Exelon 2001 Annual Report Download - page 28

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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Exelon Corporation and Subsidiary Companies
General
On October 20, 2000, Exelon Corporation (Exelon) became the parent corporation for each of PECO Energy Company (PECO)
and Commonwealth Edison Company (ComEd) as a result of the completion of the transactions contemplated by an
Agreement and Plan of Exchange and Merger, as amended, among PECO, Unicom Corporation (Unicom) and Exelon (Merger).
The Merger was accounted for using the purchase method of accounting. Exelon’s results of operations for 1999 and 2000
consist of PECO’s results of operations for 1999 and 2000 and Unicom’s results of operations after October 20, 2000.
During January 2001, Exelon undertook a restructuring to separate its generation and other competitive businesses
from its regulated energy delivery business at ComEd and PECO. As part of the restructuring, the generation-related
operations and assets and liabilities of ComEd were transferred to Exelon Generation Company, LLC (Generation). Also, as
part of the restructuring, the non-regulated operations and related assets and liabilities of PECO, representing PECO’s
Generation and Enterprises business segments, were transferred to Generation and Exelon Enterprises Company, LLC
(Enterprises), respectively. Additionally, certain operations and assets and liabilities of ComEd and PECO were transferred to
Exelon Business Services Company.
Exelon, through its subsidiaries, operates in three business segments:
– Energy Delivery,consisting of the retail electricity distribution and transmission businesses of ComEd in northern Illinois
and PECO in southeastern Pennsylvania and the natural gas distribution business of PECO in the Pennsylvania counties
surrounding the City of Philadelphia.
– Generation, consisting of electric generating facilities, energy marketing operations and equity interests in Sithe Energies,
Inc. (Sithe) and AmerGen Energy Company, LLC (AmerGen).
– Enterprises, consisting of competitive retail energy sales, energy and infrastructure services, communications and
other investments weighted towards the communications, energy services and retail services industries.
See Note 21 of the Notes to Consolidated Financial Statements for further segment information.
Results of Operations
Year Ended December 31, 2001 Compared To Year Ended December 31,2000
Net Income and Earnings Per Share
Exelon’s net income increased $842 million, or 144%, for 2001. Diluted earnings per share increased $1.56 per share, or 54%.
Income before extraordinary items and cumulative effect of changes in accounting principles increased $850 million,or 150%,
for 2001. Diluted earnings per share on the same basis increased $1.62 per share, or 58%. Earnings per share increased less
than net income as a result of an increase in the weighted average shares of common stock outstanding from the issuance
of common stock in connection with the Merger, partially offset by the repurchase of common stock with the proceeds from
PECO’s May 2000 stranded cost recovery securitization.
Earnings Before Interest and Income Taxes
Exelon evaluates the performance of its business segments based on earnings before interest and income taxes (EBIT). In
addition to components of operating income as shown on the consolidated statements of income, EBIT includes equity in
earnings (losses) of unconsolidated affiliates, and other income and expense recorded in other, net, with the exception of
investment income. Operating revenues, operating expenses, depreciation and amortization and other income and
expenses for each business segment in the following analyses include intercompany transactions, which are eliminated in
the consolidated Exelon financial statements.