UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) February 15, 2005



Commission
File Number
 
Registrant; State of Incorporation;
Address; and Telephone Number
 
I.R.S. Employer
Identification No.
         
333-21011
 
FIRSTENERGY CORP.
 
34-1843785
   
(An Ohio Corporation)
   
   
76 South Main Street
   
   
Akron, OH 44308
   
   
Telephone (800)736 - 3402
   

























Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
 
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
Item 2.02 Results of Operations and Financial Condition
 
On February 15, 2005, FirstEnergy Corp. issued two public announcements, which are attached as Exhibits 99.1, and 99.2 hereto and incorporated by reference. FirstEnergy's Press Release and Consolidated Report to the Financial Community contain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. Pursuant to the requirements of Regulation G, FirstEnergy has provided quantitative reconciliations within the Press Release and Consolidated Report to the Financial Community of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

The Press Release and Consolidated Report to the Financial Community include normalized earnings per share, which is not calculated in accordance with GAAP because it excludes the impact of "unusual items". Unusual items reflect the impact on earnings of events that are not routine, are related to discontinued businesses or are the cumulative effect of an accounting change. Management believes presenting normalized earnings calculated in this manner provides useful information to investors in evaluating the ongoing results of FirstEnergy's businesses and assists investors in comparing the company's operating performance to the operating performance of others in the energy sector. The Consolidated Report to the Financial Community also includes references to free cash flow and cash generation which are not defined under GAAP. Management believes presenting these non-GAAP measures provides useful information to investors in assessing FirstEnergy's normalized operating performance from a cash perspective. FirstEnergy’s management frequently references these non-GAAP financial measures in its decision-making, using them to facilitate historical and ongoing performance comparisons as well as comparisons to the performance of peer companies.

The non-GAAP information presented in the Press Release and Consolidated Report to the Financial Community should be considered in addition to, and not as a substitute for, reported earnings per share prepared in accordance with GAAP.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

Exhibit No.
Description
   
99.1
Press release issued by FirstEnergy Corp., dated February 15, 2005
99.2
Consolidated Report to the Financial Community, dated February 15, 2005



Forward-Looking Statement:   This Form 8-K includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), adverse regulatory or legal decisions and outcomes (including revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of government investigations, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage in particular, the availability and cost of capital, the continuing availability and operation of generating units, our inability to accomplish or realize anticipated benefits from strategic goals, our ability to improve electric commodity margins and to experience growth in the distribution business, our ability to access the public securities and other capital 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 the outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, and other similar factors. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 
 
 
2
 
SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



February 15, 2005


   
 
FIRSTENERGY   CORP .
 
Registrant


 
/s/ Harvey L. Wagner
 
Harvey L. Wagner
 
Vice President, Controller and
 
Chief Accounting Officer



 
3

 















 

FirstEnergy Corp.
For Release: February 15, 2005
76 South Main Street
 
Akron, Ohio 44308
 
www.firstenergycorp.com
 

News Media
Contact:Investor Contact:
Keith Hancock
Kurt Turosky
(330) 384-5247
(330) 384-5500

F IRST E NERGY REPORTS 2004 HIGHER EARNINGS 

FirstEnergy Corp. (NYSE: FE) today reported earnings for 2004 on a GAAP basis of $878.2 million, or basic earnings per share of common stock of $2.68 ($2.67 diluted). Normalized non-GAAP(*) earnings were $991.5 million, or basic earnings per share of common stock of $3.03 ($3.01 diluted), excluding unusual charges related to the sale and impairment of non-core assets; severance costs associated with the reorganization of the company’s nuclear operations; settlements of lawsuits; and costs associated with the extended outage at the Davis-Besse Nuclear Power Station.
 
Including the costs related to Davis-Besse, basic earnings per share on a non-GAAP basis were $2.91, exceeding the Company's $2.70 to $2.85 guidance to the financial community.
 
These results compare with GAAP earnings in 2003 of $422.8 million, or basic and diluted earnings of $1.39 per share of common stock. Normalized non-GAAP earnings in 2003 were $735.9 million, or basic earnings of $2.42 ($2.41 diluted) per share of common stock, excluding the impact of the Davis-Besse extended outage and other unusual charges. 

Total revenues for 2004 were $12.5 billion, compared with $11.7 billion in 2003. Total generation sales for the year increased 7.7 percent, while total electric distribution deliveries increased 1.6 percent during the same period.

“We achieved strong financial results in 2004, particularly in the areas of earnings, cash flow and debt reduction,” said President and Chief Executive Officer Anthony J. Alexander. “At the same time, we made strategic investments in our infrastructure to enhance the reliability of our service to customers, addressed pension funding by making a significant contribution to the plan and improved operations throughout the company.”
(more)
 

 
Year 2004 Non-GAAP Reconciliation
           
   
After-tax Amount (Millions)
 
Basic
Earnings Per Share
 
           
Earnings Before Davis-Besse Impact
 and Other Unusual Items (Non-GAAP)
 
$
991.5
 
$
3.03
 
Davis-Besse Impact
   
(38.3
)
 
(0.12
)
Non-Core Asset Sales/Impairments
   
(60.6
)
 
(0.19
)
Lawsuits Settlements
   
(10.6
)
 
(0.03
)
Nuclear Operations Severance Costs
   
(3.8
)
 
(0.01
)
Net Income (GAAP)
 
$
878.2
 
$
2.68
 


Year 2003 Non-GAAP Reconciliation
           
   
After-Tax Amount (Millions)
 
 
Basic
Earnings Per Share
 
           
Earnings Before Davis-Besse Impact and
Other Unusual Items (Non-GAAP)
 
$
735.9
     
$
2.42
 
Claim Settlement
   
99.1
       
0.33
 
Davis-Besse Impacts
   
(170.3
)
     
(0.56
)
JCP&L Rate Case Disallowance
   
(109.3
)
     
(0.36
)
Asset Impairments
Discontinued International Operations
   
(124.8
(101.3
)
)
     
(0.41
(0.33
)
)
Cumulative Effect of Accounting Change
   
102.1
       
0.33
 
Other
   
(8.6
)
     
(0.03
)
Net Income (GAAP)
 
$
422.8
     
$
1.39
 

FirstEnergy continued to pursue its strategy of selling non-core assets throughout 2004. Losses and impairments recorded for such activities lowered earnings by $60.6 million ($0.19 per share). The impact of costs associated with Davis-Besse’s extended outage - which concluded on April 4, 2004, when the unit came back online at full power - reduced earnings by $38.3 million ($0.12 per share). The company also settled all outstanding securities and derivative lawsuits related to the extended outage at Davis-Besse; the August 14, 2003, regional power outages; and financial restatements related to changed accounting treatments for transition costs being recovered in Ohio.
(more)
 
2
 
 
 
                This action lowered earnings by $10.6 million, or $0.03 per share of common stock. Additionally, severance costs associated with the reorganization of the company’s nuclear operations reduced earnings by $3.8 million ($0.01 per share).

During the year, FirstEnergy improved its financial flexibility through an aggressive debt reduction and refinancing program. The company retired approximate ly $1 billion of debt in 2004, and refinanced or restructured an additional $1.8 billion in long-term debt. These actions reduced interest costs by approximately $54 million in 2004 . At the end of the year, the total capacity of FirstEnergy’s primary credit facilities and those of its subsidiaries stood at $2.3 billion.

The company also made a voluntary, $500-million contribution to its pension plan in September, which helped add security to future plan benefits. The contribution represented a net after-tax cost to the company of approximately $300 million and mitigates uncertainty regarding the plan’s unfunded liability.  
 
