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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 1-4928
DUKE ENERGY CORPORATION
(Exact name of Registrant as Specified in its Charter)
NORTH CAROLINA 56-0205520
(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 and (2) has been subject to such filing requirements for
the past 90 days. Yes x No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares of Common Stock, without par value, outstanding at July 31,
1998...............................................................361,084,410
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<PAGE>
DUKE ENERGY CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
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...........................................................................17
4. Submission of Matters to a Vote of Security Holders.........................................17
5. Other Information...........................................................................17
6. Exhibits and Reports on Form 8-K............................................................18
Signatures..................................................................................19
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share amounts)
Three Months Ended June 30 Six Months Ended June 30
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Operating Revenues
<S> <C> <C> <C> <C>
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
Generation, transmission and distribution of
electricity 1,113.6 982.9 2,133.3 2,007.2
Trading and marketing of electricity 417.3 112.5 954.7 195.0
Other 261.0 152.1 455.5 293.8
----------- ----------- ----------- -----------
Total operating revenues 4,013.7 3,112.8 8,128.5 6,898.6
----------- ----------- ----------- -----------
Operating Expenses
Natural gas and petroleum products purchased 1,795.8 1,416.6 3,664.5 3,385.5
Fuel used in electric generation 194.0 167.5 346.8 338.5
Net interchange and purchased power 484.3 196.6 1,095.8 358.0
Other operation and maintenance 675.8 685.5 1,245.0 1,259.1
Depreciation and amortization 223.5 205.4 445.7 409.4
Property and other taxes 91.5 89.2 173.5 186.1
----------- ----------- ----------- -----------
Total operating expenses 3,464.9 2,760.8 6,971.3 5,936.6
----------- ----------- ----------- -----------
Operating Income 548.8 352.0 1,157.2 962.0
----------- ----------- ----------- -----------
Other Income and Expenses
Deferred returns and allowance for funds
used during construction 22.9 37.2 46.1 63.4
Other, net 10.7 17.8 57.0 25.9
----------- ----------- ----------- -----------
Total other income and expenses 33.6 55.0 103.1 89.3
----------- ----------- ----------- -----------
Earnings Before Interest and Taxes 582.4 407.0 1,260.3 1,051.3
Interest Expense 122.8 111.6 246.4 229.2
Minority Interests 16.7 1.8 32.1 12.3
----------- ----------- ----------- -----------
Earnings Before Income Taxes 442.9 293.6 981.8 809.8
Income Taxes 163.4 125.0 374.2 329.5
----------- ----------- ----------- -----------
Income Before Extraordinary Item 279.5 168.6 607.6 480.3
Extraordinary Item (net of tax) - - (8.0) -
----------- ----------- ----------- -----------
Net Income 279.5 168.6 599.6 480.3
----------- ----------- ----------- -----------
Dividends and Premiums on Redemptions of
Preferred and Preference Stock 5.1 11.0 11.6 22.1
----------- ----------- ----------- -----------
Earnings Available For Common Stockholders $ 274.4 $ 157.6 $ 588.0 $ 458.2
=========== =========== =========== ===========
Common Stock Data
Average shares outstanding 360.5 359.8 360.3 359.7
Earnings per share (before extraordinary item)
Basic $ 0.76 $ 0.43 $ 1.65 $ 1.27
Diluted $ 0.76 $ 0.43 $ 1.65 $ 1.26
Earnings per share
Basic $ 0.76 $ 0.43 $ 1.63 $ 1.27
Diluted $ 0.76 $ 0.43 $ 1.63 $ 1.26
Dividends per share (Note 7) $ 1.10 $ 0.40 $ 1.65 $ 0.80
See Notes to Consolidated Financial Statements.
