Dominion Power 2003 Annual Report Download - page 72

70.Dominion 2003
Notes to Consolidated Financial Statements, Continued
Consolidated Statement of Income. The charge consisted of the
premium paid to acquire the notes, the consent fee paid to the
note holders and the recognition of previously unamortized debt
costs. After the transaction, Dominion owned a total of $644 mil-
lion of DFV senior notes with the remaining $21 million of
outstanding notes held by third parties.
Dominion began consolidating the results of DFV in its Consol-
idated Financial Statements in February 2003, as a result of
acquiring substantially all of DFV’s outstanding senior notes. Prior
to this acquisition, Dominion accounted for DFV as an equity-
method investment, due to the Investor Trust’s equity investment
and veto rights.
In the fourth quarter of 2003, Dominion purchased the
Investor Trust’s interest in DFV for $62 million, including $2 million
for accrued dividends. This transaction was accounted for as a
purchase of a minority interest and $60 million was recognized
as goodwill and impaired. The purchase enabled Dominion to
proceed with its strategy to sell DTI and, accordingly, classify the
business as discontinued operations as of December 31, 2003.
2003
— Other
Also early in 2003, Dominion recognized a $27 million charge
for the reallocation of DFV’s equity losses between the Investor
Trust and Dominion. Based on updated projections of DFV’s
expected net losses, Dominion and the Investor Trust revised the
allocation of equity losses, using cash allocations and liquidation
provisions of the underlying limited liability company agreement
rather than voting interests.
2002 and 2001 Transactions
For periods in which DFV was accounted for under the equity
method, Dominion’s Consolidated Financial Statements reflected
the following transactions between Dominion and DFV and DTI:
• Loans from DTI and DFV to Dominion of $140 million at
December 31, 2002;
• Equity losses of $32 million and $3 million for 2002 and
2001, respectively;
• Interest expense on the affiliated loans of $13 million and
$23 million for 2002 and 2001, respectively; and
• Management and other support services billed by Dominion
to DTI of $35 million and $20 million in 2002 and 2001,
respectively.
10. Earnings Per Share
The following table presents Dominion’s basic and diluted earn-
ings per share (EPS) calculation:
Year Ended December 31, 2003 2002 2001
(millions, except per share amounts)
Income from continuing operations before
cumulative effect of changes in
accounting principles $ 949 $1,362 $ 544
Loss from discontinued operations (642) ——
Cumulative effect of changes in
accounting principles 11 ——
Net income $ 318 $1,362 $ 544
Basic EPS
Average shares of common stock
outstanding
— basic 317.5 281.0 250.2
Income from continuing operations
before cumulative effect of changes
in accounting principle $ 2.99 $ 4.85 $ 2.17
Loss from discontinued operations (2.02) ——
Cumulative effect of changes in
accounting principles .03 ——
Net income $ 1.00 $ 4.85 $ 2.17
Diluted EPS
Average shares of common
stock outstanding 317.5 281.0 250.2
Net effect of dilutive stock options(1) 1.3 1.6 2.3
Average shares of common stock
outstanding — diluted 318.8 282.6 252.5
Income from continuing operations
before cumulative effect of changes
in accounting principles $ 2.98 $ 4.82 $ 2.15
Loss from discontinued operations (2.01) ——
Cumulative effect of changes in
accounting principles .03 ——
Net income $ 1.00 $ 4.82 $ 2.15
Average anti-dilutive shares excluded
from the EPS calculation 9.5 11.0 3.0
(1) Represents the effect of “in-the-money” stock options on the calculation of
average outstanding shares of common stock.