Exelon Announces Second Quarter 2016 Results

CHICAGO--(BUSINESS WIRE)-- Exelon Corporation (NYSE: EXC) announced second quarter 2016 consolidated earnings as follows:

		Second Quarter
		2016		2015
GAAP Results:
Net Income ($ millions)		$267		$638
Diluted Earnings per Share		$0.29		$0.74
Adjusted (non-GAAP) Operating Results:
Net Income ($ millions)		$604		$508
Diluted Earnings per Share		$0.65		$0.59

"Our family of companies continued to perform at top levels for our customers, shareholders and communities,” said Christopher M. Crane, Exelon’s President and chief executive officer. “Exelon achieved earnings of $0.65 per share, exceeding our guidance range for the second quarter. For the third quarter we are providing a guidance of $0.65 - $0.75 per share and reaffirming our guidance of $2.40 to $2.70 for the full year.”

Second Quarter Operating Results

Exelon's GAAP Net Income decreased to $0.29 per share in the second quarter of 2016 from $0.74 per share in the second quarter of 2015. Exelon’s adjusted (non-GAAP) Operating Earnings increased to $0.65 per share in the second quarter of 2016 from $0.59 per share in the second quarter of 2015. Earnings in the second quarter of 2016 primarily reflect the following favorable factors:

• Higher utility earnings due to favorable impacts of regulatory rate increases; and
• Higher revenue at Generation under the Reliability Support Services Agreement approved in the second quarter of 2016 for Ginna for periods retroactive to April 1, 2015.

These factors were partially offset by:

• Higher operating and maintenance costs at BGE due to charges for certain disallowances contained in the June and July 2016 MDPSC rate case orders;
• Higher operating and maintenance costs at Generation, which includes the impact of the timing and extended duration of an outage at the Salem nuclear power plant;
• Higher nuclear decommissioning amortization at Generation; and
• Lower realized NDT fund investment gains at Generation.

Second quarter 2016 results also include $0.06 per share of PHI GAAP and Adjusted (non-GAAP) Operating Earnings, the impact of which was fully offset by the incremental debt and equity costs incurred in connection with the merger.

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2016 do not include the following items (after tax) that were included in reported GAAP Net Income:

		(in millions)		(per diluted share)
Exelon GAAP Net Income		$267		$0.29
Mark-to-Market Impact of Economic Hedging Activities		185		0.20
Unrealized Gains Related to NDT Fund Investments		(27)		(0.03)
Amortization of Commodity Contract Intangibles		8		0.01
Merger and Integration Costs		1		—
Merger Commitments		1		—
Long-Lived Asset Impairments		22		0.02
Plant Retirements and Divestitures		133		0.14
Cost Management Program		6		0.01
CENG Non-Controlling Interest		8		0.01
Exelon Adjusted (non-GAAP) Operating Earnings		$604		$0.65

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2015 do not include the following items (after tax) that were included in reported GAAP Net Income:

		(in millions)		(per diluted share)
Exelon GAAP Net Income		$638		$0.74
Mark-to-Market Impact of Economic Hedging Activities		(143)		(0.16)
Unrealized Losses Related to NDT Fund Investments		56		0.06
Amortization of Commodity Contract Intangibles		9		0.01
Merger and Integration Costs		18		0.02
Mark-to-Market Impact of PHI Merger Related Interest Rate Swap		(71)		(0.08)
Long-Lived Asset Impairments		15		0.02
CENG Non-Controlling Interest		(14)		(0.02)
Exelon Adjusted (non-GAAP) Operating Earnings		$508		$0.59

