Exelon 2003 Annual Report Download - page 42

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40 Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXELON CORPORATION AND SUBSIDIARY COMPANIES
expense primarily due to the adoption of SFAS No. 143 and
lower depreciation and amortization expense in the Energy
Delivery segment. In addition, taxes other than income also
decreased by $128 million primarily due to a reduction in re-
serves for real estate taxes within the Energy Delivery and
Generation segments.
Other Income and Deductions. Other income and deductions
changed primarily due to impairment and other transaction-
related charges of $280 million recorded in 2003 related to
Generation’s investment in Sithe. Interest expense decreased
9% from $966 million in 2002 to $881 million in 2003
primarily due to less outstanding debt and refinancing of
existing debt at lower interest rates at Energy Delivery parti-
ally offset by increased interest expense at Generation due
to debt related to 2002 acquisitions and reduced capitalized
interest in 2003. In 2002, Enterprises recorded a gain on the
sale of its investment in AT&T Wireless of $198 million
(before income taxes).
Results of Operations by Business Segment
The comparisons of 2003 and 2002 operating results and other statistical information set forth below reflect intercompany
transactions, which are eliminated in our consolidated financial statements.
Income (Loss) Before Cumulative Effect of Changes in Accounting Principles by Business Segment
2003 2002 Variance % Change
Energy Delivery $1,170 $1,268 $ (98) (7.7%)
Generation (241) 387 (628) (162.3%)
Enterprises (135) 65 (200) n.m.
Corporate (1) (50) 49 (98.0%)
Total $793 $1,670 $ (877) (52.5%)
n.m. – not meaningful
Net Income (Loss) by Business Segment
2003 2002 Variance % Change
Energy Delivery $1,175 $1,268 $ (93) (7.3%)
Generation (133) 400 (533) (133.3%)
Enterprises (136) (178) 42 (23.6%)
Corporate (1) (50) 49 (98.0%)
Total $ 905 $1,440 $(535) (37.2%)
Results of Operations–Energy Delivery
Energy Delivery 2003 2002 Variance % Change
Operating revenues $10,202 $10,457 $(255) (2.4%)
Purchased power and fuel expense 4,597 4,602 (5) (0.1%)
Operating and maintenance expense 1,669 1,486 183 12.3%
Depreciation and amortization expense 873 978 (105) (10.7%)
Taxes other than income 440 531 (91) (17.1%)
Operating income 2,623 2,860 (237) (8.3%)
Interest expense 747 854 (107) (12.5%)
Income before income taxes and cumulative effect of a change in
accounting principle 1,888 2,033 (145) (7.1%)
Income before cumulative effect of a change in accounting principle 1,170 1,268 (98) (7.7%)
Net income 1,175 1,268 (93) (7.3%)
Net Income. Energy Delivery’s net income in 2003 decreased
primarily due to increased operating and maintenance ex-
pense resulting from severance and curtailment charges
associated with The Exelon Way, a charge at ComEd asso-
ciated with a regulatory settlement, lower revenues, net of
purchased power primarily attributable to weather and
higher purchased power prices, partially offset by reductions
in depreciation and amortization expense, taxes other than
income, and interest expense.