EX-99.2 3 ex99-2.htm EXHIBIT 99.2 - CONSOLIDATED REPORT TO THE FINANCIAL COMMUNITY Exhibit 99.2 - Consolidated Report to the Financial Community
Exhibit 99.2
Consolidated Report to the Financial Community
Third Quarter 2005
(Released October 25, 2005)
 

         
 
    Highlights
 
 After-Tax EPS Variance Analysis
3rd Qtr.
  
 
   n  Normalized non-GAAP* earnings, excluding
  
 
 3Q 2004 Basic EPS - GAAP Basis
 
$    0.91
  
 
       unusual items, were $1.04 per share for the
  
 
    Unusual Items - 2004
 
      0.06
 
 
       third quarter of 2005, compared with $0.97
  
 
 3Q 2004 Normalized Earnings - non-GAAP Basis
 
$    0.97
  
 
       per share for the third quarter of 2004.  GAAP
  
 
    Electric Gross Margin:
 
    
  
         
       earnings were $1.01 per share, compared         - JCP&L Rate Increase
      0.03
  
         
       with $0.91 per share in the third quarter of         - Other Electric Gross Margin
      0.06 
  
 
       2004.
  
 
    Net MISO/PJM Transmission Expenses
 
     (0.05)
  
 
      
 
 
    Energy Delivery Expenses
 
     (0.03)
  
 
       
  
 
    Pension and Other Employee Benefits
 
      0.05
  
 
      
 
 
    Depreciation and Amortization
 
     (0.06)
  
   
 
    Investment, Financing and Other Activities
 
      0.07
  
   
 3Q 2005 Normalized Earnings - non-GAAP Basis
 
$    1.04
  
   
 
    Unusual Items - 2005
 
     (0.03)
  
   
 
 3Q 2005 Basic EPS - GAAP Basis
 
$    1.01
  
         
 
 
 
 
3Q 2005 Results vs. 3Q 2004
 

 
n
 
Electric distribution deliveries increased 10% primarily due to unusually warm weather. Residential sales increased 15%, while commercial and industrial deliveries increased 8% and 5%, respectively. Cooling-degree-days were 40% higher than in the same period last year and 32% above normal. Total electric generation sales rose 5% with sales to retail customers increasing 10%.
 
n
 
Electric gross margin increased $48 million, or $0.09 per share, after adjusting for changes in regulatory deferrals. The improvement resulted from increased distribution deliveries, the JCP&L rate increase, and increased generation output. Partially offsetting this improvement was a 9% reduction in higher-margin wholesale sales with most of our generation serving the retail load. Increased fuel expense and purchased power prices also negatively affected electric gross margin.
 
n
 
Net MISO/PJM transmission costs increased $27 million primarily due to higher congestion expenses.
 
n
 
Energy delivery expenses increased $15 million due to increased spending on system reliability initiatives.
 
n
 
Pension and other employee benefit costs decreased approximately $25 million due to the voluntary $500 million contribution to the pension plan in September 2004, favorable market returns in 2004, and changes in health care benefits.
 
n
 
Total depreciation and amortization expenses, after adjusting for changes in regulatory deferrals and deferral of incremental transmission and ancillary service-related MISO charges, increased $33 million. This resulted from higher Ohio transition cost amortization and increased depreciation expense.
 
n
 
Investment, financing, and other activities increased net income by $21 million. Financing activities during the quarter included $406 million in debt and preferred securities redemptions and $103 million of refinancing and repricing transactions.
 
 
 
 
 
2005 Earnings and Cash Generation Guidance*
 
 
n
 
Earnings guidance for 2005, excluding unusual charges, remains at $2.85 to $3.00 per share. Year-to-date normalized non-GAAP earnings now stand at $2.22 per share.
 
n
 
Total cash generation (non-GAAP) guidance for 2005 remains at $620 million and free cash flow guidance for 2005 remains at $535 million. Our estimated 2005 free cash flow reflects capital expenditures of $1.0 billion.
 
 
2006 Earnings and Cash Generation Guidance*
 
 
n
 
Earnings guidance for 2006, excluding unusual charges, remains at $3.40 to $3.60 per share.
 
n
 
Total cash generation (non-GAAP) guidance for 2006 remains at a range of $300 million to $400 million, with a free cash flow (non-GAAP) guidance range of $280 million to $380 million. Our estimated 2006 free cash flow reflects a capital expenditure range of $1.0 billion to $1.1 billion.
 
 
 
 
 *
 The GAAP to non-GAAP reconciliation statements are attached and available on the Investor Information section of FirstEnergy Corp.'s website at 
 www.firstenergycorp.com/ir.
 

 

 
 

 







 
 
 

 




For additional information, please contact:
 
  
Kurt E. Turosky
Terrance G. Howson
Rey Y. Jimenez
Director, Investor Relations
Vice President, Investor Relations
Principal, Investor Relations
(330) 384-5500
(973) 401-8519
(330) 761-4239
 
2
 

FirstEnergy Corp.
Consolidated Statements of Income
(In thousands, except for per share amounts)

         
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
         
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
   
        Revenues
                            
    (1)
Electric sales 
        
$
3,116,275
  
$
3,029,596
  
$
86,679
  
$
8,031,877
  
$
8,330,373
  
$
(298,496
)
  (2)
FE Facilities 
          
59,483
   
61,235
   
(1,752
)
  
161,582
   
155,955
   
5,627
 
  (3)
MYR 
          
132,329
   
79,821
   
52,508
   
353,964
   
245,720
   
108,244
 
  (4)
Other 
          
278,700
   
214,816
   
63,884
   
729,716
   
628,485
   
101,231
 
    (5)
Total Revenues
          
3,586,787
   
3,385,468
   
201,319
   
9,277,139
   
9,360,533
   
(83,394
)
                                               
 
Expenses
                                            
  (6)
Fuel 
          
335,876
   
214,408
   
121,468
   
848,993
   
604,329
   
244,664
 
  (7)
Purchased power 
          
951,349
   
1,070,947
   
(119,598
)
  
