CHARLOTTE, N.C., Nov. 5 /PRNewswire-FirstCall/ -- Duke Energy (NYSE: DUK)
today reported adjusted diluted earnings per share (EPS) of 33 cents for the
third-quarter 2008, compared with 45 cents for the same period last year.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040414/DUKEENERGYLOGO )
Third-quarter 2008 reported diluted EPS was 17 cents vs. 48 cents in
third-quarter 2007.
"We are disappointed in the third quarter results, but our strong
performance earlier in the year will help mitigate the impact of these results
on our year-end performance," said Chairman, President and Chief Executive
Officer James E. Rogers. "Although we don't believe we will be able to achieve
our 2008 employee incentive target of $1.27 of adjusted diluted earnings per
share by year's end -- particularly in this economy -- we are only about 5
cents off of where we expected to be at the end of the third quarter."
Third-quarter 2008 adjusted results were adversely affected by milder
weather in Duke Energy's service territories, expenses related to the worst
storm-related outages ever recorded in the Midwest, timing of recovery of fuel
and purchased power costs under the RSP in Ohio, and generally declining
economic conditions.
"Despite a recessionary economy and tight credit markets, our energy
businesses remain solid and our liquidity position is excellent. We have the
operational and financial flexibility to respond to a recessionary economy or
continued turmoil in the credit markets," Rogers said.
Starting in the first-quarter 2008, Duke Energy began presenting adjusted
earnings, which excludes the impacts of special items and discontinued
operations, as well as the mark-to-market impacts of economic hedges in the
Commercial Power segment. Prior to the first-quarter 2008, Duke Energy
presented ongoing earnings, which excluded the impacts of special items and
discontinued operations. For comparative purposes, ongoing earnings for prior
periods have been revised to present results for all periods on the same
adjusted earnings basis.
Mark-to-market impacts of economic hedges in the Commercial Power segment
and special items affecting Duke Energy's adjusted diluted EPS for the quarter
include:
3Q2008 3Q2007
Pre-Tax Tax EPS EPS
(In millions, except per-share amounts) Amount Effect Impact Impact
Third quarter 2008
- Mark-to-market impact of economic hedges $(119) $42 $(0.06) --
- Crescent project impairments $(114) $44 $(0.05) --
- Emission allowances impairment $(82) $30 $(0.04) --
- Costs to achieve Cinergy merger $(11) $4 $(0.01) --
Third quarter 2007
- Settlement reserve adjustment $20 $(7) -- $0.01
- Mark-to-market impact of economic hedges $4 $(2) -- --
- Costs to achieve Cinergy merger $(15) $6 -- $(0.01)
Total diluted EPS impact $(0.16) --
Reconciliation of reported to adjusted diluted EPS for the quarter:
3Q2008 3Q2007
EPS EPS
Diluted EPS from continuing operations, as reported $0.17 $0.45
Diluted EPS from discontinued operations, as reported -- $0.03
Diluted EPS, as reported $0.17 $0.48
Adjustments to reported diluted EPS:
- Diluted EPS from discontinued operations -- $(0.03)
- Diluted EPS impact of special items and mark-to-market
in Commercial Power $0.16 --
Diluted EPS, adjusted $0.33 $0.45
BUSINESS UNIT RESULTS (ON A REPORTED BASIS)
U.S. Franchised Electric and Gas (USFE&G)
USFE&G reported third-quarter 2008 segment EBIT from continuing operations
of $726 million, compared to $760 million in the third quarter 2007.
USFE&G results decreased due primarily to milder weather and unfavorable
operation and maintenance expenses driven by storm costs in the Midwest.
During the third quarter 2007, USFE&G experienced record-setting weather in
both the Carolinas and Midwest.
These negative impacts were partially offset by higher Allowance for Funds
Used During Construction (AFUDC), higher rates in the Midwest as a result of
recovery of qualifying pollution control costs in Indiana and rate increases
in Ohio, as well as higher results from sales to wholesale customers.
Overall, USFE&G's customer base continues to grow, although the economy is
beginning to cause a decline in energy usage.
Year-to-date segment EBIT from continuing operations for USFE&G was $1,866
million, compared to $1,786 million in 2007.
Commercial Power
Commercial Power reported a third-quarter 2008 segment EBIT loss from
continuing operations of $108 million, compared to $163 million positive EBIT
in the third quarter 2007.
Commercial Power results decreased due primarily to mark-to-market losses
on economic hedges driven by sharply declining commodity prices, an impairment
of emission allowances resulting from the invalidation in federal court of the
Clean Air Interstate Rule, the timing of recovery of fuel and purchased power
costs under the Ohio RSP, and milder weather. The decrease was partially
offset by lower purchase accounting and operating and maintenance expenses.
Year-to-date segment EBIT from continuing operations for Commercial Power
was $273 million, compared to $240 million in 2007.
Duke Energy International (DEI)
Duke Energy International (DEI) reported third-quarter 2008 segment EBIT
from continuing operations of approximately $77 million, compared to $92
million in the third quarter 2007.
DEI's lower results for the quarter were driven primarily by unfavorable
hydrology and lower prices in Peru and lower results in Central America,
partially offset by increased demand in Brazil, favorable average foreign
exchange rates and higher results at National Methanol.
Year-to-date segment EBIT from continuing operations for DEI was $307
million, compared to $283 million in 2007.
Crescent Resources
Duke Energy's ownership interest in Crescent Resources reported a $124
million equity earnings loss for the third quarter 2008, compared to $10
million in positive equity earnings in the third quarter 2007. Lower current
year results reflect $114 million in asset impairments primarily related to
residential properties as Crescent continued to assess projects in troubled
real estate markets, consistent with its revised business strategy. This
strategy involves accelerating property sales, which is necessitated by the
June 2008 restructuring of the terms of its long-term debt obligations.
Year-to-date, Duke Energy's ownership interest in Crescent Resources
reported a $230 million equity earnings loss, compared to $29 million in
positive equity earnings in 2007.
As a result of these write-downs, Duke Energy has a zero basis investment
in Crescent as of September 30, 2008.
Other
Other primarily includes costs associated with corporate governance,
costs-to-achieve the Cinergy merger and Duke Energy's captive insurance
company.
Other reported a third-quarter 2008 net expense from continuing operations
of $71 million, compared to $44 million in the third quarter 2007. The
increase was due primarily to a non-recurring settlement adjustment in the
prior year quarter.
