UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------------------------------------------
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 30, 2003
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) for the transition period
from _________ to 5313 __________.
Commission file number 333-21011
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
FIRSTENERGY CORP. SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
FIRSTENERGY CORP.
76 SOUTH MAIN STREET
AKRON, OH 44308
FirstEnergy Corp. Savings Plan
Report on Audits of Financial Statements and
Supplemental Schedules
December 30, 2003 and 2002
FirstEnergy Corp. Savings Plan
Index
December 30, 2003 and 2002
--------------------------------------------------------------------------------
Page
Report of Independent Registered Public Accounting Firms 1, 1a
Statements of Net Assets Available for Plan Benefits at
December 30, 2003 and 2002 2
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 30, 2003 and 2002 3
Notes to Financial Statements 4-13
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
as of December 30, 2003 14
Schedule H, Line 4j - Schedule of Reportable Transactions
for the Year Ended December 30, 2003 15
All other supplemental schedules are omitted as they are not applicable or are
not required based on the disclosure requirements of the Employee Retirement
Income Security Act of 1974 and applicable regulations issued by the Department
of Labor.
Report of Independent Registered Public Accounting Firm
To the Participants and Savings Plan Committee of the
FirstEnergy Corp. Savings Plan
Akron, Ohio
We have audited the accompanying statement of net assets available for plan
benefits of FirstEnergy Corp. Savings Plan as of December 30, 2003, and the
related statement of changes in net assets available for plan benefits for the
year then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of FirstEnergy Corp.
Savings Plan as of December 30, 2002 were audited by other auditors whose report
dated June 20, 2003, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with the standards of Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of FirstEnergy
Corp. Savings Plan as of December 30, 2003 and the changes in its net assets
available for plan benefits for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions as of and for the year ended
December 30, 2003 together referred to as "supplemental information", are
presented for the purpose of additional analysis and are not a required part of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental information is the
responsibility of the Plan's management. The supplemental information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
BOBER, MARKEY, FEDOROVICH & COMPANY
June 1, 2004
1
Report of Independent Registered Public Accounting Firm
To the Participants and Savings Plan Committee of the
FirstEnergy Corp. Savings Plan
In our opinion, the accompanying statement of net assets available for plan
benefits and the related statement of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the FirstEnergy Corp. Savings Plan (the "Plan") at December 30,
2002 and the changes in net assets available for plan benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Cleveland, Ohio
June 20, 2003
1a
FirstEnergy Corp. Savings Plan
Statements of Net Assets Available for Plan Benefits
At December 30, 2003 and 2002
--------------------------------------------------------------------------------
Assets 2003 2002
Cash and cash equivalents $ 2,315,659 $ 2,122,300
FirstEnergy common stock 451,241,964 413,047,769
Capital preservation investments 389,693,314 197,456,856
Domestic equity stocks 579,885,658 238,326,911
International equity stocks 61,992,782 35,268,919
Other equities 41,447,926 18,893,250
Balanced 187,419,570 -
Bonds 67,075,705 29,884,888
Participant loans 30,412,933 19,762,708
Interest receivable 1,803,494 940,951
Employee contributions receivable - 2,209,914
Pending sale transactions 427,549 830,930
-------------- --------------
Total assets 1,813,716,554 958,745,396
Liabilities
Pending purchase transactions - 138,287
ESOP loan balance 96,550,000 125,850,000
Accrued fees 92,270 18,846
-------------- --------------
Total liabilities 96,642,270 126,007,133
-------------- --------------
Net assets available for plan benefits $1,717,074,284 $ 832,738,263
============== =============
The accompanying notes are an integral part of these financial statements.
2
FirstEnergy Corp. Savings Plan
Statements of Changes in Net Assets Available for Plan Benefits
For the Years Ended December 30, 2003 and 2002
--------------------------------------------------------------------------------
2003 2002
Additions:
Contributions:
Employee $ 76,674,175 $ 51,490,830
Employer 31,398,910 24,200,635
------------ -------------
Total contributions 108,073,085 75,691,465
Investment income (loss):
Interest and dividends 51,151,845 33,601,245
Net appreciation (depreciation) in
fair value of investments (Note 5) 202,582,607 (113,347,156)
------------ -------------
Total investment income (loss) 253,734,452 (79,745,911)
Transfer of assets from other plans,
net (Note 9) 622,421,986 18,949,093
Total additions 984,229,523 14,894,647
------------ -------------
Deductions:
Distributions to Participants (85,489,592) (35,304,079)
ESOP interest (12,585,000) (14,955,570)
Fees (1,818,910) (677,964)
ESOP transfers to other benefit plan - (2,786,632)
------------ -------------
Total deductions (99,893,502) (53,724,245)
------------ -------------
Increase (decrease) in net assets available
for benefits 884,336,021 (38,829,598)
Net assets available for plan benefits,
beginning of year 832,738,263 871,567,861
------------- -------------
Net assets available for plan benefits,
end of year $1,717,074,284 $ 832,738,263
============== =============
The accompanying notes are an integral part of these financial statements.