</TABLE>
1
<PAGE>
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
<TABLE>
Six Months Ended June 30
------------------------
1998 1997
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 599.6 $ 480.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 528.6 475.2
Deferred income taxes (29.8) 35.7
Purchased capacity levelization 48.1 28.9
(Increase) Decrease in
Receivables 300.3 296.0
Inventory (73.0) (33.3)
Other current assets 59.5 60.5
Increase (Decrease) in
Accounts payable (521.9) (412.2)
Taxes accrued 144.6 133.6
Interest accrued 0.6 (9.0)
Other current liabilities (45.3) (98.6)
Other, net (43.3) (81.7)
----------- ----------
Net cash provided by operating activities 968.0 875.4
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (572.5) (557.5)
Investment expenditures (137.3) (74.7)
Decommissioning, retirements and other 7.5 32.9
----------- ----------
Net cash used in investing activities (702.3) (599.3)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of
Long-term debt 231.7 155.6
Guaranteed preferred beneficial interests in
Corporation's subordinated notes 242.1 -
Common stock and stock options 49.2 6.0
Payments for the redemption of
Long-term debt (107.0) (205.1)
Preferred and preference stock (180.4) -
Net change in notes payable and commercial paper (177.4) 75.8
Dividends paid (406.3) (308.4)
Other 2.2 (52.1)
----------- ----------
Net cash used in financing activities (345.9) (328.2)
----------- ----------
Net decrease in cash and cash equivalents (80.2) (52.1)
Cash received from business acquisitions 34.5 -
Cash and cash equivalents at beginning of period 109.4 166.0
=========== ==========
Cash and cash equivalents at end of period $ 63.7 $ 113.9
=========== ==========
Supplemental Disclosures
Cash paid for interest (net of amount capitalized) $ 231.9 $ 232.4
Cash paid for income taxes $ 314.8 $ 203.4
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
<TABLE>
June 30, December 31,
1998 1997
(Unaudited)
----------- -----------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 63.7 $ 109.4
Receivables 1,993.3 2,280.8
Inventory 521.7 440.1
Current portion of natural gas transition costs 66.0 66.9
Current portion of purchased capacity costs 89.5 76.2
Unrealized gains on mark to market transactions 1,833.3 551.3
Other 118.3 160.5
----------- -----------
Total current assets 4,685.8 3,685.2
----------- -----------
Investments and Other Assets
Investments in affiliates 756.7 685.9
Nuclear decommissioning trust funds 551.3 471.1
Pre-funded pension costs 347.5 337.5
Goodwill, net 506.1 503.6
Notes receivable 235.7 239.6
Unrealized gains on mark to market transactions 246.7 65.5
Other 177.5 144.4
----------- -----------
Total investments and other assets 2,821.5 2,447.6
----------- -----------
Property, Plant and Equipment
Cost 26,057.2 25,448.1
Less accumulated depreciation and amortization 10,155.7 9,712.2
----------- -----------
Net property, plant and equipment 15,901.5 15,735.9
----------- -----------
Regulatory Assets and Deferred Debits
Purchased capacity costs 698.0 759.4
Debt expense 241.4 253.1
Regulatory asset related to income taxes 508.5 511.0
Natural gas transition costs 167.4 193.7
Environmental clean-up costs 95.2 103.6
Other 309.8 339.3
----------- -----------
Total regulatory assets and deferred debits 2,020.3 2,160.1
----------- -----------
Total Assets $ 25,429.1 $ 24,028.8
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
<TABLE>
June 30, December 31,
1998 1997
(Unaudited)
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
<S> <C> <C>
Accounts payable $ 1,153.0 $ 1,669.7
Notes payable and commercial paper 199.0 169.5
Taxes accrued 269.5 124.8
Interest accrued 111.8 111.2
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 175.6 77.3
Unrealized losses on mark to market transactions 1,861.2 537.8
Other (Note 7) 681.7 523.5
----------- -----------
Total current liabilities 4,501.1 3,275.2
----------- -----------
Long-term Debt 6,419.8 6,530.0
----------- -----------
Deferred Credits and Other Liabilities
Deferred income taxes 3,683.8 3,706.5
Investment tax credit 249.5 256.7
Nuclear decommissioning costs externally funded 551.3 471.1
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 893.1 967.0
----------- -----------
Total deferred credits and other liabilities 5,804.5 5,687.6
----------- -----------
Minority Interests 210.2 168.3
----------- -----------
Guaranteed Preferred Beneficial Interests
in Corporation's Subordinated Notes 581.3 339.0
----------- -----------
Preferred and Preference Stock
Preferred and preference stock with sinking fund requirements 124.0 149.0
Preferred and preference stock without sinking fund requirements 208.9 340.0
----------- -----------
Total preferred and preference stock 332.9 489.0
----------- -----------
Common Stockholders' Equity
Common stock, no par, 500 million shares authorized; 360.9 million
and 359.8 million shares outstanding at June 30, 1998 and December 31,
1997, respectively 4,325.1 4,283.7
Retained earnings 3,254.2 3,256.0
----------- -----------
Total common stockholders' equity 7,579.3 7,539.7
----------- -----------
Total Liabilities and Stockholders' Equity $ 25,429.1 $ 24,028.8
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
DUKE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
Duke Energy Corporation (the Corporation) is an integrated energy and energy
services provider with the ability to offer physical delivery and management of
both electricity and natural gas throughout the United States and abroad. The
Corporation provides these services through its four business segments: Electric
Operations, Natural Gas Transmission, Energy Services and Parent and Other
Operations.
