Edison International Reports Third Quarter 2017 Results; Increases Guidance

Edison International (NYSE: EIX) today reported third quarter 2017 net income of $470 million, or $1.44 per share, compared to $421 million, or $1.29 per share, in the third quarter of 2016. There was no impact from non-core items in the third quarter 2017 and third quarter 2016 results.

Southern California Edison's (SCE) third quarter 2017 net income increased by $30 million, or $0.09 per share, from the third quarter 2016 primarily due to the escalation mechanism set forth in the 2015 General Rate Case (GRC) decision.

Edison International Parent and Other's third quarter 2017 earnings from continuing operations increased by $19 million, or $0.06 per share, compared to third quarter 2016. The increase was primarily related to higher income tax benefits resulting from net operating loss carrybacks from the filing of the 2016 tax returns in 2017.

"Based on the continued strong performance at SCE and tax benefits we have received throughout the year, we have increased Edison International's 2017 earnings per share guidance range to $4.27-$4.37," said Pedro Pizarro, president and chief executive officer of Edison International. "We will strengthen and grow our business and lead the transformation of the industry by focusing on opportunities in clean energy, efficient electrification, a modernized and more reliable grid, and enabling customers' technology choices."

Year-to-Date Earnings

For the nine months ended September 30, 2017, Edison International reported net income of $1.1 billion, or $3.41 per share, compared to $982 million, or $3.01 per share, during the same period in 2016. Edison International's core earnings were $1.1 billion, or $3.41 per share, compared to $978 million, or $3.00 per share, in the year-to-date period in 2016.

SCE's net income for the nine months ended September 30, 2017 increased $73 million, or $0.23 per share, from the same period in 2016, primarily related to an increase in revenue from the escalation mechanism set forth in the 2015 GRC decision and lower operation and maintenance expenses, partially offset by a reduction in CPUC revenue related to prior overcollections and higher net financing costs.

Edison International Parent and Other's losses from continuing operations for the nine months ended September 30, 2017 decreased by $54 million, or $0.17 per share, compared to the same period in 2016. Total core losses for the year-to-date period in 2017 decreased by $58 million, or $0.18 per share, compared to the same period in 2016. The decrease in core losses is primarily related to higher income tax benefits resulting from: stock option exercises, net operating loss carrybacks from the filing of the 2016 tax returns in 2017, and the 2017 settlement of federal income tax audits for 2007 - 2012.

Edison International's non-core items for the nine months ended September 30, 2017 included income of $1 million compared to income of $5 million, or $0.01 per share, for the same period in 2016 primarily related to losses (net of distributions) allocated to tax equity investors under the HLBV accounting method. Additionally, during the nine months ended September 30, 2016, Edison International recorded $1 million of losses from discontinued operations.

Edison International uses core earnings, which is a non-GAAP financial measure that adjusts for significant discrete items that management does not consider representative of ongoing earnings. Edison International management believes that core earnings provide more meaningful comparisons of performance from period to period. Please see the attached tables for a reconciliation of core earnings to basic GAAP earnings.

2017 Earnings Guidance Increased

The company increased its earnings guidance for 2017 as summarized in the following chart. See the presentation accompanying the company's conference call for further information including key guidance assumptions.

2017 Earnings Guidance
       
2017 Earnings Guidance 2017 Earnings Guidance
as of July 27, 2017 as of October 30, 2017
Low   Mid   High Low   Mid   High
EIX Basic EPS $ 4.13 $ 4.23 $ 4.33 $ 4.27 $ 4.32 $ 4.37
Less: Non-core Items* - - - - - -
EIX Core EPS $ 4.13 $ 4.23 $ 4.33 $ 4.27 $ 4.32 $ 4.37

* There were $1 million of non-core items recorded for the nine months ended September 30, 2017.

A Note on 2016 Results

In March 2016, the Financial Accounting Standards Board issued a new accounting standard for employee share-based payments. Edison International adopted this accounting standard during the fourth quarter of 2016, effective January 1, 2016. Under this new standard, share-based payments may create a permanent difference between the amount of compensation expense recognized for book and tax purposes. The tax impact of this permanent difference is recognized in earnings in the period it is created. 2016 earnings were updated to reflect the implementation of the accounting standard for share-based payments effective January 1, 2016. See the Third Quarter Reconciliation tables below and the presentation accompanying the company's conference call for further information.

About Edison International

Edison International (NYSE:EIX), through its subsidiaries, is a generator and distributor of electric power, as well as a provider of energy services and technologies, including renewable energy. Headquartered in Rosemead, California, Edison International is the parent company of Southern California Edison, one of the nation's largest electric utilities. Edison International is also the parent company of Edison Energy Group, a portfolio of competitive businesses that provide commercial and industrial customers with energy management and procurement services and distributed solar generation. Edison Energy Group companies are independent from Southern California Edison.

