10-Q 1 duk-20140630x10q.htm 10-Q DUK-2014.06.30-10Q


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
________________________
Commission file number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, and Telephone Number
IRS Employer Identification No.
 
 
1-32853
DUKE ENERGY CORPORATION
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218
Commission file number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
 
Commission file number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
 
1-3274
DUKE ENERGY FLORIDA, INC.
(a Florida corporation)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
59-0247770
1-15929
PROGRESS ENERGY, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-2155481
 
1-1232
DUKE ENERGY OHIO, INC.
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
1-3382
DUKE ENERGY PROGRESS, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-0165465
 
1-3543
DUKE ENERGY INDIANA, INC.
(an Indiana corporation)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
35-0594457
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Duke Energy Corporation (Duke Energy)
Yes x
No ¨
 
Duke Energy Florida, Inc. (Duke Energy Florida)
Yes x
No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
Yes x
No ¨
 
Duke Energy Ohio, Inc. (Duke Energy Ohio)
Yes x
No ¨
Progress Energy, Inc. (Progress Energy)
Yes x
No ¨
 
Duke Energy Indiana, Inc. (Duke Energy Indiana)
Yes x
No ¨
Duke Energy Progress, Inc. (Duke Energy Progress)
Yes x
No ¨
 
 
 
 




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Duke Energy
Yes 
No ¨
 
Duke Energy Florida
Yes 
No ¨
Duke Energy Carolinas
Yes 
No ¨
 
Duke Energy Ohio
Yes 
No ¨
Progress Energy
Yes 
No ¨
 
Duke Energy Indiana
Yes 
No ¨
Duke Energy Progress
Yes 
No ¨
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filer 
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Duke Energy Carolinas
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Progress Energy
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Progress
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Florida
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Ohio
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Duke Energy Indiana
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer 
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Duke Energy
Yes ¨
No 
 
Duke Energy Florida
Yes ¨
No 
Duke Energy Carolinas
Yes ¨
No 
 
Duke Energy Ohio
Yes ¨
No 
Progress Energy
Yes ¨
No 
 
Duke Energy Indiana
Yes ¨
No 
Duke Energy Progress
Yes ¨
No 
 
 
 
 
Number of shares of Common Stock outstanding at August 4, 2014:
Registrant
Description
Shares
Duke Energy
Common Stock, $0.001 par value
707,271,675
Duke Energy Carolinas
All of the registrant's limited liability company member interests are directly owned by Duke Energy.
Progress Energy
All of the registrant's common stock is directly owned by Duke Energy.
Duke Energy Progress
All of the registrant’s common stock is indirectly owned by Duke Energy.
Duke Energy Florida
All of the registrant’s common stock is indirectly owned by Duke Energy.
Duke Energy Ohio
All of the registrant’s common stock is indirectly owned by Duke Energy.
Duke Energy Indiana
All of the registrant’s common stock is indirectly owned by Duke Energy.
This combined Form 10-Q is filed separately by seven registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.




TABLE OF CONTENTS
 
 
 
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 





CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
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. Forward-looking statements are based on management’s beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook,” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:
State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
The extent and timing of the costs and liabilities relating to the Dan River ash basin release and future regulatory changes related to the management of coal ash;
The ability to recover eligible costs, including those associated with future significant weather events, and earn an adequate return on investment through the regulatory process;
The costs of decommissioning Crystal River Unit 3 could prove to be more extensive than are currently identified and all costs may not be fully recoverable through the regulatory process;
The risk that the credit ratings of the company or its subsidiaries may be different from what the companies expect;
Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
Industrial, commercial and residential growth or decline in service territories or customer bases resulting from customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies;
Additional competition in electric markets and continued industry consolidation;
Political and regulatory uncertainty in other countries in which Duke Energy conducts business;
The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts and tornadoes;
The ability to successfully operate electric generating facilities and deliver electricity to customers;
The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, and other catastrophic events;
The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks;
The timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general economic conditions;
Declines in the market prices of equity and fixed income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans, and nuclear decommissioning trust funds;
Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
The ability to control operation and maintenance costs;
The level of creditworthiness of counterparties to transactions;
Employee workforce factors, including the potential inability to attract and retain key personnel;
The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);
The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
The impact of potential goodwill impairments;
The ability to reinvest retained earnings of foreign subsidiaries or repatriate such earnings on a tax-free basis; and
The ability to successfully complete future merger, acquisition or divestiture plans.
In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made; the Duke Energy Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date.


PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in millions, except per-share amounts)
2014

 
2013

 
2014

 
2013

Operating Revenues
 
 
 
 
 
 
 
Regulated electric
$
5,167

 
$
4,834

 
$
10,745

 
$
9,723

Nonregulated electric, natural gas and other
675

 
951

 
1,499

 
1,775

Regulated natural gas
107

 
94

 
329

 
279

Total operating revenues
5,949

 
5,879

 
12,573

 
11,777

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power - regulated
1,808

 
1,678

 
3,808

 
3,381

Fuel used in electric generation and purchased power - nonregulated
436

 
447

 
845

 
901

Cost of natural gas and other
43

 
43

 
165

 
147

Operation, maintenance and other
1,467

 
1,504

 
2,973

 
2,925

Depreciation and amortization
761

 
678

 
1,551

 
1,338

Property and other taxes
318

 
323

 
676

 
666

Impairment charges
6

 
386

 
1,388

 
386

Total operating expenses
4,839

 
5,059

 
11,406

 
9,744

Gains on Sales of Other Assets and Other, net
6

 
1

 
7

 
3

Operating Income
1,116

 
821

 
1,174

 
2,036

Other Income and Expenses
 
 
 
 
 
 
 
Equity in earnings of unconsolidated affiliates
33

 
22

 
69

 
58

Other income and expenses, net
89

 
48

 
184

 
128

Total other income and expenses
122

 
70

 
253

 
186

Interest Expense
413

 
381

 
819

 
748

Income From Continuing Operations Before Income Taxes
825

 
510

 
608

 
1,474

Income Tax Expense from Continuing Operations
209

 
165

 
82

 
495

Income From Continuing Operations
616

 
345

 
526

 
979

Loss From Discontinued Operations, net of tax
(3
)
 
(3
)
 
(6
)
 
(3
)
Net Income
613

 
342

 
520

 
976

Less: Net Income Attributable to Noncontrolling Interests
4

 
3

 
8

 
3

Net Income Attributable to Duke Energy Corporation
$
609

 
$
339

 
$
512

 
$
973

 
 
 
 
 
 
 
 
Earnings Per Share - Basic and Diluted
 
 
 
 
 
 
 
Income from continuing operations attributable to Duke Energy Corporation common shareholders
 
 
 
 
 
 
 
Basic
$
0.86

 
$
0.48

 
$
0.73

 
$
1.37

Diluted
$
0.86

 
$
0.48

 
$
0.73

 
$
1.37

Income from discontinued operations attributable to Duke Energy Corporation common shareholders
 
 
 
 
 
 
 
Basic
$

 
$

 
$
(0.01
)
 
$

Diluted
$

 
$

 
$
(0.01
)
 
$

Net Income attributable to Duke Energy Corporation common shareholders
 
 
 
 
 
 
 
Basic
$
0.86

 
$
0.48

 
$
0.72

 
$
1.37

Diluted
$
0.86

 
$
0.48

 
$
0.72

 
$
1.37

Weighted-average shares outstanding
 
 
 
 
 
 
 
Basic
707

 
706

 
707

 
705

Diluted
707

 
706

 
707

 
706


See Notes to Condensed Consolidated Financial Statements
5

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in millions)
2014

 
2013

 
2014

 
2013

Net Income
$
613

 
$
342

 
$
520

 
$
976

Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
28

 
(133
)
 
52

 
(129
)
Pension and OPEB adjustments
1

 
2

 

 
5

Net unrealized gain on cash flow hedges(a)

 
44

 

 
54

Reclassification into earnings and other adjustments to cash flow hedges
(9
)
 

 
(9
)
 

Unrealized gain (loss) on investments in available-for-sale securities
2

 
(4
)
 
2

 
(4
)
Other Comprehensive Income (Loss), net of tax
22

 
(91
)
 
45

 
(74
)
Comprehensive Income
635

 
251

 
565

 
902

Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests
4

 
(1
)
 
9

 
(1
)
Comprehensive Income Attributable to Duke Energy Corporation
$
631

 
$
252

 
$
556

 
$
903


(a)
Net of $14 million tax expense and $18 million tax expense for the three months and six months ended June 30, 2013.

