Dominion Power 2002 Annual Report Download - page 69

The statutory U.S. federal income tax rate reconciles to the
effective income tax rates as follows:
Year Ended December 31, 2002(1) 2001(2) 2000
U.S. statutory rate 35.0% 35.0% 35.0%
Increases (reductions) resulting from:
Utility plant differences (0.1) 0.5 0.8
Preferred dividends 0.3 0.9 2.1
Amortization of investment
tax credits (0.7) (1.7) (2.3)
Nonconventional fuel credit (1.8) (4.6) (7.1)
Other benefits and taxes related
to foreign operations 0.2 3.0 (2.7)
State taxes, net of federal benefit 2.5 5.9 4.3
Goodwill amortization — 3.3 4.4
Employee pension and other benefits (0.6) (1.4) (1.4)
Employee stock ownership
plan deduction (0.8) ——
Other, net (0.7) (0.5) (2.6)
Effective tax rate 33.3% 40.4% 30.5%
(1) Dominion’s effective income tax rate decreased, reflecting the effect of
including certain subsidiaries in Dominion’s consolidated state income tax
returns. In addition,the effective tax rate decreased for foreign earnings,
the impact of discontinuing goodwill amortization for book purposes and
other factors.
(2) Dominion’s effective income tax rate increased in 2001 due to its utility
operations in Virginia becoming subject to state income taxes in lieu of gross
receipts taxes, higher effective rates associated with foreign earnings and
higher pretax income in relation to nonconventional fuel tax credits realized.
Deferred income taxes reflect the net tax effects of tempo-
rary differences between the carrying amount of assets and lia-
bilities for financial reporting purposes and the amounts used
for income tax purposes. Dominion’s net deferred taxes consist
of the following:
At December 31, 2002 2001
(millions)
Deferred income tax assets:
Other comprehensive income $ 246 $ —
Deferred investment tax credits 37 43
Other 18 122
Total deferred income tax assets 301 165
Deferred income tax liabilities:
Depreciation method and plant basis differences 2,007 1,911
Income taxes recoverable through future rates 15 19
Partnership basis differences 184 113
Investee earnings reported in different tax periods 149 143
Postretirement and pension benefits 517 464
Intangible drilling costs 723 520
Geological, geophysical and other
exploration differences 196 170
Deferred state income taxes 222 221
Other comprehensive income — 182
Other 298 113
Total deferred income tax liabilities 4,311 3,856
Total net deferred income tax liabilities (1) $4,010 $3,691
(1) For 2002 and 2001, total net deferred income tax liabilities include $89
million and $121 million, respectively, of current deferred tax assets
reported in other current assets.
At December 31, 2002, Dominion had U.S. federal net
operating loss carryforwards of $107 million. These carryfor-
wards are expected to be fully utilized between 2003 and 2007.
These amounts resulted from the acquisition of subsidiaries.
11 Earnings Per Share
The following table presents Dominion’s basic and diluted earn-
ings per share (EPS) calculation:
Year Ended December 31, 2002 2001 2000
(millions, except per share amounts)
Basic
Income before cumulative effect of a
change in accounting principle $1,362 $ 544 $ 415
Average shares of common stock
outstanding—basic 281.0 250.2 235.2
Basic EPS $ 4.85 $ 2.17 $ 1.76
Diluted
Income before cumulative effect of a
change in accounting principle $1,362 $ 544 $ 415
Average shares of common
stock outstanding 281.0 250.2 235.2
Net effect of dilutive stock options (1) 1.6 2.3 0.7
Average shares of common
stock outstanding—diluted 282.6 252.5 235.9
Diluted EPS $ 4.82 $ 2.15 $ 1.76
Average anti-dilutive shares excluded
from the EPS calculation 11.0 3.0 4.0
(1) Represents the effect of “in-the-money” stock options on the calculation of
average outstanding shares of common stock.
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Dominion ’02 Annual Report