Company reaffirms earnings guidance for 2003 and
long-term growth outlook
Conference call scheduled for 10 a.m. EDT today
RICHMOND, Va. – Dominion (NYSE: D) announced today consolidated
operating earnings for the first quarter ended March 31, 2003, of $471 million
($1.52 per share), compared with operating earnings of $322 million ($1.20 per
share) for the same period in 2002. This represents a 27 percent year-over-year
increase in operating earnings per share.
First-quarter earnings prepared in accordance with Generally
Accepted Accounting Principles (GAAP), or reported earnings, were $508 million
($1.64 per share) compared to $322 million ($1.20 per share) last year. This
represents a 37 percent increase in earnings per share.
While reported earnings were higher than operating earnings
in the first quarter of 2003, Dominion management believes that the company's
operating earnings figure, or reported earnings adjusted for certain items described
below, provides a more meaningful representation of the company's fundamental
earnings power.
Dominion utilizes operating earnings as the primary performance
measurement for external communications with analysts and investors regarding
its earnings outlook and results. Internally, Dominion uses operating earnings
to measure performance against budget, to report to the Dominion Board of Directors
and for the company's profit sharing plan.
Specific items excluded from operating earnings
The net impact of the following items, all shown on an after-tax
basis, are included in reported earnings, but are excluded from operating earnings:
a $180 million gain (58 cents per share) representing the cumulative effect
of a change in accounting principle from adoption of SFAS No. 143, Accounting
for Asset Retirement Obligations; a $67 million charge (22 cents per share)
representing the cumulative effect of a change in accounting principle from
rescission of EITF Issue No. 98-10, Accounting for Contracts Involved in
Energy Trading and Risk Management Activities; a $59 million charge (18
cents per share) resulting from refinancings and impairments at Dominion Fiber
Ventures, LLC; and a $17 million charge (6 cents per share) for severance costs
related to workforce reductions announced in January.
Thos. E. Capps, chairman, president and chief executive officer,
said:
"Dominion's first-quarter financial performance was spectacular.
Dominion produced record first-quarter earnings and is in solid position to
achieve full-year operating earnings per share of $4.60 to $4.80 in 2003 and
5 to 7 percent growth going-forward. Operating cash flow more than doubled to
nearly $900 million compared to about $400 million in the first quarter of last
year and the company is on track to produce more than $3 billion in operating
cash flow this year, compared to $2.4 billion in 2002."
In reaffirming operating earnings guidance of $4.60 to $4.80
per share, Dominion notes that there could be differences between operating
and reported earnings for the remainder of 2003. At this time, Dominion management
is not aware of any known and estimable differences beyond those recorded in
the first quarter and discussed above.
Capps said: "All of Dominion's core operating units performed
very well. However, the biggest drivers of first-quarter financial performance
were colder weather, which drove significant increases in demand for our gas
and electric products and services, and strong natural gas prices, which helped
not only our E&P business, but also the Dominion Energy Clearinghouse. Earnings
were strong despite a 4-cent per share negative mark-to-market impact related
to the corporate hedge, which effectively will reverse over the course of the
year in combination with physical gas sales."
In other first-quarter highlights Dominion:
Completed the North Anna Unit 2 vessel head replacement,
becoming the first U.S. company to successfully complete a nuclear vessel
head replacement;
Received NRC license renewals for the North Anna and Surry
nuclear units, extending the operating lives of those units for twenty years;
Served an additional 40,000 franchise gas and electric
utility customers compared to the same period last year, transporting and
delivering nearly 20 million megawatt-hours of electricity and more than 166
billion cubic feet of natural gas to the company's 3.9 million franchise customers
during the quarter;
Added nearly 300,000 unregulated retail gas and electric
customers to the Dominion Retail unit, increasing the unregulated retail customer
base to 1.1 million since the first quarter of 2002;
Issued more than $2 billion of debt, most of which replaces existing debt,
capturing the benefits of the lowest interest rates and corporate bond spreads
in recent history; and,
Continued industry leading drilling program by completing more than 250
net wells in the first quarter.
First-quarter operating earnings breakdown by segment
For comparison purposes, 2002 segment results have been restated
to reflect the transfer of the electric transmission operations from Dominion
Delivery to Dominion Energy.
