Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - PEPCO HOLDINGS LLC | t1502446_8k.htm |
Exhibit 99
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For Immediate Release | OCTOBER 26, 2015 Media Contact: Robert Hainey Investor Contact: Donna Kinzel |
701 Ninth St., NW Washington, DC 20068 pepcoholdings.com NYSE: POM
|
Pepco Holdings Reports Third Quarter 2015 Financial Results
Pepco Holdings, Inc. (NYSE: POM) today reported third quarter and nine months ended September 30, 2015 consolidated earnings as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net Income (GAAP) | ||||||||||||||||
| Net Income ($ in millions) | $ | 91 | $ | 79 | $ | 197 | $ | 207 | ||||||||
| Earnings Per Share | $ | 0.36 | $ | 0.31 | $ | 0.78 | $ | 0.82 | ||||||||
| Adjusted Net Income (Non-GAAP) | ||||||||||||||||
| Adjusted Net Income ($ in millions) | $ | 83 | $ | 116 | $ | 201 | $ | 262 | ||||||||
| Adjusted Earnings Per Share | $ | 0.33 | $ | 0.46 | $ | 0.80 | $ | 1.04 | ||||||||
“While we are disappointed with the decision by the Public Service Commission of the District of Columbia denying our merger application in August, we were pleased to announce the settlement agreement signed earlier this month by Pepco Holdings, Exelon, the District of Columbia government, the Office of the People’s Counsel and other interested parties,” said Joseph M. Rigby, Chairman, President and Chief Executive Officer. “We believe the settlement agreement addresses the issues raised in the Commission’s denial order, and provides significant benefits to our customers and the communities we serve.” Rigby added, “Our earnings continue to be impacted by increased operation and maintenance costs, primarily driven by higher system maintenance costs and the implementation of a new customer information system. We continue to invest and spend to further improve electric system reliability while our merger with Exelon is pending.”
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Pepco Holdings’ GAAP net income for the three-month period ended September 30, 2015, was $91 million, or 36 cents per share as compared to $79 million, or 31 cents per share for the same quarter in 2014. Excluding items that we believe are not representative of ongoing business operations, adjusted earnings for the third quarter of 2015 would have been $83 million, or 33 cents per share as compared to $116 million, or 46 cents per share for the quarter ending September 30, 2014.
The primary drivers of the decrease in adjusted net income (Non-GAAP) in the third quarter of 2015, as compared to the same quarter in 2014, were higher operation and maintenance expense (primarily due to increased distribution system maintenance, increased employee-related costs and the implementation of a new customer information system), lower unbilled revenue associated with Atlantic City Electric basic generation service, lower network transmission revenue (mainly due to an increase in refund reserves related to a return on equity challenge), higher utility property taxes and lower Pepco Energy Services tax benefits (due to a favorable adjustment in 2014). Higher electric distribution revenue primarily due to the effects of warmer weather in 2015 partially offset the decrease for the third quarter.
For the nine months ended September 30, 2015, Pepco Holdings’ GAAP earnings were $197 million, or 78 cents per share, as compared to net income of $207 million, or 82 cents per share for the nine months ended September 30, 2014. Excluding items that we believe are not representative of ongoing business operations, adjusted earnings for the nine months ended September 30, 2015 would have been $201 million, or 80 cents per share as compared to $262 million, or $1.04 per share for the same period in the prior year.
The decrease in adjusted net income (Non-GAAP) for the nine months ended September 30, 2015, as compared to the 2014 period, was driven by higher operation and maintenance expense (primarily related to the implementation of a new customer information system, increased employee-related costs and increased distribution system maintenance), higher depreciation expense from increased plant investment and higher interest expense. Higher electric distribution revenue (primarily due to higher rates from increased infrastructure investment, as well as favorable weather) partially offset the decrease for the period.
Non-GAAP Financial Information
Management believes the adjusted net income and related per share data are representative of Pepco Holdings’ ongoing business operations. Management uses this information internally to evaluate Pepco Holdings’ period-over-period financial performance and, therefore, believes that this information is useful to investors. The presentation of adjusted net income and related per share data is intended to complement, and should not be considered as an alternative to, reported earnings and related per share data presented in accordance with generally accepted accounting principles in the United States (GAAP).
