Pepco Holdings, Inc. (NYSE: POM) today reported second quarter and six months ended June 30, 2014 earnings from continuing operations as follows:
   
Three Months Ended Six Months Ended
June 30, June 30,

2014
 

2013

2014
 

2013
Net Income (Loss) from Continuing Operations (GAAP)
Net Income (Loss) ($ in millions) $ 53 $ 53 $ 128 $ (58 )
Earnings (Loss) Per Share $ 0.21 $ 0.21 $ 0.51 $ (0.24 )
 
Adjusted Net Income from Continuing Operations (Non-GAAP)
Adjusted Net Income ($ in millions) $ 71 $ 53 $ 146 $ 109
Adjusted Earnings Per Share $ 0.28 $ 0.21 $ 0.58 $ 0.45
 

“We remain 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. “The significant investments we continue to make in the electric system have resulted in a more resilient electric grid, and the increase in adjusted earnings for the second quarter reflects the impact of these investments.” Rigby added, “We are working diligently with Exelon on filing and obtaining approval from our regulators and stakeholders to create a stronger combined company better positioned to deliver value to our customers.”

Pepco Holdings’ GAAP net income from continuing operations for the three months ended June 30, 2014 and 2013, 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 2014 would have been $71 million or 28 cents per share. There were no adjustments to GAAP earnings in the second quarter of 2013.

The increase in adjusted net income from continuing operations (Non-GAAP) in the second quarter of 2014, as compared to the 2013 quarter, was driven by higher electric distribution and network transmission revenue (primarily due to higher rates from increased infrastructure investment) and lower operation and maintenance expense. Partially offsetting these positive factors was higher depreciation expense.

For the six months ended June 30, 2014, Pepco Holdings’ GAAP earnings were $128 million or 51 cents per share, as compared to a net loss of $58 million or 24 cents per share for the six months ended June 30, 2013. Excluding items that we believe are not representative of ongoing business operations, adjusted earnings for the six months ended June 30, 2014 would have been $146 million or 58 cents per share as compared to $109 million or 45 cents per share for the same period in the prior year.

The primary drivers of the increase in adjusted net income from continuing operations (Non-GAAP) for the six months ended June 30, 2014, as compared to the 2013 period, were higher electric distribution and network transmission revenue (primarily due to higher rates from increased infrastructure investment, as well as, higher sales driven by customer growth) and lower operation and maintenance expense. Higher depreciation expense and lower income tax benefits (due to a favorable income tax adjustment in 2013) partially offset the increase for the period.

Non-GAAP Financial Information

Management believes the adjusted net income from continuing operations and related per share data (both as historical financial information and earnings guidance) 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 from continuing operations 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
 
Three Months Six Months

Net Income (Loss) from Continuing Operations
Ended Ended

(Millions of dollars)
June 30, June 30,
2014   2013 2014   2013
Reported (GAAP) Net Income (Loss) from Continuing Operations $ 53   $ 53 $ 128   $ (58 )
Adjustments (after-tax):

-- Incremental merger-related transaction costs
14 14

-- Incremental merger-related integration costs
4 4

-- Potomac Capital Investment Corporation (PCI) valuation allowances related to certain deferred tax assets

 
101
-- Interest associated with change in assessment of corporate tax benefits related to the cross-border energy lease investments             66  
Adjusted Net Income from Continuing Operations (Non-GAAP) $ 71   $ 53 $ 146   $ 109  
 
Three Months Six Months
Ended Ended

Earnings (Loss) per Share from Continuing Operations
June 30, June 30,
2014   2013 2014   2013
Reported (GAAP) Earnings (Loss) per Share from Continuing Operations $ 0.21 $ 0.21 $ 0.51 $ (0.24 )
Adjustments (after-tax):
-- Incremental merger-related transaction costs 0.06 0.06
-- Incremental merger-related integration costs 0.01 0.01
-- PCI valuation allowances related to certain deferred tax assets 0.42
-- Interest associated with change in assessment of corporate tax benefits related to the cross-border energy lease investments             0.27  
Adjusted Earnings per Share from Continuing Operations (Non-GAAP) $ 0.28   $ 0.21 $ 0.58   $ 0.45  
 

The income tax effects with respect to the foregoing adjustments, where applicable, were calculated using a composite income tax rate of 35 percent. Most merger-related costs are not tax deductible.

