Market Newsdesk

May 5, 2021 6:58 am

Sempra Energy Reports Strong First-Quarter 2021 Earnings Results

PR Newswire

SAN DIEGO, May 5, 2021 /PRNewswire/ — Sempra Energy (NYSE: SRE) today announced first-quarter 2021 earnings of $874 million, or $2.87 per diluted share, compared to first-quarter 2020 earnings of $760 million, or $2.53 per diluted share. On an adjusted basis, the company’s first-quarter 2021 earnings were $900 million, or $2.95 per diluted share, compared to $741 million, or $2.47 per diluted share, in the first quarter of 2020.

“Over the last several years, we have narrowed our market focus, expanded investment in our utilities and worked hard to improve safety and operating results,” said Jeffrey W. Martin, chairman and CEO of Sempra Energy. “Taken together, these activities also support our financial commitments and, in part, are reflected in the strength of our first quarter results. The company is well positioned to deliver another strong year of financial performance.”

The reported financial results reflect certain significant items as described on an after-tax basis in the following table of GAAP (generally accepted accounting principles in the United States of America) earnings, reconciled to adjusted earnings, for the first quarter of 2021 and 2020.



	Three months ended
	March 31,
(Dollars, except EPS, and shares in millions)	2021	2020
	(Unaudited)
GAAP Earnings	$ 874	$ 760

Impact from Foreign Currency and Inflation and Associated Undesignated Derivatives⁽¹⁾	(3)	(150)

Net Unrealized Losses (Gains) on Commodity Derivatives⁽¹⁾	29	(41)

Impacts Associated with Aliso Canyon Litigation	–	72

Losses from Investment in RBS Sempra Commodities LLP	–	100

Adjusted Earnings⁽²⁾	$ 900	$ 741


Diluted Weighted-Average Common Shares Outstanding	308	314
GAAP EPS^(3),(4)	$ 2.87	$ 2.53

Diluted Weighted-Average Common Shares Outstanding	308	314
Adjusted EPS^(2),(3),(4)	$ 2.95	$ 2.47

1)	Q1-2020 Adjusted Earnings and Adjusted earnings-per-common-share (EPS) have been updated to exclude this item to conform to current year presentation.
2)	Represents a non-GAAP financial measure. Q1-2020 Adjusted Earnings and Adjusted EPS have been updated to exclude additional items to conform to current year presentation. See Table A for information regarding non-GAAP financial measures and descriptions of adjustments.
3)	To calculate Q1-2021 GAAP EPS and Adjusted EPS, preferred dividends of $10 million are added back to GAAP Earnings and Adjusted Earnings because of the dilutive effect of Series B mandatory convertible preferred stock in the quarter.
4)	To calculate Q1-2020 GAAP EPS and Adjusted EPS, preferred dividends of $36 million are added back to GAAP Earnings and Adjusted Earnings because of the dilutive effect of Series A and Series B mandatory convertible preferred stock in the quarter.

Building Resiliency in California Utilities

Sempra Energy’s California utilities, San Diego Gas & Electric Co. (SDG&E) and Southern California Gas Co. (SoCalGas), both recently announced net-zero emissions goals, contributing to Sempra Energy’s overall efforts to help shape a more sustainable future. In March 2021, SoCalGas announced its goal to achieve net-zero greenhouse gas (GHG) emissions in its operations and delivery of energy by 2045. With this commitment, SoCalGas becomes the largest gas distribution utility in North America to set a net-zero GHG emissions target across all three scopes.

Building on the sustainability strategy SDG&E released last October and its goal to reach net-zero GHG emissions by 2045, the utility announced it is developing two hydrogen pilot projects, it is nearing completion of an additional battery storage facility and it has begun construction on another, while also launching a vehicle-to-grid pilot program featuring electric school buses, among other efforts.

Additionally, SDG&E and SoCalGas recently received a proposed decision for attrition rates for 2022 and 2023, providing improved visibility into funding in support of safety and reliability programs. SDG&E’s attrition rate would be 3.92% for 2022 and 3.7% for 2023, and SoCalGas’ attrition rate would be 4.53% for 2022 and 3.97% for 2023.

Continuing Growth at Oncor

In Texas, Oncor Electric Delivery Company LLC (Oncor) continues to play a key role in meeting the growing energy needs of Texas’ economy through the execution of its 2021-2025 capital plan. In the first quarter of 2021, Oncor continued to see strong organic growth and connected approximately 19,000 new premises, compared to approximately 18,000 in the first quarter of 2020.

Making Progress on Sempra Infrastructure

Last month, Sempra Energy announced that it has entered into a definitive agreement to sell a non-controlling 20% interest in Sempra Infrastructure to KKR for $3.37 billion in cash, subject to adjustments. The transaction values Sempra Infrastructure at approximately $25.2 billion, including expected asset-related debt at closing of $8.37 billion. Proceeds from the sale will be used to help fund growth in Sempra Energy’s U.S. utilities and to further strengthen the company’s balance sheet. The sale is expected to be accretive to earnings. The transaction is forecasted to be completed in mid-2021, subject to customary closing conditions, including consents from third parties and regulators.

On April 26, 2021, Sempra Energy launched its exchange offer to acquire all the outstanding shares of Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) not owned by Sempra Energy. As part of the exchange offer, Sempra Energy intends to list its shares of common stock on the Mexican stock exchange (Bolsa Mexicana de Valores, S.A.B de C.V.). The exchange offer is expected to be completed by the end of May.

Additionally, IEnova continues to advance its development projects in Mexico with a focus on improving the country’s energy security. In March, IEnova achieved commercial operations on its Border Solar project, a 150-megawatt solar facility in northern Mexico, and completed the acquisition of the remaining 50% equity interest in Energía Sierra Juárez, a cross-border wind generation complex in Baja California, Mexico.

Earnings Guidance

Sempra Energy is updating its full-year 2021 GAAP EPS guidance range to $7.42 to $8.02 and affirming its full-year 2021 adjusted EPS guidance range of $7.50 to $8.10.

Non-GAAP Financial Measures

Non-GAAP financial measures include Sempra Energy’s adjusted earnings, adjusted EPS and adjusted EPS guidance range. See Table A for additional information regarding these non-GAAP financial measures.

Internet Broadcast

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 12 p.m. ET with senior management of the company. Access is available by logging onto the website at www.sempra.com. For those unable to log on to the live webcast, the teleconference will be available on replay a few hours after its conclusion by dialing (888) 203-1112 and entering passcode 6657833.

About Sempra Energy

Sempra Energy’s mission is to be North America’s premier energy infrastructure company. The Sempra Energy family of companies have more than 19,000 talented employees who deliver energy with purpose to over 36 million consumers. With more than $66 billion in total assets at the end of 2020, the San Diego-based company is the owner of one of the largest energy networks in North America serving some of the world’s leading economies. The company is helping to advance the global energy transition by enabling the delivery of lower-carbon energy solutions in each market it serves, including California, Texas, Mexico and the LNG export market. Sempra Energy is consistently recognized as a leader in sustainable business practices and for its long-standing commitment to building a high-performing culture including safety, workforce development and training, and diversity and inclusion. Sempra Energy is the only North American utility sector company included on the Dow Jones Sustainability World Index and was also named one of the “World’s Most Admired Companies” for 2021 by Fortune Magazine. For additional information about Sempra Energy, please visit Sempra Energy’s website at www.sempra.com and on Twitter @SempraEnergy.

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees. Future results may differ materially from those expressed in any forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this press release. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.

In this press release, forward-looking statements can be identified by words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “under construction,” “in development,” “target,” “outlook,” “maintain,” “continue,” or similar expressions, or when we discuss our guidance, priorities, strategy, goals, vision, mission, opportunities, projections, intentions or expectations.

Factors, among others, that could cause actual results and events to differ materially from those described in any forward-looking statements include risks and uncertainties relating to: California wildfires, including the risks that we may be found liable for damages regardless of fault and that we may not be able to recover costs from insurance, the wildfire fund established by California Assembly Bill 1054 or in rates from customers; decisions, investigations, regulations, issuances or revocations of permits and other authorizations, renewals of franchises, and other actions by (i) the Comisión Federal de Electricidad, California Public Utilities Commission (CPUC), U.S. Department of Energy, Public Utility Commission of Texas, and other regulatory and governmental bodies and (ii) states, counties, cities and other jurisdictions in the U.S., Mexico and other countries in which we do business; the success of business development efforts, construction projects and major acquisitions and divestitures, including risks in (i) the ability to make a final investment decision, (ii) completing construction projects or other transactions on schedule and budget, (iii) the ability to realize anticipated benefits from any of these efforts if completed, and (iv) obtaining the consent of partners or other third parties; the resolution of civil and criminal litigation, regulatory inquiries, investigations and proceedings, and arbitrations, including, among others, those related to the natural gas leak at Southern California Gas Company’s (SoCalGas) Aliso Canyon natural gas storage facility; the impact of the COVID-19 pandemic on our capital projects, regulatory approval processes, supply chain, liquidity and execution of operations; actions by credit rating agencies to downgrade our credit ratings or to place those ratings on negative outlook and our ability to borrow on favorable terms and meet our substantial debt service obligations; actions to reduce or eliminate reliance on natural gas, including any deterioration of or increased uncertainty in the political or regulatory environment for local natural gas distribution companies operating in California, and the impact of volatility of oil prices on our businesses and development projects; weather, natural disasters, pandemics, accidents, equipment failures, explosions, acts of terrorism, computer system outages and other events that disrupt our operations, damage our facilities and systems, cause the release of harmful materials, cause fires and subject us to liability for property damage or personal injuries, fines and penalties, some of which may not be covered by insurance, may be disputed by insurers or may otherwise not be recoverable through regulatory mechanisms or may impact our ability to obtain satisfactory levels of affordable insurance; the availability of electric power and natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, limitations on the withdrawal of natural gas from storage facilities, and equipment failures; cybersecurity threats to the energy grid, the storage and pipeline infrastructure, the information and systems used to operate our businesses, and the confidentiality of our proprietary information and the personal information of our customers and employees; expropriation of assets, failure of foreign governments and state-owned entities to honor their contracts, and property disputes; the impact at San Diego Gas & Electric Company (SDG&E) on competitive customer rates and reliability due to the growth in distributed and local power generation, including from departing retail load resulting from customers transferring to Direct Access and Community Choice Aggregation, and the risk of nonrecovery for stranded assets and contractual obligations; Oncor Electric Delivery Company LLC’s (Oncor) ability to eliminate or reduce its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director; volatility in foreign currency exchange, inflation and interest rates and commodity prices and our ability to effectively hedge these risks; changes in tax and trade policies, laws and regulations, including tariffs and revisions to international trade agreements that may increase our costs, reduce our competitiveness, or impair our ability to resolve trade disputes; and other uncertainties, some of which may be difficult to predict and are beyond our control.

These risks and uncertainties are further discussed in the reports that Sempra Energy has filed with the U.S. Securities and Exchange Commission (SEC). These reports are available through the EDGAR system free-of-charge on the SEC’s website, www.sec.gov, and on the company’s website, www.sempra.com. Investors should not rely unduly on any forward-looking statements.

Sempra North American Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas Utilities, Oncor and Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) are not the same companies as the California utilities, SDG&E or SoCalGas, and Sempra North American Infrastructure, Sempra LNG, Sempra Mexico, Sempra Texas Utilities, Oncor and IEnova are not regulated by the CPUC.

None of the website references in this press release are active hyperlinks, and the information contained on, or that can be accessed through, any such website is not, and shall not be deemed to be, part of this document.

SEMPRA ENERGY
Table A

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended March 31,
	2021		2020
	(unaudited)
REVENUES
Utilities	$	2,845	$	2,665
Energy-related businesses	414		364
Total revenues	3,259		3,029

EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas	(349)		(337)
Cost of electric fuel and purchased power	(232)		(229)
Energy-related businesses cost of sales	(109)		(59)
Operation and maintenance	(1,001)		(851)
Aliso Canyon litigation and regulatory matters	—		(100)
Depreciation and amortization	(442)		(412)
Franchise fees and other taxes	(153)		(137)
Other income (expense), net	35		(254)
Interest income	19		27
Interest expense	(259)		(280)
Income from continuing operations before income taxes and equity earnings	768		397
Income tax (expense) benefit	(158)		207
Equity earnings	318		263
Income from continuing operations, net of income tax	928		867
Income from discontinued operations, net of income tax	—		80
Net income	928		947
Earnings attributable to noncontrolling interests	(33)		(151)
Preferred dividends	(21)		(36)

Earnings attributable to common shares	$	874	$	760

Basic earnings per common share (EPS):
Earnings	$	2.91	$	2.60
Weighted-average common shares outstanding	300,905		292,790

Diluted EPS:
Earnings	$	2.87	$	2.53
Weighted-average common shares outstanding	308,458		313,925

SEMPRA ENERGY

Table A (Continued)

RECONCILIATION OF SEMPRA ENERGY ADJUSTED EARNINGS TO SEMPRA ENERGY GAAP EARNINGS (Unaudited)

Sempra Energy Adjusted Earnings and Adjusted EPS exclude items (after the effects of income taxes and, if applicable, noncontrolling interests) in 2021 and 2020 as follows:

Three months ended March 31, 2021:

$3 million impact from foreign currency and inflation and associated undesignated derivatives
$(29) million net unrealized losses on commodity derivatives

Three months ended March 31, 2020:

$150 million impact from foreign currency and inflation and associated undesignated derivatives
$41 million net unrealized gains on commodity derivatives
$(72) million from impacts associated with Aliso Canyon natural gas storage facility litigation at Southern California Gas Company (SoCalGas)
$(100) million equity losses at RBS Sempra Commodities LLP, which represents an estimate of our obligations to settle pending tax matters and related legal costs at our equity method investment at Parent and Other

Sempra Energy Adjusted Earnings and Adjusted EPS are non-GAAP financial measures (GAAP represents generally accepted accounting principles in the United States of America). These non-GAAP financial measures exclude significant items that are generally not related to our ongoing business activities and/or are infrequent in nature. These non-GAAP financial measures also exclude the impact from foreign currency and inflation effects and associated undesignated derivatives and unrealized gains and losses on commodity derivatives, which we expect to occur in future periods, and which can vary significantly from one period to the next. Exclusion of these items is useful to management and investors because it provides a meaningful comparison of the performance of Sempra Energy’s business operations to prior and future periods. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. The table below reconciles for historical periods these non-GAAP financial measures to Sempra Energy GAAP Earnings and GAAP EPS, which we consider to be the most directly comparable financial measures calculated in accordance with GAAP.

SEMPRA ENERGY
Table A (Continued)

RECONCILIATION OF ADJUSTED EARNINGS TO GAAP EARNINGS
(Dollars in millions, except per share amounts; shares in thousands)
	Pretax amount		Income tax benefit⁽¹⁾		Non- controlling interests		Earnings		Pretax amount		Income tax (benefit) expense⁽¹⁾		Non- controlling interests		Earnings

	Three months ended March 31, 2021								Three months ended March 31, 2020
Sempra Energy GAAP Earnings							$	874							$	760
Excluded items:
Impact from foreign currency and inflation and associated undesignated derivatives	$	30	$	(42)	$	9	(3)		$	95	$	(353)	$	108	(150)
Net unrealized losses (gains) on commodity derivatives	46		(13)		(4)		29		(57)		16		—		(41)
Impacts associated with Aliso Canyon litigation	—		—		—		—		100		(28)		—		72
Losses from investment in RBS Sempra Commodities LLP	—		—		—		—		100		—		—		100
Sempra Energy Adjusted Earnings⁽²⁾							$	900							$	741

Diluted EPS:
Sempra Energy GAAP Earnings							$	874							$	760
Add back dividends for dilutive series A preferred stock							—								26
Add back dividends for dilutive series B preferred stock							10								10
Sempra Energy GAAP Earnings for GAAP EPS							$	884							$	796
Weighted-average common shares outstanding, diluted							308,458								313,925
Sempra Energy GAAP EPS							$	2.87							$	2.53

Sempra Energy Adjusted Earnings⁽²⁾							$	900							$	741
Add back dividends for dilutive series A preferred stock							—								26
Add back dividends for dilutive series B preferred stock							10								10
Sempra Energy Adjusted Earnings for Adjusted EPS⁽²⁾							$	910							$	777
Weighted-average common shares outstanding, diluted							308,458								313,925
Sempra Energy Adjusted EPS⁽²⁾							$	2.95							$	2.47


⁽¹⁾	Income taxes were primarily calculated based on applicable statutory tax rates. We did not record an income tax benefit for the equity losses from our investment in RBS Sempra Commodities LLP because, even though a portion of the liabilities may be deductible under United Kingdom tax law, it is not probable that the deduction will reduce United Kingdom taxes.
⁽²⁾	Adjusted Earnings, Adjusted Earnings for Adjusted EPS and Adjusted EPS have been updated to reflect impact from foreign currency and inflation and associated undesignated derivatives and net unrealized gains on commodity derivatives for the three months ended March 31, 2020.

SEMPRA ENERGY

Table A (Continued)

RECONCILIATION OF SEMPRA ENERGY 2021 ADJUSTED EPS GUIDANCE RANGE TO SEMPRA ENERGY 2021 GAAP EPS GUIDANCE RANGE (Unaudited)

Sempra Energy 2021 Adjusted EPS Guidance Range of $7.50 to $8.10 excludes items (after the effects of income taxes and, if applicable, noncontrolling interests) as follows:

$3 million impact from foreign currency and inflation and associated undesignated derivatives for the three months ended March 31, 2021
$(29) million net unrealized losses on commodity derivatives for the three months ended March 31, 2021

Sempra Energy 2021 Adjusted EPS Guidance is a non-GAAP financial measure. This non-GAAP financial measure excludes the impact from foreign currency and inflation and associated undesignated derivatives and unrealized gains and losses on commodity derivatives, which we expect to occur in future periods, and which can vary significantly from one period to the next. Exclusion of these items is useful to management and investors because it provides a meaningful comparison of the performance of Sempra Energy’s business operations to prior and future periods. Sempra Energy 2021 Adjusted EPS Guidance Range should not be considered an alternative to Sempra Energy 2021 GAAP EPS Guidance Range. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. The table below reconciles Sempra Energy 2021 Adjusted EPS Guidance Range to Sempra Energy 2021 GAAP EPS Guidance Range, which we consider to be the most directly comparable financial measure calculated in accordance with GAAP.

	RECONCILIATION OF ADJUSTED EPS GUIDANCE RANGE TO GAAP EPS GUIDANCE RANGE

		Full-Year 2021
	Sempra Energy GAAP EPS Guidance Range⁽¹⁾	$	7.42	to	$	8.02
	Excluded items:
	Impact from foreign currency and inflation and associated undesignated derivatives	(0.01)			(0.01)
	Net unrealized losses on commodity derivatives	0.09			0.09
	Sempra Energy Adjusted EPS Guidance Range	$	7.50	to	$	8.10
	Weighted-average common shares outstanding, diluted (millions)⁽²⁾				308

⁽¹⁾	Sempra Energy’s prior GAAP EPS Guidance Range for full-year 2021 of $7.50 to $8.10 has been updated to reflect the impact from foreign currency and inflation and undesignated derivatives and net unrealized losses on commodity derivatives for the three months ended March 31, 2021.
⁽²⁾	Weighted-average common shares outstanding does not include the dilutive effect of mandatory convertible preferred stock, as they are assumed to be antidilutive for full-year 2021. If such mandatory convertible preferred stock were dilutive for the full year, the 2021 GAAP EPS Guidance Range would differ from the range presented above.

