- Second-quarter GAAP earnings of 51 cents per share, operating earnings of 50 cents per share - Company raises 2009 operating earnings outlook to $3.30 to $3.45 per share
RICHMOND, Va., July 31 /PRNewswire-FirstCall/ -- Dominion (NYSE: D) today
announced unaudited net income determined in accordance with Generally
Accepted Accounting Principles (GAAP) for the three months ended June 30,
2008, of $298 million (51 cents per share) compared to a loss of $530 million
(76 cents per share) for the same period in 2007.
Operating earnings for the three months ended June 30, 2008, amounted to
$289 million (50 cents per share) compared to operating earnings of $310
million (44 cents per share) for the same period in 2007. Operating earnings
are defined as GAAP earnings adjusted for certain items.
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,
for reporting to the board of directors, for the company's incentive
compensation plans and for its targeted dividend payouts. Dominion management
believes operating earnings provide a more meaningful representation of the
company's fundamental earnings power.
Business segment results and detailed descriptions of items included in
2008 and 2007 GAAP earnings but excluded from operating earnings can be found
on Schedules 1, 2 and 3 of this release.
Thomas F. Farrell II, chairman, president and chief executive officer,
said:
"This quarter was notable not only for our excellent operational results
but also for our continued success in implementing our major strategic
initiatives. We obtained approval to begin construction of our coal and
biomass plant in Southwest Virginia; we reached an agreement to sell drilling
rights for a portion of our Marcellus acreage in Appalachia; and we also
announced our intent to construct a pipeline from the Appalachian basin to
markets on the East Coast. These actions position us to achieve our expected
future earnings growth and remain a leader in energy infrastructure.
"In consideration of our year-to-date operating earnings and our limited
sensitivity to commodity price changes, we are comfortable in tightening our
2008 operating earnings guidance range per share from $3.05 to $3.15 to $3.10
to $3.15.
"We are also raising our 2009 operating earnings outlook per share from
$3.25 to $3.40 to $3.30 to $3.45. This change reflects expected positive
impacts of sale of Marcellus shale drilling rights and higher margins from our
generation business. We reiterate our expected annual operating earnings per
share growth rate of at least 6 percent."
Second-quarter 2008 operating earnings compared to guidance
Second-quarter 2008 operating earnings of 50 cents per share compare to
guidance of 47 cents to 52 cents per share. Drivers that compared favorably
to guidance include contributions from the generation and gas transmission
businesses, warmer-than-normal weather in the company's electric utility
service area and contributions from Dominion Retail. Factors that compared
negatively to guidance include storm restoration-related expenses in the
company's electric utility service area; lower contributions from the producer
services business; and certain state tax impacts.
Second-quarter 2008 operating earnings compared to 2007
The increase in second-quarter 2008 operating earnings per share as
compared to 2007 is primarily attributable to the absence of unrecovered
Virginia fuel expenses due to the deferral of fuel expenses in excess of
current period recovery; higher margins from the merchant generation business;
higher volumes and realized prices from the company's remaining E&P
operations, including volumes associated with reacquired overriding royalty
interests arising from the volumetric production payment agreements terminated
in 2007; lower interest expense; and accretion due to share repurchases in
2007. These positives were partially offset by the absence of earnings
resulting from the divestiture of the majority of the company's U.S. E&P
operations and an increase in outage costs within the generation business.
Complete details of second-quarter 2008 operating earnings compared to
2007 can be found on Schedule 4 of this release.
Third-quarter 2008 operating earnings guidance
Dominion expects third-quarter 2008 operating earnings in the range of 87
cents to 92 cents per share. This compares to operating earnings of 86 cents
per share in the third quarter of 2007. Drivers expected to compare favorably
to 2007 include higher contributions from its merchant generation business;
growth in electric utility sales; higher volumes and realized prices for the
company's remaining E&P operations, including volumes associated with
reacquired overriding royalty interests arising from the volumetric production
payment agreements terminated in 2007; and accretion due to share repurchases
in 2007.
Expected offsets include a return to normal weather in its electric
utility service area; higher maintenance and depreciation expenses in the
company's electric and gas utility businesses; and the impact of certain state
income tax legislation enacted in July 2008. Complete details of the company's
third-quarter 2008 guidance can be found in Dominion's second-quarter 2008
Earnings Release Kit published this morning on Dominion's Web page under
Financial Modeling, Earnings Release Kits at http://www.dom.com/investors/.