2,266,160
   
2,910,487
   
(644,327
)
  (8)
Other operating expenses 
          
804,984
   
725,707
   
79,277
   
2,247,432
   
2,094,540
   
152,892
 
  (9)
FE Facilities 
          
59,102
   
60,531
   
(1,429
)
  
163,006
   
156,037
   
6,969
 
 (10)
MYR 
          
128,350
   
82,202
   
46,148
   
347,940
   
249,605
   
98,335
 
 (11)
Provision for depreciation 
          
152,786
   
147,052
   
5,734
   
444,443
   
439,017
   
5,426
 
 (12)
Amortization of regulatory assets 
          
364,337
   
324,300
   
40,037
   
981,750
   
905,488
   
76,262
 
  (13)
Deferral of new regulatory assets 
          
(123,827
)
  
(78,767
)
  
(45,060
)
  
(303,496
)
  
(191,487
)
  
(112,009
)
  (14)
General taxes 
          
187,562
   
177,452
   
10,110
   
540,606
   
514,174
   
26,432
 
 (15)
Total Expenses
          
2,860,519
   
2,723,832
   
136,687
   
7,536,834
   
7,682,190
   
(145,356
)
                                               
 
Income Before Interest and
                                           
 (16)
Income Taxes
          
726,268
   
661,636
   
64,632
   
1,740,305
   
1,678,343
   
61,962
 
 
Net interest charges: 
                                            
  (17)
 Interest expense
          
162,104
   
152,348
   
9,756
   
488,462
   
504,396
   
(15,934
)
 (18)
 Capitalized interest
          
(7,005
)
  
(6,536
)
  
(469
)
  
(11,957
)
  
(18,286
)
  
6,329
 
 (19)
 Subsidiaries' preferred stock dividends
          
2,626
   
5,354
   
(2,728
)
  
12,912
   
16,024
   
(3,112
)
 (20)
Net interest charges 
          
157,725
   
151,166
   
6,559
   
489,417
   
502,134
   
(12,717
)
 (21)
Income taxes 
          
236,711
   
214,345
   
22,366
   
599,261
   
505,875
   
93,386
 
 (22)
Income before discontinued operations 
          
331,832
   
296,125
   
35,707
   
651,627
   
670,334
   
(18,707
)
 (23)
Discontinued operations 
          
528
   
2,497
   
(1,969
)
  
18,451
   
6,332
   
12,119
 
 (24)
Net Income
        
$
332,360
  
$
298,622
  
$
33,738
  
$
670,078
  
$
676,666
  
$
(6,588
)
                                               
 
Basic Earnings Per Common Share:
                                            
 (25)
Before discontinued operations 
        
$
1.01
  
$
0.90
  
$
0.11
  
$
1.99
  
$
2.05
  
$
(0.06
)
 (26)
Discontinued operations 
          
-
   
0.01
   
(0.01
)
  
0.05
   
0.02
   
0.03
 
  (27)
Basic Earnings Per Common Share
        
$
1.01
  
$
0.91
  
$
0.10
  
$
2.04
  
$
2.07
  
$
(0.03
)
 
Weighted Average Number of
                                           
 (28)
Basic Shares Outstanding
          
328,119
   
327,499
   
620
   
328,030
   
327,280
   
750
 
                                               
 
Diluted Earnings Per Common Share:
                                            
 (29)
Before discontinued operations 
        
$
1.01
  
$
0.90
  
$
0.11
  
$
1.98
  
$
2.04
  
$
(0.06
)
 (30)
Discontinued operations 
          
-
   
0.01
   
(0.01
)
  
0.05
   
0.02
   
0.03
 
 (31)
Diluted Earnings Per Common Share
        
$
1.01
  
$
0.91
  
$
0.10
  
$
2.03
  
$
2.06
  
$
(0.03
)
 
Weighted Average Number of
                                           
 (32)
Diluted Shares Outstanding
          
330,193
   
329,099
   
1,094
   
329,926
   
328,850
   
1,076
 
 
 
3
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)


         
Three Months Ended September 30, 2005
  
             
Power
                 
             
Supply
                 
         
Regulated
  
Management
  
Facilities
     
Reconciling
     
         
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
   
             Revenues
                            
  (1)
Electric sales 
        
$
1,432,015
  
$
1,684,260
  
$
-
  
$
-
  
$
-
  
$
3,116,275
  
  (2)
FE Facilities 
          
-
   
-
   
59,483
   
-
   
-
   
59,483
 
  (3)
MYR 
          
-
   
-
   
-
   
132,329
   
-
   
132,329
 
  (4)
Other 
          
243,722
   
27,851
   
-
   
5,420
   
1,707
   
278,700
 
  (5)
Internal Revenues 
          
79,168
   
-
   
-
   
-
   
(79,168
)
  
-
 
  (6)
Total Revenues
          
1,754,905
   
1,712,111
   
59,483
   
137,749
   
(77,461
)
  
3,586,787
 
                                               
 
Expenses
                                            
  (7)
Fuel 
          
-
   
335,876
   
-
   
-
   
-
   
335,876
 
  (8)
Purchased power 
          
-
   
951,349
   
-
   
-
   
-
   
951,349
 
  (9)
Other operating expenses 
          
510,358
   
364,212
   
-
   
(1,767
)
  
(67,819
)
  
804,984
 
 (10)
FE Facilities 
          
-
   
-
   
59,102
   
-
   
-
   
59,102
 
 (11)
MYR 
          
-
   
-
   
-
   
128,350
   
-
   
128,350
 
  (12)
Provision for depreciation 
          
137,228
   
8,857
   
8
   
549
   
6,144
   
152,786
 
 (13)
Amortization of regulatory assets 
          
364,337
   
-
   
-
   
-
   
-
   
364,337
 
  (14)
Deferral of new regulatory assets 
          
(123,827
)
  
-
   
-
   
-
   
-
   
(123,827
)
 (15)
General taxes 
          
158,543
   
23,892
   
1
   
763
   
4,363
   
187,562
 
 (16)
Total Expenses
          
1,046,639
   
1,684,186
   
59,111
   
127,895
   
(57,312
)
  
2,860,519
 
                                               
  (17)
Income Before Interest and Income Taxes
          
708,266
   
27,925
   
372
   
9,854
   
(20,149
)
  