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Reconciliation of GAAP Financial Information to Adjusted Financial Information
| Net Income (Millions of dollars) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Reported (GAAP) Net Income | $ | 91 | $ | 79 | $ | 197 | $ | 207 | ||||||||
| Adjustments (after-tax): | ||||||||||||||||
| · Incremental merger-related transaction costs | 1 | 3 | 10 | 17 | ||||||||||||
| · Incremental merger-related integration costs | 1 | 2 | 4 | 6 | ||||||||||||
| · Impairment loss related to Pepco Energy Services (PES) long-lived assets | – | 32 | – | 32 | ||||||||||||
| · Change in fair value of derivative related to preferred stock | (10 | ) | – | (10 | ) | – | ||||||||||
| Adjusted Net Income (Non-GAAP) | $ | 83 | $ | 116 | $ | 201 | $ | 262 | ||||||||
| Earnings per Share | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Reported (GAAP) Earnings per Share | $ | 0.36 | $ | 0.31 | $ | 0.78 | $ | 0.82 | ||||||||
| Adjustments (after-tax): | ||||||||||||||||
| · Incremental merger-related transaction costs | 0.01 | 0.01 | 0.04 | 0.07 | ||||||||||||
| · Incremental merger-related integration costs | – | 0.01 | 0.02 | 0.02 | ||||||||||||
| · Impairment loss related to PES long-lived assets | – | 0.13 | – | 0.13 | ||||||||||||
| · Change in fair value of derivative related to preferred stock | (0.04 | ) | – | (0.04 | ) | – | ||||||||||
| Adjusted Earnings per Share (Non-GAAP) | $ | 0.33 | $ | 0.46 | $ | 0.80 | $ | 1.04 | ||||||||
The income tax effects with respect to the foregoing adjustments, where applicable, were calculated using a composite income tax rate of approximately 40 percent. Most merger-related costs are not tax deductible.
Recent Events
Pepco Holdings – Exelon Merger
| · | On October 6, 2015, Exelon and Pepco Holdings entered into a Nonunanimous Full Settlement Agreement and Stipulation (DC Settlement) with the District of Columbia Government, the Office of the People’s Counsel and other parties. A motion to reopen the merger proceeding to consider the DC Settlement was filed with the District of Columbia Public Service Commission (DCPSC) that same day. Among other things, the DC Settlement requires a final order, on conditions consistent with the terms of the settlement agreement, be issued by the DCPSC within 150 days of the filing of the motion to reopen the |
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| merger proceeding. District of Columbia law does not impose a time limit on the DCPSC’s review of the merger application. |
| · | On October 6, 2015, Exelon and Pepco Holdings agreed that neither party will exercise termination rights under the merger agreement on or after October 29, 2015, unless certain conditions of the DC Settlement are not met, including issuance of a procedural schedule and a final order by the DCPSC approving the merger based on timeframes and conditions set forth in the DC Settlement. |
| · | On October 15, 2015, the New Jersey Board of Public Utilities issued an order extending the effectiveness of its merger approval until June 30, 2016. |
Operations
| · | Power Delivery electric sales were 13,249 gigawatt hours (GWh) in the third quarter of 2015, compared to 12,780 GWh for the same period in 2014. In the electric service territory, cooling degree days increased by 19 percent for the three months ended September 30, 2015, compared to the same period in 2014. Weather-adjusted electric sales were 12,932 GWh in the third quarter of 2015, compared to 12,984 GWh for the same period in the prior year. |
| · | Power Delivery electric sales were 37,125 GWh for the nine months ended September 30, 2015 compared to 36,219 GWh for the nine months ended September 30, 2014. In the electric service territory, cooling degree days increased by 23 percent for the nine months ended September 30, 2015, compared to the same period in 2014. Weather-adjusted electric sales were 35,883 GWh for the nine months ended September 30, 2015 compared to 35,929 GWh for the same period in 2014. |
| · | Pepco Holdings’ capital expenditures for the nine months ended September 30, 2015 were $855 million. Due to the pending merger with Exelon, new distribution rate cases have not been filed since March 2014, although capital expenditures and operation and maintenance expenses have continued or increased from levels in prior periods. |
| · | In the nine months ended September 30, 2015, PES signed $29 million in energy efficiency contracts and $38 million in underground transmission construction contracts. PES signed $33 million in energy efficiency contracts and $53 million in underground transmission construction contracts for the same period in 2014. |
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Financing
| · | On July 30, 2015, Pepco Holdings entered into a $300 million unsecured term loan agreement due July 28, 2016. The net proceeds were used to repay outstanding commercial paper and for general corporate purposes. |
Further details regarding changes in consolidated earnings between 2015 and 2014 are provided in the schedules that follow. Additional information regarding financial results and recent regulatory events can be found in the Pepco Holdings, Inc. Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission, and which is also available at www.pepcoholdings.com/investors. Pepco Holdings, Inc. routinely makes available this and other important information on its website, which is a key channel of distribution for Pepco Holdings, Inc. to reach its public investors and to disclose material, non-public information. Information on the website is not part of this news release.
About PHI: Pepco Holdings, Inc. (NYSE: POM) is one of the largest energy delivery companies in the Mid-Atlantic region, serving about 2 million customers in Delaware, the District of Columbia, Maryland and New Jersey. PHI subsidiaries Pepco, Delmarva Power and Atlantic City Electric provide regulated electricity service; Delmarva Power also provides natural gas service. Through Pepco Energy Services, PHI also provides energy savings performance contracting services, underground transmission and distribution construction and maintenance services, and steam and chilled water under long-term contracts.