In providing its third-quarter, full year 2008 and full year 2009
operating earnings outlook, the company notes that there will be differences
between expected GAAP and operating earnings for matters such as, but not
limited to, divestitures or changes in accounting principles. At this time,
Dominion management is not able to estimate the impact, if any, of these items
on GAAP earnings. Accordingly, Dominion is not able to provide a corresponding
GAAP equivalent for its operating earnings guidance and outlook.
Conference call today
Dominion will host its second-quarter earnings conference call at 10 a.m.
EDT on Thursday, July 31. Dominion management will discuss second-quarter
2008 financial results, third-quarter 2008 guidance and other matters of
interest to the financial community.
Domestic callers should dial (866) 710-0179. The passcode for the
conference call is "Dominion." International callers should dial
(334) 323-9871. Participants should dial in 10 minutes to 15 minutes prior to
the scheduled start time. Members of the media also are invited to listen.
A live Webcast of the conference call will be available on the company's
investor information page at http://www.dom.com/investors/.
A replay of the conference call will be available beginning about 1 p.m.
EDT July 31 and lasting until 11 p.m. EDT August 7. Domestic callers may
access the recording by dialing (877) 919-4059. International callers should
dial (334) 323-7226. The PIN for the replay is 12697117. Additionally, a
replay of the Webcast will be available on the company's investor information
page by the end of the day July 31.
Dominion is one of the nation's largest producers and transporters of
energy, with a portfolio of approximately 27,000 megawatts of generation, 1.1
trillion cubic feet equivalent of proved natural gas and oil reserves, 14,000
miles of natural gas transmission, gathering and storage pipeline and 6,000
miles of electric transmission lines. Dominion operates the nation's largest
natural gas storage facility with 975 billion cubic feet of storage capacity
and serves retail energy customers in 11 states. For more information about
Dominion, visit the company's Web site at http://www.dom.com.
This release contains certain forward-looking statements, including our
forecasted operating earnings for 2008 and 2009 as well as projected future
long-term operating earnings growth rates, that are subject to various risks
and uncertainties. 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 fluctuations in energy-related
commodity prices, the timing of the closing dates of acquisitions or
divestitures, estimates of future market conditions, estimates of proved and
unproved reserves, the company's ability to meet its natural gas and oil
production forecasts, the timing and receipt of regulatory approvals necessary
for planned projects, acquisitions and divestitures, and the ability to
complete planned construction or expansion projects as scheduled. Other
factors include, but are not limited to, weather conditions, including the
effects of hurricanes on operations, the behavior of other market
participants, state and federal legislative and regulatory developments and
changes to environmental and other laws and regulations, including those
related to climate change, greenhouse gases and other emissions to which we
are subject, economic conditions in the company's service area, risks of
operating businesses in regulated industries that are subject to changing
regulatory structures, changes to regulated gas and electric rates collected
by Dominion, changes to rating agency requirements and ratings, changing
financial accounting standards, trading counter-party credit risks, risks
related to energy trading and marketing, adverse outcomes in litigation
matters, 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.
Schedule 1 -- Segment Operating Earnings
Preliminary, Unaudited
(millions, except earnings per
share)Three months ended June 30,
20082007Change
Operating Revenue (GAAP Based) $3,452 $3,730 $(278)
Earnings: (1)
Dominion Virginia Power$76 $98$(22)
Dominion Energy 70 66 4
Dominion Generation206 81 125
Corporate and Other:
Other (63)(69) 6
Divested U.S. E&P Operations (2)- 130(130)
Peoples & Hope (3) - 4 (4)
OPERATING EARNINGS$289$310$(21)
Items excluded from operating
earnings (2), (4) 9(840)849
GAAP EARNINGS $298 $(530) $828
Common Shares Outstanding (average,
diluted) (5) 580.7 698.2
Earnings Per Share (EPS): (1)
Dominion Virginia Power $0.13 $0.14 $(0.01)
Dominion Energy 0.120.090.03
Dominion Generation 0.360.120.24
Corporate and Other:
Other (0.11) (0.10) (0.01)
Divested U.S. E&P Operations (2)-0.19 (0.19)
Peoples & Hope (3) - - -
OPERATING EARNINGS $0.50 $0.44 $0.06
Items excluded from operating
earnings (2), (4). 0.01 (1.20) 1.21
GAAP EARNINGS$0.51 $(0.76) $1.27
Six months ended June 30,
20082007 Change
Operating Revenue (GAAP Based) $7,841 $8,391 $(550)
Earnings: (1)
Dominion Virginia Power $194$230$(36)
Dominion Energy252 208 44
Dominion Generation542 220 322
Corporate and Other:
Other(121) (121) -
Divested U.S. E&P Operations (2)- 253(253)
Peoples & Hope (3) - 38 (38)
OPERATING EARNINGS$867$828 $39
Items excluded from operating
earnings (2), (4) 111(905) 1,016
GAAP EARNINGS $978$(77) $1,055
Common Shares Outstanding (average,
diluted) 579.5 702.3
Earnings Per Share (EPS): (1)
Dominion Virginia Power $0.34 $0.33 $0.01
Dominion Energy 0.430.300.13
Dominion Generation 0.940.310.63
Corporate and Other:
Other (0.21) (0.17) (0.04)
Divested U.S. E&P Operations (2)-0.36 (0.36)
Peoples & Hope (3) -0.05 (0.05)
OPERATING EARNINGS $1.50 $1.18 $0.32
Items excluded from operating
earnings (2), (4)0.19 (1.29) 1.48
GAAP EARNINGS$1.69 $(0.11) $1.80
1) 2007 segment earnings and per share values have been recast to
reflect the impact of segment realignment and the November 2007
2-for-1 common stock split.
