CHICAGO — Exelon Corporation (Nasdaq: EXC) today reported its financial results for the fourth quarter and full year 2019.
“Each of our utilities achieved record-high customer satisfaction in 2019 as we continued to invest in infrastructure to increase reliability and prepare the grid to accommodate more renewable energy, electric vehicles and other technology necessary to meet the challenge of climate change,” said Christopher M. Crane, president and CEO of Exelon. “Our nuclear fleet achieved its highest capacity factor in company history, and our total generation output accounted for about 12 percent of all the carbon-free energy produced in the U.S., avoiding nearly 81 million metric tons of greenhouse gas emissions. We continued to support the communities we serve last year by volunteering a record-breaking 251,000 hours and donating nearly $52 million to nonprofits.”
“We reported another strong year, with full-year adjusted (non-GAAP) earnings of $3.22 per share coming in above our revised guidance of $3.05 to $3.20 per share,” said Joseph Nigro, senior executive vice president and CFO, Exelon. “Last year we invested $5.5 billion in capital at the utilities - or about $150 million more than originally planned - to modernize the electric grid, and we are on track to invest an additional $6.5 billion in the year ahead as we work to provide our customers with more reliable service and help our states meet their environmental goals. With these investments and our continuing focus on reducing costs, we are providing 2020 adjusted (non-GAAP) earnings guidance of $3.00 to $3.30 per share.”
Exelon's GAAP Net Income for the fourth quarter of 2019 increased to $0.79 per share from $0.16 per share in the fourth quarter of 2018. Adjusted (non-GAAP) Operating Earnings increased to $0.83 per share in the fourth quarter of 2019 from $0.58 per share in the fourth quarter of 2018. For the reconciliations of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings, refer to the tables beginning on page 6.
Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2019 primarily reflect:
Exelon's GAAP Net Income increased to $3.01 per share from $2.07 per share in 2018. Exelon's Adjusted (non-GAAP) Operating Earnings for 2019 increased to $3.22 per share from $3.12 per share in 2018.
Adjusted (non-GAAP) Operating Earnings for the full year 2019 primarily reflect:
ComEd
ComEd's fourth quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the fourth quarter of 2018. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.
PECO
PECO’s fourth quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the fourth quarter of 2018. The favorable impacts of regulatory rate increases were offset by unfavorable weather conditions and volume and higher storm costs.
BGE
BGE’s fourth quarter of 2019 GAAP Net Income increased to $99 million from $71 million in the fourth quarter of 2018. BGE’s Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2019 increased to $101 million from $72 million in the fourth quarter of 2018, primarily due to regulatory rate increases. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.
PHI
PHI’s fourth quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the fourth quarter of 2018. The favorable impacts of regulatory rate increases were offset by an increase in various expenses. 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 had GAAP Net Income of $397 million in the fourth quarter of 2019 compared with a GAAP Net Loss of $178 million in the fourth quarter of 2018. Generation’s Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2019 increased to $427 million from $221 million in the fourth quarter of 2018, primarily reflecting higher realized energy prices, decreased nuclear outage days, lower operating and maintenance expense and research and development income tax benefits, partially offset by lower capacity prices.
The proportion of expected generation hedged for the Mid-Atlantic, Midwest, New York and ERCOT reportable segments as of Dec. 31, 2019, was 91.0% to 94.0% for 2020 and 61.0% to 64.0% for 2021.
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.
Exelon introduced a guidance range for 2020 Adjusted (non-GAAP) Operating Earnings of $3.00-$3.30 per share. The outlook for 2020 Adjusted (non-GAAP) Operating Earnings for Exelon and its subsidiaries excludes the following items:
Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2019 do not include the following items (after tax) that were included in reported GAAP Net Income:
(in millions) | Exelon Earnings per
Diluted
Share
| Exelon | ComEd | PECO | BGE | PHI | Generation |
2019 GAAP Net Income (Loss) | $0.79 | $773 | $144 | $118 | $99 | $65 | $397 |
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $35 and $32, respectively) | 0.10 | 101 | — | — | — | — | 95 |
Unrealized Gains Related to Nuclear Decommissioning Trust (NDT) Funds (net of taxes of $102) | (0.12) | (119) | — | — | — | — | (119) |
Asset Impairments (net of taxes of $1) | — | 4 | — | — | — | — | 4 |
Plant Retirements and Divestitures (net of taxes of $1) | — | 3 | — | — | — | — | 3 |
Cost Management Program (net of taxes of $6, $0, $0, $1 and $4, respectively) | 0.02 | 21 | — | 1 | 2 | 3 | 13 |
Change in Environmental Liabilities (net of taxes of $1) | — | 4 | — | — | — | — | 4 |
Income Tax-Related Adjustments (entire amount represents tax expense) | (0.01) | (8) | —
| — | — | — | (2) |
Noncontrolling Interests (net of taxes of $8) | 0.03 | 33 | — | — | — | — | 33 |
2019 Adjusted (non-GAAP) Operating Earnings | $0.83 | $810 | $144 | $119 | $101 | $68 | $427 |
Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2018 do not include the following items (after tax) that were included in reported GAAP Net Income:
(in millions) | Exelon Earnings per
Diluted
Share
| Exelon | ComEd | PECO | BGE | PHI | Generation |
2018 GAAP Net Income | $0.16 | $152 | $141 | $124 | $71 | $62 | $(178) |
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $63 and $61, respectively) | 0.19 | 178 | — | — | — | — | 176 |
Unrealized Losses Related to NDT Funds (net of taxes of $172) | 0.25 | 243 | — | — | — | — | 243 |
Merger Commitments (net of taxes of $0 and $1, respectively) | — | — | — | — | — | 4 | — |
Plant Retirements and Divestitures (net of taxes of $32 and $31, respectively) | 0.10 | 90 | — | — | — | — | 91 |
Cost Management Program (net of taxes of $6, $0, $0, $1 and $5, respectively) | 0.02 | 18 | — | 1 | 1 | 2 | 14 |
Asset Retirement Obligation (net of taxes of $1) | — | 4 | — | — | — | — | 4 |
Change in Environmental Liabilities (net of taxes of $1) | — | 3 | — | — | — | — | 3 |
Gain on Contract Settlement (net of taxes of $20 and $19, respectively) | (0.06) | (55) | — | — | — | — | (56) |
Reassessment of Deferred Income Taxes (entire amount represents tax expense) | — | 3 | — | — | — | — | 1 |
Noncontrolling Interests (net of taxes of $15) | (0.08) | (77) | — | — | — | — | (77) |
2018 Adjusted (non-GAAP) Operating Earnings | $0.58 | $559 | $141 | $125 | $72 | $68 | $221 |
Adjusted (non-GAAP) Operating Earnings for the full year 2018 do not include the following items (after tax) that were included in reported GAAP Net Income:
(in millions) | Exelon
Earnings per
Diluted
Share
| Exelon | ComEd | PECO | BGE | PHI | Generation |
2019 GAAP Net Income | $3.01 | $2,936 | $688 | $528 | $360 | $477 | $1,125 |
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $66 and $58, respectively) | 0.20 | 197 | — | — | — | — | 175 |
Unrealized Gains Related to NDT Funds (net of taxes of $269) | (0.31) | (299) | — | — | — | — | (299) |
Asset Impairments (net of taxes of $56) | 0.13 | 123 | — | — | — | — | 123 |
Plant Retirements and Divestitures (net of taxes of $9) | 0.12 | 118 | — | — | — | — | 118 |
Cost Management Program (net of taxes of $17, $1, $1, $3 and $11, respectively) | 0.05 | 51 | — | 3 | 4 | 7 | 35 |
Litigation Settlement Gain (net of taxes of $7) | (0.02) | (19) | — | — | — | — | (19) |
Asset Retirement Obligation (net of taxes of $9) | (0.09) | (84) | — | — | — | — | (84) |
Change in Environmental Liabilities (net of taxes of $8, $6 and $2, respectively) | 0.02 | 20 | — | — | — | 16 | 4 |
Income Tax-Related Adjustments (entire amount represents tax expense) | 0.01 | 5 | — | — | — | 2 | 6 |
Noncontrolling Interests (net of taxes of $26) | 0.09 | 90 | — | — | — | — | 90 |
2019 Adjusted (non-GAAP) Operating Earnings | $3.22 | $3,139 | $688 | $531 | $364 | $502 | $1,276 |
Adjusted (non-GAAP) Operating Earnings for the full year 2018 do not include the following items (after tax) that were included in reported GAAP Net Income:
(in millions) | Exelon Earnings per
Diluted
Share
| Exelon(a) | ComEd | PECO | BGE | PHI(a) | Generation |
2018 GAAP Net Income | $2.07 | $2,005 | $664 | $460 | $313 | $393 | $370 |
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $89 and $84, respectively) | 0.26 | 252 | — | — | — | — | 241 |
Unrealized Losses Related to NDT Funds (net of taxes of $289) | 0.35 | 337 | — | — | — | — | 337 |
Merger and Integration Costs (net of taxes of $2) | — | 3 | — | — | — | — | 3 |
Merger Commitments (net of taxes of $0 and $1, respectively) | — | — | — | — | — | 4 | — |
Asset Impairments (net of taxes of $13) | 0.04 | 35 | — | — | — | — | 35 |
Plant Retirements and Divestitures (net of taxes of $181 and $178, respectively) | 0.53 | 512 | — | — | — | — | 514 |
Cost Management Program (net of taxes of $16, $1, $1, $2, and $12, respectively) | 0.05 | 48 | — | 3 | 3 | 4 | 37 |
Asset Retirement Obligation (net of taxes of $7, $6 and $1, respectively) | 0.02 | 20 | — | — | — | 16 | 4 |
Change in Environmental Liabilities (net of taxes of $0) | — | (1) | — | — | — | — | (1) |
Gain on Contract Settlement (net of taxes of $20 and $19, respectively) | (0.06) | (55) | — | — | — | — | (56) |
Income Tax-Related Adjustments (entire amount represents tax expense) | (0.02) | (22) | — | — | — | (7) | (28) |
Noncontrolling Interests (net of taxes of $24) | (0.12) | (113) | — | — | — | — | (113) |
2018 Adjusted (non-GAAP) Operating Earnings | $3.12 | $3,021 | $664 | $463 | $316 | $410 | $1,343 |
(a) Exelon’s and PHI’s amounts have been revised to reflect the correction of an error.
Note:
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 funds, the marginal statutory income tax rates for 2019 and 2018 ranged from 26.0% to 29.0%. Under IRS regulations, NDT fund 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 funds were 46.1% and 41.4% for the three months ended Dec. 31, 2019 and 2018, respectively; and were 47.3% and 46.2% for the twelve months ended Dec. 31, 2019 and 2018, respectively
Webcast Information
Exelon will discuss fourth 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
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 Feb. 11, 2020.
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) Part I, ITEM 1A. Risk Factors, (b) Part II, ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part II, ITEM 8. Financial Statements and Supplementary Data: Note 22, Commitments and Contingencies; (2) the Registrant’s Third Quarter 2019 Quarterly Report on Form 10-Q in (a) Part II, ITEM 1A. Risk Factors, (b) Part I, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, 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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