Form 8-K PEPCO HOLDINGS INC For: Jul 27

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):                July 27, 2015               

 

PEPCO HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		001-31403		52-2297449
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

701 Ninth Street, N.W., Washington, DC		20068
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number, including area code		(202) 872-2000

 

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On July 27, 2015, Pepco Holdings, Inc. issued a news release announcing its operating results for the second quarter of 2015. The news release is furnished as Exhibit 99 to this Form 8-K. The information being furnished pursuant to this Item 2.02, including Exhibit 99, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the Securities Act), except as shall be expressly set forth by specific reference in such filing. Exhibit 99 is hereby incorporated by reference in response to this Item 2.02.

 

Item 3.02.

Unregistered Sales of Equity Securities.

 

On July 24, 2015, Pepco Holdings issued 1,800 originally issued shares of non-voting, non-convertible and non-transferable Series A preferred stock, par value $0.01 per share (the Preferred Stock), to Exelon Corporation, a Pennsylvania corporation (Exelon), for a purchase price of $18,000,000. The Preferred Stock was issued in connection with that certain Subscription Agreement (the Subscription Agreement), dated April 29, 2014, between Pepco Holdings and Exelon, pursuant to which Pepco Holdings issued to Exelon on April 30, 2014, 9,000 originally issued shares of Preferred Stock for a purchase price of $90,000,000. The Subscription Agreement was entered into in connection with the execution of that certain Agreement and Plan of Merger, dated April 29, 2014, as amended and restated on July 18, 2014, among Exelon, Purple Acquisition Corp., an indirect, wholly-owned subsidiary of Exelon (Merger Sub), and Pepco Holdings, providing for the merger of Merger Sub with and into Pepco Holdings, with Pepco Holdings surviving the merger as an indirect, wholly-owned subsidiary of Exelon. Under the terms of the Subscription Agreement, Exelon also committed to purchase 1,800 originally issued shares of Preferred Stock for a purchase price of $18,000,000 at the end of each 90 day period following the date of the Subscription Agreement, up to an aggregate of 18,000 shares of Preferred Stock, for a maximum aggregate consideration of $180,000,000. There are currently 18,000 shares of Preferred Stock issued and outstanding, all of which are held by Exelon.

 

The issuance of the Preferred Stock was exempt from the registration requirement of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof because such issuance did not involve a public offering.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits

 

The following exhibits are filed herewith:

 

Exhibit No.		Description of Exhibit
4		Certificate of Series A Non-Voting Non-Convertible Preferred Stock (incorporated by reference from Exhibit 4.1 to Pepco Holdings, Inc.’s Form 8-K, April 30, 2014)
10		Subscription Agreement, dated April 29, 2014, by and between Pepco Holdings, Inc. and Exelon Corporation (incorporated by reference from Exhibit 2.2 to Pepco Holdings, Inc.’s Form 8-K, April 30, 2014)

 

 

The following exhibit is furnished herewith:
Exhibit No.		Description of Exhibit
99		News Release of Pepco Holdings, Inc., dated July 27, 2015

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

			PEPCO HOLDINGS, INC.
			(Registrant)
Date:	July 24, 2015		/s/ FRED BOYLE
			Name:  Frederick J. Boyle Title:    Senior Vice President and Chief Financial Officer

 

 

INDEX TO EXHIBITS FILED HEREWITH

 

Exhibit No.		Description of Exhibit
4		Certificate of Series A Non-Voting Non-Convertible Preferred Stock (incorporated by reference from Exhibit 4.1 to Pepco Holdings, Inc.’s Form 8-K, April 30, 2014)
10		Subscription Agreement, dated April 29, 2014, by and between Pepco Holdings, Inc. and Exelon Corporation (incorporated by reference from Exhibit 2.2 to Pepco Holdings, Inc.’s Form 8-K, April 30, 2014)

 

INDEX TO EXHIBIT FURNISHED HEREWITH

 

