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, OH 44308 | ||||
Telephone (800)736-3402 | ||||
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release issued by FirstEnergy Corp., dated April 27, 2017 | |
99.2 | Consolidated Report to the Financial Community, dated April 27, 2017 |
FIRSTENERGY CORP. | |
Registrant | |
By: | /s/ K. Jon Taylor |
K. Jon Taylor Vice President, Controller and Chief Accounting Officer |
Exhibit No. | Description | |
99.1 | Press Release issued by FirstEnergy Corp., dated April 27, 2017 | |
99.2 | Consolidated Report to the Financial Community, dated April 27, 2017 |
Consolidated GAAP Earnings Per Share to Operating (Non-GAAP) Earnings Per Share* Reconciliation | ||||||||
First Quarter | 2017 Estimate | |||||||
2017 | 2016 | Second Quarter | Full Year | |||||
Basic Earnings Per Share (GAAP) | $0.46 | $0.78 | $0.54-$0.64 | $2.17 - $2.47 | ||||
Excluding Special Items*: | ||||||||
Mark-to-market adjustments | 0.07 | (0.09) | — | 0.07 | ||||
Regulatory charges | 0.02 | 0.09 | 0.01 | 0.04 | ||||
Merger accounting – commodity contracts | — | 0.01 | — | — | ||||
Asset impairment/plant exit costs | 0.23 | — | — | 0.23 | ||||
Debt redemption costs | — | — | — | 0.19 | ||||
Trust securities impairment | — | 0.01 | — | — | ||||
Total Special Items* | 0.32 | 0.02 | 0.01 | 0.53 | ||||
Basic Earnings Per Share - Operating (Non-GAAP) | $0.78 | $0.80 | $0.55-$0.65 | $2.70 - $3.00 | ||||
* Per share amounts for the special items and earnings drivers above are based on the after-tax effect of each item divided by the weighted average basic shares outstanding and assumes up to $600 million of additional equity in 2017, of which ~$100 million relates to employee benefit and other plans. The current and deferred income tax effect was calculated by applying the subsidiaries’ statutory tax rate to the pretax amount. The income tax rates range from 35% to 42%. |
Competitive | FirstEnergy | |||||||||||
EPS Variance Analysis | Regulated | Regulated | Energy | Corporate / | Corp. | |||||||
(in millions, except per share amounts) | Distribution** | Transmission** | Services | Other | Consolidated | |||||||
1Q 2016 Net Income (Loss) - GAAP | $158 | $81 | $144 | $(55) | $328 | |||||||
1Q 2016 Basic Earnings (Loss) Per Share* (avg. shares outstanding 424M) | $0.38 | $0.19 | $0.34 | $(0.13) | $0.78 | |||||||
Special Items - 2016*** | ||||||||||||
Mark-to-market adjustments | — | — | (0.09) | — | (0.09) | |||||||
Merger accounting - commodity contracts | — | — | 0.01 | — | 0.01 | |||||||
Regulatory Charges | 0.09 | — | — | — | 0.09 | |||||||
Trust securities impairment | — | — | 0.01 | — | 0.01 | |||||||
Total Special Items - 1Q 2016 | 0.09 | — | (0.07) | — | 0.02 | |||||||
1Q 2016 Basic Earnings (Loss) Per Share - Operating (Non-GAAP)* | $0.47 | $0.19 | $0.27 | $(0.13) | $0.80 | |||||||
Distribution Deliveries - Weather | (0.02) | — | — | — | (0.02) | |||||||
Distribution Deliveries - Normal Load | 0.01 | — | — | — | 0.01 | |||||||
OH DMR | 0.06 | — | — | — | 0.06 | |||||||
PA Rate Case | 0.06 | — | — | — | 0.06 | |||||||
NJ Rate Case | 0.03 | — | — | — | 0.03 | |||||||
Transmission Revenues | — | 0.04 | — | — | 0.04 | |||||||
Commodity Margin | — | — | (0.23) | — | (0.23) | |||||||
Other Revenues | (0.04) | — | — | — | (0.04) | |||||||
O&M Expenses | — | (0.01) | — | — | (0.01) | |||||||
Depreciation | (0.02) | (0.01) | 0.11 | — | 0.08 | |||||||
General Taxes | — | — | 0.01 | — | 0.01 | |||||||
Net Financing Costs | 0.02 | — | — | (0.03) | (0.01) | |||||||
Effective Income Tax Rate | — | — | — | 0.03 | 0.03 | |||||||
Share Dilution | (0.02) | (0.01) | (0.01) | 0.01 | (0.03) | |||||||
1Q 2017 Basic Earnings (Loss) Per Share - Operating (Non-GAAP)* | $0.55 | $0.20 | $0.15 | $(0.12) | $0.78 | |||||||
Special Items - 2017*** | ||||||||||||
Mark-to-market adjustments | — | — | (0.07) | — | (0.07) | |||||||
Regulatory charges | (0.02) | — | — | — | (0.02) | |||||||
Asset impairment/Plant exit costs | — | — | (0.23) | — | (0.23) | |||||||
Total Special Items - 1Q 2017 | (0.02) | — | (0.30) | — | (0.32) | |||||||
1Q 2017 Basic Earnings (Loss) Per Share* (avg. shares outstanding 443M) | $0.53 | $0.20 | $(0.15) | $(0.12) | $0.46 | |||||||
1Q 2017 Net Income (Loss) - GAAP | $237 | $88 | $(67) | $(53) | $205 | |||||||
Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the weighted average basic shares outstanding for the period. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount. The income tax rates range from 35% to 38%. |
Estimate for Year 2017* | Q2 of 2017* | |||||||||||||||||
(In millions, except per share amounts) | Regulated Distribution | Regulated Transmission | Competitive Energy Services | Corporate / Other | FirstEnergy Corp. Consolidated | FirstEnergy Corp. Consolidated | ||||||||||||
2017F Net Income (Loss) - GAAP | $980 - $1,025 | $360 - $380 | $(130) - $(75) | $(245) - $(230) | $965 - $1,100 | $240 - $285 | ||||||||||||
2017F Basic Earnings (Loss) Per Share (avg. shares outstanding 445M) | $2.20 - $2.30 | $0.81 - $0.85 | $(0.29) - $(0.17) | $(0.55) - $(0.51) | $2.17 - $2.47 | $0.54 - $0.64 | ||||||||||||
Excluding Special Items: | ||||||||||||||||||
Mark-to-market adjustments | — | — | 0.07 | — | 0.07 | — | ||||||||||||
Regulatory charges | 0.04 | — | — | — | 0.04 | 0.01 | ||||||||||||
Asset impairment/Plant exit costs | — | — | 0.23 | — | 0.23 | — | ||||||||||||
Debt redemption costs | — | — | 0.19 | — | 0.19 | — | ||||||||||||
Total Special Items** | 0.04 | — | 0.49 | — | 0.53 | 0.01 | ||||||||||||
2017F Basic Earnings (Loss) Per Share - Operating (Non-GAAP) (avg. shares outstanding 445M) | $2.24 - $2.34 | $0.81 - $0.85 | $0.20 - $0.32 | $(0.55) - $(0.51) | $2.70 - $3.00 | $0.55 - $0.65 | ||||||||||||
* Per share amounts for the special items and earnings drivers above are based on the after-tax effect of each item divided by the weighted average basic shares outstanding and assumes up to $600 million of additional equity in 2017, of which ~$100 million relates to employee benefit and other plans. The current and deferred income tax effect was calculated by applying the subsidiaries’ statutory tax rate to the pre-tax amount. The income tax rates range from 35% to 42%. ** See page 28 for descriptions regarding special items. |
Regulated Distribution - GAAP earnings for the first quarter of 2017 were $237 million, or $0.53 per basic share, compared with first quarter 2016 GAAP earnings of $158 million, or $0.38 per basic share. Operating (non-GAAP) earnings, excluding special items, were $0.55 per basic share for the first quarter of 2017 compared with $0.47 per basic share for the first quarter of 2016. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
