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Exelon Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 27, 2011 09:39PM
Exelon Corp. (EXC) filed Quarterly Report for the period ended 2011-03-31. Exelon Corp. has a market cap of $27.26 billion; its shares were traded at around $41.17 with a P/E ratio of 10.4 and P/S ratio of 1.4. The dividend yield of Exelon Corp. stocks is 5.1%. Exelon Corp. had an annual average earning growth of 10.2% over the past 10 years. GuruFocus rated Exelon Corp. the business predictability rank of 2.5-star.
Highlight of Business Operations:
Exelons net income was $668 million for the three months ended March 31, 2011 as compared to $749 million for the three months ended March 31, 2010, and diluted earnings per average common share were $1.01 for the three months ended March 31, 2011 as compared to $1.13 for the three months ended March 31, 2010.
Revenue net of purchased power and fuel expense, which is a non-GAAP measure discussed below, decreased by $247 million primarily as a result of $146 million in mark-to-market losses from Generations hedging activities in 2011 compared to $233 million in gains in 2010, as discussed in Generations Results of Operation below. In addition, PECO revenues related to CTC recoveries decreased by $268 million as a result of the end of the transition period on December 31, 2010. This impact on Exelons results was partially offset by decreased CTC amortization expense. Offsetting these unfavorable impacts were favorable market and portfolio conditions of $224 million primarily at Generation attributable to increased realized market prices for the sale of energy due to the end of the PECO PPA, favorable capacity pricing of $59 million, higher nuclear volume of $46 million due to decreased planned nuclear outage days and increased distribution revenue of $47 million resulting from the 2010 Pennsylvania electric and gas distribution rate increases.
Operating and maintenance expense increased by $123 million primarily as a result of a $74 million increase in uncollectible accounts expense at ComEd principally due to the recovery rider mechanism which was approved by the ICC in 2010. Exelons results were also affected by increased labor, other benefits, contracting and materials expenses of $72 million. These impacts were partially offset by decreased planned nuclear refueling outage costs, including the co-owned Salem plant, of $35 million at Generation.
Adjusted (non-GAAP) Operating Earnings. Exelons adjusted (non-GAAP) operating earnings for the three months ended March 31, 2011 were $778 million, or $1.17 per diluted share, compared with adjusted (non-GAAP) operating earnings of $662 million, or $1.00 per diluted share, for the same period in 2010. In addition to net income, 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 information is intended to enhance an investors overall understanding of year-to-year operating results and provide an indication of Exelons baseline operating performance. In addition, this information 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 presentations or deemed more useful than the GAAP information provided elsewhere in this report.
Acquisition of John Deere Renewables. In December 2010, Generation acquired all of the equity interests of John Deere Renewables, LLC (now known as Exelon Wind), a leading operator and developer of wind power, for approximately $893 million in cash. Generation acquired 735 MWs of installed, operating wind capacity located in eight states. Approximately 75% of the operating portfolios expected output is already sold under long-term power purchase arrangements. Additionally, Generation will pay up to $40 million related to three projects with a capacity of 230 MWs which are currently in advanced stages of development, contingent upon meeting certain contractual commitments related to the commencement of construction of each project. This contingent consideration was valued at $32 million of which approximately $16 million has been recorded as a current liability and the remainder has been recorded as a noncurrent liability. As a result, total consideration recorded for the Exelon Wind acquisition was $925 million. Generation also has the opportunity to pursue approximately 1,200 MWs of new wind projects that are in various stages of development. The acquisition provides incremental earnings starting in 2012 and cash flows starting in 2013 and is a key part of Exelon 2020.
Pension Plan Funding. As a result of accelerated cash benefits associated with the Tax Relief Act of 2010, Exelon contributed $2.1 billion to its pension plans in January 2011, representing all currently planned 2011 qualified pension contributions. Exelons planned funding of these contributions includes $500 million from cash from operations, $750 million from the tax benefits of making the pension contributions and $850 million associated with the accelerated cash tax benefits from the 100% bonus depreciation provision enacted as part of the Tax Relief Act of 2010. Exelon expects the $2.1 billion contribution, along with other factors, will increase the pension funded status from 71% at December 31, 2010 to 91% at December 31, 2011, subject to actual 2011 asset returns and final actuarial valuations. The $2.1 billion pension contribution will also decrease 2011 pension costs.
Stocks Discussed: EXC,