SEMPRA ENERGY
Table B

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	March 31, 2021		December 31, 2020(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	725	$	960
Restricted cash	38		22
Accounts receivable – trade, net	1,595		1,578
Accounts receivable – other, net	393		403
Due from unconsolidated affiliates	26		20
Income taxes receivable	78		113
Inventories	274		308
Regulatory assets	183		190
Greenhouse gas allowances	555		553
Other current assets	333		364
Total current assets	4,200		4,511

Other assets:
Restricted cash	15		3
Due from unconsolidated affiliates	674		780
Regulatory assets	2,010		1,822
Nuclear decommissioning trusts	1,014		1,019
Investment in Oncor Holdings	12,553		12,440
Other investments	1,505		1,388
Goodwill	1,602		1,602
Other intangible assets	397		202
Dedicated assets in support of certain benefit plans	494		512
Insurance receivable for Aliso Canyon costs	414		445
Deferred income taxes	132		136
Greenhouse gas allowances	181		101
Right-of-use assets – operating leases	528		543
Wildfire fund	356		363
Other long-term assets	765		753
Total other assets	22,640		22,109
Property, plant and equipment, net	40,981		40,003
Total assets	$	67,821	$	66,623


⁽¹⁾	Derived from audited financial statements.

SEMPRA ENERGY
Table B (Continued)

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	March 31, 2021		December 31, 2020(1)
	(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	1,817	$	885
Accounts payable – trade	1,354		1,359
Accounts payable – other	141		154
Due to unconsolidated affiliates	42		45
Dividends and interest payable	595		551
Accrued compensation and benefits	273		446
Regulatory liabilities	437		140
Current portion of long-term debt and finance leases	505		1,540
Reserve for Aliso Canyon costs	152		150
Greenhouse gas obligations	555		553
Other current liabilities	1,004		1,016
Total current liabilities	6,875		6,839

Long-term debt and finance leases	22,023		21,781

Deferred credits and other liabilities:
Due to unconsolidated affiliates	258		234
Pension and other postretirement benefit plan obligations, net of plan assets	1,069		1,059
Deferred income taxes	3,114		2,871
Regulatory liabilities	3,333		3,372
Reserve for Aliso Canyon costs	285		301
Asset retirement obligations	3,121		3,113
Greenhouse gas obligations	41		—
Deferred credits and other	2,094		2,119
Total deferred credits and other liabilities	13,315		13,069
Equity:
Sempra Energy shareholders’ equity	23,999		23,373
Preferred stock of subsidiary	20		20
Other noncontrolling interests	1,589		1,541
Total equity	25,608		24,934
Total liabilities and equity	$	67,821	$	66,623


⁽¹⁾	Derived from audited financial statements.

SEMPRA ENERGY
Table C

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Three months ended March 31,
	2021		2020
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	928	$	947
Less: Income from discontinued operations, net of income tax	—		(80)
Income from continuing operations, net of income tax	928		867
Adjustments to reconcile net income to net cash provided by operating activities	446		175
Net change in working capital components	84		217
Distributions from investments	208		73
Insurance receivable for Aliso Canyon costs	31		(172)
Changes in other noncurrent assets and liabilities, net	(195)		90
Net cash provided by continuing operations	1,502		1,250
Net cash provided by discontinued operations	—		68
Net cash provided by operating activities	1,502		1,318

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(1,181)		(1,010)
Expenditures for investments and acquisitions	(115)		(86)
Proceeds from sale of assets	—		5
Purchases of nuclear decommissioning trust assets	(288)		(552)
Proceeds from sales of nuclear decommissioning trust assets	288		552
Advances to unconsolidated affiliates	(8)		(30)
Intercompany activities with discontinued operations, net	—		(3)
Other	3		8
Net cash used in continuing operations	(1,301)		(1,116)
Net cash used in discontinued operations	—		(65)
Net cash used in investing activities	(1,301)		(1,181)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	(301)		(269)
Preferred dividends paid	(36)		(36)
Issuances of common stock	—		11
Repurchases of common stock	(37)		(57)
Issuances of debt (maturities greater than 90 days)	102		1,619
Payments on debt (maturities greater than 90 days) and finance leases	(1,093)		(1,433)
Increase in short-term debt, net	932		2,127
Advances from unconsolidated affiliates	20		64
Proceeds from sale of noncontrolling interests	7		—
Purchases of noncontrolling interests	—		(16)
Intercompany activities with discontinued operations, net	—		(2)
Other	(1)		(5)
Net cash (used in) provided by continuing operations	(407)		2,003
Net cash provided by discontinued operations	—		111
Net cash (used in) provided by financing activities	(407)		2,114

Effect of exchange rate changes in continuing operations	(1)		(6)
Effect of exchange rate changes in discontinued operations	—		(8)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1)		(14)

(Decrease) increase in cash, cash equivalents and restricted cash, including discontinued operations	(207)		2,237
Cash, cash equivalents and restricted cash, including discontinued operations, January 1	985		217
Cash, cash equivalents and restricted cash, including discontinued operations, March 31	$	778	$	2,454

SEMPRA ENERGY
Table D

SEGMENT EARNINGS (LOSSES) AND CAPITAL EXPENDITURES, INVESTMENTS AND ACQUISITIONS
(Dollars in millions)
	Three months ended March 31,
	2021		2020
	(unaudited)
Earnings (Losses) Attributable to Common Shares
SDG&E	$	212	$	262
SoCalGas	407		303
Sempra Texas Utilities	135		105
Sempra Mexico	57		191
Sempra LNG	146		75
Parent and other	(83)		(248)
Discontinued operations	—		72
Total	$	874	$	760


	Three months ended March 31,
	2021		2020
	(unaudited)
Capital Expenditures, Investments and Acquisitions
SDG&E	$	555	$	402
SoCalGas	459		388
Sempra Texas Utilities	50		86
Sempra Mexico	142		170
Sempra LNG	89		47
Parent and other	1		3
Total	$	1,296	$	1,096

SEMPRA ENERGY
Table E

OTHER OPERATING STATISTICS
	Three months ended March 31,
	2021	2020
	(unaudited)
UTILITIES
*SDG&E and SoCalGas*
Gas sales (Bcf)⁽¹⁾	127	129
Transportation (Bcf)⁽¹⁾	137	148
Total deliveries (Bcf)⁽¹⁾	264	277

Total gas customer meters (thousands)	6,975	6,933

*SDG&E*
Electric sales (millions of kWhs)⁽¹⁾	3,289	3,460
Direct Access and Community Choice Aggregation (millions of kWhs)	813	769
Total deliveries (millions of kWhs)⁽¹⁾	4,102	4,229

Total electric customer meters (thousands)	1,486	1,475

*Oncor* *⁽²⁾*
Total deliveries (millions of kWhs)	30,677	30,420
Total electric customer meters (thousands)	3,781	3,703

*Ecogas*
Natural gas sales (Bcf)	1	1
Natural gas customer meters (thousands)	136	135


ENERGY-RELATED BUSINESSES
Power generated and sold
*Sempra Mexico*
Termoeléctrica de Mexicali (TdM) (millions of kWhs)	845	826
Wind and solar (millions of kWhs)⁽³⁾	543	422


⁽¹⁾	Include intercompany sales.
⁽²⁾	Includes 100% of the electric deliveries and customer meters of Oncor Electric Delivery Company LLC (Oncor), in which we hold an indirect 80.25% interest through our investment in Oncor Electric Delivery Holdings Company LLC.
⁽³⁾	Includes 50% of the total power generated and sold at the Energía Sierra Juárez wind power generation facility through March 19, 2021. As of March 19, 2021, ESJ became a wholly owned, consolidated subsidiary of IEnova.

SEMPRA ENERGY
Table F (Unaudited)

STATEMENTS OF OPERATIONS DATA BY SEGMENT
(Dollars in millions)
Three months ended March 31, 2021	SDG&E		SoCalGas		Sempra Texas Utilities		Sempra Mexico		Sempra LNG		Consolidating Adjustments, Parent & Other		Total

Revenues	$	1,337	$	1,508	$	—	$	367	$	196	$	(149)	$	3,259
Cost of sales and other expenses	(801)		(834)		(2)		(195)		(139)		127		(1,844)
Depreciation and amortization	(213)		(173)		—		(51)		(3)		(2)		(442)
Other income (expense), net	35		39		—		(43)		—		4		35
Income (loss) before interest and tax⁽¹⁾	358		540		(2)		78		54		(20)		1,008
Net interest (expense) income	(101)		(39)		—		(26)		6		(80)		(240)
Income tax (expense) benefit	(45)		(94)		—		(8)		(49)		38		(158)
Equity earnings, net	—		—		137		47		134		—		318
(Earnings) losses attributable to noncontrolling interests	—		—		—		(34)		1		—		(33)
Preferred dividends	—		—		—		—		—		(21)		(21)
Earnings (losses) attributable to common shares	$	212	$	407	$	135	$	57	$	146	$	(83)	$	874


Three months ended March 31, 2020	SDG&E		SoCalGas		Sempra Texas Utilities		Sempra Mexico		Sempra LNG		Consolidating Adjustments, Parent & Other		Total

Revenues	$	1,269	$	1,395	$	—	$	309	$	123	$	(67)	$	3,029
Cost of sales and other expenses	(679)		(872)		(1)		(137)		(87)		63		(1,713)
Depreciation and amortization	(201)		(159)		—		(47)		(2)		(3)		(412)
Other income (expense), net	31		30		—		(283)		—		(32)		(254)
Income (loss) before interest and tax⁽¹⁾	420		394		(1)		(158)		34		(39)		650
Net interest (expense) income	(100)		(39)		—		(14)		6		(106)		(253)
Income tax (expense) benefit	(58)		(52)		—		307		(23)		33		207
Equity earnings (losses), net	—		—		106		200		57		(100)		263
(Earnings) losses attributable to noncontrolling interests	—		—		—		(144)		1		—		(143)
Preferred dividends	—		—		—		—		—		(36)		(36)
Earnings (losses) from continuing operations	$	262	$	303	$	105	$	191	$	75	$	(248)	688
Earnings from discontinued operations													72
Earnings attributable to common shares													$	760


⁽¹⁾	Management believes Income (Loss) Before Interest and Tax is a useful measurement of our segments’ performance because it can be used to evaluate the effectiveness of our operations exclusive of interest and income tax, neither of which is directly relevant to the efficiency of those operations.

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SOURCE Sempra Energy

May 5, 2021 6:58 am

Connect America Acquires Philips Aging and Caregiving Business

Combined Business Will Service an Expanded Customer Base of PERS and Senior Living Subscribers and Healthcare Providers with Innovative Technologies in Connected Care across the U.S. and in Canada

PR Newswire

BALA CYNWYD, Pa., May 5, 2021 /PRNewswire/ — Connect America.com, LLC, a nationally recognized leading innovator in connected health solutions, announced today that it has signed a definitive agreement to acquire the Aging and Caregiving (ACG) business from Royal Philips (NYSE: PHG). The ACG business offers the Lifeline Personal Emergency Response System (PERS) and senior living solutions with 24/7 access to trained care specialists, and digital solutions that help caregivers stay connected and coordinate their loved one’s needs. North American subscribers of both Connect America and ACG will benefit from expanded service offerings and new innovations in connected care. Financial terms of the deal will not be disclosed. Subject to regulatory approvals, the deal is expected to close in the weeks ahead. Philips will maintain an equity stake in the company. Until close, the two companies will continue to operate fully independently and competitively.

As a leading innovator helping to shape technology and solutions across the connected health continuum, Connect America is an independent provider of medical alert systems in North America and has become known as a leader in technology solutions that help aging individuals and vulnerable populations to feel safe and connected without losing their independence. With the addition of the ACG business, Connect America will further leverage its strength in innovation and technology solutions to serve stakeholders in the PERS market in both the consumer and healthcare segments. Detroit-based Rockbridge Growth Equity remains the lead investor and will continue to provide strategic support for Connect America.

“Connect America and Philips ACG’s shared commitment to supporting the aging journey for our subscribers and caregivers, as well as our highly complementary offerings make this acquisition a very exciting opportunity to expand our impact and better serve our subscribers,” said Janet Dillione, CEO, Connect America. “Philips ACG has been an experienced provider of digital caregiving, monitoring, and senior living solutions for more than 35 years, offering a connected data-driven ecosystem to customers across North America. Together as one team, we will deliver an unmatched, state-of-the-art health management platform.”

“Both Philips ACG, with its Lifeline Personal Emergency Response services, and Connect America have a rich history of innovation and delivering customer value. Our joining forces will bring two market innovators together to provide exciting new opportunities for our employees, subscribers, and healthcare network partners,” said Derek Ross, business leader of Philips ACG.

“Connect America’s mission is to help to address some of the most serious challenges facing patients and providers. Acquiring Philips’ ACG business will allow us to expand our ability to serve our subscribers and partners by bringing additional connected care products and services to individuals and caregivers throughout North America,” said Richard Brooks, President, Connect America Healthcare. “Philips ACG subscribers and providers will benefit from our web-based platform that enables clinicians to better manage chronic conditions and educates individuals on how to better monitor their own health.”

“This acquisition solidifies Connect America’s position in shaping the future of the connected health space and the innovative, value-added solutions that can be delivered to our customers. We are excited for the opportunity to grow our technology offerings and expand our geographic coverage in both the U.S. and Canadian markets,” added Dillione.

About Connect America
Headquartered in Bala Cynwyd, Pa., Connect America is a leading provider of connected health solutions dedicated to improving access to care, safety, independence, and quality of life. Its growing portfolio of medical alert systems, remote patient monitoring, and medication management solutions help bridge the gap between individuals and their health partners, providing a more connected health experience.

Connect America is proud to offer innovative healthcare technologies that help improve the lives of those they serve. For more than 40 years, the company and its wholly owned subsidiaries, have been delivering value-based solutions committed to quality care, improved health outcomes, increased patient satisfaction, and reduced costs. Its mission is to ensure that every individual, patient, and provider has access to the life-saving benefits of receiving the right care at the right time. To learn more, visit https://www.connectamerica.com.

CONTACT:

Allison Gumbs

Connect America
[email protected]

Kim Warth

Amendola Communications
[email protected]

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SOURCE Connect America

May 5, 2021 6:58 am

Emerson Reports Second Quarter 2021 Results, Raises 2021 Outlook

Emerson Reports Second Quarter 2021 Results, Raises 2021 Outlook

Q2 Net Sales of $4.4 billion up 6 percent from the year prior; Underlying Sales up 2 percent, both ahead of February guidance
Q2 EPS was $0.93, up 11 percent from the year prior; Adjusted EPS, which excludes restructuring and first year purchase accounting charges, was $0.97, up 9 percent, both ahead of February guidance
Operating Cash Flow of $807 million in the quarter, up 37 percent; Free Cash Flow (FCF) was $707 million, up 48 percent, resulting in FCF conversion of 125 percent
Restructuring and related actions of $21 million were initiated in the quarter, continuing execution of the comprehensive cost reset program to return the company to record adjusted EBIT margins

ST. LOUIS–(BUSINESS WIRE)–
Emerson (NYSE: EMR) today reported results for the second fiscal quarter ended March 31, 2021.

“I remain proud, humbled, and energized by the exceptional advances and adaptability I’m seeing across the enterprise,” said Emerson President and CEO Lal Karsanbhai. “We have two major concurrent themes building momentum within the organization. First, the enthusiasm and progress around modernizing our culture is palpable, particularly with regard to diversity and inclusion, work practices, and talent management. These initiatives are not just good practice, but are expected to be key business enablers for Emerson’s outperformance and value creation going forward. We will share more details on this vital work and our overall sustainability progress in our upcoming ESG Report which will be published in June.

“Secondly, economic recovery momentum is building across most of our key end markets, which resulted in better than expected top line results this quarter. Trailing three month underlying orders ended on the high side of the guided range, and underlying sales came in above guidance – a strong signal for broadening recovery. Residential markets and shorter cycle automation markets continue to show strength, while commercial and longer cycle automation markets should continue their steady recovery during the second half of the year. Importantly, we will continue to drive the remaining elements of our comprehensive cost reset plan as we target achieving record margins. Lastly, we are accelerating investment in innovation and key technologies that drive differentiation, create value for our customers, and are aligned with global macrotrends such as sustainability and digital transformation.”

Second quarter Net Sales were up 6 percent and Underlying Sales were up 2 percent, excluding favorable currency of 3 percent and an impact from acquisitions of 1 percent. Revenue for the quarter was ahead of management’s February guidance, with both business platforms finishing above expectations. The Americas improved sequentially, but was down 4 percent year over year, as residential and cold chain strength was more than offset by a more sluggish process automation recovery. Europe was up 7 percent, while Asia, Middle East & Africa grew by 12 percent, driven by China which recovered sharply by 45 percent.

March Trailing Three-Month Underlying Orders were up 4 percent (improved from down 2 percent in February), in the upper portion of guidance, as strength in residential, cold chain, professional tools, hybrid and discrete automation markets more than offset later cycle process automation markets.

Second quarter Gross Profit Margin of 42.0 percent was down 10 basis points from the previous year primarily due to business mix, as the recovery in Commercial & Residential Solutions outpaced Automation Solutions. Pretax Margin of 16.6 percent was flat while EBIT Margin of 17.5 percent was up 10 basis points, as ongoing comprehensive cost reduction actions were largely offset by higher costs due to the mark-to-market stock compensation plan, which produced an unfavorable impact of 230 basis points. The stock price in the prior year was sharply lower than current year as a result of the pandemic induced drop. Adjusted EBIT Margin, which excludes restructuring and first year purchase accounting charges, was 18.2 percent for the quarter, down 20 basis points.

Earnings Per Share were $0.93 for the quarter, up 11 percent, and Adjusted Earnings Per Share were $0.97, up 9 percent. Earnings in the quarter exceeded management guidance, benefiting from better volume and ongoing cost reduction actions.

Operating Cash Flow was $807 million for the quarter, up 37 percent, and $1.6 billion year-to-date, up 60 percent. Free Cash Flow was $707 million, up 48 percent for the quarter, resulting in strong free cash flow conversion of 125 percent. Year-to-date, Free Cash Flow was $1.4 billion, up 77 percent. Cash flow results reflected higher earnings due to operational execution across the two business platforms and favorable trade working capital.

Business Platform Results

Automation Solutions net sales increased 3 percent in the quarter, with underlying sales down 2 percent, which was ahead of February guidance. Results reflected ongoing strength across discrete and hybrid markets, and improvement across MRO and installed base programs (KOB3). Discrete oriented businesses grew high single digits, while systems and software grew low single digits. Recovery in the Americas continues to lag, but exceeded our expectations and showed sequential improvement with underlying sales down 12 percent compared to down 20 percent in Q1. Continued momentum in life sciences, food & beverage, and medical markets paired with lagging but stabilizing trends across most process industries. Europe underlying sales were up 6 percent, driven by power and biofuels demand. Asia, Middle East & Africa underlying sales grew 9 percent, as recovery in China (up 42 percent), more than offset softness in SE Asia and the Middle East.

