternative
to, or more meaningful than, net income, income from continuing operations,
operating income or cash flow as determined in accordance with generally
accepted accounting principles (GAAP). Duke Energy’s EBIT from
continuing operations may not be comparable to a similarly titled measure
of another company.
Duke Energy’s management uses ongoing EPS, which represents income
from continuing operations adjusted for special items as one of the
measures to evaluate operations of the company. Special items represent
certain charges which management believes will not be recurring on a
regular basis. Management believes that the presentation of ongoing
EPS provides useful information to investors, as it allows them to more
accurately compare the company’s ongoing performance across all
periods.
| Debt reconciliation to the Condensed Cash
Flow Statement -- $ in millions |
| Issuances of long-term debt |
$3,009 |
| Payments for the redemption of long-term debt, guaranteed preferred
beneficial interests and preferred member interests and net paydown
of commercial paper and notes payable |
(4,839) |
| Assumed debt from asset sales |
(387) |
| Total debt reduction |
($2,217)
|
Duke Energy is a diversified energy company with a portfolio of natural
gas and electric businesses, both regulated and unregulated, and an affiliated
real estate company. Duke Energy supplies, delivers and processes energy
for customers in North America and selected international markets. In 2004,
the company celebrates a century of service with the 100th anniversary of
its electric utility Duke Power. Headquartered in Charlotte, N.C., Duke
Energy 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: 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 http://www.duke-energy.com/investors/financial/latest/default.asp
or by dialing 800/946-0786 in the United States or 719/457-2662 outside
the United States. The confirmation code is 474733. 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 474733. The international replay number is 719/457-0820, confirmation
code 474733. A replay and transcript also will be available by accessing
the investors' section of the company’s Web site http://www.duke-energy.com/investors/financial/latest/default.asp.
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; changes
in environmental and other laws and regulations to which Duke Energy
and its subsidiaries are subject or other external factors over which
Duke Energy has no control; 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, interest rates and foreign currency
exchange 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 and the effect of accounting pronouncements
issued periodically by accounting standard-setting bodies; 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.
| Media Contact: |
Randy Wheeless |
| Phone: |
704/382-8379 |
| 24 Hour Phone: |
704/382-8333 |
| Email: |
crwheele@duke-energy.com |
| Analyst Contact: |
Greg Ebel |
| Phone: |
704/382-8118 |
 |
DECEMBER 2003
QUARTERLY HIGHLIGHTS
(unaudited) |
| |
|
Three Months Ended
December 31,
|
Twelve Months Ended
December 31,
|
| (In millions, except where noted) |
2003 |
2002 |
2003 |
2002 |
|
| COMMON STOCK DATA |
|
|
|
|
| (Loss) Earnings Per Share (from continuing operations) |
|
|
|
|
| |
Basic |
$(1.99) |
$0.24 |
$(1.13) |
$1.53 |
| |
Diluted |
$(1.99) |
$0.24 |
$(1.13) |
$1.53 |
| Loss Per Share (from discontinued operations) |
|
|
|
|
| |
Basic |
$(0.24) |
$(0.30) |
$(0.17) |
$(0.31) |
| |
Diluted |
$(0.24) |
$(0.30) |
$(0.17) |
$(0.31) |
| (Loss) Earnings Per Share (before cumulative effect of
change in accounting principles) |