726,268
 
 
Net interest charges: 
                                            
 (18)
 Interest expense
          
91,728
   
11,882
   
335
   
1,438
   
56,721
   
162,104
 
  (19)
 Capitalized interest
          
(6,108
)
  
(785
)
  
-
   
(1
)
  
(111
)
  
(7,005
)
  (20)
 Subsidiaries' preferred stock dividends
          
2,626
   
-
   
-
   
-
   
-
   
2,626
 
 (21)
Net interest charges 
          
88,246
   
11,097
   
335
   
1,437
   
56,610
   
157,725
 
 (22)
Income taxes 
          
254,208
   
6,900
   
33
   
3,267
   
(27,697
)
  
236,711
 
 (23)
Income before discontinued operations 
          
365,812
   
9,928
   
4
   
5,150
   
(49,062
)
  
331,832
 
 (24)
Discontinued operations 
          
-
   
-
   
-
   
528
   
-
   
528
 
 (25)
Net Income
        
$
365,812
  
$
9,928
  
$
4
  
$
5,678
  
$
(49,062
)
$
332,360
  
                                               
 
(a) Other consists of MYR (a construction service company) and telecommunications services.                     
    
 
(b) Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest
      expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues which are reflected as reductions to
      expenses for internal management reporting purposes and elimination of intersegment transactions.                                    
    
 
                  
    
 
 
4
 
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)



                                 
         
Three Months Ended September 30, 2004
  
             
Power
                 
             
Supply
                 
         
Regulated
  
Management
  
Facilities
     
Reconciling
     
         
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
         Revenues  
 
                          
  (1)
Electric sales 
        
$
1,308,731
  
$
1,720,865
  
$
-
  
$
-
  
$
-
  
$
3,029,596
  
  (2)
FE Facilities 
          
-
   
-
   
61,235
   
-
   
-
   
61,235
 
  (3)
MYR 
          
-
   
-
   
-
   
79,821
   
-
   
79,821
 
  (4)
Other 
          
172,642
   
34,778
   
-
   
9,964
   
(2,568
)
  
214,816
 
  (5)
Internal Revenues 
          
79,596
   
-
   
-
   
-
   
(79,596
)
  
-
 
  (6)
Total Revenues
          
1,560,969
   
1,755,643
   
61,235
   
89,785
   
(82,164
)
  
3,385,468
 
                                               
 
Expenses
                                            
  (7)
Fuel 
          
-
   
214,408
   
-
   
-
   
-
   
214,408
 
  (8)
Purchased power 
          
-
   
1,070,947
   
-
   
-
   
-
   
1,070,947
 
    (9)
Other operating expenses 
          
413,219
   
356,003
   
-
   
9,403
   
(52,918
)
  
725,707
 
 (10)
FE Facilities 
          
-
   
-
   
60,531
   
-
   
-
   
60,531
 
 (11)
MYR 
          
-
   
-
   
-
   
82,202
   
-
   
82,202
 
 (12)
Provision for depreciation 
          
129,226
   
8,837
   
536
   
98
   
8,355
   
147,052
 
 (13)
Amortization of regulatory assets 
          
324,300
   
-
   
-
   
-
   
-
   
324,300
 
 (14)
Deferral of new regulatory assets 
          
(78,767
)
  
-
   
-
   
-
   
-
   
(78,767
)
  (15)
General taxes 
          
150,075
   
22,624
   
-
   
705
   
4,048
   
177,452
 
 (16)
Total Expenses
          
938,053
   
1,672,819
   
61,067
   
92,408
   
(40,515
)
  
2,723,832
 
                                               
 (17)
Income Before Interest and Income Taxes
          
622,916
   
82,824
   
168
   
(2,623
)
  
(41,649
)
  
661,636
 
 
Net interest charges: 
                                            
 (18)
 Interest expense
          
81,312
   
10,240
   
164
   
436
   
60,196
   
152,348
 
  (19)
 Capitalized interest
          
(4,591
)
  
(1,377
)
  
-
   
(3
)
  
(565
)
  
(6,536
)
 (20)
 Subsidiaries' preferred stock dividends
          
5,354
   
-
   
-
   
-
   
-
   
5,354
 
 (21)
Net interest charges 
          
82,075
   
8,863
   
164
   
433
   
59,631
   
151,166
 
 (22)
Income taxes 
          
225,743
   
30,324
   
(4
)
  
(1,022
)
  
(40,696
)
  
214,345
 
 (23)
Income before discontinued operations 
          
315,098
   
43,637
   
8
   
(2,034
)
  
(60,584
)
  
296,125
 
 (24)
Discontinued operations 
          
-
   
-
   
1,083
   
1,414
   
-
   
2,497
 
 (25)
Net Income
        
$
315,098
  
$
43,637
  
$
1,091
  
$
(620
)
$
(60,584
)
$
298,622
  
                                               
                                               
 
(a) Other consists of MYR (a construction service company) and telecommunications services.                     
    
 
(b) Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest
     expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues which are reflected as reductions to expenses  
     for internal management reporting purposes and elimination of intersegment transactions.                              
    
 
 
    
 
 
    
 
 
5
 
 

FirstEnergy Corp.
Consolidated Income Segments
(In thousands)
 

                                 
         
Three Months Ended September 30, 2005 vs. Three Months Ended September 30, 2004
  
             
Power
                 
             
Supply
                 
         
Regulated
  
Management
  
Facilities
     
Reconciling
     
         
Services
  
Services
  
Services
  
Other (a)
  
Adjustments (b)
  
Consolidated
  
            Revenues  
 
                          
    (1)
Electric sales 
        
$
123,284
  
$
(36,605
)
$
-
  
$
-
  
$
-
  
$
86,679
  
  (2)
FE Facilities 
          
-
   
-
   
(1,752
)
  
-
   
-
   
(1,752
)
  (3)
MYR 
          
-
   
-
   
-
   
52,508
   
-
   
52,508
 
  (4)
Other 
          
71,080
   
(6,927
)
  
-
   
(4,544
)
  
4,275
   
63,884
 
  (5)
Internal Revenues 
          
(428
)
  
