News Release
July 29, 2004

DUKE ENERGY REPORTS SECOND QUARTER 2004 RESULTS

  • Ongoing earnings of 42 cents per share versus 30 cents in second quarter 2003; reported second quarter EPS of 46 cents versus 46 cents in 2003
  • Duke Energy Field Services and Crescent Resources post strong quarter
  • Franchised Electric and Natural Gas Transmission continue to report solid earnings and strong cash flow
  • Cash generation, asset sales and debt reduction all expected to meet or exceed full-year expectations
  • DENA results affected by positive mark-to-market earnings of 2 cents per share

CHARLOTTE, N.C. – Duke Energy reported net income in the second quarter of 2004 of $432 million, or $0.46 per share, compared to net income of $424 million, or $0.46 per share in the second quarter of 2003.

Excluding special items, ongoing second quarter earnings per share (EPS) were $0.42 versus $0.30 in the comparable year's quarter.

"We accelerated progress on our financial objectives in the quarter," said Paul Anderson, Duke Energy chairman of the board and chief executive officer. "We've already surpassed a number of our year-end targets and our business units are showing encouraging results."

Special items for the quarter include:

($ in Millions)
Pre-Tax
Amount
Tax
Effect
2004
EPS Impact
2003
EPS Impact
Second quarter 2004
Enron settlement (net of minority interest)
$130 
($46)
$0.09 
 
True-up on net gain on sale of International Energy assets
38 
(9)
0.03 
 
California and western U.S. energy markets settlement
(105)
37 
(0.07)
 
Net losses on asset sales (net of minority interest)
(5)
---
 
Interest related to litigation reserve
(12)
(0.01)
 
 
Second quarter 2003
 
 
 
 
Gains on asset sales (net of minority interest)
$229 
($83)
 
0.16 
 
Total EPS Impact
 
 
$0.04 
$0.16 
EPS, as reported
 
 
$0.46 
$0.46 
EPS, ongoing *
 
 
$0.42 
$0.30 

Special items EPS year-to-date impact:

 
2004
2003
First quarter
$0.01 
($0.17)
Second quarter
0.04 
0.16 
Impact of change in shares outstanding
(0.01)
--
Total EPS Impact
$0.04 
($0.01)
Year-to-date EPS, as reported
$0.80 
$0.71 
Year-to-date EPS, ongoing *
$0.76 
$0.72 

* Includes results from operations primarily in International Energy and Field Services that have been discontinued.

BUSINESS UNIT RESULTS

Franchised Electric
Second quarter 2004 earnings before interest and taxes (EBIT) from Duke Power totaled $338 million, compared to $316 million in the second quarter of 2003. The increase was primarily due to warmer weather during the quarter, which increased EBIT from residential and commercial sales by approximately $60 million.

The increase was partially offset by lower bulk power sales.

During the quarter, Duke Power took steps in North Carolina and South Carolina to share half of the profits from the company's bulk power marketing sales to fund several programs designed to make the service area more competitive and respond to customer needs. The year-to-date total of $27 million of shared profits was recorded as a charge in the second quarter.

Year-to-date EBIT for Franchised Electric was $762 million, compared with $770 million in 2003.

Natural Gas Transmission
Duke Energy Gas Transmission (DEGT) reported second quarter 2004 EBIT of $311 million compared to $306 million in the prior year's quarter. The 2003 second quarter included gains of $31 million from asset sales and $4 million of earnings from assets sold during 2003. The increase was primarily due to improved operational results, U.S. business expansion contributions, a $17 million benefit due to the positive resolution of ad valorem tax issues in various states and a $12 million benefit from a stronger Canadian currency. These increases were offset by certain reserve reversals of $12 million in 2003.

The favorable Canadian currency impacts on DEGT's EBIT were partially offset in Duke Energy's net income by currency impacts on Canadian interest and taxes.

