FE-06.30.2013-10Q


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________
Commission
 
Registrant; State of Incorporation;
 
I.R.S. Employer
File Number
 
Address; and Telephone Number
 
Identification No.
 
 
 
 
 
333-21011
 
FIRSTENERGY CORP.
 
34-1843785
 
 
(An Ohio Corporation)
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
 
 
 
 
 
000-53742
 
FIRSTENERGY SOLUTIONS CORP.
 
31-1560186
 
 
(An Ohio Corporation)
 
 
 
 
c/o FirstEnergy Corp.
 
 
 
 
76 South Main Street
 
 
 
 
Akron, OH 44308
 
 
 
 
Telephone (800)736-3402
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
 
FirstEnergy Corp. and FirstEnergy Solutions Corp.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
 
FirstEnergy Corp. and FirstEnergy Solutions Corp.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer þ
FirstEnergy Corp.
 
 
Accelerated Filer o
N/A
 
 
Non-accelerated Filer (Do not check
if a smaller reporting company)
þ
FirstEnergy Solutions Corp.
 
 
Smaller Reporting Company o
N/A
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No þ
 
FirstEnergy Corp. and FirstEnergy Solutions Corp.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 
 
OUTSTANDING
CLASS
 
AS OF AUGUST 5, 2013
FirstEnergy Corp., $0.10 par value
 
418,216,437

FirstEnergy Solutions Corp., no par value
 
7

FirstEnergy Corp. is the sole holder of FirstEnergy Solutions Corp. common stock.
This combined Form 10-Q is separately filed by FirstEnergy Corp. and FirstEnergy Solutions Corp. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to FirstEnergy Solutions Corp. is also attributed to FirstEnergy Corp.
FirstEnergy Web Site and Other Social Media Sites and Applications
Each of the registrants’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also made available free of charge on or through the "Investors" page of FirstEnergy’s Internet web site at www.firstenergycorp.com.
These SEC filings are posted on the web site as soon as reasonably practicable after they are electronically filed with the SEC. Additionally, the registrants routinely post additional important information including press releases, investor presentations and notices of upcoming events, under the "Investors" section of FirstEnergy’s Internet web site and recognize FirstEnergy’s Internet web site as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under SEC Regulation FD. Investors may be notified of postings to the web site by signing up for email alerts and RSS feeds on the "Investors" page of FirstEnergy's Internet web site or through push alerts from FirstEnergy Investor Relations apps for Apple Inc.'s iPad and iPhone devices, which can be installed for free at the Apple online store. FirstEnergy also uses Twitter and Facebook as an additional channel of distribution to reach public investors and as a supplemental means of disclosing material non-public information for complying with its disclosure obligations under SEC Regulation FD. Information contained on FirstEnergy’s Internet web site or its Twitter or Facebook site, and any corresponding applications of those sites, shall not be deemed incorporated into, or to be part of, this report.
OMISSION OF CERTAIN INFORMATION
FirstEnergy Solutions Corp. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to Form 10-Q.
 





Forward-Looking Statements: This Form 10-Q 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, in general, and the retail sales market in particular.
The impact of the regulatory process on the pending matters before FERC and in the various states in which we do business including, but not limited to, matters related to rates and pending rate cases.
The uncertainties of various cost recovery and cost allocation issues resulting from ATSI's realignment into PJM.
Economic or weather conditions affecting future sales and margins.
Regulatory outcomes associated with storms, including but not limited to Hurricane Sandy, Hurricane Irene and the October snowstorm of 2011.
Changing energy, capacity and commodity market prices including, but not limited to, coal, natural gas and oil, and availability and their impact on retail margins.
The continued ability of our regulated utilities to recover their costs.
Costs being higher than anticipated and the success of our policies to control costs and to mitigate low energy, capacity and market prices.
Other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission, water discharge, water intake and coal combustion residual regulations, the potential impacts of CSAPR, CAIR, and/or any laws, rules or regulations that ultimately replace CAIR, and the effects of the EPA's MATS rules including our estimated costs of compliance.
The uncertainty of the timing and amounts of the capital expenditures that may arise in connection with any litigation, including NSR litigation or potential regulatory initiatives or rulemakings (including that such expenditures could result in our decision to deactivate or idle certain generating units).
The uncertainties associated with the deactivation of certain older regulated and competitive fossil units including the decision to deactivate the Hatfield's Ferry and Mitchell Power Stations, the impact on vendor commitments, and the timing thereof as they relate to, among other things, RMR arrangements and the reliability of the transmission grid.
Adverse regulatory or legal decisions and outcomes with respect to our nuclear operations (including, but not limited to the revocation or non-renewal of necessary licenses, approvals or operating permits by the NRC or as a result of the incident at Japan's Fukushima Daiichi Nuclear Plant).
Adverse legal decisions and outcomes related to ME's and PN's ability to recover certain transmission costs through their TSC riders.
The impact of future changes to the operational status or availability of our generating units.
The risks and uncertainties associated with litigation, arbitration, mediation and like proceedings, including, but not limited to, any such proceedings related to vendor commitments.
Replacement power costs being higher than anticipated or inadequately hedged.
The ability to comply with applicable state and federal reliability standards and energy efficiency and peak demand reduction mandates.
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.
The ability to accomplish or realize anticipated benefits from strategic and financial goals including, but not limited to, the ability to reduce costs and to successfully complete our announced financial plans designed to improve our credit metrics and strengthen our balance sheet, including but not limited to, proposed capital raising and debt reduction initiatives, the proposed West Virginia asset transfer and potential sale of non-core hydro assets.
Our ability to improve electric commodity margins and the impact of, among other factors, the increased cost of fuel and fuel transportation on such margins.
The ability to experience growth in the Regulated Distribution segment and to continue to successfully implement our direct retail sales strategy in the Competitive Energy Services segment.
Changing market conditions that could affect the measurement of liabilities and the value of assets held in our NDTs, pension trusts and other trust funds, and cause us and our subsidiaries to make additional contributions sooner, or in amounts that are larger than currently anticipated.
The impact of changes to material accounting policies.
The ability to access the public securities and other capital and credit markets in accordance with our announced financial plan, the cost of such capital and overall condition of the capital and credit markets affecting us and our subsidiaries.
Actions that may be taken by credit rating agencies that could negatively affect us and our subsidiaries' access to financing, increase the costs thereof, and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees.
Changes in national and regional economic conditions affecting us, our subsidiaries and our major industrial and commercial customers, and other counterparties including fuel suppliers, with which we do business.
Issues concerning the stability of domestic and foreign financial institutions and counterparties with which we do business.




