Exelon Corporation (NYSE: EXC) announced second quarter 2016
consolidated earnings as follows:
Second Quarter
2016
2015
GAAP Results:
Net Income ($ millions)
$267
$638
Diluted Earnings per Share
$0.29
$0.74
Adjusted (non-GAAP) Operating
Results:
Net Income ($ millions)
$604
$508
Diluted Earnings per Share
$0.65
$0.59
"Our family of companies continued to perform at top levels for
our customers, shareholders and communities,” said Christopher M.
Crane, Exelon’s President and chief executive officer. “Exelon
achieved earnings of $0.65 per share, exceeding our guidance range
for the second quarter. For the third quarter we are providing a
guidance of $0.65 - $0.75 per share and reaffirming our guidance of
$2.40 to $2.70 for the full year.”
Second Quarter Operating Results
Exelon's GAAP Net Income decreased to $0.29 per share in the
second quarter of 2016 from $0.74 per share in the second quarter
of 2015. Exelon’s adjusted (non-GAAP) Operating Earnings increased
to $0.65 per share in the second quarter of 2016 from $0.59 per
share in the second quarter of 2015. Earnings in the second quarter
of 2016 primarily reflect the following favorable factors:
- Higher utility earnings due to
favorable impacts of regulatory rate increases; and
- Higher revenue at Generation under the
Reliability Support Services Agreement approved in the second
quarter of 2016 for Ginna for periods retroactive to April 1,
2015.
These factors were partially offset by:
- Higher operating and maintenance costs
at BGE due to charges for certain disallowances contained in the
June and July 2016 MDPSC rate case orders;
- Higher operating and maintenance costs
at Generation, which includes the impact of the timing and extended
duration of an outage at the Salem nuclear power plant;
- Higher nuclear decommissioning
amortization at Generation; and
- Lower realized NDT fund investment
gains at Generation.
Second quarter 2016 results also include $0.06 per share of PHI
GAAP and Adjusted (non-GAAP) Operating Earnings, the impact of
which was fully offset by the incremental debt and equity costs
incurred in connection with the merger.
Adjusted (non-GAAP) Operating Earnings for the second quarter of
2016 do not include the following items (after tax) that were
included in reported GAAP Net Income:
(in millions)
(per diluted share)
Exelon GAAP Net Income
$267
$0.29
Mark-to-Market Impact of Economic Hedging
Activities
185 0.20 Unrealized Gains Related to NDT Fund Investments (27)
(0.03) Amortization of Commodity Contract Intangibles 8 0.01 Merger
and Integration Costs 1 — Merger Commitments 1 — Long-Lived Asset
Impairments 22 0.02 Plant Retirements and Divestitures 133 0.14
Cost Management Program 6 0.01 CENG Non-Controlling Interest
8 0.01
Exelon Adjusted (non-GAAP) Operating
Earnings
$604
$0.65
Adjusted (non-GAAP) Operating Earnings for the second quarter of
2015 do not include the following items (after tax) that were
included in reported GAAP Net Income:
(in millions)
(per diluted share)
Exelon GAAP Net Income
$638
$0.74
Mark-to-Market Impact of Economic Hedging
Activities
(143) (0.16) Unrealized Losses Related to NDT Fund Investments 56
0.06 Amortization of Commodity Contract Intangibles 9 0.01 Merger
and Integration Costs 18 0.02 Mark-to-Market Impact of PHI Merger
Related Interest Rate Swap (71) (0.08) Long-Lived Asset Impairments
15 0.02 CENG Non-Controlling Interest (14) (0.02)
Exelon Adjusted (non-GAAP) Operating
Earnings
$508
$0.59
Second Quarter and Recent Highlights
- Early Retirement of Clinton and Quad
Cities Nuclear Facilities: On June 2, 2016, Generation
announced it will move forward to shut down the Clinton and Quad
Cities nuclear plants on June 1, 2017, and June 1, 2018,
respectively. As a result, Exelon and Generation recognized
one-time charges in GAAP Operating and maintenance expense of $141
million related to materials and supplies inventory reserve
adjustments, employee-related costs and construction
work-in-progress impairments, among other items. Additionally,
Exelon and Generations' second quarter 2016 GAAP operating results
include an incremental $110 million of pre-tax expense primarily
related to accelerated depreciation of plant assets, accelerated
amortization of nuclear fuel, and additional asset retirement
obligation accretion expense associated with the changes in
decommissioning timing and cost assumptions. These amounts have
been excluded from GAAP Net Income to arrive at Adjusted (non-GAAP)
Operating Earnings.