|
|
|
|
| |
Basic |
$(2.23) |
$(0.06) |
$(1.30) |
$1.22 |
| |
Diluted |
$(2.23) |
$(0.06) |
$(1.30) |
$1.22 |
| (Loss) Earnings Per Share |
|
|
|
|
| |
Basic |
$(2.23) |
$(0.06) |
$(1.48) |
$1.22 |
| |
Diluted |
$(2.23) |
$(0.06) |
$(1.48) |
$1.22 |
| Dividends Per Share |
$0.275 |
$0.275 |
$1.10 |
$1.10 |
| Weighted-Average Shares Outstanding |
|
|
|
|
| |
Basic |
908 |
892 |
903 |
836 |
| |
Diluted |
908 |
893 |
903 |
838 |
|
| INCOME |
| Operating Revenues |
$5,227
|
$4,852
|
$21,577
|
$15,448
|
| (Loss) Earnings Before Interest and Taxes (EBIT) |
(2,557) |
651 |
(268) |
3,118 |
| Interest Expense |
354 |
344 |
1,380 |
1,097 |
| Minority Interest (Benefit) Expense (a) |
(28) |
9 |
64 |
115 |
| Income Tax (Benefit) Expense |
(1,077) |
84 |
(707) |
611 |
| Loss from Discontinued Operations |
(215) |
(266) |
(156) |
(261) |
Cumulative Effect of Change in Accounting Principles,
net of tax and minority interest |
-
|
-
|
(162)
|
-
|
| Net (Loss) Income |
(2,021) |
(52) |
(1,323) |
1,034 |
| Dividends and Premiums on Redemptions of Preferred and
Preference Stock |
2
|
3
|
15
|
13
|
| (Loss) Earnings Available for Common Stockholders |
$(2,023)
|
$(55)
|
$(1,338)
|
$1,021
|
|
| CAPITALIZATION |
| Common Equity |
|
|
37% |
36% |
| Preferred Stock (b) |
|
|
0% |
1% |
| Trust Preferred Securities (b) |
|
|
0%
|
3%
|
| Total Common Equity and Preferred Securities |
|
|
37% |
40% |
| |
|
|
|
|
|
| Minority Interests (b) |
|
|
5% |
5% |
| Total Debt (b) |
|
|
58% |
55% |
|
| Total Debt (b) |
|
|
$21,952 |
$22,465 |
| Book Value Per Share |
|
|
$15.11 |
$16.70 |
| Actual Shares Outstanding |
|
|
911 |
895 |
|
| CAPITAL AND INVESTMENT EXPENDITURES |
| Franchised Electric |
$262 |
$402 |
$1,030 |
$1,269 |
| Natural Gas Transmission (c) |
163 |
353 |
766 |
2,878 |
| Field Services |
117 |
59 |
211 |
309 |
| Duke Energy North America |
9 |
255 |
277 |
2,013 |
| International Energy |
10 |
62 |
71 |
412 |
| Other Operations (d) |
93 |
81 |
319 |
491 |
| Other |
61 |
(33) |
87 |
(23) |
| Cash acquired in acquisitions |
-
|
-
|
-
|
(77)
|
| Total Capital and Investment Expenditures |
$715
|
$1,179
|
$2,761
|
$7,272
|
|
| EBIT BY BUSINESS SEGMENT |
| Franchised Electric |
$197 |
$248 |
$1,403 |
$1,595 |
| Natural Gas Transmission |
308 |
294 |
1,317 |
1,161 |
| Field Services |
52 |
49 |
192 |
148 |
| Duke Energy North America |
(3,164) |
26 |
(3,341) |
169 |
| International Energy |
36 |
23 |
210 |
102 |
| Other Operations (d) |
96 |
91 |
153 |
239 |
| Other |
(92)
|
(87)
|
(292)
|
(449)
|
| Total Segment and Other EBIT |
(2,567) |
644 |
(358) |
2,965 |
| |
EBIT Attributable to: |
|
|
|
|
| |
Minority Interest (Benefit) Expense |
(21) |
(3) |
65 |
42 |
| |
Third Party Interest Income |
5 |
15 |
20 |
102 |
| |
Foreign Currency Remeasurement Gain (Loss) |
24 |
(3) |
24 |
11 |
| Intercompany EBIT Elimination (e) |
2
|
(2)
|
(19)
|
(2)
|
| Total EBIT |
$(2,557)
|
$651
|
$(268)
|
$3,118
|
(a) Includes financing expenses related to securities of
subsidiaries of $27 million for the three months ended December 31, 2002
and $55 million and $130 million for the twelve months ended December 31,
2003 and 2002, respectively. The expense related to these securities is
now accounted for in interest expense.
(b) As a result of the implementation of SFAS No. 150 and
FIN 46, approximately $900 million related to trust preferred securities
and preferred stock with sinking fund requirements has been reclassified
to debt and remains outstanding. Additionally, debt excludes approximately
$880 million of debt that has been reclassified as liabilities associated
with assets held for sale.