Discontinued Operations

Due to the early termination of Pepco Holdings’ cross-border energy lease investments during 2013, these investments are being accounted for as discontinued operations and are no longer reported as a separate segment for financial reporting purposes.

In 2013, Pepco Energy Services (PES) completed a previously announced wind-down of its retail energy supply component. As a result, the operations of PES’ retail electric and natural gas supply businesses are being reported as discontinued operations and are no longer a part of the PES segment for financial reporting purposes.

For the six months ended June 30, 2014 there was no activity in discontinued operations, compared to a net loss of $1.36 per share for the same period in 2013.

Earnings Guidance

Pepco Holdings reaffirms its earnings guidance range for 2014 of between $1.12 and $1.27 per share. The guidance range assumes normal weather conditions and excludes:
  • the results of discontinued operations and the impact of any special, unusual or extraordinary items,
  • the effect of adopting new accounting standards,
  • the effect of changes in tax law,
  • the impairment of assets, and
  • incremental transaction and integration costs associated with the planned merger with Exelon.

Recent Events

Pepco Holdings – Exelon Merger

During the second quarter, approval applications were submitted to the Federal Energy Regulatory Commission, the Virginia State Corporation Commission, the Delaware Public Service Commission, the New Jersey Board of Public Utilities and the District of Columbia Public Service Commission (DCPSC) related to the planned merger with Exelon Corporation announced earlier this year. The Maryland Public Service Commission (MPSC) approval application and the Hart-Scott-Rodino notification are expected to be filed in the third quarter of 2014. Following receipt of required approvals, the parties anticipate closing the transaction in the second or third quarter of 2015.

Operations

  • Power Delivery electric sales were 11,175 gigawatt hours (GWh) in the second quarter of 2014, compared to 11,172 GWh for the same period in 2013. In the electric service territory, cooling degree days decreased by 5 percent for the three months ended June 30, 2014, compared to the same period in 2013. Weather-adjusted electric sales were 11,136 GWh in the second quarter of 2014, compared to 11,041 GWh for the same period in the prior year.
  • Power Delivery electric sales were 23,439 GWh for the six months ended June 30, 2014 compared to 23,077 GWh for the six months ended June 30, 2013. In the electric service territory, heating degree days increased by 10 percent and cooling degree days decreased by 5 percent for the six months ended June 30, 2014 compared to the same period in 2013. Weather-adjusted electric sales were 22,945 GWh for the six months ended June 30, 2014 compared to 23,025 GWh for the same period in 2013.
  • As of June 30, 2014, Pepco’s installation and activation of smart meters in its District of Columbia and Maryland service territories is complete. Delmarva Power’s installation and activation of smart meters is complete in its Delaware electric service territory, and is underway in its Maryland service territory. Recovery of smart meter costs in electric distribution base rates has begun in the District of Columbia and Delaware. Regulatory assets associated with smart meter installation and activation in Maryland have been created.
  • In the six months ended June 30, 2014, PES signed $18 million in energy efficiency contracts and $41 million in underground transmission construction contracts. PES signed $25 million in energy efficiency contracts and $36 million in underground transmission construction contracts for the same period in 2013.

Regulatory Matters
  • On July 2, 2014, the MPSC approved an $8.75 million annual increase in Pepco’s electric distribution base rates based on a 9.62 percent return on equity. The annual pre-tax earnings impact of the order is approximately $8.2 million. The new rates were effective July 4, 2014.
  • On June 17, 2014, Pepco and the District of Columbia Department of Transportation jointly filed an application with the DCPSC for approval of the triennial plan for the District of Columbia power line undergrounding project. The legislation for the public-private partnership to underground up to 60 high-voltage lines became law on May 3, 2014. The application for the financing and surcharge order will be filed in August 2014. The DCPSC is expected to approve the triennial plan and financing and surcharge applications associated with the legislation in the fourth quarter of 2014.

Financing
  • On June 9, 2014, Delmarva Power issued $200 million of 10-year first mortgage bonds. The bonds bear interest at a fixed rate of 3.50 percent and are due on November 15, 2023. The net proceeds were used to repay outstanding commercial paper and for general corporate purposes.

Further details regarding changes in consolidated earnings between 2014 and 2013 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, 2014, 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, 2013, filed with the Securities and Exchange Commission on February 28, 2014, and in each Reporting Company’s Quarterly Reports on Form 10-Q for the quarter ended June 30, 2014, 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.

