EX-99.1 2 d387433dex991.htm PRESS RELEASE AND EARNINGS RELEASE ATTACHMENTS Press release and earnings release attachments

Exhibit 99.1

 

LOGO

News Release

 

Contact:  

JaCee Burnes

Investor Relations

312-394-2948

 

Judy Rader

Corporate Communications

312-394-7417

      FOR IMMEDIATE RELEASE

EXELON ANNOUNCES SECOND QUARTER 2012 RESULTS

CHICAGO (Aug. 1, 2012) – Exelon Corporation (NYSE: EXC) announced second quarter 2012 consolidated earnings as follows:

 

     Second Quarter  
     2012      2011  

Adjusted (non-GAAP) Operating Results:

     

Net Income ($ millions)

   $ 522       $ 697   

Diluted Earnings per Share

   $ 0.61       $ 1.05   
  

 

 

    

 

 

 

GAAP Results:

     

Net Income ($ millions)

   $ 286       $ 620   

Diluted Earnings per Share

   $ 0.33       $ 0.93   

“We have delivered on our financial and operating commitments with solid second quarter earnings, and are reaffirming our full-year operating earnings guidance of $2.55 to $2.85 per share.” said Christopher M. Crane, Exelon’s president and CEO. “Our businesses are performing well. Exelon Generation’s nuclear fleet achieved a capacity factor of 93.4 percent, and our delivery companies – BGE, ComEd and PECO – provided strong operational and financial performance for the quarter. We are also pleased with the results of our merger integration efforts to date and are confident of realizing the value investors expect from the Exelon-Constellation merger.”

Second Quarter Operating Results

Second quarter 2012 earnings include financial results for Constellation Energy (Constellation) and Baltimore Gas and Electric Company (BGE). Therefore, the composition of results of operations from 2012 and 2011 are not comparable for Exelon Generation Company, LLC (Generation), BGE and Exelon.

 

1


As shown in the table above, Exelon’s adjusted (non-GAAP) operating earnings declined to $0.61 per share in the second quarter of 2012 from $1.05 per share in the second quarter of 2011. Earnings in second quarter 2012 primarily reflected the following negative factors:

 

   

Lower energy margins at Generation, resulting from decreased capacity pricing related to the Reliability Pricing Model (RPM) for the PJM Interconnection, LLC (PJM) market, higher nuclear fuel costs and lower realized market prices for the sale of energy in the Midwest and Mid-Atlantic regions;

 

   

Higher operating and maintenance expenses, including increased labor, contracting and benefit costs;

 

   

Impact of increased average diluted common shares outstanding as a result of the merger; and

 

   

Increased depreciation and amortization expense due to ongoing capital expenditures.

These factors were partially offset by:

 

   

The addition of BGE’s financial results and Constellation’s contribution to Generation’s energy margins; and

 

   

Fewer nuclear outage days.

Adjusted (non-GAAP) operating earnings for the second quarter of 2012 do not include the following items (after tax) that were included in reported GAAP earnings:

 

     (in millions)     (per diluted share)  

Mark-to-market gains primarily from Generation’s economic hedging activities, net of intercompany eliminations

   $ 123      $ 0.15   

Unrealized losses related to Nuclear Decommissioning Trust (NDT) fund investments to the extent not offset by contractual accounting

   $ (19   $ (0.02

Financial impacts associated with plant retirements and divestitures

   $ 1        —     

Certain costs related to the merger and integration initiatives

   $ (67   $ (0.08

Non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value at the merger date

   $ (281   $ (0.33

Non-cash amortization of certain debt recorded at fair value at the merger date

   $ 3        —     

Non-cash benefit resulting from reassessment of state deferred income taxes

   $ 4        —     
  

 

 

   

 

 

 

 

2


Adjusted (non-GAAP) operating earnings for the second quarter of 2011 do not include the following items (after tax) that were included in reported GAAP earnings:

 

     (in millions)     (per diluted share)  

Mark-to-market losses primarily from Generation’s economic hedging activities

   $ (75   $ (0.12

Unrealized gains related to NDT fund investments to the extent not offset by contractual accounting

   $ 6      $ 0.01   

One-time benefits for the recovery of previously incurred costs per ComEd’s 2011 distribution rate case order

   $ 17      $ 0.03   

Certain costs related to the merger and integration initiatives

   $ (15   $ (0.02

Financial impacts associated with the planned retirement of certain Generation fossil generating units

   $ (10   $ (0.02
  

 

 

   

 

 

 

Second Quarter and Recent Highlights

 

   

Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station, produced 35,137 gigawatt-hours (GWh) in the second quarter of 2012, compared with 33,167 GWh in the second quarter of 2011. The output data excludes the units owned by Constellation Energy Nuclear Group LLC (CENG). Excluding Salem and the units owned by CENG, the Exelon-operated nuclear plants achieved a 93.4 percent capacity factor for the second quarter of 2012 compared with 89.6 percent for the second quarter of 2011. The Exelon-operated nuclear plants completed one scheduled refueling outage in the second quarter of 2012, compared with completing two scheduled refueling outages in the second quarter of 2011. The number of planned refueling outage days totaled 51 in the second quarter of 2012 versus 103 days in the second quarter of 2011. The number of non-refueling outage days at the Exelon-operated plants totaled 16 days in the second quarter of 2012 compared with 24 days in the second quarter of 2011.

 

   

Fossil and Renewables Operations: The equivalent demand forced outage rate for Generation’s fossil fleet is 4.5 percent in the first half of 2012, compared with 5.0 percent in the first half of 2011. The 2012 fossil fleet results include former Constellation plants, exclusive of the Maryland Clean Coal plants to be sold, whereas 2011 data include only legacy Exelon plants. The equivalent availability factor for the hydroelectric facilities was 96.2 percent in the second quarter of 2012, compared with 93.4 percent in the second quarter of 2011. The change was largely due to planned outages in April 2011. The energy capture for the wind fleet was 95.0 percent in the second quarter of 2012, compared with 93.0 percent in the second quarter of 2011.

 

3


   

ComEd Distribution Formula Rate Cases: On November 8, 2011, ComEd filed its initial formula rate tariff and associated testimony based on 2010 costs and 2011 plant additions. The primary purpose of this initial proceeding was to establish the formula rate under which rates will be calculated going-forward, and the initial rates, which went into effect in late June. On May 30, 2012 the Illinois Commerce Commission (ICC) issued its final Order (Order) in ComEd’s 2011 formula rate proceeding under the Energy Infrastructure Modernization Act (EIMA). The Order reduced the annual revenue requirement by $168 million, or approximately $110 million more than the reduction proposed by ComEd. Of this incremental revenue requirement reduction, approximately $50 million reflected the ICC’s determination that certain costs should be recovered through alternative rate recovery tariffs available to ComEd or will be reflected in the annual reconciliation, thereby primarily delaying the timing of cash flows. In the second quarter of 2012, ComEd recorded a reduction of revenue of approximately $100 million pre-tax to decrease the regulatory asset for the 2011 and 2012 reconciliations consistent with the terms of the Order. On June 22, 2012 the ICC granted expedited rehearing on ComEd’s pension asset recovery, the use of average or year-end rate base in determining ComEd’s reconciliation revenue requirement and the interest rate charged on over/under recovered costs. A final order on rehearing is due by September 19, 2012.

