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July 31, 2008
Dominion Announces Second-Quarter 2008 Earnings
- Second-quarter GAAP earnings of 51 cents per share, operating earnings of 50 cents per share
- Company raises 2009 operating earnings outlook to $3.30 to $3.45 per share
- Company tightens 2008 operating earnings guidance to $3.10 to $3.15 per share
- Conference call scheduled for 10 a.m. EDT today
RICHMOND, Va. – Dominion (NYSE: D) today announced unaudited net income determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended June 30, 2008, of $298 million (51 cents per share) compared to a loss of $530 million (76 cents per share) for the same period in 2007.
Operating earnings for the three months ended June 30, 2008, amounted to $289 million (50 cents per share) compared to operating earnings of $310 million (44 cents per share) for the same period in 2007. Operating earnings are defined as GAAP earnings adjusted for certain items.
Dominion uses operating earnings as the primary performance measurement of its earnings outlook and results for public communications with analysts and investors. Dominion also uses operating earnings internally for budgeting, for reporting to the board of directors, for the company’s incentive compensation plans and for its targeted dividend payouts. Dominion management believes operating earnings provide a more meaningful representation of the company’s fundamental earnings power.
Business segment results and detailed descriptions of items included in 2008 and 2007 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.
Thomas F. Farrell II, chairman, president and chief executive officer, said:
“This quarter was notable not only for our excellent operational results but also for our continued success in implementing our major strategic initiatives. We obtained approval to begin construction of our coal and biomass plant in Southwest Virginia; we reached an agreement to sell drilling rights for a portion of our Marcellus acreage in Appalachia; and we also announced our intent to construct a pipeline from the Appalachian basin to markets on the East Coast. These actions position us to achieve our expected future earnings growth and remain a leader in energy infrastructure.
“In consideration of our year-to-date operating earnings and our limited sensitivity to commodity price changes, we are comfortable in tightening our 2008 operating earnings guidance range per share from $3.05 to $3.15 to $3.10 to $3.15.
“We are also raising our 2009 operating earnings outlook per share from $3.25 to $3.40 to $3.30 to $3.45. This change reflects expected positive impacts of sale of Marcellus shale drilling rights and higher margins from our generation business. We reiterate our expected annual operating earnings per share growth rate of at least 6 percent.”
Second-quarter 2008 operating earnings compared to guidance
Second-quarter 2008 operating earnings of 50 cents per share compare to guidance of 47 cents to 52 cents per share. Drivers that compared favorably to guidance include contributions from the generation and gas transmission businesses, warmer-than- normal weather in the company’s electric utility service area and contributions from Dominion Retail. Factors that compared negatively to guidance include storm restoration-related expenses in the company’s electric utility service area; lower contributions from the producer services business; and certain state tax impacts.
Second-quarter 2008 operating earnings compared to 2007
The increase in second-quarter 2008 operating earnings per share as compared to 2007 is primarily attributable to the absence of unrecovered Virginia fuel expenses due to the deferral of fuel expenses in excess of current period recovery; higher margins from the merchant generation business; higher volumes and realized prices from the company’s remaining E&P operations, including volumes associated with reacquired overriding royalty interests arising from the volumetric production payment agreements terminated in 2007; lower interest expense; and accretion due to share repurchases in 2007. These positives were partially offset by the absence of earnings resulting from the divestiture of the majority of the company’s U.S. E&P operations and an increase in outage costs within the generation business.
Complete details of second-quarter 2008 operating earnings compared to 2007 can be found on Schedule 4 of this release.
Third-quarter 2008 operating earnings guidance
Dominion expects third-quarter 2008 operating earnings in the range of 87 cents to 92 cents per share. This compares to operating earnings of 86 cents per share in the third quarter of 2007. Drivers expected to compare favorably to 2007 include higher contributions from its merchant generation business; growth in electric utility sales; higher volumes and realized prices for the company’s remaining E&P operations, including volumes associated with reacquired overriding royalty interests arising from the volumetric production payment agreements terminated in 2007; and accretion due to share repurchases in 2007.
Expected offsets include a return to normal weather in its electric utility service area; higher maintenance and depreciation expenses in the company’s electric and gas utility businesses; and the impact of certain state income tax legislation enacted in July 2008. Complete details of the company’s third-quarter 2008 guidance can be found in Dominion’s second-quarter 2008 Earnings Release Kit published this morning on Dominion’s Web page under Financial Modeling, Earnings Release Kits at http://www.dom.com/investors/.
In providing its third-quarter, full year 2008 and full year 2009 operating earnings outlook, the company notes that there will be differences between expected GAAP and operating earnings for matters such as, but not limited to, divestitures or changes in accounting principles. At this time, Dominion management is not able to estimate the impact, if any, of these items on GAAP earnings. Accordingly, Dominion is not able to provide a corresponding GAAP equivalent for its operating earnings guidance and outlook.
Conference call today
Dominion will host its second-quarter earnings conference call at 10 a.m. EDT on Thursday, July 31. Dominion management will discuss second-quarter 2008 financial results, third-quarter 2008 guidance and other matters of interest to the financial community.
Domestic callers should dial (866) 710-0179. The passcode for the conference call is “Dominion.” International callers should dial (334) 323-9871. Participants should dial in 10 minutes to 15 minutes prior to the scheduled start time. Members of the media also are invited to listen.
A live Webcast of the conference call will be available on the company’s investor information page at http://www.dom.com/investors/.
A replay of the conference call will be available beginning about 1 p.m. EDT July 31 and lasting until 11 p.m. EDT August 7. Domestic callers may access the recording by dialing (877) 919-4059. International callers should dial (334) 323-7226. The PIN for the replay is 12697117. Additionally, a replay of the Webcast will be available on the company’s investor information page by the end of the day July 31.
Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 27,000 megawatts of generation, 1.1 trillion cubic feet equivalent of proved natural gas and oil reserves, 14,000 miles of natural gas transmission, gathering and storage pipeline and 6,000 miles of electric transmission lines. Dominion operates the nation’s largest natural gas storage facility with 975 billion cubic feet of storage capacity and serves retail energy customers in 11 states. For more information about Dominion, visit the company's Web site at http://www.dom.com/.
This release contains certain forward-looking statements, including our forecasted operating earnings for 2008 and 2009 as well as projected future long-term operating earnings growth rates, that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, such as fluctuations in energy-related commodity prices, the timing of the closing dates of acquisitions or divestitures, estimates of future market conditions, estimates of proved and unproved reserves, the company’s ability to meet its natural gas and oil production forecasts, the timing and receipt of regulatory approvals necessary for planned projects, acquisitions and divestitures, and the ability to complete planned construction or expansion projects as scheduled. Other factors include, but are not limited to, weather conditions, including the effects of hurricanes on operations, the behavior of other market participants, state and federal legislative and regulatory developments and changes to environmental and other laws and regulations, including those related to climate change, greenhouse gases and other emissions to which we are subject, economic conditions in the company's service area, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates collected by Dominion, changes to rating agency requirements and ratings, changing financial accounting standards, trading counter-party credit risks, risks related to energy trading and marketing, adverse outcomes in litigation matters, and other uncertainties. Other risk factors are detailed from time to time in Dominion’s most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with the Securities & Exchange Commission.
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