August 1, 2019 - 6:45 AM EDT
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Exelon Reports Second Quarter 2019 Results

CHICAGO

Earnings Release Highlights

  • GAAP Net Income of $0.50 per share and Adjusted (non-GAAP) Operating Earnings of $0.60 per share for the second quarter of 2019
  • Reaffirming full year 2019 Adjusted Operating Earnings guidance of $3.00 to $3.30 per share
  • Delmarva Power achieved the number one ranking by J.D. Power in its 2019 Electric Utility Residential Customer Satisfaction Study - first Exelon utility to rank first
  • Strong utility customer operations performance - every utility achieved top quartile in Service Level and Abandon Rate, with ComEd and PHI demonstrating top decile performance
  • On July 25, 2019, FERC released an order directing PJM not to hold the Base Residual Auction in August 2019

Exelon Corporation (NYSE: EXC) today reported its financial results for the second quarter of 2019.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190801005471/en/

Exelon quarterly earnings infographic (Graphic: Business Wire)

Exelon quarterly earnings infographic (Graphic: Business Wire)

“We continue to drive toward operational excellence and customer satisfaction by modernizing our infrastructure and maintaining our clean power fleet to deliver stable earnings,” said Christopher M. Crane, Exelon president and CEO. “In fact, Exelon Generation was cited by the annual Benchmarking Air Emissions report as the largest producer of zero-carbon electricity in the United States, and its nuclear fleet maintained best-in-class performance levels. Additionally, all our electric and gas companies received top metrics for customer service and scored well in terms of customer satisfaction, with Delmarva Power earning the number one ranking by J.D. Power in its 2019 Electric Utility Residential Customer Satisfaction Study. We were also proud to receive multiple accolades from DiversityInc in recognition of our commitment to veterans and to maintaining diversity at both the staff and leadership levels.”

“Our second quarter performance remained strong, with adjusted (non-GAAP) operating earnings of $0.60 per share coming in at the midpoint of our guidance range,” said Joseph Nigro, Exelon’s senior executive vice president and CFO. “In keeping with our strategy to invest in enhancing our electric companies’ reliability and resiliency to maintain optimal performance for our customers, we devoted $1.4 billion to strengthening infrastructure and deploying advanced technology. Our strong outage frequency and duration metrics reflect this continued investment.”

Second Quarter 2019

Exelon's GAAP Net Income for the second quarter of 2019 decreased to $0.50 per share from $0.56 per share in the second quarter of 2018. Adjusted (non-GAAP) Operating Earnings decreased to $0.60 per share in the second quarter of 2019 from $0.71 per share in the second quarter of 2018. For the reconciliations of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings, refer to the tables beginning on page 5.

The Adjusted (non-GAAP) Operating Earnings in the second quarter of 2019 reflect lower realized energy prices, partially offset by increased revenue from Zero Emissions Credits (ZECs) in New York and New Jersey at Generation. On the utility side, the Adjusted (non-GAAP) Operating Earnings reflect higher utility earnings due to regulatory rate increases at PECO, BGE and PHI.

Operating Company Results1

ComEd

ComEd's second quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings both increased to $186 million from $164 million in the second quarter of 2018, primarily due to increased transmission revenues. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.

PECO

PECO’s second quarter of 2019 GAAP Net Income increased to $102 million from $96 million in the second quarter of 2018. PECO’s Adjusted (non-GAAP) Operating Earnings for the second quarter of 2019 increased to $103 million from $97 million in the second quarter of 2018, primarily due to regulatory rate increases partially offset by unfavorable weather conditions.

BGE

BGE’s second quarter of 2019 GAAP Net Income decreased to $45 million from $51 million in the second quarter of 2018. BGE’s Adjusted (non-GAAP) Operating Earnings for the second quarter of 2019 decreased to $46 million from $52 million compared with the second quarter of 2018, primarily due to an increase in various expenses, including interest, partially offset by regulatory rate increases. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.

PHI

PHI’s second quarter of 2019 GAAP Net Income increased to $106 million from $84 million in the second quarter of 2018. PHI’s Adjusted (non-GAAP) Operating Earnings for the second quarter of 2019 increased to $107 million from $86 million in the second quarter of 2018, primarily due to regulatory rate increases (not reflecting the impact of TCJA). Due to revenue decoupling, PHI's distribution earnings related to Pepco Maryland, DPL Maryland and Pepco District of Columbia are not affected by actual weather or customer usage patterns.

