-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IWRwYXTKtyBbN4k4oxqxLoOpMv9EKwCAQIWQ5Opmf8Q4WbQQ3dwxEYBNvOz1/Tnf d1YVoZJogUpdMNJ/VgbhfA== 0001031296-04-000013.txt : 20040219 0001031296-04-000013.hdr.sgml : 20040219 20040219120039 ACCESSION NUMBER: 0001031296-04-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040219 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTENERGY CORP CENTRAL INDEX KEY: 0001031296 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341843785 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-21011 FILM NUMBER: 04615189 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 3303845100 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 8-K 1 main.txt SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) February 19, 2004 Commission Registrant; State of Incorporation; I.R.S. Employer File Number Address; and Telephone Number Identification No. - ----------- ----------------------------- ------------------ 333-21011 FIRSTENERGY CORP. 34-1843785 (An Ohio Corporation) 76 South Main Street Akron, Ohio 44308 Telephone (800)736-3402 Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits (c) Exhibits. Exhibit No. Description - ----------- ----------- 99.1 Press Release issued by FirstEnergy Corp., dated February 19, 2004 99.2 Consolidated Report to the Financial Community, dated February 19, 2004 Item 12. Results of Operations and Financial Condition On February 19, 2004, FirstEnergy Corp. issued two public announcements, which are attached as Exhibits 99.1, and 99.2 hereto and incorporated by reference. FirstEnergy's Press Release and Consolidated Report to the Financial Community contain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. Pursuant to the requirements of Regulation G, FirstEnergy has provided quantitative reconciliations within the Press Release and Consolidated Report to the Financial Community of the non-GAAP financial measures to the most directly comparable GAAP financial measures. The Press Release and Consolidated Report to the Financial Community include normalized earnings per share, which is not calculated in accordance with GAAP because it excludes the impact of "unusual items". Unusual items reflect the impact on earnings of events that are not routine, are related to discontinued businesses or are the cumulative effect of an accounting change. Management believes presenting normalized earnings calculated in this manner provides useful information to investors in evaluating the ongoing results of FirstEnergy's businesses and assists investors in comparing the company's operating performance to the operating performance of others in the energy sector. FirstEnergy's management frequently references these non-GAAP financial measures in its decision-making, using them to facilitate historical and ongoing performance comparisons as well as comparisons to the performance of peer companies. The non-GAAP information presented in the Press Release and Consolidated Report to the Financial Community should be considered in addition to, and not as a substitute for, reported earnings per share prepared in accordance with GAAP. Forward-Looking Statement: This Form 8-K includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "expect," "believe," "estimate," and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), adverse regulatory or legal decisions and the outcome of governmental investigations, availability and cost of capital, inability of the Davis-Besse Nuclear Power Station to restart (including because of any inability to obtain a favorable final determination from the Nuclear Regulatory Commission), inability to accomplish or realize anticipated benefits of strategic goals, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities markets, further investigation into the causes of the August 14, 2003 regional power outage and the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to that outage, a denial of or material change to the Company's Application related to its Rate Stabilization Plan, and other factors discussed from time to time in FirstEnergy's Securities and Exchange Commission filings, including its annual report on Form 10-K (as amended) for the year ended December 31, 2002, its Form 10-Q for the quarter ended September 30, 2003 and under "Risk Factors" in the Prospectus Supplement dated September 12, 2003 to the Prospectus dated August 29, 2003 (which was part of the Registration Statement-SEC File No. 333-103865) and other similar factors. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained in this document as a result of new information, future events, or otherwise. 1 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. February 19, 2004 FIRSTENERGY CORP. ----------------- Registrant /s/ Harvey L. Wagner ------------------------------------------ Harvey L. Wagner Vice President, Controller and Chief Accounting Officer 2 EX-99 3 ex99-1.txt PRESS RELEASE EXHIBIT 99.1 FirstEnergy Corp. For Release: February 19, 2004 76 South Main Street Akron, Ohio 44308 www.firstenergycorp.com News Media Contact: Investor Contact: Kristen Baird Kurt Turosky (330) 761-4261 (330) 384-5500 FIRSTENERGY REPORTS 2003 EARNINGS FirstEnergy Corp. (NYSE: FE) today reported that earnings for 2003 on a non-GAAP(*) basis were $735.9 million, or basic earnings per share of common stock of $2.42 ($2.41 diluted), before discontinued operations, the cumulative effect of a change in accounting, unusual items, and costs associated with the extended outage at Davis-Besse. Including those items, 2003 GAAP earnings were $422.8 million, or basic and diluted earnings per share of $1.39. This compares with restated 2002 earnings of $552.8 million, or basic earnings per share of $1.89 ($1.88 diluted), on a GAAP basis. The restatement reflected implementation of changed accounting treatments regarding the recovery of transition assets in Ohio and recognition of above-market values of certain leased generation facilities. Total revenues for 2003 were $12.3 billion, compared with $12.0 billion in 2002. Total generation sales for the year increased 8.3 percent. Total electric distribution deliveries were unchanged. 