Exhibit No.		Description of Exhibit
99		News Release of Pepco Holdings, Inc., dated July 27, 2015

 

 

 

Exhibit 99

 

  

For Immediate Release | jULY 27, 2015 Media Contact: Robert Hainey Office 202-872-2680 | 24/7 Media Hotline 202-872-2680 | [email protected] Investor Contact: Donna Kinzel Office 302-429-3004 | [email protected]

701 Ninth St., NW Washington, DC 20068 pepcoholdings.com NYSE: POM

 

Pepco Holdings Reports Second-Quarter 2015 Financial Results

 

Pepco Holdings, Inc. (NYSE: POM) today reported second quarter and six months ended June 30, 2015 consolidated earnings as follows:

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Net Income (GAAP)
Net Income ($ in millions)		$	53			$	53			$	106			$	128
Earnings Per Share		$	0.21			$	0.21			$	0.42			$	0.51
Adjusted Net Income (Non-GAAP)
Adjusted Net Income ($ in millions)		$	57			$	71			$	118			$	146
Adjusted Earnings Per Share		$	0.23			$	0.28			$	0.47			$	0.58

 

“Our goals remain unchanged. We are committed to system reliability and ongoing improvement of the customer experience as we move forward with our pending merger with Exelon,” said Joseph M. Rigby, Chairman, President and Chief Executive Officer. “Increased operation and maintenance costs, primarily driven by the implementation of a new customer information system, impacted second quarter results.” Rigby added, “In May, both the Maryland and Delaware Public Service Commissions approved the proposed merger. We continue to expect the transaction to close in the third quarter of this year creating a stronger combined company that is better positioned to deliver value to our stakeholders.”

 

Pepco Holdings’ GAAP net income for each of the three month periods ended June 30, 2015 and 2014, was $53 million, or 21 cents per share. Excluding items that we believe are not representative of ongoing

 

  

business operations, adjusted earnings for the second quarter of 2015 would have been $57 million, or 23 cents per share as compared to $71 million, or 28 cents per share for the same period in 2014.

 

The primary drivers of the decrease in adjusted net income (Non-GAAP) in the second quarter of 2015, as compared to the same quarter in 2014, were higher operation and maintenance expense (primarily due to the implementation of a new customer information system and increased distribution system maintenance) and higher depreciation expense from increased plant investment. Higher electric distribution revenue and default supply margins partially offset the decrease for the second quarter.

 

For the six months ended June 30, 2015, Pepco Holdings’ GAAP earnings were $106 million, or 42 cents per share, as compared to net income of $128 million, or 51 cents per share for the six months ended June 30, 2014. Excluding items that we believe are not representative of ongoing business operations, adjusted earnings for the six months ended June 30, 2015 would have been $118 million, or 47 cents per share as compared to $146 million, or 58 cents per share for the same period in the prior year.

 

The decrease in adjusted net income (Non-GAAP) for the six months ended June 30, 2015, as compared to the 2014 period, was driven by higher operation and maintenance expense (primarily related to the implementation of a new customer information system and increased distribution system maintenance), higher depreciation expense from increased plant investment and higher interest expense. Higher electric distribution and network transmission revenue (primarily due to higher rates from increased infrastructure investment, as well as higher usage and favorable weather) partially offset the decrease for the period.

 

Non-GAAP Financial Information

 

Management believes the adjusted net income and related per share data are representative of Pepco Holdings’ ongoing business operations. Management uses this information internally to evaluate Pepco Holdings’ period-over-period financial performance and, therefore, believes that this information is useful to investors. The presentation of adjusted net income and related per share data is intended to complement, and should not be considered as an alternative to, reported earnings and related per share data presented in accordance with generally accepted accounting principles in the United States (GAAP).