The risks and other factors discussed from time to time in our SEC filings, and other similar factors.

Dividends declared from time to time on FE's common stock during any period may in the aggregate vary from prior periods due to circumstances considered by FE'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.
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. The registrants expressly disclaim any current intention to update, except as required by law, any forward-looking statements contained herein as a result of new information, future events or otherwise.




TABLE OF CONTENTS
 
Page


Part I. Financial Information
 




Item 1. Financial Statements
 


 


 




FirstEnergy Corp. Management's Discussion and Analysis of Financial Condition and Results of Operations


 






 






 
 
Item 3. Defaults Upon Senior Securities
 
 
Item 4. Mine Safety Disclosures
 
 
Item 5. Other Information




i



GLOSSARY OF TERMS
The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:

AE
Allegheny Energy, Inc., a Maryland utility holding company that merged with a subsidiary of FirstEnergy on February 25, 2011
AE Supply
Allegheny Energy Supply Company, LLC, an unregulated generation subsidiary of AE
AGC
Allegheny Generating Company, a generation subsidiary of AE Supply
Allegheny
Allegheny Energy, Inc., together with its consolidated subsidiaries
Allegheny Utilities
MP, PE and WP
ATSI
American Transmission Systems, Incorporated, formerly a direct subsidiary of FE that became a subsidiary of FET in April 2012, which owns and operates transmission facilities.
CEI
The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FE
FirstEnergy Corp., a public utility holding company
FENOC
FirstEnergy Nuclear Operating Company, which operates nuclear generating facilities
FES
FirstEnergy Solutions Corp., which provides energy-related products and services
FESC
FirstEnergy Service Company, which provides legal, financial and other corporate support services
FET
FirstEnergy Transmission, LLC, formerly known as Allegheny Energy Transmission, LLC, a subsidiary of AE, which is the parent of ATSI and TrAIL and has a joint venture in PATH.
FEV
FirstEnergy Ventures Corp., which invests in certain unregulated enterprises and business ventures
FG
FirstEnergy Generation, LLC, a subsidiary of FES, which owns and operates non-nuclear generating facilities
FirstEnergy
FirstEnergy Corp., together with its consolidated subsidiaries
Global Holding
Global Mining Holding Company, LLC, a joint venture between FEV, WMB Marketing Ventures, LLC and Pinesdale LLC
Global Rail
A subsidiary of Global Holding that owns coal transportation operations near Roundup, Montana
JCP&L
Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
ME
Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
MP
Monongahela Power Company, a West Virginia electric utility operating subsidiary of AE
NG
FirstEnergy Nuclear Generation, LLC, a subsidiary of FES, which owns nuclear generating facilities
OE
Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies
CEI, OE and TE
PATH
Potomac-Appalachian Transmission Highline, LLC, a joint venture between Allegheny and a subsidiary of AEP
PATH-Allegheny
PATH Allegheny Transmission Company, LLC
PATH-WV
PATH West Virginia Transmission Company, LLC
PE
The Potomac Edison Company, a Maryland electric utility operating subsidiary of AE
Penn
Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies
ME, PN, Penn and WP
PN
Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
PNBV
PNBV Capital Trust, a special purpose entity created by OE in 1996
Shippingport
Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak
An indirect subsidiary of Global Holding that owns mining operations near Roundup, Montana
TE
The Toledo Edison Company, an Ohio electric utility operating subsidiary
TrAIL
Trans-Allegheny Interstate Line Company, a subsidiary of FET, which owns and operates transmission facilities
Utilities
OE, CEI, TE, Penn, JCP&L, ME, PN, MP, PE and WP
WP
West Penn Power Company, a Pennsylvania electric utility operating subsidiary of AE
 