Appendix

Use of Non-GAAP Financial Measures

Edison International's earnings are prepared in accordance with generally accepted accounting principles used in the United States and represent the company's earnings as reported to the Securities and Exchange Commission. Our management uses core earnings and core earnings per share (EPS) internally for financial planning and for analysis of performance of Edison International and Southern California Edison. We also use core earnings and core EPS when communicating with analysts and investors regarding our earnings results to facilitate comparisons of the Company's performance from period to period. Financial measures referred to as net income, basic EPS, core earnings, or core EPS also apply to the description of earnings or earnings per share.

Core earnings and core EPS are non-GAAP financial measures and may not be comparable to those of other companies. Core earnings and core EPS are defined as basic earnings and basic EPS excluding income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings. Basic earnings and losses refer to net income or losses attributable to Edison International shareholders. Core earnings are reconciled to basic earnings in the attached tables. The impact of participating securities (vested awards that earn dividend equivalents that may participate in undistributed earnings with common stock) for the principal operating subsidiary is not material to the principal operating subsidiary's EPS and is therefore reflected in the results of the Edison International holding company, which is included in Edison International Parent and Other.

Safe Harbor Statement

Statements contained in this release about future performance, including, without limitation, operating results, rate base growth, financial outlook, and other statements that are not purely historical, are forward-looking statements. These forward-looking statements reflect our current expectations; however, such statements involve risks and uncertainties. Actual results could differ materially from current expectations. Important factors that could cause different results include, but are not limited to the:
  • ability of SCE to recover its costs in a timely manner from its customers through regulated rates, including costs related to San Onofre and proposed spending on grid modernization;
  • decisions and other actions by the CPUC, the FERC, the NRC and other regulatory authorities, including determinations of authorized rates of return or return on equity, approval of proposed spending on grid modernization, the outcome of San Onofre CPUC proceedings, and delays in regulatory actions;
  • risks associated with higher rates for utility bundled service customers, caused by the authority of cities, counties and certain other public agencies to generate and/or purchase electricity for their local residents and businesses (known as Community Choice Aggregation or CCA), and other possible customer bypass or departure due to increased adoption of distributed energy resources or technological advancements in the generation, storage, transmission, distribution and use of electricity, and supported by public policy, government regulations and incentives;
  • risks inherent in SCE's transmission and distribution infrastructure investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, power curtailment costs (payments due under power contracts in the event there is insufficient transmission to enable acceptance of power delivery), and governmental approvals;
  • ability to obtain sufficient insurance, including insurance relating to SCE's nuclear facilities and wildfire-related liability, and to recover the costs of such insurance or in the absence of insurance the ability to recover uninsured losses; and
  • risks associated with the decommissioning of San Onofre, including those related to public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel, and cost overruns.

Other important factors are discussed under the headings "Risk Factors" and "Management's Discussion and Analysis" in Edison International's Form 10-K, most recent Form 10-Q, and other reports filed with the Securities and Exchange Commission, which are available on our website: www.edisoninvestor.com. These filings also provide additional information on historical and other factual data contained in this news release. Edison International and SCE also routinely post or provide direct links to presentations, documents and other information that may be of interest to investors at www.edisoninvestor.com (Events and Presentations) in order to publicly disseminate such information.

These forward-looking statements represent our expectations only as of the date of this news release, and Edison International assumes no duty to update them to reflect new information, events or circumstances.

Reminder: Edison International Will Hold a Conference Call Today
 
When: Monday, October 30, 2017, 1:30 p.m. (Pacific Time)
Telephone Numbers:    

1-888-673-9780 (US) and 1-312-470-0178 (Int'l) - Passcode: Edison
Telephone Replay:

1-866-430-5848 (US) and 1-203-369-0934 (Int'l) - Passcode: 4219
Telephone replay available through November 13, 2017
Webcast:

www.edisoninvestor.com
 

Third Quarter Reconciliation of Basic Earnings Per Share to Core Earnings Per Share
 

 
     