Generation

Generation's second quarter of 2019 GAAP Net Income decreased to $108 million from $178 million in the second quarter of 2018. Generation’s Adjusted (non-GAAP) Operating Earnings for the second quarter of 2019 decreased to $202 million from $331 million in the second quarter of 2018, primarily due to lower realized energy prices, partially offset by increased revenue from ZECs in New York and New Jersey.

As of June 30, 2019, the percentage of expected generation hedged is 92%-95%, 70%-73% and 40%-43% for 2019, 2020 and 2021, respectively.

___________

1Exelon’s five business units include ComEd, which consists of electricity transmission and distribution operations in northern Illinois; PECO, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania; BGE, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland; PHI, which 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; and Generation, which 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 and risk management services.

Recent Developments and Second Quarter Highlights

  • BGE Maryland Electric and Natural Gas Rate Case: On May 24, 2019, BGE filed an application with the Maryland Public Service Commission (MDPSC) to increase its annual electric and natural gas distribution base rates by $74 million and $59 million, respectively, reflecting a requested ROE of 10.3%. BGE currently expects a decision in the fourth quarter of 2019 but cannot predict if the MDPSC will approve the application as filed.
  • Pepco District of Columbia Electric Base Rate Case: On May 30, 2019, Pepco filed an application for a multi-year plan with the Public Service Commission of the District of Columbia (DCPSC) to increase its annual electric distribution base rates by $85 million, $40 million and $37 million for years 2020, 2021, and 2022, respectively, to recover capital investments made in 2018 and 2019 and planned capital investments from 2020 to 2022, reflecting a requested ROE of 10.3%. Pepco has requested a decision by the second quarter of 2020 but cannot predict if the DCPSC will approve the application as filed or the requested schedule.
  • Pending PECO Transmission Formula Rate: On May 1, 2017, PECO filed a request with the Federal Energy Regulatory Commission (FERC) seeking approval to update its transmission rates and change the manner in which PECO’s transmission rate is determined from a fixed rate to a formula rate. On July 22, 2019, PECO and other parties filed with FERC a settlement agreement, which includes a ROE of 10.35%, inclusive of a 50-basis point adder for being a member of a regional transmission organization (RTO). The impact of the settlement is not expected to be material. A final order from FERC is not expected prior to the fourth quarter of 2019. PECO cannot predict the outcome of this proceeding, or the transmission formula FERC may approve.
  • Sale of Oyster Creek: On July 31, 2018, Generation entered into an agreement with Holtec International (Holtec) and its indirect wholly owned subsidiary, Oyster Creek Environmental Protection, LLC (OCEP), for the sale and decommissioning of Oyster Creek located in Forked River, New Jersey, which permanently ceased generation operations on Sep 17, 2018. As a result of the transaction, in the third quarter of 2018, Generation reclassified certain Oyster Creek assets and liabilities as held for sale at their respective fair values. Generation had $863 million and $759 million of assets and liabilities held for sale, respectively, at June 30, 2019. Completion of the transaction contemplated by the sale agreement was subject to the satisfaction of several closing conditions, including approval of the license transfer from the Nuclear Regulatory Commission and other regulatory approvals, and a private letter ruling from the Internal Revenue Service (IRS), which were satisfied in the second quarter 2019. The sale was completed on July 1, 2019. Under the terms of the transaction, Generation transferred to OCEP substantially all the assets associated with Oyster Creek, including assets held in Nuclear Decommissioning Trust (NDT) funds, along with the assumption of liability for all responsibility for the site, including full decommissioning and ongoing management of spent fuel until the spent fuel is moved offsite. Generation expects the loss on the sale, which will be recognized in the third quarter of 2019, to be immaterial.
  • Complaints and PJM Filing at FERC Seeking to Mitigate ZEC Programs: On April 10, 2019, PJM Interconnection, LLC (PJM) notified FERC of its intent to proceed with the next capacity auction in August 2019 under the existing market rules and asked FERC to clarify that it would not require PJM to re-run the auction in the event FERC alters market rules in its decision on the Minimum Offer Price Rule complaint. On July 25, 2019, FERC issued an order denying PJM’s request to clarify that any alteration of PJM’s existing market rules would operate prospectively and, therefore, directed PJM to not conduct the capacity auction in August 2019. It is too early to predict the final outcome of each of these proceedings or their potential financial impact, if any, on Exelon or Generation.
  • Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100% of the CENG units, produced 44,748 gigawatt-hours (GWhs) in the second quarter of 2019, compared with 45,723 GWhs in the second quarter of 2018. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 95.1% capacity factor for the second quarter of 2019, compared with 93.2% for the second quarter of 2018. The number of planned refueling outage days in the second quarter of 2019 totaled 56, compared with 94 in the second quarter of 2018. There were 28 non-refueling outage days in the second quarter of 2019, compared with two in the second quarter of 2018.
  • Fossil and Renewables Operations: The Dispatch Match rate for Generation’s gas and hydro fleet was 99.7% in the second quarter of 2019, compared with 97.8% in the second quarter of 2018. Energy Capture for the wind and solar fleet was 96.0% in the second quarter of 2019, compared with 95.1% in the second quarter of 2018.
  • Financing Activities:
    • On May 21, 2019, ACE issued $100 million in aggregate principal amount of its First Mortgage Bonds, 3.50% due May 21, 2029 and $50 million in aggregate principal amount of its First Mortgage Bonds, 4.14% due May 21, 2049. ACE used the proceeds to repay existing indebtedness and for general corporate purposes.
    • On June 13, 2019, Pepco issued $150 million aggregate principal amount of its First Mortgage Bonds, 3.45% due June 13, 2029. Pepco used the proceeds of to repay existing indebtedness and for general corporate purposes.
    • On June 27, 2019, Pepco issued $110 million of tax-exempt bonds, 1.70% due Sep 1, 2022. Pepco used the proceeds repay existing indebtedness.

GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliation

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2019 do not include the following items (after tax) that were included in reported GAAP Net Income:

(in millions)

Exelon
Earnings
per
Diluted
Share

Exelon

ComEd

PECO

BGE

PHI

Generation

2019 GAAP Net Income

$

0.50

 

$

484

 

$

186

 

$

102

 

$

45

 

$

106

 

$

108

 

Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $22 and $20, respectively)

0.07

 

68

 

 

 

 

 

65

 

Unrealized Losses Related to Nuclear Decommissioning Trust (NDT) Fund Investments (net of taxes of $28)

0.05

 

52

 

 

 

 

 

52

 

Long-Lived Asset Impairments (net of taxes of $1)

 

1

 

 

 

 

 

1

 

Plant Retirements and Divestitures (net of taxes of $37 and $38, respectively)

(0.02

)

(24

)

 

 

 

 

(23

)

Cost Management Program (net of taxes of $1, $0, $0, $0 and $1, respectively)

0.01

 

6

 

 

1

 

1

 

1

 

3

 

Litigation Settlement Gain (net of taxes of $7)

(0.02

)

(19

)

 

 

 

 

(19

)

Noncontrolling Interests (net of taxes of $3)

0.02

 

15

 

 

 

 

 

15

 

2019 Adjusted (non-GAAP) Operating Earnings

$

0.60

 

$

583

 

$

186

 

$

103

 

$

46

 

$

107

 

$

202

 

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2018 do not include the following items (after tax) that were included in reported GAAP Net Income:

(in millions)

Exelon
Earnings
per
Diluted
Share

Exelon

ComEd

PECO

BGE

PHI

Generation

2018 GAAP Net Income

$

0.56

 

$

539

 

$

164

 

$

96

 

$

51

 

$

84

 

$

178

 

Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $23)

(0.07

)

(67

)

 

 

 

 

(67

)

Unrealized Losses Related to NDT Fund Investments (net of taxes of $77)

0.08

 

81

 

 

 

 

 

81

 

PHI Merger and Integrations Costs (net of taxes of $0)

 

1

 

 

 

 

 

1

 

Long-Lived Asset Impairments (net of taxes of $11)

0.03

 

30

 

 

 

 

 

30

 

Plant Retirements and Divestitures (net of taxes of $47)

0.14

 

127

 

 

 

 

 

127

 

Cost Management Program (net of taxes of $4, $0, $0, $0 and $4, respectively)

0.01

 

12

 

 

1

 

1

 

1

 

9

 

Change in Environmental Liabilities (net of taxes of $2)

0.01

 

5

 

 

 

 

 

5

 

Reassessment of Deferred Income Taxes (entire amount represents tax expense)

(0.01

)

(8

)

 

 

 

1

 

1

 

Noncontrolling Interests (net of taxes of $7)

(0.04

)

(34

)

 

 

 

 

(34

)

2018 Adjusted (non-GAAP) Operating Earnings

$

0.71

 

$

686

 

$

164

 

$

97

 

$

52

 

$

86

 

$

331

 

Note:

Amounts may not sum due to rounding.