 
The following abbreviations and acronyms are used to identify frequently used terms in this report:
AEP
American Electric Power Company, Inc.
AFS
Available-for-sale
ALJ
Administrative Law Judge
Anker WV
Anker West Virginia Mining Company, Inc.
Anker Coal
Anker Coal Group, Inc.
AOCI
Accumulated Other Comprehensive Income
ARO
Asset Retirement Obligation
ARR
Auction Revenue Right

ii



GLOSSARY OF TERMS, Continued

ASLB
Atomic Safety and Licensing Board
BGS
Basic Generation Service
BTU
British Thermal Units
CAA
Clean Air Act
CAIR
Clean Air Interstate Rule
CBP
Competitive Bid Process
CCB
Coal Combustion By-products
CCR
Coal Combustion Residuals
CDWR
California Department of Water Resources
CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
CFR
Code of Federal Regulations
CO2
Carbon Dioxide
CSAPR
Cross-State Air Pollution Rule
CWA
Clean Water Act
DCR
Delivery Capital Recovery
DOE
United States Department of Energy
DOJ
United States Department of Justice
DSP
Default Service Plan
EDC
Electric Distribution Company
EE&C
Energy Efficiency and Conservation
EGS
Electric Generation Supplier
EIS
Environmental Impact Statement
ELPC
Environmental Law & Policy Center
ENEC
Expanded Net Energy Cost
EPA
United States Environmental Protection Agency
ERO
Electric Reliability Organization
ESP
Electric Security Plan
FERC
Federal Energy Regulatory Commission
Fitch
Fitch Ratings
FMB
First Mortgage Bond
FPA
Federal Power Act
FTR
Financial Transmission Right
GAAP
Accounting Principles Generally Accepted in the United States of America
GHG
Greenhouse Gases
GWH
Gigawatt-hour
HCL
Hydrochloric Acid
ICC
Illinois Commerce Commission
ICE
IntercontinentalExchange, Inc.
ICG
International Coal Group Inc.
ILP
Integrated License Application Process
kV
Kilovolt
KWH
Kilowatt-hour
LAR
License Amendment Request
LBR
Little Blue Run
LCAPP
Long-Term Capacity Agreement Pilot Program
LITE
Local Infrastructure and Transmission Enhancement
LOC
Letter of Credit
LSE
Load Serving Entity
MATS
Mercury and Air Toxics Standards
MDPSC
Maryland Public Service Commission
MISO
Midcontinent Independent System Operator, Inc.

iii



GLOSSARY OF TERMS, Continued

mmBTU
One Million British Thermal Units
Moody’s
Moody’s Investors Service, Inc.
MOPR
Minimum Offer Price Rule
MTEP
MISO Regional Transmission Expansion Plan
MVP
Multi-value Project
MW
Megawatt
MWH
Megawatt-hour
NDT
Nuclear Decommissioning Trust
NERC
North American Electric Reliability Corporation
NJBPU
New Jersey Board of Public Utilities
NMB
Non-Market Based
NNSR
Non-Attainment New Source Review
NOL
Net Operating Loss
NOV
Notice of Violation
NOx
Nitrogen Oxide
NPDES
National Pollutant Discharge Elimination System
NRC
Nuclear Regulatory Commission
NSR
New Source Review
NUG
Non-Utility Generation
NYPSC
New York State Public Service Commission
NYSEG
New York State Electric and Gas
OCC
Ohio Consumers' Counsel
OPEB
Other Post-Employment Benefits
OTTI
Other Than Temporary Impairments
OVEC
Ohio Valley Electric Corporation
PA DEP
Pennsylvania Department of Environmental Protection
PCB
Polychlorinated Biphenyl
PCRB
Pollution Control Revenue Bond
PJM
PJM Interconnection LLC
PI
Performance Indicator
PM
Particulate Matter
POLR
Provider of Last Resort
PPUC
Pennsylvania Public Utility Commission
PSA
Power Supply Agreement
PSD
Prevention of Significant Deterioration
PUCO
Public Utilities Commission of Ohio
PURPA
Public Utility Regulatory Policies Act of 1978
RCRA
Resource Conservation and Recovery Act
REC
Renewable Energy Credit
REIT
Real Estate Investment Trust
RFC
ReliabilityFirst Corporation
RFP
Request for Proposal
RGGI
Regional Greenhouse Gas Initiative
RMR
Reliability Must-Run
RPM
Reliability Pricing Model
RTEP
Regional Transmission Expansion Plan
RTO
Regional Transmission Organization
S&P
Standard & Poor’s Ratings Service
SAIDI
System Average Interruption Duration Index
SAIFI
System Average Interruption Frequency Index
SAMA
Severe Accident Mitigation Alternatives

iv



GLOSSARY OF TERMS, Continued

SB221
Amended Substitute Senate Bill 221
SBC
Societal Benefits Charge
SEC
United States Securities and Exchange Commission
SIP
State Implementation Plan(s) Under the Clean Air Act
SMIP
Smart Meter Implementation Plan
SO2
Sulfur Dioxide
SOS
Standard Offer Service
SPE
Special Purpose Entity
SREC
Solar Renewable Energy Credit
SSO
Standard Service Offer
TDS
Total Dissolved Solid
TMI-2
Three Mile Island Unit 2
TSC
Transmission Service Charge
UWUA
Utility Workers Union of America
VIE
Variable Interest Entity
VSCC
Virginia State Corporation Commission
WVDEP
West Virginia Department of Environmental Protection
WVPSC
Public Service Commission of West Virginia
 

v



PART I. FINANCIAL INFORMATION

ITEM I.         Financial Statements

FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)

 

Three Months Ended June 30
 
Six Months Ended June 30
 
(In millions, except per share amounts)
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
 
Electric utilities
 
$
2,221

 
$
2,323

 
$
4,609

 
$
4,863

 
Unregulated businesses
 
1,298

 
1,432

 
2,639

 
2,882

 
Total revenues*
 
3,519

 
3,755

 
7,248

 
7,745

 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
Fuel
 
628

 
656

 
1,258

 
1,197

 
Purchased power
 
862

 
1,042

 
1,805

 
2,301

 
Other operating expenses
 
887

 
921

 
1,771

 
1,739

 
Provision for depreciation
 
302

 
285

 
596

 
564

 
Amortization of regulatory assets, net
 
72

 
62

 
131

 
137

 
General taxes
 
241

 
232

 
506

 
504

 
Impairment of long-lived assets
 
473

 