Year-to-date net expense from continuing operations for Other was $230
million, compared to $194 million in 2007.
INTEREST EXPENSE
Interest expense in third quarter 2008 was $176 million, compared to $177
million in third quarter 2007.
Year-to-date interest expense was $552 million, compared to $499 million
in 2007.
INCOME TAX EXPENSE
Income tax expense from continuing operations in third quarter 2008 was
$132 million, compared to $304 million in third quarter 2007. The effective
tax rate for the third quarter 2008 increased to 38 percent from 35 percent in
third quarter 2007. The decrease in income tax expense from continuing
operations was primarily due to a decrease in taxable income.
Year-to-date income tax expense from continuing operations was $521
million, compared to $595 million in 2007. The effective tax rate for
year-to-date 2008 was 34 percent, compared to 33 percent in 2007.
Discontinued Operations
In the third quarter of 2008, Discontinued Operations had an after-tax
loss of $1 million, compared to a $34 million after-tax gain in the third
quarter 2007. The variance is primarily due to the presentation of the
third-quarter 2007 synfuel operations as discontinued operations.
NON-GAAP FINANCIAL MEASURES
The primary performance measure used by management to evaluate segment
performance is segment EBIT from continuing operations, which at the segment
level represents all profits from continuing operations (both operating and
non-operating), including any equity in earnings of unconsolidated affiliates,
before deducting interest and taxes, and is net of the minority interest
expense related to those profits. Management believes segment EBIT from
continuing operations, which is the GAAP measure used to report segment
results, is a good indicator of each segment's operating performance as it
represents the results of Duke Energy's ownership interests in continuing
operations without regard to financing methods or capital structures.
Duke Energy's management uses adjusted diluted EPS, which is a non-GAAP
financial measure as it represents diluted EPS from continuing operations,
adjusted for the per-share impact of special items and the mark-to-market
impacts of economic hedges in the Commercial Power segment, as a measure to
evaluate operations of the company.
Special items represent certain charges and credits, which management
believes will not be recurring on a regular basis. Mark-to-market adjustments
reflect the mark-to-market impact of derivative contracts, which is recognized
in GAAP earnings immediately as such derivative contracts do not qualify for
hedge accounting, used in Duke Energy's hedging of a portion of the economic
value of its generation assets in the Commercial Power segment. The economic
value of the generation assets is subject to fluctuations in fair value due to
market price volatility of the input and output commodities (e.g. coal, power)
and, as such, the economic hedging involves both purchases and sales of those
input and output commodities related to the generation assets. Because the
operations of the generation assets are accounted for under the accrual
method, management believes that excluding the impact of mark-to-market
changes of the economic hedge contracts from adjusted earnings until
settlement better matches the financial impacts of the hedge contract with the
portion of the economic value of the underlying hedged asset. Management
believes that the presentation of adjusted diluted EPS provides useful
information to investors, as it allows them to more accurately compare the
company's performance across periods. Adjusted diluted EPS is also used as a
basis for employee incentive bonuses.
Management prepares its annual forecast of adjusted diluted EPS as a basis
for employee incentive bonuses based in part on normalized weather patterns.
In the third quarter of 2008, the Company incurred approximately $50 million
in restoration costs related to the worst storm-related outages ever recorded
in the Midwest. Also, in the third quarter of 2007, record setting above-
normal weather was experienced in the Carolinas and the Midwest. The milder
weather in the third quarter of 2008 had the effect of an approximate $120
million decrease in non-fuel operating revenues. These specific items
resulted in a decline in adjusted diluted EPS in the third quarter of 2008
compared to the third quarter of 2007 of approximately 8 cents. Additional
revenue and expense items that might have been attributable to the
above-normal weather conditions in the third quarter of 2007, such as
increased short-term incentive expense, are not included in the calculation of
the 8 cents diluted EPS impact. In the current quarter, given the
record-setting nature of the aforementioned weather occurrences, management
believes the presentation of the diluted EPS impact of these specific items
provides useful supplemental information to investors, as it allows them to
more accurately compare the company's performance on a weather normalized
basis.
The most directly comparable GAAP measure for adjusted diluted EPS is
reported diluted EPS from continuing operations, which includes the impact of
special items and the mark-to-market impacts of economic hedges in the
Commercial Power segment.
Due to the forward-looking nature of adjusted diluted EPS for future
periods, information to reconcile such non-GAAP financial measures to the most
directly comparable GAAP financial measures is not available at this time, as
the company is unable to forecast special items and the mark-to-market impacts
of economic hedges in the Commercial Power segment for future periods.
Duke Energy also uses adjusted segment EBIT (including adjusted equity
earnings for Crescent Resources) and Other net expenses as a measure of
historical and anticipated future segment and other performance. When used for
future periods, adjusted segment EBIT and Other net expenses may also include
any amounts that may be reported as discontinued operations. Adjusted segment
EBIT and Other net expenses are non-GAAP financial measures, as they represent
reported segment EBIT and Other net expenses adjusted for special items and
the mark-to-market impacts of economic hedges in the Commercial Power segment.
Management believes that the presentation of adjusted segment EBIT and Other
net expenses provides useful information to investors, as it allows them to
more accurately compare a segment's or Other's ongoing performance across
periods. The most directly comparable GAAP measure for adjusted segment EBIT
or Other net expenses is reported segment EBIT or Other net expenses, which
represents segment EBIT and Other net expenses from continuing operations,
including any special items and the mark-to-market impacts of economic hedges
in the Commercial Power segment. Due to the forward-looking nature of any
forecasted adjusted segment EBIT or Other net expenses and any related growth
rates for future periods, information to reconcile these non-GAAP financial
measures to the most directly comparable GAAP financial measures is not
available at this time, as the company is unable to forecast special items,
the mark-to-market impacts of economic hedges in the Commercial Power segment,
or any amounts that may be reported as discontinued operations for future
periods.
Duke Energy, one of the largest electric power companies in the United
States, supplies and delivers electricity to approximately 4.0 million U.S.
customers in its regulated jurisdictions. The company has approximately 35,000
megawatts of electric generating capacity in the Midwest and the Carolinas,
and natural gas distribution services in Ohio and Kentucky. In addition, Duke
Energy has more than 4,000 megawatts of electric generation in Latin America,
and is a joint-venture partner in a U.S. real estate company. 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 on
Wednesday, Nov. 5. The conference call can be accessed via the investors'
section (http://www.duke-energy.com/investors/) of Duke Energy's Web site or
by dialing 719-325-4762 outside the United States or 877-719-9788 in the
United States. The confirmation code is 3796646. Please call in 10 to 15
minutes prior to the scheduled start time. A replay of the conference call
will be available until Nov. 15, by dialing 719-457-0820 outside the United
States or 888-203-1112 in the United States, with a confirmation code of
3796646. A replay and transcript also will be available by accessing the
investors' section of the company's Web site.