 

   

BGE Electric and Gas Distribution Rate Case: On July 27, 2012, BGE filed an application for increases of $151 million and $53 million to its electric and gas base rates, respectively with the Maryland Public Service Commission (MDPSC). The requested rate of return on equity in the application is 10.5 percent. The MDPSC will determine any increase in rates after a 7-month proceeding with input from all interested parties. The new electric and gas distribution base rates are expected to take effect in late February 2013.

 

   

Debt Exchange: On June 13, 2012, Generation commenced private offers to certain eligible holders to exchange any and all of the $700 million outstanding 7.60 percent Senior Notes due 2032 (Old Notes) of Exelon Corporation which were assumed by Exelon in the merger with Constellation Energy Group, Inc., for:

 

   

Generation’s newly issued 4.25 percent Senior Notes due 2022, plus a cash payment; and

 

   

Generation’s newly issued 5.60 percent Senior Notes due 2042, plus a cash payment.

Pursuant to an exchange offer completed on July 12, 2012, Generation purchased $442 million of the outstanding Old Notes in exchange for issuing $535 million of new notes, including a cash payment of $60 million. Generation incurred gains associated with the early retirement of debt of approximately $13 million as a result of paying a price less than book value of the Old Notes. The gain was recorded as an increase to Long-term Debt within Generation’s Consolidated Balance Sheets and will be amortized to income over the life of the debt as a reduction in interest expense.

 

4


   

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. Expected generation represents the amount of energy estimated to be generated or purchased through owned or contracted-for capacity. The proportion of expected generation hedged as of June 30, 2012 is 99 to 102 percent for 2012, 79 to 82 percent for 2013 and 46 to 49 percent for 2014. 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

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.

Second quarter 2012 net income was $166 million compared with $443 million in the second quarter of 2011. Second quarter 2012 net income included (all after tax) mark-to-market gains of $120 million from economic hedging activities, unrealized losses of $19 million related to Nuclear Decommissioning Trust (NDT) fund investments, a net impact of $1 million for plant retirements and divestitures, certain costs of $57 million associated with the merger and integration initiatives, amortization of commodity contract intangibles of $281 million and $3 million of amortization of the fair value of certain debt expected to be retired in 2013. Second quarter 2011 net income included (all after tax) mark-to-market losses of $75 million from economic hedging activities, net costs of $10 million associated with the planned retirement of certain fossil generating units, unrealized gains of $6 million related to NDT fund investments and certain costs of $1 million associated with the proposed merger with Constellation.

Excluding the effects of these items, Generation’s net income in the second quarter of 2012 decreased $124 million compared with the same quarter in 2011. This decrease primarily reflected:

 

   

Lower energy margins at Generation, resulting from decreased capacity pricing related to RPM for the PJM market, higher nuclear fuel costs and lower realized market prices for the sale of energy in the Midwest and Mid-Atlantic regions;

 

   

Higher operating and maintenance expenses; and

 

   

Increased depreciation and amortization expense due to ongoing capital expenditures.

These items were partially offset by increased nuclear volumes, lower nuclear refueling outage costs and the contribution to Generation’s energy margins from Constellation.

 

5


Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $26.15 per megawatt-hour (MWh) in the second quarter of 2012 compared with $41.59 per MWh in the second quarter of 2011.

ComEd consists of electricity transmission and distribution operations in northern Illinois.

ComEd recorded net income of $42 million in the second quarter of 2012, compared with net income of $114 million in the second quarter of 2011. Second quarter net income in 2011 included an after-tax non-cash credit of $17 million for the recovery of previously incurred costs pursuant to the 2011 distribution rate case order. Excluding the effects of this item, ComEd’s net income in the second quarter of 2012 was down $55 million from the same quarter in 2011, primarily due to decreased distribution revenues as a result of a final order issued by the ICC on the 2011 performance based formula rate proceeding under the EIMA, higher operating and maintenance expenses reflecting increased labor and contracting costs driven, in part by EIMA initiatives and one-time benefits recorded in the second quarter of 2011 related to the 2011 ComEd electric distribution rate case.

These unfavorable items were partially offset by the effect of favorable weather in ComEd’s service territory and lower interest expense.

In the second quarter of 2012, heating degree-days in the ComEd service territory were down 33.9 percent relative to the same period in 2011 and were 28.9 percent below normal. For the second quarter of 2012, cooling degree-days in the ComEd service territory were up 78.5 percent relative to the same period in 2011 and were 94.0 percent above normal. Total retail electric deliveries increased 3.2 percent quarter over quarter.

Weather-normalized retail electric deliveries decreased 1.3 percent in the second quarter of 2012 relative to 2011, reflecting decreases in deliveries to both residential and small commercial and industrial (C&I) customers that were partially offset by an increase in deliveries to large C&I customers. For ComEd, weather had a favorable after-tax effect of $11 million on second quarter 2012 earnings relative to 2011 and a favorable after-tax effect of $12 million relative to normal weather.

PECO consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania.

PECO’s net income in the second quarter of 2012 was $79 million, compared with $82 million in the second quarter of 2011. Second quarter net income in 2012 included certain after-tax costs of $2 million associated with the merger and integration initiatives. Excluding the effect of this item, PECO’s net income in the second quarter of 2012 was down $1 million from the same quarter in 2011, primarily reflecting the effect of unfavorable weather in PECO’s service territory and lower load.

These unfavorable items were partially offset by lower operating and maintenance expenses reflecting decreased labor and contracting costs.

In the second quarter of 2012, heating degree-days in the PECO service territory were up 1.8 percent from 2011 and were 27.2 percent below normal. Total retail electric deliveries were down 4.5 percent quarter over quarter. On the retail gas side, deliveries in the second quarter of 2012 were down 6.0 percent from the second quarter of 2011.

 

6


Weather-normalized retail electric deliveries were down 2.7 percent in the second quarter of 2012 relative to 2011, reflecting declines in deliveries to all customer classes. Weather-normalized retail gas deliveries were down 3.7 percent in the second quarter of 2012. For PECO, weather had an unfavorable after-tax effect of $8 million on second quarter 2012 earnings relative to 2011 and a favorable after-tax effect of $1 million relative to normal weather.

BGE consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland.

BGE’s net income in the second quarter of 2012 was $13 million. The net income included after-tax costs of $1 million associated with the merger and integration initiatives. Excluding the effects of these items, BGE’s net income in the second quarter of 2012 was $14 million.