FirstEnergy’s generation fleet continued to show strong performance, enabling the company to take advantage of sales opportunities in the wholesale market. The company’s generating plants posted a record output of 76 billion kilowatt-hours in 2004.

Other major factors that favorably impacted FirstEnergy’s 2004 earnings included: improved power generation profit margin; lower operating costs in most business units; higher investment income; return to service of Davis-Besse; and approval of the company’s Rate Stabilization Plan in Ohio.

For 2004, average common shares outstanding totaled 327.4 million, compared with 303.6 million in 2003. This increase reflects the company’s issuance of more than 32 million shares of common stock in September 2003.

For the fourth quarter of 2004, FirstEnergy reported normalized non-GAAP earnings of $238.4 million, or basic and diluted earnings of $0.72 per share of common stock, excluding unusual charges related to the sale and impairment of non-core assets.
(more)
 
 
3
On a GAAP basis, earnings for the quarter were $201.5 million, or basic and diluted earnings per share of $0.61. That compares favorably with earnings on a GAAP basis of $109.4 million for the fourth quarter of 2003, or basic and diluted earnings of $0.33 per share of common stock.


Fourth Quarter 2004 Non-GAAP Reconciliation
           
   
After-tax Amount (Millions)
 
Basic
Earnings Per Share
 
           
Earnings Before Unusual Items (Non-GAAP)
 
$
238.4
 
$
0.72
 
Non-Core Asset Sales/Impairments
   
(36.9
)
 
(0.11
)
Net Income (GAAP)
 
$
201.5
 
$
0.61
 


Fourth Quarter 2003 Non-GAAP Reconciliation
   
 
After-tax Amount (Millions)
 
 
Basic
Earnings Per Share
 
            
Earnings Before Davis-Besse Impact and Other Unusual Items (Non-GAAP)
 
$
136.2
 
$
0.42
 
Claim Settlement
   
99.1
   
0.30
 
Davis-Besse Impacts
   
(38.3
)
 
(0.12
)
JCP&L Rate Case Disallowance
Asset Impairments
Discontinued International Operations
   
(8.0
(34.8
(36.2
)
)
)
 
(0.02
(0.11
(0.11
)
)
)
Other
   
(8.6
)
 
(0.03
)
Net Income (GAAP)
 
$
109.4
 
$
0.33
 

Total electric generation sales for the fourth quarter were up 9.8 percent, contributing to an improved electric generation margin. Also, distribution deliveries to customers of FirstEnergy’s electric utility companies were up 3.1 percent, reflecting a return to normal weather patterns in the company’s service area during the quarter.

(more)
 
4
 
FirstEnergy’s Consolidated Report to the Financial Community - which provides highlights on company developments and financial results for the year and for the fourth quarter of 2004 - is posted on the company’s Internet site - www.firstenergycorp.com/i r . To access the report, click on Consolidated Report to the Financial Community .
 
FirstEnergy is a diversified energy company headquartered in Akron, Ohio. Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity, as well as and energy management and other energy-related services.

(*) This news release contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP).
 

Forward-Looking Statement: This news release includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), adverse regulatory or legal decisions and outcomes (including revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of government investigations, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage in particular, the availability and cost of capital, the continuing availability and operation of generating units, our inability to accomplish or realize anticipated benefits from strategic goals, our ability to improve electric commodity margins and to experience growth in the distribution business, our ability to access the public securities and other capital 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 the outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, and other similar factors. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.

(021505)
 
5

 
After-Tax EPS Variance Analysis
 
4th
 Qtr.
 
4Q 2003 Basic EPS - GAAP Basis
 
$
0.33
 
Discontinued International Operations
 
 
0.11
 
Unusual Items - 2003
 
 
( 0.14
)
4Q 2003 Basic EPS - Non-GAAP Basis
 
$
0.30
 
    Davis-Besse Incremental Expenses - 2003
 
 
0.12
 
4Q 2003 Normalized Earnings - Non-GAAP Basis
 
$
0.42
 
Electric Gross Margin
 
 
0.12
 
Nuclear Operating Expense
 
 
(0.05
)
 Fossil Operating Expense
 
 
0.05
 
Energy Delivery Expenses
 
 
0.06
 
Pension and Other Employee Benefits
 
 
0.08
 
Incentive Compensation
 
 
(0.10
)
Other A&G Expenses
 
 
0.05
 
Depreciation and Amortization
 
 
0.02
 
Financing Costs
 
 
0.06
 
Other
 
 
0.01
 
4Q 2004 Normalized Earnings - Non-GAAP Basis
 
$
0.72
 
Unusual Charges - 2004
 
 
(0.11
)
4Q 2004 Basic GAAP Basis
 
$
    0.61
 
 
 
HIGHLIGHTS
 
 
n
  Normalized non-GAAP earnings for the fourth quarter of 2004, excluding unusual charges, were $0.72 per share, compared with fourth quarter 2003 normalized non-GAAP 
  earnings of $0.42 per share. GAAP earnings were $0.61 per share compared with GAAP earnings of $0.33 per share in the fourth quarter of 2003, which included
  discontinued international operations, unusual items and incremental expenses associated with the Davis-Besse outage.
 
n
  Normalized non-GAAP earnings for 2004, excluding unusual charges, were $2.91 per share which exceeded our earnings guidance of $2.70-$2.85 per share. GAAP earnings
   were $2.68 per share.
 
4Q 2004 Results vs. 4Q 2003
 
 
n
  Electric distribution deliveries increased 3%. Residential and commercial deliveries increased 6% and 4%, respectively, while industrial deliveries were unchanged. Heating-
  degree-days were approximately 1% higher than the same period last year, but 4% below normal. Total electric generation sales rose 10% due primarily to a 29% increase in
   wholesale sales.
 
n  
  Electric gross margin increased $66 million after adjusting for changes in regulatory deferrals and last year's Davis-Besse replacement power costs. The improvement
  resulted from a 12% increase in generation output, along with higher contributions from increased wholesale sales and distribution deliveries.
 
n  
  Nuclear operating expenses, excluding incremental expenses associated with the Davis-Besse outage last year, increased $29 million, due to the refueling outage at
  Beaver Valley Unit 1 this quarter . Fossil operating expenses decreased $30 million as a result of fewer planned outages compared to the same period last year.
 
n  
  Energy delivery expenses decreased $35 million due to less storm-related maintenance, reduced use of outside contractors, and more capital-related projects this quarter
  compared to maintenance activities last year.
 
n  
Forward-Looking Statement:   This Form 8-K includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), adverse regulatory or legal decisions and outcomes (including revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of government investigations, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission Filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage in particular, the availability and cost of capital, the continuing availability and operation of generating units, our inability to accomplish or realize anticipated benefits from strategic goals, our ability to improve electric commodity margins and to experience growth in the distribution business, our ability to access the public securities and other capital 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 the outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings  and other similar factors. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 
 
 
  n
  Incentive compensation expense increased $54 million compared to the same period last year. The majority of the increase relates to last year's fourth quarter reversal of nine
  months of accrued incentive compensation expense, as incentive compensation was not paid in 2003.
 
n
  Other A&G expenses decreased $30 million primarily as a result of reduced legal, customer sales and marketing expenses.
 
n
  Total depreciation and amortization expenses decreased $13 million after adjusting for regulatory deferrals. The reduction was due to the capitalization of carrying charges on
  regulatory deferrals .
 
n
  Net interest charges decreased $35 million. Financing activities during the quarter included $16 million in mandatory long-term debt redemptions and $143 million of
   refinancing and repricing transactions.
 
n  
  Consistent with our ongoing efforts to divest non-core assets and businesses, we now anticipate divesting the Facilities Services Group within the year. Thus, the Facilities
  Services Group qualified as assets held for sale and we recognized unusual charges of $0.11 per share primarily for asset and goodwill impairments .
 
