UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Name of Registrant; State of Incorporation; Address of IRS Employer
Number Principal Executive Offices; and Telephone Number Identification Number
- --------------------- --------------------------------------------------------- -------------------------
1-16169 EXELON CORPORATION 23-2990190
(a Pennsylvania corporation)
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680-5379
(312) 394-4321
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680-5379
(312) 394-4321
1-1401 PECO ENERGY COMPANY 23-0970240
(a Pennsylvania corporation)
P.O. Box 8699
2301 Market Street
Philadelphia, Pennsylvania 19101-8699
(215) 841-4000
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days. Yes [X] No [__].
The number of shares outstanding of each registrant's common stock as
of May 4, 2001 was as follows:
Exelon Corporation Common Stock, without par value 320,599,887
Commonwealth Edison Company Common Stock,
$12.50 par value 128,033,227
PECO Energy Company Common Stock, without par value 170,478,507
TABLE OF CONTENTS
Page No.
Filing Format 3
Forward-Looking Statements 3
PART I. FINANCIAL INFORMATION 4
ITEM 1. FINANCIAL STATEMENTS 4
Exelon Corporation
Condensed Consolidated Statements of Income and Comprehensive Income 5
Condensed Consolidated Balance Sheets 6
Condensed Consolidated Statements of Cash Flows 8
Commonwealth Edison Company
Condensed Consolidated Statements of Income and Comprehensive Income 9
Condensed Consolidated Balance Sheets 10
Condensed Consolidated Statements of Cash Flows 12
PECO Energy Company
Condensed Consolidated Statements of Income and Comprehensive Income 13
Condensed Consolidated Balance Sheets 14
Condensed Consolidated Statements of Cash Flows 16
Notes to Condensed Consolidated Financial Statements 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 30
Exelon Corporation 30
Commonwealth Edison Company 37
PECO Energy Company 41
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 45
PART II. OTHER INFORMATION 48
ITEM 1. LEGAL PROCEEDINGS 48
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 48
ITEM 5. OTHER INFORMATION 49
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 49
SIGNATURES
2
Filing Format
This combined Form 10-Q is separately being filed by Exelon
Corporation, Commonwealth Edison Company and PECO Energy Company. Information
contained herein relating to any individual registrant has been filed by such
registrant on its own behalf. Each registrant makes no representation as to
information relating to the other registrants.
Forward-Looking Statements
Except for the historical information contained herein, certain of the
matters discussed in this Report are forward-looking statements that are subject
to risks and uncertainties. The factors that could cause actual results to
differ materially include those discussed herein as well as those listed in Note
7 of Notes to Consolidated Financial Statements and other factors discussed in
filings with the Securities and Exchange Commission by Exelon Corporation,
Commonwealth Edison Company and PECO Energy Company. Readers are cautioned not
to place undue reliance on these forward-looking statements, which apply only as
of the date of this Report. Exelon Corporation, Commonwealth Edison Company and
PECO Energy Company undertake no obligation to publicly release any revision to
these forward-looking statements to reflect events or circumstances after the
date of this Report.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
4
EXELON CORPORATION
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In Millions, except per share data)
Three Months Ended March 31,
-------------------------
2001 2000
------- -------
OPERATING REVENUES $ 3,823 $ 1,353
OPERATING EXPENSES
Fuel and Purchased Power 1,330 463
Operating and Maintenance 1,058 391
Depreciation and Amortization 378 80
Taxes Other Than Income 168 67
------- -------
Total Operating Expenses 2,934 1,001
------- -------
OPERATING INCOME 889 352
------- -------
OTHER INCOME AND DEDUCTIONS
Interest Expense (294) (104)
Distributions on Preferred Securities of Subsidiaries (9) (5)
Equity in Earnings (Losses) of Unconsolidated Affiliates, net 18 4
Other, net 55 21
------- -------
Total Other Income and Deductions (230) (84)
------- -------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 659 268
INCOME TAXES 272 101
------- -------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE 387 167
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE (net of income taxes of $8 million and $16 million in
2001 and 2000, respectively) 12 24
------- -------
NET INCOME 399 191
------- -------
OTHER COMPREHENSIVE INCOME (LOSS)
SFAS 133 Transition Adjustment 73 --
Cash Flow Hedge Fair Value Adjustment (36) --
Unrealized Gain (Loss) on Marketable Securities (net of income taxes) (122) (1)
------- -------
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (85) (1)
------- -------
TOTAL COMPREHENSIVE INCOME $ 314 $ 190
======= =======
AVERAGE SHARES OF COMMON STOCK OUTSTANDING - Basic 320 181
======= =======
AVERAGE SHARES OF COMMON STOCK OUTSTANDING - Diluted 324 183
======= =======
EARNINGS PER AVERAGE COMMON SHARE:
BASIC:
Income Before Cumulative Effect of a Change in Accounting Principle $ 1.21 $ 0.92
Cumulative Effect of a Change in Accounting Principle 0.04 0.13
------- -------
Net Income $ 1.25 $ 1.05
======= =======
DILUTED:
Income Before Cumulative Effect of a Change in Accounting Principle $ 1.19 $ 0.91
Cumulative Effect of a Change in Accounting Principle 0.04 0.13
------- -------
Net Income $ 1.23 $ 1.04
======= =======
DIVIDENDS PER AVERAGE COMMON SHARE $ 0.55 $ 0.25
======= =======
See Notes to Condensed Consolidated Financial Statements
5
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions)
March 31, December 31,
2001 2000
------- -------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 825 $ 526
Restricted Cash 210 314
Accounts Receivable, net 2,480 2,552
Inventories, at average cost 394 454
Other 454 338
------- -------
Total Current Assets 4,363 4,184
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 12,980 12,936
DEFERRED DEBITS AND OTHER ASSETS
Regulatory Assets 6,689 7,135
Nuclear Decommissioning Trust Funds 2,941 3,109
Investments 1,613 1,583
Goodwill, net 5,521 5,186
Other 483 464
------- -------
Total Deferred Debits and Other Assets 17,247 17,477
------- -------
TOTAL ASSETS $34,590 $34,597
======= =======
See Notes to Condensed Consolidated Financial Statements
6
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions)
March 31, December 31,
2001 2000
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 1,630 $ 1,373
Long-Term Debt Due within One Year 774 908
Accounts Payable 1,158 1,193
Accrued Expenses 650 720
Other 392 457
-------- --------
Total Current Liabilities 4,604 4,651
-------- --------
LONG-TERM DEBT 12,890 12,958
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred Income Taxes 4,363 4,409
Unamortized Investment Tax Credits 329 330
Nuclear Decommissioning Liability for Retired Plants 1,314 1,301
Pension Obligation 555 567
Non-Pension Postretirement Benefits Obligation 845 819
Spent Nuclear Fuel Obligation 821 810
Other 882 907
-------- --------
Total Deferred Credits and Other Liabilities 9,109 9,143
-------- --------
PREFERRED SECURITIES OF SUBSIDIARIES 630 630
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock 6,919 6,883
Retained Earnings 570 332
Accumulated Other Comprehensive Income (Loss) (132) --
-------- --------
Total Shareholders' Equity 7,357 7,215
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 34,590 $ 34,597
======== ========
See Notes to Condensed Consolidated Financial Statements
7
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
Three Months Ended March 31,
---------------------------
2001 2000
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 399 $ 191
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 490 107
Cumulative Effect of a Change in Accounting Principle (net of income taxes) (12) (24)
Provision for Uncollectible Accounts 30 16
Deferred Income Taxes 65 5
Deferred Energy Costs (29) 12
Equity in (Earnings) Losses of Unconsolidated Affiliates, net (18) (4)
Other Operating Activities 17 6
Changes in Working Capital:
Accounts Receivable 57 82
Inventories 60 30
Accounts Payable, Accrued Expenses and Other Current Liabilities (174) (122)
Other Current Assets (64) (129)
------- -------
Net Cash flows provided by operating activities 821 170
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Plant (492) (121)
Acquisitions - Enterprises, net of cash acquired (38) --
Increase in Other Investments (11) (43)
------- -------
Net Cash flows used in investing activities (541) (164)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Short-Term Debt 257 (28)
Issuance of Long-Term Debt 827 14
Retirement of Long-Term Debt (1,029) (65)
Change in Restricted Cash 104 97
Proceeds from Stock Option Exercises 36 --
Dividends on Common Stock (176) (45)
------- -------
Net Cash flows provided by (used in) financing activities 19 (27)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 299 (21)
------- -------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 526 55
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 825 $ 34
======= =======
See Notes to Condensed Consolidated Financial Statements
8
COMMONWEALTH EDISON COMPANY
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In Millions)
Three Months Ended March 31,
2001 2000
------- -------
OPERATING REVENUES $ 1,446 | $ 1,563
|
OPERATING EXPENSES |
Fuel and Purchased Power 609 | 326
Operating and Maintenance 218 | 460
Depreciation and Amortization 167 | 372
Taxes Other Than Income 72 | 137
------- | -------
|
Total Operating Expenses 1,066 | 1,295
------- | -------
|
|
OPERATING INCOME 380 | 268
------- | -------
|
OTHER INCOME AND DEDUCTIONS |
Interest Expense (141) | (147)
Provision for Dividends on Company-Obligated |
Mandatorily Redeemable Preferred Securities of |
Subsidiary Trusts Holding Solely the Company's |
Subordinated Debt Securities (7) | (7)
Other, net 37 | 140
------- | -------
|
Total Other Income and Deductions (111) | (14)
------- | -------
|
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 269 | 254
INCOME TAXES 123 | 45
------- | -------
|
INCOME BEFORE EXTRAORDINARY ITEMS 146 |
| 209
EXTRAORDINARY ITEMS (net of income taxes of $1 million) -- | (3)
------- | -------
|
NET INCOME 146 | 206
Preferred and Preference Stock Dividends -- | (1)
------- | -------
|
NET INCOME ON COMMON STOCK $ 146 | $ 205
======= | =======
|
COMPREHENSIVE INCOME |
Net Income $ 146 | $ 206
Other Comprehensive Income (net of income taxes): |
Unrealized Gain (Loss) on Marketable Securities (4) | 1
------- | -------
TOTAL COMPREHENSIVE INCOME $ 142 $ 207
======= =======
See Notes to Condensed Consolidated Financial Statements
9
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions)
March 31, December 31,
2001 2000
------- -------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 290 $ 141
Restricted Cash 62 60
Accounts Receivable, net 913 1,204
Receivables from Affiliates 379 468
Inventories, at average cost 64 186
Deferred Income Taxes 53 89
Other 278 285
------- -------
Total Current Assets 2,433 2,039
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 7,017 7,657
DEFERRED DEBITS AND OTHER ASSETS
Regulatory Assets 722 1,110
Nuclear Decommissioning Trust Funds -- 2,669
Investments 63 152
Goodwill, net 5,082 4,766
Receivables from Affiliates 1,316 1,316
Other 131 178
------- -------
Total Deferred Debits and Other Assets 7,314 10,191
------- -------
TOTAL ASSETS $16,370 $20,281
======= =======
See Notes to Condensed Consolidated Financial Statements
10
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions)
March 31, December 31,
2001 2000
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Long-Term Debt Due within One Year $ 346 $ 348
Accounts Payable 181 597
Accrued Expenses 395 532
Payable to Affiliates 456 --
Other 160 329
-------- --------
Total Current Liabilities 1,538 1,806
-------- --------
LONG-TERM DEBT 6,803 6,882
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred Income Taxes 1,715 1,837
Unamortized Investment Tax Credits 58 59
Nuclear Decommissioning Liability for Retired Plants -- 1,301
Pension Obligation 140 285
