2018 Q2 Form 10-Q Financial Statement

#000162828018010287 Filed on August 02, 2018

View on sec.gov

Income Statement

Concept 2018 Q2 2017 Q2
Revenue $8.074B $7.665B
YoY Change 5.34% 10.93%
Cost Of Revenue $3.026B $2.803B
YoY Change 7.96% 14.22%
Gross Profit $5.050B $4.862B
YoY Change 3.87% 9.11%
Gross Profit Margin 62.55% 63.43%
Selling, General & Admin
YoY Change
% of Gross Profit
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $1.088B $1.317B
YoY Change -17.39% -1.2%
% of Gross Profit 21.54% 27.09%
Operating Expenses $7.138B $4.563B
YoY Change 56.43% 18.83%
Operating Profit $940.0M $300.0M
YoY Change 213.33% -53.63%
Interest Expense $367.0M $426.0M
YoY Change -13.85% 16.39%
% of Operating Profit 39.04% 142.0%
Other Income/Expense, Net -$329.0M -$259.0M
YoY Change 27.03% 11.64%
Pretax Income $613.0M $41.00M
YoY Change 1395.12% -90.12%
Income Tax $66.00M -$62.00M
% Of Pretax Income 10.77% -151.22%
Net Earnings $542.0M $94.00M
YoY Change 476.6% -69.28%
Net Earnings / Revenue 6.71% 1.23%
Basic Earnings Per Share $0.56 $0.10
Diluted Earnings Per Share $0.55 $0.10
COMMON SHARES
Basic Shares Outstanding 967.0M shares 934.0M shares
Diluted Shares Outstanding 969.0M shares 936.0M shares

Balance Sheet

Concept 2018 Q2 2017 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $694.0M $1.786B
YoY Change -61.14% 8.44%
Cash & Equivalents $694.0M $536.0M
Short-Term Investments $1.250B
Other Short-Term Assets $1.360B $1.600B
YoY Change -15.0% 45.32%
Inventory $1.590B $1.601B
Prepaid Expenses
Receivables $4.094B $3.825B
Other Receivables $1.407B $958.0M
Total Short-Term Assets $11.49B $12.23B
YoY Change -6.07% 6.41%
LONG-TERM ASSETS
Property, Plant & Equipment $75.28B $72.75B
YoY Change 3.49% 2.91%
Goodwill $6.677B $6.677B
YoY Change 0.0% -0.28%
Intangibles
YoY Change
Long-Term Investments $636.0M $638.0M
YoY Change -0.31% 27.09%
Other Assets $1.194B $1.265B
YoY Change -5.61% -7.39%
Total Long-Term Assets $105.8B $104.9B
YoY Change 0.85% 3.54%
TOTAL ASSETS
Total Short-Term Assets $11.49B $12.23B
Total Long-Term Assets $105.8B $104.9B
Total Assets $117.2B $117.1B
YoY Change 0.12% 3.84%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.113B $3.134B
YoY Change -0.67% 10.9%
Accrued Expenses $1.665B $2.878B
YoY Change -42.15% 4.39%
Deferred Revenue $28.00M
YoY Change
Short-Term Debt $1.252B $1.757B
YoY Change -28.74% 84.75%
Long-Term Debt Due $1.158B $3.619B
YoY Change -68.0% 34.39%
Total Short-Term Liabilities $9.626B $13.97B
YoY Change -31.07% 17.41%
LONG-TERM LIABILITIES
Long-Term Debt $33.18B $30.32B
YoY Change 9.45% -3.89%
Other Long-Term Liabilities $2.087B $1.828B
YoY Change 14.17% -2.56%
Total Long-Term Liabilities $35.27B $32.14B
YoY Change 9.72% -3.81%
TOTAL LIABILITIES
Total Short-Term Liabilities $9.626B $13.97B
Total Long-Term Liabilities $35.27B $32.14B
Total Liabilities $84.41B $87.81B
YoY Change -3.88% 2.76%
SHAREHOLDERS EQUITY
Retained Earnings $14.55B $11.44B
YoY Change 27.17% -4.06%
Common Stock $19.01B $18.86B
YoY Change 0.78% 0.74%
Preferred Stock
YoY Change
Treasury Stock (at cost) $123.0M $2.300B
YoY Change -94.65% 15.0%
Treasury Stock Shares 1.832M shares 2.000M shares
Shareholders Equity $30.52B $27.55B
YoY Change
Total Liabilities & Shareholders Equity $117.2B $117.1B
YoY Change 0.12% 3.84%