-
   
-
   
-
   
428
   
-
 
    (6)
Total Revenues
          
193,936
   
(43,532
)
  
(1,752
)
  
47,964
   
4,703
   
201,319
 
                                               
 
Expenses
                                            
  (7)
Fuel 
          
-
   
121,468
   
-
   
-
   
-
   
121,468
 
  (8)
Purchased power 
          
-
   
(119,598
)
  
-
   
-
   
-
   
(119,598
)
  (9)
Other operating expenses 
          
97,139
   
8,209
   
-
   
(11,170
)
  
(14,901
)
  
79,277
 
 (10)
FE Facilities 
          
-
   
-
   
(1,429
)
  
-
   
-
   
(1,429
)
 (11)
MYR 
          
-
   
-
   
-
   
46,148
   
-
   
46,148
 
 (12)
Provision for depreciation 
          
8,002
   
20
   
(528
)
  
451
   
(2,211
)
  
5,734
 
 (13)
Amortization of regulatory assets 
          
40,037
   
-
   
-
   
-
   
-
   
40,037
 
 (14)
Deferral of new regulatory assets 
          
(45,060
)
  
-
   
-
   
-
   
-
   
(45,060
)
 (15)
General taxes 
          
8,468
   
1,268
   
1
   
58
   
315
   
10,110
 
 (16)
Total Expenses
          
108,586
   
11,367
   
(1,956
)
  
35,487
   
(16,797
)
  
136,687
 
                                               
 (17)
Income Before Interest and Income Taxes
          
85,350
   
(54,899
)
  
204
   
12,477
   
21,500
   
64,632
 
 
Net interest charges: 
                                            
 (18)
 Interest expense
          
10,416
   
1,642
   
171
   
1,002
   
(3,475
)
  
9,756
 
 (19)
 Capitalized interest
          
(1,517
)
  
592
   
-
   
2
   
454
   
(469
)
 (20)
 Subsidiaries' preferred stock dividends
          
(2,728
)
  
-
   
-
   
-
   
-
   
(2,728
)
 (21)
Net interest charges 
          
6,171
   
2,234
   
171
   
1,004
   
(3,021
)
  
6,559
 
 (22)
Income taxes 
          
28,465
   
(23,424
)
  
37
   
4,289
   
12,999
   
22,366
 
 (23)
Income before discontinued operations 
          
50,714
   
(33,709
)
  
(4
)
  
7,184
   
11,522
   
35,707
 
 (24)
Discontinued operations 
          
-
   
-
   
(1,083
)
  
(886
)
  
-
   
(1,969
)
 (25)
Net Income
        
$
50,714
  
$
(33,709
)
$
(1,087
)
$
6,298
  
$
11,522
  
$
33,738
  
                                               
                                               
 
(a) Other consists of MYR (a construction service company) and telecommunications services. 
    
 
(b) Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consists of interest  
    
 
     expense related to holding company debt, corporate support services revenues and expenses, fuel marketing revenues which are reflected as reductions to expenses for internal management 
     reporting purposes and elimination of intersegment transactions.
    
     
 
 
6
 

FirstEnergy Corp.
Financial Statements
(In thousands)
 

                
 Condensed Consolidated Balance Sheet   
        
As of
  
As of
  
        
September 30, 2005
  
December 31, 2004
  
   Assets              
   Current Assets:              
    Cash and cash equivalents
        
$
139,812
  
$
52,941
  
    Receivables
          
1,535,225
   
1,356,437
 
    Other
          
731,698
   
602,969
 
Total Current Assets 
          
2,406,735
   
2,012,347
 
                     
Property, Plant, and Equipment 
          
13,773,219
   
13,478,356
 
Investments 
          
3,390,610
   
3,273,966
 
Deferred charges 
          
11,803,378
   
12,303,275
 
Total Assets 
        
$
31,373,942
  
$
31,067,944
  
                     
Liabilities and Capitalization 
                    
Current Liabilities: 
                    
    Currently payable long-term debt
        
$
983,412
  
$
940,944
  
    Short-term borrowings
          
246,505
   
170,489
 
    Accounts payable
          
651,941
   
610,589
 
    Other
          
1,962,988
   
1,586,413
 
Total Current Liabilities 
          
3,844,846
   
3,308,435
 
                     
Capitalization: 
                    
    Common stockholders' equity
          
8,827,959
   
8,589,294
 
    Preferred stock
          
183,719
   
335,123
 
    Long-term debt and other long-term obligations
          
9,418,734
   
10,013,349
 
Total Capitalization 
          
18,430,412
   
18,937,766
 
Noncurrent Liabilities 
          
9,098,684
   
8,821,743
 
Total Liabilities and Capitalization 
        
$
31,373,942
  
$
31,067,944
  
                     
 

                        
 Adjusted Capitalization (Including Off-Balance Sheet Items) 
        
As of September 30,
        
2005
  
% Total
  
2004
  
% Total
  
Total common equity 
        
$
8,827,959
    
42%
 
$
8,624,410
    
40%
 
Preferred stock  
          
183,719
   
1%
 
  
335,123
   
2%
 
Long-term debt * 
          
10,402,146
   
50%
 
  
10,785,453
   
50%
 
Short-term debt 
          
246,505
   
1%
 
  
302,508
   
1%
 
Off-balance sheet debt equivalents: 
                                
    Sale-leaseback net debt equivalents
          
1,321,305
   
6%
 
  
1,380,879
   
6%
 
    Accounts receivable factoring **
          
-
   
0%
 
  
199,000
   
1%
 
Total  
        
$
20,981,634
    
100%
 
$
21,627,373
    
100%
 
                                 
                                 
 

 
GENERAL INFORMATION
  
 
  
Three Months Ended Sep. 30,
 
Nine Months Ended Sep. 30,
 
       
2005
  
2004
  
2005
  
2004
  
Long-term debt and preferred stock redemptions
        
$
(192,939
 )
$
(758,972
 )
$
(1,021,337
 ) 
$
(1,748,915
 ) 
New long-term debt issues
        
$
88,950
  
$
-
  
$
334,300
  
$
700,000
  
Short-term debt increase (decrease) **
        
$
(308,319
)
$
228,072
  
$
77,295
  
$
(219,032
)
Capital expenditures
        
$
294,443
  
$
211,243
  
$
756,118
  
$
545,743
  
                                 
                                 
*   Includes amounts due to be paid within one year, JCP&L securitization of $269 million and $285 million in 2005 and 
    2004,  respectively.
  
