DUK-2015.06.30-10Q


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
________________________
Commission file number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, and Telephone Number
IRS Employer Identification No.
 
 
1-32853
DUKE ENERGY CORPORATION
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218
Commission file number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
 
Commission file number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number
1-4928
DUKE ENERGY CAROLINAS, LLC
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
 
1-3274
DUKE ENERGY FLORIDA, LLC
(formerly DUKE ENERGY FLORIDA, INC.)
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
59-0247770
1-15929
PROGRESS ENERGY, INC.
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-2155481
 
1-1232
DUKE ENERGY OHIO, INC.
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
1-3382
DUKE ENERGY PROGRESS, LLC
(formerly DUKE ENERGY PROGRESS, INC.)
(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-0165465
 
1-3543
DUKE ENERGY INDIANA, INC.
(an Indiana corporation)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
35-0594457
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Duke Energy Corporation (Duke Energy)
Yes x
No ¨
 
Duke Energy Florida, LLC (Duke Energy Florida)
Yes x
No ¨
Duke Energy Carolinas, LLC (Duke Energy Carolinas)
Yes x
No ¨
 
Duke Energy Ohio, Inc. (Duke Energy Ohio)
Yes x
No ¨
Progress Energy, Inc. (Progress Energy)
Yes x
No ¨
 
Duke Energy Indiana, Inc. (Duke Energy Indiana)
Yes x
No ¨
Duke Energy Progress, LLC (Duke Energy Progress)
Yes x
No ¨
 
 
 
 



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Duke Energy
Yes x 
No ¨
 
Duke Energy Florida
Yes x 
No ¨
Duke Energy Carolinas
Yes x 
No ¨
 
Duke Energy Ohio
Yes x 
No ¨
Progress Energy
Yes x 
No ¨
 
Duke Energy Indiana
Yes x 
No ¨
Duke Energy Progress
Yes x 
No ¨
 
 
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Duke Energy
Large accelerated filer x 
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Duke Energy Carolinas
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x 
Smaller reporting company ¨
Progress Energy
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x 
Smaller reporting company ¨
Duke Energy Progress
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x 
Smaller reporting company ¨
Duke Energy Florida
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x 
Smaller reporting company ¨
Duke Energy Ohio
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x 
Smaller reporting company ¨
Duke Energy Indiana
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x 
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Duke Energy
Yes ¨
No x 
 
Duke Energy Florida
Yes ¨
No x 
Duke Energy Carolinas
Yes ¨
No x 
 
Duke Energy Ohio
Yes ¨
No x 
Progress Energy
Yes ¨
No x 
 
Duke Energy Indiana
Yes ¨
No x 
Duke Energy Progress
Yes ¨
No x 
 
 
 
 
Number of shares of Common stock outstanding at August 4, 2015:
Registrant
Description
Shares
Duke Energy
Common stock, $0.001 par value
688,330,456
Duke Energy Carolinas
All of the registrant's limited liability company member interests are directly owned by Duke Energy.
Progress Energy
All of the registrant's common stock is directly owned by Duke Energy.
Duke Energy Progress
All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.
Duke Energy Florida
All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.
Duke Energy Ohio
All of the registrant's common stock is indirectly owned by Duke Energy.
Duke Energy Indiana
All of the registrant's common stock is indirectly owned by Duke Energy.
This combined Form 10-Q is filed separately by seven registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.



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




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook,” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:
◦
State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
◦
The extent and timing of the costs and liabilities relating to the Dan River ash basin release and compliance with current regulations and any future regulatory changes related to the management of coal ash;
◦
The ability to recover eligible costs, including those associated with future significant weather events, and earn an adequate return on investment through the regulatory process;
◦
The costs of decommissioning Crystal River Unit 3 could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
◦
Credit ratings of the Duke Energy Registrants may be different from what is expected;
◦
Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
◦
Industrial, commercial and residential growth or decline in service territories or customer bases resulting from customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies;
◦
Additional competition in electric markets and continued industry consolidation;
◦
Political and regulatory uncertainty in other countries in which Duke Energy conducts business;
◦
The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts and tornadoes;
◦
The ability to successfully operate electric generating facilities and deliver electricity to customers;
◦
The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events;
◦
The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks;
◦
The timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
◦
The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general economic conditions;
◦
Declines in the market prices of equity and fixed income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
◦
Construction and development risks associated with the completion of Duke Energy Registrants’ capital investment projects in existing and new generation facilities, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules, and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner or at all;
◦
Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
◦
The ability to control operation and maintenance costs;
◦
The level of creditworthiness of counterparties to transactions;
◦
Employee workforce factors, including the potential inability to attract and retain key personnel;
◦
The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);
◦
The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
◦
The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
◦
The impact of potential goodwill impairments;
◦
The ability to reinvest prospective undistributed earnings of foreign subsidiaries or repatriate such earnings on a tax-efficient basis; and
◦
The ability to successfully complete future merger, acquisition or divestiture plans.