Unless otherwise noted, the income tax impact of each reconciling item between GAAP Net Income and Adjusted (non-GAAP) Operating Earnings is based on the marginal statutory federal and state income tax rates for each Registrant, taking into account whether the income or expense item is taxable or deductible, respectively, in whole or in part. For all items except the unrealized gains and losses related to NDT fund investments, the marginal statutory income tax rates for 2019 and 2018 ranged from 26.0% to 29.0%. Under IRS regulations, NDT fund investment returns are taxed at different rates for investments if they are in qualified or non-qualified funds. The effective tax rates for the unrealized gains and losses related to NDT fund investments were 35.1% and 48.9% for the three months ended June 30, 2019 and 2018, respectively.

Webcast Information

Exelon will discuss second quarter 2019 earnings in a one-hour conference call scheduled for today at 9 a.m. Central Time (10 a.m. Eastern Time). The webcast and associated materials can be accessed at www.exeloncorp.com/investor-relations.

About Exelon

Exelon Corporation (NYSE: EXC) is a Fortune 100 energy company with the largest number of electricity and natural gas customers in the U.S. Exelon does business in 48 states, the District of Columbia and Canada and had 2018 revenue of $36 billion. Exelon serves 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 32,000 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.

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 measure 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 measure 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 Net Income 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 Aug 1, 2019.

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 the Registrants include those factors discussed herein, as well as the items discussed in (1) the Registrants' 2018 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 22, Commitments and Contingencies; (2) the Registrants' Second Quarter 2019 Quarterly Report on Form 10-Q (to be filed on August 1, 2019) 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 16, Commitments and Contingencies; and (3) 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

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions, except per share data)

 

 

 

Three Months Ended
June 30, 2019

 

Three Months Ended
June 30, 2018

 

 

GAAP (a)

 

Non-GAAP
Adjustments

 

 

 

GAAP (a)

 

Non-GAAP
Adjustments

 

 

Operating revenues

 

$

7,689

 

 

$

(38

)

 

(b)

 

$

8,076

 

 

$

5

 

 

(b)

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Purchased power and fuel

 

3,225

 

 

(117

)

 

(b),(d)

 

3,315

 

 

76

 

 

(b),(d)

Operating and maintenance

 

2,159

 

 

(2

)

 

(d),(e),(f)

 

2,307

 

 

(68

)

 

(c),(d),(e),(g),(h)

Depreciation and amortization

 

1,079

 

 

(99

)

 

(d)

 

1,088

 

 

(152

)

 

(d)

Taxes other than income

 

418

 

 

 

 

 

 

428

 

 

 

 

 

Total operating expenses

 

6,881

 

 

 

 

 

 

7,138

 

 

 

 

 

Gain on sales of assets and businesses

 

33

 

 

(33

)

 

(d)

 

4

 

 

(1

)

 

(d)

Operating income

 

841

 

 

 

 

 

 

942

 

 

 

 

 

Other income and (deductions)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(409

)

 

14

 

 

(b)

 

(373

)

 

 

 

 

Other, net

 

212

 

 

(68

)

 

(b),(d),(i)

 

44

 

 

158

 

 

(i)

Total other income and (deductions)

 

(197

)

 

 

 

 

 

(329

)

 

 

 

 

Income before income taxes

 

644

 

 

 

 

 

 

613

 

 

 

 

 

Income taxes

 

144

 

 

9

 

 

(b),(d),(e),(f),(i),(j)

 

66

 

 

126

 

 

(b),(d),(c),(e),(h),(i),(j),(k)

Equity in losses of unconsolidated affiliates

 

(6

)

 

 

 

 

 

(5

)

 

 

 

 

Net income

 

494

 

 

 

 

 

 

542

 

 

 

 

 

Net income attributable to noncontrolling interests

 

10

 

 

(15

)

 

(l)

 

3

 

 

33

 

 

(l)

Net income attributable to common shareholders

 

$

484

 

 

 

 

 

 

$

539

 

 

 

 

 

Effective tax rate(n)

 

22.4

%

 

 

 

 

 

10.8

%

 

 

 

 

Earnings per average common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.50

 

 

 

 

 

 

$

0.56

 

 

 

 

 

Diluted

 

$

0.50

 

 

 

 

 

 

$

0.56

 

 

 

 

 