 
473

 

 
Total operating expenses
 
3,465

 
3,198

 
6,540

 
6,442

 
 
 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
54

 
557

 
708

 
1,303

 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
 
Loss on debt redemptions
 
(24
)
 

 
(141
)
 

 
Investment income (loss)
 
(15
)
 
13

 
3

 
24

 
Interest expense
 
(256
)
 
(274
)
 
(514
)
 
(520
)
 
Capitalized interest
 
19

 
19

 
34

 
36

 
Total other expense
 
(276
)
 
(242
)
 
(618
)
 
(460
)
 
 
 
 
 
 
 
 
 
 
 
INCOME (LOSS) BEFORE INCOME TAXES
 
(222
)
 
315

 
90

 
843

 
 
 
 
 
 
 
 
 
 
 
INCOME TAXES (BENEFITS)
 
(58
)
 
127

 
58

 
349

 
 
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS)
 
(164
)
 
188

 
32

 
494

 
 
 
 
 
 
 
 
 
 
 
Income attributable to noncontrolling interest
 

 
1

 

 
1

 
 
 
 
 
 
 
 
 
 
 
EARNINGS (LOSSES) AVAILABLE TO FIRSTENERGY CORP.
 
$
(164
)
 
$
187

 
$
32

 
$
493

 
 
 
 
 
 
 
 
 
 
 
EARNINGS (LOSSES) PER SHARE OF COMMON STOCK:
 
 
 
 
 
 
 
 
 
Basic
 
$
(0.39
)
 
$
0.45

 
$
0.08

 
$
1.18

 
Diluted
 
$
(0.39
)
 
$
0.45

 
$
0.08

 
$
1.18

 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
 
Basic
 
418

 
417

 
418

 
418

 
Diluted
 
418

 
419

 
419

 
419

 
 
 
 
 
 
 
 
 
 
 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
 
$

 
$

 
$
0.55

 
$
0.55

 

*
Includes excise tax collections of $107 million in each of the three month periods ended June 30, 2013 and 2012 and $229 million and $228 million in the six months ended June 30, 2013 and 2012, respectively.

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


1



FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 
 
Three Months Ended June 30
 
Six Months Ended June 30
 
(In millions)
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS)
 
$
(164
)
 
$
188

 
$
32

 
$
494

 
 
 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS):
 
 

 
 

 
 
 
 
 
Pensions and OPEB prior service costs
 
(55
)
 
(48
)
 
(101
)
 
(101
)
 
Amortized losses on derivative hedges
 
1

 
3

 
2

 
1

 
Change in unrealized gain on available-for-sale securities
 
(8
)
 
2

 
(3
)
 
12

 
Other comprehensive loss
 
(62
)
 
(43
)
 
(102
)
 
(88
)
 
Income tax benefits on other comprehensive loss
 
(24
)
 
(27
)
 
(40
)
 
(51
)
 
Other comprehensive loss, net of tax
 
(38
)
 
(16
)
 
(62
)
 
(37
)
 
 
 
 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME (LOSS)
 
(202
)
 
172

 
(30
)
 
457

 
 
 
 
 
 
 
 
 
 
 
Comprehensive income attributable to noncontrolling interest
 

 
1

 

 
1

 
 
 
 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME (LOSS) AVAILABLE TO FIRSTENERGY CORP.
 
$
(202
)
 
$
171

 
$
(30
)
 
$
456

 

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.



2



FIRSTENERGY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(In millions, except share amounts)
 
June 30,
2013
 
December 31,
2012
ASSETS
 
 

 
 

CURRENT ASSETS:
 
 

 
 

Cash and cash equivalents
 
$
71

 
$
172

Receivables-
 
 

 
 

Customers, net of allowance for uncollectible accounts of $40 in 2013 and 2012
 
1,646

 
1,614

Other, net of allowance for uncollectible accounts of $3 in 2013 and $4 in 2012
 
277

 
315

Materials and supplies, at average cost
 
806

 
861

Prepaid taxes
 
288

 
119

Derivatives
 
173

 
160

Accumulated deferred income taxes
 
51

 
319

Other
 
248

 
208

 
 
3,560

 
3,768

PROPERTY, PLANT AND EQUIPMENT:
 
 

 
 

In service
 
43,888

 
43,210

Less — Accumulated provision for depreciation
 
13,027

 
12,600

 
 
30,861

 
30,610

Construction work in progress
 
2,230

 
2,293

 
 
33,091

 
32,903

INVESTMENTS:
 
 

 
 

Nuclear plant decommissioning trusts
 
2,178

 
2,204

Investments in lease obligation bonds
 
46

 
54

Other
 
876

 
936

 
 
3,100

 
3,194

DEFERRED CHARGES AND OTHER ASSETS:
 
 

 
 

Goodwill
 
6,447

 
6,447

Regulatory assets
 
2,321

 
2,375

Other
 
1,638

 
1,719

 
 
10,406

 
10,541

 
 
$
50,157

 
$
50,406

LIABILITIES AND CAPITALIZATION
 
 

 
 

CURRENT LIABILITIES:
 
 

 
 