Forward-Looking Statements: Some of the statements contained in this news release with respect to Pepco Holdings, Pepco, Delmarva Power and Atlantic City Electric, including each of their respective subsidiaries (each, a “Reporting Company”), are forward-looking statements within the meaning of the U.S. federal securities laws, and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “could,” “expects,” “intends,” “assumes,” “seeks to,” “plans,” “anticipates,” “believes,” “projects,” “estimates,” “predicts,” “potential,” “future,” “goal,” “objective,” or “continue” or the negative of such terms or other variations thereof or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause one or more Reporting Company’s or their subsidiaries’ actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Therefore, forward-looking statements are not guarantees or assurances of future performance, and actual results could differ materially from those indicated by the forward-looking statements. These factors should be read together with the risk factors included in the “Risk Factors” section and other statements contained in each Reporting Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on February 27, 2015, and in each Reporting Company’s Quarterly Reports on Form 10-Q for the quarter ended September 30, 2015, and investors should refer to these risk factor sections and other statements. All of such factors and forward-looking statements are difficult to predict, contain uncertainties, are beyond each Reporting Company’s control and may cause actual results to differ materially from those contained in any forward-looking statements. Any forward-looking statements speak only as to the date this news release was issued, and none of the Reporting Companies undertakes any obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for a Reporting Company to predict all such factors. Furthermore, it may not be possible to assess the impact of any such factor on such Reporting Company’s or its subsidiaries’ business (viewed independently or together with the business or businesses of some or all of the other Reporting Companies or their subsidiaries) or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any specific factors that may be provided should not be construed as exhaustive.
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Pepco Holdings, Inc.
Earnings Per Share Variance
2015 / 2014
| Three Months Ended September 30, | ||||||||||||||||
| Power | Pepco Energy | Corporate | Total | |||||||||||||
| Delivery | Services | and Other | PHI | |||||||||||||
| 2014 Earnings (loss) per share (GAAP) (1) | $ | 0.44 | $ | (0.10 | ) | $ | (0.03 | ) | $ | 0.31 | ||||||
| 2014 Adjustments (2) | ||||||||||||||||
| · Incremental merger-related transaction costs | - | - | 0.01 | 0.01 | ||||||||||||
| · Incremental merger-related integration costs | 0.01 | - | - | 0.01 | ||||||||||||
| · Impairment loss related to PES long-lived assets | - | 0.13 | - | 0.13 | ||||||||||||
| 2014 Adjusted earnings (loss) per share (Non-GAAP) | 0.45 | 0.03 | (0.02 | ) | 0.46 | |||||||||||
| Change from 2014 Adjusted earnings (loss) per share | ||||||||||||||||
| Regulated Operations | ||||||||||||||||
| · Distribution Revenue | ||||||||||||||||
| - Weather (estimate) (3) | 0.03 | - | - | 0.03 | ||||||||||||
| - Rate Increases | 0.01 | - | - | 0.01 | ||||||||||||
| - Other Distribution Revenue | (0.01 | ) | - | - | (0.01 | ) | ||||||||||
| · ACE Basic Generation Service (primarily unbilled revenue) | (0.03 | ) | - | - | (0.03 | ) | ||||||||||
| · Network Transmission Revenue | (0.02 | ) | - | - | (0.02 | ) | ||||||||||
| · Operation and Maintenance | (0.05 | ) | - | - | (0.05 | ) | ||||||||||
| · Depreciation and Amortization | (0.01 | ) | - | - | (0.01 | ) | ||||||||||
| · Other, net | (0.02 | ) | - | - | (0.02 | ) | ||||||||||
| Pepco Energy Services | - | (0.01 | ) | - | (0.01 | ) | ||||||||||
| Corporate and Other | - | - | 0.01 | 0.01 | ||||||||||||
| Net Interest Expense | (0.01 | ) | - | - | (0.01 | ) | ||||||||||
| Income Tax Adjustments | - | (0.02 | ) | - | (0.02 | ) | ||||||||||
| 2015 Adjusted earnings (loss) per share (Non-GAAP) | 0.34 | - | (0.01 | ) | 0.33 | |||||||||||
| 2015 Adjustments (2) | ||||||||||||||||
| · Incremental merger-related transaction costs | - | - | (0.01 | ) | (0.01 | ) | ||||||||||
| · Incremental merger-related integration costs | - | - | - | - | ||||||||||||
| · Change in fair value of derivative related to preferred stock | - | - | 0.04 | 0.04 | ||||||||||||
| 2015 Earnings per share (GAAP) (4) | $ | 0.34 | $ | - | $ | 0.02 | $ | 0.36 | ||||||||
| (1) | The 2014 weighted average number of diluted shares outstanding was 252 million. |
| (2) | Management believes the adjusted items are not representative of the Company's ongoing business operations. The presentation of this Non-GAAP financial information is intended to complement, and should not be considered an alternative to, the GAAP information. |
| (3) | The effect of weather compared to the 20-year average weather is estimated to have increased earnings by $0.01 per share. |
| (4) | The 2015 weighted average number of diluted shares outstanding was 254 million. |
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Pepco Holdings, Inc.
