SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1998 COMMISSION FILE NUMBER 0-23977
DUKE CAPITAL CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 51-0282142
(State or Other Jurisdiction of
Incorporation) (IRS Employer Identification No.)
422 SOUTH CHURCH STREET
CHARLOTTE, NC 28202-1904
(Address of Principal Executive Offices)
(Zip code)
704-594-6200
(Registrant's telephone number, including area code)
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 since May 13, 1998. Yes [X] No [ ]
All of the Registrant's common shares are directly owned by Duke Energy
Corporation (File No. 1-4928), which files reports and proxy materials pursuant
to the Securities Exchange Act of 1934.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Number of shares of Common Stock, no par value, outstanding at
August 14, 1998 .................................................... 1,010
<PAGE>
DUKE CAPITAL CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
Item Page
PART I. FINANCIAL INFORMATION
<S> <C>
1. Financial Statements ................................................................................. 1
Consolidated Statements of Income for the Three and Six Months Ended June 30, 1998 and 1997 ....... 1
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 ............. 2
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 ............................. 3
Notes to Consolidated Financial Statements ........................................................ 5
2. Management's Discussion and Analysis of Results of Operations and Financial Condition ................ 10
PART II. OTHER INFORMATION
1. Legal Proceedings .................................................................................... 16
4. Submission of Matters to a Vote of Security Holders .................................................. 16
5. Other Information .................................................................................... 16
6. Exhibits and Reports on Form 8-K ..................................................................... 16
Signatures ........................................................................................... 17
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DUKE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
------------------------ -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Sales, trading and marketing of natural gas
and petroleum products .................................... $1,884.6 $1,507.1 $3,860.6 $3,634.4
Transportation and storage of natural gas .................... 337.2 358.2 724.4 768.2
Trading and marketing of electricity ......................... 417.3 112.5 954.7 195.0
Other ........................................................ 255.8 137.8 447.8 265.5
-------- -------- -------- --------
Total operating revenues .................................. 2,894.9 2,115.6 5,987.5 4,863.1
-------- -------- -------- --------
OPERATING EXPENSES
Natural gas and petroleum products purchased ................. 1,795.8 1,416.6 3,664.5 3,385.5
Purchased power .............................................. 406.1 112.7 943.8 195.1
Other operation and maintenance .............................. 365.5 334.0 687.6 620.7
Depreciation and amortization ................................ 93.1 80.9 185.3 161.6
Property and other taxes ..................................... 25.3 25.2 40.3 56.0
-------- -------- -------- --------
Total operating expenses .................................. 2,685.8 1,969.4 5,521.5 4,418.9
-------- -------- -------- --------
OPERATING INCOME .................................................. 209.1 146.2 466.0 444.2
-------- -------- -------- --------
OTHER INCOME AND EXPENSES ......................................... 9.9 28.5 55.9 33.6
-------- -------- -------- --------
EARNINGS BEFORE INTEREST AND TAXES ................................ 219.0 174.7 521.9 477.8
INTEREST EXPENSE .................................................. 54.6 50.8 112.8 102.9
MINORITY INTERESTS ................................................ 10.4 1.8 19.5 12.3
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES ...................................... 154.0 122.1 389.6 362.6
INCOME TAXES ...................................................... 46.1 55.3 135.0 149.5
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM .................................. 107.9 66.8 254.6 213.1
EXTRAORDINARY ITEM (NET OF TAX) ................................... -- -- (8.0) --
-------- -------- -------- --------
NET INCOME ........................................................ $ 107.9 $ 66.8 $ 246.6 $ 213.1
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE>
DUKE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
Six Months Ended June 30
-----------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................................................... $ 246.6 $ 213.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ...................................................... 190.7 166.8
Deferred income taxes .............................................................. (2.0) 31.9
(Increase) Decrease in
Receivables ..................................................................... 340.6 297.6
Inventory ....................................................................... (32.7) 7.8
Other current assets ............................................................ 38.1 64.5
Increase (Decrease) in
Accounts payable ................................................................ (354.1) (256.1)
Taxes accrued ................................................................... 47.2 34.1
Interest accrued ................................................................ (0.4) (8.3)
Other current liabilities ....................................................... (33.9) (125.9)
Other, net ......................................................................... 25.8 (103.3)
-------- --------
Net cash provided by operating activities ....................................... 465.9 322.2
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ............................................................... (335.5) (236.5)
Investment expenditures ............................................................ (137.3) (74.7)
Proceeds from sales and other, net ................................................. 36.6 66.4
-------- --------
Net cash used in investing activities ........................................... (436.2) (244.8)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of
Long-term debt .................................................................. 31.7 85.6
Guaranteed preferred beneficial interests in Company's subordinated notes ....... 242.1 --
Payments for the redemption of long term debt ...................................... (106.2) (131.8)
Net change in notes payable and commercial paper ................................... (287.2) 23.6
Dividends paid ..................................................................... -- (72.7)
Other, net ......................................................................... 9.0 (40.8)
-------- --------
Net cash used in financing activities ........................................... (110.6) (136.1)
-------- --------
Net decrease in cash and cash equivalents ............................................... (80.9) (58.7)
Cash received from business acquisitions ................................................ 34.5 --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................................ 94.3 151.3
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............................................. $ 47.9 $ 92.6
======== ========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest (net of amount capitalized) ................................. $ 109.5 $ 113.7
Cash paid for income taxes ......................................................... $ 58.4 $ 73.4
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
DUKE CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
June 30, December 31,
1998 1997
(unaudited)
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................ $ 47.9 $ 94.3
Receivables ...................................... 1,293.6 1,621.4
Inventory ........................................ 223.7 182.4
Current portion of natural gas transition costs .. 66.0 66.9
Unrealized gains on mark to market transactions .. 1,833.3 551.3
Other ............................................ 102.9 140.0
--------- ---------
Total current assets .......................... 3,567.4 2,656.3
--------- ---------
INVESTMENTS AND OTHER ASSETS
Investments in affiliates ........................ 756.7 685.9
Pre-funded pension costs ......................... 312.7 302.6
Goodwill, net .................................... 506.1 503.6
Notes receivable ................................. 235.7 239.6
Unrealized gains on mark to market transactions .. 246.7 65.5
Other ............................................ 120.9 89.7
--------- ---------
Total investments and other assets ............ 2,178.8 1,886.9
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Cost ............................................. 10,052.0 9,696.5
Less accumulated depreciation and amortization ... 3,784.8 3,631.3
--------- ---------
Net property, plant and equipment ............. 6,267.2 6,065.2
--------- ---------
REGULATORY ASSETS AND DEFERRED DEBITS
Debt expense ..................................... 61.6 65.6
Regulatory asset related to income taxes ......... 15.9 16.9
Natural gas transition costs ..................... 167.4 193.7
Environmental clean-up costs ..................... 95.2 103.6
Other ............................................ 95.0 108.6
--------- ---------
Total regulatory assets and deferred debits ... 435.1 488.4
--------- ---------
TOTAL ASSETS ..................................... $12,448.5 $11,096.8
========= =========
See Notes to Consolidated Financial Statements.