Forward-looking statement
This release 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. Forward-looking statements are based on management's
beliefs and assumptions. These forward-looking statements are identified by
terms and phrases such as "anticipate," "believe," "intend," "estimate,"
"target," "expect," "continue," "should," "could," "may," "plan," "project,"
"predict," "will," "potential," "forecast," and similar expressions. Forward-
looking statements involve risks and uncertainties that may cause actual
results to be materially different from the results predicted. Factors that
could cause actual results to differ materially from those indicated in any
forward-looking statement include, but are not limited to: State, federal and
foreign legislative and regulatory initiatives, including costs of compliance
with existing and future environmental requirements; state, federal and
foreign legislation and regulatory initiatives that affect cost and investment
recovery, or have an impact on rate structures; costs and effects of legal and
administrative proceedings, settlements, investigations and claims;
industrial, commercial and residential growth in Duke Energy Corporation's
(Duke Energy) service territories; additional competition in electric markets
and continued industry consolidation; political and regulatory uncertainty in
other countries in which Duke Energy conducts business; the influence of
weather and other natural phenomena on Duke Energy operations, including the
economic, operational and other effects of hurricanes, droughts, ice storms
and tornadoes; the timing and extent of changes in commodity prices, interest
rates and foreign currency exchange rates; unscheduled generation outages,
unusual maintenance or repairs and electric transmission system constraints;
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;
declines in the market prices of equity securities and resultant cash funding
requirements for Duke Energy's defined benefit pension plans; the level of
credit worthiness of counterparties to Duke Energy's transactions; employee
workforce factors, including the potential inability to attract and retain key
personnel; growth in opportunities for Duke Energy's business units, including
the timing and success of efforts to develop domestic and international power
and other projects; the performance of electric generation and of projects
undertaken by Duke Energy's non-regulated businesses; construction and
development risks associated with the completion of Duke Energy's capital
investment projects in existing and new generation facilities, including risks
related to financing, obtaining and complying with terms of permits, meeting
construction budgets and schedules, and satisfying operating and environmental
performance standards, as well as the ability to recover costs from customers
in a timely manner; the effect of accounting pronouncements issued
periodically by accounting standard-setting bodies; and the ability to
successfully complete merger, acquisition or divestiture plans. 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.
MEDIA CONTACT Tom Shiel
Phone: 704-382-2235
24-Hour: 704-382-8333
ANALYST CONTACT Sean Trauschke
Phone: 980-373-7905
September 2008
QUARTERLY HIGHLIGHTS
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
--------------- ---------------
(In millions, except per-share
amounts and where noted) 2008 2007 2008 2007
---------------------------------------------------------------------
COMMON STOCK DATA
Earnings Per Share (from continuing
operations)
Basic $0.17 $0.45 $0.81 $0.96
Diluted $0.17 $0.45 $0.80 $0.96
Earnings per Share (from
discontinued operations)
Basic $- $0.03 $0.01 $0.04
Diluted $- $0.03 $0.01 $0.03
Earnings Per Share
Basic $0.17 $0.48 $0.82 $1.00
Diluted $0.17 $0.48 $0.81 $0.99
Dividends Per Share $- $- $0.67 $0.64
Weighted-Average Shares Outstanding
Basic 1,265 1,260 1,264 1,259
Diluted 1,268 1,265 1,268 1,266
---------------------------------------------------------------------
INCOME
Operating Revenues $3,508 $3,688 $10,074 $9,689
======= ======= ======= =======
Total Reportable Segment EBIT 571 1,025 2,216 2,338
Other EBIT (71) (44) (230) (194)
Interest Expense (176) (177) (552) (499)
Interest Income and Other (a) 24 73 104 159
Income Tax Expense from Continuing
Operations (132) (304) (521) (595)
(Loss) Income from Discontinued
Operations, net of tax (1) 34 14 48
------- ------- ------- -------
Net Income $215 $607 $1,031 $1,257
======= ======= ======= =======
---------------------------------------------------------------------
CAPITALIZATION
Total Common Equity 59% 64%
Total Debt 41% 36%
---------------------------------------------------------------------
Total Debt $14,919 $11,776
Book Value Per Share $16.86 $16.72
Actual Shares Outstanding 1,265 1,260
---------------------------------------------------------------------
CAPITAL AND INVESTMENT EXPENDITURES
U.S. Franchised Electric and Gas $1,015 $506 $2,668 $1,840
Commercial Power 371 97 648 323
International Energy 25 8 108 32
Other 50 34 189 104
------- ------- ------- -------
Total Capital and Investment
Expenditures $1,461 $645 $3,613 $2,299
======= ======= ======= =======
---------------------------------------------------------------------
EBIT BY BUSINESS SEGMENT
U.S. Franchised Electric and Gas $726 $760 $1,866 $1,786
Commercial Power (108) 163 273 240
International Energy 77 92 307 283
Crescent (124) 10 (230) 29
------- ------- ------- -------
Total Reportable Segment EBIT 571 1,025 2,216 2,338
Other EBIT (71) (44) (230) (194)
Interest Expense (176) (177) (552) (499)
Interest Income and Other (a) 24 73 104 159
------- ------- ------- -------
Consolidated Income From Continuing
Operations Before Income Taxes $348 $877 $1,538 $1,804
======= ======= ======= =======
---------------------------------------------------------------------
(a) Other within Interest Income and Other includes foreign currency
transaction gains and losses and additional minority interest not
allocated to the segment results.
Note: Certain 2007 amounts have been recast due to the
reclassification of Synfuel operations to discontinued operations.