2005 Earnings and Cash Generation Guidance *
 
 
n   
  Earnings guidance for 2005, excluding unusual charges, is $2.70 to $2.85 per share. Our estimate for the quarterly pattern of our 2005 earnings guidance are:
 
1 st Quarter: 15%    2 nd Quarter: 25%    3 rd Quarter: 35%    4 th Quarter: 25%
 
n  
  Total cash generation (Non-GAAP) guidance for 2005 is estimated at $560 million.
 

 

 
* The GAAP to Non-GAAP reconciliation statements are attached and available on FirstEnergy Corp.'s website at www.firstenergycorp.com/ir .


 







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


 
 
 
 

FirstEnergy Corp.
 
Consolidated Statements of Income
 
(In thousands except for share amounts)
 
                                 
   
Consolidated Statements of Income
     
       
Three Months Ended December 31, 
 
  Twelve Months Ended December 31,
   
 
     
2004
 
  2003
 
  Change
 
  2004
 
 2003
 
 Change
 
 
(1)
   
Revenues
                       
(2)
   
Electric sales
 
$
2,500,405
$
2,244,246
 
$
256,159
 
$
10,830,606
 
$
10,205,012
 
$
625,594
 
(3)
   
FE facilities
   
107,869
 
84,742
   
23,127
   
397,680
   
327,211
   
70,469
 
(4)
   
MYR
   
92,930
 
105,506
   
(12,576
)
 
347,416
   
438,710
   
(91,294
)
(5)
   
International
   
-
 
3,651
   
(3,651
)
 
-
   
25,482
   
(25,482
)
(6)
   
Other
   
248,687
 
210,693
   
37,994
   
877,344
   
678,473
   
198,871
 
(7)
   
Total Revenues
   
2,949,891
 
2,648,838
   
301,053
   
12,453,046
   
11,674,888
   
778,158
 
(8)
   
Expenses
                       
(9)
   
Fuel
   
205,765
 
200,103
   
5,662
   
810,093
   
763,698
   
46,395
 
(10)
   
Purchased power
   
748,903
 
620,679
   
128,224
   
3,659,391
   
3,395,445
   
263,946
 
(11)
   
Other operating expenses
   
706,467
 
782,188
   
(75,721
)
 
2,798,334
   
3,004,265
   
(205,931
)
(12)
   
FE facilities
   
117,624
 
84,215
   
33,409
   
401,388
   
319,721
   
81,667
 
(13)
   
MYR
   
95,384
 
113,962
   
(18,578
)
 
353,430
   
444,087
   
(90,657
)
(14)
   
International
   
-
 
11,151
   
(11,151
)
 
-
   
30,099
   
(30,099
)
(15)
   
Mark-to-market adjustment
   
2,851
 
5,440
   
(2,589
)
 
5,524
   
(2,110
)
 
7,634
 
(16)
   
Provision for depreciation
   
148,759
 
142,574
   
6,185
   
589,652
   
606,436
   
(16,784
)
(17)
   
Amortization of regulatory assets
   
260,833
 
273,172
   
(12,339
)
 
1,166,323
   
1,079,337
   
86,986
 
(18)
   
Deferral of new regulatory assets
   
(65,307)
 
(43,857
)
 
(21,450
)
 
(256,795
)
 
(194,261
)
 
(62,534
)
(19)
   
Goodwill Impairment
   
36,471
 
-
   
36,471
   
36,471
   
116,988
   
(80,517
)
(20)
   
General taxes
   
163,583
 
120,014
   
43,569
   
677,757
   
637,967
   
39,790
 
(21)
   
Total Expenses
   
2,421,333
 
2,309,641
   
111,692
   
10,241,568
   
10,201,672
   
39,896
 
(22)
   
Claim Settlement
   
-
 
167,937
   
(167,937
)
 
-
   
167,937
   
(167,937
)
(23)
   
Income Before Interest and
Income Taxes
   
528,558
 
507,134
   
21,424
   
2,211,478
   
1,641,153
   
570,325
 
(24)
   
Net interest charges:
                       
(25)
   
Interest expense
   
166,481
 
201,970
   
(35,489
)
 
670,945
   
798,911
   
(127,966
)
(26)
   
Capitalized interest
   
(7,295
 
(8,613
)
 
1,318
   
(25,581
)
 
(31,900
)
 
6,319
 
(27)
   
Subsidiaries' preferred stock dividends
   
5,389
 
5,946
   
(557
)
 
21,413
   
42,369
   
(20,956
)
(28)
   
Net interest charges
   
164,575
 
199,303
   
(34,728
)
 
666,777
   
809,380
   
(142,603
)
(29)
   
Income taxes
   
163,567
 
159,837
   
3,730
   
670,922
   
407,524
   
263,398
 
(30)
   
Income before discontinued operations
and accounting change
   
200,416
 
 
147,994
   
52,422
   
873,779
   
424,249
   
449,530
 
(31)
   
Discontinued operations
   
1,093
 
(38,562
)
 
39,655
   
4,396
   
(103,632
)
 
108,028
 
(32)
   
Cumulative effect of accounting change
   
-
 
-
   
-
   
-
   
102,147
   
(102,147
)
(33)
   
Net Income
 
$
201,509
$
109,432
 
$
92,077
 
$
878,175
 
$
422,764
 
$
455,411
 
(34)
                           
(35)
   
Basic Earnings Per Common Share:
                       
(36)
   
Before discontinued operations
and accounting change
 
$
0.61
$
0.45
 
$
0.16
 
$
2.67
 
$
1.40
 
$
1.27
 
(37)
   
Discontinued operations
   
-
 
(0.12
)
 
0.12
   
0.01
   
(0.34
)
 
0.35
 
(38)
   
Cumulative effect of accounting change
   
-
 
-
   
-
   
-
   
0.33
   
(0.33
)
(39)
   
Basic Earnings Per Common Share
 
$
0.61
$
0.33
 
$
0.28
 
$
2.68
 
$
1.39
 
$
1.29
 
(40)
   
Weighted Average Number
of Basic Shares Outstanding
   
327,706
 
326,856
   
850
   
327,387
   
303,582
   
23,805
 
(41)
                           
(42)
   
Diluted Earnings Per Common Share:
                       
(43)
   
Before discontinued operations
and accounting change
 
$
0.61
$
0.45
 
$
0.16
 
$
2.66
 
$
1.40
 
$
1.26
 
(44)
   
Discontinued operations
   
-
$
(0.12
)
 
0.12
   
0.01
   
(0.34
)
 
0.35
 
(45)
   
Cumulative effect of accounting change
   
-
 
-
   
-
   
-
   
0.33
   
(0.33
)
(46)
   
Diluted Earnings Per Common Share
 
$
0.61
$
0.33
 
$
0.28
 
$
2.67
 
$
1.39
 
$
1.28
 
(47)
   
Weighted Average Number
of Diluted Shares Outstanding
   
329,391
 
328,425
   
966
   
328,982
   
304,972
   
24,010
 
                             
                             
 
 
 
2

FirstEnergy Corp.
     