Average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

972

 

 

 

 

 

 

967

 

 

 

 

 

Diluted

 

974

 

 

 

 

 

 

969

 

 

 

 

 

Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP:

Mark-to-market impact of economic hedging activities (b)

 

$

0.07

 

 

 

 

 

 

$

(0.07

)

 

 

Unrealized gains related to NDT fund investments (i)

 

0.05

 

 

 

 

 

 

0.08

 

 

 

Long-lived asset impairments (c)

 

 

 

 

 

 

 

0.03

 

 

 

Plant retirements and divestitures (d)

 

(0.02

)

 

 

 

 

 

0.14

 

 

 

Cost management program (e)

 

0.01

 

 

 

 

 

 

0.01

 

 

 

Change in environmental liabilities (h)

 

 

 

 

 

 

 

0.01

 

 

 

Reassessment of deferred income taxes (k)

 

 

 

 

 

 

 

(0.01

)

 

 

Litigation settlement (f)

 

(0.02

)

 

 

 

 

 

 

 

 

Noncontrolling interests (l)

 

0.02

 

 

 

 

 

 

(0.04

)

 

 

Total adjustments

 

$

0.10

 

 

(m)

 

 

 

$

0.15

 

 

 

(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)

In 2018, adjustment to exclude the impairment of certain wind projects at Generation.

(d)

In 2018, adjustment to exclude accelerated depreciation and amortization expense associated with Generation's decision to early retire the Oyster Creek and Three Mile Island nuclear facilities. In 2019, adjustment to exclude net realized gains related to Oyster Creek's NDT fund investments in conjunction with the Holtec sale on July 1, 2019 and a gain on the sale of certain wind assets, partially offset by accelerated depreciation and amortization expenses associated with Generation's previous decision to early retire the TMI nuclear facility.

(e)

Adjustment to exclude reorganization costs related to cost management programs.

(f)

Adjustment to exclude a gain related to a litigation settlement.

(g)

Adjustment to exclude costs related to the PHI acquisition.

(h)

Adjustment to exclude charges to adjust an environmental reserve.

(i)

Adjustment to exclude the impact of net unrealized gains and losses on Generation’s NDT fund investments for Non-Regulatory and Regulatory Agreement Units. The impacts of the Regulatory Agreement Units, including the associated income taxes, are contractually eliminated, resulting in no earnings impact.

(j)

The effective tax rate related to Adjusted (non-GAAP) Operating Earnings is 20.8% and 20.9% for the three months ended June 30, 2019 and June 30, 2018, respectively.

(k)

Adjustment to exclude and adjustment to the remeasurement of deferred income taxes as a result of TCJA.

(l)

Adjustment to exclude elimination from Generation’s results of the noncontrolling interest related to certain exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments at CENG.

(m)

Amounts may not sum due to rounding.

 

EXELON CORPORATION

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions, except per share data)

 

 

 

Six Months Ended
June 30, 2019

 

Six Months Ended
June 30, 2018

 

 

GAAP (a)

 

Non-GAAP
Adjustments

 

 

 

GAAP (a)

 

Non-GAAP
Adjustments

 

 

Operating revenues

 

$

17,166

 

 

$

14

 

 

(b)

 

$

17,769

 

 

$

102

 

 

(b)

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Purchased power and fuel

 

7,778

 

 

(97

)

 

(b),(c)

 

8,042

 

 

(107

)

 

(b),(c)

Operating and maintenance

 

4,347

 

 

55

 

 

(c),(d),(e),(f)

 

4,691

 

 

(104

)

 

(c),(d),(e),(g),(h)

Depreciation and amortization

 

2,154

 

 

(199

)

 

(c)

 

2,179

 

 

(289

)

 

(c)

Taxes other than income

 

863

 

 

 

 

 

 

874

 

 

 

 

 

Total operating expenses

 

15,142

 

 

 

 

 

 

15,786

 

 

 

 

 

Gain on sales of assets and businesses

 

36

 

 

(33

)

 

(c)

 

60

 

 

(54

)

 

(c)

Operating income

 

2,060

 

 

 

 

 

 

2,043

 

 

 

 

 

Other income and (deductions)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(813

)

 

29

 

 

(b)

 

(745

)

 

 

 

 

Other, net

 

679

 

 

(426

)

 

(b),(c),(i)

 

17

 

 

269

 

 

(i)

Total other income and (deductions)

 

(134

)

 

 

 

 

 

(728

)

