AKRON, Ohio, April 27, 2017 /PRNewswire/ -- FirstEnergy
Corp. (NYSE: FE) today reported first quarter 2017 GAAP earnings of
$205 million, or $0.46 per basic and diluted share of common
stock, on revenue of $3.6
billion. GAAP results include a charge associated with
coal transportation contract disputes. Operating (non-GAAP)
earnings* in the first quarter of 2017 were $0.78 per basic share of common stock.
Operating (non-GAAP) earnings exclude the impact of the special
items listed below.
In the first quarter of 2016, the company reported GAAP earnings
of $328 million, or $0.78 per basic share of common stock
($0.77 diluted), on revenue of
$3.9 billion. First quarter
2016 operating (non-GAAP) earnings were $0.80 per basic share of common stock.
"Our financial results for the first quarter exceeded our
operating earnings guidance, despite mild winter temperatures,"
said Charles E. Jones, FirstEnergy
president and chief executive officer. "All three of our
businesses performed well, and we are pleased with this strong
start to the year."
Jones also announced that the company expects 2017 GAAP earnings
of $2.17 to $2.47 per share, and is
affirming its 2017 operating (non-GAAP) earnings guidance range of
$2.70 to $3.00 per share. In
addition, the company provided a second quarter 2017 GAAP earnings
estimate of $0.54 to $0.64 per share,
and operating (non-GAAP) guidance of $0.55
to $0.65 per share.
First quarter 2017 operating (non-GAAP) earnings were impacted
by new distribution rates, lower depreciation expense and increased
transmission revenues, as well as lower capacity revenue in the
competitive business.
In FirstEnergy's Regulated Distribution business, first quarter
2017 earnings increased as a result of approved rates in
Ohio, New Jersey and Pennsylvania, which went into effect in
January 2017.
As a result of mild winter temperatures, total distribution
deliveries decreased 1 percent compared to the first quarter of
2016. Heating degree days were 8 percent below the same
period in 2016 and 16 percent below normal, resulting in a
residential sales decrease of 3 percent and a 1 percent decrease in
commercial sales. On a weather-adjusted basis, sales
increased slightly in both sectors. Industrial deliveries
also increased slightly in the first quarter due to higher usage
from the shale, steel and coal mining sectors.
In the Regulated Transmission business, first quarter 2017
earnings increased primarily due to a higher rate base at ATSI and
TrAIL.
In the Competitive Energy Services Segment, commodity margin
decreased in line with expectations due to lower contract sales
volume and lower capacity revenues, partially offset by lower
capacity expense and increased wholesale sales. CES operating
(non-GAAP) earnings also benefited from lower depreciation expense
and lower operating expenses.
First quarter GAAP results include asset impairment and plant
exit costs of $0.23 per share,
primarily reflecting a pre-tax charge of $164 million related to disputes regarding
long-term coal transportation contracts.
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Consolidated GAAP
Earnings Per Share to
Operating (Non-GAAP) Earnings Per Share*
Reconciliation
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First
Quarter
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2017
Estimate
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2017
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2016
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Second
Quarter
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Full
Year
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Basic Earnings Per
Share (GAAP)
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$0.46
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$0.78
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$0.54 -
$0.64
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$2.17 -
$2.47
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Excluding Special
Items*:
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Mark-to-market
adjustments
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0.07
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(0.09)
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—
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0.07
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Regulatory
charges
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0.02
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0.09
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0.01
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0.04
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Merger accounting –
commodity contracts
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—
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0.01
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—
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—
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Asset
impairment/plant exit costs
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0.23
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—
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—
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0.23
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Debt redemption
costs
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—
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—
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—
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0.19
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Trust securities
impairment
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—
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0.01
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—
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—
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Total Special
Items*
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0.32
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0.02
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0.01
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0.53
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Basic Earnings Per
Share
- Operating (Non-GAAP)
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$0.78
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$0.80
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$0.55 -
$0.65
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$2.70 -
$3.00
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* 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%.
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Non-GAAP financial measures
*Operating (non-GAAP)
earnings exclude "special items" as described herein, and is a
non-GAAP financial measure. Special items represent charges
incurred or benefits realized that management believes are not
indicative of, or may obscure trends useful in evaluating the
company's ongoing core activities and results of operations or
otherwise warrant separate classification. Special items are not
necessarily non-recurring. Management uses operating (non-GAAP)
earnings and operating (non-GAAP) earnings by segment to evaluate
the company's performance and manage its operations and frequently
references these non-GAAP financial measures in its decision
making, using them to facilitate historical and ongoing performance
comparisons. Management believes that the non-GAAP financial
measure of operating (non-GAAP) earnings provides a consistent and
comparable measure of performance of its businesses on an ongoing
basis. Management also believes that such measures are useful
to shareholders and other interested parties to understand
performance trends and evaluate the company against its peer group
by presenting period-over-period operating results without the
effect of certain charges or benefits that may not be consistent or
comparable across periods or across the company's peer group.
