Dominion Announces Fourth Quarter
And Full-Year Earnings
Conference call scheduled for 10 a.m. EST today
RICHMOND, Va. - Dominion (NYSE: D) announced today net income
determined in accordance with Generally Accepted Accounting Principles (GAAP)
for the 12 months ended Dec. 31, 2003, of $362 million ($1.14 per share) compared
to net income of $1.362 billion ($4.82 per share) for the same period last year.
Operating earnings, which are defined as GAAP earnings adjusted
for certain items, were $1.449 billion ($4.55 per share) for the 12 months ended
Dec. 31, 2003, compared to operating earnings of $1.365 billion ($4.83 per share)
for the same period in 2002.
A detailed description of the items included in 2003 and 2002
GAAP earnings but excluded from operating earnings can be found at the end of
this press release or by visiting our Web site at www.dom.com/investors.
Thos. E. Capps, chairman and chief executive officer, said:
“Operating results for the year were impressive when
considering a number of significant items which reduced operating earnings by
18 cents per share. Without these effects, operating earnings would have been
toward the upper end of our original $4.60 to $4.80 per share guidance for 2003.
This demonstrates strong recurring fundamental earnings power and a solid earnings
base from which to grow in 2004.”
Items which make up the 18-cent per share difference include
a 4-cent per share impact from lost sales margin due to Hurricane Isabel, a
3-cent per share impact resulting from the settlement of the Virginia fuel case,
and a 6-cent per share mark-to-market timing impact related to hedges on future
natural gas production and gas storage positions, which will reverse in 2004
when the positions are settled and the physical gas is produced and sold. In
addition, Dominion refinanced about $800 million in callable debt in the fourth
quarter. The refinancing cost related to calling this debt reduced earnings
by about 5 cents per share in the fourth quarter, but it will save nearly $10
million annually in future after-tax interest expenses.
This solid performance is even more impressive when considering
the 10-cent per share dilutive effect of the company's decision to strengthen
its balance sheet last May when it issued 11 million shares of common stock.
This impact was not included in the company’s original earnings per share
guidance.
Capps said: “Building off of a solid earnings base in
2003, we expect operating earnings per share of $4.80 to $5.00 in 2004 and about
5-percent operating earnings per share growth in 2005. When Dominion’s
$2.58 per share annual dividend is added to the equation, we are positioned
to continue delivering strong total shareholder return over the long term.”
Dominion uses operating earnings as the primary performance
measurement of its earnings outlook and results for public communications with
analysts and investors. Dominion also uses operating earnings internally for
budgeting, reporting to the Board of Directors and for the company’s profit
sharing plan. Dominion management believes operating earnings provide a more
meaningful representation of the company’s fundamental earnings power.
In providing operating earnings guidance, Dominion management
is aware of potential differences between 2004 operating earnings and GAAP-based
reported earnings, or net income, due to accounting for the company’s
telecom business as discontinued operations. At this time Dominion management
is not able to accurately estimate any income or loss from discontinued operations
nor the income or loss from the disposal of the telecom business. Therefore,
Dominion is not able at this time to provide a corresponding GAAP equivalent
for 2004 earnings guidance.
Full-year earnings breakdown by operating segment
Consistent with the officer changes that became effective
January 1, segment results have been reclassified. These changes resulted in
the splitting of Dominion Energy into two new reportable segments (Dominion
Energy and Dominion Generation) and the movement of Dominion Retail into the
Dominion Delivery segment. Additionally, the company’s telecom business
is now classified as discontinued operations. Such results of discontinued operations
are excluded from operating earnings, and previously reported quarterly results
have been restated. The effect of these changes is reflected in schedules at
the end of this press release and can also be found on our Web site at www.dom.com/investors.
Dominion Delivery, which manages the company’s electric
and gas distribution systems, customer service function, and Dominion Retail,
earned $453 million ($1.42 per share) in 2003 compared to $422 million ($1.49
per share) in 2002. The change is primarily attributable to customer growth
and a change in the allocation of electric franchise base revenues, partially
offset by unfavorable weather, lost electric sales margin from Hurricane Isabel,
refinancing costs on callable debt and other factors.
Dominion Energy, which manages the company’s electric
transmission assets, Dominion Energy Clearinghouse and interstate natural gas
pipeline and storage system including the Cove Point LNG facility, earned $350
million ($1.10 per share) in 2003 compared to $268 million (95 cents per share)
in 2002. The increase is primarily attributable to a change in the allocation
of electric franchise base revenues, higher contribution from Dominion Energy
Clearinghouse, the effect of corporate hedges on natural gas production, higher
average realized prices of Appalachian natural gas production and Cove Point’s
contribution, partially offset by refinancing costs on callable debt.
Dominion Generation, which manages the company’s portfolio
of electric generation assets, earned $508 million ($1.59 per share) in 2003
compared to $561 million ($1.98 per share) in 2002. The change is primarily
attributable to unfavorable weather in the electric sales area, lost electric
sales margin from Hurricane Isabel, settlement of the Virginia fuel case, a
change in the allocation of electric franchise base revenues and refinancing
costs on callable debt, partially offset by customer growth, reduced purchased
power capacity expenses and other factors.