March trailing three-month underlying orders were down 5 percent (improvement from down 9 percent in February), reflecting an ongoing lagging recovery in many process automation markets, partially offset by strength across most discrete and hybrid automation markets. Importantly, however, process automation MRO and installed base targeted programs (KOB3) showed sequential improvement. The Americas improved, but continues to be the trailing geography, down 10 percent. Asia, Middle East & Africa declined modestly by 4 percent, supported by China orders increasing sharply by 19 percent, largely driven by demand in discrete markets. Europe was up by 7 percent, also supported by discrete businesses. Backlog was unchanged from the prior quarter at $5.3 billion, but was up 14 percent year-to-date.

Segment EBIT margin increased 240 basis points to 16.8 percent, on down sales, as savings from cost actions and favorable price-cost more than offset volume deleverage and mix. Adjusted segment EBIT margin, which excludes restructuring and related costs, increased 180 basis points to 17.3 percent. Total restructuring and related actions in the quarter totaled $14 million.

Commercial & Residential Solutions net sales increased 13 percent in the quarter, with underlying sales up 11 percent, at the top end of previous guidance. Underlying sales in the Americas were up 8 percent, reflecting continued strong demand in residential markets and improvement in cold chain and professional tools businesses. Similarly, Europe was up 9 percent as heat pump demand was driven by sustainability regulations and customer technology preferences. Asia, Middle East & Africa was up 24 percent, bolstered by China, up 56 percent due to strong commercial HVAC and cold chain demand.

March trailing three-month underlying orders were up 21 percent (improvement from up 14 percent in February), with high single digit or double digit growth across all businesses and geographies. Ongoing strength in residential facing markets was bolstered by cold chain and professional tools momentum. The Americas was up 19 percent, while Europe was up 15 percent, driven by demand for heat pumps and other energy efficient appliance technologies. Asia, Middle East & Africa orders increased by 32 percent, driven by growth in China of over 60 percent. Backlog increased by approximately $200 million in the quarter, ending at a record $1.0 billion. Backlog was up 58 percent year-to-date.

Segment EBIT margin increased 70 basis points to 21.7 percent as leverage and cost reductions were somewhat offset by price-cost headwinds. Adjusted segment EBIT margin, which excludes restructuring and related costs, increased 40 basis points to 22.0 percent. Total restructuring and related actions in the quarter totaled $5 million.

2021 Updated Outlook

Despite ongoing pandemic challenges in some parts of the world, we expect overall continued improvement in industrial and commercial demand over the remainder of 2021. We also expect that residential demand will remain robust, but begin to taper in the second half.

The following table summarizes the updated 2021 guidance framework:

2021 Guidance
Net Sales Growth	6% – 9%	Operating Cash Flow	~$3.3B
Automation Solutions	3% – 5%	Capital Spend	~$600M
Commercial & Residential Solutions	14% – 16%	Free Cash Flow	~$2.7B
		Dividend	~$1.2B
Underlying Sales Growth	3% – 6%	Share Repurchase
Automation Solutions	(1%) – 1%	/ M&A (excl. OSI)¹	$500M – $1.0B
Commercial & Residential Solutions	12% – 14%

Pretax Margin	~15.5%	Tax Rate	~22%
Adjusted EBIT	~17.5%	Restructuring Actions	~$200M
Adjusted EBITDA	22.5%+

GAAP EPS	$3.60 +/- $.05
Adjusted EPS	$3.90 +/- $.05

Note 1: OSI Inc. closed on Oct. 1, 2020, the first day of the fiscal year.

Upcoming Investor Events

Today, beginning at 8:30 a.m. Central Time / 9:30 a.m. Eastern Time, Emerson management will discuss the second quarter results during an investor conference call. Participants can access a live webcast available at www.emerson.com/financial at the time of the call. A replay of the call will be available for 90 days. Conference call slides will be posted in advance of the call on the company website.

Forward-Looking and Cautionary Statements

Statements in this press release that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the scope, duration and ultimate impact of the COVID-19 pandemic as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, among others, as set forth in the Company’s most recent Annual Report on Form 10-K and subsequent reports filed with the SEC.

			Table 1
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

	Quarter Ended March 31		Percent
	2020	2021	Change

Net sales	$4,162	$4,431	6%
Costs and expenses:
Cost of sales	2,412	2,569
SG&A expenses	983	1,054
Other deductions, net	42	33
Interest expense, net	36	38
Earnings before income taxes	689	737	7%
Income taxes	165	169
Net earnings	524	568
Less: Noncontrolling interests in earnings of subsidiaries	7	7
Net earnings common stockholders	$517	$561	9%

Diluted avg. shares outstanding	611.0	602.8

Diluted earnings per share common share	$0.84	$0.93	11%


	Quarter Ended March 31
	2020	2021
Other deductions, net
Amortization of intangibles	$59	$74
Restructuring costs	31	17
Other	(48)	(58)
Total	$42	$33

			Table 2
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS
(AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

	Six Months Ended March 31		Percent
	2020	2021	Change

Net sales	$8,313	$8,592	3%
Costs and expenses:
Cost of sales	4,804	5,007
SG&A expenses	2,106	2,052
Other deductions, net	220	155
Interest expense, net	71	78
Earnings before income taxes	1,112	1,300	17%
Income taxes	259	280
Net earnings	853	1,020
Less: Noncontrolling interests in earnings of subsidiaries	10	14
Net earnings common stockholders	$843	$1,006	19%

Diluted avg. shares outstanding	612.6	602.3

Diluted earnings per share common share	$1.37	$1.67	22%


	Six Months Ended March 31
	2020	2021
Other deductions, net
Amortization of intangibles	$118	$152
Restructuring costs	128	83
Special advisory fees	13	—
Other	(39)	(80)
Total	$220	$155

		Table 3
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, UNAUDITED)

	Quarter Ended March 31
	2020	2021
Assets
Cash and equivalents	$2,583	$2,342
Receivables, net	2,641	2,754
Inventories	2,058	2,016
Other current assets	750	849
Total current assets	8,032	7,961
Property, plant & equipment, net	3,553	3,663
Goodwill	6,520	7,787
Other intangible assets	2,498	3,095
Other	1,108	1,294
Total assets	$21,711	$23,800

Liabilities and equity
Short-term borrowings and current maturities of long-term debt	$3,741	$1,456
Accounts payable	1,521	1,797
Accrued expenses	2,678	3,041
Total current liabilities	7,940	6,294
Long-term debt	3,960	5,823
Other liabilities	2,248	2,503
Total equity	7,563	9,180
Total liabilities and equity	$21,711	$23,800

			Table 4
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS, UNAUDITED)



	Six Months Ended March 31
		2020	2021
Operating activities
Net earnings		$853	$1,020
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		422	483
Stock compensation		18	125
Pension expense		34	16
Changes in operating working capital		(260)	66
Other, net		(55)	(95)
Cash provided by operating activities		1,012	1,615

Investing activities
Capital expenditures		(225)	(222)
Purchases of businesses, net of cash and equivalents acquired		(96)	(1,611)
Other, net		(42)	61
Cash used in investing activities		(363)	(1,772)

Financing activities
Net increase in short-term borrowings		2,076	60
Proceeds from short-term borrowings greater than three months		433	—
Payments of long-term debt		(502)	(301)
Dividends paid		(611)	(606)
Purchases of common stock		(942)	(78)
Other, net		39	83
Cash provided by (used in) financing activities		493	(842)

Effect of exchange rate changes on cash and equivalents		(53)	26
Increase (Decrease) in cash and equivalents		1,089	(973)
Beginning cash and equivalents		1,494	3,315
Ending cash and equivalents		$2,583	$2,342

		Table 5
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS, UNAUDITED)

	Quarter Ended March 31
	2020	2021
Sales
Measurement & Analytical Instrumentation	$776	$732
Valves, Actuators & Regulators	854	836
Industrial Solutions	494	555
Systems & Software	585	670
Automation Solutions	2,709	2,793

Climate Technologies	1,026	1,160
Tools & Home Products	432	485
Commercial & Residential Solutions	1,458	1,645

Eliminations	(5)	(7)
Net sales	$4,162	$4,431

Earnings
Automation Solutions	$391	$471

Climate Technologies	217	245
Tools & Home Products	89	112
Commercial & Residential Solutions	306	357

Stock compensation	38	(61)
Unallocated pension and postretirement costs	12	23
Corporate and other	(22)	(15)
Interest expense, net	(36)	(38)
Earnings before income taxes	$689	$737

Restructuring costs
Automation Solutions	$23	$12

Climate Technologies	2	3
Tools & Home Products	5	1
Commercial & Residential Solutions	7	4

Corporate	1	1
Total	$31	$17

The table above does not include $9 and $4 of costs related to restructuring actions that were reported in cost of sales and selling, general and administrative expenses for the three months ended March 31, 2020 and 2021, respectively.

Depreciation and Amortization
Automation Solutions	$138	$156

Climate Technologies	45	47
Tools & Home Products	19	20
Commercial & Residential Solutions	64	67

Corporate and other	9	16
Total	$211	$239

		Table 6
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS, UNAUDITED)

	Six Months Ended March 31
	2020	2021
Sales
Measurement & Analytical Instrumentation	$1,571	$1,430
Valves, Actuators & Regulators	1,767	1,642
Industrial Solutions	1,001	1,063
Systems & Software	1,222	1,350
Automation Solutions	5,561	5,485

Climate Technologies	1,899	2,191
Tools & Home Products	862	930
Commercial & Residential Solutions	2,761	3,121

Eliminations	(9)	(14)
Net sales	$8,313	$8,592

Earnings
Automation Solutions	$701	$832

Climate Technologies	368	457
Tools & Home Products	175	210
Commercial & Residential Solutions	543	667

Stock compensation	(18)	(125)
Unallocated pension and postretirement costs	25	47
Corporate and other	(68)	(43)
Interest expense, net	(71)	(78)
Earnings before income taxes	$1,112	$1,300

Restructuring costs
Automation Solutions	$106	$76

Climate Technologies	9	4
Tools & Home Products	8	2
Commercial & Residential Solutions	17	6

Corporate	5	1
Total	$128	$83

The table above does not include $9 and $7 of costs related to restructuring actions that were reported in cost of sales and selling, general and administrative expenses for the six months ended March 31, 2020 and 2021, respectively.

Depreciation and Amortization	$277	$312
Automation Solutions

Climate Technologies	89	96
Tools & Home Products	38	39
Commercial & Residential Solutions	127	135

Corporate and other	18	36
Total	$422	$483

Reconciliations of Non-GAAP Financial Measures & Other				Table 7
Reconciliations of Non-GAAP measures (denoted by *) with the most directly comparable GAAP measure (dollars in millions, except per share amounts):

Q2 2021 Underlying Sales Change	Auto Solns			Comm & Res Solns			Emerson
Reported (GAAP)	3		%	13		%	6	%
(Favorable) / Unfavorable FX	(3)		%	(2)		%	(3)	%
Acquisitions / Divestitures	(2)		%	—		%	(1)	%
Underlying*	(2)		%	11		%	2	%

FY 2021E Underlying Sales Change	Auto Solns			Comm & Res Solns			Emerson
Reported (GAAP)	3% – 5%			14% – 16%			6% – 9%
(Favorable) / Unfavorable FX	~ (3)%			~ (2)%			~(2)%
Acquisitions / Divestitures	~ (1)%			~ – %			~(1)%
Underlying*	(1)% – 1%			12% – 14%			3% – 6%

Q2 Earnings Per Share	Q2 FY20			Q2 FY21			Change
Earnings per share (GAAP)	$	0.84		$	0.93		11	%
Restructuring	0.05			0.03			(3)	%
OSI purchase accounting items	—			0.01			1	%
Adjusted earnings per share*	$	0.89		$	0.97		9	%

Earnings Per Share	FY2021E
Earnings per share (GAAP)	$3.55 – $3.65
Restructuring	~ 0.26
OSI purchase accounting items & fees	~ 0.07
Equity investment gain	~ (0.03)
Adjusted earnings per share*	$3.85 – $3.95

EBIT Margin	Q2 FY20			Q2 FY21			Change		FY21E
Pretax margin (GAAP)	16.6		%	16.6		%	– bps		~15.5%
Interest expense, net	0.8		%	0.9		%	10 bps		1.0%
Earnings before interest and taxes margin*	17.4		%	17.5		%	10 bps		~16.5%
Restructuring	1.0		%	0.5		%	(50) bps		1.0%
OSI purchase accounting items	—		%	0.2		%	20 bps		0.1%
Equity investment gain	—		%	—		%	– bps		(0.1)%
Adjusted earnings before interest and taxes margin*	18.4		%	18.2		%	(20) bps		~17.5%
Depreciation and amortization expense									5.0%
Adjusted earnings before interest, taxes, depreciation and amortization margin*									~22.5%+

Automation Solutions Segment EBIT Margin	Q2 FY20			Q2 FY21			Change
Automation Solutions Segment EBIT margin (GAAP)	14.4		%	16.8		%	240 bps
Restructuring and related charges impact	1.1		%	0.5		%	(6) bps
Automation Solutions Adjusted Segment EBIT margin*	15.5		%	17.3		%	180 bps

Commercial & Residential EBIT Margin	Q2 FY20			Q2 FY21			Change
Commercial & Residential EBIT margin (GAAP)	21.0		%	21.7		%	70 bps
Restructuring and related charges impact	0.6		%	0.3		%	(30) bps
Commercial & Residential Adjusted EBIT margin*	21.6		%	22.0		%	40 bps

Q2 Cash Flow	Q2 FY20			Q2 FY21			Change
Operating cash flow (GAAP)	$	588		$	807			37%
Capital expenditures	(111)			(100)				11%
Free cash flow*	$	477		$	707			48%

Cash Flow	Q2 YTD FY20			Q2 YTD FY21			% Change
Operating cash flow (GAAP)	$	1,012		$	1,615			60%
Capital expenditures	(225)			(222)				17%
Free cash flow*	$	787		$	1,393			77%

FY 2021E Cash Flow	FY 2021E
Operating cash flow (GAAP)	~ $3,300
Capital expenditures	~ (600)
Free cash flow*	~ $2,700

Cash Flow to Net Earnings Conversion	Q2 FY21
Operating cash flow to net earnings (GAAP)	142		%
Capital expenditures	(17)		%
Free cash flow to net earnings*	125		%

Note: Underlying sales and orders exclude the impact of acquisitions, divestitures and currency translation.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005522/en/

Investor Contact: Pete Lilly (314) 553-2197

Media Contact: Casey Murphy (314) 982-6220

KEYWORDS: United States North America Missouri

INDUSTRY KEYWORDS: Electronic Design Automation Engineering Technology Oil/Gas Manufacturing Energy Software

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May 5, 2021 6:58 am

AECOM to provide program management services for Dallas Independent School District’s $3.5 billion 2020 Bond Program

AECOM to provide program management services for Dallas Independent School District’s $3.5 billion 2020 Bond Program

LOS ANGELES–(BUSINESS WIRE)–
AECOM (NYSE: ACM), the world’s premier infrastructure consulting firm, today announced that it has been selected to provide program management services for Phase 1 of the $3.5 billion Dallas Independent School District (DISD) 2020 Bond Program, its fourth consecutive contract with the district. AECOM has previously provided program management services for DISD’s 2002, 2008, and 2015 Bond Programs.

“We’re excited to extend our successful, longstanding partnership with DISD and to support the roll out of this first wave of projects under the 2020 Bond Program,” said Drew Jeter, chief executive of AECOM’s global Program Management business. “As part of our Think and Act Globally strategy, a key focus for us is investing in our leading program management capabilities and expanding the advisory services we provide clients. Through collaboration across our organization, our technical and professional experts are focused on ensuring we bring forward the best of AECOM to all of our work, including this important program in Dallas.”

AECOM will provide oversight and coordination of designers, consultants, contractors, and vendors as well as estimating, scheduling, and program control services on projects encompassing the construction of new facilities and upgrades to existing facilities.

“We’re proud to be part of this important work, which will have a positive, lasting impact on students across the district for years to come,” said Travis Boone, chief executive of AECOM’s US West region. “This win demonstrates our sustained leading position in educational program management and is yet another example of how we’re providing a wide variety of services to improve critical infrastructure systems in major cities across the globe.”

DISD is the second largest public school district in Texas, serving more than 150,000 students at 226 campuses. Goals of the 2020 Bond Program include renovating or replacing aging schools, providing technology for students to learn virtually, and creating resource centers in neighborhoods identified as most in need.

About AECOM

AECOM (NYSE: ACM) is the world’s premier infrastructure consulting firm, delivering professional services throughout the project lifecycle – from planning, design and engineering to program and construction management. On projects spanning transportation, buildings, water, energy and the environment, our public- and private-sector clients trust us to solve their most complex challenges. Our teams are driven by a common purpose to deliver a better world through our unrivaled technical expertise and innovation, a culture of equity, diversity and inclusion, and a commitment to environmental, social and governance priorities. AECOM is a Fortune 500 firm and its Professional Services business had revenue of $13.2 billion in fiscal year 2020. See how we deliver what others can only imagine at aecom.com and @AECOM.

Forward-Looking Statements

All statements in this communication other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any statements of the plans, strategies and objectives for future operations, profitability, strategic value creation, coronavirus impacts, risk profile and investment strategies, and any statements regarding future economic conditions or performance, and the expected financial and operational results of AECOM. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, but are not limited to, the following: our business is cyclical and vulnerable to economic downturns and client spending reductions; impacts caused by the coronavirus and the related economic instability and market volatility, including the reaction of governments to the coronavirus, including any prolonged period of travel, commercial or other similar restrictions, the delay in commencement, or temporary or permanent halting of construction, infrastructure or other projects, requirements that we remove our employees or personnel from the field for their protection, and delays or reductions in planned initiatives by our governmental or commercial clients or potential clients; losses under fixed-price contracts; limited control over operations run through our joint venture entities; liability for misconduct by our employees or consultants; failure to comply with laws or regulations applicable to our business; maintaining adequate surety and financial capacity; high leverage and potential inability to service our debt and guarantees; exposure to Brexit; exposure to political and economic risks in different countries; currency exchange rate fluctuations; retaining and recruiting key technical and management personnel; legal claims; inadequate insurance coverage; environmental law compliance and adequate nuclear indemnification; unexpected adjustments and cancellations related to our backlog; partners and third parties who may fail to satisfy their legal obligations; AECOM Capital real estate development projects; managing pension cost; cybersecurity issues, IT outages and data privacy; risks associated with the benefits and costs of the Power transaction and other recent acquisitions and divestitures, including the risk that the expected benefits of such transactions or any contingent purchase price will not be realized within the expected time frame, in full or at all; the risk that costs of restructuring transactions and other costs incurred in connection with recent acquisitions and divestitures will exceed our estimates or otherwise adversely affect our business or operations; as well as other additional risks and factors that could cause actual results to differ materially from our forward-looking statements set forth in our reports filed with the Securities and Exchange Commission. Any forward-looking statements are made as of the date hereof. We do not intend, and undertake no obligation, to update any forward-looking statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005151/en/

Media Contact:

Brendan Ranson-Walsh

Vice President, Global Communications & Corporate Responsibility

1.213.996.2367

[email protected]

Investor Contact:

Will Gabrielski

Senior Vice President, Finance & Investor Relations

1.213.593.8208

[email protected]

KEYWORDS: California Texas United States North America

INDUSTRY KEYWORDS: Commercial Building & Real Estate Construction & Property Consulting Engineering Professional Services Manufacturing Other Education Education Residential Building & Real Estate

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May 5, 2021 6:58 am

Ryder CEO to Address Goldman Sachs Industrials and Materials Conference

Ryder CEO to Address Goldman Sachs Industrials and Materials Conference

MIAMI–(BUSINESS WIRE)–
Ryder System, Inc. (NYSE: R) Chairman and Chief Executive Officer Robert Sanchez will present a company update at the Goldman Sachs Industrials and Materials Virtual Conference.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210505005023/en/

Ryder System, Inc. Chairman and Chief Executive Officer Robert Sanchez (Photo: Business Wire)

Who:				Ryder System, Inc. Chairman and Chief Executive Officer Robert Sanchez

What:				Goldman Sachs Industrials and Materials Conference

Where:				Virtual Event

When:				Wednesday, May 12, 2021

Time:				3:30 p.m. Eastern Daylight Time

Webcast:				To access the live webcast, visit http://investors.ryder.com.

