Form 8-K Goodwill Impairment Dated January 12, 2007
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported) January 12, 2007
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Commission
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Registrant;
State of Incorporation;
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I.R.S.
Employer
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File
Number
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Address;
and Telephone Number
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Identification
No.
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1-446
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METROPOLITAN
EDISON COMPANY
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23-0870160
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(A
Pennsylvania Corporation)
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c/o
FirstEnergy Corp.
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76
South Main Street
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Akron,
OH 44308
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Telephone
(800)736-3402
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
2.06
Material Impairments.
On
January 12, 2007,
Metropolitan Edison Company (Met-Ed) concluded that a goodwill impairment
charge, currently estimated to be $340
million, would be
recorded in the fourth quarter of 2006. The goodwill at Met-Ed resulted from
the
November 2001 merger between FirstEnergy Corp. and GPU, Inc., Met-Ed’s former
parent company.
In
accordance with
guidance provided by Statement of Financial Accounting Standards No. 142,
“Goodwill and Other Intangible Assets,” Met-Ed evaluates its goodwill for
impairment at least annually and more frequently as conditions warrant. Met-Ed’s
annual review for 2006 was completed in the third quarter of 2006 with no
impairment indicated. On April 10, 2006, Met-Ed made a comprehensive rate filing
(Rate Filing) with the Pennsylvania Public Utility Commission (PPUC) that
addressed transmission, distribution and supply issues and requested an annual
increase in rates of $216 million. The goodwill impairment analysis performed
in
the third quarter of 2006 incorporated management’s estimation at that time
regarding the outcome of the Rate Filing.
On
December 21,
2006, the PPUC conducted an informal, nonbinding polling of the Commissioners
that indicated that the rate increase ultimately granted to Met-Ed could be
substantially less than requested. As a result, Met-Ed determined that an
interim review of its goodwill was required. On January 11, 2007, the PPUC
issued its final rate order in the case authorizing Met-Ed to increase its
annual revenues by approximately $59 million. Accordingly, Met-Ed concluded
that
an impairment to goodwill of approximately $340
million is
required.
No
adjustment to the
consolidated goodwill of Met-Ed’s parent, FirstEnergy Corp., will be made since
the fair value of its regulated segment (which represents FirstEnergy’s
reporting unit to evaluate goodwill) continues to exceed the carrying value
of
its investment in the segment.
Forward-Looking
Statements:
This Form 8-K
includes forward-looking statements based on information currently available
to
management. Such statements are subject to certain risks and uncertainties.
These statements typically contain, but are not limited to, the terms
“anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words.
Actual results may differ materially due to the speed and nature of increased
competition and deregulation in the electric utility industry, economic or
weather conditions affecting future sales and margins, changes in markets for
energy services, changing energy and commodity market prices, replacement power
costs being higher than anticipated or inadequately hedged, the continued
ability of FirstEnergy’s regulated utilities to collect transition and other
charges or to recover increased transmission costs, maintenance costs being
higher than anticipated, legislative and regulatory changes (including revised
environmental requirements), and the legal and regulatory changes resulting
from
the implementation of the Energy Policy Act of 2005 (including, but not limited
to, the repeal of the Public Utility Holding Company Act of 1935), the
uncertainty of the timing and amounts of the capital expenditures needed to,
among other things, implement the Air Quality Compliance Plan (including that
such amounts could be higher than anticipated) or levels of emission reductions
related to the Consent Decree resolving the New Source Review litigation,
adverse regulatory or legal decisions and outcomes (including, but not limited
to, the revocation of necessary licenses or operating permits, fines or other
enforcement actions and remedies) of governmental investigations and oversight,
including by the Securities and Exchange Commission, the Nuclear Regulatory
Commission and the various state public utility commissions as disclosed in
the
registrant’s Securities and Exchange Commission filings, generally, and
heightened scrutiny at the Perry Nuclear Power Plant in particular, the timing
and outcome of various proceedings before the Public Utilities Commission of
Ohio (including, but not limited to, the successful resolution of the issues
remanded to the Public Utilities Commission of Ohio by the Ohio Supreme Court
regarding the Rate Stabilization Plan) and the Pennsylvania Public Utility
Commission, including the transition rate plan filings for Met-Ed and Penelec,
the continuing availability and operation of generating units, the ability
of
generating units to continue to operate at, or near full capacity, the inability
to accomplish or realize anticipated benefits from strategic goals (including
employee workforce initiatives), the anticipated benefits from voluntary pension
plan contributions, the ability to improve electric commodity margins and to
experience growth in the distribution business, the ability to access the public
securities and other capital markets and the cost of such capital, the outcome,
cost and other effects of present and potential legal and administrative
proceedings and claims related to the August 14, 2003 regional power
outage, the successful completion of the share repurchase program announced
August 10, 2006, the risks and other factors discussed from time to time in
the registrant’s Securities and Exchange Commission filings, including its
annual report on Form 10-K for the year ended December 31, 2005, and other
similar factors. The registrant expressly disclaims any current intention to
update any forward-looking statements contained herein as a result of new
information, future events, or otherwise.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
January
19,
2007
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METROPOLITAN
EDISON COMPANY
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Registrant
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/s/
Harvey L.
Wagner
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Harvey
L.
Wagner
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Vice
President
and Controller
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