Second Quarter and Recent Highlights

• Early Retirement of Clinton and Quad Cities Nuclear Facilities: On June 2, 2016, Generation announced it will move forward to shut down the Clinton and Quad Cities nuclear plants on June 1, 2017, and June 1, 2018, respectively. As a result, Exelon and Generation recognized one-time charges in GAAP Operating and maintenance expense of $141 million related to materials and supplies inventory reserve adjustments, employee-related costs and construction work-in-progress impairments, among other items. Additionally, Exelon and Generations' second quarter 2016 GAAP operating results include an incremental $110 million of pre-tax expense primarily related to accelerated depreciation of plant assets, accelerated amortization of nuclear fuel, and additional asset retirement obligation accretion expense associated with the changes in decommissioning timing and cost assumptions. These amounts have been excluded from GAAP Net Income to arrive at Adjusted (non-GAAP) Operating Earnings.
• BGE Electric and Natural Gas Distribution Rate Case: In the June and July 2016 rate case orders, the MDPSC authorized electric and natural gas rate increases of $44 million and $48 million, respectively, and allowed ROEs for BGE's electric and natural gas distribution businesses of 9.75 percent and 9.65 percent, respectively. The new rates took effect for service rendered on or after June 4, 2016. While the MDPSC found compelling evidence to conclude that BGE’s smart grid initiative overall was cost beneficial to customers, the final order contained several cost disallowances and adjustments precluding BGE from recovering the full amount of costs it has incurred and invested in the smart grid initiative. As a result, BGE recorded a $52 million charge to Operating and maintenance expense in the second quarter.
• Proposed Acquisition of ConEdison Solutions: On July 27, 2016, Generation entered into an Asset Purchase Agreement with ConEdison Solutions, a subsidiary of Consolidated Edison, Inc. Pursuant to the Purchase Agreement, ConEdison Solutions agreed to sell its competitive retail electric and natural gas business to Generation for an all cash purchase price of $53 million plus estimated purchase price adjustments, including net working capital of $130 million. The transaction is expected to close in the third or fourth quarter of 2016. The closing of the transaction is subject to certain conditions, including, obtaining the termination or expiration of any applicable waiting period required under the HSR Act for the consummation of the transaction.
• New York Clean Energy Standard: On Aug. 1, 2016, the Clean Energy Standard (CES) was approved by the NYPSC, a component of which includes creation of a Tier 3 Zero Emission Credit program targeted at preserving the environmental attributes of zero-emissions nuclear-powered generating facilities that meet the criteria demonstrating public necessity as determined by the NYPSC. Subject to the Ginna and Nine Mile Point nuclear power plants entering into satisfactory contracts with the New York State Energy Research & Development Agency, as required under the CES, and subject to any potential administrative or legal challenges, the CES will allow Ginna and Nine Mile Point to continue to operate at least through the life of the program (March 31, 2029). The duration of the program beyond April 1, 2019, is conditional upon a buyer purchasing the James A. FitzPatrick nuclear generating station and taking title prior to Sept. 1, 2018.
• Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100 percent of the CENG units, produced 42,453 gigawatt-hours (GWh) in the second quarter of 2016, compared with 43,805 GWh in the second quarter of 2015. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 92.3 percent capacity factor for the second quarter of 2016, compared with 93.1 percent for the second quarter of 2015. The number of planned refueling outage days in the second quarter of 2016 totaled 87, compared with 71 in the second quarter of 2015. There were 21 non-refueling outage days in the second quarter of 2016, compared with 18 days in the second quarter of 2015.
• Fossil and Renewables Operations: The Dispatch Match rate for Generation’s gas and hydro fleet was 97.4 percent in the second quarter of 2016, compared with 99.2 percent in the second quarter of 2015. The lower performance in the quarter was primarily due to an unplanned outage in April at Wolf Hollow, in Texas. Energy Capture for the wind and solar fleet was 95.5 percent in the second quarter of 2016, compared with 96.1 percent in the second quarter of 2015. The lower performance was attributed to minor mechanical issues across the fleet.
• Pepco District of Columbia Electric Distribution Rate Case: On June 30, 2016, Pepco filed an application with the DCPSC requesting an increase of $86 million to its annual service revenues for electric delivery, based on a requested ROE of 10.6 percent. Any adjustments to rates approved by the DCPSC are expected to take effect in June 2017.
• DPL Maryland Electric Distribution Rate Case: On July 20, 2016, DPL filed an application with the MDPSC requesting an increase of $66 million to its electric distribution base rates, based on a requested ROE of 10.6 percent. Any adjustments to rates approved by the MDPSC are expected to take effect in February 2017.
• DPL Delaware Electric and Natural Gas Distribution Rate Case: On May 17, 2016, DPL filed an application with the DPSC requesting an increase of $63 million and $22 million to its electric and natural gas distribution base rates, based on a requested ROE of 10.6 percent. While the DPSC is not required to issue a decision on the application within a specified period time, Delaware law allows DPL to put into effect $2.5 million of the rate increase two months after filing the application and the entire requested rate increase seven months after filing, subject to a cap and a refund obligation based on the final DPSC order.
• BGE Preference Stock Redemption: BGE has $190 million of cumulative preference stock that are redeemable at its option at any time for the redemption price of $100 per share, plus accrued and unpaid dividends. On July 3, 2016, BGE redeemed all 400,000 shares of its outstanding 7.125 percent Cumulative Preference Stock, 1993 Series and all 600,000 shares of its outstanding 6.99 percent Cumulative Preference Stock, 1995 Series for $100 million, plus accrued and unpaid dividends. Following these redemptions, BGE has $90 million remaining of cumulative preference stock outstanding.
• Financing Activities:
  • On May 26, 2016, Exelon Corporate, Generation, ComEd, PECO and BGE entered into amendments to each of their respective syndicated revolving credit facilities, which extended the maturity of each of the facilities to May 26, 2021. Exelon Corporate also increased the size of its facility from $500 million to $600 million. In addition, PHI, Pepco, DPL and ACE entered into an amendment to their Second Amended and Restated Credit Agreement which extended the maturity date of the facility to May 26, 2021, removed PHI as a borrower under the facility and decreased the size of the facility from $1.5 billion to $900 million.
  • On June 27, 2016, ComEd issued $500 million in aggregate principal amount of its First Mortgage Bonds, 2.550 percent Series due June 15, 2026, and $700 million in aggregate principal amount of its First Mortgage Bonds, 3.650 percent Series due June 15, 2046. The net proceeds from sale of the bonds will be used to refinance maturing mortgage bonds, repay a portion of ComEd's outstanding commercial paper obligations and for general corporate purposes.
• Hedging Update: Exelon’s hedging program involves the hedging of commodity risk for Exelon’s expected generation, typically on a ratable basis over a three-year period. The proportion of expected generation hedged as of June 30, 2016, is 97.0 percent to 100.0 percent for 2016, 78.0 percent to 81.0 percent for 2017, and 47.0 percent to 50.0 percent for 2018. Expected generation is the volume of energy that best represents our financial exposure through owned or contracted capacity. The primary objective of Exelon’s hedging program is to manage market risks and protect the value of its generation and its investment-grade balance sheet, while preserving its ability to participate in improving long-term market fundamentals.

