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For Immediate Release

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PEPCO Reports Third Quarter Earnings

FOR IMMEDIATE RELEASE CONTACT: Makini Street
October 16, 1998 202-872-2680



PEPCO Reports Third Quarter Earnings

Earnings
Potomac Electric Power Company today reported consolidated earnings per share of $1.27 for the three months ended September 30, 1998, compared with earnings per share of $1.11 for the same period in 1997. For the nine- and 12-month periods ended September 30, 1998, consolidated earnings per share were $1.78 and $1.51, respectively, compared with earnings per share of $1.66 and $1.72 for the corresponding periods in 1997.
Consolidated earnings per share include a 2 cent per share reduction for the three months ended September 30, 1998, and a 4 cent per share reduction for the nine- and 12-month periods ended September 30, 1998 associated with the Company`s targeted employee severance plan. Earnings for the nine- and 12-month periods ended September 30, 1998 also include a 6 cent per share reduction for premiums paid in connection with the June 1, 1998, redemption of 2.3 million shares of serial preferred stock. The redemption was funded through issuance of Trust Originated Preferred Securities that will result in an annual after-tax cost reduction of approximately $3 million.
Consolidated earnings per share for the 12 months ended September 30, 1998, include the effects of a one-time write-off of 28 cents per share for costs related to the proposed merger with Baltimore Gas and Electric Company that was canceled in December 1997.
Utility Results
Kilowatt-hour sales increased 7.1 percent, 3.7 percent and 3.4 percent for the three-, nine- and 12-month periods ended September 30, 1998, respectively, compared with the corresponding periods in 1997. Although the temperature in the second and third quarters of 1998, as measured in cooling degree hours, was 18 percent hotter than the corresponding periods in 1997, it was nevertheless 7 percent cooler than the 20-year average.
PCI Results
Consolidated earnings for the three-, nine- and 12-month periods ended September 30, 1998, reflect a contribution of 3 cents, 14 cents and 15 cents per share, respectively, from PEPCO`s wholly-owned, nonutility subsidiary, Potomac Capital Investment Corporation (PCI). In the corresponding periods in 1997, PCI contributed 1 cent, 13 cents and 14 cents, respectively.

Results from operating were:

Three Months Ended

September 30

Six Months Ended

September 30

Twelve Months Ended

September 30

1998
1997
1998
1997
1998
1997
Basic Earnings (Loss) Per Share:
Utility Operations
$1.26
$1.10
$1.74
$1.53
$ 1.74
$1.58
Preferred Stock Redemption Premium
-
-
(.06)
-
(0.06)
-
Severence Costs
(.02)
-
(.04)
-
(0.04)
-
Write-off of Merger Costs
-
-
-
-
(.28)
-
--------
-------
-------
-------
-------
-------
Net Utility Operations
1.24
1.10
1.64
1.53
1.36
1.58
Nonutility Subsidiary
0.03
0.01
0.14
0.13
0.15
0.14
Consolidated
$1.27
$1.11
$1.78
$1.66
$1.51
$1.72
Diluted Earnings (Loss) Per Share:
Consolidated
$1.23
$1.07
$1.73
$1.62
$1.49
$1.69
Average Commom Shares Outstanding
Basic
118,527,000
118,501,000
118,522,000
118,500,000
118,517,000
118,500,000
Diluted
124,245,000
124,292,000
124,244,000
124,292,000
124,256,000
124,305,000
Operating Revenue
$670,197,000
$618,218,000
$1,519,408,000
$1,432,259,000
$1,897,978,000
$1,804,782,000

Total Revenue

$750,776,000
$633,042,000
$1,659,684,000
$1,473,073,000
$2,050,121,000
$1,886,786,000
Operating Income
$186,000,000
$166,500,000
$317,613,000
$289,342,000
$353,654,000
$332,149,000
Net Earnings (Loss) from
Nonutility Subsidiary
$3,777,000
$875,000
$16,239,000
$15,781,000
$17,539,000
$16,274,000

Net Income (Loss)

$153,100,000
$135,985,000
$226,601,000
$209,091,000
$199,340,000
$220,377,000
Earnings (Loss) for Common Stock
$151,092,000
$131,828,000
$210,479,000
$196,652,000
$179,078,000
$203,782,000

Point of Contact:
Makini Street

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