The Electric Operations segment is engaged in the generation, transmission,
distribution and sale of electric energy in central and western North Carolina
and the western portion of South Carolina. These electric operations are subject
to the rules and regulations of the Federal Energy Regulatory Commission (FERC),
the North Carolina Utilities Commission and The Public Service Commission of
South Carolina.
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 also subject to the rules and regulations of the 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 Corporation
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 and the timing of maintenance of certain electric generating units.
Certain amounts for the prior periods have been reclassified in the consolidated
financial statements to conform to the current presentation.
2. EARNINGS PER COMMON SHARE
Common stock options, which are common stock equivalents, had a dilutive effect
on earnings per share and increased the weighted average number of common shares
outstanding for dilutive purposes by 1.2 million and 1.9 million for the
quarters ended June 30, 1998 and 1997, respectively, and 1.1 million and 1.9
million for the six months ended June 30, 1998 and 1997, respectively. The
weighted average number of common shares outstanding for dilutive purposes was
361.7 million for the quarters ended June 30, 1998 and 1997, and 361.4 million
and 361.6 million for the six months ended June 30, 1998 and 1997, respectively.
The increase in weighted average number of common shares outstanding as a result
of the common stock options exerciseable is partially offset by the number of
shares purchased with the proceeds of the options.
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 include intersegment
eliminations.
<TABLE>
- ----------------------------------------------------------------------------------------------------
Earnings
Before Depreciation Capital and
Total Operating Interest and Investment
IN MILLIONS Revenues Income and Taxes Amortization Expenditures
- -----------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1998
- --------------------------------
<S> <C> <C> <C> <C> <C>
Electric Operations $ 1,134.4 $ 338.4 $ 362.1 $ 130.1 $ 138.5
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 (2.7) 28.9 28.2 9.5 42.5
-----------------------------------------------------------
Total Consolidated $ 4,013.7 $ 548.8 $ 582.4 $ 223.5 $ 323.3
================================================================================================
<CAPTION>
- --------------------------------
Three Months Ended June 30, 1997
- --------------------------------
<S> <C> <C> <C> <C> <C>
Electric Operations $ 998.9 $ 244.2 $ 270.6 $ 124.2 $ 177.0
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 (17.0) (66.9) (54.8) 1.7 40.0
----------------------------------------------------------
Total Consolidated $ 3,112.8 $ 352.0 $ 407.0 $ 205.4 $ 343.5
================================================================================================
</TABLE>
6
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------
Earnings Capital
Before Depreciation and
Total Operating Interest and Investment
IN MILLIONS Revenues Income and Taxes Amortization Expenditures
- -----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1998
- -------------------------------
<S> <C> <C> <C> <C> <C>
Electric Operations $ 2,170.0 $ 693.1 $ 740.3 $ 259.9 $ 239.7
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 (21.7) 41.2 42.2 18.9 96.7
-----------------------------------------------------------------
Total Consolidated $ 8,128.5 $1,157.2 $1,260.3 $ 445.7 $ 709.8
====================================================================================================
<CAPTION>
- -------------------------------
Six Months Ended June 30, 1997
- -------------------------------
Electric Operations $ 2,039.3 $ 560.5 $ 616.2 $ 247.3 $ 319.8
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 (29.2) (52.9) (42.0) 3.2 111.9
----------------------------------------------------------------
Total Consolidated $ 6,898.6 $ 962.0 $1,051.3 $ 409.4 $ 632.2
==================================================================================================
</TABLE>
- ----------------------------------------------------
Identifiable Assets
------------------------
December
June 30, 31,
IN MILLIONS 1998 1997
- ----------------------------------------------------
Electric Operations $ 13,028.7 $ 12,958.5
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 1,238.4 1,102.6
========================
Total Consolidated $ 25,429.1 $ 24,028.8
====================================================
4. GUARANTEED PREFERRED BENEFICIAL INTERESTS IN CORPORATION'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
Duke Capital Corporation (Duke Capital), a subsidiary of the Corporation, 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 Duke
Capital owns all the common securities,
7
<PAGE>
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
Duke Capital due March 31, 2038.
