Progress Energy 2006 Annual Report Download - page 132

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We use ongoing earnings per share to evaluate our
operations and to establish goals for management and
employees. We believe this presentation is appropriate
and enables investors to more accurately compare
our ongoing financial performance over the periods
presented. Ongoing earnings as presented here may
not be comparable to similarly titled measures used by
other companies. Reconciling adjustments for ongoing
earnings per share to reported GAAP earnings per share
are as follows:
Years ended December 31 2006 2005 2004
Ongoing earnings per share $2.58 $3.31 $2.86
Contingent value obligations
mark-to-market (0.10) 0.03 0.04
Discontinued operations 0.23 (0.10) 0.35
Impairments and one-time charges (0.29) – –
Loss on debt redemption (0.14) – –
Postretirement and severance charges –(0.42) –
Litigation settlement –– (0.12)
Reported GAAP earnings per share $2.28 $2.82 $3.13
Contingent Value Obligation Mark-To-Market
In connection with the acquisition of Florida Progress
Corporation, we issued 98.6 million contingent value
obligations (CVO). Each CVO represents the right of the
holder to receive contingent payments based on after-
tax cash flows above certain levels of four synthetic
fuels facilities purchased by subsidiaries of Florida
Progress Corporation in October 1999. The CVOs are debt
instruments and, under GAAP, are valued at market value.
Unrealized gains and losses from changes in market value
are recognized in earnings. Since changes in the market
value of the CVOs do not affect our underlying obligation,
we do not consider the adjustment a component of
ongoing earnings.
Discontinued Operations
The operations of businesses that have been sold or are
in the process of being sold are reported as discontinued
operations, and therefore we do not view these
activities as representative of our ongoing operations.
Our discontinued operations include CCO; Rowan and
DeSoto; Winchester Energy; Progress Telecom, LLC;
Dixie Fuels; Progress Materials, Inc.; Coal Mining; and
Progress Rail.
Impairments and One-Time Charges
In May 2006, we announced that we had idled our
synthetic fuels facilities. Due to the idling of these
facilities, we performed an impairment test of all synthetic
fuels facilities and other related long-lived assets during
the second quarter of 2006. Based on the results of the
impairment test, we recorded impairment charges. These
charges represent the entirety of the asset carrying value
of our synthetic fuels intangible assets and facilities, as
well as a portion of the asset carrying value associated
with the river terminals at which the synthetic fuels
facilities are located. We do not believe this impairment
is representative of our ongoing operations.
Due to the disposition plans relating to PVI’s nonregulated
generation facilities, we evaluated previously recorded
state net operating losses for potential impairment during
the second and fourth quarters of 2006. Based on the
results of these evaluations, we impaired the state net
operating losses by recording a valuation allowance
for state net operation losses. We do not believe this
impairment is representative of our ongoing operations.
Loss On Debt Redemption
In November 2006, the Parent redeemed the entire
outstanding $350 million principal amount of its 6.05%
Senior Notes due April 15, 2007, and the entire outstanding
$400 million principal amount of its 5.85% Senior Notes
due October 30, 2008. In December 2006, the Parent
repurchased, pursuant to a tender offer, $550 million, or
approximately 53.0 percent, of the aggregate principal
amount of its 7.10% Senior Notes due March 1, 2011. Due
to the nonrecurring nature of this loss, we do not believe
it is representative of our ongoing operations.
Postretirement and Severance Charges
As part of our cost-management initiative, we approved
a workforce restructuring in February 2005, which
resulted in a reduction of approximately 450 positions.
In addition to the workforce restructuring, the cost-
management initiative included a voluntary enhanced
retirement program, in which 1,450 eligible employees
elected to participate. In connection with this initiative, we
incurred charges related to estimated future payments for
severance benefits that will be paid out over time. Due to
the nonrecurring nature of the charge, we do not believe
it is representative of our ongoing operations.
Litigation Settlement
In June 2004, our subsidiary Strategic Resource Solutions
Corp. reached a settlement agreement in a civil suit and
recorded a corresponding settlement charge. We do not
believe this settlement charge is representative of our
ongoing operations.
R E C O N C I L I A T I O N O F O N G O I N G E A R N I N G S P E R S H A R E
T O R E P O R T E D G A A P E A R N I N G S P E R S H A R E ( U N A U D I T E D )