2003 Non-GAAP Earnings Reconciliation - After-Tax Amounts Basic Amount in Millions Earnings Per Share ------------------ ------------------ Earnings Before Unusual Items $ 735.9 $ 2.42 Claim Settlement 99.1 0.33 Davis-Besse Impacts (170.3) (0.56) JCP&L Rate Case Disallowance (109.3) (0.36) Asset Impairments (124.8) (0.41) Other ( 8.6) (0.03) ------- ------ Income Before Discontinued Operations and Accounting Change $ 422.0 $ 1.39 Discontinued Operations (101.3) (0.33) Cumulative Effect of Accounting Change 102.1 0.33 ------- ------ Net Income $ 422.8 $ 1.39 "We faced a number of challenges in 2003. With most of those behind us, we are committed to delivering a strong performance in 2004. With a sound and disciplined strategy and a renewed focus on execution, we expect to achieve 2004 earnings ranging from $2.70 to $2.85 per share on a non- 3 GAAP basis, which excludes incremental Davis-Besse costs and unusual charges," said Senior Vice President and Chief Financial Officer Richard H. Marsh. FirstEnergy's 2003 earnings were impacted by $289 million of maintenance and replacement power expenses related to the extended outage at the company's Davis-Besse Nuclear Power Station - reducing net income by $170 million, or $0.56 per share of common stock. On February 12, subsidiary FirstEnergy Nuclear Operating Company requested Nuclear Regulatory Commission authorization to return the plant to safe and reliable service. Other major factors that reduced FirstEnergy's 2003 earnings included: the adverse impact of disallowed costs related to a rate decision for its Jersey Central Power & Light (JCP&L) subsidiary, which lowered earnings by $109 million ($0.36 per share); an $80.9 million ($0.27 per share) after-tax, non-cash goodwill impairment charge that reduced the carrying value of FirstEnergy's electrical and mechanical contracting companies; and $126.5 million ($0.42 per share) of after tax, non-cash charges related to FirstEnergy's divestiture of interests in assets in Argentina, Bolivia and Colombia. Also affecting the company's 2003 results were an increase in energy delivery costs, primarily due to storm restoration expenses and accelerated spending to improve service reliability; higher nuclear production costs related to three refueling outages completed during the year; and higher pension and other employee benefit costs. Partially offsetting those cost increases were net after-tax proceeds of $99.1 million, or $0.33 per share, from the sale of FirstEnergy's settled claim against NRG Energy, Inc., related to the never-completed sale of four FirstEnergy power plants and reduced depreciation and amortization expenses. Also, net income for 2003 was increased by $102.1 million, or $0.33 per share, from the cumulative effect of a change in accounting due to a new accounting standard for asset retirement costs. For the fourth quarter of 2003, FirstEnergy reported earnings of $136.2 million, or basic earnings per share of $0.42 ($0.41 diluted) on a non-GAAP basis, before the impact of costs associated with Davis-Besse's extended outage, charges related to discontinued operations and other unusual items. Including those items, fourth quarter GAAP earnings were $109.4 million, or basic and diluted earnings of $0.33 per share, compared with a restated loss of $0.20 per share of common stock in the fourth quarter of 2002. 4 Fourth Quarter 2003 Non-GAAP Earnings Reconciliation - After-Tax Amounts Basic Amount in Millions Earnings Per Share ------------------ ------------------ Earnings Before Unusual Items $136.2 $0.42 Claim Settlement 99.1 0.30 Davis-Besse Impacts (38.3) (0.12) JCP&L Rate Case Disallowance ( 8.0) (0.02) Asset Impairments (34.8) (0.11) Other ( 8.6) (0.03) ------ ----- Income Before Discontinued Operations $145.6 $0.44 Discontinued Operations ( 36.2) (0.11) ------ ----- Net Income $109.4 $0.33 Total electric generation sales for the quarter declined 7.4 percent, reflecting a 13-percent reduction in wholesale transactions and a 5-percent reduction in retail generation sales, which was attributed to a higher number of customers choosing alternative generation suppliers. Distribution deliveries to franchise customers were off by 1.7 percent, reflecting the effect of milder weather conditions on residential customer usage in the fourth quarter of 2003. Total revenues for the fourth quarter were $2.8 billion, compared with $3.0 billion in the year-earlier quarter. FirstEnergy's divestiture of its holdings in Bolivia and Colombia, and the company's recent sale of its 20.1 percent stake in Aquila Sterling Limited - the parent company of Avon Energy Partners Holdings and Midlands Electricity - marked the successful completion of the company's program to divest the international assets acquired through the 2001 merger with the former GPU. During the year, FirstEnergy improved its financial flexibility through an aggressive program of debt reduction and refinancings. The company reduced debt and preferred stock by $1.9 billion, which along with refinancing activities during the year, is expected to produce annualized interest savings of approximately $155 million. For the year 2003, average common shares outstanding totaled 303.6 million, compared with 293.2 million in 2002. This increase reflects 32.2 million additional shares from FirstEnergy's common equity issuance in September of 2003. FirstEnergy's Consolidated Report to the Financial Community - which includes financial results for the fourth quarter - is posted on the company's Internet site - ww.firstenergycorp.com/ir. To access the report, click on Consolidated Report to the Financial Community. FirstEnergy is a registered public utility holding company headquartered in Akron, Ohio. Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity; exploration and production of oil and natural gas; transmission and marketing of natural gas; and energy management and other energy-related services. 5 (*) This news release contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States. Forward-Looking Statement: This news release includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "expect," "believe," "estimate," and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), adverse regulatory or legal decisions and the outcome of governmental investigations, availability and cost of capital, inability of the Davis-Besse Nuclear Power Station to restart (including because of any inability to obtain a favorable final determination from the Nuclear Regulatory Commission), inability to accomplish or realize anticipated benefits of strategic goals, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities markets, further investigation into the causes of the August 14, 2003 regional power outage and the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to that outage, a denial of or material change to the Company's Application related to its Rate Stabilization Plan, and other factors discussed from time to time in FirstEnergy's Securities and Exchange Commission filings, including its annual report on Form 10-K (as amended) for the year ended December 31, 2002, its Form 10-Q for the quarter ended September 30, 2003 and under "Risk Factors" in the Prospectus Supplement dated September 12, 2003 to the Prospectus dated August 29, 2003 (which was part of the Registration Statement-SEC File No. 333-103865) and other similar factors. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained in this document as a result of new information, future events, or otherwise. 6 EX-99 4 ex99-2highlights.txt HIGHLIGHTS Consolidated Report to Exhibit 99.2 the Financial Community - ---------------------------------------------------------------------------
------------------------------------------------------------------------ Fourth Quarter 2003 Highlights | After Tax EPS Variance Analysis 4th Qtr. | (Released February 19, 2004) | ------------------------------- -------- | | 4th Quarter 2002 Basic EPS - GAAP Basis (Restated) $ (0.20) | o Non-GAAP earnings for the fourth | Discontinued Operations - 2002 0.29 | quarter, before discontinued | Lake Plant Depreciation Adjustment - 2002 0.12 | operations and unusual charges, | Unusual Charges - 2002 (See Page 6) 0.25 | were $0.30 per share. Excluding | ------- | costs associated with the | 4th Quarter 2002 Basic EPS - Non-GAAP Basis $ 0.46 | Davis-Besse extended outage, | Davis-Bese Incremental Expenses - 2002 0.19 | normalized non-GAAP earnings were | ------- | $0.42 per share, compared with | 4th Quarter 2002 Normalized Earnings - Non-GAAP $ 0.65 | restated fourth quarter 2002 | Common Stock Dilution (0.07) | normalized non-GAAP earnings of | JCP&L Rate Reduction (0.10) | $0.65 per share. GAAP earnings | Electric Gross Margin (Excl. Davis-Besse) (0.05) | for the fourth quarter of 2003 | Generation Operating Expenses (0.05) | were $0.33 per share compared | Energy Delivery (0.06) | with the restated GAAP loss of | Pension and OPEB (0.09) | $0.20 per share in the same | Employee Benefits 0.05 | quarter of 2002. Fourth quarter | Incentive Compensation Adjustment - 2003 0.09 | 2002 results were restated to | Financing Costs 0.03 | reflect the changes in the | Other 0.02 | amortization of transition costs | ------- | and above-market lease costs for | 4th Quarter 2003 Normalized Earnings - Non-GAAP $ 0.42 | the Ohio distribution companies, | Davis-Besse Incremental Expenses - 2003 (0.12) | a reclassification of certain | ------- | international operations as | Subtotal - Non-GAAP $ 0.30 | discontinued operations, and | Discontinued Operations - 2003 (0.11) | other year-end audit adjustments. | Unusual Items - 2003 (See Page 6) 0.14 | | ------- | | 4th Quarter 2003 Basic EPS - GAAP Basis $ 0.33 | | ------- | | | -----------------------------------------------------------------------
4Q 2003 Results Compared With 4Q 2002 - ------------------------------------- o Electric distribution deliveries decreased 2%. Residential deliveries decreased 5% reflecting milder weather, while a 1% decrease in commercial deliveries was offset by a 1% increase in industrial deliveries. Heating degree-days during the quarter were 6% below normal and 13% lower then same period last year. Total electric generation sales decreased 7% due to a 13 % reduction in wholesale sales and a 5% decline in retail generation sales. The retail sales decline was attributable to increased customer shopping levels. o Electric gross margin decreased $26 million after adjusting for changes in regulatory deferrals, JCP&L's rate reduction, and Davis-Besse replacement power costs. The reduction in electric gross margin resulted from lower wholesale generation sales and electric distribution deliveries. o Generation operating expenses, excluding incremental expenses associated with the Davis-Besse outage, increased $30 million. Fossil operating expenses increased $24 million due to planned maintenance outages at the Mansfield 3, Bay Shore 4, and Eastlake 5 coal plants. Nuclear operating expenses increased $6 million due to the refueling outage at Beaver Valley Unit 2. o Energy delivery expenses increased $35 million as a result of accelerated reliability improvement spending, increased tree trimming activities, and storm-related restoration expenses. 