Consolidated Income Segments
     
(in thousands)
     
                                   
       
Three Months Ended December 31, 2004
     
       
Regulated
Services
 
Competitive Electric Energy Services
 
Facilities Services
 
Other (c)
 
Reconciling
Adjustments
     
Consolidated
 
(1)
   
REVENUES
   
           
   
       
(2)
   
Electric sales
 
$
1,113,103
 
$
1,387,302
 
$
-
 
$
-
 
$
-
   
$
2,500,405
 
(3)
   
FE facilities
   
-
   
-
   
107,869
   
-
   
-
     
107,869
 
(4)
   
MYR
   
-
   
-
   
-
   
92,930
   
-
     
92,930
 
(5)
   
International
   
-
   
-
   
-
   
-
   
-
     
-
 
(6)
   
Other
   
232,390
   
-
   
-
   
13,520
   
2,777
 
  (a)
 
 
 
248,687
 
(7)
   
Internal revenues
   
79,598
   
-
   
-
   
113,821
   
(193,419
)(b)
 
 
 
-
 
(8)
   
Total Revenues
   
1,425,091
   
1,387,302
   
107,869
   
220,271
   
(190,642
)
   
2,949,891
 
(9)
   
EXPENSES
                           
(10)
   
Fuel
   
-
   
205,765
   
-
   
-
   
-
     
205,765
 
(11)
   
Purchased power
   
-
   
748,903
   
-
   
-
   
-
     
748,903
 
(12)
   
Other operating expenses
   
475,347
   
329,766
   
-
   
110,425
   
(209,071
 
 
)(a)(b)
 
 
 
706,467
 
(13)
   
FE facilities
   
-
   
-
   
117,624
   
-
   
-
     
117,624
 
(14)
   
MYR
   
-
   
-
   
-
   
95,384
   
-
     
95,384
 
(15)
   
International
   
-
   
-
   
-
   
-
   
-
     
-
 
(16)
   
Mark-to-market adjustment
   
-
   
5,254
   
-
   
(2,403
)
 
-
     
2,851
 
(17)
   
Provision for depreciation
   
132,893
   
8,764
   
-
   
7,102
   
-
     
148,759
 
(18)
   
Amortization of regulatory assets
   
260,833
   
-
   
-
   
-
   
-
     
260,833
 
(19)
   
Deferral of regulatory assets
   
(65,307
)
                   
(65,307
)
(20)
   
Goodwill Impairment
   
-
   
-
   
36,471
   
-
   
-
     
36,471
 
(21)
   
General taxes
   
139,562
   
20,446
   
-
   
3,575
   
-
     
163,583
 
(22)
   
Total Expenses
   
943,328
   
1,318,898
   
154,095
   
214,083
   
(209,071
)
   
2,421,333
 
(23)
   
Claim settlement
   
-
   
-
   
-
   
-
   
-
     
-
 
(24)
   
Income before Interest
and Income taxes
   
481,763
   
68,404
   
(46,226
)
 
6,188
   
18,429
  (b)
   
528,558
 
(25)
   
Net interest charges:
                           
(26)
   
Interest expense
   
29,614
   
39,300
   
-
   
79,138
   
18,429
   (b)
 
 
 
166,481
 
(27)
   
Capitalized interest
   
(5,396
)
 
(1,857
)
 
-
   
(42
)
 
-
     
(7,295
)
(28)
   
Subsidiaries' preferred stock dividends
   
5,389
   
-
   
-
   
-
   
-
 
   
5,389
 
(29)
   
Net interest charges
   
29,607
   
37,443
   
-
   
79,096
   
18,429
 
   
164,575
 
(30)
   
Income Taxes
   
198,412
   
6,510
   
(64
)
 
(41,291
)
 
-
 
   
163,567
 
(31)
   
Income before discontinued operations
and an accounting change
   
253,744
   
24,451
   
(46,162
)
 
(31,617
)
 
-
 
   
200,416
 
(32)
   
Discontinued operations
   
-
   
-
   
-
   
1,093
   
-
     
1,093
 
(33)
   
Cumulative effect of an accounting change
   
-
   
-
   
-
   
-
   
-
     
-
 
(34)
   
Net Income
 
$
253,744
 
$
24,451
 
$
(46,162
)
$
(30,524
)
$
-
 
 
$
201,509
 
                                 
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, MYR and gas operations.
 
                                 
 
 
 
3

FirstEnergy Corp.
     
Consolidated Income Segments
     
(in thousands)
     
                                   
       
Three Months Ended December 31, 2003
     
       
Regulated
Services
 
Competitive Electric Energy Services
 
Facilities Services
 
Other (c)
 
Reconciling
Adjustments
 
 
 
Consolidated
 
(1)
   
REVENUES
   
   
       
   
         
(2)
   
Electric sales
 
$
1,084,878
 
$
1,159,368
 
$
-
 
$
-
 
$
-
     
$
2,244,246
 
(3)
   
FE facilities
   
-
   
-
   
84,742
   
-
   
-
       
84,742
 
(4)
   
MYR
   
-
   
-
   
-
   
105,506
   
-
       
105,506
 
(5)
   
International
   
-
   
-
   
-
   
3,651
   
-
       
3,651
 
(6)
   
Other
   
161,274
   
-
   
-
   
54,345
   
(4,926
)(a)
 
 
 
 
210,693
 
(7)
   
Internal revenues
   
79,530
   
-
   
-
   
140,779
   
(220,309
)(b)
 
 
 
 
-
 
(8)
   
Total Revenues
   
1,325,682
   
1,159,368
   
84,742
   
304,281
   
(225,235
)
     
2,648,838
 
(9)
   
EXPENSES
                             
(10)
   
Fuel
   
-
   
200,103
   
-
   
-
   
-
       
200,103
 
(11)
   
Purchased power
   
-
   
620,679
   
-
   
-
   
-
       
620,679
 
(12)
   
Other operating expenses
   
379,932
   
368,668
   
-
   
241,570
   
(207,982
 
 
)(a)(b)
 
 
 
 
782,188
 
(13)
   
FE facilities
   
-
   
-
   
84,215
   
-
   
-
       
84,215
 
(14)
   
MYR
   
-
   
-
   
-
   
113,962
   
-
       
113,962
 
(15)
   
International
   
-
   
-
   
-
   
11,151
   
-
       
11,151
 
(16)
   
Mark-to-market adjustment
   
-
   
5,254
   
-
   
186
   
-
       
5,440
 
(17)
   
Provision for depreciation
   
124,891
   
7,144
   
-
   
10,539
   
-
       
142,574
 
(18)
   
Amortization of regulatory assets
   
273,172
   
-
   
-
   
-
   
-
       
273,172
 
(19)
   
Deferral of regulatory assets
   
(43,857
)
                     
(43,857
)
(20)
   
Goodwill Impairment
   
-
   
-
   
-
   
-
   
-
       
-
 
(21)
   
General taxes
   
99,695
   
18,585
   
-
   
1,973
   
(239
)
     
120,014
 
(22)
   
Total Expenses
   
833,833
   
1,220,433
   
84,215
   
379,381
   
(208,221
)
     
2,309,641
 
(23)
   
Claim settlement
   
167,937
   
-
   
-
   
-
   
-
       
167,937
 
(24)
   
Income before Interest
and Income taxes
   
659,786
   
(61,065
)
 
527
   
(75,100
)
 
(17,014
)
     
507,134
 
(25)
   
Net interest charges:
                             
(26)
   
Interest expense
   
122,864
   
39,011
   
-
   
57,109
   
(17,014
 
 
)(b)
 
 
 
 
201,970
 
(27)
   
Capitalized interest
   
(6,814
)
 
(1,568
)
 
-
   
(231
)
 
-
       
(8,613
)
(28)
   
Subsidiaries' preferred stock dividends
   
5,946
   
-
   
-
   
-
   
-
   
   
5,946
 
(29)
   
Net interest charges
   
121,996
   
37,443
   
-
   
56,878
   
(17,014
)
 
   
199,303
 
(30)
   
Income Taxes
   
225,914
   
(40,388
)
 
1,174
   
(26,863
)
 
-
   
   
159,837
 
(31)
   
Income before discontinued operations
and an accounting change
   
311,876
   
(58,120
)
 
(647
)
 
(105,115
)
 
-
       
147,994
 
(32)
   
Discontinued operations
   
-
   
-
   
-
   
(38,562
)
 
-
       
(38,562
)
(33)
   
Cumulative effect of an accounting change
   
-
   
-
   
-
   
-
   
-
       
-
 
(34)
   
Net Income
 
$
311,876
 
$
(58,120
)
$
(647
)
$
(143,677
)
$
-
   
 
$
109,432
 
     
 
                                           
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, MYR and gas operations
                                                   


 
4
 

FirstEnergy Corp.
 
