10-QPeriod: Q2 FY2007

EDISON INTERNATIONAL Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 9, 2007For Securities:EIX

Summary

Edison International reported a decrease in net income for the three months ended June 30, 2007, to $93 million ($0.28 per share) from $177 million ($0.54 per share) in the prior year period. This decline was primarily driven by lower earnings from its electric utility segment (SCE) and increased debt extinguishment costs within its nonutility power generation segment (EMG). For the six months ended June 30, 2007, net income also decreased to $426 million ($1.29 per share) from $435 million ($1.32 per share) in the prior year period. SCE's lower earnings were impacted by a large benefit recognized in the prior year related to state income taxes and a catch-up adjustment from a prior General Rate Case decision. EMG's results were significantly affected by a pre-tax charge of $241 million ($148 million after-tax) for the early extinguishment of debt related to its refinancing activities. Despite these headwinds, EMG saw improved energy margins from its Midwest Generation and Homer City facilities. Financially, the company maintained a strong liquidity position, with $1.2 billion in cash and equivalents at the end of the period. Significant debt refinancing activities were completed by EMG, improving its overall liquidity and operating flexibility. Capital expenditures remained substantial, particularly for SCE's infrastructure upgrades and EMG's wind project development.

Key Highlights

  • 1Net income for the three months ended June 30, 2007, was $93 million ($0.28/share), down from $177 million ($0.54/share) in the prior year.
  • 2Six-month net income was $426 million ($1.29/share), compared to $435 million ($1.32/share) in the prior year.
  • 3Edison International incurred a $241 million pre-tax loss ($148 million after-tax) related to the early extinguishment of debt during the quarter.
  • 4SCE's earnings were impacted by prior-year tax benefits and rate case adjustments, while EMG's nonutility segment saw improved energy margins.
  • 5Total operating revenue increased to $3.05 billion for the quarter, up from $3.00 billion in the prior year.
  • 6The company ended the quarter with $1.22 billion in cash and equivalents.
  • 7Significant debt refinancing activities were completed by EMG, improving its financial flexibility.

Frequently Asked Questions

The decrease in net income was primarily due to lower earnings from SCE, impacted by prior-year tax benefits and rate case adjustments. Additionally, EMG incurred a significant pre-tax charge of $241 million related to the early extinguishment of debt as part of its refinancing activities.

EMG completed a significant debt refinancing during the quarter, issuing $2.7 billion in senior notes. These proceeds were used to repurchase outstanding senior notes and term loans, and to facilitate a dividend payment to its parent for further debt repurchases. This refinancing improved EMG's liquidity and operating flexibility, but resulted in a pre-tax loss of $241 million due to early extinguishment of debt.

SCE is undertaking significant capital expenditures, with a $17.3 billion plan for 2007-2011. For the first six months of 2007, SCE spent $1 billion on capital expenditures, primarily for transmission and distribution infrastructure upgrades and generation asset replacements.

SCE is involved in several regulatory proceedings, including its 2008 cost of capital application and its 2009 General Rate Case application, which could impact future revenues. SCE is also progressing with its EdisonSmartConnecttm advanced metering project, receiving CPUC approval for phase II funding. Separately, Midwest Generation and EMMT entered into a settlement agreement with the Illinois Attorney General regarding auction results, subject to legislative approval.