Con Edison(US:ED)2019-05-02 21:02PART I—Financial Information Presents the unaudited financial statements and related disclosures for the reporting period ITEM 1 Financial Statements (Unaudited) Presents unaudited consolidated financial statements for Con Edison and CECONY, including income, cash flow, balance sheets, and equity statements with notes Consolidated Edison, Inc. Financial Statements Provides key financial statements for Con Edison, including income, balance sheet, and cash flow highlights for Q1 2019 Con Edison Consolidated Income Statement Highlights (Q1 2019 vs Q1 2018) | Metric | Q1 2019 (Millions) | Q1 2018 (Millions) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $3,514 | $3,364 | +4.5% | | Operating Income | $786 | $755 | +4.1% | | Net Income | $445 | $428 | +4.0% | | Net Income for Common Stock | $424 | $428 | -0.9% | | Diluted EPS | $1.31 | $1.37 | -4.4% | Con Edison Consolidated Balance Sheet Highlights (As of March 31, 2019) | Account | March 31, 2019 (Millions) | Dec 31, 2018 (Millions) | | :--- | :--- | :--- | | Total Assets | $55,066 | $53,920 | | Net Utility Plant | $38,052 | $37,580 | | Total Liabilities | $37,565 | $37,081 | | Long-Term Debt | $16,933 | $17,495 | | Total Equity | $17,501 | $16,839 | Con Edison Consolidated Cash Flow Highlights (Q1 2019 vs Q1 2018) | Cash Flow Activity | Q1 2019 (Millions) | Q1 2018 (Millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $464 | $143 | | Net Cash Used in Investing Activities | $(888) | $(909) | | Net Cash from/(Used in) Financing Activities | $(108) | $605 | | Net Change in Cash | $(532) | $(161) | Consolidated Edison Company of New York, Inc. Financial Statements Presents key financial statements for CECONY, including income, balance sheet, and cash flow highlights for Q1 2019 CECONY Consolidated Income Statement Highlights (Q1 2019 vs Q1 2018) | Metric | Q1 2019 (Millions) | Q1 2018 (Millions) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $3,039 | $2,884 | +5.4% | | Operating Income | $726 | $705 | +3.0% | | Net Income | $412 | $389 | +5.9% | CECONY Consolidated Balance Sheet Highlights (As of March 31, 2019) | Account | March 31, 2019 (Millions) | Dec 31, 2018 (Millions) | | :--- | :--- | :--- | | Total Assets | $44,122 | $43,108 | | Net Utility Plant | $35,814 | $35,370 | | Total Liabilities | $30,803 | $30,198 | | Shareholder's Equity | $13,319 | $12,910 | CECONY Consolidated Cash Flow Highlights (Q1 2019 vs Q1 2018) | Cash Flow Activity | Q1 2019 (Millions) | Q1 2018 (Millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $395 | $56 | | Net Cash Used in Investing Activities | $(750) | $(808) | | Net Cash from/(Used in) Financing Activities | $(111) | $596 | | Net Change in Cash | $(466) | $(156) | Notes to the Financial Statements (Unaudited) Details significant accounting policies, new standards, contingencies, and regulatory matters impacting financial statements - The company adopted the new lease accounting standard ASU No. 2016-02 (Topic 842) in January 2019, resulting in the recognition of operating lease right-of-use assets of $852 million for Con Edison and $627 million for CECONY on their respective balance sheets1283759 - The bankruptcy of Pacific Gas and Electric Company (PG&E) in January 2019 is a significant contingency. Con Edison has substantial assets ($859M net plant, $1,108M intangible assets) and non-recourse debt ($1,041M) tied to power purchase agreements with PG&E. While no impairment was recorded as of March 31, 2019, a future rejection of these agreements could lead to a material impairment76102 - CECONY has updated its rate increase requests to the NYSPSC in April 2019, seeking a $473 million electric rate increase and a $201 million gas rate increase, both effective January 20208384 - The company is managing several regulatory and legal matters, including costs related to a 2017 MTA subway power outage ($270M incurred), investigations into the response to 2018 winter storms, and a 2018 steam main rupture in Manhattan. The potential losses for these matters are not yet estimable8790120 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2019 financial condition and results, analyzing performance across segments, liquidity, capital resources, and market risks Results of Operations Analyzes Con Edison's net income by segment and key drivers of earnings changes for Q1 2019 Con Edison Net Income for Common Stock by Segment (Q1 2019 vs Q1 2018) | Segment | Q1 2019 (Millions) | Q1 2018 (Millions) | | :--- | :--- | :--- | | CECONY | $412 | $389 | | O&R | $32 | $23 | | Clean Energy Businesses | $(35) | $6 | | Con Edison Transmission | $13 | $11 | | Other | $2 | $(1) | | Total Con Edison | $424 | $428 | - Con Edison's diluted EPS decreased from $1.37 in Q1 2018 to $1.31 in Q1 2019. The decline was primarily driven by the Clean Energy Businesses, which saw a $0.14 per share negative variance due to lower construction revenues, higher depreciation, and increased interest expense following the Sempra Solar acquisition. This was partially offset by positive performance from CECONY (+$0.02/share) and O&R (+$0.03/share)198202203 - CECONY's operating income increased by $21 million, driven by higher electric and gas base rates from its rate plans. This was partially offset by higher property taxes and increased depreciation202209 - The Clean Energy Businesses' operating income increased slightly to $11 million from $9 million, but net income for common stock swung to a loss of $35 million from a $6 million profit. This was due to significantly higher depreciation ($39M increase) and net interest expense ($33M increase) related to the December 2018 acquisition of Sempra Solar Holdings, LLC, and a $21 million income allocation to a non-controlling tax equity investor245247249251 Liquidity and Capital Resources Examines the company's cash flow, financing activities, and capital structure, including common equity ratios - Con Edison's net cash from operating activities increased significantly to $464 million in Q1 2019 from $143 million in Q1 2018. This was primarily due to the timing of pension contributions, lower storm restoration costs, and the absence of payments for Puerto Rico restoration efforts made in the prior year257261 - In March 2019, Con Edison issued 5.6 million common shares for $425 million to settle forward sale agreements. The proceeds were used to fund subsidiary capital requirements and repay short-term debt265 - In February 2019, Con Edison borrowed $825 million under a two-year variable-rate term loan to repay a previous 6-month term loan, which was part of the financing for the Sempra Solar acquisition99265 Common Equity Ratio | Company | March 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Con Edison | 50.8% | 49.0% | | CECONY | 49.3% | 48.6% | Financial and Commodity Market Risks Identifies the company's exposure to interest rate, commodity price, and investment risks, including potential financial impacts - The company's primary market risks are interest rate risk, commodity price risk, and investment risk300 - A 10% increase in interest rates on variable rate debt would increase annual interest expense by an estimated $9 million for Con Edison301 - A 10% decline in market prices would decrease the fair value of the Utilities' commodity derivative instruments by an estimated $63 million, though this would be largely offset by lower costs for the physical energy purchased304 - The investment policy for pension plan assets targets 45-55% equity, 33-43% debt, and 10-14% real estate. As of March 31, 2019, the allocation was 52% equity, 39% debt, and 9% real estate307 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk Refers to the MD&A's 'Financial and Commodity Market Risks' section for disclosures on market risks and derivative instruments - The company's disclosures about market risk are incorporated by reference from the 'Financial and Commodity Market Risks' section in the MD&A311 ITEM 4 Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019312 - No material changes were made to the company's internal control over financial reporting during the first quarter of 2019313 PART II—Other Information Presents additional information including legal proceedings, risk factors, and a list of exhibits filed with the report ITEM 1 Legal Proceedings Refers to financial statement notes for details on legal proceedings, including PG&E bankruptcy and regulatory matters - Information regarding legal proceedings is detailed in Notes A, B, C, G, and H of the financial statements, covering topics such as the PG&E bankruptcy, regulatory matters, and other contingencies315 ITEM 1A Risk Factors No material changes to risk factors were reported compared to the 2018 Annual Report on Form 10-K - There were no material changes in the company's risk factors compared to those disclosed in the 2018 Form 10-K316 ITEM 6 Exhibits Lists exhibits filed with the Form 10-Q, including CEO/CFO certifications, credit agreement amendments, and XBRL data - The exhibits filed with this report include CEO/CFO certifications under Sections 302 and 906, an amendment to the company's credit agreement, and interactive data files (XBRL)316