10-QPeriod: Q3 FY2003

DOMINION ENERGY, INC Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 7, 2003For Securities:D

Summary

Dominion Energy (D) reported a net loss of $256 million, or $0.79 per diluted share, for the third quarter ended September 30, 2003. This represents a significant decrease from the same period in the prior year, primarily driven by substantial impairment charges related to its telecommunications assets. Despite the quarterly loss, operating revenue increased by 12% year-over-year, bolstered by higher gas prices and increased sales volumes across various segments, including merchant generation and retail sales. For the nine-month period, net income was $492 million, or $1.56 per diluted share, a decline from the previous year, also impacted by the telecommunications asset impairment and other corporate expenses. The company highlighted increased operating revenues driven by colder weather, customer growth, and higher commodity prices. Dominion continues to manage its debt and financing through various credit facilities and issuances of long-term debt and equity, with a focus on maintaining its credit ratings amidst evolving industry conditions and regulatory landscapes.

Key Highlights

  • 1Reported a net loss of $256 million for Q3 2003, significantly down from a net income of $430 million in Q3 2002, largely due to a $527 million impairment charge on telecommunications assets.
  • 2Total operating revenue increased by 12% to $2.86 billion in Q3 2003 compared to $2.55 billion in Q3 2002, driven by higher gas prices and increased sales volumes.
  • 3For the nine months ended September 30, 2003, net income was $492 million ($1.56/share), a decrease from $1.02 billion ($3.71/share) in the same period of 2002.
  • 4The company adopted new accounting standards, including SFAS No. 143 for Asset Retirement Obligations and EITF Issue No. 02-3 for energy trading contracts, which impacted reported results and classifications.
  • 5Dominion issued approximately $2.2 billion in net new long-term debt and $0.9 billion in common stock during the first nine months of 2003 to fund operations and capital expenditures.
  • 6The company is proceeding with its exit strategy from the telecommunications business and expects to formalize the plan of divestiture for DTI.
  • 7Environmental matters, including a settlement for $1.2 billion in air quality improvements, and operational challenges like Hurricane Isabel restoration costs, are noted as significant factors impacting expenses.

Frequently Asked Questions

The primary driver for the net loss of $256 million in the third quarter of 2003 was a substantial impairment charge of $527 million related to Dominion's telecommunications assets. This charge reflects a reassessment of long-term expectations for growth in this sector and the company's strategic decision to exit the telecommunications business.

Despite the net loss, operating revenue saw a positive increase of 12% to $2.86 billion in the third quarter of 2003, up from $2.55 billion in the same period of 2002. This growth was attributed to higher gas prices and increased sales volumes across its merchant generation, retail sales, and field services operations.

The adoption of SFAS No. 143 (Asset Retirement Obligations) and EITF 02-3 (Accounting for Derivative Contracts) has impacted Dominion's financial reporting. SFAS No. 143 led to the recognition of asset retirement obligations, particularly for nuclear decommissioning, and had a positive impact on net income for the nine-month period. EITF 02-3 changed the accounting for certain energy trading contracts, affecting the timing and presentation of revenues and expenses, and resulted in a cumulative effect of a change in accounting principle, a net after-tax loss of $67 million.

Dominion has announced its intention to exit the telecommunications business and is in the process of formalizing a divestiture plan for DTI. The company recognized significant impairment charges for these assets and expects to present them as held-for-sale, potentially leading to further losses depending on the terms of the sale.