During the second quarter, DEGT began mainline construction on a 110-mile expansion of the Gulfstream pipeline system. In addition, DEGT placed into service the first phase of Texas Eastern's M-1 expansion project, which will provide new and increased service to customers served through East Tennessee including the Patriot expansion capacity.

Year-to-date EBIT for Natural Gas Transmission was $709 million, compared with $729 million in 2003.

Field Services
The Field Services business segment, which represents Duke Energy's 70-percent interest in Duke Energy Field Services (DEFS), reported second quarter 2004 EBIT of $94 million from continuing operations, compared to $53 million in the second quarter of 2003.

The increase was primarily due to higher commodity prices compared to last year's quarter. In June, DEFS paid an $87 million dividend, of which Duke Energy received $61 million. This payment reflects continuing strong cash flow and earnings at DEFS.

In second quarter 2003, results were positively affected by a pre-tax gain on the sale of TEPPCO class B units of $11 million.

Year-to-date EBIT for Field Services from continuing operations was $186 million, compared with $83 million in 2003.

Duke Energy North America
Duke Energy North America (DENA) reported an EBIT loss of $39 million in the second quarter of 2004, compared to EBIT of $211 million in the prior year's quarter.

The key factors for the quarter were: 1) a previously announced $105 million charge related to the California and western U.S. energy markets settlement, offset by a $108 million positive settlement in the Enron bankruptcy proceeding; 2) positive mark-to-market earnings of $24 million as a result of changes in power and natural gas prices; and 3) a $10 million loss on the liquidation of Duke Energy Trading and Marketing contracts.

Compared to the same quarter in 2003, DENA's losses from energy generation increased primarily due to lower hedge value realization and higher operating and maintenance costs. This was partially offset by improved margins on structured contracts and lower depreciation and general and administrative costs.

Results for the second quarter of 2003 included a pre-tax gain of $175 million from the sale of DENA's ownership interest in American Re-Fuel. Foregone earnings associated with this sale were $14 million for this year's quarter.

During the quarter, DENA announced two significant asset sales. In May, it announced an agreement to sell eight power plants in the southeast United States; and in June, it announced the sale of its unfinished Moapa project in Nevada. These transactions are expected to close in third quarter and fourth quarter of 2004, respectively, and will provide Duke Energy with approximately $1.3 billion in cash proceeds and tax benefits.

Excluding the expense related to the California and western U.S. energy markets settlement, the gain from the Enron settlement, the mark-to-market gain and the DETM contract liquidation loss, DENA's EBIT loss for the quarter would have been $56 million.

Overall year-to-date EBIT loss for DENA was $596 million, compared to a $234 million profit in 2003.

International Energy
For the second quarter of 2004, Duke Energy International (DEI) reported EBIT from continuing operations of $68 million, compared to $91 million in the second quarter of 2003.

The second quarter 2003 results benefited from a positive regulatory settlement in Brazil and early termination of a natural gas sales contract, which together totaled $37 million. The absence of such transactions in the second quarter of 2004 was partially offset by improved operating results in Latin America during this year's quarter.

During the quarter, DEI announced the sale of its ownership share of Cantarell, a nitrogen-production plant in Mexico. The sale is expected to close in third quarter 2004.

Year-to-date EBIT from continuing operations for International Energy was $97 million, compared with $131 million in 2003.

Crescent Resources
Crescent Resources, Duke Energy's affiliated real estate company, reported second quarter 2004 EBIT from continuing operations of $87 million, compared to $21 million in the second quarter of 2003.

The increase was primarily attributed to a large commercial land sale at Potomac Yard in northern Virginia, and greater than expected residential developed lot sales during the quarter.

Year-to-date EBIT from continuing operations for Crescent Resources was $147 million, compared with $21 million in 2003.

Other
Other, which includes corporate costs, DukeNet Communications, Duke/Fluor Daniel, Duke Energy Merchants (DEM) and Energy Delivery Services, reported an EBIT loss of $26 million in the second quarter of 2004, compared to an EBIT loss of $69 million in the second quarter of 2003. The better results were driven primarily by a $21 million portion of the Enron settlement, which was recorded at DEM.

