8-KEarnings & ResultsFinancial Events

FIRSTENERGY CORP 8-K Report, Financial Results (Oct 4, 2013)

Filed October 4, 2013For Securities:FE

Summary

FirstEnergy Corp (FE) has filed an 8-K report on October 4, 2013, primarily to disclose a significant regulatory asset impairment charge of approximately $254 million (pre-tax). This charge stems from a U.S. District Court decision on September 30, 2013, which dismissed a complaint by FirstEnergy's subsidiaries, Metropolitan Edison Company and Pennsylvania Electric Company, seeking federal preemption for the recovery of marginal transmission losses. While this impairment is a notable event, management expects it to be treated as a special item, excluded from normalized non-GAAP earnings per share, and importantly, it will not result in future cash expenditures. The company maintains its belief in the merits of its case and plans to appeal the court's decision.

Key Highlights

  • 1FirstEnergy Corp announced a pre-tax regulatory asset impairment charge of approximately $254 million for the quarter ended September 30, 2013.
  • 2The impairment is a result of a U.S. District Court decision on September 30, 2013, dismissing legal action related to the recovery of marginal transmission losses.
  • 3The charge is expected to be treated as a special item and excluded from normalized non-GAAP basic earnings per share.
  • 4Management states the impairment will not result in any future cash expenditures.
  • 5FirstEnergy intends to appeal the U.S. District Court's decision.
  • 6The company's subsidiaries, Metropolitan Edison Company and Pennsylvania Electric Company, were involved in the litigation concerning transmission cost recovery.

Frequently Asked Questions

The regulatory asset impairment charge of approximately $254 million (pre-tax) is due to a U.S. District Court decision on September 30, 2013, which dismissed a lawsuit filed by FirstEnergy's subsidiaries concerning the recovery of marginal transmission losses through a transmission service charge rider.

No, management has stated that this impairment charge is not expected to result in any future cash expenditures. It is a non-cash accounting charge.

Management expects the impairment charge to be recorded as a special item and therefore excluded from FirstEnergy's normalized non-GAAP basic earnings per share. This means it will not affect the company's core operational earnings metrics.

Yes, FirstEnergy continues to believe in the merits of its case and expects to appeal the U.S. District Court's decision to dismiss the proceedings.