Dominion Reports $1B Drop in 2003 Net Income
Taking on a number of one-time charges during the year, Dominion reported 2003 net income of $362 million ($1.14 per share), marking a sizeable drop-off compared to net income of $1.362 billion ($4.82 per share) for 2002.
Minus the charges, operating earnings -- which are defined as Generally Accepted Accounting Principles (GAAP) earnings adjusted for certain items -- were $1.449 billion ($4.55 per share) for the 12 months ended Dec. 31, 2003, compared to operating earnings of $1.365 billion ($4.83 per share) for 2002.
"Operating results for the year were impressive when considering a number of significant items which reduced operating earnings by 18 cents per share," said Thos. E. Capps, CEO. "Without these effects, operating earnings would have been toward the upper end of our original $4.60 to $4.80 per share guidance for 2003. This demonstrates strong recurring fundamental earnings power and a solid earnings base from which to grow in 2004."
Capps said items that made up the 18-cent per share difference included a 4-cent per share impact from lost sales margin due to Hurricane Isabel, a 3-cent per share impact resulting from the settlement of the Virginia fuel case, and a 6- cent per share mark-to-market timing impact related to hedges on future natural gas production and gas storage positions, which will reverse in 2004 when the positions are settled and the physical gas is produced and sold. In addition, the company said it refinanced about $800 million in callable debt in the fourth quarter.
"Building off of a solid earnings base in 2003, we expect operating earnings per share of $4.80 to $5.00 in 2004 and about 5% operating earnings per share growth in 2005," Capps said. "When Dominion's $2.58 per share annual dividend is added to the equation, we are positioned to continue delivering strong total shareholder return over the long term."
In the fourth quarter, Dominion reported a net loss in accordance with GAAP of $130 million (40 cents per share) compared to net income of $339 million ($1.12 per share) for the same period of 2002. Operating earnings for the quarter were $274 million (84 cents per share) compared to operating earnings of $342 million ($1.13 per share) for the same period in 2002.
On the year, Dominion E&P, which manages the company's gas and oil exploration, development and production operations, earned $415 million ($1.30 per share) in 2003 compared to $380 million ($1.34 per share) in 2002. The change is primarily attributable to higher average realized prices and higher sales volume.
Dominion Energy, which manages the company's electric transmission assets, Dominion Energy Clearinghouse and interstate natural gas pipeline and storage system including the Cove Point LNG facility, contributed $350 million ($1.10 per share) in 2003 compared to $268 million (95 cents per share) in 2002. The company attributed the increase to a change in the allocation of electric franchise base revenues, a higher contribution from Dominion Energy Clearinghouse, the effect of corporate hedges on natural gas production, higher average realized prices of Appalachian natural gas production and Cove Point's contribution.
The company's Dominion Delivery unit, which manages the company's electric and gas distribution systems, customer service function, and Dominion Retail, earned $453 million ($1.42 per share) in 2003 compared to $422 million ($1.49 per share) in 2002.