Year-to-date EBIT for Other was a loss of $31 million, compared with a loss of $117 million in 2003.

Discontinued Operations
Discontinued Operations generated second quarter 2004 income of $27 million, primarily driven by a true-up of the net gain on the sale of International Energy assets. These results compare to second quarter 2003 income of $23 million.

Year-to-date income for Discontinued Operations was $273 million, compared with $18 million in 2003.

INCOME TAXES

Income tax expense from continuing operations of $133 million is lower than the prior year's by approximately $62 million. The decrease is driven primarily by the release of income tax reserves of approximately $52 million resulting from resolution in the second quarter 2004 of various outstanding income tax issues.

INTEREST EXPENSE

Interest expense was $337 million for the second quarter of 2004, compared to $325 million for the second quarter of 2003.

LIQUIDITY AND CAPITAL RESOURCES

Duke Energy's consolidated capital structure at the end of second quarter 2004, including short-term debt, was 56 percent debt, 39 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 $2.5 billion at the end of the second quarter of 2004. The companies had borrowings and letters of credit outstanding under these programs of approximately $1.2 billion as of the end of the second quarter of 2004, resulting in unused capacity of approximately $1.3 billion. The company also had approximately $2.6 billion in cash and cash equivalents at the end of second quarter 2004.

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 second quarter 2004 earnings information Web site at: http://www.duke-energy.com/investors/.

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.

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 net income 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.

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/ or by dialing 800/967-7187 in the United States or 719/457-2635 outside the United States. The confirmation code is 601243. 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 601243. The international replay number is 719/457-0820, confirmation code 601243. 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/. 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/publications/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 could cause actual results to differ materially from those in the forward- looking statements herein are 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

JUNE 2004
QUARTERLY HIGHLIGHTS
(unaudited)
               
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
(In millions, except where noted)
2004
2003
2004
2003

COMMON STOCK DATA
 
Earnings Per Share (from continuing operations)
 
  Basic
$0.43 
 
$0.44 
$0.50 
$0.87 
  Diluted
$0.43 
 
$0.44 
$0.50 
$0.87 
Earnings Per Share (from discontinued operations)
 
  Basic
$0.03 
 
$0.02 
$0.30 
$0.02 
  Diluted
$0.03 
 
$0.02 
$0.30 
$0.02 
Earnings Per Share (before cumulative effect of change in accounting principle)
 
  Basic
$0.46 
 
$0.46 
$0.80 
$0.89 
  Diluted
$0.46 
 
$0.46 
$0.80 
$0.89 
Earnings Per Share
 
  Basic
$0.46 
 
$0.46 
$0.80 
$0.71 
  Diluted
$0.46 
 
$0.46 
$0.80 
$0.71 
Dividends Per Share
$0.550 
 
$0.550 
$0.825 
$0.825 
Weighted-Average Shares Outstanding
 
  Basic
926 
 
902 
919 
899 
  Diluted
928 
 
903 
921 
900 
 
 

INCOME
 
Operating Revenues
$5,360 
 
$5,152 
$11,049 
$11,322 
 
 
 
 
Earnings Before Interest and Taxes (EBIT)
916 
 
971 
1,408 
1,934 
Interest Expense (a)
337 
 
325 
693 
651 
Minority Interest Expense (a)
41 
 
50 
79 
100 
Income Tax Expense from Continuing Operations
133 
 
195 
166 
390 
Income from Discontinued Operations
27 
 
23 
273 
18 
Cumulative Effect of Change in Accounting Principle, net of tax and minority interest
 
(162)
 
 
 
 
Net Income
432 
 
424 
743 
649 
Dividends and Premiums on Redemptions of Preferred and Preference Stock
 
10 
 
 
 
 
Earnings Available for Common Stockholders
$429 
 
$417 
$738 
$639 
 

 
 