In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made; the Duke Energy Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after that date.


PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions, except per-share amounts)
2015

 
2014

 
2015

 
2014

Operating Revenues
 
 
 
 
 
 
 
Regulated electric
$
5,090

 
$
5,138

 
$
10,547

 
$
10,688

Nonregulated electric and other
403

 
463

 
780

 
954

Regulated natural gas
96

 
107

 
327

 
329

Total operating revenues
5,589

 
5,708

 
11,654

 
11,971

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power – regulated
1,721

 
1,808

 
3,662

 
3,808

Fuel used in electric generation and purchased power – nonregulated
118

 
126

 
222

 
262

Cost of natural gas and other
26

 
38

 
137

 
154

Operation, maintenance and other
1,422

 
1,396

 
2,848

 
2,845

Depreciation and amortization
790

 
762

 
1,567

 
1,517

Property and other taxes
279

 
311

 
543

 
661

Impairment charges
—

 
(16
)
 
—

 
80

Total operating expenses
4,356

 
4,425

 
8,979

 
9,327

Gains on Sales of Other Assets and Other, net
13

 
6

 
27

 
7

Operating Income
1,246

 
1,289

 
2,702

 
2,651

Other Income and Expenses
 
 
 
 
 
 
 
Equity in earnings of unconsolidated affiliates
23

 
33

 
36

 
69

Other income and expenses, net
72

 
89

 
146

 
184

Total other income and expenses
95

 
122

 
182

 
253

Interest Expense
403

 
403

 
806

 
807

Income From Continuing Operations Before Income Taxes
938

 
1,008

 
2,078

 
2,097

Income Tax Expense from Continuing Operations
334

 
282

 
698

 
621

Income From Continuing Operations
604

 
726

 
1,380

 
1,476

(Loss) Income From Discontinued Operations, net of tax
(57
)
 
(113
)
 
34

 
(956
)
Net Income
547

 
613

 
1,414

 
520

Less: Net Income Attributable to Noncontrolling Interests
4

 
4

 
7

 
8

Net Income Attributable to Duke Energy Corporation
$
543

 
$
609

 
$
1,407

 
$
512

 
 
 
 
 
 
 
 
Earnings Per Share – Basic and Diluted
 
 
 
 
 
 
 
Income from continuing operations attributable to Duke Energy Corporation common shareholders
 
 
 
 
 
 
 
Basic
$
0.87

 
$
1.02

 
$
1.96

 
$
2.07

Diluted
$
0.87

 
$
1.02

 
$
1.96

 
$
2.07

(Loss) Income from discontinued operations attributable to Duke Energy Corporation common shareholders
 
 
 
 
 
 
 
Basic
$
(0.09
)
 
$
(0.16
)
 
$
0.05

 
$
(1.35
)
Diluted
$
(0.09
)
 
$
(0.16
)
 
$
0.05

 
$
(1.35
)
Net income attributable to Duke Energy Corporation common shareholders
 
 
 
 
 
 
 
Basic
$
0.78

 
$
0.86

 
$
2.01

 
$
0.72

Diluted
$
0.78

 
$
0.86

 
$
2.01

 
$
0.72

Weighted-average shares outstanding
 
 
 
 
 
 
 
Basic
692

 
707

 
700

 
707

Diluted
692

 
707

 
700

 
707


See Notes to Condensed Consolidated Financial Statements
6

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions)
2015

 
2014

 
2015

 
2014

Net Income
$
547

 
$
613

 
$
1,414

 
$
520

Other Comprehensive Income (Loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
9

 
28

 
(116
)
 
52

Pension and OPEB adjustments
7

 
1

 
2

 
—

Net unrealized gains on cash flow hedges
9

 
—

 
2

 
—

Reclassification into earnings from cash flow hedges
1

 
(9
)
 
