2017 Q1 Form 10-Q Financial Statement

#000119312517155836 Filed on May 03, 2017

View on sec.gov

Income Statement

Concept 2017 Q1 2016 Q1
Revenue $8.747B $7.573B
YoY Change 15.5% -14.24%
Cost Of Revenue $3.633B $3.254B
YoY Change 11.65% -27.2%
Gross Profit $5.114B $4.319B
YoY Change 18.41% -0.94%
Gross Profit Margin 58.47% 57.03%
Selling, General & Admin
YoY Change
% of Gross Profit
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $754.0M $606.0M
YoY Change 24.42% 12.22%
% of Gross Profit 14.74% 14.03%
Operating Expenses $3.810B $3.845B
YoY Change -0.91% 28.38%
Operating Profit $1.308B $483.0M
YoY Change 170.81% -64.64%
Interest Expense $363.0M $277.0M
YoY Change 31.05% -17.31%
% of Operating Profit 27.75% 57.35%
Other Income/Expense, Net -$116.0M -$173.0M
YoY Change -32.95% -34.72%
Pretax Income $1.192B $310.0M
YoY Change 284.52% -71.84%
Income Tax $211.0M $184.0M
% Of Pretax Income 17.7% 59.35%
Net Earnings $971.0M $123.0M
YoY Change 689.43% -83.33%
Net Earnings / Revenue 11.1% 1.62%
Basic Earnings Per Share $1.07 $0.19
Diluted Earnings Per Share $1.06 $0.19
COMMON SHARES
Basic Shares Outstanding 928.0M shares 923.0M shares
Diluted Shares Outstanding 930.0M shares 925.0M shares

Balance Sheet

Concept 2017 Q1 2016 Q1
SHORT-TERM ASSETS
Cash & Short-Term Investments $1.859B $960.0M
YoY Change 93.65% -47.4%
Cash & Equivalents $609.0M $960.0M
Short-Term Investments $1.250B
Other Short-Term Assets $1.221B $1.086B
YoY Change 12.43% 36.95%
Inventory $1.561B $1.514B
Prepaid Expenses
Receivables $3.886B $3.594B
Other Receivables $1.133B $1.138B
Total Short-Term Assets $12.19B $11.36B
YoY Change 7.3% 0.06%
LONG-TERM ASSETS
Property, Plant & Equipment $72.63B $69.41B
YoY Change 4.65% 30.95%
Goodwill $6.677B $6.688B
YoY Change -0.16% 150.3%
Intangibles
YoY Change
Long-Term Investments $648.0M $455.0M
YoY Change 42.42% -19.89%
Other Assets $1.440B $1.398B
YoY Change 3.0% 13.29%
Total Long-Term Assets $104.9B $100.4B
YoY Change 4.48% 32.02%
TOTAL ASSETS
Total Short-Term Assets $12.19B $11.36B
Total Long-Term Assets $104.9B $100.4B
Total Assets $117.1B $111.7B
YoY Change 4.77% 27.86%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.011B $2.874B
YoY Change 4.77% 1.23%
Accrued Expenses $3.007B $2.260B
YoY Change 33.05% 83.74%
Deferred Revenue
YoY Change
Short-Term Debt $2.048B $3.640B
YoY Change -43.74% 1077.99%
Long-Term Debt Due $3.645B $2.058B
YoY Change 77.11% 63.33%
Total Short-Term Liabilities $14.44B $13.77B
YoY Change 4.84% 86.74%
LONG-TERM LIABILITIES
Long-Term Debt $31.04B $29.31B
YoY Change 5.9% 42.86%
Other Long-Term Liabilities $1.853B $1.886B
YoY Change -1.75% -12.93%
Total Long-Term Liabilities $32.90B $31.20B
YoY Change 5.44% 37.54%
TOTAL LIABILITIES
Total Short-Term Liabilities $14.44B $13.77B
Total Long-Term Liabilities $32.90B $31.20B
Total Liabilities $88.78B $84.54B
YoY Change 5.02% 34.71%
SHAREHOLDERS EQUITY
Retained Earnings $12.72B $11.95B
YoY Change 6.41% 5.47%
Common Stock $18.81B $18.69B
YoY Change 0.65% 11.68%
Preferred Stock
YoY Change
Treasury Stock (at cost) -$123.0M $2.327B
YoY Change -105.29% 0.0%
Treasury Stock Shares 34.74M shares 35.00M shares
Shareholders Equity $26.53B $25.72B
YoY Change
Total Liabilities & Shareholders Equity $117.1B $111.7B
YoY Change 4.77% 27.86%

Cashflow Statement

Concept 2017 Q1 2016 Q1
OPERATING ACTIVITIES
Net Income $971.0M $123.0M
YoY Change 689.43% -83.33%
Depreciation, Depletion And Amortization $754.0M $606.0M
YoY Change 24.42% 12.22%
Cash From Operating Activities $1.074B $1.473B
YoY Change -27.09% -1.14%
INVESTING ACTIVITIES
Capital Expenditures $2.009B $2.202B
YoY Change -8.76% 23.43%
Acquisitions
YoY Change
Other Investing Activities $18.00M $2.000M
YoY Change 800.0% 0.0%
Cash From Investing Activities -$2.283B -$8.548B
YoY Change -73.29% 388.18%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net $65.00M $116.0M
YoY Change -43.97% -80.0%
Cash From Financing Activities $1.184B $1.533B
YoY Change -22.77% 637.02%
NET CHANGE
Cash From Operating Activities $1.074B $1.473B
Cash From Investing Activities -$2.283B -$8.548B
Cash From Financing Activities $1.184B $1.533B
Net Change In Cash -$25.00M -$5.542B
YoY Change -99.55% 10356.6%
FREE CASH FLOW
Cash From Operating Activities $1.074B $1.473B
Capital Expenditures $2.009B $2.202B
Free Cash Flow -$935.0M -$729.0M
YoY Change 28.26% 147.96%

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CY2017Q1 us-gaap Defined Benefit Plan Contributions By Employer
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CY2017Q1 us-gaap Depreciation
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CY2017Q1 us-gaap Depreciation Amortization And Accretion Net
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CY2017Q1 us-gaap Derivative Assets Current
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CY2016Q4 us-gaap Derivative Assets Noncurrent
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492000000 USD
CY2017Q1 us-gaap Derivative Assets Noncurrent
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539000000 USD
CY2016Q4 us-gaap Derivative Collateral Right To Reclaim Cash
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29000000 USD
CY2017Q1 us-gaap Derivative Collateral Right To Reclaim Cash
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CY2017Q1 us-gaap Derivative Liabilities Current
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228000000 USD
CY2016Q4 us-gaap Derivative Liabilities Noncurrent
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392000000 USD