 

 

 
               

CAPITALIZATION
 
  Common Equity
 
39%
37%
  Preferred Stock
 
0%
1%
  Trust Preferred Securities
 
0%
3%
         
 
Total Common Equity and Preferred Securities
 
39%
41%
 
 
Minority Interests
 
5%
4%
Total Debt
 
56%
55%
 
 

Total Debt
 
$21,153 
$22,766 
Book Value Per Share
 
$15.52 
$17.38 
Actual Shares Outstanding
 
938 
904 

CAPITAL AND INVESTMENT EXPENDITURES
 
  Franchised Electric (b)
$507 
 
$292 
$769 
$550 
  Natural Gas Transmission
102 
 
210 
256 
426 
  Field Services
107 
 
31 
132 
62 
  Duke Energy North America
 
97 
14 
257 
  International Energy
 
18 
15 
43 
  Crescent (c) (d)
122 
 
73 
284 
127 
  Other
(14)
 
(37)
(14)
24 
 
 
 
 
Total Capital and Investment Expenditures
$836 
 
$684 
$1,456 
$1,489 
 

 



               

EBIT BY BUSINESS SEGMENT
 
  Franchised Electric
$338 
 
$316 
$762 
$770 
  Natural Gas Transmission
311 
 
306 
709 
729 
  Field Services
94 
 
53 
186 
83 
  Duke Energy North America
(39)
 
211 
(596)
234 
  International Energy
68 
 
91 
97 
131 
  Crescent (c)
87 
 
21 
147 
21 
  Other
(26)
 
(69)
(31)
(117)
 
 
 
 
Total Segment and Other EBIT
833 
 
929 
1,274 
1,851 
EBIT Attributable to:
 
  Minority Interest Expense
51 
 
36 
101 
79 
  Third Party Interest Income
29 
 
36 
  Foreign Currency Remeasurement Gain (Loss)
 
(1)
(3)
(5)
  Intercompany EBIT Elimination (e)
 
 
 
 
 
Total EBIT
$916 
 
$971 
$1,408 
$1,934 
 

 
 

 

 

 
 
 

(a) Minority interest includes financing expenses related to securities of subsidiaries of $28 million for the three months ended June 30, 2003 and $55 million for the six months ended June 30, 2003. The expense related to these securities is accounted for in interest expense in 2004.
(b) Current year amounts include a $262 million contribution to the nuclear decommissioning trust funds.
(c) Beginning in 2004, Crescent, formerly part of Other, is considered a reportable segment.
(d) Capital expenditures for residential properties are included in operating cash flows on the Consolidated Statements of Cash Flows. Capital expenditures for commercial and multi-family properties are included in investing cash flows on the Consolidated Statements of Cash Flows.
(e) Amount relates to the elimination of intercompany EBIT that has been reclassified to discontinued operations.

 

JUNE 2004
QUARTERLY HIGHLIGHTS
(unaudited)

               
 
Three Months Ended
June 30,
Six Months Ended
June 30,
 
 
(In millions, except where noted)
2004
2003
2004
2003

FRANCHISED ELECTRIC              
  Operating Revenues
$1,228 
$1,110 
$2,499 
$2,361 
  Operating Expenses
896 
809 
1,747 
1,622 
  Gains on Sales of Other Assets, net
  Other Income, net of expenses
15 
30 
 
 
 
 
  EBIT
$338 
$316 
$762 
$770 
 




               
  Sales, GWh
20,087 
19,415 
42,050 
41,458 
 

NATURAL GAS TRANSMISSION
  Operating Revenues
$688 
$692 
$1,726 
$1,660 
  Operating Expenses
397 
421 
1,035 
988 
  Gains on Sales of Other Assets, net
  Other Income, net of expenses (a)
13 
45 
19 
79 
  Minority Interest Expense
10 
10 
23 
 
 
 