About Ryder

Ryder System, Inc. (NYSE: R) is a leading logistics and transportation company. It provides supply chain, dedicated transportation, and fleet management solutions, including full service leasing, rental, and maintenance, used vehicle sales, professional drivers, transportation services, freight brokerage, warehousing and distribution, e-commerce fulfillment, and last mile delivery services, to some world’s most-recognized brands. Ryder provides services throughout the United States, Mexico, Canada, and the United Kingdom. In addition, Ryder manages nearly 235,000 commercial vehicles and operates more than 300 warehouses encompassing approximately 64 million square feet. Ryder is regularly recognized for its industry-leading practices in third-party logistics, technology-driven innovations, commercial vehicle maintenance, environmentally friendly solutions, corporate social responsibility, world-class safety and security programs, military veteran recruitment initiatives, and the hiring of a diverse workforce. www.ryder.com

Note Regarding Forward-Looking Statements: Certain statements and information included in this news release are “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties that could cause actual results and events to differ materially from those in the forward-looking statements including those risks set forth in our periodic filings with the Securities and Exchange Commission. New risks emerge from time to time. It is not possible for management to predict all such risk factors or to assess the impact of such risks on our business. Accordingly, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

ryder-financial

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View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005023/en/

Amy Federman

(305) 500-4989

[email protected]

Bob Brunn

(305) 500-4053

[email protected]

KEYWORDS: Florida United States North America

INDUSTRY KEYWORDS: Fleet Management Automotive Trucking Rail Automotive Manufacturing Logistics/Supply Chain Management Transport Manufacturing

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Ryder System, Inc. Chairman and Chief Executive Officer Robert Sanchez (Photo: Business Wire)

May 5, 2021 6:53 am

Exelon Reports First Quarter 2021 Results

Exelon Reports First Quarter 2021 Results

Earnings Release Highlights

GAAP Net Loss of $(0.30) per share and Adjusted (non-GAAP) Operating Loss of $(0.06) per share for the first quarter of 2021
Affirming range for full year 2021 adjusted (non-GAAP) operating earnings guidance of $2.60-$3.00 per share
Strong utility reliability performance – all gas utilities achieved top decile in gas odor response and every utility achieved top quartile in outage frequency and outage duration
Generation’s nuclear fleet capacity factor was 95.3% (owned and operated units)
PECO filed an electric distribution rate case with the PAPUC in March and ComEd filed its annual distribution formula rate update with the ICC in April. Both cases are seeking an increase in electric distribution base rates to support investments that will enhance the reliability of the grid and enable the advancement of clean technologies and renewable energy.

CHICAGO–(BUSINESS WIRE)–
Exelon Corporation (Nasdaq: EXC) today reported its financial results for the first quarter of 2021.

“Our utility businesses performed at a high level both financially and operationally during the first quarter, and we continue to invest in customer service and grid modernization across our six utilities,” said Christopher M. Crane, president and CEO of Exelon. “The generation business overall was strong, and we are implementing cost savings to offset losses from the unprecedented Texas storms. Looking ahead, we remain on track with the planned separation of our generation and utility businesses and are encouraged by growing momentum for federal and state clean energy policies that, if approved, will leave both standalone companies uniquely positioned to aid our nation’s transition to a carbon-free future.”

“Utility adjusted (non-GAAP) operating earnings was 11 cents per share higher than a year ago and ahead of plan, and excluding the storm impact, Exelon Generation would have earned adjusted (non-GAAP) operating earnings of 32 cents per share, which was in keeping with expectations,” said Joseph Nigro, senior executive vice president and CFO of Exelon. “The Texas storms and subsequent generation outages resulted in a 90 cents per share impact to operating earnings, though we expect to narrow some of that loss over the course of the year. The strong utility results and continued cost-savings measures at Generation reduced our adjusted (non-GAAP) operating loss for the quarter to $0.06 cents per share and we are affirming our full-year adjusted (non-GAAP) operating earnings guidance of $2.60 to $3.00 per share.”

First Quarter 2021

Exelon’s GAAP Net Loss for the first quarter of 2021 decreased to $(0.30) per share from $0.60 GAAP Net Income per share in the first quarter of 2020. Adjusted (non-GAAP) Operating Loss for the first quarter of 2021 decreased to $(0.06) per share from $0.87 Adjusted (non-GAAP) Operating Earnings per share in the first quarter of 2020. For the reconciliations of GAAP Net Loss to Adjusted (non-GAAP) Operating Loss, refer to the tables beginning on page 6.

Adjusted (non-GAAP) Operating Loss in the first quarter of 2021 primarily reflect:

Lower Generation earnings primarily due to the impacts of the February 2021 extreme cold weather event; partially offset by
Higher utility earnings primarily due to higher electric distribution earnings at ComEd from higher rate base and higher allowed ROE due to an increase in treasury rates; the favorable impacts of the multi-year plan at BGE; regulatory rate increases at PHI; and favorable weather conditions at PECO and PHI.

Operating Company Results¹

ComEd

ComEd’s first quarter of 2021 GAAP Net Income increased to $197 million from $168 million in the first quarter of 2020. ComEd’s Adjusted (non-GAAP) Operating Earnings for the first quarter of 2021 increased to $198 million from $168 million in the first quarter of 2020, primarily due to higher electric distribution earnings from higher rate base and higher allowed ROE due to an increase in treasury rates. Due to revenue decoupling, ComEd’s distribution earnings are not affected by actual weather or customer usage patterns.

PECO

PECO’s first quarter of 2021 GAAP Net Income increased to $167 million from $140 million in the first quarter of 2020. PECO’s Adjusted (non-GAAP) Operating Earnings for the first quarter of 2021 increased to $170 million from $140 million in the first quarter of 2020, primarily due to favorable weather conditions and favorable volume.

BGE

BGE’s first quarter of 2021 GAAP Net Income increased to $209 million from $181 million in the first quarter of 2020. BGE’s Adjusted (non-GAAP) Operating Earnings increased to $211 million from $182 million in the first quarter of 2020, primarily due to the favorable impacts of the multi-year plan. Due to revenue decoupling, BGE’s distribution earnings are not affected by actual weather or customer usage patterns.

PHI

PHI’s first quarter of 2021 GAAP Net Income increased to $128 million from $108 million in the first quarter of 2020. PHI’s Adjusted (non-GAAP) Operating Earnings for the first quarter of 2021 increased to $130 million from $110 million in the first quarter of 2020, primarily due to regulatory rate increases and favorable weather conditions in Delaware and New Jersey. Due to revenue decoupling, PHI’s distribution earnings related to Pepco Maryland, DPL Maryland and Pepco District of Columbia are not affected by actual weather or customer usage patterns.

Generation

Generation had a GAAP Net Loss of $(793) million in the first quarter of 2021 compared with GAAP Net Income of $45 million in the first quarter of 2020. Generation had an Adjusted (non-GAAP) Operating Loss of $(571) million in the first quarter of 2021 compared with Adjusted (non-GAAP) Operating Earnings of $312 million in the first quarter of 2020, primarily due to the impacts of the February 2021 extreme cold weather event.

As of March 31, 2021, the percentage of expected generation hedged is 94%-97% for 2021.

___________

¹Exelon’s five business units include ComEd, which consists of electricity transmission and distribution operations in northern Illinois; PECO, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania; BGE, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland; PHI, which consists of electricity transmission and distribution operations in the District of Columbia and portions of Maryland, Delaware, and New Jersey and retail natural gas distribution operations in northern Delaware; and Generation, which consists of owned and contracted electric generating facilities and wholesale and retail customer supply of electric and natural gas products and services, including renewable energy products and risk management services.

Recent Developments and First Quarter Highlights

Planned Separation: On Feb. 25, 2021, Exelon and Generation filed applications with the Federal Energy Regulatory Commission (FERC), New York State Department of Public Service (NYPSC), and Nuclear Regulatory Commission (NRC) seeking approvals for the separation of Generation. On March 25, 2021, Exelon filed a request for a private letter ruling with the Internal Revenue Service (IRS) to confirm the tax-free treatment of the planned separation. Exelon and Generation expect a decision from the FERC and the IRS in the third quarter of 2021, the NRC in the fourth quarter of 2021, and have requested a decision from the NYPSC before the end of 2021 but cannot predict if the applications will be approved as filed. Exelon is targeting the completion of the separation in the first quarter of 2022.

Impacts of the February 2021 Extreme Cold Weather Event and Texas-based Generating Assets Outages: Beginning on Feb. 15, 2021, Generation’s Texas-based generating assets within the Electric Reliability Council of Texas (ERCOT) market, specifically Colorado Bend II, Wolf Hollow II, and Handley, experienced outages as a result of extreme cold weather conditions. In addition, those weather conditions drove increased demand for service, dramatically increased wholesale power prices, and also increased gas prices in certain regions. In response to the high demand and significantly reduced total generation on the system, the Public Utility Commission of Texas (PUCT) directed ERCOT to use an administrative price cap of $9,000 per megawatt hour during firm load shedding events.
The estimated impact to Exelon’s and Generation’s Net income for the first quarter of 2021 arising from these market and weather conditions was a reduction of approximately $880 million. The first quarter estimated impact includes certain charges associated with the natural gas business that may be reduced through waivers and/or recoveries from customers. Therefore, such charges are not included in the estimated full year earnings impact. Exelon and Generation estimate a reduction in Net income of approximately $670 million to $820 million for the full year 2021. The ultimate impact to Exelon’s and Generation’s consolidated financial statements may be affected by a number of factors, including final settlement data, the impacts of customer and counterparty credit losses, any state or federal solutions to address the financial challenges caused by the event, and related litigation and contract disputes. Various parties, including Generation, have filed requests with the PUCT to void the PUCT’s orders setting prices at $9,000 per megawatt hour during firm load shedding events and to enforce its order and reduce prices for 32 hours between February 18 and February 19 after firm load shedding ceased. Appeals of certain of the PUCT’s orders also have been filed in state court. Exelon and Generation cannot predict the outcome of these proceedings or the financial statement impact.

Exelon expects to offset between $410 million and $490 million of this impact for the full year 2021 primarily at Generation through a combination of enhanced revenue opportunities, deferral of selected non-essential maintenance, and primarily one-time cost savings.

ComEd Distribution Formula Rate: On April 16, 2021, ComEd filed its annual distribution formula rate update with the Illinois Commerce Commission (ICC). The ICC approval is due by December 2021 and the rates will take effect in January 2022. The filing request includes an increase of $40 million for the initial year revenue requirement for 2022 and an increase of $11 million related to the annual reconciliation for 2020. The revenue requirement for 2022 provides for a weighted average debt and equity return on distribution rate base of 5.72%, inclusive of an allowed ROE of 7.36%, reflecting the average monthly yields for 30-year treasury bonds plus 580 basis points. The reconciliation revenue requirement for 2020 provides for a weighted average debt and equity return on distribution rate base of 5.69%, inclusive of an allowed ROE of 7.29%, reflecting the average monthly yields for 30-year treasury bonds plus 580 basis points less a performance metrics penalty of 7 basis points.

PECO Pennsylvania Electric Distribution Rate Case: On March 30, 2021, PECO filed an application with the Pennsylvania Public Utility Commission (PAPUC) to increase its annual electric distribution rates by $246 million, reflecting an ROE of 10.95%. PECO currently expects a decision in the fourth quarter of 2021 but cannot predict if the PAPUC will approve the application as filed.

Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100% of the CENG units, produced 43,466 gigawatt-hours (GWhs) in the first quarter of 2021, compared with 42,555 GWhs in the first quarter of 2020. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 95.3% capacity factor for the first quarter of 2021, compared with 93.9% for the first quarter of 2020. The number of planned refueling outage days in the first quarter of 2021 totaled 84, compared with 94 in the first quarter of 2020. There were 3 non-refueling outage days in the first quarter of 2021 and 11 in the first quarter of 2020.

Fossil and Renewables Operations: The Dispatch Match rate for Generation’s gas and hydro fleet was 68.5% in the first quarter of 2021, compared with 98.2% in the first quarter of 2020. The lower performance in the quarter was attributed to unplanned outages at Texas-based generating assets during the February 2021 extreme cold-weather event.

Energy Capture for the wind and solar fleet was 96.4% in the first quarter of 2021, compared with 94.7% in the first quarter of 2020.

Financing Activities:

On March 9, 2021, ComEd issued $700 million of its First Mortgage 3.13% Bonds, Series 130, due March 15, 2051. ComEd used the proceeds to repay existing indebtedness and for general corporate purposes.

On March 8, 2021, PECO issued $375 million of its First and Refunding Mortgage Bonds, 3.05% Series due March 15, 2051. PECO used the proceeds for general corporate purposes.

On March 30, 2021, Pepco issued $150 million of its First Mortgage Bonds, 2.32% Series due March 30, 2031. Pepco used the proceeds to repay existing indebtedness and for general corporate purposes.

On March 30, 2021, DPL issued $125 million of its First Mortgage Bonds, 3.24% Series due March 30, 2051. DPL used the proceeds to repay existing indebtedness and for general corporate purposes.

On March 10, 2021, ACE issued $350 million of its First Mortgage Bonds, 2.30% Series due March 15, 2031. ACE used the proceeds to repay existing indebtedness and for general corporate purposes.

GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliation

Adjusted (non-GAAP) Operating Earnings (Loss) for the first quarter of 2021 do not include the following items (after tax) that were included in reported GAAP Net Income (Loss):

(in millions)

Exelon

Earnings per

Diluted

Share

Exelon

ComEd

PECO

BGE

PHI

Generation

2021 GAAP Net Income (Loss)

$

(0.30

)

$

(289

)

$

197

$

167

$

209

$

128

$

(793

)

Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $46 and $45, respectively)

(0.14

)

(135

)

—

—

—

—

(134

)

Unrealized Losses Related to Nuclear Decommissioning Trust (NDT) Fund Investments (net of taxes of $40)

0.04

43

—

—

—

—

43

Plant Retirements and Divestitures (net of taxes of $103)

0.32

310

—

—

—

—

310

Cost Management Program (net of taxes of $0)

—

1

—

—

—

—

1

Change in Environmental Liabilities (net of taxes of $1)

—

2

—

—

—

—

2

COVID-19 Direct Costs (net of taxes of $4, $1, $0, and $3, respectively)

0.01

10

—

1

1

—

8

Acquisition Related Costs (net of taxes of $2)

0.01

6

—

—

—

—

6

ERP System Implementation Costs (net of taxes of $1, $0, $0, $0, and $1, respectively)

0.01

5

—

1

1

1

2

Planned Separation Costs (net of taxes of $2, $0, $0, $0, and $1, respectively)

0.01

7

1

1

—

1

2

Income Tax-Related Adjustments (entire amount represents tax expense)

—

(2

)

—

—

—

—

—

Noncontrolling Interests (net of taxes of $6)

(0.02

)

(17

)

—

—

—

—

(17

)

2021 Adjusted (non-GAAP) Operating Earnings (Loss)

$

(0.06

)

$

(60

)

$

198

$

170

$

211

$

130

$

(571

)

Adjusted (non-GAAP) Operating Earnings for the first quarter of 2020 do not include the following items (after tax) that were included in reported GAAP Net Income:

(in millions)

Exelon

Earnings per

Diluted

Share

Exelon

ComEd

PECO

BGE

PHI

Generation

2020 GAAP Net Income

$

0.60

$

582

$

168

$

140

$

181

$

108

$

45

Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $32 and $33, respectively)

(0.10

)

(94

)

—

—

—

—

(97

)

Unrealized Losses Related to NDT Fund Investments (net of taxes of $405)

0.50

485

—

—

—

—

485

Asset Impairments (net of taxes of $1)

—

2

—

—

—

—

2

Plant Retirements and Divestitures (net of taxes of $4)

0.01

13

—

—

—

—

13

Cost Management Program (net of taxes of $3, $0, $1, and $3, respectively)

0.01

9

—

—

1

2

8

Income Tax-Related Adjustments (entire amount represents tax expense)

—

(2

)

—

—

—

—

—

Noncontrolling Interests (net of taxes of $30)

(0.15

)

(144

)

—

—

—

—

(144

)

2020 Adjusted (non-GAAP) Operating Earnings

$

0.87

$

851

$

168

$

140

$

182

$

110

$

312

Note:

Amounts may not sum due to rounding.

Unless otherwise noted, the income tax impact of each reconciling item between GAAP Net Income (Loss) and Adjusted (non-GAAP) Operating Earnings (Loss) is based on the marginal statutory federal and state income tax rates for each Registrant, taking into account whether the income or expense item is taxable or deductible, respectively, in whole or in part. For all items except the unrealized losses related to NDT fund investments, the marginal statutory income tax rates for 2021 and 2020 ranged from 25.0% to 29.0%. Under IRS regulations, NDT fund investment returns are taxed at different rates for investments if they are in qualified or non-qualified funds. The effective tax rates for the unrealized losses related to NDT fund investments were 48.0% and 45.5% for the three months ended March 31, 2021 and 2020, respectively.

Webcast Information

Exelon will discuss first quarter 2021 earnings in a conference call scheduled for today at 9 a.m. Central Time (10 a.m. Eastern Time). The webcast and associated materials can be accessed at www.exeloncorp.com/investor-relations.