1Q 2016 Net Income - GAAP | $158 | ||||||
1Q 2016 Basic Earnings Per Share (avg. shares outstanding 424M) | $0.38 | ||||||
Special Items - 2016* | 0.09 | ||||||
1Q 2016 Basic Earnings Per Share - Operating (Non-GAAP) | $0.47 | ||||||
Distribution Deliveries - Weather | (0.02) | ||||||
Distribution Deliveries - Normal Load | 0.01 | ||||||
OH DMR | 0.06 | ||||||
PA Rate Case | 0.06 | ||||||
NJ Rate Case | 0.03 | ||||||
Other Revenues | (0.04) | ||||||
Depreciation | (0.02) | ||||||
Net Financing Costs | 0.02 | ||||||
Share Dilution | (0.02) | ||||||
1Q 2017 Basic Earnings Per Share - Operating (Non-GAAP) | $0.55 | ||||||
Special Items - 2017* | (0.02) | ||||||
1Q 2017 Basic Earnings Per Share (avg. shares outstanding 443M) | $0.53 | ||||||
1Q 2017 Net Income - GAAP | $237 | ||||||
*See pages 21-28 for additional details on special items. |
• | Distribution Deliveries - Total distribution deliveries decreased earnings $0.01 per share as a result of mild temperatures during the first quarter of 2017, partially offset by stronger weather-adjusted demand across all customer classes. Total deliveries decreased 530,000 megawatt-hours (MWH), or 1.4%. Sales to residential customers decreased 467,000 MWH, or 3.3%, and sales to commercial customers decreased 115,000 MWH, or 1.1%. Heating-degree-days were 8% below the same period last year and 16% below normal. Sales to industrial customers increased 56,000 MWH, or 0.5%, primarily due to higher usage in the shale gas and steel sectors. |
• | Ohio Distribution Modernization Rider (DMR) - Higher revenues increased earnings $0.06 per share due to the implementation of the DMR effective January 1, 2017. |
• | Pennsylvania Rate Case - Earnings increased $0.06 per share due to approved distribution rate increases, net of incremental operating expenses, effective January 27, 2017. |
• | New Jersey Rate Case - Earnings increased $0.03 per share due to an approved distribution rate increase, effective January 1, 2017. |
• | Other Revenues - Other revenues decreased earnings $0.04 per share due to lower revenues from the sale of oil and gas rights recognized in the first quarter of 2016. |
• | Depreciation - Higher depreciation expense reduced earnings $0.02 per share primarily due to a higher asset base. |
• | Net Financing Costs - Lower net financing costs increased earnings $0.02 per share primarily as a result of various debt redemptions. |
• | Share Dilution - Higher average shares outstanding decreased earnings $0.02 per share. |
• | Special Items - In the first quarter of 2017 and 2016, Regulated Distribution special items included regulatory charges of $0.02 and $0.09 per share, respectively, reflecting the impact of regulatory orders requiring certain commitments and/or disallowing the recoverability of costs. Additional details regarding special items can be found on page 28. |
Regulated Transmission - GAAP and Operating (non-GAAP) earnings for the first quarter of 2017 were $88 million, or $0.20 per basic share, compared with first quarter 2016 GAAP and Operating (non-GAAP) earnings of $81 million, or $0.19 per basic share. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
1Q 2016 Net Income - GAAP | $81 | ||||||
1Q 2016 Basic Earnings Per Share (avg. shares outstanding 424M) | $0.19 | ||||||
Special Items - 2016* | — | ||||||
1Q 2016 Basic Earnings Per Share - Operating (Non-GAAP) | $0.19 | ||||||
Transmission Revenues | 0.04 | ||||||
O&M Expenses | (0.01) | ||||||
Depreciation | (0.01) | ||||||
Share Dilution | (0.01) | ||||||
1Q 2017 Basic Earnings Per Share - Operating (Non-GAAP) | $0.20 | ||||||
Special Items - 2017* | — | ||||||
1Q 2017 Basic Earnings Per Share (avg. shares outstanding 443M) | $0.20 | ||||||
1Q 2017 Net Income - GAAP | $88 | ||||||
*See pages 21-28 for additional details on special items. | |||||||
• | Transmission Revenues - Higher transmission revenues increased earnings $0.04 per share, primarily due to recovery of incremental operating expenses and a higher rate base at American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL). |
• | Depreciation and O&M Expenses - Higher depreciation and O&M expenses decreased earnings $0.02 per share. These expenses are recovered through formula rates. |
• | Share Dilution - Higher average shares outstanding decreased earnings $0.01 per share. |
CES - GAAP losses for the first quarter of 2017 were $(67) million, or $(0.15) per basic share, compared with first quarter 2016 GAAP earnings of $144 million, or $0.34 per basic share. Operating (non-GAAP) earnings, excluding special items, for the first quarter of 2017 were $0.15 per basic share, compared with first quarter 2016 Operating (non-GAAP) earnings of $0.27 per basic share. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
1Q 2016 Net Income - GAAP | $144 | ||||||
1Q 2016 Basic Earnings Per Share (avg. shares outstanding 424M) | $0.34 | ||||||
Special Items - 2016* | (0.07) | ||||||
1Q 2016 Basic Earnings Per Share - Operating (Non-GAAP) | $0.27 | ||||||
Commodity Margin | (0.23) | ||||||
Depreciation | 0.11 | ||||||
General Taxes | 0.01 | ||||||
Share Dilution | (0.01) | ||||||
1Q 2017 Basic Earnings Per Share - Operating (Non-GAAP) | $0.15 | ||||||
Special Items - 2017* | (0.30) | ||||||
1Q 2017 Basic Loss Per Share (avg. shares outstanding 443M) | $(0.15) | ||||||
1Q 2017 Net Loss - GAAP | $(67) | ||||||
*See pages 21-28 for additional details on special items. | |||||||
• | Commodity Margin - CES commodity margin decreased earnings $0.23 per share primarily due to lower capacity revenues and lower contract sales, partially offset by increased wholesale sales and lower capacity expense. |
Commodity Margin EPS - 1Q17 vs 1Q16 | Rate | Volume | Total | |||||||||||
(a) Contract Sales | ||||||||||||||
- Direct Sales (LCI & MCI) | $ | (0.02 | ) | $ | 0.01 | $ | (0.01 | ) | ||||||
- Governmental Aggregation Sales | (0.05 | ) | (0.14 | ) | (0.19 | ) | ||||||||
- Mass Market Sales | — | (0.02 | ) | (0.02 | ) | |||||||||
- POLR Sales | (0.02 | ) | 0.02 | — | ||||||||||
- Structured Sales | 0.01 | (0.12 | ) | (0.11 | ) | |||||||||
Subtotal - Contract Sales | $ | (0.08 | ) | $ | (0.25 | ) | $ | (0.33 | ) | |||||
(b) Wholesale Sales | — | 0.09 | 0.09 | |||||||||||
(c) PJM Capacity, BRA and CP Revenues | (0.24 | ) | 0.03 | (0.21 | ) | |||||||||
(d) Fuel Expense | (0.01 | ) | 0.02 | 0.01 | ||||||||||