Adjusted (non-GAAP) Operating Earnings

Adjusted (non-GAAP) operating earnings, which generally exclude significant one-time charges or credits that are not normally associated with ongoing operations, mark-to-market adjustments from economic hedging activities and unrealized gains and losses from NDT fund investments, are provided as a supplement to results reported in accordance with GAAP. Management uses such adjusted (non-GAAP) operating earnings measures internally to evaluate the company’s performance and manage its operations. Reconciliation of GAAP to adjusted (non-GAAP) operating earnings for historical periods is attached. Additional earnings release attachments, which include the reconciliation on pages 7 and 8, are posted on Exelon’s Web site: www.exeloncorp.com and have been furnished to the Securities and Exchange Commission on Form 8-K on August 1, 2012.

Cautionary Statements Regarding Forward-Looking Information

This news 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, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company and Exelon Generation Company, LLC (Registrants) include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2011 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

 

7


Supplementary Data: Note 18; (2) Constellation Energy Group’s 2011 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 12; (3) the Registrant’s First Quarter 2012 Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors and (b) Part I, Financial Information, ITEM 1. Financial Statements: Note 15; 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 presentation. 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 news release.

###

Exelon Corporation is the nation’s leading competitive energy provider, with approximately $33 billion in annual revenues. Headquartered in Chicago, Exelon has operations and business activities in 47 states, the District of Columbia and Canada. Exelon is the largest competitive U.S. power generator, with approximately 35,000 megawatts of owned 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 100,000 business and public sector customers and approximately 1 million residential customers. Exelon’s utilities deliver electricity and natural gas to more than 6.6 million customers in central Maryland (BGE), northern Illinois (ComEd) and southeastern Pennsylvania (PECO).

 

8


Earnings Release Attachments

Table of Contents

 

Consolidating Statements of Operations—Three Months Ended June 30, 2012 and 2011

     1  

Consolidating Statements of Operations—Six Months Ended June 30, 2012 and 2011

     2  

Business Segment Comparative Statements of Operations—Generation and ComEd—Three and Six Months Ended June 30, 2012 and 2011

     3  

Business Segment Comparative Statements of Operations—PECO and BGE—Three and Six Months Ended June 30, 2012 and 2011

     4  

Business Segment Comparative Statements of Operations—Other—Three and Six Months Ended June 30, 2012 and 2011

     5  

Consolidated Balance Sheets—June 30, 2012 and December 31, 2011

     6  

Consolidated Statements of Cash Flows—Six Months Ended June 30, 2012 and 2011

     7  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations—Exelon—Three Months Ended June 30, 2012 and 2011

     8  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations—Exelon—Six Months Ended June 30, 2012 and 2011

     9  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Earnings By Business Segment—Three Months Ended June 30, 2012 and 2011

     10  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Earnings By Business Segment—Six Months Ended June 30, 2012 and 2011

     11  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations—Generation—Three and Six Months Ended June 30, 2012 and 2011

     12  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations—ComEd—Three and Six Months Ended June 30, 2012 and 2011

     13  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations—PECO—Three and Six Months Ended June 30, 2012 and 2011

     14  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations—BGE—Three Months Ended June 30, 2012 and March 12, 2012 Through June 30, 2012

     15  

Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations—Other—Three and Six Months Ended June 30, 2012 and 2011

     16  

Exelon Generation Statistics—Three Months Ended June 30, 2012, March 31, 2012, December 31, 2011, September 30, 2011 and June 30, 2011

     17  

Exelon Generation Statistics—Six Months Ended June 30, 2012 and 2011

     18  

ComEd Statistics—Three and Six Months Ended June 30, 2012 and 2011

     19  

PECO Statistics—Three and Six Months Ended June 30, 2012 and 2011

     20  

BGE Statistics—Three Months Ended June 30, 2012 and March 12, 2012 Through June 30, 2012

     21  


EXELON CORPORATION

Consolidating Statements of Operations

(unaudited)

(in millions)

 

     Three Months Ended June 30, 2012  
     Generation     ComEd     PECO     BGE     Other (a)     Exelon
Consolidated
 

Operating revenues

   $ 3,753     $ 1,281     $ 715     $ 616     $ (411   $ 5,954  

Operating expenses

            

Purchased power and fuel

     1,852       587       296       285       (414     2,606  

Operating and maintenance

     1,209       331       172       161       (2     1,871  

Depreciation, amortization, accretion and depletion

     204       152       54       71       13       494  

Taxes other than income

     90       69       42       47       6       254  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,355       1,139       564       564       (397     5,225  

Equity in loss of unconsolidated affiliates

     (57     —          —          —          —          (57
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     341       142       151       52       (14     672  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (85     (74     (31     (34     (32     (256

Other, net

     (33     3       2       7       20       (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (118     (71     (29     (27     (12     (257
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     223       71       122       25       (26     415  

Income taxes

     58       29       42       9       (12     126  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     165       42       80       16       (14     289  

Net loss attributable to noncontrolling interests, preferred security dividends and preference stock dividends

     (1     —          1       3       —          3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) on common stock

   $ 166     $ 42     $ 79     $ 13     $ (14   $ 286  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended June 30, 2011  
     Generation     ComEd     PECO     BGE     Other (a)     Exelon
Consolidated
 

Operating revenues

   $ 2,455     $ 1,444     $ 842     $ —        $ (245   $ 4,496  

Operating expenses

            

Purchased power and fuel

     841       716       408       —          (249     1,716  

Operating and maintenance

     763       268       172       —          23       1,226  

Depreciation, amortization, accretion and depletion

     138       136       50       —          5       329  

Taxes other than income

     66       70       51       —          4       191  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     1,808       1,190       681       —          (217     3,462  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     647       254       161       —          (28     1,034  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (45     (86     (34     —          (17     (182

Other, net

     76       4       3       —          18       101  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     31       (82     (31     —          1       (81
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     678       172       130         (27     953  

Income taxes

     235       58       47       —          (8     332  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     443       114       83       —          (19     621  

Preferred security dividends

     —          —          1       —          —          1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) on common stock

   $ 443     $ 114     $ 82     $ —        $ (19   $ 620  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Other primarily includes eliminating and consolidating adjustments, Exelon’s corporate operations, shared service entities and other financing and investment activities.