 
  EBIT
$311 
$306 
$709 
$729 
 




               
  Proportional Throughput, TBtu
726 
742 
1,815 
1,824 
 

FIELD SERVICES (b)
  Operating Revenues
$2,356 
$2,048 
$4,731 
$4,598 
  Operating Expenses
2,225 
1,991 
4,474 
4,500 
  Other Income, net of expenses
15 
24 
33 
39 
  Minority Interest Expense
52 
28 
104 
54 
 
 
 
 
  EBIT
$94 
$53 
$186 
$83 
 




               
  Natural Gas Gathered and Processed/
  Transported, TBtu/day 7.5    7.6    7.4    7.6 
  Natural Gas Liquids Production, MBbl/d
371 
352 
364 
360 
  Average Natural Gas Price per MMBtu
$5.99 
$5.41 
$5.84 
$6.00 
  Average Natural Gas Liquids Price per Gallon
$0.61 
$0.49 
$0.60 
$0.54 
 

DUKE ENERGY NORTH AMERICA
  Operating Revenues
$672 
$962 
$1,328 
$2,358 
  Operating Expenses
705 
945 
1,576 
2,327 
  Loss on Sales of Other Assets, net (c)
(16)
(368)
  Other Income, net of expenses (d)
187 
(1)
196 
  Minority Interest Benefit
(7)
(7)
(21)
(7)
 
 
 
 
  EBIT
$(39)
$211 
$(596)
$234 
 
 
 
 
 
  Actual Plant Production, GWh (e)
5,895 
4,510 
11,356 
9,620 
  Proportional MW Capacity in Operation
15,660 
15,206 
 

INTERNATIONAL ENERGY (b)
  Operating Revenues
$147 
$169 
$301 
$341 
  Operating Expenses
98 
90 
229 
225 
  Gains on Sales of Other Assets, net
  Other Income, net of expenses
22 
15 
31 
22 
  Minority Interest Expense
 
 
 
 
  EBIT
$68 
$91 
$97 
$131 
 




               
  Sales, GWh
4,248 
4,446 
8,811 
8,416 
  Proportional MW Capacity in Operation
4,130 
4,013 
 
 

CRESCENT (b)
Operating Revenues
$101 
$76 
$140 
$97 
Operating Expenses
75 
63 
112 
86 
Gains on Sales of Investments in Commercial and Multi-Family Real Estate
62 
121 
11 
Other Income, net of expenses
Minority Interest Expense
 
 
 
 
EBIT
$87 
$21 
$147 
$21 
 




               

 
OTHER (b)
  Operating Revenues
$290 
$362 
$634 
$879 
  Operating Expenses
311 
412 
698 
994 
  (Loss) Gains on Sales of Other Assets, net
(7)
  Other Income, net of expenses
(19)
26 
(2)
 
 
 
 
  EBIT
$(26)
$(69)
$(31)
$(117)
 

 

 

 

 
 

(a) Prior year includes $31 million gain on sale of the Alliance/Aux Sable equity investment.
(b) Certain prior year amounts have been reclassified due to discontinued operations.
(c) Current year amounts include DENA Southeast plant impairment of $361 million and loss on sale of Duke Energy Trading & Marketing contracts.
(d) Prior year includes $175 million gain on sale of the American Ref-Fuel Company equity investment.
(e) Represents 100% of GWh.

 

DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per-share amounts)
         
         
 
Three Months Ended
Six Months Ended
 
June 30,
June 30,
 


 
2004
2003
2004
2003
 



Operating Revenues        
  Non-regulated electric, natural gas, natural gas liquids and other
$3,453 
$3,394 
$6,909 
$7,406 
  Regulated electric
1,272 
1,122 
2,523 
2,401 
  Regulated natural gas
635 
636 
1,617 
1,515 
     



    Total operating revenues
5,360 
5,152 
11,049 
11,322 
 



 
Operating Expenses
  Natural gas and petroleum products purchased
2,594 
2,664 
5,626 
6,156 
  Operation, maintenance and other
837 
881 
1,628 
1,555 
  Fuel used in electric generation and purchased power
607 
369 
1,171 
917 
  Depreciation and amortization
421 
438 
857 
869 
  Property and other taxes
125 
134 
279 
274 
     



