10-QPeriod: Q3 FY2015

FIRSTENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 29, 2015For Securities:FE

Summary

FirstEnergy Corp. reported a net income of $395 million for the third quarter of 2015, a significant increase from $333 million in the same period of the prior year. This improvement was driven by higher earnings in the Competitive Energy Services (CES) segment, a stronger performance in Regulated Transmission, and positive contributions from Regulated Distribution, partially offset by increased corporate expenses. Revenues also saw a notable increase, primarily due to rate adjustments and higher weather-related usage in the Regulated Distribution segment, alongside improved transmission revenues. The CES segment, however, experienced a revenue decline due to a strategic reduction in contract sales, although this was mitigated by higher capacity prices and wholesale sales. The company continues to focus on strategic investments in its regulated transmission and distribution infrastructure, including the "Energizing the Future" plan. Management is actively managing costs through a cash flow improvement plan, targeting substantial savings by 2017. While the company faces ongoing regulatory and market uncertainties, particularly within its CES segment, the overall financial performance for the quarter reflects progress in its strategic initiatives.

Financial Highlights

45 data points
Beta

Revenue

$4.12B

Net Income

$395.00M

9.6% Net Margin

EPS (Diluted)

$0.93

Total Assets

$51.93B

Cash & Equivalents

$86.00M

Free Cash Flow

$1.33B

Financial Statements
Beta
Revenue$4.12B
Operating Expenses$3.21B
Operating Income$908.00M
Interest Expense$285.00M
Net Income$395.00M
EPS (Basic)$0.94
EPS (Diluted)$0.93
Shares Outstanding (Basic)423.00M
Shares Outstanding (Diluted)424.00M

Key Highlights

  • 1Net income increased by 19% to $395 million ($0.94 per diluted share) for Q3 2015 compared to $333 million ($0.79 per diluted share) in Q3 2014.
  • 2Total revenues increased by 6% to $4,123 million in Q3 2015, driven by higher revenues in Regulated Distribution and Regulated Transmission.
  • 3The CES segment saw a revenue decrease of $131 million due to a strategic reduction in contract sales, though this was partially offset by higher capacity prices and wholesale sales.
  • 4Operating income increased by 27% to $908 million in Q3 2015.
  • 5The company continues to invest in its regulated infrastructure with "Energizing the Future" transmission expansion plan, with $970 million in capital expenditures forecast for the Regulated Transmission segment in 2015.
  • 6FirstEnergy is executing a cash flow improvement plan targeting $58 million in savings in 2015 and $240 million annually by 2017.
  • 7The effective tax rate increased to 36.4% in Q3 2015 from 31.3% in Q3 2014, primarily due to tax benefits recorded in the prior year.

Frequently Asked Questions

FirstEnergy reported a net income of $395 million for the third quarter of 2015, or $0.94 per diluted share, compared to $333 million, or $0.79 per diluted share, for the same period in 2014. This represents a 19% increase in net income.

The total revenue increase of 6% to $4,123 million was primarily driven by a $267 million increase in Regulated Distribution revenues due to higher weather-related usage and rate adjustments, and a $51 million increase in Regulated Transmission revenues, largely due to ATSI's transition to a forward-looking rate. The Competitive Energy Services (CES) segment's revenue decreased by $131 million due to a strategic reduction in contract sales.

FirstEnergy is implementing a cash flow improvement plan targeting approximately $58 million in savings for 2015, with further reductions planned for 2016 and 2017. The company is also focused on strategic investments in its regulated operations, with its "Energizing the Future" transmission expansion plan representing a significant capital investment. For 2015, capital expenditures were expected to be around $2.9 billion.

The CES segment is undergoing a strategic repositioning to reduce exposure to weather-sensitive loads and focus on high-margin sales, while maintaining a portion of generation to capture future market upside. This strategy led to a decrease in contract sales revenue but was partially offset by higher capacity prices and wholesale sales. The company aims to better position CES to benefit from market improvements while limiting risk.