(c) 2002 twelve 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.
(e) Amounts relate to the elimination of intercompany EBIT
that has been reclassified to discontinued operations.
DECEMBER 2003
QUARTERLY HIGHLIGHTS
(unaudited) |
| |
|
Three Months Ended
December 31,
|
Twelve Months Ended
December 31,
|
| (In millions, except where noted) |
2003 |
2002 |
2003 |
2002 |
|
| FRANCHISED ELECTRIC |
|
|
|
|
| |
Operating Revenues |
$1,165 |
$1,153 |
$4,883 |
$4,888 |
| |
Operating Expenses |
983 |
895 |
3,533 |
3,329 |
| |
Gains on Sales of Other Assets, net |
4 |
- |
6 |
- |
| |
Other Income, net of expenses |
11
|
(10)
|
47
|
36
|
| |
EBIT |
$197
|
$248
|
$1,403
|
$1,595
|
| |
|
|
|
|
|
| |
Sales, GWh |
19,207 |
20,593 |
82,828 |
83,783 |
|
| NATURAL GAS TRANSMISSION |
|
|
|
|
| |
Operating Revenues |
$896 |
$765 |
$3,197 |
$2,464 |
| |
Operating Expenses |
588 |
466 |
1,969 |
1,420 |
| |
Gains on Sales of Other Assets, net |
3 |
- |
7 |
- |
| |
Other Income, net of expenses (a) |
8 |
5 |
125 |
148 |
| |
Minority Interest Expense |
11
|
10
|
43
|
31
|
| |
EBIT |
$308
|
$294
|
$1,317
|
$1,161
|
| |
|
|
|
|
|
| |
Proportional Throughput, TBtu |
860 |
983 |
3,362 |
3,160 |
|
| FIELD SERVICES (g) |
|
|
|
|
| |
Operating Revenues |
$1,770 |
$1,623 |
$7,828 |
$5,316 |
| |
Operating Expenses |
1,700 |
1,582 |
7,586 |
5,182 |
| |
(Losses) Gains on Sales of Other Assets, net |
(5) |
- |
(4) |
- |
| |
Other Income, net of expenses (b) |
14 |
25 |
67 |
60 |
| |
Minority Interest Expense |
27
|
17
|
113
|
46
|
| |
EBIT |
$52
|
$49
|
$192
|
$148
|
| |
|
|
|
|
|
| |
Natural Gas Gathered and Processed/Transported, TBtu/day |
7.5 |
8.0 |
7.7 |
8.1 |
| |
Natural Gas Liquids Production, MBbl/d |
364.6 |
388.4 |
365.3 |
388.7 |
| |
Average Natural Gas Price per MMBtu |
$4.58 |
$3.98 |
$5.39 |
$3.22 |
| |
Average Natural Gas Liquids Price per Gallon |
$0.54 |
$0.45 |
$0.53 |
$0.38 |
|
| DUKE ENERGY NORTH AMERICA |
|
|
|
|
| |
Operating Revenues |
$822 |
$399 |
$4,321 |
$1,552 |
| |
Operating Expenses and Impairments (c) |
3,924 |
453 |
7,767 |
1,507 |
| |
Losses on Sales of Other Assets, net (d) |
(124) |
- |
(208) |
- |
| |
Other Income, net of expenses (e) |
(1) |
52 |
206 |
81 |
| |
Minority Interest Benefit |
(63)
|
(28)
|
(107)
|
(43)
|
| |
EBIT |
$(3,164)
|
$26
|
$(3,341)
|
$169
|
| |
|
|
|
|
|
| |
Actual Plant Production, GWh (f) |
5,376 |
5,774 |
24,046 |
24,962 |
| |
Proportional MW Capacity in Operation |
|
|
15,665 |
14,157 |
|
| INTERNATIONAL ENERGY (g) |
|
|
|
|
| |
Operating Revenues |
$105 |
$165 |
$597 |
$743 |
| |
Operating Expenses |
67 |
174 |
406 |
716 |
| |
Losses on Sales of Other Assets, net |
(2) |
- |
- |
- |
| |
Other Income, net of expenses |
2 |
30 |
32 |
85 |
| |
Minority Interest Expense (Benefit) |
2
|
(2)
|
13
|
10
|
| |
EBIT |
$36
|
$23
|
$210
|
$102
|
| |
|
|
|
|
|
| |
Sales, GWh |
4,253 |
5,067 |
18,134 |
18,350 |
| |
Proportional MW Capacity in Operation |
|
|
4,121 |
4,082 |
|
| OTHER OPERATIONS (g) |
|
|
|
|
| |
Operating Revenues |
$647 |
$211 |
$2,061 |
$756 |
| |
Operating Expenses |
560 |
141 |
1,964 |
661 |
| |
Gains on Sales of Other Assets, net |
- |
7 |
- |
32 |
| |
Other Income , net of expenses |
11 |
14 |
59 |
110 |
| |
Minority Interest Expense (Benefit) |
2
|
-
|
3
|
(2)
|
| |
EBIT |
$96
|
$91
|
$153
|
$239
|
(a) For the twelve months ended December 31, 2003, other income includes
approximately $89 million of gains on sale of equity investments, including
Alliance/Aux Sable, Foothills and Northern Border.
