Duke Energy Corporation (DUK)

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Call Start: 10:00

Call End: 11:22

Duke Energy Corporation (DUK)

Q2 2009 Earnings Call

August 04, 2009 10:00 am ET

Executives

Bill Currens - General Manager, Investor Relations

James E. Rogers - Chairman, President and Chief Executive Officer

Lynn J. Good - Group Executive and Chief Financial Officer

Analysts

Paul Ridzon - Keybanc Capital Markets

Paul Patterson - Glenrock Associates

Greg Gordon - Morgan Stanley

Michael Lapides - Goldman Sachs

Brian Chin - Citigroup

Paul Fremont - Jeffries

Nathan Judge - Atlantic Equities

Hugh Wynn - Sanford Bernstein

Presentation

Operator

Good day, everyone, and welcome to the Duke Energy Second Quarter Earnings Conference Call. As a reminder, today's conference is being recorded. At this time for opening remarks, I'd like to turn the call over to Mr. Bill Currens, General Manager, Investor Relations. Please go ahead, sir.

Bill Currens

Good morning, and welcome to Duke Energy's second quarter 2009 earnings review. Leading our discussion today are Jim Rogers, Chairman, President, and Chief Executive Officer, and Lynn Good, Group Executive and Chief Financial Officer. Jim will begin today's presentation by providing a general overview of the quarter's results. Then Lynn will provide more detail and context around the quarterly results for each of our businesses, including an update on our sales volumes, as well as our credit and liquidity positions. Jim will close with updates on our operational performance, regulatory initiatives, and our wind energy business. Following those prepared remarks we will open the lines for your questions.


Before we begin let me take a moment to remind you that some of the things we will discuss today concern future company performance and include forward looking statements within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward looking statements. You should refer to the additional information contained in Duke Energy's 2008 Form 10-K filed with the SEC and our other SEC filings concerning factors that could cause those results to be different than contemplated in today's discussion.

In addition, today's discussion includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most-directly comparable GAAP measures is available on our investor relations [Author ID1: at Tue Aug 4 21:26:00 2009

]section of our[Author ID2: at Tue Aug 4 23:23:00 2009

] [Author ID2: at Tue Aug 4 23:23:00 2009

] section of our [Author ID2: at Tue Aug 4 23:23:00 2009

]website at www.duke-energy.com. With that I'll turn the call over to Jim.

James E. Rogers

Thank you, Bill. Good morning, everyone. Thank you for joining us today and thank you for your interest and investment in Duke Energy. In our news release this morning we announced adjusted diluted earnings per share of $0.26 for the second quarter of 2009 versus $0.27 in the second quarter of 2008.

Our results for the quarter were slightly better than street consensus. Finally through the first half of the year we are slightly ahead of our internal plan on an adjusted diluted basis. I am pleased with our results through the first half of '09, especially in these very challenging times. Our operational performance and cost management efforts largely offset the impact of lower industrial sales volumes. All of this is a tribute to our employees and I am very proud of their performance in the first half of this year.

The second half of the year looks to be just as challenging as the first half as we anticipate continued softness in our volume sales when compared to last year. Achievement of our employee incentive target of $1.20 EPS on an adjusted diluted basis will required continued focus on what we can control, especially our cost management efforts.

Of course, as we look forward, we are assuming normal weather for the remainder of '09, and as you all know so well, the third quarter is normally the largest contributor to our annual sales.

As part of her discussion, Lynn will give you an in-depth look at our retail and industrial sales volumes and our thoughts on the economy. She will also comment on the results of a survey of our leading industrial customers.


Before I turn it over to Lynn, let me take a moment to thank David Hauser for his 35 years of service to Duke Energy, most recently as our CFO. As you all know, last month David moved on to become CEO of FairPoint Communications here in Charlotte. We thank David for his leadership and integrity and his contribution to Duke Energy's success, and we wish him the best of luck in his new assignment.

Also, let me introduce Lynn Good who succeeded David as CFO. Lynn became our Treasurer when the merger closed in 2006. She has led our commercial businesses for the last 18 months. This seamless transition is evidence of the great bench strength we have in our senior management team.

Let me now ask Lynn to provide more details on the quarter.

Lynn J. Good

Thanks, Jim, and good morning, everyone. Let me begin our financial discussion with our largest segment, U.[Author ID1: at Tue Aug 4 21:34:00 2009

]S.[Author ID1: at Tue Aug 4 21:34:00 2009

] Franchised Electric and Gas. The segment reported second quarter 2009 adjusted segment EBIT of $500 million. This compared to $503 million in the prior year.

The segment's slightly unfavorable results reflected lower weather-normalized sales volumes across all our jurisdictions and lower ops system sales net of sharing. These negative drivers were partially offset by lower operation and maintenance costs.

The decreased sales are being largely driven by our industrial customers who continue to feel the effects of the downturn in the economy. On a weather normalized basis, lower sales volumes had a negative quarter-on-quarter impact of approximately $45 million on the segment's results. I'll talk more about sales volumes in a moment.

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