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). These non-GAAP
financial measures are intended to complement, and are not
considered as alternatives to, the most directly comparable GAAP
financial measures. Also, the non-GAAP financial measures may not
be comparable to similarly titled measures used by other
entities.
Consolidated Report and Teleconference
FirstEnergy's Consolidated Report to the Financial
Community, which provides highlights on company developments
and financial results for the first quarter, is posted on the
company's Investor Information website –
www.firstenergycorp.com/ir. To access the report, click on
First Quarter 2017 Consolidated Report to the Financial
Community.
The company invites investors, customers and other interested
parties to listen to a live Internet webcast of its teleconference
for financial analysts and view slides associated with the
presentation at 10:00 a.m. EDT
tomorrow. FirstEnergy management will present an
overview of the company's financial results and discuss earnings
guidance, followed by a question-and-answer session. The
teleconference and presentation can be accessed on the website by
selecting the First Quarter 2017 Earnings Conference Call
link. The webcast and presentation will be archived on the
website.
FirstEnergy is dedicated to safety, reliability and operational
excellence. Its 10 electric distribution companies form one
of the nation's largest investor-owned electric systems, serving
customers in Ohio, Pennsylvania, New
Jersey, West Virginia,
Maryland and New York. The
company's transmission subsidiaries operate more than 24,000 miles
of transmission lines that connect the Midwest and Mid-Atlantic
regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online
at www.firstenergycorp.com.
Forward-Looking Statements: 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 include declarations
regarding management's intents, beliefs and current expectations.
These statements typically contain, but are not limited to, the
terms "anticipate," "potential," "expect," "forecast," "target,"
"will," "intend," "believe," "project," "estimate," "plan" and
similar words. Forward-looking statements involve estimates,
assumptions, known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements
to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements, which may include the following: the ability to
experience growth in the Regulated Distribution and Regulated
Transmission segments and the effectiveness of our strategy to
transition to a fully regulated business profile; the
accomplishment of our regulatory and operational goals in
connection with our transmission investment plan, including, but
not limited to, our planned transition to forward-looking formula
rates; changes in assumptions regarding economic conditions within
our territories, assessment of the reliability of our transmission
system, or the availability of capital or other resources
supporting identified transmission investment opportunities; the
ability to accomplish or realize anticipated benefits from
strategic and financial goals, including, but not limited to, the
ability to continue to reduce costs and to successfully execute our
financial plans designed to improve our credit metrics and
strengthen our balance sheet through, among other actions, our cash
flow improvement plan and other proposed capital raising
initiatives; success of legislative and regulatory solutions for
generation assets that recognize their environmental or energy
security benefits; the risks and uncertainties associated with the
lack of viable alternative strategies regarding the Competitive
Energy Services (CES) segment, thereby causing FirstEnergy
Solutions Corp. (FES), and possibly FirstEnergy Nuclear Operating
Company (FENOC), to restructure its debt and other financial
obligations with its creditors or seek protection under
United States bankruptcy laws and
the losses, liabilities and claims arising from such bankruptcy
proceeding, including any obligations at FirstEnergy Corp.; the
risks and uncertainties at the CES segment, including FES and its
subsidiaries and FENOC, related to continued depressed wholesale
energy and capacity markets, and the viability and/or success of
strategic business alternatives, such as pending and potential CES
generating unit asset sales, the potential conversion of the
remaining generation fleet from competitive operations to a
regulated or regulated-like construct or the potential need to
deactivate additional generating units; the substantial uncertainty
as to FES' ability to continue as a going concern and substantial
risk that it may be necessary for FES, and possibly FENOC, to seek
protection under United States
bankruptcy laws; the risks and uncertainties associated with
litigation, arbitration, mediation and like proceedings, including,
but not limited to, any such proceedings related to vendor
commitments, such as long-term fuel and transportation agreements;
the uncertainties associated with the deactivation of older
regulated and competitive units, including the impact on vendor
commitments, such as long-term fuel and transportation agreements,
and as it relates to the reliability of the transmission grid, the
timing thereof; the impact of other future changes to the
operational status or availability of our generating units and any
capacity performance charges associated with unit unavailability;
changing energy, capacity and commodity market prices including,
but not limited to, coal, natural gas and oil prices, and their
availability and impact on margins; costs being higher than
anticipated and the success of our policies to control costs and to
mitigate low energy, capacity and market prices; replacement power
costs being higher than anticipated or not fully hedged; our
ability to improve electric commodity margins and the impact of,
among other factors, the increased cost of fuel and fuel
transportation on such margins; the uncertainty of the timing and
amounts of the capital expenditures that may arise in connection
with any litigation, including New Source Review litigation, or