Earnings Per Share Variance
2015 / 2014
| Nine Months Ended September 30, | ||||||||||||||||
| Power | Pepco Energy | Corporate | Total | |||||||||||||
| Delivery | Services | and Other | PHI | |||||||||||||
| 2014 Earnings (loss) per share (GAAP) (1) | $ | 1.04 | $ | (0.10 | ) | $ | (0.12 | ) | $ | 0.82 | ||||||
| 2014 Adjustments (2) | ||||||||||||||||
| · Incremental merger-related transaction costs | - | - | 0.07 | 0.07 | ||||||||||||
| · Incremental merger-related integration costs | 0.02 | - | - | 0.02 | ||||||||||||
| · Impairment loss related to PES long-lived assets | - | 0.13 | - | 0.13 | ||||||||||||
| 2014 Adjusted earnings (loss) per share (Non-GAAP) | 1.06 | 0.03 | (0.05 | ) | 1.04 | |||||||||||
| Change from 2014 Adjusted earnings (loss) per share | ||||||||||||||||
| Regulated Operations | ||||||||||||||||
| · Distribution Revenue | ||||||||||||||||
| - Weather (estimate) (3) | 0.05 | - | - | 0.05 | ||||||||||||
| - Rate Increases | 0.08 | - | - | 0.08 | ||||||||||||
| - Other Distribution Revenue | 0.01 | - | - | 0.01 | ||||||||||||
| · Network Transmission Revenue | (0.01 | ) | - | - | (0.01 | ) | ||||||||||
| · ACE Basic Generation Service (primarily unbilled revenue) | (0.02 | ) | - | - | (0.02 | ) | ||||||||||
| · Operation and Maintenance | (0.23 | ) | - | - | (0.23 | ) | ||||||||||
| · Depreciation and Amortization | (0.04 | ) | - | - | (0.04 | ) | ||||||||||
| · Other, net | (0.02 | ) | - | - | (0.02 | ) | ||||||||||
| Pepco Energy Services | - | (0.01 | ) | - | (0.01 | ) | ||||||||||
| Corporate and Other | - | - | (0.01 | ) | (0.01 | ) | ||||||||||
| Net Interest Expense | (0.03 | ) | - | - | (0.03 | ) | ||||||||||
| Dilution | (0.01 | ) | - | - | (0.01 | ) | ||||||||||
| 2015 Adjusted earnings (loss) per share (Non-GAAP) | 0.84 | 0.02 | (0.06 | ) | 0.80 | |||||||||||
| 2015 Adjustments (2) | ||||||||||||||||
| · Incremental merger-related transaction costs | - | - | (0.04 | ) | (0.04 | ) | ||||||||||
| · Incremental merger-related integration costs | (0.02 | ) | - | - | (0.02 | ) | ||||||||||
| · Change in fair value of derivative related to preferred stock | - | - | 0.04 | 0.04 | ||||||||||||
| 2015 Earnings (loss) per share (GAAP) (4) | $ | 0.82 | $ | 0.02 | $ | (0.06 | ) | $ | 0.78 | |||||||
| (1) | The 2014 weighted average number of diluted shares outstanding was 252 million. |
| (2) | Management believes the adjusted items are not representative of the Company's ongoing business operations. The presentation of this Non-GAAP financial information is intended to complement, and should not be considered an alternative to, the GAAP information. |
| (3) | The effect of weather compared to the 20-year average weather is estimated to have increased earnings by $0.05 per share. |
| (4) | The 2015 weighted average number of diluted shares outstanding was 254 million. |
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SEGMENT INFORMATION
| Three Months Ended September 30, 2015 | ||||||||||||||||
| (millions of dollars) | ||||||||||||||||
| Power Delivery | Pepco Energy Services | Corporate and Other (a) | PHI Consolidated | |||||||||||||
| Operating Revenue | $ | 1,316 | $ | 47 | $ | (1 | ) | $ | 1,362 | |||||||
| Operating Expenses (b) | 1,131 | 49 | (1 | ) | 1,179 | |||||||||||
| Operating Income (Loss) | 185 | (2 | ) | - | 183 | |||||||||||
| Interest Expense | 59 | - | 12 | 71 | ||||||||||||
| Other Income | 11 | - | 17 | (c) | 28 | |||||||||||
| Income Tax Expense (Benefit) | 49 | (2 | ) | 2 | 49 | |||||||||||
| Net Income | 88 | - | 3 | 91 | ||||||||||||
| Total Assets | 14,330 | 218 | 2,009 | 16,557 | ||||||||||||
| Construction Expenditures | $ | 286 | $ | - | $ | 7 | $ | 293 | ||||||||
| (a) | Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(1) million for Operating Revenue, $1 million for Operating Expenses, $(1) million for Interest and Dividend Income. |
