8-KOther Events

FIRSTENERGY CORP 8-K Report (Aug 5, 2003)

Filed August 5, 2003For Securities:FE

Summary

FirstEnergy Corp. (FE) and its Ohio utility subsidiaries announced on August 5, 2003, that they will restate their 2002 financial results, with Cleveland Electric Illuminating Company (CEI) and The Toledo Edison Company (TE) also restating their 2001 financial results. This restatement is driven by two accounting modifications: a change in the method of accounting for the recovery of transition costs in Ohio and a revision to the accounting for above-market generation asset leases in place prior to the 1997 merger of Ohio Edison (OE) and Centerior (the former parent of CEI and TE). The company anticipates that these changes will cumulatively increase net income by $381 million through 2017. While net income is expected to be lower in the near term (through 2005), it is projected to be higher in subsequent years. Importantly, these are non-cash adjustments and will not impact FirstEnergy's cash flow. The restatements are subject to potential material changes as the process continues, with PricewaterhouseCoopers LLP assisting in the review.

Key Highlights

  • 1FirstEnergy Corp. (FE) and its Ohio subsidiaries are restating 2002 financial results; CEI and TE are also restating 2001 results.
  • 2Restatements are due to modified accounting for Ohio transition cost recovery and above-market generation asset leases.
  • 3Cumulative net income is expected to increase by $381 million through 2017.
  • 4Near-term net income (through 2005) is expected to be lower, with higher net income anticipated in later years.
  • 5These are non-cash adjustments and will not affect the company's cash flow.
  • 6The changes involve timing differences in expense recognition, not the total recovery or amortization of costs.
  • 7The review was conducted with the assistance of PricewaterhouseCoopers LLP.

Frequently Asked Questions

FirstEnergy and its Ohio utility subsidiaries are restating their financial results primarily due to two accounting modifications. The first concerns the method of accounting for the recovery of transition costs in Ohio, and the second relates to the accounting for above-market generation asset leases that were in place prior to the 1997 merger of Ohio Edison and Centerior.

The company expects these accounting changes to result in a cumulative increase in net income of $381 million through the year 2017. Net income is anticipated to be lower than previously reported through 2005, but higher in the years thereafter.

No, the company explicitly states that these restatements are non-cash adjustments and will have no impact on FirstEnergy's cash flow.

Yes, the company notes that material changes may still occur as a result of the restatement process. The forward-looking statements section also highlights various risks and uncertainties that could affect actual results, including competitive and regulatory changes, economic conditions, market prices, and potential issues with the Davis-Besse Nuclear Power Station.