Non-Pension Postretirement Benefits Obligation 149 315
Payable to Affiliates 374 --
Other 306 1,285
-------- --------
Total Deferred Credits and Other Liabilities 2,742 5,082
-------- --------
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUSTS HOLDING THE COMPANY'S
SUBORDINATED DEBT SECURITIES 328 328
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock 2,678 2,678
Preference Stock of Subsidiary 7 7
Other Paid-in Capital 6,453 5,388
Receivable from Parent (1,062) --
Retained Earnings 216 133
Treasury Stock, at cost (3,329) (2,023)
Accumulated Other Comprehensive Income (Loss) (4) --
-------- --------
Total Shareholders' Equity 4,959 6,183
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,370 $ 20,281
======== ========
See Notes to Condensed Consolidated Financial Statements
11
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
Three Months Ended March 31,
2001 2000
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 146 | $ 206
Adjustments to Reconcile Net Income to Net |
Cash Flows provided by Operating Activities: |
Depreciation and Amortization 167 | 405
Extraordinary Items (net of income taxes) -- | 3
Gain on Forward Share Arrangements -- | (113)
Provision for Uncollectible Accounts 7 | 50
Deferred Income Taxes 3 | (39)
Early Retirement and Separation Program -- | (9)
Other Operating Activities 19 | 104
Changes in Working Capital: |
Accounts Receivable 38 | 129
Inventories 8 | (12)
Accounts Payable, Accrued Expenses, & Other |
Current Liabilities 70 | (1,123)
Other Current Assets -- | 51
------- | -------
|
Net Cash Flows provided by (used in) Operating Activities 458 | (348)
------- | -------
|
CASH FLOWS FROM INVESTING ACTIVITIES |
Investment in Plant (230) | (290)
Plant Removals, net (4) | (2)
Contributions to Nuclear Decommissioning Trust Funds -- | (39)
Notes Receivable from Affiliate 98 | --
Other Investments (15) | 49
Other Investing Activities (4) | 3
------- | -------
|
Net Cash Flows used in Investing Activities (155) | (279)
------- | -------
|
CASH FLOWS FROM FINANCING ACTIVITIES |
Common Stock Repurchases -- | (153)
Retirement of Long-Term Debt (89) | (219)
Change in Restricted Cash (2) | 220
Change in Short-Term Debt -- | 117
Dividends on Common and Preferred Stock (63) | (97)
Common Stock Forward Repurchases -- | (67)
------- | -------
|
Net Cash Flows used in Financing Activities (154) | (199)
------- | -------
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 149 | (826)
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 141 | 1,255
------- | -------
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 290 | $ 429
======= | =======
|
|
SUPPLEMENTAL CASH FLOW INFORMATION Noncash Investing and Financing: |
Net Assets Transferred as a Result of Restructuring, net of Note Payable $ 1,306 | --
Receivable from Parent $ 1,062 | --
Regulatory Asset Fair Value Adjustment $ 347 | --
See Notes to Condensed Consolidated Financial Statements
12
PECO ENERGY COMPANY
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In Millions)
Three Months Ended March 31,
2001 2000
------- -------
OPERATING REVENUES $ 1,051 $ 1,353
OPERATING EXPENSES
Fuel and Purchased Power 488 463
Operating and Maintenance 132 391
Depreciation and Amortization 101 80
Taxes Other Than Income 43 67
------- -------
Total Operating Expenses 764 1,001
------- -------
OPERATING INCOME 287 352
------- -------
OTHER INCOME AND DEDUCTIONS
Interest Expense (105) (104)
Interest Expense - Affiliate (5) --
Company-Obligated Mandatorily Redeemable Preferred
Securities of a Partnership, which holds Solely
Subordinated Debentures of the Company (2) (2)
Equity in Earnings (Losses) of Unconsolidated Affiliates, net -- 4
Other, net 15 21
------- -------
Total Other Income and Deductions (97) (81)
------- -------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 190 271
INCOME TAXES 68 101
------- -------
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 122 170
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE (net of income taxes of $16 million) -- 24
------- -------
NET INCOME 122 194
Preferred Stock Dividends (2) (3)
------- -------
NET INCOME ON COMMON STOCK $ 120 $ 191
======= =======
COMPREHENSIVE INCOME
Net Income $ 122 $ 194
Other Comprehensive Income:
SFAS 133 Transition Adjustment 69 --
Cash Flow Hedge Fair Value Adjustment (30) --
Unrealized Gain (Loss) on Marketable Securities (net of income tax) -- (1)
------- -------
Total Other Comprehensive Income (Loss) 39 (1)
------- -------
TOTAL COMPREHENSIVE INCOME $ 161 $ 193
======= =======
See Notes to Condensed Consolidated Financial Statements
13
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions)
March 31, December 31,
2001 2000
------- -------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 26 $ 49
Restricted Cash 148 254
Accounts Receivable, net 369 1,024
Receivables from Affiliates 99 --
Inventories, at average cost 25 257
Other 210 195
------- -------
Total Current Assets 877 1,779
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 3,955 5,158
DEFERRED DEBITS AND OTHER ASSETS
Regulatory Assets 5,967 6,026
Nuclear Decommissioning Trust Funds -- 440
Investments 27 847
Goodwill, net -- 326
Other 92 200
------- -------
Total Deferred Debits and Other Assets 6,086 7,839
------- -------
TOTAL ASSETS $10,918 $14,776
======= =======
See Notes to Condensed Consolidated Financial Statements
14
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Millions)
March 31, December 31,
2001 2000
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 334 $ 163
Payables to Affiliates -- 1,096
Long-Term Debt Due within One Year 415 553
Accounts Payable 97 403
Accrued Expenses 212 481
Deferred Income Taxes 27 27
Other 18 95
-------- --------
Total Current Liabilities 1,103 2,818
-------- --------
LONG-TERM DEBT 5,811 6,002
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred Income Taxes 3,044 2,532
Unamortized Investment Tax Credits 29 271
Pension Obligation 129 281
Non-Pension Postretirement Benefits Obligation 237 505
Other 113 427
-------- --------
Total Deferred Credits and Other Liabilities 3,552 4,016
-------- --------
COMPANY OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF A PARTNERSHIP 128 128
MANDATORILY REDEEMABLE PREFERRED STOCK 37 37
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock 1,830 1,449
Receivable from Parent (1,983) --
Preferred Stock 137 137
Deferred Compensation (7) (7)
Retained Earnings 272 197
Accumulated Other Comprehensive Income (Loss) 38 (1)
-------- --------
Total Shareholders' Equity 287 1,775
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,918 $ 14,776
======== ========
See Notes to Condensed Consolidated Financial Statements
15
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
Three Months Ended March 31,
----------------------------
2001 2000
----- -----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 122 $ 194
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 101 107
Cumulative Effect of a Change in Accounting Principle (net of income taxes) -- (24)
Provision for Uncollectible Accounts 18 16
Deferred Income Taxes 55 5
Deferred Energy Costs (29) 12
Equity in Earnings (Losses) of Unconsolidated Affiliates, net -- (4)
Other Operating Activities 19 6
Changes in Working Capital:
Accounts Receivable (53) 82
Receivable from Affiliates (99) --
Inventories 45 30
Accounts Payable, Accrued Expenses and Other Current Liabilities (106) (122)
Other Current Assets (149) (129)
----- -----
Net Cash Flows provided by (used in) Operating Activities (76) 173
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Plant (57) (121)
Other Investing Activities 11 (43)
----- -----
Net Cash Flows used in Investing Activities (46) (164)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Short-Term Debt 173 (28)
Change in Payable to Affiliate (46) --
Issuance of Long-Term Debt 805 14
Retirement of Long-Term Debt (923) (65)
Change in Restricted Cash 106 97
Dividends on Preferred and Common Stock (47) (48)
Settlement of Interest Rate Swap Agreements 31 --
----- -----
Net Cash Flows provided by (used in) Financing Activities 99 (30)
----- -----
DECREASE IN CASH AND CASH EQUIVALENTS (23) (21)
----- -----
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 49 55
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 26 $ 34
===== =====
SUPPLEMENTAL CASH FLOW INFORMATION Noncash Investing and Financing:
Net Assets Transferred as a Result of Restructuring, net of
Receivable from Affiliates $1,602 --
Receivable from Parent $1,983 --
See Notes to Condensed Consolidated Financial Statements
16
EXELON CORPORATION AND SUBSIDIARY COMPANIES
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data, unless otherwise noted)
1. BASIS OF PRESENTATION (Exelon, ComEd and PECO)
The accompanying condensed consolidated financial statements as of
March 31, 2001 and for the quarter then ended are unaudited, but include all
adjustments that Exelon Corporation (Exelon), Commonwealth Edison Company
(ComEd) and PECO Energy Company (PECO) consider necessary for a fair
presentation of such financial statements. All adjustments are of a normal,
recurring nature, except as otherwise disclosed. The year-end condensed
consolidated balance sheet data were derived from audited financial statements
but do not include all disclosures required by generally accepted accounting
principles (GAAP). Certain prior-year amounts have been reclassified for
comparative purposes. These reclassifications had no material effect on net
income or shareholders' equity. These notes should be read in conjunction with
the Notes to Consolidated Financial Statements of Exelon, ComEd and PECO
included in or incorporated by reference in Item 8 of their Annual Report on
Form 10-K for the year ended December 31, 2000.
ComEd
ComEd was the principal subsidiary of Unicom Corporation (Unicom) prior
to the merger with Exelon. See Note 2 - Merger. The merger was accounted for
using the purchase method of accounting in accordance with GAAP. The effects of
the purchase method are reflected on the financial statements of ComEd as of the
merger date. Accordingly, the financial statements presented for the period
after the merger reflect a new basis of accounting. ComEd's Condensed
Consolidated Statements of Income and Comprehensive Income and Condensed
Consolidated Statements of Cash Flows are separated by a bold black line to
indicate the different basis of accounting existing in each of the periods
presented.
2. MERGER (Exelon)
On October 20, 2000, Exelon became the parent corporation for each of
ComEd and PECO as a result of the completion of the transactions contemplated by
an Agreement and Plan of Exchange and Merger, as amended, among PECO, Unicom and
Exelon. Pursuant to the merger, Exelon became the owner of all of the common
stock of PECO and Unicom ceased to exist and its subsidiaries, including ComEd,
became subsidiaries of Exelon. The merger was accounted for using the purchase
method of accounting. Exelon's results of operations include Unicom's results of
operations since October 20, 2000.
Selected unaudited pro forma combined results of operations for the
quarter ended March 31, 2000 assuming the merger occurred on January 1, 2000 are
as follows:
Operating revenue $3,000
Net income $352
Net income per common share (basic) $1.10
Net income per common share (diluted) $1.10
17
Pro forma net income excludes the benefit from the cumulative effect of
a change in accounting principle of $40 million ($24 million, net of income
taxes) and merger-related costs of $16 million ($10 million, net of income
taxes). These non-recurring items total $14 million, net of income taxes, or
$0.04 per share on a basic and diluted basis. The pro forma financial
information is not necessarily indicative of the operating results that would
have occurred had the merger been consummated as of the date indicated, nor is
it necessarily indicative of future operating results.
Merger-Related Costs (Exelon and ComEd )
In association with the merger, Exelon recorded certain reserves in
2000. The reserves associated with PECO were charged to expense, while the
reserves associated with Unicom were recorded as part of the application of
purchase accounting and did not affect results of operations. Approximately
2,900 positions were identified to be eliminated as a result of the merger.
