Edison International Reports Fourth Quarter and Full-Year 2018 Results
Edison International (NYSE: EIX) today reported fourth quarter 2018 net loss of $1.4 billion, or $4.39 loss per share, compared to net loss of $545 million, or $1.67 loss per share, in the fourth quarter 2017. As adjusted, fourth quarter 2018 core earnings were $305 million, or $0.94 per share, compared to core earnings of $357 million, or $1.10 per share, in the fourth quarter 2017.
Southern California Edison (SCE) is awaiting a proposed decision from the California Public Utilities Commission (CPUC) on its 2018 General Rate Case (GRC). Consequently, during the fourth quarter 2018, SCE recognized revenue from CPUC activities largely based on 2017 authorized base revenue requirements included in customer rates with reserves taken for known items, including the July 2017 cost of capital decision and the Tax Cuts and Jobs Act (Tax Reform). The revenue requirement ultimately adopted by the CPUC will be retroactive to January 1, 2018.
SCE's fourth quarter 2018 earnings decreased by $1.3 billion, or $4.05 per share, from the fourth quarter 2017, consisting of $44 million, or $0.14 per share, of lower core earnings and $1.3 billion, or $3.91 per share, of higher non-core losses. The reduction in core earnings was due to the impact of the July 2017 cost of capital decision on GRC revenue, higher operation and maintenance expenses related to vegetation management and higher net financing costs. The higher non-core losses for the fourth quarter 2018 were mainly related to the $1.8 billion, or $5.60 per share, after-tax charge recorded at SCE related to wildfire-related claims, net of recoveries, partially offset by the absence of the $448 million, or $1.38 per share, after-tax impairment and other charges related to the Revised San Onofre Settlement Agreement recorded in the fourth quarter 2017.
Edison International Parent and Other’s fourth quarter 2018 losses from continuing operations decreased by $401 million, or $1.23 per share, compared to fourth quarter 2017, consisting of $8 million, or $0.02 per share, of higher core losses and $409 million, or $1.25 per share, of lower non-core losses. The increase in core losses was primarily due to a $13 million, or $0.04 per share, after-tax goodwill impairment charge on the Edison Energy reporting unit, partially offset by income of $11 million, or $0.03 per share, related to a California tax audit settlement. The lower non-core losses for the fourth quarter 2018 were primarily related to the absence of a $433 million, or $1.33 per share, write-down from the re-measurement of deferred taxes as a result of Tax Reform recorded in 2017.
Additionally, Edison International recorded $34 million of income, or $0.10 per share, from discontinued operations in the fourth quarter 2018.
“Edison International’s performance in 2018 was negatively impacted by wildfires in our service territory and a charge for liabilities related to the Southern California wildfires and mudslides,” said Pedro Pizarro, president and chief executive officer of Edison International. “Devastating wildfires have become a regular occurrence in California and mitigating this threat continues to be our top priority. We are working closely with State, county and municipal leaders, as well as the business community, to develop responsible, regional and statewide solutions to address the ongoing wildfire risk.”
Mr. Pizarro adds, “SCE has proposed multiple programs to enhance operational practices and increase grid hardening which we have already started implementing. In addition, we continue to make substantial investments to support California’s climate change policies. All of these illustrate California’s need for financially healthy utilities and therefore the need for sustainable wildfire risk management policies.”
For 2018, Edison International reported net loss of $423 million, or $1.30 loss per share, compared to net income of $565 million, or $1.73 per share, for 2017. As adjusted, Edison International’s core earnings were $1.4 billion, or $4.15 per share, compared to core earnings of $1.5 billion, or $4.50 per share, in 2017.
SCE is awaiting a proposed decision from the CPUC on its 2018 GRC. Consequently, during 2018, SCE recognized revenue from CPUC activities largely based on 2017 authorized base revenue requirements included in customer rates with reserves taken for known items, including the July 2017 cost of capital decision and Tax Reform.
SCE's 2018 earnings decreased by $1.3 billion, or $4.05 per share, from 2017, consisting of $53 million, or $0.16 per share, of lower core earnings and $1.3 billion, or $3.89 per share, of higher non-core losses. The reduction in core earnings was due to the impact of the July 2017 cost of capital decision on GRC revenue, higher operation and maintenance expenses related to wildfire insurance premiums and vegetation management, and higher net financing costs, partially offset by higher income tax benefits. The higher non-core losses for 2018 were mainly related to the $1.8 billion, or $5.60 per share, after-tax charge recorded in the fourth quarter at SCE related to wildfire-related claims, net of recoveries, partially offset by the absence of the $448 million, or $1.38 per share, after-tax impairment and other charges related to the Revised San Onofre Settlement Agreement recorded in the fourth quarter 2017.
Edison International Parent and Other’s 2018 losses from continuing operations decreased by $300 million, or $0.92 per share, compared to 2017, consisting of $62 million, or $0.19 per share, of higher core losses and $362 million, or $1.11 per share, of lower non-core losses. The increase in core losses was primarily due to higher income tax benefits recorded in 2017 compared to 2018 and the impact of Tax Reform on pre-tax losses in 2018, partially offset by the absence of SoCore Energy losses due to its sale in April 2018 and income of $11 million, or $0.03 per share, related to a California tax audit settlement. The lower non-core losses for the fourth quarter 2018 were primarily related to the absence of a $433 million, or $1.33 per share, write-down from the re-measurement of deferred taxes as a result of Tax Reform recorded in 2017.
Additionally, Edison International recorded $34 million of income, or $0.10 per share, from discontinued operations in 2018.
Edison International uses core earnings, which is a non-GAAP financial measure that adjusts for significant discrete items that management does not consider representative of ongoing earnings. Edison International management believes that core earnings provide more meaningful comparisons of performance from period to period. Please see the attached tables for a reconciliation of core earnings to basic GAAP earnings.
