10-QPeriod: Q2 FY2008

EDISON INTERNATIONAL Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 8, 2008For Securities:EIX

Summary

Edison International (EIX) reported its financial results for the quarter and six months ended June 30, 2008. For the second quarter, the company generated $261 million in net income, or $0.79 per diluted share, a significant increase from $93 million, or $0.28 per diluted share, in the prior year's second quarter. This improvement was primarily driven by a strong performance from Southern California Edison (SCE) and a turnaround at Edison Mission Group (EMG), which shifted from a loss to a profit, largely due to the early extinguishment of debt and improved generation and pricing at its Illinois plants. For the first six months of 2008, net income rose to $559 million, or $1.69 per diluted share, compared to $426 million, or $1.29 per diluted share, in the same period of 2007. The substantial increase in earnings was again bolstered by SCE's performance and EMG's improved results, notably the absence of a significant loss on early extinguishment of debt that impacted the prior year. Investors should note the ongoing significant tax dispute with the IRS regarding lease transactions, which presents a potential earnings exposure, and the company's continued investment in capital expenditures, particularly in transmission and distribution infrastructure.

Financial Highlights

25 data points
Beta

Revenue

$3.48B

Net Income

$261.00M

7.5% Net Margin

EPS (Diluted)

$0.79

Cash & Equivalents

$1.07B

Free Cash Flow

-$727.00M

Financial Statements
Beta
Revenue$3.48B
Operating Expenses$2.97B
Operating Income$506.00M
Interest Expense$165.00M
Net Income$261.00M
EPS (Basic)$0.79
EPS (Diluted)$0.79
Shares Outstanding (Basic)326.00M
Shares Outstanding (Diluted)329.00M

Key Highlights

  • 1Net income for the second quarter of 2008 was $261 million, a substantial increase from $93 million in the second quarter of 2007.
  • 2Diluted earnings per share for the second quarter of 2008 were $0.79, up from $0.28 in the prior year's second quarter.
  • 3For the first six months of 2008, net income increased to $559 million from $426 million in the same period of 2007.
  • 4Southern California Edison (SCE) reported improved earnings, driven by lower taxes and interest expenses, partially offset by lower operating income.
  • 5Edison Mission Group (EMG) returned to profitability in the quarter due to the absence of a significant loss on early extinguishment of debt and improved generation and pricing at its Illinois plants.
  • 6The company's overall revenue increased due to growth in both its electric utility and nonutility power generation segments.
  • 7Edison International faces a significant potential earnings exposure related to an ongoing tax dispute with the IRS concerning cross-border leveraged lease transactions, with a maximum exposure estimated at $1.25 billion after taxes.

Frequently Asked Questions

The significant improvement in earnings was primarily driven by stronger performance from Southern California Edison (SCE) and a turnaround at Edison Mission Group (EMG), which moved from a loss to a profit. This was largely due to the absence of a significant loss on early extinguishment of debt that impacted the prior year and improved generation and pricing at EMG's Illinois plants.

Edison International is engaged in ongoing negotiations with the IRS to resolve tax disputes related to cross-border leveraged lease transactions. While preliminary understandings have been reached, the final resolution is subject to definitive agreements. The company estimates a maximum earnings exposure of approximately $1.25 billion after taxes related to these leases, excluding potential penalties.

Edison International continues to invest in capital expenditures. SCE's capital forecast for 2008-2012 includes spending up to $19.9 billion, primarily for replacing and expanding transmission and distribution infrastructure, as well as constructing and replacing generation assets. EMG is also investing in wind projects, with significant commitments for turbine purchases and project development.

SCE anticipates an increase in customer rates before the end of 2008. This is due to higher natural gas and power prices than forecasted, which are negatively impacting SCE's Energy Resource Recovery Account (ERRA) balancing account, leading to an expected undercollection that triggers rate adjustments.