 

  

Reconciliation of GAAP Financial Information to Adjusted Financial Information

 

Net Income (Millions of dollars)			Three Months Ended June 30,				Six Months Ended June 30,
			2015		2014		2015		2014
Reported (GAAP) Net Income		$	53	$	53	$	106	$	128
Adjustments (after-tax):
·	Incremental merger-related transaction costs		3		14		9		14
·	Incremental merger-related integration costs		1		4		3		4
Adjusted Net Income (Non-GAAP)		$	57	$	71	$	118	$	146

 

Earnings per Share			Three Months Ended June 30,				Six Months Ended June 30,
			2015		2014		2015		2014
Reported (GAAP) Earnings per Share		$	0.21	$	0.21	$	0.42	$	0.51
Adjustments (after-tax):
·	Incremental merger-related transaction costs		0.01		0.06		0.03		0.06
·	Incremental merger-related integration costs		0.01		0.01		0.02		0.01
Adjusted Earnings per Share (Non-GAAP)		$	0.23	$	0.28	$	0.47	$	0.58

 

The income tax effects with respect to the foregoing adjustments, where applicable, were calculated using a composite income tax rate of approximately 40 percent. Most merger-related costs are not tax deductible.

 

Recent Events

 

Pepco Holdings – Exelon Merger

 

·

On May 19, 2015, the Delaware Public Service Commission approved the proposed merger agreement with Exelon Corporation (Exelon). An order approving the merger was issued by the Maryland Public Service Commission (MPSC) on May 15, 2015. Following the issuance of the Maryland order, the Maryland Office of People’s Counsel (OPC) and other parties filed petitions for judicial review in the Circuit Court of Queen Anne’s County, Maryland, seeking to appeal the MPSC order. On July 21, 2015, the OPC filed a motion in the same court requesting a stay of the MPSC order. Pepco Holdings believes the motion and appeals are without merit, and intends to vigorously oppose the motion and the appeals. The District of Columbia Public Service Commission (DCPSC) held evidentiary hearings related to the merger in March and April of 2015 and the record was closed on May 27, 2015. District of

 

  

Columbia law does not impose a time limit on the DCPSC’s review of the merger application. The parties anticipate receiving final approval and closing the transaction in the third quarter of 2015.

 

Operations

 

·

Power Delivery electric sales were 11,279 gigawatt hours (GWh) in the second quarter of 2015, compared to 11,175 GWh for the same period in 2014. In the electric service territory, cooling degree days increased by 32 percent for the three months ended June 30, 2015, compared to the same period in 2014. Weather-adjusted electric sales were 10,916 GWh in the second quarter of 2015, compared to 11,136 GWh for the same period in the prior year.

·

Power Delivery electric sales were 23,876 GWh for the six months ended June 30, 2015 compared to 23,439 GWh for the six months ended June 30, 2014. In the electric service territory, cooling degree days increased by 32 percent for the six months ended June 30, 2015, compared to the same period in 2014. Weather-adjusted electric sales were 22,951 GWh for the six months ended June 30, 2015 compared to 22,945 GWh for the same period in 2014.

·

Pepco Holdings capital expenditures for the six months ended June 30, 2015 were $562 million. Due to the pending merger with Exelon, new rate cases have not been filed since March 2014, although capital expenditures and operation and maintenance expenses have continued or increased from levels in prior periods.

·

In the six months ended June 30, 2015, PES signed $26 million in energy efficiency contracts and $28 million in underground transmission construction contracts. PES signed $18 million in energy efficiency contracts and $41 million in underground transmission construction contracts for the same period in 2014.

 

Financing

 

·

On May 11, 2015, Delmarva Power issued $200 million of 30-year first mortgage bonds. The bonds bear interest at a fixed rate of 4.15 percent and are due on May 15, 2045. The net proceeds were used to repay outstanding commercial paper and for general corporate purposes.

 

  

Further details regarding changes in consolidated earnings between 2015 and 2014 are provided in the schedules that follow. Additional information regarding financial results and recent regulatory events can be found in the Pepco Holdings, Inc. Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission, and which is also available at www.pepcoholdings.com/investors. Pepco Holdings, Inc. routinely makes available this and other important information on its website, which is a key channel of distribution for Pepco Holdings, Inc. to reach its public investors and to disclose material, non-public information. Information on the website is not part of this news release.