CY2017Q1 us-gaap Derivative Liabilities Noncurrent
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420000000 USD
CY2016Q2 us-gaap Derivative Loss On Derivative
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CY2017Q1 us-gaap Due To Affiliate Current
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8000000 USD
CY2016Q4 us-gaap Due To Related Parties Noncurrent
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641000000 USD
CY2017Q1 us-gaap Due To Related Parties Noncurrent
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641000000 USD
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0.19
CY2017Q1 us-gaap Earnings Per Share Basic
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CY2017Q1 us-gaap Earnings Per Share Diluted
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1.07
CY2016Q1 us-gaap Effective Income Tax Rate Continuing Operations
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CY2017Q1 us-gaap Effective Income Tax Rate Continuing Operations
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0.178
CY2016Q1 us-gaap Effective Income Tax Rate Reconciliation At Federal Statutory Income Tax Rate
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0.350
CY2017Q1 us-gaap Effective Income Tax Rate Reconciliation At Federal Statutory Income Tax Rate
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0.350
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0.051
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0.006
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0.005
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0.020
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0.000
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-0.024
CY2016Q1 us-gaap Effective Income Tax Rate Reconciliation State And Local Income Taxes
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CY2017Q1 us-gaap Effective Income Tax Rate Reconciliation State And Local Income Taxes
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0.009
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CY2017Q1 us-gaap Effective Income Tax Rate Reconciliation Tax Contingencies Other
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CY2016Q1 us-gaap Effective Income Tax Rate Reconciliation Tax Credits Investment
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CY2017Q1 us-gaap Effective Income Tax Rate Reconciliation Tax Credits Investment
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CY2016Q1 us-gaap Electric Utility Revenue
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CY2016Q1 us-gaap Electrical Generation Revenue
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CY2017Q1 us-gaap Electrical Generation Revenue
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4560000000 USD
CY2016Q4 us-gaap Energy Marketing Accounts Payable
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CY2017Q1 us-gaap Energy Marketing Accounts Payable
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400000000 USD
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407000000 USD
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388000000 USD
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830000000 USD
CY2017Q1 us-gaap Energy Marketing Contract Liabilities Noncurrent
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779000000 USD
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88000000 USD
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103000000 USD
CY2016Q4 us-gaap Energy Marketing Contracts Assets Noncurrent
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447000000 USD
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432000000 USD
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364000000 USD
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249000000 USD
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11000000 USD
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1150000000 USD
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55000000 USD
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175000000 USD
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9000000 USD
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48000000 USD
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119000000 USD
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310000000 USD
CY2017Q1 us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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1206000000 USD
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CY2016Q1 us-gaap Income Tax Expense Benefit
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CY2017Q1 us-gaap Income Tax Expense Benefit
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215000000 USD
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206000000 USD
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CY2016Q1 us-gaap Increase Decrease In Accounts Payable And Accrued Liabilities
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CY2017Q1 us-gaap Increase Decrease In Accounts Payable And Accrued Liabilities
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CY2016Q1 us-gaap Increase Decrease In Accrued Income Taxes Payable
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47000000 USD
CY2017Q1 us-gaap Increase Decrease In Accrued Income Taxes Payable
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50000000 USD
CY2016Q1 us-gaap Increase Decrease In Inventories