3
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
1. Description of the Plan
The FirstEnergy Corp. Savings Plan (the "Plan") provides eligible
employees of FirstEnergy Corp. ("FirstEnergy") and its subsidiaries,
collectively referred to as the "Companies", a mechanism through which
they can save and invest part of their income on a tax deferred basis at
regular intervals. Additionally, the Companies currently match employee
contributions with shares of FirstEnergy common stock (see Note 7) held
in the Employee Stock Ownership Plan ("ESOP") except for former GPU union
participants that are currently matched in cash. However, according to
the Plan, the Companies can alternatively make all contributions in cash.
Employees may invest their contributions in other investment options (the
"Funds") and all contributions made to employees' accounts are fully and
immediately vested in the Plan. The purpose of the Plan is to encourage
employees to adopt a regular savings program and to provide additional
security for retirement. The following is a brief description of the Plan
and is provided for general information purposes only. Employees should
refer to the Plan documents for more complete information.
The Plan is a qualified profit-sharing plan under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and provides for
salary reduction contributions under Section 401(k) of the Code. In
general, plans established pursuant to Section 401(k) of the Code permit
eligible employees to defer current federal and, subject to applicable
laws, state and local income taxes on the portion of their current
compensation represented by the amount of the salary reduction elected.
The amounts, as elected by the employees, are contributed to the Plan by
the Companies through payroll deductions.
The Plan is subject to Title I of the Employee Retirement Income Security
Act of 1974 ("ERISA"), but not Title IV as it is an "individual account
plan." Title I establishes reporting and disclosure requirements, minimum
standards for participation, vesting and benefit accrual, prohibitions
governing the conduct of fiduciaries and provides that ERISA pre-empts
other federal, state and local statutes relating to employee benefits.
The protective benefits of Title IV which relate to insuring pension
benefits by the Pension Benefit Guaranty Corporation are not applicable
to individual account plans.
Every permanent FirstEnergy employee is eligible to become a participant
in the Plan, herein referred to as "employee" or "Participant",
immediately at commencement of employment.
Employees may participate in one or more of the Funds through deferral of
compensation. The choice of investments (except the Companies' matching
contributions, which are in the form of FirstEnergy common stock) is the
responsibility of the individual employee. Transfers between funds are
the responsibility of the employee and may be made on a daily basis.
Securities in the ESOP Account
------------------------------
The ESOP purchased a total of 10,654,114 shares of Ohio Edison ("OE")
common stock from November 1990 to December 1991 for the purpose of
funding the Companies' matching contribution to the Plan. On November 8,
1997, pursuant to the merger of OE and Centerior Energy Corporation that
created FirstEnergy ("Merger"), shares of OE common stock were converted
into shares of FirstEnergy common stock on a one-for-one basis.
The Plan borrowed $200 million, referred to herein as the "ESOP Loan", at
a rate of 10% from OE to fund the purchase of the stock. The ESOP Loan is
collateralized by the unallocated FirstEnergy common stock acquired with
4
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
the proceeds of the ESOP Loan. The ESOP Loan is expected to be repaid by
December 2005. Interest payments on the loan are made annually.
Additionally, principal payments may be made sooner if additional shares
of FirstEnergy common stock are needed for distributions to Participants.
At December 30, 2003 and 2002, the ESOP Loan balance was $96,550,000 and
$125,850,000, respectively.