 

About PHI: Pepco Holdings, Inc. (NYSE: POM) is one of the largest energy delivery companies in the Mid-Atlantic region, serving about 2 million customers in Delaware, the District of Columbia, Maryland and New Jersey. PHI subsidiaries Pepco, Delmarva Power and Atlantic City Electric provide regulated electricity service; Delmarva Power also provides natural gas service. Through Pepco Energy Services, PHI also provides energy savings performance contracting services, underground transmission and distribution construction and maintenance services, and steam and chilled water under long-term contracts.

 

Forward-Looking Statements: Some of the statements contained in this news release with respect to Pepco Holdings, Pepco, Delmarva Power and Atlantic City Electric, including each of their respective subsidiaries (each, a “Reporting Company”), are forward-looking statements within the meaning of the U.S. federal securities laws, and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “could,” “expects,” “intends,” “assumes,” “seeks to,” “plans,” “anticipates,” “believes,” “projects,” “estimates,” “predicts,” “potential,” “future,” “goal,” “objective,” or “continue” or the negative of such terms or other variations thereof or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause one or more Reporting Company’s or their subsidiaries’ actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Therefore, forward-looking statements are not guarantees or assurances of future performance, and actual results could differ materially from those indicated by the forward-looking statements. These factors should be read together with the risk factors included in the “Risk Factors” section and other statements contained in each Reporting Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on February 27, 2015, and in each Reporting Company’s Quarterly Reports on Form 10-Q for the quarter ended June 30, 2015, and investors should refer to these risk factor sections and other statements. All of such factors and forward-looking statements are difficult to predict, contain uncertainties, are beyond each Reporting Company’s control and may cause actual results to differ materially from those contained in any forward-looking statements. Any forward-looking statements speak only as to the date this news release was issued, and none of the Reporting Companies undertakes any obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for a Reporting Company to predict all such factors. Furthermore, it may not be possible to assess the impact of any such factor on such Reporting Company’s or its subsidiaries’ business (viewed independently or together with the business or businesses of some or all of the other Reporting Companies or their subsidiaries) or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any specific factors that may be provided should not be construed as exhaustive.

 

  

Pepco Holdings, Inc.

Earnings Per Share Variance

2015 / 2014

 

	Three Months Ended June 30,
	Power			Pepco Energy			Corporate			Total
	Delivery			Services			and Other			PHI
2014 Earnings (loss) per share (GAAP) (1)	$	0.29		$	0.01		$	(0.09)		$	0.21
2014 Adjustments (2)
· Incremental merger-related transaction costs	-			-			0.06			0.06
· Incremental merger-related integration costs	0.01			-			-			0.01
2014 Adjusted earnings (loss) per share (Non-GAAP)	0.30			0.01			(0.03)			0.28
Change from 2014 Adjusted earnings (loss) per share
Regulated Operations
· Distribution Revenue
-     Weather (estimate) (3)	0.01			-			-			0.01
-     Rate Increases	0.01			-			-			0.01
· ACE Basic Generation Service (primarily unbilled revenue)	0.02			-			-			0.02
· Operation and  Maintenance	(0.07)			-			-			(0.07)
· Depreciation and Amortization	(0.01)			-			-			(0.01)
Pepco Energy Services	-			-			-			-
Corporate and Other	-			-			-			-
Net Interest Expense	(0.01)			-			-			(0.01)
2015 Adjusted earnings (loss) per share (Non-GAAP)	0.25			0.01			(0.03)			0.23
2015 Adjustments (2)
· Incremental merger-related transaction costs	-			-			(0.01)			(0.01)
· Incremental merger-related integration costs	(0.01)			-			-			(0.01)
2015 Earnings (loss) per share (GAAP) (4)	$	0.24		$	0.01		$	(0.04)		$	0.21

 

(1)

The 2014 weighted average number of diluted shares outstanding was 252 million.