September 2008
QUARTERLY HIGHLIGHTS
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ----------------
(In millions, except where noted) 2008 2007 2008 2007
------------------------------------------------------------------------
U.S. FRANCHISED ELECTRIC AND GAS
Operating Revenues $2,698 $2,756 $7,701 $7,404
Operating Expenses 2,003 2,005 5,941 5,652
Gains (Losses) on Sales of Other
Assets and Other, net 1 (1) 4 -
Other Income and Expenses, net 30 10 102 34
------- ------- ------- -------
EBIT $726 $760 $1,866 $1,786
------- ------- ------- -------
Depreciation and Amortization $344 $393 $1,009 $1,117
Duke Energy Carolinas GWh sales 22,785 23,797 65,875 66,209
Duke Energy Midwest GWh sales 16,566 17,230 47,860 49,038
Net Proportional MW Capacity in
Operation 27,487 27,590
------------------------------------------------------------------------
COMMERCIAL POWER (a)
Operating Revenues $498 $643 $1,429 $1,474
Operating Expenses 614 485 1,219 1,242
Gains (Losses) on Sales of Other
Assets and Other, net - - 46 (11)
Other Income and Expenses, net 8 5 17 19
------- ------- ------- -------
EBIT $(108) $163 $273 $240
------- ------- ------- -------
Depreciation and Amortization $43 $44 $128 $128
Actual Plant Production, GWh 5,027 7,230 15,893 18,228
Net Proportional MW Capacity in
Operation 7,550 8,100
------------------------------------------------------------------------
INTERNATIONAL ENERGY
Operating Revenues $297 $276 $920 $782
Operating Expenses 250 211 716 561
Gains (Losses) on Sales of Other
Assets and Other, net - - 1 -
Other Income and Expenses, net 36 24 119 69
Minority Interest Expense (Benefit) 6 (3) 17 7
------- ------- ------- -------
EBIT $77 $92 $307 $283
------- ------- ------- -------
Depreciation and Amortization $22 $20 $64 $58
Sales, GWh 4,379 4,200 13,541 12,854
Proportional MW Capacity in
Operation 4,010 3,940
------------------------------------------------------------------------
CRESCENT
Equity in Earnings (Loss) of
Unconsolidated Affiliates $(124) $10 $(230) $29
------- ------- ------- -------
EBIT $(124) $10 $(230) $29
------- ------- ------- -------
------------------------------------------------------------------------
OTHER
Operating Revenues $38 $40 $94 $131
Operating Expenses 90 83 311 317
Gains (Losses) on Sales of Other
Assets and Other, net 1 2 2 1
Other Income and Expenses, net (25) (3) (24) (12)
Minority Interest Benefit (5) - (9) (3)
------- ------- ------- -------
EBIT $(71) $(44) $(230) $(194)
------- ------- ------- -------
Depreciation and Amortization $23 $17 $62 $43
------------------------------------------------------------------------
(a) Excludes the results of Synfuel operations, which have been
reclassified to discontinued operations for the three and nine months
ended September 30, 2007.
DUKE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per-share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- --------------
2008 2007 2008 2007
------------------------------------------------------------------------
Operating Revenues $3,508 $3,688 $10,074 $9,689
Operating Expenses 2,933 2,758 8,116 7,670
Gains (Losses) on Sales of Other Assets
and Other, net 2 - 53 (10)
------------------------------------------------------------------------
Operating Income 577 930 2,011 2,009
------------------------------------------------------------------------
Other Income and Expenses, net (55) 120 76 293
Interest Expense 176 177 552 499
Minority Interest Benefit (2) (4) (3) (1)
------------------------------------------------------------------------
Income From Continuing Operations Before
Income Taxes 348 877 1,538 1,804
Income Tax Expense from Continuing
Operations 132 304 521 595
------------------------------------------------------------------------
Income From Continuing Operations 216 573 1,017 1,209
(Loss) Income From Discontinued
Operations, net of tax (1) 34 14 48
------------------------------------------------------------------------
Net Income $215 $607 $1,031 $1,257
========================================================================
Common Stock Data
Weighted-average shares outstanding
Basic 1,265 1,260 1,264 1,259
Diluted 1,268 1,265 1,268 1,266
Earnings per share (from continuing
operations)
Basic $0.17 $0.45 $0.81 $0.96
Diluted $0.17 $0.45 $0.80 $0.96
Earnings per share (from discontinued
operations)
Basic $- $0.03 $0.01 $0.04
Diluted $- $0.03 $0.01 $0.03
Earnings per share
Basic $0.17 $0.48 $0.82 $1.00
Diluted $0.17 $0.48 $0.81 $0.99
Dividends per share $- $- $0.67 $0.64
DUKE ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
September 30, December 31,
2008 2007
------------- -------------
ASSETS
Current Assets $5,852 $4,916
Investments and Other Assets 10,921 11,199
Net Property, Plant and Equipment 33,248 31,110
Regulatory Assets and Deferred Debits 2,748 2,461
------------- -------------
Total Assets $52,769 $49,686
============= =============
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current Liabilities $5,060 $5,698
Long-term Debt 12,695 9,498
Deferred Credits and Other
Liabilities 13,509 13,110
Minority Interests 175 181
Common Stockholders' Equity 21,330 21,199
------------- -------------
Total Liabilities and Common
Stockholders' Equity $52,769 $49,686
============= =============
DUKE ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Nine Months Ended
September 30,
---------------------
2008 2007
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,031 $1,257
Adjustments to reconcile net income to
net cash provided by operating activities 1,446 1,208
-------- --------
Net cash provided by operating activities 2,477 2,465
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities (3,484) (1,703)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by (used in) financing
activities 2,205 (1,035)
-------- --------
Net increase (decrease) in cash
and cash equivalents 1,198 (273)
Cash and cash equivalents at beginning of period 678 948
-------- --------
Cash and cash equivalents at end of period $1,876 $675
======== ========
Duke Energy Carolinas
Quarterly Highlights
Supplemental Franchised Electric Information
September 30, 2008
Quarter-to-Date
---------------------------------
%
2008 2007 (1) Inc.(Dec.)