See Notes to Condensed Consolidated Financial Statements
6

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2014
 
December 31, 2013
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
2,008

 
$
1,501

Short-term investments

 
44

Receivables (net of allowance for doubtful accounts of $18 at June 30, 2014 and $30 at December 31, 2013)
877

 
1,286

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $54 at June 30, 2014 and $43 at December 31, 2013)
2,118

 
1,719

Inventory
3,056

 
3,250

Assets held for sale
409

 

Regulatory assets
1,349

 
895

Other
1,698

 
1,821

Total current assets
11,515

 
10,516

Investments and Other Assets
 
 
 
Investments in equity method unconsolidated affiliates
381

 
390

Nuclear decommissioning trust funds
5,417

 
5,132

Goodwill
16,343

 
16,340

Assets held for sale
2,195

 
107

Other
3,227

 
3,432

Total investments and other assets
27,563

 
25,401

Property, Plant and Equipment
 
 
 
Cost
100,885

 
103,115

Accumulated depreciation and amortization
(33,977
)
 
(33,625
)
Net property, plant and equipment
66,908

 
69,490

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
9,009

 
9,191

Other
178

 
181

Total regulatory assets and deferred debits
9,187

 
9,372

Total Assets
$
115,173

 
$
114,779

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
1,782

 
$
2,391

Notes payable and commercial paper
1,867

 
839

Taxes accrued
522

 
551

Interest accrued
453

 
440

Current maturities of long-term debt
1,887

 
2,104

Liabilities associated with assets held for sale
271

 
7

Regulatory liabilities
140

 
316

Other
1,786

 
1,996

Total current liabilities
8,708

 
8,644

Long-term Debt
38,706

 
38,152

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
12,014

 
12,097

Investment tax credits
435

 
442

Accrued pension and other post-retirement benefit costs
1,263

 
1,322

Liabilities associated with assets held for sale
75

 
66

Asset retirement obligations
5,030

 
4,950

Regulatory liabilities
6,338

 
5,949

Other
1,723

 
1,749

Total deferred credits and other liabilities
26,878

 
26,575

Commitments and Contingencies


 


Equity
 
 
 
Common stock, $0.001 par value, 2 billion shares authorized; 707 million and 706 million shares outstanding at June 30, 2014 and December 31, 2013, respectively
1

 
1

Additional paid-in capital
39,389

 
39,365

Retained earnings
1,768

 
2,363

Accumulated other comprehensive loss
(355
)
 
(399
)
Total Duke Energy Corporation stockholders' equity
40,803

 
41,330

Noncontrolling interests
78

 
78

Total equity
40,881

 
41,408

Total Liabilities and Equity
$
115,173

 
$
114,779


See Notes to Condensed Consolidated Financial Statements
7

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
(in millions)
2014

 
2013

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net Income
$
520

 
$
976

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
1,748

 
1,544

Equity component of AFUDC
(61
)
 
(82
)
Gains (losses) on sales of other assets
(2
)
 
8

Impairment charges
1,388

 
386

Deferred income taxes
(46
)
 
397

Equity in earnings of unconsolidated affiliates
(69
)
 
(58
)
Accrued pension and other post-retirement benefit costs
54

 
172

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
116

 
40

Receivables
(118
)
 
(144
)
Inventory
122

 
84

Other current assets
(451
)
 
(43
)
Increase (decrease) in
 
 
 
Accounts payable
(218
)
 
(308
)
Taxes accrued
(84
)
 
95

Other current liabilities
(308
)
 
4

Other assets
(45
)
 
(175
)
Other liabilities
73

 
(53
)
Net cash provided by operating activities
2,619

 
2,843

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(2,400
)
 
(2,715
)
Investment expenditures
(38
)
 
(49
)
Acquisitions
(16
)
 

Purchases of available-for-sale securities
(1,773
)
 