1 o Pension and other post-employment benefit costs increased approximately $50 million, continuing to reflect reduced plan asset values as of the beginning of 2003, reduced return assumptions on trust assets, and lower discount rates used to value projected obligations compared to assumptions used in 2002. o Employee benefit costs decreased by approximately $26 million reflecting a greater cost sharing with employees for benefit costs as well as fewer employees. o A&G expenses were reduced by $51 million in the fourth quarter because short-term incentive compensation payment triggers were not met in 2003. o Net interest charges decreased $12 million as a result of our ongoing debt reduction program and refinancing activities. Financing activities during the quarter included $15 million in mandatory long-term debt redemptions, $300 million in optional debt redemptions, $335 million of refinancing and repricing transactions, and $150 million in new debt issuance. These activities and other financing transactions are expected to produce annualized financing cost savings of $49 million. Increased shares outstanding from the issuance of common stock in the third quarter diluted normalized non-GAAP earnings by $0.07 per share. o In the fourth quarter of 2003, we recorded as discontinued operations, an after-tax non-cash charge of $36 million to recognize the divestiture of our international generating assets in Bolivia and a loss on the sale of a mechanical contracting company. We also recorded $0.14 per share of unusual items to reflect the gain from the NRG Energy settlement claim, partially offset by asset impairments, an environmental liability, and an additional disallowance from the JCP&L rate case decision. 4Q 2003 Earnings Impact Associated with Davis-Besse - --------------------------------------------------- o Incremental expenses associated with the extended outage at Davis-Besse during the quarter totaled $65 million, or $0.12 per share ($48 million of replacement power costs and $17 million of O&M expenses). For the year, incremental expenses totaled $288 million, or $0.56 per share ($196 million of replacement power costs and $92 million of O&M expenses). 2004 Earnings Guidance - ---------------------- o Earnings guidance for 2004 remains at $2.70 to $2.85 per share, excluding incremental expenses associated with the Davis-Besse restart effort and unusual charges. Our estimate for the quarterly pattern of our 2004 earnings guidance follows: - 20% in the 1st Quarter - 35% in the 3rd Quarter - 25% in the 2nd Quarter - 20% in the 4th Quarter For additional information, please contact: Kurt E. Turosky Terrance G. Howson Thomas C. Navin Director, Investor Relations Vice President, Investor Relations Treasurer (330) 384-5500 (973) 401-8519 (330) 384-5889 2
FIRSTENERGY CORP. Three Months Ended Twelve Months Ended CONSOLIDATED INCOME December 31, December 31, ----------------------------------- ------------------------------------ STATEMENTS (thousands): 2003 2002 Change 2003 2002 Change --------------------------------------------- ----------- ----------- --------- ----------- ----------- ---------- (1)REVENUES: (2) Electric Sales $ 2,263,079 $ 2,426,203 $(163,124) $10,266,899 $ 9,697,484 $ 569,415 (3) Natural Gas 137,550 147,534 (9,984) 624,315 613,256 11,059 (4) FE Facilities 84,626 86,686 (2,060) 327,095 383,043 (55,948) (5) MYR 105,506 114,688 (9,182) 438,710 521,195 (82,485) (6) International 3,651 15,872 (12,221) 25,482 293,857 (268,375) (7) Other 204,380 184,988 19,392 624,546 538,513 86,033 ----------- ----------- --------- ----------- ----------- --------- (8) Total revenues 2,798,792 2,975,971 (177,179) 12,307,047 12,047,348 259,699 ----------- ----------- --------- ----------- ----------- --------- (9) (10)EXPENSES: (11) Fuel 212,308 180,803 31,505 757,952 749,874 8,078 (12) Purchased Power 712,615 792,318 (79,703) 3,809,907 2,920,970 888,937 (13) Purchased Gas 133,211 142,333 (9,122) 586,799 587,860 (1,061) (14) Other operating expenses 750,981 805,518 (54,537) 2,852,221 2,704,988 147,233 (15) FE Facilities 84,215 86,592 (2,377) 319,721 373,752 (54,031) (16) MYR 113,962 113,630 332 444,087 511,988 (67,901) (17) International 11,151 42,958 (31,807) 30,099 164,528 (134,429) (18) Mark-to-Market Adjustment 4,997 (9,988) 14,985 (2,553) (29,669) 27,116 (19) Provision for depreciation and amortization 319,547 383,774 (64,227) 1,281,690 1,298,290 (16,600) (20) Goodwill Impairment - - - 116,988 - 116,988 (21) General taxes 120,014 156,291 (36,277) 638,465 649,898 (11,433) ----------- ----------- --------- ------------ ----------- --------- (22) Total expenses 2,463,001 2,694,229 (231,228) 10,835,376 9,932,479 902,897 ----------- ----------- --------- ------------ ----------- --------- (23)Claim Settlement 167,937 - 167,937 167,937 - 167,937 (24)INCOME BEFORE INTEREST (25) AND INCOME TAXES 503,728 281,742 221,986 1,639,608 2,114,869 (475,261) ----------- ----------- --------- ------------ ----------- --------- (26)Net interest charges: (27) Interest expense 202,539 205,014 (2,475) 801,184 906,970 (105,786) (28) Capitalized interest (8,613) (5,752) (2,861) (31,900) (24,474) (7,426) (29) Subsidiaries' preferred stock dividends 5,946 12,248 (6,302) 42,369 75,647 (33,278) ----------- ----------- --------- ----------- ----------- --------- (30) Net interest charges 199,872 211,510 (11,638) 811,653 958,143 (146,490) ----------- ----------- --------- ----------- ----------- --------- (31)Income taxes 158,267 43,534 114,733 405,959 524,059 (118,100) ----------- ------------ ---------- ----------- ----------- --------- (32)Income before discontinued operations (33) and accounting change 145,589 26,698 118,891 421,996 632,667 (210,671) (34)Discontinued Operations (36,157) (84,905) 48,748 (101,379) (79,863) (21,516) (35)Cumulative effect of accounting change - - - 102,147 - 102,147 ----------- ------------ ---------- ----------- ----------- --------- (36)NET INCOME $ 109,432 $ (58,207) $ 167,639 $ 422,764 $ 552,804 $(130,040) =========== =========== ========= =========== =========== ========= (37) (38)Basic