2) Dominion sold the majority of its E&P operations in 2007.
3) Earnings for the Peoples Natural Gas Company (Peoples) and Hope
Gas, Inc. (Hope) are excluded from our 2008 operating earnings.
4) Refer to schedules 2 and 3 for details related to items excluded
from operating earnings, or find "GAAP Reconciliation" on
Dominion's Web site at www.dom.com/investors/
5) As a result of the net loss from continuing operations for the
three months ended June 30, 2007, the issuance of common stock
under potentially-dilutive securities was considered antidilutive
and therefore not included in the calculation of the diluted loss
per share for that period.
Schedule 2 -- Reconciliation of 2008 Operating Earnings to GAAP
2008 Earnings (Six months ended June 30, 2008)
The net effects of the following items, all shown on an after-tax basis,
are included in 2008 reported earnings, but are excluded from operating
earnings:
-- $157 million net benefit related to the planned sale of Peoples and
Hope natural gas distribution companies, mainly reflecting the reversal of
deferred tax liabilities established in 2006, due to a change in the expected
tax treatment of the sale.
-- $40 million of earnings from Peoples and Hope.
-- $38 million impairment charge related to a Dominion Capital investment.
-- $31 million of impairment charges reflecting other-than-temporary
declines in the fair value of securities held in merchant nuclear
decommissioning trust funds.
-- $17 million in other charges, including an increase to tax valuation
allowances, primarily related to the effect of lower projected capital gain
income on the realizability of existing state loss carryforwards.
(millions, except perYTD
share amounts) 1Q08 2Q083Q084Q08 2008*
Operating earnings$578 $289 $867
Items excluded from operating
earnings (after-tax):
Net benefit related to the
planned sale of Peoples & Hope 133 24157
Peoples and Hope operations 34 6 40
Dominion Capital asset impairment(38) (38)
Impairment losses in nuclear
decommisioning trust funds (16) (15) (31)
Other charges(11)(6) (17)
Total items excluded from operating
earnings102 9111
Reported net income $680 $298 $978
Common shares outstanding
(average, diluted) 578.4 580.7 579.5
Operating earnings per
share $1.00 $0.50 $1.50
Items excluded from
operating earnings (after-tax) 0.18 0.01 0.19
Reported earnings per share $1.18 $0.51 $1.69
* YTD 2008 EPS may not equal sum of quarters due to share count
differences.
Schedule 3 -- Reconciliation of 2007 Operating Earnings to GAAP
2007 Earnings (Twelve months ended December 31, 2007)
The net effects of the following items, all shown on an after-tax basis,
are included in 2007 reported earnings, but are excluded from operating
earnings:
-- $1.5 billion net benefit resulting from the sale of the majority of our
E&P operations including:
-- $2.1 billion net gain from the sales; partially offset by
-- $506 million in other charges including the effect of discontinuing
hedge accounting for certain gas and oil hedges and subsequent
changes in the fair value of these hedges ($342 million), settlement
of volumetric production payment (VPP) agreements ($108 million),
and employee-related expenses; and
-- $148 million in net charges related to the early retirement of debt
associated with the completion of our debt tender offer in July
2007;
-- $119 million net benefit related to the release of tax valuation
allowances;
-- $270 million of impairment charges related to our merchant generation
assets including $252 million related to the sale of a partially completed
generation facility (Dresden);
-- $137 million charge related to the termination of a power sales
agreement at our State Line generating facility;
-- $158 million extraordinary item related to the reapplication of SFAS
No. 71, Accounting for the Effects of Certain Types of Regulation, to the
Virginia jurisdiction of our electric utility generation operations;
-- $56 million in charges related to the impairment of certain Dominion
Capital investments;
-- $29 million in charges related to litigation reserves;
-- $93 million in other charges, including losses from certain
discontinued operations.