Exelon anticipates that $282 million of employee costs will be funded from its
pension and postretirement benefit plans and $149 million will be funded from
general corporate funds. The following table provides a reconciliation of the
reserve for employee severance associated with the merger:
$ Employees
----- ---------
Balance at December 31, 2000 $144 2,900
Deductions for employee terminations (25) (619)
---- -----
Balance at March 31, 2001 $119 2,281
==== =====
3. CORPORATE RESTRUCTURING (Exelon, ComEd and PECO)
During January 2001, Exelon undertook a corporate restructuring to
separate its generation and other competitive businesses from its regulated
energy delivery businesses at ComEd and PECO. As part of the restructuring, the
generation-related operations and assets and liabilities of ComEd were
transferred to a separate subsidiary of Exelon. Also as part of the
restructuring, the non-regulated operations and related assets and liabilities
of PECO, representing PECO's Generation and Enterprises business segments were
transferred to separate subsidiaries of Exelon. Additionally, certain operations
and assets and liabilities of ComEd and PECO were transferred to Exelon Business
Services Company (BSC). As a result, effective January 1, 2001, the operations
of ComEd consist of its retail electricity distribution and transmission
business in northern Illinois and the operations of PECO consist of its retail
electricity distribution and transmission business in southeastern Pennsylvania
and its natural gas distribution business located in the Pennsylvania counties
surrounding the City of Philadelphia.
18
The corporate restructuring had the following effect on the Condensed
Consolidated Balance Sheets of ComEd and PECO as of January 1, 2001:
ComEd PECO
----- ----
Decrease in Assets:
- -------------------
Current Assets ($825) ($1,085)
Property, Plant & Equipment, net (782) (1,212)
Investments (104) (1,262)
Other Noncurrent Assets (3,063) (431)
(Increase) Decrease in Liabilities:
- -----------------------------------
Current Liabilities 834 1,601
Long-Term Debt -- 205
Deferred Income Taxes 84 (457)
Other Noncurrent Liabilities 3,000 964
----- -------
Net Assets Transferred ($856) ($1,677)
====== ========
Consideration, based on the net book value of the net assets
transferred, was as follows:
ComEd PECO
----- ----
Treasury Stock Received $1,306 $ --
Return of Capital -- 1,602
Note (Payable)/Receivable - Affiliates (450) 75
------ ------
$856 $1,677
====== ======
Selected unaudited pro forma results of operations for the quarter
ended March 31, 2000, assuming the merger and corporate restructuring occurred
as of January 1, 2000, are presented as follows:
ComEd PECO
----- ----
Operating revenues $1,444 $849
Operating income $199 $341
Net income $151 $142
Pro forma financial information above for ComEd excludes merger-related
costs of $4 million ($3 million, net of income taxes). Pro forma information
above for PECO excludes the benefit from the cumulative effect of a change in
accounting principles of $40 million ($24 million, net of income taxes) and
merger-related costs of $11 million ($7 million, net of income taxes).
In connection with the restructuring, ComEd and PECO assigned their
respective rights and obligations under various power purchase and fuel supply
agreements to Exelon Generation Company, LLC (Generation). Additionally, ComEd
and PECO entered into power purchase agreements (PPAs) with Generation.
Under the PPA between ComEd and Generation, Generation will supply all
of ComEd's load requirements through 2004. Prices for this energy vary depending
upon the time of day and month of delivery, as specified in the PPA. During 2005
and 2006, ComEd will purchase all of its required energy and capacity from
Generation, up to the available capacity of the nuclear generating plants
formerly owned by ComEd and transferred to Generation. Under the terms of
ComEd's PPA, Generation is responsible for obtaining the required transmission
for its supply. The PPA also specifies that prior to 2005, ComEd and Generation
will jointly determine and agree on a market-based price for energy delivered
under the PPA for 2005 and 2006. In the event that the parties cannot agree to
market-based prices for 2005 and 2006 prior to July 1, 2004, ComEd has the
option of terminating the PPA effective December 31, 2004. ComEd will need to
obtain any additional supply required from market sources in 2005 and 2006, and
subsequent to 2006, will need to obtain all of its supply from market sources,
which could include Generation.
19
PECO has entered into a PPA whereby Generation will supply all of
PECO's load requirements through 2010. Prices for this energy will be equivalent
to the net proceeds from sales of unbundled generation to PECO's Provider of
Last Resort customers at rates PECO is allowed to charge customers who do not
choose an alternate generation supplier. Under the terms of PECO's PPA, PECO is
responsible for obtaining the required transmission for its supply. Subsequent
to 2010, PECO will obtain all of its supply from market sources, which could
include Generation.
4. CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (Exelon and PECO)
Exelon's activities expose it to a variety of market risks primarily
related to the effects of changes in commodity prices and interest rates. These
financial exposures are monitored and managed by Exelon as an integral part of
its overall risk-management program.
Exelon's commodity-price, risk-management strategy includes the use of
derivatives to minimize significant, unanticipated earnings and cash flow
fluctuations caused by commodity-price volatility. Exelon utilizes contracts for
the forward purchase and sale of energy and energy-related commodities to manage
its generation and physical delivery obligations to its retail and wholesale
customers. Energy option contracts and energy and energy-related swap agreements
are used to limit the price risk associated with these forward contracts.
Exelon's interest-rate, risk-management strategy includes use of
derivative instruments to minimize significant, unanticipated earnings and cash
flow fluctuations caused by interest-rate volatility. Exelon uses a combination
of fixed-rate and variable-rate debt to reduce interest-rate exposure.
Interest-rate swaps may be used to adjust exposure when deemed appropriate,
based on market conditions. These strategies are employed to minimize the cost
of capital.
By using derivative financial instruments to hedge exposures to changes
in energy prices and interest rates, Exelon exposes itself to credit risk and
market risk. Credit risk is the risk of a counterparty failing to perform
according to contract terms. When the value of a contract is positive, the
counterparty owes Exelon, which creates repayment risk for Exelon. When the
value of a derivative contract is negative, Exelon owes the counterparty and,
therefore, the derivative contract does not create repayment risk. Exelon
minimizes the credit (or repayment) risk by (1) entering into transactions with
high-quality counterparties, (2) limiting the amount of exposure to each
counterparty, (3) monitoring the financial condition of its counterparties, and
(4) seeking credit enhancements to improve counterparty credit quality.
Market risk is the effect on the value of Exelon's outright and
contingent commitments that result from a change in interest rates or commodity
prices. The market risk associated with interest-rate and energy and
energy-related contracts is managed by the establishment and monitoring of
parameters that limit the types and degree of market risk that may be
undertaken.
20
Exelon's derivative activities are subject to the management,
direction, and control of the corporate Risk Management Committee (RMC). The RMC
is chaired by Exelon's chief risk officer and includes the chief financial
officer, general counsel, treasurer, vice president of corporate planning and
officers from each of the business units. The RMC reports to the board of
directors on the scope of Exelon's derivative activities. The RMC (1) sets forth
risk management philosophy and objectives through a corporate policy, and (2)
establishes procedures for control and valuation, counterparty credit approval,
and the monitoring and reporting of derivative activity.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (SFAS No. 133) to establish accounting and
reporting standards for derivatives. The new standard requires recognizing all
derivatives as either assets or liabilities on the balance sheet at their fair
value and specifies the accounting for changes in fair value depending upon the
intended use of the derivative. Exelon adopted SFAS No. 133 on January 1, 2001,
which resulted in after-tax income of $12 million that is reflected in Exelon's
Condensed Consolidated Statement of Income and Comprehensive Income as a
cumulative effect of a change in accounting principle. In addition, the adoption
of SFAS No. 133 resulted in $73 million of other comprehensive income associated
with the fair value of cash flow hedges.
For the quarter ended March 31, 2001, Exelon recognized a net loss of
$16 million in Exelon's Condensed Consolidated Statement of Income and
Comprehensive Income, which represents the valuation at March 31, 2001, on a
marked-to-market basis, of contracts designated as cash flow hedges. Exelon also
reclassified a net gain of $6 million to other income in the Condensed
Consolidated Statement of Income and Comprehensive Income, as a result of
discontinuance of cash flow hedges related to certain forecasted transactions
that are no longer probable of occurring.
As of March 31, 2001, $7 million of deferred net gains on derivative
instruments accumulated in other comprehensive income are expected to be
reclassified to earnings during the next twelve months. Amounts in accumulated
other comprehensive income related to interest rate cash flows are reclassified
into earnings when the forecasted interest rate payment occurs. Amounts in
accumulated other comprehensive income related to energy commodity cash flows
are reclassified into earnings when the forecasted purchase or sale of the
energy commodity occurs.
5. EARNINGS PER SHARE (Exelon)
Diluted earnings per share are calculated by dividing net income by the
weighted average shares of common stock outstanding including shares issuable
upon exercise of stock options outstanding under Exelon's stock option plans
considered to be common stock equivalents. The following table shows the effect
21
of these stock options on the weighted average number of shares outstanding used
in calculating diluted earnings per share (in millions):
Three Months Ended
March 31,
2001 2000
---- ----
Average Common Shares Outstanding 320 181
Assumed Exercise of Stock Options 4 2
---- ----
Average Diluted Common Shares Outstanding 324 183
==== ====
6. SEGMENT INFORMATION (Exelon)
Exelon operates in three business segments: Energy Delivery, Generation
and Enterprises. Operations of ComEd and PECO are included in Energy Delivery.
Exelon's segment information as of March 31, 2001 and December 31, 2000 and for
the quarter ended March 31, 2001 as compared to the same period in 2000 is as
follows :
Corporate
and
Energy Intersegment
Delivery Generation Enterprises Eliminations Consolidated
Revenues:
2001 $ 2,501 $1,628 $ 667 $ (973) $ 3,823
2000 $ 849 $ 498 $ 247 $ (241) $ 1,353
EBIT (a):
2001 $ 682 $ 293 $ (31) $ (3) $ 941
2000 $ 339 $ 38 $ (12) $ -- $ 365
Total Assets:
March 31, 2001 $26,936 $6,191 $1,787 $ (324) $34,590
December 31, 2000 $27,424 $5,734 $2,277 $ (838) $34,597
<FN>
(a) EBIT - includes operating income, equity in earnings (losses) of
unconsolidated affiliates, and other income and expenses recorded in other,
net, with the exception of interest income.
</FN>
The operations of Exelon Energy, Exelon's competitive retail generation
supplier, for 2000 have been reclassified from Generation to Enterprises to
reflect the effects of the corporate restructuring. See Note 3 - Corporate
Restructuring.
7. COMMITMENTS AND CONTINGENCIES (Exelon, ComEd and PECO)
For information regarding Exelon's capital commitments, nuclear
insurance, nuclear decommissioning and spent fuel storage, energy commitments,
22
environmental issues and litigation, see the Commitments and Contingencies Notes
in Exelon's, ComEd's and PECO's Notes to Consolidated Financial Statements for
the year ended December 31, 2000.
Environmental Liabilities
Exelon has identified 72 sites where former manufactured gas plant
(MGP) activities have or may have resulted in actual site contamination. As of
March 31, 2001, Exelon had accrued $170 million for environmental investigation
and remediation costs, including $138 million for MGP investigation and
remediation that currently can be reasonably estimated. Exelon, ComEd and PECO
cannot predict whether they will incur other significant liabilities for
additional investigation and remediation costs at these or additional sites
identified by environmental agencies or others, or whether all such costs will
be recoverable from third parties.
ComEd
As of March 31, 2001, ComEd had accrued $115 million (discounted) for
environmental investigation and remediation costs. This reserve included $109
million for MGP investigation and remediation, which currently can be reasonably
estimated.
PECO
As of March 31, 2001, PECO had accrued $39 million (undiscounted) for
environmental investigation and remediation costs, including $29 million for MGP
investigation and remediation, which currently can be reasonably estimated.
Energy Commitments
At March 31, 2001, Exelon had long-term commitments, in millions of
megawatt hours (MWhs) and dollars, relating to the purchase and sale of energy,
capacity and transmission rights from unaffiliated utilities and others as
expressed in the following tables:
Power Only
------------------------------------------------
Purchases Sales
MWhs Dollars MWhs Dollars
2001 13 $ 270 29 $ 827
2002 11 167 18 371
2003 9 135 15 327
2004 5 71 8 190
2005 4 61 6 148
Thereafter 5 81 4 87
------ ------
Total $ 785 $1,950
====== ======
23
Capacity Capacity Transmission
Purchases Sales Rights
in Dollars in Dollars in Dollars
2001 $ 737 $ 24 $ 112
2002 881 21 42
2003 786 16 32
2004 778 3 25
2005 414 3 25
Thereafter 5,200 8 80
------ ------ ------
Total $8,796 $ 75 316
====== ====== ======
See Note 3 - Corporate Restructuring, for information about ComEd and PECO PPAs
with Generation.