Consolidated Income Segments
 
(in thousands)
 
                                                   
       
Three Months Ended December 31, 2004 vs. Three Months Ended December 31, 2003
 
           
Regulated
Services
     
Competitive Electric Energy Services
     
Facilities Services
     
Other (c)
     
Reconciling
Adjustments
 
Conso lidated
 
(1)   
REVENUES
     
 
                     
 
     
 
     
(2)     
Electric sales
     
$
28,225
     
$
227,934
     
$
-
     
$
-
     
$
-
 
$
256,159
 
(3)     
FE facilities
       
-
       
-
       
23,127
       
-
       
-
   
23,127
 
(4)     
MYR
       
-
       
-
       
-
       
(12,576
)
     
-
   
(12,576
)
(5)     
International
       
-
       
-
       
-
       
(3,651
)
     
-
   
(3,651
)
(6)     
Other
       
71,116
       
-
       
-
       
(40,825
)
     
7,703
  (a)  
37,994
 
(7)     
Internal revenues
       
68
       
-
       
-
       
(26,958
)
     
26,890
  (b)  
-
 
(8)     
Total Revenues
       
99,409
       
227,934
       
23,127
       
(84,010
)
     
34,593
   
301,053
 
(9)     
EXPENSES
                                             
(10)     
Fuel
       
-
       
5,662
       
-
       
-
       
-
   
5,662
 
(11)     
Purchased power
       
-
       
128,224
       
-
       
-
       
-
   
128,224
 
(12)     
Other operating expenses
       
95,415
       
(38,902
)
     
-
       
(131,145
)
     
(1,089
)(a)(b)
 
(75,721
)
(13)     
FE facilities
       
-
       
-
       
33,409
       
-
       
-
   
33,409
 
(14)     
MYR
       
-
       
-
       
-
       
(18,578
)
     
-
   
(18,578
)
(15)     
International
       
-
       
-
       
-
       
(11,151
)
     
-
   
(11,151
)
(16)     
Mark-to-market adjustment
       
-
       
-
       
-
       
(2,589
)
     
-
   
(2,589
)
(17)     
Provision for depreciation
       
8,002
       
1,620
       
-
       
(3,437
)
     
-
   
6,185
 
(18)     
Amortization of regulatory assets
       
(12,339
)
     
-
       
-
       
-
       
-
   
(12,339
)
(19)     
Deferral of regulatory assets
       
(21,450
)
 
#
   
-
   
#
   
-
   
#
   
-
   
#
   
-
   
(21,450
)
(20)     
Goodwill Impairment
       
-
   
#
   
-
   
#
   
36,471
   
#
   
-
   
#
   
-
   
36,471
 
(21)     
General taxes
       
39,867
   
#
   
1,861
   
#
   
-
   
#
   
1,602
   
#
   
239
   
43,569
 
(22)     
Total Expenses
       
109,495
       
98,465
       
69,880
       
(165,298
)
     
(850
)
 
111,692
 
(23)     
Claim Settlement
       
(167,937
)
     
-
       
-
       
-
       
-
   
(167,937
)
(24)     
Income before Interest
and Income taxes
       
(178,023
)
     
129,469
       
(46,753
)
     
81,288
       
35,443
  (a)  
21,424
 
(25)     
Net interest charges:
                                             
(26)     
Interest expense
       
(93,250
)
     
289
       
-
       
22,029
       
35,443
   
(35,489
)
(27)     
Capitalized interest
       
1,418
       
(289
)
     
-
       
189
       
-
   
1,318
 
(28)     
Subsidiaries' preferred stock dividends
       
(557
)
     
-
       
-
       
-
       
-
   
(557
)
(29)     
Net interest charges
       
(92,389
)
     
-
       
-
       
22,218
       
35,443
   
(34,728
)
(30)     
Income Taxes
       
(27,502
)
     
46,898
       
(1,238
)
     
(14,428
)
     
-
   
3,730
 
(31)     
Income before discontinued operations
and an accounting change
       
(58,132
)
     
82,571
       
(45,515
)
     
73,498
       
-
   
52,422
 
(32)     
Discontinued operations
       
-
       
-
       
-
       
39,655
       
-
   
39,655
 
(33)     
Cumulative effect of an accounting change
       
-
       
-
       
-
       
-
       
-
   
-
 
(34)     
Net Income
     
$
(58,132
)
   
$
82,571
     
$
(45,515
)
   
$
113,153
     
$
-
 
$
92,077
 
                                                   
 
 
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, MYR and gas operations.  
   
                                                   

5


 

FirstEnergy Corp.

Financial statements

(in thousands)

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheet

 

 

 

 

 
As of
December 31, 2004
 
As of
December 31, 2003
 

Assets

   

   

 

Current Assets:

         

   

 

Cash and cash equivalents

       

$

52,941

 

$

113,975

 

Receivables

         

1,356,437

   

1,505,500

 

Other

         

602,969

   

623,836

 

 

   

   

2,012,347

   

2,243,311

 

Property, Plant and Equipment

         

13,478,356

   

13,268,922

 

Investments

         

3,273,966

   

3,497,691

 

Deferred Charges

         

12,303,275

   

13,900,024

 

 

   

 

$

31,067,944

 

$

32,909,948

 

 

   

   

   

 

Liabilities and Capitalization

         

   

 

Current Liabilities:

         

   

 

Currently payable long-term debt and preferred stock

       

$

1,037,349

 

$

1,754,197

 

Short-term borrowings

         

170,489

   

521,540

 

Accounts payable

         

610,589

   

725,239

 

Other

         

1,586,412

   

1,471,191

 

 

   

   

3,404,839

   

4,472,167

 

Capitalization:

         

   

 

Common stockholders' equity

         

8,589,294

   

8,289,341

 

Preferred stock not subject to mandatory redemption

         

238,719

   

335,123

 

Long-term debt and other long-term obligations

         

10,013,349

   

9,789,066

 

 

   

   

18,841,362

   

18,413,530

 

Noncurrent Liabilities

         

8,821,743

   

10,024,251

 

 

   

 

$

31,067,944

 

$

32,909,948

 

 

   

   

   

 
 
 

Adjusted Capitalization (including Off-Balance Sheet Items)

 

 

 

As of December 31,

 

 

 

2004

 

% Total

 

2003

 

% Total

 

Total common equity

   

$

8,589,294

   

42

%

$

8,289,341

   

37

%

Preferred stock *

     

238,719

   

1

%

 

335,123

   

2

%

Long-term debt – all other*

     

10,013,349

   

49

%

 

11,543,263

   

52

%

Short-term debt

     

170,489

   

1

%

 

521,540

   

2

%

Off-balance sheet debt equivalents:

     

   

   

   

 

  – Sale-leaseback net debt equivalents

     

1,358,221

   

7

%

 

1,414,541

   

6

%

  – Accounts receivable factoring

     

84,000

   

0

%

 

200,000

   

1

%

Total

   

$

20,454,072

   

100

%

$

22,303,808

   

100

%

 

   

   

   

   

 

* Includes amounts due to be paid within one year, JCP&L securitization of $281 million and $296 million in 2004 and 2003, respectively.

