Exelon 2001 Annual Report Download - page 36

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Investment Income Investment income is recorded in Other, Net on the Consolidated Statements of Income, but is excluded
from EBIT. Investment income increased by $12 million to $64 million in 2000, primarily reflecting the effects of the Merger.
Income Taxes The effective tax rate was 37.6% in 2000 as compared to 37.1% in 1999.
Extraordinary Items In 2000, Exelon incurred extraordinary charges aggregating $6 million ($4 million, net of tax) related to
prepayment premiums and the write-off of unamortized deferred financing costs associated with the early retirement of
debt with a portion of the proceeds from the securitization of PECO’s stranded cost recovery in May 2000.
In 1999, Exelon incurred extraordinary charges aggregating $62 million ($37 million, net of tax) related to prepayment
premiums and the write-off of unamortized debt costs associated with the repayment and refinancing of debt.
Cumulative Effect of a Change in Accounting Principle In 2000, Exelon recorded a benefit of $40 million ($24 million, net of
income taxes) representing the cumulative effect of a change in accounting method for nuclear outage costs by PECO in
conjunction with the synchronization of accounting policies in connection with the Merger.
Liquidity and Capital Resources
Exelon’s capital resources are primarily provided by internally generated cash flows from operations and, to the extent
necessary, external financing including the issuance of commercial paper. Exelon’s access to external financing at reasonable
terms is dependent on the credit ratings of Exelon and its subsidiaries and the general business condition of Exelon and the
industry. Exelon’s businesses are capital intensive. Capital resources are used primarily to fund Exelon’s capital requirements,
including construction, investments in new and existing ventures, repayments of maturing debt and preferred securities of
subsidiaries and payment of common stock dividends. Any potential future acquisitions could require external financing,
including the issuance by Exelon of common stock.
Cash Flows from Operating Activities
Cash flows provided by operations for 2001 were $3.6 billion, approximately two-thirds of which were provided by Energy
Delivery and one-third of which was provided by Generation. Enterprises’ cash flows from operations were immaterial to
Exelon in 2001. Energy Delivery’s cash flow from operating activities primarily results from sales of electricity and gas to a
stable and diverse base of retail customers at fixed prices. Energy Delivery’s future cash flows will depend upon the ability
to achieve cost savings in operations, and the impact of the economy, weather and customer choice on its revenues.
Generation’s cash flows from operating activities primarily result from the sale of electric energy to wholesale customers,
including Energy Delivery. Generation’s future cash flow from operating activities will depend upon future demand and
market prices for energy and the ability to continue to produce and supply power at competitive costs. Although the
amounts may vary from period to period as a result of the uncertainties inherent in business, Exelon expects that Energy
Delivery and Generation will continue to provide a reliable and steady source of internal cash flow from operations for the
foreseeable future.