-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GHWW5L69AyKUwxj1Md2on4XXy2AcJwCqMsoQT+1b16KUHLzRT+8qpvY9rcdHH4td rtww1FTcQGIfbQdkFYzeqQ== 0001031296-97-000003.txt : 19971111 0001031296-97-000003.hdr.sgml : 19971111 ACCESSION NUMBER: 0001031296-97-000003 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971029 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971110 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTENERGY CORP CENTRAL INDEX KEY: 0001031296 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 341843785 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-21011 FILM NUMBER: 97710826 BUSINESS ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 BUSINESS PHONE: 8007363402 MAIL ADDRESS: STREET 1: 76 SOUTH MAIN ST CITY: AKRON STATE: OH ZIP: 44308-1890 8-K 1 FIRSTENERGY MERGER SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) October 29, 1997 FirstEnergy Corp. (Exact name of Registrant as specified in its charter) Ohio 34-1843785 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation) File Number) Identification No.) 76 South Main Street, Akron, Ohio 44308 (address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 330-384-5100 Item 2. Acquisition or Disposition of Assets On November 8, 1997, the merger of Ohio Edison Company (OE) and Centerior Energy Corporation (Centerior) became effective pursuant to the Merger Agreement, dated September 13, 1996, which was reported on Form 8-K filed by OE on September 17, 1996. The Federal Energy Regulatory Commission (FERC) issued an order on October 29, 1997, conditionally approving the transaction and OE and Centerior notified the FERC of their acceptance of that order on October 30, 1997. The application of FirstEnergy Corp (Company) to the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act of 1935 to acquire the common stock of OE, Pennsylvania Power Company and the Centerior utility subsidiaries was approved on November 5, 1997. Under the Merger Agreement, OE and Centerior formed FirstEnergy Corp., an Ohio holding company, which after a series of intermediate mergers will hold directly all of the issued and outstanding common shares of OE and all of the issued and outstanding common shares of Centerior's direct subsidiaries, which include, among others, The Cleveland Electric Illuminating Company and The Toledo Edison Company. As a result of the merger, the former common shareholders of OE and Centerior now own all of the outstanding shares of FirstEnergy Common Stock. The Company's common shares are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934. All other classes of capital stock of OE and its subsidiaries and of the subsidiaries of Centerior will be unaffected by the Merger and will remain outstanding. Item 7. Financial Statements The pro forma financial statements are based on actual results of operations as of June 30, 1997, adjusted for the estimated purchase accounting adjustments used for purposes of the Company's Form S-4 filed with the SEC in February 1997. These pro forma financial statements will be amended upon completion of the fair value analysis of the Centerior net assets which were acquired in the merger, but in any event no later than January 23, 1998. The unaudited pro forma financial statements reflect a fair value adjustment of $1.25 billion to reduce the carrying value of the nuclear generating units at FirstEnergy, as required by Accounting Principles Board Opinion 16. This fair value adjustment is an estimated amount; the ultimate fair value of Cleveland Electric's and Toledo Edison's net assets to be determined is likely to require an adjustment which may be more or less than the amount used for purposes of these unaudited pro forma financial statements. Any difference between the ultimate net asset valuation and the valuation assumed in the unaudited pro forma financial statements will be reflected as an adjustment of the goodwill recognized in connection with the Merger. The unaudited pro forma balance sheet of FirstEnergy at June 30, 1997, set forth below, gives effect to the Merger as if it had been consummated on that date. The unaudited pro forma statements of income of FirstEnergy for the twelve month period ended June 30, 1997 set forth below, give effect to the Merger as if it had been consummated on July 1, 1996. These statements are prepared based on accounting for the Merger as a purchase with the assumptions specified in the notes thereto. Purchase accounting adjustments are estimates and therefore subject to change. The following pro forma financial information has been prepared from, and should be read in conjunction with, the historical consolidated financial statements and related notes thereto of Ohio Edison and Centerior. The following information does not reflect any potential cost reductions or synergies associated with the Merger and is not necessarily indicative of the financial position or operating results that would have occurred had the Merger been consummated on the date as of which, or at the beginning of the periods for which, the Merger is being given effect, nor is it necessarily indicative of future financial position or operating results. FIRSTENERGY CORP. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET June 30, 1997 (In millions)