 
 
  GENERAL INFORMATION  
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2004
 
2003
 
2004
 
2003
 
   
   
   
   
 
L-T Debt and Preferred Stock Redemptions
 
$
24,686
 
$
792,112
 
$
1,573,830
 
$
2,255,654
 
New L-T Debt Issues
 
$
-
 
$
255,675
 
$
961,474
 
$
1,027,312
 
Short-term Debt Increase (Decrease)
 
$
(132,019
)
$
271,343
 
$
(351,051
)
$
(575,391
)
Capital Expenditures
 
$
300,478
 
$
276,247
 
$
846,221
 
$
856,316
 
 
 
6
 

FirstEnergy Corp.

Financial Statements

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 
Condensed Consolidated Statements of Cash Flows

 

 

 

 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 

 

 

 

 
2004
 
2003
 
2004
 
2003
 
Cash flows from operating activities:
         
   
   
   
 
Net income
       
$
201,509
 
$
109,432
 
$
878,175
 
$
422,764
 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of regulatory assets, nuclear fuel and leases
         
368,587
   
390,242
   
1,595,264
   
1,557,584
 
Deferred costs recoverable as regulatory assets
         
(153,327
)
 
(124,441
)
 
(416,617
)
 
(427,092
)
Deferred income taxes and investment tax credits
         
315,258
   
134,001
   
258,263
   
53,639
 
Goodwill and investment impairments
         
54,368
   
43,803
   
54,368
   
160,791
 
Pension trust contribution
         
-
   
-
   
(500,000
)
 
-
 
Disallowed regulatory assets
         
-
   
-
   
-
   
152,500
 
Cumulative effect of accounting change
         
-
   
-
   
-
   
(174,663
)
Loss (income) from discontinued operations
         
(1,093
)   
38,562
 
 
(4,396
)
 
103,632
 
Change in working capital and other
         
(443,740
)
 
(141,677
)
 
11,793
   
(94,300
)
   
 
$
341,562
 
$
449,922
 
$
1,876,850
 
$
1,754,855
 
Cash flows from financing activities
         
(41,573
)
 
(394,768
)
 
(1,456,676
)
 
(1,298,266
)
Cash flows from investing activities:
         
(314,940
)
 
(181,073
)
 
(481,208
)
 
(568,546
)
   
   
   
   
   
 
Net increase (decrease) in cash and cash equivalents
       
$
(14,951
)
$
(125,919
)
$
(61,034
)
$
(111,957
)
Cash and cash equivalents at beginning of period
         
67,892
   
239,894
   
113,975
   
225,932
 
Cash and cash equivalents at end of period
       
$
52,941
 
$
113,975
 
$
52,941
 
$
113,975
 
 
REGULATORY DEFERRALS
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2004
 
2003
 
Change
 
2004
 
2003
 
Change
 
Ohio Transition Plan
     
   
   
   
   
   
 
  Beginning Balance
   
$
644,888
 
$
409,758
   
 
$
453,400
 
$
259,354
   
 
  Deferral of Shopping Incentives
     
56,012
   
41,904
 
$
14,108
   
210,151
   
181,229
 
$
28,922
 
  Deferral of New Regulatory Assets
     
9,295
   
1,953
   
7,342
   
46,644
   
13,032
   
33,612
 
  Current period deferrals
   
$
65,307
 
$
43,857
 
$
21,450
 
$
256,795
 
$
194,261
 
$
62,534
 
     
   
   
   
   
   
 
Ending Balance-Ohio Deferrals
   
$
710,195
 
$
453,615
   
 
$
710,195
 
$
453,615
   
 
     
   
   
   
   
   
 
Deferred Energy Costs – New Jersey
     
   
   
   
   
   
 
  Beginning Balance
   
$
404,400
 
$
444,117
   
 
$
440,900
 
$
548,641
   
 
  Deferral (recovery) of energy costs
     
36,600
   
(3,217
)
$
39,817
   
100
   
57,844
 
$
(57,744
)
  Rate case disallowance
     
-
   
-
   
-
   
-
   
(165,585
)
 
165,585
 
  Current period change
   
$
36,600
 
$
(3,217
)
$
39,817
 
$
100
 
$
(107,741
)
$
107,841
 
     
   
   
   
   
   
 
Ending Balance
   
$
441,000
 
$
440,900
   
 
$
441,000
 
$
440,900
   
 
     
   
   
   
   
   
 
     
   
   
   
   
   
 
UNUSUAL ITEMS
   
Three Months Ended December 31,
Twelve Months Ended December 31,
     
2004
   
2003
   
Change
   
2004
   
2003
   
Change
 
Non-Core Asset Sales / Impairments
   
$
(805
)
$
(37,174
)
$
36,369
 
$
(13,316
)
$
(55,937
)
$
42,621
 
FENOC Severance
     
-
   
-
   
-
   
(6,488
)
 
-
   
(6,488
)
Lawsuits Settlement
     
-
   
-
   
-
   
(17,980
)
 
-
   
(17,980
)
Facilities Services Impairment
     
(47,440
)
 
-
   
(47,440
)
 
(47,440
)
 
(116,988
)
 
69,548
 
JCP&L Rate Case Disallowance
     
-
   
(13,635
)
 
13,635
   
-
   
(185,241
)
 
185,241
 
Environmental Liability
     
-
   
(14,500
)
 
14,500
   
-
   
(14,500
)
 
14,500
 
Claim Settlement
     
-
   
167,937
   
(167,937
)
 
-
   
167,937
   
(167,937
)
Total - Pre-tax Amounts
   
$
(48,245
)
$
102,628
 
$
(150,873
)
$
(85,224
)
$
(204,729
)
$
119,505
 
     
   
   
   
   
   
 
EPS Effect
     
($0.11
)
$
0.14
   
($0.25
)
 
($0.23
)
 
($0.47
)
$
0.24
 
     
   
   
   
   
   
 
 
8
 
 
 
 
 
 

FirstEnergy Corp.