(e) Capacity Expense | 0.10 | 0.10 | 0.20 | |||||||||||
(f) Net MISO - PJM Transmission Cost | — | 0.01 | 0.01 | |||||||||||
(g) Purchased Power (net of financials) | (0.01 | ) | 0.01 | — | ||||||||||
Net Change | $ | (0.24 | ) | $ | 0.01 | $ | (0.23 | ) | ||||||
(a) | Contract Sales - CES' contract sales decreased 3.2 million MWH, or 22%, and reduced earnings $0.33 per share. Retail contract sales decreased 1.5 million MWH primarily in the governmental aggregation class. Non-retail contract sales decreased 1.7 million MWH due to lower structured sales, partially offset by higher POLR sales. As of March 31, 2017, the total number of retail customers was approximately 920,000, a decrease of approximately 640,000 customers since March 31, 2016. |
CES Contract Sales - 1Q17 vs 1Q16 | ||||||||||||||
(thousand MWH) | Retail | Non-Retail | ||||||||||||
Direct | Aggr. | Mass Market | POLR | Structured | Total | |||||||||
Contract Sales Increase / (Decrease) | 145 | (1,432) | (160) | 212 | (1,944) | (3,179) | ||||||||
Planning Period | RTO | ATSI | MAAC | RTO/ATSI/MAAC | ||||||
Price Per Megawatt-Day | BR | BR | BR | CP | ||||||
June 2015 - May 2016 | $136.00 | $357.00 | $167.46 | NA | ||||||
June 2016 - May 2017 | $59.37 | $114.23 | $119.13 | $134.00 | ||||||
(d) | Fuel Expense - Lower fuel expense increased earnings $0.01 per share primarily due to lower fossil generation output. |
• | Depreciation Expense - Lower depreciation expense increased earnings $0.11 per share primarily due to the impact of asset impairments recognized in the fourth quarter of 2016. |
• | General Taxes - Lower general taxes increased earnings $0.01 per share primarily due to lower gross receipts taxes associated with lower contract sales. |
• | Share Dilution - Higher average shares outstanding decreased earnings $0.01 per share. |
• | Special Items - In the first quarter of 2017, CES special items included impacts from asset impairment/plant exit costs of $0.23 per share and mark-to-market adjustments of $0.07 per share. In the first quarter of 2016, CES special items included merger accounting-commodity contracts of $0.01 per share, trust securities impairment of $0.01 per share, and mark-to-market adjustments of $(0.09) per share. Additional details regarding special items can be found on page 28. |
Corporate / Other - GAAP and Operating (non-GAAP) losses for the first quarter of 2017 were $(53) million, or $(0.12) per basic share, compared with first quarter 2016 GAAP and Operating (non-GAAP) losses of $(55) million, or $(0.13) per basic share. | |||||||
EPS Variance Analysis | |||||||
(In millions, except per share amounts) | |||||||
1Q 2016 Net Loss - GAAP | $(55) | ||||||
1Q 2016 Basic Loss Per Share (avg. shares outstanding 424M) | $(0.13) | ||||||
Special Items - 2016* | — | ||||||
1Q 2016 Basic Loss Per Share - Operating (Non-GAAP) | $(0.13) | ||||||
Net Financing Costs | (0.03) | ||||||
Effective Income Tax Rate | 0.03 | ||||||
Share Dilution | 0.01 | ||||||
1Q 2017 Basic Loss Per Share - Operating (Non-GAAP) | $(0.12) | ||||||
Special Items - 2017* | — | ||||||
1Q 2017 Basic Loss Per Share (avg. shares outstanding 443M) | $(0.12) | ||||||
1Q 2017 Net Loss - GAAP | $(53) | ||||||
*See pages 21-28 for additional details on special items. |
• | Net Financing Costs - Higher net financing costs primarily due to increased borrowings decreased results $0.03 per share. |
• | Effective Income Tax Rate - A lower consolidated effective income tax rate increased results $0.03 per share. The consolidated effective tax rate for the first quarter of 2017 was 37.2% compared to 39.1% for the same period of 2016. |
• | Share Dilution - Higher average shares outstanding improved results $0.01 per share. |
Irene M. Prezelj | Meghan G. Beringer | Jake M. Mackin | ||
Vice President, Investor Relations | Director, Investor Relations | Manager, Investor Relations | ||
(330) 384-3859 | (330) 384-5832 | (330) 384-4829 |
Three Months Ended March 31 | |||||||||||||||||
2017 | 2016 | Change | |||||||||||||||
Revenues | |||||||||||||||||
(1 | ) | Regulated distribution | $ | 2,490 | $ | 2,510 | $ | (20 | ) | ||||||||
(2 | ) | Regulated transmission | 313 | 286 | 27 | ||||||||||||
(3 | ) | Competitive energy services | 931 | 1,304 | (373 | ) | |||||||||||
(4 | ) | Corporate / Other | (182 | ) | (231 | ) | 49 | ||||||||||
(5 | ) | Total Revenues | 3,552 | 3,869 | (317 | ) | |||||||||||
Operating Expenses | |||||||||||||||||
(6 | ) | Fuel | 368 | 381 | (13 | ) | |||||||||||
(7 | ) | Purchased power | 863 | 1,124 | (261 | ) | |||||||||||
(8 | ) | Other operating expenses | 1,142 | 918 | 224 | ||||||||||||
(9 | ) | Provision for depreciation | 275 | 329 | (54 | ) | |||||||||||
(10 | ) | Amortization of regulatory assets, net | 59 | 61 | (2 | ) | |||||||||||
(11 | ) | General taxes | 271 | 280 | (9 | ) | |||||||||||
(12 | ) | Total Operating Expenses | 2,978 | 3,093 | (115 | ) | |||||||||||
(13 | ) | Operating Income | 574 | 776 | (202 | ) | |||||||||||
Other Income (Expense) | |||||||||||||||||
(14 | ) | Investment income | 24 | 28 | (4 | ) | |||||||||||
(15 | ) | Interest expense | (287 | ) | (288 | ) | 1 | ||||||||||
(16 | ) | Capitalized financing costs | 20 | 25 | (5 | ) | |||||||||||
(17 | ) | Total Other Expense | (243 | ) | (235 | ) | (8 | ) | |||||||||
(18 | ) | Income Before Income Taxes | 331 | 541 | (210 | ) | |||||||||||
(19 | ) | Income taxes | 126 | 213 | (87 | ) | |||||||||||
(20 | ) | Net Income | $ | 205 | $ | 328 | $ | (123 | ) | ||||||||
Earnings Per Share of Common Stock | |||||||||||||||||
(21 | ) | Basic | $ | 0.46 | $ | 0.78 | $ | (0.32 | ) | ||||||||
(22 | ) | Diluted | $ | 0.46 | $ | 0.77 | $ | (0.31 | ) | ||||||||
Weighted Average Number of Common | |||||||||||||||||
Shares Outstanding | |||||||||||||||||
(23 | ) | Basic | 443 | 424 | 19 | ||||||||||||
(24 | ) | Diluted | 444 | 426 | 18 | ||||||||||||
Three Months Ended March 31, 2017 | |||||||||||||||||||||||
Competitive | |||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | FirstEnergy | |||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | |||||||||||||||||||
Revenues | |||||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,444 | $ | 313 | $ | 773 | $ | (42 | ) | $ | 3,488 | ||||||||||
(2 | ) | Other | 46 | — | 41 | (23 | ) | 64 | |||||||||||||||
(3 | ) | Internal | — | — | 117 | (117 | ) | — | |||||||||||||||
(4 | ) | Total Revenues | 2,490 | 313 | 931 | (182 | ) | 3,552 | |||||||||||||||
Operating Expenses | |||||||||||||||||||||||
(5 | ) | Fuel | 141 | — | 227 | — | 368 | ||||||||||||||||