--------- --------- ---------
GWH Sales
Residential 7,911 8,429 (6.1%)
General Service 7,755 7,866 (1.4%)
Industrial - Textile 1,237 1,386 (10.7%)
Industrial - Other 4,891 5,009 (2.4%)
--------- --------- ---------
Total Industrial 6,128 6,395 (4.2%)
Other Energy Sales 71 69 3.3%
Regular Resale 523 529 (1.1%)
--------- --------- ---------
Total Regular Sales Billed 22,389 23,287 (3.9%)
Special Sales 1,148 724 58.7%
--------- --------- ---------
Total Electric Sales 23,537 24,011 (2.0%)
Unbilled Sales (752) (214) (251.9%)
--------- --------- ---------
Total Consolidated Electric
Sales - Carolinas 22,785 23,797 (4.3%)
Average Number of Customers
Residential 2,015,424 1,985,445 1.5%
General Service 334,699 330,251 1.3%
Industrial - Textile 671 704 (4.7%)
Industrial - Other 6,597 6,479 1.8%
--------- --------- ---------
Total Industrial 7,268 7,183 1.2%
Other Energy Sales 13,687 13,401 2.1%
Regular Resale 21 21 0.0%
--------- --------- ---------
Total Regular Sales 2,371,099 2,336,301 1.5%
Special Sales 31 30 3.3%
--------- --------- ---------
Total Avg Number of Customers -
Carolinas 2,371,130 2,336,331 1.5%
Heating and Cooling Degree Days
Actual
Heating Degree Days 8 1 715.6%
Cooling Degree Days 976 1,203 (18.9%)
Variance from Normal
Heating Degree Days (59.1%) (94.7%) n/a
Cooling Degree Days 2.4% 25.0% n/a
Year-to-Date
---------------------------------
%
2008 2007 (1) Inc.(Dec.)
---------- ---------- ---------
GWH Sales
Residential 21,139 21,503 (1.7%)
General Service 20,833 20,860 (0.1%)
Industrial - Textile 3,526 3,966 (11.1%)
Industrial - Other 13,898 14,123 (1.6%)
---------- ---------- ---------
Total Industrial 17,424 18,089 (3.7%)
Other Energy Sales 213 208 2.4%
Regular Resale 1,341 1,304 2.9%
---------- ---------- ---------
Total Regular Sales Billed 60,950 61,963 (1.6%)
Special Sales 5,324 4,245 25.4%
---------- ---------- ---------
Total Electric Sales 66,274 66,208 0.1%
Unbilled Sales (399) 1 NA
---------- ---------- ---------
Total Consolidated Electric
Sales - Carolinas 65,875 66,209 (0.5%)
Average Number of Customers
Residential 2,009,610 1,976,213 1.7%
General Service 332,160 328,426 1.1%
Industrial - Textile 674 723 (6.8%)
Industrial - Other 6,566 6,527 0.6%
---------- ---------- ---------
Total Industrial 7,240 7,250 (0.1%)
Other Energy Sales 13,641 13,391 1.9%
Regular Resale 21 21 0.0%
---------- ---------- ---------
Total Regular Sales 2,362,672 2,325,301 1.6%
Special Sales 34 34 0.0%
---------- ---------- ---------
Total Avg Number of Customers -
Carolinas 2,362,706 2,325,335 1.6%
(1) Amounts for prior periods have been recast to eliminate separate
presentation of Nantahala amounts following the elimination of
separate rates for Nantahala customers effective January 1, 2008.
Heating and Cooling Degree Days
Actual
Heating Degree Days 1,903 1,862 2.2%
Cooling Degree Days 1,521 1,740 (12.6%)
Variance from Normal
Heating Degree Days (1.6%) (6.7%) n/a
Cooling Degree Days 8.3% 21.9% n/a
Duke Energy - Midwest
Quarterly Highlights
Supplemental Franchised Electric Information
September 2008
Quarter-to-Date
--------------------------------
%
2008 2007 Inc.(Dec.)
--------- --------- ---------
GWH Sales
Residential 4,834 5,314 (9.0%)
General Service 5,024 5,226 (3.9%)
Industrial 4,477 4,692 (4.6%)
Other Energy Sales 43 44 (2.3%)
--------- --------- --------
Total Regular Electric Sales
Billed 14,378 15,276 (5.9%)
Special Sales 2,232 1,999 11.7%
--------- --------- --------
Total Electric Sales Billed
- Midwest 16,610 17,275 (3.8%)
Unbilled Sales (44) (45) 2.2%
--------- --------- --------
Total Electric Sales - Midwest 16,566 17,230 (3.9%)
Average Number of Customers
Residential 1,399,932 1,397,131 0.2%
General Service 184,822 183,808 0.6%
Industrial 5,569 5,644 (1.3%)
Other Energy 4,014 3,860 4.0%
--------- --------- --------
Total Regular Sales 1,594,337 1,590,443 0.2%
Special Sales 38 35 8.6%
--------- --------- --------
Total Avg Number Electric
Customers - Midwest 1,594,375 1,590,478 0.2%
Heating and Cooling Degree Days*
Actual
Heating Degree Days 1 3 (66.7%)
Cooling Degree Days 753 1,009 (25.4%)
Variance from Normal
Heating Degree Days (93.8%) (81.3%) n/a
Cooling Degree Days 3.4% 38.6% n/a
Year-to-Date
----------------------------------
%
2008 2007 Inc.(Dec.)
