(19) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The quarterly data presented below reflect all adjustments necessary in the opinion of management for a fair presentation of the interim results. Quarterly data normally vary seasonally because of temperature variations and differences between summer and winter rates. The totals of the four quarterly basic and diluted earnings per common share amounts may not equal the basic and diluted earnings per common share for the year due to changes in the number of shares of common stock outstanding during the year.


	2014
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars, except per share amounts)*
Total Operating Revenue (a)	$	1,330		$	1,117		$	1,313		$	1,118		$	4,878
Total Operating Expenses (b)		1,157			966			1,147			1,004	(c)		4,274
Operating Income		173			151			166			114			604
Other Expenses		(52	)		(53	)		(53	)		(66	)		(224	)
Income from Continuing Operations Before Income Tax Expense		121			98			113			48			380
Income Tax Expense Related to Continuing Operations		46			45			34			13			138
Net Income	$	75		$	53		$	79		$	35		$	242

Basic and Diluted Earnings Per Share of Common Stock:
Earnings Per Share of Common Stock	$	0.30		$	0.21		$	0.31		$	0.14		$	0.96
Cash Dividends Per Share of Common Stock	$	0.27		$	0.27		$	0.27		$	0.27		$	1.08

(a)	During the fourth quarter of 2014, ACE reversed unbilled revenue of $3 million ($2 million after-tax) to correct an error that had overstated operating revenue in the third quarter of 2014.

(b)

Includes pre-tax impairment losses of $53 million ($32 million after-tax) and $28 million ($16 million after-tax) in the third and fourth quarters of 2014, respectively, at Pepco Energy Services associated with its combined heat and power thermal generating facilities and operations in Atlantic City.

(c)	Includes a charge of $3 million ($2 million after-tax) to correct a prior period error related to the recoverability of certain regulatory assets at ACE.


	2013
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars, except per share amounts)*
Total Operating Revenue	$	1,180		$	1,051		$	1,344		$	1,091		$	4,666
Total Operating Expenses		1,047			906			1,109			936	(a)		3,998
Operating Income		133			145			235			155			668
Other Expenses		(59	)		(62	)		(60	)		(58	)		(239	)
Income From Continuing Operations Before Income Tax Expense		74			83			175			97			429
Income Tax Expense Related to Continuing Operations		185	(b)		30			65			39	(c)		319
Net (Loss) Income From Continuing Operations		(111	)		53			110			58			110
(Loss) Income from Discontinued Operations, net of taxes		(319	)		(11	)		8			—			(322	)
Net (Loss) Income	$	(430	)	$	42		$	118		$	58		$	(212	)

Basic and Diluted Earnings Per Share of Common Stock:
(Loss) Earnings Per Share of Common Stock from Continuing Operations	$	(0.47	)	$	0.21		$	0.44		$	0.23		$	0.45
(Loss) Earnings Per Share of Common Stock from Discontinued Operations	$	(1.35	)	$	(0.04	)	$	0.04		$	—		$	(1.31	)
(Loss) Earnings Per Share of Common Stock	$	(1.82	)	$	0.17		$	0.48		$	0.23		$	(0.86	)
Cash Dividends Per Share of Common Stock	$	0.27		$	0.27		$	0.27		$	0.27		$	1.08

(a)	Includes a pre-tax impairment loss of $4 million ($3 million after-tax) at Pepco Energy Services associated with a landfill gas-fired electric generation facility.

(b)	Includes an income tax charge of $56 million (after-tax) primarily associated with interest on uncertain and effectively settled tax positions and an income tax charge of $101 million associated with the establishment of valuation allowances against certain deferred tax assets of PCI.

(c)	Includes an income tax charge of $4 million (after-tax) to correct a prior period error related to Pepco’s deferred income taxes.

Quarterly Financial Information

(16) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The quarterly data presented below reflect all adjustments necessary, in the opinion of management, for a fair presentation of the interim results. Quarterly data normally vary seasonally because of temperature variations and differences between summer and winter rates. Therefore, comparisons by quarter within a year are not meaningful.