- BGE Electric and Natural Gas
Distribution Rate Case: In the June and July 2016 rate case
orders, the MDPSC authorized electric and natural gas rate
increases of $44 million and $48 million, respectively, and allowed
ROEs for BGE's electric and natural gas distribution businesses of
9.75 percent and 9.65 percent, respectively. The new rates took
effect for service rendered on or after June 4, 2016. While the
MDPSC found compelling evidence to conclude that BGE’s smart grid
initiative overall was cost beneficial to customers, the final
order contained several cost disallowances and adjustments
precluding BGE from recovering the full amount of costs it has
incurred and invested in the smart grid initiative. As a result,
BGE recorded a $52 million charge to Operating and maintenance
expense in the second quarter.
- Proposed Acquisition of ConEdison
Solutions: On July 27, 2016, Generation entered into an Asset
Purchase Agreement with ConEdison Solutions, a subsidiary of
Consolidated Edison, Inc. Pursuant to the Purchase Agreement,
ConEdison Solutions agreed to sell its competitive retail electric
and natural gas business to Generation for an all cash purchase
price of $53 million plus estimated purchase price adjustments,
including net working capital of $130 million. The transaction is
expected to close in the third or fourth quarter of 2016. The
closing of the transaction is subject to certain conditions,
including, obtaining the termination or expiration of any
applicable waiting period required under the HSR Act for the
consummation of the transaction.
- New York Clean Energy Standard:
On Aug. 1, 2016, the Clean Energy Standard (CES) was approved by
the NYPSC, a component of which includes creation of a Tier 3 Zero
Emission Credit program targeted at preserving the environmental
attributes of zero-emissions nuclear-powered generating facilities
that meet the criteria demonstrating public necessity as determined
by the NYPSC. Subject to the Ginna and Nine Mile Point nuclear
power plants entering into satisfactory contracts with the New York
State Energy Research & Development Agency, as required under
the CES, and subject to any potential administrative or legal
challenges, the CES will allow Ginna and Nine Mile Point to
continue to operate at least through the life of the program (March
31, 2029). The duration of the program beyond April 1, 2019, is
conditional upon a buyer purchasing the James A. FitzPatrick
nuclear generating station and taking title prior to Sept. 1,
2018.
- Nuclear Operations: Generation’s
nuclear fleet, including its owned output from the Salem Generating
Station and 100 percent of the CENG units, produced 42,453
gigawatt-hours (GWh) in the second quarter of 2016, compared with
43,805 GWh in the second quarter of 2015. Excluding Salem, the
Exelon-operated nuclear plants at ownership achieved a 92.3 percent
capacity factor for the second quarter of 2016, compared with 93.1
percent for the second quarter of 2015. The number of planned
refueling outage days in the second quarter of 2016 totaled 87,
compared with 71 in the second quarter of 2015. There were 21
non-refueling outage days in the second quarter of 2016, compared
with 18 days in the second quarter of 2015.
- Fossil and Renewables
Operations: The Dispatch Match rate for Generation’s gas and
hydro fleet was 97.4 percent in the second quarter of 2016,
compared with 99.2 percent in the second quarter of 2015. The lower
performance in the quarter was primarily due to an unplanned outage
in April at Wolf Hollow, in Texas. Energy Capture for the wind and
solar fleet was 95.5 percent in the second quarter of 2016,
compared with 96.1 percent in the second quarter of 2015. The lower
performance was attributed to minor mechanical issues across the
fleet.
- Pepco District of Columbia Electric
Distribution Rate Case: On June 30, 2016, Pepco filed an
application with the DCPSC requesting an increase of $86 million to
its annual service revenues for electric delivery, based on a
requested ROE of 10.6 percent. Any adjustments to rates approved by
the DCPSC are expected to take effect in June 2017.