** Off-balance sheet accounts receivable factoring agreement ($84 million as of December 31, 2004) renewed as an on-balance sheet short-
    term debt financing agreement in 2005 ($35 million as of September 30, 2005).
   
 
      
 
 
 
7
 

FirstEnergy Corp.
Financial Statements
(In thousands)
 

 Condensed Consolidated Statements of Cash Flows  
       
Three Months Ended Sep. 30,
  
Nine Months Ended Sep. 30,
  
       
2005
  
2004
  
2005
  
2004
  
 Cash flows from operating activities:  
Net income
        
$
332,360
  
$
298,622
  
$
670,078
  
$
676,666
  
Adjustments to reconcile net income to net cash from operating activities:
                                
Depreciation and amortization of regulatory assets,  
                                
  nuclear fuel, and leases
          
419,081
   
419,361
   
1,186,060
   
1,224,800
 
Deferred purchased power and other costs 
          
(39,215
)
  
(118,409
)
  
(231,438
)
  
(263,290
)
Deferred income taxes and investment tax credits 
          
(37,851
)
  
37,138
   
24,034
   
(56,995
)
Income from discontinued operations 
          
(528
)
  
(2,497
)
  
(18,451
)
  
(6,332
)
Pension trust contribution 
          
-
   
(500,000
)
  
-
   
(500,000
)
Change in working capital and other 
          
307,309
   
393,290
   
281,989
   
463,364
 
Cash flows provided from operating activities
        
$
981,156
  
$
527,505
  
$
1,912,272
  
$
1,538,213
  
                                 
Cash flows used for financing activities
          
(580,449
)
  
(601,719
)
  
(1,048,843
)
  
(1,415,103
)
                                 
Cash flows provided from (used for) investing activities
          
(310,643
)
  
42,568
   
(776,558
)
  
(169,193
)
Net increase (decrease) in cash and cash equivalents
        
$
90,064
  
$
(31,646
)
$
86,871
  
$
(46,083
)
 

 REGULATORY DEFERRALS   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
        
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
 Ohio Transition Plan and MISO costs     
 Beginning balance
        
$
861,923
  
$
566,334
        
$
710,019
  
$
453,614
        
 Deferral of shopping incentives
          
77,197
   
68,014
 
$
9,183
    
180,193
   
161,814
 
$
18,379
  
 Interest on shopping incentives
          
12,396
   
8,573
   
3,823
   
33,927
   
22,838
   
11,089
 
 Deferral of MISO Costs
          
31,349
   
-
   
31,349
   
51,537
   
-
   
51,537
 
 Deferral of other regulatory assets
          
2,885
   
2,180
   
705
   
10,074
   
6,835
   
3,239
 
 Current period deferrals
        
$
123,827
  
$
78,767
  
$
45,060
  
$
275,731
  
$
191,487
  
$
84,244
  
                                             
Ending Balance  
        
$
985,750
  
$
645,101
        
$
985,750
  
$
645,101
        
                                             
Deferred Energy Costs - New Jersey 
                                            
 Beginning balance
        
$
517,800
  
$
402,700
        
$
445,600
  
$
440,900
        
 Deferral (recovery) of energy costs
          
(10,100
)
  
1,700
 
$
(11,800
)
  
62,100
   
(36,500
)
$
98,600
  
Ending Balance 
        
$
507,700
  
$
404,400
        
$
507,700
  
$
404,400
        
 

 UNUSUAL ITEMS   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
        
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
                                
Gain (Loss) on Non-Core Asset Sales 
                                            
    FES Natural Gas Business (a)
        
$
-
  
$
-
  
$
-
  
$
8,229
  
$
-
  
$
8,229
  
    FirstCommunications (b)
          
-
   
-
   
-
   
6,800
   
-
   
6,800
 
    FSG Subsidiary - Elliott-Lewis (a) (f)
          
-
   
-
   
-
   
51
   
-
   
51
 
    Venture Capital Funds (b)
          
-
   
-
   
-
   
2,015
   
-
   
2,015
 
    Great Lakes Energy Partner (b) (g)
          
-
   
-
   
-
   
-
   
15,777
   
(15,777
)
    Venture Capital (c)
          
-
   
(28,288
)
  
28,288
   
-
   
(28,288
)
  
28,288
 
    MYR Subsidiary (a)
          
-
   
-
   
-
   
(524
)
  
-
   
(524
)
    FSG Subsidiary - Cranston (a) (h)
          
-
   
-
   
-
   
(42
)
  
-
   
(42
)
Total Gain (Loss) on Non-Core Asset Sales 
          
-
   
(28,288
)
  
28,288
   
16,529
   
(12,511
)
  
29,040
 
Litigation Settlement (c) 
          
-
   
-
   
-
   
-
   
(17,980
)
  
17,980
 
FENOC Severance (c) 
          
-
   
(6,488
)
  
6,488
   
-
   
(6,488
)
  
6,488
 
EPA Settlement - Environmental Projects (c) 
          
-
   
-
   
-
   
(10,000
)
  
-
   
(10,000
)
EPA Penalty and NRC Fine(c) (i) 
          
-
   
-
   
-
   
(11,950
)
  
-
   
(11,950
)
JCP&L Rate Settlement (d) 
          
-
   
-
   
-
   
27,765
   
-
   
27,765
 
JCP&L Arbitration Decision (c) 
          
(16,141
)
  
-
   
(16,141
)
  
(16,141
)
  
-
   
(16,141
)
Total-Pretax Items 
          
(16,141
)
  
(34,776
)
  
18,635
   
6,203
   
(36,979
)
  
43,182
 
                                             
Ohio Tax Write-off (e) 
          
-
   
-
   
-
   
(71,702
)
  
-
   
(71,702
)
                                             
EPS Effect 
        
$
(0.03
)
$
(0.06
)
$
0.03
  
$
(0.18
)
$
(0.11
)
$
(0.07
)
                                             