Currently payable long-term debt
 
$
1,952

 
$
1,999

Short-term borrowings
 
3,254

 
1,969

Accounts payable
 
950

 
1,599

Accrued taxes
 
338

 
543

Accrued compensation and benefits
 
298

 
331

Derivatives
 
142

 
126

Other
 
599

 
1,038

 
 
7,533

 
7,605

CAPITALIZATION:
 
 

 
 

Common stockholders’ equity-
 
 

 
 

Common stock, $0.10 par value, authorized 490,000,000 shares - 418,216,437 shares outstanding
 
42

 
42

Other paid-in capital
 
9,744

 
9,769

Accumulated other comprehensive income
 
323

 
385

Retained earnings
 
2,690

 
2,888

Total common stockholders’ equity
 
12,799

 
13,084

Noncontrolling interest
 
4

 
9

Total equity
 
12,803

 
13,093

Long-term debt and other long-term obligations
 
15,449

 
15,179

 
 
28,252

 
28,272

NONCURRENT LIABILITIES:
 
 

 
 

Accumulated deferred income taxes
 
6,427

 
6,616

Retirement benefits
 
3,088

 
3,080

Asset retirement obligations
 
1,795

 
1,599

Deferred gain on sale and leaseback transaction
 
875

 
892

Adverse power contract liability
 
484

 
506

Other
 
1,703

 
1,836

 
 
14,372

 
14,529

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 12)
 


 


 
 
$
50,157

 
$
50,406


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


3



FIRSTENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
 
Six Months Ended June 30
 
(In millions)
 
2013
 
2012
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net Income
 
$
32

 
$
494

 
Adjustments to reconcile net income to net cash from operating activities-
 
 
 
 
 
Provision for depreciation
 
596

 
564

 
Amortization of regulatory assets, net
 
131

 
137

 
Nuclear fuel amortization
 
98

 
106

 
Deferred purchased power and other costs
 
(39
)
 
(149
)
 
Deferred income taxes and investment tax credits, net
 
119

 
423

 
Impairments of long-lived assets
 
473

 

 
Investment impairments
 
53

 
7

 
Deferred rents and lease market valuation liability
 
(59
)
 
(106
)
 
Stock based compensation
 
(22
)
 
(18
)
 
Retirement benefits
 
(104
)
 
(64
)
 
Commodity derivative transactions, net (Note 9)
 
21

 
(86
)
 
Pension trust contributions
 

 
(600
)
 
Cash collateral, net
 
(42
)
 
22

 
Loss on debt redemptions
 
141

 

 
Make-whole premiums paid on debt redemptions
 
(61
)
 

 
Decrease (increase) in operating assets-
 
 
 
 
 
Receivables
 
(125
)
 
(105
)
 
Materials and supplies
 
42

 
(109
)
 
Prepayments and other current assets
 
(185
)
 
(117
)
 
Increase (decrease) in operating liabilities-
 
 
 
 
 
Accounts payable
 
(329
)
 
(122
)
 
Accrued taxes
 
(199
)
 
(192
)
 
Accrued interest
 
2

 
(5
)
 
Accrued compensation and benefits
 
(34
)
 
(96
)
 
Other
 
(16
)
 
78

 
Net cash provided from operating activities
 
493

 
62

 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
New Financing-
 
 
 
 
 
Long-term debt
 
2,245

 
182

 
Short-term borrowings, net
 
1,285

 
1,890

 
Redemptions and Repayments-
 
 
 
 
 
Long-term debt
 
(1,968
)
 
(746
)
 
Tender premiums paid on debt redemptions
 
(110
)
 

 
Common stock dividend payments
 
(460
)
 
(460
)
 
Other
 
(16
)
 
(35
)
 
Net cash provided from financing activities
 
976

 
831

 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Property additions
 
(1,412
)
 
(911
)
 
Nuclear fuel
 
(50
)
 
(90
)
 
Sales of investment securities held in trusts
 
1,177

 
382

 
Purchases of investment securities held in trusts
 
(1,173
)
 
(420
)
 
Cash investments
 
(3
)
 
87

 
Asset removal costs
 
(111
)
 
(36
)
 
Other
 
2

 
(13
)
 
Net cash used for investing activities
 
(1,570
)
 
(1,001
)
 
 
 
 
 
 
 
Net change in cash and cash equivalents
 
(101
)
 
(108
)
 
Cash and cash equivalents at beginning of period
 
172

 
202

 
Cash and cash equivalents at end of period
 
$
71

 
$
94

 
    
The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


4



FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 
 
Three Months Ended June 30
 
Six Months Ended June 30
(In millions)
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
 
STATEMENTS OF INCOME (LOSS)
 
 
 
 
 
 
 
 

REVENUES:
 
 
 
 
 
 
 
 

Electric sales to non-affiliates
 
$
1,284

 
$
1,322

 
$
2,624

 
$
2,688

Electric sales to affiliates
 
140

 
107

 
296

 
230

Other
 
35

 
27

 
69

 
54

Total revenues
 
1,459

 
1,456

 
2,989

 
2,972

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 

 
 

Fuel
 
332


380


632

 
675

Purchased power from affiliates
 
137


133


269

 
250

Purchased power from non-affiliates
 
524


434


1,029

 
921

Other operating expenses
 
388


393


768

 
688

Provision for depreciation
 
78


69


154

 
132

General taxes
 
34


32


71

 
69

Total operating expenses
 
1,493


1,441


2,923

 
2,735

 
 
 
 
 
 
 
 
 
OPERATING INCOME (LOSS)
 
(34
)

15


66

 
237

 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 

 
 

Loss on debt redemptions
 
(32
)
 