- DPL Maryland Electric Distribution
Rate Case: On July 20, 2016, DPL filed an application with the
MDPSC requesting an increase of $66 million to its electric
distribution base rates, based on a requested ROE of 10.6 percent.
Any adjustments to rates approved by the MDPSC are expected to take
effect in February 2017.
- DPL Delaware Electric and Natural
Gas Distribution Rate Case: On May 17, 2016, DPL filed an
application with the DPSC requesting an increase of
$63 million and $22 million to its electric and natural gas
distribution base rates, based on a requested ROE of 10.6 percent.
While the DPSC is not required to issue a decision on the
application within a specified period time, Delaware law allows DPL
to put into effect $2.5 million of the rate increase two months
after filing the application and the entire requested rate increase
seven months after filing, subject to a cap and a refund obligation
based on the final DPSC order.
- BGE Preference Stock Redemption:
BGE has $190 million of cumulative preference stock that are
redeemable at its option at any time for the redemption price of
$100 per share, plus accrued and unpaid dividends. On July 3, 2016,
BGE redeemed all 400,000 shares of its outstanding 7.125 percent
Cumulative Preference Stock, 1993 Series and all 600,000 shares of
its outstanding 6.99 percent Cumulative Preference Stock, 1995
Series for $100 million, plus accrued and unpaid dividends.
Following these redemptions, BGE has $90 million remaining of
cumulative preference stock outstanding.
- Financing Activities:
- On May 26, 2016, Exelon Corporate,
Generation, ComEd, PECO and BGE entered into amendments to each of
their respective syndicated revolving credit facilities, which
extended the maturity of each of the facilities to May 26, 2021.
Exelon Corporate also increased the size of its facility from $500
million to $600 million. In addition, PHI, Pepco, DPL and ACE
entered into an amendment to their Second Amended and Restated
Credit Agreement which extended the maturity date of the facility
to May 26, 2021, removed PHI as a borrower under the facility and
decreased the size of the facility from $1.5 billion to $900
million.
- On June 27, 2016, ComEd issued $500
million in aggregate principal amount of its First Mortgage Bonds,
2.550 percent Series due June 15, 2026, and $700 million in
aggregate principal amount of its First Mortgage Bonds, 3.650
percent Series due June 15, 2046. The net proceeds from sale of the
bonds will be used to refinance maturing mortgage bonds, repay a
portion of ComEd's outstanding commercial paper obligations and for
general corporate purposes.
- Hedging Update: Exelon’s hedging
program involves the hedging of commodity risk for Exelon’s
expected generation, typically on a ratable basis over a three-year
period. The proportion of expected generation hedged as of
June 30, 2016, is 97.0 percent to 100.0 percent for 2016, 78.0
percent to 81.0 percent for 2017, and 47.0 percent to 50.0 percent
for 2018. Expected generation is the volume of energy that best
represents our financial exposure through owned or contracted
capacity. The primary objective of Exelon’s hedging program is to
manage market risks and protect the value of its generation and its
investment-grade balance sheet, while preserving its ability to
participate in improving long-term market fundamentals.
Operating Company Results
ComEd consists of electricity transmission and
distribution operations in Northern Illinois.
ComEd's second quarter 2016 GAAP Net Income was $145 million
compared with $99 million in the second quarter of 2015. Adjusted
(non-GAAP) Operating Earnings for the second quarter of 2016 and
2015 do not include merger and integration costs that were included
in reported GAAP earnings. A reconciliation of GAAP Net Income to
Adjusted (non-GAAP) Operating Earnings is presented in the table
below:
($ millions)
2Q16
2Q15
ComEd GAAP Net Income
$145
$99
Merger and Integration Costs 1 2
ComEd Adjusted (non-GAAP) Operating
Earnings
$146
$101
ComEd’s Adjusted (non-GAAP) Operating Earnings in the second
quarter of 2016 increased by $45 million from the same quarter in
2015, primarily due to higher electric distribution and
transmission formula rate earnings and favorable weather.
