10-QPeriod: Q1 FY2008

FIRSTENERGY CORP Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 8, 2008For Securities:FE

Summary

FirstEnergy Corp. reported a slight decrease in net income for the first quarter of 2008, with net income at $276 million, or $0.91 per share, compared to $290 million, or $0.92 per share, in the same period of 2007. This decline was primarily driven by increased operating expenses, partially offset by higher revenues. Key factors impacting the results included increased fuel and purchased power costs, as well as higher other operating expenses across various segments, notably driven by storm restoration work and labor expenses. The company also provided updates on significant regulatory matters in Ohio, where new legislation (Substitute SB221) requires utilities to file Electric Service Plans (ESPs), and in Pennsylvania, concerning default service procurement processes and transmission service charges. These regulatory developments are crucial for future revenue recovery and operational planning. Financially, the company managed its liquidity through its revolving credit facility and other financing arrangements, while also undertaking initiatives like the repurchase of auction rate bonds and the sale of non-core assets.

Financial Highlights

20 data points
Beta

Revenue

$3.28B

Net Income

$277.00M

8.5% Net Margin

Cash & Equivalents

$70.00M

Free Cash Flow

$359.00M

Financial Statements
Beta
Revenue$3.28B
Operating Expenses$2.66B
Operating Income$618.00M
Net Income$277.00M
Shares Outstanding (Basic)304.00M
Shares Outstanding (Diluted)307.00M

Key Highlights

  • 1Net income decreased slightly to $276 million ($0.91/share) in Q1 2008 from $290 million ($0.92/share) in Q1 2007, primarily due to increased operating expenses.
  • 2Total revenues increased by $304 million to $3.277 billion in Q1 2008 compared to $2.973 billion in Q1 2007.
  • 3Energy Delivery Services segment net income decreased by $39 million, largely due to higher operating expenses.
  • 4Competitive Energy Services segment net income decreased by $11 million, reflecting a decrease in gross generation margin and higher operating costs.
  • 5The company repurchased $530 million of tax-exempt long-term PCRBs due to disruptions in the auction rate securities market.
  • 6FirstEnergy sold substantially all assets of FirstEnergy Telecom Services, Inc. for $45 million, resulting in an after-tax gain of $0.06 per share.
  • 7Significant regulatory developments were noted in Ohio regarding new electricity market legislation and in Pennsylvania concerning default service procurement and transmission costs.

Frequently Asked Questions

The decrease in net income was primarily driven by increased operating expenses, including higher fuel and purchased power costs, as well as increased other operating expenses across several business segments. These were partially offset by higher revenues.

In Ohio, new legislation (Substitute SB221) mandates utilities to file Electric Service Plans (ESPs) for retail generation supply and pricing. In Pennsylvania, regulatory approvals were granted for residential default service procurement, and updates were filed for transmission service charges.

FirstEnergy managed its liquidity through its $2.75 billion revolving credit facility and other financing arrangements. The company also repurchased $530 million of auction rate bonds due to market disruptions and sold non-core assets, generating an after-tax gain.

The Competitive Energy Services segment saw a decrease in net income, reflecting a lower gross generation margin and higher operating costs. However, the company did report a record first-quarter generation output of 20.4 million megawatt-hours.