5. PREFERRED STOCK
During February 1998, the Corporation completed its tender offer to purchase a
maximum of 50% of the outstanding shares of six of its preferred issues,
purchasing 2.4 million shares of its preferred stock for $180.4 million.
6. COMMITMENTS AND CONTINGENCIES
LITIGATION. On February 18, 1997, Amerada Hess Corporation (Amerada Hess)
notified Texas Eastern Transmission Corporation (TETCO), a subsidiary of the
Corporation, 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 Corporation.
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 Corporation, 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 Corporation, the Corporation believes the
resolution of this matter will not have a material adverse effect on the
consolidated results of operations or financial position of the Corporation.
The Corporation 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 these
matters, the Corporation 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 Corporation.
OTHER COMMITMENTS AND CONTINGENCIES. In January 1998, the Corporation acquired a
9.8 percent 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 Corporation has contracted for 67.25
million cubic feet per day of capacity on the line over 15 years for an
estimated $315 million.
Periodically, the Corporation 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 Corporation
may not receive the full value of anticipated benefits under the contracts.
8
<PAGE>
In the normal course of business, certain of the Corporation'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. Certain subsidiaries of
the Corporation 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 Corporation.
7. COMMON STOCK DIVIDENDS DECLARED
On April 16, 1998 and June 17, 1998, the Corporation's board of directors
declared second and third quarter dividends of $0.55 per share per quarter, for
a total of $1.10 per share of dividends declared during the quarter ended June
30, 1998. During the quarter ended June 30, 1997, second quarter dividends of
$0.40 per share were declared.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
INTRODUCTION
Duke Energy Corporation (the Corporation) is an integrated energy and energy
services provider with the ability to offer physical delivery and management of
both electricity and natural gas throughout the United States and abroad. The
Corporation provides these services through its four business segments: Electric
Operations, Natural Gas Transmission, Energy Services and Parent and Other
Operations.
The Electric Operations segment is engaged in the generation, transmission,
distribution and sale of electric energy in central and western North Carolina
and the western portion of South Carolina. These electric operations are subject
to the rules and regulations of the Federal Energy Regulatory Commission (FERC),
the North Carolina Utilities Commission and The Public Service Commission of
South Carolina.
The Natural Gas Transmission segment is involved 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 also subject to the rules and regulations of the 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 Corporation.
RESULTS OF OPERATIONS
For the quarter ended June 30, 1998, earnings available for common stockholders
was $274.4 million, or $0.76 per share. For the comparable 1997 period, earnings
available to common stockholders was $157.6 million, or $0.43 per share. The 74%
increase in earnings available for common stockholders is primarily due to
increased electric sales resulting from warm weather conditions and the absence
of 1997 merger-related costs.
For the six months ended June 30, 1998, earnings available for common
stockholders was $588.0 million, or $1.63 per share, net of an extraordinary
item of $8.0 million, or $0.02 per share. For the six months ended June 30,
1997, earnings available to common stockholders was $458.2 million, or $1.27 per
share. The 28% increase in earnings available for common stockholders is
primarily due to increased electric sales due to warmer weather in the spring of
1998 and the absence of 1997 merger-related costs. This increase was
partially offset by an extraordinary item in the first quarter of 1998 resulting
from premiums paid associated with a debt refinancing at TEPPCO Partners, L.P.
(TEPPCO) and a 1997 gain on the sale of the Corporation's interest in Midland
Cogeneration Venture.
Operating income for the quarter ended June 30, 1998 increased to $548.8 million
compared to $352.0 million for the same period in 1997. Earnings before interest
and taxes (EBIT) were $582.4 million and $407.0 million for the quarter ended
June 30, 1998 and 1997, respectively. For the six months ended June 30, 1998,
operating income increased $195.2 million, to $1,157.2 million from the same
period in 1997, and earnings before interest and taxes increased $209.0 million,
to $1,260.3 million from the same period in 1997. 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 the first quarter of 1998, are not materially
different, and are affected by the same fluctuations for the Corporation 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
- -------------------------------------------------------------------------
Electric Operations $ 362.1 $ 270.6 $ 740.3 $ 616.2
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 (14.1) (70.5) (22.5) (79.9)
-----------------------------------------
Total Corporation $ 582.4 $ 407.0 $1,260.3 $ 1,051.3
=========================================================================
Included in the amounts discussed below are intercompany transactions that do
not have a material impact on consolidated earnings before interest and taxes.