For the second quarter of 2016, heating degree-days in the ComEd
service territory were up 10.1 percent relative to the same period
in 2015 and were 1.3 percent below normal. Cooling degree days were
up 69.6 percent relative to the same period in 2015 and were 33.0
percent above normal. Total retail deliveries increased by 4.3
percent in the second quarter of 2016 compared with the same period
in 2015.
Weather-normalized retail electric deliveries remained
relatively consistent in the second quarter of 2016 compared with
the same period in 2015.
PECO consists of electricity transmission and
distribution operations and retail natural gas distribution
operations in Southeastern Pennsylvania.
PECO’s second quarter 2016 GAAP Net Income was $100 million,
compared with $70 million in the second quarter of 2015. Adjusted
(non-GAAP) Operating Earnings for the second quarter of 2016 and
2015 do not include certain items (after tax) that were included in
reported GAAP earnings. A reconciliation of GAAP Net Income to
Adjusted (non-GAAP) Operating Earnings is presented in the table
below:
($ millions)
2Q16
2Q15
PECO GAAP Net Income
$100
$70
Merger and Integration Costs — 1 Cost Management Program 1
—
PECO Adjusted (non-GAAP) Operating
Earnings
$101
$71
PECO’s Adjusted (non-GAAP) Operating Earnings in the second
quarter of 2016 increased by $30 million from the same quarter in
2015, primarily due to increased electric distribution revenue
pursuant to a rate increase effective Jan. 1, 2016, and the impact
of a cumulative tax adjustment related to an anticipated gas
repairs tax return accounting method change.
For the second quarter of 2016, heating degree-days in the PECO
service territory were up 42.1 percent relative to the same period
in 2015 and were 0.6 percent above normal. Cooling degree days were
down 23.8 percent relative to the same period in 2015 and were 12.4
percent above normal. Total retail electric deliveries were down
1.9 percent compared with the second quarter of 2015. Natural gas
deliveries (including both retail and transportation segments) in
the second quarter of 2016 were up 8.9 percent compared with the
same period in 2015.
Weather-normalized retail electric deliveries remained
relatively consistent, while gas deliveries decreased 1.5 percent
in the second quarter of 2016 compared with the same period in
2015. The decreased gas volumes were driven primarily by lower use
per customer.
BGE consists of electricity transmission and distribution
operations and retail natural gas distribution operations in
Central Maryland.
BGE’s second quarter 2016 GAAP Net Income was $31 million,
compared with $44 million in the second quarter of 2015. Adjusted
(non-GAAP) Operating Earnings for the second quarter of 2016 and
2015 do not include certain items (after tax) that were included in
reported GAAP earnings. A reconciliation of GAAP Net Income to
Adjusted (non-GAAP) Operating Earnings is presented in the table
below:
($ millions)
2Q16
2Q15
BGE GAAP Net Income
$31
$44
Merger and Integration Costs (3) 1 Cost Management Program 1
—
BGE Adjusted (non-GAAP) Operating
Earnings
$29
$45
BGE’s Adjusted (non-GAAP) Operating Earnings in the second
quarter of 2016 decreased $16 million from the same quarter in
2015, primarily due to charges for certain disallowances contained
in the June and July 2016 rate orders and increased underground
conduit rental fees assessed by the City of Baltimore, partially
offset by increased transmission revenue due to increased capital
investments and operating and maintenance expense recoveries and
increased distribution revenue pursuant to increased rates
effective in June 2016. Due to revenue decoupling, BGE is not
affected by actual weather with the exception of major storms.
PHI consists of electricity transmission and distribution
operations in the District of Columbia and portions of Maryland,
Delaware, and New Jersey and retail natural gas distribution
operations in northern Delaware.
PHI’s second quarter 2016 GAAP Net Income was $52 million.
Adjusted (non-GAAP) Operating Earnings do not include merger
commitments that were included in reported GAAP earnings. A
reconciliation of GAAP Net Income to (after-tax) Adjusted
(non-GAAP) Operating Earnings is presented in the table below:
($ millions)
2Q16
PHI GAAP Net Income
$52
Merger Commitments 1
PHI Adjusted (non-GAAP) Operating
Earnings
$53
Generation consists of owned and contracted electric
generating facilities and wholesale and retail customer supply of
electric and natural gas products and services, including renewable
energy products, risk management services and natural gas
exploration and production activities.