(6 | ) | Purchased power | 813 | — | 167 | (117 | ) | 863 | |||||||||||||||
(7 | ) | Other operating expenses | 624 | 45 | 564 | (91 | ) | 1,142 | |||||||||||||||
(8 | ) | Provision for depreciation | 178 | 51 | 28 | 18 | 275 | ||||||||||||||||
(9 | ) | Amortization of regulatory assets, net | 57 | 2 | — | — | 59 | ||||||||||||||||
(10 | ) | General taxes | 184 | 42 | 30 | 15 | 271 | ||||||||||||||||
(11 | ) | Total Operating Expenses | 1,997 | 140 | 1,016 | (175 | ) | 2,978 | |||||||||||||||
(12 | ) | Operating Income (Loss) | 493 | 173 | (85 | ) | (7 | ) | 574 | ||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
(13 | ) | Investment income (loss) | 14 | — | 20 | (10 | ) | 24 | |||||||||||||||
(14 | ) | Interest expense | (138 | ) | (39 | ) | (45 | ) | (65 | ) | (287 | ) | |||||||||||
(15 | ) | Capitalized financing costs | 6 | 6 | 8 | — | 20 | ||||||||||||||||
(16 | ) | Total Other Expense | (118 | ) | (33 | ) | (17 | ) | (75 | ) | (243 | ) | |||||||||||
(17 | ) | Income (Loss) Before Income Taxes (Benefits) | 375 | 140 | (102 | ) | (82 | ) | 331 | ||||||||||||||
(18 | ) | Income taxes (benefits) | 138 | 52 | (35 | ) | (29 | ) | 126 | ||||||||||||||
(19 | ) | Net Income (Loss) | $ | 237 | $ | 88 | $ | (67 | ) | $ | (53 | ) | $ | 205 | |||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy's (FE) service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | ||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | ||||||||||||||||||||||
(c) | Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | ||||||||||||||||||||||
(d) | Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | ||||||||||||||||||||||
Three Months Ended March 31, 2016 | ||||||||||||||||||||||||
Competitive | ||||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 2,431 | $ | 286 | $ | 1,101 | $ | (46 | ) | $ | 3,772 | |||||||||||
(2 | ) | Other | 79 | — | 51 | (33 | ) | 97 | ||||||||||||||||
(3 | ) | Internal | — | — | 152 | (152 | ) | — | ||||||||||||||||
(4 | ) | Total Revenues | 2,510 | 286 | 1,304 | (231 | ) | 3,869 | ||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 139 | — | 242 | — | 381 | |||||||||||||||||
(6 | ) | Purchased power | 926 | — | 350 | (152 | ) | 1,124 | ||||||||||||||||
(7 | ) | Other operating expenses | 647 | 37 | 321 | (87 | ) | 918 | ||||||||||||||||
(8 | ) | Provision for depreciation | 167 | 45 | 102 | 15 | 329 | |||||||||||||||||
(9 | ) | Amortization of regulatory assets, net | 59 | 2 | — | — | 61 | |||||||||||||||||
(10 | ) | General taxes | 185 | 41 | 39 | 15 | 280 | |||||||||||||||||
(11 | ) | Total Operating Expenses | 2,123 | 125 | 1,054 | (209 | ) | 3,093 | ||||||||||||||||
(12 | ) | Operating Income (Loss) | 387 | 161 | 250 | (22 | ) | 776 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(13 | ) | Investment income | 11 | — | 15 | 2 | 28 | |||||||||||||||||
(14 | ) | Interest expense | (150 | ) | (40 | ) | (47 | ) | (51 | ) | (288 | ) | ||||||||||||
(15 | ) | Capitalized financing costs | 4 | 7 | 11 | 3 | 25 | |||||||||||||||||
(16 | ) | Total Other Expense | (135 | ) | (33 | ) | (21 | ) | (46 | ) | (235 | ) | ||||||||||||
(17 | ) | Income (Loss) Before Income Taxes (Benefits) | 252 | 128 | 229 | (68 | ) | 541 | ||||||||||||||||
(18 | ) | Income taxes (benefits) | 94 | 47 | 85 | (13 | ) | 213 | ||||||||||||||||
(19 | ) | Net Income (Loss) | $ | 158 | $ | 81 | $ | 144 | $ | (55 | ) | $ | 328 | |||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy's (FE) service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | |||||||||||||||||||||||
(c) | Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | |||||||||||||||||||||||
(d) | Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | |||||||||||||||||||||||
Changes Between the First Three Months of 2017 and the First Three Months of 2016 Increase (Decrease) | ||||||||||||||||||||||||
Competitive | ||||||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | FirstEnergy | ||||||||||||||||||||
Distribution (a) | Transmission (b) | Services (c) | Other (d) | Consolidated | ||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
(1 | ) | Electric sales | $ | 13 | $ | 27 | $ | (328 | ) | $ | 4 | $ | (284 | ) | ||||||||||
(2 | ) | Other | (33 | ) | — | (10 | ) | 10 | (33 | ) | ||||||||||||||
(3 | ) | Internal revenues | — | — | (35 | ) | 35 | — | ||||||||||||||||
(4 | ) | Total Revenues | (20 | ) | 27 | (373 | ) | 49 | (317 | ) | ||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
(5 | ) | Fuel | 2 | — | (15 | ) | — | (13 | ) | |||||||||||||||
(6 | ) | Purchased power | (113 | ) | — | (183 | ) | 35 | (261 | ) | ||||||||||||||
(7 | ) | Other operating expenses | (23 | ) | 8 | 243 | (4 | ) | 224 | |||||||||||||||
(8 | ) | Provision for depreciation | 11 | 6 | (74 | ) | 3 | (54 | ) | |||||||||||||||
(9 | ) | Amortization of regulatory assets, net | (2 | ) | — | — | — | (2 | ) | |||||||||||||||
(10 | ) | General taxes | (1 | ) | 1 | (9 | ) | — | (9 | ) | ||||||||||||||
(11 | ) | Total Operating Expenses | (126 | ) | 15 | (38 | ) | 34 | (115 | ) | ||||||||||||||
(12 | ) | Operating Income (Loss) | 106 | 12 | (335 | ) | 15 | (202 | ) | |||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||
(13 | ) | Investment income (loss) | 3 | — | 5 | (12 | ) | (4 | ) | |||||||||||||||
(14 | ) | Interest expense | 12 | 1 | 2 | (14 | ) | 1 | ||||||||||||||||
(15 | ) | Capitalized financing costs | 2 | (1 | ) | (3 | ) | (3 | ) | (5 | ) | |||||||||||||
(16 | ) | Total Other Expense | 17 | — | 4 | (29 | ) | (8 | ) | |||||||||||||||
(17 | ) | Income (Loss) From Before Income Taxes (Benefits) | 123 | 12 | (331 | ) | (14 | ) | (210 | ) | ||||||||||||||
(18 | ) | Income taxes (benefits) | 44 | 5 | (120 | ) | (16 | ) | (87 | ) | ||||||||||||||
(19 | ) | Net Income (Loss) | $ | 79 | $ | 7 | $ | (211 | ) | $ | 2 | $ | (123 | ) | ||||||||||
(a) | Revenues are primarily derived from the delivery of electricity within FirstEnergy's (FE) service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (POLR or default service). Its results reflect the commodity costs of securing electric generation from affiliated and non-affiliated power suppliers and the deferral and amortization of certain fuel costs. | |||||||||||||||||||||||
(b) | Revenues are primarily derived from rates that recover costs and provide a return on transmission capital investment. Except for the recovery of the PATH abandoned project regulatory asset, these revenues are primarily for transmission services provided pursuant to the PJM Tariff to Load Serving Entities (LSEs). The segment's results also reflect the net transmission expenses related to the delivery of electricity on FE's transmission facilities. | |||||||||||||||||||||||
