Progress Energy 2004 Annual Report Download - page 80

The changes in the carrying amount of goodwill, by
reportable segment, are as follows:
In December 2003, $7 million in goodwill was recorded
based on a preliminary purchase price allocation as part
of the Progress Telecommunications Corporation partial
acquisition of EPIK and was reported in the Corporate
and Other segment. The Company revised the preliminary
EPIK purchase price allocation as of September 2004,
and the $7 million of goodwill was reallocated to certain
tangible assets acquired based on the results of
valuations and appraisals (See Note 5A).
The gross carrying amount and accumulated
amortization of the Company’s intangible assets at
December 31 are as follows:
In June 2004, the Company sold, in two transactions, a
combined 49.8% partnership interest in Colona Synfuel
Limited Partnership, LLLP, one of its synthetic fuel operations.
Approximately $6 million in synthetic fuel intangibles and
$3 million in related accumulated amortization were
included in the basis of the partnership interest sold.
All of the Company’s intangibles are subject to
amortization. Synthetic fuel intangibles represent
intangibles for synthetic fuel technology. These
intangibles are being amortized on a straight-line basis
until the expiration of tax credits under Section 29 of the
Internal Revenue Code (Section 29) in December 2007
(See Note 23E). The intangibles related to power
agreements acquired are being amortized based on the
economic benefits of the contracts (See Notes 5C and
5D). Other intangibles are primarily acquired customer
contracts and permits that are amortized over their
respective lives. Of the increase in other intangible
assets, $24 million resulted from the minimum pension
liability adjustment at December 31, 2004 (See Note 17).
Amortization expense recorded on intangible assets for
the years ended December 31, 2004, 2003 and 2002 was,
in millions, $42, $37 and $33, respectively. The estimated
annual amortization expense for intangible assets for
2005 through 2009, in millions, is approximately $35, $36,
$36, $18 and $18, respectively.
10. IMPAIRMENTS OF LONG-LIVED ASSETS
AND INVESTMENTS
The Company applies SFAS No. 144 for the accounting and
reporting of impairment or disposal of long-lived assets. In
2003 and 2002, the Company recorded pre-tax long-lived
asset and investment impairments and other charges of
approximately $38 million and $414 million, respectively.
A. Long-Lived Assets
Due to the reduction in coal production, the Company
evaluated Kentucky May coal mine’s long-lived assets in
2003. Fair value was determined based on discounted
cash flows. As a result of this review, the Company
recorded asset impairments of $17 million on a pre-tax
basis during the fourth quarter of 2003.
An estimated impairment of assets held for sale of
$59 million is included in the 2002 amount, which relates
to Railcar Ltd. (See Note 4C).
Due to the decline of the telecommunications industry
and continued operating losses, the Company initiated an
independent valuation study during 2002 to assess the
recoverability of the long-lived assets of PTC and
Caronet. Based on this assessment, the Company
recorded asset impairments of $305 million on a pre-tax
basis and other charges of $25 million on a pre-tax basis
primarily related to inventory adjustments in the third
quarter of 2002. This write-down constitutes a significant
reduction in the book value of these long-lived assets.
The long-lived asset impairments include an impairment of
property, plant and equipment, construction work in
process and intangible assets. The impairment charge
represents the difference between the fair value and
carrying amount of these long-lived assets. The fair value
of these assets was determined using a valuation study
heavily weighted on the discounted cash flow methodology,
using market approaches as supporting information.
78
Notes to Consolidated Financial Statements
(in millions)
PEC
Electric PEF CCO
Corporate
and Other Total
Balance as of
January 1, 2003 $1,922 $1,733 $64 $– $3,719
Acquisitions – – – 7 7
Balance as of
December 31, 2003 $1,922 $1,733 $64 $7 $3,726
Purchase accounting
adjustment – – – (7) (7)
Balance as of
December 31, 2004 $1,922 $1,733 $64 $– $3,719
2004 2003
(in millions)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Synthetic fuel
intangibles $134 $(80) $140 $(64)
Power
agreements
acquired 221 (39) 221 (20)
Other 119 (18) 93 (13)
Total $474 $(137) $454 $(97)