earnings per common share: (39) Before discontinued operations and (40) accounting change $ 0.44 $ 0.09 $ 0.35 $ 1.39 $ 2.16 $ (0.77) (41) Discontinued operations (0.11) (0.29) 0.18 (0.33) (0.27) (0.06) (42) Cumulative effect of accounting change - - - 0.33 - 0.33 ----------- ----------- --------- ----------- ----------- --------- (43) $ 0.33 $ (0.20) $ 0.53 $ 1.39 $ 1.89 $ (0.50) =========== =========== ========= =========== =========== ========= (44)Weighted average number of basic (45) shares outstanding 326,856 293,577 33,279 303,582 293,194 10,388 =========== =========== ========= =========== =========== ========= (46) (47)Diluted earnings per common share: (48) Before discontinued operations and (49) accounting change $ 0.44 $ 0.09 $ 0.35 $ 1.39 $ 2.15 $ (0.76) (50) Discontinued operations (0.11) (0.29) 0.18 (0.33) (0.27) (0.06) (51) Cumulative effect of accounting change - - - 0.33 - 0.33 ----------- ----------- --------- ----------- ----------- --------- (52) $ 0.33 $(0.20) $ 0.53 $ 1.39 $ 1.88 $ (0.49) =========== =========== ========= =========== =========== ========= (53)Weighted average number of diluted (54) shares outstanding 328,425 294,277 34,148 304,972 294,421 10,551 =========== =========== ========= =========== =========== ========= 3
FiIrstEnergy Consolidated Income Segments Three Months Ended December 31, 2003 -----------------------------------------------------------------------------
Regulated Competitive Other Reconciling (In thousands): Services Services (c) Adjustments Consolidated -------------------------------------- ----------- ----------- ---------- ------------ ------------ (1)REVENUES: (2) Electric Sales $ 1,879,443 $ 383,636 $ - $ - $ 2,263,079 (3) Natural Gas - 137,550 - - 137,550 (4) FE Facilities - 84,626 - - 84,626 (5) MYR - 105,506 - - 105,506 (6) International - - 3,651 - 3,651 (7) Other 142,758 26,164 13,711 21,747 (a) 204,380 (8) Internal revenues 297,604 518,890 140,779 (957,273)(b) - ----------- ---------- ---------- ---------- ----------- (9) Total revenues 2,319,805 1,256,372 158,141 (935,526) 2,798,792 ----------- ---------- ---------- ---------- ----------- (10) (11)EXPENSES: (12) Fuel - 209,217 3,091 - 212,308 (13) Purchased Power 877,864 353,641 - (518,890)(b) 712,615 (14) Purchased Gas - 133,211 - - 133,211 (15) Other operating expenses 623,709 366,777 159,878 (399,383)(a)(b) 750,981 (16) FE Facilities - 84,215 - - 84,215 (17) MYR - 113,962 - - 113,962 (18) International - - 11,151 - 11,151 (19) Mark-to-Market Adjustment - 5,038 (41) - 4,997 (20) Provision for depreciation and amortization 300,245 8,174 11,128 - 319,547 (21) Goodwill Impairment - - - - - (22) General taxes 107,691 10,147 2,415 (239) 120,014 ----------- ---------- ---------- ----------- ----------- (23) Total expenses 1,909,509 1,284,382 187,622 (918,512) 2,463,001 ----------- ---------- ---------- ----------- ----------- (24)Claim Settlement 167,937 - - - 167,937 (25)INCOME BEFORE INTEREST (26) AND INCOME TAXES 578,233 (28,010) (29,481) (17,014) 503,728 ----------- ---------- ----------- ----------- ----------- (27)Net interest charges: (28) Interest expense 125,928 11,591 82,034 (17,014)(b) 202,539 (29) Capitalized interest (6,814) (1,568) (231) - (8,613) (30) Subsidiaries' preferred stock dividends 5,946 - - - 5,946 ----------- ---------- ---------- ---------- ----------- (31) Net interest charges 125,060 10,023 81,803 (17,014) 199,872 ----------- ---------- ---------- ---------- ----------- (32)Income taxes 207,602 (7,732) (41,603) - 158,267 ----------- ---------- ---------- ---------- ----------- (33)Income before discontinued operations (34) and an accounting change 245,571 (30,301) (69,681) - 145,589 (35)Discontinued operations - (2,530) (33,627) - (36,157) (36)Cumulative effect of an accounting change - - - - - ----------- ---------- ---------- ---------- ----------- (37)NET INCOME $ 245,571 $ (32,831) $ (103,308) $ - $ 109,432 =========== ========== ========== ========== =========== Three Months Ended December 31, 2002 ----------------------------------------------------------------------------- Regulated Competitive Other Reconciling (In thousands): Services Services (c) Adjustments Consolidated -------------------------------------- ----------- ------------- ---------- ----------- ------------ (1)REVENUES: (2) Electric Sales $ 2,083,639 $ 342,564 $ - $ $ - $ 2,426,203 (3) Natural Gas - 147,534 - - 147,534 (4) FE Facilities - 86,686 - - 86,686 (5) MYR - 114,688 - - 114,688 (6) International - - 15,872 - 15,872 (7) Other 106,134 13,593 65,845 (584)(a) 184,988 (8) Internal revenues 259,097 555,998 119,342 (934,437)(b) - ----------- ---------- ---------- ---------- ----------- (9) Total revenues 2,448,870 1,261,063 201,059 (935,021) 2,975,971 ----------- ---------- ---------- ---------- ----------- (10) (11)EXPENSES: (12) Fuel 1,360 179,443 - - 180,803 (13) Purchased Power 988,959 359,357 - (555,998)(b) 792,318 (14) Purchased Gas - 142,333 - - 142,333 (15) Other operating expenses 614,218 442,324 113,713 (364,737)(a)(b) 805,518 (16) FE Facilities - 86,592 - - 86,592 (17) MYR - 113,630 - - 113,630 (18) International - - 42,958 - 42,958 (19) Mark-to-Market Adjustment - (9,320) (668) - (9,988) (20) Provision for depreciation and amortization 367,657 8,235 7,882 - 383,774 (21) Goodwill Impairment - - - - - (22) General taxes 147,965 5,733 2,593 - 156,291 ----------- ---------- ----------- ---------- ------------ (23) Total expenses 2,120,159 1,328,327 166,478 (920,735) 2,694,229 ----------- ---------- ----------- ---------- ------------ (24)Claim Settlement - - - - - (25)INCOME BEFORE INTEREST (26) AND INCOME TAXES 328,711 (67,264) 34,581 (14,286) 281,742 ----------- ---------- ----------- ---------- ------------ (27)Net interest charges: (28) Interest expense 121,608 12,714 84,978 (14,286)(b) 205,014 (29) Capitalized interest (3,324) (1,527) (901) - (5,752) (30) Subsidiaries' preferred stock dividends 12,248 - - - 12,248 ----------- ---------- ----------- ---------- ------------ (31) Net interest charges 130,532 11,187 84,077 (14,286) 211,510 ----------- ---------- ----------- ---------- ------------ (32)Income taxes 74,731 (35,384) 4,187 - 43,534 ----------- ---------- ----------- ---------- ------------ (33)Income before discontinued operations (34) and an accounting change 123,448 (43,067) (53,683) - 26,698 (35)Discontinued operations - 1,196 (86,101) - (84,905) (36)Cumulative effect of a change in accounting - - - - - ----------- ---------- ----------- ---------- ----------- (37)NET INCOME $ 123,448 $ (41,871) $ (139,784) $ - $ (58,207) =========== ========== =========== ========== =========== 4