(a) Included in "Discontinued Operations"      (d) Included in "Deferral of New Regulatory Assets"         (g) Before income taxes of $22.6 million
    
(b) Included in "Other Revenues"                   (e) Included in "Income Taxes"                                            (h) Before income tax benefit of $0.4 million
    
(c) Included in "Other Operating Expenses"   (f) Before income tax benefit of $12.2 million                      (i) No income tax benefit
    
 
 
8

FirstEnergy Corp.
Statistical Summary
 

 ELECTRIC SALES STATISTICS       
Three Months Ended September 30,    
  
Nine Months Ended September 30,    
  
 (kWh in millions)       
2005
  
2004
  
Change
  
2005
  
2004
  
Change
  
                                    
Electric Generation Sales 
                                                  
Retail- Regulated 
                
23,459
   
21,299
   
10.1
%
  
65,178
   
61,287
   
6.3
%
Retail - Competitive 
                
4,130
   
3,798
   
8.7
%
  
10,988
   
11,565
   
-5.0
%
      Total Retail
                
27,589
   
25,097
   
9.9
%
  
76,166
   
72,852
   
4.5
%
Wholesale * 
                
7,889
   
8,641
   
-8.7
%
  
21,484
   
22,478
   
-4.4
%
Total Electric Generation Sales 
                
35,478
   
33,738
   
5.2
%
  
97,650
   
95,330
   
2.4
%
                                                   
Electric Distribution Deliveries 
                                                  
Ohio                                   - Residential
          
 
    
4,909
   
4,171
   
17.7
%
  
13,242
   
12,113
   
9.3
%
                                      - Commercial
                
4,099
   
3,920
   
4.6
%
  
11,477
   
11,010
   
4.2
%
                                      - Industrial
                
6,094
   
5,852
   
4.1
%
  
17,750
   
17,516
   
1.3
%
                                      - Other
                
96
   
94
   
2.1
%
  
289
   
279
   
3.6
%
                                     Total Ohio
                
15,198
   
14,037
   
8.3
%
  
42,758
   
40,918
   
4.5
%
                                                   
Pennsylvania                     - Residential
          
 
    
3,055
   
2,733
   
11.8
%
  
8,656
   
8,145
   
6.3
%
                                      - Commercial
                
2,949
   
2,738
   
7.7
%
  
8,236
   
7,820
   
5.3
%
                                      - Industrial
                
2,677
   
2,484
   
7.8
%
  
7,882
   
7,628
   
3.3
%
                                      - Other
                
21
   
20
   
5.0
%
  
62
   
60
   
3.3
%
                                     Total Pennsylvania
                
8,702
   
7,975
   
9.1
%
  
24,836
   
23,653
   
5.0
%
                                                   
New Jersey                      - Residential
          
 
    
3,312
   
2,866
   
15.6
%
  
7,882
   
7,340
   
7.4
%
                                      - Commercial
                
2,670
   
2,356
   
13.3
%
  
7,196
   
6,743
   
6.7
%
                                      - Industrial
                
821
   
779
   
5.4
%
  
2,316
   
2,307
   
0.4
%
                                      - Other
                
22
   
18
   
22.2
%
  
65
   
52
   
25.0
%
                                     Total New Jersey
                
6,825
   
6,019
   
13.4
%
  
17,459
   
16,442
   
6.2
%
                                                   
Total Residential 
                
11,276
   
9,770
   
15.4
%
  
29,780
   
27,598
   
7.9
%
Total Commercial 
                
9,718
   
9,014
   
7.8
%
  
26,909
   
25,573
   
5.2
%
Total Industrial 
                
9,592
   
9,115
   
5.2
%
  
27,948
   
27,451
   
1.8
%
Total Other 
                
139
   
132
   
5.3
%
  
416
   
391
   
6.4
%
                                                   
Total Distribution Deliveries 
                
30,725
   
28,031
   
9.6
%
  
85,053
   
81,013
   
5.0
%
                                                   
Electric Sales Shopped 
                                                  
Ohio                                  - Residential
          
 
    
2,364
   
1,933
   
22.3
%
  
5,972
   
5,351
   
11.6
%
                                     - Commercial
                
2,068
   
1,945
   
6.3
%
  
5,632
   
5,369
   
4.9
%
                                     - Industrial
                
1,317
   
1,209
   
8.9
%
  
3,715
   
3,418
   
8.7
%
                                    Total Ohio
                
5,749
   
5,087
   
13.0
%
  
15,319
   
14,138
   
8.4
%
                                                   
Pennsylvania                    - Residential
          
 
    
6
   
6
   
0.0
%
  
18
   
19
   
-5.3
%
                                     - Commercial
                
18
   
21
   
-14.3
%
  
65
   
99
   
-34.3
%
                                     - Industrial
                
334
   
431
   
-22.5
%
  
1,164
   
1,511
   
-23.0
%
                                   Total Pennsylvania
                
358
   
458
   
-21.8
%
  
1,247
   
1,629
   
-23.4
%
                                                   
New Jersey                     - Residential
          
 
    
1
   
-
 
  
0.0
%
  
4
   
520
    
-99.2
%
                                    - Commercial
                
525
   
558
    
-5.9
%
  
1,558
   
1,758
    
-11.4
%
                                    - Industrial
                
633
   
629
   
0.6
%
  
1,747
   
1,681
   
3.9
%
                                   Total New Jersey
                
1,159
   
1,187
   
-2.4
%
  
3,309
   
3,959
   
-16.4
%
                                                   
Total Electric Sales Shopped 
                
7,266
   
6,732
   
7.9
%
  
19,875
   
19,726
   
0.8
%
                                                   
* 2004 excludes the reporting of PJM sales and purchases on a gross basis.                        
    
