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| Non-GAAP Financial Measures |  Print |
Duke Energy’s 2005 Summary Annual Report references 2005 ongoing basic earnings per share (EPS) of $1.79, which topped our incentive target of $1.65. Ongoing basic EPS is a non-GAAP (generally accepted accounting principles) financial measure, as it represents basic EPS from continuing operations plus the per-share effect of any discontinued operations from the company’s Crescent Resources real estate unit, adjusted for the per-share impact of special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. The following is a reconciliation of reported basic EPS from continuing operations to ongoing basic EPS for 2005:
| Basic EPS from continuing operations, as reported | $ | 2.69 | |
| Basic EPS from discontinued operations, as reported | (0.75 | ) | |
| Basic EPS, as reported | 1.94 | ||
| Adjustments to reported basic EPS: | |||
| Basic EPS from discontinued operations excluding Crescent Resources, and cumulative effect of change in accounting principle |
0.76 | ||
| Basic EPS impact of special items (see detail below) | (0.91 | ) | |
| Basic EPS, ongoing | $ | 1.79 |
The following is the detail of the $0.91 in special items impacting basic EPS for 2005:
| (In millions, except per-share amounts) | Pre-Tax Amount | Tax Effect | 2005 Basic EPS Impact |
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| Gain on sale of TEPPCO GP (net of minority interest of $343 million) | $ | 791 | $ | (293 | ) | $ | 0.53 | ||
| Gain on sale of TEPPCO LP units | 97 | (36 | ) | 0.07 | |||||
| Loss on de-designation of Field Services’ hedges, net of settlements on 2005 positions | (23 | ) | 9 | (0.01 | ) | ||||
| Additional liabilities related to mutual insurance companies | (28 | ) | 10 | (0.02 | ) | ||||
| Gain on transfer of 19.7 percent interest in DEFS to ConocoPhillips | 576 | (213 | ) | 0.39 | |||||
| Impairment of DEI’s investment in Campeche | (20 | ) | 6 | (0.02 | ) | ||||
| Initial and subsequent net mark-to-market gains on de-designating Southeast DENA hedges | 21 | (8 | ) | 0.01 | |||||
| Loss on Southeast DENA contract termination | (75 | ) | 28 | (0.05 | ) | ||||
| Tax adjustments | — | 12 | 0.01 | ||||||
| Total Basic EPS impact | $ | 0.91 | |||||||
Duke Energy’s 2005 Summary Annual Report references ongoing EBIT (earnings before interest and taxes) losses for Duke Energy North America’s (DENA) continuing operations of approximately $120 million, which are included in Other. Ongoing EBIT losses for DENA’s continuing operations is a non-GAAP financial measure, as it represents reported Other EBIT adjusted to include only the results of DENA’s continuing operations, excluding special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing EBIT losses for DENA’s continuing operations is reported in Other EBIT, which includes DENA’s EBIT losses from continuing operations, including any special items, in addition to certain other amounts that are reported as part of Other.
The following is a reconciliation of ongoing EBIT losses for DENA’s continuing operations to reported Other EBIT for the year ended Dec. 31, 2005:
| (In millions) | Year Ended Dec. 31, 2005 |
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| Ongoing EBIT losses for DENA’s continuing operations | $ | (119 | ) | |||
| Special items: | ||||||
| Initial and subsequent net pretax mark-to-market gains on de-designating Southeast DENA hedges |
21 | |||||
| Pretax loss on Southeast DENA contract termination | (75 | ) | (54 | ) | ||
| Reported EBIT losses for DENA’s continuing operations | (173 | ) | ||||
| Other items included in Other EBIT (1) | (472 | ) | ||||
| Reported Other EBIT Loss | $ | (645 | ) | |||
(1) Primarily consists of losses on de-designated hedges, captive insurance losses and corporate governance costs.
Duke Energy’s 2005 Summary Annual Report references ongoing segment EBIT for Field Services of $291 million for the first six months of 2005 and $214 million in ongoing equity earnings for the second half of 2005. Following the deconsolidation of Duke Energy Field Services LLC effective July 1, 2005, ongoing segment EBIT approximated ongoing equity earnings in Field Services. Ongoing segment EBIT is a non-GAAP financial measure, as it represents reported segment EBIT adjusted for special items, which represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing segment EBIT is reported segment EBIT, which represents EBIT from continuing operations, including any special items.
