Duke Energy 2011 Annual Report Download - page 63

PART II
Year Ended December 31, 2010 as Compared to
December 31, 2009. Consolidated interest expense increased
$89 million in 2010 as compared to 2009. This increase is primarily
attributable to higher debt balances, partially offset by a higher debt
component of AFUDC due to increased spending on capital projects
and lower interest expense related to income taxes.
Consolidated Income Tax Expense from Continuing Operations
Year Ended December 31, 2011 as Compared to
December 31, 2010. For 2011, consolidated income tax expense
from continuing operations decreased $138 million compared to
2010, primarily due to a decrease in the effective tax rate. The
effective tax rate for the year ended December 31, 2011 was 30.5%
compared to 40.3% for the year ended December 31, 2010. The
change in the effective tax rate is primarily due to a $500 million
impairment of non-deductible goodwill in 2010
Year Ended December 31, 2010 as Compared to
December 31, 2009. For 2010, consolidated income tax expense
from continuing operations increased $132 million compared to
2009, primarily due to the increase in pre-tax income. The effective
tax rate for the year ended December 31, 2010 was 40% compared
to 41% for the year ended December 31, 2009. The effective tax
rates for both 2010 and 2009 reflect the effect of goodwill
impairments, which are non-deductible for tax purposes.
Segment Results
Management evaluates segment performance based on
earnings before interest and taxes from continuing operations
(excluding certain allocated corporate governance costs), after
deducting amounts attributable to noncontrolling interests related to
those profits (EBIT). On a segment basis, EBIT excludes discontinued
operations, represents all profits from continuing operations (both
operating and non-operating) before deducting interest and taxes, and
is net of the amounts attributable to noncontrolling interests related to
those profits. Cash, cash equivalents and short-term investments are
managed centrally by Duke Energy, so interest and dividend income
on those balances, as well as gains and losses on remeasurement of
foreign currency denominated balances, are excluded from the
segments’ EBIT. Management considers segment EBIT to be a good
indicator of each segment’s operating performance from its continuing
operations, as it represents the results of Duke Energy’s ownership
interest in operations without regard to financing methods or capital
structures.
See Note 3 to the Consolidated Financial Statements, “Business
Segments,” for a discussion of Duke Energy’s segment structure.
Duke Energy’s operating earnings may not be comparable to a
similarly titled measure of another company because other entities
may not calculate operating earnings in the same manner. Beginning
in 2012, the chief operating decision maker began evaluating
segment financial performance and allocation of resources on a net
income basis. Therefore, previously unallocated corporate costs will
be reflected in each segment.
Segment EBIT is summarized in the following table, and detailed discussions follow.
EBIT by Business Segment
Years Ended December 31,
(in millions) 2011 2010
Variance
2011 vs.
2010 2009
Variance
2010 vs.
2009
U.S. Franchised Electric and Gas $2,604 $2,966 $(362) $2,321 $ 645
Commercial Power 225 (229) 454 27 (256)
International Energy 679 486 193 365 121
Total reportable segment EBIT 3,508 3,223 285 2,713 510
Other (261) (255) (6) (251) (4)
Total reportable segment EBIT and other 3,247 2,968 279 2,462 506
Interest expense (859) (840) (19) (751) (89)
Interest income and other(a) 56 64 (8) 102 (38)
Add back of noncontrolling interest component of reportable segment and Other EBIT 21 18 3 18 —
Consolidated earnings from continuing operations before income taxes $2,465 $2,210 $ 255 $1,831 $ 379
(a) Other within Interest income and other includes foreign currency transaction gains and losses and additional noncontrolling interest amounts not allocated to reportable segment and
Other EBIT.
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