About Exelon

Exelon Corporation (Nasdaq: EXC) is a Fortune 100 energy company with the largest number of electricity and natural gas customers in the U.S. Exelon does business in 48 states, the District of Columbia, and Canada and had 2020 revenue of $33 billion. Exelon serves approximately 10 million customers in Delaware, the District of Columbia, Illinois, Maryland, New Jersey, and Pennsylvania through its Atlantic City Electric, BGE, ComEd, Delmarva Power, PECO, and Pepco subsidiaries. Exelon is one of the largest competitive U.S. power generators, with more than 31,000 megawatts of nuclear, gas, wind, solar and hydroelectric generating capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets. The company’s Constellation business unit provides energy products and services to approximately 2 million residential, public sector, and business customers, including three fourths of the Fortune 100. Follow Exelon on Twitter @Exelon.

Non-GAAP Financial Measures

In addition to net income as determined under generally accepted accounting principles in the United States (GAAP), Exelon evaluates its operating performance using the measure of Adjusted (non-GAAP) Operating Earnings because management believes it represents earnings directly related to the ongoing operations of the business. Adjusted (non-GAAP) Operating Earnings exclude certain costs, expenses, gains and losses, and other specified items. This measure is intended to enhance an investor’s overall understanding of period over period operating results and provide an indication of Exelon’s baseline operating performance excluding items that are considered by management to be not directly related to the ongoing operations of the business. In addition, this measure is among the primary indicators management uses as a basis for evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting of future periods. Adjusted (non-GAAP) Operating Earnings is not a presentation defined under GAAP and may not be comparable to other companies’ presentation. The Company has provided the non-GAAP financial measure as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. Adjusted (non-GAAP) Operating Earnings should not be deemed more useful than, a substitute for, or an alternative to the most comparable GAAP Net Income measures provided in this earnings release and attachments. This press release and earnings release attachments provide reconciliations of Adjusted (non-GAAP) Operating Earnings to the most directly comparable financial measures calculated and presented in accordance with GAAP, are posted on Exelon’s website: www.exeloncorp.com, and have been furnished to the Securities and Exchange Commission on Form 8-K on May 5, 2021.

Cautionary Statements Regarding Forward-Looking Information

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties including, among others, those related to the timing, manner, tax-free nature, and expected benefits associated with the potential separation of Exelon’s competitive power generation and customer-facing energy business from its six regulated electric and gas utilities. Words such as “could,” “may,” “expects,” “anticipates,” “will,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “predicts,” and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic, and financial performance, are intended to identify such forward-looking statements.

The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company, Pepco Holdings LLC, Potomac Electric Power Company, Delmarva Power & Light Company, and Atlantic City Electric Company (Registrants) include those factors discussed herein, as well as the items discussed in (1) the Registrants’ 2020 Annual Report on Form 10-K in (a) Part I, ITEM 1A. Risk Factors, (b) Part II, ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and (c) Part II, ITEM 8. Financial Statements and Supplementary Data: Note 19, Commitments and Contingencies; (2) the Registrants’ First Quarter 2021 Quarterly Report on Form 10-Q (to be filed on May 5, 2021) in (a) Part II, ITEM 1A. Risk Factors, (b) Part I, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and (c) Part I, ITEM 1. Financial Statements: Note 14, Commitments and Contingencies; and (3) other factors discussed in filings with the SEC by the Registrants.

Investors are cautioned not to place undue reliance on these forward-looking statements, whether written or oral, which apply only as of the date of this press release. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this press release.

Exelon

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions, except per share data)

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

GAAP (a)

Non-GAAP

Adjustments

GAAP (a)

Non-GAAP

Adjustments

Operating revenues

$

9,890

$

83

(b)

$

8,747

$

(179

)

(b)

Operating expenses

Purchased power and fuel

5,968

204

(b),(c)

3,867

(48

)

(b)

Operating and maintenance

1,979

173

(c),(d),(e),(f),

(g),(h),(i)

2,204

(21

)

(c),(d),(l)

Depreciation and amortization

1,697

(642

)

(c)

1,021

(10

)

(c)

Taxes other than income taxes

438

—

437

—

Total operating expenses

10,082

7,529

Gain on sales of assets and businesses

71

(68

)

(c)

2

—

Operating (loss) income

(121

)

1,220

Other income and (deductions)

Interest expense, net

(386

)

(3

)

(b)

(410

)

16

(b)

Other, net

225

80

(b),(j)

(725

)

879

(b),(j)

Total other income and (deductions)

(161

)

(1,135

)

(Loss) income before income taxes

(282

)

85

Income taxes

(19

)

109

(b),(c),(e),(f),

(g),(h),(i),(j)

(294

)

382

(b),(c),(d),(j),

(l)

Equity in losses of unconsolidated affiliates

(1

)

—

(3

)

—

Net (loss) income

(264

)

376

Net income (loss) attributable to noncontrolling interests

25

18

(k)

(206

)

144

(k)

Net income (loss) attributable to common shareholders

$

(289

)

$

582

Effective tax rate^(m)

6.7

%

(345.9

)%

Earnings per average common share

Basic

$

(0.30

)

$

0.60

Diluted

$

(0.30

)

$

0.60

Average common shares outstanding

Basic

977

975

Diluted

977

976

__________

(a)

Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(b)
Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations.

(c)
In 2021, adjustment to exclude accelerated depreciation and amortization associated with Generation’s decision in the third quarter of 2020 to early retire Byron and Dresden nuclear facilities in 2021 and Mystic Units 8 and 9 in 2024, partially offset by a gain on sale of Generation’s solar business. In 2020, adjustment to exclude accelerated depreciation and amortization expenses associated with the early retirement of certain fossil sites.

(d)
Adjustment to exclude reorganization related to cost management programs.

(e)
Adjustment to exclude costs related to the acquisition of Electricite de France SA’s (EDF’s) interest in CENG.

(f)
Adjustment to exclude changes in environmental liabilities.

(g)
Adjustment to exclude direct costs related to COVID-19 consisting primarily of costs to acquire personal protective equipment, costs for cleaning supplies and services, and costs to hire healthcare professionals to monitor the health of employees.

(h)
Adjustment to exclude costs related to the planned separation primarily comprised of third-party costs paid to advisors, consultants, lawyers, and other experts assisting in the planned separation as well as employee-related severance costs.

(i)
Adjustment to exclude costs related to a multi-year Enterprise Resource Program (ERP) system implementation.

(j)
Adjustment to exclude the impact of net unrealized losses on Generation’s NDT fund investments for Non-Regulatory and Regulatory Agreement Units. The impacts of the Regulatory Agreement Units, including the associated income taxes, are contractually eliminated, resulting in no earnings impact.

(k)
Adjustment to exclude elimination from Generation’s results of the noncontrolling interests related to certain exclusion items, primarily related to unrealized gains and losses on NDT fund investments for CENG units.

(l)
Adjustment to exclude certain asset impairments.

(m)
The effective tax rate related to Adjusted (non-GAAP) Operating Earnings is 120.0% and 10.0% for the three months ended March 31, 2021 and 2020, respectively.

ComEd

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions)

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

GAAP (a)

Non-GAAP

Adjustments

GAAP (a)

Non-GAAP

Adjustments

Operating revenues

$

1,535

$

—

$

1,439

$

—

Operating expenses

Purchased power and fuel

527

—

486

—

Operating and maintenance

316

(1)

(b)

317

—

Depreciation and amortization

292

—

273

—

Taxes other than income taxes

75

—

75

—

Total operating expenses

1,210

1,151

Operating income

325

288

Other income and (deductions)

Interest expense, net

(96

)

—

(94

)

—

Other, net

7

—

10

—

Total other income and (deductions)

(89

)

(84

)

Income before income taxes

236

204

Income taxes

39

—

36

—

Net income

$

197

$

168

__________

(a)
Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(b)
Adjustment to exclude costs related to the planned separation primarily comprised of third-party costs paid to advisors, consultants, lawyers, and other experts assisting in the planned separation as well as employee-related severance costs.

PECO

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions)

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

GAAP (a)

Non-GAAP

Adjustments

GAAP (a)

Non-GAAP

Adjustments

Operating revenues

$

889

$

—

$

813

$

—

Operating expenses

Purchased power and fuel

316

—

283

—

Operating and maintenance

234

(4)

(b)

217

—

Depreciation and amortization

86

—

86

—

Taxes other than income taxes

43

—

39

—

Total operating expenses

679

625

Operating income

210

188

Other income and (deductions)

Interest expense, net

(38

)

—

(36

)

—

Other, net

5

—

3

—

Total other income and (deductions)

(33

)

(33

)

Income before income taxes

177

155

Income taxes

10

1

(b)

15

—

Net income

$

167

$

140

__________

(a)
Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(b)
Adjustment to exclude reorganization costs related to cost management programs and direct costs related to COVID-19 consisting primarily of costs to acquire personal protective equipment, costs for cleaning supplies and services, and costs to hire healthcare professionals to monitor the health of employees.

BGE

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions)

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

GAAP (a)

Non-GAAP

Adjustments

GAAP (a)

Non-GAAP

Adjustments

Operating revenues

$

974

$

—

$

937

$

—

Operating expenses

Purchased power and fuel

331

—

288

—

Operating and maintenance

197

(3)

(b),(c)

188

(1)

(d)

Depreciation and amortization

152

—

143

—

Taxes other than income taxes

72

—

69

—

Total operating expenses

752

688

Operating income

222

249

Other income and (deductions)

Interest expense, net

(34

)

—

(32

)

—

Other, net

8

—

5

—

Total other income and (deductions)

(26

)

(27

)

Income before income taxes

196

222

Income taxes

(13

)

1

(b),(c)

41

—

Net income

$

209

$

181

__________

(a)
Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(b)
Adjustment to exclude direct costs related to COVID-19 consisting primarily of costs to acquire personal protective equipment, costs for cleaning supplies and services, and costs to hire healthcare professionals to monitor the health of employees.

(c)
Adjustment to exclude costs related to a multi-year Enterprise Resource Program (ERP) system implementation.

(d)
Adjustment to exclude reorganization costs related to cost management programs.

PHI

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions)

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

GAAP (a)

Non-GAAP

Adjustments

GAAP (a)

Non-GAAP

Adjustments

Operating revenues

$

1,244

$

—

$

1,171

$

—

Operating expenses

Purchased power and fuel

479

—

435

—

Operating and maintenance

256

(3)

(b),(c)

257

(3)

(d)

Depreciation and amortization

210

—

194

—

Taxes other than income taxes

113

—

114

—

Total operating expenses

1,058

1,000

Gain on sales of assets

—

—

2

—

Operating income

186

173

Other income and (deductions)

Interest expense, net

(67

)

—

(67

)

—

Other, net

17

—

13

—

Total other income and (deductions)

(50

)

(54

)

Income before income taxes

136

119

Income taxes

8

1

(b),(c)

11

1

(d)

Net income

$

128

$

108

__________

(a)
Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(b)
Adjustment to exclude costs related to a multi-year Enterprise Resource Program (ERP) system implementation.

(c)
Adjustment to exclude costs related to the planned separation primarily comprised of third-party costs paid to advisors, consultants, lawyers, and other experts assisting in the planned separation as well as employee-related severance costs.

(d)
Adjustment to exclude reorganization costs related to cost management programs.

Generation

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions)

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

GAAP (a)

Non-GAAP

Adjustments

GAAP (a)

Non-GAAP

Adjustments

Operating revenues

$

5,559

$

83

(b)

$

4,733

$

(179)

(b)

Operating expenses

Purchased power and fuel

4,610

204

(b),(c)

2,704

(48)

(b)

Operating and maintenance

1,001

186

(c),(d),(e),(f),

(g),(h),(i)

1,263

(20)

(c),(d),(l)

Depreciation and amortization

940

(642

)

(c)

304

(10)

(c)

Taxes other than income taxes

121

—

129

—

Total operating expenses

6,672

4,400

Gain on sales of assets and businesses

71

(68)

(c)

—

—

Operating income (loss)

(1,042

)

333

Other income and (deductions)

Interest expense, net

(72

)

(3)

(b)

(109

)

12

(b)

Other, net

167

82

(j)

(771

)

879

(b),(j)

Total other income and (deductions)

95

(880

)

Income (loss) before income taxes

(947

)

(547

)

Income taxes

(179

)

105

(b),(c),(e),(f),

(g),(h),(i),(j)

(389

)

379

(b),(c),(d).(j),

(l)

Equity in losses of unconsolidated affiliates

(1

)

—

(3

)

—

Net income (loss)

(769

)

(161

)

Net (loss) income attributable to noncontrolling interests

24

18

(k)

(206

)

144

(k)

Net income (loss) attributable to membership interest

$

(793

)

$

45

__________

(a)
Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(b)
Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations.

(c)
In 2021, adjustment to exclude accelerated depreciation and amortization associated with Generation’s decision in the third quarter of 2020 to early retire Byron and Dresden nuclear facilities in 2021 and Mystic Units 8 and 9 in 2024, partially offset by a gain on sale of Generation’s solar business. In 2020, adjustment to exclude accelerated depreciation and amortization expenses associated with the early retirement of certain fossil sites.

(d)
Adjustment to exclude reorganization costs related to cost management programs.

(e)
Adjustment to exclude costs related to the acquisition of Electricite de France SA’s (EDF’s) interest in CENG.

(f)
Adjustment to exclude changes in environmental liabilities.

(g)
Adjustment to exclude direct costs related to COVID-19 consisting primarily of costs to acquire personal protective equipment, costs for cleaning supplies and services, and costs to hire healthcare professionals to monitor the health of employees.

(h)
Adjustment to exclude costs related to the planned separation primarily comprised of third-party costs paid to advisors, consultants, lawyers, and other experts assisting in the planned separation as well as employee-related severance costs.

(i)
Adjustment to exclude costs related to a multi-year Enterprise Resource Program (ERP) system implementation.

(j)
Adjustment to exclude the impact of net unrealized losses on Generation’s NDT fund investments for Non-Regulatory and Regulatory Agreement Units. The impacts of the Regulatory Agreement Units, including the associated income taxes, are contractually eliminated, resulting in no earnings impact.

(k)
Adjustment to exclude elimination from Generation’s results of the noncontrolling interests related to certain exclusion items, primarily related to unrealized gains and losses on NDT fund investments for CENG units.

(l)
Adjustment to exclude certain asset impairments.

Other (a)

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions)

Three Months Ended

March 31, 2021

Three Months Ended

March 31, 2020

GAAP (b)

Non-GAAP

Adjustments

GAAP (b)

Non-GAAP

Adjustments

Operating revenues

$

(311

)

$

—

$

(346

)

$

—

Operating expenses

Purchased power and fuel

(295

)

—

(329

)

—

Operating and maintenance

(25

)

(2

)

(c)

(38

)

3

(f)

Depreciation and amortization

17

—

21

—

Taxes other than income taxes

14

—

11

—

Total operating expenses

(289

)

(335

)

Operating loss

(22

)

(11

)

Other income and (deductions)

Interest expense, net

(79

)

—

(72

)

4

(d)

Other, net

21

(2

)

(d)

15

—

Total other income and (deductions)

(58

)

(57

)

Loss before income taxes

(80

)

(68

)

Income taxes

116

1

(c),(d),(e)

(8

)

2

(d),(e),(f)

Net loss

(196

)

(60

)

Net income attributable to noncontrolling interests

1

—

Net loss attributable to common shareholders

$

(197

)

$

(60

)

__________

(a)
Other primarily includes eliminating and consolidating adjustments, Exelon’s corporate operations, shared service entities, and other financing and investment activities.

(b)
Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(c)
Adjustment to exclude costs related to the planned separation primarily comprised of third-party costs paid to advisors, consultants, lawyers, and other experts assisting in the planned separation as well as employee-related severance costs.

(d)
Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations.

(e)
Adjustment to exclude income tax-related adjustments.

(f)
Adjustment to exclude reorganization related to cost management programs.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005403/en/

Paul Adams

Corporate Communications

410-245-8717

Emily Duncan

Investor Relations

312-394-2345

KEYWORDS: United States North America Illinois Maryland Pennsylvania

INDUSTRY KEYWORDS: Other Energy Environment Oil/Gas Alternative Energy Energy Nuclear

MEDIA:

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Posted on May 5, 2021 6:53 am
Waters Corporation (NYSE: WAT) Reports First Quarter 2021 Financial Results

Waters Corporation (NYSE: WAT) Reports First Quarter 2021 Financial Results

Salesof $609 million grew 31% as reported and 27% in constant currency

GAAP EPS of $2.37; non-GAAP EPS of $2.29, a 99% increase from prior year

Adjusted free cash flow of $193 million, a 60% increase from prior year

Double-digit sales growth across all end markets and product categories

Broad-based growth across all geographies, led by triple-digit growth in China

MILFORD, Mass.–(BUSINESS WIRE)–
Waters Corporation (NYSE: WAT)today announced first quarter 2021 sales of $609 million, a 31% increase as reported, compared to sales of $465 million for the first quarter of 2020. Foreign currency translation benefited sales growth by approximately 4% for the quarter.

On a GAAP basis, diluted earnings per share (EPS) for the first quarter of 2021 increased to $2.37, compared to $0.86 for the first quarter of 2020. On a non-GAAP basis, EPS increased to $2.29, compared to $1.15 for the first quarter of 2020. A description and reconciliation of GAAP to non-GAAP results appear in the tables below and can be found on the Company’s website www.waters.com in the Investor Relations section.

On a GAAP basis, net cash provided by operating activities was $218 million for the first quarter of 2021, compared to $152 million for the first quarter of 2020. On a non-GAAP basis, adjusted free cash flow for the first quarter of 2021 was $193 million versus $121 million for the first quarter of 2020.

“I remain grateful to our colleagues for their continued hard work and commitment, especially to those who are experiencing the devastating effects of the pandemic,” said Dr. Udit Batra, President and Chief Executive Officer of Waters Corporation. “There is much to be pleased about with our first quarter results, driven by strong growth across each of our major end markets, with pharma leading the way. Thanks to solid execution and instrument sales growing in double-digits, we saw revenue increases across every region, with China’s sales more than doubling. Our transformation plan is well underway, with commercial momentum and a strong leadership team in place, we now turn towards developing a new strategy as we work to more closely align our portfolio with higher growth areas of the market.”

Unless otherwise noted, sales growth and decline percentages are presented on an as-reported basis and are the same as the sales growth and decline percentages presented on a constant-currency basis as compared with the same period in the prior year, each of which is detailed in the reconciliation of sales growth rates to constant-currency growth rates in the tables below.

During the first quarter of 2021, sales into the pharmaceutical market increased 32% as reported and 28% in constant currency, sales into the industrial market increased 28% as reported and 24% in constant currency and sales into the academic and government markets increased 33% as reported and 29% in constant currency.

During the first quarter, recurring revenues, which represent the combination of service and precision chemistries revenues, increased 20% as reported and 15% in constant currency, while instrument system sales increased 49% as reported and 45% in constant currency.

Geographically, sales in Asia during the quarter increased 44% as reported and 41% in constant currency, sales in the Americas increased 15% as reported and 14% in constant currency (with U.S. sales growing 13%) and sales in Europe increased 36% as reported and 25% in constant currency.

Second Quarter and Fiscal Year 2021 Financial Outlook

The Company expects full-year 2021 constant-currency sales growth in the range of 8% to 11%. Currency translation is expected to increase full-year sales growth by one to two percentage points. The Company also expects full-year 2021 non-GAAP EPS in the range of $9.85 to $10.05. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the full-year.