FirstEnergy Consolidated Income Segments Three Months Ended December 31, 2003 VS 2002
----------------------------------------------------------------------- Regulated Competitive Other Reconciling (In thousands): Services Services (c) Adjustments Consolidated ---------------------------------------- ------------- ------------ ------- ------------ ------------ (1)REVENUES: (2) Electric Sales $ (204,196) $ 41,072 $ - $ - $ (163,124) (3) Natural Gas - (9,984) - - (9,984) (4) FE Facilities - (2,060) - - (2,060) (5) MYR - (9,182) - - (9,182) (6) International - - (12,221) - (12,221) (7) Other 36,624 12,571 (52,134) 22,331 (a) 19,392 (8) Internal revenues 38,507 (37,108) 21,437 (22,836)(b) - ---------- -------- --------- -------- ---------- (9) Total revenues (129,065) (4,691) (42,918) (505) (177,179) ---------- -------- --------- -------- ---------- (10) (11)EXPENSES: (12) Fuel (1,360) 29,774 3,091 - 31,505 (13) Purchased Power (111,095) (5,716) - 37,108 (b) (79,703) (14) Purchased Gas - (9,122) - - (9,122) (15) Other operating expenses 9,491 (75,547) 46,165 (34,646)(a)(b) (54,537) (16) FE Facilities - (2,377) - - (2,377) (17) MYR - 332 - - 332 (18) International - - (31,807) - (31,807) (19) Mark-to-Market Adjustment - 14,358 627 - 14,985 (20) Provision for depreciation and amortization (67,412) (61) 3,246 - (64,227) (21) Goodwill Impairment - - - - - (22) General taxes (40,274) 4,414 (178) (239) (36,277) ---------- -------- --------- -------- ---------- (23) Total expenses (210,650) (43,945) 21,144 2,223 (231,228) ---------- -------- --------- -------- ---------- (24)NRG Settlement 167,937 - - - 167,937 (25)INCOME BEFORE INTEREST (26) AND INCOME TAXES 249,522 39,254 (64,062) (2,728) 221,986 ---------- -------- ---------- -------- ---------- (27)Net interest charges: (28) Interest expense 4,320 (1,123) (2,944) (2,728)(b) (2,475) (29) Capitalized interest (3,490) (41) 670 - (2,861) (30) Subsidiaries' preferred stock dividends (6,302) - - - (6,302) ---------- -------- --------- -------- ---------- (31) Net interest charges (5,472) (1,164) (2,274) (2,728) (11,638) ---------- -------- --------- -------- ---------- (32)Income taxes 132,871 27,652 (45,790) - 114,733 ---------- -------- --------- -------- ---------- (33)Income before discontinued operations (34) and an accounting change 122,123 12,766 (15,998) - 118,891 (35)Discontinued operations - (3,726) 52,474 - 48,748 (36)Cumulative effect of a change in accounting - - - - - ---------- -------- --------- -------- ---------- (37)NET INCOME $ 122,123 $ 9,040 $ 36,476 $ - $ 167,639 ========== ======== ========= ======== ========== Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting. (a) Principally fuel marketing revenues which are reflected as reductions to expenses for internal management reporting purposes. (b) Elimination of intersegment transactions. (c) "Other" segment primarily consists of corporate support services and international businesses. 5
FirstEnergy Statistical Summary - --------------------------------------------------------------------------------------------------------------------- FirstEnergy Combined Electric Sales Statistics - ---------------------------------------------------------------------------------------------------------------------
Three Months Ended December 31, Twelve Months Ended December 31, -------------------------------- -------------------------------- 2003 2002 Change 2003 2002 Change ------- ------- -------- ------- ------ ------ (In Millions) (In Millions) ELECTRIC GENERATION SALES (KWHs): Retail - Regulated 19,232 21,131 -9.0% 82,407 88,786 -7.2% Unregulated 3,629 2,914 24.5% 14,230 9,300 53.0% ------- ------ ------- ------- ------- ----- Total Retail 22,861 24,045 -4.9% 96,637 98,086 -1.5% Wholesale 9,677 11,087 -12.7% 42,062 30,007 40.2% ------- ------ ------- ------- ------- ----- Total Electric Generation Sales 32,538 35,132 -7.4% 138,699 128,093 8.3% ======= ====== ======= ======= ======= ===== ELECTRIC DISTRIBUTION DELIVERIES (KWHs): Residential 8,346 8,744 -4.6% 35,708 35,943 -0.7% Commercial 7,897 7,972 -0.9% 32,962 32,573 1.2% Industrial 8,930 8,885 0.5% 36,159 36,309 -0.4% Other 140 139 0.7% 564 536 5.2% ------- ------ ------- ------- ------- ----- Total Distribution Deliveries 25,313 25,740 -1.7% 105,393 105,361 0.0% ======= ====== ======= ======= ======= ===== ELECTRIC SALES SHOPPED (KWHs): Residential 1,712 1,281 33.6% 6,831 5,443 25.5% Commercial 2,104 1,454 44.7% 7,558 4,079 85.3% Industrial 2,265 1,875 20.8% 8,597 7,053 21.9% ------- ------ ------- ------- ------- ----- Total Electric Sales Shopped 6,081 4,610 31.9% 22,986 16,575 38.7% ======= ====== ====== ======= ======= ===== - -------------------------------------------------------------------------------------------------------------------- At December 31, ----------------------------------------------------- 2003 % Total 2002 % Total ------------ ---------- ----------- --------- Capitalization ( in thousands): ------------------------------------ Total common equity $ 8,294,199 37% $ 7,050,661 30% Preferred stock * 335,123 2% 765,261 3% Long-term debt - mandatory preferred 