Generation's second quarter 2016 GAAP Net Loss was $8 million
compared with GAAP Net Income of $398 million in the second quarter
of 2015. Adjusted (non-GAAP) Operating Earnings for the second
quarter of 2016 and 2015 do not include various items (after tax)
that were included in reported GAAP earnings. A reconciliation of
GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is
presented in the table below:
($ millions)
2Q16
2Q15
Generation GAAP Net (Loss)
Income
$(8)
$398
Mark-to-Market Impact of Economic Hedging
Activities
185 (145) Unrealized (Gains) Losses Related to NDT Fund Investments
(27) 56 Amortization of Commodity Contract Intangibles 8 9 Merger
and Integration Costs 3 5 Long-Lived Asset Impairments 22 — Plant
Retirements and Divestitures 133 — Cost Management Program 4 — CENG
Non-Controlling Interest 8 (14)
Generation Adjusted (non-GAAP)
Operating Earnings
$328
$309
Generation’s Adjusted (non-GAAP) Operating Earnings in the
second quarter of 2016 increased by $19 million compared with the
same quarter in 2015. This increase primarily reflects higher
revenue under the Reliability Support Services Agreement approved
in the second quarter of 2016 for Ginna for periods retroactive to
April 1, 2015, mostly offset by the impacts of the timing and
extended duration of an outage at the Salem nuclear power plant,
lower realized gains on nuclear decommissioning trust funds, and
increased nuclear decommissioning amortization expense.
Non-GAAP Financial Measures
In addition to net income as determined under generally accepted
accounting principles in the United States (GAAP), Exelon evaluates
its operating performance using the measure of adjusted (non-GAAP)
operating earnings because management believes it represents
earnings directly related to the ongoing operations of the
business. Adjusted (non-GAAP) operating earnings exclude certain
costs, expenses, gains and losses and other specified items. This
information is intended to enhance an investor’s overall
understanding of period over period operating results and provide
an indication of Exelon’s baseline operating performance excluding
items that are considered by management to be not directly related
to the ongoing operations of the business. In addition, this
information is among the primary indicators management uses as a
basis for evaluating performance, allocating resources, setting
incentive compensation targets and planning and forecasting of
future periods. Adjusted (non-GAAP) operating earnings is not a
presentation defined under GAAP and may not be comparable to other
companies’ presentation. The Company has provided the non-GAAP
financial measure as supplemental information and in addition to
the financial measures that are calculated and presented in
accordance with GAAP. Adjusted (non-GAAP) operating earnings should
not be deemed more useful than, a substitute for, or an alternative
to the most comparable GAAP measures provided in this earnings
release and attachments. This press release and earnings release
attachments provide reconciliations of adjusted (non-GAAP)
operating earnings to the most directly comparable financial
measures calculated and presented in accordance with GAAP, are
posted on Exelon’s website: www.exeloncorp.com, and have been furnished to the
Securities and Exchange Commission on Form 8-K on August 9,
2016.
Cautionary Statements Regarding Forward-Looking
Information
This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, that are subject to risks and uncertainties. The factors
that could cause actual results to differ materially from the
forward-looking statements made by Exelon Corporation, Exelon
Generation Company, LLC, Commonwealth Edison Company, PECO Energy
Company, Baltimore Gas and Electric Company, Pepco Holdings LLC
(PHI), Potomac Electric Power Company, Delmarva Power & Light
Company, and Atlantic City Electric Company (Registrants) include
those factors discussed herein, as well as the items discussed in
(1) Exelon’s 2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk
Factors, (b) ITEM 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations and (c) ITEM 8.
Financial Statements and Supplementary Data: Note 23; (2) PHI’s
2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b)
ITEM 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations and (c) ITEM 8. Financial Statements and
Supplementary Data: Note 16; (3) Exelon’s Second Quarter 2016
Quarterly Report on Form 10-Q in (a) Part II, Other Information,
ITEM 1A. Risk Factors; (b) Part 1, Financial Information, ITEM 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations and (c) Part I, Financial Information, ITEM
1. Financial Statements: Note 18 and (4) other factors discussed in
filings with the SEC by the Registrants. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
apply only as of the date of this press release. None of the
Registrants undertakes any obligation to publicly release any
revision to its forward-looking statements to reflect events or
circumstances after the date of this press release.