Requirements for maturing long-term debt are as follows:
2004 $35,700,000
2005 60,850,000
-----------
$96,550,000
===========
ESOP Allocation
---------------
As principal and interest payments are made on the ESOP Loan, shares of
FirstEnergy common stock are released from the ESOP Unallocated Fund to
the ESOP Allocated Fund where they are made available for contribution to
Participants' accounts. The Plan made interest payments of $12,585,000 in
2003 and $14,955,000 in 2002, which released 297,695 shares in 2003 and
353,756 shares in 2002. In December 2003, a principal payment of
$29,300,000 was made which led to the release of 693,083 shares. In
December 2002, a principal payment of $23,700,000 was made which led to
the release of 560,617 shares.
The Companies' matching contribution to each Participant's account is
computed the Thursday following the end of each pay period based on the
Companies' matching contribution percentages (see Note 7) and on the
quoted market price of FirstEnergy common stock when contributed. During
2003 and 2002, there were 968,431 and 688,740 ESOP shares, respectively
contributed to Participants' accounts. In 2003 and 2002, respectively,
254,833 and 207,989 ESOP shares were realized related to the reinvestment
of dividends on the ESOP shares.
At December 30, 2003 and 2002, there were 2,656,189 and 3,646,967 shares,
respectively, held in the ESOP Unallocated Fund at market values of
$93,497,853 and $120,240,502, respectively, and 6,553,214 and 5,690,142
shares, respectively, held in the ESOP Allocated Fund at market values of
$230,673,148 and $187,604,005. The market value of the ESOP common stock
is measured by the quoted market price.
PAYSOP
------
A component of the Plan consists of a qualified payroll-based tax credit
employee stock ownership plan ("PAYSOP") under Section 401(a) and Section
501(a) of the Code.
Under the Economic Recovery Tax Act of 1981, effective January 1, 1983,
tax credits were based upon eligible employee compensation. The
regulation permitted the Companies to contribute to the fund a maximum of
one-half of one percent of the aggregate compensation of eligible
employees and claim a tax credit on its consolidated federal income tax
return equal to this amount. The amounts allocated to eligible employees
were based upon the proportion of their wages and salaries (to a maximum
of $100,000) to the wages and salaries of total employees for the year.
5
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
The Tax Reform Act of 1986 eliminated the PAYSOP tax credit with respect
to compensation earned in 1987 or later years. As a result, the Companies
have not contributed to the PAYSOP since the 1986 contribution other than
for the reimbursement of PAYSOP administrative expenses.
On November 8, 1997, pursuant to the Merger, shares of OE common stock
held in the PAYSOP were converted into shares of FirstEnergy common stock
on a one-for-one basis.
Prior to February 11, 2002, dividends were paid annually to Participants
in the PAYSOP. The market value of the common stock in the PAYSOP is
measured by the quoted market price. As of February 11, 2002, dividends
are payable quarterly to Participants and Participants will also have the
option to reinvest dividends back into the PAYSOP Fund. The market value
of the PAYSOP Fund was $3,347,085 and $3,114,477 at December 30, 2003 and
2002 respectively.
2. Summary of Accounting Policies
The financial statements have been prepared on the accrual basis of
accounting.
The Plan presents, in the Statements of Changes in Net Assets Available
for Plan Benefits, the net appreciation (depreciation) in the fair value
of its investments, which consists of realized gains or losses and
unrealized appreciation or depreciation. All investment management fees
are deducted from investment income. The market value of the Fund is
measured at the market value per share determined by the investment
manager except for funds A, B, L and N. See footnote 4 for the
methodology used to determine fair value for each of these funds.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
recorded in the financial statements and accompanying notes. Actual
results may differ from these estimates.
Expenses for the administration of the Plan are paid for by the Plan
unless otherwise paid for by the Companies.
Certain amounts from the prior year have been reclassified in order to
conform to the current presentation.
3. Plan Termination
Although the Companies have not expressed any intent to do so, the
Companies reserve the right to discontinue or terminate the Plan at any
time. If the Plan should be terminated, in whole or in part, Participants
will be entitled to withdraw the full value of their accounts, to the
extent allowed by law.
4. Descriptions of Funds
The following are brief descriptions of the Funds currently available to
Participants at December 30, 2003:
6
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
Fund A - Company Common Stock Fund
----------------------------------
This Fund consists entirely of shares of FirstEnergy common stock. The
Fund provides an opportunity for employees to increase their common
ownership stake in FirstEnergy. The objective for this Fund is the growth
of capital through both appreciation and dividend income. The Fund also
holds the Companies' pre-ESOP matching contribution in FirstEnergy common
stock. The common stock is purchased by the Trustee on the open market.