(c) | Revenues are primarily derived from supplying electric power to end-use customers through retail and wholesale arrangements, including competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey, and the provision of partial POLR and default service for affiliated and non-affiliated utilities in Ohio, Pennsylvania and Maryland. | |||||||||||||||||||||||
(d) | Contains corporate support not charged to FE's subsidiaries, interest expense on stand-alone holding company debt, corporate income taxes and other businesses that do not constitute an operating segment. Additionally, reconciling adjustments for the elimination of inter-segment transactions are included in Corporate/Other. | |||||||||||||||||||||||
Condensed Consolidated Balance Sheets (GAAP) | |||||||||||
As of | As of | ||||||||||
Assets | Mar. 31, 2017 | Dec. 31, 2016 | |||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 164 | $ | 199 | |||||||
Receivables | 1,551 | 1,615 | |||||||||
Other | 1,045 | 1,136 | |||||||||
Total Current Assets | 2,760 | 2,950 | |||||||||
Property, Plant and Equipment | 28,795 | 29,387 | |||||||||
Investments | 3,090 | 3,026 | |||||||||
Assets Held for Sale | 921 | — | |||||||||
Deferred Charges and Other Assets | 7,646 | 7,785 | |||||||||
Total Assets | $ | 43,212 | $ | 43,148 | |||||||
Liabilities and Capitalization | |||||||||||
Current Liabilities: | |||||||||||
Currently payable long-term debt | $ | 2,147 | $ | 1,685 | |||||||
Short-term borrowings | 2,750 | 2,675 | |||||||||
Accounts payable | 977 | 1,043 | |||||||||
Other | 1,783 | 1,723 | |||||||||
Total Current Liabilities | 7,657 | 7,126 | |||||||||
Capitalization: | |||||||||||
Total equity | 6,139 | 6,241 | |||||||||
Long-term debt and other long-term obligations | 17,762 | 18,192 | |||||||||
Total Capitalization | 23,901 | 24,433 | |||||||||
Noncurrent Liabilities | 11,654 | 11,589 | |||||||||
Total Liabilities and Capitalization | $ | 43,212 | $ | 43,148 | |||||||
General Information | ||||||||||
Three Months Ended March 31 | ||||||||||
2017 | 2016 | |||||||||
Debt redemptions | $ | (211 | ) | $ | (31 | ) | ||||
New long-term debt issues | $ | 250 | $ | — | ||||||
Short-term borrowings increase | $ | 75 | $ | 425 | ||||||
Property additions | $ | 588 | $ | 698 | ||||||
Debt to Total Capitalization Ratio as Defined Under the FE Credit Facility | ||||||||||||||||
As of March 31 | As of December 31 | |||||||||||||||
2017 | % Total | 2016 | % Total | |||||||||||||
Total Equity (GAAP) | $ | 6,139 | 17 | % | $ | 6,241 | 17 | % | ||||||||
Non-cash Charges / Non-cash Write Downs* | 8,264 | 23 | % | 8,264 | 23 | % | ||||||||||
Accumulated Other Comprehensive Income | (175 | ) | (1 | )% | (174 | ) | (1 | )% | ||||||||
Adjusted Equity (Non-GAAP)** | 14,228 | 39 | % | 14,331 | 39 | % | ||||||||||
Long-term Debt and Other Long-term Obligations (GAAP) | 17,762 | 49 | % | 18,192 | 50 | % | ||||||||||
Currently Payable Long-term Debt (GAAP) | 2,147 | 6 | % | 1,685 | 5 | % | ||||||||||
Short-term Borrowings (GAAP) | 2,750 | 7 | % | 2,675 | 7 | % | ||||||||||
Reimbursement Obligations | 9 | — | % | 54 | — | % | ||||||||||
Guarantees of Indebtedness | 325 | 1 | % | 325 | 1 | % | ||||||||||
Less Securitization Debt | (792 | ) | (2 | )% | (887 | ) | (2 | )% | ||||||||
Adjusted Debt (Non-GAAP)** | 22,201 | 61 | % | 22,044 | 61 | % | ||||||||||
Adjusted Capitalization (Non-GAAP)** | $ | 36,429 | 100 | % | $ | 36,375 | 100 | % | ||||||||
*Includes after-tax non-cash charges and non-cash write downs, primarily associated with the impairment of assets at CES, pension and OPEB mark-to-market adjustments and regulatory asset charges through March 31, 2017, as permitted by the FE Credit Facility, as amended. | ||||||||||||||||
**Management uses Adjusted Equity, Adjusted Debt, and Adjusted Capitalization, each of which is a non-GAAP financial measure, to calculate and monitor its compliance with the debt to total capitalization financial covenant under the FE's current syndicated revolving credit facility (FE Credit Facility) and term loans. These financial measures, as calculated in accordance with the FE Credit Facility and term loans, help shareholders understand FE's compliance with, and provide a basis for understanding FE's incremental debt capacity under the debt to total capitalization financial covenant. The financial covenant under the FE Credit Facility requires FE to maintain a consolidated debt to total capitalization ratio of no more than 65%, measured at the end of each fiscal quarter. | ||||||||||||||||
Additionally under the FE Credit Facility, FE is now also required to maintain a minimum interest coverage ratio of 1.75 to 1.00 until December 31, 2017, 2.00 to 1.00 beginning January 1, 2018 until December 31, 2018, 2.25 to 1.00 beginning January 1, 2019 until December 31, 2019, and 2.50 to 1.00 beginning January 1, 2020 until December 31, 2021. As of March 31, 2017 FE's interest coverage ratio was 4.8. | ||||||||||||||||
Condensed Consolidated Statements of Cash Flows (GAAP) | ||||||||||
Three Months Ended | ||||||||||
March 31 | ||||||||||
2017 | 2016 | |||||||||
Cash flows from operating activities | ||||||||||
Net income | $ | 205 | $ | 328 | ||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||
Depreciation and amortization (1) | 392 | 461 | ||||||||
Deferred income taxes and investment tax credits, net | 114 | 206 | ||||||||
Deferred costs on sale leaseback transaction, net | 12 | 12 | ||||||||
Deferred purchased power and fuel costs | 23 | (10 | ) | |||||||
Retirement benefits, net of payments | 10 | 16 | ||||||||
Commodity derivative transactions, net | 47 | (64 | ) | |||||||
Pension trust contributions | — | (160 | ) | |||||||
Changes in working capital and other | (18 | ) | (139 | ) | ||||||
Cash flows provided from operating activities | 785 | 650 | ||||||||
Cash flows provided from/(used for) financing activities | (58 | ) | 230 | |||||||
Cash flows used for investing activities | (762 | ) | (865 | ) | ||||||
Net change in cash and cash equivalents | $ | (35 | ) | $ | 15 | |||||
(1) Includes amortization of Regulatory Assets, net, nuclear fuel, intangible assets, and deferred debt related costs. | ||||||||||
Liquidity position as of March 31, 2017 | ||||||||||
Company | Type | Maturity | Amount | Available | ||||||
FirstEnergy(1) | Revolving | December 2021 | $4,000 | $1,240 | ||||||
FET / ATSI / TrAIL / MAIT | Revolving | December 2021 | 1,000 | 1,000 | ||||||