 

1


EXELON CORPORATION

Consolidating Statements of Operations

(unaudited)

(in millions)

 

     Six Months Ended June 30, 2012 (a)  
     Generation     ComEd     PECO     BGE     Other (b)     Exelon
Consolidated
 

Operating revenues

   $ 6,492     $ 2,670     $ 1,590     $ 668     $ (780   $ 10,640  

Operating expenses

            

Purchased power and fuel

     2,896       1,208       707       352       (792     4,371  

Operating and maintenance

     2,382       650       375       222       206       3,835  

Depreciation, amortization, accretion and depletion

     357       300       107       90       22       876  

Taxes other than income

     164       144       74       57       9       448  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     5,799       2,302       1,263       721       (555     9,530  

Equity in loss of unconsolidated affiliates

     (79     —          —          —          —          (79
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     614       368       327       (53     (225     1,031  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (138     (156     (62     (42     (53     (451

Other, net

     145       7       5       8       29       194  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     7       (149     (57     (34     (24     (257
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     621       219       270       (87     (249     774  

Income taxes

     289       90       93       (38     (150     284  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     332       129       177       (49     (99     490  

Net loss attributable to noncontrolling interests, preferred security dividends and preference stock dividends

     (2     —          2       4       —          4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) on common stock

   $ 334     $ 129     $ 175     $ (53   $ (99   $ 486  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      Six Months Ended June 30, 2011  
     Generation     ComEd     PECO     BGE     Other (b)     Exelon
Consolidated
 

Operating revenues

   $ 5,098     $ 2,910     $ 1,996     $ —        $ (553   $ 9,451  

Operating expenses

            

Purchased power and fuel

     1,724       1,505       1,042       —          (555     3,716  

Operating and maintenance

     1,517       534       378       —          20       2,449  

Depreciation, amortization, accretion and depletion

     277       270       98       —          11       656  

Taxes other than income

     132       147       106       —          9       394  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,650       2,456       1,624       —          (515     7,215  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     1,448       454       372       —          (38     2,236  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (91     (172     (68     —          (32     (363

Other, net

     152       8       8       —          28       196  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     61       (164     (60     —          (4     (167
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     1,509       290       312       —          (42     2,069  

Income taxes

     571       107       102       —          (1     779  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     938       183       210       —          (41     1,290  

Preferred security dividends

     —          —          2       —          —          2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) on common stock

   $ 938     $ 183     $ 208     $ —        $ (41   $ 1,288  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Includes financial results for Constellation and BGE beginning on March 12, 2012, the date the merger was completed.
(b) Other primarily includes eliminating and consolidating adjustments, Exelon’s corporate operations, shared service entities and other financing and investment activities.

 

2


EXELON CORPORATION

Business Segment Comparative Statements of Operations

(unaudited)

(in millions)

 

     Generation  
     Three Months Ended June 30,     Six Months Ended June 30,  
     2012     2011     Variance     2012 (a)     2011     Variance  

Operating revenues

   $ 3,753     $ 2,455     $ 1,298     $ 6,492     $ 5,098     $ 1,394  

Operating expenses

            

Purchased power and fuel

     1,852       841       1,011       2,896       1,724       1,172  

Operating and maintenance

     1,209       763       446       2,382       1,517       865  

Depreciation, amortization, accretion and depletion

     204       138       66       357       277       80  

Taxes other than income

     90       66       24       164       132       32  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,355       1,808       1,547       5,799       3,650       2,149  

Equity in loss of unconsolidated affiliates

     (57     —          (57     (79     —          (79
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     341       647       (306     614       1,448       (834
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (85     (45     (40     (138     (91     (47

Other, net

     (33     76       (109     145       152       (7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (118     31       (149     7       61       (54
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     223       678       (455     621       1,509       (888

Income taxes

     58       235       (177     289       571       (282
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     165       443       (278     332       938       (606

Net loss attributable to noncontrolling interests

     (1     —          (1     (2     —          (2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income on common stock

   $ 166     $ 443     $ (277   $ 334     $ 938     $ (604
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Includes financial results for Constellation beginning on March 12, 2012, the date the merger was completed.

 

     ComEd  
     Three Months Ended June 30,     Six Months Ended June 30,  
     2012     2011     Variance     2012     2011     Variance  

Operating revenues

   $ 1,281     $ 1,444     $ (163   $ 2,670     $ 2,910     $ (240

Operating expenses

            

Purchased power

     587       716       (129     1,208       1,505       (297

Operating and maintenance

     331       268       63       650       534       116  

Depreciation and amortization

     152       136       16       300       270       30  

Taxes other than income

     69       70       (1     144       147       (3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     1,139       1,190       (51     2,302       2,456       (154
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     142       254       (112     368       454       (86
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (74     (86     12       (156     (172     16  

Other, net

     3       4       (1     7       8       (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (71     (82     11       (149     (164     15  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     71       172       (101     219       290       (71

Income taxes

     29       58       (29     90       107       (17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 42     $ 114     $ (72   $ 129     $ 183     $ (54
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

3


EXELON CORPORATION

Business Segment Comparative Statements of Operations

(unaudited)

(in millions)

 

     PECO  
     Three Months Ended June 30,     Six Months Ended June 30,  
     2012     2011     Variance     2012     2011     Variance  

Operating revenues

   $ 715     $ 842     $ (127   $ 1,590     $ 1,996     $ (406

Operating expenses

            

Purchased power and fuel

     296       408       (112     707       1,042       (335

Operating and maintenance

     172       172       —          375       378       (3

Depreciation and amortization

     54       50       4       107       98       9  

Taxes other than income

     42       51       (9     74       106       (32
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     564       681       (117     1,263       1,624       (361
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     151       161       (10     327       372       (45
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (31     (34     3       (62     (68     6  

Other, net

     2       3       (1     5       8       (3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (29     (31     2       (57     (60     3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     122       130       (8     270       312       (42

Income taxes

     42       47       (5     93       102       (9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     80       83       (3     177       210       (33

Preferred security dividends

     1       1       —          2       2       —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income on common stock

   $ 79     $ 82     $ (3   $ 175     $ 208     $ (33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     BGE  
     Three Months Ended June 30,     March 12, 2012 through June 30, 2012  
         2012             2011             Variance             2012             2011             Variance      

Operating revenues

   $ 616     $ —        $ 616     $ 668     $ —        $ 668  

Operating expenses

            

Purchased power and fuel

     285       —          285       352       —          352  

Operating and maintenance

     161       —          161       222       —          222  

Depreciation and amortization

     71       —          71       90       —          90  

Taxes other than income

     47       —          47       57       —          57  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     564       —          564       721       —          721  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     52       —          52       (53     —          (53
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (34     —          (34     (42     —          (42

Other, net

     7       —          7       8       —          8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (27     —          (27     (34     —          (34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     25       —          25       (87     —          (87

Income taxes

     9       —          9       (38     —          (38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     16       —          16       (49     —          (49

Preference stock dividends

     3       —          3       4       —          4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss on common stock

   $ 13     $ —        $ 13     $ (53   $ —        $ (53
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

4


EXELON CORPORATION

Business Segment Comparative Statements of Operations

(unaudited)

(in millions)

 

     Other (a)  
     Three Months Ended June 30,     Six Months Ended June 30,  
         2012             2011             Variance             2012 (b)         2011     Variance  

Operating revenues

   $ (411   $ (245   $ (166   $ (780   $ (553   $ (227

Operating expenses

            

Purchased power and fuel

     (414     (249     (165     (792     (555     (237

Operating and maintenance

     (2     23       (25     206       20       186  

Depreciation and amortization

     13       5       8       22       11       11  

Taxes other than income

     6       4       2       9       9       —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     (397     (217     (180     (555     (515     (40
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (14     (28     14       (225     (38     (187
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (32     (17     (15     (53     (32     (21

Other, net

     20       18       2       29       28       1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (12     1       (13     (24     (4     (20
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (26     (27     1       (249     (42     (207

Income taxes

     (12     (8     (4     (150     (1     (149
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (14   $ (19   $ 5     $ (99   $ (41   $ (58
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Other primarily includes eliminating and consolidating adjustments, Exelon’s corporate operations, shared service entities and other financing and investment activities.
(b) Includes financial results for Constellation and BGE beginning on March 12, 2012, the date the merger was completed.