Three months ended September 30, Nine months ended September 30,
    2017  

2016 1
  Change   2017   2016   Change
Earnings (loss) per share attributable to Edison International
Continuing operations    
SCE $ 1.43 $ 1.34 $ 0.09 $ 3.44 $ 3.21 $ 0.23
Edison International Parent and Other 0.01 (0.05 ) 0.06 (0.03 ) (0.20 ) 0.17
Discontinued operations                      
Edison International 1.44     1.29     0.15     3.41     3.01     0.40  
Less: Non-core items
SCE
Edison International Parent and Other 0.01 (0.01 )
Discontinued operations                      
Total non-core items                 0.01     (0.01 )
Core earnings (losses)
SCE 1.43 1.34 0.09 3.44 3.21 0.23
Edison International Parent and Other 0.01     (0.05 )     0.06     (0.03 )   (0.21 )   0.18  
Edison International   $ 1.44     $ 1.29     $ 0.15     $ 3.41     $ 3.00     $ 0.41  

Note: Diluted earnings were $1.43 and $1.27 per share for the three months ended September 30, 2017 and 2016, respectively, and $3.38 and $2.98 per share for the nine months ended September 30, 2017 and 2016, respectively.
 

Third Quarter Reconciliation of Basic Earnings to Core Earnings (in millions)

 
       
Three months ended September 30, Nine months ended September 30,
(in millions)   2017  

2016 1
  Change   2017  

2016 1
  Change
Net income (loss) attributable to Edison International
Continuing operations    
SCE $ 465 $ 435 $ 30 $ 1,121 $ 1,048 $ 73
Edison International Parent and Other 5 (14 ) 19 (11 ) (65 ) 54
Discontinued operations                 (1 )     1  
Edison International 470     421     49     1,110     982     128  
Less: Non-core items
SCE
Edison International Parent and Other 1 5 (4 )
Discontinued operations                 (1 )     1  
Total non-core items             1     4     (3 )
Core earnings (losses)
SCE 465 435 30 1,121 1,048 73
Edison International Parent and Other 5     (14 )     19     (12 )   (70 )     58  
Edison International   $ 470     $ 421     $ 49     $ 1,109     $ 978     $ 131  

1 In the 2016 Form 10-K, 2016 earnings were updated to reflect the implementation of the accounting standard for share-based payments effective January 1, 2016. Previously reported 2016 net income and core earnings for the three months ended September 30, 2016 were $419 million, or $1.29 per share, respectively. Previously reported 2016 net income for the nine months ended September 30, 2016 was $965 million, or $2.96 per share, and core earnings were $961 million, or $2.95 per share.
     
Consolidated Statements of Income   Edison International
       
Three months ended September 30,     Nine months ended September 30,
(in millions, except per-share amounts, unaudited)   2017   2016     2017   2016
Operating revenue $ 3,672     $ 3,767       $ 9,100     $ 8,985  
Purchased power and fuel 1,783 1,719 3,742 3,576
Operation and maintenance 713 740 2,016 2,090
Depreciation and amortization 524 521 1,535 1,504
Property and other taxes 98 92 284 269
Impairment charges 22
Other operating (income) and expenses (7 )         (8 )   21  
Total operating expenses 3,111     3,072       7,591     7,460  
Operating income 561 695 1,509 1,525
Interest and other income 42 32 111 97
Interest expense (162 ) (147 ) (473 ) (431 )
Other expenses (9 )   (9 )     (28 )   (29 )
Income from continuing operations before income taxes 432 571 1,119 1,162
Income tax (benefit) expense (69 )   120       (83 )   96  
Income from continuing operations 501 451 1,202 1,066
Income from discontinued operations, net of tax               (1 )
Net income 501 451 1,202 1,065
Preferred and preference stock dividend requirements of SCE 32 31 94 92
Other noncontrolling interests (1 )   (1 )     (2 )   (9 )
Net income attributable to Edison International common shareholders $ 470     $ 421       $ 1,110     $ 982  
Amounts attributable to Edison International common shareholders:
Income from continuing operations, net of tax $ 470 $ 421 $ 1,110 $ 983
Income from discontinued operations, net of tax               (1 )
Net income attributable to Edison International common shareholders $ 470     $ 421       $ 1,110     $ 982  
Basic earnings per common share attributable to Edison International common shareholders:
Weighted-average shares of common stock outstanding 326 326 326 326
Continuing operations $ 1.44 $ 1.29 $ 3.41 $ 3.01
Discontinued operations                
Total $ 1.44     $ 1.29       $ 3.41     $ 3.01  
Diluted earnings per common share attributable to Edison International common shareholders:
Weighted-average shares of common stock outstanding, including effect of dilutive securities 328 330 329 330
Continuing operations $ 1.43 $ 1.27 $ 3.38 $ 2.98
Discontinued operations                
Total $ 1.43     $ 1.27       $ 3.38     $ 2.98  
Dividends declared per common share   $ 0.5425     $ 0.4800       $ 1.6275     $ 1.4400  
 
     
Consolidated Balance Sheets   Edison International
   
(in millions, unaudited)  

