Allegheny Power 2015 Annual Report Download - page 28

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assettransfer.CES'increaseinotheroperatingexpenseswasprimarilyattributabletohighertransmissioncosts,which
resultedfromthemarketconditionsassociatedwiththeextremeweathereventsinthefirstquarterof2014,andhigher
marktomarketexpensesonderivativecontracts,partiallyoffsetbylowergenerationoperatingandmaintenancecosts
primarilyresultingfromthedeactivationofgeneratingplantsandtheHarrison/Pleasantsassettransfer.
FirstEnergy’s other expenses decreased $121 million yearoveryear, primarily resulting from the absence of a loss on debt
redemptionsof$124millionrecognizedin2013.Higherinterestexpensewasoffsetbyhigherinvestmentincomeandcapitalized
financingcosts,primarilyattributabletoRegulatedTransmission’sEnergizingtheFutureinvestmentplan.
FirstEnergy’seffectivetaxrateonincomefromcontinuingoperationswas(24.6)%comparedto34.2%in2013.Thedecreaseinthe
effectivetaxratewasattributabletotaxbenefitsrecognizedin2014associatedwithanIRSapprovedchangeinaccountingmethod
forcostsassociatedwiththerefurbishmentofmetersandtransformersandtheexpirationofthestatuteoflimitationsonuncertaintax
positions.Additionally,during2014,FirstEnergyrecognizedareductioninincometaxexpenseof$25millionthatrelatedtoprior
periodsresultingfromadjustmentstoitstaxbasisbalancesheet.
RESULTSOFOPERATIONS
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ThefinancialresultsdiscussedbelowincluderevenuesandexpensesfromtransactionsamongFirstEnergy’sbusinesssegments.A
reconciliationofsegmentfinancialresultsisprovidedinNote18,SegmentInformation,oftheCombinedNotestoConsolidated
FinancialStatements.Certainprioryearamountshavebeenreclassifiedtoconformtothecurrentyearpresentation.
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Duringthefourthquarterof2015,managementconcludedthatFEV's331/3%equityinvestmentinGlobalHoldingwasnolongera
strategicassettoCES.Becauseofthisdecision,thesegmentreportingwasmodifiedtoreflecthowmanagementnowviewsand
makesinvestmentdecisionsregardingCESandGlobalHolding.Theexternalsegmentreportingisconsistentwiththeinternal
financialreportsusedbyFirstEnergy'sChiefExecutiveOfficer(itschiefoperatingdecisionmaker)toregularlyassessperformanceof
thebusinessandallocateresources.DisclosuresforFirstEnergy'sreportableoperatingsegmentsfor2014and2013havebeen
reclassifiedtoconformtothecurrentpresentationreflectingtheactivityofFEV'sinvestmentinGlobalHoldinginCorporate/Other.
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Netincomebybusinesssegmentwasasfollows:
Increase(Decrease)
2015
2014
2013
2015vs2014
2014vs2013
(Inmillions,exceptpershareamounts)
NetIncome(Loss)ByBusinessSegment:
RegulatedDistribution
$
618
$
465
$
501
$
153
$
(36
)
RegulatedTransmission
298
223
214
75
9
CompetitiveEnergyServices
89
(331
)
(218
)
420
(113

)
Corporate/Other(1)
(427
)
(58
)
(105
)
(369
)
47
NetIncome
$
578
$
299
$
392
$
279
$
(93
)
BasicEarningsPerShare:
Continuingoperations
$
1.37
$
0.51
$
0.90
$
0.86
$
(0.39
)
Discontinuedoperations(Note19)
—
0.20
0.04
(0.20
)
0.16
Earningsperbasicshare
$
1.37
$
0.71
$
0.94
$
0.66
$
(0.23
)
DilutedEarningsPerShare:
Continuingoperations
$
1.37
$
0.51
$
0.90
$
0.86
$
(0.39
)
Discontinuedoperations(Note19)
—
0.20
0.04
(0.20
)
0.16
Earningsperdilutedshare
$
1.37
$
0.71
$
0.94
$
0.66
$
(0.23
)
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(1)Consistsprimarilyofinterestonstandaloneholdingcompanydebt,nonecorebusinessrelatedactivityandcorporateincometaxes.
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SummaryofResultsofOperations—2015Comparedwith2014
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FinancialresultsforFirstEnergy’sbusinesssegmentsin2015and2014wereasfollows:

2015FinancialResults
Regulated
Distribution
Regulated
Transmission
Competitive
Energy
Services
Corporate/Other
andReconciling
Adjustments
FirstEnergy
Consolidated
(Inmillions)
Revenues:
External
Electric $ 9,429 $ 1,011 $ 4,493 $ (173) $ 14,760
Other196 — 205(135) 266
Internal — — 686(686) —
TotalRevenues9,6251,0115,384(994) 15,026
OperatingExpenses:
Fuel533 — 1,322 — 1,855
Purchasedpower3,548 — 1,456(686) 4,318
Otheroperatingexpenses2,2421541,670(317) 3,749
PensionandOPEBmarktomarket179 3 60 — 242
Provisionfordepreciation672156394601,282
Amortizationofregulatoryassets,net261 7 — — 268
Generaltaxes70310214033978
Impairmentoflonglivedassets 8 — 34 — 42
TotalOperatingExpenses8,1464225,076(910) 12,734
OperatingIncome1,479589308(84) 2,292
OtherIncome(Expense):
Lossondebtredemptions — — — — —
Investmentincome(loss)42 — (16) (48) (22)
Impairmentofequitymethodinvestment — — — (362) (362)
Interestexpense(586) (161) (192) (193) (1,132)
Capitalizedfinancingcosts254439 9 117
TotalOtherExpense(519) (117) (169) (594) (1,399)
IncomeFromContinuingOperationsBefore
IncomeTaxes960472139(678) 893
Incometaxes34217450(251) 315
IncomeFromContinuingOperations61829889(427) 578
DiscontinuedOperations,netoftax — — — — —
NetIncome $ 618 $ 298 $ 89 $ (427) $ 578