ELECTRIC OPERATIONS
- -------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
DOLLARS IN MILLIONS 1998 1997 1998 1997
- -------------------------------------------------------------------------
Operating Revenues $1,134.4 $ 998.9 $2,170.0 $2,039.3
Operating Expenses 796.0 754.7 1,476.9 1,478.8
-----------------------------------------
Operating Income 338.4 244.2 693.1 560.5
Other Income, Net 23.7 26.4 47.2 55.7
-----------------------------------------
EBIT $ 362.1 $ 270.6 $ 740.3 $ 616.2
=========================================
Volumes, GWh Sales A 20,730 18,178 40,094 36,562
-----------------------------------------------------------------------
A Gigawatt-hour sales
For the quarter ended June 30, 1998, earnings before interest and taxes for
Electric Operations increased 34% compared to the same period in 1997, primarily
due to a 14.0% increase in gigawatt-hour sales. Sales to weather-sensitive
customers increased significantly for the period as compared to the prior year
quarter, with sales to residential and general service customers up 18.5% and
10.8%, respectively, primarily due to hot weather conditions. Sales to
industrial customers increased 2.2% over the prior year quarter, with textile
sales up 4.6%. The reliability and availability of Electric Operations'
generating facilities also contributed to the increase in earnings before
interest and taxes for the quarter ended June 30, 1998. The increase in earnings
before interest and taxes was partially offset by an increase in nuclear
expenses due primarily to maintenance work performed during refueling outages at
the Oconee Nuclear Station.
For the six months ended June 30, 1998, earnings before interest and taxes for
Electric Operations increased to $740.3 million from $616.2 million for the same
period in 1997, primarily due to a 9.7% increase in gigawatt-hour sales,
partially offset by an increase in nuclear expenses due primarily to maintenance
work performed during refueling outages. Sales to residential and general
service customers increased 10.3% and 8.1%, respectively, over the same period
in 1997, primarily due to hot weather conditions. For the six months ended June
30, 1998, sales to industrial customers increased 2.8% over the comparable
period in 1997, with textile sales up 4.8%.
On July 6, 1998, the Corporation filed an application for a 20-year renewal of
its Oconee Nuclear Station's operating license, a 40-year license granted by the
Nuclear Regulatory Commission in 1973. The license renewal process could take as
many as three to five years to complete.
11
<PAGE>
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.
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.
12
<PAGE>
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 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.
13
<PAGE>
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
$56.4 million and $57.4 million, respectively, over the comparable prior year
periods, primarily as a result of the absence of merger-related costs in 1997,
partially offset by a 1997 gain on the sale of the Corporation's interest in the
Midland Cogeneration Venture.
OTHER IMPACTS ON EARNINGS AVAILABLE FOR COMMON STOCKHOLDERS
For the quarter and six months ended June 30, 1998, interest expense increased
10% and 8%, respectively, over the comparable 1997 periods due to higher average
debt balances outstanding.
For the quarter and six months ended June 30, 1998, minority interests increased
$14.9 million and $19.8 million, respectively, over the comparable 1997 periods,
primarily as a result of dividends incurred during 1998 for the Corporation's
trust preferred securities, $350 million of which were issued in December 1997
and $250 million of which were issued in June 1998. See further discussion of
the June 1998 issuance of trust preferred securities in the Liquidity and
Capital Resources section of Management's Discussion and Analysis.
During the quarter ended June 30, 1998, the Corporation 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, in which the Corporation has a 10% ownership interest,
redeemed certain First Mortgage Notes. The Corporation 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
For the six months ended June 30, 1998, operating cash flows increased $92.6
million compared to the same period in 1997 primarily as a result of increased
net income and changes in working capital.
On April 28, 1998, Texas Eastern Transmission Corporation (TETCO), a subsidiary
of the Corporation, 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 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
14
<PAGE>
Corporation. 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 were
$709.8 million, an increase of $77.6 million over the same period in 1997. This
increase was primarily due to business expansion for the Natural Gas
Transmission and the Energy Services segments, specifically Field Services and
Global Asset Development. These increases were offset by decreased expenditures
for Electric Operations, primarily as a result of steam generator replacements
at certain of the Corporation's nuclear plants in 1997.
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.
Proceeds from the sales of two NGL fractionation facilities to TEPPCO were $40
million in 1998. Proceeds from the sales of the Corporation's ownership in
operations in the United Kingdom and its equity interests in certain affiliates
were $85 million in 1997.
FINANCING CASH FLOW
The Corporation's consolidated capital structure at June 30, 1998, including
short-term debt, was 44.4% debt, 2.2% preferred stock, 49.6% common equity and
3.8% trust preferred securities. Fixed charges coverage, using the SEC method,
was 4.7 times and 4.1 times for the six months ended June 30, 1998 and 1997,
respectively.
