ComEd 2002 Annual Report Download - page 39

States for his signature. The extension would affect facilities
obtaining NRC operating licenses in 2003. Existing facilities are
unaffected by the extension.
Other insurance.In addition to nuclear liability insurance,Exelon
also carries property damage and liability insurance for its
properties and operations. As a result of significant changes in
the insurance marketplace, due in part to the September 11,
2001 terrorist acts,the available coverage and limits may be less
than the amount of insurance obtained in the past, and the
recovery for losses due to terrorists acts may be limited.We are
self-insured for deductibles and to the extent that any losses
may exceed the amount of insurance maintained.
A claim that exceeds the amounts available under our
property damage and liability insurance, together with the
deductible, would negatively affect our results of operations.
Nuclear Electric Insurance Limited (NEIL), a mutual insurance
company to which we belong, provides property and business
interruption insurance for our nuclear operations. In recent
years, NEIL has made distributions to its members. Our distri-
bution for 2002 was $40 million, which was recorded as a
reduction to Operating and Maintenance expense on our
Consolidated Statements of Income. Due in part to the
September 11, 2001 events and the results in the stock market
over the last two years, we cannot predict the level of future
distributions.
The possibility of attack or war may adversely affect our results
of operations, future growth and ability to raise capital.
Any military strikes or sustained military campaign may affect
our operations in unpredictable ways, such as further changes
in insurance markets, increased security measures and disrup-
tions of fuel supplies and markets, particularly oil and LNG.Just
the possibility that infrastructure facilities,such as electric gen-
eration,transmission and distribution facilities,would be direct
targets of, or indirect casualties of, an act of terror or war may
affect our operations. War and the possibility of war may have
an adverse effect on the economy in general. A lower level of
economic activity might result in a decline in energy consump-
tion, which may adversely affect our revenues or restrict our
future growth. Instability in the financial markets as a result of
war may affect our ability to raise capital.
The introduction of new technologies could increase competition
within our markets.
While demand for electricity is generally increasing throughout
the United States, the rate of construction and development of
new, more efficient, electric generation facilities and distribu-
tion methodologies may exceed increases in demand in some
regional electric markets.The introduction of new technologies
could increase competition,which could lower prices and have an
adverse affect on our results of operations or financial condition.
results of operations
Year Ended December 31, 2002 Compared
To Year Ended December 31,2001
Net Income and Earnings Per Share
Net income for 2002 increased $12 million compared to 2001.
Diluted earnings per common share were $4.44 and $4.43 for
2002 and 2001, respectively.Net income for 2002 reflects a $230
million charge for the cumulative effect of changes in account-
ing principles as a result of the adoption of Financial
Accounting Standards Board (FASB) Statement of Financial
Accounting Standards (SFAS) No. 142, “Goodwill and Other
Intangible Assets” (SFAS No. 142), while net income for 2001
reflects $12 million of income for the cumulative effect of
changes in accounting principles as a result of the adoption of
SFAS No.133,“Accounting for Derivatives and Hedging Activities”
(SFAS No.133). See Note 4 of the Notes to Consolidated Financial
Statements for further information regarding the adoption of
SFAS No. 142 and SFAS No.133.
Income Before Cumulative Effect of Changes in Accounting
Principles in 2002 increased $254 million, or 18%, compared to
2001. Diluted earnings per common share on the same basis
increased $0.76 per share, or 17%. The increase reflects
Enterprises’sale of its interest in AT&T Wireless,a 2.6% increase
in retail sales due to a warmer-than-usual summer, an exten-
sion of the estimated service lives of generating stations,the
discontinuation of goodwill amortization as of January 1, 2002
pursuant to SFAS No. 142, lower interest expense, and reduced
depreciation expense resulting from lower depreciation rates
at Energy Delivery.The increase was partially offset by lower
wholesale energy prices, increased nuclear refueling outage
costs, the write-down of certain investments at Enterprises,
employee severance costs, and other factors described below.
Results of Operations by Business Segment
All comparisons presented under this heading are comparisons
of operating results and other statistical information for 2002 to
operating results and other statistical information for 2001.
These results reflect intercompany transactions, which are
eliminated in our consolidated financial statements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
exelon corporation and subsidiary companies
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