Litigation
FERC Municipal Request for Refund. Three of ComEd's wholesale municipal
customers filed a complaint and request for refund with FERC alleging that ComEd
failed to properly adjust their rates as provided for under the terms of their
electric service contracts, and to track certain refunds made to ComEd's retail
customers in the years 1992 through 1994. In the third quarter of 1998, FERC
granted the complaint and directed that refunds be made, with interest. On April
30, 2001, FERC issued an order pursuant to ComEd's request for a rehearing, in
which it determined that its 1998 order had been erroneous and that no refunds
were due from ComEd to the municipal customers. The FERC order is subject to
appeal.
8. PENSION AND POSTRETIREMENT BENEFIT OBLIGATIONS (ComEd and PECO)
ComEd
As part of Exelon's corporate restructuring, approximately 5,500 ComEd
employees were transferred to Generation, BSC and Enterprises. As a result of
the transfer, ComEd's pension and non-pension postretirement benefits
obligations were reduced by $143 million and $172 million, respectively, as of
January 1, 2001.
PECO
As part of Exelon's corporate restructuring, approximately 3,200 PECO
employees were transferred to Generation, BSC and Enterprises. As a result of
the transfer, PECO's pension and non-pension postretirement benefits obligations
were reduced by $70 million and $271 million, respectively, as of January 1,
2001.
ComEd's and PECO's plan assets and funded status of the plans as of
December 31, 2000, after reflecting the effect of these transfers, are as
follows:
24
ComEd PECO
---------------------------- --------------------------
Other Other
Pension Postretirement Pension Postretirement
Benefits Benefits Benefits Benefits
Net Benefit Obligation at December 31, 2000 $2,220 $539 $1,024 $423
====== ==== ====== ====
Fair Value of Plan Assets at December 31, 2000 $1,987 $352 $1,380 $121
====== ==== ====== ====
Funded Status at December 31, 2000 $(233) $(187) $356 $(302)
Unrecognized net actuarial (gain) loss 91 42 (441) 16
Unrecognized prior service cost -- -- 35 --
Unrecognized net transition obligation (asset) -- -- (9) 56
Miscellaneous adjustments -- 2 -- --
------ ------ ----- ------
Net amount recognized at December 31, 2000 $(142) $(143) $(59) $(230)
====== ====== ===== ======
Amounts recognized in the consolidated balance
sheets consist of:
Prepaid benefit cost $ 70 $ 2
Accrued benefit cost (129) (232)
---- ----
Net amount recognized at December 31, 2000 $(59) $(230)
==== =====
9. DECOMMISSIONING AND SPENT FUEL STORAGE (Exelon, ComEd and PECO)
The obligation for decommissioning Exelon's nuclear facilities and the
related trust fund assets were transferred from ComEd and PECO to Generation
concurrent with the transfer of the generating plants and the related Nuclear
Regulatory Commission (NRC) operating licenses as of January 1, 2001.
Additionally, obligations for spent nuclear fuel disposal, and provisions for
nuclear insurance were assumed by Generation under terms and conditions
commensurate with those previously borne by ComEd and PECO.
ComEd
ComEd's historical accounting policy for the recognition of
decommissioning costs has been to record a debit to decommissioning expense (a
component of operating and maintenance expense) and a credit to accumulated
depreciation for operating units, or a credit to regulatory assets for retired
units (in current year dollars) on a straight-line basis over the NRC operating
license life of the plants. As of December 31, 2000, ComEd's cumulative
liability of $2.1 billion was recorded as a component of accumulated
depreciation. Additionally, a $1.3 billion liability representing the present
value of the estimated cost of decommissioning nuclear units previously retired
was recorded as a long-term
25
liability. These liabilities, as well as investments in trust fund assets of
$2.6 billion to fund the costs of decommissioning, were transferred to
Generation.
In December 2000, the Illinois Commerce Commission (ICC) issued an
order, effective upon the transfer of the nuclear plants to Generation,
authorizing ComEd to recover $73 million annually from customers during the
first four years of the six-year term of the PPA between ComEd and Generation.
See Note 3 - Corporate Restructuring. Up to $73 million annually can also be
collected in 2005 and 2006, depending on the portion of the output of the former
ComEd nuclear stations that ComEd purchases from Generation. Under the ICC
order, subsequent to 2006, there would be no further collection for
decommissioning costs from customers. All amounts collected from customers must
be remitted to Generation for deposit into the related trust funds. The ICC
order also provides that any surplus trust funds after ComEd's former nuclear
stations are decommissioned must be refunded to ComEd's customers. The ICC order
has been appealed to the Illinois Appellate Court.
The $73 million annual recovery of decommissioning costs authorized by
the ICC order represents a reduction from the $84 million annual recovery in
2000. Accordingly, ComEd reduced its nuclear decommissioning regulatory asset to
$372 million, reflecting the expected probable future recoveries from customers
under the new ICC order. The reduction in the regulatory asset in the amount of
$347 million was recorded as an adjustment to the merger purchase price
allocation and resulted in a corresponding increase in goodwill. Effective
January 1, 2001, ComEd recorded an obligation to Generation of approximately
$440 million representing ComEd's legal requirement to remit funds to Generation
for the remaining regulatory asset amount of $372 million upon collection from
customers, and for collections from customers prior to the establishment of
external decommissioning trust funds in 1989 to be remitted to Generation for
deposit into the decommissioning trusts through 2006. Unrealized gains and
losses on decommissioning trust funds (based on the market value of the assets
on the merger date, in accordance with purchase accounting) had previously been
recorded in accumulated depreciation or regulatory assets. As a result of the
transfer of the nuclear plants to Generation and the ICC order limiting the
regulated recoveries of decommissioning costs, net unrealized losses of $47
million (net of income taxes) were reclassified to accumulated other
comprehensive income. Realized gains and losses are based on the adjusted cost
basis of the assets and are recorded as income on Exelon's Condensed
Consolidated Statements of Income and Comprehensive Income.
Additionally, as part of the corporate restructuring, ComEd's liability
to the U.S. Department of Energy (DOE) for payment of its one-time fee for spent
nuclear fuel disposal has been transferred to Generation. As of December 31,
2000, this liability, including accrued interest, was $810 million.
PECO
As of December 31, 2000, PECO's Condensed Consolidated Balance Sheet
included an estimated liability for decommissioning its nuclear plants of $412
million that was recorded as a component of accumulated depreciation.
Investments in nuclear decommissioning trust fund assets were $440 million. Both
the liability and the trust fund investments were transferred to Generation as
26
of January 1, 2001. Annual decommissioning cost recovery of $29 million,
collected through regulated rates, will continue, and all amounts collected will
be remitted to Generation to be deposited into the decommissioning trust funds.
10. TRANSITION BONDS (Exelon and PECO)
On March 1, 2001, PECO Energy Transition Trust (PETT), a Delaware
business trust and a wholly owned subsidiary of PECO, refinanced $805 million of
floating rate Series 1999-A Transition Bonds through the issuance by PETT of
fixed-rate transition bonds (Series 2001-A Transition Bonds). Approximately 72%
of the Class A-3 and 70% of the Class A-5 Series 1999-A Transition Bonds were
redeemed. The Series 2001-A Transition Bonds are non-callable, fixed-rate
securities with an interest rate of 6.52%. The Series 2001-A Transition Bonds
have an expected final payment date of September 1, 2010 and a termination date
of December 31, 2010. The transition bonds are solely obligations of PETT,
secured by intangible transition property sold by PECO to PETT concurrently with
the issuance of the Series 1999-A Transition Bonds and certain other related
collateral.
In 1999, PECO entered into interest rate swaps relating to the Class
A-3 and Class A-5 Series 1999-A Transition Bonds in the aggregate notional
amount of $1.1 billion with an average interest rate of 6.65%. PECO also entered
into forward starting interest rate swaps relating to these two classes of
floating rate transition bonds in the aggregate notional amount of $1.1 billion
with an average interest rate of 6.01%. In connection with the refinancing of a
portion of the two floating rate series of transition bonds in the first quarter
of 2001, PECO settled $318 million of a forward starting interest rate swap
resulting in a $6 million gain which is reflected in other income and
deductions. See Note 4 - Cumulative Effect of a Change in Accounting Principle.
Also, in connection with the refinancing, PECO settled a portion of the interest
rate swaps and the remaining portion of the forward starting interest rate swaps
resulting in gains of $25 million, which were deferred and are being amortized
over the expected remaining lives of the related debt.
In connection with the adoption of SFAS No. 133, on January 1, 2001,
PECO reflected a transition adjustment increasing other comprehensive income by
$69 million related to the interest rate swaps and forward starting interest
rate swaps. As of March 31, 2001, the fair value of interest rate swaps
decreased $31 million to $38 million, reflecting the fair value of the remaining
interest rate swaps at PETT and the settlement of PECO's interest rate swaps
described above.
11. SALE OF ACCOUNTS RECEIVABLE (Exelon and PECO)
PECO is party to an agreement with a financial institution under which
it can sell or finance with limited recourse an undivided interest, adjusted
daily, in up to $225 million of designated accounts receivable until November
2005. At March 31, 2001, PECO had sold a $225 million interest in accounts
receivable, consisting of a $174 million interest in accounts receivable which
PECO accounted for as a sale under SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," and a $51
million interest in special-agreement accounts receivable which were accounted
27
for as a long-term note payable. PECO retains the servicing responsibility for
these receivables. The agreement requires PECO to maintain the $225 million
interest, which, if not met, requires PECO to deposit cash in order to satisfy
such requirements. At March 31, 2001, PECO met this requirement and was not
required to make any cash deposits.
12. RELATED-PARTY TRANSACTIONS (ComEd and PECO)
ComEd
At March 31, 2001 and December 31, 2000, respectively, ComEd had a $352
million and a $400 million receivable from PECO, which were reflected in current
assets in ComEd's Condensed Consolidated Balance Sheets. The average interest
rate on this receivable for the period was 6.5%. Interest income on the
receivable from PECO was $5 million for the quarter ended March 31, 2001. ComEd
had notes receivable from affiliates of $1.3 billion at March 31, 2001 and
December 31, 2000, primarily relating to the December 1999 fossil plant sale,
and is included in deferred debits and other assets in ComEd's Condensed
Consolidated Balance Sheets. Interest income earned on this note receivable was
$22 million and $43 million for the quarters ended March 31, 2001 and 2000,
respectively.
Effective January 1, 2001, Exelon contributed to ComEd a $1.0 billion
receivable, payable by Exelon, for the purpose of funding future tax payments
resulting from collection of intangible transition charges. This receivable is
reflected as a reduction of shareholders' equity in ComEd's Condensed
Consolidated Balance Sheets. This non-interest bearing receivable is expected to
be settled over the years 2001 through 2008 in conjunction with the payment of
the taxes resulting from the collection of intangible transition charges.
At March 31, 2001, ComEd had a short-term payable of $409 million and a
long-term payable of $364 million to Generation resulting from the
restructuring, which were included in current liabilities and deferred credits
and other liabilities, respectively, on ComEd's Condensed Consolidated Balance
Sheets.
In connection with the transfer of the generation assets in the
restructuring transaction, ComEd entered into a PPA with Generation. See Note 3
- - Corporate Restructuring. Intercompany power purchases pursuant to the PPA for
the quarter ended March 31, 2001 were $609 million.