(millions, except perYTD
share amounts) 1Q072Q073Q07 4Q07 2007*
Operating earnings $518$310$551 $299 $1,678
Items excluded from operating
earnings after-tax):
Items related to the sale of the
majority of our E&P operations:
Net gain on sale (2) 5 2,124 12 2,139
Other related charges(6) (482)(15)(3) (506)
Net charges related to debt
tender offer15(163) (148)
Release of tax valuation
allowances, net (6) 70 55119
Impairment of merchant
generation assets (252)(18) (270)
Termination of the State
Line power sales agreement (140) 3(137)
Extraordinary item related to
the reapplication of
SFAS 71 (158) (158)
Dominion Capital impairment
of assets(55)(1)(56)
Litigation reserves (16)(16) 3 (29)
Other charges (35)(38) (6) (14)(93)
Total items excluded
from operating earnings (65) (840) 1,766 0 861
Reported net income (loss) $453 ($530) $2,317 $299 $2,539
Common shares outstanding
(average, diluted) **701.7 698.2 639.6 578.1 655.2
Operating earnings per share $0.74 $0.44 $0.86 $0.52 $2.56
Items excluded from operating
earnings (after-tax) (0.09) (1.20) 2.76 0.001.32
Reported earnings per share $0.65 ($0.76) $3.62 $0.52 $3.88
* YTD 2007 EPS may not equal sum of quarters due to share count
differences.
** As a result of the net loss from continuing operations for the three
months ended June 30, 2007, the issuance of common stock under
potentially-dilutive securities was considered antidilutive and
therefore not included in the calculation of the diluted loss per
share for that period.
Schedule 4 -- Reconciliation of 2008 Earnings to 2007
Preliminary, unaudited Three Months Ended
(millions, except EPS) June 30,
2008 vs. 2007
Increase / (Decrease)
Reconciling ItemsAmountEPS
Dominion Virginia Power
Regulated electric sales:
Weather $1$0.00
Customer growth2 0.00
Other (3)0.00
Interest Expense (3)0.00
Storm damage and service restoration -
distribution operations (7) (0.01)
Retail energy marketing operations 5 0.00
Operation & maintenance expense(8) (0.01)
Other (9) (0.01)
Share Accretion --- 0.02
Change in contribution to operating earnings ($22) ($0.01)
Dominion Energy
Producer services($14) ($0.02)
Gas and Oil -- production 114 0.02
Gas and Oil -- prices 17 0.02
Gas and Oil -- DDA expense (7) (0.01)
Other (6)0.00
Share Accretion --- 0.02
Change in contribution to operating earnings $4$0.03
Dominion Generation
Regulated electric sales:
Weather $3$0.00
Customer growth4 0.00
Other 9 0.01
Virginia fuel underrecovery 118 0.18
Merchant generation margin 26 0.04
Sales of emissions allowances 9 0.01
Outage costs (45) (0.06)
Depreciation and amortization (8) (0.01)
Other 9 0.01
Share Accretion --- 0.06
Change in contribution to operating earnings $125$0.24
Corporate and Other
Change in contribution to operating
earnings (2) ($128) ($0.20)
Change in consolidated operating earnings ($21) $0.06
Change in items excluded from operating
earnings (2), (3)$849$1.21
Change in net income (GAAP earnings) $828$1.27
1) Increase is primarily due to volumes associated with reacquired
overriding royalty interest arising from the VPPs terminated in 2007.
2) Earnings for the Peoples Natural Gas Company (Peoples) and Hope Gas,
Inc. (Hope) are excluded from our 2008 operating earnings.
3) Refer to schedules 2 and 3 for details of items excluded from
operating earnings, or find "GAAP Reconciliation" on Dominion's Web
site at www.dom.com/investors/.
SOURCE Dominion Resources, Inc.