 

 

 

 

Income before income taxes

 

1,926

 

 

 

 

 

 

1,315

 

 

 

 

 

Income taxes

 

454

 

 

(130

)

 

(b),(c),(d),(e),(f),(i),(j)

 

125

 

 

274

 

 

(b),(c),(d),(e),(g),(h),(i),(j),(k)

Equity in losses of unconsolidated affiliates

 

(12

)

 

 

 

 

 

(11

)

 

 

 

 

Net income

 

1,460

 

 

 

 

 

 

1,179

 

 

 

 

 

Net income attributable to noncontrolling interests

 

69

 

 

(82

)

 

(l)

 

54

 

 

57

 

 

(l)

Net income attributable to common shareholders

 

$

1,391

 

 

 

 

 

 

$

1,125

 

 

 

 

 

Effective tax rate(h)

 

23.6

%

 

 

 

 

 

9.5

%

 

 

 

 

Earnings per average common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.43

 

 

 

 

 

 

$

1.16

 

 

 

 

 

Diluted

 

$

1.43

 

 

 

 

 

 

$

1.16

 

 

 

 

 

Average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

972

 

 

 

 

 

 

967

 

 

 

 

 

Diluted

 

973

 

 

 

 

 

 

968

 

 

 

 

 

Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP:

Mark-to-market impact of economic hedging activities (b)

 

$

0.10

 

 

 

 

 

 

$

0.13

 

 

 

Unrealized (gains) losses related to NDT fund investments (i)

 

(0.15

)

 

 

 

 

 

0.15

 

 

 

Long-lived asset impairments (d)

 

0.01

 

 

 

 

 

 

0.03

 

 

 

Plant retirements and divestitures (c)

 

 

 

 

 

 

 

0.23

 

 

 

Cost management program (e)

 

0.02

 

 

 

 

 

 

0.02

 

 

 

Change in environmental liabilities (h)

 

 

 

 

 

 

 

0.01

 

 

 

Litigation settlement gain (f)

 

(0.02

)

 

 

 

 

 

 

 

 

Reassessment of deferred income taxes (k)

 

 

 

 

 

 

 

(0.01

)

 

 

Noncontrolling interests (l)

 

0.08

 

 

 

 

 

 

(0.06

)

 

 

Total adjustments

 

$

0.04

 

 

 

 

 

 

$

0.50

 

 

 

(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)

In 2018, adjustment to exclude accelerated depreciation and amortization expenses and one-time charges associated with Generation's decision to early retire the Oyster Creek nuclear facility, as well as accelerated depreciation and amortization expenses associated with the 2017 decision to early retire the Three Mile Island nuclear facility, partially offset by a gain associated with Generation's sale of its electrical contracting business. In 2019, adjustment to exclude net realized gains related to Oyster Creek's NDT fund investments in conjunction with the Holtec sale on July 1, 2019, a benefit associated with a remeasurement in the first quarter 2019 of the TMI asset retirement obligation and a gain on the sale of certain wind assets in the second quarter of 2019, partially offset by accelerated depreciation and amortization expenses associated with Generation's previous decision to early retire the TMI nuclear facility.

(d)

In 2018, adjustment to exclude the impairment of certain wind projects at Generation. In 2019, adjustment to exclude the impairment of a fossil asset at Generation.

(e)

Adjustment to exclude reorganization costs related to cost management programs.

(f)

Adjustment to exclude a gain related to a litigation settlement.

(g)

Adjustment to exclude costs related to the PHI acquisition.

(h)

Adjustment to exclude charges to adjust an environmental reserve.

(i)

Adjustment to exclude the impact of net unrealized gains and losses on Generation’s NDT fund investments for Non-Regulatory and Regulatory Agreement Units. The impacts of the Regulatory Agreement Units, including the associated income taxes, are contractually eliminated, resulting in no earnings impact.

(j)

The effective tax rate related to Adjusted (non-GAAP) Operating Earnings is 18.5% and 18.7% for the six months ended June 30, 2019 and June 30, 2018, respectively.

(k)

Adjustment to exclude and adjustment to the remeasurement of deferred income taxes as a result of TCJA.

(l)

Adjustment to exclude elimination from Generation’s results of the noncontrolling interests related to certain exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments at CENG.

 

Robin Gray
Corporate Communications
202-637-0317

Emily Duncan
Investor Relations
312-394-2345


Source: Business Wire (August 1, 2019 - 6:45 AM EDT)

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