EX-99 2 e18672ex99.txt PRESS RELEASE Exhibit 99 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., July 29 /PRNewswire-FirstCall/ -- 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 $0.30 in the comparable year's quarter. "We accelerated progress on our financial objectives in the quarter," said Paul Anderson, Duke Energy chairman of the board and chief executive officer. "We've already surpassed a number of our year-end targets and our business units are showing encouraging results." Special items for the quarter include: 2004 2003 Pre-Tax Tax EPS EPS ($ in Millions) Amount Effect Impact 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) 2 --- Interest related to litigation reserve (12) 4 (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. JUNE 2004 QUARTERLY HIGHLIGHTS (unaudited) Three Months Ended Six Months Ended June 30, 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 3 7 5 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 5 97 14 257 International Energy 7 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 7 36 9 Foreign Currency Remeasurement Gain (Loss) 2 (1) (3) (5) Intercompany EBIT Elimination (e) 1 - - - ------ ------ ------- ------- 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 Six Months Ended June 30, 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 3 - 3 1 Other Income, net of expenses 3 15 7 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 9 - 9 1 Other Income, net of expenses (a) 13 45 19 79 Minority Interest Expense 2 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) 3 187 (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 - 1 - 1 Other Income, net of expenses 22 15 31 22 Minority Interest Expense 3 4 6 8 ------- ------- ------- ------- 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 9 121 11 Other Income, net of expenses - - - - Minority Interest Expense 1 1 2 1 ------- ------- ------- ------- 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) - 7 - Other Income, net of expenses 2 (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 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 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 bankruptcy gain of $113 and California settlement charges of $105) (38) Minority interest 7 Other income, net of expenses 3 Gain (loss) on sale of other assets (16) ------- DENA Segment EBIT $(39) ======= Owned Assets - Merchant Plant Production and Hedging Information (a) 2004(b) 2005 2006 ------- ------- ------- Estimated available production (millions of MWh) 32 63 63 Combined cycle 29 56 56 Peaker units 3 7 7 Estimated production (millions of MWh) 12 23 25 Combined cycle 12 23 24 Peaker units - - 1 Estimated production sold 93% 77% 68% Estimated average price ($/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 4 Fair 2004 2005 2006 2007 Years Value Proprietary Trading ---- ---- ---- ---- ---- ---- Actively quoted prices and other external sources $100 $6 $30 $(7) $(20) $109 Modeled (2) 13 8 6 9 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 Tax 2004 EPS 2003 EPS Amount Effect Impact 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) 5 (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 SOURCE Duke Energy -0- 07/29/2004 /CONTACT: Media, Randy Wheeless, +1-704-382-8379, or 24-Hour, +1-704-382-8333, or Analysts, Greg Ebel, +1-704-382-8118, both of Duke Energy / /Photo: http://www.newscom.com/cgi-bin/prnh/20040414/DUKEENERGYLOGO AP Archive: http://photoarchive.ap.org PRN Photo Desk, photodesk@prnewswire.com/ /Company News On-Call: http://www.prnewswire.com/comp/257451.html/ /Web site: http://www.duke-energy.com / (DUK) CO: Duke Energy ST: North Carolina, Texas IN: OIL UTI SU: ERN ERP CCA MAV