3
<PAGE>
DUKE CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(unaudited)
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable ......................................... $ 989.3 $ 1,338.2
Notes payable and commercial paper ....................... 57.4 137.7
Taxes accrued ............................................ 166.6 119.3
Interest accrued ......................................... 50.3 50.7
Current portion of natural gas transition liabilities .... 21.1 35.0
Current portion of environmental clean-up liabilities .... 28.2 26.4
Current maturities of long-term debt ..................... 20.7 22.5
Unrealized losses on mark to market transactions ......... 1,861.2 537.8
Other .................................................... 300.6 329.5
--------- ---------
Total current liabilities ............................. 3,495.4 2,597.1
--------- ---------
LONG-TERM DEBT ................................................ 2,708.7 2,918.8
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes .................................... 1,368.0 1,363.9
Natural gas transition liabilities ....................... 65.6 78.4
Environmental clean-up liabilities ....................... 146.5 157.6
Unrealized losses on mark to market transactions ......... 214.7 50.3
Other .................................................... 381.5 397.0
--------- ---------
Total deferred credits and other liabilities .......... 2,176.3 2,047.2
--------- ---------
MINORITY Interests ............................................ 210.2 168.3
--------- ---------
GUARANTEED PREFERRED BENEFICIAL INTERESTS
IN COMPANY'S SUBORDINATED NOTES .......................... 242.1 --
--------- ---------
COMMON STOCKHOLDER'S EQUITY
Common stock, no par, 3,000 shares authorized;
1,010 shares outstanding .............................. -- --
Paid-in capital .......................................... 2,769.3 2,765.5
Retained earnings ........................................ 846.5 599.9
--------- ---------
Total common stockholder's equity ..................... 3,615.8 3,365.4
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ............... $12,448.5 $11,096.8
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
DUKE CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
Duke Capital Corporation (the Company) is a wholly owned subsidiary of Duke
Energy Corporation. The Company provides financing and credit enhancement
services for its subsidiaries. The Company conducts its operating activities
through its three business segments: Natural Gas Transmission, Energy Services,
and Parent and Other Operations.
The Natural Gas Transmission segment is engaged in interstate transportation and
storage of natural gas for customers primarily in the Mid-Atlantic, New England
and Midwest states. The interstate natural gas transmission and storage
operations are subject to the rules and regulations of the Federal Energy
Regulatory Commission (FERC).
The Energy Services segment is comprised of several separate business units:
Field Services gathers and processes natural gas, produces and markets natural
gas liquids and transports and trades crude oil; Trading and Marketing markets
natural gas, electricity and other energy-related products; Global Asset
Development develops, owns and operates energy-related facilities worldwide; and
Other Energy Services provides engineering consulting, construction and
integrated energy solutions.
Parent and Other Operations include the real estate operations of Crescent
Resources, Inc. and communications services. Corporate costs and intersegment
eliminations are also included in the financial results of this segment.
The consolidated financial statements include the accounts of the Company and
all majority-owned subsidiaries. These consolidated financial statements reflect
all normal recurring adjustments that are, in the opinion of management,
necessary to present fairly the financial position and results of operations for
the respective periods. Amounts reported in the Consolidated Statements of
Income are not necessarily indicative of amounts expected for the respective
years due to the effects of seasonal temperature variations on energy
consumption.
Certain amounts for the prior period have been reclassified in the consolidated
financial statements to conform to the current presentation.