The market value of the common stock is measured by the quoted market
price.
Fund B - Capital Preservation Fund
----------------------------------
This Fund consists of guaranteed fixed income contracts issued by
insurance companies and banks, collateralized mortgage obligations, and
short-term money market instruments. These contracts guarantee interest
for a fixed period and the principal amount of all investments. The
market value of the Capital Preservation Fund is measured at the contract
value as determined by the insurers and banks.
Fund C - S&P 500 Index Fund
---------------------------
This Fund is a common/collective trust investing in the S&P 500 stocks.
The objective of this Fund is the growth of capital through both
appreciation and dividend income.
Fund D - Small Cap Value Fund
-----------------------------
This Fund invests primarily in securities of well-financed small cap
companies at a substantial discount to what the manager believes are
takeover values. The manager is National City Bank and the mutual fund
name is Armada Small Cap Value. The objective of the Fund is to match or
exceed the returns of the Russell 2000 Value Index over time.
Fund E - Large Cap Value Fund
-----------------------------
The Fund seeks long-term capital appreciation and income by focusing on
domestic large company equities that are selling at modest prices to
earnings multiples. Shares are usually held for the long-term. Only
extreme valuations or major changes to a company's fundamentals will
trigger a sale. The portfolio manager is Davis Selected Advisors, L.P.
and the mutual fund name is Selected American Fund. The performance
objective is to match or exceed the S&P/Barra Large Cap Value Index over
time.
Fund F - Mid Cap Value Fund
---------------------------
The Fund seeks long-term capital appreciation by investing in mid-sized
companies that are less closely monitored by the investment community as
evidenced by low institutional ownership and analyst coverage. The goal
is to find well-managed companies that have sustainable growth prospects
but that are selling at prices below their private market value. The
manager believes that these factors may cause shares to be undervalued.
The manager may sell a stock when its price no longer compares favorably
with the company's private market value. The portfolio manager is Lord
Abbett Management and the mutual fund name is Lord Abbett Mid Cap Value
Fund.
7
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
Fund G - Mid Cap Growth Fund
----------------------------
The Fund seeks long-term capital appreciation by investing in mid cap
companies that are leaders in attractive growth markets and in securities
of higher risk accelerating growth companies. These securities are driven
by product cycles, favorable sector conditions or other company specific
factors expected to produce rapid sales and earnings growth. The Fund's
investments are usually bought and sold relatively frequently. The
portfolio manager is Invesco Funds Group, Inc. and the mutual fund name
is Invesco Dynamics Fund.
Fund H - Small Cap Growth Fund
------------------------------
The Fund seeks long term capital appreciation by investing in small
companies that are positioned for above-average growth in revenues,
earnings or assets. Both qualitative and quantitative analysis is used to
evaluate companies for distinct and sustainable competitive advantages
which are likely to lead to growth in earnings and share price. The
portfolio manager is Franklin Advisers, Inc. The mutual fund name is
Franklin Small Cap Growth II Fund.
Fund I - Bond Fund
------------------
The Fund seeks to maximize total return consistent with the preservation
of capital by investing at least 65% of its assets in a diversified
portfolio of intermediate term fixed income investments of varying
maturities. The Fund invests primarily in investment grade debt but may
invest up to 10% of its assets in high yield securities rated B or
higher. The Fund may invest up to 20% of assets in securities denominated
in foreign currencies. The portfolio manager is PIMCO and the mutual fund
name is PIMCO Total Return Fund.
Fund J - Self Managed Fund
--------------------------
Participants may invest in a self-managed brokerage account available
through State Street Brokerage Services, Inc. Options include mutual
funds along with any security that is listed on the NYSE, ASE and NASDAQ.
Fund K - EuroPacific Fund
-------------------------
This Fund is an actively managed portfolio of foreign common stocks
managed by Capital Research & Management Co. The objective of the Fund is
the growth of capital through appreciation.
Fund L - Loan Fund
------------------
The Plan allows Participants to borrow from their before-tax, after-tax
and rollover accounts for certain approved purposes. When loans are made,
they are recorded as interfund transfers. The repayments of principal and
interest are credited to the Participants' account balances within the
respective funds. The employee repays the loan and all related interest
through payroll deductions.