Cashflow Statement

Concept 2018 Q2 2017 Q2
OPERATING ACTIVITIES
Net Income $542.0M $94.00M
YoY Change 476.6% -69.28%
Depreciation, Depletion And Amortization $1.088B $1.317B
YoY Change -17.39% -1.2%
Cash From Operating Activities $2.367B $1.821B
YoY Change 29.98% -40.88%
INVESTING ACTIVITIES
Capital Expenditures $1.927B -$1.836B
YoY Change -204.96% -19.72%
Acquisitions
YoY Change
Other Investing Activities -$62.00M $138.0M
YoY Change -144.93% -428.57%
Cash From Investing Activities -$1.989B -$1.698B
YoY Change 17.14% -27.09%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -449.0M -201.0M
YoY Change 123.38% 214.06%
NET CHANGE
Cash From Operating Activities 2.367B 1.821B
Cash From Investing Activities -1.989B -1.698B
Cash From Financing Activities -449.0M -201.0M
Net Change In Cash -71.00M -78.00M
YoY Change -8.97% -111.35%
FREE CASH FLOW
Cash From Operating Activities $2.367B $1.821B
Capital Expenditures $1.927B -$1.836B
Free Cash Flow $440.0M $3.657B
YoY Change -87.97% -31.86%

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CY2017Q4 us-gaap Variable Interest Entity Consolidated Assets Not Pledged
VariableInterestEntityConsolidatedAssetsNotPledged
9597000000 USD
CY2018Q2 us-gaap Variable Interest Entity Consolidated Assets Not Pledged
VariableInterestEntityConsolidatedAssetsNotPledged
9612000000 USD
CY2017Q4 us-gaap Variable Interest Entity Consolidated Carrying Amount Assets
VariableInterestEntityConsolidatedCarryingAmountAssets
9979000000 USD
CY2018Q2 us-gaap Variable Interest Entity Consolidated Carrying Amount Assets
VariableInterestEntityConsolidatedCarryingAmountAssets
9978000000 USD
CY2017Q4 us-gaap Variable Interest Entity Consolidated Carrying Amount Liabilities
VariableInterestEntityConsolidatedCarryingAmountLiabilities
3624000000 USD
CY2018Q2 us-gaap Variable Interest Entity Consolidated Carrying Amount Liabilities
VariableInterestEntityConsolidatedCarryingAmountLiabilities
3552000000 USD
CY2017Q4 us-gaap Variable Interest Entity Consolidated Liabilities Current
VariableInterestEntityConsolidatedLiabilitiesCurrent
308000000 USD
CY2018Q2 us-gaap Variable Interest Entity Consolidated Liabilities Current
VariableInterestEntityConsolidatedLiabilitiesCurrent
268000000 USD
CY2017Q4 us-gaap Variable Interest Entity Consolidated Liabilities No Recourse
VariableInterestEntityConsolidatedLiabilitiesNoRecourse
3618000000 USD
CY2018Q2 us-gaap Variable Interest Entity Consolidated Liabilities No Recourse
VariableInterestEntityConsolidatedLiabilitiesNoRecourse
3544000000 USD
CY2017Q4 us-gaap Variable Interest Entity Consolidated Liabilities Noncurrent
VariableInterestEntityConsolidatedLiabilitiesNoncurrent
3316000000 USD
CY2018Q2 us-gaap Variable Interest Entity Consolidated Liabilities Noncurrent
VariableInterestEntityConsolidatedLiabilitiesNoncurrent
3284000000 USD
CY2018Q2 us-gaap Variable Interest Entity Entity Maximum Loss Exposure Amount
VariableInterestEntityEntityMaximumLossExposureAmount
9000000 USD
CY2017Q4 us-gaap Variable Interest Entity Nonconsolidated Carrying Amount Assets
VariableInterestEntityNonconsolidatedCarryingAmountAssets
1134000000 USD
CY2018Q2 us-gaap Variable Interest Entity Nonconsolidated Carrying Amount Assets
VariableInterestEntityNonconsolidatedCarryingAmountAssets
1111000000 USD
CY2017Q4 us-gaap Variable Interest Entity Nonconsolidated Carrying Amount Liabilities
VariableInterestEntityNonconsolidatedCarryingAmountLiabilities
265000000 USD
CY2018Q2 us-gaap Variable Interest Entity Nonconsolidated Carrying Amount Liabilities
VariableInterestEntityNonconsolidatedCarryingAmountLiabilities
261000000 USD
CY2017Q2 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
936000000 shares
us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
932000000 shares
CY2018Q2 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
969000000 shares
us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
968000000 shares
CY2017Q2 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
934000000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
931000000 shares
CY2018Q2 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
967000000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
967000000 shares
us-gaap Description Of New Accounting Pronouncements Not Yet Adopted
DescriptionOfNewAccountingPronouncementsNotYetAdopted
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:12px;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 as of June 30, 2018: </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 as of June 30, 2018. 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 that such standards will not significantly impact the Registrants' financial reporting.</font></div><div style="line-height:120%;padding-bottom:12px;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 standard is effective January 1, 2019. Early adoption is permitted; however, the Registrants will not early adopt the standard. The issued guidance required a modified retrospective transition approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented (January 1, 2017). In July 2018, the FASB issued an amendment to the standard giving entities the option to apply the requirements of the standard in the period of adoption (January 1, 2019) with no restatement of prior periods.