(b) For the twelve months ended December 31, 2003, other income includes
approximately $11 million gain on sale of TEPPCO Class B shares.
(c) Includes DENA plant impairments of $2,640 million and redesignation
of power contracts to mark-to-market of $262 million in the fourth quarter
of 2003, and $254 million of goodwill in the third quarter of 2003.
(d) For the twelve months ended December 31, 2003, amount includes approximately
$18 million loss on the anticipated sale of 25% interest in Vermillion,
a $66 million loss on the anticipated sale of turbines and DETM charges
related to the sale of contracts of $127 million.
(e) For the twelve months ended December 31, 2003, other income includes
approximately $178 million gain on sale of the American Ref-Fuel Company
equity investment.
(f) Represents 100% of GWh.
(g) Prior year amounts have been reclassified due to the current year discontinued
operations.
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share amounts)
|
| |
|
|
Years Ended
December 31,
|
| |
|
|
2003
|
2002
|
| Operating Revenues |
| |
Non-regulated electric, natural gas, natural gas liquids,
and other |
$13,609 |
$8,368 |
| |
Regulated electric |
5,026 |
4,880 |
| |
Regulated natural gas |
2,942
|
2,200
|
| |
|
Total Operating Revenues |
21,577
|
15,448
|
| |
|
|
|
|
| Operating Expenses |
| |
Natural gas and petroleum products purchased |
10,616 |
4,695 |
| |
Fuel used in electric generation and purchased power |
2,087 |
2,191 |
| |
Operation and maintenance |
3,959 |
3,441 |
| |
Depreciation and amortization |
1,803 |
1,515 |
| |
Property and other taxes |
527 |
535 |
| |
Impairment and other related charges |
2,956 |
364 |
| |
Impairment of goodwill |
254
|
-
|
| |
|
Total Operating Expenses |
22,202
|
12,741
|
| |
|
|
|
|
| (Losses) Gains on Sales of Other Assets, net |
(199)
|
32
|
| Operating (Loss) Income |
(824)
|
2,739
|
| |
|
|
|
|
| Other Income and Expenses |
| |
Equity in earnings of unconsolidated affiliates |
123 |
218 |
| |
Gains on sales of equity investments |
279 |
32 |
| |
Other income and expenses, net |
154
|
129
|
| |
|
Total Other Income and Expenses |
556 |
379 |
| |
|
|
|
|
| Interest Expense |
1,380 |
1,097 |
| Minority Interest Expense |
64
|
115
|
| |
|
|
|
|
| (Loss) Earnings From Continuing Operations Before
Income Taxes |
(1,712) |
1,906 |
| Income Tax (Benefit) Expense |
(707)
|
611
|
| |
|
|
|
|
| (Loss) Income From Continuing Operations |
(1,005) |
1,295 |
| Discontinued Operations |
|
|
| |
|
Net operating loss, net of tax |
(27) |
(261) |
| |
|
Net loss on dispositions, net of tax |
(129)
|
-
|
| Loss From Discontinued Operations |
(156) |
(261) |
| |
|
|
|
|
| (Loss) Income Before Cumulative Effect of Change
in Accounting Principle |
(1,161) |
1,034 |
| Cumulative Effect of Change in Accounting Principle,
net of tax and minority interest |
(162)
|
-
|
| |
|
|
|
|
| Net (Loss) Income |
(1,323) |
1,034 |
| |
|
|
|
|
| Dividends and Premiums on Redemption of Preferred
and Preference Stock |
15
|
13
|
| |
|