Additional Information and Where to Find It: This communication does not constitute a solicitation of any vote or approval. PHI intends to file with the SEC and mail to its stockholders a proxy statement in connection with the proposed merger transaction. PHI URGES INVESTORS AND SECURITY HOLDERS TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION about Exelon, PHI and the proposed merger. Investors and security holders will be able to obtain these materials (when they are available) and other documents filed with the SEC free of charge at the SEC’s website, www.sec.gov. In addition, a copy of PHI’s proxy statement (when it becomes available) may be obtained free of charge from Pepco Holdings, Inc., Corporate Secretary, 701 Ninth Street, N.W., Room 1300, Washington, D.C. 20068. Investors and security holders may also read and copy any reports, statements and other information filed by PHI with the SEC, at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on its public reference room.

Participants in the Merger Solicitation: Exelon, PHI, and their respective directors, executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Exelon’s directors and executive officers is available in its proxy statement filed with the SEC on April 2, 2014 in connection with its 2014 annual meeting of stockholders, and information regarding PHI’s directors and executive officers is available in its proxy statement filed with the SEC on March 25, 2014 in connection with its 2014 annual meeting of stockholders. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC when they become available.
 
Pepco Holdings, Inc.
Earnings Per Share Variance
2014 / 2013
       
Three Months Ended June 30,
 
Power Pepco Energy Corporate Total
Delivery   Services   and Other   PHI

2013 Earnings (loss) per share from Continuing Operations (GAAP) (1)

$

0.23
$ 0.01 $ (0.03 ) $ 0.21
             
 

Change from 2013 earnings (loss) per share from Continuing Operations
Regulated Operations

-- Distribution Revenue

- Weather (estimate) (3)
(0.01 ) - - (0.01 )

- Rate Increases
0.07 - - 0.07

- Other Distribution Revenue
0.01 - - 0.01

-- Network Transmission Revenue
0.02 - - 0.02

-- ACE Basic Generation Service (primarily unbilled revenue)
(0.01 ) - - (0.01 )

-- Operation & Maintenance
0.02 - - 0.02

-- Depreciation
(0.03 ) - - (0.03 )
Pepco Energy Services - - - -
Corporate and Other   -       -     -       -  
 
2014 Adjusted earnings (loss) per share from Continuing Operations (Non-GAAP) 0.30 0.01 (0.03 ) 0.28
 

2014 Adjustments (2)

-- Incremental merger-related transaction costs
- - (0.06 ) (0.06 )

-- Incremental merger-related integration costs
  (0.01 )     -     -       (0.01 )
 
2014 Earnings (loss) per share from Continuing Operations (GAAP) (4) $ 0.29     $ 0.01   $ (0.09 )   $ 0.21  
 
(1) The 2013 weighted average number of diluted shares outstanding was 249 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 decreased earnings by $0.01 per share.
 
(4) The 2014 weighted average number of diluted shares outstanding was 252 million.
 
 

Pepco Holdings, Inc.
Earnings Per Share Variance
2014 / 2013
       
Six Months Ended June 30,
 

Pepco
Power

Energy
Corporate Total
Delivery   Services   and Other   PHI
2013 Earnings (loss) per share from Continuing Operations (GAAP) (1) $ 0.47 $ 0.02 $ (0.73 ) $ (0.24 )
 

2013 Adjustments (2)

-- Interest associated with change in assessment of corporate tax benefits related to the cross-border energy lease investments
- - 0.27 0.27

-- PCI valuation allowances related to certain deferred tax assets
  -       -       0.42       0.42  
 
2013 Adjusted earnings (loss) per share from Continuing Operations (Non-GAAP) 0.47 0.02 (0.04 ) 0.45
 

Change from 2013 Adjusted earnings (loss) per share from Continuing Operations
Regulated Operations
-- Distribution Revenue
- Weather (estimate) (3) 0.02 - - 0.02
- Rate Increases 0.12 - - 0.12
- Other Distribution Revenue 0.03 - - 0.03
-- Network Transmission Revenue 0.03 - - 0.03
-- ACE Basic Generation Service (primarily unbilled revenue) (0.02 ) - - (0.02 )
-- Operation & Maintenance 0.06 - - 0.06
-- Depreciation (0.05 ) - - (0.05 )
-- Other, net 0.01 - - 0.01
Pepco Energy Services - (0.01 ) - (0.01 )
Corporate and Other - - (0.01 ) (0.01 )
Net Interest Expense - - 0.01 0.01
Income Tax Adjustments (0.04 ) - - (0.04 )
Dilution   (0.02 )     -       -       (0.02 )
 
