Progress Energy 2010 Annual Report Download - page 107

103
Progress Energy Annual Report 2010
Management uses the non-GAAP financial measure
“Ongoing Earnings” as a performance measure to
evaluate the results of our segments and operations.
Ongoing Earnings is computed as GAAP net income
attributable to controlling interests after excluding
discontinued operations and the effects of certain
identified gains and charges, which are considered
Ongoing Earnings adjustments. Some of the excluded
gains and charges have occurred in more than one
reporting period but are not considered representative of
fundamental core earnings. Management has identified
the following Ongoing Earnings adjustments: CVO
mark-to-market adjustments because we are unable
to predict changes in their fair value and the impact
from changes in the tax treatment of the Medicare Part
D subsidy because GAAP requires that the impact of
the tax law change be accounted for in the period of
enactment rather than the affected tax year. Additionally,
management has determined that impairments, charges
(and฀ subsequent฀ adjustments,฀ if฀ any)฀ recognized฀ for฀
the retirement of generating units prior to the end of
their estimated useful lives, cumulative prior period
adjustments, net valuation allowances and operating
results of discontinued operations are not representative
of our ongoing operations and should be excluded in
computing Ongoing Earnings.
Reconciliations of consolidated Ongoing Earnings to net
income attributable to controlling interests for the years
ended December 31 follow:
(in millions) 2010 2009 2008
Ongoing Earnings $889 $846 $776
CVO mark-to-market (Note 15) – 19 –
Impairment, net of tax benefit of $4 and $1 (6) (2) –
Plant retirement adjustment, net of tax
benefit of $1 and $11 (1) (17) –
Change in tax treatment of the Medicare
Part D subsidy (Note 16) (22) – –
Cumulative prior period adjustment
related to certain employee life
insurance benefits, net of tax benefit of $7 – (10) –
Valuation allowance and related net
operating loss carry forward – – (3)
Continuing income attributable to
noncontrolling interests, net of tax 7 4 5
Income from continuing operations 867 840 778
Discontinued operations, net of tax (4) (79) 58
Net income attributable to noncontrolling
interests, net of tax (7) (4) (6)
Net income attributable to
controlling interests $856 $757 $830
20. OTHER INCOME AND OTHER EXPENSE
Other income and expense includes interest income;
AFUDC equity, which represents the estimated equity
costs of capital funds necessary to finance the
construction of new regulated assets; and other, net. The
components of other, net as shown on the accompanying
Consolidated Statements of Income are presented below.
Nonregulated energy and delivery services include
power protection services and mass market programs
such as surge protection, appliance services and area
light sales, and delivery, transmission and substation
work for other utilities.
(in millions) 2010 2009 2008
Nonregulated energy and delivery
services income, net $10 $17 $17
CVOs฀unrealized฀gain,฀net฀(Note฀15) – 19 –
Investment gains (losses), net 9 (9) (13)
Donations (23) (20) (25)
Other, net 4 (1) 4
Other, net $– $6 $(17)
21. ENVIRONMENTAL MATTERS
We are subject to regulation by various federal, state
and local authorities in the areas of air quality, water
quality,฀ control฀ of฀ toxic฀ substances฀ and฀ hazardous฀
and solid wastes, and other environmental matters.
We believe that we are in substantial compliance with
those environmental regulations currently applicable
to our business and operations and believe we have
all necessary permits to conduct such operations.
Environmental laws and regulations frequently change
and the ultimate costs of compliance cannot always be
precisely estimated.
A. Hazardous and Solid Waste
The provisions of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980,
as฀ amended฀ (CERCLA),฀ authorize฀ the฀ United฀ States฀
Environmental Protection Agency (EPA) to require the
cleanup฀of฀hazardous฀waste฀sites.฀This฀statute฀imposes฀
retroactive joint and several liabilities. Some states,
including North Carolina, South Carolina and Florida, have
similar types of statutes. We are periodically notified by
regulators, including the EPA and various state agencies,
of our involvement or potential involvement in sites that
may require investigation and/or remediation. There are
presently several sites with respect to which we have
been notified of our potential liability by the EPA, the