Statistical Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
ELECTRIC SALES STATISTICS
   
Three Months Ended December 31
 
Twelve Months Ended December 31 
 
  (kWh in millions)
   
2004
 
2003
 
Change
 
2004
 
2003
 
Change
 
Electric Generation Sales
     
   
   
   
   
   
 
Retail - Regulated
     
19,853
   
19,231
   
3.2
%
 
81,140
   
82,408
   
-1.5
%
Retail - Competitive
     
3,369
   
3,629
   
-7.2
%
 
14,934
   
14,230
   
4.9
%
      Total Retail
     
23,222
   
22,860
   
1.6
%
 
96,074
   
96,638
   
-0.6
%
Wholesale
         
   
12,511
   
9,673
   
29.3
%
 
53,268
   
42,059
   
26.7
%
      Total Electric Generation Sales
     
35,733
   
32,533
   
9.8
%
 
149,342
   
138,697
   
7.7
%
   
   
   
   
   
   
   
   
 
Electric Distribution Deliveries
     
   
   
   
   
   
 
Ohio                - Residential
             
4,095
   
3,734
   
9.7
%
 
16,209
   
16,032
   
1.1
%
                         - Commercial
   
         
3,573
   
3,411
   
4.7
%
 
14,583
   
14,277
   
2.1
%
                         - Industrial
   
         
5,581
   
5,655
   
-1.3
%
 
23,097
   
23,160
   
-0.3
%
                         - Other
   
         
77
   
99
   
-22.2
%
 
356
   
391
   
-9.0
%
                               Total Ohio
   
         
13,326
   
12,899
   
3.3
%
 
54,245
   
53,860
   
0.7
%
   
   
   
   
   
   
   
   
 
Pennsylvania - Residential
         
   
2,726
   
2,632
   
3.6
%
 
10,871
   
10,572
   
2.8
%
                         - Commercial
   
         
2,522
   
2,511
   
0.4
%
 
10,342
   
10,065
   
2.8
%
                         - Industrial
   
         
2,576
   
2,543
   
1.3
%
 
10,203
   
9,953
   
2.5
%
                         - Other
   
         
21
   
21
   
0.0
%
 
80
   
84
   
-4.8
%
                               Total Pennsylvania
   
         
7,845
   
7,707
   
1.8
%
 
31,496
   
30,674
   
2.7
%
   
   
   
   
   
   
   
   
 
New Jersey   - Residential
         
   
2,015
   
1,980
   
1.8
%
 
9,355
   
9,104
   
2.8
%
                        - Commercial
   
         
2,134
   
1,975
   
8.1
%
 
8,877
   
8,620
   
3.0
%
                        - Industrial
   
         
763
   
732
   
4.2
%
 
3,070
   
3,046
   
0.8
%
                       - Other
   
         
22
   
20
   
10.0
%
 
74
   
89
   
-16.9
%
                             Total New Jersey
   
         
4,934
   
4,707
   
4.8
%
 
21,376
   
20,859
   
2.5
%
   
   
   
   
   
   
   
   
 
Total Residential
     
8,836
   
8,346
   
5.9
%
 
36,435
   
35,708
   
2.0
%
Total Commercial
     
8,229
   
7,897
   
4.2
%
 
33,802
   
32,962
   
2.5
%
Total Industrial
         
   
8,920
   
8,930
   
-0.1
%
 
36,370
   
36,159
   
0.6
%
Total Other
         
   
120
   
140
   
-14.3
%
 
510
   
564
   
-9.6
%
       Total Distribution Deliveries
     
26,105
   
25,313
   
3.1
%
 
107,117
   
105,393
   
1.6
%
   
   
   
   
   
   
   
   
 
Electric Sales Shopped
     
   
   
   
   
   
 
Ohio                  - Residential
         
   
1,806
   
1,451
   
24.5
%
 
7,158
   
6,377
   
12.2
%
                          - Commercial
   
         
1,743
   
1,529
   
14.0
%
 
7,112
   
6,501
   
9.4
%
                          - Industrial
   
         
1,130
   
1,106
   
2.2
%
 
4,549
   
4,903
   
-7.2
%
                                Total Ohio
   
         
4,679
   
4,086
   
14.5
%
 
18,819
   
17,781
   
5.8
%
   
   
   
   
   
   
   
   
 
Pennsylvania - Residential
         
   
6
   
7
   
-14.3
%
 
24
   
31
   
-22.6
%
                          - Commercial
   
         
24
   
41
   
-41.5
%
 
122
   
252
   
-51.6
%
                          - Industrial
   
         
433
   
698
   
-38.0
%
 
1,944
   
2,848
   
-31.7
%
                               Total Pennsylvania
   
         
463
   
746
   
-37.9
%
 
2,090
   
3,131
   
-33.2
%
   
   
   
   
   
   
   
   
 
New Jersey   - Residential
         
   
17
   
254
   
-93.3
%
 
488
   
423
   
15.4
%
                        - Commercial
   
         
508
   
534
   
-4.9
%
 
2,315
   
805
   
187.6
%
                        - Industrial
   
         
585
   
462
   
26.6
%
 
2,265
   
845
   
168.0
%
                            Total New Jersey
   
         
1,110
   
1,250
   
-11.2
%
 
5,068
   
2,073
   
144.5
%
   
   
   
   
   
   
   
   
 
Total Electric Sales Shopped
     
6,252
   
6,082
   
2.8
%
 
25,977
   
22,985
   
13.0
%
   
   
   
   
   
   
   
   
 
 
 
 
   
   
   
Twelve Months Ended December 31,    
 
   
 
OPERATING STATISTICS
     
2004
   
   
2003
   
   
   
 
System Load Factor
     
66.7
%
 
   
64.7
%
 
   
   
 
Capacity Factors:
     
   
   
   
   
   
 
     Fossil
         
   
57.7
%
 
   
58.3
%
 
   
   
 
     Nuclear
         
   
90.5
%
 
   
64.1
%
 
   
   
 
Generation Output:
     
   
   
   
   
   
 
     Fossil
         
   
60
%
 
   
68
%
 
   
   
 
     Nuclear
         
   
40
%
 
   
32
%
 
   
   
 
   
   
   
   
   
   
   
   
 
Weather
         
   
2004
 
 
Normal
   
2003
   
   
   
 
Composite Heating-Degree-Days
     
   
   
   
   
   
 
     4th Quarter
         
   
1,877
   
1,962
   
1,869
   
   
   
 
     Year-to-Date
         
   
5,456
   
5,550
   
5,745
   
   
   
 
Composite Cooling-Degree-Days
     
   
   
   
   
   
 
     4th Quarter
         
   
8
   
12
   
9
   
   
   
 
     Year-to-Date
         
   
902
   
880
   
810
   
   
   
 
   
   
   
   

   

   

   

   

 
 
 
10
 

 

FirstEnergy Corp.

2004 EPS and Cash Flow

 

 

 

 

 

 

 

 

 

 
2004 Earnings Per Share (EPS)
 (Reconciliation of GAAP to Non-GAAP)
 

 

 
 
 
Three Months
Ended December 31
 
Twelve Months
Ended December 31
 
Annual
Guidance
 
Basic EPS (GAAP Basis)
     
$
0.61
 
$
2.68
 
$
2.47 - $2.62
 
Unusual Charges:
       
   
   
 
  Non-core Asset Sales / Impairments
       
0.11
   
0.19
   
0.19
 
  FENOC Severance
       
0.00
   
0.01
   
0.01
 
  Lawsuits Settlement
       
0.00
   
0.03
   
0.03
 
EPS Basis (Non-GAAP Basis) *
     
$
0.72
 
$
2.91
 
$
2.70 - $2.85
 
 
       
   
   
 
*  Earnings for 2004 includes the incremental expenses associated with the Davis-Besse outage and the
            impact resulting from approval of the Ohio Rate Stabilization Plan.
 