&#160; Exelon plans to elect this expedient.</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The new guidance requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas today only finance lease liabilities (referred to as capital leases) are recognized in the balance sheet. In addition, the definition of a lease has been revised which may result in changes to the classification of an arrangement as a lease. Under the new guidance, an arrangement that conveys the right to control the use of an identified asset by obtaining substantially all of its economic benefits and directing how it is used is a lease, whereas the current definition focuses on the ability to control the use of the asset or to obtain its output. Quantitative and qualitative disclosures related to the amount, timing and judgments of an entity&#8217;s accounting for leases and the related cash flows are expanded. Disclosure requirements apply to both lessees and lessors, whereas current disclosures relate only to lessees. Significant changes to lease systems, processes and procedures are required to implement the requirements of the new standard. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. Lessor accounting is also largely unchanged.</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:justify;text-indent:29px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The standard provides a number of transition practical expedients that entities may elect. These include a "package of three" expedients that must be taken together and allow entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases. The Registrants expect to elect this practical expedient.</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:justify;text-indent:29px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In January 2018, the FASB issued additional guidance which provides another optional transition practical expedient. This practical expedient allows entities to not evaluate land easements under the new guidance at adoption if they were not previously accounted for as leases.</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The Registrants have assessed the lease standard and are executing a detailed implementation plan in preparation for adoption on January 1, 2019. Key activities in the implementation plan include:</font></div><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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:29px;"><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;">Developing a complete lease inventory and abstracting the required data attributes into a lease accounting system that supports the Registrants' lease portfolios and integrates with existing systems.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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:29px;"><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;">Evaluating the transition practical expedients available under the guidance.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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:29px;"><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;">Identifying, assessing and documenting technical accounting issues, policy considerations and financial reporting implications.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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:29px;"><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;">Identifying and implementing changes to processes and controls to ensure all impacts of the new guidance are effectively addressed.</font></div></td></tr></table><div style="line-height:120%;padding-bottom:12px;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 (with early adoption as of January 1, 2019 permitted) and 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-bottom:12px;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 </font><font style="font-family:Arial;font-size:10pt;">June&#160;30, 2018</font><font style="font-family:Arial;font-size:10pt;">. 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 applied on a prospective basis.</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Derivatives and Hedging (Issued September 2017): </font><font style="font-family:Arial;font-size:10pt;">Allows more financial and nonfinancial hedging strategies to be eligible for hedge accounting. The amendments are intended to more closely align hedge accounting with companies&#8217; risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. There are also amendments related to effectiveness testing and disclosure requirements. The guidance is effective January 1, 2019 and early adoption is permitted with a modified retrospective transition approach. The Registrants are currently assessing this standard but do not currently expect a significant impact given the limited activity for which the Registrants elect hedge accounting and because the Registrants do not anticipate increasing their use of hedge accounting as a result of this standard.</font></div></div>
us-gaap Reclassifications
Reclassifications