Dominion Energy contributed $275 million (89 cents per share)
to first-quarter 2003 earnings compared to $156 million (58 cents per share)
in the first quarter of 2002. The increase in Dominion Energy's first-quarter
2003 earnings resulted primarily from customer growth and cooler weather in
the electric franchise area, performance of the Dominion Energy Clearinghouse
and Millstone, and the impact related to corporate hedges of natural gas production,
partially offset by a change in the allocation of electric franchise base revenues
and share dilution.
Dominion Delivery earned $158 million (51 cents per share)
in its first quarter compared to $132 million (49 cents per share) for the same
period in 2002. The increase in Dominion Delivery's first-quarter earnings is
primarily attributable to customer growth, cooler weather in the electric and
gas franchise areas and a change in the allocation of electric franchise base
revenues, partially offset by other expenses, performance of the telecommunications
business and share dilution.
Dominion Exploration & Production (E&P) contributed
$106 million (34 cents per share) to first-quarter 2003 earnings, up from $88
million (33 cents per share) in the first quarter of 2002. The increase in Dominion
E&P's first-quarter earnings is primarily attributable to higher average
realized prices partially offset by higher expenses, the expiration of Section
29 production tax credits and share dilution.
The operating earnings contribution of the corporate segment,
including Dominion Capital, was negative $68 million (22 cents per share) for
the quarter, compared to negative $54 million (20 cents per share) in the first
quarter of 2002. The change in the corporate segment's operating earnings contribution
is attributable to reduced earnings of Dominion Capital partially offset by
share dilution. The reported earnings contribution of the corporate segment
was negative $31 million (10 cents per share) for the first quarter of 2003,
as compared to negative $54 million (20 cents per share) in the first quarter
of 2002. The change in the corporate segment's contribution to reported earnings
is attributable to the factors noted above, plus the following after-tax items
which impacted the first quarter of 2003, as compared to the same period last
year: a $180 million gain (58 cents per share) representing the cumulative effect
of a change in accounting principle from adoption of SFAS No. 143; a $67 million
charge (22 cents per share) representing the cumulative effect of a change in
accounting principle from rescission of EITF Issue No. 98-10; a $59 million
charge (18 cents per share) from specific items related to Dominion Fiber Ventures,
LLC; and a $17 million charge (6 cents per share) related to severance costs
for workforce reductions announced in January.
Conference call for investors / media
Dominion will host a conference call for investors today at
10 a.m. EDT to discuss first-quarter earnings in detail. Members of the media
are also invited to listen.
Domestic investors who wish to participate in the conference
call should dial 877-241-5946. International investors should call 706-643-0540.
Participants should dial in 5 to 10 minutes prior to the scheduled start time.
A live web cast of the conference call will be available on
the company's investor information page at www.dom.com/investors.
A replay of the conference call will be available from approximately
11 a.m. EDT April 16 through 11 p.m. EDT April 23. Domestic investors may access
the recording by dialing 800-642-1687. International callers should dial 706-645-9291
to access the recording. The conference ID for the replay is 9631248. A replay
of the conference call also will be available on the company's investor information
home page by the end of the day April 16.
Dominion is one of the nation's largest producers of energy,
with an energy portfolio of about 24,000 megawatts of generation, 6.1 trillion
cubic feet equivalent of proved natural gas reserves and 7,900 miles of natural
gas transmission pipeline. Dominion also operates the nation's largest underground
natural gas storage system with more than 960 billion cubic feet of storage
capacity and serves 5 million retail energy customers in nine states. In addition,
Dominion owns a managing equity interest in Dominion Fiber Ventures LLC, owner
of Dominion Telecom. For more information about Dominion, visit the company's
web site at www.dom.com.
This release contains forward-looking statements including
our expectations for 2003 earnings and for future annual growth rates that are
subject to various risks and uncertainties. Discussion of factors that could
cause actual results to differ materially from management's projections, forecasts,
estimates and expectations may include factors that are beyond the company's
ability to control or estimate precisely, such as estimates of future market
conditions, estimates of proved and unproved reserves and the behavior of other
market participants. Other factors include, but are not limited to, weather
conditions, economic conditions in the company's service area, fluctuations
in energy-related commodity prices, changes to rating agency requirements and
ratings, changing financial accounting standards, trading counterparty credit
risks, risks related to energy trading and marketing, risks associated with
successfully executing the telecommunications business plan and other uncertainties.
Other risk factors are detailed from time to time in the company's Securities
& Exchange Commission filings.