2019 Earnings Guidance
Edison International will provide 2019 earnings guidance after a final decision has been issued by the CPUC on the Southern California Edison 2018 GRC. This is consistent with the company's practice of not providing earnings guidance prior to a decision on its GRC. See the presentation accompanying the company’s conference call for further information.
Edison International and Southern California Edison Declare Dividends
Today, the Board of Directors of Edison International declared a quarterly common stock dividend of $0.6125 per share, payable on April 30, 2019, to shareholders of record on March 29, 2019. Additionally, the Board of Directors of Southern California Edison Company today declared dividends on preference and preferred stock. For more information, please see the related press release at www.edisoninvestor.com.
About Edison International
Edison International (NYSE:EIX), through its subsidiaries, is a generator and distributor of electric power, as well as a provider of energy services and technologies, including renewable energy. Headquartered in Rosemead, California, Edison International is the parent company of Southern California Edison, one of the nation’s largest electric utilities. Edison International is also the parent company of Edison Energy, a portfolio of competitive businesses that provide commercial and industrial customers with energy management and procurement services. Edison Energy is independent from Southern California Edison.
Use of Non-GAAP Financial Measures
Edison International’s earnings are prepared in accordance with generally accepted accounting principles used in the United States and represent the company’s earnings as reported to the Securities and Exchange Commission. Our management uses core earnings and core earnings per share (EPS) internally for financial planning and for analysis of performance of Edison International and Southern California Edison. We also use core earnings and core EPS when communicating with analysts and investors regarding our earnings results to facilitate comparisons of the Company’s performance from period to period. Financial measures referred to as net income, basic EPS, core earnings, or core EPS also apply to the description of earnings or earnings per share.
Core earnings and core EPS are non-GAAP financial measures and may not be comparable to those of other companies. Core earnings and core EPS are defined as basic earnings and basic EPS excluding income or loss from discontinued operations and income or loss from significant discrete items that management does not consider representative of ongoing earnings. Basic earnings and losses refer to net income or losses attributable to Edison International shareholders. Core earnings are reconciled to basic earnings in the attached tables. The impact of participating securities (vested awards that earn dividend equivalents that may participate in undistributed earnings with common stock) for the principal operating subsidiary is not material to the principal operating subsidiary’s EPS and is therefore reflected in the results of the Edison International holding company, which is included in Edison International Parent and Other.
Safe Harbor Statement
Statements contained in this release about future performance, including, without limitation, operating results, rate base growth, financial outlook, and other statements that are not purely historical, are forward-looking statements. These forward-looking statements reflect our current expectations; however, such statements involve risks and uncertainties. Actual results could differ materially from current expectations. Important factors that could cause different results include, but are not limited to the:
- ability of SCE to recover its costs through regulated rates, including costs related to uninsured wildfire-related and mudslide-related liabilities and capital spending incurred prior to formal regulatory approval;
- ability to obtain sufficient insurance at a reasonable cost, including insurance relating to SCE's nuclear facilities and wildfire-related claims, and to recover the costs of such insurance or, in the event liabilities exceed insured amounts, the ability to recover uninsured losses from customers or other parties;
- decisions and other actions by the CPUC, the FERC, the NRC and other regulatory authorities, including determinations of authorized rates of return or return on equity, the 2018 GRC, the GS&RP application, the recoverability of wildfire-related and mudslide- related costs, and delays in regulatory actions;
- ability of Edison International or SCE to borrow funds and access the bank and capital markets on reasonable terms;
- actions by credit rating agencies to downgrade Edison International or SCE's credit ratings or to place those ratings on negative watch or outlook;
- risks associated with the decommissioning of San Onofre, including those related to public opposition, permitting, governmental approvals, on-site storage of spent nuclear fuel, delays, contractual disputes, and cost overruns;
- extreme weather-related incidents and other natural disasters (including earthquakes and events caused, or exacerbated, by climate change, such as wildfires), which could cause, among other things, public safety issues, property damage and operational issues;
- risks associated with cost allocation resulting in higher rates for utility bundled service customers because of possible customer bypass or departure for other electricity providers such as CCAs and Electric Service Providers;
- risks inherent in SCE's transmission and distribution infrastructure investment program, including those related to project site identification, public opposition, environmental mitigation, construction, permitting, power curtailment costs (payments due under power contracts in the event there is insufficient transmission to enable acceptance of power delivery), changes in the CAISO's transmission plans, and governmental approvals; and
- risks associated with the operation of transmission and distribution assets and power generating facilities, including public and employee safety issues, the risk of utility assets causing or contributing to wildfires, failure, availability, efficiency, and output of equipment and facilities, and availability and cost of spare parts.
Other important factors are discussed under the headings “Risk Factors” and “Management’s Discussion and Analysis” in Edison International’s Form 10-K, and other reports filed with the Securities and Exchange Commission, which are available on our website: www.edisoninvestor.com. These filings also provide additional information on historical and other factual data contained in this news release. Edison International and SCE provide direct links to certain SCE and other parties' regulatory filings and documents with the CPUC and the FERC and certain agency rulings and notices in open proceedings at www.edisoninvestor.com (SCE Regulatory Highlights) so that such filings, rulings and notices are available to all investors. Edison International and SCE post or provide direct links to certain documents and information related to Southern California wildfires which may be of interest to investors at www.edisoninvestor.com (Southern California Wildfires) in order to publicly disseminate such information. Edison International and SCE also routinely post or provide direct links to presentations, documents and other information that may be of interest to investors at www.edisoninvestor.com (Events and Presentations) in order to publicly disseminate such information.