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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

(Registrant’s 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 Issuer’s 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

 



Table of Contents

DUKE ENERGY CORPORATION

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2004

INDEX

 

Item

        Page

PART I. FINANCIAL INFORMATION     
1.    Financial Statements    1
    

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003, as revised

   1
    

Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003

   2
    

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003, as revised

   4
    

Notes to Consolidated Financial Statements

   5
2.    Management’s Discussion and Analysis of Results of Operations and Financial Condition    38
3.    Quantitative and Qualitative Disclosures About Market Risk    62
4.    Controls and Procedures    63
PART II. OTHER INFORMATION     
1.    Legal Proceedings    63
2.    Changes in Securities and Use of Proceeds    64
4.    Submission of Matters to a Vote of Security Holders    64
6.    Exhibits and Reports on Form 8-K    65
     Signatures    66

 

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

 

Duke Energy Corporation’s 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 Energy’s 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 Energy’s 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 Energy’s service territories

 

The weather and other natural phenomena

 

The timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates

 

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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 Energy’s ability to obtain financing on favorable terms, which can be affected by various factors, including Duke Energy’s 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 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

 

Growth in opportunities for Duke Energy’s 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.

 

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PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

DUKE ENERGY CORPORATION

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.

 

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DUKE ENERGY CORPORATION

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