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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 September 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 October 29, 2004…937,955,726

 



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DUKE ENERGY CORPORATION

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

INDEX

 

Item


             Page

     PART I. FINANCIAL INFORMATION     
1.   

Financial Statements

   1
         

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

   1
         

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

   2
         

Consolidated Statements of Cash Flows for the Nine Months Ended September 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

   44
3.   

Quantitative and Qualitative Disclosures About Market Risk

   68
4.   

Controls and Procedures

   69
     PART II. OTHER INFORMATION     
1.   

Legal Proceedings

   70
2.   

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

   70
4.   

Submission of Matters to a Vote of Security Holders

   70
6.   

Exhibits

   71
    

Signatures

   72

 

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

 

i


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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 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, liquefied natural gas, 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
September 30,


    Nine Months Ended
September 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

   $ 3,491     $ 3,572     $ 10,310     $ 10,947  

Regulated electric

     1,431       1,387       3,954       3,788  

Regulated natural gas

     585       590       2,202       2,105  
    


 


 


 


Total operating revenues

     5,507       5,549       16,466       16,840  
    


 


 


 


Operating Expenses

                                

Natural gas and petroleum products purchased

     2,616       2,749       8,167       8,878  

Operation, maintenance and other

     826       964       2,439       2,515  

Fuel used in electric generation and purchased power

     530       695       1,699       1,612  

Depreciation and amortization

     525       473       1,379       1,341  

Property and other taxes

     133       127       411       400  

Impairment and other related charges

     22       —         25       —    

Impairment of goodwill

     —         254       —         254  
    


 


 


 


Total operating expenses

     4,652       5,262       14,120       15,000  
    


 


 


 


Gains on Sales of Investments in Commercial and Multi-Family Real Estate

     28       36       149       47  

Losses on Sales of Other Assets, net

     (4 )     (79 )     (353 )     (76 )
    


 


 


 


Operating Income

     879       244       2,142       1,811  
    


 


 


 


Other Income and Expenses

                                

Equity in earnings of unconsolidated affiliates

     33       35       110       85  

(Losses) gains on sales and impairments of equity investments

     (14 )     33       (14 )     266  

Other income and expenses, net

     35       35       107       121  
    


 


 


 


Total other income and expenses

     54       103       203       472  

Interest Expense

     342       375       1,035       1,027  

Minority Interest Expense (Benefit)

     61       (11 )     142       89  
    


 


 


 


Earnings (Loss) From Continuing Operations Before Income Taxes

     530       (17 )     1,168       1,167  

Income Tax Expense (Benefit) from Continuing Operations

     129       (22 )     296       368  
    


 


 


 


Income From Continuing Operations

     401       5       872       799  

Discontinued Operations

                                

Net operating (loss) income, net of tax

     (11 )     8       (8 )     27  

Net (loss) gain on dispositions, net of tax

     (1 )     36       268       34  
    


 


 


 


(Loss) Income From Discontinued Operations

     (12 )     44       260       61  

Income Before Cumulative Effect of Change in Accounting Principle

     389       49       1,132       860  

Cumulative Effect of Change in Accounting Principle, net of tax and minority interest

     —         —         —         (162 )
    


 


 


 


Net Income

     389       49       1,132       698  

Dividends and Premiums on Redemption of Preferred and Preference Stock

     2       3       7       13  
    


 


 


 


Earnings Available For Common Stockholders

   $ 387     $ 46     $ 1,125     $ 685  
    


 


 


 


Common Stock Data

                                

Weighted-average shares outstanding

                                

Basic

     938       905       925       901  

Diluted

     940       907       928       902  

Earnings per share (from continuing operations)

                                

Basic

   $ 0.42     $ —       $ 0.94     $ 0.87  

Diluted

   $ 0.42     $ —       $ 0.93     $ 0.87  

(Loss) Earnings per share (from discontinued operations)

                                

Basic

   $ (0.01 )   $ 0.05     $ 0.28     $ 0.07  

Diluted

   $ (0.01 )   $ 0.05     $ 0.28     $ 0.07  

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

                                

Basic

   $ 0.41     $ 0.05     $ 1.22     $ 0.94  

Diluted

   $ 0.41     $ 0.05     $ 1.21     $ 0.94  

Earnings per share

                                

Basic

   $ 0.41     $ 0.05     $ 1.22     $ 0.76  

Diluted

   $ 0.41     $ 0.05     $ 1.21     $ 0.76  

Dividends per share

   $ —       $ —       $ 0.825     $ 0.825  

 

See Notes to Consolidated Financial Statements.

 

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DUKE ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)

 

     September 30,
2004


   December 31,
2003


ASSETS

             

Current Assets

             

Cash and cash equivalents

   $ 2,858    $ 1,160

Receivables (net of allowance for doubtful accounts of $230 at September 30, 2004 and $280 at December 31, 2003)

     2,720      2,890

Inventory

     894      941

Assets held for sale

     125      424

Unrealized gains on mark-to-market and hedging transactions

     1,207      1,566

Other

     844      694
    

  

Total current assets

     8,648      7,675
    

  

Investments and Other Assets

             

Investments in unconsolidated affiliates

     1,294      1,398

Nuclear decommissioning trust funds

     1,262      925

Goodwill

     4,002      3,962

Notes receivable

     225   </