September 30,2017
    December 31,2016
ASSETS
Cash and cash equivalents $ 117 $ 96
Receivables, less allowances of $55 and $62 for uncollectible accounts at respective dates 1,105 714
Accrued unbilled revenue 352 370
Inventory 229 239
Prepaid taxes 179 1
Derivative assets 36 73
Regulatory assets 445 350
Other current assets 295       280
Total current assets 2,758       2,123
Nuclear decommissioning trusts 4,415 4,242
Other investments 72       83
Total investments 4,487       4,325
Utility property, plant and equipment, less accumulated depreciation and amortization of $9,173 and $9,000 at respective dates 37,666 36,806
Nonutility property, plant and equipment, less accumulated depreciation of $109 and $99 at respective dates 295       194
Total property, plant and equipment 37,961       37,000
Regulatory assets 8,028 7,455
Other long-term assets 358       416
Total long-term assets 8,386       7,871
 
 
 
 
 
 
 
 
 
Total assets   $ 53,592     $ 51,319
 
     
Consolidated Balance Sheets   Edison International
   
(in millions, except share amounts, unaudited)   September 30,2017     December 31,2016
LIABILITIES AND EQUITY
Short-term debt $ 908 $ 1,307
Current portion of long-term debt 583 981
Accounts payable 1,104 1,342
Accrued taxes 90 50
Customer deposits 276 269
Derivative liabilities 3 216
Regulatory liabilities 1,281 756
Other current liabilities 1,164       991  
Total current liabilities 5,409       5,912  
Long-term debt 11,638       10,175  
Deferred income taxes and credits 9,141 8,327
Derivative liabilities 941
Pensions and benefits 1,378 1,354
Asset retirement obligations 2,682 2,590
Regulatory liabilities 5,858 5,726
Other deferred credits and other long-term liabilities 2,863       2,102  
Total deferred credits and other liabilities 21,922       21,040  
Total liabilities 38,969       37,127  
Commitments and contingencies
Redeemable noncontrolling interest 13 5
Common stock, no par value (800,000,000 shares authorized; 325,811,206 shares issued and outstanding at respective dates) 2,520 2,505
Accumulated other comprehensive loss (48 ) (53 )
Retained earnings 9,944       9,544  
Total Edison International's common shareholders' equity 12,416       11,996  
Noncontrolling interests - preferred and preference stock of SCE 2,194       2,191  
Total equity 14,610       14,187  
 
 
 
Total liabilities and equity   $ 53,592       $ 51,319  
 
     
Consolidated Statements of Cash Flows   Edison International
 
Nine months ended September 30,
(in millions, unaudited)   2017   2016
Cash flows from operating activities:  
Net income $ 1,202 $ 1,065
Less: loss from discontinued operations     (1 )
Income from continuing operations 1,202 1,066
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 1,591 1,575
Allowance for equity during construction (65 ) (58 )
Impairment charges 22
Deferred income taxes and investment tax credits 77 114
Other 8 17
Nuclear decommissioning trusts (117 ) (159 )
EME settlement payments, net of insurance proceeds (209 )
Changes in operating assets and liabilities:
Receivables (387 ) (235 )
Inventory 10 (43 )
Accounts payable (11 ) 151
Prepaid and accrued taxes (128 ) 56
Other current assets and liabilities (17 ) (68 )
Derivative assets and liabilities (24 ) 15
Regulatory assets and liabilities 560 189
Other noncurrent assets and liabilities (31 )   91  
Net cash provided by operating activities 2,690     2,502  
Cash flows from financing activities:
Long-term debt issued or remarketed, net of premium, discount and issuance costs of $1 and $(3) for respective periods 2,236 397
Long-term debt matured or repurchased (1,182 ) (83 )
Preference stock issued, net 463 294
Preference stock redeemed (475 ) (125 )
Short-term debt financing, net (401 ) 60
Payments for stock-based compensation (365 ) (175 )
Receipt from stock option exercises 201 102
Dividends to noncontrolling interests (100 ) (98 )
Dividends paid (530 ) (469 )
Other (23 )   (5 )
Net cash used in financing activities (176 )   (102 )
Cash flows from investing activities:
Capital expenditures (2,660 ) (2,773 )
Proceeds from sale of nuclear decommissioning trust investments 3,974 2,075
Purchases of nuclear decommissioning trust investments (3,857 ) (1,916 )
Life insurance policy loan proceeds 26 140
Other 24     (3 )
Net cash used in investing activities (2,493 )   (2,477 )
Net increase (decrease) in cash and cash equivalents 21 (77 )
Cash and cash equivalents at beginning of period 96     161  
Cash and cash equivalents at end of period   $ 117     $ 84  

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