10-QPeriod: Q2 FY2018

Duke Energy CORP Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:DUKDUKBDUK-PA

Summary

Duke Energy Corporation (DUK) reported mixed financial results for the second quarter of 2018, with a decrease in reported earnings per share (EPS) compared to the prior year. GAAP Reported EPS was $0.71, down from $0.98 in the same period last year. This decline was primarily attributed to significant regulatory and legislative charges related to rate cases in North Carolina, as well as higher operations and maintenance expenses, increased depreciation, and higher interest expenses. Despite these headwinds, adjusted diluted EPS stood at $0.93 for the quarter, reflecting an attempt to present a clearer picture of ongoing operational performance by excluding these "special items." Operationally, the company saw an increase in total operating revenues to $5.64 billion, up from $5.56 billion in the prior year's second quarter, driven by higher fuel costs passed through to customers and favorable weather conditions. However, total operating expenses also rose, largely due to impairment charges and increased depreciation. The company continues to invest heavily in its infrastructure, as evidenced by the significant capital expenditures noted in the cash flow statements. The company's credit facilities remain robust, providing ample liquidity.

Financial Highlights

45 data points
Beta

Revenue

$5.47B

Net Income

$500.00M

9.1% Net Margin

EPS (Diluted)

$0.71

Total Assets

$140.26B

Cash & Equivalents

$304.00M

Free Cash Flow

-$377.00M

Financial Statements
Beta
Revenue$5.47B
Operating Expenses$4.67B
Operating Income$979.00M
Interest Expense$518.00M
Net Income$500.00M
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)703.00M
Shares Outstanding (Diluted)704.00M

Key Highlights

  • 1Reported GAAP diluted EPS of $0.71 for Q2 2018, a decrease from $0.98 in Q2 2017, impacted by regulatory charges.
  • 2Adjusted diluted EPS was $0.93 for Q2 2018, compared to $1.01 in Q2 2017, with "special items" like regulatory charges and merger costs impacting the year-over-year comparison.
  • 3Total operating revenues increased to $5.64 billion in Q2 2018 from $5.56 billion in Q2 2017, driven by higher fuel costs and favorable weather.
  • 4Total operating expenses increased to $4.67 billion in Q2 2018 from $4.21 billion in Q2 2017, largely due to impairment charges and increased depreciation.
  • 5Net income attributable to Duke Energy Corporation was $500 million, or $0.71 per share, compared to $686 million, or $0.98 per share, in the prior year's quarter.
  • 6Capital expenditures for the six months ended June 30, 2018, were $4.38 billion, up from $3.93 billion in the same period last year, indicating continued investment in infrastructure.
  • 7The company maintained compliance with all debt covenants as of June 30, 2018.

Frequently Asked Questions

Duke Energy reported a decrease in GAAP diluted Earnings Per Share (EPS) to $0.71 for the second quarter of 2018, down from $0.98 in the same quarter of 2017. Net income attributable to Duke Energy Corporation was $500 million. While total operating revenues increased to $5.64 billion, operating expenses also rose significantly, particularly due to impairment charges and increased depreciation.

The decrease in earnings was primarily driven by significant regulatory and legislative charges, especially from the North Carolina rate case for Duke Energy Carolinas, as well as higher operations and maintenance expenses (including storm costs), increased depreciation and amortization, and higher interest expenses. These were partially offset by favorable weather and positive contributions from the Duke Energy Progress North Carolina rate case.

The Tax Cuts and Jobs Act, which lowered the corporate federal income tax rate to 21%, had a significant impact on Duke Energy's effective tax rate, lowering it substantially for both the quarter and year-to-date periods. The company is working with regulators to determine the appropriate pass-through of these tax benefits to customers.

Duke Energy continued its significant investment in infrastructure, with capital expenditures totaling $4.38 billion for the first six months of 2018, an increase from the prior year. The company's liquidity remains strong, with ample capacity available under its Master Credit Facility, and it was in compliance with all debt covenants at the end of the quarter.