2014 Adjusted earnings (loss) per share from Continuing Operations (Non-GAAP) 0.61 0.01 (0.04 ) 0.58
 

2014 Adjustments (2)
-- Incremental merger-related transaction costs - - (0.06 ) (0.06 )
-- Incremental merger-related integration costs   (0.01 )     -       -       (0.01 )
 
2014 Earnings (loss) per share from Continuing Operations (GAAP) (4) $ 0.60     $ 0.01     $ (0.10 )   $ 0.51  
 
(1) The 2013 weighted average number of diluted shares outstanding was 243 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 $0.02 per share.
 
(4) The 2014 weighted average number of diluted shares outstanding was 251 million.
 

SEGMENT INFORMATION
 
Three Months Ended June 30, 2014
(millions of dollars)
  Pepco   Corporate  
Power Energy and PHI
Delivery Services Other (a) 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) from Continuing Operations 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.
 
 
Three Months Ended June 30, 2013
(millions of dollars)
  Pepco   Corporate  
Power Energy and PHI
Delivery Services Other (a) Consolidated
Operating Revenue $ 1,006 $ 49 $ (4 ) $ 1,051
Operating Expenses (b) 866 47 (7 ) 906
Operating Income 140 2 3 145
Interest Expense 58

-
12 70
Other Income 7 - 1 8
Income Tax Expense (Benefit) 33 1 (4 ) 30
Net Income (Loss) from Continuing Operations 56 1 (4 ) 53
Total Assets (excluding Assets Held for Disposition) 12,535 350 1,923 14,808
Construction Expenditures $ 281 $ - $ 39 $ 320
 
(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 $(5) million for Operating Revenue and $(5) million for Operating Expenses.
(b) Includes depreciation and amortization expense of $116 million, consisting of $107 million for Power Delivery, $2 million for Pepco Energy Services and $7 million for Corporate and Other.
 
 
Six Months Ended June 30, 2014
(millions of dollars)
  Pepco   Corporate  
Power Energy and PHI
Delivery Services Other (a) 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) from Continuing Operations 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.
 
 
Six Months Ended June 30, 2013
(millions of dollars)
  Pepco   Corporate  
Power Energy and PHI
Delivery Services Other (a) Consolidated
Operating Revenue $ 2,130 $ 106 $ (5 ) $ 2,231
Operating Expenses (b) 1,867 101 (15 ) 1,953
Operating Income 263 5 10 278
Interest Expense 114

-
23 137
Other Income 13 1 2 16
Income Tax Expense (c) 48 2

165

(d)
215
Net Income (Loss) from Continuing Operations 114 4 (176 ) (58 )
Total Assets (excluding Assets Held for Disposition) 12,535 350 1,923 14,808
Construction Expenditures $ 563 $ 1 $ 52 $ 616
 
(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 $(5) million for Operating Revenue, $(6) million for Operating Expenses and $(4) million for Interest Expense.
(b) Includes depreciation and amortization expense of $228 million, consisting of $211 million for Power Delivery, $4 million for Pepco Energy Services and $13 million for Corporate and Other.
(c) Includes after-tax interest associated with uncertain and effectively settled tax positions allocated to each member of the consolidated group, including a $12 million interest benefit for Power Delivery and interest expense of $66 million for Corporate and Other.
(d) Includes non-cash charges of $101 million representing the establishment of valuation allowances against certain deferred tax assets of PCI included in Corporate and Other.
 
   
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2014   2013 2014   2013
(millions of dollars, except per share data)
 
Operating Revenue

$

1,117

$

1,051

 
$ 2,447 $ 2,231
 
Operating Expenses
Fuel and purchased energy 463 446 1,077 1,008
Other services cost of sales 61 35 107 75
Other operation and maintenance 221 212 437 439
Depreciation and amortization 132 116 265 228
Other taxes 102 101

 
206 206
Deferred electric service costs   (13 )   (4 )   31     (3 )
 
Total Operating Expenses   966     906     2,123     1,953  
 
Operating Income   151     145     324     278  
 
Other Income (Expenses)
Interest and dividend income 1

-
1 -
Interest expense (67 ) (70 ) (132 ) (137 )
Other income   13     8     26     16  
 