Participants may borrow up to 50 percent of their total account balance
or 100 percent of their before-tax account, whichever is less. The
interest rate charged is based on the prime rate plus 1 percent, and
range from 5.0% to 10.79%. Participants may have up to two loans
outstanding at one time. The minimum loan amount is $1,000 and must be
repaid within 6 and 60 months. If the loan is for the purchase of a
principal residence, the loan repayment period can be extended to 30
years. The maximum loan amount is $50,000.
8
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
Fund M - Armada Equity Growth Fund
----------------------------------
This is an actively managed Fund specializing in large capitalization
growth-oriented stock issues managed by National City Bank. The objective
of the Fund is the growth of capital through appreciation.
Fund N - DQE Frozen Stock Fund
------------------------------
This Fund consists entirely of shares of Duquesne Light Holdings, Inc.
("DQE") common stock. These investments were transferred from the former
Beaver Valley Power Station 401(k) Plan. The market value of the common
stock is measured by the quoted market price. The Fund is frozen to
contributions from Participants and allows withdrawals by Participants in
accordance with the Plan document.
Fund O - Fidelity Puritan Fund
------------------------------
This Fund seeks capital appreciation by investing in a combination of
equities and fixed income vehicles. Approximately 60% of assets are
invested in stocks and 40% in bonds and other debt securities. The market
value of this Fund is measured by the quoted market price.
Fund P - Conservative Balanced Fund
-----------------------------------
This Fund seeks capital appreciation by investing in a combination of
equities and fixed income vehicles and is appropriate for the participant
with a lower risk tolerance. The market value of this Fund is measured by
the quoted market price.
Fund Q - Moderate Balanced Fund
-------------------------------
This Fund seeks capital appreciation by investing in a combination of
equities and fixed income vehicles and is appropriate for the participant
with moderate risk tolerance. The market value of this Fund is measured
by the quoted market price.
Fund R - Aggressive Balanced Fund
---------------------------------
This Fund seeks capital appreciation by investing in a combination of
equities and fixed income vehicles and is appropriate for the participant
with a high level of risk tolerance. The market value of this Fund is
measured by the quoted market price.
5. Investments
The Plan's investments are maintained in investment funds and shares of
common stock of FirstEnergy and DQE, as described in Note 4.
Investment securities are exposed to various risks such as interest rate,
market and credit risks. Market values of securities fluctuate based on
the magnitude of changing market conditions; significant changes in
market conditions could materially affect plan investments.
9
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
The following presents the market value of investments that represent 5
percent or more of the Plan's net assets available for plan benefits at
December 30, 2003 and 2002:
2003 2002
FirstEnergy Common Stock $451,241,964 $413,047,769
Capital Preservation Fund 391,375,465 197,456,856
S&P 500 Index Fund 294,886,126 121,527,709
Armada Equity Growth Fund 118,799,934 59,553,514
Moderate Growth Lifestyle Fund 105,488,054
The net appreciation (depreciation) of the Plan's investments for 2003
and 2002 was as follows:
2003 2002
Bonds $ 353,657 $ 328,438
Domestic stocks 130,149,306 (80,716,515)
International stocks 14,481,185 (6,013,812)
Balanced Funds 27,453,763 -
FirstEnergy common stock 30,144,696 (26,945,267)
------------ -------------
Total $202,582,607 $(113,347,156)
============ =============-
6. Non-Participant Directed Investments
Net assets available for plan benefits and changes in net assets
available for plan benefits relating to non-participant directed
investments at December 30, 2003 and 2002 and for the years then ended
are as follows:
10
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
2003 2002
Assets:
FirstEnergy common stock $231,085,956 $185,218,066
------------ ------------
Net assets available for plan benefits $231,085,956* $185,218,066*
============ ============
Changes in net assets available for plan benefits:
Employer contributions $ 27,791,575 $ 24,200,635
Interest and dividends 14,254,896 14,569,239
Net appreciation in fair value
of investments 22,840,018 4,225,121
Distributions to Participants (8,022,813) (5,782,225)
Transfers, net (2,135,415) (971,214)
Conversions 3,724,629 (2,459,855)
ESOP interest expense (12,585,000) (14,955,570)
------------ ------------
Increase in net assets available for plan
benefits $ 45,867,890 $ 18,826,131
============ ============
* Net of ESOP loan amounts of $96.6 million and $125.9 million, respectively.