---------- ----------- ---------
GWH Sales
Residential 13,987 14,515 (3.6%)
General Service 13,941 14,087 (1.0%)
Industrial 13,057 13,704 (4.7%)
Other Energy Sales 130 131 (0.8%)
---------- ---------- ---------
Total Regular Electric Sales
Billed 41,115 42,437 (3.1%)
Special Sales 6,845 6,563 4.3%
---------- ---------- ---------
Total Electric Sales Billed -
Midwest 47,960 49,000 (2.1%)
Unbilled Sales (100) 38 (363.2%)
---------- ---------- ---------
Total Electric Sales - Midwest 47,860 49,038 (2.4%)
Average Number of Customers
Residential 1,404,914 1,399,772 0.4%
General Service 184,798 183,476 0.7%
Industrial 5,598 5,660 (1.1%)
Other Energy 3,986 3,788 5.2%
---------- ---------- ---------
Total Regular Sales 1,599,296 1,592,696 0.4%
Special Sales 38 31 22.6%
---------- ---------- ---------
Total Avg Number Electric Customers
- Midwest 1,599,334 1,592,727 0.4%
Heating and Cooling Degree Days*
Actual
Heating Degree Days 2,528 2,478 2.0%
Cooling Degree Days 1,043 1,468 (29.0%)
Variance from Normal
Heating Degree Days 8.4% 7.2% n/a
Cooling Degree Days 2.2% 43.8% n/a
* Reflects HDD and CDD for Duke Energy - Indiana, Duke Energy - Ohio and
Duke Energy - Kentucky
DUKE ENERGY CORPORATION
ADJUSTED TO REPORTED EARNINGS RECONCILIATION
September 2007 Quarter-to-Date
(Dollars in millions, except per-share amounts)
Special Items (Note 1)
---------------------
Costs Settle- Economic
to ment Hedges Discon-
Achieve, Reserve (Mark- tinued Total
Adjusted Cinergy Adjust- to- Opera- Adjust- Reported
Earnings Merger ment Market)* tions ments Earnings
-------- ------- ------ -------- ------- ------- --------
SEGMENT EARNINGS
BEFORE INTEREST
AND TAXES
FROM CONTINUING
OPERATIONS
U.S. Franchised
Electric and
Gas $760 $- $- $- $- $- $760
Commercial
Power 159 - - 4 B - 4 163
International
Energy 92 - - - - - 92
Crescent 10 - - - - - 10
-------- ------- ------ -------- ------- ------- --------
Total
reportable
segment
EBIT 1,021 - - 4 - 4 1,025
Other (49) (15)A 20 A - - 5 (44)
-------- ------- ------ -------- ------- ------- --------
Total
reportable
segment
EBIT and
other
EBIT $972 $(15) $20 $4 $- $9 $981
Interest
Expense (177) - - - - - (177)
Interest Income
and Other 73 - - - - - 73
Income Taxes from
Continuing
Operations (301) 6 (7) (2) - (3) (304)
Discontinued
Operations,
net of taxes - - - - 34 C 34 34
-------- ------- ------ -------- ------- ------- --------
Net Income $567 $(9) $13 $2 $34 $40 $607
======== ======= ====== ======== ======= ======= ========
EARNINGS PER
SHARE, BASIC $0.45 $(0.01) $0.01 $- $0.03 $0.03 $0.48
======== ======= ====== ======== ======= ======= ========
EARNINGS PER
SHARE,
DILUTED $0.45 $(0.01) $0.01 $- $0.03 $0.03 $0.48
======== ======= ====== ======== ======= ======= ========
Note 1 - Amounts for special items are presented net of any related
minority interest.
A - Recorded in Operation, maintenance and other (Operating Expenses) on
the Consolidated Statements of Operations.
B - $6 million gain recorded within Non-regulated electric, natural gas,
and other (Operating Revenues) and $2 million loss recorded within
Fuel used in electric generation and purchased power (Operating
Expenses) on the Consolidated Statements of Operations.
C - Recorded in (Loss) Income From Discontinued Operations, net of tax on
the Consolidated Statements of Operations.
Weighted Average Shares (reported and adjusted) - in millions
Basic 1,260
Diluted 1,265
* Represents the mark-to-market impact of derivative contracts, which is
recognized in earnings immediately as such derivative contracts do not qualify
for hedge accounting, used in Duke Energy's hedging of a portion of the
economic value of its generation assets in the Commercial Power segment. The
economic value of the generation assets is subject to fluctuations in fair
value due to market price volatility of the input and output commodities (e.g.
coal, power) and, as such, the economic hedging involves both purchases and
sales of those input and output commodities related to the generation assets.
Because the operations of the generation assets are accounted for under the
accrual method, management believes that excluding the impact of mark-to-
market changes of the economic hedge contracts from adjusted earnings until
settlement better matches the financial impacts of the hedge contract with the
portion of the economic value of the underlying hedged asset. Management
believes that the presentation of adjusted diluted EPS provides useful
information to investors, as it allows them to more accurately compare the
company's performance across periods.
DUKE ENERGY CORPORATION
ADJUSTED TO REPORTED EARNINGS RECONCILIATION
September 2007 Year-to-Date
(Dollars in millions, except per-share amounts)
Special Items (Note 1)
---------------------------------
Conver-
tible
Debt Costs Settle-
Costs, to IT ment
Gas Achieve, Sever- Reserve
Adjusted Spin- Cinergy ance Adjust-
Earnings off Merger Costs ment
-------- ------- -------- ------ -------
SEGMENT EARNINGS BEFORE INTEREST
AND TAXES FROM CONTINUING OPERATIONS
U.S. Franchised Electric and Gas $1,786 $- $- $- $-
Commercial Power 240 - - - -
International Energy 283 - - - -
Crescent 29 - - - -
-------- ------- -------- ------ -------
Total reportable segment
EBIT 2,338 - - - -
Other (143) (21)D (38)A (12) 20 A
-------- ------- -------- ------ -------
Total reportable segment
EBIT and other EBIT $2,195 $(21) $(38) $(12) $20
Interest Expense (499) - - - -
Interest Income and Other 159 - - - -
Income Taxes from Continuing
Operations (606) - 14 4 (7)
Discontinued Operations, net of
taxes - - - - -
-------- ------- -------- ------ -------
Net Income $1,249 $(21) $(24) $(8) $13
======== ======= ======== ====== =======
EARNINGS PER SHARE, BASIC $0.99 $(0.02) $(0.02) $- $0.01
======== ======= ======== ====== =======
EARNINGS PER SHARE, DILUTED $0.99 $(0.02) $(0.02) $- $0.01
======== ======= ======== ====== =======
Economic
Hedges Discon-
(Mark- tinued Total
to- Opera- Adjust- Reported
Market)* tions ments Earnings
-------- -------- ------- --------
SEGMENT EARNINGS BEFORE INTEREST AND
TAXES FROM CONTINUING OPERATIONS
U.S. Franchised Electric and Gas $- $- $- $1,786
Commercial Power - B - - 240
International Energy - - - 283
Crescent - - - 29
-------- -------- ------- --------
Total reportable segment EBIT - - - 2,338
Other - - (51) (194)
-------- -------- ------- --------
Total reportable segment EBIT and
other EBIT $- $- $(51) $2,144
Interest Expense - - - (499)
Interest Income and Other - - - 159
Income Taxes from Continuing Operations - - 11 (595)
Discontinued Operations, net of taxes - 48 C 48 48
-------- -------- ------- --------
Net Income $- $48 $8 $1,257
======== ======== ======= ========
EARNINGS PER SHARE, BASIC $- $0.04 $0.01 $1.00
======== ======== ======= ========
EARNINGS PER SHARE, DILUTED $- $0.03 $- $0.99
======== ======== ======= ========
Note 1 - Amounts for special items are presented net of any related
minority interest.
A - Recorded in Operation, maintenance and other (Operating Expenses) on
the Consolidated Statements of Operations.