(2,827
)
Proceeds from sales and maturities of available-for-sale securities
1,793

 
2,775

Net proceeds from the sales of other assets
119

 
38

Change in restricted cash
(6
)
 
188

Other
(46
)
 
28

Net cash used in investing activities
(2,367
)
 
(2,562
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the:
 
 
 
Issuance of long-term debt
2,088

 
1,832

Issuance of common stock related to employee benefit plans
23

 
7

Payments for the:
 
 
 
Redemption of long-term debt
(1,757
)
 
(1,538
)
Redemption of preferred stock of a subsidiary

 
(96
)
Notes payable and commercial paper
1,024

 
763

Distributions to noncontrolling interests
(9
)
 
(8
)
Dividends paid
(1,107
)
 
(1,085
)
Other
(7
)
 
(9
)
Net cash provided by (used in) financing activities
255

 
(134
)
Net increase in cash and cash equivalents
507

 
147

Cash and cash equivalents at beginning of period
1,501

 
1,424

Cash and cash equivalents at end of period
$
2,008

 
$
1,571

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
348

 
$
480

Dividends declared but not paid

 
551


See Notes to Condensed Consolidated Financial Statements
8

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
 
(in millions)
Common
Stock
Shares

 
Common
Stock

 
Additional
Paid-in
Capital

 
Retained
Earnings

 
Foreign Currency Translation Adjustments

 
Net Gains (Losses) on Cash Flow Hedges

 
Net Losses on Available-for-Sale Securities

 
Pension and OPEB Adjustments

 
Common
Stockholders'
Equity

 
Noncontrolling
Interests

 
Total
Equity

Balance at December 31, 2012
704

 
$
1

 
$
39,279

 
$
1,889

 
$
(116
)
 
$
(100
)
 
$

 
$
(90
)
 
$
40,863

 
$
78

 
$
40,941

Net income

 

 

 
973

 

 

 

 

 
973

 
3

 
976

Other comprehensive (loss) income

 

 

 

 
(125
)
 
54

 
(4
)
 
5

 
(70
)
 
(4
)
 
(74
)
Common stock issuances, including dividend reinvestment and employee benefits
2

 

 
5

 

 

 

 

 

 
5

 

 
5

Common stock dividends

 

 

 
(1,636
)
 

 

 

 

 
(1,636
)
 

 
(1,636
)
Premium on the redemption of preferred stock of subsidiaries

 

 

 
(3
)
 

 

 

 

 
(3
)
 

 
(3
)
Changes in noncontrolling interest in subsidiaries

 

 

 

 

 

 

 

 

 
(8
)
 
(8
)
Balance at June 30, 2013
706

 
$
1

 
$
39,284

 
$
1,223

 
$
(241
)
 
$
(46
)
 
$
(4
)
 
$
(85
)
 
$
40,132

 
$
69

 
$
40,201

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
706

 
$
1

 
$
39,365

 
$
2,363

 
$
(307
)
 
$
(40
)
 
$

 
$
(52
)
 
$
41,330

 
$
78

 
$
41,408

Net income

 

 

 
512

 

 

 

 

 
512

 
8

 
520

Other comprehensive income (loss)

 

 

 

 
51

 
(9
)
 
2

 

 
44

 
1

 
45

Common stock issuances, including dividend reinvestment and employee benefits
1

 

 
24

 

 

 

 

 

 
24

 

 
24

Common stock dividends

 

 

 
(1,107
)
 

 

 

 

 
(1,107
)
 

 
(1,107
)
Distribution to noncontrolling interest in subsidiaries

 

 

 

 

 

 

 

 

 
(9
)
 
(9
)
Balance at June 30, 2014
707

 
$
1

 
$
39,389

 
$
1,768

 
$
(256
)
 
$
(49
)
 
$
2

 
$
(52
)
 
$
40,803

 
$
78

 
$
40,881


See Notes to Condensed Consolidated Financial Statements
9

PART I


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in millions)
2014

 
2013

 
2014

 
2013

Operating Revenues
$
1,755

 
$
1,591

 
$
3,755

 
$
3,320

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power
503

 
443

 
1,161

 
961

Operation, maintenance and other
463

 
479

 
950

 
936

Depreciation and amortization
248

 
226

 
490

 
448

Property and other taxes
100

 
92

 
204

 
192

Impairment charges
3

 

