AKRON, Ohio, April 23, 2018 /PRNewswire/ -- FirstEnergy
Corp. (NYSE: FE) today reported first quarter 2018 GAAP earnings of
$1.2 billion or $2.55 per basic share ($2.54 diluted), on revenues of $3 billion, primarily reflecting a gain on the
deconsolidation of FirstEnergy Solutions Corp. (FES), its
subsidiaries and FirstEnergy Nuclear Operating Company (FENOC) as a
result of their bankruptcy filings on March
31, 2018. In the first quarter of 2017, the company
recorded GAAP earnings of $205
million, or $0.46 per basic
and diluted share of common stock, on revenue of $2.9 billion. GAAP earnings for both
periods include the impact of special items listed below.
Operating (non-GAAP) earnings* were $0.67 per share for the first quarter of 2018,
compared with $0.52 per share in the
first quarter of 2017.
"Eighteen months ago, we announced our plan to move away from
commodity-exposed generation, so our company could fully focus on
the tremendous opportunities in our regulated businesses," said
Charles E. Jones, FirstEnergy
president and chief executive officer. "Today, we are pleased
to report strong earnings that represent FirstEnergy as a fully
regulated company, and to reaffirm our guidance and growth
projections."
The company raised its forecast for 2018 GAAP earnings to a
range of $3.61 to $3.91 per share, and affirmed its full-year
operating (non-GAAP) earnings guidance range of $2.25 to $2.55 per
share. In addition, the company is providing a second quarter
GAAP earnings forecast range of $(0.06) to $0.04
per share, and operating (non-GAAP) earnings guidance range of
$0.47 to $0.57 per share.
In FirstEnergy's Regulated Distribution business, first quarter
2018 earnings increased compared to the same period in 2017 as a
result of higher weather-related usage, rates that went into effect
in Ohio and Pennsylvania and lower expenses. These
factors were partially offset by higher depreciation and general
taxes.
Heating degree days in the company's utility service area were
17 percent higher than the same period of 2017. The colder
weather drove a 5 percent increase in total distribution deliveries
compared to the first quarter of 2017, including an 8.1 percent
increase in residential sales and 3.6 percent increase in
deliveries to commercial customers. Deliveries to industrial
customers increased 2.8 percent, primarily due to higher usage in
the shale gas and steel sectors. This marked the seventh
consecutive quarterly increase in the company's industrial
distribution sales.
In the Regulated Transmission business, first quarter earnings
benefited from the implementation of approved settlement rates at
Jersey Central Power & Light and a higher rate base associated
with the company's continued investments in the Energizing the
Future transmission initiative.
In Corporate/Other, results for the first quarter of 2018
reflect the impact of higher taxes and net financing costs,
partially offset by higher commodity margin at the Pleasants Power
Station related to higher wholesale prices and lower operating
expenses.
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Consolidated GAAP
Earnings Per Share to Operating (Non-GAAP)
EPS* Reconciliation
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|
|
|
|
|
|
|
|
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Three Months Ended
March 31
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2018
Estimates
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|
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2018
|
2017
|
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Second
Quarter
|
Full
Year
|
|
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Basic Earnings Per
Share (GAAP)
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$
2.55
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$
0.46
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($0.06) -
$0.04
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$ 3.61 -
$3.91
|
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Excluding Special
Items*:
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Impact of full dilution
to 538M shares
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–
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(0.08)
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0.32
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0.29
|
|
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Regulatory
charges
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0.01
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0.02
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0.01
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0.04
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Mark-to-market
adjustments
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(0.01)
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–
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–
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(0.01)
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Exit of competitive
generation
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(1.88)
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0.12
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–
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(1.88)
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Debt redemption
costs
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–
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–
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0.20
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0.20
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Total Special Items*
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(1.88)
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0.06
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0.53
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(1.36)
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Operating EPS
(non-GAAP)
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$0.67
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$0.52
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$0.47 -
$0.57
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$2.25 -
$2.55
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Per share amounts for
the special items and earnings drivers above are based on the
after-tax effect of each item divided by number of shares
outstanding assuming full impact of dilution from the $2.5 billion
equity issuance in January 2018 (538M fully diluted shares). The
current and deferred income tax effect was calculated by applying
the subsidiaries' statutory tax rate to the pretax amount. The
income tax rates range from 21% to 29% and 35% to 38% in the first
quarter of 2018 and 2017, respectively.