Effective January 1, 2001, upon the corporate restructuring, ComEd
received a variety of corporate support services from BSC including legal, human
resources, financial and information technology services. Such services are
provided at cost including applicable overheads.
PECO
At March 31, 2001 and December 31, 2000, respectively, PECO had a $352
million and $400 million payable to ComEd, which is reflected in current
liabilities in PECO's Condensed Consolidated Balance Sheets. The average annual
interest rate on this payable for the period was 6.5%. Interest expense related
to this payable for the quarter ended March 31, 2001 was $5 million. In
conjunction with the payable to ComEd, as of January 1, 2001, Exelon contributed
to PECO a $330 million receivable, payable by Exelon, for the purpose of funding
the repayment of the liability.
28
Effective January 1, 2001, Exelon contributed to PECO a $2.0 billion
receivable, payable by Exelon, for the purpose of funding future tax payments
resulting from collection of competitive transition charges. This receivable is
reflected as a reduction of shareholders' equity in PECO's Condensed
Consolidated Balance Sheets. This non-interest bearing receivable is expected to
be settled over the years 2001 through 2010 in conjunction with the payment of
the taxes resulting from the collection of competitive transition charges.
In connection with the transfer of the generation assets in the
restructuring transaction, PECO entered into a PPA with Generation. See Note 3 -
Corporate Restructuring. Intercompany power purchases pursuant to the PPA for
the quarter ended March 31, 2001 were $245 million.
Effective January 1, 2001, upon the corporate restructuring, PECO
received a variety of corporate support services from BSC including legal, human
resources, financial and information technology services. Such services are
provided at cost including applicable overheads.
13. SUBSEQUENT EVENT (Exelon)
On May 8, 2001, Exelon issued $500 million of its senior unsecured
notes with a maturity date of May 1, 2011 and an interest rate of 6.75%. Exelon
used the proceeds from the issuance of the notes to repay a portion of a $1.21
billion term loan.
29
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXELON CORPORATION
GENERAL
On October 20, 2000, Exelon Corporation (Exelon) became the parent corporation
of each of Commonwealth Edison Company (ComEd) and PECO Energy Company (PECO) as
a result of the completion of the merger. The merger was accounted for using the
purchase method of accounting.
During January 2001, Exelon undertook a corporate restructuring to separate its
generation and other competitive businesses from its regulated energy delivery
businesses at ComEd and PECO. As part of the restructuring, the
generation-related operations and assets and liabilities of ComEd were
transferred to Exelon Generation Company, LLC (Generation). Also as part of the
restructuring, the non-regulated operations and related assets and liabilities
of PECO, representing PECO's Generation and Enterprises business segments were
transferred to Generation and Exelon Enterprises Company, LLC (Enterprises).
Additionally, certain operations and assets and liabilities of ComEd and PECO
were transferred to Exelon Business Services Company (BSC).
Exelon, through subsidiaries, including PECO and ComEd, operates in three
business segments:
o Energy Delivery, consisting of the retail electricity distribution and
transmission businesses of ComEd in northern Illinois and PECO in
southeastern Pennsylvania and the natural gas distribution business of PECO
in the Pennsylvania counties surrounding the City of Philadelphia.
o Generation, consisting of electric generating facilities, power marketing
operations and equity interests in Sithe Energies, Inc. (Sithe) and AmerGen
Energy Company, LLC (AmerGen).
o Enterprises, consisting of competitive retail energy sales, energy and
infrastructure services, communications and related investments. The
operations of Exelon Energy for 2000 have been reclassified from Generation
to Enterprises to reflect the effects of the corporate restructuring.
30
Significant Operating Trends
Revenue and Expense Items as a
Percentage of Total Operating Revenues
March 31,
---------
2001 2000
---- ----
Operating Revenues 100% 100%
---- ----
Fuel and Purchased Power 35% 34%
Operating and Maintenance 28% 29%
Depreciation and Amortization 10% 6%
Taxes Other Than Income 4% 5%
----- -----
Total Operating Expenses 77% 74%
----- -----
Operating Income 23% 26%
===== =====
RESULTS OF OPERATIONS
Quarter Ended March 31, 2001 Compared To Quarter Ended March 31, 2000
Net Income and Earnings Per Share
Exelon's net income increased $220 million, or 132% in the first quarter of
2001, before giving effect to the cumulative effect of a change in accounting
principle. Earnings per share (diluted), on the same basis, increased $0.28 per
share, or 31%. Earnings per share increased less than net income because of an
increase in the weighted average shares of common stock outstanding as a result
of the issuance of common stock in connection with the merger, partially offset
by the repurchase of common stock with the proceeds from PECO's May 2000
stranded cost recovery securitization. Net income, inclusive of the cumulative
effect of a change in accounting principle increased $208 million, or 109% in
the first quarter of 2001. Earnings per share, on the same basis, increased
$0.19 per share, or 18%.
Earnings Before Interest and Income Taxes
Exelon evaluates the performance of its business segments based on earnings
before interest and income taxes (EBIT). In addition to components of operating
income as shown on the consolidated statements of income, EBIT includes equity
in earnings (losses) of unconsolidated affiliates, and other income and expense
recorded in other, net, with the exception of interest income. Operating
revenues, operating expenses and depreciation and amortization for each business
segment in the following analyses include intercompany transactions that are
eliminated in the consolidated Exelon financial statements. Exelon's EBIT was
$941 million and $365 million for the three months ended March 31, 2001 and
2000, respectively. EBIT for the first quarter of 2000 represents the results of
PECO only and does not include the effects of the October 20, 2000 merger of
31
Unicom and PECO. To provide a more meaningful analysis of results of operations,
the EBIT analyses by business segment below identify the portion of the EBIT
variance that is attributable to the addition of Unicom results of operations
and the portion of the variance that results from changes in components of the
underlying operations. The Unicom 2000 contribution represents results for the
three months ended March 31, 2000 on a pro forma basis as if the merger occurred
January 1, 2000.
EBIT Contribution by Business Segment
Components of Variance
Three Months ------------------------
Ended March 31, Unicom
------------------ 2000 Normal
2001 2000 Variance Contribution Operations
---- ---- -------- ------------ ----------
(In millions)
Energy Delivery $682 $339 $343 $271 $ 72
Generation 293 38 255 87 168
Enterprises (31) (12) (19) - (19)
Corporate (3) - (3) (18) 15
---- ---- ---- ---- ----
Total $941 $365 $576 $340 $236
==== ==== ==== ==== ====
EBIT - Energy Delivery
Components of Variance
Three Months --------------------------
Ended March 31, Unicom
------------------- 2000 Normal
2001 2000 Variance Contribution Operations
---- ---- -------- ------------ ----------
(In millions)
Operating Revenue $2,501 $ 849 $1,652 $1,444 $ 208
Operating Expense and Other $1,550 $ 470 $1,080 $ 850 $ 230
Depreciation & Amortization $ 269 $ 40 $ 229 $ 323 $ (94)
EBIT $ 682 $ 339 $ 343 $ 271 $ 72
32
Energy Delivery's EBIT increased $343 million in the first quarter of 2001, as
compared to the same period in 2000. ComEd's contribution accounted for $271
million of the variance and normal operations added $72 million. The $208
million growth in operating revenues was primarily attributable to increased
PECO electric revenues of $109 million and additional gas revenue of $94
million. The increase in electric revenue was primarily attributable to $85
million from customers in Pennsylvania selecting or returning to PECO as their
electric generation supplier and rate adjustments in Pennsylvania, an $11
million prepayment of competitive transition charges by a large customer and an
increase of $8 million as a result of higher delivery volume. The increase in
regulated gas revenue was primarily attributable to increases of $80 million
related to higher prices, $10 million as a result of favorable weather
conditions and $4 million attributable to increased delivery volume from new and
existing customers.
ComEd's electric operating revenues increased $2 million compared to the same
period in 2000. The increase reflects kilowatthour sales growth to ComEd's
residential retail and wholesale customers (municipalities and certain
alternative retail suppliers) offset by lower non-residential retail sales
primarily due to a slowing regional economy.
Energy Delivery's higher revenues were offset by higher operating expenses of
$230 million which includes $181 million of increased fuel and purchased power
expense related to PECO electricity purchases from Generation caused by higher
customer retention at PECO and higher gas prices and $9 million in increased
operating and maintenance expenses. Depreciation and amortization expense
decreased due to lower regulatory asset amortization compared to the first
quarter of 2000 during which ComEd recorded an additional $145 million in
regulatory asset amortization, partially offset by increased amortization of $51
million related to the Competitive Transition Charge (CTC) at PECO.
EBIT - Generation
Components of Variance
Three Months --------------------------
Ended March 31, Unicom
------------------- 2000 Normal
2001 2000 Variance Contribution Operations
---- ---- -------- ------------ ----------
(In millions)
Operating Revenue $1,628 $ 498 $1,130 $ 707 $ 423
Operating Expense and Other $1,242 $ 429 $ 813 $ 598 $ 215
Depreciation & Amortization $ 93 $ 31 $ 62 $ 22 $ 40
EBIT $ 293 $ 38 $ 255 $ 87 $ 168
33
Generation's EBIT increased $255 million for the quarter ended March 31, 2001
compared to the same period in 2000. Unicom's contribution accounted for $87
million of the variance. The remaining $168 million increase resulted from
higher margins on market and affiliate wholesale energy sales, coupled with
decreased operating costs at the nuclear plants. During the first quarter of
2001, Generation benefited from increases in wholesale market prices,
particularly in the Pennsylvania New Jersey Maryland control area (PJM) and
Mid-America Interconnected Network (MAIN) regions, and higher nuclear plant
output due to increased capacity levels.
The increase in wholesale market prices was primarily driven by significant
increases in fossil fuel prices. The large concentration of nuclear generation
in the Generation portfolio allowed Exelon to capture the higher prices for
wholesale market sales, with minimal exposure to the increasing fuel prices.
Average realized prices for wholesale market sales were $12 per MWh higher in
the quarter ended March 31, 2001 compared to the same period in 2000.
In the first three months of 2001, Generation's sales were 48,254 GWhs, of which
29,966 GWhs were supplied by nuclear units, 2,726 GWhs by fossil generating
units, and 15,562 GWhs from purchases. Approximately 60% of Generation's sales
were to affiliates (ComEd and PECO), and the remaining 40% were to the wholesale
market.
Since the end of the first quarter 2000, Generation has added 161 MWs of new
capacity through power uprates, system modifications and operational
improvements. The nuclear fleet operated at a capacity factor of 98.8% in the
first quarter of 2001 compared to 91.5% in the previous year period. Fleet
production cost (operating and maintenance and fuel) in the first quarter of
2001 was $11.70 per MWh, compared to first quarter 2000 production cost of
$14.28 per MWh.
EBIT - Enterprises
Components of Variance
--------------------------
Three Months
Ended March 31 Unicom
------------------- 2000 Normal
2001 2000 Variance Contribution Operations
---- ---- -------- ------------ ----------
(In millions)
Operating Revenue $667 $247 $420 $109 $311
Operating Expense and Other $683 $252 $431 $107 $324
Depreciation & Amortization $ 15 $ 7 $ 8 $ 2 $ 6
EBIT $(31) $(12) $(19) $ - $(19)
Enterprises' EBIT decreased $19 million for the quarter ended March 31, 2001
compared to the same period in 2000. The decrease was primarily attributable to
Exelon Energy, which, due to higher wholesale prices of natural gas and
increased electric capacity costs, incurred a loss at the EBIT level of $25
million, a decrease of $34 million from prior year. This decrease was partially
offset by increased earnings of $7 million at Exelon Capital Partners due to a
realized gain on an investment.
Enterprises' revenue growth for the quarter ended March 31, 2001, as compared to
the same period in 2000, was $420 million. Unicom's Enterprise businesses
contributed $109 million in revenue. Primarily as a result of acquisitions,
Exelon Infrastructure Services revenue increased $87 million and Exelon Services
revenue increased $88 million. Exelon Energy's revenue increased $147 million
34
compared to the the first quarter of 2000, primarily due to an acquisition of a
gas services company and the increase in natural gas prices over the prior year.