5

 
(9
)
Unrealized (losses) gains on available-for-sale securities
(3
)
 
2

 
(3
)
 
2

Other Comprehensive Income (Loss), net of tax
23

 
22

 
(110
)
 
45

Comprehensive Income
570

 
635

 
1,304

 
565

Less: Comprehensive Income Attributable to Noncontrolling Interests
3

 
4

 
2

 
9

Comprehensive Income Attributable to Duke Energy Corporation
$
567

 
$
631

 
$
1,302

 
$
556



See Notes to Condensed Consolidated Financial Statements
7

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2015
 
December 31, 2014
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
960

 
$
2,036

Receivables (net of allowance for doubtful accounts of $17 at June 30, 2015 and December 31, 2014)
650

 
791

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $55 at June 30, 2015 and $51 at December 31, 2014)
2,046

 
1,973

Inventory
3,469

 
3,459

Assets held for sale
—

 
364

Regulatory assets
975

 
1,115

Other
1,498

 
1,837

Total current assets
9,598

 
11,575

Investments and Other Assets
 
 
 
Investments in equity method unconsolidated affiliates
375

 
358

Nuclear decommissioning trust funds
5,529

 
5,546

Goodwill
16,328

 
16,321

Assets held for sale
—

 
2,642

Other
3,239

 
3,008

Total investments and other assets
25,471

 
27,875

Property, Plant and Equipment
 
 
 
Cost
107,125

 
104,861

Accumulated depreciation and amortization
(35,826
)
 
(34,824
)
Generation facilities to be retired, net
460

 
9

Net property, plant and equipment
71,759

 
70,046

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
11,564

 
11,042

Other
183

 
171

Total regulatory assets and deferred debits
11,747

 
11,213

Total Assets
$
118,575

 
$
120,709

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
1,920

 
$
2,271

Notes payable and commercial paper
2,162

 
2,514

Taxes accrued
550

 
569

Interest accrued
419

 
418

Current maturities of long-term debt
2,374

 
2,807

Liabilities associated with assets held for sale
—

 
262

Regulatory liabilities
245

 
204

Other
1,976

 
2,188

Total current liabilities
9,646

 
11,233

Long-Term Debt
36,795

 
37,213

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
13,664

 
13,423

Investment tax credits
420

 
427

Accrued pension and other post-retirement benefit costs
1,152

 
1,145

Liabilities associated with assets held for sale
—

 
35

Asset retirement obligations
9,490

 
8,466

Regulatory liabilities
6,203

 
6,193

Other
1,588

 
1,675

Total deferred credits and other liabilities
32,517

 
31,364

Commitments and Contingencies


 


Equity
 
 
 
Common stock, $0.001 par value, 2 billion shares authorized; 688 million and 707 million shares outstanding at June 30, 2015 and December 31, 2014, respectively
1

 
1

Additional paid-in capital
37,933

 
39,405

Retained earnings
2,294

 
2,012

Accumulated other comprehensive loss
(648
)
 
(543
)
Total Duke Energy Corporation stockholders' equity
39,580

 
40,875

Noncontrolling interests
37

 
24

Total equity
39,617

 
40,899

Total Liabilities and Equity
$
118,575

 
$
120,709


See Notes to Condensed Consolidated Financial Statements
8

PART I

DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
(in millions)
2015

 
2014

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
1,414

 
$
520

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
1,784

 
1,748

Equity component of AFUDC
(82
)
 
(61
)
Gains on sales of other assets
(29
)
 
(2
)
Impairment charges
37

 
1,388

Deferred income taxes
699

 
(46
)
Equity in earnings of unconsolidated affiliates
(36
)
 
(69
)
Accrued pension and other post-retirement benefit costs
36

 
54

Contributions to qualified pension plans
(132
)
 
—

Payments for asset retirement obligations
(125
)
 
—

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
(29
)
 
116

Receivables
105

 
(118
)
Inventory
2

 
122

Other current assets
(161
)
 
(451
)
Increase (decrease) in
 
 
 
Accounts payable
(288
)
 
(218
)
Taxes accrued
(29
)
 
(84
)
Other current liabilities
(145
)
 
(308
)
Other assets
(63
)
 
(45
)
Other liabilities
(79
)
 
73

Net cash provided by operating activities
2,879

 
2,619

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(3,062
)
 