The following is a reconciliation of Field Services’ ongoing segment EBIT to reported segment EBIT for the six months ended June 30, 2005, and the six-months ended Dec. 31, 2005:
| (In millions) | Six Months Ended June 30, 2005 |
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| Ongoing segment EBIT | $ | 291 | ||||
| Special items: | ||||||
| Pretax gain on sale of TEPPCO GP (net of minority interest of $343 million) | 791 | |||||
| Pretax gain on sale of TEPPCO LP units | 97 | |||||
| Pretax loss on de-designation of Field Services’ hedges, net of settlements | (96 | ) | 792 | |||
| Reported segment EBIT | $ | 1,083 | ||||
| (In millions) | Six Months Ended Dec. 31, 2005 |
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| Ongoing segment EBIT (equity earnings) | $ | 214 | ||||
| Special items: | ||||||
| Pretax gain on transfer of 19.7 percent interest in DEFS to ConocoPhillips | 576 | |||||
| Reversal of pretax loss on de-designation of Field Services’ hedges, net of settlements |
73 | 649 | ||||
| Reported segment EBIT (equity earnings) | $ | 863 | ||||
| Total reported segment EBIT for 2005 | $ | 1,946 | ||||
Duke Energy’s 2005 Summary Annual Report includes a discussion of Cinergy’s adjusted segment EBIT results for 2004 and 2005 for certain segments. Adjusted segment EBIT for Cinergy represents a non-GAAP financial measure, as it reflects reported segment profit adjusted for interest, taxes and items not related to Cinergy’s ongoing, underlying business or which distort comparability of results. A reconciliation of adjusted segment EBIT to reported segment profit is provided below:
| 2005 | 2004 | ||||||||||||
| (In millions) | Regulated Business Unit | Commercial Business Unit | Regulated Business Unit | Commercial Business Unit | |||||||||
| Adjusted segment EBIT | $ | 645 | $ | 443 | $ | 586 | $ | 345 | |||||
| Reconciling items: | |||||||||||||
| Mark-to-market effect on asset hedges |
— | (62 | ) | — | 6 | ||||||||
| Merger costs | (16 | ) | (9 | ) | — | — | |||||||
| Severance costs | (10 | ) | (10 | ) | — | — | |||||||
| EBIT from synthetic fuel production |
— | (96 | ) | — | (70 | ) | |||||||
| Write-down and/or disposal of certain investments and other charges |
— | — | (7 | ) | (29 | ) | |||||||
| Preferred dividends | (2 | ) | (1 | ) | (3 | ) | — | ||||||
| Interest | (154 | ) | (127 | ) | (145 | ) | (125 | ) | |||||
| Income Taxes | (174 | ) | 72 | (173 | ) | 57 | |||||||
| Discontinued operations net of tax |
— | 3 | — | (10 | ) | ||||||||
| Cumulative effect of change in accounting principle, net of tax |
— | (3 | ) | — | — | ||||||||
| Reported segment profit | $ | 289 | $ | 210 | $ | 258 | $ | 174 | |||||
Duke Energy’s 2005 Summary Annual Report includes a discussion of the company’s 2006 EPS incentive target of $1.90. This EPS measure is used for employee incentive bonuses and should track ongoing diluted EPS, which is a non-GAAP financial measure as it represents diluted EPS from continuing operations plus the per-share effect of any discontinued operations from the company’s Crescent Resources real estate unit, adjusted for the per-share impact of special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing diluted EPS is reported diluted EPS from continuing operations, which includes the impact of special items. Due to the forward-looking nature of this non-GAAP financial measure, information to reconcile it to the most directly comparable GAAP financial measure is not available at this time, as the company is unable to project any special items for 2006.
Duke Energy’s 2005 Summary Annual Report includes discussion of forecasted ongoing EBIT for 2006 for certain segments, including a discussion of ongoing equity earnings for Duke Energy Field Services and, for Duke Energy Gas Transmission, a discussion of forecasted ongoing segment EBIT growth rates, which are based on historical and forecasted ongoing segment EBIT.
Ongoing segment EBIT and related growth rates are non-GAAP financial measures, as they represent reported segment EBIT adjusted for special items, which represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing segment EBIT is reported segment EBIT, which represents EBIT from continuing operations, including any special items. Due to the forward-looking nature of forecasted ongoing segment EBIT and related growth rates for future periods, information to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures is not available at this time, as the company is unable to project special items for any future periods.
Duke Energy’s 2005 Summary Annual Report includes a discussion of Crescent Resources’ forecasted ongoing segment EBIT from continuing and discontinued operations for 2006. As the company’s segment GAAP measure is EBIT from continuing operations, the combination of segment EBIT from continuing and discontinued operations represents a non-GAAP financial measure. The most directly comparable GAAP measure for Crescent’s segment EBIT from continuing and discontinued operations is reported segment EBIT from continuing operations. Information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time, as the company is unable to forecast which Crescent operations, if any, will be discontinued operations during 2006.
Duke Energy’s 2005 Summary Annual Report includes a discussion of forecasted 2007 ongoing diluted EPS and related forecasted growth percentages thereafter. Ongoing diluted EPS and related growth rates are non-GAAP financial measures, as they represent diluted EPS from continuing operations plus the per-share effects of any discontinued operations from the company’s Crescent Resources real estate unit, adjusted for the impact of special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing diluted EPS is reported diluted EPS from continuing operations, which includes the impact of special items. Due to the forward-looking nature of ongoing diluted EPS for future periods, information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time, as the company is unable to forecast any special items for 2007 or for any future periods.