2. RELATED PARTY TRANSACTIONS
Certain balances due to or from related parties included in the Consolidated
Balance Sheets at June 30, 1998 and December 31, 1997 are as follows:
- -------------------------------------------------------
June 30, December 31,
IN MILLIONS 1998 1997
- -------------------------------------------------------
Receivables $ 10.8 $ 17.9
Accounts payable 57.6 52.2
Taxes accrued 91.8 39.9
- -------------------------------------------------------
5
<PAGE>
3. BUSINESS SEGMENTS
Business segment financial information follows for the three and six months
ended June 30, 1998 and 1997. Parent and Other Operations includes intersegment
eliminations.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Earnings Before Capital and
Total Operating Interest Depreciation and Investment
IN MILLIONS Revenues Income and Taxes Amortization Expenditures
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Three Months Ended June 30, 1998
- ---------------------------------------
Natural Gas Transmission .............. $ 367.4 $ 141.9 $ 147.6 $ 56.5 $ 51.4
Energy Services
Field Services ..................... 728.6 12.6 12.8 19.9 61.2
Trading and Marketing .............. 1,726.6 14.4 14.8 2.3 0.8
Global Asset Development ........... 60.1 10.7 14.9 3.4 20.0
Other Energy Services .............. 135.6 1.9 2.0 1.8 8.9
Energy Services' Eliminations ...... (136.3) -- -- -- --
---------------------------------------------------------------------------------
Total Energy Services ......... 2,514.6 39.6 44.5 27.4 90.9
Parent and Other Operations ........... 12.9 27.6 26.9 9.2 55.7
---------------------------------------------------------------------------------
Total Consolidated ............... $ 2,894.9 $ 209.1 $ 219.0 $ 93.1 $ 198.0
============================================================================================================================
Three Months Ended June 30, 1997
- ---------------------------------------
Natural Gas Transmission .............. $ 371.3 $ 137.8 $ 144.7 $ 57.3 $ 59.8
Energy Services
Field Services ..................... 697.9 31.8 31.9 17.4 32.5
Trading and Marketing .............. 1,072.5 4.1 4.2 1.6 2.3
Global Asset Development ........... 29.5 (5.0) 4.5 2.2 8.3
Other Energy Services .............. 87.4 6.0 5.9 1.0 23.6
Energy Services' Eliminations ...... (127.7) -- -- -- --
---------------------------------------------------------------------------------
Total Energy Services ........... 1,759.6 36.9 46.5 22.2 66.7
Parent and Other Operations ........... (15.3) (28.5) (16.5) 1.4 60.2
---------------------------------------------------------------------------------
Total Consolidated ................. $ 2,115.6 $ 146.2 $ 174.7 $ 80.9 $ 186.7
============================================================================================================================
6
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------------
Earnings Before Capital and
Total Operating Interest Depreciation and Investment
IN MILLIONS Revenues Income and Taxes Amortization Expenditures
- --------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1998
- ---------------------------------------
Natural Gas Transmission .............. $ 777.1 $ 341.8 $ 356.4 $ 114.4 $ 124.0
Energy Services
Field Services ..................... 1,398.2 29.1 60.5 39.0 130.7
Trading and Marketing .............. 3,738.5 26.7 27.5 4.4 1.6
Global Asset Development ........... 97.5 16.0 24.0 5.8 104.5
Other Energy Services .............. 250.8 9.3 9.4 3.3 12.6
Energy Services' Eliminations ...... (281.9) -- -- -- --
---------------------------------------------------------------------------------
Total Energy Services ......... 5,203.1 81.1 121.4 52.5 249.4
Parent and Other Operations ........... 7.3 43.1 44.1 18.4 99.4
---------------------------------------------------------------------------------
Total Consolidated ............... $ 5,987.5 $ 466.0 $ 521.9 $ 185.3 $ 472.8
============================================================================================================================
Six Months Ended June 30, 1997
- ---------------------------------------
Natural Gas Transmission .............. $ 809.2 $ 333.7 $ 350.7 $ 114.5 $ 75.7
Energy Services
Field Services ..................... 1,470.1 82.6 82.8 34.9 74.3
Trading and Marketing .............. 2,702.0 33.7 34.3 2.9 4.3
Global Asset Development ........... 50.7 (5.4) 4.6 4.5 21.6
Other Energy Services .............. 171.8 9.8 4.7 2.1 24.6
Energy Services' Eliminations ...... (315.3) -- -- -- --
---------------------------------------------------------------------------------
Total Energy Services ........... 4,079.3 120.7 126.4 44.4 124.8
Parent and Other Operations ........... (25.4) (10.2) 0.7 2.7 110.7
---------------------------------------------------------------------------------
Total Consolidated ................. $ 4,863.1 $ 444.2 $ 477.8 $ 161.6 $ 311.2
============================================================================================================================
- -----------------------------------------------------------------------------
Identifiable Assets
----------------------------------
June 30, December 31,
IN MILLIONS 1998 1997
- -----------------------------------------------------------------------------
Natural Gas Transmission .............. $ 4,981.6 $ 5,088.9
Energy Services
Field Services ..................... 1,874.7 1,979.8
Trading and Marketing .............. 3,010.6 1,857.3
Global Asset Development ........... 1,151.7 987.6
Other Energy Services .............. 254.2 223.2
Energy Services' Eliminations ...... (110.8) (169.1)
- --------------------------------------------------------------------------
Total Energy Services ........... 6,180.4 4,878.8
Parent and Other Operations ........... 1,286.5 1,129.1
- --------------------------------------------------------------------------
Total Consolidated ................. $ 12,448.5 $ 11,096.8
==========================================================================
</TABLE>
4. GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S SUBORDINATED NOTES
On June 1, 1998, Duke Capital Financing Trust I (the Trust) issued $250 million
of its 7 3/8% trust preferred securities, at a $7.9 million discount,
representing preferred undivided beneficial interests in the assets of the
Trust. Payment of distributions on such preferred securities is guaranteed by
the Company, but only to the extent the Trust has funds legally and immediately
available to make such distributions. The Trust is a statutory business trust,
of which the Company owns all the common securities, established for the purpose
of issuing and selling such preferred securities and investing the gross
proceeds in the 7 3/8% Series A Junior Subordinated Notes of the Company due
March 31, 2038.