(2,400
)
Investment expenditures
(98
)
 
(38
)
Acquisitions
(29
)
 
(16
)
Purchases of available-for-sale securities
(2,187
)
 
(1,773
)
Proceeds from sales and maturities of available-for-sale securities
2,200

 
1,793

Net proceeds from the sales of equity investments and other assets
2,832

 
119

Change in restricted cash
(3
)
 
(6
)
Other
53

 
(46
)
Net cash used in investing activities
(294
)
 
(2,367
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the:
 
 
 
Issuance of long-term debt
574

 
2,088

Issuance of common stock related to employee benefit plans
16

 
23

Payments for the redemption of long-term debt
(1,246
)
 
(1,757
)
Proceeds from the issuance of short-term debt with original maturities greater than 90 days
287

 
—

Payments for the redemption of short-term debt with original maturities greater than 90 days
(664
)
 
—

Notes payable and commercial paper
12

 
1,024

Distributions to noncontrolling interests
(7
)
 
(9
)
Dividends paid
(1,115
)
 
(1,107
)
Repurchase of common shares
(1,500
)
 
—

Other
(18
)
 
(7
)
Net cash (used in) provided by financing activities
(3,661
)
 
255

Net (decrease) increase in cash and cash equivalents
(1,076
)
 
507

Cash and cash equivalents at beginning of period
2,036

 
1,501

Cash and cash equivalents at end of period
$
960

 
$
2,008

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
547

 
$
348


See Notes to Condensed Consolidated Financial Statements
9

PART I

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

 
Common
Stock

 
Additional
Paid-in
Capital

 
Retained
Earnings

 
Foreign Currency Translation Adjustments

 
Net Losses on Cash Flow Hedges

 
Net Gains on Available-for-Sale Securities

 
Pension and OPEB Adjustments

 
Common
Stockholders'
Equity

 
Noncontrolling
Interests

 
Total
Equity

Balance at December 31, 2013
706

 
$
1

 
$
39,365

 
$
2,363

 
$
(307
)
 
$
(40
)
 
$
—

 
$
(52
)
 
$
41,330

 
$
78

 
$
41,408

Net income
—

 
—

 
—

 
512

 
—

 
—

 
—

 
—

 
512

 
8

 
520

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
51

 
(9
)
 
2

 
—

 
44

 
1

 
45

Common stock issuances, including dividend reinvestment and employee benefits
1

 
—

 
24

 
—

 
—

 
—

 
—

 
—

 
24

 
—

 
24

Common stock dividends
—

 
—

 
—

 
(1,107
)
 
—

 
—

 
—

 
—

 
(1,107
)
 
—

 
(1,107
)
Distributions to noncontrolling interest in subsidiaries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

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

 
$
1

 
$
39,389

 
$
1,768

 
$
(256
)
 
$
(49
)
 
$
2

 
$
(52
)
 
$
40,803

 
$
78

 
$
40,881

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
707

 
$
1

 
$
39,405

 
$
2,012

 
$
(439
)
 
$
(59
)
 
$
3

 
$
(48
)
 
$
40,875

 
$
24

 
$
40,899

Net income
—

 
—

 
—

 
1,407

 
—

 
—

 
—

 
—

 
1,407

 
7

 
1,414

Other comprehensive (loss) income
—

 
—

 
—

 
—

 
(111
)
 
7

 
(3
)
 
2

 
(105
)
 
(5
)
 
(110
)
Common stock issuances, including dividend reinvestment and employee benefits
1

 
—

 
28

 
—

 
—

 
—

 
—

 
—

 
28

 
—

 
28

Stock repurchase
(20
)
 
—

 
(1,500
)
 
—

 
—

 
—

 
—

 
—

 
(1,500
)
 
—

 
(1,500
)
Common stock dividends
—

 
—

 
—

 
(1,115
)
 
—

 
—

 
—

 
—

 
(1,115
)
 
—

 
(1,115
)
Distributions to noncontrolling interest in subsidiaries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(7
)
 
(7
)
Other (a)
—

 
—

 
—

 
(10
)
 
—

 
—

 
—

 
—

 
(10
)
 
18

 
8

Balance at June 30, 2015
688


$
1


$
37,933


$
2,294


$
(550
)

$
(52
)

$
—


$
(46
)

$
39,580


$
37


$
39,617

(a)
The $18 million change in Noncontrolling Interests is primarily related to an acquisition of majority interest in a solar company for an insignificant amount of cash consideration.