 
(103
)
 

Investment income (loss)
 
(18
)

6


(1
)
 
12

Miscellaneous income
 
6


20


8

 
24

Interest expense — affiliates
 
(5
)

(2
)

(6
)
 
(4
)
Interest expense — other
 
(39
)

(48
)

(91
)
 
(89
)
Capitalized interest
 
10


9


19

 
18

Total other expense
 
(78
)

(15
)

(174
)
 
(39
)
 
 
 
 
 
 
 
 
 
INCOME (LOSS) BEFORE INCOME TAXES
 
(112
)



(108
)
 
198

 
 
 
 
 
 
 
 
 
INCOME TAXES (BENEFITS)
 
(41
)

1


(39
)
 
77

 
 
 
 
 
 
 
 
 
NET INCOME (LOSS)
 
$
(71
)

$
(1
)

$
(69
)
 
$
121

 
 
 
 
 
 
 
 
 
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS)
 
$
(71
)

$
(1
)

$
(69
)
 
$
121

 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS):
 
 
 
 
 
 

 
 

Pensions and OPEB prior service costs
 
(5
)

8


(11
)
 
3

Amortized loss (gain) on derivative hedges
 
(1
)

1


(2
)
 
(4
)
Change in unrealized gain on available-for-sale securities
 
(8
)

3


(3
)
 
13

Other comprehensive income (loss)
 
(14
)

12


(16
)
 
12

Income taxes (benefits) on other comprehensive income (loss)
 
(5
)
 
2

 
(6
)
 
4

Other comprehensive income (loss), net of tax
 
(9
)
 
10

 
(10
)
 
8

 
 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME (LOSS)
 
$
(80
)

$
9


$
(79
)
 
$
129


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


5



FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except share amounts)
 
June 30, 2013
 
December 31, 2012
ASSETS
 
 

 
 

CURRENT ASSETS:
 
 

 
 

Cash and cash equivalents
 
$
2


$
3

Receivables-
 
 

 
 

Customers, net of allowance for uncollectible accounts of $15 in 2013 and $16 in 2012
 
541


483

Affiliated companies
 
435


379

Other, net of allowance for uncollectible accounts of $3 in 2013 and $2 in 2012
 
122


91

Notes receivable from affiliated companies
 
120


276

Materials and supplies
 
454


505

Derivatives
 
170


158

Prepayments and other
 
129


87

 
 
1,973


1,982

PROPERTY, PLANT AND EQUIPMENT:
 
 

 
 

In service
 
12,563


11,997

Less — Accumulated provision for depreciation
 
4,610


4,408

 
 
7,953


7,589

Construction work in progress
 
1,016


1,141

 
 
8,969


8,730

INVESTMENTS:
 
 

 
 

Nuclear plant decommissioning trusts
 
1,270


1,283

Other
 
12


12

 
 
1,282


1,295

DEFERRED CHARGES AND OTHER ASSETS:
 
 

 
 

Customer intangibles
 
103


110

Goodwill
 
24


24

Property taxes
 
36


36

Unamortized sale and leaseback costs
 
164


119

Derivatives
 
87


99

Other
 
239


253

 
 
653


641

 
 
$
12,877


$
12,648

LIABILITIES AND CAPITALIZATION
 
 

 
 

CURRENT LIABILITIES:
 
 

 
 

Currently payable long-term debt
 
$
859


$
1,102

Short-term borrowings
 
4

 
4

Accounts payable-
 
 

 
 

Affiliated companies
 
514


726

Other
 
256


159

Accrued taxes
 
40


171

Derivatives
 
140


124

Other
 
179


280

 
 
1,992


2,566

CAPITALIZATION:
 
 

 
 

Common stockholder's equity-
 
 

 
 

Common stock, without par value, authorized 750 shares- 7 shares outstanding
 
3,082

 
1,573

Accumulated other comprehensive income
 
62

 
72

Retained earnings
 
2,049

 
2,118

Total common stockholder's equity
 
5,193


3,763

Long-term debt and other long-term obligations
 
2,180


3,118

 
 
7,373


6,881

NONCURRENT LIABILITIES:
 
 

 
 

Deferred gain on sale and leaseback transaction
 
875


892

Accumulated deferred income taxes
 
647


515

Asset retirement obligations
 
1,138


965

Retirement benefits
 
250


241

Derivatives
 
35

 
37

Other
 
567


551

 
 
3,512


3,201

COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 12)
 


 


 
 
$
12,877


$
12,648


The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


6



FIRSTENERGY SOLUTIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
 
Six Months Ended June 30
 
(In millions)
 
2013
 
2012
 
 
 
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net Income (Loss)
 
$
(69
)
 
$
121

 
Adjustments to reconcile net income to net cash from operating activities-
 
 
 
 
 
Provision for depreciation
 
154

 
132

 
Nuclear fuel amortization
 
98

 
103

 
Deferred rents and lease market valuation liability
 
(56
)
 
(103
)
 
Deferred income taxes and investment tax credits, net
 
141

 
162

 
Investment impairments
 
45

 
6

 
Retirement benefits
 
(3
)
 
1

 
Pension trust contribution
 

 
(209
)
 
Commodity derivative transactions, net (note 9)
 
22

 
(53
)
 
Cash collateral, net
 
(3
)
 
17

 
Loss on debt redemptions
 
103

 

 
Make-whole premiums paid on debt redemptions
 
(31
)
 

 
Decrease (increase) in operating assets-
 
 
 
 
 
Receivables
 
(156
)
 