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Non-GAAP financial measures
*Operating earnings
(loss) excludes "special items" as described below, and is a
non-GAAP financial measure. Special items represent charges
incurred or benefits realized that management believes are not
indicative of, or may obscure trends useful in evaluating the
company's ongoing core activities and results of operations or
otherwise warrant separate classification. Special items also
reflect the adjustment to include the full impact of share dilution
from the $2.5 billion equity issuance
in January 2018. Special items are
not necessarily non-recurring. Management uses Operating earnings
(loss) and Operating earnings (loss) per share to evaluate the
company's performance and manage its operations and frequently
references these non-GAAP financial measures in its decision
making, using them to facilitate historical and ongoing performance
comparisons. Operating earnings (loss) per share, a non-GAAP
financial measure, is calculated by dividing Operating earnings
(loss), which excludes specials items as discussed herein, for the
periods presented by 538 million shares, which reflects the full
impact of share dilution from the equity issuance in January 2018. As of the first quarter 2018,
Regulated operating (non-GAAP) earnings (loss), Regulated operating
earnings (loss) per share, and Regulated operating earnings (loss)
per share by segment, which were non-GAAP financial measures used
in the guidance provided in February
2018, are now referred to as Operating earnings (loss),
Operating earnings (loss) per share, and Operating earnings (loss)
per share by segment, respectively. Management believes that the
non-GAAP financial measures of Operating earnings (loss) and
Operating earnings (loss) per share provide consistent and
comparable measures of performance of its businesses on an ongoing
basis. Management also believes that such measures are useful to
shareholders and other interested parties to understand performance
trends and evaluate the company against its peer group by
presenting period-over-period operating results without the effect
of certain charges or benefits that may not be consistent or
comparable across periods or across the company's peer group.
Generally, a non-GAAP financial measure is a numerical measure of a
company's historical or future financial performance, financial
position, or cash flows that either excludes or includes amounts
that are not normally excluded or included in the most directly
comparable measure calculated and presented in accordance with
accounting principles generally accepted in the United States (GAAP). These non-GAAP
financial measures are intended to complement, and are not
considered as alternatives to, the most directly comparable GAAP
financial measures. Also, the non-GAAP financial measures may not
be comparable to similarly titled measures used by other
entities.
Deconsolidation
As a result of the bankruptcy
filings, FirstEnergy Solutions (FES), its subsidiaries and
FirstEnergy Nuclear Operating Company (FENOC) were deconsolidated
from FirstEnergy's consolidated financial statements as of
March 31, 2018. Additionally, the
operating results of FES and FENOC, as well as Bay Shore Power
Company and a portion of AE Supply, LLC that were subject to
completed or pending asset sales, collectively representing
substantially all of FirstEnergy's operations that comprised the
Competitive Energy Services (CES) reportable operating segment,
will be presented as discontinued operations in Corporate/Other.
The remaining business activities that previously comprised the CES
reportable operating segment were not material, and as such, have
been combined into Corporate/Other for reporting purposes. The
external segment reporting is consistent with the internal
financial reports used by FirstEnergy's Chief Executive Officer
(its chief operating decision maker) to regularly assess
performance of the business and allocate resources. Disclosures for
FirstEnergy's reportable operating segments for 2017, including the
presentation of non-GAAP financial measures, have been revised to
conform to the current presentation.