7
<PAGE>
5. COMMITMENTS AND CONTINGENCIES
LITIGATION. On February 18, 1997, Amerada Hess Corporation (Amerada Hess)
notified Texas Eastern Transmission Corporation (TETCO), a subsidiary of the
Company, that it intended to commence substitution of other gas reserves,
deliverability and leases for those dedicated to its natural gas purchase
contract (the Amerada Hess Contract) with TETCO. On the same date, Amerada Hess
also filed a petition in the District Court of Harris County, Texas, 157th
Judicial District, seeking a declaratory judgment that its interpretation of the
Amerada Hess Contract is correct. TETCO filed a declaratory judgment action with
respect to Amerada Hess' contentions in the U.S. District Court for the Eastern
District of Louisiana on February 21, 1997.
On September 26, 1997, the judge presiding over the Amerada Hess contract matter
issued a summary judgment in favor of TETCO. Amerada Hess subsequently filed a
notice of appeal of the summary judgment. On July 7, 1998, the Fifth Circuit
Court of Appeals affirmed the lower court's judgment in favor of TETCO. In
August 1998, Amerada Hess and TETCO entered into an agreement terminating the
Amerada Hess Contract effective June 30, 1998. Management is of the opinion that
this matter was resolved on terms favorable to the Company.
On April 25, 1997, a group of affiliated plaintiffs that own and/or operate
various pipeline and marketing companies and partnerships primarily in Kansas
filed suit against Panhandle Eastern Pipe Line Company (PEPL), a subsidiary of
the Company, in the U.S. District Court for the Western District of Missouri.
The plaintiffs allege that PEPL has engaged in unlawful and anti-competitive
conduct with regard to requests for interconnects with the PEPL system for
service to the Kansas City area. Asserting that PEPL has violated the antitrust
laws and tortiously interfered with the plaintiffs' contracts with third
parties, the plaintiffs seek compensatory and punitive damages. Based on
information currently available to the Company, the Company believes the
resolution of this matter will not have a material adverse effect on the
consolidated results of operations or financial position of the Company.
On May 1, 1997, Citrus Trading Corporation (Citrus) and Enron Capital and Trade
Resources Corporation, as successor to Enron Gas Marketing Corporation, filed
suit in the District Court of Harris County, Texas, against Duke Energy LNG
Sales, Inc. (formerly PanEnergy LNG Sales, Inc. and Pan National Gas Sales,
Inc.), a subsidiary of the Company, alleging breach of a gas purchase contract
(the Contract) for regasified LNG entered into between Citrus and Pan National
Gas Sales, Inc. Plaintiffs allege that Duke Energy LNG Sales, Inc. failed to
deliver LNG pursuant to the terms of the Contract. The plaintiffs seek
compensatory damages in unspecified amounts for losses allegedly incurred as a
result of the contract breach as well as a declaratory judgment that Duke Energy
LNG Sales, Inc.'s assertions of force majeure due to the interruption in the
supply of LNG to Duke Energy LNG Sales, Inc. do not constitute force majeure
under the Contract. Based on information currently available to the Company, the
Company believes the resolution of this matter will not have a material adverse
effect on the consolidated results of operations or financial position of the
Company.
On May 13, 1997, Anadarko Petroleum Corporation (Anadarko) filed suits against
PEPL and other affiliates, as defendants, both in the U.S. District Court for
the Southern District of Texas and State District Court of Harris County, Texas.
Anadarko claims that it was effectively indemnified by the defendants against
any responsibility for refunds of Kansas ad-valorem taxes which are due
purchasers of gas from Anadarko, retroactive to 1983. The suit has been stayed
pending resolution by the FERC of ad-valorem tax issues. Based on information
currently available to the Company, the Company believes the resolution of this
matter will not have a material adverse effect on the consolidated results of
operations or financial position of the Company.
The Company and its subsidiaries are also involved in other legal, tax and
regulatory proceedings before various courts, regulatory commissions and
governmental agencies regarding matters arising in the ordinary course of
business, some of which involve substantial amounts. Where appropriate for all
of these matters, the Company has made accruals in accordance with Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies," in order
to provide for such matters. Management is of the opinion that the final
disposition of these proceedings will not have a material adverse effect on the
consolidated results of operations or financial position of the Company.
OTHER COMMITMENTS AND CONTINGENCIES. In 1993, the U.S. Department of the
Interior announced its intention to seek additional royalties from gas producers
as a result of payments received by such producers in connection
8
<PAGE>
with past take-or-pay settlements, and buyouts and buydowns of gas sales
contracts with natural gas pipelines. The Company's pipelines, with respect to
certain producer contract settlements, may be contractually required to
reimburse or, in some instances, to indemnify producers against such royalty
claims. The potential liability of the producers to the government and of the
pipelines to the producers involves complex issues of law and fact which are
likely to take substantial time to resolve. If required to reimburse or
indemnify the producers, the Company's pipelines will file with the FERC to
recover a portion of these costs from pipeline customers.
The Company has a 10% ownership interest in TEPPCO Partners, L.P., a master
limited partnership (MLP) that owns and operates a petroleum products pipeline.
At June 30, 1998, a subsidiary partnership of the MLP had $389.7 million in
First Mortgage Notes outstanding with recourse to the general partner, a
subsidiary of the Company, up to $40 million.
PEPL owns an effective 5.3% ownership interest in Northern Border Pipeline
Company (Northern Border). Under the terms of a settlement related to a
transportation agreement between PEPL and Northern Border, PEPL guarantees
payment to Northern Border under a transportation agreement held by an affiliate
of Pan-Alberta Gas Limited. The transportation agreement requires estimated
total payments of $68.1 million for the remainder of 1998 through 2001.