 

5


EXELON CORPORATION

Consolidated Balance Sheets

(unaudited)

(in millions)

 

     June 30, 2012 (a)     December 31, 2011  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 1,349     $ 1,016  

Restricted cash and investments

     83       40  

Restricted cash and investments of variable interest entities

     34       —     

Accounts receivable, net

    

Customer

     2,828       1,613  

Other

     1,252       1,000  

Accounts receivable, net, variable interest entities

     241       —     

Mark-to-market derivative assets

     1,170       432  

Unamortized energy contracts assets

     1,433       13  

Inventories, net

    

Fossil fuel

     227       208  

Materials and supplies

     772       656  

Deferred income taxes

     63       —     

Regulatory assets

     867       390  

Other

     1,435       345  
  

 

 

   

 

 

 

Total current assets

     11,754       5,713  
  

 

 

   

 

 

 

Property, plant and equipment, net

     42,613       32,570  

Deferred debits and other assets

    

Regulatory assets

     6,103       4,518  

Nuclear decommissioning trust (NDT) funds

     6,841       6,507  

Investments

     836       751  

Investments in affiliates

     420       15  

Investment in CENG

     1,878       —     

Goodwill

     2,626       2,625  

Mark-to-market derivative assets

     1,241       650  

Unamortized energy contracts assets

     1,317       388  

Pledged assets for Zion Station decommissioning

     650       734  

Other

     1,155       524  
  

 

 

   

 

 

 

Total deferred debits and other assets

     23,067       16,712  
  

 

 

   

 

 

 

Total assets

   $ 77,434     $ 54,995  
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Current liabilities

    

Short-term borrowings

   $ 376     $ 163  

Short-term notes payable—accounts receivable agreement

     225       225  

Long-term debt due within one year

     526       828  

Long-term debt of variable interest entities due within one year

     65       —     

Accounts payable

     2,183       1,444  

Accounts payable of variable interest entities

     119       —     

Accrued expenses

     1,441       1,255  

Deferred income taxes

     482       1  

Regulatory liabilities

     259       197  

Dividends payable

     4       349  

Mark-to-market derivative liabilities

     829       112  

Unamortized energy contract liabilities

     616       —     

Other

     958       560  
  

 

 

   

 

 

 

Total current liabilities

     8,083       5,134  
  

 

 

   

 

 

 

Long-term debt

     17,045       11,799  

Long-term debt to financing trusts

     649       390  

Long-term debt of variable interest entity

     479       —     

Deferred credits and other liabilities

    

Deferred income taxes and unamortized investment tax credits

     10,823       8,253  

Asset retirement obligations

     4,126       3,884  

Pension obligations

     2,610       2,194  

Non-pension postretirement benefit obligations

     2,703       2,263  

Spent nuclear fuel obligation

     1,019       1,019  

Regulatory liabilities

     3,963       3,627  

Mark-to-market derivative liabilities

     578       126  

Unamortized energy contract liabilities

     747       —     

Payable for Zion Station decommissioning

     464       563  

Other

     1,736       1,268  
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     28,769       23,197  
  

 

 

   

 

 

 

Total liabilities

     55,025       40,520  
  

 

 

   

 

 

 

Commitments and contingencies

    

Preferred securities of subsidiary

     87       87  

Shareholders’ equity

    

Common stock

     16,559       9,107  

Treasury stock, at cost

     (2,327     (2,327

Retained earnings

     10,114       10,055  

Accumulated other comprehensive loss, net

     (2,313     (2,450
  

 

 

   

 

 

 

Total shareholders’ equity

     22,033       14,385  

BGE preference stock not subject to mandatory redemption

     193       —     

Noncontrolling interest

     96       3  
  

 

 

   

 

 

 

Total equity

     22,322       14,388  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 77,434     $ 54,995  
  

 

 

   

 

 

 

 

(a) Includes the financial information of Constellation and BGE.

 

6


EXELON CORPORATION

Consolidated Statements of Cash Flows

(unaudited)

(in millions)

 

     Six Months Ended
June 30,
 
     2012 (a)     2011  

Cash flows from operating activities

    

Net income

   $ 490     $ 1,290  

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization, accretion and depletion including nuclear fuel and energy contract amortization

     1,895       1,114  

Deferred income taxes and amortization of investment tax credits

     227       590  

Net fair value changes related to derivatives

     (323     264  

Net realized and unrealized gains on NDT fund investments

     (70     (51

Other non-cash operating activities

     937       378  

Changes in assets and liabilities:

    

Accounts receivable

     414       —     

Inventories

     45       17  

Accounts payable, accrued expenses and other current liabilities

     (1,058     (486

Option premiums (paid) received, net

     (109     38  

Counterparty collateral received (posted), net

     451       (494

Income taxes

     259       691  

Pension and non-pension postretirement benefit contributions

     (90     (2,089

Other assets and liabilities

     (339     (249
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     2,729       1,013  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (2,816     (1,985

Proceeds from nuclear decommissioning trust fund sales

     5,371       1,657  

Investment in nuclear decommissioning trust funds

     (5,483     (1,772

Cash acquired from Constellation

     964       —     

Proceeds from sales of investments

     12       —     

Purchases of investments

     (5     —     

Change in restricted cash

     (15     (2

Other investing activities

     (12 )     28  
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (1,984     (2,074
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term debt

     179       140  

Issuance of long-term debt

     850       599  

Retirement of long-term debt

     (649     (2

Dividends paid on common stock

     (773     (695

Dividends paid to former Constellation shareholders

     (51     —     

Proceeds from employee stock plans

     42       15  

Other financing activities

     (10     (46
  

 

 

   

 

 

 

Net cash flows (used in) provided by financing activities

     (412     11  
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     333       (1,050

Cash and cash equivalents at beginning of period

     1,016       1,612  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,349     $ 562  
  

 

 

   

 

 

 

 

(a) Includes financial results for Constellation and BGE beginning on March 12, 2012, the date the merger was completed.