See Notes to Condensed Consolidated Financial Statements
10

PART I


DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions)
2015

 
2014

 
2015

 
2014

Operating Revenues
$
1,707

 
$
1,755

 
$
3,608

 
$
3,755

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power
427

 
503

 
1,005

 
1,161

Operation, maintenance and other
469

 
463

 
958

 
950

Depreciation and amortization
261

 
248

 
510

 
490

Property and other taxes
67

 
100

 
137

 
204

Impairment charges
—

 
3

 
—

 
3

Total operating expenses
1,224

 
1,317

 
2,610

 
2,808

Operating Income
483

 
438

 
998

 
947

Other Income and Expenses, net
41

 
44

 
83

 
93

Interest Expense
106

 
102

 
208

 
203

Income Before Income Taxes
418

 
380

 
873

 
837

Income Tax Expense
153

 
110

 
316

 
281

Net Income
$
265

 
$
270

 
$
557

 
$
556

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

 
1

 
—

 
2

Comprehensive Income
$
265

 
$
271

 
$
557

 
$
558



See Notes to Condensed Consolidated Financial Statements
11

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2015

 
December 31, 2014

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
28

 
$
13

Receivables (net of allowance for doubtful accounts of $3 at June 30, 2015 and
December 31, 2014)
76

 
129

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $6 at June 30, 2015 and December 31, 2014)
692

 
647

Receivables from affiliated companies
106

 
75

Notes receivable from affiliated companies
700

 
150

Inventory
1,154

 
1,124

Regulatory assets
343

 
399

Other
54

 
77

Total current assets
3,153

 
2,614

Investments and Other Assets
 
 
 
Nuclear decommissioning trust funds
3,094

 
3,042

Other
1,041

 
959

Total investments and other assets
4,135

 
4,001

Property, Plant and Equipment
 
 
 
Cost
38,085

 
37,372

Accumulated depreciation and amortization
(13,120
)
 
(12,700
)
Net property, plant and equipment
24,965

 
24,672

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
2,631

 
2,465

Other
44

 
42

Total regulatory assets and deferred debits
2,675

 
2,507

Total Assets
$
34,928

 
$
33,794

LIABILITIES AND MEMBER'S EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
494

 
$
709

Accounts payable to affiliated companies
141

 
154

Taxes accrued
225

 
146

Interest accrued
104

 
95

Current maturities of long-term debt
506

 
507

Regulatory liabilities
31

 
34

Other
379

 
434

Total current liabilities
1,880


2,079

Long-Term Debt
8,079

 
7,584

Long-Term Debt Payable to Affiliated Companies
300

 
300

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
6,019

 
5,812

Investment tax credits
201

 
204

Accrued pension and other post-retirement benefit costs
109

 
111

Asset retirement obligations
3,604

 
3,428

Regulatory liabilities
2,738

 
2,710

Other
617

 
642

Total deferred credits and other liabilities
13,288

 
12,907

Commitments and Contingencies


 


Member's Equity
 
 
 
Member's equity
11,394

 
10,937

Accumulated other comprehensive loss
(13
)
 
(13
)
Total member's equity
11,381

 
10,924

Total Liabilities and Member's Equity
$
34,928

 
$
33,794


See Notes to Condensed Consolidated Financial Statements
12

PART I

DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
(in millions)
2015

 
2014

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
557

 
$
556

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization (including amortization of nuclear fuel)
670

 
621

Equity component of AFUDC
(48
)
 
(44
)
Impairment charges
—

 
3

Deferred income taxes
184

 
132

Accrued pension and other post-retirement benefit costs
7

 
11

Contributions to qualified pension plans
(42
)
 
—

Payments for asset retirement obligations
(60
)
 
—

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

 
3

Receivables
45

 
(39
)
Receivables from affiliated companies
(31
)
 
(12
)
Inventory
(31
)
 
157

Other current assets
34

 
(150
)
Increase (decrease) in
 
 
 
Accounts payable
(200
)
 
(107
)
Accounts payable to affiliated companies
(13
)
 
(5
)
Taxes accrued
73

 
95

Other current liabilities
(33
)
 
(57
)
Other assets
58

 
6

Other liabilities
(49
)
 