|
|
|
| (Loss) Earnings Available For Common Stockholders |
$(1,338)
|
$1,021
|
| |
|
|
|
|
| Common Stock Data |
| |
Weighted-average shares outstanding |
903 |
836 |
| |
(Loss) Earnings per share (from continuing operations) |
|
|
| |
|
Basic |
$(1.13) |
$1.53 |
| |
|
Diluted |
$(1.13) |
$1.53 |
| |
Loss per share (from discontinued operations) |
|
|
| |
|
Basic |
$(0.17) |
$(0.31) |
| |
|
Diluted |
$(0.17) |
$(0.31) |
| |
(Loss) Earnings per share (before cumulative effect of
change in accounting principle) |
|
|
| |
|
Basic |
$(1.30) |
$1.22 |
| |
|
Diluted |
$(1.30) |
$1.22 |
| |
(Loss) Earnings per share |
|
|
| |
|
Basic |
$(1.48) |
$1.22 |
| |
|
Diluted |
$(1.48) |
$1.22 |
| |
Dividends per share |
$1.10 |
$1.10 |
DUKE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
|
| |
|
|
|
Years Ended December 31,
|
| |
|
|
|
2003
|
2002
|
| |
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
| |
Net (loss) income |
$(1,323) |
$1,034 |
| |
Adjustments to reconcile net (loss) income to net cash
provided by |
|
|
| |
|
operating activities: |
|
|
| |
|
Depreciation and amortization (including amortization
of nuclear fuel) |
1,987 |
1,692 |
| |
|
Cumulative effect of change in accounting principles |
162 |
- |
| |
|
Impairment charges |
3,495 |
545 |
| |
|
Net realized and unrealized mark-to-market and hedging
transactions |
(15) |
596 |
| |
|
Gains on sale of equity investments and other assets |
(86) |
(81) |
| |
|
Changes in working capital and other |
(291)
|
761
|
| |
|
|
Net Cash Provided by Operating Activities |
3,929
|
4,547
|
| |
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
| |
|
Capital expenditures, net |
(2,471) |
(4,924) |
| |
|
Investment expenditures |
(290) |
(641) |
| |
|
Acquisition of Westcoast Energy Inc., net of cash acquired |
- |
(1,707) |
| |
|
Proceeds from the sale of equity investments and other
assets and sales of and collections on notes receivable |
|
|
| |
|
|
1,966 |
516 |
| |
|
Other |
(136)
|
(53)
|
| |
|
|
Net Cash Used in Investing Activities |
(931)
|
(6,809)
|
| |
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES |
| |
|
Proceeds from: |
|
|
| |
|
|
Issuance of long-term debt |
3,009 |
5,114 |
| |
|
|
Issuance of common stock |
277 |
1,323 |
| |
|
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 |
(4,839) |
(2,992) |
| |
|
Dividends paid |
(1,051) |
(938) |
| |
|
Other |
(53)
|
339
|
| |
|
|
Net cash (used in) provided by financing activities |
(2,657)
|
2,846
|
| |
|
|
|
|
|
| |
Reclassification of cash associated with assets held for
sale |
(55) |
- |
| |
|
|
|
|
|
| |
Net increase in cash and cash equivalents |
286 |
584 |
| |
Cash and cash equivalents at beginning of period |
874
|
290
|
| |
Cash and cash equivalents at end of period |
$1,160
|
$874
|
DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions) |
| |
|
December 31,
|
| |
|
2003
|
2002
|
| ASSETS |
|
|
| |
|
|
|
| Current Assets |
|
|
| |
Cash and cash equivalents |
$1,160 |
$874 |
| |
Receivables |
2,888 |
4,861 |
| |
Inventory |
