10-QPeriod: Q3 FY2018

Duke Energy CORP Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 2, 2018For Securities:DUKDUKBDUK-PA

Summary

Duke Energy Corporation's (DUK) third quarter 2018 results showed a mixed financial performance. While consolidated net income attributable to Duke Energy increased year-over-year to $1.08 billion ($1.51 per diluted share) from $954 million ($1.36 per diluted share) in the prior year's third quarter, this was largely driven by the positive impact of the Tax Cuts and Jobs Act and favorable weather conditions. However, the nine-month period told a different story, with GAAP reported diluted EPS declining to $3.11 from $3.36 in the same period last year, primarily due to significant impairment charges, regulatory and legislative impacts from rate cases, and higher depreciation expenses. The company continues to navigate a complex regulatory environment with ongoing proceedings in various states and is managing the financial impacts of significant weather events like Hurricane Florence and Hurricane Michael.

Financial Highlights

46 data points
Beta

Revenue

$6.45B

Net Income

$1.08B

16.8% Net Margin

EPS (Diluted)

$1.51

Total Assets

$143.16B

Cash & Equivalents

$303.00M

Free Cash Flow

-$12.00M

Financial Statements
Beta
Revenue$6.45B
Operating Expenses$5.06B
Operating Income$1.58B
Interest Expense$517.00M
Net Income$1.08B
EPS (Basic)$1.51
EPS (Diluted)$1.51
Shares Outstanding (Basic)713.00M
Shares Outstanding (Diluted)714.00M

Key Highlights

  • 1Consolidated Net Income Attributable to Duke Energy Corporation increased to $1.082 billion for Q3 2018, up from $954 million in Q3 2017.
  • 2Diluted EPS from continuing operations was $1.51 for Q3 2018, an increase from $1.36 in Q3 2017.
  • 3Nine-month Net Income Attributable to Duke Energy Corporation decreased to $2.202 billion from $2.356 billion in the prior year's comparable period.
  • 4Total Operating Revenues for the nine months ended September 30, 2018, increased to $18.406 billion from $17.766 billion in the prior year's period.
  • 5Capital expenditures for the nine months ended September 30, 2018, increased to $7.270 billion from $6.331 billion in the prior year's period.
  • 6The company experienced significant operating expenses related to Hurricane Florence, with estimated restoration costs of approximately $540 million impacting its Electric Utilities and Infrastructure segment.
  • 7Duke Energy recorded a goodwill impairment charge of $93 million in the Commercial Renewables segment during the third quarter of 2018.

Frequently Asked Questions

For the third quarter of 2018, Duke Energy reported consolidated Net Income Attributable to Duke Energy Corporation of $1.082 billion, an increase from $954 million in the third quarter of 2017. Diluted Earnings Per Share from continuing operations also rose to $1.51 from $1.36 year-over-year. This improvement was primarily driven by favorable weather-normal retail sales volumes, higher income tax benefits, a FERC-approved settlement refund, and lower regulatory settlement charges compared to the prior year, partially offset by increased operations and maintenance expenses due to Hurricane Florence and share dilution.

The Tax Cuts and Jobs Act significantly lowered the federal corporate income tax rate from 35% to 21%. This resulted in a decrease in Duke Energy's effective tax rates across all segments for the nine months ended September 30, 2018. The company has been working with regulators to pass these savings onto customers through rate adjustments and has recorded regulatory liabilities for expected customer benefits related to the remeasurement of deferred tax balances.

Duke Energy experienced significant impacts from Hurricane Florence, with estimated restoration costs of approximately $540 million impacting its Electric Utilities and Infrastructure segment, primarily within Duke Energy Progress and Duke Energy Carolinas. The company intends to request regulatory approval to defer these costs as a regulatory asset for recovery in future rate cases. Additionally, Hurricane Michael caused damage and outages, with preliminary estimates of $235 million in operation and maintenance expenses and $185 million in capital costs, which Duke Energy Florida expects to recover through existing settlement agreements, while Duke Energy Carolinas and Duke Energy Progress plan to seek deferral.

Yes, Duke Energy recorded a goodwill impairment charge of $93 million in the third quarter of 2018 related to its Commercial Renewables reporting unit. The fair value of this unit was below its carrying value, impacted by factors such as the cost of capital and forecasted tax credit utilization. Additionally, impairment charges were recognized within the Electric Utilities and Infrastructure segment in relation to North Carolina rate case orders and coal ash costs in South Carolina.