Duke Energy 2010 Annual Report Download - page 21

DUKE ENERGY CORPORATION / 2010 ANNUAL REPORT
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The following is the detail of the $(0.40) per share in
special items and mark-to-market in Commercial Power
impacting adjusted diluted EPS for 2009:
2009
Diluted
Pre-Tax Tax EPS
(In millions, except per-share amounts) Amount Effect Impact
Goodwill and other impairments $(431) $ 21 $(0.32)
Mark-to-market impact of economic hedges (60) 22 (0.03)
International transmission adjustment (32) 10 (0.02)
Crescent related guarantees and
tax adjustments (26) (3) (0.02)
Costs to achieve the Cinergy merger (25) 10 (0.01)
Total adjusted EPS impact $(0.40)
The following is the detail of the $(0.20) per share in
special items and mark-to-market in Commercial Power
impacting adjusted diluted EPS for 2008:
2008
Diluted
Pre-Tax Tax EPS
(In millions, except per-share amounts) Amount Effect Impact
Crescent project impairments $(214) $83 $(0.10)
Emission allowances impairment (82) 30 (0.04)
Mark-to-market impact of economic hedges (75) 27 (0.04)
Costs to achieve the Cinergy merger (44) 17 (0.02)
Total adjusted EPS impact $(0.20)
2011 Adjusted Diluted EPS Outlook
Duke Energy’s 2010 Annual Report references Duke
Energy’s forecasted 2011 adjusted diluted EPS outlook range
of $1.35-$1.40 per share, which is consistent with the 2011
employee incentive earnings target. The materials also reference
the forecasted range of growth of 4%-6% in adjusted diluted
EPS (on a compound annual growth rate (“CAGR”) basis) from
a base of adjusted diluted EPS for 2009 of $1.22. Adjusted
diluted EPS is a non-GAAP financial measure as it represents
diluted EPS from continuing operations attributable to Duke
Energy Corporation shareholders, adjusted for the per-share
impact of special items and the mark-to-market impacts of
economic hedges in the Commercial Power segment. Special
items represent certain charges and credits which management
believes will not be recurring on a regular basis, although it
is reasonably possible such charges and credits could recur.
Mark-to-market adjustments reflect the mark-to-market impact
of derivative contracts, which is recognized in GAAP earnings
immediately as such derivative contracts do not qualify for
hedge accounting or regulatory accounting treatment, used
in Duke Energy’s hedging of a portion of the economic value
of its generation assets in the Commercial Power segment
(as discussed separately under “Adjusted Diluted Earnings per
Share (‘EPS’)”). The most directly comparable GAAP measure
for adjusted diluted EPS is reported diluted EPS from continuing
operations attributable to Duke Energy Corporation common
shareholders, which includes the impact of special items
and the mark-to-market impacts of economic hedges in the
Commercial Power segment. Due to the forward-looking
nature of this non-GAAP financial measure for future periods,
information to reconcile it to the most directly comparable GAAP
financial measure is not available at this time, as management
is unable to project special items or mark-to-market adjustments
for future periods.
Adjusted Segment EBIT for 2009 and 2010
Duke Energy’s 2010 Annual Report includes a discussion
of adjusted segment EBIT for the years ended December 31,
2010 and 2009. The primary performance measure used by
management to evaluate segment performance is segment
EBIT from continuing operations, which at the segment level
represents all profits from continuing operations (both operating
and non-operating), including any equity in earnings of
unconsolidated affiliates, before deducting interest and taxes,
and is net of the income attributable to non-controlling interests.
Management believes segment EBIT from continuing operations,
which is the GAAP measure used to report segment results, is
a good indicator of each segment’s operating performance as it
represents the results of Duke Energy’s ownership interests in
continuing operations without regard to financing methods or
capital structures. Duke Energy also uses adjusted segment
EBIT as a measure of historical and anticipated future segment
performance. When used for future periods, adjusted segment
EBIT may also include any amounts that may be reported as
discontinued operations or extraordinary items.
Adjusted segment EBIT is a non-GAAP financial measure
as it represents reported segment EBIT adjusted for the impact
of special items and the mark-to market impacts of economic
hedges in the Commercial Power segment. Special items
represent certain charges and credits which management
believes will not be recurring on a regular basis, although it
is reasonably possible such charges and credits could recur.
Mark-to-market adjustments reflect the mark-to-market impact
of derivative contracts, which is recognized in GAAP earnings
immediately as such derivative contracts do not qualify for hedge
accounting or regulatory accounting, used in Duke Energy’s
hedging of a portion of the economic value of certain of its
generation assets in the Commercial Power segment (as
discussed above under “Adjusted Diluted Earnings per Share
(‘EPS’)”). Management believes that the presentation of adjusted
segment EBIT provides useful information to investors, as it
provides them an additional relevant comparison of a segment’s
performance across periods. The most directly comparable
GAAP measure for adjusted segment EBIT is reported segment
EBIT, which represents segment results from continuing
operations, including any special items and the mark-to-market
impacts of economic hedges in the Commercial Power segment.