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Dominion Announces Second-Quarter 2014 Earnings

- Second-quarter 2014 operating earnings of 62 cents per share compared to guidance of 55 cents to 65 cents per share

RICHMOND, Va., July 30, 2014 /PRNewswire/ -- Dominion (NYSE: D) today announced unaudited reported earnings determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended June 30, 2014, of $159 million ($0.27 per share), compared with earnings of $202 million ($0.35 per share) for the same period in 2013.

Operating earnings for the three months ended June 30, 2014, amounted to $361 million ($0.62 per share), compared to operating earnings of $355 million ($0.62 per share) for the same period in 2013. Operating earnings are defined as reported (GAAP) earnings adjusted for certain items.

Dominion uses operating earnings as the primary performance measurement of its earnings guidance 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 and other purposes. Dominion management believes operating earnings provide a more meaningful representation of the company's fundamental earnings power.

The principal difference between GAAP earnings and operating earnings for the quarter was a charge associated with Virginia legislation permitting recovery of certain costs related to the development of a third nuclear unit at North Anna and offshore wind facilities through base rates.

Business segment results and detailed descriptions of items included in 2014 and 2013 reported 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 second-quarter results came in the upper half of our guidance range of $0.55 to $0.65 per share. Excluding the two cents per share impact of milder than normal weather, second quarter earnings would have been at the top of our range.

"During the quarter, we also continued to move forward with our infrastructure growth plan. We received the environmental assessment from FERC for our Cove Point Liquefaction project and we anticipate receiving FERC approval for the project in the next few weeks. We are also in negotiations with multiple parties on the Southeast Reliability Pipeline and hope to secure firm contracts in the near future.

"Construction of the Warren County Power Station and Brunswick County Power Station continues on time and on budget. During the quarter, we announced the acquisition of two solar projects in Tennessee and an agreement to acquire a seventh in California, bringing the total solar projects in service or in development to 232 megawatts."

SECOND-QUARTER 2014 OPERATING EARNINGS COMPARED TO 2013

Second-quarter 2014 operating earnings per share were equivalent to second-quarter 2013 operating earnings per share. The main positive driver for the quarter was a lower effective tax rate, partially offset by lower contributions from unregulated retail energy marketing operations.

Details of second-quarter 2014 operating earnings as compared to 2013 can be found on Schedule 4 of this release.

THIRD-QUARTER 2014 OPERATING EARNINGS GUIDANCE

Dominion expects third-quarter 2014 operating earnings in the range of 90 cents to $1.05 per share, compared to third-quarter 2013 operating earnings of $1.00 per share. Positive factors for the third-quarter of 2014 compared to the same period of the prior year include an expected return to normal weather in our electric service territory, higher weather-normalized kilowatt sales and higher revenues related to our electric transmission growth projects. Negative factors for the quarter include higher interest expense, the absence of a benefit from an asset contribution to Blue Racer last year and higher operating expenses. GAAP earnings for the third quarter of 2013 were 98 cents per share. A reconciliation between operating and GAAP earnings for the third quarter of 2013 can be found on Schedule 3 of this release.

In providing its third-quarter and full-year 2014 operating earnings guidance, the company notes that there could be differences between expected reported earnings and estimated 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 aggregate impact of these items on reported earnings. However, Dominion anticipates recording additional pre-tax charges of approximately $44 million in each of the third and fourth quarters of 2014 associated with the North Anna and offshore wind legislation.

CONFERENCE CALL TODAY

Dominion will host its second-quarter earnings conference call at 10 a.m. ET on Wednesday, July 30. Dominion management will discuss its second-quarter financial results 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) 323-9872. Participants should dial in 10 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, including accompanying slides, and the Earnings Release Kit will be available on the company's investor information page at www.dom.com/investors.

A replay of the conference call will be available beginning about 1 p.m. ET July 30 and lasting until 11 p.m. ET August 6. Domestic callers may access the recording by dialing (877) 919-4059. International callers should dial (334) 323-0140. The PIN for the replay is 14710756. Additionally, a replay of the webcast will be available on the company's investor information page by the end of the day July 30.

Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 23,600 megawatts of generation, 10,900 miles of natural gas transmission, gathering and storage pipeline, and 6,400 miles of electric transmission lines. Dominion operates one of the nation's largest natural gas storage systems with 947 billion cubic feet of storage capacity and serves utility and retail energy customers in 10 states. For more information about Dominion, visit the company's website at www.dom.com.

