Dominion Reports Second Quarter 2007 Earnings
Dominion (NYSE: D) reported a net loss determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended June 30, 2007, of $530 million ($1.52 per share) compared with net income of $161 million (46 cents per share) for the same period last year.
Operating earnings for the three months ended June 30, 2007, were $310 million (89 cents per share) compared with operating earnings of $279 million (80 cents per share) for the three months ended June 30, 2006. 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 and for the company's annual incentive plan. Dominion management believes operating earnings provide a more meaningful representation of the company's fundamental earnings power.
In addition to differences between GAAP and operating earnings recorded through the second-quarter 2007, the company notes that there could be differences between remaining 2007 GAAP and operating earnings for matters such as, but not limited to, items related to our strategic repositioning including, gains on sale of our non-Appalachian E&P operations and changes in accounting principles. While Dominion management is currently not able to estimate precisely the impact, if any, of these items on GAAP earnings, it does expect GAAP earnings to exceed operating earnings for the year.
Business segment results and detailed descriptions of items included in 2007 and 2006 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:
"Our energy infrastructure businesses had an exceptional second quarter. Total operating earnings per share from our delivery, energy and generation businesses grew nearly 10 percent compared with the second quarter of 2006. Adjusting each period for the effects of weather and Virginia fuel expenses, operating earnings per share grew nearly 14 percent at those businesses.
"But the bigger story this quarter is our progress in repositioning the company for the future. Since our last earnings release, we completed the sale of our offshore E&P operations and announced transactions to sell all of our onshore E&P operations except those in the Appalachian Basin. We closed all of the onshore sales except the Mid-Continent transaction. We launched and completed a tender offer for $2.5 billion of debt, repaid another $700 million in debt and we commenced a tender offer to repurchase a significant number of common shares."
Other corporate highlights: -- The Virginia General Assembly's passage in April of electric re-regulation legislation and fuel factor amendments; -- The request by Dominion for Virginia State Corporation Commission (SCC) approval to construct the Virginia City Hybrid Energy Center in Southwest Virginia, with an enhanced return on common equity; and -- The approval by the SCC of our Virginia fuel factor adjustment.
Farrell added: "With the strength of our continuing operations, and the imminent completion of our corporate repositioning, I remain confident in our 2008 operating earnings forecast of $6.00 or more per share, and long-term average annual operating earnings per share growth outlook of at least 4 percent to 6 percent thereafter."
In providing its operating earnings outlook, the company notes that there could be differences between expected 2008 GAAP and operating earnings for matters such as, but not limited to, 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 outlook.
Second-quarter 2007 operating earnings compared with 2006
Second-quarter 2007 operating earnings of 89 cents per share compares with operating earnings of 80 cents per share in the second quarter of 2006. The increase is primarily attributable to an increase in electric and natural gas utility sales resulting from weather compared with the second quarter of 2006, higher contributions from the company's merchant generation and producer services businesses, and higher average realized prices for the company's natural gas and oil production. These positives were partially offset by higher unrecovered Virginia fuel expenses, lower contributions from the company's gas transmission business, lower natural gas and oil production and higher DD&A expenses at the company's E&P business, and higher interest expense.
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