Dominion E&P, which manages the company’s gas and
oil exploration, development and production operations, earned $415 million
($1.30 per share) in 2003 compared to $380 million ($1.34 per share) in 2002.
The change is primarily attributable to higher average realized prices and higher
sales volume, including those volumes delivered to Texas Municipal Gas Corp.
under a volumetric production payment (VPP), partially offset by a higher depreciation,
depletion and amortization (DD&A) rate, higher expenses and the expiration
of Section 29 production tax credits.
The corporate segment, which consists of the company’s
corporate and other operations as well as Dominion Capital, impacted 2003 operating
earnings by negative $277 million (86 cents per share) compared to negative
$266 million (93 cents per share) in 2002.
The corporate segment’s 2003 earnings impact under GAAP
was negative $1.364 billion ($4.27 per share) compared to negative $269 million
(94 cents per share) in 2002. Corporate segment 2003 and 2002 operating earnings
exclude all items not included from Dominion’s consolidated results detailed
at the end of this release.
Fourth-quarter earnings breakdown by segment
Dominion reported a net loss determined in accordance with
GAAP for the three months ended Dec. 31, 2003 of $130 million (40 cents per
share) compared to net income of $339 million ($1.12 per share) for the same
period last year.
Operating earnings were $274 million (84 cents per share)
for the three months ended Dec. 31, 2003, compared to operating earnings of
$342 million ($1.13 per share) for the same period in 2002.
A detailed description of the items included in fourth quarter
2003 and 2002 GAAP earnings but excluded from operating earnings can be found
at the end of this press release or by visiting our Web site at www.dom.com/investors.
Dominion Delivery earned $132 million (40 cents per share)
in the fourth quarter of 2003 compared to $129 million (43 cents per share)
in the fourth quarter of 2002. The change is primarily attributable to customer
growth, a change in the allocation of electric franchise base revenues, and
lower O&M expenses, partially offset by unfavorable weather in the electric
and gas franchise areas, refinancing costs on callable debt and other factors.
Dominion Energy earned $42 million (13 cents per share) in
the fourth quarter of 2003 compared to $51 million (17 cents per share) in the
fourth quarter of 2002. The change is primarily attributable to a lower contribution
from Dominion Energy Clearinghouse and refinancing costs on callable debt, partially
offset by the effect of corporate hedges on natural gas production, higher average
realized prices of Appalachian natural gas production, Cove Point’s contribution
and other factors.
Dominion Generation earned $64 million (20 cents per share)
in the fourth quarter of 2003 compared to $141 million (47 cents per share)
in the fourth quarter of 2002. The change is primarily attributable to unfavorable
weather in the electric sales area, a change in the allocation of electric franchise
base revenues, refinancing costs on callable debt and Millstone’s contribution,
partially offset by customer growth, reduced purchased power capacity expenses
and other factors.
Dominion E&P earned $117 million (36 cents per share)
in the fourth quarter of 2003 compared to $109 million (36 cents per share)
in the fourth quarter of 2002. The change is primarily attributable to higher
average realized prices and the positive impact of volumes delivered under the
VPP net of lower production volumes, partially offset by higher DD&A rate
and the expiration of Section 29 production tax credits.
The corporate segment impact on fourth quarter 2003 operating
earnings was negative $81 million (25 cents per share) compared to negative
$88 million (30 cents per share) in the fourth quarter of 2002.
The corporate segment’s fourth quarter 2003 earnings
impact under GAAP was negative $485 million ($1.49 per share) compared to negative
$91 million (31 cents per share) in the fourth quarter of 2002. Corporate segment
fourth-quarter 2003 and 2002 operating earnings exclude all items not included
from Dominion’s fourth-quarter consolidated results detailed at the end
of this release.
Conference call for investors / media
Dominion will host a conference call today at 10 a.m. EST
to discuss 2003 results and the outlook for 2004 and beyond. 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.
Additionally, a reconciliation of measures prepared in accordance with GAAP
versus non-GAAP measures can be found on the company’s investor information
page under “GAAP Reconciliation”.
A replay of the conference call will be available from approximately
11 a.m. EST January 23 through 11 p.m. EST January 30. 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 4822598. A replay of the conference
call also will be available on the company’s investor information page
by the end of the day January 23.
Dominion is one of the nation's largest producers of energy,
with an energy portfolio of more than 24,000 megawatts of generation, 6.4 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 5.3 million retail energy customers in nine states. 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 2004 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 counter-party credit
risks, risks related to energy trading and marketing, costs associated with
successfully executing the company’s exit from the telecommunications
business, and other uncertainties. Other risk factors are detailed from time
to time in Dominion’s most recent quarterly report on Form 10-Q or annual
report on Form 10-K filed with the Securities & Exchange Commission.