    Total operating expenses
4,584 
4,486 
9,561 
9,771 
 



 
Gains on Sales of Investments in Commercial and Multi-Family Real Estate
62 
121 
11 
(Losses) Gains on Sales of Other Assets, net
(11)
(349)
 



Operating Income
827 
676 
1,260 
1,565 
 



 
Other Income and Expenses
  Equity in earnings of unconsolidated affiliates
43 
16 
77 
50 
  Gains on sales of equity investments
219 
233 
  Other income and expenses, net
46 
60 
71 
86 
     



    Total other income and expenses
89 
295 
148 
369 
 
Interest Expense
337 
325 
693 
651 
Minority Interest Expense
41 
50 
79 
100 
 



 
Earnings From Continuing Operations Before Income Taxes
538 
596 
636 
1,183 
Income Tax Expense from Continuing Operations
133 
195 
166 
390 
 



 
Income From Continuing Operations
405 
401 
470 
793 
Discontinued Operations
  Net operating (loss) income, net of tax
(3)
17 
20 
  Net gain (loss) on dispositions, net of tax
30 
269 
(2)
 



Income From Discontinued Operations
27 
23 
273 
18 
 
Income Before Cumulative Effect of Change in Accounting Principle
432 
424 
743 
811 
Cumulative Effect of Change in Accounting Principle, net of tax and minority interest
(162)
 



 
Net Income
432 
424 
743 
649 
 
Dividends and Premiums on Redemption of Preferred and Preference Stock
10 
 



 
Earnings Available For Common Stockholders
$429 
$417 
$738 
$639 
 



 
Common Stock Data
  Weighted-average shares outstanding
    Basic
926 
902 
919 
899 
    Diluted
928 
903 
921 
900 
  Earnings per share (from continuing operations)
    Basic
$0.43 
$0.44 
$0.50 
$0.87 
    Diluted
$0.43 
$0.44 
$0.50 
$0.87 
  Earnings per share (from discontinued operations)
    Basic
$0.03 
$0.02 
$0.30 
$0.02 
    Diluted
$0.03 
$0.02 
$0.30 
$0.02 
  Earnings per share (before cumulative effect of change in accounting principle)
    Basic
$0.46 
$0.46 
$0.80 
$0.89 
    Diluted
$0.46 
$0.46 
$0.80 
$0.89 
  Earnings per share
    Basic
$0.46 
$0.46 
$0.80 
$0.71 
    Diluted
$0.46 
$0.46 
$0.80 
$0.71 
  Dividends per share
$0.550 
$0.550 
$0.825 
$0.825 

 

DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
           
     
June 30,
December 31,
     
2004
2003
 
 
ASSETS      
           
Current Assets      
  Cash and cash equivalents
$2,644
$1,160
  Receivables, net
2,982
2,888
  Inventory
837
941
  Assets held for sale
287
424
  Unrealized gains on mark-to-market and hedging transactions
1,438
1,566
  Other
604
694
     
 
    Total current assets
8,792
7,673
     
 
     
Investments and Other Assets
  Investments in unconsolidated affiliates
1,331
1,398
  Nuclear decommissioning trust funds
1,243
925
  Goodwill
3,855
3,962
  Notes receivable
244
260
  Unrealized gains on mark-to-market and hedging transactions
1,828
1,857
  Assets held for sale
570
1,444
  Investments in residential, commercial and multi-family real estate, net
1,228
1,331
  Other
840
1,117
     
 
    Total investments and other assets
11,139
12,294
     
 
     
Property, Plant and Equipment
  Cost
45,530
46,009
  Less accumulated depreciation and amortization
12,800
12,139
     
 
    Net property, plant and equipment
32,730
33,870
     
 
     