Operating Company Results

ComEd consists of electricity transmission and distribution operations in Northern Illinois.

ComEd's second quarter 2016 GAAP Net Income was $145 million compared with $99 million in the second quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2016 and 2015 do not include merger and integration costs that were included in reported GAAP earnings. A reconciliation of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)		2Q16		2Q15
ComEd GAAP Net Income		$145		$99
Merger and Integration Costs		1		2
ComEd Adjusted (non-GAAP) Operating Earnings		$146		$101

ComEd’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2016 increased by $45 million from the same quarter in 2015, primarily due to higher electric distribution and transmission formula rate earnings and favorable weather.

For the second quarter of 2016, heating degree-days in the ComEd service territory were up 10.1 percent relative to the same period in 2015 and were 1.3 percent below normal. Cooling degree days were up 69.6 percent relative to the same period in 2015 and were 33.0 percent above normal. Total retail deliveries increased by 4.3 percent in the second quarter of 2016 compared with the same period in 2015.

Weather-normalized retail electric deliveries remained relatively consistent in the second quarter of 2016 compared with the same period in 2015.

PECO consists of electricity transmission and distribution operations and retail natural gas distribution operations in Southeastern Pennsylvania.

PECO’s second quarter 2016 GAAP Net Income was $100 million, compared with $70 million in the second quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2016 and 2015 do not include certain items (after tax) that were included in reported GAAP earnings. A reconciliation of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)		2Q16		2Q15
PECO GAAP Net Income		$100		$70
Merger and Integration Costs		—		1
Cost Management Program		1		—
PECO Adjusted (non-GAAP) Operating Earnings		$101		$71

PECO’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2016 increased by $30 million from the same quarter in 2015, primarily due to increased electric distribution revenue pursuant to a rate increase effective Jan. 1, 2016, and the impact of a cumulative tax adjustment related to an anticipated gas repairs tax return accounting method change.