The Company expects second quarter 2021 constant-currency sales growth in the range of 14% to 16%. Currency translation is expected to increase second quarter sales growth by approximately three percentage points. The Company also expects second quarter 2021 non-GAAP EPS in the range of $2.15 to $2.25. Please refer to the tables below for a reconciliation of the projected GAAP to non-GAAP financial outlook for the second quarter.

Conference Call

Waters Corporation will webcast its first quarter 2021 financial results conference call today, May 5, 2021 at 8:00 a.m. Eastern Time. To listen to the call, please visit www.waters.com, select “Investors” under the “About Waters” section, and click on the “Live Webcast.” A replay will be available through May 12, 2021 at midnight Eastern Time on the same website by webcast and also by phone at 866-485-4163.

About Waters Corporation

Waters Corporation (NYSE: WAT), the world’s leading specialty measurement company, has pioneered chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences for more than 60 years. With more than 7,400 employees worldwide, Waters operates directly in 35 countries, including 14 manufacturing facilities, and with products available in more than 100 countries. For more information, visit www.waters.com.

Non-GAAP Financial Measures

This press release contains financial measures, such as constant-currency growth rate, adjusted operating income, adjusted net income, adjusted earnings per diluted share and adjusted free cash flow, among others, which are considered “non-GAAP” financial measures under applicable U.S. Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company’s definitions of these non-GAAP measures may differ from similarly titled measures used by others. The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management’s financial and operational decision-making, including evaluation of the Company’s historical operating results, comparison to competitors’ operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting the Company’s business. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.

Cautionary Statement

This release contains “forward-looking” statements regarding future results and events. For this purpose, any statements that are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words “feels”, “believes”, “anticipates”, “plans”, “expects”, “intends”, “suggests”, “appears”, “estimates”, “projects” and similar expressions, whether in the negative or affirmative, are intended to identify forward-looking statements. The Company’s actual future results may differ significantly from the results discussed in the forward-looking statements within this release for a variety of reasons, including and without limitation, risks related to the effects of the ongoing COVID-19 pandemic on our business, financial condition, results of operations and prospects, including: portions of our global workforce being unable to work fully and/or effectively due to working remotely, illness, quarantines, government actions, facility closures or other reasons related to the pandemic, increased risks of cyber-attacks resulting from our temporary remote working model, disruptions in our manufacturing capabilities or to our supply chain, volatility and uncertainty in global capital markets limiting our ability to access capital, customers being unable to make timely payments for purchases and volatility in demand for our products; foreign exchange rate fluctuations potentially affecting translation of the Company’s future non-U.S. operating results; the impact on demand for the Company’s products among the Company’s various market sectors or geographies from economic, sovereign and political uncertainties, particularly regarding the effect of new or proposed tariff or trade regulations or changes in the interpretation or enforcement of existing regulations; the effect on the Company’s financial results from the United Kingdom exiting the European Union; fluctuations in expenditures by the Company’s customers, in particular large pharmaceutical companies; introduction of competing products by other companies and loss of market share; pressures on prices from competitors and/or customers; regulatory, economic and competitive obstacles to new product introductions; other changes in demand for the Company’s products from the effect of mergers and acquisitions by the Company’s customers; increased regulatory burdens as the Company’s business evolves, especially with respect to the U.S. Food and Drug Administration and U.S. Environmental Protection Agency, among others; shifts in taxable income in jurisdictions with different effective tax rates; the outcome of tax examinations or changes in respective country legislation affecting the Company’s effective tax rate; the effect of the adoption of new accounting standards; the ability to access capital, maintain liquidity and service the Company’s debt in volatile market conditions, particularly in the U.S., as a large portion of the Company’s cash is held and operating cash flows are generated outside the U.S.; environmental and logistical obstacles affecting the distribution of products and risks associated with lawsuits and other legal actions, particularly involving claims for infringement of patents and other intellectual property rights. Such factors and others are discussed more fully in the sections entitled “Forward-Looking Statements” and “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”), which discussions are incorporated by reference in this release, as updated by the Company’s future filings with the SEC. The forward-looking statements included in this release represent the Company’s estimates or views as of the date of this release and should not be relied upon as representing the Company’s estimates or views as of any date subsequent to the date of this release. Except as required by law, the Company does not assume any obligation to update any forward-looking statements.

Waters Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended

April 3, 2021

March 28, 2020

Net sales
$

608,545

$

464,939

Costs and operating expenses:

Cost of sales

254,147

210,644

Selling and administrative expenses

143,196

147,735

Research and development expenses

38,092

34,989

Purchased intangibles amortization

1,840

2,625

Litigation provision

–

666

Operating income

171,270

68,280

Other income (expense), net

9,359

(374

)

Interest expense, net

(6,845

)

(10,043

)

Income from operations before income taxes

173,784

57,863

Provision for income taxes

25,657

4,301

Net income
$

148,127

$

53,562

Net income per basic common share
$

2.38

$

0.86

Weighted-average number of basic common shares

62,260

62,232

Net income per diluted common share
$

2.37

$

0.86

Weighted-average number of diluted common shares and equivalents

62,632

62,626

Waters Corporation and Subsidiaries

Reconciliation of GAAP to Adjusted Non-GAAP

Net Sales by Operating Segment, Products & Services, Geography and Markets

Three Months Ended April 3, 2021 and March 28, 2020

(In thousands)

Current

Period

Constant

Three Months Ended

Percent

Currency

Currency

April 3, 2021
March 28, 2020

Change

Impact

Growth Rate ^(a)

NET SALES – OPERATING SEGMENT

Waters $
541,878
$
414,211

31

%
$
18,021

26

%

TA
66,667

50,728

31

%

1,817

28

%

Total $
608,545
$
464,939

31

%
$
19,838

27

%

NET SALES – PRODUCTS & SERVICES

Instruments $
263,048
$
176,938

49

%
$
6,934

45

%

Service
226,523

190,756

19

%

8,724

14

%

Chemistry
118,974

97,245

22

%

4,180

18

%

Total Recurring
345,497

288,001

20

%

12,904

15

%

Total $
608,545
$
464,939

31

%
$
19,838

27

%

NET SALES – GEOGRAPHY

Asia $
229,542
$
159,080

44

%
$
5,097

41

%

Americas
197,357

172,176

15

%

457

14

%

Europe
181,646

133,683

36

%

14,284

25

%

Total $
608,545
$
464,939

31

%
$
19,838

27

%

NET SALES – MARKETS

Pharmaceutical $
360,148
$
272,563

32

%
$
11,790

28

%

Industrial
183,273

143,354

28

%

5,976

24

%

Academic & Government
65,124

49,022

33

%

2,072

29

%

Total $
608,545
$
464,939

31

%
$
19,838

27

%

NET SALES – EXCLUDING CHINA

Total Net Sales $
608,545
$
464,939

31

%
$
19,838

27

%

China Net Sales
102,919

47,231

118

%

4,026

109

%

Total Net Sales Excluding China $
505,626
$
417,708

21

%
$
15,812

17

%

(a)

The Company believes that referring to comparable constant-currency growth rates is a useful way to evaluate the underlying performance of Waters Corporation’s net sales. Constant-currency growth rate, a non-GAAP financial measure, measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. See description of non-GAAP financial measures contained in this release.

Waters Corporation and Subsidiaries

Reconciliation of GAAP to Adjusted Non-GAAP Financials

Three Months Ended April 3, 2021 and March 28, 2020

(In thousands, except per share data)

Selling &

Administrative

Expenses^(a)

Operating

Income

Operating

Income

Percentage

Other

Income

(Expense)

Income from

Operations

before

Income

Taxes

Provision for

Income

Taxes

Net

Income

Diluted

Earnings

per Share

Three Months Ended April 3, 2021

GAAP $
145,036
$
171,270

28.1%
$
9,359
$
173,784
$
25,657
$
148,127
$
2.37

Adjustments:

Purchased intangibles amortization ^(b)
(1,840)

1,840

0.3%

–

1,840

414

1,426

0.02

Restructuring costs and certain other items ^(c)
(870)

870

0.1%

(9,707)

(8,837)

(2,120)

(6,717)

(0.11)

Certain income tax items ^(d)
–

–

–

–

–

(550)

550

0.01

Adjusted Non-GAAP $
142,326
$
173,980

28.6%
$
(348)
$
166,787
$
23,401
$
143,386
$
2.29

Three Months Ended March 28, 2020

GAAP $
151,026
$
68,280

14.7%
$
(374)
$
57,863
$
4,301
$
53,562
$
0.86

Adjustments:

Purchased intangibles amortization ^(b)
(2,625)

2,625

0.6%

–

2,625

522

2,103

0.03

Restructuring costs and certain other items ^(c)
(20,520)

20,520

4.4%

(309)

20,211

4,597

15,614

0.25

Litigation provision ^(e)
(666)

666

0.1%

–

666

160

506

0.01

Certain income tax items ^(d)
–

–

–

–

–

(375)

375

0.01

Adjusted Non-GAAP $
127,215
$
92,091

19.8%
$
(683)
$
81,365
$
9,205
$
72,160
$
1.15

(a)

Selling & administrative expenses include purchased intangibles amortization, litigation provisions and settlements and asset impairments.

(b)

The purchased intangibles amortization, a non-cash expense, was excluded to be consistent with how management evaluates the performance of its core business against historical operating results and the operating results of competitors over periods of time.

(c)

Restructuring costs, mergers and acquisition costs and certain other items were excluded as the Company believes that the cost to consolidate operations, reduce overhead, acquire companies and certain other income or expense items are not normal and do not represent future ongoing business expenses of a specific function or geographic location of the Company.

(d)

Certain income tax items were excluded as these non-cash expenses and benefits represent updates in management’s assessment of ongoing examinations or other tax items that are not indicative of the Company’s normal or future income tax expense.

(e)

Litigation provisions and settlement gains were excluded as these items are isolated, unpredictable and not expected to recur regularly.

Waters Corporation and Subsidiaries

Preliminary Condensed Unclassified Consolidated Balance Sheets

(In thousands and unaudited)

April 3, 2021

December 31, 2020

Cash, cash equivalents and investments
$

809,769

$

443,146

Accounts receivable

550,677

573,316

Inventories

327,967

304,281

Property, plant and equipment, net

513,719

494,003

Intangible assets, net

240,853

258,645

Goodwill

438,139

444,362

Other assets

330,439

322,167

Total assets
$

3,211,563

$

2,839,920

Notes payable and debt
$

1,703,090

$

1,356,515

Other liabilities

1,277,511

1,251,261

Total liabilities

2,980,601

2,607,776

Total stockholders’ equity

230,962

232,144

Total liabilities and stockholders’ equity
$

3,211,563

$

2,839,920

Waters Corporation and Subsidiaries

Preliminary Condensed Consolidated Statements of Cash Flows

Three Months Ended April 3, 2021 and March 28, 2020

(In thousands and unaudited)

Three Months Ended

April 3, 2021

March 28, 2020

Cash flows from operating activities:

Net income
$

148,127

$

53,562

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation

8,305

9,196

Depreciation and amortization

31,356

29,188

Change in operating assets and liabilities, net

30,616

59,689

Net cash provided by operating activities

218,404

151,635

Cash flows from investing activities:

Additions to property, plant, equipment and software capitalization

(39,503

)

(51,130

)

Business acquisitions, net of cash acquired

–

(76,664

)

Net change in investments

(119,501

)

(2,381

)

Net cash used in investing activities

(159,004

)

(130,175

)

Cash flows from financing activities:

Net change in debt

346,363

214,634

Proceeds from stock plans

16,295

11,743

Purchases of treasury shares

(173,305

)

(196,226

)

Other cash flow from financing activities, net

(578

)

2,767

Net cash provided by financing activities

188,775

32,918

Effect of exchange rate changes on cash and cash equivalents

(1,087

)

(32

)

Increase in cash and cash equivalents

247,088

54,346

Cash and cash equivalents at beginning of period

436,695

335,715

Cash and cash equivalents at end of period
$

683,783

$

390,061

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow ^(a)

Net cash provided by operating activities – GAAP
$

218,404

$

151,635

Adjustments:

Additions to property, plant, equipment and software capitalization

(39,503

)

(51,130

)

Major facility renovations

14,490

20,543

Free Cash Flow – Adjusted Non-GAAP
$

193,391

$

121,048

(a)

The Company defines free cash flow as net cash flow from operations accounted for under GAAP less capital expenditures and software capitalizations plus or minus any unusual and non recurring items. Free cash flow is not a GAAP measurement and may not be comparable to free cash flow reported by other companies.

Waters Corporation and Subsidiaries

Reconciliation of Projected GAAP to Adjusted Non-GAAP Financial Outlook

Three Months Ended

Twelve Months Ended

July 3, 2021

December 31, 2021

Range

Range

Projected Sales

Projected constant-currency sales growth rate ^(a)

14

%

–

16

%

8

%

–

11

%

Projected currency impact

2

%

–

4

%

1

%

–

2

%

Projected sales growth rate as reported

16

%

–

20

%

9

%

–

13

%

Projected Earnings Per Diluted Share
Range

Range

Projected GAAP earnings per diluted share
$

2.10

–

$

2.20

$

9.65

–

$

9.85

Adjustments:

Purchased intangibles amortization
$

0.04

–

$

0.04

$

0.16

–

$

0.16

Certain income tax items
$

0.01

–

$

0.01

$

0.04

–

$

0.04

Projected adjusted non-GAAP earnings per diluted share
$

2.15

–

$

2.25

$

9.85

–

$

10.05

(a)

Constant-currency growth rates are a non-GAAP financial measure that measures the change in net sales between current and prior year periods, ignoring the impact of foreign currency exchange rates during the current period. These amounts are estimated at the current foreign currency exchange rates and based on the forecasted geographical sales in local currency, as well as an assessment of market conditions as of today, and may differ significantly from actual results.

These forward-looking adjustment estimates do not reflect future gains and charges that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005130/en/

Bryan Brokmeier, CFA, Senior Director, Investor Relations, 508-482-3448

KEYWORDS: United States North America Massachusetts

INDUSTRY KEYWORDS: Health Other Health Other Science Research Science Biotechnology

MEDIA:

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Posted on May 5, 2021 6:53 am
The ODP Corporation Announces First Quarter 2021 Results

The ODP Corporation Announces First Quarter 2021 Results

First Quarter Revenue of $2.4 Billion with GAAP Diluted EPS of $0.95; Adjusted EPS of $1.21

Low-Cost Model Helped Drive Operating Income of $55 million; Adjusted Operating Income of $91 million

Delivered Significant Cash Flow with $1.7 Billion in Total Available Liquidity at Quarter End

Announced Plans to Separate ODP into Two Independent, Publicly Traded Companies

Board Approves a New $300 Million Stock Repurchase Authorization

Plan for CompuCom Sale Process Continues to Proceed

BOCA RATON, Fla.–(BUSINESS WIRE)–
The ODP Corporation (“ODP,” or the “Company”) (NASDAQ: ODP), a leading provider of business services, products and digital workplace technology solutions through an integrated B2B distribution platform with an online presence and approximately 1,100 stores, today announced results for the first quarter ended March 27, 2021.

Consolidated (in millions, except per share amounts)

1Q21

1Q20

Sales

$2,366

$2,725

Sales change from prior year period

(13)%

Operating income

$55

$80

Adjusted operating income⁽¹⁾

$91

$108

Net income

$53

$45

Diluted earnings per share⁽²⁾

$0.95

$0.84

Adjusted net income⁽¹⁾

$68

$66

Adjusted earnings per share (most dilutive)⁽²⁾

$1.21

$1.21

Adjusted EBITDA⁽¹⁾

$138

$157

Operating Cash Flow

$86

$188

Free Cash Flow ⁽³⁾

$73

$163

Adjusted Free Cash Flow⁽⁴⁾

$79

$173

First Quarter 2021 Summary⁽¹⁾⁽²⁾

Total reported sales of $2.4 billion, down 13% versus last year

GAAP operating income of $55 million and net income of $53 million, or $0.95 per diluted share, versus $80 million and $45 million, or $0.84 per diluted share, respectively in the prior year

Adjusted operating income of $91 million, down from $108 million in the first quarter of 2020; and adjusted EBITDA of $138 million, down from $157 million in the first quarter of 2020

Adjusted net income of $68 million, or adjusted earnings per share of $1.21, versus $66 million or $1.21, respectively in the prior year

Operating cash flow of $86 million and adjusted free cash flow of $79 million, versus $188 million and $173 million, respectively in prior year

$1.7 billion of total available liquidity including $753 million in cash and cash equivalents

“It’s an exciting day for ODP, as we mark the continued evolution of our B2B pivot and digital transformation, drove solid quarterly results, and took the next step in unlocking shareholder value,” said Gerry Smith, chief executive officer of The ODP Corporation.

“While conditions related to COVID-19 persisted in the quarter and adverse weather temporarily impacted operations in the Southwest, the continued execution of our low-cost model drove solid operating and free cash flow results, as we continued to make meaningful progress on our strategic initiatives. We delivered our value proposition to customers at home, in the office, and through our Retail channel, which experienced strong demand, including a 35% year-over-year increase in our buy online, pick-up in store (BOPIS) offering. While COVID-19 conditions continued to impact our contract channel, we did achieve one of our highest levels of net new customer wins and are encouraged by the increased business activity and traction exiting the quarter,” he added.

“The significant progress on our B2B pivot and digital transformation initiatives have us well positioned for the future. Our digital platform business integrated BuyerQuest, our new procure-to-pay (P2P) platform, and we advanced our collaboration with Microsoft. Additionally, the supplier community continues to gain interest as they realize the broad capabilities and reach of our new digital platform. In all, we are well on our way to pursue future growth in the large and growing business commerce market.”

“Also, as we described in a separate release, we’re taking an important step to unlock shareholder value by planning a tax-free spin-off of our B2B businesses, creating two, independent, publicly-traded companies. As separate companies, we believe all stakeholders will benefit from the increased strategic focus and flexibility, aligned capital structures and growth profiles, which will enhance our prospects for long-term value creation. In support of our strategy, we are happy to announce that our Board has authorized a new $300 million stock repurchase program,” he added.

Consolidated Results

Reported (GAAP) Results

Total reported sales for the first quarter of 2021 were $2.4 billion, a decrease of 13% compared to the first quarter of 2020. The year-over-year decrease in revenue was primarily the result of fewer retail stores in service and lower sales driven by impacts related to the COVID-19 pandemic. Product sales in the first quarter were down 12% relative to the prior year period. Service revenue in the first quarter was down 19% related to lower comparable sales at CompuCom as a result of the COVID-19 outbreak and the previously disclosed malware incident, and lower sales of services in our BSD and Retail Division, both of which were negatively impacted by the COVID-19 outbreak.