Regulatory Assets and Deferred Debits
  Deferred debt expense
317
275
  Regulatory assets related to income taxes
1,175
1,152
  Other
962
939
     
 
    Total regulatory assets and deferred debits
2,454
2,366
     


     
     
  Total Assets
$55,115
$56,203
   


 

DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
       
 
June 30,
December 31,
 
2004
2003
 
 
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY      
       
Current Liabilities      
  Accounts payable
$2,112
$2,317
  Notes payable and commercial paper
437
130
  Taxes accrued
398
14
  Interest accrued
309
304
  Liabilities associated with assets held for sale
44
651
  Current maturities of long-term debt
1,535
1,200
  Unrealized losses on mark-to-market and hedging transactions
1,239
1,283
  Other
1,826
1,799
     
 
    Total current liabilities
7,900
7,698
     
 
     
Long-term Debt, including debt to affiliates of $258 at June 30, 2004 and
  $876 at December 31, 2003
19,181
20,622
     
 
     
Deferred Credits and Other Liabilities
  Deferred income taxes
4,315
4,120
  Investment tax credit
159
165
  Unrealized losses on mark-to-market and hedging transactions
1,611
1,754
  Liabilities associated with assets held for sale
-
737
  Other
5,586
5,524
     
 
    Total deferred credits and other liabilities
11,671
12,300
     
 
     
Commitments and Contingencies
     
Minority Interests
1,674
1,701
     
 
     
Preferred and preference stock without sinking fund requirements
134
134
     
 
     
Common Stockholders' Equity
  Common stock, no par, 2 billion shares authorized; 938 million and 911
    million shares outstanding at June 30, 2004 and December 31, 2003,
    respectively 10,492   9,519
  Retained earnings
4,053
4,060
  Accumulated other comprehensive income
10
169
     
 
    Total common stockholders' equity
14,555
13,748
     
 
     
  Total Liabilities and Common Stockholders' Equity
$55,115
$56,203
     


 

DUKE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In millions)
             
         
Six Months Ended
         
June 30,
         
         
2004
2003
 

CASH FLOWS FROM OPERATING ACTIVITIES    
  Net income
$743 
$649 
  Adjustments to reconcile net income to net cash provided by
    operating activities
      Depreciation and amortization (including amortization of nuclear fuel)
943 
972 
      Cumulative effect of change in accounting principle
162 
      Net gains on sales of equity investments and other assets
(57)
(250)
      Net realized and unrealized mark-to-market and hedging transactions
229 
(42)
      Capital expenditures for residential real estate
(138)
(76)
      Cost of residential real estate sold
80 
50 
      Changes in working capital and other
589 
359 
         

        Net cash provided by operating activities
2,389 
1,824 
         

         
CASH FLOWS FROM INVESTING ACTIVITIES
    Capital and investment expenditures, net of refund
(1,318)
(1,413)
    Net proceeds from the sales of equity investment and other assets,
      and sales of and collections on notes receivable
671 
1,279 
    Proceeds from the sales of commercial and multi-family real estate
303 
47 
    Other
(102)
(51)
         

        Net cash used in investing activities
(446)
(138)
         

         
CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from the
      Issuance of long-term debt
112 
1,707 
      Issuance of common stock and common stock
        related to employee benefit plans
947 
150 
    Payments for the redemption of long-term debt, preferred stock of a subsidiary,
      guaranteed preferred beneficial interests in subordinated notes,
      and net paydown of commercial paper and notes payable
(917)
(2,387)
    Dividends paid
(526)
(524)
    Other
(63)
(7)
         

        Net cash used in financing activities
(447)
(1,061)
         

         
  Changes in cash and cash equivalents associated with assets held for sale
(12)
         

         
  Net increase in cash and cash equivalents
1,484 
625 
  Cash and cash equivalents at beginning of period
1,160 
857 
   

  Cash and cash equivalents at end of period
$2,644 
$1,482 
         

 

