UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2004
Commission File Number 1-4928
DUKE ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| North Carolina | 56-0205520 | |
| (State or Other Jurisdiction of Incorporation) | (IRS Employer Identification No.) |
526 South Church Street
Charlotte, NC 28202-1803
(Address of Principal Executive Offices)
(Zip code)
704-594-6200
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No ¨
Indicate the number of shares outstanding of each of the Issuers classes of common stock, as of the latest practicable date.
Number of shares of Common Stock, without par value, outstanding as of July 30, 2004 937,782,753
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2004
INDEX
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Duke Energy Corporations reports, filings and other public announcements may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can typically identify forward-looking statements by the use of forward-looking words, such as may, will, could, project, believe, anticipate, expect, estimate, continue, potential, plan, forecast and other similar words. Those statements represent Duke Energys intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside Duke Energys control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Those factors include:
| | State, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures, and affect the speed at and degree to which competition enters the electric and natural gas industries |
| | The outcomes of litigation and regulatory investigations, proceedings or inquiries |
| | Industrial, commercial and residential growth in Duke Energys service territories |
| | The weather and other natural phenomena |
| | The timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates |
i
| | General economic conditions, including any potential effects arising from terrorist attacks 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 Energys ability to obtain financing on favorable terms, which can be affected by various factors, including Duke Energys credit ratings and general economic conditions |
| | Lack of improvement or further declines in the market prices of equity securities and resultant cash funding requirements for Duke Energys defined benefit pension plans |
| | The level of creditworthiness of counterparties to Duke Energys transactions |
| | The amount of collateral required to be posted from time to time in Duke Energys transactions |
| | Growth in opportunities for Duke Energys business units, including the timing and success of efforts to develop domestic and international power, pipeline, gathering, processing and other infrastructure projects |
| | The performance of electric generation, pipeline and gas processing facilities |
| | The extent of success in connecting natural gas supplies to gathering and processing systems and in connecting and expanding gas and electric markets |
| | The effect of accounting pronouncements issued periodically by accounting standard-setting bodies and |
| | Conditions of the capital markets and equity markets during the periods covered by the forward-looking statements |
In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than Duke Energy has described. Duke Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
ii
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per-share amounts)
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
||||||||||||
| (as Revised - see Note 1) |
(as Revised - see Note 1) |
||||||||||||||
| 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 | 9 | 121 | 11 | |||||||||||
| (Losses) Gains on Sales of Other Assets, net |
(11 | ) | 1 | (349 | ) | 3 | |||||||||
| 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 | 4 | 20 | ||||||||||
| Net gain (loss) on dispositions, net of tax |
30 | 6 | 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 |
3 | 7 | 5 | 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 | |||||||
See Notes to Consolidated Financial Statements.
1
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
| June 30, 2004 |
December 31, 2003 | |||||
| ASSETS |
||||||
| Current Assets |
||||||
| Cash and cash equivalents |
$ | 2,696 | $ | 1,160 | ||
| Receivables (net of allowance for doubtful accounts of $223 at June 30, 2004 and $280 at December 31, 2003) |
2,982 | 2,888 | ||||
| Inventory |
837 | 941 | ||||
| Assets held for sale |
113 | 424 | ||||
| Unrealized gains on mark-to-market and hedging transactions |
1,346 | 1,566 | ||||
| Other |
604 | 694 | ||||
| Total current assets |
8,578 | 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 |
1,632 | 1,857 | ||||
| Assets held for sale |
692 | 1,444 | ||||
| Investments in residential, commercial and multi-family real estate (net of accumulated depreciation of $28 at June 30, 2004 and $32 at December 31, 2003) |
1,228 | 1,331 | ||||
| Other |
840 | 1,117 | ||||
| Total investments and other assets |
11,065 | 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 | ||||