Progress Energy 2008 Annual Report Download - page 128

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Progress Energy Annual Report 2008
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 from ongoing
earnings per share to GAAP earnings per share are as
follows:
December 31 2008 2007 2006
Ongoing earnings per share $2.98 $2.72 $2.44
Contingent value obligations
mark-to-market −(0.01) (0.10)
Discontinued operations 0.22 (0.74) 0.08
Loss on debt redemption −−(0.14)
Valuation allowance (0.01) – −
Reported GAAP earnings per share $3.19 $1.97 $2.28
Contingent Value Obligation (CVO)
Mark-to-Market
In connection with the acquisition of Florida Progress
Corporation, we issued 98.6 million CVOs. Each CVO
represents the right of the holder to receive contingent
payments based on after-tax cash flows above certain
levels of four synthetic fuel facilities purchased by
subsidiaries of Florida Progress Corporation in October
1999. The CVOs are derivatives and, under GAAP, are
recorded at fair value. Unrealized gains and losses from
changes in fair value are recognized in earnings. Since
changes in the fair 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 primarily include Terminals
Operations and Synthetic Fuels businesses; Coal Mining
businesses; CCO – Georgia Operations; Natural Gas Drilling
and Production; CCO – DeSoto and Rowan Generation
facilities; Progress Telecom, LLC; Dixie Fuels and other
fuels businesses; and Progress Rail.
Loss on Redemption of Debt
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 44.0 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.
Valuation Allowance
Progress Energy previously recorded a deferred tax asset
for a state net operating loss carry forward upon the sale of
Progress Energy Ventures, Inc.’s nonregulated generation
facilities and energy marketing and trading operations. In
2008, we recorded an additional deferred tax asset related
to the state net operating loss carry forward due to a
change in estimate based on 2007 tax return filings. We also
evaluated the total state net operating loss carry forward
and recorded a partial valuation allowance, which more
than offset the change in estimate. Management does not
believe this net valuation allowance is representative of
our ongoing operations.
R E C O N C I L I AT 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
TO REPORTED GAAP EARNINGS PER SHARE (UNAUDITED)