Exelon Corporation (NYSE: EXC) is a Fortune 100 energy company
with the largest number of utility customers in the U.S. Exelon
does business in 48 states, the District of Columbia and Canada and
had 2015 revenue of $34.5 billion. Exelon’s six utilities deliver
electricity and natural gas to approximately 10 million customers
in Delaware, the District of Columbia, Illinois, Maryland, New
Jersey and Pennsylvania through its Atlantic City Electric, BGE,
ComEd, Delmarva Power, PECO and Pepco subsidiaries. Exelon is one
of the largest competitive U.S. power generators, with more than
32,700 megawatts of nuclear, gas, wind, solar and hydroelectric
generating capacity comprising one of the nation’s cleanest and
lowest-cost power generation fleets. The company’s Constellation
business unit provides energy products and services to
approximately 2 million residential, public sector and business
customers, including more than two-thirds of the Fortune 100.
Follow Exelon on Twitter @Exelon.
EXELON CORPORATION
Reconciliation of Adjusted (non-GAAP)
Operating Earnings to GAAP Consolidated Statements of
Operations
(unaudited)
(in millions, except per share data)
Three Months Ended June 30, 2016 Three Months
Ended June 30, 2015 GAAP (a) Adjustments
Adjusted Non-GAAP
GAAP (a) Adjustments
Adjusted Non-GAAP
Operating revenues $ 6,910 $ 626 (b),(d),(e) $ 7,536 $ 6,514
$ (7 ) (b),(d) $ 6,507
Operating expenses Purchased power
and fuel 2,454 300 (b),(d),(i) 2,754 2,449 214 (b),(d) 2,663
Operating and maintenance 2,505 (172 ) (e),(g),(i),(j) 2,333 2,042
(41 ) (e),(g) 2,001 Depreciation and amortization 941 (114 ) (i)
827 602 — 602 Taxes other than income 394 — 394
294 — 294
Total operating
expenses 6,294 14 6,308 5,387 173 5,560
Gain on sales of
assets 31 — 31 7 — 7
Operating income 647 612 1,259 1,134
(180 ) 954
Other income and (deductions)
Interest expense, net (376 ) — (376 ) (155 ) (104 ) (e),(h) (259 )
Other, net 144 (89 ) (c),(i) 55 (17 ) 127 (c)
110
Total other income and (deductions) (232 ) (89 )
(321 ) (172 ) 23 (149 )
Income before income taxes
415 523 938 962 (157 ) 805
Income taxes 102 194
(b),(c),(d),(f),(g),(i),(j) 296 327 (41 ) (b),(c),(d),(e),(g),(h)
286
Equity in losses of unconsolidated affiliates (7 ) —
(7 ) (2 ) — (2 )
Net income 306 329 635 633
(116 ) 517
Net income (loss) attributable to noncontrolling
interests and preference stock dividends 39 (8 ) (k) 31
(5 ) 14 (k) 9
Net income attributable to
common shareholders $ 267 $ 337 $ 604 $
638 $ (130 ) $ 508
Effective tax rate 24.6 %
31.6 % 34.0 % 35.5 %
Earnings per average common share Basic
$ 0.29 $ 0.36 $ 0.65 $ 0.74 $ (0.15 ) $ 0.59 Diluted $ 0.29
$ 0.36 $ 0.65 $ 0.74 $ (0.15 ) $ 0.59
Average common shares outstanding Basic 924 924 863 863
Diluted 926 926 866 866
Effect of adjustments on earnings per
average diluted common share recorded in accordance with GAAP:
Mark-to-market impact of economic hedging activities (b) $ 0.20 $
(0.16 ) Unrealized (gains) losses related to NDT fund investments
(c) (0.03 ) 0.06 Amortization of commodity contract intangibles (d)
0.01 0.01 Merger and integration costs (e) — 0.02 Merger
commitments (f) — — Long-lived asset impairments (g) 0.02 0.02
Mark-to-market impact of PHI merger related interest swap (h) —
(0.08 ) Plant retirements and divestitures (i) 0.14 — Cost
management program (j) 0.01 — CENG non-controlling interest (k)
0.01 (0.02 ) Total adjustments $ 0.36 $ (0.15 )
For the three months ended June 30, 2016, includes financial
results for PHI. Therefore, the results of operations from 2016 and
2015 are not comparable for Exelon. The explanations below identify
any other significant or unusual items affecting the results of
operations.
