Dominion Power 2003 Annual Report Download - page 33

31.Dominion 2003
In addition, under FIN 46R, Dominion reports its junior subor-
dinated notes held by five capital trusts as long-term debt, rather
than the trust preferred securities issued by those trusts. At Decem-
ber 31, 2002, Dominion consolidated the trusts and reported the
trust preferred securities on its Consolidated Balance Sheet.
Dominion’s Results of Operations
2003 2002 2001
(millions,
except per Net Diluted Net Diluted Net Diluted
share amounts) Income EPS Income EPS Income EPS
Dominion
Generation $ 508 $ 1.59 $ 561 $ 1.98 $ 511 $ 2.02
Dominion
Energy 350 1.10 268 0.95 268 1.06
Dominion
Delivery 453 1.42 422 1.49 311 1.23
Dominion
Exploration &
Production 415 1.30 380 1.34 320 1.27
Primary
operating
segments 1,726 5.41 1,631 5.76 1,410 5.58
Corporate and
Other (1,408) (4.41) (269) (0.94) (866) (3.43)
Consolidated $ 318 $ 1.00 $1,362 $ 4.82 $ 544 $ 2.15
Overview
2003 vs. 2002
Dominion earned $1.00 per diluted share on net income of
$318 million, a decrease of $3.82 per diluted share and
$1,044 million. The per share decrease includes approximately
$0.13 of share dilution, reflecting an increase in the average
number of common shares outstanding during 2003.
The combined net income contribution of Dominion’s primary
operating segments increased $95 million in 2003. This increase
largely reflects the benefits of higher natural gas prices during
2003 on sales of Dominion’s gas and oil production as well as
margins associated with gas trading activities. See Note 28 to
the Consolidated Financial Statements for information about
Dominion’s operating segments. This increased contribution by
the operating segments was more than offset by significant spe-
cific charges recognized in 2003 and reported in the Corporate
and Other segment, including:
• $750 million of after-tax losses associated with Dominion’s
telecommunications business, which is being discontinued;
• $122 million of after-tax incremental expenses associated with
Hurricane Isabel;
• $96 million of after-tax charges for DCI asset impairments;
• $69 million of after-tax charges for asset impairments related
to certain investments held for sale;
• $104 million of after-tax charges associated with the
termination of long-term power purchase agreements and the
restructuring of power sales agreements and
• $16 million of after-tax severance costs for workforce
reductions.
2002 vs. 2001
Dominion earned $4.82 per diluted share on net income of
$1.4 billion, an increase of $818 million and $2.67 per diluted
share compared to 2001. Per share amounts also reflect approxi-
mately $0.57 of share dilution, due to an increase in the average
number of common shares outstanding during 2002.
The combined net income contribution of Dominion’s primary
operating segments increased $222 million in 2002. These
results largely reflect the impact of favorable weather and cus-
tomer growth on utility operations and the inclusion of a full year
of operations after the Louis Dreyfus acquisition. In addition to the
increased contribution by the operating segments, the increase in
net income included the effect of discontinuing the amortization
of goodwill in 2002 ($95 million) and the impact of significant
specific charges recognized in 2001 that did not recur in 2002.
These items were reported in the Corporate and Other segment
and included:
• $208 million of after-tax losses from the impairment of DCI
financial assets and the sale of a DCI subsidiary;
• A $136 million after-tax charge related to the termination of
certain long-term power purchase contracts;
• A $97 million after-tax charge for credit exposure associated
with the bankruptcy of Enron and
• A $68 million after-tax charge for restructuring activities.
Analysis of Consolidated Operations
Presented below are selected amounts related to Dominion’s
results of operations.
Year Ended December 31, 2003 2002 2001
(millions)
Operating Revenue
Regulated electric sales $4,876 $4,856 4,619
Regulated gas sales 1,258 876 1,409
Nonregulated electric sales 1,130 1,017 1,022
Nonregulated gas sales 1,718 778 1,073
Gas transportation and storage 740 705 702
Gas and oil production 1,503 1,334 1,057
Other 853 652 676
Operating Expenses
Electric fuel and energy purchases, net 1,667 1,447 1,369
Purchased electric capacity 607 691 680
Purchased gas, net 2,175 1,159 1,822
Liquids, pipeline capacity and
other purchases 468 159 219
Restructuring and other acquisition-
related costs
— (8) 105
Other operations and maintenance 2,908 2,198 2,938
Depreciation, depletion and amortization 1,216 1,258 1,245
Other taxes 476 429 395
Other income (loss) (40) 103 126
Interest and related charges 975 945 997
Income tax expense 597 $ 681 $ 370
Loss from discontinued operations (642) ——
Cumulative effective of changes in
accounting principles $11 ——