	2014
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars)*
Total Operating Revenue	$	397		$	279		$	309		$	308		$	1,293
Total Operating Expenses		326			239			264			257			1,086
Operating Income		71			40			45			51			207
Other Expenses		(9	)		(8	)		(9	)		(12	)		(38	)
Income Before Income Tax Expense		62			32			36			39			169
Income Tax Expense		25			13			13			14			65
Net Income	$	37		$	19		$	23		$	25		$	104


	2013
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars)*
Total Operating Revenue	$	370		$	266		$	296		$	312		$	1,244
Total Operating Expenses		317			235			249			258			1,059
Operating Income		53			31			47			54			185
Other Expenses		(11	)		(10	)		(10	)		(9	)		(40	)
Income Before Income Tax Expense		42			21			37			45			145
Income Tax Expense		16			9			14			17			56
Net Income	$	26		$	12		$	23		$	28		$	89

Quarterly Financial Information

(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The quarterly data presented below reflect all adjustments necessary, in the opinion of management, for a fair presentation of the interim results. Quarterly data normally vary seasonally because of temperature variations and differences between summer and winter rates. Therefore, comparisons by quarter within a year are not meaningful.


	2014
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars)*
Total Operating Revenue	$	535		$	508		$	587		$	471		$	2,101
Total Operating Expenses		469			414			462			408			1,753
Operating Income		66			94			125			63			348
Other Expenses		(18	)		(20	)		(20	)		(27	)		(85	)
Income Before Income Tax Expense		48			74			105			36			263
Income Tax Expense		16			28			38			10			92
Net Income	$	32		$	46		$	67		$	26		$	171

	2013
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars)*
Total Operating Revenue	$	477		$	469		$	605		$	475		$	2,026
Total Operating Expenses		430			389			476			410			1,705
Operating Income		47			80			129			65			321
Other Expenses		(22	)		(23	)		(23	)		(24	)		(92	)
Income Before Income Tax Expense		25			57			106			41			229
Income Tax Expense		2	(a)		20			40			17	(b)		79
Net Income	$	23		$	37		$	66		$	24		$	150

(a)	Includes tax benefits of $5 million (after-tax) allocated to Pepco associated with interest on uncertain and effectively settled tax positions resulting from a change in assessment of tax benefits associated with the cross-border energy leases of a PHI affiliate.

(b)	Includes an income tax charge of $4 million (after-tax) to correct a prior period error related to Pepco’s deferred income taxes.

Quarterly Financial Information

(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The quarterly data presented below reflect all adjustments necessary, in the opinion of management, for a fair presentation of the interim results. Quarterly data normally vary seasonally because of temperature variations and differences between summer and winter rates. Therefore, comparisons by quarter within a year are not meaningful.


	2014
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars)*
Total Operating Revenue(a)	$	340		$	253		$	347		$	273		$	1,213
Total Operating Expenses		309			228			295			246	(b)		1,078
Operating Income		31			25			52			27			135
Other Expenses		(15	)		(15	)		(15	)		(17	)		(62	)
Income Before Income Tax Expense		16			10			37			10			73
Income Tax Expense		6			4			14			4			28
Net Income	$	10		$	6		$	23		$	6		$	45

(a)	During the fourth quarter of 2014, ACE reversed unbilled revenue of $3 million ($2 million after-tax) to correct an error that had overstated operating revenue in the third quarter of 2014.

(b)	Includes a charge of $3 million ($2 million after-tax) to correct a prior period error related to the recoverability of certain regulatory assets.


	2013
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	*(millions of dollars)*
Total Operating Revenue	$	277		$	271		$	396		$	258		$	1,202
Total Operating Expenses		254			242			341			229			1,066
Operating Income		23			29			55			29			136
Other Expenses		(17	)		(18	)		(17	)		(15	)		(67	)
Income Before Income Tax (Benefit) Expense		6			11			38			14			69
Income Tax (Benefit) Expense		(3	)		4			13			5			19
Net Income	$	9		$	7		$	25		$	9		$	50