10-QPeriod: Q1 FY2002

EDISON INTERNATIONAL Quarterly Report for Q1 Ended Mar 31, 2002

Filed May 10, 2002For Securities:EIX

Summary

Edison International (EIX) reported a significant turnaround in its financial performance for the first quarter of 2002 compared to the same period in 2001. The company moved from a substantial net loss of $617 million in Q1 2001 to a net income of $84 million in Q1 2002. This improvement was driven primarily by the regulated electric utility segment (SCE), which reported a net income of $146 million compared to a significant loss in the prior year. This turnaround is largely attributed to the resolution of certain regulatory matters, including the establishment of the Procurement-Related Obligations Account (PROACT) which allowed for the recovery of previously written-off regulatory assets. The non-utility power generation segment (EME) continued to face challenges, reporting a net loss from continuing operations. Despite the improved net income, the company's financial condition remains complex, influenced by ongoing regulatory proceedings, the settlement of litigation, and market volatility in the energy sector. Key liquidity issues persist, particularly for the parent company and EME, with restrictions on dividend payments and reliance on debt financing. Investors should closely monitor the outcomes of pending regulatory decisions and legal appeals, especially concerning the recovery of regulatory assets and potential impacts on future earnings and cash flows.

Key Highlights

  • 1Edison International reported a net income of $84 million in Q1 2002, a substantial improvement from a net loss of $617 million in Q1 2001.
  • 2Southern California Edison (SCE) electric utility segment showed a strong recovery, with net income of $146 million in Q1 2002, compared to a loss of $598 million in Q1 2001, largely due to regulatory adjustments and cost recovery mechanisms.
  • 3The company experienced a significant decrease in operating expenses, particularly in purchased power, which fell from $1,724 million in Q1 2001 to $255 million in Q1 2002.
  • 4Total operating revenue increased to $2,587 million in Q1 2002 from $2,195 million in Q1 2001, driven by the electric utility segment.
  • 5Despite improved profitability, the company's balance sheet shows a decrease in cash and equivalents from $3,991 million at the end of 2001 to $1,823 million at March 31, 2002.
  • 6Edison International is subject to various ongoing legal and regulatory proceedings, including an appeal of the CPUC litigation settlement and the handling of regulatory assets (PROACT), which could impact future financial performance.
  • 7The non-utility power generation segment (EME) reported a net loss from continuing operations of $36 million in Q1 2002, indicating continued challenges in this segment.

Frequently Asked Questions

The primary reason for the improved performance is the significant turnaround in the electric utility segment (SCE), which moved from a large loss to a profit. This was largely due to regulatory adjustments, including the resolution of the California Public Utilities Commission (CPUC) litigation settlement and the establishment of the Procurement-Related Obligations Account (PROACT), which allowed for the recovery of previously written-off power procurement costs.

Key concerns include the ongoing legal and regulatory proceedings, particularly the appeal of the CPUC litigation settlement, and the uncertainty surrounding the full recovery of regulatory assets (PROACT). The company's liquidity also remains a focus, with restrictions on dividend payments and reliance on external financing. The non-utility power generation segment (EME) continues to face profitability challenges.

Short-term debt decreased significantly from $2,445 million at December 31, 2001, to $199 million at March 31, 2002. However, long-term debt increased from $12,674 million to $13,752 million. Cash and equivalents saw a substantial decrease, falling from $3,991 million to $1,823 million, reflecting operational cash usage and debt repayments.

The CPUC litigation settlement is currently under appeal in federal court, and SCE cannot predict the outcome. Under the settlement, SCE cannot pay dividends on its common stock until its procurement-related obligations are fully recovered or by January 1, 2005. However, if obligations are not fully recovered by December 31, 2003, SCE can apply to the CPUC for consent to resume dividends.