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Business Wire 2-May-2019 6:45 AM
Earnings Release Highlights
Exelon Corporation (NYSE:EXC) today reported its financial results for the first quarter of 2019.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20190502005375/en/
Exelon Corp. Quarter Review (Graphic: Business Wire)
"Delivering clean energy to address climate change while meeting the needs of our customers and the communities we serve continues to drive Exelon's business results. Our electric and gas companies earned top marks on key customer satisfaction and operating metrics, while our nuclear generation fleet had its best quarterly capacity factor in 10 years," said Christopher M. Crane, president and CEO. "The Supreme Court declined to hear cases disputing Illinois' and New York's Zero Emissions Credit programs, preserving these states' emissions-free nuclear power plants and the economic and environmental benefits they provide. We marked the anniversaries of our mergers with Constellation and Pepco Holdings, which not only have improved service for our customers but also increased our regulated business mix and provided more stable earnings."
"Exelon made a strong start to 2019, with adjusted (non-GAAP) operating earnings this quarter above the midpoint of our guidance range, at $0.87 per share," said Joseph Nigro, Exelon's senior executive vice president and CFO. "Our strategy to invest in advanced technology and infrastructure to grow our regulated business continues to prove successful and, in recognition of this, both S&P and Fitch upgraded Exelon's credit ratings."
First Quarter 2019
Exelon's GAAP Net Income for the first quarter of 2019 increased to $0.93 per share from $0.60 per share in the first quarter of 2018. Adjusted (non-GAAP) Operating Earnings decreased to $0.87 per share in the first quarter of 2019 from $0.96 per share in the first 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 first quarter of 2019 reflect lower realized energy prices and the absence of the revenue recognized in the first quarter of 2018 related to Zero Emissions Credits (ZECs) generated in Illinois from June through December 2017, partially offset by increased capacity prices 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 and lower storm costs at PECO and BGE.
Operating Company Results1
ComEd
ComEd's first quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) remained relatively consistent compared with the first quarter of 2018. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.
PECO
PECO's first quarter of 2019 GAAP Net Income increased to $168 million from $113 million in the first quarter of 2018. PECO's Adjusted (non-GAAP) Operating Earnings for the first quarter of 2019 increased to $169 million from $114 million in the first quarter of 2018, primarily due to regulatory rate increases and the absence of the March 2018 winter storm costs.
BGE
BGE's first quarter of 2019 GAAP Net Income increased to $160 million from $128 million in the first quarter of 2018. BGE's Adjusted (non-GAAP) Operating Earnings for the first quarter of 2019 increased to $161 million from $129 million compared with the first quarter of 2018, primarily due to regulatory rate increases and the absence of the March 2018 winter storm costs. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.
PHI
PHI's first quarter of 2019 GAAP Net Income increased to $117 million from $65 million in the first quarter of 2018. PHI's Adjusted (non-GAAP) Operating Earnings for the first quarter of 2019 increased to $118 million from $65 million in the first quarter of 2018, primarily due to regulatory rate increases. 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 first quarter of 2019 GAAP Net Income increased to $363 million from $136 million in the first quarter of 2018. Generation's Adjusted (non-GAAP) Operating Earnings for the first quarter of 2019 decreased to $294 million from $474 million in the first quarter of 2018, primarily due to lower realized energy prices and the absence of the revenue recognized in the first quarter of 2018 related to ZECs generated in Illinois from June through December 2017, partially offset by increased capacity prices.
The proportion of expected generation hedged as of March 31, 2019, was 90 percent to 93 percent for 2019, 64 percent to 67 percent for 2020 and 38 percent to 41 percent for 2021.
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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 First Quarter Highlights
GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliation
Adjusted (non-GAAP) Operating Earnings for the first quarter of 2019 do not include the following items (after tax) that were included in reported GAAP Net Income:
Exelon | ||||||||||||||||||||||||||||
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Diluted | ||||||||||||||||||||||||||||
(in millions) | Share | Exelon | ComEd | PECO | BGE | PHI | Generation | |||||||||||||||||||||
2019 GAAP Net Income | $ | 0.93 | $ | 907 | $ | 157 | $ | 168 | $ | 160 | $ | 117 | $ | 363 | ||||||||||||||
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $12 and $10, respectively) | 0.03 | 31 | — | — | — | — | 26 | |||||||||||||||||||||
Unrealized Gains Related to Nuclear Decommissioning Trust (NDT) Fund Investments (net of taxes of $161) | (0.20 | ) | (193 | ) | — | — | — | — | (193 | ) | ||||||||||||||||||
Long-Lived Asset Impairments (net of taxes of $1) | — | 4 | — | — | — | — | 4 | |||||||||||||||||||||
Plant Retirements and Divestitures (net of taxes of $6) | 0.02 | 19 | — | — | — | — | 19 | |||||||||||||||||||||
Cost Management Program (net of taxes of $3, $0, $0, $0 and $3, respectively) | 0.01 | 11 | — | 1 | 1 | 1 | 8 | |||||||||||||||||||||
Noncontrolling Interests (net of taxes of $13) | 0.07 | 67 | — | — | — | — | 67 | |||||||||||||||||||||
2019 Adjusted (non-GAAP) Operating Earnings | $ | 0.87 | $ | 846 | $ | 157 | $ | 169 | $ | 161 | $ | 118 | $ | 294 | ||||||||||||||
Adjusted (non-GAAP) Operating Earnings for the first quarter of 2018 do not include the following items (after tax) that were included in reported GAAP Net Income:
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(in millions) | Share | Exelon | ComEd | PECO | BGE | PHI | Generation | |||||||||||||||||||||
2018 GAAP Net Income | $ | 0.60 | $ | 585 | $ | 165 | $ | 113 | $ | 128 | $ | 65 | $ | 136 | ||||||||||||||
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $69) | 0.20 | 197 | — | — | — | — | 197 | |||||||||||||||||||||
Unrealized Losses Related to NDT Fund Investments (net of taxes of $45) | 0.07 | 66 | — | — | — | — | 66 | |||||||||||||||||||||
Merger and Integrations Costs (net of taxes of $1) | — | 3 | — | — | — | — | 3 | |||||||||||||||||||||
Plant Retirements and Divestitures (net of taxes of $32) | 0.10 | 92 | — | — | — | — | 92 | |||||||||||||||||||||
Cost Management Program (net of taxes of $1, $0, $0 and $1, respectively) | 0.01 | 5 | — | 1 | 1 | — | 3 | |||||||||||||||||||||
Noncontrolling Interests (net of taxes of $5) | (0.02 | ) | (23 | ) | — | — | — | — | (23 | ) | ||||||||||||||||||
2018 Adjusted (non-GAAP) Operating Earnings | $ | 0.96 | $ | 925 | $ | 165 | $ | 114 | $ | 129 | $ | 65 | $ | 474 | ||||||||||||||
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 percent to 29.0 percent. 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 45.4 percent and 40.3 percent for the three months ended March 31, 2019 and 2018, respectively.
