10-Q/APeriod: Q2 FY2003

FIRSTENERGY CORP Quarterly Report (Amendment) for Q2 Ended Jun 30, 2003

Filed September 11, 2003For Securities:FE

Summary

FirstEnergy Corp. (FE) filed an Amendment No. 1 to its Form 10-Q for the quarter ended June 30, 2003. This amendment corrects minor typographical and computational errors in the previously filed report. The company has a complex operating structure with two main segments: regulated services and competitive services. Key financial highlights include a net loss for the quarter, impacted by charges related to the abandonment of Argentine operations and an accounting change, though overall revenues saw an increase in the year-to-date period due to growth in both regulated and competitive segments. The company is actively managing market risks through derivative instruments and is navigating significant regulatory and environmental matters, including ongoing investigations into a widespread power outage in August 2003 and legal challenges related to past earnings restatements.

Key Highlights

  • 1Amendment filed to correct minor errors in the June 30, 2003 10-Q, with no impact on previously reported results.
  • 2The company reported a net loss of $57.9 million for the second quarter of 2003, a significant decrease from the $207.9 million net income in the same period of 2002.
  • 3Total revenues for the six months ended June 30, 2003, increased to $6.1 billion from $5.75 billion in the prior year's comparable period, driven by growth in both regulated and competitive services.
  • 4Significant charges were recorded in the second quarter, including a $67.4 million after-tax charge related to the abandonment of Argentine operations (Emdersa).
  • 5The company experienced increased operational costs, particularly in purchased power, due to higher sales volumes and the extended outage at the Davis-Besse Nuclear Power Station.
  • 6FirstEnergy is subject to ongoing legal matters, including shareholder lawsuits concerning earnings restatements and significant environmental regulations and potential liabilities, notably a ruling regarding the Sammis Plant.
  • 7The company is actively managing financial risks through various derivative instruments, primarily for hedging purposes, and has a substantial amount of goodwill on its balance sheet.

Frequently Asked Questions

This Amendment No. 1 to the Form 10-Q for the quarter ended June 30, 2003, was filed to correct typographical and minor computational errors in Item 1 (Financial Statements) and Item 2 (Management's Discussion and Analysis). The company explicitly states that this amendment has no effect on previously reported results of operations or financial position.

The net loss of $57.9 million in the second quarter of 2003 was significantly influenced by a $67.4 million after-tax charge related to the abandonment of FirstEnergy's Argentine operations (Emdersa). Additionally, increased operational costs, particularly higher purchased power costs and expenses related to the extended outage at the Davis-Besse Nuclear Power Station, contributed to the unfavorable quarterly results compared to the prior year's profit.

FirstEnergy utilizes a variety of non-derivative and derivative instruments, including forward contracts, options, futures contracts, and swaps, primarily for hedging purposes to manage the volatility associated with fluctuations in electricity, natural gas, coal prices, and interest rates. These instruments are overseen by the Risk Policy Committee to ensure compliance with corporate risk management policies.

FirstEnergy faces several material environmental matters, including compliance with Clean Air Act regulations for sulfur dioxide and nitrogen oxides, potential liabilities related to hazardous waste disposal sites, and ongoing regulatory scrutiny of its power plants. Legally, the company is dealing with shareholder lawsuits alleging securities law violations in connection with prior earnings restatements and a significant ruling concerning the Sammis Plant that could have a material adverse impact.