Supplemental Disclosures
Quarter Ended June 30, 2004
         
         
Duke Energy Corporation        

 
2Q04
     
 
     
Mark-to-market Portfolio (in millions)
$(209)
 
Daily Value at Risk (DvaR) (in millions)
 
95% Confidence Level, One-Day Holding Period, Two-Tailed
     Average for the Period
$19 
         
         
         
Duke Energy North America        

(in millions unless stated otherwise)
Q-T-D June 30, 2004
         
 
Proprietary
Structured
Owned
Merchant Energy Gross Margin
Trading
Contracts
Assets
Total





     Mark-to-market gross margin (loss)
$2 
$20 
$- 
$22 
     Accrual gross margin (loss)
n/a 
(5)
109 
104 
 



Total Gross Margin
$2 
$15 
$109 
126 
 


 
 
Reconciliation to Segment EBIT:
     Plant depreciation
(39)
     Plant operating and maintenance expenses
(82)
     General and administrative and other expenses (including Enron
(38)
        bankruptcy gain of $113 and California settlement charges of $105)
     Minority interest
     Other income, net of expenses
     Gain (loss) on sale of other assets
(16)
       
DENA Segment EBIT
$(39)
 

         
         
Owned Assets - Merchant Plant Production        
               and Hedging Information a
2004b
2005
2006
 




 
Estimated available production (millions of MWh)
32 
63 
63 
        Combined cycle
29 
56 
56 
        Peaker units
 
Estimated production (millions of MWh)
12 
23 
25 
        Combined cycle
12 
23 
24 
        Peaker units
 
Estimated production sold
93%
77%
68%
 
Estimated average price ($/MWh)
$46 
$47 
$45 
 
 
a All figures exclude Southeast plants.
b Information for 2004 is for the remainder of the year only (July - December).
         

 

Supplemental Disclosures
Quarter Ended June 30, 2004
             
             
Duke Energy North America (continued)

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







Proprietary Trading            
  Actively quoted prices and other external sources
$100 
$6 
$30 
$(7)
$(20)
$109 
  Modeled
(2)
13 
34 
 





 
$98 
$19 
$38 
$(1)
$(11)
$143 
 




 
Structured Contracts
  Actively quoted prices and other external sources
$11 
$39 
$(50)
$(31)
$(75)
$(106)
  Modeled
(30)
(30)
(32)
(25)
(21)
(138)
 





 
$(19)
$9 
$(82)
$(56)
$(96)
$(244)
 




 
Owned Assets
  Actively quoted prices and other external sources
$181 
$266 
$193 
$88 
$69 
$797 
  Modeled
(11)
(9)
(5)
(1)
(7)
(33)
 





 
$170 
$257 
$188 
$87 
$62 
$764 
 




 
 

Total Fair Value of Energy Contract Net Assets * 
$663 
           
             
* 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 Average Price
Represents the average price expected to be realized. This figure is based on both existing sales (hedges) as well as expected sales, given market conditions at June 30, 2004.
 
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.

Special items for the first quarter (as summarized in this Earnings Release) include:

($ in Millions)
Pre-Tax
Amount
Tax
Effect
2004 EPS
Impact
2003 EPS
Impact 
First Quarter 2004
  Gain on sale of Australian assets
$256 
($18)
$0.26 
--
  Net loss on sale of DENA assets, primarily anticipated sale of southeast U.S. plants
(359)
134 
(0.25)
--
  Gains on sale of other assets, including Caribbean Nitrogen Co.
14 
(5)
0.01 
--
  Charge related to planned sale of Cantarell investment
(13)
(0.01)
--
 
 
First quarter 2003
  2003 gain on asset sales
16 
(5)
--
$0.01 
  2003 change in accounting principles
(256)
94 
--
(0.18)
     
TOTAL EPS IMPACT
$0.01 
($0.17)
EPS, as reported
$0.34 
$0.25 
EPS, ongoing
$0.33 
$0.42