 
3

 

Total operating expenses
1,317

 
1,240

 
2,808

 
2,537

Gains on Sales of Other Assets and Other, net

 

 

 
2

Operating Income
438

 
351

 
947

 
785

Other Income and Expenses, net
44

 
29

 
93

 
65

Interest Expense
102

 
91

 
203

 
173

Income Before Income Taxes
380

 
289

 
837

 
677

Income Tax Expense
110

 
108

 
281

 
252

Net Income
$
270

 
$
181

 
$
556

 
$
425

Other Comprehensive Income, net of tax
 
 
 
 
 
 
 
Reclassification into earnings from cash flow hedges
1

 

 
2

 

Comprehensive Income
$
271

 
$
181

 
$
558

 
$
425



See Notes to Condensed Consolidated Financial Statements
10

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2014

 
December 31, 2013

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
23

 
$
23

Receivables (net of allowance for doubtful accounts of $3 at June 30, 2014 and December 31, 2013)
163

 
186

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at June 30, 2014 and December 31, 2013)
705

 
673

Receivables from affiliated companies
87

 
75

Notes receivable from affiliated companies
280

 
222

Inventory
909

 
1,065

Regulatory assets
388

 
295

Other
271

 
309

Total current assets
2,826

 
2,848

Investments and Other Assets
 
 
 
Nuclear decommissioning trust funds
2,995

 
2,840

Other
997

 
1,000

Total investments and other assets
3,992

 
3,840

Property, Plant and Equipment
 
 
 
Cost
35,645

 
34,906

Accumulated depreciation and amortization
(12,304
)
 
(11,894
)
Net property, plant and equipment
23,341

 
23,012

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
1,509

 
1,527

Other
43

 
46

Total regulatory assets and deferred debits
1,552

 
1,573

Total Assets
$
31,711

 
$
31,273

LIABILITIES AND MEMBER'S EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
510

 
$
701

Accounts payable to affiliated companies
156

 
161

Taxes accrued
255

 
147

Interest accrued
100

 
97

Current maturities of long-term debt
47

 
47

Regulatory liabilities
30

 
65

Other
368

 
393

Total current liabilities
1,466


1,611

Long-term Debt
8,088

 
8,089

Long-term Debt Payable to Affiliated Companies
300

 
300

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
5,781

 
5,706

Investment tax credits
207

 
210

Accrued pension and other post-retirement benefit costs
157

 
161

Asset retirement obligations
1,641

 
1,594

Regulatory liabilities
2,736

 
2,576

Other
678

 
676

Total deferred credits and other liabilities
11,200

 
10,923

Commitments and Contingencies


 


Member's Equity
 
 
 
Member's equity
10,670

 
10,365

Accumulated other comprehensive loss
(13
)
 
(15
)
Total member's equity
10,657

 
10,350

Total Liabilities and Member's Equity
$
31,711

 
$
31,273


See Notes to Condensed Consolidated Financial Statements
11

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
(in millions)
2014

 
2013

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
556

 
$
425

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization (including amortization of nuclear fuel)
621

 
569

Equity component of AFUDC
(44
)
 
(47
)
Gains on sales of other assets and other, net

 
(2
)
Impairment charge
3

 

Deferred income taxes
132

 
247

Accrued pension and other post-retirement benefit costs
11

 
20

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
3

 
(7
)
Receivables
(39
)
 
(3
)
Receivables from affiliated companies
(12
)
 
(46
)
Inventory
157

 
(12
)
Other current assets
(150
)
 
(14
)
Increase (decrease) in
 
 
 
Accounts payable
(107
)
 
(44
)
Accounts payable to affiliated companies
(5
)
 
(6
)
Taxes accrued
95

 
(5
)
Other current liabilities
(57
)
 
(50
)
Other assets
6

 
(68
)
Other liabilities
15

 
(41
)
Net cash provided by operating activities
1,185

 
916

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(851
)
 
(804
)
Purchases of available-for-sale securities
(1,098
)
 
(1,122
)
Proceeds from sales and maturities of available-for-sale securities
1,087