 
Materials and supplies
 
52

 
(56
)
 
Prepayments and other current assets
 
(40
)
 
19

 
Increase (decrease) in operating liabilities-
 
 
 
 
 
Accounts payable
 
(104
)
 
243

 
Accrued taxes
 
(131
)
 
(167
)
 
Accrued compensation and benefits
 
3

 
13

 
Other
 
(25
)
 
(10
)
 
Net cash provided from operating activities
 

 
219

 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
New financing-
 
 
 
 
 
Long-term debt
 

 
82

 
Equity contribution from parent
 
1,500

 

 
Redemptions and repayments-
 
 
 
 
 
Long-term debt
 
(1,179
)
 
(140
)
 
Tender premiums paid on debt redemptions
 
(67
)
 

 
Other
 
(5
)
 
(6
)
 
Net cash provided from (used for) financing activities
 
249

 
(64
)
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Property additions
 
(350
)
 
(213
)
 
Nuclear fuel
 
(50
)
 
(90
)
 
Proceeds from asset sales
 
19

 
17

 
Sales of investment securities held in trusts
 
487

 
109

 
Purchases of investment securities held in trusts
 
(515
)
 
(127
)
 
Loans to affiliated companies, net
 
156

 
155

 
Other
 
3

 
(6
)
 
Net cash used for investing activities
 
(250
)
 
(155
)
 
 
 
 
 
 
 
Net change in cash and cash equivalents
 
(1
)
 

 
Cash and cash equivalents at beginning of period
 
3

 
7

 
Cash and cash equivalents at end of period
 
$
2

 
$
7

 

The accompanying Combined Notes to Consolidated Financial Statements are an integral part of these financial statements.


7



FIRSTENERGY CORP. AND SUBSIDIARIES

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note
Number
 
Page
Number
 
 
 
 
 
 
Impairment of Long-Lived Assets
 
 
 
Earnings Per Share of Common Stock
 
 
 
 
 
 
Accumulated Other Comprehensive Income
 
 
 
Income Taxes
 
 
 
Variable Interest Entities
 
 
 
Fair Value Measurements
 
 
 
Derivative Instruments
 
 
 
Asset Retirement Obligations
 
 
 
Regulatory Matters
 
 
 
Commitments, Guarantees and Contingencies
 
 
 
13
Supplemental Guarantor Information
 
 
 
14
Segment Information



8



COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Unless otherwise indicated, defined terms and abbreviations used herein have the meanings set forth in the accompanying Glossary of Terms.

FE is a diversified energy holding company that holds, directly or indirectly, all of the outstanding common stock of its principal subsidiaries: OE, CEI, TE, Penn (a wholly owned subsidiary of OE), JCP&L, ME, PN, FENOC, AE and its principal subsidiaries (AE Supply, AGC, MP, PE, WP and FET), FES and its principal subsidiaries (FG and NG) and FESC. During the second quarter of 2013, FE completed a $1.5 billion equity contribution to FES.

These interim financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and disclosures normally included in financial statements and notes prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim financial statements should be read in conjunction with the financial statements and notes included in the combined Annual Report on Form 10-K for the year ended December 31, 2012.

FirstEnergy follows GAAP and complies with the related regulations, orders, policies and practices prescribed by the SEC, FERC, and, as applicable, the PUCO, the PPUC, the MDPSC, the NYPSC, the WVPSC, the VSCC and the NJBPU. The accompanying interim financial statements are unaudited, but reflect all adjustments, consisting of normal recurring adjustments, that, in the opinion of management, are necessary for a fair presentation of the financial statements. The preparation of financial statements in conformity with GAAP requires management to make periodic estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The reported results of operations are not indicative of results of operations for any future period. FE and its subsidiaries have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

FE and its subsidiaries consolidate all majority-owned subsidiaries over which they exercise control and, when applicable, entities for which they have a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation. FE and its subsidiaries consolidate a VIE when it is determined that it is the primary beneficiary (see Note 7, Variable Interest Entities). Investments in affiliates over which FE and its subsidiaries have the ability to exercise significant influence, but with respect to which they are not the primary beneficiary and do not exercise control, follow the equity method of accounting. Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and the percentage share of the entity’s earnings is reported in the Consolidated Statements of Income and Comprehensive Income. These Notes to the Consolidated Financial Statements are combined for FirstEnergy and FES.

Certain prior year amounts have been reclassified to conform to the current year presentation.
New Accounting Pronouncements

New accounting pronouncements not yet effective are not expected to have a material effect on the financial statements of FE or its subsidiaries.
2. IMPAIRMENT OF LONG-LIVED ASSETS

FirstEnergy reviews long-lived assets, including regulatory assets, for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The recoverability of a long-lived asset is measured by comparing its carrying value to the sum of undiscounted future cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is greater than the undiscounted cash flows, an impairment exists and a loss is recognized for the amount by which the carrying value of the long-lived asset exceeds its estimated fair value. FirstEnergy utilizes the income approach, based upon discounted cash flows to estimate fair value.

Generating Plant Retirements - 2013

On July 8, 2013, officers of FirstEnergy and AE Supply committed to deactivating the following generating units by October 9, 2013:

Generating Units
MW Capacity
Location
Hatfield's Ferry, Units 1-3
1,710
Masontown, Pennsylvania
Mitchell, Units 2-3
370
Courtney, Pennsylvania

As a result of this decision, in the second quarter of 2013, FirstEnergy recorded a pre-tax impairment of approximately $473 million to continuing operations, which also includes pre-tax impairments of $13 million related to excessive inventory at these facilities. The impairment charge is included within the results of the Competitive Energy Services Segment.