Consolidated Report and Teleconference
FirstEnergy's
Consolidated Report to the Financial Community, which
provides highlights on company developments and financial results
for the first quarter, is posted on the company's Investor
Information website – www.firstenergycorp.com/ir. To access
the report, click on First Quarter 2018 Consolidated Report to
the Financial Community.
The company invites investors, customers and other interested
parties to listen to a live Internet webcast of its teleconference
for financial analysts and view slides associated with the
presentation at 10:00 a.m. EDT
today. FirstEnergy management will present an overview of the
company's financial results, followed by a question-and-answer
session. The teleconference and presentation can be accessed
on the website by selecting the First Quarter 2018 Earnings
Conference Call link. The webcast and presentation will be
archived on the website.
FirstEnergy is dedicated to safety, reliability and operational
excellence. Its 10 electric distribution companies form one
of the nation's largest investor-owned electric systems, serving
customers in Ohio, Pennsylvania, New
Jersey, West Virginia,
Maryland and New York. The
company's transmission subsidiaries operate more than 24,000 miles
of transmission lines that connect the Midwest and Mid-Atlantic
regions. Follow FirstEnergy on Twitter @FirstEnergyCorp or online
at www.firstenergycorp.com.
Forward-Looking Statements: This news release includes
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 based on information
currently available to management. Such statements are subject to
certain risks and uncertainties and readers are cautioned not to
place undue reliance on these forward-looking statements. These
statements include declarations regarding management's intents,
beliefs and current expectations. These statements typically
contain, but are not limited to, the terms "anticipate,"
"potential," "expect," "forecast," "target," "will," "intend,"
"believe," "project," "estimate," "plan" and similar words.
Forward-looking statements involve estimates, assumptions, known
and unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements, which may
include the following: the ability to successfully execute an
exit of commodity-based generation that minimizes cash outflows and
associated liabilities, including, without limitation, the losses,
guarantees, claims and other obligations of FirstEnergy Corp.,
together with its consolidated subsidiaries (FirstEnergy) as such
relate to the entities previously consolidated into FirstEnergy,
including FirstEnergy Solutions Corp.(FES), its subsidiaries and
FirstEnergy Nuclear Operating Company (FENOC), which have recently
filed for bankruptcy protection; the potential for litigation and
demands for payment against FirstEnergy by FES and FENOC or certain
of their creditors; the risks associated with the bankruptcy cases
of FES, its subsidiaries and FENOC, including, but not limited to,
third-party motions in the cases that could adversely affect
FirstEnergy, its liquidity or results of operations; the ability to
experience growth in the Regulated Distribution and Regulated
Transmission segments and the effectiveness of our strategy to
operate as a fully regulated business; the accomplishment of our
regulatory and operational goals in connection with our
transmission and distribution investment plans, including, but not
limited to, our planned transition to forward-looking formula
rates; changes in assumptions regarding economic conditions within
our territories, assessment of the reliability of our transmission
and distribution system, or the availability of capital or other
resources supporting identified transmission and distribution
investment opportunities; the ability to accomplish or realize
anticipated benefits from strategic and financial goals, including,
but not limited to, the ability to grow earnings in our regulated
businesses, continue to reduce costs and to successfully execute
our financial plans designed to improve our credit metrics and
strengthen our balance sheet; the risks and uncertainties
associated with litigation, arbitration, mediation and like
proceedings; the uncertainties associated with the deactivation of
our remaining commodity-based generating units, including the
impact on vendor commitments, and as it relates to the reliability
of the transmission grid, the timing thereof; costs being higher
than anticipated and the success of our policies to control costs;
the uncertainty of the timing and amounts of the capital
expenditures that may arise in connection with any litigation,
including New Source Review litigation, or potential regulatory
initiatives or rulemakings; changes in customers' demand for power,
including, but not limited to, changes resulting from the
implementation of state and federal energy efficiency and peak
demand reduction mandates; economic and weather conditions
affecting future sales, margins and operations, such as significant
weather events, and all associated regulatory events or actions;
changes in national and regional economic conditions affecting
FirstEnergy and/or our major industrial and commercial customers,
and other counterparties with which we do business; the impact of
labor disruptions by our unionized workforce; the risks associated
with cyber-attacks and other disruptions to our information
technology system that may compromise our generation, transmission
and/or distribution services and data security breaches of
sensitive data, intellectual property and proprietary or personally
identifiable information regarding our business, employees,
shareholders, customers, suppliers, business partners and other
individuals in our data centers and on our networks; the impact of
the regulatory process and resulting outcomes on the matters at the
federal level and in the various states in which we do business,
including, but not limited to, matters related to rates; the impact
of the federal regulatory process on Federal Energy Regulatory
Commission (FERC) regulated entities and transactions, in
particular FERC regulation of PJM Interconnection, L.L.C.