 

7


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, 2012 (a)     Three Months Ended June 30, 2011  
     GAAP (b)     Adjustments     Adjusted
Non-GAAP
    GAAP (b)     Adjustments     Adjusted
Non-GAAP
 

Operating revenues

   $ 5,954     $ 412 (c),(d),(e)    $ 6,366     $ 4,496     $ (8 )(c)    $ 4,488  

Operating expenses

            

Purchased power and fuel

     2,606       262 (c),(d),(e)      2,868       1,716       (124 )(d)      1,592  

Operating and maintenance

     1,871       (144 )(c),(f)      1,727       1,226       (15 )(c),(f),(j)      1,211  

Depreciation, amortization, accretion and depletion

     494       (14 )(c),(f)      480       329       (22 )(c)      307  

Taxes other than income

     254       (2 )(c)      252       191       —          191  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     5,225       102        5,327       3,462       (161     3,301  

Equity in loss of unconsolidated affiliates

     (57     52 (e),(f)      (5     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     672       362        1,034       1,034       153        1,187  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (256     (5 )(g)      (261     (182     —          (182

Other, net

     (1     62 (c),(f),(h)      61       101       (25 )(h)      76  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (257     57        (200     (81     (25     (106
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     415       419        834       953       128        1,081  

Income taxes

     126      
 
183
 
(c),(d),(e), 
(f),(g),(h),(i) 
    309       332      
 
51
 
(c),(d),(f), 
(h),(j) 
    383  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     289       236        525       621       77        698  

Net loss attributable to noncontrolling interests, preferred security dividends and preference stock dividends

     3       —          3       1       —          1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income on common stock

   $ 286     $ 236      $ 522     $ 620     $ 77      $ 697  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     30.4       37.1     34.8       35.4

Earnings per average common share

            

Basic

   $ 0.34     $ 0.28      $ 0.62     $ 0.93     $ 0.12      $ 1.05  

Diluted

   $ 0.33     $ 0.28      $ 0.61     $ 0.93     $ 0.12      $ 1.05  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average common shares outstanding

            

Basic

     853         853       663         663  

Diluted

     856         856       664         664  

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

  

 

Plant retirements and divestitures (c)

     $ —            $ 0.02    

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

       (0.15         0.12    

Amortization of commodity contract intangibles (e)

       0.33           —       

Constellation merger and integration costs (f)

       0.08           0.02    

Amortization of the fair value of certain debt (g)

       —              —       

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

       0.02           (0.01  

Reassessment of state deferred income taxes (i)

       —              —       

Recovery of costs pursuant to the 2011 distribution rate case
order (j)

       —              (0.03  
    

 

 

       

 

 

   

Total adjustments

     $ 0.28         $ 0.12    
    

 

 

       

 

 

   

 

(a) Includes financial results for Constellation and BGE beginning on March 12, 2012, the date the merger was completed.
(b) Results reported in accordance with accounting principles generally accepted in the United States (GAAP).
(c) Adjustment to exclude costs associated with the retirement of fossil generating units, the impacts of the Federal Energy Regulatory Commission (FERC) approved reliability-must-run rate schedule, and the revenues and operating expenses related to three generation facilities required to be sold within 180 days of the merger.
(d) Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations.
(e) Adjustment to exclude the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value at the merger date.
(f) Adjustment to exclude certain costs incurred associated with the merger, including transaction costs, employee-related expenses (e.g. severance, relocation and retention bonuses) and integration initiatives.
(g) Adjustment to exclude the non-cash amortization of certain debt recorded at fair value at the merger date expected to be retired in 2013.
(h) Adjustment to exclude the unrealized gains in 2011 and losses in 2012 associated with Generation’s NDT fund investments and the associated contractual accounting relating to income taxes.
(i) Adjustment to exclude a one-time, non-cash benefit associated with a change in state deferred tax rates resulting from a reassessment of anticipated apportionment of Exelon’s deferred taxes as a result of the merger.
(j) Adjustment to exclude one-time benefits for the recovery of previously incurred costs related to the 2009 restructuring plan and for the passage of Federal health care legislation in 2010.

 

8


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, 2012 (a)     Six Months Ended June 30, 2011  
     GAAP (b)     Adjustments     Adjusted
Non-GAAP
    GAAP (b)     Adjustments     Adjusted
Non-GAAP
 

Operating revenues

   $ 10,640     $
 
559
 
(c),(d), 
(e),(f) 
  $ 11,199     $ 9,451     $ (8 )(c)    $ 9,443  

Operating expenses

            

Purchased power and fuel

     4,371      
 
262
 
(c),(d), 
(e),(g) 
    4,633       3,716       (272 )(d)      3,444  

Operating and maintenance

     3,835      
 
(716
 
)(c),(e),(f), 
(g),(h),(i) 
    3,119       2,449      
 
(17
 
)(c),(g), 
(m) 
    2,432  

Depreciation, amortization, accretion and depletion

     876       (30 )(c),(g)      846       656       (46 )(c)      610  

Taxes other than income

     448       (1 )(c),(f)      447       394       —          394  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     9,530       (485     9,045       7,215       (335     6,880  

Equity in earnings of unconsolidated affiliates

     (79     60 (e),(g)      (19     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     1,031       1,104        2,135       2,236       327        2,563  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income and deductions

            

Interest expense

     (451     (6 )(j)      (457     (363     —          (363

Other, net

     194       (57 )(c),(g),(k)      137       196       (88 )(k)      108  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and deductions

     (257     (63     (320     (167     (88     (255
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     774       1,041        1,815       2,069       239        2,308  

Income taxes

     284      
 
 
402
 
 
(c),(d),(e), 
(f),(g),(h),(i), 
(j),(k),(l) 
    686       779      
 
51
 
(c),(d),(g), 
(k),(m),(n) 
    830  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income on common stock

     490       639        1,129       1,290       188        1,478  

Net loss attributable to noncontrolling interests, preferred security dividends and preference stock dividends

     4       —          4       2       —          2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 486     $ 639      $ 1,125     $ 1,288     $ 188      $ 1,476  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     36.7       37.8     37.7       36.0

Earnings per average common share

            

Basic

   $ 0.62     $ 0.82      $ 1.44     $ 1.94     $ 0.28      $ 2.22  

Diluted

   $ 0.62     $ 0.82      $ 1.44     $ 1.94     $ 0.28      $ 2.22  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average common shares outstanding

            

Basic

     779         779       663         663  

Diluted

     781         781       664         664  

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

  

Plant retirements and divestitures (c)

     $ 0.01         $ 0.04    

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

       (0.21         0.25    

Amortization of commodity contract intangibles (e)

       0.46           —       

Maryland commitments (f)

       0.29           —       

Constellation merger and integration costs (g)

       0.23           0.02    

FERC settlement (h)

       0.22           —       

Other acquisition costs (i)

       —              —       

Amortization of the fair value of certain debt (j)

       —              —       

Unrealized (gains) related to NDT fund investments (k)

       (0.02         (0.04  

Reassessment of state deferred income taxes (l)

       (0.16         —       

Recovery of costs pursuant to the 2011 distribution rate case order (m)

       —              (0.03  

Charge resulting from Illinois tax rate change legislation (n)

       —              0.04    
    

 

 

       

 

 

   

Total adjustments

     $ 0.82         $ 0.28    
    

 

 

       

 

 

   

 