(1) FirstEnergy Corp. and FEU subsidiary borrowers | Subtotal: | $5,000 | $2,240 | |||||||
Cash: | — | 164 | ||||||||
Total: | $5,000 | $2,404 | ||||||||
Electric Distribution Deliveries | Three Months Ended March 31 | |||||||||||
(MWH in thousand) | 2017 | 2016 | Change | |||||||||
Ohio | - Residential | 4,338 | 4,456 | -2.6 | % | |||||||
- Commercial | 3,742 | 3,711 | 0.8 | % | ||||||||
- Industrial | 4,936 | 5,011 | -1.5 | % | ||||||||
- Other | 84 | 85 | -1.2 | % | ||||||||
Total Ohio | 13,100 | 13,263 | -1.2 | % | ||||||||
Pennsylvania | - Residential | 4,974 | 5,087 | -2.2 | % | |||||||
- Commercial | 3,190 | 3,242 | -1.6 | % | ||||||||
- Industrial | 5,129 | 5,010 | 2.4 | % | ||||||||
- Other | 27 | 30 | -10.0 | % | ||||||||
Total Pennsylvania | 13,320 | 13,369 | -0.4 | % | ||||||||
New Jersey | - Residential | 2,148 | 2,154 | -0.3 | % | |||||||
- Commercial | 2,120 | 2,162 | -1.9 | % | ||||||||
- Industrial | 520 | 547 | -4.9 | % | ||||||||
- Other | 22 | 21 | 4.8 | % | ||||||||
Total New Jersey | 4,810 | 4,884 | -1.5 | % | ||||||||
Maryland | - Residential | 908 | 971 | -6.5 | % | |||||||
- Commercial | 506 | 519 | -2.5 | % | ||||||||
- Industrial | 371 | 386 | -3.9 | % | ||||||||
- Other | 4 | 4 | 0.0 | % | ||||||||
Total Maryland | 1,789 | 1,880 | -4.8 | % | ||||||||
West Virginia | - Residential | 1,501 | 1,668 | -10.0 | % | |||||||
- Commercial | 887 | 926 | -4.2 | % | ||||||||
- Industrial | 1,477 | 1,423 | 3.8 | % | ||||||||
- Other | 6 | 7 | -14.3 | % | ||||||||
Total West Virginia | 3,871 | 4,024 | -3.8 | % | ||||||||
Total Residential | 13,869 | 14,336 | -3.3 | % | ||||||||
Total Commercial | 10,445 | 10,560 | -1.1 | % | ||||||||
Total Industrial | 12,433 | 12,377 | 0.5 | % | ||||||||
Total Other | 143 | 147 | -2.7 | % | ||||||||
Total Distribution Deliveries | 36,890 | 37,420 | -1.4 | % | ||||||||
Weather | Three Months Ended March 31 | ||||||||
2017 | 2016 | Normal | |||||||
Composite Heating-Degree-Days | 2,340 | 2,536 | 2,779 | ||||||
Composite Cooling-Degree-Days | 1 | 2 | 2 | ||||||
Shopping Statistics (Based on MWH) | Three Months Ended March 31 | |||||
2017 | 2016 | |||||
OE | 80% | 78% | ||||
Penn | 65% | 60% | ||||
CEI | 87% | 83% | ||||
TE | 87% | 76% | ||||
JCP&L | 51% | 50% | ||||
Met-Ed | 67% | 66% | ||||
Penelec | 70% | 68% | ||||
PE(1) | 45% | 45% | ||||
WP | 65% | 63% | ||||
(1) Represents Maryland only. | ||||||
Competitive Operating Statistics | Three Months Ended March 31 | ||||||
2017 | 2016 | ||||||
Generation Capacity Factors: | |||||||
Nuclear | 88% | 88% | |||||
Fossil - Baseload | 50% | 45% | |||||
Fossil - Load Following | 23% | 41% | |||||
Generation Fuel Rate: | |||||||
Nuclear | $7 | $7 | |||||
Fossil | $26 | $25 | |||||
Total Fleet | $16 | $16 | |||||
Generation Output Mix: | |||||||
Nuclear | 53% | 52% | |||||
Fossil - Baseload | 37% | 33% | |||||
Fossil - Load Following | 4% | 7% | |||||
Peaking/CT/Hydro | 6% | 8% | |||||
Competitive Energy Services - Sources and Uses (MWH in thousands) | |||||||||||||
Three Months Ended March 31 | |||||||||||||
Contract Sales | 2017 | 2016 | Change | ||||||||||
POLR | 2,764 | 2,552 | 212 | ||||||||||
Structured Sales | 1,952 | 3,896 | (1,944 | ) | |||||||||
Direct | 3,939 | 3,794 | 145 | ||||||||||
Aggregation | 2,137 | 3,569 | (1,432 | ) | |||||||||
Mass Market | 543 | 703 | (160 | ) | |||||||||
Total Contract Sales | 11,335 | 14,514 | (3,179 | ) | |||||||||
Wholesale Spot Sales | 4,455 | 1,913 | 2,542 | ||||||||||
Purchased Power | |||||||||||||
- Bilaterals | 790 | 636 | 154 | ||||||||||
- Spot | 787 | 1,351 | (564 | ) | |||||||||
Total Purchased Power | 1,577 | 1,987 | (410 | ) | |||||||||
Generation Output | |||||||||||||
- Fossil | 6,825 | 7,294 | (469 | ) | |||||||||
- Nuclear | 7,675 | 7,750 | (75 | ) | |||||||||
Total Generation Output | 14,500 | 15,044 | (544 | ) | |||||||||
Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 | |||||||||||||||||||||
GAAP | Special Items | GAAP | Special Items | |||||||||||||||||||
(1 | ) | Revenues | $ | 3,552 | $ | (5 | ) | (e) | $ | 3,869 | $ | — | ||||||||||
Operating Expenses | ||||||||||||||||||||||
(2 | ) | Fuel | 368 | — | 381 | (8 | ) | (b) | ||||||||||||||
(3 | ) | Purchased power | 863 | — | 1,124 | — | ||||||||||||||||
(4 | ) | Other operating expenses | 1,142 | (219 | ) | (a,c,e) | 918 | 3 | (a,c) | |||||||||||||
(5 | ) | Provision for depreciation | 275 | — | 329 | — | ||||||||||||||||
(6 | ) | Amortization of regulatory assets, net | 59 | — | 61 | — | ||||||||||||||||
(7 | ) | General taxes | 271 | — | 280 | — | ||||||||||||||||
(8 | ) | Total Operating Expenses | 2,978 | (219 | ) | 3,093 | (5 | ) | ||||||||||||||
(9 | ) | Operating Income | 574 | 214 | 776 | 5 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(10 | ) | Investment income | 24 | 3 | (d) | 28 | 7 | (d,e) | ||||||||||||||
(11 | ) | Interest expense | (287 | ) | — | (288 | ) | — | ||||||||||||||
(12 | ) | Capitalized financing costs | 20 | — | 25 | — | ||||||||||||||||
(13 | ) | Total Other Expense | (243 | ) | 3 | (235 | ) | 7 | ||||||||||||||
(14 | ) | Income Before Income Taxes | 331 | 217 | 541 | 12 | ||||||||||||||||
(15 | ) | Income taxes | 126 | 78 | 213 | 3 | ||||||||||||||||
(16 | ) | Net Income | $ | 205 | $ | 139 | $ | 328 | $ | 9 | ||||||||||||
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 26 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||
(a) | Regulatory charges: 2017 ($0.02 per share), ($8) million included in "Other operating expenses". 2016 ($0.09 per share), ($61) million included in "Other operating expenses". | |||||||||||||||||||||
(b) | Merger accounting - commodity contracts: 2016 ($0.01 per share), ($8) million included in "Fuel". | |||||||||||||||||||||
(c) | Mark-to-market adjustments: 2017 ($0.07 per share), ($47) million included in "Other operating expenses". 2016 (($0.09) per share), $64 million included in "Other operating expenses". | |||||||||||||||||||||
(d) | Trust securities impairment: 2017, $3 million included in "Investment income". 2016 ($0.01 per share), $9 million included in "Investment income". | |||||||||||||||||||||
(e) | Asset impairment/Plant exit costs: 2017 ($0.23 per share), ($5) million included in "Revenues", and ($164) million included in "Other operating expenses". 2016, $(2) million included in "Investment income". | |||||||||||||||||||||
See page 28 for additional descriptions related to special items. | ||||||||||||||||||||||