For the second quarter of 2016, heating degree-days in the PECO service territory were up 42.1 percent relative to the same period in 2015 and were 0.6 percent above normal. Cooling degree days were down 23.8 percent relative to the same period in 2015 and were 12.4 percent above normal. Total retail electric deliveries were down 1.9 percent compared with the second quarter of 2015. Natural gas deliveries (including both retail and transportation segments) in the second quarter of 2016 were up 8.9 percent compared with the same period in 2015.

Weather-normalized retail electric deliveries remained relatively consistent, while gas deliveries decreased 1.5 percent in the second quarter of 2016 compared with the same period in 2015. The decreased gas volumes were driven primarily by lower use per customer.

BGE consists of electricity transmission and distribution operations and retail natural gas distribution operations in Central Maryland.

BGE’s second quarter 2016 GAAP Net Income was $31 million, compared with $44 million in the second quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2016 and 2015 do not include certain items (after tax) that were included in reported GAAP earnings. A reconciliation of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)		2Q16		2Q15
BGE GAAP Net Income		$31		$44
Merger and Integration Costs		(3)		1
Cost Management Program		1		—
BGE Adjusted (non-GAAP) Operating Earnings		$29		$45

BGE’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2016 decreased $16 million from the same quarter in 2015, primarily due to charges for certain disallowances contained in the June and July 2016 rate orders and increased underground conduit rental fees assessed by the City of Baltimore, partially offset by increased transmission revenue due to increased capital investments and operating and maintenance expense recoveries and increased distribution revenue pursuant to increased rates effective in June 2016. Due to revenue decoupling, BGE is not affected by actual weather with the exception of major storms.

PHI consists of electricity transmission and distribution operations in the District of Columbia and portions of Maryland, Delaware, and New Jersey and retail natural gas distribution operations in northern Delaware.

PHI’s second quarter 2016 GAAP Net Income was $52 million. Adjusted (non-GAAP) Operating Earnings do not include merger commitments that were included in reported GAAP earnings. A reconciliation of GAAP Net Income to (after-tax) Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)		2Q16
PHI GAAP Net Income		$52
Merger Commitments		1
PHI Adjusted (non-GAAP) Operating Earnings		$53

Generation consists of owned and contracted electric generating facilities and wholesale and retail customer supply of electric and natural gas products and services, including renewable energy products, risk management services and natural gas exploration and production activities.

Generation's second quarter 2016 GAAP Net Loss was $8 million compared with GAAP Net Income of $398 million in the second quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2016 and 2015 do not include various items (after tax) that were included in reported GAAP earnings. A reconciliation of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)		2Q16		2Q15
Generation GAAP Net (Loss) Income		$(8)		$398
Mark-to-Market Impact of Economic Hedging Activities		185		(145)
Unrealized (Gains) Losses Related to NDT Fund Investments		(27)		56
Amortization of Commodity Contract Intangibles		8		9
Merger and Integration Costs		3		5
Long-Lived Asset Impairments		22		—
Plant Retirements and Divestitures		133		—
Cost Management Program		4		—
CENG Non-Controlling Interest		8		(14)
Generation Adjusted (non-GAAP) Operating Earnings		$328		$309

Generation’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2016 increased by $19 million compared with the same quarter in 2015. This increase primarily reflects higher revenue under the Reliability Support Services Agreement approved in the second quarter of 2016 for Ginna for periods retroactive to April 1, 2015, mostly offset by the impacts of the timing and extended duration of an outage at the Salem nuclear power plant, lower realized gains on nuclear decommissioning trust funds, and increased nuclear decommissioning amortization expense.