(PJM) wholesale energy and capacity markets and
cost-of-service rates, as well as FERC's compliance and enforcement
activity, including compliance and enforcement activity related to
North American Electric Reliability Corporation's mandatory
reliability standards; the uncertainties of various cost recovery
and cost allocation issues resulting from American Transmission
Systems, Incorporated's realignment into PJM; the ability to comply
with applicable state and federal reliability standards and energy
efficiency and peak demand reduction mandates; other legislative
and regulatory changes, including the federal administration's
required review and potential revision of environmental
requirements, including, but not limited to, the effects of the
United States Environmental Protection Agency's Clean Power Plan,
Coal Combustion Residuals, Cross-State Air Pollution Rule and
Mercury and Air Toxics Standards programs, including our estimated
costs of compliance, Clean Water Act (CWA) waste water effluent
limitations for power plants, and CWA 316(b) water intake
regulation; changing market conditions that could affect the
measurement of certain liabilities and the value of assets held in
our pension trusts and other trust funds, and cause us and/or our
subsidiaries to make additional contributions sooner, or in amounts
that are larger, than currently anticipated; the impact of changes
to significant accounting policies; the impact of any changes in
tax laws or regulations, including the Tax Cuts and Jobs Act,
adopted December 22, 2017, or adverse
tax audit results or rulings; the ability to access the public
securities and other capital and credit markets in accordance with
our financial plans, the cost of such capital and overall condition
of the capital and credit markets affecting us and our
subsidiaries; further actions that may be taken by credit rating
agencies that could negatively affect us and/or our subsidiaries'
access to financing, increase the costs thereof, letters of credit
and other financial guarantees, and the impact of these events on
the financial condition and liquidity of FirstEnergy Corp. and/or
its subsidiaries; issues concerning the stability of domestic and
foreign financial institutions and counterparties with which we do
business; and the risks and other factors discussed from time to
time in our United States Securities and Exchange Commission (SEC)
filings, and other similar factors. Dividends declared from time to
time on FirstEnergy Corp.'s common stock, and thereby on
FirstEnergy Corp.'s preferred stock, during any period may in the
aggregate vary from prior periods due to circumstances considered
by FirstEnergy Corp.'s Board of Directors at the time of the actual
declarations. A security rating is not a recommendation to buy or
hold securities and is subject to revision or withdrawal at any
time by the assigning rating agency. Each rating should be
evaluated independently of any other rating. These forward-looking
statements are also qualified by, and should be read together with,
the risk factors included in our filings with the SEC. The
foregoing review of factors also should not be construed as
exhaustive. New factors emerge from time to time, and it is not
possible for management to predict all such factors, nor assess the
impact of any such factor on our business or the extent to which
any factor, or combination of factors, may cause results to differ
materially from those contained in any forward-looking statements.
We expressly disclaim any obligation to update or revise, except as
required by law, any forward-looking statements contained herein as
a result of new information, future events or otherwise.
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SOURCE FirstEnergy Corp.