Dominion Power 2002 Annual Report Download - page 67

Restructuring and related costs for the year ended Decem-
ber 31, 2001 were as follows:
(millions)
Severance and related costs $42
Nonqualified plan benefits, settlement and other costs 46
Lease termination and restructuring 13
Other 4
Total restructuring costs $105
The change in the liabilities for severance and related costs
and lease termination costs during 2002 is presented below:
Severance Liability Lease Liability
(millions)
Balance at December 31, 2001 $ 42 $10
Amounts paid (24) (1)
Revision of estimate (8) —
Balance at December 31, 2002 $10 $ 9
2000 Restructuring and Acquisition-Related Activities
During 2000, Dominion incurred charges associated with the
divestiture of certain businesses and the implementation of a
restructuring plan for the operations of Dominion and its sub-
sidiaries. The divestitures and restructuring plans were driven
by certain requirements associated with the CNG acquisition
and a focus on operations in the region that begins at the Mid-
America Interconnected Network (MAIN) and extends north-
eastward through Maine (MAIN-to-Maine). The restructuring
plan included an involuntary severance program, a voluntary
early retirement program (ERP) and a transition plan to
consolidate operations after the CNG acquisition.
For the year ended December 31, 2000, Dominion
recorded $460 million of restructuring and acquisition-related
costs, including those incurred from exiting certain businesses
of DCI, as follows:
(millions)
Severance and related costs $70
Commodity contract losses 55
Information technology related costs 35
Lease termination and restructuring 14
DCI exit strategies (see Note 9) 172
ERP benefit costs (see Note 26) 114
Curtailment gains (see Note 26) (26)
Other 26
Total $460
Employee Severance Programs—As a result of the 2000
restructuring activities, Dominion eliminated 750 salaried posi-
tions. Severance payments were based on the individual’s base
salary and years-of-service at the time of termination. In addi-
tion, severance payments were provided to employees at DCI
who were terminated as part of Dominion’s strategy to exit cer-
tain businesses of DCI. At December 31, 2001, $3 million of
severance and related benefit costs accrued under the plan had
not yet been paid; such amounts were paid during 2002.
Change in Risk Management Strategy—During the first quar-
ter of 2000, Dominion created an enterprise risk management
group with responsibility for managing Dominion’s aggregate
energy portfolio, including the related commodity price risk,
across its consolidated operations. In connection with this
change in risk management strategy, management evaluated
CNG’s hedging strategy in relation to Dominion’s combined
operations and designated CNG’s portfolio of derivative con-
tracts that existed on January 28, 2000, as held for purposes
other than hedging for accounting purposes. This action
required a change to mark-to-market accounting and resulted
in $55 million of losses recognized in the first quarter of 2000
before Dominion had either financially settled the contracts or
had entered into offsetting contracts.
Other—Restructuring and other acquisition-related costs
included amounts paid to employees to retain their services
during the post-acquisition transition period, amounts payable
under certain employee contracts and information technology
systems and operations integration costs. The information tech-
nology costs included excess amortization expense attributable
to shortening the useful lives of capitalized software being
impacted by systems integration and related conversion costs.
Dominion also incurred lease termination and restructuring
costs as a result of the consolidation of operations.
9Impairment Losses—DCI Operations
In 2002, Dominion recognized impairment losses of $24 mil-
lion ($16 million after-tax) on its retained interests in mortgage
securitizations and goodwill associated with a DCI subsidiary.
These impairment losses were reported in other operations
and maintenance expenses. See Note 18 for a discussion of the
goodwill impairment. In 2001, Dominion recognized impair-
ment losses of $281 million on various investments at DCI
and reported the losses in other operations and maintenance
expenses. These charges, after-tax, reduced 2001 net income by
$183 million. In 2000, Dominion recognized impairment losses
of $291 million, of which $172 million was determined to be
attributable to Dominion’s DCI exit strategy and were included
in restructuring and other acquisition-related costs. The
remaining $119 million of impairment charges were related to
normal operations of DCI and are included in other operations
and maintenance expenses. See Notes 6, 8 and 13. These
charges, after-tax, reduced 2000 net income by $186 million.
The 2002, 2001 and 2000 impairments are reflected in the
Corporate and Other operating segment. See Note 32.
65
Dominion ’02 Annual Report