Non-GAAP Financial Measures

In addition to net income as determined under generally accepted accounting principles in the United States (GAAP), Exelon evaluates its operating performance using the measure of adjusted (non-GAAP) operating earnings because management believes it represents earnings directly related to the ongoing operations of the business. Adjusted (non-GAAP) operating earnings exclude certain costs, expenses, gains and losses and other specified items. This information is intended to enhance an investor’s overall understanding of period over period operating results and provide an indication of Exelon’s baseline operating performance excluding items that are considered by management to be not directly related to the ongoing operations of the business. In addition, this information is among the primary indicators management uses as a basis for evaluating performance, allocating resources, setting incentive compensation targets and planning and forecasting of future periods. Adjusted (non-GAAP) operating earnings is not a presentation defined under GAAP and may not be comparable to other companies’ presentation. The Company has provided the non-GAAP financial measure as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. Adjusted (non-GAAP) operating earnings should not be deemed more useful than, a substitute for, or an alternative to the most comparable GAAP measures provided in this earnings release and attachments. This press release and earnings release attachments provide reconciliations of adjusted (non-GAAP) operating earnings to the most directly comparable financial measures calculated and presented in accordance with GAAP, are posted on Exelon’s website: www.exeloncorp.com, and have been furnished to the Securities and Exchange Commission on Form 8-K on August 9, 2016.

Cautionary Statements Regarding Forward-Looking Information

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company, Pepco Holdings LLC (PHI), Potomac Electric Power Company, Delmarva Power & Light Company, and Atlantic City Electric Company (Registrants) include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 23; (2) PHI’s 2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 16; (3) Exelon’s Second Quarter 2016 Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors; (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 18 and (4) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this press release. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this press release.

Exelon Corporation (NYSE: EXC) is a Fortune 100 energy company with the largest number of utility customers in the U.S. Exelon does business in 48 states, the District of Columbia and Canada and had 2015 revenue of $34.5 billion. Exelon’s six utilities deliver electricity and natural gas to approximately 10 million customers in Delaware, the District of Columbia, Illinois, Maryland, New Jersey and Pennsylvania through its Atlantic City Electric, BGE, ComEd, Delmarva Power, PECO and Pepco subsidiaries. Exelon is one of the largest competitive U.S. power generators, with more than 32,700 megawatts of nuclear, gas, wind, solar and hydroelectric generating capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets. The company’s Constellation business unit provides energy products and services to approximately 2 million residential, public sector and business customers, including more than two-thirds of the Fortune 100. Follow Exelon on Twitter @Exelon.

EXELON CORPORATION
Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations
(unaudited)
(in millions, except per share data)
		Three Months Ended June 30, 2016														Three Months Ended June 30, 2015
		GAAP (a)				Adjustments						Adjusted Non-GAAP				GAAP (a)				Adjustments						Adjusted Non-GAAP
Operating revenues		$	6,910			$	626			(b),(d),(e)		$	7,536			$	6,514			$	(7	)		(b),(d)		$	6,507
Operating expenses
Purchased power and fuel		2,454				300				(b),(d),(i)		2,754				2,449				214				(b),(d)		2,663
Operating and maintenance		2,505				(172		)		(e),(g),(i),(j)		2,333				2,042				(41		)		(e),(g)		2,001
Depreciation and amortization		941				(114		)		(i)		827				602				—						602
Taxes other than income		394				—						394				294				—						294
Total operating expenses		6,294				14						6,308				5,387				173						5,560
Gain on sales of assets		31				—						31				7				—						7
Operating income		647				612						1,259				1,134				(180		)				954
Other income and (deductions)
Interest expense, net		(376		)		—						(376		)		(155		)		(104		)		(e),(h)		(259		)
Other, net		144				(89		)		(c),(i)		55				(17		)		127				(c)		110
Total other income and (deductions)		(232		)		(89		)				(321		)		(172		)		23						(149		)
Income before income taxes		415				523						938				962				(157		)				805
Income taxes		102				194				(b),(c),(d),(f),(g),(i),(j)		296				327				(41		)		(b),(c),(d),(e),(g),(h)		286
Equity in losses of unconsolidated affiliates		(7		)		—						(7		)		(2		)		—						(2		)
Net income		306				329						635				633				(116		)				517
Net income (loss) attributable to noncontrolling interests and preference stock dividends		39				(8		)		(k)		31				(5		)		14				(k)		9
Net income attributable to common shareholders		$	267			$	337					$	604			$	638			$	(130	)				$	508
Effective tax rate		24.6		%								31.6		%		34.0		%								35.5		%
Earnings per average common share
Basic		$	0.29			$	0.36					$	0.65			$	0.74			$	(0.15	)				$	0.59
Diluted		$	0.29			$	0.36					$	0.65			$	0.74			$	(0.15	)				$	0.59
Average common shares outstanding
Basic		924										924				863										863
Diluted		926										926				866										866
Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP:
Mark-to-market impact of economic hedging activities (b)						$	0.20													$	(0.16	)
Unrealized (gains) losses related to NDT fund investments (c)						(0.03		)												0.06
Amortization of commodity contract intangibles (d)						0.01														0.01
Merger and integration costs (e)						—														0.02
Merger commitments (f)						—														—
Long-lived asset impairments (g)						0.02														0.02
Mark-to-market impact of PHI merger related interest swap (h)						—														(0.08		)
Plant retirements and divestitures (i)						0.14														—
Cost management program (j)						0.01														—
CENG non-controlling interest (k)						0.01														(0.02		)
Total adjustments						$	0.36													$	(0.15	)