 

(2)

Management believes the adjusted items are not representative of the Company's ongoing business operations. The presentation of this Non-GAAP financial information is intended to complement, and should not be considered an alternative to, the GAAP information.

 

(3)

The effect of weather compared to the 20-year average weather is estimated to have had no impact on earnings per share.

 

(4)

The 2015 weighted average number of diluted shares outstanding was 254 million.

 

  

Pepco Holdings, Inc.

Earnings Per Share Variance

2015 / 2014

 

	Six Months Ended June 30,
	Power			Pepco Energy				Corporate			Total
	Delivery			Services				and Other			PHI
2014 Earnings (loss) per share (GAAP) (1)	$	0.60		$	0.01			$	(0.10)		$	0.51
2014 Adjustments (2)
·  Incremental merger-related transaction costs	-			-				0.06			0.06
·  Incremental merger-related integration costs	0.01			-				-			0.01
2014 Adjusted earnings (loss) per share (Non-GAAP)	0.61			0.01				(0.04)			0.58
Change from 2014 Adjusted earnings (loss) per share
Regulated Operations
·  Distribution Revenue
-     Weather (estimate) (3)	0.02			-				-			0.02
-     Rate Increases	0.07			-				-			0.07
-     Other Distribution Revenue	0.02			-				-			0.02
·  Network Transmission Revenue	0.01			-				-			0.01
·  ACE Basic Generation Service (primarily unbilled revenue)	0.01			-				-			0.01
·  Operation and Maintenance	(0.17)			-				-			(0.17)
·  Depreciation and Amortization	(0.03)			-				-			(0.03)
·  Other, net	(0.02)			-				-			(0.02)
Pepco Energy Services	-			(0.01)				-			(0.01)
Corporate and Other	-			-				-			-
Net Interest Expense	(0.02)			-				-			(0.02)
Income Tax Adjustments	-			0.02				(0.01)			0.01
2015 Adjusted earnings (loss) per share (Non-GAAP)	0.50			0.02				(0.05)			0.47
2015 Adjustments (2)
·  Incremental merger-related transaction costs	-			-				(0.03)			(0.03)
·  Incremental merger-related integration costs	(0.02)			-				-			(0.02)
2015 Earnings (loss) per share (GAAP) (4)	$	0.48		$		0.02		$	(0.08)		$	0.42

 

(1)

The 2014 weighted average number of diluted shares outstanding was 251 million.

 

(2)

Management believes the adjusted items are not representative of the Company's ongoing business operations. The presentation of this Non-GAAP financial information is intended to complement, and should not be considered an alternative to, the GAAP information.

 

(3)

The effect of weather compared to the 20-year average weather is estimated to have increased earnings by $0.04 per share.

 

(4)

The 2015 weighted average number of diluted shares outstanding was 254 million.

 

  

SEGMENT INFORMATION

 

	Three Months Ended June 30, 2015
	(millions of dollars)
	Power Delivery	Pepco Energy Services	Corporate and  Other (a)	PHI Consolidated
Operating Revenue	$   1,078	$       63	$       (1)	$    1,140
Operating Expenses (b)	940	62	(1)	1,001
Operating Income	138	1	-	139
Interest Expense	60	-	11	71
Other Income	12	-	-	12
Income Tax Expense (Benefit)	29	-	(2)	27
Net Income (Loss)	61	1	(9)	53
Total Assets	14,184	233	1,715	16,132
Construction Expenditures	$      305	$         2	$        9	$       316

 

(a)

Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(1) million for Operating Revenue, $(3) million for Operating Expenses, $(1) million for Interest Expense and $(2) million for Interest and Dividend Income.

(b)

Includes depreciation and amortization expense of $157 million, consisting of $147 million for Power Delivery, zero for Pepco Energy Services and $10 million for Corporate and Other.

