10-QPeriod: Q1 FY2019

FIRSTENERGY CORP Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 23, 2019For Securities:FE

Summary

FirstEnergy Corp. (FE) reported revenues of $2.88 billion for the first quarter of 2019, a slight increase of 1% compared to the prior year, driven by growth in its regulated transmission segment. Net income attributable to common stockholders significantly decreased to $315 million ($0.59 per diluted share) from $1.21 billion ($2.54 per diluted share) in the first quarter of 2018. This decline is largely due to the absence of a significant gain from the deconsolidation of FES and FENOC that occurred in the prior year's quarter, which had boosted reported net income. Excluding discontinued operations, income from continuing operations saw a substantial increase of 96% to $355 million, indicating operational improvements within the core regulated businesses. The company continues its strategic shift towards becoming a fully regulated utility, with significant investments planned for its Regulated Distribution and Regulated Transmission segments. These investments are aimed at improving reliability, modernizing infrastructure, and enhancing customer service. FirstEnergy's balance sheet was strengthened by a substantial equity issuance in early 2018, which has helped support its transition and financial stability. The company is actively managing its debt and capital structure, with available liquidity remaining strong.

Financial Highlights

46 data points
Beta

Revenue

$2.88B

Net Income

$320.00M

11.1% Net Margin

EPS (Diluted)

$0.59

Total Assets

$40.49B

Cash & Equivalents

$174.00M

Free Cash Flow

-$182.00M

Financial Statements
Beta
Revenue$2.88B
Operating Expenses$2.25B
Operating Income$629.00M
Interest Expense$253.00M
Net Income$320.00M
EPS (Basic)$0.59
EPS (Diluted)$0.59
Shares Outstanding (Basic)530.00M
Shares Outstanding (Diluted)533.00M

Key Highlights

  • 1Total revenues increased slightly by 1% to $2.88 billion, driven by the regulated transmission segment.
  • 2Net income attributable to common stockholders significantly decreased to $315 million ($0.59/share) from $1.21 billion ($2.54/share) due to the absence of a large gain from discontinued operations in the prior year.
  • 3Income from continuing operations surged by 96% to $355 million, highlighting improved performance in core regulated businesses.
  • 4FirstEnergy continues its strategic focus on transitioning to a fully regulated utility, with significant planned capital investments in Regulated Distribution and Transmission.
  • 5The company's balance sheet remains strong, supported by a substantial equity issuance in early 2018, and it maintains robust liquidity.
  • 6Operational expenses decreased by 1% to $2.25 billion, primarily due to lower storm restoration costs and fuel expenses.

Frequently Asked Questions

The substantial decrease in net income is primarily attributable to the absence of a large gain from discontinued operations (specifically, the deconsolidation of FES and FENOC) that was recognized in the first quarter of 2018. This prior year gain significantly inflated the reported net income, making the year-over-year comparison appear unfavorable for net income, despite improvements in ongoing operations.

FirstEnergy is actively pursuing its strategy to become a fully regulated utility. This involves significant planned capital investments in its Regulated Distribution and Regulated Transmission segments, aimed at enhancing reliability, modernizing infrastructure, and improving customer service. The company's focus is on stable, predictable earnings from these regulated operations, which are expected to support its financial strategy and dividend.

FirstEnergy plans substantial capital investments in both its Regulated Distribution ($6.2-$6.7 billion from 2018-2021) and Regulated Transmission ($4.8 billion from 2018-2021 through the 'Energizing the Future' initiative) segments. These investments are expected to drive rate base growth and improve operational efficiency. The company sees further opportunities for investment in transmission infrastructure beyond 2021 and is exploring growth in grid modernization and customer engagement within its distribution segment.

FirstEnergy's balance sheet was significantly strengthened by a $2.5 billion equity issuance in early 2018. This issuance helped reduce debt, supported the transition to a regulated utility model, and improved credit metrics. The company continues to focus on maintaining investment-grade ratings at its regulated businesses and has ample liquidity to meet its obligations.