Webcast Information
Exelon will discuss first 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 May 2, 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' First Quarter 2019 Quarterly Report on Form 10-Q (to be filed on May 2, 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.
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GAAP Consolidated Statements of Operations and | ||||||||||||||||||||
Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments | ||||||||||||||||||||
(unaudited) |
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(in millions, except per share data) |
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Three Months Ended | Three Months Ended | |||||||||||||||||||
March 31, 2019 | March 31, 2018 | |||||||||||||||||||
Non-GAAP | Non-GAAP | |||||||||||||||||||
GAAP (a) | Adjustments | GAAP (a) | Adjustments | |||||||||||||||||
Operating revenues | $ | 9,477 | $ | 52 | (b) | $ | 9,693 | $ | 97 | (b) | ||||||||||
Operating expenses | ||||||||||||||||||||
Purchased power and fuel | 4,553 | 20 | (b),(c) | 4,727 | (183 | ) | (b),(c) | |||||||||||||
Operating and maintenance | 2,189 | 56 | (c),(d),(e) | 2,384 | (36 | ) | (c),(d),(f) | |||||||||||||
Depreciation and amortization | 1,075 | (100 | ) | (c) | 1,091 | (137 | ) | (c) | ||||||||||||
Taxes other than income | 445 | — | 446 | — | ||||||||||||||||
Total operating expenses | 8,262 | 8,648 | ||||||||||||||||||
Gain on sales of assets and businesses | 3 | — | 56 | (53 | ) | (c) | ||||||||||||||
Operating income | 1,218 | 1,101 | ||||||||||||||||||
Other income and (deductions) | ||||||||||||||||||||
Interest expense, net | (403 | ) | 15 | (b) | (371 | ) | — | |||||||||||||
Other, net | 467 | (358 | ) | (c),(g) | (28 | ) | 111 | (g) | ||||||||||||
Total other income and (deductions) | 64 | (399 | ) | |||||||||||||||||
Income before income taxes | 1,282 | 702 | ||||||||||||||||||
Income taxes | 310 | (139 | ) | (b),(c),(d),(e),(g),(h) | 59 | 148 | (b),(c),(d),(f),(g),(h) | |||||||||||||
Equity in losses of unconsolidated affiliates | (6 | ) | — | (7 | ) | — | ||||||||||||||
Net income | 966 | 636 | ||||||||||||||||||
Net income attributable to noncontrolling interests | 59 | (67 | ) | (i) | 51 | 23 | (i) | |||||||||||||
Net income attributable to common shareholders | $ | 907 | $ | 585 | ||||||||||||||||
Effective tax rate(h) | 24.2 | % | 8.4 | % | ||||||||||||||||
Earnings per average common share | ||||||||||||||||||||
Basic | $ | 0.93 | $ | 0.61 | ||||||||||||||||
Diluted | $ | 0.93 | $ | 0.60 | ||||||||||||||||
Average common shares outstanding | ||||||||||||||||||||
Basic | 971 | 966 | ||||||||||||||||||
Diluted | 972 | 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) | $ | 0.03 | $ | 0.20 | ||||||||||||||||
Unrealized (gains) losses related to NDT fund investments (g) | (0.20 | ) | 0.07 | |||||||||||||||||
Plant retirements and divestitures (c) | 0.02 | 0.10 | ||||||||||||||||||
Cost management program (d) | 0.01 | 0.01 | ||||||||||||||||||
Noncontrolling interests (i) | 0.07 | (0.02 | ) | |||||||||||||||||
Total adjustments | $ | (0.06 | ) | (j) | $ | 0.36 |
(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 and accelerated depreciation and amortization expenses associated with the 2017 decision to early retire the Three Mile Island (TMI) nuclear facility, partially offset by a gain associated with Generation's sale of its electrical contracting business. In 2019, adjustment to exclude accelerated depreciation and amortization expenses associated with Generation's previous decision to early retire the TMI nuclear facility and a benefit associated with a remeasurement of the TMI asset retirement obligation. | |
(d) | Adjustment to exclude reorganization costs related to cost management programs. | |
(e) | Adjustment to exclude the impairment of certain wind projects at Generation. | |
(f) | Adjustment to exclude costs related to the PHI acquisition. | |
(g) | 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. | |
(h) | The effective tax rate related to Adjusted (non-GAAP) Operating Earnings is 16.8 percent and 17.1 percent for the three months ended March 31, 2019 and March 31, 2018, respectively. | |
(i) | 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. | |
(j) | Amounts may not sum due to rounding. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190502005375/en/