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 443 million shares in the first three months of 2017 and 424 million shares in the first three months of 2016. | ||||||||||||||||||||||
Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 | |||||||||||||||||||||
GAAP | Special Items | GAAP | Special Items | |||||||||||||||||||
(1 | ) | Revenues | $ | 2,490 | $ | — | $ | 2,510 | $ | — | ||||||||||||
Operating Expenses | ||||||||||||||||||||||
(2 | ) | Fuel | 141 | — | 139 | — | ||||||||||||||||
(3 | ) | Purchased power | 813 | — | 926 | — | ||||||||||||||||
(4 | ) | Other operating expenses | 624 | (8 | ) | (a) | 647 | (61 | ) | (a) | ||||||||||||
(5 | ) | Provision for depreciation | 178 | — | 167 | — | ||||||||||||||||
(6 | ) | Amortization of regulatory assets, net | 57 | — | 59 | — | ||||||||||||||||
(7 | ) | General taxes | 184 | — | 185 | — | ||||||||||||||||
(8 | ) | Total Operating Expenses | 1,997 | (8 | ) | 2,123 | (61 | ) | ||||||||||||||
(9 | ) | Operating Income | 493 | 8 | 387 | 61 | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(10 | ) | Investment income | 14 | — | 11 | 1 | (b) | |||||||||||||||
(11 | ) | Interest expense | (138 | ) | — | (150 | ) | — | ||||||||||||||
(12 | ) | Capitalized financing costs | 6 | — | 4 | — | ||||||||||||||||
(13 | ) | Total Other Expense | (118 | ) | — | (135 | ) | 1 | ||||||||||||||
(14 | ) | Income Before Income Taxes | 375 | 8 | 252 | 62 | ||||||||||||||||
(15 | ) | Income taxes | 138 | 3 | 94 | 22 | ||||||||||||||||
(16 | ) | Net Income | $ | 237 | $ | 5 | $ | 158 | $ | 40 | ||||||||||||
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 26 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||
(a) | Regulatory charges: 2017 ($0.02 per share), ($8) million included in "Other operating expenses". 2016 ($0.09 per share), ($61) million included in "Other operating expenses". | |||||||||||||||||||||
(b) | Trust securities impairment: 2016, $1 million included in "Investment income". | |||||||||||||||||||||
See page 28 for additional descriptions related to special items. | ||||||||||||||||||||||
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 443 million shares in the first three months of 2017 and 424 million shares in the first three months of 2016. | ||||||||||||||||||||||
Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 | |||||||||||||||||||||
GAAP | Special Items | GAAP | Special Items | |||||||||||||||||||
(1 | ) | Revenues | $ | 313 | $ | — | $ | 286 | $ | — | ||||||||||||
Operating Expenses | ||||||||||||||||||||||
(2 | ) | Fuel | — | — | — | — | ||||||||||||||||
(3 | ) | Purchased power | — | — | — | — | ||||||||||||||||
(4 | ) | Other operating expenses | 45 | — | 37 | — | ||||||||||||||||
(5 | ) | Provision for depreciation | 51 | — | 45 | — | ||||||||||||||||
(6 | ) | Amortization of regulatory assets, net | 2 | — | 2 | — | ||||||||||||||||
(7 | ) | General taxes | 42 | — | 41 | — | ||||||||||||||||
(8 | ) | Total Operating Expenses | 140 | — | 125 | — | ||||||||||||||||
(9 | ) | Operating Income | 173 | — | 161 | — | ||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(10 | ) | Investment income | — | — | — | — | ||||||||||||||||
(11 | ) | Interest expense | (39 | ) | — | (40 | ) | — | ||||||||||||||
(12 | ) | Capitalized financing costs | 6 | — | 7 | — | ||||||||||||||||
(13 | ) | Total Other Expense | (33 | ) | — | (33 | ) | — | ||||||||||||||
(14 | ) | Income Before Income Taxes | 140 | — | 128 | — | ||||||||||||||||
(15 | ) | Income taxes | 52 | — | 47 | — | ||||||||||||||||
(16 | ) | Net Income | $ | 88 | $ | — | $ | 81 | $ | — | ||||||||||||
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 26 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||
Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 | |||||||||||||||||||||
GAAP | Special Items | GAAP | Special Items | |||||||||||||||||||
(1 | ) | Revenues | $ | 931 | $ | (5 | ) | (d) | $ | 1,304 | $ | — | ||||||||||
Operating Expenses | ||||||||||||||||||||||
(2 | ) | Fuel | 227 | — | 242 | (8 | ) | (a) | ||||||||||||||
(3 | ) | Purchased power | 167 | — | 350 | — | ||||||||||||||||
(4 | ) | Other operating expenses | 564 | (211 | ) | (b,d) | 321 | 64 | (b) | |||||||||||||
(5 | ) | Provision for depreciation | 28 | — | 102 | — | ||||||||||||||||
(6 | ) | Amortization of regulatory assets, net | — | — | — | — | ||||||||||||||||
(7 | ) | General taxes | 30 | — | 39 | — | ||||||||||||||||
(8 | ) | Total Operating Expenses | 1,016 | (211 | ) | 1,054 | 56 | |||||||||||||||
(9 | ) | Operating Income (Loss) | (85 | ) | 206 | 250 | (56 | ) | ||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(10 | ) | Investment income | 20 | 3 | (c) | 15 | 6 | (c,d) | ||||||||||||||
(11 | ) | Interest expense | (45 | ) | — | (47 | ) | — | ||||||||||||||
(12 | ) | Capitalized financing costs | 8 | — | 11 | — | ||||||||||||||||
(13 | ) | Total Other Expense | (17 | ) | 3 | (21 | ) | 6 | ||||||||||||||
(14 | ) | Income (Loss) Before Income Taxes (Benefits) | (102 | ) | 209 | 229 | (50 | ) | ||||||||||||||
(15 | ) | Income taxes (benefits) | (35 | ) | 75 | 85 | (19 | ) | ||||||||||||||
(16 | ) | Net Income (Loss) | $ | (67 | ) | $ | 134 | $ | 144 | $ | (31 | ) | ||||||||||
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 26 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||
(a) | Merger accounting - commodity contracts: 2016 ($0.01 per share), ($8) million included in "Fuel". | |||||||||||||||||||||
(b) | Mark-to-market adjustments: 2017 ($0.07 per share), ($47) million included in "Other operating expenses". 2016 (($0.09) per share), $64 million included in "Other operating expenses". | |||||||||||||||||||||
(c) | Trust securities impairment: 2017, $3 million included in "Investment income". 2016 ($0.01 per share), $8 million included in "Investment income". | |||||||||||||||||||||
(d) | Asset impairment/Plant exit costs: 2017 ($0.23 per share), ($5) million included in "Revenues", and ($164) million included in "Other operating expenses". 2016, ($2) million included in "Investment income". | |||||||||||||||||||||
See page 28 for additional descriptions related to special items. | ||||||||||||||||||||||
Per share amounts included above are based on the after-tax effect of the above special items as discussed on page 1 divided by the weighted average shares outstanding of 443 million shares in the first three months of 2017 and 424 million shares in the first three months of 2016. | ||||||||||||||||||||||
Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 | |||||||||||||||||||||
GAAP | Special Items | GAAP | Special Items | |||||||||||||||||||