(a) Includes financial results for Constellation Energy including BGE, beginning on March 12, 2012, the date the acquisition was completed.
(b) Results reported in accordance with GAAP.
(c) Adjustment to exclude costs associated with the retirement of fossil generating units, the impacts of the FERC approved reliability-must-run rate schedule, and the revenues and operating expenses related to three generation facilities required to be sold within 180 days of the merger.
(d) Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities.
(e) Adjustment to exclude the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value at the merger date.
(f) Adjustment to exclude costs incurred as part of the Maryland order approving the merger transaction.
(g) Adjustment to exclude certain costs incurred associated with the merger, including transaction costs, employee-related expenses (e.g. severance, relocation and retention bonuses) and integration initiatives.
(h) Adjustment to exclude costs associated with the March 2012 settlement with the FERC.
(i) Adjustment to exclude certain costs associated with various acquisitions.
(i) Adjustment to exclude the non-cash amortization of certain debt recorded at fair value at the merger date expected to be retired in 2013.
(k) Adjustment to exclude the unrealized gains in 2011 and 2012 associated with Generation’s NDT fund investments and the associated contractual accounting relating to income taxes.
(l) Adjustment to exclude a one-time, non-cash benefit associated with a change in state deferred tax rates resulting from a reassessment of anticipated apportionment of Exelon’s deferred taxes as a result of the merger.
(m) Adjustment to exclude one-time benefits for the recovery of previously incurred costs related to the 2009 restructuring plan and for the passage of Federal health care legislation in 2010.
(n) Adjustment to exclude a one-time, non-cash charge to remeasure deferred taxes at higher corporate tax rates pursuant to the Illinois tax rate change legislation.

 

9


EXELON CORPORATION (a)

Reconciliation of Adjusted (non-GAAP) Operating

Earnings to GAAP Earnings (in millions)

Three Months Ended June 30, 2012 and 2011

 

     Exelon
Earnings per
Diluted Share
    Generation     ComEd     PECO         BGE         Other (b)     Exelon  

2011 GAAP Earnings (Loss)

   $ 0.93     $ 443     $ 114     $ 82     $ —        $ (19   $ 620  

2011 Adjusted (non-GAAP) Operating Earnings (Loss) Adjustments:

              

Mark-to-Market Impact of Economic Hedging Activities

     0.12       75       —          —          —          —          75  

Unrealized Gains Related to NDT Fund Investments (1)

     (0.01     (6     —          —          —          —          (6

Plant Retirements and Divestitures (2)

     0.02       10       —          —          —          —          10  

Recovery of Costs Pursuant to the 2011 Distribution Rate Case Order (3)

     (0.03     —          (17     —          —          —          (17

Constellation Merger and Integration Costs (4)

     0.02       1       —          —          —          14       15  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2011 Adjusted (non-GAAP) Operating Earnings (Loss)

     1.05       523       97       82       —          (5     697  

Year Over Year Effects on Earnings:

              

Generation Energy Margins, Excluding Mark-to-Market:

              

Nuclear Volume (5)

     0.03       22       —          —          —          —          22  

Nuclear Fuel Costs (6)

     (0.01     (12     —          —          —          —          (12

Capacity Pricing

     (0.03     (26     —          —          —          —          (26

Market and Portfolio Conditions (7)

     0.25       212       —          —          —          —          212  

Transmission Upgrades (8)

     —          6       —          —          —          (6     —     

ComEd, PECO and BGE Margins:

              

Weather

     —          —          11       (8     —   (c)      —          3  

Load

     (0.01     —          (4     (3     —   (c)      —          (7

Discrete Impacts of the 2012 Distribution Formula Rate Order (9)

     (0.07     —          (59     —          —          —          (59

Other Energy Delivery (10)

     0.28       —          42       1       199       —          242  

Discrete Impacts of the 2011 Distribution Rate Case Order (11)

     (0.03     —          (22     —          —          —          (22

Operating and Maintenance Expense:

              

Labor, Contracting and Materials (12)

     (0.24     (149     (10     9       (59     —          (209

Planned Nuclear Refueling Outages (13)

     0.04       31       —          —          —          —          31  

Pension and Non-Pension Postretirement Benefits (14)

     (0.03     (9     (5     (2     (4     (3     (23

Other Operating and Maintenance

     (0.12     (72     (3     (5     (32     11       (101

Depreciation and Amortization Expense (15)

     (0.13     (45     (9     (2     (43     (5     (104

Nuclear Decommissioning Trust Fund Special Transfer Tax Deduction (16)

     (0.07     (41     —          —          —          (2     (43

Equity in Losses of Unconsolidated Affiliates (17)

     —          (3     —          —          —          —          (3

Income Taxes

     —          (2     (3     2       1       (1     (3

Interest Expense, Net

     (0.05     (26     7       2       (21     (2     (40

Other

     (0.04     (10     —          5       (27     (1     (33

Share Differential (18)

     (0.21     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2012 Adjusted (non-GAAP) Operating Earnings (Loss)

     0.61       399       42       81       14       (14     522  

2012 Adjusted (non-GAAP) Operating Earnings (Loss) Adjustments:

              

Mark-to-Market Impact of Economic Hedging Activities

     0.15       120       —          —          —          3       123  

Unrealized Losses Related to NDT Fund Investments (1)

     (0.02     (19     —          —          —          —          (19

Plant Retirements and Divestitures (2)

     —          1       —          —          —          —          1  

Constellation Merger and Integration Costs (4)

     (0.08     (57     —          (2     (1     (7     (67

Amortization of Commodity Contract Intangibles (19)

     (0.33     (281     —          —          —          —          (281

Amortization of the Fair Value of Certain Debt (20)

     —          3       —          —          —          —          3  

Reassessment of State Deferred Income Taxes (21)

     —          —          —          —          —          4       4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2012 GAAP Earnings (Loss)

   $ 0.33     $ 166     $ 42     $ 79     $ 13     $ (14   $ 286  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) For the three months ended June 30, 2012, includes financial results for Constellation and BGE. Therefore, the results of operations from 2012 and 2011 are not comparable for Generation, BGE, Other and Exelon. The explanations below identify any significant or unusual items affecting the results of operations.
(b) Other primarily includes eliminating and consolidating adjustments, Exelon’s corporate operations, shared service entities and other financing and investment activities.
(c) As approved by the Maryland PSC, BGE records a monthly adjustment to residential and the majority of its commercial and industrial customers to eliminate the effect of abnormal weather and usage patterns per customer on distribution volumes, thereby recovering a specified dollar amount of distribution revenues per customer, by customer class, regardless of changes in consumption levels. Therefore, while these revenues are affected by customer growth, they will not be affected by actual weather or usage conditions.