Pro Forma Pro Forma Ohio Edison Centerior Adjustments Combined ----------- --------- ----------- ---------- Assets Utility plant, net of depreciation $5,256 $ 6,799 $ (1,250) (3a) $10,805 Other property and investments 1,132 1,142 2,274 Current assets 513 480 (13) (3b) 980 Regulatory assets 1,656 2,248 (750) (3a) 3,154 Goodwill 0 0 904 (3c) 904 Other deferred charges 265 270 535 ------ ------- ------- ------- Total Assets $8,822 $10,939 $(1,109) $18,652 ====== ======= ======= ======= Capitalization and Liabilities Common shareholders' equity: Common stock and other paid-in capital $2,101 $2,321 $ (755) (3d) $3,667 Retained earnings (deficit) 596 (393) 393 (3d) 596 Unallocated ESOP common shares (150) 0 0 (150) ------ ------ ------ ------ Total common shareholders' equity 2,547 1,928 (362) 4,113 Preferred stock: Not subject to mandatory redemption 161 0 (161) (3e) 0 Subject to mandatory redemption 20 0 (20) (3e) 0 Preferred stock of consolidated subsidiaries: Not subject to mandatory redemption 51 448 161 (3e) 660 Subject to mandatory redemption 15 174 6 (3e)(3f) 195 Ohio Edison obligated mandatorily redeemable preferred securities of subsidiary trust hold- ing solely Ohio Edison subordinated debentures 120 0 120 Long-term debt 2,369 4,238 16 (3f) 6,623 ------ ------- ------- ------- Total capitalization 5,283 6,788 (360) 11,711 Current liabilities 1,295 1,062 (13) (3b) 2,344 Accumulated deferred income taxes 1,742 1,896 (690) (3k) 2,948 Accumulated deferred investment tax credits 192 246 (64) (3k) 374 Other liabilities 310 947 18 (3g) 1,275 ------ ------- ------- ------- Total Capitalization and Liabilities $8,822 $10,939 $(1,109) $18,652 ====== ======= ======= =======
FIRSTENERGY CORP. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME Twelve Months Ended June 30, 1997 (In millions, except per share amounts)) - --------------------------------------------------------------------------------------------------
Pro Forma Pro Forma Ohio Edison Centerior Adjustments Combined ----------- --------- ----------- --------- Operating revenues $2,457 $2,563 $(13) (3h) $5,007 ------ ------ ---- ------ Fuel and purchased power 435 475 (3) (3h) 907 Other operation and maintenance expenses 679 783 (12) (3h) 1,450 ------ ------ ---- ------ Total operation and maintenance expenses 1,114 1,258 (15) 2,357 Depreciation and amortization, net 399 352 (75) (3i) 676 General taxes 234 312 2 (3h) 548 Income taxes 186 125 26 (3k) 337 ------ ------ ---- ------ Total operating expense and taxes 1,933 2,047 (62) 3,918 ------ ------ ---- ------ Operating income 524 516 49 1,089 Other income (expense) 48 (14) (22) (3i) 12 ------ ------ ---- ------ Total income 572 502 27 1,101 ------ ------ ---- ------ Interest charges 240 324 564 Allowance for borrowed funds used during construction and capitalized interest (2) (2) (4) Subsidiaries' preferred stock dividend requirements 16 54 12 (3j) 82 ------ ------ ---- ------ Net interest and other charges 254 376 12 642 Net income 318 126 15 459 Preferred stock dividend requirements 12 - (12) (3j) - ------ ------- ---- ------ Earnings on common stock $ 306 $ 126 $ 27 $ 459 ====== ======= ==== ====== Average common shares outstanding 144 148 (70) 222 ====== ======= ==== ====== Earnings per share of common stock $ 2.12 $ .85 $ 2.07 ====== ======= ======
FIRSTENERGY CORP. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS Note 1 - Reclassifications Certain reclassifications have been made to the Centerior unaudited historical financial statements to conform to the presentation expected to be used by the merged companies. Note 2- Exchange Ratios Under the Merger Agreement, each outstanding share of Ohio Edison Common Stock will be converted into one share of FirstEnergy Common Stock, and each outstanding share of Centerior Common Stock will be converted into 0.525 of a share of FirstEnergy Common Stock. These conversion numbers were used in computing share and per share amounts in the accompanying unaudited pro forma combined condensed financial statements. Note 3 - Pro Forma Adjustments (a) As required by APB16, a pro forma adjustment has been recognized by FirstEnergy to adjust the Cleveland Electric and Toledo Edison nuclear generating units to fair value. Such adjustment has been based upon the estimated discounted future cash flows expected to be generated by their nuclear generating units. (b) A pro forma adjustment has been made to eliminate accounts receivable and payable between Ohio Edison and Centerior as of the balance sheet date. (c) A pro forma adjustment has been made to recognize goodwill in connection with the Merger. The goodwill represents the excess of the purchase price over Centerior's net assets after taking into account the adjustments described in (a) above. The carrying cost for all other assets and liabilities (except as described in (f) and (g) below) is assumed to be equal to fair market value. If it is determined that the ultimate fair market value of Centerior's net assets is more or less than their estimated carrying value at the time of consummation, goodwill would be adjusted accordingly. The purchase price was based on the imputed value to holders of Centerior Common Stock using a market value of Ohio Edison Common Stock of $20.125 per share. (d) Pro forma equity adjustments recognize the elimination of Centerior's accumulated deficit as of the consummation of the Merger and the purchase price computed as described in (c) above. (e) Pro forma adjustments have been made to reclassify Ohio Edison preferred stock outstanding to subsidiary preferred stock outstanding on FirstEnergy's balance sheet. (f) A pro forma adjustment has been made to recognize Centerior's preferred stock of consolidated subsidiaries subject to mandatory redemption and long-term debt at estimated fair market value. (g) A pro forma adjustment has been made to recognize Centerior's net unamortized transition obligation related to certain retirement benefits. (h) Pro forma adjustments have been made to eliminate revenue and expense transactions between Ohio Edison and Centerior. (I) Pro forma adjustments have been made to recognize amortization of goodwill in connection with the Merger over a 40- year period, offset by reductions in depreciation expense and amortization of regulatory assets resulting from the assumed revaluation of Centerior's assets described in (a) above. (j) A pro forma adjustment has been made to reclassify Ohio Edison's preferred stock dividend requirements to subsidiaries' preferred stock dividend requirements (a reduction to net income) on FirstEnergy's statement of income. (k) Pro forma adjustments have been made for the estimated tax effects of the adjustments discussed in (a), (f), (g) and (i) above. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRSTENERGY CORP. /s/Harvey L. Wagner ------------------------ Harvey L. Wagner Controller Dated: November 10, 1997 -----END PRIVACY-ENHANCED MESSAGE-----