 

	Three Months Ended June 30, 2014
	(millions of dollars)
	Power Delivery	Pepco Energy Services	Corporate and  Other (a)	PHI Consolidated
Operating Revenue	$   1,040	$       79	$        (2)	$     1,117
Operating Expenses (b)	881	77	8	966
Operating Income (Loss)	159	2	(10)	151
Interest and Dividend Income	-	-	1	1
Interest Expense	56	-	11	67
Other Income (Expense)	13	1	(1)	13
Income Tax Expense (Benefit)	45	1	(1)	45
Net Income (Loss)	71	2	(20)	53
Total Assets	13,471	297	1,302	15,070
Construction Expenditures	$      253	$        1	$       17	$        271

 

(a)

Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(2) million for Operating Revenue, $(3) million for Operating Expenses, $1 million for Interest Expense and $(1) million for Interest and Dividend Income.

(b)

Includes depreciation and amortization expense of $132 million, consisting of $122 million for Power Delivery, $2 million for Pepco Energy Services and $8 million for Corporate and Other.

 

  

SEGMENT INFORMATION – continued

 

	Six Months Ended June 30, 2015
	(millions of dollars)
	Power Delivery	Pepco Energy Services	Corporate and  Other (a)	PHI Consolidated
Operating Revenue	$   2,391	$       123	$        (3)	$     2,511
Operating Expenses (b)	2,107	123	-	2,230
Operating Income (Loss)	284	-	(3)	281
Interest Expense	118	-	21	139
Other Income	21	-	-	21
Income Tax Expense (Benefit)	64	(5)	(2)	57
Net Income (Loss)	123	5	(22)	106
Total Assets	14,184	233	1,715	16,132
Construction Expenditures	$       546	$           2	$       14	$       562

 

(a)

Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(3) million for Operating Revenue, $(5) million for Operating Expenses, $(2) million for Interest Expense and $(4) million for Interest and Dividend Income.

(b)

Includes depreciation and amortization expense of $316 million, consisting of $294 million for Power Delivery, $1 million for Pepco Energy Services and $21 million for Corporate and Other.

 

	Six Months Ended June 30, 2014
	(millions of dollars)
	Power Delivery	Pepco Energy Services	Corporate and  Other (a)	PHI Consolidated
Operating Revenue	$    2,312	$     139	$         (4)	$     2,447
Operating Expenses (b)	1,984	137	2	2,123
Operating Income (Loss)	328	2	(6)	324
Interest and Dividend Income	-	-	1	1
Interest Expense	111	-	21	132
Other Income	25	1	-	26
Income Tax Expense (Benefit)	92	1	(2)	91
Net Income (Loss)	150	2	(24)	128
Total Assets	13,471	297	1,302	15,070
Construction Expenditures	$       517	$         1	$        35	$        553

 

(a)

Total Assets in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, all of which is allocated to Power Delivery for purposes of assessing impairment. Total assets also include capital expenditures related to certain hardware and software expenditures which primarily benefit Power Delivery. These expenditures are recorded as incurred in Corporate and Other and are allocated to Power Delivery once the assets are placed in service. Corporate and Other includes intercompany amounts of $(4) million for Operating Revenue, $(4) million for Operating Expenses and $(1) million for Interest and Dividend Income.

(b)

Includes depreciation and amortization expense of $265 million, consisting of $246 million for Power Delivery, $4 million for Pepco Energy Services and $15 million for Corporate and Other.