(a) Results reported in accordance with accounting
principles generally accepted in the United States (GAAP). (b)
Adjustment to exclude the mark-to-market impact of Exelon’s
economic hedging activities, net of intercompany eliminations. (c)
Adjustment to exclude the unrealized gains and losses on NDT fund
investments to the extent not offset by contractual accounting as
described in the notes to the consolidated financial statements.
(d) Adjustment to exclude the non-cash amortization of intangible
assets, net, related to commodity contracts recorded at fair value
related to the Integrys acquisition. (e) Adjustment to exclude
certain costs associated with mergers and acquisitions, including,
if and when applicable, professional fees, employee-related
expenses, integration activities, and upfront credit facilities
fees, partially offset in 2016 at BGE and PHI by the anticipated
recovery of previously incurred PHI acquisition costs. (f)
Adjustment to exclude costs incurred as part of the settlement
orders approving the PHI acquisition. (g) Adjustment to exclude a
2015 charge to earnings primarily related to the impairment of
investment in long-term leases at Corporate and a 2016 charge to
earnings primarily related to the impairment of certain wind
projects at Generation. (h) Adjustment to exclude the
mark-to-market impact of Exelon's Corporate's forward-starting
interest rate swaps related to financing for the PHI acquisition,
which were terminated on June 8, 2015. (i) Adjustment to exclude
the impacts associated with the announced early retirement of
Generation's Clinton and Quad Cities nuclear facilities, partially
offset by a gain associated with Generation's 2016 sale of the New
Boston generating site. (j) Adjustment to exclude the 2016
severance expense and reorganization costs related to a cost
management program. (k) Adjustments to exclude the elimination from
Generation’s results of the non-controlling interest related to
CENG exclusion items, primarily related to the impact of unrealized
gains and losses on NDT fund investments and mark-to-market
activity.
EXELON CORPORATION
Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP
Consolidated Statements of Operations
(unaudited)
(in millions, except per share data)
Six Months Ended June 30, 2016 Six Months Ended
June 30, 2015 GAAP (a) Adjustments
Adjusted Non-GAAP
GAAP (a) Adjustments
Adjusted Non-GAAP
Operating revenues $ 14,485 $ 534 (b),(d),(e) $ 15,019 $
15,345 $ (201 ) (b),(d) $ 15,144
Operating expenses
Purchased power and fuel 5,708 338 (b),(d),(i) 6,046 6,919 220
(b),(d) 7,139 Operating and maintenance 5,341 (932 )
(e),(f),(g),(i),(j) 4,409 4,123 (53 ) (e),(g),(k) 4,070
Depreciation and amortization 1,626 (114 ) (i) 1,512 1,212 — 1,212
Taxes other than income 720 (1 ) (j) 719 598 —
598
Total operating expenses 13,395 (709 )
12,686 12,852 167 13,019
Gain on sales of assets 40 —
40 8 — 8
Operating income
1,130 1,243 2,373 2,501 (368 ) 2,133
Other income and (deductions) Interest expense, net
(663 ) — (663 ) (501 ) (15 ) (e),(h) (516 ) Other, net 258
(155 ) (c),(i) 103 64 78 (c) 142
Total other income and (deductions) (405 ) (155 ) (560 )
(437 ) 63 (374 )
Income before income taxes 725 1,088
1,813 2,064 (305 ) 1,759
Income taxes 285 311
(b),(c),(d),(e),(f),(g),(i),(j) 596 690 (104 )
(b),(c),(d),(e),(g),(h),(k) 586
Equity in losses of
unconsolidated affiliates (10 ) — (10 ) (2 ) — (2
)
Net income 430 777 1,207 1,372 (201 ) 1,171
Net income
attributable to noncontrolling interests and preference stock
dividends (10 ) (18 ) (l) (28 ) 41 7 (l) 48
Net income attributable to common shareholders $ 440
$ 795 $ 1,235 $ 1,331 $ (208 ) $ 1,123
Effective tax rate 39.3 % 32.9 % 33.4 % 33.3 %
Earnings per average common share Basic $ 0.48 $ 0.86 $ 1.34