In connection with the sale of Petrolane Incorporated (Petrolane) in 1989, Texas
Eastern Corporation (TEC), a subsidiary of the Company, agreed to indemnify
Petrolane against certain obligations for guaranteed leases and environmental
matters. Certain of these lease obligations relate to Petrolane's divestiture of
supermarket operations prior to its acquisition by TEC and as of June 30, 1998
totaled approximately $45.2 million over the remaining terms of the leases,
which expire in 2006.
In January 1998, the Company acquired a 9.8% ownership in Alliance Pipeline.
This pipeline is designed to transport natural gas from western Canada to the
Chicago-area market center for distribution throughout North America. The
pipeline is scheduled to begin commercial operation in the second half of 2000,
provided the necessary U.S. and Canadian regulatory approvals are secured. In
addition to buying an ownership interest in the pipeline project, the Company
has a contractual commitment for 67.25 million cubic feet per day of capacity on
the line over 15 years for an estimated total of $315 million.
As of June 30, 1998, the Company had letters of credit and surety bonds of $77.3
million issued on its behalf related to natural gas transmission operations,
engineering services contracts, insurance contracts and various other items.
Periodically, the Company may become involved in contractual disputes with
natural gas transmission customers involving potential or threatened abrogation
of contracts by the customers. If the customers are successful, the Company may
not receive the full value of anticipated benefits under the contracts.
In the normal course of business, certain of the Company's affiliates enter into
various contracts, including agreements for debt, natural gas transmission
service and construction contracts, which contain certain schedule and
performance requirements. Such affiliates use risk management techniques to
mitigate their exposure associated with such contracts. The Company and certain
subsidiaries of the Company have guaranteed performance by such affiliates under
some of these contracts.
Management is of the opinion that these commitments and contingencies will not
have a material adverse effect on the consolidated results of operations or the
financial position of the Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
INTRODUCTION
Duke Capital Corporation (the Company) is a wholly owned subsidiary of Duke
Energy Corporation (Duke Energy). The Company provides financing and credit
enhancement services for its subsidiaries. The Company conducts its operating
activities through its three business segments: Natural Gas Transmission, Energy
Services and Parent and Other Operations.
The Natural Gas Transmission segment is engaged in interstate transportation and
storage of natural gas for customers primarily in the Mid-Atlantic, New England
and Midwest states. The interstate natural gas transmission and storage
operations are subject to the rules and regulations of the Federal Energy
Regulatory Commission (FERC).
The Energy Services segment is comprised of several separate business units:
Field Services gathers and processes natural gas, produces and markets natural
gas liquids (NGL) and transports and trades crude oil; Trading and Marketing
markets natural gas, electricity and other energy-related products; Global Asset
Development develops, owns and operates energy-related facilities worldwide; and
Other Energy Services provides engineering consulting, construction and
integrated energy solutions.
Parent and Other Operations include the real estate operations of Crescent
Resources, Inc. (Crescent Resources) and communications services. Corporate
costs and intersegment eliminations are also included in the financial results
of this segment.
Management's Discussion and Analysis should be read in conjunction with the
Consolidated Financial Statements of the Company.
RESULTS OF OPERATIONS
For the quarter ended June 30, 1998, net income increased $41.1 million to
$107.9 million compared to the same period in 1997. The 62% increase in net
income is primarily the result of an increase in volumes of electricity and
natural gas marketed coupled with increased trading margins, expansions and
acquisitions, a gain on the sale of land and the absence of 1997 merger-related
costs. These increases were partially offset by decreased NGL prices and gas
margin rates and a 1997 gain on the sale of the Company's interest in Midland
Cogeneration Venture.
For the six months ended June 30, 1998, net income was $246.6 million, net of an
extraordinary loss of $8.0 million, compared to net income of $213.1 million for
the same period in 1997. The $33.5 million increase in net income is primarily
the result of expansions and acquisitions, gains on the sales of NGL
fractionation facilities and land and the absence of 1997 merger-related costs.
These increases were partially offset by decreased NGL prices and gas margin
rates, the favorable resolution of certain regulatory matters in 1997 and a gain
on the sale of the Company's interest in Midland Cogeneration Venture in 1997.
Operating income for the quarter ended June 30, 1998 increased to $209.1 million
compared to $146.2 million for the same period in 1997. For the six months ended
June 30, 1998, operating income increased to $466.0 million compared to $444.2
million for the same period in 1997. Earnings before interest and taxes (EBIT)
were $219.0 million and $174.7 million for the quarters ended June 30, 1998 and
1997, respectively. For the six months ended June 30, 1998, earnings before
interest and taxes were $521.9 million and $477.8 million, respectively.
Operating income and earnings before interest and taxes, excluding the effect of
a $31.2 million gain on an asset sale by Field Services in 1998, are not
materially different, and are affected by the same fluctuations for the Company
and each of its business segments. Earnings before interest and taxes by
business segment are summarized below, and the explanation of these results by
business segment are discussed thereafter.
10
<PAGE>
Earnings Before Interest and Taxes by Business Segment:
- -------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
IN MILLIONS 1998 1997 1998 1997
- -------------------------------------------------------------------------
Natural Gas Transmission $147.6 $144.7 $356.4 $350.7
Energy Services
Field Services 12.8 31.9 60.5 82.8
Trading and Marketing 14.8 4.2 27.5 34.3
Global Asset Development 14.9 4.5 24.0 4.6
Other Energy Services 2.0 5.9 9.4 4.7
-----------------------------------------
Total Energy Services 44.5 46.5 121.4 126.4
Crescent Resources 42.3 15.7 64.7 37.9
Parent and Other Operations (15.4) (32.2) (20.6) (37.2)
-----------------------------------------
Total Corporation $219.0 $174.7 $521.9 $477.8
=========================================================================
Included in the amounts discussed below are intercompany transactions that do
not have a material impact on consolidated earnings before interest and taxes.