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CY2017Q1 us-gaap Increase Decrease In Inventories
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311000000 USD
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439000000 USD
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2000000 USD
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2000000 shares
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2000000 shares
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CY2017Q1 us-gaap Interest Expense
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10000000 USD
CY2017Q1 us-gaap Interest Expense Related Party
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10000000 USD
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CY2017Q1 us-gaap Inventory Write Down
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2430000000 USD
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173000000 USD
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CY2017Q1 us-gaap Number Of Reportable Segments
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12 Reportable_segment
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CY2017Q1 us-gaap Other Assets Current
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CY2017Q1 us-gaap Other Commitment
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CY2017Q1 us-gaap Other Comprehensive Income Loss Available For Sale Securities Adjustment Net Of Tax
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CY2016Q1 us-gaap Other Comprehensive Income Loss Net Of Tax
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1000000 USD
CY2017Q1 us-gaap Other Comprehensive Income Loss Pension And Other Postretirement Benefit Plans Adjustment Net Of Tax
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49000000 USD
CY2016Q1 us-gaap Other Comprehensive Income Loss Tax
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CY2017Q1 us-gaap Other Comprehensive Income Loss Tax
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CY2017Q1 us-gaap Other Comprehensive Income Unrealized Gain Loss On Derivatives Arising During Period Net Of Tax
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CY2016Q1 us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
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CY2017Q1 us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
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CY2016Q1 us-gaap Other Cost And Expense Operating
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2460000000 USD
CY2016Q1 us-gaap Other Depreciation And Amortization
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CY2017Q1 us-gaap Other Depreciation And Amortization
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896000000 USD
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CY2017Q1 us-gaap Other Liabilities Current
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1827000000 USD
CY2017Q1 us-gaap Other Liabilities Noncurrent
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1853000000 USD
CY2016Q1 us-gaap Other Noncash Income Expense
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CY2017Q1 us-gaap Other Noncash Income Expense
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CY2016Q1 us-gaap Other Nonoperating Income
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CY2017Q1 us-gaap Other Nonoperating Income
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10000000 USD
CY2016Q1 us-gaap Other Nonoperating Income Expense
OtherNonoperatingIncomeExpense
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CY2017Q1 us-gaap Other Nonoperating Income Expense
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CY2016Q1 us-gaap Other Operating Income
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222000000 USD
CY2017Q1 us-gaap Other Operating Income
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250000000 USD
CY2016Q4 us-gaap Other Postretirement Defined Benefit Plan Liabilities Noncurrent
OtherPostretirementDefinedBenefitPlanLiabilitiesNoncurrent
1848000000 USD
CY2017Q1 us-gaap Other Postretirement Defined Benefit Plan Liabilities Noncurrent
OtherPostretirementDefinedBenefitPlanLiabilitiesNoncurrent
1928000000 USD
CY2016Q4 us-gaap Other Receivables
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1201000000 USD
CY2017Q1 us-gaap Other Receivables
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1133000000 USD
CY2016Q1 us-gaap Payments For Proceeds From Other Investing Activities
PaymentsForProceedsFromOtherInvestingActivities
2000000 USD
CY2017Q1 us-gaap Payments For Proceeds From Other Investing Activities
PaymentsForProceedsFromOtherInvestingActivities
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CY2016Q1 us-gaap Payments Of Dividends Common Stock
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287000000 USD
CY2017Q1 us-gaap Payments Of Dividends Common Stock
PaymentsOfDividendsCommonStock
303000000 USD
CY2016Q1 us-gaap Payments To Acquire Businesses Gross
PaymentsToAcquireBusinessesGross
6645000000 USD
CY2017Q1 us-gaap Payments To Acquire Businesses Gross
PaymentsToAcquireBusinessesGross
212000000 USD
CY2016Q1 us-gaap Payments To Acquire Other Investments
PaymentsToAcquireOtherInvestments
2297000000 USD
CY2017Q1 us-gaap Payments To Acquire Other Investments
PaymentsToAcquireOtherInvestments
1833000000 USD
CY2016 us-gaap Payments To Acquire Other Receivables
PaymentsToAcquireOtherReceivables
313000000 USD
CY2017Q1 us-gaap Payments To Acquire Other Receivables