This release contains certain forward-looking statements, including forecasted operating earnings for third-quarter and full-year 2014 which 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, including fluctuations in energy-related commodity prices, estimates of future market conditions, additional competition in our industries, changes in the demand for Dominion's services, access to and costs of capital, fluctuations in the value of our pension assets and assets held in our decommissioning trusts, impacts of acquisitions, divestitures, transfers of assets to joint ventures or an MLP and retirements of assets based on asset portfolio reviews, the receipt of regulatory approvals for, and timing of, planned projects, acquisitions and divestitures, the timing and execution of our MLP strategy, and the ability to complete planned construction or expansion projects at all or within the terms and timeframes initially anticipated. Other factors include, but are not limited to, weather conditions and other events, including the effects of hurricanes, earthquakes, high winds, major storms and changes in water temperatures on operations, the risk associated with the operation of nuclear facilities, unplanned outages at facilities in which Dominion has an ownership interest, the impact of operational hazards and catastrophic events, state and federal legislative and regulatory developments, including changes in federal and state tax laws 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, political and economic conditions, industrial, commercial and residential growth or decline in Dominion'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, fluctuations in interest rates, employee workforce factors, including collective bargaining, counter-party credit and performance risks, adverse outcomes in litigation matters or regulatory proceedings, the risk of hostile cyber intrusions and other uncertainties. Other risk factors are detailed from time to time in Dominion's quarterly reports on Form 10-Q or most recent annual report on Form 10-K filed with the Securities and Exchange Commission. 

 


Schedule 1 - Segment Operating Earnings














Preliminary, Unaudited






(millions, except earnings per share)

Three months ended June 30,





2014


2013


Change

Earnings:








Dominion Virginia Power*

$ 116


$ 112


$ 4


Dominion Energy

130


124


6


Dominion Generation*

159


185


(26)


Corporate and Other

(44)


(66)


22


OPERATING EARNINGS

$ 361


$ 355


$ 6


Items excluded from operating earnings 2, 3

(202)


(153)


(49)


REPORTED EARNINGS 1

$ 159


$ 202


$ (43)










Common Shares Outstanding (average, diluted)

583.9


578.9












Earnings Per Share (EPS):







Dominion Virginia Power*

$ 0.20


$ 0.20


$ -


Dominion Energy

0.22


0.21


0.01


Dominion Generation*

0.27


0.32


(0.05)


Corporate and Other

(0.07)


(0.11)


0.04


OPERATING EARNINGS

$ 0.62


$ 0.62


$ -


Items excluded from operating earnings 2

(0.35)


(0.27)


(0.08)


REPORTED EARNINGS 1

$ 0.27


$ 0.35


$ (0.08)










(millions, except earnings per share)

Six months ended June 30,





2014


2013


Change

Earnings:








Dominion Virginia Power*

$ 247


$ 228


$ 19


Dominion Energy

338


303


35


Dominion Generation*

468


439


29


Corporate and Other

(85)


(139)


54


OPERATING EARNINGS

$ 968


$ 831


$ 137


Items excluded from operating earnings 2, 4

(430)


(134)


(296)


REPORTED EARNINGS 1

$ 538


$ 697


$ (159)










Common Shares Outstanding (average, diluted)

583.4


578.2












Earnings Per Share (EPS):







Dominion Virginia Power*

$ 0.42


$ 0.39


$ 0.03


Dominion Energy

0.58


0.53


0.05


Dominion Generation*

0.80


0.76


0.04


Corporate and Other

(0.14)


(0.24)


0.10


OPERATING EARNINGS

$ 1.66


$ 1.44


$ 0.22


Items excluded from operating earnings 2

(0.74)


(0.23)


(0.51)


REPORTED EARNINGS 1

$ 0.92


$ 1.21


$ (0.29)





1)

Determined in accordance with Generally Accepted Accounting Principles (GAAP).


2)

Items excluded from operating earnings are reported in Corporate and Other segment. Refer to Schedules



2 and 3 for details, or find "GAAP Reconciliation" on Dominion's website at www.dom.com/investors.


3)

Pre-tax amounts for the current period and the prior period are ($302) million and ($263) million, respectively.


4)

Pre-tax amounts for the current period and the prior period are ($654) million and ($232) million, respectively.








*

Amounts for 2013 have been recast to reflect unregulated retail energy marketing operations in Dominion Generation.

 

Schedule 2 - Reconciliation of 2014 Operating Earnings to Reported Earnings

2014 Earnings (Six months ended June 30, 2014)

The net effects of the following items, all shown on an after-tax basis, are included in 2014 reported earnings, but are excluded from operating earnings:

  • $193 million net charge related to the repositioning of our Producer Services business, reflecting the termination of natural gas trading and certain energy marketing activities.
  • $191 million charge associated with Virginia legislation enacted in April that permits Virginia Power to recover 70% of the costs previously deferred or capitalized through Dec. 31, 2013 relating to the development of a third nuclear unit located at North Anna and offshore wind facilities as part of the 2013 and 2014 base rates.
  • $31 million goodwill write-off associated with the company exiting the unregulated electric retail energy marketing business.
  • $15 million net charge related to other items.

(millions, except per share amounts)

1Q14

2Q14

3Q14

4Q14

YTD 2014

2

Operating earnings

$607

$361



$968


Items excluded from operating earnings (after-tax):








Producer Services repositioning

(193)




(193)



North Anna and offshore wind facilities


(191)



(191)



Goodwill write-off at unregulated electric retail

(31)




(31)



Other items

(4)

(11)



(15)



Total items excluded from operating earnings (after-tax) 1

(228)

(202)



(430)


Reported net income

$379

$159



$538


Common shares outstanding (average, diluted)

582.9

583.9



583.4


Operating earnings per share

$1.04

$0.62



$1.66


Items excluded from operating earnings (after-tax)

(0.39)

(0.35)



(0.74)


Reported earnings per share

$0.65

$0.27



$0.92










1)

Pre-tax amounts for items excluded from operating earnings are reflected in the following table:


Items excluded from operating earnings:

1Q14

2Q14

3Q14

4Q14

YTD 2014











Producer Services repositioning

(319)




(319)



North Anna and offshore wind facilities


(287)



(287)



Goodwill write-off at unregulated electric retail

(31)




(31)



Other items

(2)

(15)



(17)



Total items excluded from operating earnings

($352)

($302)

$0

$0

($654)










2)

YTD EPS may not equal sum of quarters due to share count differences.