7. Contributions
Employer Contributions
----------------------
The Companies pay a matching contribution of 50% on the first 6% of
compensation contributed by an employee, except for the former GPU
unions. The former GPU union participants receive a match on the first 4%
of eligible contributions. In addition, the Companies may designate a
number of performance objectives and contribute for each objective
achieved, an additional $0.05, up to a maximum of $0.25, on each $1.00 of
the first 6% of compensation contributed by an employee. However, the
former GPU union participants receive no bonus match. The Companies'
contributions are always invested in FirstEnergy common stock, except for
the former GPU union participants that are currently matched in cash.
The Companies' contributions have been pre-funded by the FirstEnergy
common stock held by the ESOP Unallocated Fund. These shares of
FirstEnergy common stock earn dividend income and are subject to
unrealized appreciation and depreciation as the market value of the
FirstEnergy common stock fluctuates. The dividend income serves to pay
the ESOP Loan and related interest, which results in the release of
shares to the ESOP Allocated Fund as the Companies' matching
contribution. To the extent dividend income is not sufficient to pay the
ESOP Loan and interest, the Companies will contribute cash which is
reflected as employer contributions in the Statements of Changes in Net
Assets Available for Plan Benefits. Effective February 11, 2002,
Participants who are at least 55 years of age with ten years in the ESOP
are provided the ability to diversify a portion of their company matching
portfolio. The first participants to elect this option became eligible in
2002.
11
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
Employee Contributions
----------------------
Employees can invest between 1% and 20% of their salary in the Plan.
Employee contributions may be made on a before-tax and/or after-tax
basis. Under the before-tax option, deposits are deducted from current
taxable income but are taxable when they are withdrawn from the Plan. The
Economic Growth and Tax Relief Reconciliation Act of 2001 limited the
maximum annual before-tax contribution to $12,000 for 2003 and $11,000
for 2002. Participants who are at least 50 years of age can elect to
defer an additional $1,000 annually. Prior to age 59-1/2, an active
employee may withdraw before-tax deposits only under certain hardship
conditions as defined in the Plan document.
Employees may make rollover contributions to the Plan of funds held in
other tax-qualified plans which the employee was a participant of prior
to becoming employed by the Companies. The rollover contributions must be
the result of a qualified total distribution from another tax-qualified
plan and must be contributed to the Plan within 60 days after
distribution to the employee.
Both employer and employee contributions under the Plan are held in a
trust fund with the Trustee. Employees may choose to invest their
contributions in Funds A, B, C, D, E, F, G, H, I, J, K, M, O, P, Q or R
(see Note 4) which are offered by the Plan. Employees may also elect to
borrow from their before-tax accounts for certain approved purposes (Fund
L).
8. Tax Considerations
The Plan is exempt from federal, state and local income taxes. The Plan
received a favorable determination letter, which was dated March 24,
2003. The federal, state and local income tax treatments of distributions
from the Plan depend upon when they are made and their form. The
withdrawal of the principal amount of a Participant's after-tax
contribution is not, however, subject to tax. For tax years beginning
after December 31, 1986, the Tax Reform Act of 1986 requires that an
additional tax of 10% be applied to employee withdrawals from the Plan
prior to death, disability, attainment of age 59-1/2, or under certain
other limited circumstances.
In the case of withdrawal by a Participant employed by the Companies
prior to the attainment of age 59-1/2, the excess of the value of the
withdrawal over the total amount of the Participant's after-tax
contributions, is taxable at ordinary income tax rates. The value of
FirstEnergy's common stock withdrawn is considered to be its fair value
on the date it is withdrawn.
In the case of a distribution that qualifies as a lump-sum distribution
upon a Participant's termination of employment with the Companies or
after attaining the age of 59-1/2, only the excess of the value of the
lump sum distribution over the amount of the Participant's after-tax
contributions to the Plan (less withdrawals) is taxable at ordinary
income tax rates. In determining the value of the lump-sum distribution,
the FirstEnergy common stock distributed in-kind or in cash shall be
valued at fair value on the date it is withdrawn.
9. Transfers of Net Assets into the Plan
On January 7, 2003, the GPU Savings Plans merged into the FirstEnergy
Corp. Savings Plan Trust. Assets of $623 million transferred into the
Plan. On September 11, 2003, the Northeast Ohio Natural Gas Savings Plan
transferred $1.1 million of assets out of the Plan.
