Exelon 2005 Annual Report Download - page 28

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Discussion of Financial Results – Exelon
Results of Operations (Dollars in millions except for per share data, unless otherwise noted)
2005 2004
Favorable
(unfavorable)
variance
Operating revenues $15,357 $14,133 $ 1,224
Purchased power and fuel expense 5,646 4,929 (717)
Operating and maintenance expense 3,718 3,700 (18)
Impairment of goodwill 1,207 – (1,207)
Depreciation and amortization 1,334 1,295 (39)
Operating income 2,724 3,499 (775)
Other income and deductions (829) (922) 93
Income from continuing operations before income taxes and minority interest 1,895 2,577 (682)
Income taxes 944 713 (231)
Income from continuing operations 951 1,870 (919)
Income (loss) from discontinued operations, net of income taxes 14 (29) 43
Income before cumulative effect of a change in accounting principle 965 1,841 (876)
Cumulative effect of changes in accounting principles (42) 23 (65)
Net income 923 1,864 (941)
Diluted earnings per share $ 1.36 $ 2.78 $ (1.42)
Net Income. Net income for 2005 reflects an impairment charge of $1,207 million associated with ComEd’s goodwill and losses
of $42 million for the cumulative effect of adopting Financial Accounting Standards Board Interpretation No. (FIN) 47,
“Accounting for Conditional Asset Retirement Obligations” (FIN 47), partially offset by higher realized prices on market sales at
Generation and favorable weather conditions in the ComEd and PECO service territories. Net income for 2004 reflects income
of $32 million for the adoption of FIN 46 (revised December 2003), “Consolidation of Variable Interest Entities” (FIN 46-R),
partially offset by a loss of $9 million related to the adoption of Emerging Issues Task Force Issue No. 03-16, “Accounting for
Investments in Limited Liability Companies” (EITF 03-16). See Note 1 of Exelon’s Notes to Consolidated Financial Statements
within its 2005 Form 10-K for further information regarding the adoption of FIN 46-R.
Operating Revenues. Operating revenues increased primarily due to increased revenues at ComEd and PECO and increased
revenues from non-affiliates at Generation. The increase in revenues at ComEd and PECO was primarily due to favorable
weather conditions, an increase in the number of customers choosing ComEd or PECO as their electric supplier and higher
transmission revenues, partially offset by decreased competitive transition charge (CTC) collections at ComEd. The increase in
revenues from non-affiliates at Generation was primarily due to higher prices on energy sold in the market, partially offset by an
increase in the percentage of energy produced and sold to ComEd and PECO and the sale of Boston Generating in 2004.
Purchased Power and Fuel Expense.Purchased power and fuel expense increased primarily due to overall higher market
energy prices and higher natural gas and oil prices, partially offset by the decrease in fuel expense due to the sale of Boston
Generating in 2004, favorable mark-to-market adjustments related to non-trading activities and the expiration of the purchase
power agreement with Midwest Generation in 2004. Purchased power represented 22% of Generation’s total supply in 2005
compared to 24% in 2004.
26 EXELON CORPORATION AND SUBSIDIARY COMPANIES