| (b) | Includes depreciation and amortization expense of $178 million, consisting of $165 million for Power Delivery, $1 million for Pepco Energy Services and $12 million for Corporate and Other. |
| (c) | Includes $15 million ($10 million after-tax) increase in fair value of preferred stock derivative. |
| Three Months Ended September 30, 2014 | ||||||||||||||||
| (millions of dollars) | ||||||||||||||||
| Power Delivery | Pepco Energy Services | Corporate and | PHI Consolidated | |||||||||||||
| Operating Revenue | $ | 1,242 | $ | 73 | $ | (2 | ) | $ | 1,313 | |||||||
| Operating Expenses (b) | 1,021 | 126 | (c) | - | 1,147 | |||||||||||
| Operating Income (Loss) | 221 | (53 | ) | (2 | ) | 166 | ||||||||||
| Interest Expense | 58 | 1 | 9 | 68 | ||||||||||||
| Other Income | 14 | 1 | - | 15 | ||||||||||||
| Income Tax Expense (Benefit) | 65 | (26 | ) | (5 | ) | 34 | ||||||||||
| Net Income (Loss) | 112 | (27 | ) | (6 | ) | 79 | ||||||||||
| Total Assets | 13,697 | 255 | 1,346 | 15,298 | ||||||||||||
| Construction Expenditures | $ | 272 | $ | 1 | $ | 20 | $ | 293 | ||||||||
| (a) | Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(2) million for Operating Revenue, $(1) million for Operating Expenses, $(2) million for Interest Expense and $(2) million for Interest Income. |
| (b) | Includes depreciation and amortization expense of $145 million, consisting of $135 million for Power Delivery, $2 million for Pepco Energy Services and $8 million for Corporate and Other. |
| (c) | Includes an impairment loss of $53 million ($32 million after-tax) at Pepco Energy Services associated with its combined heat and power thermal generating plant and operation assets in Atlantic City. |
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SEGMENT INFORMATION – continued
| Nine Months Ended September 30, 2015 | ||||||||||||||||
| (millions of dollars) | ||||||||||||||||
Power | Pepco | Corporate and | PHI | |||||||||||||
| Operating Revenue | $ | 3,707 | $ | 170 | $ | (4 | ) | $ | 3,873 | |||||||
| Operating Expenses (b) | 3,238 | 172 | (1 | ) | 3,409 | |||||||||||
| Operating Income (Loss) | 469 | (2 | ) | (3 | ) | 464 | ||||||||||
| Interest Expense | 177 | - | 33 | 210 | ||||||||||||
| Other Income | 32 | - | 17 | (c) | 49 | |||||||||||
| Income Tax Expense (Benefit) | 113 | (7 | ) | - | 106 | |||||||||||
| Net Income (Loss) | 211 | 5 | (19 | ) | 197 | |||||||||||
| Total Assets | 14,330 | 218 | 2,009 | 16,557 | ||||||||||||
| Construction Expenditures | $ | 832 | $ | 2 | $ | 21 | $ | 855 | ||||||||
| (a) | Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(4) million for Operating Revenue, $(4) million for Operating Expenses, $(2) million for Interest Expense and $(5) million for Interest and Dividend Income. |
| (b) | Includes depreciation and amortization expense of $494 million, consisting of $459 million for Power Delivery, $2 million for Pepco Energy Services and $33 million for Corporate and Other. |
| (c) | Includes $15 million ($10 million after-tax) increase in fair value of preferred stock derivative. |
| Nine Months Ended September 30, 2014 | ||||||||||||||||
| (millions of dollars) | ||||||||||||||||
| Power Delivery | Pepco Energy Services | Corporate and | PHI Consolidated | |||||||||||||
| Operating Revenue | $ | 3,554 | $ | 212 | $ | (6 | ) | $ | 3,760 | |||||||
| Operating Expenses (b) | 3,005 | 263 | (c) | 2 | 3,270 | |||||||||||
| Operating Income (Loss) | 549 | (51 | ) | (8 | ) | 490 | ||||||||||
| Interest Expense | 169 | 1 | 30 | 200 | ||||||||||||
| Other Income | 39 | 2 | 1 | 42 | ||||||||||||
| Income Tax Expense (Benefit) | 157 | (25 | ) | (7 | ) | 125 | ||||||||||
| Net Income (Loss) | 262 | (25 | ) | (30 | ) | 207 | ||||||||||
| Total Assets | 13,697 | 255 | 1,346 | 15,298 | ||||||||||||
| Construction Expenditures | $ | 789 | $ | 2 | $ | 55 | $ | 846 | ||||||||