 
 Reconciliation of 2004 Estimated Cash From Operating Activities (GAAP) to
Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP)
(in millions)
 
Net Cash from Operating Activities:
       
 
   Net Income
     
$
878
 
      Adjustments:
       
 
         Depreciation
       
590
 
         Amortization
       
996
 
         Deferred costs recoverable as regulatory assets
       
(417
)
         Deferred income taxes and ITC, net
       
59
 
         Pension plan contribution, net of tax 1
       
(300
)
        Other, including changes in working capital 2
       
71 
 
           Net Cash from Operating Activities (GAAP)
     
$
1,877
 
 
       
 
Other Items:
       
 
    Capital expenditures
       
(756
)
    Nuclear fuel fabrication
       
(90
)
    Decommissioning
       
(100
)
    Common stock dividends
       
(490
)
    NUG trust contributions
       
(50
)
    Claim settlement 2
       
(100
)
    Pension plan contribution, net of tax 1
       
300
 
    Miscellaneous
       
295
 
        Free Cash Flow (Non-GAAP)
     
$
886
 
 
       
 
Claim settlement 2
       
100
 
Pension plan contribution, net of tax
       
(300
)
Miscellaneous asset sales / other
       
134 
 
Cash Generation (Non-GAAP)
     
$
820
 
 
       
 
Notes:
       
 
1  On a Non-GAAP basis, we are reducing "Free Cash Flow" to exclude the after-tax pension.  
 
       
 
2 On a GAAP basis, the $100 million after-tax cash benefit from the claim settlement is reflected in "Other, including changes in working capital." Since we do not consider this one-time settlement to be part of "Free Cash Flow," we removed it from the subtotal and then added it back to include it as a component of "Cash Generation."
       

 

 

       

 
 
 
11
 
Reconciliation of 2005 Estimated Cash From Operating Activities (GAAP) to
Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP)
(in millions)
 
Net Cash from Operating Activities:
   
 
Non-GAAP Earnings Guidance
 
$
887-$937
 
Adjustments:
   
 
Depreciation
   
608
 
Amortization
   
1,061
 
Deferred costs recoverable as regulatory assets
   
(425
)
Deferred income taxes and ITC, net
   
(170
)
Other, including changes in working capital
   
104
 
Net Cash from Operating Activities (GAAP)
 
$
2,090
 
 
   
 
Other Items:
   
 
Capital expenditures
   
(1,003
)
Nuclear fuel fabrication
   
(90
)
Decommissioning
   
(100
)
Common stock dividends
   
(542
)
NUG trust contributions
   
20
 
Miscellaneous
   
25
 
Free Cash Flow (Non-GAAP)
 
$
400
 
 
   
 
Miscellaneous asset sales / other
   
160
 
Cash Generation (Non-GAAP)
 
$
560
 
਍
 
12

 
 


RECENT DEVELOPMENTS

Common Stock Dividend Increase
 
On November 30, FirstEnergy Corp.'s Board of Directors declared a quarterly dividend of 41.25 cents per share of outstanding common stock, a 10 percent increase over the previous quarterly rate of 37.5 cents per share, payable March 1, 2005. With the increase, the new indicated annual dividend will be $1.65 per share. Additionally, the Board adopted a dividend policy that will target sustainable annual dividend increases after 2005 that generally reflect an annual growth rate of 4% to 5%, and an earnings payout ratio generally within the range of 50% to 60%. The Board will continue to review FirstEnergy's dividend policy regularly.

Record Generation Output
 
In 2004, FirstEnergy set a new generation output record of 76.4 million megawatt-hours in spite of Davis-Besse being out of service for the first three months of the year. The 6% increase in output, compared to the previous record of 72.1 million megawatt-hours established in 2002, was attributable to higher nuclear generation, which set a record of 29.9 million-megawatt hours and continued strong performance from our baseload fossil plants.
 
Nuclear Update
 
On November 14, Beaver Valley Unit 1 completed its 16 th refueling outage. The refueling outage lasted 28 days and was the Unit's shortest ever.

On February 1, the Perry Plant returned to service following a 26-day forced outage that was initiated by a downshift to slow speed of the reactor recirculation system and a subsequent trip of one of the pumps. In addition to resolution of the intermittent electrical problem that caused the outage, minor modifications were made to resolve a circuit breaker problem in a motor driven feed pump and to install heat shields and insulation to the emergency diesel generation exhaust system.

On February 9, Davis-Besse returned to service following the completion of its mid-cycle outage. During the outage, plant personnel completed inspections of the reactor vessel head and under vessel area. The inspections showed no indications of leakage. The inspections of the reactor coolant pumps indicated both will support safe, reliable operations into the Spring 2006 refueling, when they will be refurbished. Minor repair work was completed on steam generator tubes.

The Perry Plant refueling outage is scheduled to commence later this month, while Beaver Valley Unit 2's refueling outage is scheduled to begin in early April.
 
Competitive Bid Process
 
On December 8, National Economic Research Associates conducted the retail load auction for FirstEnergy's Ohio operating companies. On December 9, The Public Utilities Commission of Ohio (PUCO) rejected the final auction price for FirstEnergy’s operating companies retail load. The Commission found that the clearing price of 5.45 cents per kilowatt-hour was inadequate in comparison to the price available through FirstEnergy’s rate stabilization plan. As a result, subject to appeal, the modified rate stabilization plan approved for FirstEnergy will be implemented on January 1, 2006.

Update on Labor Negotiations
 
On December 8, Jersey Central Power & Light (JCP&L) implemented its work continuation plan in response to a strike of approximately 1,350 employees (approximately 850 field employees and 500 office staff) represented by International Brotherhood of Electrical Workers System Council U-3. The strike is the first since 1987 for JCP&L. Key issues involved employee wages, benefits and work rules, especially those related to adequate employee response to meet customers' service needs. Non-represented employees from JCP&L are performing service reliability and priority maintenance work, with assistance from operating companies in Ohio and Pennsylvania, while the union is on strike. Settlement discussions between JCP&L and the union are ongoing.

On January 31, the International Brotherhood of Electrical Workers Local 245, representing 550 employees, ratified a three-year contract agreement with Toledo Edison, FirstEnergy Nuclear Operating Company, and FirstEnergy Generation Corp. On February 4, the International Brotherhood of Electrical Workers Local 272, representing approximately 350 Bruce Mansfield employees, ratified a three-year contract with FirstEnergy Generation Corp. Both agreements reflect an average annual three-percent wage increase.
 
Governmental Investigations and Legal Proceedings
 
On December 10, 2004, FirstEnergy received a letter from the US Attorney's Office stating that FENOC is a target of the federal grand jury investigation into alleged false statements relating to the Davis-Besse outage made to the NRC in the Fall of 2001 in response to NRC Bulletin 2001-01. The letter also said that the designation of FENOC as a target indicates that, in the view of the prosecutors assigned to the matter, it is likely that federal charges will be returned against FENOC by the grand jury. FirstEnergy is unable to predict the outcome of this investigation.

FirstEnergy previously reported on the formal investigation by the SEC’s Division of Enforcement relating to the August 2003 restatements of previously reported results by FirstEnergy and certain of its Ohio utility subsidiaries, the Davis-Besse extended outage and issues raised during the SEC's examination of FirstEnergy and its subsidiaries under the Public Utility Holding Company Act of 1935 (PUHCA). On December 30, 2004, FirstEnergy received a second subpoena asking for documents relating to issues raised during the PUHCA examination. FirstEnergy has cooperated fully with these investigations and will continue to do so.

If it were ultimately determined that FirstEnergy or its subsidiaries have legal liability or are otherwise made subject to liability based on any of the above matters, it could have a material adverse effect on FirstEnergy's or its subsidiaries' financial condition and results of operations.

 
 

 
 

 

 
Forward-Looking Statements:   This discussion 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," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), adverse regulatory or legal decisions and outcomes (including revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of government investigations, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage in particular, the availability and cost of capital, the continuing availability and operation of generating units, our inability to accomplish or realize anticipated benefits from strategic goals, our ability to improve electric commodity margins and to experience growth in the distribution business, our ability to access the public securities and other capital 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 the outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, and other similar factors. We expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 
 
 
13