10-QPeriod: Q2 FY2010

Duke Energy CORP Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:DUKDUKBDUK-PA

Summary

Duke Energy Corporation (DUK) reported a net loss attributable to common shareholders of $222 million, or ($0.17) per diluted share, for the second quarter of 2010, a significant decline from a net income of $276 million, or $0.21 per diluted share, in the same period of the prior year. This decline was primarily driven by a substantial goodwill and asset impairment charge of $660 million in its Commercial Power segment related to non-regulated Midwest generation operations, due to factors like sustained lower forward power prices and potential stringent environmental regulations. Despite the net loss, the company's US Franchised Electric and Gas (USFE&G) segment showed resilience, with EBIT increasing by $171 million year-over-year, driven by higher retail rates, favorable weather conditions boosting sales volumes, and increased wholesale power revenues. International Energy also reported improved EBIT, benefiting from higher sales volumes and favorable exchange rates in Brazil, alongside stronger equity earnings from its investment in National Methanol Company. Investors should closely monitor the recovery and strategic repositioning of the Commercial Power segment and the ongoing impact of regulatory and environmental factors across all segments.

Financial Highlights

49 data points
Beta

Revenue

$3.29B

Net Income

-$222.00M

-6.8% Net Margin

EPS (Diluted)

$-0.51

Total Assets

$56.40B

Cash & Equivalents

$1.01B

Free Cash Flow

-$143.00M

Financial Statements
Beta
Revenue$3.29B
Operating Expenses$3.31B
Operating Income-$14.00M
Interest Expense$212.00M
Net Income-$222.00M
EPS (Basic)$-0.51
EPS (Diluted)$-0.51
Shares Outstanding (Basic)438.00M
Shares Outstanding (Diluted)438.00M

Key Highlights

  • 1Reported a net loss attributable to common shareholders of $222 million for Q2 2010, compared to a net income of $276 million in Q2 2009.
  • 2Diluted EPS for Q2 2010 was a loss of ($0.17), down from $0.21 in Q2 2009.
  • 3Recorded a significant goodwill and asset impairment charge of $660 million in the Commercial Power segment.
  • 4US Franchised Electric and Gas (USFE&G) segment EBIT increased by $171 million to $671 million, driven by higher rates and favorable weather.
  • 5International Energy segment EBIT increased by $58 million to $126 million, benefiting from operational improvements and higher equity earnings.
  • 6Total operating revenues increased to $3.287 billion from $2.913 billion in the prior year's quarter.
  • 7Consolidated operating expenses increased substantially to $3.306 billion from $2.398 billion, largely due to the impairment charges.

Frequently Asked Questions

The primary driver for the net loss in the second quarter of 2010 was a substantial goodwill and asset impairment charge of $660 million within the Commercial Power segment. This charge was primarily due to sustained lower forward power prices and the potential impact of more stringent environmental regulations on non-regulated Midwest generation operations.

The US Franchised Electric and Gas (USFE&G) segment performed well, with EBIT increasing by $171 million year-over-year. This was driven by higher retail rates implemented in North Carolina and South Carolina, favorable weather conditions boosting sales volumes, and increased wholesale power revenues. International Energy also saw improved EBIT due to higher sales volumes, favorable exchange rates, and stronger equity earnings.

The Commercial Power segment faced significant challenges, including customer switching due to competitive markets and sustained lower commodity prices. The substantial impairment charges reflect these difficulties. The company is evaluating strategic options for its assets in this segment, and future performance will depend on market conditions and potential restructuring efforts.

Duke Energy continued its investment in capital expansion projects. Financially, the company used $148 million in net cash for financing activities during the first six months of 2010, a decrease from the $836 million provided in the same period of 2009. This was mainly due to lower long-term debt issuances and common stock issuances. The company maintains a substantial master credit facility of $3.137 billion, with $2.159 billion available as of June 30, 2010, indicating continued access to liquidity.