 

  

PEPCO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		Three Months Ended June 30,							Six Months Ended June 30,
		2015				2014			2015			2014
	(millions of dollars, except per share data)
Operating Revenue	$		1,140	$	1,117				$	2,511	$	2,447
Operating Expenses
Fuel and purchased energy			452		463					1,071		1,077
Other services cost of sales			49		61					94		107
Other operation and maintenance			248		221					515		437
Depreciation and amortization			157		132					316		265
Other taxes			104		102					213		206
Deferred electric service costs			(9)		(13)					21		31
Total Operating Expenses			1,001		966					2,230		2,123
Operating Income			139		151					281		324
Other Income (Expenses)
Interest and dividend income			-		1					-		1
Interest expense			(71)		(67)					(139)		(132)
Other income			12		13					21		26
Total Other Expenses			(59)		(53)					(118)		(105)
Income Before Income Tax Expense			80		98					163		219
Income Tax Expense			27		45					57		91
Net Income	$		53	$	53				$	106	$	128
Basic and Diluted Share Information
Weighted average shares outstanding – Basic (millions)			253		251					253		251
Weighted average shares outstanding – Diluted (millions)			254		252					254		251
Basic and Diluted earnings per share	$		0.21	$	0.21				$	0.42	$	0.51

 

 

PEPCO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

	June 30, 2015	December 31, 2014
	(millions of dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$           34	$           14
Restricted cash equivalents	13	25
Accounts receivable, less allowance for uncollectible accounts of $48 million and $40 million, respectively	956	782
Inventories	150	141
Deferred income tax assets, net	47	50
Income taxes and related accrued interest receivable	12	9
Prepaid expenses and other	79	63
Total Current Assets	1,291	1,084
OTHER ASSETS
Goodwill	1,406	1,407
Regulatory assets	2,310	2,409
Income taxes and related accrued interest receivable	81	81
Restricted cash equivalents	14	14
Other	165	166
Total Other Assets	3,976	4,077
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	15,787	15,465
Accumulated depreciation	(4,922)	(4,959)
Net Property, Plant and Equipment	10,865	10,506
TOTAL ASSETS	$    16,132	$    15,667

 

  

PEPCO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2015	December 31, 2014
	(millions of dollars, except shares)
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term debt	$          798	$       729
Current portion of long-term debt and project funding	312	431
Accounts payable	172	174
Accrued liabilities	353	313
Capital lease obligations due within one year	11	10
Taxes accrued	47	41
Interest accrued	50	47
Liabilities and accrued interest related to uncertain tax positions	6	6
Other	284	314
Total Current Liabilities	2,033	2,065
DEFERRED CREDITS
Regulatory liabilities	355	343
Deferred income tax liabilities, net	3,330	3,266
Investment tax credits	15	16
Pension benefit obligation	437	396
Other postretirement benefit obligations	238	265
Liabilities and accrued interest related to uncertain tax positions	2	2
Other	194	193
Total Deferred Credits	4,571	4,481
OTHER LONG-TERM LIABILITIES
Long-term debt	4,848	4,441
Transition bonds issued by ACE Funding	148	171
Long-term project funding	4	8
Capital lease obligations	45	50
Total Other Long-Term Liabilities	5,045	4,670
COMMITMENTS AND CONTINGENCIES
PREFERRED STOCK
Series A preferred stock, $.01 par value, 18,000 shares authorized, 16,200 and 12,600 shares outstanding, respectively	165	129
EQUITY
Common stock, $.01 par value, 400,000,000 shares authorized, 253,436,046 and 252,728,684 shares outstanding, respectively	3	3
Premium on stock and other capital contributions	3,823	3,800
Accumulated other comprehensive loss	(42)	(46)
Retained earnings	534	565
Total Equity	4,318	4,322
TOTAL LIABILITIES AND EQUITY	$      16,132	$      15,667

 

  

POWER DELIVERY SALES AND REVENUE

 

