10-QPeriod: Q1 FY2016

FIRSTENERGY CORP Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 26, 2016For Securities:FE

Summary

FirstEnergy Corp. (FE) reported strong financial results for the first quarter of 2016, with net income increasing significantly to $328 million, or $0.78 per diluted share, compared to $222 million, or $0.53 per diluted share, in the same period of the prior year. This substantial year-over-year improvement was primarily driven by a $152 million increase in net income from the Competitive Energy Services (CES) segment. The regulated segments, Distribution and Transmission, also contributed positively, though the Distribution segment saw a decrease in net income, partly due to regulatory charges related to Ohio's ESP IV. Overall revenues saw a slight decrease of $28 million, mainly due to lower volumes in the CES segment as the company continued its strategy of aligning sales with generation. However, operating expenses decreased by $210 million, largely driven by lower fuel costs and mark-to-market gains within the CES segment. FirstEnergy's regulated businesses are continuing to focus on infrastructure investments and regulatory initiatives aimed at enhancing customer service and reliability.

Financial Highlights

45 data points
Beta

Revenue

$3.87B

Net Income

$328.00M

8.5% Net Margin

EPS (Diluted)

$0.77

Total Assets

$52.70B

Cash & Equivalents

$146.00M

Free Cash Flow

$650.00M

Financial Statements
Beta
Revenue$3.87B
Operating Expenses$3.09B
Operating Income$776.00M
Interest Expense$288.00M
Net Income$328.00M
EPS (Basic)$0.78
EPS (Diluted)$0.77
Shares Outstanding (Basic)424.00M
Shares Outstanding (Diluted)426.00M

Key Highlights

  • 1Net income increased by 48% to $328 million in Q1 2016 compared to $222 million in Q1 2015.
  • 2Diluted earnings per share rose to $0.77 in Q1 2016 from $0.53 in Q1 2015.
  • 3The Competitive Energy Services (CES) segment saw a significant improvement in net income, contributing $144 million in Q1 2016 compared to a loss of $8 million in Q1 2015.
  • 4Total revenues slightly decreased by 1% to $3,869 million, primarily due to lower volumes in the CES segment.
  • 5Total operating expenses decreased by 6% to $3,093 million, driven by lower fuel and other operating expenses, particularly in the CES segment.
  • 6The company continues to invest in its regulated transmission and distribution infrastructure, with the Energizing the Future plan progressing.
  • 7FirstEnergy's dividend payout remained steady at $0.72 per share for the quarter.

Frequently Asked Questions

The primary driver for the substantial increase in net income was the significant turnaround in the Competitive Energy Services (CES) segment, which reported a net income of $144 million in Q1 2016, a substantial improvement from a net loss of $8 million in the prior year's quarter. This segment's performance was boosted by higher capacity revenues and mark-to-market gains on commodity contracts.

The Regulated Distribution segment's net income decreased by $43 million year-over-year, largely due to lower revenues from decreased weather-related usage and regulatory charges in Ohio related to the ESP IV. The Regulated Transmission segment saw a modest increase in net income of $2 million, driven by higher revenue requirements and an increased rate base at ATSI.

The 'Energizing the Future' plan continues to be a key focus, with approximately $1 billion in capital expenditures projected for 2016 under this plan. This initiative aims to modernize the company's transmission system and is expected to involve significant investments over several years.

Yes, the Ohio PUCO approved the Ohio Companies' ESP IV plan on March 31, 2016, with certain modifications. This plan includes an eight-year term and a rate freeze, but also faces potential challenges and regulatory review regarding a Power Purchase Agreement (PPA) with FES, which could materially impact future results.