1,156 |
1,134 |
| |
Assets held for sale |
424 |
- |
| |
Unrealized gains on mark-to-market and hedging transactions |
1,566 |
2,144 |
| |
Other |
694
|
887
|
| |
Total current assets |
7,888
|
9,900
|
| |
|
|
|
| Investments and Other Assets |
|
|
| |
Investments in unconsolidated affiliates |
1,398 |
2,015 |
| |
Nuclear decommissioning trust funds |
925 |
708 |
| |
Goodwill, net of accumulated amortization |
3,953 |
3,747 |
| |
Notes receivable |
260 |
589 |
| |
Unrealized gains on mark-to-market and hedging transactions |
1,857 |
2,480 |
| |
Assets held for sale |
1,444 |
- |
| |
Other |
1,117
|
1,645
|
| |
Total investments and other assets |
10,954
|
11,184
|
| |
|
|
|
| Property, Plant and Equipment |
|
|
| |
Cost |
47,157 |
48,677 |
| |
Less accumulated depreciation and amortization |
13,378
|
12,458
|
| |
Net property, plant and equipment |
33,779
|
36,219
|
| |
|
|
|
| Regulatory Assets and Deferred Debits |
|
|
| |
Deferred debt expense |
275 |
263 |
| |
Regulatory asset related to income taxes |
1,152 |
936 |
| |
Other |
939
|
460
|
| |
Total regulatory assets and deferred debits |
2,366
|
1,659
|
| |
|
|
|
| |
|
|
|
| |
Total Assets |
$54,987
|
$58,962
|
|
DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
|
| |
|
|
|
December 31,
|
| |
|
|
|
2003
|
2002
|
| LIABILITIES AND COMMON STOCKHOLDERS' EQUITY |
| |
|
|
|
|
|
| Current Liabilities |
| |
|
Accounts payable |
|
$2,331 |
$3,637 |
| |
|
Notes payable and commercial paper |
|
130 |
915 |
| |
|
Taxes accrued |
|
- |
156 |
| |
|
Interest accrued |
|
304 |
310 |
| |
|
Liabilities associated with assets held for sale |
|
651 |
- |
| |
|
Current maturities of long-term debt and preferred stock |
|
1,200 |
1,331 |
| |
|
Unrealized losses on mark-to-market and hedging transactions |
|
1,283 |
1,918 |
| |
|
Other |
|
1,799
|
1,770
|
| |
|
Total current liabilities |
|
7,698
|
10,037
|
| |
|
|
|
|
|
| Long-term Debt |
20,622
|
20,221
|
| |
|
|
|
|
|
| Deferred Credits and Other Liabilities |
| |
Deferred income taxes |
|
4,130 |
4,834 |
| |
Investment tax credit |
|
165 |
176 |
| |
Unrealized losses on mark-to-market and hedging transactions
|
|
1,754 |
1,548 |
| |
Liabilities associated with assets held for sale |
|
737 |
- |
| |
Other |
|
4,287
|
3,733
|
| |
|
Total deferred credits and other liabilities |
|
11,073
|
10,291
|
| |
|
|
|
|
|
| Commitments and Contingencies |
| |
|
|
|
|
|
| Guaranteed Preferred Beneficial Interests in Subordinated |
| |
Notes of Duke Energy Corporation or Subsidiaries
|
|
-
|
1,408
|
| |
|
|
|
|
|
| Minority Interests |
1,701
|
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; 911
million and 895 million |
|
|
|
| |
|
shares outstanding at December 31, 2003 and 2002, respectively |
|
9,519 |
9,236 |
| |
Retained earnings |
|
4,060 |
6,417 |
| |
|
Accumulated other comprehensive income (loss) |
|
180
|
(709)
|
| |
|
Total common stockholders' equity |
|
13,759
|
14,944
|
| |
|
|
|
|
|
| |
|
Total Liabilities and Common Stockholders' Equity |
|
$54,987
|
$58,962
|
