Energy giant Edison International lost $16 million in the second quarter, but it was mostly due to the settlement of a long-running tax dispute.
The parent company of Southern California Edison said Friday that it had finally resolved several federal income tax issues that date back to 1986, but not without considerable cost. The $262 million for the tax settlement swung the company to a loss, the Rosemead-based company said.
Analysts viewed the settlement in a positive light, noting that the question of how much Edison would have to pay, and when, had been hanging over the company for the last several quarterly earnings calls.
Moreover, Edison easily beat analyst expectations, which usually ignore one-time expenses such as the settlement.
"It looked like a pretty favorable quarter for them. If you strip out those unusual items, they beat the consensus estimates, largely based on better-than-expected sales out of their non-regulated power plants," said Paul Fremont, an analyst with Jefferies and Co.
A survey of Thomson Reuters analysts had predicted a profit of 52 cents a share. Excluding the tax settlement and other one-time items, Edison's profit was 78 cents a share, the company said.
"Although not reflected in our reported earnings, our second-quarter core earnings are on track with our expectations for the quarter," said Theodore F. Craver Jr., Edison's chairman and chief executive.
"We established several key milestones to accomplish this year and are pleased with the progress to date, such as the completion of the global tax settlement with the IRS which removes a major uncertainty for investors."
Edison's net loss was 5 cents a share, compared with net income of $261 million, or 79 cents a share, a year earlier. Sales fell 19% to $2.83 billion.
Edison changed its 2009 net income forecast to a range of $2.18 to $2.48 a share to reflect the settlement. The company's previous guidance had been $1.98 to $2.51. Its yearly earnings forecast excluding one-time items stayed steady, at $2.90 to $3.20.
The market for energy also affected Edison's bottom line. The company said the recession had eroded demand for power and had lowered prices in the generation unit's service area in the Midwest.
Earlier this year, the company's Southern California Edison utility won approval from the California Public Utilities Commission to increase its rate-base revenue this year by $495 million, or about 11%, to pay for investments in its power-distribution system.
In June, the utility won regulatory approval for a project to help it meet California's strict renewable energy requirements. It will spend $875 million to install and run 250 megawatts of rooftop solar panels. It also will buy 250 megawatts of additional rooftop panels from third-party developers.
Southern California Edison serves nearly 14 million people through 4.9 million customer accounts in a 50,000-square-mile area in central, coastal and southern California.