Enterprises' operating expenses for the quarter increased $431 million from the
same period in 2000. Unicom's 2000 contribution accounted for $107 million of
the variance and normal operations added $324 million. Increased operating
expenses from normal operations of $324 million include $81 million and $84
million as a result of acquisitions made by Exelon Infrastructure Services and
Exelon Services, respectively. The remainder of the operating expense increase
related primarily to Exelon Energy, and is due to an acquisition, the increase
in natural gas prices from the previous year, and higher electric capacity costs
in Exelon Energy's Pennsylvania market.
Enterprises' depreciation and amortization expense increased primarily as a
result of acquisitions by Exelon Infrastructure Services, Exelon Services, and
Exelon Energy.
Other Components of Net Income
Interest Charges
Interest charges consist of interest expense and distributions on preferred
securities of subsidiaries. Interest charges increased $194 million, or 178% in
the quarter ended March 31, 2001. The increase was primarily attributable to
$161 million from the effects of the merger, $24 million related to borrowings
by Exelon and additional interest of $16 million as a result of the issuance of
transition bonds in May 2000 to securitize a portion of PECO's stranded cost
recovery, partially offset by $10 million of lower interest charges as a result
of the reduction of PECO's long-term debt with the proceeds from the
securitization.
Income Taxes
The effective income tax rate was 41.2% in 2001 as compared to 37.7% in 2000.
The increase in the effective income tax rate was primarily attributable to
goodwill amortization associated with the merger which is not deductible for tax
purposes, and a higher effective state income tax rate due to operations in
Illinois resulting from the merger.
Cumulative Effect of a Change in Accounting Principle
On January 1, 2001, Exelon adopted Statement of Financial Accounting Standards
No. 133 "Accounting for Derivatives Instruments and Hedging Activities" (SFAS
No. 133) resulting in a benefit of $20 million ($12 million, net of income
taxes). On January 1, 2000, Exelon recorded a benefit of $40 million ($24
million, net of income taxes) representing the cumulative effect of a
35
change in accounting method for nuclear outage costs by PECO in conjunction with
the synchronization of accounting policies in connection with the merger.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations for the three months ended March 31, 2001 were
$821 million as compared to $170 million for the same 2000 period.
Cash flows used in investing activities for the three months ended March 31,
2001 were $541 million as compared to $164 million for the same 2000 period. The
increase was primarily attributable to increased capital expenditures of $371
million.
Cash flows provided by financing activities were $19 million for the three
months ended March 31, 2001 as compared to cash flows used in financing
activities of $27 million for the same 2000 period. Cash flows from financing
activities in 2001 primarily reflect the refinancing of $805 million of
transition bonds, increases in short-term debt of $257 million partially offset
by additional debt repayments of $224 million and a payment of dividends on
common stock of $176 million. The common stock dividend covers the period from
October 20, 2000, the date of the merger, through February 15, 2001.
At March 31, 2001, Exelon's capital structure consisted of 58% of long-term debt
of Exelon and subsidiaries, 32% common stock, 7% notes payable and 3% preferred
securities of subsidiaries. Long-term debt included $7.2 billion of
securitization debt constituting obligations of certain consolidated special
purpose entities, representing 31% of capitalization.
At March 31, 2001, Exelon had outstanding $1.63 billion of notes payable
including $418 million of commercial paper. For the quarter ended March 31,
2001, the average interest rate on notes payable was approximately 6.0%. Certain
of the credit agreements to which Exelon, PECO and ComEd are a party require
each of them to maintain a debt to total capitalization ratio of 65% (excluding
securitization debt). At March 31, 2001, the debt to total capitalization ratios
on the same basis for Exelon, PECO and ComEd were 50%, 80%, and 47%,
respectively. The banks that are parties to the credit facility have agreed to
waive the debt to total capitalization requirement for PECO through July 13,
2001.
On May 8, 2001, Exelon issued $500 million of its senior unsecured notes with a
maturity date of May 1, 2011 and an interest rate of 6.75%. Exelon used the
proceeds from the issuance of the notes to repay a portion of a $1.21 billion
term loan.
36
COMMONWEALTH EDISON COMPANY
GENERAL
On October 20, 2000, ComEd became a 99.9% owned subsidiary of Exelon as a result
of the transactions relating to the merger of PECO and ComEd's former parent,
Unicom. Effective January 1, 2001, Exelon undertook a restructuring to separate
its generation and other competitive businesses from its regulated energy
delivery business. See ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Exelon Corporation - General for
information about Exelon's corporate restructuring. As a result of the merger,
ComEd's consolidated financial information for the period after the merger has a
different cost basis than in previous periods. Material variances caused by the
different cost basis and restructuring have been disclosed where applicable. The
restructuring has had a significant impact on all components of ComEd's results
of operations. The estimated impact of the restructuring set forth herein
reflects the effects of removing the operations related to ComEd's nuclear
generating stations and obtaining energy and capacity from Generation under the
terms of the PPA in the first quarter of 2000.
Significant Operating Trends
Variance
----------------------------------------------
March 31, Restructuring Normal
2001 2000 Impact Operations Total
------- ------- ------- ---------- -------
(In millions)
Operating Revenue $ 1,446 $ 1,563 $ (119) $ 2 $ (117)
Fuel and Purchased Power 609 326 265 18 283
Operating and Maintenance 218 460 (236) (6) (242)
Depreciation and Amortization 167 372 (79) (126) (205)
Taxes Other Than Income 72 137 (31) (34) (65)
------- ------- ------- ------- -------
Total Operating Expenses 1,066 1,295 (81) (148) (229)
------- ------- ------- ------- -------
Operating Income 380 268 (38) 150 112
------- ------- ------- ------- -------
Interest Expense (141) (147) 10 (4) 6
Provision for Dividends on Company-
Obligated Mandatorily Redeemable
Preferred Securities Of Subsidiary
Trusts Holding Solely the Company's
Subordinated Debt Securities (7) (7) -- -- --
Other, Net 37 140 -- (103) (103)
------- ------- ------- ------- -------
Income Before Income Taxes and
Extraordinary Items 269 254 (28) 43 15
Income Taxes 123 45 (7) 85 78
------- ------- ------- ------- -------
37
Net Income Before Extraordinary Items 146 209 (21) (42) (63)
Extraordinary Items -- (3) -- (3) (3)
------- ------- ------- ------- -------
Net Income 146 206 (21) (39) (60)
Preferred and Preference Stock Dividends -- (1) -- 1 1
------- ------- ------- ------- -------
Net Income on Common Stock $ 146 $ 205 $ (21) $ (38) $ (59)
======= ======= ======= ======= =======
RESULTS OF OPERATIONS
Quarter Ended March 31, 2001 Compared to Quarter Ended March 31, 2000
Net Income
Net income decreased $45 million, or 24% as compared to the same period in 2000,
before giving effect to extraordinary items and non-recurring items. Net income
decreased $60 million or 29%, after reflecting the effects of the $3 million
extraordinary item, the $21 million restructuring impact, and $4 million of
non-recurring merger costs ($3 million, net of tax) incurred for the quarter
ended March 31, 2000.
Operating Revenue
Operating revenue was $1,446 million for the quarter ended March 31, 2001, an
increase of $2 million from the same 2000 period, excluding the effects of the
operating revenue from the wholesale marketing business that was transferred to
Generation. Total kilowatthour sales to ComEd's retail and wholesale customers
(municipalities and certain alternative retail suppliers) remained consistent
from quarter to quarter. Residential retail sales and wholesale sales, which
increased 6% and 10% respectively, were offset by lower non-residential retail
sales primarily due to a slowing regional economy. There continues to be a
migration of non-residential customers to alternative electric suppliers or the
power purchase option. As of March 31, 2001, approximately 12,000 customers had
elected to purchase energy from an alternative electric supplier or the power
purchase option, compared to approximately 6,000 customers for the same 2000
period. Such election resulted in an increase in kilowatthours delivered to such
customers from approximately 2.6 billion to 4.1 billion, or 12% to 19% of total
quarterly retail sales, respectively.
Fuel and Purchased Power Expense
Fuel and purchased power expense was $609 million for the quarter ended March
31, 2001, an increase of $18 million, or 3% from the same 2000 period, excluding
the effects of the restructuring impact which represents power purchases under
the PPA with Generation. The remaining increase was primarily attributable to
slight increases in megawatthours purchased and cost per megawatthour.
38
Operating and Maintenance Expense
Operating and maintenance (O&M) expense remained consistent from quarter to
quarter, excluding the effects of the operating and maintenance expense related
to the nuclear generating assets transferred to Generation. Such costs continue
at higher than historic levels which reflects ComEd's continued commitment to
attain additional improvements in overall system reliability.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased $126 million or 43% from the
same 2000 period, excluding the effects of depreciation and amortization expense
related to the nuclear generating assets transferred to Generation. The decrease
in depreciation and amortization expense not related to restructuring was
primarily attributable to a $145 million decrease in regulatory asset
amortization due to the settlement of the common stock forward purchase
arrangements in the first quarter of 2000, partially offset by goodwill
amortization of $32 million.
Taxes Other Than Income
Taxes other than income decreased $34 million, or 32% from the same 2000 period,
excluding the effects of the taxes other than income related to the nuclear
generating assets transferred to Generation. The decrease in taxes other than
income not related to restructuring was primarily attributable to the $25
million effect of the change in municipal utility taxes from operating revenue
and tax expense to collections recorded as liabilities as required by Illinois
legislation.
Interest Charges
Interest charges consist of interest expense and provisions for dividends on
Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trusts. Interest charges remained consistent from quarter to quarter, excluding
the effects of the interest charges related to ComEd's liability to the U.S.
Department of Energy for payment of its one-time fee for spent nuclear fuel
disposal and accrued interest that was transferred to Generation.
Other Income and Deductions
Other income and deductions, excluding interest charges, decreased $103 million,
or 74% from the same 2000 period. This decrease is primarily attributable to the
$113 million gain on the forward share repurchase agreement recognized during
the first quarter of 2000.
Income Taxes
The effective income tax rate was 45.7% for the quarter ended March 31, 2001,
compared to 17.7% for the same 2000 period. The increase in the effective income
tax rate was primarily attributable to the effects of the gain on the forward
share repurchase agreement, recorded in January 2000, which was not recognized
for tax purposes, goodwill amortization, which is not deductible for tax
purposes, in 2001 and lower investment tax credit amortization resulting from
the application of purchase accounting in connection with the merger.
Extraordinary Items
Extraordinary charges aggregating $4 million ($3 million, net of tax) were
incurred for the quarter ended March 31, 2000, and consisted of prepayment
premiums and the write-off of unamortized deferred financing costs associated
with the early retirement of debt.
39
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations were $458 million for the three months ended
March 31, 2001 compared to cash flows used in operations of $348 million for the
same period in 2000. The increase in cash flows in 2001 was primarily
attributable to a $1,078 million increase in working capital due to a decrease
in income tax payments, partially offset by lower cash flows from other
operating activities following the transfer of assets to Generation.
Cash flows used in investing activities were $155 million for the three months
ended March 31, 2001 compared to $279 million for the same period in 2000. The
decrease in cash flows used in investing activities in 2001 was primarily
attributable to a $98 million decrease in receivables from affiliates and lower
plant investment of $30 million as a result of the transfer of assets to
Generation.
Cash flows used in financing activities were $154 million for the three months
ended March 31, 2001 compared to $199 million for the same period in 2000. The
decrease in cash flows used in financing activities in 2001 was primarily
attributable to $153 million of common stock repurchases and $67 million of
common stock forward repurchases in the first quarter of 2000, partially offset
by a $222 million change in restricted cash.