Sales Breakdown (in millions)

1Q21

1Q20

Product sales

$2,051

$2,337

Product sales change from prior year

(12)%

Service revenues

$315

$388

Service revenues change from prior year

(19)%

Total sales

$2,366

$2,725

The Company reported operating income of $55 million in the first quarter of 2021, compared to $80 million in the prior year period. GAAP operating results in the first quarter included a total of $36 million of charges which include $10 million of SG&A expenses related to CompuCom’s efforts to address the malware incident and restore service delivery to impacted customers, $12 million of non-cash asset impairment charges primarily related to the impairment of operating lease right-of-use (ROU) assets associated with the Company’s retail store locations, and $14 million of merger, restructuring and other operating costs primarily associated with the Maximize B2B Restructuring Plan. Net income was $53 million, or $0.95 per diluted share in the first quarter of 2021, compared to $45 million, or $0.84 per diluted share in the first quarter of 2020.

Adjusted (non-GAAP) Results⁽¹⁾⁽²⁾

Adjusted results for the first quarter of 2021 exclude charges and credits totaling $36 million as defined above, as well as a credit of $7 million for other income related to the release of certain liabilities of its former European Business, and the tax impacts associated with the above items.

First quarter of 2021 adjusted EBITDA was $138 million compared to $157 million in the prior year period. This included adjusted depreciation and amortization⁽⁵⁾ of $44 million and $49 million in the first quarters of 2021 and 2020, respectively.

First quarter 2021 adjusted operating income was $91 million compared to $108 million in the first quarter of 2020, including the impacts related to the COVID-19 pandemic.

First quarter 2021 adjusted net income was $68 million, or $1.21 per diluted share, compared to $66 million, or $1.21 per diluted share, in the first quarter of 2020.

First Quarter Division Results

Business Solutions Division (BSD)

Reported sales were $1.1 billion in the first quarter of 2021, down 16% compared to the same period last year. Sales performance was impacted by conditions caused by the COVID-19 outbreak, which impacted schools and business operations

Demand in our eCommerce channel increased 3% with growth in certain adjacency product sales, which comprised 44% of total BSD revenues in the quarter

Operating income was $17 million in the first quarter of 2021 compared to $40 million in the prior year period

Retail Division

Reported sales were $1.0 billion in the first quarter of 2021, down 10% versus the prior year period, but up sequentially from $951 million in the fourth quarter of 2020. Planned closures of underperforming stores drove the reported decline with 149 fewer retail outlets at the end of the first quarter as compared to the prior year. The Company closed 8 stores in the quarter and had 1,146 stores at quarter end

Partially offsetting these impacts were increased sales per shopper as well as a 35% increase in our buy online, pick up in store (BOPIS) offering

Operating income was $100 million in the first quarter of 2021, up 15% over the same period last year. As a percentage of sales, this performance reflects an approximate 210 basis point margin improvement

CompuCom Division

Reported sales were $196 million in the first quarter of 2021, down 17% compared to the prior year period. The year-over-year decrease was due primarily to lower services volumes related to the COVID-19 outbreak and other factors, as well as lower billed service revenues as a result of the malware incident

CompuCom reported $1 million operating loss in the first quarter of 2021, compared to $3 million operating income in the prior year period

The Company continues to make progress on its plan for a value-maximizing sale of its CompuCom Division to maximize CompuCom’s full potential and drive forward its future value and success

B2B Pivot and Digital Transformation Progress

As a primary component of its strategy to drive growth in higher value industry segments, the Company has made significant progress on its B2B pivot and digital transformation initiatives. The Company recently established its new technology business, announced its digital transformation leadership team, acquired one of the leading Procure-to-Pay software companies, and entered into a collaboration with Microsoft corporation.

During the quarter, the Company’s new technology platform business integrated BuyerQuest, its new leading P2P eProcurement software platform, launching new customers and growing its pipeline of new business opportunities. Furthering its collaboration with Microsoft, in April, the Company’s digital technology business successfully completed a live technical demonstration of the platform at an industry technology conference, representing an important step as the Company prepares for a full launch to Microsoft’s Business Central customers scheduled for late 2021. The Company continues to generate strong interest from suppliers as they begin to recognize the expansive reach and innovative capabilities of the new digital platform.

Balance Sheet and Cash Flow

As of March 27, 2021, ODP had total available liquidity of approximately $1.7 billion, consisting of $753 million in cash and cash equivalents and $946 million of available credit under the Third Amended Credit Agreement. Total debt was $367 million.

For the first quarter of 2021, cash provided by operating activities was $86 million, which included less than $1 million in acquisition and integration-related costs and $6 million in restructuring costs, compared to cash provided by operating activities of $188 million in the first quarter of the prior year, which included $4 million and $10 million, respectively, of the same costs. The reduction in operating cash flow was driven primarily by higher working capital usage in the quarter.

Capital expenditures in the quarter were $13 million versus $25 million in the prior year period, reflecting lower investment in retail operations, while continuing growth investments in the Company’s digital transformation, distribution network, and eCommerce capabilities. The cash charges associated with the Company’s Maximize B2B Restructuring Plan and its Business Acceleration Program in the quarter were $5 million and $1 million, respectively. Accordingly, Adjusted Free Cash Flow was $79 million in the first quarter of 2021.

Additionally, as part of its ongoing commitment to drive shareholder value in support of its strategic initiatives, the Company announced today that its Board of Directors authorized a new $300 million stock repurchase program. This new program, available through June 30, 2022, replaces the current share repurchase program that was temporarily suspended during the onset of COVID-19. The authorization permits the Company to repurchase common stock from time-to-time through a combination of open market repurchases, privately negotiated transactions, 10b5-1 trading plans, accelerated stock repurchase transactions and/or other derivative transactions. The stock repurchase program may be modified, extended, suspended or discontinued at any time. The exact number and timing of share repurchases will depend on market conditions and other factors, and will be funded through available cash balances. “Reflecting our team’s confidence in the future, this new authorization will allow us to opportunistically enhance the return of capital to shareholders as we execute our strategic initiatives. As we make progress, our Board of Director’s will continue to evaluate our capital allocation plans in order to maximize long-term value for shareholders,” Smith added.

(1)

As presented throughout this release, adjusted results represent non-GAAP financial measures and exclude charges or credits not indicative of core operations and the tax effect of these items, which may include but not be limited to merger integration, restructuring, acquisition costs, and asset impairments. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com.

(2)

All share and per share amounts in this release have been retroactively adjusted for the prior period presented to give effect to a 1-for-10 reverse stock split which was effective on June 30, 2020.

(3)

As used in this release, Free Cash Flow is defined as cash flows from operating activities less capital expenditures. Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com.

(4)

As used in this release, Adjusted Free Cash Flow is defined as Free Cash Flow excluding cash charges associated with the Company’s Maximize B2B Restructuring Plan and its Business Acceleration Program. Adjusted Free Cash Flow is a non-GAAP financial measure and reconciliations from GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com.

(5)

Adjusted depreciation and amortization each represents a non-GAAP financial measure and excludes accelerated depreciation caused by updating the salvage value and shortening the useful life of depreciable fixed assets to coincide with planned store closures under an approved restructuring plan, but only if impairment is not present. Accelerated depreciation charges are restructuring expenses. Reconciliations from GAAP to non-GAAP financial measures can be found in this release as well as on the Company’s Investor Relations website at investor.theodpcorp.com.

About The ODP Corporation

The ODP Corporation (NASDAQ:ODP) is a leading provider of business services and supplies, products and digital workplace technology solutions to small, medium and enterprise businesses, through an integrated business-to-business (B2B) distribution platform, which includes world-class supply chain and distribution operations, dedicated sales professionals and technicians, online presence, and approximately 1,100 stores. Through its banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as well as others, the Company offers its customers the tools and resources they need to focus on their passion of starting, growing and running their business. For more information, visit news.theodpcorp.com and investor.theodpcorp.com.

The ODP Corporation and Office Depot are trademarks of The Office Club, Inc. OfficeMax is a trademark of OMX, Inc. CompuCom is a trademark of CompuCom Systems, Inc. Grand&Toy is a trademark of Grand & Toy, LLC in Canada. ©2021 Office Depot, LLC. All rights reserved. Any other product or company names mentioned herein are the trademarks of their respective owners.

FORWARD LOOKING STATEMENTS

This communication may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements or disclosures may discuss goals, intentions and expectations as to future trends, plans, events, results of operations, cash flow or financial condition, the potential impacts on our business due to the unknown severity and duration of the COVID-19 outbreak, or state other information relating to, among other things, the Company, based on current beliefs and assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” “propose” or other similar words, phrases or expressions, or other variations of such words. These forward-looking statements are subject to various risks and uncertainties, many of which are outside of the Company’s control. There can be no assurances that the Company will realize these expectations or that these beliefs will prove correct, and therefore investors and stakeholders should not place undue reliance on such statements.

Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, highly competitive office products market and failure to differentiate the Company from other office supply resellers or respond to decline in general office supplies sales or to shifting consumer demands; competitive pressures on the Company’s sales and pricing; the adverse effects of an unsolicited tender offer on our business, operating results or financial condition; the risk that the Company is unable to transform the business into a service-driven, B2B platform that such a strategy will not result in the benefits anticipated; the risk that the Company will not be able to achieve its strategic plans, including the announced separation of the B2B Operations and the sale of CompuCom, and the high costs in connection with these transactions which may not be recouped if these transactions are not consummated, the risk that the Company may not be able to realize the anticipated benefits of acquisitions due to unforeseen liabilities, future capital expenditures, expenses, indebtedness and the unanticipated loss of key customers or the inability to achieve expected revenues, synergies, cost savings or financial performance; the risk that the Company is unable to successfully maintain a relevant omni-channel experience for its customers; the risk that the Company is unable to execute the Maximize B2B Restructuring Plan successfully or that such plan will not result in the benefits anticipated; the risk that the Company will not be successful in maximizing the full potential of its CompuCom Division; failure to effectively manage the Company’s real estate portfolio; loss of business with government entities, purchasing consortiums, and sole- or limited- source distribution arrangements; failure to attract and retain qualified personnel, including employees in stores, service centers, distribution centers, field and corporate offices and executive management, and the inability to keep supply of skills and resources in balance with customer demand; failure to execute effective advertising efforts and maintain the Company’s reputation and brand at a high level; disruptions in computer systems, including delivery of technology services; breach of information technology systems affecting reputation, business partner and customer relationships and operations and resulting in high costs and lost revenue; unanticipated downturns in business relationships with customers or terms with the suppliers, third-party vendors and business partners; disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods); exclusive Office Depot branded products are subject to additional product, supply chain and legal risks; product safety and quality concerns of manufacturers’ branded products and services and Office Depot private branded products; covenants in the credit facility; general disruption in the credit markets; incurrence of significant impairment charges; retained responsibility for liabilities of acquired companies; fluctuation in quarterly operating results due to seasonality of the Company’s business; changes in tax laws in jurisdictions where the Company operates; increases in wage and benefit costs and changes in labor regulations; changes in the regulatory environment, legal compliance risks and violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws; volatility in the Company’s common stock price; changes in or the elimination of the payment of cash dividends on Company common stock; macroeconomic conditions such as future declines in business or consumer spending; increases in fuel and other commodity prices and the cost of material, energy and other production costs, or unexpected costs that cannot be recouped in product pricing; unexpected claims, charges, litigation, dispute resolutions or settlement expenses; catastrophic events, including the impact of weather events on the Company’s business; the discouragement of lawsuits by shareholders against the Company and its directors and officers as a result of the exclusive forum selection of the Court of Chancery, the federal district court for the District of Delaware or other Delaware state courts by the Company as the sole and exclusive forum for such lawsuits; and the impact of the COVID-19 pandemic on the Company’s business, including on the demand for its and our customers’ products and services, on trade and transport restrictions and generally on our ability to effectively manage the impacts of the COVID-19 pandemic on our business operations. The foregoing list of factors is not exhaustive. Investors and shareholders should carefully consider the foregoing factors and the other risks and uncertainties described in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission. The Company does not assume any obligation to update or revise any forward-looking statements.

THE ODP CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

13 Weeks Ended

March 27,

March 28,

2021

2020

Sales:

Products

$

2,051

$

2,337

Services

315

388

Total sales

2,366

2,725

Cost of goods sold and occupancy costs:

Products

1,609

1,828

Services

223

268

Total cost of goods sold and occupancy costs

1,832

2,096

Gross profit

534

629

Selling, general and administrative expenses

453

521

Asset impairments

12

12

Merger, restructuring and other operating expenses, net

14

16

Operating income

55

80

Other income (expense):

Interest income

—

3

Interest expense

(7

)

(18

)

Other income, net

11

1

Income before income taxes

59

66

Income tax expense

6

21

Net income

$

53

$

45

Earnings per share

Basic

$

0.99

$

0.86

Diluted

$

0.95

$

0.84

THE ODP CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except shares and par value)

March 27,

December 26,

2021

2020

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

753

$

729

Receivables, net

687

631

Inventories

929

930

Prepaid expenses and other current assets

75

65

Total current assets

2,444

2,355

Property and equipment, net

546

576

Operating lease right-of-use assets

1,096

1,170

Goodwill

677

609

Other intangible assets, net

357

357

Deferred income taxes

156

162

Other assets

322

329

Total assets

$

5,598

$

5,558

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Trade accounts payable

$

959

$

919

Accrued expenses and other current liabilities

1,141

1,138

Income taxes payable

6

12

Short-term borrowings and current maturities of long-term debt

23

24

Total current liabilities

2,129

2,093

Deferred income taxes and other long-term liabilities

201

197

Pension and postretirement obligations, net

41

43

Long-term debt, net of current maturities

344

354

Operating lease liabilities

923

991

Total liabilities

3,638

3,678

Commitments and contingencies

Stockholders’ equity:

Common stock — authorized 80,000,000 shares of $0.01 par value; issued shares — 64,604,629 at March 27, 2021 and 62,551,255 at December 26, 2020; outstanding shares — 54,747,436 at March 27, 2021 and 52,694,062 at December 26, 2020

1

1

Additional paid-in capital

2,697

2,675

Accumulated other comprehensive loss

(27

)

(32

)

Accumulated deficit

(356

)

(409

)

Treasury stock, at cost — 9,857,193 shares at March 27, 2021 and December 26, 2020

(355

)

(355

)

Total stockholders’ equity

1,960

1,880

Total liabilities and stockholders’ equity

$

5,598

$

5,558

THE ODP CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

13 Weeks Ended

March 27,

March 28,

2021

2020

Cash flows from operating activities:

Net income

$

53

$

45

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

46

49

Charges for losses on receivables and inventories

7

8

Asset impairments

12

12

Compensation expense for share-based payments

10

7

Deferred income taxes and deferred tax asset valuation allowances

6

24

Changes in working capital and other operating activities

(48

)

43

Net cash provided by operating activities

86

188

Cash flows from investing activities:

Capital expenditures

(13

)

(25

)

Businesses acquired, net of cash acquired

(28

)

(18

)

Proceeds from collection of notes receivable

—

818

Other investing activities

8

1

Net cash provided by (used in) investing activities

(33

)

776

Cash flows from financing activities:

Net payments on long and short-term borrowings

(6

)

(25

)

Debt retirement

—

(735

)

Cash dividends on common stock

—

(13

)

Share purchases for taxes, net of proceeds from employee share-based

transactions

(23

)

(4

)

Repurchase of common stock for treasury

—

(30

)

Other financing activities

(1

)

(1

)

Net cash used in financing activities

(30

)

(808

)

Effect of exchange rate changes on cash and cash equivalents

1

(12

)

Net increase in cash, cash equivalents and restricted cash

24

144

Cash, cash equivalents and restricted cash at beginning of period

729

700

Cash, cash equivalents and restricted cash at end of period

$

753

$

844

Supplemental information on non-cash investing and financing activities

Right-of-use assets obtained in exchange for new finance lease liabilities

$

—

$

3

Right-of-use assets obtained in exchange for new operating lease liabilities

11

54

Business acquired in exchange for common stock issuance

35

—

THE ODP CORPORATION

BUSINESS UNIT PERFORMANCE

(In millions)

(Unaudited)

Business Solutions Division (in millions)

1Q21

1Q20

Sales

$1,127

$1,334

Sales change from prior year

(16)%

Division operating income

$17

$40

Division operating income margin

1.5%

3.0%

BSD year-over-year sales performance was impacted by conditions caused by the COVID-19 outbreak, negatively impacting sales primarily in the Company’s contract channel as the operations of many businesses were interrupted and the majority of school systems remained closed to in-class learning. The Company utilized diverse channels and a broader product portfolio to meet customer needs. Demand through its eCommerce channel grew by 3%. Adjacency categories include cleaning and breakroom, personal protective equipment (PPE), technology, furniture, and copy and print, and comprised 44% of total BSD revenues in the quarter. BSD operating income was impacted by lower sales volume related to the effects of the COVID-19 pandemic and product mix, partially offset by cost efficiency measures. The Company’s contract channel experienced stronger demand late in the quarter as more businesses resumed normal operations and a great number of school systems returned to in-class learning.

Retail Division (in millions)

1Q21

1Q20

Sales

$1,039

$1,156

Sales change from prior year

(10)%

Division operating income

$100

$87

Division operating income margin

9.6%

7.5%

The Retail Division reported sales were down 10% versus the prior year period related to planned closures of underperforming stores with 149 fewer retail outlets at the end of the first quarter as compared to the prior year. Partially offsetting these impacts were increased sales per shopper, increased demand for certain adjacency product categories, and stronger adoption of our BOPIS offering. Retail Division operating income was up 15% over the same period last year and reflects a 210 basis point margin improvement. The increase in operating income versus the prior year was largely related to lower SG&A from cost savings initiatives, improvements in distribution and inventory management costs, and lower operating lease costs.

CompuCom Division (in millions)

1Q21

1Q20

Sales

$196

$235

Sales change from prior year

(17)%

Division operating income

$(1)

$3

Division operating income margin

(0.5)%

1.3%

The CompuCom Division reported sales decrease was due primarily to lower services volumes related to the impact of the COVID-19 pandemic and other factors, as well as lower billed service revenue as a result of the malware incident. Service disruptions related to the malware incident have largely been addressed and service has been restored to all customers. The CompuCom Division reported an operating loss of $1 million in the first quarter of 2021, compared to $3 million operating income in the first quarter of 2020.

THE ODP CORPORATION

GAAP to Non-GAAP Reconciliations

(Unaudited)

We report our results in accordance with accounting principles generally accepted in the United States (“GAAP”). We also review certain financial measures excluding impacts of transactions that are not related to our core operations (“non-GAAP”). Management believes that the presentation of these non-GAAP financial measures enhances the ability of its investors to analyze trends in its business and provides a means to compare periods that may be affected by various items that might obscure trends or developments in its business. Management uses both GAAP and non-GAAP measures to assist in making business decisions and assessing overall performance. Non-GAAP measures help to evaluate programs and activities that are intended to attract and satisfy customers, separate from expenses and credits directly associated with Merger, restructuring, and certain similar items. Certain non-GAAP measures are also used for short and long-term incentive programs.

Our measurement of these non-GAAP financial measures may be different from similarly titled financial measures used by others and therefore may not be comparable. These non-GAAP financial measures should not be considered superior to the GAAP measures, but only to clarify some information and assist the reader. We have included reconciliations of this information to the most comparable GAAP measures in the tables included within this material.