For the three months ended June 30, 2016, includes financial results for PHI. Therefore, the results of operations from 2016 and 2015 are not comparable for Exelon. The explanations below identify any other significant or unusual items affecting the results of operations.

(a)		Results reported in accordance with accounting principles generally accepted in the United States (GAAP).
(b)		Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations.
(c)		Adjustment to exclude the unrealized gains and losses on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements.
(d)		Adjustment to exclude the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value related to the Integrys acquisition.
(e)		Adjustment to exclude certain costs associated with mergers and acquisitions, including, if and when applicable, professional fees, employee-related expenses, integration activities, and upfront credit facilities fees, partially offset in 2016 at BGE and PHI by the anticipated recovery of previously incurred PHI acquisition costs.
(f)		Adjustment to exclude costs incurred as part of the settlement orders approving the PHI acquisition.
(g)		Adjustment to exclude a 2015 charge to earnings primarily related to the impairment of investment in long-term leases at Corporate and a 2016 charge to earnings primarily related to the impairment of certain wind projects at Generation.
(h)		Adjustment to exclude the mark-to-market impact of Exelon's Corporate's forward-starting interest rate swaps related to financing for the PHI acquisition, which were terminated on June 8, 2015.
(i)		Adjustment to exclude the impacts associated with the announced early retirement of Generation's Clinton and Quad Cities nuclear facilities, partially offset by a gain associated with Generation's 2016 sale of the New Boston generating site.
(j)		Adjustment to exclude the 2016 severance expense and reorganization costs related to a cost management program.
(k)		Adjustments to exclude the elimination from Generation’s results of the non-controlling interest related to CENG exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments and mark-to-market activity.