At March 31, 2001, ComEd's capital structure, excluding the deduction from
shareholders' equity of the $1.0 billion receivable from Exelon, consisted of
53% long-term debt, 45% of common stock, and 2% of preferred securities of
subsidiaries. Long-term debt included $2.5 billion of transitional trust notes
constituting obligations of certain consolidated special purpose entities
representing 19% of capitalization.
ComEd meets its short-term liquidity requirements primarily through the issuance
of commercial paper and borrowings under bank credit facilities. ComEd, along
with Exelon and PECO, entered into a $2 billion unsecured revolving credit
facility with a group of banks. ComEd has a $200 million sublimit under this
364-day credit facility and expects to use the credit facility principally to
support its $200 million commercial paper program. The credit facility requires
ComEd to maintain a debt to total capitalization ratio of 65% or less (excluding
transitional trust notes). At March 31, 2001, ComEd's debt to total
capitalization ratio on that basis was 47%. At March 31, 2001, ComEd had no
short-term borrowings.
Effective January 1, 2001, Exelon contributed to ComEd a $1.0 billion receivable
for the purpose of funding future tax payments resulting from collection of
intangible transition charges. See ITEM 1. Financial Statements - Note 12 -
Related Party Transactions.
40
PECO ENERGY COMPANY
GENERAL
On October 20, 2000, PECO became a wholly owned subsidiary of Exelon as a result
of the transactions relating to the merger of PECO and Unicom Corporation.
Effective January 1, 2001, Exelon undertook a restructuring to separate its
generation and other competitive businesses from its regulated energy delivery
business. See ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Exelon Corporation - General for
information about Exelon's corporate restructuring. The restructuring has had a
significant impact on all components of PECO's results of operations. As part of
the restructuring, the non-regulated operations and related assets and
liabilities previously included in PECO's Generation and Enterprises business
segments were transferred to separate subsidiaries of Exelon. As a result,
effective January 1, 2001, PECO operates in a single business segment, Energy
Delivery, and its operations consist of its retail electricity distribution and
transmission business in southeastern Pennsylvania and its natural gas
distribution business in the Pennsylvania counties surrounding the City of
Philadelphia.
41
Significant Operating Trends
Three Months
Ended Variance
March 31, -----------------------------------
------------- Restructuring Normal
2001 2000 Impact Variance Total
------ ------ -------- ------ -------
(In millions)
Operating Revenues $1,051 $1,353 ($504) $202 ($302)
Fuel and Purchased Power 488 463 (156) 181 25
Operating and Maintenance 132 391 (274) 15 (259)
Depreciation and Amortization 101 80 (39) 60 21
Taxes Other Than Income 43 67 (21) (3) (24)
------ ------ -------- ------ -------
Total Operating Expenses 764 1,001 (490) 253 (237)
------ ------ -------- ------ -------
Operating Income 287 352 (14) (51) (65)
------ ------ -------- ------ -------
Interest Expense (105) (104) 14 (15) (1)
Interest Expense - Affiliate (5) -- -- (5) (5)
Company-Obligated Mandatorily Redeemable
Preferred Securities of a Partnership (2) (2) -- -- --
Equity in Earnings (Losses) of
Unconsolidated Affiliates, Net -- 4 (4) -- (4)
Other, Net 15 21 (17) 11 (6)
------ ------ -------- ------ -------
Income Before Income Taxes and Cumulative
Effect of a Change of Accounting Principle 190 271 (21) (60) (81)
Income Taxes 68 101 (7) (26) (33)
------ ------ -------- ------ -------
Net Income Before Cumulative
Effect of a Change of Accounting Principle 122 170 (14) (34) (48)
Cumulative Effect of a Change
of Accounting Principle -- 24 (24) -- (24)
------ ------ -------- ------ -------
Net Income 122 194 (38) (34) (72)
Preferred Stock Dividends (2) (3) -- (1) (1)
------ ------ -------- ------ -------
Net Income on Common Stock $120 $191 $(38) $(33) $(71)
====== ====== ======== ====== =======
RESULTS OF OPERATIONS
First Quarter 2001 Compared To First Quarter 2000
Net Income
Net income decreased $72 million, or 37% for the quarter ended March 31, 2001 as
compared to the same 2000 period. Net income, before the effects of a $24
million benefit for the cumulative effect of a change in accounting principle
during the prior year, decreased $48 million, or 28% for the quarter ended March
31, 2001.
42
Operating Revenue
Operating revenue for the quarter ended March 31, 2001 increased $202 million,
or 24% as compared to 2000, excluding the effects of the restructuring. The
increase in operating revenue was attributable to higher electric revenue of
$109 million and additional gas revenue of $94 million. The increase in electric
revenue was primarily attributable to $85 million from customers in Pennsylvania
selecting or returning to PECO as their electric generation supplier and rate
adjustments in Pennsylvania, an $11 million prepayment of competitive transition
charges by a large customer and an increase of $8 million as a result of higher
delivery volume. The increase in regulated gas revenue was primarily
attributable to increases of $80 million related to higher prices, $10 million
as a result of favorable weather conditions and $4 million attributable to
increased delivery volume from new and existing customers.
Fuel and Purchased Power Expense
Fuel and purchased power expense for the quarter ended March 31, 2001 increased
$181 million, or 59% as compared to 2000, excluding the effects of the
restructuring. The increase in fuel and purchased power expense was primarily
attributable to $78 million from customers in Pennsylvania selecting PECO as
their electric generation supplier, $63 million from additional delivery volume
and increased prices related to gas, $11 million as a result of favorable
weather conditions and $11 million in additional PJM ancillary charges.
Operating and Maintenance Expense
Operating and maintenance expense for the quarter ended March 31, 2001 increased
$15 million, or 13% as compared to 2000, excluding the effects of the
restructuring. The increase in O&M expense was primarily attributable to $7
million of additional general and administrative expenses, $6 million of
incremental costs related to a storm in the first quarter of 2001 and $4 million
associated with the write-off for excess and obsolete inventory.
Depreciation and Amortization Expense
Depreciation and amortization expense for the quarter ended March 31, 2001
increased $60 million, or 146% as compared to 2000, excluding the effects of the
restructuring. The increase was primarily attributable to $51 million of
additional amortization of PECO's CTC and $9 million increase in depreciation
expense associated with additional plant in service.
Taxes Other Than Income
Taxes other than income for the quarter ended March 31, 2001 decreased $3
million, or 7% as compared to 2000, excluding the effects of the restructuring.
The decrease was attributable to the reduction of the gross receipts tax rate on
electric sales in 2001.
Interest Charges
Interest charges consist of interest expense and distributions on
Company-Obligated Mandatorily Redeemable Preferred Securities of a Partnership
(COMRPS). Interest charges for the quarter ended March 31, 2001 increased $20
million as compared to 2000, or 22%, excluding the effects of the restructuring.
The increase was primarily attributable to interest on the additional transition
bonds issued in May 2000 to securitize a portion of PECO's stranded cost
recovery of $16 million in 2001 and interest expense related to a loan from an
affiliate in 2001
43
of $5 million, partially offset by $10 million of lower interest charges as a
result of the reduction of long-term debt with the proceeds from securitization.
Equity in Earnings (Losses) of Unconsolidated Affiliates
Equity in earnings (losses) of unconsolidated affiliates for the quarter ended
March 31, 2001 decreased by $4 million as compared to 2000, excluding the
effects of the restructuring.
Other Income and Deductions
Other income and deductions excluding interest charges and equity in earnings
(losses) of unconsolidated affiliates for the quarter ended March 31, 2001
increased by $11 million as compared to 2000, excluding the effects of the
restructuring. The increase was primarily attributable to a gain on the
settlement of an interest rate swap of $6 million and the favorable settlement
of a customer contract of $3 million.
Income Taxes
The effective tax rate was 35.8% for the quarter ended March 31, 2001 as
compared to 37.3% for the same 2000 period.
Cumulative Effect of a Change in Accounting Principle
On January 1, 2000, PECO recorded a benefit of $40 million ($24 million, net of
tax) representing the cumulative effect of a change in accounting method for
nuclear outage costs in conjunction with the synchronization of accounting
policies in connection with the merger.
Preferred Stock Dividends
Preferred stock dividends for the quarter ended March 31, 2001 were consistent
with the same 2000 period.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operations were $76 million for the three months ended March
31, 2001 as compared to cash flows provided by operations of $173 million in the
same 2000 period. The decrease was attributable to changes in working capital of
$223 million and a decrease in cash generated by operations of $26 million.
Cash flows used in investing activities were $46 million for the three months
ended March 31, 2001 as compared to $164 million in the same 2000 period. The
decrease was attributable to lower capital expenditures of $64 million and a
decrease in other investing activities of $54 million.
Cash flows provided by financing activities were $99 million for the three
months ended March 31, 2001 as compared to cash flows used in financing
activities of $30 million for the same period in 2000. Cash flows from
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financing activities primarily reflect PECO's additional borrowings of
commercial paper and the effects of refinancing $805 million of transition
bonds. The increase in cash flows from financing activities is primarily
attributable to a change in notes payable of $201 million and $31 million of
proceeds from the settlement of interest rate swaps, partially offset by $53
million of additional retirements of long-term debt and $46 million of payments
on notes payable to affiliates.
At March 31, 2001, PECO's capital structure, excluding the deduction from
shareholders' equity of $2.0 billion receivable from Exelon, consisted of 23.7%
common equity, 3.7% notes payable, 3.4% preferred stock and COMRPS (which
comprised 1.4% of PECO's total capitalization structure), and 69.2% long-term
debt including transition bonds issued by PETT (which comprised 75.6% of PECO's
long-term debt).
PECO meets its short-term liquidity requirements primarily through the issuance
of commercial paper and borrowings under bank credit facilities. PECO, along
with Exelon and ComEd, entered into a $2 billion unsecured revolving credit
facility with a group of banks. PECO has an $800 million sublimit under this
364-day credit facility and expects to use the credit facility principally to
support its $800 million commercial paper program. This credit facility requires
PECO to maintain a debt to total capitalization ratio of 65% or less (excluding
transitional trust notes). As a result of the corporate restructuring, at March
31, 2001, PECO's debt to total capitalization ratio on that basis was 80%. The
banks that are parties to the credit facility have agreed to waive the debt to
total capitalization requirement through July 13, 2001.
At March 31, 2001, PECO had outstanding $334 million of notes payable consisting
principally of commercial paper. Also, PECO had a $352 million payable to ComEd
bearing interest at an average annualized interest rate for the period it was
outstanding of 6.5%. Interest expense related to this payable for the quarter
ended March 31, 2001 was $5 million. In conjunction with the payable to ComEd
and as of January 1, 2001, Exelon contributed to PECO a $330 million receivable
for the purpose of funding the repayment of liability. See ITEM 1. Financial
Statements - Note 12 - Related Party Transactions.
Effective January 1, 2001, Exelon contributed to PECO a $2.0 billion receivable
for the purpose of funding future tax payments resulting from collection of
intangible transition charges. See ITEM 1. Financial Statements - Note 12 -
Related-Party Transactions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
EXELON
Exelon's activities expose it to a variety of market risks primarily related to
the effects of changes in commodity prices and interest rates. These financial
exposures are monitored and managed by Exelon as an integral part of its overall
risk-management program.
Exelon's commodity-price risk management strategy includes use of derivatives to
minimize significant, unanticipated earnings and cash flow fluctuations caused
by commodity-price volatility. Exelon utilizes contracts for the forward
purchase and sale of energy and energy-related commodities to manage its
generation and physical delivery obligations to its retail and wholesale
45
customers. Energy option contracts and energy and energy-related swap agreements
are used to limit the price risk associated with these forward contracts.
Exelon's interest-rate risk management strategy includes use of derivative
instruments to minimize significant, unanticipated earnings and cash flow
fluctuations caused by interest-rate volatility. Exelon uses a combination of
fixed-rate and variable-rate debt to reduce interest-rate exposure.