 
1,098

Notes receivable from affiliated companies
(58
)
 
167

Other
(14
)
 
(10
)
Net cash used in investing activities
(934
)
 
(671
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Distributions to parent
(251
)
 
(249
)
Other

 
(2
)
Net cash used in financing activities
(251
)
 
(251
)
Net decrease in cash and cash equivalents

 
(6
)
Cash and cash equivalents at beginning of period
23

 
19

Cash and cash equivalents at end of period
$
23

 
$
13

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
113

 
$
125


See Notes to Condensed Consolidated Financial Statements
12

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Statements of Changes in Member's Equity
(Unaudited)
 
 
 
Accumulated Other Comprehensive Loss
 
 
(in millions)
Member's
Equity

 
Net Losses on Cash Flow Hedges

 
Unrealized Losses on Available-for-Sale Securities

 
Total

Balance at December 31, 2012
$
9,888

 
$
(15
)
 
$
(1
)
 
$
9,872

Net income
425

 

 

 
425

Distributions to parent
(249
)
 

 

 
(249
)
Balance at June 30, 2013
$
10,064

 
$
(15
)
 
$
(1
)
 
$
10,048

 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
10,365

 
$
(14
)
 
$
(1
)
 
$
10,350

Net income
556

 

 

 
556

Other comprehensive income

 
2

 

 
2

Distributions to parent
(251
)
 

 

 
(251
)
Balance at June 30, 2014
$
10,670

 
$
(12
)
 
$
(1
)
 
$
10,657



See Notes to Condensed Consolidated Financial Statements
13

PART I


PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(in millions)
2014

 
2013

 
2014

 
2013

Operating Revenues
$
2,421

 
$
2,281

 
$
4,962

 
$
4,467

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power
977

 
918

 
2,020

 
1,778

Operation, maintenance and other
555

 
533

 
1,150

 
1,094

Depreciation and amortization
281

 
210

 
557

 
404

Property and other taxes
137

 
141

 
288

 
282

Impairment charges
(17
)
 
366

 
(17
)
 
366

Total operating expenses
1,933

 
2,168

 
3,998

 
3,924

Gains on Sales of Other Assets and Other, net

 
1

 
1

 
1

Operating Income
488

 
114

 
965

 
544

Other Income and Expenses, net
13

 
14

 
28

 
37

Interest Expense
167

 
160

 
336

 
358

Income (Loss) From Continuing Operations Before Taxes
334

 
(32
)
 
657

 
223

Income Tax Expense (Benefit) From Continuing Operations
127

 
(19
)
 
246

 
82

Income (Loss) From Continuing Operations
207

 
(13
)
 
411

 
141

Loss From Discontinued Operations, net of tax
(5
)
 
(4
)
 
(6
)
 
(4
)
Net Income (Loss)
202

 
(17
)
 
405

 
137

Less: Net Income Attributable to Noncontrolling Interest

 

 
1

 
1

Net Income (Loss) Attributable to Parent
$
202

 
$
(17
)
 
$
404

 
$
136

 
 
 
 
 
 
 
 
Net Income (Loss)
$
202

 
$
(17
)
 
$
405

 
$
137

Other Comprehensive Income, net of tax
 
 
 
 
 
 
 
Pension and OPEB adjustments

 

 
1

 
1

Net unrealized gain on cash flow hedges

 
2

 

 
3

Reclassification into earnings from cash flow hedges
4

 

 
4

 

Other Comprehensive Income, net of tax
4

 
2

 
5

 
4

Comprehensive Income (Loss)
$
206

 
$
(15
)
 
$
410

 
$
141



See Notes to Condensed Consolidated Financial Statements
14

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2014

 
December 31, 2013

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
38

 
$
58

Receivables (net of allowance for doubtful accounts of $7 at June 30, 2014 and $14 at December 31, 2013)
193

 
528

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $7 at June 30, 2014)
875

 
417

Receivables from affiliated companies
19

 
4

Notes receivable from affiliated companies
65

 
75

Inventory
1,481

 
1,424

Regulatory assets
642

 
353

Other
449

 
726

Total current assets
3,762

 
3,585

Investments and Other Assets
 
 
 