NATURAL GAS TRANSMISSION
- -------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
DOLLARS IN MILLIONS 1998 1997 1998 1997
- -------------------------------------------------------------------------
Operating Revenues $367.4 $371.3 $777.1 $809.2
Operating Expenses 225.5 233.5 435.3 475.5
-----------------------------------------
Operating Income 141.9 137.8 341.8 333.7
Other Income, Net 5.7 6.9 14.6 17.0
-----------------------------------------
EBIT $147.6 $144.7 $356.4 $350.7
=========================================
Volumes, TBtu(a) 591 644 1,369 1,486
- -------------------------------------------------------------------------
(a) Trillion British thermal units
For the quarter ended June 30, 1998, earnings before interest and taxes for the
Natural Gas Transmission segment increased slightly compared to the same period
in 1997. Earnings before interest and taxes for the Northeast Pipelines
increased $4.0 million for the quarter ended June 30, 1998 compared to the prior
year quarter, primarily as a result of increases in market expansion projects.
Earnings before interest and taxes for the Midwest Pipelines decreased slightly
for the quarter ended June 30, 1998 compared to the prior year quarter,
primarily due to the favorable resolution of certain regulatory matters in 1997,
partially offset by lower operating expenses in 1998.
For the six months ended June 30, 1998, earnings before interest and taxes for
the Natural Gas Transmission segment increased $5.7 million over the comparable
period in 1997. Earnings before interest and taxes for the Northeast Pipelines
increased $27.1 million for the six months ended June 30, 1998 compared to the
same period in 1997, primarily as a result of a favorable state property tax
ruling and increases in market expansion projects in 1998, partially offset by a
decrease in throughput as a result of mild winter weather, and a one-time charge
for severance costs during the first quarter of 1997.
For the six months ended June 30, 1998, earnings before interest and taxes for
the Midwest Pipelines decreased $21.4 million compared to the same period in
1997, primarily due to the favorable resolution of certain regulatory matters in
1997, partially offset by lower operating expenses in the first six months of
1998.
11
<PAGE>
ENERGY SERVICES
Earnings before interest and taxes for Energy Services decreased slightly for
the quarter ended June 30, 1998 compared to the prior year quarter. For the six
months ended June 30, 1998, earnings before interest and taxes for Energy
Services decreased $5.0 million compared to the same period in 1997. For the
quarter and six months ended June 30, 1998, the change in earnings before
interest and taxes from the prior year comparable periods was primarily driven
by the results of operations of Field Services, Trading and Marketing and Global
Asset Development.
FIELD SERVICES
- -------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
DOLLARS IN MILLIONS 1998 1997 1998 1997
- -------------------------------------------------------------------------
Operating Revenues $728.6 $697.9 $1,398.2 $1,470.1
Operating Expenses 716.0 666.1 1,369.1 1,387.5
----------------------------------------
Operating Income 12.6 31.8 29.1 82.6
Other Income, Net 0.2 0.1 31.4 0.2
----------------------------------------
EBIT $ 12.8 $ 31.9 $ 60.5 $ 82.8
=========================================
Volumes
Natural Gas
Gathered/Processed, TBtu/d(a) 3.7 3.4 3.7 3.4
NGL Production, MBbl/d(b) 112.8 108.5 109.6 107.3
- -------------------------------------------------------------------------
(a) Trillion British thermal units per day
(b) Thousand barrels per day
Earnings before interest and taxes for Field Services decreased 60% for the
quarter ended June 30, 1998 compared to the same period in 1997, primarily due
to a decrease in average NGL prices of approximately $0.05 per gallon, or 16%,
from the prior year quarter.
For the six months ended June 30, 1998, earnings before interest and taxes for
Field Services decreased 27% compared to the same period in 1997, primarily due
to a decrease in average NGL prices of approximately $0.08 per gallon, or 22%,
partially offset by a $31.2 million gain on the sale of two NGL fractionation
facilities in the first quarter of 1998, which is included in other income and
expenses.
TRADING AND MARKETING
- -------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
DOLLARS IN MILLIONS 1998 1997 1998 1997
- -------------------------------------------------------------------------
Operating Revenues $1,726.6 $1,072.5 $3,738.5 $2,702.0
Operating Expenses 1,712.2 1,068.4 3,711.8 2,668.3
-----------------------------------------
Operating Income 14.4 4.1 26.7 33.7
Other Income, Net 0.4 0.1 0.8 0.6
-----------------------------------------
EBIT $ 14.8 $ 4.2 $ 27.5 $ 34.3
=========================================
Volumes
Natural Gas Marketed, TBtu/d 7.2 5.5 7.5 6.1
Electricity Marketed, GWh(A) 19,534 5,560 43,426 9,353
- -------------------------------------------------------------------------
(A) Gigawatt-hours
Earnings before interest and taxes for Trading and Marketing increased $10.6
million for the quarter ended June 30, 1998 compared with the same period in
1997. The increase results primarily from increased trading margins and
increased gas and power volumes marketed, partially offset by lower natural gas
margin rates. Electricity volumes
12
<PAGE>
marketed increased primarily as a result of acquiring 100% ownership of the
Duke/Louis Dreyfus, L.L.C. joint venture in June 1997.