Total Other Expenses   (53 )   (62 )   (105 )   (121 )
 
Income from Continuing Operations Before Income Tax Expense 98 83 219 157
 
Income Tax Expense Related to Continuing Operations   45     30     91     215  
 
Net Income (Loss) from Continuing Operations 53 53 128 (58 )
 
Loss from Discontinued Operations, net of Income Taxes   -     (11 )   -     (330 )
 
Net Income (Loss) $ 53   $ 42  

 
  128   $ (388 )
 
Basic and Diluted Share Information
Weighted average shares outstanding – Basic (millions)   251     249     251     243  
 
Weighted average shares outstanding – Diluted (millions)   252     249     251     243  
 
Earnings (loss) per share of common stock from Continuing Operations – Basic and Diluted $ 0.21 $ 0.21

 
0.51 $ (0.24 )
 
Earnings (loss) per share of common stock from Discontinued Operations – Basic and Diluted   -     (0.04 )   -     (1.36 )
 
Basic and Diluted earnings (loss) per share $ 0.21   $ 0.17  

 
  0.51   $ (1.60 )
 
   
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2014 2013
(millions of dollars)
ASSETS
 
CURRENT ASSETS
Cash and cash equivalents $ 184 $ 23
Restricted cash equivalents 21 13
Accounts receivable, less allowance for uncollectible accounts of $44 million and $38 million, respectively 822 835
Inventories 149 148
Deferred income tax assets, net 50 51
Income taxes and related accrued interest receivable 8 274
Prepaid expenses and other   82     54  
Total Current Assets   1,316     1,398  
 
OTHER ASSETS
Goodwill 1,407 1,407
Regulatory assets 2,002 2,087
Income taxes and related accrued interest receivable 58 75
Restricted cash equivalents 14 14
Other   168     163  
Total Other Assets   3,649     3,746  
 
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 15,043 14,567
Accumulated depreciation   (4,938 )   (4,863 )
Net Property, Plant and Equipment   10,105     9,704  
 
TOTAL ASSETS $ 15,070   $ 14,848  
 
   
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2014 2013
(millions of dollars, except shares)
LIABILITIES AND EQUITY
 
CURRENT LIABILITIES
Short-term debt $ 479 $ 565
Current portion of long-term debt and project funding 371 446
Accounts payable 170 215
Accrued liabilities 327 301
Capital lease obligations due within one year 10 9
Taxes accrued 51 56
Interest accrued 49 47
Liabilities and accrued interest related to uncertain tax positions 6 397
Other   304     277  
Total Current Liabilities   1,767     2,313  
 
DEFERRED CREDITS
Regulatory liabilities 394 399
Deferred income tax liabilities, net 3,160 2,928
Investment tax credits 17 17
Pension benefit obligation 124 116
Other postretirement benefit obligations 173 206
Liabilities and accrued interest related to uncertain tax positions 6 28
Other   187     189  
Total Deferred Credits   4,061     3,883  
 
OTHER LONG-TERM LIABILITIES
Long-term debt 4,557 4,053
Transition bonds issued by ACE Funding 193 214
Long-term project funding 9 10
Capital lease obligations   55     60  
Total Other Long-Term Liabilities   4,814     4,337  
 
COMMITMENTS AND CONTINGENCIES
 
PREFERRED STOCK
Series A preferred stock, $.01 par value, 18,000 shares authorized, 9,000 and zero shares outstanding, respectively   93     -  
 
EQUITY
Common stock, $.01 par value, 400,000,000 shares authorized, 251,498,408 and 250,324,898 shares outstanding, respectively 3 3
Premium on stock and other capital contributions 3,780 3,751
Accumulated other comprehensive loss (35 ) (34 )
Retained earnings   587     595  
Total Equity   4,335     4,315  
TOTAL LIABILITIES AND EQUITY $ 15,070   $ 14,848  
 
 
POWER DELIVERY SALES AND REVENUE
   
Three Months Ended Six Months Ended
    June 30,   June 30,
Power Delivery Sales (Gigawatt Hours) 2014   2013 2014   2013
Regulated T&D Electric Sales    
Residential 3,616 3,567 8,672 8,282
Commercial and industrial 7,504 7,553 14,643 14,673
Transmission and other   55   52   124   122
Total Regulated T&D Electric Sales   11,175   11,172   23,439   23,077
 