9



Approximately 380 plant employees and generation related positions are expected to be affected by these plant deactivations. Eligible employees will receive severance benefits in 2013 that are currently estimated to be approximately $15 million (pre-tax) and were recognized in Other operating expenses in the Consolidated Statements of Income (Loss) in the second quarter of 2013.

Upon termination of operations at Hatfield's Ferry Units 1-3, AE Supply will have the right to redeem $235 million of its outstanding PCRBs at par.

AE Supply has obligations, such as fuel supply, that could be affected by the plant closings and management is currently unable to reasonably estimate potential costs, or a range thereof, that could be incurred.

Generating Plant Retirements - 2012

As of September 1, 2012, Albright, Armstrong, Bay Shore Units 2-4, Eastlake Units 4-5, R. Paul Smith, Rivesville and Willow Island have been deactivated. On April 25, 2012, PJM concluded its initial analysis of the reliability impacts from the previously announced plant deactivations and requested RMR arrangements for Eastlake Units 1-3, Ashtabula Unit 5 and Lake Shore Unit 18 through the spring of 2015. During the three months and six months ended June 30, 2012, FirstEnergy recognized pre-tax severance expense of approximately $10 million ($6 million by FES) and $17 million ($10 million by FES), respectively, as a result of the deactivations. These costs are included in Other operating expenses in the Consolidated Statements of Income (Loss).

Cost Savings Initiatives

In addition to deactivating Hatfield's Ferry and Mitchell, FirstEnergy has identified and intends to implement additional cost control opportunities across the organization. These actions include reductions to medical and other employee benefits and other organizational changes, including a reduction in staffing of an additional 250 positions. FirstEnergy did not recognize any costs in the second quarter of 2013 associated with these actions as final plans were not completed. FirstEnergy expects to incur approximately $3 million (pre-tax) of severance related expenses in the third quarter of 2013.
3. EARNINGS PER SHARE OF COMMON STOCK

Basic earnings per share of common stock are computed using the weighted average number of common shares outstanding during the relevant period as the denominator. The denominator for diluted earnings per share of common stock reflects the weighted average of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised.

The following table reconciles basic and diluted earnings per share of common stock:

 
 
Three Months Ended June 30
 
Six Months Ended June 30
Reconciliation of Basic and Diluted Earnings per Share of Common Stock
 
2013
 
2012
 
2013
 
2012
 
 
(In millions, except per share amounts)
 
 
 
 
 
 
 
Weighted average number of basic shares outstanding
 
418

 
417

 
418

 
418

Assumed exercise of dilutive stock options and awards(1)
 

 
2

 
1

 
1

Weighted average number of diluted shares outstanding
 
418

 
419

 
419

 
419

 
 
 
 
 
 
 
 
 
Earnings (Losses) Available to FirstEnergy Corp.
 
$
(164
)
 
$
187

 
$
32

 
$
493

 
 
 
 
 
 
 
 
 
Basic earnings (losses) per share of common stock
 
$
(0.39
)
 
$
0.45

 
$
0.08

 
$
1.18

Diluted earnings (losses) per share of common stock
 
$
(0.39
)
 
$
0.45

 
$
0.08

 
$
1.18


(1) 
For the three months ended June 30, 2013, 1 million shares were excluded from the calculation of diluted shares outstanding, as a net loss was incurred and the inclusion of any other potential shares outstanding would be antidilutive. The number of potentially dilutive securities not included in the calculation of diluted shares outstanding due to their antidilutive effect were not significant for the three months ended June 30, 2012 and six months ended June 30, 2013 and 2012.


10



4. PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS

The components of the consolidated net periodic cost for pensions and OPEB (including amounts capitalized) were as follows:

Components of Net Periodic Benefit Costs (Credits)
 
Pensions
OPEB
For the Three Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
 
(In millions)
Service costs
 
$
49

 
$
40

 
$
3

 
$
3

Interest costs
 
93

 
97

 
9

 
12

Expected return on plan assets
 
(125
)
 
(121
)
 
(8
)
 
(9
)
Amortization of prior service costs (credits)
 
3

 
3

 
(58
)
 
(51
)
Net periodic costs (credits)
 
$
20

 
$
19

 
$
(54
)
 
$
(45
)

Components of Net Periodic Benefit Costs (Credits)
 
Pensions
OPEB
For the Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
 
(In millions)
Service costs
 
$
98

 
$
80

 
$
6

 
$
6

Interest costs
 
186

 
194

 
18

 
24

Expected return on plan assets
 
(250
)
 
(242
)
 
(16
)
 
(18
)
Amortization of prior service costs (credits)
 
6

 
6

 
(107
)
 
(102
)
Net periodic costs (credits)
 
$
40

 
$
38

 
$
(99
)
 
$
(90
)
 
 
 
 
 
 
 
 
 

Pension and OPEB obligations are allocated to FE's subsidiaries employing the plan participants. The net periodic pension and OPEB costs (net of amounts capitalized) recognized in earnings by FE and FES were as follows:

Net Periodic Benefit Expense (Credit)
 
Pensions
 
OPEB
For the Three Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
 
(In millions)
FirstEnergy
 
$
14

 
$
14

 
$
(34
)
 
$
(32
)
FES
 
5

 
5

 
(5
)
 
(4
)

Net Periodic Benefit Expense (Credit)
 
Pensions
 
OPEB
For the Six Months Ended June 30,