10-QPeriod: Q3 FY2009

Duke Energy CORP Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 6, 2009For Securities:DUKDUKBDUK-PA

Summary

Duke Energy Corporation (DUK) reported a decrease in net income and earnings per share for the third quarter and first nine months of 2009 compared to the same periods in 2008. This decline was primarily driven by a significant goodwill impairment charge of $371 million related to its Commercial Power segment's non-regulated Midwest generation operations, coupled with lower revenues across most segments due to economic conditions and milder weather. Despite the overall earnings decrease, the company highlighted stable performance in its U.S. Franchised Electric and Gas segment, which benefited from rate increases and cost management, although it experienced lower sales volumes. The company also continued to manage its liquidity and capital resources effectively, issuing debt and returning capital to shareholders through dividends and stock repurchases. Investors should note the ongoing regulatory proceedings and potential impacts from environmental legislation, which could affect future financial performance.

Financial Highlights

51 data points
Beta

Revenue

$3.40B

Net Income

$109.00M

3.2% Net Margin

EPS (Diluted)

$0.24

Total Assets

$55.77B

Cash & Equivalents

$1.61B

Free Cash Flow

$401.00M

Financial Statements
Beta
Revenue$3.40B
Operating Expenses$2.96B
Operating Income$445.00M
Interest Expense$190.00M
Net Income$109.00M
EPS (Basic)$0.24
EPS (Diluted)$0.24
Shares Outstanding (Basic)433.00M
Shares Outstanding (Diluted)433.33M

Key Highlights

  • 1Net income attributable to Duke Energy Corporation decreased to $109 million in Q3 2009 from $215 million in Q3 2008, with diluted EPS falling to $0.08 from $0.17.
  • 2A significant goodwill impairment charge of $371 million impacted the Commercial Power segment, primarily due to declining load forecasts, depressed market power prices, and carbon legislation developments.
  • 3Total operating revenues declined by $112 million in Q3 2009 and $453 million for the first nine months of 2009 compared to the prior year periods, attributed to lower demand, economic conditions, and milder weather.
  • 4U.S. Franchised Electric and Gas segment EBIT decreased by $10 million year-over-year for Q3 2009, despite lower operating expenses, due to decreased revenues from lower sales volumes and milder weather.
  • 5Commercial Power segment EBIT significantly decreased by $126 million in Q3 2009, largely due to the aforementioned goodwill impairment charge and other factors impacting its non-regulated operations.
  • 6The company issued new debt totaling $1 billion in August 2009 and $750 million in January 2009 to fund capital expenditures and for general corporate purposes.
  • 7Duke Energy increased its common stock dividend by $0.01 per share in June 2009.

Frequently Asked Questions

The primary driver for the decrease in net income was a significant goodwill impairment charge of $371 million recognized in the Commercial Power segment, related to its non-regulated generation operations. This was further impacted by lower operating revenues across most segments due to weaker economic conditions and milder weather compared to the prior year.

The economic downturn led to lower sales volumes across most retail customer classes, particularly in the industrial sector. Milder weather conditions in the third quarter of 2009, compared to the prior year, also resulted in lower energy demand and reduced sales volumes, negatively impacting revenues for both the U.S. Franchised Electric and Gas and Commercial Power segments.

The impairment charge in the Commercial Power segment signals challenges in its non-regulated generation operations, stemming from factors like declining load forecasts and lower market power prices. While the company continues to manage these operations, the impairment suggests ongoing volatility and potential headwinds in this segment. Investors should monitor regulatory and market developments impacting this business.

Duke Energy is actively managing its liquidity through a combination of debt issuance and operations. During the first nine months of 2009, the company issued new debt totaling approximately $2.1 billion and received proceeds of about $410 million from the issuance of common stock related to its Dividend Reinvestment Plan and other internal plans. The company also increased its quarterly dividend by $0.01 per share, indicating a continued commitment to returning capital to shareholders while maintaining financial flexibility.