For the six months ended June 30, 1998, earnings before interest and taxes for
Trading and Marketing decreased $6.8 million compared with the same period in
1997. The decline results primarily from lower natural gas margin rates
partially offset by increased trading margins and increased volumes. Electricity
volumes marketed increased primarily as a result of acquiring 100% ownership of
the Duke/Louis Dreyfus, L.L.C. joint venture in June 1997.
GLOBAL ASSET DEVELOPMENT
For the quarter and six months ended June 30, 1998, earnings before interest and
taxes for Global Asset Development increased $10.4 million and $19.4 million,
respectively, over the comparable periods in 1997, primarily due to expansions
and acquisitions.
PARENT AND OTHER OPERATIONS
For the quarter and six months ended June 30, 1998, earnings before interest and
taxes for Crescent Resources increased $26.6 million and $26.8 million,
respectively, over the comparable prior year periods, primarily as a result of a
gain on land sales in the Jocassee Gorges region of South Carolina and increased
project and lake lot sales.
For the quarter and six months ended June 30, 1998, earnings before interest and
taxes for Parent and Other Operations, excluding Crescent Resources, increased
$16.8 million and $16.6 million, respectively, over the comparable prior year
periods, primarily as a result of the absence of 1997 merger-related costs
partially offset by a 1997 gain on the sale of the Company's interest in the
Midland Cogeneration Venture.
OTHER IMPACTS ON NET INCOME
For the quarter and six months ended June 30, 1998, interest expense increased
7% and 10% over the comparable periods in 1997 due to higher average debt
balances outstanding.
During the quarter ended June 30, 1998, the Company recognized a tax benefit of
$11.9 million related to the excess of fair market value over the sales price of
the land in the Jocassee Gorges region of South Carolina sold by Crescent
Resources to the State of South Carolina.
In January 1998, TEPPCO Partners, L.P. (TEPPCO), in which the Company has a 10%
ownership interest, redeemed certain First Mortgage Notes. The Company recorded
a non-cash extraordinary item of $8 million, net of income tax of $5.1 million,
related to its share of costs of the early retirement of debt.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING CASH FLOW
Operating cash flows increased $143.7 million for the six months ended June 30,
1998 compared with the same period in 1997. This increase reflects the cash
impact of the Company's trading and marketing activities and non-recurring 1997
payments associated with rate case settlements and the termination of an
accounts receivable sales agreement.
On April 28, 1998, Texas Eastern Transmission Corporation (TETCO), a subsidiary
of the Company, filed with the FERC a proposed settlement to accelerate recovery
of natural gas transition costs and to reduce depreciation expense to more
appropriately reflect the estimated useful lives of its facilities, principally
interstate natural gas pipelines. TETCO reviewed the condition of its natural
gas pipeline facilities and current maintenance practices, and concluded that
extension of the useful lives was appropriate. The proposed settlement reduces
customer rates as a result of the reduced depreciation expense offset by the
accelerated recovery of natural gas transition costs. On June 26, 1998, the FERC
issued a procedural order on the settlement requesting certain additional
information which was
13
<PAGE>
subsequently provided by TETCO on July 13, 1998. Currently, the settlement is
unopposed and pending further Commission action.
TETCO anticipates implementation of the proposed settlement sometime in the
second half of 1998. The proposed settlement is not expected to have a material
effect on the net results of operations or financial position of the Company. As
a result of the proposed settlement, cash flows from operations are not expected
to change for the first two years after implementation due to the offsetting
effect on customer rates of the reduced depreciation expense and increased
recovery of natural gas transition costs. Once the natural gas transition costs
are fully recovered, cash flows from operations are expected to decrease during
2001 through 2003 by an estimated total of $270 million.
INVESTING CASH FLOW
For the six months ended June 30, 1998, capital and investment expenditures
totaled $472.8 million compared with $311.2 million for the same period in 1997.
Increased capital and investment expenditures during the period were primarily
due to business expansion for the Natural Gas Transmission and the Energy
Services segments, specifically Field Services and Global Asset Development.
On July 1, 1998, Global Asset Development completed the purchase of three
electric generating stations in California from Pacific Gas & Electric Company
for $501 million. The plants have a combined capacity of 2,645 megawatts. Also,
on July 16, 1998, Global Asset Development purchased the Queensland Pipeline, a
389-mile pipeline in southeast Queensland, Australia, from PG&E Corporation for
$128 million.
Proceeds from the sales of two NGL fractionation facilities to TEPPCO were $40
million in 1998. Proceeds from the sales of the Company's ownership in
operations in the United Kingdom and its equity interests in certain affiliates
were $85 million in 1997.
FINANCING CASH FLOW
Dividends and debt repayments, along with operating and investing requirements,
are expected to be funded by cash from operations, debt and commercial paper
issuances and available credit facilities. The Company is seeking to
significantly grow its Energy Services businesses, which will likely require
additional financing. The Company plans to fund Energy Services growth
opportunities through a combination of internally generated cash and external
debt. Debt financing will be obtained through the Company's commercial paper
program and by accessing the capital markets.
In connection with its plans to access the capital markets, the Company filed a
$1 billion shelf registration statement, which was declared effective by the
Securities and Exchange Commission on May 13, 1998. Subsequently, financing was
obtained under this shelf registration statement on June 1, 1998, when Duke
Capital Financing Trust I (the Trust), a business trust which is treated as a
subsidiary of the Company for financial reporting purposes, issued $250 million
of its 7 3/8% trust preferred securities, at a $7.9 million discount,
representing preferred undivided beneficial interests in the assets of the
Trust. Payment of distributions on such preferred securities is guaranteed by
the Company, but only to the extent the Trust has funds legally and immediately
available to make such distributions. The Trust's assets consist of an
investment of approximately $258 million in Duke Capital 7 3/8% Series A Junior
Subordinated Notes due 2038.