Supplemental Disclosures
Quarter Ended December 31, 2003 |
Duke Energy Corporation
|
| |
|
4Q03
|
|
|
|
| |
|
|
|
|
|
| Mark-to-market Portfolio (in billions) |
$ - |
|
|
|
| Daily Value at Risk (DvaR) (in millions) |
|
|
|
|
| 95% Confidence Level, One-Day Holding Period, Two-Tailed
Average for the Period |
$ 9 |
|
|
|
| |
Duke Energy North America
|
| (in millions unless stated otherwise)
|
Q-T-D December 31, 2003 |
Merchant Energy Gross Margin
|
Proprietary Trading
|
Structured Contracts
|
Owned Assets
|
Total
|
| |
Mark-to-market gross margin (loss) |
$ (3) |
$ (38) |
$ (7) |
$ (48) |
| |
Accrual gross margin (loss) |
n/a
|
33
|
131
|
164
|
| Total Gross Margin |
$ (3)
|
$ (5)
|
$ 124
|
116 |
| Reconciliation to Segment EBIT: |
|
|
|
|
| |
Plant depreciation |
|
|
|
(62) |
| |
Plant operating and maintenance expenses |
|
|
|
(88) |
| |
General and administrative and other expenses |
|
|
|
(166) |
| |
Minority interest |
|
|
|
63 |
| |
Gain (loss) on sale of other assets |
|
|
|
(124) |
| |
Asset impairment and other charges |
|
|
|
(2,903)
|
| DENA Segment EBIT |
|
|
|
$(3,164)
|
|
|
|
|
| |
|
|
|
|
|
| |
|
|
|
|
|
Owned Assets - Merchant Plant Production and Hedging
Information *
|
2004
|
2005
|
2006
|
|
| Estimated available production (millions of MWh) |
65 |
65 |
65 |
|
| |
Combined cycle |
57 |
57 |
57 |
|
| |
Peaker units |
8 |
8 |
8 |
|
| |
|
|
|
|
|
| Estimated production (millions of MWh) |
20 |
25 |
27 |
|
| |
Combined cycle |
20 |
24 |
26 |
|
| |
Peaker units |
- |
1 |
1 |
|
| |
|
|
|
|
|
| Hedges |
|
|
|
|
| |
Estimated production sold |
93% |
66% |
66% |
|
| |
Average price sold ($/MWh) |
$ 44 |
$ 45 |
$ 42 |
|
Supplemental Disclosures
Quarter Ended December 31, 2003
|
Duke Energy North America (continued)
|
| (in millions) |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Maturity/Source of Carrying Value of Energy Contract
Net Assets
|
2004
|
2005
|
2006
|
2007
|
Over
4 Years
|
Total
Fair Value
|
| Proprietary Trading |
|
|
|
|
|
|
| |
Actively quoted prices and other external sources |
$155 |
$(1) |
$25 |
$(7) |
$(14) |
$158 |
| |
Modeled |
(10)
|
22
|
4
|
3
|
4
|
23
|
| |
|
$145
|
$21
|
$29
|
$(4)
|
$(10)
|
$181
|
| Structured Contracts |
|
|
|
|
|
|
| |
Actively quoted prices and other external sources |
$39 |
$29 |
$(47) |
$(43) |
$(107) |
$(129) |
| |
Modeled |
(41)
|
(34)
|
2
|
9
|
(22)
|
(86)
|
| |
|
$(2)
|
$(5)
|
$(45)
|
$(34)
|
$(129)
|
$(215)
|
| Owned Assets |
|
|
|
|
|
|
| |
Actively quoted prices and other external sources |
$255 |
$166 |
$105 |
$61 |
$44 |
$631 |
| |
Modeled |
-
|
-
|
-
|
-
|
37
|
37
|
| |
|
$255
|
$166
|
$105
|
$61
|
$81
|
$668
|
| |
|
|
|
|
|
|
|
| |
|
Total Fair Value of Energy Contract Net Assets
* |
$634
|
| * |
Total Carrying 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 Sold
Represents the portion of estimated production which has been hedged, primarily
through firm physical contracts.
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.
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