18,514 0% - 0% Long-term debt - all other* 11,524,748 52% 12,573,288 55% Short-term debt * 521,540 2% 1,092,817 5% Off-balance sheet debt equivalents: - Sale-leaseback arrangements 1,414,541 6% 1,472,906 6% - Accounts receivable factoring 200,000 1% 170,000 1% ----------- ----- ------------ ----- Total Capitalization $22,308,665 100% $ 23,124,933 100% =========== ===== ============ ===== * Includes amounts due to be paid within one year, JCP&L securitization of $296 million and $320 million in 2003 and 2002, respectively, and reflects the deconsolidation of Los Amigos debt. - ---------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Three Months Ended December 31, Twelve Months Ended December 31, ---------------------------------- ----------------------------------------- 2003 2002 Change 2003 2002 Change --------- ---------- --------- ----------- ----------- ----------- (in thousands) (in thousands) Financial Statistics ( in thousands): --------------------------------------- L-T Debt and Preferred Stock Redemptions $ 759,529 $ 76,970 $ 682,559 $ 2,433,071 $ 1,831,037 $ 602,034 Short-term Debt Increase (Decrease) $ 280,127 $ (60,751) $ 340,878 $ (566,607) $ 478,520 $ (1,045,127) Capital Investments $ 274,201 $ 303,109 $ (28,908) $ 854,270 $ 997,723 $ (143,453) ----------------------------------------------------------------------------- ----------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------- Unusual Items: 2003 vs 2002 Three Months Ended Twelve Months Ended December 31, December 31, ---------------------------------- -------------------------------------- 2003 2002 Change 2003 2002 Change --------- --------- --------- ---------- -------- --------- Claim Settlement $ 167,937 $ 167,937 $ 167,937 $ 167,937 Goodwill Impairment * - $ - - (116,988) - (116,988) JCP&L Rate Case Disallowance (13,635) - (13,635) (185,241) - (185,241) Avon Investment Impairment (5,287) (50,000) 44,713 (5,287) (50,000) 44,713 Environmental Liability (14,500) (14,500) (14,500) (14,500) TEBSA Investment Impairment (25,953) - (25,953) (25,953) - (25,953) Pantellos Investment Impairment (5,934) - (5,934) (5,934) - (5,934) Note Receivable Impairment - - - (12,563) - (12,563) Loss on sale of gas operations unit - - - (6,200) - (6,200) Lake Plant Transaction Fees - (17,226) 17,226 - (17,226) 17,226 Claims Settlement Reserve - (16,800) 16,800 - (16,800) 16,800 Environmental Investment Impairment - (7,649) 7,649 - (7,649) 7,649 SSAI Severance Costs - 2002 - - - - (11,325) 11,325 Long-term Derivative Contract Adjustment - - - - (18,091) 18,091 Equity Investment - Bankruptcy - - - - (30,371) 30,371 Telecommunications Investment Writedown - - - - (12,610) 12,610 Generation Project Cancellation - - - - (17,102) 17,102 --------- --------- --------- --------- ---------- --------- Total - Pre-tax Amounts $ 102,628 $ (91,675) $ 194,303 $(204,729) $ (181,174) $ (23,555) ========= ========= ========= ========= ========== ========= EPS Effect $0.14 ($0.25) $0.39 ($0.47) ($0.43) ($0.04) ========= ========= ========= ========= ========== ========= * Excluding $4.5 million included in Discontinued Operations. - -------------------------------------------------------------------------------------------------------------------------------- 6
FirstEnergy Statistical Summary - ------------------------------------------------------------------------------ -------------------------------
Three Months Ended Twelve Months Ended December 31, December 31, ------------------------------- ------------------------------- 2003 2002 Change 2003 2002 Change --------- ------- --------- -------- -------- ------- NATURAL GAS SALES (Decatherms): (in thousands) (in thousands) Retail 15,206 23,571 -35.5% 71,156 98,882 -28.0% Wholesale 9,365 7,938 18.0% 36,303 48,641 -25.4% --------- ------- --------- -------- -------- ----- Total Natural Gas Sales 24,571 31,509 -22.0% 107,459 147,523 -27.2% ========= ======= ========= ======== ======== ===== - ------------------------------------------------------------------------------ ------------------------------- Three Months Ended December 31, Twelve Months Ended December 31, ------------------------------- -------------------------------- 2003 2002 Change 2003 2002 Change ------------------------------- ---------- ------ ------- Regulatory Asset Amortization (in thousands) (in thousands) ------------------------------------ Depreciation and Amortization $ 226,276 $ 187,538 $ 38,738 $910,349 $785,433 $ 124,916 Income Tax Amortization 15,115 15,190 (75) 62,129 56,891 5,238 --------- --------- -------- -------- -------- --------- Total $ 241,391 $ 202,728 $ 38,663 $972,478 $842,324 $ 130,154 ========= ========= ======== ======== ======== ========= Regulatory Deferrals ------------------------------------ Ohio Transition Plan Beginning Balance $ 409,746 $ 221,282 $259,353 $ 75,406 Deferral of Shopping Incentives 43,321 28,131 $ 15,190 184,106 137,213 $ 46,893 Deferral of New Regulatory Assets 3,424 9,940 (6,516) 13,032 46,734 (33,702) --------- --------- -------- -------- -------- --------- Current period deferrals 46,745 38,071 $ 8,674 197,138 183,947 $ 13,191 --------- --------- ======== -------- -------- ========= Ending Balance-Ohio Deferrals $ 456,491 $ 259,353 $456,491 $259,353 ========= ========= ======== ======== Deferred Energy Costs ------------------------------------ New Jersey Beginning Balance $ 444,117 $ 481,635 $548,641 $301,204 Deferral (recovery) of energy costs (3,217) 67,006 $(70,223) 57,844 247,437 $(189,593) Rate case disallowance - - - (165,585) - (165,585) --------- --------- -------- -------- -------- ---------- Current period charge (3,217) 67,006 $(70,223) (107,741) 247,437 $(355,178) --------- --------- ======== -------- -------- ========== Ending Balance $ 440,900 $ 548,641 $440,900 $548,641 ========= ========= ======== ======== Mark-to-Market Adjustment ------------------------------------ Expenses - Pre-Tax Income Effect: Increase (Decrease) $ 4,997 $ (9,988) $ 14,985 $ (2,553) $ (29,668) $ 27,115 EPS Effect ($0.01) $0.02 ($0.03) ($0.01) $0.06 ($0.07) - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------- At December 31, ----------------------------------------------- Operating Statistics (12 mos. Ending) 2003 2002 ------------------------------------- ---------------- ------------ System Load Factor 64.7% 60.5% Capacity Factors: Fossil 58.3% 60.2% Nuclear 64.1% 74.2% Generation Output: Fossil 68% 66% Nuclear 32% 34% Weather ------- Composite Heating Days Year-to-Date 5,748 5,348 (Normal - 5552) Composite Cooling Days Year-to-Date 810 1,119 (Normal - 886) - -------------------------------------------------------------------------------------------------------- 7
