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