Default Electricity Supply Sales
Residential 2,913 2,847 6,967 6,665
Commercial and industrial 1,254 1,224 2,562 2,479
Other   10   11   21   31
Total Default Electricity Supply Sales   4,177   4,082   9,550   9,175
 
 
 
Power Delivery Electric Revenue (Millions of dollars)
Regulated T&D Electric Revenue
Residential $ 185 $ 170 $ 389 $ 354
Commercial and industrial 256 241 482 457
Transmission and other   106   97   215   188
Total Regulated T&D Electric Revenue $ 547 $ 508 $ 1,086 $ 999
 
Default Electricity Supply Revenue
Residential $ 276 $ 286 $ 659 $ 661
Commercial and industrial 132 129 273 253
Other   43   38   138   70
Total Default Electricity Supply Revenue $ 451 $ 453 $ 1,070 $ 984
 
Other Electric Revenue $ 14 $ 16 $ 31 $ 33
 
Total Electric Operating Revenue $ 1,012 $ 977 $ 2,187 $ 2,016
 
 
 
Power Delivery Gas Sales and Revenue
Regulated Gas Sales (Mcf)
Residential 937 887 5,710 4,959
Commercial and industrial 907 608 3,540 2,669
Transportation and other   1,282   1,454   3,662   3,886
Total Regulated Gas Sales   3,126   2,949   12,912   11,514
 
Regulated Gas Revenue (Millions of dollars)
Residential $ 14 $ 14 $ 68 $ 62
Commercial and industrial 9 7 38 29
Transportation and other   2   3   6   6
Total Regulated Gas Revenue $ 25 $ 24 $ 112 $ 97
 
Other Gas Revenue $ 3 $ 5 $ 13 $ 17
 
Total Gas Operating Revenue $ 28 $ 29 $ 125 $ 114
 
Total Power Delivery Operating Revenue $ 1,040 $ 1,006 $ 2,312 $ 2,130
 
POWER DELIVERY – CUSTOMERS  
 
June 30, 2014   June 30, 2013
 
Regulated T&D Electric Customers (in thousands)
Residential 1,654 1,641
Commercial and industrial 199 199
Transmission and other 2 2
Total Regulated T&D Electric Customers 1,855 1,842
 
 
Regulated Gas Customers (in thousands)
Residential 117 115
Commercial and industrial 9 10
Transportation and other
Total Regulated Gas Customers 126 125
 
 

WEATHER DATA - CONSOLIDATED ELECTRIC SERVICE TERRITORY
 
  Three Months Ended   Six Months Ended
June 30,   June 30,
2014   2013   2014   2013
   
Heating Degree Days 381 408 3,009 2,727
20 Year Average 423 424 2,714 2,723
Percentage Difference from Average (10%) (4%) 11%
Percentage Difference from Prior Year (7%) 10%
 
Cooling Degree Days 417 440 417 440
20 Year Average 390 385 392 387
Percentage Difference from Average 7% 14% 6% 14%
Percentage Difference from Prior Year (5%) (5%)
 
 
PEPCO ENERGY SERVICES
Financial Information - Continuing Operations
 
Three Months Ended

(Millions of Dollars)
June 30,
2014 2013
 
Operating Revenues $ 79 $ 49
Cost of Goods Sold   62   35
Gross Margin 17 14
Other Operation and Maintenance Expenses 13 10
Depreciation and Amortization   2   2
Operating Income 2 2
Other Income   1  
Income Before Income Taxes 3 2
Income Tax Expense   1   1
Net Income from Continuing Operations (GAAP) $ 2 $ 1
 
 
Six Months Ended

(Millions of Dollars)
June 30,
2014 2013
 
Operating Revenues $ 139 $ 106
Cost of Goods Sold   109   75
Gross Margin 30 31
Other Operation and Maintenance Expenses 24 22
Depreciation and Amortization   4   4
Operating Income 2 5
Other Income   1   1
Income Before Income Taxes 3 6
Income Tax Expense   1   2
Net Income from Continuing Operations (GAAP) $ 2 $ 4
 
 
(Millions of Dollars)

June 30,

December 31,
2014 2013
 
Total Assets $ 297 $ 335
Current Assets 156 188
Property, Plant and Equipment 110 113
Other Assets 31 34
 
Total Liabilities $ 103 $ 85
Current Liabilities 76 55
Long-Term Liabilities 27 30
 
Equity $ 194 $ 250
 

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