                                                   
 
 

                    
 OPERATING STATISTICS   
As of September 30,    
  
 For 12 Months Ended   
2005
      
2004
  
                    
System Load Factor 
          
61.5
%
        
67.1
%
Capacity Factors: 
                          
     Fossil
         
63.2
%
        
57.2
%
     Nuclear
          
85.1
%
        
85.8
%
Generation Output: 
                          
     Fossil
         
64
%
        
61
%
     Nuclear
          
36
%
        
39
%
                           
WEATHER 
          
2005
    
Normal
    
2004
  
Composite Heating-Degree-Days 
                          
     3rd Quarter
          
23
   
93
   
51
 
     Year-to-Date
          
3,686
   
3,570
   
3,583
 
Composite Cooling-Degree-Days 
                          
     3rd Quarter
          
843
   
638
   
601
 
     Year-to-Date
          
1,118
   
884
   
902
 
                           
 
 
9
 

FirstEnergy Corp.
2005 EPS and Cash Flow
 

                    
 2005 Earnings Per Share (EPS) 
  
 (Reconciliation of GAAP to Non-GAAP) 
  
                    
                    
        
Three Months
 
Nine Months
 
Annual
 
        
Ended Sep. 30
  
Ended Sep. 30
  
Guidance
  
                    
Basic EPS (GAAP basis) 
        
$
1.01
  
$
2.04
  
$
2.67 - $2.82
  
Excluding Unusual Items: 
                          
    Gain on non-core asset sales
          
-
   
(0.07
)
  
(0.07
)
    EPA settlement
          
-
   
0.04
   
0.04
 
     NRC fine
          
-
   
0.01
   
0.01
 
    JCP&L rate settlement
          
-
   
(0.05
)
  
(0.05
)
    JCP&L arbitration decision
          
0.03
   
0.03
   
0.03
 
    Ohio tax write-off
          
-
   
0.22
   
0.22
 
Basic EPS (non-GAAP basis) 
        
$
1.04
  
$
2.22
  
$
2.85 - $3.00
  
 
 

               
 Reconciliation of September 2005 Year-to-Date Cash From Operating Activities (GAAP) to
  
 Free Cash Flow (Non-GAAP) and Cash Generation (Non-GAAP)
  
 (in millions)
  
               
 Net Cash from Operating Activities:    
               
Net Income
              
$
670
  
              Adjustments:                    
   Depreciation 
                
444
 
   Amortization of regulatory assets 
                
982
  
   Deferral of new regulatory assets
                
(304
)
   Deferred purchased power costs
                
(231
)
               Deferred income taxes and ITC, net                 24   
   Conversion of off-balance sheet receivables financing 
                    
      to on-balance sheet
                
(155
)
                   Ohio School Council's prepayment for electric service, net                 232  
   Other, including changes in working capital * 
                
250
  
 Net Cash from Operating Activities (GAAP)
              
$
1,912
  
                     
Other Items:
                    
 Capital expenditures
                
(698
)
 Nuclear fuel fabrication
                
(88
)
 Contributions to nuclear decommissioning trusts
                
(76
)
 Common stock dividends
                
(412
)
 Conversion of off-balance sheet receivables financing
                    
 to on-balance sheet
                
155
 
 Other, net
                
(152
)
 Free Cash Flow (Non-GAAP)
              
$
641
  
                     
 Non-core asset sales and other
                
66
 
 Cash generation (Non-GAAP)
              
$
707
  
                     
                     
   *     Primarily represents changes in accrued taxes, accrued interest, and other working
         capital items.
    
                     
      The GAAP to Non-GAAP reconciliation statements are available on the Investor Information
      section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir.
    
 
 
10
 

FirstEnergy Corp.
2005 Cash Flow Guidance
 

               
 Reconciliation of 2005 Estimated Cash from Operating Activities (GAAP) to
  
 Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP)
  
 (in millions)
  
               
 Net Cash from Operating Activities:    
               
GAAP Earnings Guidance
              
$
887 - $937
  
    Adjustments:
                    
      Depreciation 
                
578
  
      Amortization of regulatory assets 
                
1,277
  
      Deferral of new regulatory assets
                
(381
)
                 Deferred purchased power costs                 (390 )
      Deferred income taxes and ITC, net 
                
23 
  
      Conversion of off-balance sheet receivables financing 
                    
         to on-balance sheet
                
(155
)
                 Ohio School Council's prepayment for electric service, net                 220  
      Other, including changes in working capital
                
(27
 )
         Net Cash from Operating Activities (GAAP)
              
$
2,057
  
                     
Other Items:
                    
                     
Capital expenditures
                
(1,005
)
Nuclear fuel fabrication
                
(80
)
Contributions to nuclear decommissioning trusts
                
(100
)
Common stock dividends
                
(542
)
Conversion of off-balance sheet receivables financing
                    
to on-balance sheet
                
155
 
Other, net
                
50
 
       Free Cash Flow (Non-GAAP)
              
$
535
  
                     
Non-core asset sales
                
85
 
      Cash Generation (Non-GAAP)
              
$
620
  
                     
   
                     
The GAAP to Non-GAAP reconciliation statements are available on the Investor Information
   
section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir.
    
                     
 
 
11
 

FirstEnergy Corp.
2006 Cash Flow Guidance
 

     
 Reconciliation of 2006 Estimated Cash from Operating Activities (GAAP) to
  
 Estimated Free Cash Flow (Non-GAAP) and Estimated Cash Generation (Non-GAAP)
  
 (in millions)
  
           
 Net Cash from Operating Activities:    
           
GAAP Earnings Guidance
        
$
1,120 - $1,185
  
 Adjustments:
              
 Depreciation 
          
595
 
 Amortization of regulatory assets 
          
870
  
             Deferral of new regulatory assets           (90  )
 Deferred purchased power costs 
          
(380
)
 Deferred income taxes and ITC, net 
          
(110
)
 Other, including changes in working capital 
          
32
 
     Net Cash from Operating Activities (GAAP)
        
$
2,070
  
               
Other Items:
              
               
Capital expenditures
          
(1,000) - (1,100
)
Nuclear fuel fabrication
          
(160
)
Common stock dividends
          
(570
)
Other, net
          
40
 
      Free Cash Flow (Non-GAAP)
        
$
280 - $380
  
               
Non-core asset sales
         
20
 
      Cash Generation (Non-GAAP)
        
$
300 - $400
  
               
The GAAP to Non-GAAP reconciliation statements are available on the Investor Information    
section of FirstEnergy Corp.'s website at www.firstenergycorp.com/ir.  
    
