FirstEnergy Reports Third Quarter Earnings

Oct 26, 2010, 09:26 ET from FirstEnergy Corp.

AKRON, Ohio, Oct. 26 /PRNewswire-FirstCall/ -- FirstEnergy Corp. (NYSE: FE) today reported third quarter 2010 basic and diluted earnings of $1.28 per share of common stock on a non-GAAP* basis.  These results exclude the impact of the special items listed below.  This compares to non-GAAP* basic and diluted earnings of $1.11 per share in the third quarter of 2009.

On a GAAP basis, third quarter basic and diluted earnings were $0.59 per share on net income of $175 million and revenue of $3.7 billion.  These results include charges related to operating changes at the company's smaller, coal-fired plants, which reduced earnings by $0.60 per share.  In the third quarter of 2009, basic and diluted earnings were $0.77 per share of common stock on net income of $230 million and revenue of $3.4 billion.

GAAP to Non-GAAP* Reconciliation

Third Quarter

Nine Months

2010

2009

2010

2009

Basic Earnings Per Share (GAAP)

$0.59

$0.77

$1.97

$2.52

 Excluding Special Items:

 Regulatory Charges

0.02

--

0.11

0.56

 Trust Securities Impairment

--

(0.03)

0.04

0.04

 Organizational Restructuring/Strike Costs

--

0.07

--

0.14

 Lake Plant Charges

0.60

--

0.60

--

 Non-Core Asset Sales/Impairments

--

--

0.02

(0.52)

 Merger Transaction Costs

0.04

--

0.09

--

  Litigation Settlement

--

--

(0.01)

--

  Debt Redemption Premiums

--

0.30

--

0.30

  Income Taxes –

   Accounting Standards Change

--

--

--

(0.04)

   Legislative Change (Retiree Drug Subsidy)

--

--

0.04

--

 Derivative Mark-to-Market Adjustment

0.03

--

0.06

--

Basic Earnings Per Share (Non-GAAP*)

$1.28

$1.11

$2.92

$3.00

"Warmer-than-normal weather and the continued success of our competitive generation strategy contributed to strong non-GAAP* earnings in the third quarter of 2010," said Anthony J. Alexander, president and chief executive officer of FirstEnergy.  "And, while the operating changes we've made at our smaller, coal-fired plants had a negative impact on GAAP earnings, these changes are expected to position our generation fleet to better respond to changing economic and market conditions, which will provide long-term operating and cost benefits."

Higher generation sales by FirstEnergy Solutions (FES) led to a $0.19 per share increase in third quarter 2010 earnings.  A 45 percent increase in retail and default service sales for FES was partially offset by lower wholesale sales and higher fuel and purchased power costs.  

Utility distribution deliveries were 12 percent, or 3.2 million megawatt-hours, higher in the third quarter of 2010 compared with 2009, contributing $0.17 per share to the increased earnings.  FirstEnergy's third quarter residential customer usage was at its highest level in nearly a decade and 19 percent above the third quarter of 2009.  Industrial and commercial deliveries were 11 percent higher and 5 percent higher, respectively.  

Lower operation and maintenance expenses further increased earnings by $0.12 per share.  Those gains were offset by lower investment income this year, reducing earnings by $0.25 per share.  Last year FirstEnergy repositioned its nuclear decommissioning trust fund assets to further limit volatility risk.

On a non-GAAP* basis, basic and diluted earnings were $2.92 per share in the first nine months of 2010, compared to basic and diluted earnings of $3.00 per share in the first nine months of 2009.  

For the first nine months of 2010, basic earnings per share of common stock on a GAAP basis were $1.97 ($1.96 diluted) on net income of $580 million and revenue of $10.1 billion.  This compares to basic earnings per share of common stock of $2.52 ($2.51 diluted) on net income of $754 million and revenue of $10.0 billion in the prior-year period.  

FirstEnergy's Consolidated Report to the Financial Community – which provides highlights on company developments and financial results for the third quarter of 2010 – is posted on the company's website – www.firstenergycorp.com/ir.  To access the report, click on Q3 2010 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 at 1:00 p.m. Eastern Daylight Time today.  FirstEnergy management will present an overview of the company's financial results for the quarter, followed by a question-and-answer session.  The teleconference can be accessed on the company's website by selecting the Q3 2010 Earnings Conference Call link.  The webcast will be archived on the website.

FirstEnergy is a diversified energy company headquartered in Akron, Ohio.  Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity, as well as energy management and other energy-related services.  Its seven electric utility operating companies comprise the nation's fifth largest investor-owned electric system, based on 4.5 million customers served within a 36,100-square-mile area of Ohio, Pennsylvania and New Jersey; and its generation subsidiaries control approximately 14,000 megawatts of capacity.

(*)  This news release contains non-GAAP financial measures.  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 not considered as an alternative, to the most directly comparable GAAP financial measure.  Also, the non-GAAP financial measures may not be comparable to similarly titled measures used by other entities.

Forward-Looking Statements: This news release includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. 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," "believe," "estimate" 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. Actual results may differ materially due to the speed and nature of increased competition in the electric utility industry and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Pennsylvania, the impact of the regulatory process on the pending matters in Ohio, Pennsylvania and New Jersey, business and regulatory impacts from American Transmission Systems, Incorporated's realignment into PJM Interconnection, L.L.C., economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices and availability, financial derivative reforms that could increase our liquidity needs and collateral costs, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of FirstEnergy's regulated utilities to collect transition and other charges or to recover increased transmission costs, operating and maintenance costs being higher than anticipated, other legislative and regulatory changes, revised environmental requirements, including possible greenhouse gas emission and coal combustion regulations, the potential impacts of the U.S. Court of Appeals' July 11, 2008 decision requiring revisions to the Clean Air Interstate Rules and the scope of any laws, rules or regulations that may ultimately take their place, the uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated or that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the New Source Review litigation or other similar potential regulatory initiatives or actions, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight) by the Nuclear Regulatory Commission, Metropolitan Edison Company's and Pennsylvania Electric Company's transmission service charge filings with the Pennsylvania Public Utility Commission, the continuing availability of generating units and their ability to operate at or near full capacity, the ability to comply with applicable state and federal reliability standards, the ability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives), the ability to improve electric commodity margins and to experience growth in the distribution business, the changing market conditions that could affect the value of assets held in FirstEnergy's nuclear decommissioning trusts, pension trusts and other trust funds, and cause it to make additional contributions sooner, or in an amount that is larger than currently anticipated, the ability to access the public securities and other capital and credit markets in accordance with FirstEnergy's financing plan and the cost of such capital, changes in general economic conditions affecting the company, the state of the capital and credit markets affecting the company, interest rates and any actions taken by credit rating agencies that could negatively affect FirstEnergy's access to financing or its costs or increase its requirements to post additional collateral to support outstanding commodity positions, letters of credit and other financial guarantees, the continuing decline of the national and regional economy and its impact on the company's major industrial and commercial customers, issues concerning the soundness of financial institutions and counterparties with which FirstEnergy does business, the expected timing and likelihood of completion of the proposed merger with Allegheny Energy, Inc., including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of management's time and attention from our ongoing business during this time period, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect and the risks and other factors discussed from time to time in its Securities and Exchange Commission filings, and other similar factors. The foregoing review of factors 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 FirstEnergy's 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. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.

SOURCE FirstEnergy Corp.



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