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:justify;padding-left:0px;text-indent:0px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-weight:bold;">Prior Period Adjustments and Reclassifications (All Registrants)</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Certain prior year amounts in the Registrants' Consolidated Statements of Operations and Comprehensive Incom</font><font style="font-family:Arial;font-size:10pt;">e, Consolidated Statements of Cash Flows, Consolidated Balance Sheets and Consolidated Statements of Changes in Shareholders' Equity have been recasted to reflect new accounting standards issued by the FASB and adopted as of January 1, 2018.</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Beginning on January 1, 2018, Exelon adopted the following new accounting standards requiring reclassification or adjustments to previously reported information as follows:</font></div><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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;font-style:italic;">Statement of Cash Flows: Classification of Restricted Cash.</font><font style="font-family:Arial;font-size:10pt;"> The Registrants applied the new guidance using the full retrospective method and, accordingly, have recasted the presentation of restricted cash in their Consolidated Statements of Cash Flows in the prior periods presented. See Note </font><font style="font-family:Arial;font-size:10pt;">18</font><font style="font-family:Arial;font-size:10pt;"> &#8212; </font><font style="font-family:Arial;font-size:10pt;">Supplemental Financial Information</font><font style="font-family:Arial;font-size:10pt;"> for additional information.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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;font-style:italic;">Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.</font><font style="font-family:Arial;font-size:10pt;">&#160; Exelon early adopted and retrospectively applied the new guidance to when the effects of the TCJA were recognized and, accordingly, recasted its December 31, 2017 AOCI and retained earnings in its Consolidated Balance Sheet and Consolidated Statement of Changes in Shareholders' Equity.&#160; Exelon's accounting policy is to release the stranded tax effects from AOCI related to its pension and OPEB plans under a portfolio (or aggregate) approach as an entire pension or OPEB plan is liquidated or terminated. See Note </font><font style="font-family:Arial;font-size:10pt;">2</font><font style="font-family:Arial;font-size:10pt;"> &#8212; </font><font style="font-family:Arial;font-size:10pt;">New Accounting Standards</font><font style="font-family:Arial;font-size:10pt;"> for additional information.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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;font-style:italic;">Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.</font><font style="font-family:Arial;font-size:10pt;"> Exelon applied this guidance retrospectively for the presentation of the service and other non-service costs components of net benefit cost and, accordingly, have recasted those amounts, which were not material, in its Consolidated Statement of Operations and Comprehensive Income in prior periods presented.&#160;As part of the adoption, Exelon elected the practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the comparative periods as the estimation basis for applying the retrospective presentation requirements. See Note </font><font style="font-family:Arial;font-size:10pt;">14</font><font style="font-family:Arial;font-size:10pt;"> &#8212; </font><font style="font-family:Arial;font-size:10pt;">Retirement Benefits</font><font style="font-family:Arial;font-size:10pt;"> for additional information.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:12px;padding-bottom:12px;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;font-style:italic;">Revenue from Contracts with Customers.</font><font style="font-family:Arial;font-size:10pt;"> The Registrants applied the new guidance using the full retrospective method and, accordingly, have recasted certain amounts in their Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows, Consolidated Balance Sheets, Consolidated Statements of Changes in Shareholders' Equity and Combined Notes to Consolidated Financial Statements in the prior periods presented.&#160;The amounts recasted in the Registrants' Consolidated Statements of Operations and Comprehensive Income are shown in the table below. The amounts recasted in the Registrants&#8217; Consolidated Statements of Cash Flows, Consolidated Balance Sheets, Consolidated Statements of Changes in Shareholders' Equity and Combined Notes to Consolidated Financial Statements were not material.&#160; See Note </font><font style="font-family:Arial;font-size:10pt;">5</font><font style="font-family:Arial;font-size:10pt;"> &#8212; </font><font style="font-family:Arial;font-size:10pt;">Revenue from Contracts with Customers </font><font style="font-family:Arial;font-size:10pt;">for additional information.</font></div></td></tr></table></div>

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