B - $46 million loss recorded within Non-regulated electric, natural gas,
and other (Operating Revenues) and $46 million gain recorded within
Fuel used in electric generation and purchased power (Operating
Expenses) on the Consolidated Statements of Operations.
C - Recorded in (Loss) Income From Discontinued Operations, net of tax on
the Consolidated Statements of Operations.
D - Recorded in Other income and expenses, net (Other Income and Expenses,
net) on the Consolidated Statements of Operations.
Weighted Average Shares (reported and adjusted) - in millions
Basic 1,259
Diluted 1,266
* Represents the mark-to-market impact of derivative contracts, which is
recognized in earnings immediately as such derivative contracts do not qualify
for hedge accounting, used in Duke Energy's hedging of a portion of the
economic value of its generation assets in the Commercial Power segment. The
economic value of the generation assets is subject to fluctuations in fair
value due to market price volatility of the input and output commodities (e.g.
coal, power) and, as such, the economic hedging involves both purchases and
sales of those input and output commodities related to the generation assets.
Because the operations of the generation assets are accounted for under the
accrual method, management believes that excluding the impact of mark-to-
market changes of the economic hedge contracts from adjusted earnings until
settlement better matches the financial impacts of the hedge contract with the
portion of the economic value of the underlying hedged asset. Management
believes that the presentation of adjusted diluted EPS provides useful
information to investors, as it allows them to more accurately compare the
company's performance across periods.
DUKE ENERGY CORPORATION
ADJUSTED TO REPORTED EARNINGS RECONCILIATION
September 2008 Quarter-to-Date
(Dollars in millions, except per-share amounts)
Special Items (Note 1)
---------------------------
Emis-
Costs Cres- sion
to scent Allow-
Achieve, Project ances
Adjusted Cinergy Impair- Impair-
Earnings Merger ments ment
-------- -------- ------- -------
SEGMENT EARNINGS BEFORE INTEREST AND
TAXES FROM CONTINUING OPERATIONS
U.S. Franchised Electric and Gas $726 $- $- $-
Commercial Power 93 - - (82)E
International Energy 77 - - -
Crescent (10) - (114)D -
-------- -------- ------- -------
Total reportable segment EBIT 886 - (114) (82)
Other (60) (11)A - -
-------- -------- ------- -------
Total reportable segment and
Other EBIT $826 $(11) $(114) $(82)
Interest Expense (176) - -
Interest Income and Other 24 - -
Income Taxes from Continuing Operations (252) 4 44 30
Discontinued Operations, net of taxes - - - -
-------- -------- ------- -------
Net Income $422 $(7) $(70) $(52)
======== ======= ======= =======
EARNINGS PER SHARE, BASIC $0.34 $(0.01) $(0.06) $(0.04)
======== ======= ======= =======
EARNINGS PER SHARE, DILUTED $0.33 $(0.01) $(0.05) $(0.04)
======== ======= ======= =======
Economic
Hedges Discon-
(Mark- tinued Total
to- Opera- Adjust- Reported
Market)* tions ments Earnings
-------- ------- ------- --------
SEGMENT EARNINGS BEFORE INTEREST AND
TAXES FROM CONTINUING OPERATIONS
U.S. Franchised Electric and Gas $- $- $- $726
Commercial Power (119)B - (201) (108)
International Energy - - - 77
Crescent - - (114) (124)
-------- ------- ------- --------
Total reportable segment EBIT (119) - (315) 571
Other - - (11) (71)
-------- ------- ------- --------
Total reportable segment and Other
EBIT $(119) $- $(326) $500
Interest Expense - - - (176)
Interest Income and Other - - - 24
Income Taxes from Continuing
Operations 42 - 120 (132)
Discontinued Operations, net of taxes - (1)C (1) (1)
-------- ------- ------- --------
Net Income $(77) $(1) $(207) $215
======== ======= ======= ========
EARNINGS PER SHARE, BASIC $(0.06) $- $(0.17) $0.17
======== ======= ======= ========
EARNINGS PER SHARE, DILUTED $(0.06) $- $(0.16) $0.17
======== ======= ======= ========
Note 1 - Amounts for special items are presented net of any related
minority interest.
A - $5 million recorded in Operation, maintenance and other and $6 million
recorded in Depreciation and amortization (all Operating Expenses) on
the Consolidated Statements of Operations.
B - $45 million loss recorded within Non-regulated electric, natural gas,
and other (Operating Revenues) and $74 million loss recorded within
Fuel used in electric generation and purchased power (Operating
Expenses) on the Consolidated Statements of Operations.
C - Recorded in (Loss) Income From Discontinued Operations, net of tax on
the Consolidated Statements of Operations.
D - Recorded in Equity in earnings (loss) of unconsolidated affiliates on
the Consolidated Statements of Operations.
E - Recorded in Impairment and other charges on the Consolidated
Statements of Operations.
Weighted Average Shares (reported and adjusted) - in millions
Basic 1,265
Diluted 1,268
* Represents the mark-to-market impact of derivative contracts, which is
recognized in earnings immediately as such derivative contracts do not qualify
for hedge accounting, used in Duke Energy's hedging of a portion of the
economic value of its generation assets in the Commercial Power segment. The
economic value of the generation assets is subject to fluctuations in fair
value due to market price volatility of the input and output commodities (e.g.
coal, power) and, as such, the economic hedging involves both purchases and
sales of those input and output commodities related to the generation assets.
Because the operations of the generation assets are accounted for under the
accrual method, management believes that excluding the impact of mark-to-
market changes of the economic hedge contracts from adjusted earnings until
settlement better matches the financial impacts of the hedge contract with the
portion of the economic value of the underlying hedged asset. Management
believes that the presentation of adjusted diluted EPS provides useful
information to investors, as it allows them to more accurately compare the
company's performance across periods.