15

Net cash provided by operating activities
1,121

 
1,185

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(954
)
 
(851
)
Purchases of available-for-sale securities
(1,410
)
 
(1,098
)
Proceeds from sales and maturities of available-for-sale securities
1,410

 
1,087

Notes receivable from affiliated companies
(550
)
 
(58
)
Other
8

 
(14
)
Net cash used in investing activities
(1,496
)
 
(934
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the issuance of long-term debt
496

 
—

Distributions to parent
(100
)
 
(251
)
Other
(6
)
 
—

Net cash provided by (used in) financing activities
390

 
(251
)
Net increase in cash and cash equivalents
15

 
—

Cash and cash equivalents at beginning of period
13

 
23

Cash and cash equivalents at end of period
$
28

 
$
23

Supplemental Disclosures:
 
 
 
Significant non-cash transactions:
 
 
 
Accrued capital expenditures
$
160

 
$
113


See Notes to Condensed Consolidated Financial Statements
13

PART I

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

 
Net Losses on Cash Flow Hedges

 
Net Losses on Available-for-Sale Securities

 
Total

Balance at December 31, 2013
$
10,365

 
$
(14
)
 
$
(1
)
 
$
10,350

Net income
556

 
—

 
—

 
556

Other comprehensive income
—

 
2

 
—

 
2

Distributions to parent
(251
)
 
—

 
—

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

 
$
(12
)
 
$
(1
)
 
$
10,657

 
 
 
 
 
 
 
 
Balance at December 31, 2014
$
10,937

 
$
(12
)
 
$
(1
)
 
$
10,924

Net income
557

 
—

 
—

 
557

Distributions to parent
(100
)
 
—

 
—

 
(100
)
Balance at June 30, 2015
$
11,394

 
$
(12
)
 
$
(1
)
 
$
11,381



See Notes to Condensed Consolidated Financial Statements
14

PART I


PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions)
2015

 
2014

 
2015

 
2014

Operating Revenues
$
2,476

 
$
2,421

 
$
5,012

 
$
4,962

Operating Expenses
 
 
 
 
 
 
 
Fuel used in electric generation and purchased power
1,003

 
977

 
2,035

 
2,020

Operation, maintenance and other
568

 
555

 
1,133

 
1,150

Depreciation and amortization
283

 
281

 
570

 
557

Property and other taxes
124

 
137

 
235

 
288

Impairment charges
—

 
(17
)
 
—

 
(17
)
Total operating expenses
1,978

 
1,933

 
3,973

 
3,998

Gains on Sales of Other Assets and Other, net
6

 
—

 
14

 
1

Operating Income
504

 
488

 
1,053

 
965

Other Income and Expenses, net
19

 
13

 
46

 
28

Interest Expense
166

 
167

 
334

 
336

Income From Continuing Operations Before Taxes
357

 
334

 
765

 
657

Income Tax Expense From Continuing Operations
140

 
127

 
284

 
246

Income From Continuing Operations
217

 
207

 
481

 
411

Loss From Discontinued Operations, net of tax
—

 
(5
)
 
(1
)
 
(6
)
Net Income
217

 
202

 
480

 
405

Less: Net Income Attributable to Noncontrolling Interest
2

 
—

 
5

 
1

Net Income Attributable to Parent
$
215

 
$
202

 
$
475

 
$
404

 
 
 
 
 
 
 
 
Net Income
$
217

 
$
202

 
$
480

 
$
405

Other Comprehensive Income, net of tax
 
 
 
 
 
 
 
Pension and OPEB adjustments
1

 
—

 
2

 
1

Reclassification into earnings from cash flow hedges
1

 
4

 
(1
)
 
4

Unrealized losses on available-for-sale securities
(1
)
 
—

 
(1
)
 
—

Other Comprehensive Income, net of tax
1


4


—


5

Comprehensive Income
218

 
206

 
480

 
410

Less: Comprehensive Income Attributable to Noncontrolling Interests
2

 
—

 
5

 
1

Comprehensive Income Attributable to Parent
$
216


$
206


$
475


$
409



See Notes to Condensed Consolidated Financial Statements
15

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2015

 
December 31, 2014

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
45

 
$
42

Receivables (net of allowance for doubtful accounts of $5 at June 30, 2015 and $8 at December 31, 2014)
136

 
129

Restricted receivables of variable interest entities (net of allowance for doubtful accounts of $8 at June 30, 2015 and December 31, 2014)
854