 

Schedule 3 - Reconciliation of 2013 Operating Earnings to Reported Earnings

2013 Earnings (Twelve months ended December 31, 2013)

The net effects of the following items, all shown on an after-tax basis, are included in 2013 reported earnings, but are excluded from operating earnings:

  • $92 million net loss from discontinued operations of two merchant power stations (Brayton Point & Kincaid) which were sold in third quarter 2013.
  • $109 million net charge related to an impairment of certain natural gas infrastructure assets and the repositioning of Producer Services.
  • $28 million charge in connection with the Virginia Commission's final ruling associated with its biennial review of Virginia Power's base rates for 2011-2012 test years.
  • $17 million charge associated with our operating expense reduction initiative, primarily reflecting severance pay and other employee-related costs.
  • $39 million net gain related to our investments in nuclear decommissioning trust funds.
  • $30 million benefit due to a downward revision in the nuclear decommissioning asset retirement obligations (ARO) for certain merchant nuclear units that are no longer in service.
  • $7 million net expense related to other items.

(millions, except per share amounts)

1Q13

2Q13

3Q13

4Q13

YTD 2013

2

Operating earnings

$476

$355

$583

$467

$1,881


Items excluded from operating earnings (after-tax):








Discontinued operations - Brayton Point & Kincaid

1

(70)

(23)


(92)



Gas infrastructure & repositioning


(57)

(17)

(35)

(109)



Impact of Virginia Power biennial review order




(28)

(28)



O&M expense reduction initiative


(17)



(17)



Net gain in nuclear decommissioning trust funds

20

1

9

9

39



ARO revision




30

30



Other items

(2)

(10)

17

(12)

(7)



Total items excluded from operating earnings (after-tax) 1

19

(153)

(14)

(36)

(184)


Reported net income

$495

$202

$569

$431

$1,697


Common shares outstanding (average, diluted)

577.5

578.9

580.1

581.3

579.5


Operating earnings per share

$0.83

$0.62

$1.00

$0.80

$3.25


Items excluded from operating earnings (after-tax)

0.03

(0.27)

(0.02)

(0.06)

(0.32)


Reported earnings per share

$0.86

$0.35

$0.98

$0.74

$2.93










1)

Pre-tax amounts for items excluded from operating earnings are reflected in the following table:


Items excluded from operating earnings:

1Q13

2Q13

3Q13

4Q13

YTD 2013











Discontinued operations - Brayton Point & Kincaid

1

(119)

(17)


(135)



Gas infrastructure & repositioning


(107)

(23)

(52)

(182)



Impact of Virginia Power biennial review order




(40)

(40)



O&M expense reduction initiative


(28)



(28)



Net gain in nuclear decommissioning trust funds

34

1

15

15

65



ARO revision




47

47



Other items

(4)

(10)

29

(26)

(11)



Total items excluded from operating earnings

$31

($263)

$4

($56)

($284)










2)

YTD EPS may not equal sum of quarters due to share count differences.

 


Schedule 4 - Reconciliation of 2Q14 Earnings to 2Q13






Preliminary, unaudited

Three Months Ended

(millions, except EPS)

June 30,



2014 vs. 2013



Increase / (Decrease)

Reconciling Items

Amount

EPS





Dominion Virginia Power




Regulated electric sales:




Weather

$2

$0.00


FERC Transmission equity return

7

0.01


Storm damage and service restoration

7

0.01


Other

(12)

(0.02)


Change in contribution to operating earnings

$4

$0.00





Dominion Energy




Gas Distribution margins

3

0.00


Gas Transmission projects

8

0.02


Other

(5)

(0.01)


Change in contribution to operating earnings

$6

$0.01





Dominion Generation




Regulated electric sales:




Weather

$3

$0.01


Other

(2)

0.00


Merchant generation margin

9

0.02


Retail energy marketing operations

(18)

(0.04)


Rate adjustment clause equity return

(17)

(0.04)


PJM ancillary services

5

0.01


Other

(6)

(0.01)


Change in contribution to operating earnings

($26)

($0.05)





Corporate and Other




Change in contribution to operating earnings

$22

$0.04





Change in consolidated operating earnings

$6

$0.00





Change in items excluded from operating earnings1

($49)

($0.08)





Change in reported earnings (GAAP)

($43)

($0.08)





1)

Refer to Schedules 2 and 3 for details of items excluded from operating earnings, or find "GAAP Reconciliation" on Dominion's website at www.dom.com/investors.












 

SOURCE Dominion

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