10-Q/APeriod: Q1 FY2003

FIRSTENERGY CORP Quarterly Report (Amendment) for Q1 Ended Mar 31, 2003

Filed August 19, 2003For Securities:FE

Summary

FirstEnergy Corp. (FE) and its subsidiaries have filed an Amendment No. 1 to their Form 10-Q for the quarter ended March 31, 2003. This filing primarily serves to restate certain amounts in the consolidated financial statements for the three-month periods ended March 31, 2002, and 2003, due to a change in the method of amortizing costs related to the Ohio transition plan and the recognition of above-market values for certain leased generation facilities. These restatements resulted in a decrease in net income for the three months ended March 31, 2003, for FirstEnergy Corp. and its subsidiaries. Key financial highlights for the first quarter of 2003 show a net income of $218.5 million, or $0.74 per share, compared to $118.3 million, or $0.40 per share, in the prior year. This increase was driven by factors such as colder weather, higher gas margins, and reduced financing costs, though partially offset by higher employee benefit expenses and costs associated with the Davis-Besse nuclear plant outage. The company also adopted SFAS 143, leading to a significant cumulative effect adjustment to net income.

Key Highlights

  • 1Restatement of financial statements for the three months ended March 31, 2002, and 2003, due to changes in accounting for Ohio transition plan costs and above-market lease values.
  • 2Net income for Q1 2003 was $218.5 million ($0.74/share), an increase from $118.3 million ($0.40/share) in Q1 2002.
  • 3Adoption of SFAS 143 resulted in a cumulative effect adjustment increasing net income by $102.1 million (net of tax) in Q1 2003.
  • 4Total revenues increased by $380.5 million in Q1 2003 compared to Q1 2002, driven by higher electricity and gas sales due to colder weather.
  • 5Expenses increased by $462.1 million in Q1 2003, primarily due to a $528.8 million rise in purchased power costs, partly from supplying New Jersey's Basic Generation Service (BGS) and the Davis-Besse outage.
  • 6Net interest charges decreased by $72.7 million in Q1 2003 compared to Q1 2002 due to debt redemptions and refinancings.
  • 7The company is continuing to manage its operations through two segments: Regulated Services and Competitive Services, with Regulated Services showing a net income increase to $317 million in Q1 2003.

Frequently Asked Questions

The primary reason for the restatement is a change in the method of amortizing costs related to the Ohio transition plan and the recognition of above-market values for certain leased generation facilities.

Net income increased significantly from $118.3 million ($0.40 per share) in Q1 2002 to $218.5 million ($0.74 per share) in Q1 2003. This improvement was driven by factors such as colder weather, higher gas margins, and reduced financing costs.

The extended outage at the Davis-Besse nuclear plant led to higher nuclear operating costs and increased purchased power costs due to the need for replacement power. These factors partially offset the positive drivers of income in the first quarter of 2003, reducing earnings per share by $0.18.

Yes, the company adopted SFAS 143, 'Accounting for Asset Retirement Obligations,' in the first quarter of 2003. This adoption resulted in a cumulative effect adjustment that increased net income by $102.1 million (net of tax).