potential regulatory initiatives or rulemakings (including that
such initiatives or rulemakings could result in our decision to
deactivate or idle certain generating units); changes in customers'
demand for power, including, but not limited to, changes resulting
from the implementation of state and federal energy efficiency and
peak demand reduction mandates; economic or weather conditions
affecting future sales and margins such as a polar vortex or other
significant weather events, and all associated regulatory events or
actions; changes in national and regional economic conditions
affecting us, our subsidiaries and/or our major industrial and
commercial customers, and other counterparties with which we do
business, including fuel suppliers; the impact of labor disruptions
by our unionized workforce; the risks associated with cyber-attacks
and other disruptions to our information technology system that may
compromise our generation, transmission and/or distribution
services and data security breaches of sensitive data, intellectual
property and proprietary or personally identifiable information
regarding our business, employees, shareholders, customers,
suppliers, business partners and other individuals in our data
centers and on our networks; the impact of the regulatory process
and resulting outcomes on the matters at the federal level and in
the various states in which we do business including, but not
limited to, matters related to rates; the impact of the federal
regulatory process on Federal Energy Regulatory Commission
(FERC)-regulated entities and transactions, in particular FERC
regulation of wholesale energy and capacity markets, including PJM
Interconnection, L.L.C. (PJM) markets and FERC-jurisdictional
wholesale transactions; FERC regulation of cost-of-service rates;
and FERC's compliance and enforcement activity, including
compliance and enforcement activity related to North American
Electric Reliability Corporation's mandatory reliability standards;
the uncertainties of various cost recovery and cost allocation
issues resulting from American Transmission Systems,
Incorporated 's realignment into PJM; the ability to comply
with applicable state and federal reliability standards and energy
efficiency and peak demand reduction mandates; other legislative
and regulatory changes, including the new federal administration's
required review and potential revision of environmental
requirements, including, but not limited to, the effects of the
United States Environmental Protection Agency's Clean Power Plan,
Coal Combustion Residuals regulations, Cross-State Air Pollution
Rule and Mercury and Air Toxics Standards programs, including
our estimated costs of compliance, Clean Water Act (CWA) waste
water effluent limitations for power plants, and CWA 316(b) water
intake regulation; adverse regulatory or legal decisions and
outcomes with respect to our nuclear operations (including, but not
limited to, the revocation or non-renewal of necessary licenses,
approvals or operating permits by the Nuclear Regulatory Commission
or as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant);
issues arising from the indications of cracking in the shield
building at Davis-Besse; changing market conditions that could
affect the measurement of certain liabilities and the value of
assets held in our Nuclear Decommissioning Trusts, pension trusts
and other trust funds, and cause us and/or our subsidiaries to make
additional contributions sooner, or in amounts that are larger than
currently anticipated; the impact of changes to significant
accounting policies; the impact of any changes in tax laws or
regulations or adverse tax audit results or rulings; the ability to
access the public securities and other capital and credit markets
in accordance with our financial plans, the cost of such capital
and overall condition of the capital and credit markets affecting
us and our subsidiaries; further actions that may be taken by
credit rating agencies that could negatively affect us and/or our
subsidiaries' access to financing, increase the costs thereof,
increase requirements to post additional collateral to support, or
accelerate payments under outstanding commodity positions, letters
of credit and other financial guarantees, and the impact of these
events on the financial condition and liquidity of FirstEnergy
Corp. and/or its subsidiaries, specifically FES and its
subsidiaries; issues concerning the stability of domestic and
foreign financial institutions and counterparties with which we do
business; and the risks and other factors discussed from time to
time in our United States Securities and Exchange Commission (SEC)
filings, and other similar factors. Dividends declared from time to
time on FirstEnergy Corp.'s common stock during any period may in
the aggregate vary from prior periods due to circumstances
considered by FirstEnergy Corp.'s Board of Directors at the time of
the actual declarations. A security rating is not a recommendation
to buy or hold securities and is subject to revision or withdrawal
at any time by the assigning rating agency. Each rating should be
evaluated independently of any other rating. These forward-looking
statements are also qualified by, and should be read in conjunction
with the other cautionary statements and risks that are included in
our filings with the SEC, including but not limited to the most
recent Annual Report on Form 10-K and any subsequent Quarterly
Reports on Form 10-Q. The foregoing review of factors also should
not be construed as exhaustive. New factors emerge from time to
time, and it is not possible for management to predict all such
factors, nor assess the impact of any such factor on our business
or the extent to which any factor, or combination of factors, may
cause results to differ materially from those contained in any
forward-looking statements. We expressly disclaim any current
intention to update, except as required by law, any forward-looking
statements contained herein as a result of new information, future
events or otherwise.
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SOURCE FirstEnergy Corp.