10-QPeriod: Q1 FY2002

CONSOLIDATED EDISON INC Quarterly Report for Q1 Ended Mar 31, 2002

Filed May 14, 2002For Securities:ED

Summary

Consolidated Edison, Inc. (Con Edison) reported its first quarter results for the period ending March 31, 2002. The company experienced a decrease in operating revenues and net income compared to the prior year, largely attributed to milder weather conditions and a general economic slowdown which reduced energy sales. Despite these headwinds, Con Edison demonstrated resilience through effective cost management and continued strategic investments in utility infrastructure. Financially, the company maintained a stable capital structure with a common equity ratio of 50.1% as of March 31, 2002. While operating cash flows saw a decrease, the company managed its liquidity effectively, though unrestricted cash and temporary cash investments declined. Con Edison also highlighted its ongoing efforts to manage market risks, particularly interest rate and commodity price risks, through various hedging strategies. The company also noted the adoption of new accounting standards, which had no immediate material impact on its financial position.

Key Highlights

  • 1Operating revenues decreased by 27.3% to $2,099.1 million for the three months ended March 31, 2002, compared to $2,886.3 million in the prior year, primarily due to lower energy sales volumes driven by warmer weather and economic conditions.
  • 2Net income for common stock decreased by 7.0% to $166.6 million ($0.78 per share) for the three months ended March 31, 2002, compared to $179.1 million ($0.84 per share) in the prior year.
  • 3The company's common equity ratio stood at a healthy 50.1% as of March 31, 2002, indicating a strong capital structure.
  • 4Unrestricted cash and temporary cash investments decreased by $163.1 million during the first quarter of 2002, reflecting operational cash needs.
  • 5Net cash used in investing activities, including construction, increased significantly to $358.8 million from $134.5 million in the prior year, driven by higher utility construction expenditures.
  • 6Con Edison is actively managing interest rate and commodity price risks through various hedging strategies, with estimates suggesting a 10% change in interest rates could impact annual interest expense by approximately $13.3 million.
  • 7The company adopted new accounting standards SFAS No. 142 (Goodwill and Other Intangible Assets) and SFAS No. 144 (Accounting for the Impairment or Disposal of Long-Lived Assets), with no immediate material impact on its financial position or results.

Frequently Asked Questions

The primary reasons for the decrease were milder winter weather, which led to lower energy sales volumes, and a general economic slowdown, both of which impacted demand for electricity and gas.

Con Edison employs various strategies, including issuing mostly fixed-rate debt, opportunistic debt refinancing, and using derivative financial instruments (hedges) to manage interest rate risk. For commodity price risk, particularly for electricity and gas purchases, the company utilizes derivative instruments and, for its utility subsidiaries, rates are adjusted to reflect fluctuations in purchased power and gas costs, mitigating direct customer impact.

Con Edison maintains a strong capital structure, with its common equity ratio at 50.1% as of March 31, 2002. This indicates a solid foundation and financial stability.

The filing notes accrued liabilities for environmental matters, including hazardous substances like asbestos and PCBs, with some amounts deferred as regulatory assets. While specific amounts are disclosed, Con Edison believes these will not have a material adverse effect. A significant legal proceeding involves a dispute with Northeast Utilities regarding a terminated merger agreement, with both parties having filed motions for summary judgment. The outcome of this litigation is currently unpredictable.