Nuclear decommissioning trust funds
2,422

 
2,292

Goodwill
3,655

 
3,655

Other
773

 
804

Total investments and other assets
6,850

 
6,751

Property, Plant and Equipment
 
 
 
Cost
36,750

 
36,480

Accumulated depreciation and amortization
(13,214
)
 
(13,098
)
Net property, plant and equipment
23,536

 
23,382

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
4,036

 
4,155

Other
96

 
96

Total regulatory assets and deferred debits
4,132

 
4,251

Total Assets
$
38,280

 
$
37,969

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
660

 
$
836

Accounts payable to affiliated companies
234

 
123

Notes payable to affiliated companies
984

 
1,213

Taxes accrued
148

 
105

Interest accrued
176

 
181

Current maturities of long-term debt
318

 
485

Regulatory liabilities
87

 
207

Other
749

 
896

Total current liabilities
3,356

 
4,046

Long-term Debt
14,200

 
13,630

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
3,801

 
3,283

Accrued pension and other post-retirement benefit costs
631

 
765

Asset retirement obligations
2,597

 
2,562

Regulatory liabilities
2,480

 
2,292

Other
482

 
527

Total deferred credits and other liabilities
9,991

 
9,429

Commitments and Contingencies

 

Common Stockholder's Equity
 
 
 
Common stock, $0.01 par value, 100 shares authorized and outstanding at June 30, 2014 and December 31, 2013

 

Additional paid-in capital
7,467

 
7,467

Retained earnings
3,317

 
3,452

Accumulated other comprehensive loss
(54
)
 
(59
)
Total common stockholder's equity
10,730

 
10,860

Noncontrolling interests
3

 
4

Total equity
10,733

 
10,864

Total Liabilities and Equity
$
38,280

 
$
37,969


See Notes to Condensed Consolidated Financial Statements
15

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
(in millions)
2014

 
2013

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
405

 
$
137

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
642

 
480

Equity component of AFUDC
(9
)
 
(27
)
Losses on sales of other assets
3

 
4

Impairment charges
(17
)
 
366

Deferred income taxes
261

 
71

Accrued pension and other post-retirement benefit costs
14

 
105

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
14

 
23

Receivables
(166
)
 
(148
)
Receivables from affiliated companies
(15
)
 
12

Inventory
(18
)
 
69

Other current assets
(199
)
 
(33
)
Increase (decrease) in
 
 
 
Accounts payable
(41
)
 
(203
)
Accounts payable to affiliated companies
111

 
48

Taxes accrued
49

 
124

Other current liabilities
(157
)
 
169

Other assets
(71
)
 
(126
)
Other liabilities
(27
)
 
88

Net cash provided by operating activities
779

 
1,159

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(888
)
 
(1,295
)
Purchases of available-for-sale securities
(453
)
 
(978
)
Proceeds from sales and maturities of available-for-sale securities
442

 
960

Notes receivable from affiliated companies
10

 
(101
)
Other
(41
)
 
21

Net cash used in investing activities
(930
)
 
(1,393
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the:
 
 
 
Issuance of long-term debt
875

 
545

Payments for the:
 
 
 
Redemption of long-term debt
(473
)
 
(788
)
Redemption of preferred stock of subsidiary

 
(96
)
Notes payable to affiliated companies
(229
)
 
403

Distributions to noncontrolling interests
(2
)
 
(2
)
Other
(40
)
 
(5
)
Net cash provided by financing activities
131

 
57

Net decrease in cash and cash equivalents
(20
)
 
(177
)
Cash and cash equivalents at beginning of period
58

 
231

Cash and cash equivalents at end of period
$
38

 
$
54

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
156

 
$
310


See Notes to Condensed Consolidated Financial Statements
16

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Common Stockholder's Equity
(Unaudited)
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
 
(in millions)
Common
Stock

 
Additional
Paid-in Capital

 
Retained
Earnings

 
Net Losses on Cash Flow Hedges

 
Pension and OPEB Related Adjustments

 
Common Stockholder's Equity

 
Noncontrolling
Interests

 
Total
Equity

Balance at December 31, 2012
$

 
$
7,465

 
$
2,783