$ 1.54 $ (0.24 ) $ 1.30 Diluted $ 0.48 $ 0.85 $ 1.33
$ 1.54 $ (0.24 ) $ 1.30
Average common
shares outstanding Basic 923 923 862 862 Diluted 926 926 866
866
Effect of adjustments on earnings per average diluted common
share recorded in accordance with GAAP: Mark-to-market impact
of economic hedging activities (b) $ 0.12 $ (0.27 ) Unrealized
(gains) losses related to NDT fund investments (c) (0.07 ) 0.04
Amortization of commodity contract intangibles (d) — (0.02 ) Merger
and integration costs (e) 0.09 0.04 Merger commitments (f) 0.43 —
Long-lived asset impairments (g) 0.10 0.02 Mark-to-market impact of
PHI merger related interest swap (h) — (0.03 ) Plant retirements
and divestitures (i) 0.14 — Cost management program (j) 0.02 —
Midwest Generation bankruptcy recoveries (k) — (0.01 ) CENG
non-controlling interest (l) 0.02 (0.01 ) Total adjustments
$ 0.85 $ (0.24 )
As a result of the PHI acquisition completion on March 23,
2016, the table includes financial results for PHI beginning on
March 24, 2016 to June 30, 2016. Therefore, the results of
operations from 2016 and 2015 are not comparable for Exelon. The
explanations below identify any other significant or unusual items
affecting the results of operations.
(a) Results reported in accordance with accounting
principles generally accepted in the United States (GAAP). (b)
Adjustment to exclude the mark-to-market impact of Exelon’s
economic hedging activities, net of intercompany eliminations. (c)
Adjustment to exclude the unrealized gains and losses on NDT fund
investments to the extent not offset by contractual accounting as
described in the notes to the consolidated financial statements.
(d) Adjustment to exclude the non-cash amortization of intangible
assets, net, related to commodity contracts recorded at fair value
related to the Integrys acquisition. (e) Adjustment to exclude
certain costs associated with mergers and acquisitions, including,
if and when applicable, professional fees, employee-related
expenses, integration activities, and upfront credit facilities
fees, partially offset in 2016 at ComEd, BGE and PHI by the
anticipated recovery of previously incurred PHI acquisition costs.
(f) Adjustment to exclude costs incurred as part of the settlement
orders approving the PHI acquisition. (g) Adjustment to exclude a
2015 charge to earnings primarily related to the impairment of
investment in long-term leases at Corporate and 2016 charges to
earnings primarily related to the impairment of upstream assets and
certain wind projects at Generation. (h) Adjustment to exclude the
mark-to-market impact of Exelon's Corporate's forward-starting
interest rate swaps related to financing for the PHI acquisition,
which were terminated on June 8, 2015. (i) Adjustment to exclude
the impacts associated with the announced early retirement of
Generation's Clinton and Quad Cities nuclear facilities, partially
offset by a gain associated with Generation's 2016 sale of the New
Boston generating site. (j) Adjustment to exclude the 2016
severance expense and reorganization costs related to a cost
management program. (k) Adjustment to exclude a 2015 benefit for
the favorable settlement of a long-term railcar lease agreement
pursuant to the Midwest Generation bankruptcy. (l) Adjustments to
exclude the elimination from Generation’s results of the
non-controlling interest related to CENG exclusion items, primarily
related to the impact of unrealized gains and losses on NDT fund
investments and mark-to-market activity.
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version on businesswire.com: http://www.businesswire.com/news/home/20160809005531/en/
Exelon CorporationDan EggersInvestor Relations312-394-2345orPaul
AdamsCorporate Communications410-470-4167
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