RECENT DEVELOPMENTS - ------------------------------------------------------------------------------- Chairman and Chief Executive Officer Appointments - ------------------------------------------------- On January 20, FirstEnergy's Board of Directors elected Anthony J. Alexander as president and CEO. Mr. Alexander, who previously served as president and chief operating officer, succeeded H. Peter Burg who passed away on January 13, 2004, as CEO. The Board also elected George M. Smart as chairman of the Board and indicated that a search would begin immediately for a chief operating officer. Mr. Smart, who has served on FirstEnergy's Board since 1997, will not hold an executive position with the company. Davis-Besse Update - ------------------ On February 12, the Nuclear Regulatory Commission (NRC) held a public meeting to report their inspection findings on the plant's safety conscious work environment and restart readiness. Also on February 12, the NRC held a second public meeting during which the company requested the NRC's permission to restart the plant. Ohio Rate Plan Proposal - ----------------------- On February 11, evidentiary hearings commenced before the Public Utilities Commission of Ohio (PUCO) on FirstEnergy's rate stabilization plan proposal for establishing generation rates beginning January 1, 2006 for its Ohio electric operating companies. We expect to receive an Order from the PUCO in early spring. Rating Agency Actions - --------------------- On December 23, 2003, Standard & Poor's downgraded FirstEnergy Corp.'s senior unsecured debt rating to "BB+", revised the company's business risk profile to 6 from 5, removed all ratings from Creditwatch and assigned a stable outlook. On February 6, 2004, Moody's Investor's Service downgraded FirstEnergy Corp.'s senior unsecured rating from Baa2, negative outlook to Baa3, stable outlook. As part of this action, Moody's changed the senior secured ratings for JCP&L, Met-Ed and Penelec from A2 to Baa1 with a stable outlook. The existing senior secured ratings of the other operating companies were confirmed (OE and Penn Power: Baa1, CEI and TE: Baa2). Non-Core Asset Sales - -------------------- In February 2004, FirstEnergy announced the completion of the sales of its remaining international assets acquired as part of its November 2001 merger with the former GPU, Inc. and the sale of its NRG Energy, Inc. claim. The international sales included Avon Energy Partners Holdings and generation assets in Bolivia and Colombia. The company also announced completion of the sale of Ancoma, Inc., a mechanical contracting company based in Rochester, NY. The net gain from these transactions increased fourth quarter 2003 net income by $32 million, or $0.10 per common share. Pennsylvania Public Utility Commission (PaPUC) Reliability Investigation - ------------------------------------------------------------------------ On January 16, the PaPUC initiated a formal investigation into Med-Ed, Penelec and Penn Power's distribution reliability metrics to determine whether actual performance is meeting the reliability standards established by the commission as part of the restructuring of electric generation in the state. The formal investigation will be assigned to a PaPUC administrative law judge (ALJ) for hearings and to collect evidence. A ruling by the ALJ is expected by September 30, 2004, to support a final Commission order expected by December 16, 2004. This Consolidated Report to the Financial Community includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "expect," "believe," "estimate," and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), adverse regulatory or legal decisions, availability and cost of capital, inability of the Davis-Besse Nuclear Power Station to restart (including because of any inability to obtain a favorable final determination from the Nuclear Regulatory Commission) in early 2004, inability to accomplish or realize anticipated benefits of strategic goals, the ability to improve electric commodity margins and to experience growth in the distribution business, the ability to access the public securities markets, further investigation into the causes of the August 14, 2003 regional power outage and the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to that outage, a denial of or material change to the Company's Application related to its Rate Stabilization Plan, and other similar factors discussed from time to time in FirstEnergy's Securities and Exchange Commission filings, including its annual report on Form 10-K (as amended) for the year ended December 31, 2002, its Form 10-Q for the quarter ended September 30, 2003 and under "Risk Factors" in the Prospectus Supplement dated September 12, 2003 to the Prospectus dated August 29, 2003 (which was part of the Registration Statement-SEC File No. 333-103865) and other similar factors. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained in this document as a result of new information, future events, or otherwise. 8 -----END PRIVACY-ENHANCED MESSAGE-----