12
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2003 and 2002
--------------------------------------------------------------------------------
On April 30, 2002, the FirstEnergy Corp. 401(k) Retirement Savings Plan
for IBEW Employees of the Beaver Valley Nuclear Power Plant was merged
into the Plan. Net assets with a value of $18.9 million were transferred
into the Plan.
10. Guaranteed Investment Contracts
The Plan holds fully benefit-responsive guaranteed investment contracts
("GICs"), which are presented at contract value in the Statements of Net
Assets Available for Plan Benefits as previously stated in Note 4. The
fair values of the GICs at December 30, 2003 and 2002 were $391,335,049
and $209,520,197, respectively. The average yield of the contracts was
5.15% and 5.36% for the years 2003 and 2002, respectively. The crediting
interest rate as of December 30, 2003 and 2002 was 4.30% and 4.87%,
respectively. The Capital Preservation Fund is measured at the contract
value as determined by the insurers and banks and no valuation reserve in
relation to the contract value is deemed necessary. The GICs in the Plan
are of various types and have zero minimum crediting interest rates.
There are fixed crediting interest rates and variable crediting interest
rates that reset on a monthly or quarterly basis.
13
FirstEnergy Corp. Savings Plan
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
EIN: 34-1843785 PN: 002
As of December 30, 2003
--------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Identity of Issue Description Cost Current Value
State Street STIF Fund Money Market Fund *** $ 2,315,659
* Company Common Stock FE Common Stock $ 276,736,686 451,241,964
Capital Preservation Fund GICs, CMOs *** 389,693,314 **
S&P 500 Index Fund S&P 500 Stocks *** 294,676,444
(Common/Collective Trust)
Small Cap Value Fund Domestic Small Cap Stocks *** 69,948,747
(Retail Mutual Fund)
Large Cap Value Fund Large Cap Value Stocks *** 17,158,223
(Retail Mutual Fund)
Mid Cap Value Fund Mid Cap Value Stocks *** 20,727,919
(Retail Mutual Fund)
Mid Cap Growth Fund Mid Cap Growth Stocks *** 36,168,459
(Retail Mutual Fund)
Small Cap Growth Fund Small Cap Growth Stocks *** 18,897,183
(Retail Mutual Fund)
Bond Fund Bonds *** 67,075,705
(Retail Mutual Fund)
Balanced Fund Blend of Stocks, Fixed Income *** 41,945,828
Conservative Lifestyle Fund Blend of Stocks, Fixed Income *** 16,336,316
Moderate Lifestyle Fund Blend of Stocks, Fixed Income *** 105,940,807
Aggressive Lifestyle Fund Blend of Stocks, Fixed Income *** 23,196,619
Self Managed Fund Equities, Fixed Income *** 41,447,926
EuroPacific Fund International Stocks *** 61,992,782
(Mutual Fund)
Loan Fund Participant Loans - 30,412,933
(Rates from 5.0% to 10.79%)
Armada Equity Growth Fund Equities *** 118,758,719
(Mutual Fund)
DQE Frozen Stock Fund DQE Common Stock *** 3,549,964
--------------
$1,811,485,511
--------------
* Party-in-interest
** GIC's are carried at contract value which is cost.
*** Information is not required per instructions to Form 5500.
14
FirstEnergy Corp. Savings Plan
Schedule H, Line 4j - Schedule of Assets (Held at End of Year)
EIN: 34-1843785 PN: 002
As of December 30, 2003
----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Expenses Current Value
Identity of Description Purchase Selling Lease Incurred Cost of of Asset on Net Gain
Party of Assets Price Price Expense in Transaction Asset Transaction Date or (Loss)
FirstEnergy Corp. FirstEnergy $74,223,726 - - - - $ 74,223,276 -
Common Stock
FirstEnergy Corp. FirstEnergy - $ 82,803,062 - - $ 79,061,195 $ 82,803,062 $3,741,867
Common Stock
15
EXHIBIT INDEX
FIRSTENERGY CORP. SAVINGS PLAN
Exhibit
Number
------
23 Consent of Independent Registered Public Accounting Firm
23.1 Consent of Independent Registered Public Accounting Firm
16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Plan Committee, the administrator of the FirstEnergy Corp. Savings Plan,
has duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
FIRSTENERGY CORP.
SAVINGS PLAN
June 25, 2004
-------------
Date
By: /s/ Wendy E.Stark
--------------------------
Wendy E.Stark
Chairperson
Savings Plan Committee
17