 
 
12


RECENT DEVELOPMENTS
 
Second 2005 Common Stock Dividend Payment Increase
On September 20, 2005, FirstEnergy Corp.'s Board of Directors declared a quarterly dividend of 43 cents per share of outstanding common stock, a 4.2 percent increase over the previous quarterly rate of 41.25 cents per share, payable December 1, 2005. With this second payment increase in 2005, the new indicated annual dividend will be $1.72 per share. This establishes the base upon which the Board is expected to apply its targeted annual growth rate of 4 to 5 percent for dividends to be paid next year.
 
Rating Agency Upgrades
On October 3, 2005, Standard & Poor's Ratings Services (S&P) raised its corporate credit rating on FirstEnergy Corp. and all affiliated operating utilities to 'BBB' from 'BBB-'. At the same time, S&P raised the senior unsecured ratings on the utility holding company’s senior unsecured debt to 'BBB-' from 'BB+'. S&P stated that the upgrade follows the continuation of a good operating track record, specifically for the nuclear fleet through the third quarter of 2005.
 
Record Generation Output
FirstEnergy set new generation output records of 21.7 million MWhs in the third quarter and 59.5 million MWhs for the first nine months of the year.
 
Intra-System Generation Asset Transfers
On October 24, 2005, Ohio Edison Company (OE), The Cleveland Electric Illuminating Company (CEI), The Toledo Edison Company (TE), and Pennsylvania Power Company (Penn) completed an intra-system transfer of fossil and hydroelectric (non-nuclear) generation assets to FirstEnergy Generation Corp. (FGCO). FGCO purchased the utilities’ interests in currently operating non-nuclear units for an aggregate purchase price of approximately $1.6 billion (OE - $980 million; CEI - $389 million; TE - $88 million; Penn - $125 million). FGCO also assumed certain assets and liabilities relating to the purchased units. The transferred assets do not include leasehold interests of CEI and TE in certain units under existing sale and leaseback arrangements. FirstEnergy anticipates completion of the intra-system transfer of nuclear generation assets at book value by the end of the year.

Competitive Bid Process Schedule in Ohio
On September 28, 2005, the Public Utilities Commission of Ohio (PUCO) approved the schedule for the second Competitive Bid Process (CBP) for FirstEnergy's Ohio regulated retail load. The CBP bidding to potentially provide firm generation service for 2007 and 2008 actual load requirements will commence on March 21, 2006 and the PUCO will determine the acceptance or rejection of the CBP results within two business days after the completion of the auction. Full details on the CBP can be found at www.firstenergy-auction.comhttp://www.firstenergy-auction.com. 

Rate Certainty Plan Filing in Ohio
On September 9, 2005, OE, CEI, and TE filed a Rate Certainty Plan (RCP) that, if approved by the PUCO, would essentially maintain current electricity prices through 2008. The RCP has been designed to provide customers with lower, more certain rate levels than otherwise available under the Rate Stabilization Plan (RSP) during the Plan period, and to provide the Companies with financial results generally comparable to those attainable under the RSP. Several parties joined in a Stipulation and Recommendation to support the RCP and the PUCO’s approval of the Application. Signatory parties included the Industrial Energy Users - Ohio, the Ohio Energy Group and the cities of Cleveland, Akron, and Parma. The PUCO has scheduled the evidentiary hearing on the RCP proposal to commence on November 29, 2005.
 
Competitive Electricity Supply for Penn Power
On October 11, 2005, Penn filed a plan with the Pennsylvania Public Utility Commission to secure electricity supply for its customers at set rates following the end of the transition period established for Penn under the state’s electric competition law. Penn is recommending that a Request for Proposal (RFP) process be used to secure electricity from third-party suppliers for the period January 1, 2007 through May 31, 2008. Penn’s proposal provides that the RFP be managed by an independent consultant and seek bids on approximately 900 megawatts of electricity in 18 increments of approximately 50 megawatts each. Any one supplier would be limited to no more than 12 increments, or 600 megawatts of the total load.

13
 
Forward-Looking Statements: This Consolidated Report to the Financial Community includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "believe," "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy and commodity market prices, replacement power costs being higher than anticipated or inadequately hedged, the continued ability of our regulated utilities to collect transition and other charges, maintenance costs being higher than anticipated, legislative and regulatory changes (including revised environmental requirements), the uncertainty of the timing and amounts of the capital expenditures (including that such amounts could be higher than anticipated) or levels of emission reductions related to the settlement agreement resolving the New Source Review litigation, adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits, fines or other enforcement actions and remedies) of governmental investigations and oversight, including by the Securities and Exchange Commission, the United States Attorney's Office and the Nuclear Regulatory Commission as disclosed in our Securities and Exchange Commission filings, generally, and with respect to the Davis-Besse Nuclear Power Station outage and heightened scrutiny at the Perry Nuclear Power Plant in particular, the availability and cost of capital, the continuing availability and operation of generating units, the ability of our generating units to continue to operate at, or near full capacity, our inability to accomplish or realize anticipated benefits from strategic goals (including the proposed transfer of nuclear generation assets), our ability to improve electric commodity margins and to experience growth in the distribution business, any decision of the Pennsylvania Public Utilities Commission regarding the plan filed by Pennsylvania Power Company on October 11, 2005 to secure electricity supply for its customers at a set rate, our ability to access the public securities and other capital markets, the outcome, cost and other effects of present and potential legal and administrative proceedings and claims related to the August 14, 2003 regional power outage, the final outcome in the proceeding related to FirstEnergy's Application for a Rate Stabilization Plan in Ohio, including, but not limited to, Public Utilities Commission of Ohio's acceptance of our September 9, 2005 Rate Certainty Plan filing, the risks and other factors discussed from time to time in our Securities and Exchange Commission filings, and other similar factors. Dividends declared from time to time during any annual period may in aggregate vary from the indicated amounts due to circumstances considered by the Board at the time of the actual declarations. A security rating is not a recommendation to buy, sell or hold securities and it may be subject to revision or withdrawal at any time. FirstEnergy expressly disclaims any current intention to update any forward-looking statements contained herein as a result of new information, future events, or otherwise.
 
14