 
741

Receivables from affiliated companies
114

 
59

Notes receivable from affiliated companies
—

 
220

Inventory
1,529

 
1,590

Regulatory assets
435

 
491

Other
709

 
1,285

Total current assets
3,822

 
4,557

Investments and Other Assets
 
 
 
Nuclear decommissioning trust funds
2,435

 
2,503

Goodwill
3,655

 
3,655

Other
803

 
670

Total investments and other assets
6,893

 
6,828

Property, Plant and Equipment
 
 
 
Cost
38,958

 
38,650

Accumulated depreciation and amortization
(13,614
)
 
(13,506
)
Generation facilities to be retired, net
460

 
—

Net property, plant and equipment
25,804

 
25,144

Regulatory Assets and Deferred Debits
 
 
 
Regulatory assets
5,813

 
5,408

Other
87

 
91

Total regulatory assets and deferred debits
5,900

 
5,499

Total Assets
$
42,419

 
$
42,028

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
689

 
$
847

Accounts payable to affiliated companies
271

 
203

Notes payable to affiliated companies
945

 
835

Taxes accrued
209

 
114

Interest accrued
179

 
184

Current maturities of long-term debt
1,264

 
1,507

Regulatory liabilities
122

 
106

Other
918

 
1,021

Total current liabilities
4,597

 
4,817

Long-Term Debt
12,942

 
13,247

Deferred Credits and Other Liabilities
 
 
 
Deferred income taxes
4,907

 
4,759

Accrued pension and other post-retirement benefit costs
553

 
533

Asset retirement obligations
4,995

 
4,711

Regulatory liabilities
2,387

 
2,379

Other
384

 
406

Total deferred credits and other liabilities
13,226

 
12,788

Commitments and Contingencies

 

Common Stockholder's Equity
 
 
 
Common stock, $0.01 par value, 100 shares authorized and outstanding at June 30, 2015 and December 31, 2014
—

 
—

Additional paid-in capital
7,467

 
7,467

Retained earnings
4,255

 
3,782

Accumulated other comprehensive loss
(41
)
 
(41
)
Total common stockholder's equity
11,681

 
11,208

Noncontrolling interests
(27
)
 
(32
)
Total equity
11,654

 
11,176

Total Liabilities and Common Stockholder's Equity
$
42,419

 
$
42,028


See Notes to Condensed Consolidated Financial Statements
16

PART I

PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
(in millions)
2015

 
2014

CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
480

 
$
405

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion (including amortization of nuclear fuel)
648

 
642

Equity component of AFUDC
(26
)
 
(9
)
(Gains) losses on sales of other assets
(14
)
 
3

Impairment charges
—

 
(17
)
Deferred income taxes
358

 
261

Accrued pension and other post-retirement benefit costs
(3
)
 
14

Contributions to qualified pension plans
(42
)
 
—

Payments for asset retirement obligations
(61
)
 
—

(Increase) decrease in
 
 
 
Net realized and unrealized mark-to-market and hedging transactions
5

 
14

Receivables
(103
)
 
(166
)
Receivables from affiliated companies
(55
)
 
(15
)
Inventory
62

 
(18
)
Other current assets
215

 
(199
)
Increase (decrease) in
 
 
 
Accounts payable
(182
)
 
(41
)
Accounts payable to affiliated companies
68

 
111

Taxes accrued
94

 
49

Other current liabilities
(9
)
 
(157
)
Other assets
(70
)
 
(71
)
Other liabilities
(32
)
 
(27
)
Net cash provided by operating activities
1,333

 
779

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Capital expenditures
(1,170
)
 
(888
)
Purchases of available-for-sale securities
(562
)
 
(453
)
Proceeds from sales and maturities of available-for-sale securities
624

 
442

Notes receivable from affiliated companies
220

 
10

Other
4

 
(41
)
Net cash used in investing activities
(884
)
 
(930
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from the issuance of long-term debt
—

 
875

Payments for the redemption of long-term debt
(549
)
 
(473
)
Notes payable to affiliated companies
110

 
(229
)
Distributions to noncontrolling interests
(4
)
 
(2
)
Other
(3
)
 
(40
)
Net cash (used in) provided by financing activities
(446
)
 
131

Net increase (decrease) in cash and cash equivalents
3

 
(20
)