EXELON CORPORATION
Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations
(unaudited)
(in millions, except per share data)
		Six Months Ended June 30, 2016														Six Months Ended June 30, 2015
		GAAP (a)				Adjustments						Adjusted Non-GAAP				GAAP (a)				Adjustments						Adjusted Non-GAAP
Operating revenues		$	14,485			$	534			(b),(d),(e)		$	15,019			$	15,345			$	(201	)		(b),(d)		$	15,144
Operating expenses
Purchased power and fuel		5,708				338				(b),(d),(i)		6,046				6,919				220				(b),(d)		7,139
Operating and maintenance		5,341				(932		)		(e),(f),(g),(i),(j)		4,409				4,123				(53		)		(e),(g),(k)		4,070
Depreciation and amortization		1,626				(114		)		(i)		1,512				1,212				—						1,212
Taxes other than income		720				(1		)		(j)		719				598				—						598
Total operating expenses		13,395				(709		)				12,686				12,852				167						13,019
Gain on sales of assets		40				—						40				8				—						8
Operating income		1,130				1,243						2,373				2,501				(368		)				2,133
Other income and (deductions)
Interest expense, net		(663		)		—						(663		)		(501		)		(15		)		(e),(h)		(516		)
Other, net		258				(155		)		(c),(i)		103				64				78				(c)		142
Total other income and (deductions)		(405		)		(155		)				(560		)		(437		)		63						(374		)
Income before income taxes		725				1,088						1,813				2,064				(305		)				1,759
Income taxes		285				311				(b),(c),(d),(e),(f),(g),(i),(j)		596				690				(104		)		(b),(c),(d),(e),(g),(h),(k)		586
Equity in losses of unconsolidated affiliates		(10		)		—						(10		)		(2		)		—						(2		)
Net income		430				777						1,207				1,372				(201		)				1,171
Net income attributable to noncontrolling interests and preference stock dividends		(10		)		(18		)		(l)		(28		)		41				7				(l)		48
Net income attributable to common shareholders		$	440			$	795					$	1,235			$	1,331			$	(208	)				$	1,123
Effective tax rate		39.3		%								32.9		%		33.4		%								33.3		%
Earnings per average common share
Basic		$	0.48			$	0.86					$	1.34			$	1.54			$	(0.24	)				$	1.30
Diluted		$	0.48			$	0.85					$	1.33			$	1.54			$	(0.24	)				$	1.30
Average common shares outstanding
Basic		923										923				862										862
Diluted		926										926				866										866
Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP:
Mark-to-market impact of economic hedging activities (b)						$	0.12													$	(0.27	)
Unrealized (gains) losses related to NDT fund investments (c)						(0.07		)												0.04
Amortization of commodity contract intangibles (d)						—														(0.02		)
Merger and integration costs (e)						0.09														0.04
Merger commitments (f)						0.43														—
Long-lived asset impairments (g)						0.10														0.02
Mark-to-market impact of PHI merger related interest swap (h)						—														(0.03		)
Plant retirements and divestitures (i)						0.14														—
Cost management program (j)						0.02														—
Midwest Generation bankruptcy recoveries (k)						—														(0.01		)
CENG non-controlling interest (l)						0.02														(0.01		)
Total adjustments						$	0.85													$	(0.24	)

As a result of the PHI acquisition completion on March 23, 2016, the table includes financial results for PHI beginning on March 24, 2016 to June 30, 2016. Therefore, the results of operations from 2016 and 2015 are not comparable for Exelon. The explanations below identify any other significant or unusual items affecting the results of operations.

(a)		Results reported in accordance with accounting principles generally accepted in the United States (GAAP).
(b)		Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations.
(c)		Adjustment to exclude the unrealized gains and losses on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements.
(d)		Adjustment to exclude the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value related to the Integrys acquisition.
(e)		Adjustment to exclude certain costs associated with mergers and acquisitions, including, if and when applicable, professional fees, employee-related expenses, integration activities, and upfront credit facilities fees, partially offset in 2016 at ComEd, BGE and PHI by the anticipated recovery of previously incurred PHI acquisition costs.
(f)		Adjustment to exclude costs incurred as part of the settlement orders approving the PHI acquisition.
(g)		Adjustment to exclude a 2015 charge to earnings primarily related to the impairment of investment in long-term leases at Corporate and 2016 charges to earnings primarily related to the impairment of upstream assets and certain wind projects at Generation.
(h)		Adjustment to exclude the mark-to-market impact of Exelon's Corporate's forward-starting interest rate swaps related to financing for the PHI acquisition, which were terminated on June 8, 2015.
(i)		Adjustment to exclude the impacts associated with the announced early retirement of Generation's Clinton and Quad Cities nuclear facilities, partially offset by a gain associated with Generation's 2016 sale of the New Boston generating site.
(j)		Adjustment to exclude the 2016 severance expense and reorganization costs related to a cost management program.
(k)		Adjustment to exclude a 2015 benefit for the favorable settlement of a long-term railcar lease agreement pursuant to the Midwest Generation bankruptcy.
(l)		Adjustments to exclude the elimination from Generation’s results of the non-controlling interest related to CENG exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments and mark-to-market activity.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160809005531/en/

Exelon Corporation
Dan Eggers
Investor Relations
312-394-2345
or
Paul Adams
Corporate Communications
410-470-4167

Source: Exelon Corporation

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