Interest-rate swaps may be used to adjust exposure when deemed appropriate,
based on market conditions. These strategies are employed to minimize the cost
of capital.
By using derivative financial instruments to hedge exposures to changes in
energy prices and interest rates, Exelon exposes itself to credit risk and
market risk. Credit risk is the risk of a counterparty failing to perform
according to contract terms. When the value of a contract is positive, the
counterparty owes Exelon, which creates repayment risk for Exelon. When the
value of a derivative contract is negative, Exelon owes the counterparty and,
therefore, the derivative contract does not create repayment risk. Exelon
minimizes the credit (or repayment) risk by (1) entering into transactions with
high-quality counterparties, (2) limiting the amount of exposure to each
counterparty, (3) monitoring the financial condition of its counterparties, and
(4) seeking credit enhancements to improve counterparty credit quality.
Market risk is the effect on the value of Exelon outright and contingent
commitments that result from a change in interest rates or commodity prices. The
market risk associated with interest-rate and energy and energy-related
contracts is managed by the establishment and monitoring of parameters that
limit the types and degree of market risk that may be undertaken.
Exelon's derivatives activities are subject to the management, direction, and
control of the corporate Risk Management Committee (RMC). The RMC is chaired by
Exelon's chief risk officer and includes the chief financial officer, general
counsel, treasurer, vice president of corporate planning and officers from each
of the business units. The RMC reports to the board of directors on the scope of
Exelon's derivative activities. The RMC (1) sets forth risk management
philosophy and objectives through a corporate policy and (2) establishes
procedures for control and valuation, counterparty credit approval, and the
monitoring and reporting of derivative activity.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (SFAS No. 133) to establish accounting and
reporting standards for derivatives. The new standard requires recognizing all
derivatives as either assets or liabilities on the balance sheet at their fair
value and specifies the accounting for changes in fair value depending upon the
intended use of the derivative. Exelon adopted SFAS No. 133 on January 1, 2001,
which resulted in after-tax income of $12 million that is reflected in Exelon's
Consolidated Statement of Income and Comprehensive Income as a cumulative effect
of a change in accounting principle. In addition, the adoption of SFAS No. 133
resulted in $73 million of other comprehensive income associated with the fair
value of cash flow hedges.
46
For the quarter ended March 31, 2001, Exelon recognized a net loss of $16
million in Exelon's Condensed Consolidated Statement of Income and Comprehensive
Income which represents the mark-to-market of contracts designated as cash flow
hedges. Exelon also reclassified a net gain of $6 million to other income in the
Condensed Consolidated Statement of Income and Comprehensive Income, as a result
of the discontinuance of cash flow hedges related to certain forecasted
transactions that are now probable of not occurring.
As of March 31, 2001, $7 million of deferred net gains on derivative instruments
accumulated in other comprehensive income are expected to be reclassified to
earnings during the next twelve months. Amounts in accumulated other
comprehensive income related to interest rate cash flows are reclassified into
earnings when the forecasted interest rate payment occurs. Amounts in
accumulated other comprehensive income related to energy commodity cash flows
are reclassified into earnings when the forecasted purchase or sale of the
energy commodity occurs.
PECO
Interest Rate Risk
PECO has entered into interest rate swaps to manage interest rate exposure
associated with two classes of floating rate transition bonds issued to
securitize stranded cost recovery. At March 31, 2001, these interest rate swaps
had a fair market value exposure of $26 million based on the present value
difference between the contract and market rates at March 31, 2001.
The aggregate fair value of the transition bond derivative instruments that
would have resulted from a hypothetical 50 basis point decrease in the spot
yield at March 31, 2001 is estimated to be $34 million. If the derivative
instruments had been terminated at March 31, 2001, this estimated fair value
represents the amount to be paid by PECO to the counterparties.
The aggregate fair value of the transition bond derivative instruments that
would have resulted from a hypothetical 50 basis point increase in the spot
yield at March 31, 2001 is estimated to be $19 million. If the derivative
instruments had been terminated at March 31, 2001, this estimated fair value
represents the amount to be paid by PECO to the counterparties.
In connection with the refinancing of a portion of PETT's two variable rate
series of transition bonds in the first quarter of 2001, PECO settled $318
million of a forward starting interest rate swap resulting in a $6 million gain
which is reflected in other income. Also in connection with the refinancing,
PECO settled a portion of the interest rate swaps and the remaining portion of
the forward starting interest rate swaps resulting in gains of $25 million which
were deferred and are being amortized over the expected remaining lives of the
related debt.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in Exelon's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 2000 (2000 Form 10-K),
three of ComEd's wholesale municipal customers filed a complaint and request for
refund with the United States Federal Energy Regulatory Commission (FERC)
alleging that ComEd failed to properly adjust its rates, as provided for under
the terms of the electric service contracts with the municipal customers and to
track certain refunds made to ComEd's retail customers in the years 1992 through
1994. In the third quarter of 1998, FERC granted the complaint and directed that
refunds be made, with interest. ComEd filed a request for rehearing. On April
30, 2001, FERC issued an order, in which it determined that its 1998 order had
been erroneous and that no refunds were due from ComEd to the municipal
customers. The FERC order is subject to appeal.
As previously reported in Exelon's 2000 Form 10-K, in August 1999, three class
action lawsuits were filed and subsequently consolidated, in the Circuit Court
of Cook County, Illinois seeking damages for personal injuries, property damage
and economic losses from ComEd related to a series of service interruptions that
occurred in the summer of 1999. ComEd filed a motion to dismiss the complaints.
On April 24, 2001, the court dismissed four of the five counts of the
consolidated complaint without prejudice and the sole remaining count was
dismissed in part. Plaintiffs have until May 25, 2001 to file a legally valid
cause of action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 24, 2001, Exelon held its 2001 Annual Meeting of Shareholders, the
first annual meeting of shareholders for Exelon.
The following Class I directors of the Company were re-elected for terms
expiring in 2004:
Votes For Votes Withheld
Carlos H. Cantu 254,285,267 2,821,534
Daniel L. Cooper 254,235,482 2,871,319
G. Fred DiBona, Jr. 254,186,539 2,920,262
Sue L. Gin 254,413,260 2,693,541
Edgar D. Jannotta 254,338,918 2,767,883
Corbin A. McNeill, Jr. 254,436,867 2,669,934
The incumbent Class II directors, with terms expiring in 2002, are Edward A.
Brennan, Bruce DeMars, Richard H. Glanton, John W. Rowe, and Ronald Rubin. The
incumbent Class III directors with terms expiring in 2003, are M. Walter
D'Alessio, Rosemarie B. Greco, John M. Palms, John W. Rogers, Jr. and Richard L.
Thomas.
The other item voted on by holders of common stock at the Annual Meeting was the
ratification of the firm PricewaterhouseCoopers LLP, independent certified
public accountants, as auditors of Exelon and its subsidiaries for 2001, was
approved with 250,800,365 common shares (97.5% of common shares voting) voting
48
for; 4,483,426 common shares (1.7% of common shares voting) voting against; and
1,823,010 common shares (0.17% of common shares voting) abstaining.
ITEM 5. OTHER INFORMATION
On April 1, 2001, Exelon formed Exelon Energy Delivery Company, LLC, a wholly
owned subsidiary of Exelon, which is an intermediary holding company of ComEd
and PECO.
As previously reported in Exelon's 2000 Form 10-K, in March 2001, ComEd and the
Midwest Independent Transmission System Operator (MISO) and other market
participants reached a proposed settlement regarding issues associated with
ComEd's withdrawal from the MISO and that the proposed settlement was subject to
FERC approval. On May 8, 2001, FERC approved the settlement.
As previously reported in Exelon's 2000 Form 10-K, approximately 7,400 employees
are covered by a collective bargaining agreement with Local 15 of the
International Brotherhood of Electrical Workers (Local 15), which was scheduled
to expire on March 31, 2001. On April 20, 2001, Exelon and Local 15 officials
signed an agreement for a new three-year collective bargaining agreement,
effective April 1, 2001 through March 31, 2004. Exelon expects that the Local 15
membership will ratify the agreement by June 8, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
During the quarter ended March 31, 2001, Exelon filed the following
Current Reports on Form 8-K:
Date of earliest event reported:
January 12, 2001 reporting information under "ITEM 5. OTHER EVENTS"
regarding the restructuring of its competitive generation and
enterprises businesses as outlined as an integration objective when
Exelon was formed on October 20, 2000.
Date of earliest event reported:
January 30, 2001 reporting information under "ITEM 5. OTHER EVENTS"
regarding the announcement of its consolidated operating earnings
for the year ended December 31, 2000.
Date of earliest event reported:
February 26, 2001 reporting information under "ITEM 5. OTHER EVENTS"
regarding slides used during the Edison Electric Institute
International Finance Conference held in London on February 26, 2001
to explain Exelon's strategy and earnings targets.
49
Date of earliest event reported:
March 16, 2001 reporting information under "ITEM 5. OTHER EVENTS"
regarding certain financial information of Exelon Corporation and
Subsidiary Companies. The exhibits under "ITEM 7. FINANCIAL
STATEMENT AND EXHIBITS" includes a Consent of Independent Public
Accountants, Selected Financial Data and Market for Registrant's
Common Equity and Related Stockholder Matters, Management's
Discussion and Analysis of Financial Condition and Results of
Operations, and Financial Statements and Supplementary Data
During the quarter ended March 31, 2001, ComEd filed the following
Current Reports on Form 8-K:
Date of earliest event reported:
January 12, 2001 reporting information under "ITEM 5. OTHER EVENTS"
regarding the restructuring of its competitive generation and
enterprises businesses as outlined as an integration objective when
Exelon was formed on October 20, 2000.
Date of earliest event reported:
January 12, 2001 reporting information under "ITEM 2. ACQUISITION OR
DISPOSITION OF ASSETS" regarding the restructuring of its generation
and wholesale power marketing businesses into a newly formed
subsidiary of Exelon. The exhibits under "ITEM 7. FINANCIAL
STATEMENT AND EXHIBITS" includes unaudited pro forma condensed
financial statements of ComEd.
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During the quarter ended March 31, 2001, PECO filed the following
Current Reports on Form 8-K:
Date of earliest event reported:
January 12, 2001 reporting information under "ITEM 5. OTHER EVENTS"
regarding the restructuring of its competitive generation and
enterprises businesses as outlined as an integration objective when
Exelon was formed on October 20, 2000.
Date of earliest event reported:
January 12, 2001 reporting information under "ITEM 2. ACQUISITION OR
DISPOSITION OF ASSETS" regarding the restructuring of its
competitive generation and enterprises businesses into newly formed
subsidiaries of Exelon. The exhibits under "ITEM 7. FINANCIAL
STATEMENT AND EXHIBITS" include unaudited pro forma condensed
financial statements of PECO.
Date of earliest event reported:
March 1, 2001 reporting information under "ITEM 5. OTHER EVENTS"
regarding the issuance and sale of Series 2001-A Transition Bonds to
redeem Series 1999-A, Class A-3 and Series 1999-A, Class A-5
Transition Bonds. The exhibits under "ITEM 7. FINANCIAL STATEMENT
AND EXHIBITS" include agreements relating to this transaction.
51
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXELON CORPORATION
/s/ Jean H. Gibson
--------------------------------
JEAN H. GIBSON
Vice President and
Controller
(Chief Accounting Officer)
COMMONWEALTH EDISON COMPANY
/s/ Robert E. Berdelle
--------------------------------
ROBERT E. BERDELLE
Vice President and
Chief Financial Officer
(Chief Accounting Officer)
PECO ENERGY COMPANY
/s/ Thomas P. Hill, Jr.
--------------------------------
THOMAS P. HILL, JR.
Vice President and
Chief Financial Officer
(Chief Accounting Officer)
Date: May 15, 2001
52