PaymentsToAcquireOtherReceivables
305000000 USD
CY2016Q1 us-gaap Payments To Acquire Property Plant And Equipment
PaymentsToAcquirePropertyPlantAndEquipment
2202000000 USD
CY2017Q1 us-gaap Payments To Acquire Property Plant And Equipment
PaymentsToAcquirePropertyPlantAndEquipment
2114000000 USD
CY2016Q1 us-gaap Pension And Other Postretirement Benefit Contributions
PensionAndOtherPostretirementBenefitContributions
239000000 USD
CY2017Q1 us-gaap Pension And Other Postretirement Benefit Contributions
PensionAndOtherPostretirementBenefitContributions
307000000 USD
CY2016Q1 us-gaap Pension And Other Postretirement Benefit Expense
PensionAndOtherPostretirementBenefitExpense
136000000 USD
CY2017Q1 us-gaap Pension And Other Postretirement Benefit Expense
PensionAndOtherPostretirementBenefitExpense
157000000 USD
CY2016Q4 us-gaap Prepaid Taxes
PrepaidTaxes
1250000000 USD
CY2017Q1 us-gaap Prepaid Taxes
PrepaidTaxes
1250000000 USD
CY2016Q1 us-gaap Proceeds From Issuance Of Long Term Debt
ProceedsFromIssuanceOfLongTermDebt
151000000 USD
CY2017Q1 us-gaap Proceeds From Issuance Of Long Term Debt
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CY2017Q1 us-gaap Description Of New Accounting Pronouncements Not Yet Adopted
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-weight:bold;">New Accounting Standards (All Registrants)</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;font-weight:bold;">New Accounting Standards Issued and Not Yet Adopted:</font><font style="font-family:Arial;font-size:10pt;"> The following new authoritative accounting guidance issued by the FASB has not yet been adopted and reflected by the Registrants in their consolidated financial statements. Unless otherwise indicated, the Registrants are currently assessing the impacts such guidance may have (which could be material) on their Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows and disclosures, as well as the potential to early adopt where applicable. The Registrants have assessed other FASB issuances of new standards which are not listed below given the current expectation such standards will not significantly impact the Registrants' financial reporting.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Revenue from Contracts with Customers (Issued May 2014 and subsequently amended to address implementation questions):</font><font style="font-family:Arial;font-size:10pt;"> Changes the criteria for recognizing revenue from a contract with a customer. The new revenue recognition guidance, including subsequent amendments, is effective for annual reporting periods beginning on or after December 15, 2017, with the option to early adopt the standard for annual periods beginning on or after December 15, 2016. The Registrants do not plan to early adopt the standard.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The new standard replaces existing guidance on revenue recognition, including most industry specific guidance, with a five step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature, amount, timing, and uncertainty of revenue and the related cash flows. In addition, the Registrants will be required to capitalize costs to acquire new contracts, and amortize such costs in a manner consistent with the transfer to the customer of the associated goods or services. Exelon currently expenses those costs as incurred. The guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method).</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The Registrants continue to assess the impacts this guidance may have on their Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows and disclosures. In performing this assessment, the Registrants have utilized a project implementation team comprised of both internal and external resources to conduct the following key activities:</font></div><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Actively participate in the AICPA Power and Utilities Industry Task Force (Industry Task Force) process to identify implementation issues and support the development of related implementation guidance;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Evaluate existing contracts and revenue streams for potential changes in the amounts and timing of recognizing revenues under the new guidance;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Evaluate and select the transition method; and</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Develop and implement the approach and process for complying with the new revenue recognition disclosure requirements.</font></div></td></tr></table><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">While there continues to be some ongoing activities in all of these areas, the Registrants have substantially completed the evaluation of their collective contracts and revenue streams, as well as the evaluation of the transition method. Based on the work completed thus far, the Registrants have reached the following preliminary conclusions:</font></div><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The Registrants expect to apply the new guidance using the full retrospective method, however this conclusion could change based on the outcome of open implementation issues discussed below;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The Registrants currently anticipate that the implementation of the new guidance will not have a material impact on the amount and timing of revenue recognition; and</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The new guidance will result in more detailed disclosures of revenue compared to current guidance.