The Corporation's commercial paper facilities consist of $1.25 billion for Duke
Energy Corporation and $1.25 billion for Duke Capital Corp. (Duke Capital), a
wholly owned subsidiary of the Corporation. The Corporation's bank credit
facilities totaled $2.6 billion and $2.7 billion at June 30, 1998 and December
31, 1997, respectively, of which $2.5 billion supported the commercial paper
facilities at both June 30, 1998 and December 31, 1997. At June 30, 1998, $1.8
billion of commercial paper and $100.0 million under the bank credit facilities
were outstanding.
In February 1998, the Corporation completed its tender offer to purchase a
maximum of 50% of the outstanding shares of six of its preferred issues,
purchasing 2.4 million shares of its preferred stock for $180.4 million.
In order to reduce the Corporation's future need for additional financing, the
Corporation's board of directors adopted a dividend policy in June 1998 that
will target 50% of earnings paid out in dividends on the Corporation's common
stock. Currently, approximately 65% of earnings are paid out in dividends. The
Corporation will maintain dividends at the current quarterly rate of $0.55 per
share until the target payout ratio is reached.
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 Corporation is seeking to
significantly grow its Energy Services businesses, which will likely require
additional financing to be issued by subsidiaries of the Corporation. The
Corporation plans to fund Energy Services growth opportunities through a
combination of internally generated cash and external debt. Debt financing will
be obtained through Duke Capital's commercial paper program and by accessing the
capital markets.
In connection with the Corporation's plans to access the capital markets, Duke
Capital 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 Corporation 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 Duke Capital, 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.
15
<PAGE>
Additional financing was obtained under the $1 billion shelf registration
statement on July 20, 1998, when Duke Capital 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, Duke Capital
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.
CHANGES FOR THE YEAR 2000
In 1996, the Corporation 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 Corporation's ongoing systems plans. The
Corporation 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 $65 million, of which a substantial portion has been spent as of
June 30, 1998. 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 Corporation's business
operations or consolidated results of operations or financial position.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In June 1998, a subsidiary of the Corporation 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 Corporation 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 Corporation 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 Corporation.
For information concerning litigation and other contingencies, see Note 6 to the
Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Duke Energy Corporation Annual Meeting of Shareholders on April 16, 1998,
the shareholders elected Ann Maynard Gray, Dennis R. Hendrix, Harold S. Hook,
W.W. Johnson and Russell M. Robinson, II as Class I directors with terms
expiring in 2001; Paul M. Anderson and Leo E. Linbeck, Jr. as Class II directors
with terms expiring in 1999; and William T. Esrey as a Class III director with a
term expiring in 2000. The shareholders also voted to ratify the selection of
Deloitte & Touche LLP to act as independent auditors to make an examination of
the Corporation's accounts for the year 1998. The shareholders approved the Duke
Energy Corporation 1998 Long-Term Incentive Plan with 290,430,040 votes for the
plan, 21,588,369 votes against the plan and 3,235,422 votes abstaining. The Duke
Energy Short-Term Incentive Plan was approved by the shareholders, with
296,354,618 votes for the plan, 15,252,505 votes against the plan and 3,646,708
votes abstaining.
ITEM 5. OTHER INFORMATION.
FORWARD-LOOKING STATEMENTS
From time to time, the Corporation 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 Corporation 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 Corporation 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 Corporation and its subsidiaries are subject or other
external factors over which the Corporation has no control; the results of
financing efforts; growth in opportunities for the Corporation's subsidiaries
and diversified operations; and the effect of the Corporation's accounting
policies, in each case during the periods covered by the forward-looking
statements.
17
<PAGE>
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 Corporation filed no reports on Form 8-K during the second quarter of
1998.
18
<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 thereunto duly authorized.
DUKE ENERGY CORPORATION
August 13, 1998 /s/ Richard J. Osborne
------------------------
Richard J. Osborne
Executive Vice President and
Chief Financial Officer
August 13, 1998 /s/ Jeffrey L. Boyer
----------------------
Jeffrey L. Boyer
Vice President and Corporate Controller
19
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED STATEMENTS OF CASH FLOWS, AND
CONSOLIDATED BALANCE SHEETS AS OF AND FOR YEAR TO DATE 6/30/98 AND IS QUALIFIED
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<NAME> DUKE ENERGY CORPORATION
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