Free cash flow is a non-GAAP measure, which we define as cash flows from operating activities less capital expenditures. We believe that free cash flow is an important indicator that provides additional perspective on our ability to generate cash to fund our strategy and expand our distribution network. Adjusted free cash flow is also a non-GAAP measure, which we define as free cash flow excluding cash charges associated with the Company’s Maximize B2B Restructuring Plan and its Business Acceleration Program.

(In millions, except per share amounts)

Q1 2021

Reported

(GAAP)

% of

Sales

Less:

Charges &

Credits

Adjusted

(Non-

GAAP)

% of

Sales

Selling, general and administrative expenses

$

453

19.1

%

$

10

$

443

⁽⁶⁾

18.7

%

Assets impairments

$

12

0.5

%

$

12

$

—

—

%

Merger, restructuring and other operating expenses, net

$

14

0.6

%

$

14

$

—

—

%

Operating income

$

55

2.3

%

$

(36

)

$

91

⁽⁷⁾

3.8

%

Other income, net

$

11

0.5

%

$

7

$

4

⁽⁸⁾

0.2

%

Income tax expense

$

6

0.3

%

$

(14

)

$

20

⁽⁹⁾

0.8

%

Net income

$

53

2.2

%

$

(15

)

$

68

⁽¹⁰⁾

2.9

%

Earnings per share (most dilutive)

$

0.95

$

(0.26

)

$

1.21

⁽¹⁰⁾

Depreciation and amortization

$

46

1.9

%

$

2

$

44

⁽¹¹⁾

1.9

%

Q1 2020

Reported

(GAAP)

% of

Sales

Less:

Charges &

Credits

Adjusted

(Non-

GAAP)

% of

Sales

Assets impairments

$

12

0.4

%

$

12

$

—

—

%

Merger, restructuring and other operating expenses, net

$

16

0.6

%

$

16

$

—

—

%

Operating income

$

80

2.9

%

$

(28

)

$

108

⁽⁷⁾

4.0

%

Income tax expense

$

21

0.8

%

$

(7

)

$

28

⁽⁹⁾

1.0

%

Net income

$

45

1.7

%

$

(21

)

$

66

⁽¹⁰⁾

2.4

%

Earnings per share (most dilutive)

$

0.84

$

(0.37

)

$

1.21

⁽¹⁰⁾

THE ODP CORPORATION

GAAP to Non-GAAP Reconciliations

(Unaudited)

13 Weeks Ended

March 27,

March 28,

Adjusted EBITDA:

2021

2020

Net income

$

53

$

45

Income tax expense

6

21

Income before income taxes

59

66

Add (subtract)

Interest income

—

(3

)

Interest expense

7

18

Adjusted depreciation and amortization⁽¹¹⁾

44

49

Charges and credits, pretax⁽¹²⁾

29

28

Adjusted EBITDA

$

138

$

157

Amounts may not foot due to rounding. The sum of the quarterly amounts may not equal the reported amounts for the year due to rounding.

(6)

Adjusted selling, general and administrative expenses for the first quarter of 2021 exclude charges for CompuCom’s malware incident related costs of $10 million.

(7)

Adjusted operating income for all periods presented herein exclude merger, restructuring and other operating expenses, net, asset impairments (if any) and CompuCom’s malware incident related costs (if any).

(8)

Adjusted other income, net for the first quarter of 2021 excludes credits for the release of certain liabilities of our former European Business of $7 million.

(9)

Adjusted income tax expense for all periods presented herein exclude the tax effect of the charges or credits not indicative of core operations as described in the preceding notes.

(10)

Adjusted net income and adjusted earnings per share (most dilutive) for all periods presented exclude merger, restructuring and other operating expenses, net, asset impairments (if any), CompuCom’s malware incident related costs (if any), European Business liabilities release (if any), and exclude the tax effect of the charges or credits not indicative of core operations.

(11)

Adjusted depreciation and amortization for all periods presented herein exclude accelerated depreciation caused by updating the salvage value and shortening the useful life of depreciable fixed assets to coincide with the planned store closures under an approved restructuring plan, but only if impairment is not present. Accelerated depreciation charges are restructuring expenses and included in the Charges and credits, pretax line item.

(12)

Charges and credits, pretax for all periods presented include merger, restructuring and other operating expenses, net, asset impairments (if any), CompuCom’s malware incident related costs (if any) and European Business liabilities release (if any).

THE ODP CORPORATION

GAAP to Non-GAAP Reconciliations

(Unaudited)

13 Weeks Ended

March 27,

March 28,

Free cash flow

2021

2020

Net cash provided by operating activities

$

86

$

188

Capital expenditures

(13

)

(25

)

Free cash flow

73

163

Adjustments for certain cash charges

Maximize B2B Restructuring Plan

5

—

Business Acceleration Program

1

10

Adjusted free cash flow

$

79

$

173

Amounts may not foot due to rounding. The sum of the quarterly amounts may not equal the reported amounts for the year due to rounding.

THE ODP CORPORATION

Store Statistics

(Unaudited)

Q1

Q1

2021

2020

Retail Division:

Stores opened

—

—

Stores closed

8

12

Total retail stores (U.S.)

1,146

1,295

Total square footage (in millions)

25.3

28.8

Average square footage per store (in thousands)

22.1

22.3

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005297/en/

Tim Perrott

Investor Relations

561-438-4629

[email protected]

Danny Jovic

Media Relations

561-438-1594

[email protected]

KEYWORDS: United States North America Florida

INDUSTRY KEYWORDS: Retail Specialty Office Products

MEDIA:

Logo

Posted on May 5, 2021 6:53 am
Genasys Inc. Announces $18.3 Million U.S. Army LRAD® 450XL Systems Order

Company On Track for Record Fiscal Year Revenues and Bookings

SAN DIEGO, May 05, 2021 (GLOBE NEWSWIRE) — Genasys Inc. (NASDAQ: GNSS), the global leader in critical communications systems and solutions, today announced an $18.3 million follow-on order from the U.S. Army (Army). With this and previously received fiscal year 2021 orders, the Company has already exceeded total fiscal year 2020 bookings.

“In addition to the Army order and the recently announced Riverside County, CA mass notification and emergency management software services contract, several key awards are anticipated in the second half of our fiscal year,” stated Richard S. Danforth, Chief Executive Officer of Genasys Inc. “These awards, and other expected orders for Genasys Emergency Management software, Integrated Mass Notification solutions, and LRAD systems, have the Company well-positioned for record fiscal year revenues and bookings. We look forward to reporting our fiscal second quarter results next week on May 13, 2021.”

“The Army and other U.S. military services continue to equip their forces with LRAD’s unmatched long-range communications and scalable escalation of force (EOF) capabilities,” Mr. Danforth added. “This order demonstrates the Army’s ongoing commitment to supplying its soldiers with advanced equipment that enhances communication and saves lives.”

As part of a communication and layered EOF strategy, LRAD systems increase the decision time and distance for military personnel to differentiate between security threats and non-combatants, and scale EOF accordingly to save lives on both sides of the Long Range Acoustic Device^®.

Low profile, lightweight and designed to be mounted on tripods, vehicles, small vessels and Common Remotely Operated Weapon Stations (CROWS), the LRAD 450XL is the AHD of choice for U.S. and international defense, homeland security, and law enforcement agencies.

About Genasys Inc.

Genasys^™ is a global provider of critical communications solutions to help keep people safe. Genasys systems are in service in 72 countries around the world in a range of diverse applications, including defense, public safety, national emergency warning systems, mass notification, law enforcement, critical infrastructure protection, and many more. For more information, visit genasys.com.

Forward-Looking Statements

Except for historical information contained herein, the matters discussed are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, the stage of product and market development as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation the business impact of health crises or outbreaks of disease, such as epidemics or pandemics and how they may affect our supply chain, and other risks and uncertainties, many of which involve factors or circumstances that are beyond the Company’s control. Risks and uncertainties are identified and discussed in our filings with the Securities and Exchange Commission. These forward-looking statements are based on information and management’s expectations as of the date hereof. Future results may differ materially from our current expectations. For more information regarding other potential risks and uncertainties, see the “Risk Factors” section of the Company’s Form 10-K for the fiscal year ended September 30, 2020. Genasys Inc. disclaims any intent or obligation to update those forward-looking statements, except as otherwise specifically stated.

Investor Relations Contacts Jim Fanucchi and Satya Chillara Darrow Associates, Inc. [email protected]

Posted on May 5, 2021 6:53 am
Alico, Inc. Announces Strategic Actions to Increase Long-term Shareholder Returns

FORT MYERS, Fla., May 05, 2021 (GLOBE NEWSWIRE) — Alico, Inc. (“Alico” or the “Company”) (Nasdaq: ALCO) today announces significant enhancements that are expected to generate greater returns for our shareholders.

In November 2017, the Company announced the Alico 2.0 Modernization Program, which improved the operational efficiencies and optimized asset returns of Alico. Highlights included:

Transformed three legacy citrus businesses into a single optimized enterprise now known as Alico Citrus.

Reduced operating and G&A costs by 19% without negative impact on business operations.

Planted approximately 1.5 million trees over the past four years, which are expected to steadily increase production beginning in fiscal year 2022.

Expanded owned citrus operations to 49,000 acres, up from 45,000 acres.

Divested more than $105 million of non-strategic assets that historically generated low rates of returns and shut down other parts of the Company’s operations that were not profitable.

Returned more than $136 million of capital through debt repayments, a tender offer, share buybacks and common share dividends since 2015.

Reduced the company’s cost of capital and maintained healthy liquidity.

Alico successfully executed these operational initiatives and is now undertaking additional steps in its continuing efforts to create greater shareholder value by establishing a higher sustained level of profitability and cash flow.

Improved Terms for Majority of Fixed Rate Term Debt

Alico has now modified its fixed rate term loans with Metropolitan Life Insurance Company and New England Life Insurance Company (collectively “Metlife”). The interest rate on these loans has been reduced and quarterly principal payments will no longer be required. As of May 1, 2021, this long-term debt will be interest-bearing only, and the principal balance will be fixed until maturity in November 2029, when a balloon payment will be due, or the balance is refinanced. As of May 1, 2021, the annual interest rate on this debt was reduced from 4.15% to 3.85%. In April 2021, Alico prepaid without penalty approximately $10.3 million to reduce the principal of this fixed rate debt to $70 million, using net proceeds from an asset sale announced in the same month. These modifications are expected to reduce debt service to between $5 million and $6 million per year. Nominal fees and no penalties were incurred to modify these loans.

In addition, Alico retains the option to prepay approximately $40 million of variable rate term loans with Metlife without penalty. If net proceeds from future asset sales are used to prepay the entire amount of that variable rate term debt, Alico would be expected to decrease its debt service by another $3 million to $3.5 million annually. If such a repayment was made in fiscal 2022, Alico would require only approximately $5.1 million to service its remaining $88.2 million of debt, which is a substantial decrease from approximately $21.2 million used for debt service in fiscal 2020, which included approximately $4.5 million that the Company opportunistically prepaid.

Real Estate Asset Sales

As announced in April 2021, Alico completed the sale of 5,734 acres of ranch land to the State of Florida for approximately $14.4 million. The net balance, after-tax, of these funds was used to prepay a portion of the Metlife fixed term loans before the principal balance was fixed through 2029. Since 2017, Alico has sold more than 26,000 acres of ranch land and adjacent farmland for more than $72.7 million. Today, Alico is disclosing that it is under contract to sell, or in final negotiations to sell, approximately 15,000 additional acres of the Alico Ranch to approximately 10 different parties. If those transactions successfully close, approximately 33,000 acres of the Alico Ranch would remain unsold.

Alico also continues to own a portfolio of mineral and aggregate rights in Florida, which includes substantial sand reserves that may be valuable for use in the robust construction activity taking place in Southwestern Florida.

Increase in Common Share Dividend

Since fiscal year 2019, the Company has tripled its quarterly dividend to $0.18 from $0.06.

As previously noted, cash flow is expected to increase substantially in the near-term as asset sales are completed. After-tax proceeds from the next sales are expected to retire $40 million of variable rate term loans, which when combined with the impact of the recent fixed rate term loan modifications and prepayments, will improve subsequent annual cash flow by as much as $9.5 million annually. Following those transactions, along with prepaying another term loan which matures in September 2021, the debt structure for the Company should remain fixed through 2029.

It is the expectation of the Alico Board of Directors that the Company is likely to be able to support and sustain a significantly higher quarterly dividend once these debt modifications and prepayments and a portion of the pending real estate sales are concluded.   However, there will not be any change to our dividend policy until most of these transactions have closed. Any increased quarterly dividend would still need to enable the Company to pursue opportunities to acquire additional citrus acreage at attractive prices, repurchase common shares, make other acquisitions, or even consider special dividends in the future as asset sales continue to be realized. All future capital allocation decisions will be evaluated to maximize returns to shareholders.

Capital Expenditures

By the end of fiscal year 2021, Alico will have planted approximately 1.5 million new trees since 2018. This level of planting substantially exceeded Alico’s rate of tree attrition and has increased the Company’s overall density of our citrus groves. Alico will continue to evaluate the optimal density levels at our individual citrus groves but believes the Company is approaching maximum density. Therefore, Alico anticipates lower levels of tree plantings in fiscal 2022 to between 225,000 and 275,000 trees, which is an approximate estimate of the maintenance investment required to meet attrition among the Company’s 5 million trees. The reduction in annual tree plantings will likely decrease our annual cash capital expenditures by approximately $1.5 million to $2.0 million. However, at that lower level of tree plantings, a smaller portion of our growing costs will be capitalized and instead they will be expensed each year when the fruit is harvested.

Financial Improvements

Alico believes there are several ways its financial performance will improve.

Alico expects its increased plantings of approximately 1.5 million trees over the last four years has the potential in the long term to return the Company’s annual citrus production to 10 million boxes, a level last experienced in fiscal 2015. Citrus trees typically take approximately four years after planting to generate meaningful production and usually reach mature production after seven or eight years. The impact of weather-related events has impacted recent production, which was 7.6 million boxes in fiscal 2020 and production is likely to decrease again in fiscal 2021 to 6.3 million boxes.

The Company has significantly reduced its general and administrative expenses with the implementation of the Alico 2.0 Modernization Program, and believes through its continued efforts to become more efficient, it can reduce these expenses by an additional five (5) percent. This would result in a reduction of expenses by approximately $0.5 million.

In July 2020, Alico entered into an agreement to provide third-party caretaking management services to a top ten citrus grower with more than 7,000 citrus acres. Alico is reimbursed for all of its out-of-pocket costs and receives an annual fee based on acres managed. This line of business now contributes approximately $1.5 million in fees annually, and the Company is continuing to pursue similar third-party caretaking management service engagements for other large growers. Alico believes it can increase this line of business substantially each year beginning in fiscal 2022.

Alico intends to focus on maintaining its cash growing costs at consistent levels over the next several years. Alico believes there are potential cost savings opportunities related to citrus acres acquired in fiscal year 2020 as well as expanding its third-party caretaking management services. However, these improvements may be offset by future wage increases, which are likely. Also, as mentioned previously, the Company anticipates a smaller portion of the indirect costs associated with the caretaking of new plantings will be allocated to capital expenditures as the number of trees planted decreases. The impact of that lower level of capital expenditure will be that a greater portion of growing costs will be expensed instead of capitalized.

Based upon these financial improvements, Alico is now targeting average annual Adjusted EBITDA in the range of $35 and $45 million, commencing in fiscal year 2024.

About Alico

Alico, Inc. primarily operates two divisions: Alico Citrus, one of the nation’s largest citrus producers, and Land Management and Other Operations, which include environmental services, land leasing and related support operations. Learn more about Alico (Nasdaq: “ALCO”) at www.alicoinc.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on Alico’s current expectations about future events and can be identified by terms such as “plans,” “expect,” “may,” “anticipate,” “intend,” “should be,” “will be,” “is likely to,” “believes,” and similar expressions referring to future periods.

Alico believes the expectations reflected in the forward-looking statements are reasonable but cannot guarantee future results, level of activity, performance, or achievements. Actual results may differ materially from those expressed or implied in the forward-looking statements. Therefore, Alico cautions you against relying on any of these forward-looking statements. Factors which may cause future outcomes to differ materially from those foreseen in forward-looking statements include, but are not limited to: changes in laws, regulation and rules, including tax laws and tax rates; weather conditions that affect production, transportation, storage, demand, import and export of fresh product and their by-products; increased pressure from diseases including citrus greening and citrus canker, as well as insects and other pests; disruption of water supplies or changes in water allocations; market pricing of citrus; pricing and supply of raw materials and products; market responses to industry volume pressures; pricing and supply of energy; changes in interest rates; availability of refinancing; availability of financing for land development activities and other growth and corporate opportunities; onetime events; acquisitions and divestitures ability to make strategic acquisitions or divestitures; ability to redeploy proceeds from divestitures; ability to consummate selected land acquisitions; ability to take advantage of tax deferral options; seasonality; labor disruptions; inability to pay debt obligations; inability to engage in certain transactions due to restrictive covenants in debt instruments; government restrictions on land use; changes in agricultural land values; impact of the COVID-19 outbreak and coronavirus pandemic on our agriculture operations, including without limitation demand for product, supply chain, health and availability of our labor force, the labor force of contractors we engage, and the labor force of our competitors; other risks related to the duration and severity of the COVID-19 outbreak and coronavirus pandemic and its impact on Alico’s business; the impact of the COVID-19 outbreak and coronavirus pandemic on the U.S. and global economies and financial markets; access to governmental loans and incentives; any reduction in the public float resulting from repurchases of common stock by Alico; changes in equity awards to employees; whether the Company’s dividend policy, including its recent increased dividend amounts, is continued; whether the Company’s cash flow can support and sustain the Company’s dividend policy, including any future increases in dividend amounts; expressed desire of certain of our shareholders to liquidate their shareholdings by virtue of past market sales of common stock, by sales of common stock or by way of future transactions; political changes and economic crises; ability to implement ESG initiatives; competitive actions by other companies; increased competition from international companies; changes in environmental regulations and their impact on farming practices; the land ownership policies of governments; changes in government farm programs and policies and international reaction to such programs; changes in pricing calculations with our customers; fluctuations in the value of the U.S. dollar, interest rates, inflation and deflation rates; length of terms of contracts with customers; impact of concentration of sales to one customer; impact of concentration of sales to one customer; changes in and effects of crop insurance programs, global trade agreements, trade restrictions and tariffs; soil conditions, harvest yields, prices for commodities, and crop production expenses. Other risks and uncertainties include those that are described in Alico’s SEC filings, which are available on the SEC’s website at http://www.sec.gov. Alico undertakes no obligation to subsequently update or revise the forward-looking statements made in this press release, except as required by law.

This press release also contains financial projections that are necessarily based upon a variety of estimates and assumptions which may not be realized and are inherently subject, in addition to the risks identified in the forward-looking statement disclaimer, to business, economic, competitive, industry, regulatory, market and financial uncertainties, many of which are beyond the Company’s control. There can be no assurance that the assumptions made in preparing the financial projections will prove accurate. Accordingly, actual results may differ materially from the financial projections.

Investor Contact:

Investor Relations
(646) 277-1254
[email protected]

Richard Rallo
Senior Vice President and Chief Financial Officer
(239) 226-2000
[email protected]

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