(1) Reflects the impact of unrealized gains in 2011 and unrealized losses in 2012 on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements.
(2) Primarily reflects incremental accelerated depreciation associated with the retirement of four fossil generating units and compensation for operating two of the units past their planned May 31, 2011 retirement date under a FERC-approved reliability-must-run rate schedule. For 2012, also reflects revenues and operating expenses related to three generation facilities required to be sold within 180 days of the merger.
(3) Reflects one-time benefits pursuant to the ComEd 2011 electric distribution rate case order for the recovery of previously incurred costs related to the 2009 restructuring plan and for the passage of Federal health care legislation in 2010.
(4) Reflects certain costs incurred associated with the merger, including transaction costs, employee-related expenses (e.g. severance, relocation and retention bonuses) and integration initiatives.
(5) Primarily reflects the impact of decreased planned nuclear outage days in 2012, excluding Constellation Energy Nuclear Group, LLC (CENG).
(6) Primarily reflects the impact of higher nuclear fuel prices, excluding CENG.
(7) Primarily reflects the addition of Constellation’s financial results in 2012, partially offset by the impact of decreased realized market prices for the sale of energy in the Mid-Atlantic and Midwest regions.
(8) Reflects intercompany expense in 2011 at Generation for upgrades in transmission assets owned by ComEd, which are reflected as assets at Exelon Corporate.
(9) Reflects the impacts on distribution revenues recorded prior to March 31, 2012, pursuant to the final order issued by the Illinois Commerce Commission (ICC) on the 2011 performance based formula rate proceeding under the Energy Infrastructure Modernization Act (EIMA).
(10) For ComEd, primarily reflects increased distribution revenue pursuant to the 2011 electric distribution rate case order and the 2012 performance based formula rate, and increased cost recovery for energy efficiency and demand response programs (completely offset in operating and maintenance expense).
(11) Primarily reflects one-time net benefits pursuant to the 2011 ComEd electric distribution rate case order to reestablish previously expensed plant balances and to recognize the estimated recovery of funds for working capital related to the procurement of energy.
(12) Primarily reflects the impacts of increased wages and other benefits and increased contracting expenses (exclusive of planned nuclear refueling outages and incremental storm costs). At ComEd, increased contracting expenses primarily resulted from new projects related to EIMA. At PECO, decreased contracting expenses primarily relates to a reduction in construction and maintenance projects in 2012.
(13) Primarily reflects the impact of decreased planned nuclear refueling outage days in 2012, excluding Salem and CENG.
(14) The increase in pension and OPEB costs primarily reflect the impact of lower discount rates and expected return on assets for 2012 as compared to 2011.
(15) Includes increased depreciation expense across the operating companies due to ongoing capital expenditures.
(16) Reflects one-time interest and tax benefits in 2011 associated with a change in the timing of the deduction for the transfer of cash or investments from nonqualified nuclear decommissioning trust funds to qualified decommissioning trust funds pursuant to the Energy Policy Act of 2005 and related Treasury Regulations.
(17) Includes the non-cash amortization of the basis difference recorded at fair value at the merger date, partially offset by the equity in earnings in CENG.
(18) Reflects the impact on earnings per share due to the increase in Exelon’s average diluted common shares outstanding as a result of the merger.
(19) Represents the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value at the merger date.
(20) Represents the non-cash amortization of certain debt recorded at fair value at the merger date expected to be retired in 2013.
(21) Reflects a change in state deferred tax rates resulting from a reassessment of anticipated apportionment of Exelon’s deferred taxes as a result of the merger.

 

10


EXELON CORPORATION (a)

Reconciliation of Adjusted (non-GAAP) Operating

Earnings to GAAP Earnings (in millions)

Six Months Ended June 30, 2012 and 2011

 

     Exelon
Earnings per
Diluted Share
    Generation     ComEd     PECO         BGE         Other (b)     Exelon  

2011 GAAP Earnings (Loss)

   $ 1.94     $ 938     $ 183     $ 208     $ —        $ (41   $ 1,288  

2011 Adjusted (non-GAAP) Operating Earnings (Loss) Adjustments:

              

Mark-to-Market Impact of Economic Hedging Activities

     0.25       164       —          —          —          —          164  

Unrealized Gains Related to NDT Fund Investments (1)

     (0.04     (30     —          —          —          —          (30

Plant Retirements and Divestitures (2)

     0.04       27       —          —          —          —          27  

Non-Cash Charge Resulting From Illinois Tax Rate Change Legislation (3)

     0.04       21       4       —          —          4       29  

Recovery of Costs Pursuant to the 2011 Distribution Rate Case Order (4)

     (0.03     —          (17     —          —          —          (17

Constellation Merger and Integration Costs (5)

     0.02       1       —          —          —          14       15  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2011 Adjusted (non-GAAP) Operating Earnings (Loss)

     2.22       1,121       170       208       —          (23     1,476  

Year Over Year Effects on Earnings:

              

Generation Energy Margins, Excluding Mark-to-Market:

              

Nuclear Volume (6)

     0.03       23       —          —          —          —          23  

Nuclear Fuel Costs (7)

     (0.04     (31     —          —          —          —          (31

Capacity Pricing

     (0.13     (100     —          —          —          —          (100

Market and Portfolio Conditions (8)

     0.26       202       —          —          —          —          202  

Transmission Upgrades (9)

     —          6       —          —          —          (6     —     

ComEd, PECO and BGE Margins:

              

Weather

     (0.05     —          1       (37     —   (c)      —          (36

Load

     (0.02     —          (4     (8     —   (c)      —          (12

Discrete Impacts of the 2012 Distribution Formula Rate Order (10)

     (0.07     —          (52     —          —          —          (52

Other Energy Delivery (11)

     0.45       —          99       (2     257       —          354  

Discrete Impacts of the 2011 Distribution Rate Case Order (12)

     (0.03     —          (22     —          —          —          (22

Operating and Maintenance Expense:

              

Labor, Contracting and Materials (13)

     (0.33     (176     (26     10       (70     —          (262

Planned Nuclear Refueling Outages (14)

     0.03       22       —          —          —          —          22  

Pension and Non-Pension Postretirement Benefits (15)

     (0.05     (18     (10     (4     (5     (5     (42

Other Operating and Maintenance (16)

     (0.16     (89     (12     2       (39     14       (124

Depreciation and Amortization Expense (17)

     (0.18     (59     (18     (5     (54     (7     (143

Nuclear Decommissioning Trust Fund Special Transfer Tax Deduction (18)

     (0.07     (41     —          —          —          (2     (43

Equity in Losses of Unconsolidated Affiliates (19)

     (0.02     (12     —          —          —          —          (12

Income Taxes (20)

     (0.03     (16     (7     (6     3       9       (17

Interest Expense, Net

     (0.07     (32     9       4       (25     (7     (51

Other (21)

     (0.01     8       2       20       (35     —          (5

Share Differential (22)

     (0.29     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2012 Adjusted (non-GAAP) Operating Earnings (Loss)

     1.44       808       130       182       32       (27     1,125  

2012 Adjusted (non-GAAP) Operating Earnings (Loss) Adjustments:

              

Mark-to-Market Impact of Economic Hedging Activities

     0.21       157       —          —          —          10       167  

Unrealized Gains Related to NDT Fund Investments (1)

     0.02       17       —          —          —          —          17  

Plant Retirements and Divestitures (2)

     (0.01     (7     —          —