| (a) | Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(6) million for Operating Revenue, $(5) million for Operating Expenses, $(2) million for Interest Expense and $(3) million for Interest Income. |
| (b) | Includes depreciation and amortization expense of $410 million, consisting of $381 million for Power Delivery, $6 million for Pepco Energy Services and $23 million for Corporate and Other. |
| (c) | Includes an impairment loss of $53 million ($32 million after-tax) at Pepco Energy Services associated with its combined heat and power thermal generating plant and operation assets in Atlantic City. |
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| PEPCO HOLDINGS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF INCOME |
| (Unaudited) |
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| (millions of dollars, except per share data) | ||||||||||||||||
| Operating Revenue | $ | 1,362 | $ | 1,313 | $ | 3,873 | $ | 3,760 | ||||||||
| Operating Expenses | ||||||||||||||||
| Fuel and purchased energy | 580 | 545 | 1,651 | 1,622 | ||||||||||||
| Other services cost of sales | 37 | 54 | 131 | 161 | ||||||||||||
| Other operation and maintenance | 257 | 242 | 772 | 679 | ||||||||||||
| Depreciation and amortization | 178 | 145 | 494 | 410 | ||||||||||||
| Other taxes | 114 | 109 | 327 | 315 | ||||||||||||
| Deferred electric service costs | 13 | (1 | ) | 34 | 30 | |||||||||||
| Impairment loss | - | 53 | - | 53 | ||||||||||||
| Total Operating Expenses | 1,179 | 1,147 | 3,409 | 3,270 | ||||||||||||
| Operating Income | 183 | 166 | 464 | 490 | ||||||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest expense | (71 | ) | (68 | ) | (210 | ) | (200 | ) | ||||||||
| Other income | 28 | 15 | 49 | 42 | ||||||||||||
| Total Other Expenses | (43 | ) | (53 | ) | (161 | ) | (158 | ) | ||||||||
| Income Before Income Tax Expense | 140 | 113 | 303 | 332 | ||||||||||||
| Income Tax Expense | 49 | 34 | 106 | 125 | ||||||||||||
| Net Income | $ | 91 | $ | 79 | $ | 197 | $ | 207 | ||||||||
| Basic and Diluted Share Information | ||||||||||||||||
| Weighted average shares outstanding – Basic (millions) | 254 | 252 | 253 | 251 | ||||||||||||
| Weighted average shares outstanding – Diluted (millions) | 254 | 252 | 254 | 252 | ||||||||||||
| Basic and Diluted earnings per share | $ | 0.36 | $ | 0.31 | $ | 0.78 | $ | 0.82 | ||||||||
| 10 (more) |
| PEPCO HOLDINGS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| (Unaudited) |
September 30, 2015 | December 31,
2014 | |||||||
| (millions of dollars) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 271 | $ | 14 | ||||
| Restricted cash equivalents | 18 | 25 | ||||||
| Accounts receivable, less allowance for uncollectible accounts of $58 million and $40 million, respectively | 947 | 782 | ||||||
| Inventories | 142 | 141 | ||||||
| Deferred income tax assets, net | 70 | 50 | ||||||
| Income taxes and related accrued interest receivable | 11 | 9 | ||||||
| Prepaid expenses and other | 87 | 63 | ||||||
| Total Current Assets | 1,546 | 1,084 | ||||||
| OTHER ASSETS | ||||||||
| Goodwill | 1,406 | 1,407 | ||||||
| Regulatory assets | 2,294 | 2,409 | ||||||
| Income taxes and related accrued interest receivable | 81 | 81 | ||||||
| Restricted cash equivalents | 15 | 14 | ||||||
| Other | 178 | 166 | ||||||
| Total Other Assets | 3,974 | 4,077 | ||||||
| PROPERTY, PLANT AND EQUIPMENT | ||||||||
| Property, plant and equipment | 15,989 | 15,465 | ||||||
| Accumulated depreciation | (4,952 | ) | (4,959 | ) | ||||
| Net Property, Plant and Equipment | 11,037 | 10,506 | ||||||
| TOTAL ASSETS | $ | 16,557 | $ | 15,667 | ||||
| 11 (more) |
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 2015 | December 31, 2014 | |||||||
| (millions of dollars, except shares) | ||||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term debt | $ | 1,128 | $ | 729 | ||||
| Current portion of long-term debt and project funding | 300 | 431 | ||||||
| Accounts payable | 205 | 174 | ||||||