</font></div></td></tr></table><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Notwithstanding the preliminary conclusions noted above, certain implementation issues continue to be debated and worked through the Industry Task Force process that could result in amendments to the standard or implementation guidance that could have a material impact on the Registrants&#8217; Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows and disclosures. The contributions in aid of construction (CIAC) implementation issue previously disclosed has been resolved, subject to the completion of the public comment period, with the conclusion that CIAC is outside of the scope of ASC 606 and, therefore, the accounting by the Utility Registrants for CIAC will not change as a result of ASC 606. The open implementation issues that could be most impactful to the Registrants include: (1) the ability of the Utility Registrants to recognize revenue for certain contracts where collectability is in question and (2) primarily at Generation, bundled sales contracts and contracts with pricing provisions that may require recognition of revenue at prices other than the contract price (e.g., straight line or estimated future market prices). As part of the overall implementation project, the Registrants have developed alternative adoption plans that would be implemented in the event the ultimate resolution of the open implementation issues result in significant changes from current revenue recognition practices.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Issued March 2017): </font><font style="font-family:Arial;font-size:10pt;">The new standard will require significant changes to the accounting and presentation of pension and OPEB costs at the plan sponsor (i.e., Exelon) level. This guidance requires plan sponsors to separate net periodic pension cost and net periodic OPEB cost (together, net benefit cost) into the service cost component and other components; service cost will be presented as part of income from operations and the other components will be classified outside of income from operations on the Consolidated Statements of Operations and Comprehensive Income. Additionally, service cost is the only component eligible for capitalization (whereas under current GAAP, all components of net benefit cost are classified as compensation cost and are eligible for capitalization).</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Exelon is currently evaluating the impact of this standard, including coordinating with its industry group and advisors. Generation, ComEd, PECO, BGE, BSC, PHI, Pepco, DPL, ACE and PHISCO participate in Exelon&#8217;s single employer plan and apply multi-employer accounting. Exelon is currently evaluating how the new standard will impact accounting and financial reporting for these registrants.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The standard will be effective January 1, 2018 and requires retrospective adoption for the presentation of the service cost component and the other components of net benefit cost and prospective adoption for the capitalization of only the service cost component of net benefit cost. Exelon will not early adopt this standard.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Leases (Issued February 2016):</font><font style="font-family:Arial;font-size:10pt;"> Increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The guidance requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas today only financing type lease liabilities (capital leases) are recognized in the balance sheet. This is expected to require significant changes to systems, processes and procedures in order to recognize and measure leases recorded on the balance sheet that are currently classified as operating leases. In addition, the definition of a lease has been revised in regards to when an arrangement conveys the right to control the use of the identified asset under the arrangement which may result in changes to the classification of an arrangement as a lease. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. The accounting applied by a lessor is largely unchanged from that applied under current GAAP. The standard is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted, however the Registrants do not expect to early adopt the standard. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Refer to Note </font><font style="font-family:Arial;font-size:10pt;">24</font><font style="font-family:Arial;font-size:10pt;"> &#8212; </font><font style="font-family:Arial;font-size:10pt;">Commitments and Contingencies</font><font style="font-family:Arial;font-size:10pt;"> of the Combined Notes to the Consolidated Financial Statements in the Exelon </font><font style="font-family:Arial;font-size:10pt;">2016</font><font style="font-family:Arial;font-size:10pt;"> Form 10-K for additional information regarding operating leases.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Impairment of Financial Instruments (Issued June 2016):</font><font style="font-family:Arial;font-size:10pt;font-style:italic;font-weight:bold;"> </font><font style="font-family:Arial;font-size:10pt;">Provides for a new Current Expected Credit Loss (CECL) impairment model for specified financial instruments including loans, trade receivables, debt securities classified as held-to-maturity investments and net investments in leases recognized by a lessor. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity&#8217;s current estimate of credit losses expected to be incurred over the life of the financial instrument. The standard does not make changes to the existing impairment models for non-financial assets such as fixed assets, intangibles and goodwill. The standard will be effective January 1, 2020 and, for most debt instruments, requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Goodwill Impairment (issued January 2017):</font><font style="font-family:Arial;font-size:10pt;"> Simplifies the accounting for goodwill impairment by removing Step 2 of the current test, which requires calculation of a hypothetical purchase price allocation. Under the revised guidance, goodwill impairment will be measured as the amount by which a reporting unit&#8217;s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill (currently Step 1 of the two step impairment test). Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. Exelon, Generation, ComEd, PHI, and DPL have goodwill as of March 31, 2017. This updated guidance is not currently expected to impact the Registrants&#8217; financial reporting. The standard is effective January 1, 2020, with early adoption permitted, and must be adopted on a prospective basis. </font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Clarifying the Definition of a Business (issued January 2017): </font><font style="font-family:Arial;font-size:10pt;">Clarifies the definition of a business with the objective of addressing whether acquisitions should be accounted for as acquisitions of assets or as acquisitions of businesses.&#160;If substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of transferred assets and activities is not a business.&#160;If the fair value of the assets acquired is not concentrated in a single identifiable asset or a group of similar identifiable assets, then an entity must evaluate whether an input and a substantive process exist, which together significantly contribute to the ability to produce outputs.&#160;The standard also revises the definition of outputs to focus on goods and services to customers.&#160;The standard could result in more acquisitions being accounted for as asset acquisitions.&#160;The standard will be effective January 1, 2018 and will be applied prospectively.&#160; </font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Intra-Entity Transfers of Assets Other Than Inventory (Issued October 2016): </font><font style="font-family:Arial;font-size:10pt;">Requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs (compared to current GAAP which prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party). The standard is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The guidance is required to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (Issued August 2016) and Restricted Cash (Issued November 2016): </font><font style="font-family:Arial;font-size:10pt;">In 2016, the FASB issued two standards impacting the Statement of Cash Flows. The first adds or clarifies guidance on the classification of certain cash receipts and payments on the statement of cash flows as follows: debt prepayment or extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies and bank-owned life insurance policies, distributions received from equity method investees, beneficial interest in securitization transactions, and the application of the predominance principle to separately identifiable cash flows. The second states that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows (instead of being presented as cash flow activities). Exelon will adopt both standards on January 1, 2018 on a retrospective basis. Adoption of the second standard will result in a change in presentation of restricted cash on the face of the Statement of Cash Flows; otherwise the Registrants expect that adoption of the guidance will have insignificant impacts on the Registrants&#8217; Consolidated Statements of Cash Flows and disclosures.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Recognition and Measurement of Financial Assets and Financial Liabilities (Issued January 2016):</font><font style="font-family:Arial;font-size:10pt;"> (i) Requires all investments in equity securities, including other ownership interests such as partnerships, unincorporated joint ventures and limited liability companies, to be carried at fair value through net income, (ii) requires an incremental recognition and disclosure requirement related to the presentation of fair value changes of financial liabilities for which the fair value option has been elected, (iii) amends several disclosure requirements, including the methods and significant assumptions used to estimate fair value or a description of the changes in the methods and assumptions used to estimate fair value, and (iv) requires disclosure of the fair value of financial assets and liabilities measured at amortized cost at the amount that would be received to sell the asset or paid to transfer the liability. The standard is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The guidance is required to be applied retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of adoption (modified retrospective method).</font></div></div>

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