Allegheny Power 2015 Annual Report Download - page 29

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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:
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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