| Accrued liabilities | 300 | 313 | ||||||
| Capital lease obligations due within one year | 11 | 10 | ||||||
| Taxes accrued | 40 | 41 | ||||||
| Interest accrued | 76 | 47 | ||||||
| Liabilities and accrued interest related to uncertain tax positions | 6 | 6 | ||||||
| Other | 274 | 314 | ||||||
| Total Current Liabilities | 2,340 | 2,065 | ||||||
| DEFERRED CREDITS | ||||||||
| Regulatory liabilities | 348 | 343 | ||||||
| Deferred income tax liabilities, net | 3,415 | 3,266 | ||||||
| Investment tax credits | 14 | 16 | ||||||
| Pension benefit obligation | 443 | 396 | ||||||
| Other postretirement benefit obligations | 236 | 265 | ||||||
| Liabilities and accrued interest related to uncertain tax positions | 2 | 2 | ||||||
| Other | 196 | 193 | ||||||
| Total Deferred Credits | 4,654 | 4,481 | ||||||
| OTHER LONG-TERM LIABILITIES | ||||||||
| Long-term debt | 4,845 | 4,441 | ||||||
| Transition bonds issued by ACE Funding | 138 | 171 | ||||||
| Long-term project funding | 4 | 8 | ||||||
| Capital lease obligations | 45 | 50 | ||||||
| Total Other Long-Term Liabilities | 5,032 | 4,670 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| PREFERRED STOCK | ||||||||
| Series A preferred stock, $.01 par value, 18,000 shares authorized, 18,000 and 12,600 shares outstanding, respectively | 183 | 129 | ||||||
| EQUITY | ||||||||
| Common stock, $.01 par value, 400,000,000 shares authorized, 253,590,612 and 252,728,684 shares outstanding, respectively | 3 | 3 | ||||||
| Premium on stock and other capital contributions | 3,830 | 3,800 | ||||||
| Accumulated other comprehensive loss | (41 | ) | (46 | ) | ||||
| Retained earnings | 556 | 565 | ||||||
| Total Equity | 4,348 | 4,322 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 16,557 | $ | 15,667 | ||||
| 12 (more) |
POWER DELIVERY SALES AND REVENUE
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Power Delivery Sales (Gigawatt Hours) | ||||||||||||||||
| Regulated T&D Electric Sales | ||||||||||||||||
| Residential | 5,200 | 4,769 | 14,593 | 13,441 | ||||||||||||
| Commercial and industrial | 7,999 | 7,953 | 22,365 | 22,596 | ||||||||||||
| Transmission and other | 50 | 58 | 167 | 182 | ||||||||||||
| Total Regulated T&D Electric Sales | 13,249 | 12,780 | 37,125 | 36,219 | ||||||||||||
| Default Electricity Supply Sales | ||||||||||||||||
| Residential | 4,213 | 3,868 | 11,948 | 10,835 | ||||||||||||
| Commercial and industrial | 1,496 | 1,613 | 4,240 | 4,175 | ||||||||||||
| Other | 9 | 12 | 31 | 33 | ||||||||||||
| Total Default Electricity Supply Sales | 5,718 | 5,493 | 16,219 | 15,043 | ||||||||||||
| Power Delivery Electric Revenue (Millions of dollars) | ||||||||||||||||
| Regulated T&D Electric Revenue | ||||||||||||||||
| Residential | $ | 279 | $ | 251 | $ | 714 | $ | 640 | ||||||||
| Commercial and industrial | 289 | 286 | 803 | 768 | ||||||||||||
| Transmission and other | 104 | 113 | 325 | 328 | ||||||||||||
| Total Regulated T&D Electric Revenue | $ | 672 | $ | 650 | $ | 1,842 | $ | 1,736 | ||||||||
| Default Electricity Supply Revenue | ||||||||||||||||
| Residential | $ | 421 | $ | 366 | $ | 1,152 | $ | 1,025 | ||||||||
| Commercial and industrial | 154 | 156 | 429 | 429 | ||||||||||||
| Other | 32 | 37 | 111 | 175 | ||||||||||||
| Total Default Electricity Supply Revenue | $ | 607 | $ | 559 | $ | 1,692 | $ | 1,629 | ||||||||
| Other Electric Revenue | $ | 18 | $ | 13 | $ | 43 | $ | 44 | ||||||||
| Total Electric Operating Revenue | $ | 1,297 | $ | 1,222 | $ | 3,577 | $ | 3,409 | ||||||||
| Power Delivery Gas Sales and Revenue | ||||||||||||||||
| Regulated Gas Sales (Mcf) | ||||||||||||||||
| Residential | 377 | 404 | 6,311 | 6,114 | ||||||||||||
| Commercial and industrial | 734 | 745 | 4,409 | 4,285 | ||||||||||||
| Transportation and other | 1,144 | 1,075 | 4,716 | 4,737 | ||||||||||||
| Total Regulated Gas Sales | 2,255 | 2,224 | 15,436 | 15,136 | ||||||||||||