Additional financing was obtained under the $1 billion shelf registration
statement on July 20, 1998 when the Company issued $250 million Series A 6 1/4%
Senior Notes due 2005 and $150 million Series B 6 3/4% Senior Notes due 2018. In
connection with the issuance of these Senior Notes, the Company entered into
Treasury Rate Lock Agreements during the second quarter to partially hedge its
position. The hedge transactions had a notional amount of $250 million and were
settled on July 15, 1998 resulting in a net payment of $4.1 million.
In connection with Global Asset Development's purchase of the Queensland
Pipeline, a subsidiary of the Company entered into a $74.8 million bridge loan
denominated in Australian dollars due September 30, 1998. Due to the short-term
nature of this loan, foreign currency risk associated with this loan is not
expected to be material to the Company's consolidated results of operations or
financial position.
14
<PAGE>
CHANGES FOR THE YEAR 2000
In 1996, the Company initiated a program to address Year 2000 readiness issues
relating to computer and process control systems, equipment and devices. Many of
these systems, equipment and devices are now Year 2000 ready or have been
scheduled for replacement in the Company's ongoing systems plans. The Company is
continuing its assessment of Year 2000 impacts across its business and
operations, including its customer and vendor base, and continues to develop and
implement remediation plans using established processes to avoid adverse impacts
of Year 2000 on its business and operations. Management believes it is devoting
the resources necessary to achieve Year 2000 readiness in a timely manner. Total
cost of the program, including internal labor as well as incremental costs such
as consulting and contract costs, is expected to be approximately $8 million.
These costs exclude replacement systems that, in addition to being Year 2000
ready, provide significantly enhanced capabilities which will benefit operations
in future periods.
Based on assessments completed to date, compliance plans in process and
contingency planning efforts, management is of the opinion that the Year 2000
issue, including the cost of making its critical systems, equipment and devices
ready, will not have a material adverse effect on the Company's business
operations or consolidated results of operations or financial position.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In June 1998, a subsidiary of the Company received a Compliance Order and
Assessment of Civil Penalty from the Colorado Department of Public Health and
Environment related to air quality permit violations at the Greeley Fractionator
Plant. The Company was assessed a civil penalty of $137,000 and noncompliance
penalties in an amount yet to be determined but not expected to exceed $100,000.
On July 6, 1998, the Company filed an appeal of the Compliance Order and
Assessment of Civil Penalty, and a resolution of the matter has not been
reached.
Two environmental administrative proceedings are underway before the Missouri
Department of Natural Resources and the Illinois Environmental Protection
Agency, respectively, relating to two natural gas compressor stations, that
could result in fines in excess of $100,000 each.
Management is of the opinion that the resolution of these matters will not have
a material adverse effect on the consolidated results of operations or financial
position of the Company.
For information concerning litigation and other contingencies, see Note 5 to the
Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the security holders of the Company
during the second quarter of 1998.
ITEM 5. OTHER INFORMATION.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may make statements regarding its assumptions,
projections, expectations, intentions or beliefs about future events. These
statements are intended as "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. The Company cautions that assumptions,
projections, expectations, intentions or beliefs about future events may and
often do vary from actual results and the differences between assumptions,
projections, expectations, intentions or beliefs and actual results can be
material. Accordingly, there can be no assurance that actual results will not
differ materially from those expressed or implied by the forward-looking
statements. The following are some of the factors that could cause actual
achievements and events to differ materially from those expressed or implied in
such forward-looking statements: state and federal legislative and regulatory
initiatives that affect cost and investment recovery, have an impact on rate
structures, and affect the speed and degree to which competition enters the
electric and natural gas industries; industrial, commercial and residential
growth in the service territories of the Company and its subsidiaries; the
weather and other natural phenomena; the timing and extent of changes in
commodity prices and interest rates; changes in environmental and other laws and
regulations to which the Company and its subsidiaries are subject or other
external factors over which the Company has no control; the results of financing
efforts; growth in opportunities for the Company's subsidiaries; and the effect
of the Company's accounting policies, in each case during the periods covered by
the forward-looking statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(27) Financial Data Schedule (included in electronic filing only)
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the second quarter
of 1998.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DUKE CAPITAL CORPORATION
August 14, 1998 /s/ Richard J. Osborne
------------------------
Richard J. Osborne
Vice President and
Chief Financial Officer
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Duke Capital Corporation Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001051116
<NAME> DUKE CAPITAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 47900
<SECURITIES> 0
<RECEIVABLES> 1293600
<ALLOWANCES> 0
<INVENTORY> 223700
<CURRENT-ASSETS> 3567400
<PP&E> 10052000
<DEPRECIATION> 3784800
<TOTAL-ASSETS> 12448500
<CURRENT-LIABILITIES> 3495400
<BONDS> 2708700
0
0
<COMMON> 0
<OTHER-SE> 3615800
<TOTAL-LIABILITY-AND-EQUITY> 12448500
<SALES> 4815300
<TOTAL-REVENUES> 5987500
<CGS> 4608300
<TOTAL-COSTS> 5295900
<OTHER-EXPENSES> 225600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112800
<INCOME-PRETAX> 521900
<INCOME-TAX> 135000
<INCOME-CONTINUING> 254600
<DISCONTINUED> 0
<EXTRAORDINARY> (8000)
<CHANGES> 0
<NET-INCOME> 246600
<EPS-PRIMARY> 0 <F1>
<EPS-DILUTED> 0 <F1>
<FN>
<F1>Not meaningful since Duke Capital Corporation is a wholly-owned subsidiary.
</FN>
</TABLE>