	Three Months Ended June 30,						Six Months Ended June 30,
Power Delivery Sales (Gigawatt Hours)		2015			2014			2015			2014
Regulated T&D Electric Sales
Residential		3,816			3,616			9,393			8,672
Commercial and industrial		7,413			7,504			14,366			14,643
Transmission and other		50			55			117			124
Total Regulated T&D Electric Sales		11,279			11,175			23,876			23,439
Default Electricity Supply Sales
Residential		3,142			2,913			7,735			6,967
Commercial and industrial		1,308			1,254			2,739			2,562
Other		10			10			22			21
Total Default Electricity Supply Sales		4,460			4,177			10,496			9,550
Power Delivery Electric Revenue (Millions of dollars)
Regulated T&D Electric Revenue
Residential	$	206		$	185		$	435		$	389
Commercial and industrial		264			256			514			482
Transmission and other		106			106			221			215
Total Regulated T&D Electric Revenue	$	576		$	547		$	1,170		$	1,086
Default Electricity Supply Revenue
Residential	$	303		$	276		$	731		$	659
Commercial and industrial		130			132			275			273
Other		31			43			79			138
Total Default Electricity Supply Revenue	$	464		$	451		$	1,085		$	1,070
Other Electric Revenue	$	13		$	14		$	25		$	31
Total Electric Operating Revenue	$	1,053		$	1,012		$	2,280		$	2,187
Power Delivery Gas Sales and Revenue
Regulated Gas Sales (Mcf)
Residential		788			937			5,934			5,710
Commercial and industrial		943			907			3,675			3,540
Transportation and other		1,247			1,282			3,572			3,662
Total Regulated Gas Sales		2,978			3,126			13,181			12,912
Regulated Gas Revenue (Millions of dollars)
Residential	$	11		$	14		$	65		$	68
Commercial and industrial		9			9			34			38
Transportation and other		2			2			6			6
Total Regulated Gas Revenue	$	22		$	25		$	105		$	112
Other Gas Revenue	$	3		$	3		$	6		$	13
Total Gas Operating Revenue	$	25		$	28		$	111		$	125
Total Power Delivery Operating Revenue	$	1,078		$	1,040		$	2,391		$	2,312

 

 

POWER DELIVERY – CUSTOMERS

 

	June 30, 2015			June 30, 2014
Regulated T&D Electric Customers (in thousands)
Residential	1,676			1,654
Commercial and industrial	199			199
Transmission and other	2			2
Total Regulated T&D Electric Customers	1,877			1,855
Regulated Gas Customers (in thousands)
Residential	119			117
Commercial and industrial	10			9
Transportation and other	–			–
Total Regulated Gas Customers	129			126

 

WEATHER DATA - CONSOLIDATED ELECTRIC SERVICE TERRITORY

 

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Heating Degree Days	309		381		3,004		3,009
20 Year Average	423		423		2,713		2,714
Percentage Difference from Average	(27%)		(10%)		11%		11%
Percentage Difference from Prior Year	(19%)				–
Cooling Degree Days	549		417		549		417
20 Year Average	388		390		390		392
Percentage Difference from Average	41%		7%		41%		6%
Percentage Difference from Prior Year	32%				32%

 

  

PEPCO ENERGY SERVICES

Financial Information

(Unaudited)

 

(Millions of Dollars)	Three Months Ended June 30,
	2015		2014
Operating Revenues	$               63		$                79
Cost of Goods Sold	49		62
Gross Margin	14		17
Other Operation and Maintenance Expenses	13		13
Depreciation and Amortization	–		2
Operating Income	1		2
Other Income	–		1
Income Before Income Taxes	1		3
Income Tax Expense	–		1
Net Income (GAAP)	$                 1		$                  2

 

(Millions of Dollars)	Six Months Ended June 30,
	2015		2014
Operating Revenues	$             123		$              139
Cost of Goods Sold	95		109
Gross Margin	28		30
Other Operation and Maintenance Expenses	27		24
Depreciation and Amortization	1		4
Operating Income	–		2
Other Income	–		1
Income Before Income Taxes	–		3
Income Tax (Benefit) Expense	(5)		1
Net Income (GAAP)	$                 5		$                  2

 

(Millions of Dollars)	June 30,		December 31,
	2015		2014
Total Assets	$             233		$              244
Current Assets	144		146
Property, Plant and Equipment	29		30
Other Assets	60		68
Total Liabilities	$               76		$                90
Current Liabilities	55		64
Long-Term Liabilities	21		26
Equity	$             157		$              154

 

 

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