(1 | ) | Revenues | $ | (182 | ) | $ | — | $ | (231 | ) | $ | — | ||||||||||
Operating Expenses | ||||||||||||||||||||||
(2 | ) | Fuel | — | — | — | — | ||||||||||||||||
(3 | ) | Purchased power | (117 | ) | — | (152 | ) | — | ||||||||||||||
(4 | ) | Other operating expenses | (91 | ) | — | (87 | ) | — | ||||||||||||||
(5 | ) | Provision for depreciation | 18 | — | 15 | — | ||||||||||||||||
(6 | ) | Amortization of regulatory assets, net | — | — | — | — | ||||||||||||||||
(7 | ) | General taxes | 15 | — | 15 | — | ||||||||||||||||
(8 | ) | Total Operating Expenses | (175 | ) | — | (209 | ) | — | ||||||||||||||
(9 | ) | Operating Loss | (7 | ) | — | (22 | ) | — | ||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||
(10 | ) | Investment income (loss) | (10 | ) | — | 2 | — | |||||||||||||||
(11 | ) | Interest expense | (65 | ) | — | (51 | ) | — | ||||||||||||||
(12 | ) | Capitalized financing costs | — | — | 3 | — | ||||||||||||||||
(13 | ) | Total Other Expense | (75 | ) | — | (46 | ) | — | ||||||||||||||
(14 | ) | Loss Before Income Tax Benefits | (82 | ) | — | (68 | ) | — | ||||||||||||||
(15 | ) | Income tax benefits | (29 | ) | — | (13 | ) | — | ||||||||||||||
(16 | ) | Net Loss | $ | (53 | ) | $ | — | $ | (55 | ) | $ | — | ||||||||||
The above special items, if any, provides additional transparency to our disclosures by providing specific line items to which the special items are recorded. Management consistently utilizes these reconciliations to assist in its analysis of historical and ongoing performance. Additionally, the table above summarizes the pre-tax impact of each special item and the cumulative impact to income taxes (benefits) based on the current and deferred income tax expense associated with each special item. See page 26 for GAAP to Operating (non-GAAP) EPS Reconciliation. | ||||||||||||||||||||||
Earnings Per Share | |||||||||||||||||||||||
(Reconciliation of GAAP to Operating (Non-GAAP) Earnings) | |||||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||||
Three Months Ended March 31, 2017 | Competitive | FirstEnergy | |||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||||||||||||
Distribution | Transmission | Services | Other | Consolidated | |||||||||||||||||||
2017 Net Income (Loss) - GAAP | $ | 237 | $ | 88 | $ | (67 | ) | $ | (53 | ) | $ | 205 | |||||||||||
2017 Basic Earnings (Loss) Per Share (avg. shares outstanding 443M) | $ | 0.53 | $ | 0.20 | $ | (0.15 | ) | $ | (0.12 | ) | $ | 0.46 | |||||||||||
Excluding Special Items: | |||||||||||||||||||||||
Mark-to-market adjustments | — | — | 0.07 | — | 0.07 | ||||||||||||||||||
Regulatory charges | 0.02 | — | — | — | 0.02 | ||||||||||||||||||
Asset impairment/Plant exit costs | — | — | 0.23 | — | 0.23 | ||||||||||||||||||
Total Special Items | $ | 0.02 | $ | — | $ | 0.30 | $ | — | $ | 0.32 | |||||||||||||
Basic Earnings (Loss) Per Share - Operating (Non-GAAP) | $ | 0.55 | $ | 0.20 | $ | 0.15 | $ | (0.12 | ) | $ | 0.78 | ||||||||||||
Three Months Ended March 31, 2016 | Competitive | FirstEnergy | |||||||||||||||||||||
Regulated | Regulated | Energy | Corporate / | Corp. | |||||||||||||||||||
Distribution | Transmission | Services | Other | Consolidated | |||||||||||||||||||
2016 Net Income (Loss) - GAAP | $ | 158 | $ | 81 | $ | 144 | $ | (55 | ) | $ | 328 | ||||||||||||
2016 Basic Earnings (Loss) Per Share (avg. shares outstanding 424M) | $ | 0.38 | $ | 0.19 | $ | 0.34 | $ | (0.13 | ) | $ | 0.78 | ||||||||||||
Excluding Special Items: | |||||||||||||||||||||||
Mark-to-market adjustments | — | — | (0.09 | ) | — | (0.09 | ) | ||||||||||||||||
Merger accounting - commodity contracts | — | — | 0.01 | — | 0.01 | ||||||||||||||||||
Regulatory charges | 0.09 | — | — | — | 0.09 | ||||||||||||||||||
Trust securities impairment | — | — | 0.01 | — | 0.01 | ||||||||||||||||||
Total Special Items | $ | 0.09 | $ | — | $ | (0.07 | ) | $ | — | $ | 0.02 | ||||||||||||
Basic Earnings (Loss) Per Share - Operating (Non-GAAP) | $ | 0.47 | $ | 0.19 | $ | 0.27 | $ | (0.13 | ) | $ | 0.80 | ||||||||||||
Per share amounts for the special items and earnings drivers above and throughout this report are based on the after-tax effect of each item divided by the weighted average basic shares outstanding for the period. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory tax rate to the pre-tax amount. The income tax rates ranges from 35% to 38%. |
(In millions, except per share amount) | ||||||||||||||
Estimate for Year 2017 | Pre-tax | After-tax | EPS* | |||||||||||
Special Items: | ||||||||||||||
Mark-to-market adjustments | $ | 47 | $ | 30 | $ | 0.07 | ||||||||
Regulatory charges | 26 | 16 | 0.04 | |||||||||||
Asset impairments/Plant exit costs | 159 | 102 | 0.23 | |||||||||||
Trust securities impairment | 3 | 2 | — | |||||||||||
Debt redemption costs | 135 | 86 | 0.19 | |||||||||||
Total Special Items | $ | 370 | $ | 236 | $ | 0.53 | ||||||||
Estimate for Q2 2017 | Pre-tax | After-tax | EPS* | |||||||||||
Special Items | ||||||||||||||
Regulatory charges | $ | 9 | $ | 6 | $ | 0.01 | ||||||||
Total Special Items | $ | 9 | $ | 6 | $ | 0.01 | ||||||||
*Per share amounts for the special items above are based on the after-tax effect of each item, divided by the weighted average basic shares outstanding and assumes up to $600 million of additional equity in 2017. The current and deferred income tax effect was calculated by applying the subsidiaries' statutory rate to the pre-tax amount. The income tax rates range from 35% to 42%. | ||||||||||||||
• | Regulatory charges - Primarily reflects the impact of regulatory orders requiring certain commitments and/or disallowing the recoverability of costs. |
• | Trust securities impairment - Primarily reflects non-cash other than temporary impairment charges on nuclear decommissioning trust assets. |
• | Merger accounting - commodity contracts - Primarily reflects the non-cash amortization of acquired commodity contracts from the Allegheny Energy Merger. |
• | Asset impairment/Plant exit costs - Primarily reflects charges or credits resulting from management's plan to exit competitive operations, including charges resulting from long-term coal transportation contract disputes associated with previous plant deactivations. Also reflects the non-cash amortization/impairment of certain non-core investments. |
• | Mark-to-market adjustments - Primarily reflects non-cash mark-to-market gains and losses on commodity contract positions. |
• | Debt redemption costs - Primarily reflects costs associated with the redemption and early retirement of debt. |