01—Abstract
Summary
Summary of the 10-K/A filed June 25, 2004. Cited figures are marked; the original filing is the authoritative source.
This filing is Amendment No. 1 to FirstEnergy Corp.'s Form 10-K/A for fiscal year 2003, filed June 25, 2004 on behalf of FirstEnergy Corp. and seven utility subsidiaries (Ohio Edison, Cleveland Electric, Toledo Edison, Pennsylvania Power, Jersey Central P&L, Met-Ed, and Penelec).
It is a narrow amendment: only Item 9A (Controls and Procedures) has been revised, and the financial statements, business description, and MD&A are not included. The full financial results are incorporated by reference from the 2003 Annual Report to Stockholders (pages 6-85), which is not part of this document, so this filing does not provide revenue, earnings, or balance sheet figures. The substantive disclosure concerns a material weakness in internal controls identified in Q4 2003.
Management found that expenses recognized in the first three quarters of 2003 should have been capitalized, due to untimely updates of tables in the registrants' automated work management system and inconsistent cost allocation to capital projects. Management attributed the weakness to employee training and process changes not uniformly applied during the implementation of a new Enterprise Resource Planning (ERP) system. As a result, quarterly results for JCP&L, Penelec and Toledo Edison were restated in their respective annual reports.
The CEO and CFO concluded that disclosure controls remain effective despite the weakness, because corrective measures were implemented in Q4 2003: additional field employee training, procedures to keep work management tables current, and reconfiguration of the work management system to properly allocate capital and expense projects. The amendment clarifies this conclusion, which is the key point for investors evaluating governance and reporting risk at the company.
02—Key points
Key Highlights
- Filing type: Amendment No. 1 to the FY2003 Form 10-K, amending only Item 9A; financial statements and MD&A are not included and are incorporated by reference from the Annual Report to Stockholders.
- Material weakness disclosed: expenses from Q1-Q3 2003 that should have been capitalized were recorded as expenses, due to untimely work management table updates and inconsistent cost allocation.
- Root cause: employee training and process changes not uniformly applied during the company's new Enterprise Resource Planning (ERP) system implementation.
- Restatement impact: quarterly financial results for JCP&L, Penelec and Toledo Edison were restated in their respective annual reports.
- Management conclusion: CEO and CFO deemed disclosure controls effective, as remediation was completed in Q4 2003.
- Remediation steps: increased field employee training, timely table-update procedures, and reconfiguration of the work management system for capital vs. expense allocation.
- Market data: FirstEnergy had 329,836,276 common shares outstanding as of March 15, 2004, and non-affiliate market value of about $11.43 billion as of June 30, 2003.
03—Questions
Frequently Asked Questions
Why was this 10-K/A filed?
The amendment clarifies Item 9A (Controls and Procedures). It states that the CEO and CFO concluded disclosure controls were effective despite a material weakness identified in Q4 2003, because corrective measures were taken during that quarter. No other items were revised.
What was the material weakness?
During Q4 2003, management found that expenses recognized in Q1-Q3 2003 related to activities that should have been recorded as capital expenditures. This stemmed from untimely table updates in the automated work management system and inconsistent allocation of costs to capital projects.
Did the weakness affect reported financial results?
Yes, in part. The quarterly financial results for JCP&L, Penelec and Toledo Edison were restated in each registrant's annual report. The filing does not quantify the restatement, so the amounts would need to be found in the original 10-K and the 2003 Annual Report to Stockholders.
What caused the weakness, and what has been done to fix it?
Management attributed it to employee training and process changes not uniformly applied during implementation of a new Enterprise Resource Planning system. Remediation included added field employee training, procedures to keep work management tables updated on a timely basis, and reconfiguration of the system to properly classify capital and expense projects.
Where can investors find the full financial statements for 2003?
The full financial statements are in the FirstEnergy Corp. Annual Report to Stockholders for fiscal 2003 (pages 6-85), which is incorporated by reference into Part II of the 10-K. This amendment does not reproduce that content.
04—Continue