DUKE ENERGY CORPORATION
ADJUSTED TO REPORTED EARNINGS RECONCILIATION
September 2008 Year-to-Date
(Dollars in millions, except per-share amounts)
Special Items (Note 1)
---------------------------
Emis-
Costs Cres- sion
to scent Allow-
Achieve, Project ances
Adjusted Cinergy Impair- Impair-
Earnings Merger ments ment
-------- -------- ------- -------
SEGMENT EARNINGS BEFORE INTEREST AND
TAXES FROM CONTINUING OPERATIONS
U.S. Franchised Electric and Gas $1,866 $- $- $-
Commercial Power 320 - - (82)E
International Energy 307 - - -
Crescent (16) - (214)D -
-------- -------- ------- -------
Total reportable segment EBIT 2,477 - (214) (82)
Other (196) (34)A - -
-------- -------- ------- -------
Total reportable segment and Other
EBIT $2,281 $(34) $(214) $(82)
Interest Expense (552) - - -
Interest Income and Other 104 - - -
Income Taxes from Continuing Operations (634) 13 83 30
Discontinued Operations, net of taxes - - - -
-------- -------- ------- -------
Net Income $1,199 $(21) $(131) $(52)
======== ======== ======= =======
EARNINGS PER SHARE, BASIC $0.95 $(0.02) $(0.10) $(0.04)
======== ======== ======= =======
EARNINGS PER SHARE, DILUTED $0.95 $(0.02) $(0.10) $(0.04)
======== ======== ======= =======
Economic
Hedges Discon-
(Mark- tinued Total
to- Opera- Adjust- Reported
Market)* tions ments Earnings
-------- -------- ------- --------
SEGMENT EARNINGS BEFORE INTEREST AND
TAXES FROM CONTINUING OPERATIONS
U.S. Franchised Electric and Gas $- $- $- $1,866
Commercial Power 35 B - (47) 273
International Energy - - - 307
Crescent - - (214) (230)
-------- -------- ------- --------
Total reportable segment EBIT 35 - (261) 2,216
Other - - (34) (230)
-------- -------- ------- --------
Total reportable segment and Other
EBIT $35 $- $(295) $1,986
Interest Expense - - - (552)
Interest Income and Other - - - 104
Income Taxes from Continuing Operations (13) - 113 (521)
Discontinued Operations, net of taxes - 14 C 14 14
-------- -------- ------- --------
Net Income $22 $14 $(168) $1,031
======== ======== ======= ========
EARNINGS PER SHARE, BASIC $0.02 $0.01 $(0.13) $0.82
======== ======== ======= ========
EARNINGS PER SHARE, DILUTED $0.01 $0.01 $(0.14) $0.81
======== ======== ======= ========
Note 1 - Amounts for special items are presented net of any related
minority interest.
A - $17 million recorded in Operation, maintenance and other and $17
million recorded in Depreciation and amortization (all Operating
Expenses) on the Consolidated Statements of Operations.
B - $38 million loss recorded within Non-regulated electric, natural gas,
and other (Operating Revenues) and $73 million gain recorded within
Fuel used in electric generation and purchased power (Operating
Expenses) on the Consolidated Statements of Operations.
C - Recorded in (Loss) Income From Discontinued Operations, net of tax on
the Consolidated Statements of Operations.
D - Recorded in Equity in earnings (loss) of unconsolidated affiliates on
the Consolidated Statements of Operations.
E - Recorded in Impairment and other charges on the Consolidated
Statements of Operations.
Weighted Average Shares (reported and adjusted) - in millions
Basic 1,264
Diluted 1,268
* Represents the mark-to-market impact of derivative contracts, which is
recognized in earnings immediately as such derivative contracts do not qualify
for hedge accounting, used in Duke Energy's hedging of a portion of the
economic value of its generation assets in the Commercial Power segment. The
economic value of the generation assets is subject to fluctuations in fair
value due to market price volatility of the input and output commodities (e.g.
coal, power) and, as such, the economic hedging involves both purchases and
sales of those input and output commodities related to the generation assets.
Because the operations of the generation assets are accounted for under the
accrual method, management believes that excluding the impact of mark-to-
market changes of the economic hedge contracts from adjusted earnings until
settlement better matches the financial impacts of the hedge contract with the
portion of the economic value of the underlying hedged asset. Management
believes that the presentation of adjusted diluted EPS provides useful
information to investors, as it allows them to more accurately compare the
company's performance across periods.
Duke Energy Corporation
Diluted EPS Impact from Milder Weather and September 2008 Midwest Storm
Third Quarter of 2008 versus Third Quarter of 2007
Pre-Tax Tax Rate Net
USFE&G - Impact of Milder Weather in
2008 on Non-Fuel Revenues $(111) 39% $(68)
USFE&G - September 2008 Storm
Restoration Costs in Midwest (48) 39% (29)
USFE&G - Lost Revenue due to
Sustained Storm Outages in Sept. 2008 (4) 39% (2)
Commercial Power - Milder Weather
Impact on Native Load Margins (9) 36% (6)
Total $(172) $(105)
Weighted-average shares
outstanding - diluted 1,268
Diluted EPS Impact for the Above
Specific Items $(0.08)
Notes:
1) Management prepares its annual forecast of adjusted diluted EPS as a
basis for employee incentive bonuses based in part on normalized weather
patterns. In the third quarter of 2008, the Company incurred approximately
$50 million in restoration costs related to the worst storm-related outages
ever recorded in the Midwest. Also, in the third quarter of 2007, record
setting above-normal weather was experienced in the Carolinas and the Midwest.
The milder weather in the third quarter of 2008 had the effect of an
approximate $120 million decrease in non-fuel operating revenues. These
specific items resulted in a decline in adjusted diluted EPS in the third
quarter of 2008 compared to the third quarter of 2007 of approximately 8
cents. Additional revenue and expense items that might have been attributable
to the above-normal weather conditions in the third quarter of 2007, such as
increased short-term incentive expense, are not included in the calculation of
the 8 cents diluted EPS impact.
The diluted EPS impact of these specific items is a non-GAAP financial
measure. The most directly comparable GAAP measure for the diluted EPS impact
of the aforementioned specific items is reported diluted EPS from continuing
operations, which is discussed further below. In the current quarter, given
the record-setting nature of the aforementioned weather occurrences,
management believes the presentation of the diluted EPS impact of these
specific items provides useful supplemental information to investors, as it
allows them to more accurately compare the company's performance on a weather
normalized basis.
2) Reported diluted EPS for the third quarter of 2008 was $0.17 as
compared to $0.48 for the third quarter of 2007. Adjusted diluted EPS for the
third quarter of 2008 was $0.33 as compared to $0.45 for the third quarter of
2007. The aforementioned weather-related EPS impacts are reflected within
these reported and adjusted results for the third quarter of 2008 and 2007.
The most directly comparable GAAP measure for adjusted diluted EPS and the
diluted EPS impact of the aforementioned specific items is reported diluted
EPS from continuing operations. A reconcilation of adjusted diluted EPS to
reported diluted EPS is included with these materials.
