What is the primary reason for the sharp decline in net income reported for the first quarter of 2002?

The significant decrease in net income is primarily attributable to a $230 million charge for the cumulative effect of accounting changes, specifically a goodwill impairment loss of $254 million (net of taxes and minority interest) recognized upon the adoption of SFAS No. 142, 'Goodwill and Other Intangible Assets.' This accounting change impacted the 'Enterprises' segment and led to a large one-time charge.

How did weather conditions affect Exelon's financial performance in the first quarter?

Milder winter weather in the first quarter of 2002 negatively impacted Exelon's results, particularly in the Energy Delivery segment. This led to reduced retail electricity and gas volumes for ComEd and PECO, resulting in lower revenues and margins compared to the prior year when weather conditions were more favorable for energy sales.

What is the outlook for Exelon's capital expenditures and funding sources?

Exelon plans to continue investing in its capital-intensive businesses. For the first quarter of 2002, capital expenditures totaled $560 million, with significant investments in Generation's facilities (including nuclear refueling) and Energy Delivery's infrastructure. The company expects to fund these expenditures through internally generated cash flows, debt financing, and potential capital contributions from Exelon to its subsidiaries.

What impact has the adoption of SFAS No. 142 had on Exelon's financial reporting?

The adoption of SFAS No. 142 as of January 1, 2002, eliminated the amortization of goodwill. However, it introduced a requirement for annual goodwill impairment testing. In the first quarter of 2002, Exelon recorded a significant goodwill impairment charge of $230 million (net of taxes) primarily related to its 'Enterprises' segment, which led to a substantial one-time reduction in net income.

EXC 10-Q Quarterly Report Q1 FY2002 — Revenue, Net Income, EPS

Summary

Exelon Corporation (EXC) reported a significant year-over-year decrease in net income for the first quarter of 2002, largely driven by a substantial charge related to goodwill impairment following the adoption of new accounting standards (SFAS No. 142). Excluding this one-time charge, income before cumulative effect of accounting changes also declined, impacted by milder weather affecting energy delivery volumes, lower wholesale energy prices, and increased operational costs, particularly for Generation due to nuclear refueling outages. The company is actively managing its operations and capital structure, with investments in infrastructure and strategic acquisitions/divestitures underway. Despite the net income drop, operating cash flows remained robust, demonstrating the underlying resilience of Exelon's business segments.

Key Highlights

1Net income for the quarter ended March 31, 2002, decreased significantly to $8 million from $399 million in the prior year, primarily due to a $230 million goodwill impairment charge related to the adoption of SFAS No. 142.
2Excluding the accounting change impact, income before cumulative effect of changes in accounting principles declined by 38.5% to $238 million, driven by lower performance in the Energy Delivery and Generation segments.
3Energy Delivery segment revenue decreased by 6.5% to $2,335 million, impacted by milder weather reducing retail volumes and lower wholesale sales, though offset by customer choice effects in Pennsylvania.
4Generation segment revenue increased by 21.3% to $1,975 million, largely due to trading activities initiated in April 2001, but operating income decreased significantly due to lower market prices and increased costs associated with nuclear refueling outages.
5Enterprises segment reported a net loss of $271 million, which includes a $243 million goodwill impairment charge, reflecting lower revenues from divestitures and a downturn in the telecommunications industry.
6Operating cash flows remained strong, with $833 million provided by operating activities, an increase from $797 million in the prior year, indicating healthy underlying cash generation from core operations.
7Capital expenditures increased to $560 million for the quarter, primarily driven by investments in Generation's facilities and nuclear refueling, and Energy Delivery's infrastructure improvements.

EXELON CORP Quarterly Report for Q1 Ended Mar 31, 2002

Summary

Key Highlights

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