| Regulated Gas Revenue (Millions of dollars) | ||||||||||||||||
| Residential | $ | 8 | $ | 9 | $ | 73 | $ | 77 | ||||||||
| Commercial and industrial | 5 | 6 | 39 | 44 | ||||||||||||
| Transportation and other | 2 | 2 | 8 | 8 | ||||||||||||
| Total Regulated Gas Revenue | $ | 15 | $ | 17 | $ | 120 | $ | 129 | ||||||||
| Other Gas Revenue | $ | 4 | $ | 3 | $ | 10 | $ | 16 | ||||||||
| Total Gas Operating Revenue | $ | 19 | $ | 20 | $ | 130 | $ | 145 | ||||||||
| Total Power Delivery Operating Revenue | $ | 1,316 | $ | 1,242 | $ | 3,707 | $ | 3,554 | ||||||||
| 13 (more) |
| POWER DELIVERY – CUSTOMERS | ||||||||
| September
30, 2015 | September
30, 2014 | |||||||
| Regulated T&D Electric Customers (in thousands) | ||||||||
| Residential | 1,685 | 1,656 | ||||||
| Commercial and industrial | 200 | 199 | ||||||
| Transmission and other | 2 | 2 | ||||||
| Total Regulated T&D Electric Customers | 1,887 | 1,857 | ||||||
| Regulated Gas Customers (in thousands) | ||||||||
| Residential | 119 | 117 | ||||||
| Commercial and industrial | 10 | 9 | ||||||
| Transportation and other | – | – | ||||||
| Total Regulated Gas Customers | 129 | 126 | ||||||
| WEATHER DATA - CONSOLIDATED ELECTRIC SERVICE TERRITORY | ||||||||||||||||
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Heating Degree Days | 1 | 17 | 3,005 | 3,026 | ||||||||||||
| 20 Year Average | 26 | 26 | 2,739 | 2,740 | ||||||||||||
| Percentage Difference from Average | (96 | )% | (35 | )% | 10 | % | 10 | % | ||||||||
| Percentage Difference from Prior Year | (94 | )% | (1 | )% | ||||||||||||
| Cooling Degree Days | 1,081 | 912 | 1,630 | 1,329 | ||||||||||||
| 20 Year Average | 974 | 972 | 1,364 | 1,364 | ||||||||||||
| Percentage Difference from Average | 11 | % | (6 | )% | 20 | % | (3 | )% | ||||||||
| Percentage Difference from Prior Year | 19 | % | 23 | % | ||||||||||||
| 14 (more) |
PEPCO ENERGY SERVICES
Financial Information
(Unaudited)
| (Millions of Dollars) | Three
Months Ended September 30, | |||||||
| 2015 | 2014 | |||||||
| Operating Revenues | $ | 47 | $ | 73 | ||||
| Cost of Goods Sold | 37 | 56 | ||||||
| Gross Margin | 10 | 17 | ||||||
| Other Operation and Maintenance Expenses | 11 | 15 | ||||||
| Impairment Loss | – | 53 | * | |||||
| Depreciation and Amortization | 1 | 2 | ||||||
| Operating Loss | (2 | ) | (53 | ) | ||||
| Other Income | – | – | ||||||
| Loss Before Income Taxes | (2 | ) | (53 | ) | ||||
| Income Tax Benefit | (2 | ) | (26 | ) | ||||
| Net Income (Loss) (GAAP) | $ | – | $ | (27 | ) | |||
*Impairment loss of $53 million ($32 million after-tax) associated with the combined heat and power thermal generating plant and operation assets in Atlantic City.
| (Millions of Dollars) | Nine
Months Ended September 30, | |||||||
| 2015 | 2014 | |||||||
| Operating Revenues | $ | 170 | $ | 212 | ||||
| Cost of Goods Sold | 132 | 165 | ||||||
| Gross Margin | 38 | 47 | ||||||
| Other Operation and Maintenance Expenses | 38 | 39 | ||||||
| Impairment Loss | – | 53 | * | |||||
| Depreciation and Amortization | 2 | 6 | ||||||
| Operating Loss | (2 | ) | (51 | ) | ||||
| Other Income | – | 1 | ||||||
| Loss Before Income Taxes | (2 | ) | (50 | ) | ||||
| Income Tax Benefit | (7 | ) | (25 | ) | ||||
| Net Income (Loss) (GAAP) | $ | 5 | $ | (25 | ) | |||
*Impairment loss of $53 million ($32 million after-tax) associated with the combined heat and power thermal generating plant and operation assets in Atlantic City.
| (Millions of Dollars) | September 30, | December 31, | ||||||
| 2015 | 2014 | |||||||
| Total Assets | $ | 218 | $ | 244 | ||||
| Current Assets | 124 | 146 | ||||||
| Property, Plant and Equipment | 28 | 30 | ||||||
| Other Assets | 66 | 68 | ||||||
| Total Liabilities | $ | 61 | $ | 90 | ||||
| Current Liabilities | 39 | 64 | ||||||
| Long-Term Liabilities | 22 | 26 | ||||||
| Equity | $ | 157 | $ | 154 | ||||
| 15 # # # # # |